As Filed with the Securities and Exchange Commission on February 18, 2004
Registration No. 333-85755
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
POST-EFFECTIVE AMENDMENT NO. 8 TO FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
BROMWELL FINANCIAL, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
DELAWARE
[State of organization]
6289 51-0387638
(Primary SIC Number) (IRS EIN)
5916 N. 300 West
Fremont, Indiana 46737
Telephone: (260) 833-1306
(address and telephone number of registrant's principal executive offices)
Mr. Michael P. Pacult
5916 N. 300 West
Fremont, Indiana 46737
Telephone: (260) 833-1306; Facsimile (260) 833-4411
(Name, address and telephone number of agent for service of process)
Copies to:
William Sumner Scott, Esquire
The Scott Law Firm, P. A.
940 Northeast 79th Street, Suite A
Miami, FL 33138
Telephone (305) 754-3603; Facsimile (305) 754-2668
If any of the securities being offered on the Form are to be offered on a
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission acting
pursuant to said section 8(a), may determine.
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Prospectus - Part I
Bromwell Financial Fund, Limited Partnership
Amended and Fully Restated Prospectus to Offer
$7,000,000 in Units of Limited Partnership Interest
To Be Sold at the Net Asset Value per Unit
Computed At the End of Each Month During the Offering
The Offering
The partnership is a registered commodity pool that trades futures, options
on futures, and forward contracts.
Two general partners, Belmont Capital Management, Inc. and Mr. Michael
Pacult, manage the partnership. We refer to them collectively as "the
general partner." The general partner is authorized by the partnership
agreement to employ, establish the terms of employment, and terminate
investment managers called commodity trading advisors and clearing brokers
called futures commission merchants.
Futures Investment Company, an affiliated broker dealer, will use its best
efforts to sell the partnership interests. Neither it nor anyone else has
the obligation to purchase or support the price of the partnership interests.
You must purchase at least $25,000 in partnership interests, though the
general partner may reduce this to no less than $5,000. You have the right
to rescind your subscription for five days after it is submitted. After five
days, your subscription is irrevocable and you may only withdraw from the
partnership by redeeming your partnership interests. There is no redemption
fee. See the redemption and allocation of expenses provisions in this
prospectus.
All subscriptions received will be placed in an escrow account maintained by
the general partner until we accept them. Interest accrued on your
subscription amount will be used to buy additional partnership interests for
you. Partnership interests are offered for sale at their net asset value as
of the close of business on the last day of the month in which the
subscription is received and become effective on the open of business on the
first day of the subsequent month.
The Risks - These securities are highly speculative and involve a high degree
of risk. Consider carefully the risk factors below and the complete
description beginning on page 5 of this prospectus.
* Our business is the speculative trading in futures, commodity options and
unregulated currency contracts selected by registered commodity trading
advisors.
* This partnership pays substantial commissions, fees and other costs.
There is no guarantee that you will receive a return on your investment.
* To receive your investment back after one year, based upon the number of
partnership interests
presently outstanding, the partnership must generate a return of 9.12% and
6.51% should we be able to sell the maximum number of partnership interests
offered.
* Transfer of your partnership interests will be restricted and there are
limitations on your right of redemption to surrender your partnership
interests in return for their value. No public market for the partnership
interests exists and none is expected to develop.
* This partnership will not make distributions. To receive a return of your
investment, you must use our redemption procedure.
* Although you will not receive distributions, you must pay annual Federal
and state income taxes on your share of any profits, if any, earned by this
partnership.
* The general partner and affiliates have conflicts of interest with regard
to the management of this partnership.
You are required to understand fully the terms of this investment.
Therefore, you are encouraged to discuss this investment with your
independent financial and tax advisers.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, or any state securities commission or agency, nor have
any of them confirmed or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR
ACCURACY OF THIS DISCLOSURE DOCUMENT.
Price to Public Sales Commissions Proceeds to Partnership
Per Limited
Partnership Unit Net Asset Value None Net Asset Value
Total Maximum $7,000,000 None $4,719,900
A maximum of $7,000,000 in units of limited partnership interest may be sold.
As of December 31, 2003, $2,280,100 has been sold, the partnership has broken
escrow, and has commenced trading. The balance, reflected in the above
table, is offered for purchase pursuant to this prospectus to also be used
for trading.
FUTURES INVESTMENT COMPANY
5916 N. 300 West - Fremont, Indiana 46737
Telephone: (260) 833-1306
Best Efforts Sales Agent/Broker-Dealer
The date of this amended and fully restated prospectus is ____________, 2004
Commodity Futures Trading Commission - Risk Disclosure Statement
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO
PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS
GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE
POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION,
RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR
PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE
POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS
TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT
CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT
PAGE 5 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT
IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 13.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT, AT PAGE 5.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE
POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY
BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR
MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL
MAY BE EFFECTED.
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Table of Contents
Commodity Futures Trading Commission - Risk Disclosure Statement i
Table Of Contents ii
Notice To All Purchasers v
Specific Notices vi
Notice to California Investors vi
Notice to Oregon Investors vi
Notice To Pennsylvania Investors vi
Notice to Texas Investors vi
Notice to foreign investors vi
Summary Of The Offering 1
The Partnership 1
Description of Securities Offered for Sale 1
Plan For Sale of Partnership Interests And Use of Escrow 1
Subscription Procedure 1
Who Will Benefit From An Investment In The Partnership 1
Business Objectives and Expenses 1
Summary Risk Factors 2
Charges To The Partnership 2
Use Of Proceeds 3
Selection Of Commodity Trading Advisor And Allocation Of Equity 3
Federal Income Tax Aspects 3
Redemptions 3
Diagram of Partnership Structure & Commissions Bromwell Financial Fund,
Limited Partnership 4
The Risks You Face 5
We must pay substantial fees, charges and expenses which must be recovered
before you will receive a return on your investment. 5
Your right of redemption is limited. 5
The partnership depends upon Mr. Pacult, and his absence could cause the
partnership to cease operations. 5
General partner and commodity trading advisor will serve other businesses and
may not have adequate time to devote to the partnership. 5
There are conflicts of interest in the partnership structure that may limit
our profits. 6
You will be taxed on profits regardless of whether they are distributed. 6
You will have to pay taxes on profits in a current year which may be lost in
future years. 6
If the general partner selects new trading advisors, they may not be as
profitable as those replaced and the new advisors will not be responsible for
recouping any previous losses. 6
The general partner may change the commodity trading advisor and its
allocation of equity without notice to you. 6
You will not participate in management and may not contest the business
decisions of the general partner. 6
Commodity futures trading is speculative. 6
During partnership trading, a small price movement can lead to large
losses. 6
The general partner does not control the trading advisor or its methods and
may not be able to prevent large losses. 7
The partnership may be unable to execute a trade before large losses are
incurred due to market illiquidity. 7
Changes in trading equity may adversely affect performance. 7
Failure of commodity brokers or banks could result in loss of assets. 7
When trading in foreign exchanges, if the creditworthiness of the other
parties or the foreign currency is not maintained, we may lose the value of
our positions in those markets. 7
Option trading is highly risky and requires less equity to secure a trade,
thus providing greater potential for loss. 8
If the price of a contract changes dramatically, we may not be able to exit
the position without sustaining substantial loss due to government imposed
price limits. 8
We may not be able to compete with others with greater resources. 8
Resignation of Mr. Pacult as a general partner and subsequent failure of
Belmont to maintain its net worth may cause suspension of trading or taxation
as a corporation. 8
The general partner will not advise you, and you must rely upon your own
counsel before investing in the partnership. 9
The partnership is not covered by the Investment Company Act of 1940. 9
Possibility of audit - you may be subject to audit and penalties. 9
General partner may settle IRS claim not in your best interest. 9
You may be subject to back taxes and penalties. 9
The general partner may raise the incentive fee to 27% without prior notice
to you. 9
Conflicts Of Interest 9
General partner, the commodity trading advisor, the futures commission
merchant, the selling agent and their principals may preferentially trade for
themselves and others. 9
Possible retention of voting control by the general partner may limit your
ability to control issues. 9
The general partner is not likely to resign, even if it would be in your best
interest. 10
Partnership fees may be higher than they would be if they were negotiated. 10
Our profitability may be limited due to competition among traders and their
unaccountability for previous losses. 10
Your ability to redeem your partnership interests may be limited. 10
Commodity trading advisor may engage in high risk trading to generate fees.10
Mr. Pacult has sole control over the time he will allocate to the management
of the partnership. 11
No Resolution Of Conflicts Procedures 11
Interests Of Named Experts And Counsel 11
Management's Discussion And Analysis 11
The Partnership 11
The General Partners 12
Experience 12
Authority 12
Partnership Books and Records 12
The Commodity Trading Advisor 12
The Advisory Contracts 12
Business Objective And Expenses 12
Explanatory Notes: 13
Securities Offered 14
You, the Investor: 14
Your subscription agreement and check: 14
Management's Discussion 14
Description of Intended Operations 14
Risk Control 14
Trading Risks 15
Fiduciary Responsibility Of The General Partner 15
Indemnification 16
Provisions of Limited Partnership Agreement 16
Provisions of Law 16
Provisions of Federal and State Securities Laws 16
Provisions of the Securities Act of 1933 and NASAA Guidelines 16
Provisions of the Clearing Agreement 16
Other Indemnification Provisions 16
Relationship With The Futures Commission Merchant And The Selling Agent 16
Brokerage Commissions are Competitive 17
Relationship With The Commodity Trading Advisor 17
The Commodity Trading Advisor Will Trade For Other Accounts 17
Non-Disclosure Of The Commodity Trading Advisor's Methods 17
Charges To The Partnership 17
Compensation Of General Partner 17
Compensation Of The Commodity Trading Advisor 17
Restrictions on Management Fees 18
Fees To Futures Commission Merchant And Compensation of General Partner 18
Fee Paid By Partnership To The Corporate General Partner 18
Brokerage Fees Paid By the Corporate General Partner To The Futures
Commission Merchant 18
Continuing Service Fees 18
Miscellaneous Fees To Futures Commission Merchant 19
Rights of General Partner 19
Other Expenses 19
Charges To The Partnership 19
Investor Suitability 20
Potential Advantages 20
Equity Management 20
Investment Diversification 20
Limited Liability 21
Administrative Convenience 21
Access To The Commodity Trading Advisor 21
Use Of Proceeds 21
Determination Of The Offering Price 22
The General Partner 22
Identification 22
Michael P. Pacult 22
Ownership In Commodity Trading Advisor And Futures Commission Merchant 23
Trading By The General Partner; Interest In The Pool 23
Regulatory Notice 23
Trading Management 23
No Affiliation With Commodity Trading Advisor 23
Rights of the General Partner With Respect To Commodity Trading Advisor
Selection And Allocation Of Equity 23
Performance Record of the Partnership 23
The Commodity Trading Advisor - Fall River Capital, LLC 24
Business Background 24
Description Of Advisor's Trading Programs 26
Trading Program and Markets Traded 26
Performance Record Of The Commodity Trading Advisor's Programs 26
Fall River Capital, LLC - Table 1 - Global Trends Program 27
Fall River Capital, LLC - Table 2 - Global Strategies Program 27
Fall River Capital, LLC - Table 3 - Global Strategies LL Program 28
Fall River Capital, LLC - Table 4 - Global Strategies HL Program 28
Performance Record Of Other Programs Sponsored By The General Partner 28
Performance Record Of Atlas Futures Fund, Limited Partnership 29
The Futures Commission Merchant 29
Federal Income Tax Aspects 30
Scope Of Tax Presentation 30
No Legal Opinion As To Certain Material Tax Aspects 30
Partnership Tax Status And Net Worth Of The General Partner 30
No IRS Ruling 31
Tax Opinion 31
Passive Loss And Unrelated Business Income Taxes Rules 32
Basis Loss Limitation 32
At-Risk Limitation 32
Income And Losses From Passive Activities 32
Allocation Of Profits And Losses 32
Taxation Of Futures And Forward Transactions 33
Section 988 Foreign Currency Transactions 33
Capital Gain And Loss Provisions 33
Business For Profit 33
Self-Employment Income And Tax 34
Alternative Minimum Tax 34
Interest Related To Tax Exempt Obligations 34
Not A Tax Shelter 34
Taxation Of Foreign Partners 34
Partnership Entity-Audit Provisions-Penalties 34
Employee Benefit, Retirement Plans And IRA's 35
The Limited Partnership Agreement 35
Formation Of The Partnership 35
Units of Partnership Interests 35
Management Of Partnership Affairs 36
General Prohibitions 36
Additional Offerings 36
Partnership Accounting, Reports, And Distributions 36
Federal Tax Allocations 37
Transfer Of Partnership Interests Only With Consent Of The General Partner 37
Termination Of The Partnership 37
Meetings 37
Redemptions 37
Plan For Sale Of Partnership Interests 38
The Selling Agent 38
Escrow 38
Subscription Procedure 38
Subscription Amounts 38
Revocation and Acceptance of Subscription 39
Net Worth Tests 39
Investor Warranties 39
Legal Matters 39
Litigation And Claims 39
Legal Opinion 43
Experts 43
Additional Information 43
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Notice To All Purchasers
Until 90 days after the termination of this offering, all dealers effecting
transactions in the Units, whether or not participating in this distribution,
may be required to deliver a prospectus. This is in addition to the
obligation of dealers to deliver a prospectus when acting as underwriters or
best efforts sellers. The selling agent and additional sellers must also
deliver any supplemented or amended prospectus issued by the partnership.
No dealer, salesman, officer, employee or agent of the partnership or the
general partner and or any other person has been authorized, in connection
with this offering, to give any information or to make any representations
other than those contained in this prospectus and, if given or made, such
information or representations must not be relied upon as having been
authorized by the partnership, the general partner, the selling agents, or
any other person connected with this offering. This prospectus speaks as of
the date of its issuance. Neither the delivery of this prospectus nor any
sale made hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof or that there has been no change in the affairs of the
partnership since the date of this prospectus. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any Units by
anyone in any state in which such offer, solicitation, or purchase is not
authorized or in which the person making the offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such
offer or solicitation.
The regulations of the Commodity Futures Trading Commission require that no
commodity pool operator may solicit, accept or receive funds, securities or
other property from a prospective participant in a commodity pool without
first delivering a disclosure document (this "prospectus") to such
prospective participant. The general partner must furnish all partners
annual and monthly reports complying with Commodity Futures Trading
Commission and National Futures Association requirements. The annual reports
will contain certified and audited, and the monthly reports unaudited,
financial information in regard to the operation of the partnership and its
general partner.
Bromwell Financial Fund, Limited Partnership, is not a mutual fund and is not
subject to regulation under the Investment Company Act of 1940. Consequently,
investors will not have the benefit of the protective provisions of such
legislation.
Investors must rely on their own examination of the issuer and the terms of
the offering, including the merits and risks involved. Investors should be
aware that they will be required to bear the financial risks of this
investment for an indefinite period of time. The Units may be sold,
assigned, transferred or otherwise disposed of only in accordance with the
terms of the limited partnership agreement, which includes the required
consent of the general partner. No public market exists or is expected to
develop for the Units and, consequently, prospective investors who desire
liquidity should not purchase the Units. Each investor (purchaser of Units)
must meet the following suitability standards: (i) an investor must have (a)
had an annual gross income in excess of $45,000 in the last calendar year and
reasonably expects to have gross income in excess of $45,000 for the current
year together with a net worth, exclusive of principal residence, home
furnishings, and automobile of $45,000; or (b) the investor has a net worth
(exclusive of principal residence, home furnishings and automobile) in excess
of $150,000; and (ii) the investor is represented by a registered
representative or associated person or otherwise demonstrates to the general
partner sufficient knowledge to accept the risks of this investment. A
general partnership or other entity making investment or the donor of a,
qualified pension, profit-sharing or Keogh employee plan, must meet the
financial suitability requirements prescribed for natural persons.
"Accredited investors", as that term is defined under regulation D of the
act, who have a net worth in excess of $1,000,000 are deemed to have such
knowledge and experience in financial business matters as to be capable of
evaluating the merits and risks of the proposed investment and, at the time
of purchase of a $25,000 Unit, can afford a complete loss.
The act and the securities laws of certain states grant purchasers of
securities sold, either in violation of the registration or qualification
provisions of such laws or within certain time limitations, the right to
rescind their purchase of such securities and to receive back their
consideration paid, plus interest. Many of these laws that grant the right of
rescission also provide that suits for such violations must be brought within
a specified time, usually one year from discovery of facts constituting such
violation. Should any investor institute an action on the theory that the
offering conducted as described herein was required to be registered or
qualified, the partnership will contend that the contents of this prospectus
provided notice of sufficient facts to commence the time from which an action
for rescission should have been brought. Also, should any investor contend
the offer was not qualified for presentation or the investor not suitable to
make such investment, the general partner will plead reliance upon the
information supplied by the investor in the subscription documents and the
information supplied by the general partner to the investor in this
prospectus.
Specific Notices
Notice to California Investors
California residents are required to have a liquid net worth of $225,000
(exclusive of home, furnishings and automobiles) or an annual income of
$60,000 and a liquid net worth of $60,000 (computed similarly as above) to be
able to purchase partnership interests in this commodity pool. The transfer
of the limited partnership interests offered and sold pursuant to this
offering can not be resold or transferred without permission of the general
partner and fulfillment of other terms and conditions contained in the
partnership agreement. Accordingly, (a) the limited partnership, as issuer
of a security upon which a restriction on transfer has been imposed must
cause a copy of rule 260.141.11 to be delivered to each issuee or transferee
of such security at the time the certificate evidencing the security is
delivered to the issuee or transferee; and, (b) it is unlawful for the holder
of any such security to consummate a sale or transfer of such security, or
any interest therein, without the prior written consent of the commissioner
(until this condition is removed pursuant to section 260.141.12 of these
rules), except as provided in the code. The certificates, whether upon
initial issuance or upon any transfer, shall bear on their face, in capital
letters of 10-point size, as follows: "it is unlawful to consummate a sale
or transfer of this security, or any interest therein, or to receive any
consideration therefore, without the prior written con-sent of the
commissioner of corporations of the state of California, except as permitted
in the commissioner's rules".
Notice to Oregon Investors
Investors who are residents of Oregon are required to have a net worth of
$225,000 or net worth of $60,000 and annual income of $60,000 to be eligible
to invest in this offering of partnership interests in this commodity pool.
Notice To Pennsylvania Investors
Each subscriber who is a Pennsylvania resident has the right to cancel and
withdraw his acceptance of an offer to purchase the issuer's securities
without any liability to the issuer or seller within two business days from
the date of receipt by the issuer of the subscriber's subscription agreement.
Neither the Pennsylvania securities commission nor any other agency has
passed on or endorsed the merits of this offering and any representation to
the contrary is unlawful.
Notice to Texas Investors
Texas residents are required to have a liquid net worth of $225,000
(exclusive of home, furnishings and automobiles) or an annual income of
$60,000 and a liquid net worth of $60,000 (computed similarly as above) to be
able to purchase partnership interests in this commodity pool.
Notice to foreign investors
The securities have been registered with the United States Securities and
Exchange Commission and several selected states. However, the securities may
not be offered, sold, renounced or transferred, directly or indirectly, in
the United States of America, its territories, possessions, and all areas
subject to its jurisdiction ("United States" or in Canada (collectively,
"North America"), or to or for the benefit of any person who is a national
citizen or a resident or normally a resident thereof, the estates of such a
person or any corporation or other entity created or organized under any law
of the United states or Canada or any political subdivision thereof
(collectively referred to as "North American persons") unless (i) the
securities are duly registered under the applicable state act, or (ii) an
exemption from registration under the applicable state act and the company
has received an opinion of counsel to such effect reasonably satisfactory to
it, or (iii) such securities are sold on foreign exchange in accordance with
procedures approved by such foreign stock exchange.
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Summary of the Offering
This summary is to assist your understanding of the offer. To be certain you
have a full understanding of the risks of this investment, you must carefully
review the entire document, including the exhibits.
The Partnership
Bromwell Financial Fund, Limited Partnership:
* is a Delaware limited partnership organized on January 12, 1999
* maintains its main business office at 5916 N. 300 West, P.O. Box C,
Fremont, Indiana 46737, (260) 833-1306 with duplicate copies of its financial
records kept with James Hepner, CPA, 1824 N. Normandy, Chicago, IL 60635,
(773) 804-0074
* is operated pursuant to a limited partnership agreement which is included
as Exhibit A
* is managed and controlled by Belmont Capital Management, Inc., a Delaware
corporation, and Michael P. Pacult, who are collectively referred to as the
general partner.
The general partner employs an independent professional trading manager
called a commodity trading advisor to select trades for the partnership
Description of Securities Offered for Sale
Through December 31, 2003, we sold a total of $2,280,100 of partnership
interests. By this amended and restated prospectus, we are offering to sell
an additional $4,719,900, for a total of $7,000,000 in units of limited
partnership interest. The balance of the interests will be sold at the
partnership's net asset value per partnership interest determined on the
close of business on the last day of the month in which the subscription
agreement is received.
Plan For Sale of Partnership Interests And Use of Escrow
All sales will be made through a broker dealer that will use its best
efforts, which means it will try, but not guarantee, to sell any partnership
interests. To have good funds available on the last day of the month when
your subscription will be accepted, the corporate general partner will
maintain an escrow account at Star Financial Bank, Angola, IN to hold your
subscription from the date of submission to the date you become a partner.
Subscription Procedure
To purchase partnership interests, you must:
* complete and execute a subscription agreement (Exhibit D), and deliver
your executed subscription documents and check for your investment, which
should be made payable to "Escrow Account for Bromwell Financial Fund, LP"
* pay for at least $25,000 in partnership interests, though the general
partner may reduce this amount to not less than $5,000.
And you must have:
* the minimum net worth and income provided in the Notice to Residents of
the State of your residence, if it is listed, at the front of this prospectus
* or, one of the following:
* a minimum net worth, exclusive of your home, home furnishings and
automobiles, of $150,000, or
* a minimum annual gross income of $45,000 and a minimum net worth of
$45,000, both exclusive of your home, home furnishings and automobiles, or
* the State where you live may impose a higher net worth and income
requirement although it may not be listed in the front of this prospectus.
Who Will Benefit From An Investment In The Partnership
You are likely to benefit from an investment in the partnership if you want
to diversify your portfolio and if you have investment money available that
you can afford to lose without adverse consequences to your ability to
support your family and your lifestyle. This investment presents the
opportunity to participate in markets which are typically not represented in
most investors' portfolios and which can be profitable in both rising and
falling markets.
However, if you cannot afford the risk of losing your entire investment in
this partnership, you should not purchase these partnership interests.
Business Objectives and Expenses
We are organized to be a commodity pool to engage in the speculative trading
of:
* futures and forward contracts, which are instruments designed to permit
producers to hedge or investors to speculate in various interest rates,
commodities, currencies, stock indices and other financial instruments
* options on futures and forward contracts, which give the purchaser the
right to acquire or sell a given contract at a specified time at a specified
price, and
* other financial instruments.
We do not anticipate you will receive distributions and cannot guarantee that
we will meet our objectives or avoid substantial losses.
We are subject to substantial fees, charges and expenses. To return after
one year an initial investment at $824.69 per unit of partnership interest,
we must earn a profit of 9.12%, or $75.24 per partnership interest. Although
you will not receive distributions, you must report any income we earn on
your Federal, state and local income tax returns.
Summary Risk Factors
Investment in the partnership interests is speculative, illiquid, and highly
risky. You should purchase partnership interests only if you can afford to
lose your entire investment. For a complete description of the risks of an
investment in the partnership, see the Risk Factors section beginning on page
5.
* Our business is the speculative trading in futures and forward contracts,
and options on those contracts, selected by a registered commodity trading
advisor. This trading is highly leveraged and takes place in very volatile
markets.
* Past results of this partnership or the commodity trading advisor do not
guarantee future results.
* This partnership pays a substantial management fee and commission costs.
There is no guarantee that you will receive a return on your investment.
* Transfer of your partnership interests will be restricted and there are
limitations on your right of redemption to surrender your partnership
interests in return for their value. No public market for the partnership
interests exists and none is expected to develop.
* This partnership will not make distributions. To receive a return on your
investment, you must use our redemption procedure.
* Although you will not receive distributions, you must pay Federal and
state income taxes on your share of any profits earned by this partnership.
* The general partner and affiliates have conflicts of interest with regard
to the management of this partnership. Specifically, the general partner is
affiliated with the principal selling agent, and no independent due diligence
will be performed in regard to interests it sells.
Charges to the Partnership: The following table identifies who is paid by the
partnership, what they do for the partnership, and their rate of
compensation:
- -----------------------------------------------------------------------------
Entity:
The general partner (Belmont Capital Management, Inc. and Mr. Michael Pacult)
Nature of Service:
Manages the partnership; negotiates and pays trading costs; assumes credit
risk of the partnership to the futures commission merchant
Amount of Compensation:
The corporate general partner receives a fixed brokerage commission of 4% to
clear trades and retains the difference between the 4% and the round turn
commissions paid to the futures commission merchant. [$970+]
5% quarterly incentive fee on all new net profits the partnership has
generated through trading.
- ---------------------------------
Entity:
The commodity trading advisor(Fall River Capital, LLC)
Nature of Service:
Makes trades for the partnership
Amount of Compensation:
1% annual management fee, paid monthly, of the equity assigned to it to
trade. [$243+]
20% quarterly incentive fee on new net profits it generates.
- ---------------------------------
Entity:
The futures commission merchant(Citigroup Global Markets, Inc.)
Nature of Service:
Accepts trades from the advisor, clears the trades; holds the partnership's
trading equity
Amount of Compensation:
From its 4% fixed commission, the corporate general partner pays the futures
commission merchant the per round turn commissions.
- ---------------------------------
Entity:
The selling agents(Futures Investment Company, a National Association of
Securities Dealers registered broker/dealer, principal selling agent and
additional selling agents it appoints)
Nature of Service:
Solicits and services investment in the partnership
Amount of Compensation:
The partnership pays the selling agents a 4% continuing service fee per year
on the investment in the fund, adjusted month to month to reflect profit and
loss, for so long as the investment remains in the partnership. [$1,000+]
- ---------------------------------
Entity:
Lawyers and Accountants(The Scott Law Firm, P.A., Frank L. Sassetti & Co.,
James D. Hepner & Co.)
Nature of Service:
Continuing legal, audit and accounting work
Amount of Compensation:
The annual accounting, audit and legal costs are estimated to be $18,500,
$9,500 and $5,000, respectively. [$796+]
- -----------------------------------------------------------------------------
+ Each $25,000 investment pays this amount per year for this particular
charge. When the charge is not based on a percentage, but rather a fixed
amount, we have computed that expense upon the partnership's net asset value
as of the date of this prospectus.
Use Of Proceeds
Through December 31, 2003, the present partners have paid $74,007 for
offering expenses. Upon the sale of additional partnership interests and the
lapse of twelve months from the date of each investor's investment, we will
charge each new limited partner its allocated portion of the previously paid
expenses to reimburse the prior partners. This will be done as follows:
After twelve months, the incoming partners' subscriptions will be divided by
the amount of the total subscriptions made by both the incoming and the prior
partners to obtain the percentage of the costs to be paid by all partners.
This percentage will be multiplied by the outstanding offering expenses to
produce the dollar amount to be deducted from the subscription of the
incoming partners. The cash produced by that deduction will be added to the
net asset value of the partnership. This will result in an increase in the
net asset value for all partnership interests previously sold. The cash
subscription amount remaining for each incoming partner will be used to
purchase partnership interests at the increased net asset value. The
incoming partners will join with the previously admitted partners to share in
the increase of net asset value that results from the admission of future
partners until either the maximum number of partnership interests is sold or
the offering terminates.
As of December 31, 2003, prior partners paid 5.43% of their total investment
in the partnership for offering expenses. Should the maximum of $7,000,000
in total partnership interests be sold, every partner will have been
allocated approximately 1.22% of their total investment to pay for offering
expenses.
The general partner will apply substantially all of the partnership's assets
to trading commodities.
Selection Of Commodity Trading Advisor And Allocation Of Equity
The general partner has selected Fall River Capital, LLC to serve as the
commodity trading advisor of the partnership. The trading advisor is solely
responsible for making trades, and neither the general partner nor you will
have notice or the opportunity to approve the trades made. The advisor is
expected to make short sales, with unlimited risk of loss, on behalf of the
partnership. The general partner, without prior notice to you, may terminate
or add trading advisors, or change the amount of equity allocated to any
advisor.
Federal Income Tax Aspects
Although you will not be paid distributions, you will have to pay income
taxes on profits and interest, if any.
Redemptions
You may request the general partner to accept the surrender of your
partnership interests for cash through our redemption procedures. The
general partner will try to comply with all redemption requests, but may not
be able to do so because of insufficient liquid assets. There will be no
charge for redemptions. See, The Limited Partnership Agreement, Redemptions.
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Diagram of Partnership Structure & Commissions
Bromwell Financial Fund, Limited Partnership
Please see the previous table under Charges to the Partnership for a
description of the below parties.
The Risks You Face
Investment in the partnership interests is speculative, illiquid, and highly
risky. You should purchase partnership interests only if you can afford to
lose your entire investment. All of the following risks, except payment of
fixed expenses, are present without regard to the amount of partnership
interests sold.
We must pay substantial fees, charges and expenses which must be recovered
before you will receive a return on your investment.
We must pay our fees, charges and expenses before you will realize a profit.
They are:
* fixed brokerage commissions of 4% annually of equity assigned to the
trading advisor to trade
* a 4% annual continuing service fee, payable monthly, to the selling agents
* a management fee on the equity assigned to the commodity trading advisor
of 1% per year
* an incentive fee on new net profits of 20% to the commodity trading
advisor and 5% to the general partner
* yearly expenses estimated at $50,000, of which $45,000 is for accounting
and audit services and $5,000 is for legal services
* variable operating expenses such as telephone, postage, and office
supplies, and
* extra-ordinary expenses such as claims and defense of claims from brokers,
partners, and other parties.
The incentive fees are determined and accrued monthly but paid quarterly to
the general partner and the commodity trading advisor. We may be subject to
substantial incentive fees in the initial quarters of any given year that
will not be refunded, even if we experience subsequent losses that produce a
net loss for that year. See Charges to the Partnership.
You may not transfer your partnership interests and must rely on our
redemption procedures to receive your investment back.
You can assign or transfer your partnership interests with the consent of the
general partner, which will be granted only upon limited circumstances. See
The Limited Partnership Agreement, Transfer Of Units Only With Consent Of The
General Partner and the Limited Partnership Agreement (Exhibit A).
Therefore, you must rely on our redemption procedures to receive your initial
investment adjusted to reflect profits, payment of expenses, and losses. See
The Limited Partnership Agreement, Redemptions.
Your right of redemption is limited.
Our redemption procedures provide:
* the redemption amount will be based upon the net asset value of the
partnership interests as calculated at the end of the month in which the
redemption request is received
* it must be received no less than 10 business days prior to the redemption
effective date and be approved by the general partner, and
* it may not be granted if we do not have enough liquid assets.
Subject to the foregoing limitations, the general partner intends to grant
all redemption requests received no less than ten days prior to the last
business day of the month and will use its best efforts to pay those requests
within twenty days after the last business day of the month in which the
redemption request was received. You may be prevented from redeeming your
partnership interests before they are significantly devalued. See The
Limited Partnership Agreement, Exhibit A, Redemptions.
Further, substantial redemption requests could adversely affect us by:
* the liquidation of positions too rapidly or on unfavorable terms which
prevent us from satisfaction of all redemption requests, or
* the reduction of our available trading equity at a time when we have an
opportunity to earn substantial profit.
The partnership depends upon Mr. Pacult, and his absence could cause the
partnership to cease operations.
You will be relying entirely on the ability of the general partner to select
and monitor the commodity trading advisor selected for the partnership. Mr.
Pacult is the individual general partner and the sole principal and officer
of the corporate general partner. If Mr. Pacult becomes unable to perform
his duties, we could be required to cease operations and trading until a
replacement for him is found.
General partner and commodity trading advisor will serve other businesses and
may not have adequate time to devote to the partnership.
The individual general partner currently manages other commodity pools and
both general partners expect to manage additional pools in the future. They
may negotiate better terms for advisor, clearing and other services for those
other pools in competition with this pool. The commodity trading advisor
currently manages other commodity accounts and may manage new accounts,
including personal accounts and other commodity pools. Although the
commodity trading advisor intends to use similar trading methods for all
accounts it manages, it may vary those methods. Accordingly, there is no
guarantee that our trading results will be similar to or better than any of
the trading advisor's other accounts. Our business could be adversely
affected by the failure of either Mr. Pacult, who is the individual general
partner and also the sole principal of the corporate general partner, or the
trading advisor to devote sufficient time to the partnership affairs. See
Risk Factors, Trading Management, and The Commodity Trading Advisor.
There are conflicts of interest in the partnership structure that may limit
our profits.
Before investing in this partnership, you must consider the actual and
potential conflicts of interest that exist in our structure and operation.
Specifically, Mr. Pacult is also a principal and 50% owner of Futures
Investment Company, the principal selling agent. Therefore, the general
partner will probably not replace Futures Investment Company because it is
paid a 4% annual continuing service fee upon the partnership interests it
sells, including those sold to you.
In addition, because Futures Investment Company is the principal selling
agent and is affiliated with the general partner, no independent due
diligence of this offering will be conducted in regard to interests it sells.
The general partner retains a portion of the 4% fixed annual fee for
brokerage commissions and is paid a 5% incentive fee and, therefore, is
unlikely to resign. See Risk Factors, Conflicts of Interest, and the Limited
Partnership Agreement (Exhibit A).
You will be taxed on profits regardless of whether they are distributed.
We do not intend to make cash distributions from profits. Regardless of
whether distributions are made, if we realize profits for a fiscal year, you
must report that income on your tax returns.
You will have to pay taxes on profits in a current year which may be lost in
future years.
We might sustain losses that offset our profits after the end of the year.
So you might never receive a distribution equal to your share of our prior
year's taxable income. See Federal Income Tax Aspects and The Limited
Partnership Agreement (Exhibit A).
If the general partner selects new trading advisors, they may not be as
profitable as those replaced and the new advisors will not be responsible for
recouping any previous losses.
We rely upon one commodity trading advisor to generate profits pursuant to an
Advisory Contract and Power of Attorney (Exhibits F). Either the general
partner or the trading advisor may terminate their relationship at any time.
If this happens, or if the trading advisor becomes unable to serve us for any
other reason, the general partner would have to find one or more alternate
trading advisors. We cannot guarantee that any alternate trading advisor
will trade as profitably as the original trading advisor, or that it will be
retained on terms that are as favorable. Also, any new trading advisor will
not be obligated to recoup losses, if any, incurred by the prior trading
advisor before it is paid incentive fees on new net profits it generates.
The general partner may change the commodity trading advisor and its
allocation of equity without notice to you.
Without prior notice to you, the general partner may change the commodity
trading advisor and the amount of equity allocated to it at any time, for any
reason.
You will not participate in management and may not contest the business
decisions of the general partner.
You may not manage or conduct our business in any way or you would be deemed
a general partner, which is not allowed by the Limited Partnership Agreement
(Exhibit A). Accordingly, you are bound by the business decisions of the
general partner.
Commodity futures trading is speculative.
Commodity futures, forward, and option contracts have a high risk of loss and
are volatile. Specifically:
* price movements are influenced by such unpredictable variables as: changes
in supply and demand; weather; agricultural trade, fiscal, monetary and
exchange control programs and policies of governments; national and
international political and economic events; and, changes in interest rates,
governments, exchanges, and other market authorities that intervene to
influence prices
* even if the analysis of the fundamental conditions by a commodity trading
advisor is correct, prices still may not react as predicted
* analysis by the use of a computer program to measure price, historical
price averages, momentum and other technical factors deemed important by the
commodity trading advisor may also fail to predict price direction
* it is possible for most of our open positions to be unprofitable at the
same time
* price changes may reach a limit upon which trading rules require a
suspension of trading for a specified period of time. It is possible for
these limits to be reached in the same direction for successive days. This
may prevent us from exiting a position, and when the market reopens, we could
suffer a substantial loss on the position
* losses are not limited to the margin allocated to hold the position and
may exceed the total equity in our account, and
* short positions, which have unlimited risk of loss, will be taken on our
behalf by the trading advisor.
During partnership trading, a small price movement can lead to large losses.
A small amount of money relative to the value of the contract traded, called
margin, must be deposited to place and hold a trade. The margin amount is
typically between 3% and 20% of the value of the contract traded. This
permits a large percentage gain or loss relative to the margin deposit. For
example, if at the time of purchase, 5% of the futures contract price is
deposited as margin, a 5% decrease in the position's value will cause a loss
of all the equity allocated to the trade, which could equal the entire value
of the account. The losses could be substantially more than the margin
deposited and the total value of the account.
The general partner does not control the trading advisor or its methods and
may not be able to prevent large losses.
The commodity trading advisor enters trades on our behalf directly with the
futures commission merchant. The general partner does not know the trades
before they are made, nor does it know the trading advisors' methods, the
number of contracts bought or sold, or the margin required. The trading
advisor will not notify the general partner of any modifications, additions
or deletions to its trading methods and money management principles. We may
suddenly suffer large losses before the general partner knows remedial action
must be taken.
The partnership may be unable to execute a trade before large losses are
incurred due to market illiquidity.
It is not always possible to execute a buy or sell order. Such illiquidity
can be caused by:
* a lack of interest in the contract caused by market conditions which
produce no persons willing to buy or sell, or
* the suspension of trading which may occur because the price limit for a
contract has been reached.
Most United States commodity exchanges limit price movement in a single
direction by rules referred to as price limits. Once these limits have been
reached, no trades may be executed at prices beyond the limits for a
specified amount of time, usually until the next trading day. However, given
sufficient price movement the following day, price limits may be imposed
again. Accordingly, price limits may be in effect for protracted time
periods. No trading may be made in the direction of the price movement while
the limit is in place. The frequency of the imposition of price limits or
the length of time they will be in effect cannot be predicted. This causes
illiquidity and exposure to substantial losses. These losses could exceed the
total equity in our account.
Changes in trading equity may adversely affect performance.
Commodity trading advisors often are unable to adjust to changes in the
amount of money they manage. This is because:
* the larger amount of equity under management requires larger trades to be
made, which may be more difficult to execute
* there are legal limits called position limits upon the number of positions
that may be taken on a particular commodity, and
* it may be more difficult to scale in positions, which is when a trading
advisor takes positions at different prices at different times and then
allocates those positions on a ratable basis when a change in its allocated
equity occurs.
See Appendix I for the full definitions of position limits and scale in
positions.
The commodity trading advisor will not limit the total equity it accepts and
may suffer losses which cause a withdrawal of the equity it manages. A
commodity trading advisor's rate of return tends to decrease as the amount of
equity under management increases.
Failure of commodity brokers or banks could result in loss of assets.
If the futures commission merchant or other entity with which our money is on
deposit becomes bankrupt, we might only recover some, if any, of the equity
in our account. The deposits in our bank accounts will be insured for only
$100,000 and payment on insured deposits may be delayed.
When trading in foreign exchanges, if the creditworthiness of the other
parties or the foreign currency is not maintained, we may lose the value of
our positions in those markets.
Trading commodities involves entering a contract, or option to contract, for
the delivery of goods or money at a future date. The value of the contract
or option depends directly upon the creditworthiness of the parties and the
value of the item traded. The commodity trading advisor trades commodities
on United States commodity exchanges, foreign commodity exchanges, and the
inter-bank currency markets. The commodity exchange contracts and options
traded on United States exchanges are guaranteed by the members' credit.
There Contracts and options upon foreign commodity exchanges and the inter-
bank currency markets are usually not regulated by specific laws and are
backed only by the parties to the contracts. It is possible for a price
movement or a devaluation of a particular foreign currency to be large enough
to destroy the creditworthiness or value of
* the contracts and options issued by a particular party or government, or
* all of the contracts and options of an entire market.
In either of those situations, we could lose the entire value of a position
with little recourse to regain any of its value.
Option trading is highly risky and requires less equity to secure a trade,
thus providing greater potential for loss.
We expect to trade options, both puts and calls. After a position is taken,
a liquid market may not exist for any particular commodity option or at any
particular time. In an illiquid market, we may not be able to buy or sell to
offset, or liquidate, the positions we have taken.
Option trading allows us to trade with less equity on deposit. Accordingly,
the risk of loss of the entire account is great.
If the price of a contract changes dramatically, we may not be able to exit
the position without sustaining substantial loss due to government imposed
price limits.
The Commodity Futures Trading Commission and the United States commodity
exchanges have established limits referred to as Speculative Position Limits
or Position Limits. These are different from the price limits described
before. They are limits on the maximum net long or net short futures or
options positions which any person or group of persons may own, hold, or
control in futures contracts. The positions taken among all commodity
accounts owned, controlled or managed by a trading advisor and its principals
are combined for position limit purposes. Thus, a trading advisor may not be
able to hold sufficient positions for us to maximize the return on a
particular trade because it may be taking similar positions for others.
We may not be able to compete with others with greater resources.
Commodity futures trading is highly competitive. We compete with others who
may have
* greater experience
* more extensive information about developments affecting the futures
markets
* more sophisticated means of analyzing and interpreting the futures
markets, and
* greater financial resources.
Those with greater experience and financial resources have a better chance at
trading profitably. For instance, we will not maintain a warehouse to take
delivery of commodities and will not have a large capital base to allow us to
hold positions through bad times.
Resignation of Mr. Pacult as a general partner and subsequent failure of
Belmont to maintain its net worth may cause suspension of trading or taxation
as a corporation.
The North American Securities Administrators Association has established
guidelines for commodity pools structured as limited partnerships. Those
guidelines require that a sole corporate general partner maintain a net worth
during the offering period of either 5% of the offering amount or not less
than $50,000, nor more than $1,000,000. Belmont presently has insufficient
capital to meet this guideline and, therefore, the loss of Mr. Pacult as an
individual general partner could result in the suspension of sales in states
which follow the guidelines.
Any general partner wishing to voluntarily withdraw from the partnership must
give 120 days prior written notice to the limited partners. If a general
partner withdraws and the limited partners or remaining general partner
elects to continue the partnership, the withdrawing general partner shall pay
all expenses incurred as a result of its or his withdrawal.
When the sole general partner of a partnership is a corporation, the tax
rules require conditions to be met to allow the partnership to be taxed as a
partnership and not as a corporation. To be taxed as a partnership requires
that two or more of the following tests be met:
* decentralized management
* unlimited liability
* limited transferability of shares, and
* limited continuation of existence.
If we were not taxed as a partnership, the partnership income would be taxed
at corporate rates and would be distributed to the partners as dividends.
The partnership has an individual general partner and, therefore, the
unlimited liability test of a partnership is met. If Mr. Pacult resigned or
otherwise could not serve as a general partner, the partnership must either
have a substitute individual partner or be structured to satisfy the
guidelines to be taxed as a partnership.
Our tax status has not been confirmed by an IRS ruling. No such ruling has
been or will be requested on our behalf. If we are taxed as a corporation
for Federal income tax purposes in any taxable year(s),
* our income or loss would not be passed through to you
* we would be taxed at corporate rates
* all or a portion of any distributions made to you would be taxed to you as
dividend income, and
* the amount of such distributions would not be deductible by us in
computing our taxable income.
See Federal Income Tax Aspects.
If Mr. Pacult resigns and Belmont becomes the sole general partner, it will
use its best efforts to satisfy the requirements necessary to permit us to be
taxed as a partnership.
The general partner will not advise you, and you must rely upon your own
counsel before investing in the partnership.
Purchasing partnership interests does not create an Individual Retirement
Account, commonly called an IRA, and the creation and administration of an
IRA are solely your responsibility. The assets of a retirement account
should be carefully diversified and you should only allocate high risk
capital to this partnership. If you invest a significant portion of your
retirement plan or IRA assets in this partnership, you could be exposing that
portion to significant loss. The general partner will not advise you in any
manner on an investment in this partnership, including matters of
diversification, prudence, interpretation of the partnership agreement, and
liquidity. Accordingly, you must rely upon the experience of qualified
legal, investment and tax counsel you select.
The partnership is not covered by the Investment Company Act of 1940.
Stock investment companies and investment advisors must be registered under
the Investment Company Act of 1940, as amended. Because the business of the
partnership, Belmont Capital Management, Inc., Mr. Pacult and the commodity
trading advisor involves only the trade of futures regulated pursuant to the
Commodity Exchange Act, none of them is required, nor does any of them
intend, to be registered under the Investment Company Act of 1940 or any
similar state law. Therefore, you are not protected by any such legislation.
Possibility of audit - you may be subject to audit and penalties.
If our return is audited, the IRS may make adjustments to our reported items.
If an audit results in an adjustment, you may be:
* required to file amended returns
* subject to a separate audit, and
* required to pay back taxes, plus penalty and interest.
General partner may settle IRS claim not in your best interest.
Belmont Capital Management, Inc. is named tax matters partner. This grants
it the power to settle any IRS claim on your behalf if you hold 1% or less
interest in this partnership and do not timely object to the tax matters
partner's authority, after notice. Such settlement may not necessarily be in
your best interest. See Federal Income Tax Aspects.
You may be subject to back taxes and penalties.
The Scott Law Firm, P.A. has delivered an opinion to the general partner that
this partnership, as presently operated by the general partner, will be taxed
as a partnership and not as a corporation. This opinion does not include the
tax treatment of expenses to prepare the prospectus and selling expenses
because they have to be allocated between expenses attendant to formation and
ordinary business expenses by the general partner. In addition, commodity
trading advisor fees are combined with employee business expenses and other
expenses of producing income and are deductible only if the operation of the
partnership is the conduct of a trade or business. The general partner
believes that our intended operations qualify as a trade or business.
The general partner may raise the incentive fee to 27% without prior notice
to you.
The general partner has reserved the right to raise, without prior notice to
you, the incentive fee to a maximum of 27% while lowering the total
management fees between the commodity trading advisor and general partner to
0%. The general partner will notify you of any change in fees within seven
business days.
Conflicts Of Interest
There are present and potential future conflicts of interest in our structure
and operation you should consider before you purchase partnership interests.
The general partner will use this explanation of conflicts as a defense
against any claim or other proceeding made against Mr. Pacult, Belmont
Capital Management, Inc., the commodity trading advisor, the futures
commission merchant, the principal selling agent, or any principal or
affiliate, agent or employee of any of them.
General partner, the commodity trading advisor, the futures commission
merchant, the selling agents and their principals may preferentially trade
for themselves and others.
Because the general partner, the commodity trading advisor, the futures
commission merchant, the selling agents and their principals and affiliates
may trade for themselves and others, conflicts of interest may exist or be
created in the future. For example, if any of them trade for their own
account, you will not have access to their trading records. They could take
their positions prior to the entry of positions they know will be placed for
the partnership, although they have stated they will not do so.
Possible retention of voting control by the general partner may limit your
ability to control issues.
The general partner, its principal and its affiliates may purchase an
unlimited amount of partnership interests. These persons include Mr. Pacult
as general partner and as a principal of Futures Investment Company, the
principal selling agent. It is possible that they could purchase enough
partnership interests to retain voting control. They could then vote,
individually or as a block, to create a conflict with your best interests.
Such voting control may limit the limited partners' ability to achieve a
majority vote on such issues as:
* amendment of the Limited Partnership Agreement
* change in our basic investment policy
* dissolution of this partnership, or
* the sale or distribution of our assets.
However, neither general partner may vote, directly or indirectly, on the
issue of their removal.
The general partner is not likely to resign, even if it would be in your best
interest.
It is unlikely that either general partner, Mr. Pacult or Belmont Capital
Management, Inc., would voluntarily resign, even if it would be in your best
interest, because Belmont is paid a 5% incentive fee and the difference
between the 4% annual fixed fee for brokerage commissions and the round turn
commission paid to the futures commission merchant, and because Mr. Pacult
serves as both an individual general partner and the sole shareholder,
director and principal of Belmont.
Partnership fees may be higher than they would be if they were negotiated.
The fixed annual brokerage commission of 4% of equity assigned to the trading
advisor to trade to Belmont Capital Management, Inc. has not been negotiated
at arm's length. The general partner:
* accepts the credit risk of the partnership to the futures commission
merchant
* maintains the day to day contact with the selling agents and the commodity
trading advisor
* reviews the daily positions and margin requirements of the partnership
* pays the futures commission merchant's charges, and
* pays the continuing service fees to the selling agents for communicating
with investors and maintaining investment in the partnership.
Mr. Pacult is the principal of the corporate general partner and a principal
and 50% owner of Futures Investment Company the principal selling agent. He
has a conflict of interest because he receives compensation from the 4% fixed
brokerage commissions paid to the corporate general partner and the 4%
continuing service fee paid to the principal selling agent, Futures
Investment Company. From the 4% fixed brokerage commissions paid to the
corporate general partner, the corporate general partner must pay round turn
brokerage commissions to the futures commission merchant. The corporate
general partner will keep any remaining portion of the 4%. The 4% continuing
service fee per year is paid by the partnership to the selling agents for
payment, as they determine, to the associated persons who sold partnership
interests to the other partners and you. Mr. Pacult and his wife, as
associated persons, will be paid a portion of the 4% paid to Futures
Investment Company, the principal selling agent, for interests they sell.
The corporate general partner is paid a 5% incentive fee on new net profit in
lieu of a management fee that also has not been negotiated at arms length.
The 4 % fixed brokerage commission and the incentive fees that total 25% are
believed by the general partner to be reasonable.
Our profitability may be limited due to competition among traders and their
unaccountability for previous losses.
The general partner has sole and absolute discretion to select and terminate
commodity trading advisors. The partnership currently only has one commodity
trading advisor. However, if at any time in the future, multiple advisors
are appointed, each will trade independently of the others and will be
entitled to payment of incentive fees should they individually produce
profits without regard to the profitability of the partnership. Also, they
may compete for similar positions or take positions opposite each other,
which may limit our profitability. If a trading advisor is replaced, the new
trading advisor will receive any earned incentive fees regardless of the
previous trading advisor's performance.
Your ability to redeem your partnership interests may be limited.
The general partner receives a 4% fixed brokerage commission to clear trades
for us. It keeps the difference between the amount charged to the
partnership and the per round turn charged to clear trades by the futures
commission merchant. This gives the general partner an incentive to withhold
distributions and to discourage redemption because the more money available
to trade, the more commissions are generated. The general partner will try
to honor all redemption requests within twenty days after the last day of the
preceding month in which the request was made. However, if the partnership
does not have enough liquid assets, it may not be able to honor the request
on time, or possibly at all.
Commodity trading advisor may engage in high risk trading to generate fees.
As a general rule, the greater the risk assumed, the greater the potential
for profit. Because the commodity trading advisor receives 20% of our new
net profits, it might select trades that are too risky for us. Because the
corporate general partner receives 5% of our new net profits, it and Mr.
Pacult may elect to not object to these trades when they otherwise would
have.
Mr. Pacult has sole control over the time he will allocate to the management
of the partnership.
Mr. Pacult is responsible for:
* managing this partnership
* managing two other commodity pools:
* Atlas Futures Fund, LP, and
* Providence Select Fund, LP
* selling limited partnership interests in all the above commodity pools,
from time to time
* performing other investor relations services as a principal and registered
representative of Futures Investment Company.
Mr. Pacult has also reserved the right to trade for his own account and to
form and manage other commodity pools and ventures. Mr. Pacult is solely
responsible for the allocation of his time to the management of this
partnership as well as the other projects he currently manages and will
manage in the future. Mr. Pacult manages his time, in part, by the
delegation of many of the tasks, such as trade selection and preparation of
financial reports and offering documentation, to independent commodity
trading advisors, accountants, and attorneys. Mr. Pacult believes he
presently has and will, in the future, have sufficient time to devote to the
affairs of the partnership.
No Resolution Of Conflicts Procedures
As is typical in many futures partnerships, the general partner has not and
will not establish formal procedures to resolve potential conflicts of
interest. These future potential conflicts may adversely affect both you and
us. However, the general partner has taken steps to alleviate any real or
potential conflict of interest by the establishment of segregated accounts to
hold partnership equity at the banks and futures commission merchant. Also,
the general partner has assured the selling agents and all other partners
that all money on deposit is in the name of and for the beneficial use of the
partnership.
The previous risk factors and conflicts of interest are complete as of the
date of this prospectus, however, additional risks and conflicts may occur
which are not presently foreseen by the general partner. You may not
construe this prospectus as legal or tax advice. Before making an investment
in this partnership, you should read this entire prospectus, including the
Limited Partnership Agreement (Exhibit A) and the subscription agreement.
You should also consult with your personal legal, tax, and other professional
advisors. See Investor Suitability.
Interests Of Named Experts And Counsel
The general partner has employed The Scott Law Firm, P.A., a Florida
professional corporation, to prepare this prospectus, provide tax advice and
opine upon the legality of issuing the partnership interests. Neither the
law firm, its principal, any accountant, nor any other expert hired by the
partnership to give advice on the preparation of this offering document have
been hired on a contingent fee basis. Nor do any of them have any present or
future expectation of interest in the general partner, the selling agent, the
commodity trading advisor, or the futures commission merchant.
Management's Discussion And Analysis
The Partnership
Bromwell Financial Fund, Limited Partnership is a Delaware limited
partnership organized on January 12, 1999 and maintains its main business
office at 5916 N. 300 West, P. O. Box C, Fremont, IN 46737, (260) 833-1306.
It is qualified to be a commodity pool to engage in the speculative trading
of futures, commodity options and forward contracts on currencies, interest
rates, energy and agriculture products, metals, and stock indices.
Our business objective is to let our invested capital appreciate while
controlling losses; however, there can be no assurance that we will meet this
objective.
The partnership is managed by Belmont Capital Management, Inc., a Delaware
corporation, and Mr. Michael P. Pacult.
We do not have officers or employees, which is why there is no report of
executive compensation in this prospectus.
We operate pursuant to the terms of the limited partnership agreement
attached as Exhibit A, which:
* grants full management control to the general partner including, the right
to employ independent trading managers called commodity trading advisors, and
* will terminate at 11:59 p.m. on January 12, 2020, or upon an event causing
an earlier termination.
Except for the limited partnership agreement, the partnership may not enter
any contract with the general partner or a commodity trading advisor that is
greater than one year in duration. However, all such contracts are expected
to be renewed yearly and are terminable without penalty upon sixty days, or
less, written notice by the partnership.
The General Partners
The corporate general partner is Belmont Capital Management, Inc., a Delaware
corporation incorporated on January 12, 1999. It was registered as a
commodity pool operator on August 5, 1999 and maintains its main business
office at 5916 N. 300 West, P.O. Box C, Fremont, IN 46737, (260) 833-1306.
Michael P. Pacult, its sole shareholder, director and president, manages it.
The individual general partner is Michael P. Pacult, who was registered as a
commodity pool operator on July 28, 2003 and maintains his main business
office at 5916 N. 300 West, P.O. Box C, Fremont, IN 46737, (260) 833-1306.
The individual and corporate general partners and the partnership will comply
with all applicable registration and other requirements under the Commodity
Exchange Act, as amended.
Experience
Belmont has managed this commodity pool since its inception on January 12,
1999. Mr. Pacult has been supervising individual managed commodity accounts
for over twenty-two years and serves in several capacities in two other
commodity pools, as follows:
Commodity Pool Mr. Pacult Serves As
Atlas Futures Fund, LP Individual general partner and sole
(publicly offered, began trading 10/99) principal of the corporate general
partner
Providence Select Fund, LP Individual general partner and sole
(to be publicly offered, principal of the corporate general
presently in registration) partner
Authority
Mr. Pacult is the sole shareholder, director and principal of Belmont Capital
Management, Inc. and also the individual general partner, therefore, Mr.
Pacult is the sole decision maker of this partnership. Having said that, the
signature of either Belmont or Mr. Pacult, individually, may legally bind
this partnership.
The general partner is authorized to take all actions necessary to manage the
affairs of the partnership. See Article II of the Limited Partnership
Agreement attached as Exhibit A.
Partnership Books and Records
Our books and records will be maintained for six years at 5916 N. 300 West,
Fremont, IN 46737. A duplicate set of the books will be maintained by Mr.
James Hepner, Certified Public Accountant, 1824 N. Normandy, Chicago, IL
60635, (773) 804-0074. Mr. Hepner also prepares the Form K-1 for each
partner in the partnership. You may access our books and records by visiting
either office at a time convenient for both parties, and you may have copies
made at that time at a reasonable charge per page. The general partner
serves as tax partner for the partnership. Frank L. Sassetti, & Co., 6611
West North Avenue, Oak Park, IL 60302 conducts our annual audit and the
annual audit of the corporate general partner, and prepares our tax returns.
The Commodity Trading Advisor
To conduct trading on our behalf, the general partner has initially selected
an independent commodity trading advisor, Fall River Capital, LLC. Without
prior notice to you, the general partner has sole discretion to employ
additional trading advisors, terminate a trading advisor, and change the
amount of equity any advisor may trade. However, the general partner will
give you notice of any change in trading advisors within seven days of such
change. Such notice will include a description of your right to redemption.
No change in trading advisor will constitute a material change to the limited
partnership agreement or the structure of our operation. All trading
advisors employed to trade for the partnership will be registered with the
Commodity Futures Trading Commission and will have at least three years of
experience as a trading advisor.
The Advisory Contracts
The general partner has assigned a substantial portion of our assets to the
trading advisor, the terms of which are governed by an advisory contract and
power of attorney between the trading advisor and us. See Exhibit F.
The agreement provides the trading advisor with a revocable power of
attorney, which gives it sole authority to determine
* the markets to be traded
* the location of those markets
* the size of the position to be taken in each market, and
* the timing of entry and exit in a market.
The agreement may be terminated, at any time, upon notice from one party to
the other and to the futures commission merchant.
Business Objective And Expenses
Our objective is to achieve the potentially high rates of return that are
possible through the speculative trading of futures, commodity options and
forward contracts. We do not expect to engage in any other business.
The general partner organized this partnership to be a commodity pool, as
that term is defined in the Commodity Exchange Act. It employs an
independent commodity trading advisor to trade for us.
The general partner intends to allocate substantially all of our net assets
to the trading advisor to conduct this trading. The trading advisor
typically allocates 20% to 40% of the trading equity assigned to it to secure
the trading positions it selects.
Although we do not expect to make distributions, you will nevertheless be
required to pay yearly Federal, state and local taxes upon income, if any,
earned by this partnership. The general partner recommends that the
partnership interests be purchased as a long-term investment.
There can be no assurance that we will achieve our business objectives, be
able to pay the substantial commissions, fees and other costs to do business,
or avoid substantial trading losses. See Charges to the Partnership.
Below is a chart explaining the expenses we expect to incur during our twelve
months of trading beginning the effective date of this prospectus. All
interest income is paid to the partnership. All computations are based upon
the assumption that the per unit value, total invested equity on deposit and
equity available for trading remain constant during the next twelve months.
Expenses Per Unit of Partnership Interest
For The Next 12-Month Period Of Operations
Based Upon Current Based Upon Maximum
Net Asset Value Units To Be Sold
Units 1,257 Units 6,980 Units
($1,036,900) ($5,756,800)
Selling Price per Unit (1) $824.69 $824.69
Annual Expenses (2) 26.25 4.73
Trading Advisor's Management Fees (3) 8.00 8.00
Trading Advisor's and General Partner's
Incentive Fees on New Net Profits (4) 0.00 0.00
Brokerage Commissions and Trading Fees (5) 32.00 32.00
Continuing Service Fee (6) 32.99 32.99
Less Interest Income (7) (24.00) (24.00)
Amount of Trading Income Required to
Redeem Unit At Selling Price After
One Year (8) $ 75.24 $ 53.72
Percentage of Initial Selling Price Per Unit 9.12% 6.51%
Explanatory Notes:
(1) Investors will purchase partnership interests at the partnership's month
end net asset value per partnership interest. As of December 31, 2003, this
was $824.69, which is the value used in the table.
(2) The partnership must pay yearly expenses of approximately $18,500 for
accounting, $9,500 for audit and $5,000 for legal.
(3) The commodity trading advisor is paid a monthly management fee of 1/12%
of the trading equity allocated to it on deposit at the futures commission
merchant, calculated as of the close of business of the last trading day
during the previous month.
(4) The commodity trading advisor receives an incentive fee of 20% and the
corporate general partner receives an incentive fee of 5% of new net profits
earned each quarter upon the trading equity assigned to the trading advisor.
Breakeven will be achieved without attainment of new net profit and,
therefore, no incentive fee will be paid to the general partner and the
trading advisor.
(5) Brokerage commissions and trading fees are fixed by the general partner
at 1/3% monthly, 4% annually, of our assets on deposit with the futures
commission merchant. For purposes of this calculation, we assumed 97% of our
assets will be deposited with the futures commission merchant and that the
number of partnership interests outstanding during the next twelve months
will remain constant.
(6) The partnership pays a 4% continuing service fee to the selling agent on
the total investment sold by that agent for so long as the investment remains
in the partnership.
(7) We earn interest on deposits with the futures commission merchant. Based
on current interest rates, interest income is estimated at 3% annually.
(8) This computation assumes there will be no claims or other extra-ordinary
expenses during the first year.
We do not represent that the above table will reflect our actual operating
expenses or interest income. There can be no assurance that our expenses
will not exceed the amounts projected or that there will not be claims or
other extra-ordinary expenses.
Securities Offered
We, Bromwell Financial Fund, Limited Partnership, will offer and sell limited
partnership interests in this partnership at a value determined by the month
end net asset value of the partnership. See Determination Of The Offering
Price.
You, the Investor:
* will have:
* pro rata rights to profit and losses which will vary with your
investment amount
* the right to vote on partnership matters such as the replacement of the
general partner. See The Limited Partnership agreement attached as Exhibit
A.
* will not:
* be responsible for our debts in excess of your investment amount;
unless:
* we become insolvent; and
* you receive distributions which represent a return on your investment
which, under certain circumstances, you would have to return to us to pay our
debts, or
* you acquire any interest in the corporate general partner, Belmont
Capital Management, Inc., or
* you manage this partnership
See Plan For Sale of Partnership Interests and Subscription Requirements.
Your subscription agreement and check:
* must be approved by the general partner before you will become a partner
and will be accepted or rejected within five business days of receipt
* becomes irrevocable and may not be withdrawn five days after submission;
unless, a longer statutory withdrawal period applies to you, and
* will be deposited and held until you are admitted into the partnership in
a segregated escrow account maintained by the general partner as escrow
agent.
There cannot be any assurance that additional partnership interests will be
sold. The general partner is authorized, in its sole discretion, to
terminate this or any future offering of partnership interests.
Management's Discussion
This is the continuation of the offering of our partnership interests. We:
* may conduct future offerings after the close of this offering
* raise money only through offerings, such as this one, and do not intend to
borrow any money
* must pay expenses to qualify and sell our partnership interests, such as
fees for the preparation of this prospectus, sales literature, and web site
promotion, as well as other expenses
* allocate all our net assets to trading and other investments, except those
assets used to pay capital and operating expenses
* have no directors, officers or employees, which is why there is no report
of executive compensation in this prospectus, and
* conduct all our business through the general partner.
Description of Intended Operations
The general partner has selected Citigroup Global Markets, Inc. to serve as
the futures commission merchant. The partnership has deposited its funds to
the futures commission merchant to hold as security for the trades selected
by the commodity trading advisor. The futures commission merchant has been
directed to send the general partner, before the open of business each day, a
computer or fax report that describes
* the positions held
* the margin allocated, and
* the profit or loss on the positions from the date the positions were taken
Risk Control
The general partner reviews the daily transmissions provided by the futures
commission merchant and makes appropriate adjustments to the allocation of
trading equity. Based upon the amount of available trading equity, the
trading advisor has sole discretion to:
* make specific trades,
* determine the number of positions taken, and
* decide the timing of entry and departure from each trade made.
The general partner uses its best efforts to monitor the daily value of the
partnership, which its independent accountant calculates from the daily
information provided by the futures commission merchant, and will make such
information available to limited partners upon request. However, the
accountant calculates the net asset value only after the close of the last
business day of each month. If the daily net unit value falls to less than
50% of the highest value earned through trading, then the general partner
will:
* immediately suspend all trading
* provide you with immediate notice of the reduction in net unit value, and
* give you the opportunity, for 15 days after the date of such notice, to
redeem your partnership interests according to the provisions of Article IX,
Sections 9.5 and 9.6 of the Limited Partnership Agreement.
No trading shall commence until after the lapse of such fifteen-day period.
See Exhibit A attached.
Trading Risks
Most United States commodity exchanges limit daily fluctuations in commodity
futures contracts prices by regulations referred to as daily price
fluctuation limits or daily limits. Once the price of a futures contract has
reached the daily limit for that day, positions in that contract can neither
be taken nor liquidated. Commodity futures prices have occasionally moved
the daily limit for several consecutive days with little or no trading.
Such an occurrence could prevent us from promptly liquidating unfavorable
positions and subject us to substantial losses. These losses could exceed
the margin initially required to make the trade. In addition, even if
commodity futures prices have not moved the daily limit, we may not be able
to execute futures trades at favorable prices. This may be caused by light
trading in such contracts or by a sudden and substantial price move in a
futures or forward contract. These limitations on liquidity are inherent in
our proposed commodity futures trading operations. Otherwise, our assets are
expected to be highly liquid.
Except for payment of offering and other expenses, the general partner is
unaware of any anticipated:
* known demands, commitments or required capital expenditures,
* material trends, favorable or unfavorable, which will affect our capital
resources, or
* trends or uncertainties that will have a material effect on operations.
Each United States commodity exchange, with the approval of the Commodity
Futures Trading Commission, and the futures commission merchant establish
minimum margin requirements for each traded contract. The futures commission
merchant will require the margin assigned for each account to be on deposit
before a trade will be accepted. The futures commission merchant may
increase the margin requirements above these minimums for any or all
contracts for its customers. Because we generally use a small percentage of
assets for margin, we do not believe that any increase in margin requirements
will materially affect our proposed operations. However, it is possible for
an increase in margins applicable to the trades the advisor selects for us to
force us to liquidate positions because we cannot meet the additional margin
requirements.
Management cannot predict whether the value of our partnership interests will
increase or decrease. Inflation is not projected to be a significant factor
in our operations, except to the extent inflation influences futures prices.
Fiduciary Responsibility Of The General Partner
You have legal rights under Delaware partnership and applicable Federal and
state securities laws. In all dealings affecting this partnership, the
general partner has a fiduciary responsibility to you and all other partners
to exercise good faith and fairness. No contract shall permit the general
partner to contract away its fiduciary obligation under common law. The
limited partnership agreement conforms with the Uniform Limited Partnership
Act for the State of Delaware in regard to the definition of the fiduciary
duties of the general partner.
You have a right to initiate legal proceedings related to the partnership in
the following circumstances:
If, after demand from you, the general partner fails to take action to
recover damages from third parties, you may initiate proceedings on behalf of
the partnership and, upon an appropriate award from the court pursuant to
Delaware law, obtain reimbursement of your legal fees and costs from the
amount recovered.
You may bring an action against the general partner in either Federal or
state court should you believe the general partner or others have breached
its fiduciary duty to the partnership or committed a breach of any Federal or
state securities laws.
You may seek reparations for the amount of your investment and damages should
the general partner or others breach of the Commodity Exchange Act or order
of the Commodity Exchange Commission in regard to your investment.
If the general partner acts in good faith and exercises its best judgment, it
will not be liable merely because we lost money or otherwise did not meet our
business objectives. Additionally, there are substantial and inherent
conflicts of interest in the partnership's structure which are inconsistent
with the general partners' fiduciary duties. The general partner intends to
raise the disclosures made in this prospectus and the representations you
make in the subscription agreement as a defense in any proceeding brought
which seeks relief based on the existence of such conflicts of interest. See
Conflicts of Interest.
The responsibility of a general partner to you and other partners is a
changing area of the law. If you have questions concerning the
responsibilities of the general partner, you should consult your legal
counsel.
Indemnification
Provisions of Limited Partnership Agreement
The limited partnership agreement protects the general partner from being
responsible or accountable for any act or omission, for which you, other
limited partners or the partnership itself may claim it is liable, provided
that:
* the general partner determined such act or omission was within the scope
of its authority and in the best interest of this partnership, and
* such action or failure to act does not constitute misconduct or a breach
of the Federal or state securities laws related to the sale of partnership
interests.
Specifically, if the general partner
* has acted within the scope of its authority and
* is being assessed a demand, claim or lawsuit by a partner or other entity,
the partnership will defend, indemnify and hold the general partner harmless
from and against any
* loss, liability, damage, cost or
* expense, including attorneys' and accountants' fees and expenses incurred
in defense of any demands, claims or lawsuits
which were actually and reasonably incurred and arising from any act,
omission, activity or conduct undertaken by or on behalf of the partnership.
Provisions of Law
According to applicable law, indemnification of the general partner is
payable only if:
* the general partner determined, in good faith, that the act, omission or
conduct that gave rise to the claim for indemnification was in the best
interest of the partnership
* the act, omission or activity that was the basis for such loss, liability,
damage, cost or expense was not the result of negligence or misconduct
* such liability or loss was not the result of negligence or misconduct by
the general partner, and
* such indemnification or agreement to hold harmless is recoverable only out
of the assets of the partnership and not from the partners, individually.
Provisions of Federal and State Securities Laws
This offering is made pursuant to Federal and state securities laws. If any
indemnification of the general partner arises out of an alleged violation of
such laws, it is subject to the following legal conditions.
Those conditions require that no indemnification may be made in respect of
any losses, liabilities or expenses arising from or out of an alleged
violation of Federal or state securities laws unless:
* there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the general partner or
other particular indemnitee, or
* such claim has been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the general partner or other particular
indemnitee, or
* a court of competent jurisdiction approves a settlement of the claims
against the general partner or other agent of the partnership and finds that
indemnification of the settlement and related costs should be made, provided,
however, before seeking such approval, the general partner or other
indemnitee must apprise the court of the position held by regulatory agencies
against such indemnification. These agencies are the Securities and Exchange
Commission and the securities administrator of the state or states in which
the plaintiffs claim they were offered or sold partnership interests.
Provisions of the Securities Act of 1933 and NASAA Guidelines
The Securities and Exchange Commission and the various state securities
administrators believe that indemnification for liabilities arising under the
Securities Act of 1933 are unenforceable because such indemnification is
against public policy as expressed in the Securities Act of 1933 and the
North American Securities Administrators Association, Inc. commodity pool
guidelines.
Provisions of the Clearing Agreement
We clear trades through our futures commission merchant, Citigroup Global
Markets, Inc. According to the clearing agreement that governs these trades,
we must indemnify Citigroup Global Markets, Inc. for any reasonable outside
and in-house attorney's fees incurred by it arising from any failure for the
partnership to perform its duties under the clearing agreement.
Other Indemnification Provisions
The general partner has indemnified the selling agent, Futures Investment
Company, and expects to indemnify any other selling agents it selects that
there are no misstatements or omissions of material facts in this prospectus.
Relationship With The Futures Commission Merchant And The Selling Agent
The general partner has initially engaged Futures Investment Company as the
sole broker dealer. It sells partnership interests and supervises regulatory
compliance.
Mr. Michael P. Pacult serves as:
* a stockholder, director and officer of Futures Investment Company, the
principal selling agent
* a general partner and one of the commodity pool operators of this
partnership, and
* the sole shareholder, director and principal of Belmont Capital
Management, Inc., the corporate general partner and one of the commodity pool
operators of this partnership.
Belmont Capital Management, Inc., the corporate general partner, has engaged
Citigroup Global Markets, Inc. to serve as the futures commission merchant to
open and close the trades selected by the trading advisor for the partnership
account.
Brokerage Commissions are Competitive
The general partner believes a fixed percentage brokerage commission of 4%
annually on the equity assigned to the trading advisor is competitive. The
general partner has the right to select any substitute or additional selling
agents or futures commission merchants or add any introducing brokers at any
time, for any reason. However, neither the corporate general partner, nor
Mr. Pacult acting as a general partner, is likely to dismiss the current
principal selling agent because of its affiliation with Mr. Pacult.
The futures commission merchant and the selling agents act for other
commodity pools that have retained either or both of the general partners of
this partnership. Either general partner or any other commodity pool may
obtain rates to clear trades from the general partner which are more
favorable to their accounts than the 4% fixed brokerage commissions the
general partner charges the partnership.
Relationship With The Commodity Trading Advisor
The Commodity Trading Advisor Will Trade For Other Accounts
The commodity trading advisor will trade for its own accounts and for others
on a discretionary basis. It may use trading methods, policies and
strategies for others that differ from those used for us. Consequently, such
accounts may have different trading results from ours.
Because the trading advisor trades for itself and others, it is possible for
it to take positions ahead of or opposite to the positions taken for us.
This would present a potential conflict of interest. See Appendix I for
Taking Positions Ahead of the Partnership.
Pursuant to Commodity Futures Trading Commission Regulation 421.03, the
trading advisors will use the average price system for those futures and
options contracts where its use is authorized, when:
* trades taken on behalf of both the partnership and the trading advisor's
other accounts are identical, and
* the prices of such trades are different.
See Appendix I for the definition of Average Price System.
The commodity trading advisor has also informed the general partner that when
the average price system is not available, trades will be filled in order
based on the numerical account numbers, with the lowest price allocated to
the lowest account number and in numerical matching sequence, thereafter.
Non-Disclosure Of The Commodity Trading Advisor's Methods
We have provided a general description of the commodity trading advisor's
methods and strategies under The Commodity Trading Advisor, Description of
Trading Program. However, the specific details of its trading methods are
proprietary and complex in nature and will not be disclosed to us or you. No
notice will be given to you of any changes the trading advisor may make in
its trading methods. See Risk Factors, No Notice of Trades or Trading
Method.
Charges To The Partnership
As an investor in this partnership, you will pay your pro rata share of the
cost of our formation and operation. These charges are described in
narrative form and in the chart that follows this narrative. In this
prospectus, we have disclosed all compensation, fees, profits and other
benefits, including reimbursement of out-of-pocket expenses, which the
general partner and its affiliates will earn in connection with this
offering. Most of these charges were not negotiated at arm's length, but
rather were determined by the two general partners and their affiliates.
Compensation Of General Partner
We pay the corporate general partner, Belmont Capital Management, Inc., fixed
brokerage commissions of 4% annually from which it must pay the futures
commission merchant the cost of the trades entered by the commodity trading
advisor. Belmont retains the difference between the 4%, if any, and the
clearing and service fee costs paid to the futures commission merchant.
The partnership pays the general partner an incentive fee equal to 5% of the
new net profit produced by the partnership.
Compensation Of The Commodity Trading Advisor
The commodity trading advisor has been allocated equity to trade, which has
been deposited in an account with the futures commission merchant. Fall
River Capital, LLC is allocated equity through partnership accounts
maintained at Citigroup Global Markets, LLC. Each month, we deduct from its
account 1/12%, or 1% annually, computed upon the close of business on the
last trading day of the previous month and pay it directly to the trading
advisor as a management fee. The general partner has reserved the right to
change this fee at its sole discretion. See Charges to the Partnership,
Restrictions on Management Fees.
The partnership also pays the trading advisor an incentive fee equal to 20%
of the new net profit it produces. If we engage more than one trading
advisor, it would be possible for one advisor to earn an incentive fee while
the partnership as a whole lost money because of the poor trading performance
of the other advisor. New net profit:
* is calculated to determine how much a trading advisor has increased our
net assets through trading alone
* is based upon the net value of the equity assigned to the trading advisor
to trade
* is calculated monthly but paid quarterly
* is only paid when any losses in previous quarters have been offset by new
profits by the trading advisor, regardless of whether:
* the general partner has changed the trading advisor's compensation, or
* the partnership and trading advisor have entered a new contract
* is adjusted to eliminate the effects of:
* any new subscriptions for partnership interests
* redemptions by partners
* interest income paid by the futures commission merchant, and
* any other income earned on our assets that are not related to trading
activity, regardless of whether such assets are held separately or in a
margin account.
The following hypothetical table illustrates the quarterly incentive fee that
would be based on the net income, as calculated above, that is earned for the
partnership.
Qtr Net Income Incentive Fee (25%)
1 $ 1,000 $ 250
2 (200) 0
3 1,000 200
4 500 125
Restrictions on Management Fees
Some of the states in which we sell partnership interests require that we
comply with the North American Securities Administrators Association
Guidelines for commodity pools. These guidelines provide that:
* the total management fees, including that of the general partner and the
commodity trading advisor, may not exceed 6% of our net assets, and
* incentive fees based upon profits earned may not exceed 15% of new net
profits.
Provided, however, without prior notice to you, the general partner has the
right to increase the incentive fee by 2% over 15% for every 1% decrease from
6% in the management fee. Currently, the management fee is 1% and the total
incentive fee is 25%. Accordingly, the general partner may raise the current
incentive fee of 25% to a maximum of 27%, provided the management fee is
lowered to 0%. The general partner will notify you of any change in fees
within seven business days after they are made and afford you notice and
opportunity to redeem your partnership interests.
Fees To Futures Commission Merchant And Compensation of General Partner
Fee Paid By Partnership To The Corporate General Partner
The corporate general partner, Belmont Capital Management, Inc., is
responsible for introduction and payment for the clearing of the trades made
by the trading advisor through the futures commission merchant, Citigroup
Global Capital Markets, Inc. The partnership pays the corporate general
partner fixed brokerage commissions of 4% annually on the equity assigned to
the trading advisor to trade. See The Futures Commission Merchant.
In the opinion of the general partner, the brokerage commission of 4% that we
pay to clear our trades is fair and reasonable. This is an area of judgment
that depends upon:
* the value of similar services provided to partnerships and other accounts
managed by the same commodity trading advisor, or
* the value of similar services provided by other general partners for other
public commodity pools.
Brokerage Fees Paid By the Corporate General Partner To The Futures
Commission Merchant
Citigroup Global Markets, Inc. charges the corporate general partner the
round turn commission at the time the trade is made. The round turn charge
covers all clearing costs, including the pit brokerage fees, National Futures
Association fees, and exchange fees.
Continuing Service Fees
The partnership pays monthly continuing service fees at the rate of 4% per
year, payable 1/3% monthly, to the selling agents who are qualified to
provide services to us and you. Such persons include Mr. Pacult and his
wife, both of whom are principals of the principal selling agent, Futures
Investment Company.
The recipients of the continuing service fees are responsible for maintaining
investment in this partnership. This must be done to:
* spread the potential risk of losses over a large number of investors to
protect our ability to continue in business, and
* allow the long-term trading strategies of the commodity trading advisor to
be profitable so additional investments can be solicited.
The continuing service fees are paid to the persons responsible for selling
the partnership interests as compensation for:
* maintaining continuous contact with the partners to whom they sold
interests in the partnership
* reviewing of the daily runs to be aware of the partnership results to
discuss with the investors
* explaining changes in trading advisors and results from operations
* answering questions regarding the partnership, and
* working to retain investment in the partnership.
Miscellaneous Fees To Futures Commission Merchant
We will reimburse the futures commission merchant for all delivery,
insurance, storage or other charges incidental to trading and paid to third
parties. The general partner has instructed the trading advisor to avoid
these charges and, therefore, no significant charges of this nature are
anticipated.
Rights of General Partner
Without prior notification to you, the general partner has reserved the right
to:
* add an introducing broker
* add a general partner management fee
* increase or lower the incentive fee
* change the commodity trading advisor
* change the futures commission merchant
* change to a fixed commission rate provided it is less than 14% annually,
including pit brokerage fees, of the average net assets, excluding
partnership assets not directly related to trading.
* have the partnership pay a per round turn brokerage commission as opposed
to a fixed percentage, at any time, with or without a change in
circumstances; provided, however, such brokerage commissions cannot exceed
80% of the published retail rate, excluding pit brokerage fees, and the
futures commission merchant shall not provide research or other soft dollar
value to the general partner.
Other Expenses
We must pay legal and accounting fees, as well as other expenses and claims.
For each year of normal operations, we must pay yearly legal and accounting
costs of approximately $50,000, which includes $45,000 for accounting and
audit and $5,000 for legal services. We must also pay customary and routine
administrative expenses, and other direct expenses.
In addition, we will reimburse the general partner for direct expenses, such
as the cost to prepare and file periodic amendments and restatements of the
registration statement, prospectus, and financial statements. Also,
reimbursable are web site promotion used in connection with the solicitation
and sale of partnership interests, together with audit fees, delivery
charges, statement preparation and mailing costs, telephone toll charges, and
postage.
Charges To The Partnership
The following table includes all charges to the partnership.
- -----------------------------------------------------------------------------
Entity:
General Partner (Belmont Capital Management, Inc. and Mr. Michael Pacult)
Form of Compensation:
Fixed brokerage commission
Amount of Compensation:
4% annual charge, paid monthly, upon the assets on deposit with the futures
commission merchant. From this amount it will pay round turn brokerage
commissions to Citigroup Global Markets, Inc. and retain the difference.
[$970+]
Form of Compensation:
Incentive fee
Amount of Compensation:
Belmont is paid a 5% quarterly incentive fee on all new net profits the
partnership has generated through trading.
- ------------------------------
Entity:
Selling Agent(Futures Investment Company)
Form of Compensation:
Continuing service fee
Amount of Compensation:
The partnership pays the selling agents a 4% continuing service fee per year,
payable monthly, adjusted month to month to reflect profit and loss, for so
long as the investment remains in the partnership. [$1,000]
- ------------------------------
Entity:
Futures Commission Merchant(Citigroup Global Markets, Inc.)
Form of Compensation:
Round turn commissions paid from the fixed commissions paid by the
partnership to the corporate general partner.
Amount of Compensation:
The corporate general partner pays the futures commission merchant its round
turn brokerage commissions.
Form of Compensation:
Reimbursement of delivery, insurance, storage and any other charges
incidental to trading and paid to third parties
Amount of Compensation:
Reimbursement by the partnership of actual payments to third parties in
connection with partnership trading
- ------------------------------
Entity:
Commodity Trading Advisor(Fall River Capital, LLC)
Form of Compensation:
Fixed Management Fee
Amount of Compensation:
1% annual management fee, paid monthly, of the trading equity assigned to the
advisor. [$243+]
Form of Compensation:
Incentive Fee
Amount of Compensation:
20% of the quarterly new net profits earned for the account.
- ------------------------------
Entity:
Third Parties(The Scott Law Firm, P.A., Frank L. Sassetti & Co., & James D.
Hepner, CPA)
Form of Compensation:
Legal, accounting, audit and other actual expenses necessary to the operation
of the partnership, and all claims and other extraordinary expenses of the
partnership. Claims and other costs cannot be estimated but will be paid as
incurred.
Amount of Compensation:
Each year the partnership pays $18,500 for accounting, $9,500 for audit and
$5,000 for legal. [$796 for yearly expenses]
- -----------------------------------------------------------------------------
+ Each $25,000 investment pays this amount per year for this particular
charge. When the charge is not based on a percentage, but rather a fixed
amount, we have computed the expense upon the partnership's current net asset
value.
Investor Suitability
You should only invest a limited amount of the risk portion of your total
portfolio and should not invest more you can afford to lose.
To invest the minimum $25,000 in this partnership, you must have either:
* a net worth of at least $150,000, exclusive of your home, furnishings and
automobiles, or
* an annual gross income of at least $45,000 and a net worth, as calculated
above, of at least $45,000, or
* such higher amounts imposed by your state of residence.
You may not invest more than 10% of your net worth in this partnership. The
foregoing standard and the additional standards applicable to residents of
certain States and the subscription documents are regulatory minimums only.
Potential Advantages
Commodity trading is speculative and involves a high degree of risk. See Risk
Factors. However, your investment in this partnership will offer the
following potential advantages:
Equity Management
We offer the opportunity for you to:
* place equity with a registered commodity trading advisor who has
demonstrated an ability to trade profitably in the judgment of the general
partner, and
* have that equity allocated to the trading advisor in a manner which is
intended by the general partner to optimize future profit potential.
Mr. Pacult has experience managing several other commodity pools and has over
twenty-two years of experience in selecting commodity trading advisors to
manage individual investor accounts and describing to investors how managed
futures accounts work.
We expect this experience to benefit us in the quality of trading advisors
selected and in the explanation to prospective investors of our operation and
the attendant risks of investment.
Investment Diversification
If you are not prepared to spend substantial time trading various commodity
contracts or options, you may participate in these markets through a $25,000
investment in the partnership, thereby obtaining diversification from other
investments you may have in stocks, bonds and real estate.
Limited Liability
You will not be subject to margin calls and cannot lose more than your
original investment amount plus your share of distributed and undistributed
profits; provided the below bulleted legal conditions are met.
In the opinion of our legal counsel, there are no circumstances, including
bankruptcy of this partnership, which will subject your personal assets that
were never invested in or paid from this partnership to our debts, provided:
* the partnership's structure is maintained by the general partner, and
* you do not participate in any phase of our management other than the
exercise of your right to vote as a limited partner.
See the Limited Partnership Agreement (Exhibit A).
Administrative Convenience
We are structured to provide you with services that alleviate the
administrative details involved in trading commodities contracts directly,
including:
* providing monthly and annual financial reports showing, among other
things:
* the value of each unit of partnership interest
* trading profits or losses, and
* expenses; and
* preparing all tax information relating to your investment in this
partnership.
Access To The Commodity Trading Advisor
The commodity trading advisor selected by the general partner requires a
minimum account size substantially greater than the $25,000 minimum
investment required by us. For instance, Fall River Capital, LLC currently
requires a minimum investment of $2,000,000 to open an account, depending on
the investment program. Accordingly, you have access to the trading advisor
for a smaller investment than is available by a direct investment in a
managed account with the trading advisor.
Use Of Proceeds
As of December 31, 2003, the present partners have paid $74,007 for offering
expenses.
At the close of business on the last day of the twelfth month after their
investment, we will charge each new limited partner its allocated portion of
the previously paid expenses to reimburse the prior partners as follows:
The incoming partners' subscriptions will be divided by the amount of the
total subscriptions, less commissions, made by both the incoming and the
prior partners to obtain the percentage of the costs to be paid by all
partners. This percentage will be multiplied by the outstanding offering
expenses to produce the dollar amount to be deducted from the subscription of
the incoming partners. The cash produced by that deduction will be added to
the net asset value of the partnership. This will result in an increase in
the net asset value for all partnership interests previously sold. The cash
subscription amount remaining for each incoming partner will be used to
purchase partnership interests at the increased net asset value. The
incoming partners will join with the previously admitted partners to share in
the increase of net asset value that results from the admission of future
partners until either the maximum number of partnership interests is sold or
the offering terminates.
As of December 31, 2003, prior partners paid 5.43% of their total investment
in the partnership for offering expenses. Should the maximum of $7,000,000
in total partnership interests be sold, every partner will have been
allocated approximately 1.22% of their total investment to pay for offering
expenses.
After the subscriptions are deposited in good funds to the partnership bank
account and you are accepted as a limited partner, the general partner will
transfer the money you paid to the partnership accounts at the bank and
futures commission merchant and allocate additional trading equity to the
commodity trading advisor.
At the end of each month, the brokerage commissions and management and
continuing service fees, identified under Charges to the Partnership are paid
by the Partnership.
For partners admitted after the effective date of this prospectus, there
will be no redemption charge or lock in period.
The general partner has sole authority to determine the percentage of our
assets that will be:
* held on deposit with the futures commission merchant
* used for other investments, and
* held in bank accounts to pay current obligations.
The general partner expects to deposit substantially all of our net assets
with the futures commission merchant for trading by the trading advisor.
However, approximately 3% of the previous month's net assets will be retained
in our bank accounts to pay expenses and redemptions.
We use only cash and cash equivalents, such as United States Treasury Bills,
to satisfy margin requirements. All entities that will hold or trade our
assets will be based in the United States and will be subject to United
States regulations.
The general partner believes that 20% to 40% of our assets will normally be
committed as margin for commodity futures contracts. However, from time to
time, the percentage of assets committed as margin may be substantially more,
or less, than such range. All interest income is used for the partnership's
benefit. To estimate interest income earned upon our deposits, the general
partner has assumed that we will receive 3% interest on our deposits at the
futures commission merchant.
The futures commission merchant, government agency, or commodity exchange
could increase margins applicable to us to hold trading positions at any time
and we may be forced to liquidate positions in a market at a loss that would
not have occurred had we been permitted or financially able to hold the
positions as the advisor intended.
Determination Of The Offering Price
Currently, we are offering partnership interests at their net unit value, or
the price per unit equal to our net assets divided by the number of
outstanding units of partnership interests. This amount is calculated after
the close of business on the last business day of the month in which the
general partner accepts a duly executed subscription agreement and payment
from you. You are admitted as a partner on the open of business on the first
day of business of the following month.
The General Partner
Identification
Two general partners, Belmont Capital Management, Inc. and Mr. Michael P.
Pacult, manage us. See Management's Discussion and Analysis of Financial
Condition, The General Partners.
Current audited financials for Belmont are included in this prospectus.
Also, see Experts.
You will not acquire or otherwise have any interest in Belmont, the corporate
general partner, or any partnership other than Bromwell, by purchasing the
partnership interests offered by the prospectus.
Michael P. Pacult
Mr. Pacult, age 59, is:
* one of the general partners
* the sole shareholder, director, principal, and officer of the corporate
general partner, and
* a principal, officer, director and 50% shareholder of Futures Investment
Company, the principal selling agent
Mr. Pacult grew up in Detroit, MI and went to high school at Howe Military
School in Howe, IN. In 1969 he received a B.A. Degree from the University of
California, Berkeley, where he majored in English and in Zoology. Prior to
moving to Chicago in 1980 to become involved in the futures industry, he was
a part owner and Senior Vice President of a California real estate
development company.
In 1983, Mr. Pacult and his wife, Shira Del Pacult, as 50% owners,
established Futures Investment Company, an Illinois corporation, to sell
futures investments managed by independent commodity trading advisors to
retail clients. From inception to present, Mr. Pacult has been a director
and president of Futures Investment Company. It serves as the principal
selling agent of partnership interests and maintains clearing agreements with
Refco, Inc., Vision Limited Partnership, Lawrence-Bonfitto Trading Co. and
Citigroup Global Markets, Inc.
In addition to the partnership interests offered pursuant to this prospectus,
Futures Investment Company offers for sale, on a best efforts basis,
securities of other issuers and engages in other broker-dealer activities.
Commencing in August 2003 to present, Mr. Pacult has also been the sole
Owner, Director and President of Belmont Capital Management, Inc., the
commodity pool operator of this partnership; and from August, 2003, to
present, he has been the sole Owner, Director and President of Ashley Capital
Management, Inc., a commodity pool operator of partnership that competes with
this partnership; and, since April 2003 to present, he has been the sole
Owner, Director and President of White Oak Financial Services, Inc., a
commodity pool operator that will also compete with this partnership. Since
August 2003, he has also served as the individual general partner of this
partnership and two other commodity pools, Atlas Futures Fund and Providence
Select Fund, L. P.
His duties as a Director and Officer of the above named corporations and as a
general partner of those partnerships are to make all of the decisions and
supervise all of the actions they take.
In 1995, Mr. and Mrs. Pacult were featured in a book titled Interviews with
Top Futures Brokers by John Walsh that was published by the Center for
Futures Education.
Mr. Pacult also manages two other commodity pools. Though Mr. Pacult
provides less than his full time to the business affairs of this partnership,
he devotes what time he believes is necessary to properly handle his
responsibilities as a general partner and as the principal of the corporate
general partner. See Management's Discussion and Analysis of Financial
Condition, The General Partners.
Ownership In Commodity Trading Advisor And Futures Commission Merchant
Neither Mr. Pacult, nor any of his affiliates, has any ownership in the
commodity trading advisor or the futures commission merchant. Mrs. Shira
Del Pacult, Mr. Pacult's wife, will have no ownership or role in the
management of the partnership or Belmont Capital Management, Inc. However,
she is an associated person, officer and fifty percent shareholder in Futures
Investment Company. Mr. and Mrs. Pacult are also expected to sell
partnership interests in jurisdictions where they are licensed to sell
securities.
Trading By The General Partner; Interest In The Pool
Belmont Capital Management, Inc. and Mr. Pacult, may, from time to time,
trade commodity interests for their own accounts. The records of any such
trading activities will not be made available to you. Neither general
partner will knowingly take positions ahead of identical positions taken by
this partnership.
Regulatory Notice
The regulations of the Commodity Futures Trading Commission and the National
Futures Association prohibit any representation by a person registered with
the Commodity Futures Trading Commission or by any member of the National
Futures Association, respectively, that such registration or membership in
any respect indicates that the Commodity Futures Trading Commission or the
National Futures Association, as the case may be, has approved or endorsed
such person or such person's trading programs or objectives. The
registrations and memberships described in this prospectus must not be
considered as constituting any such approval or endorsement. Likewise, no
commodity or securities exchange, nor the Securities and Exchange Commission,
nor any other regulatory agency has given or will give any such approval or
endorsement.
Trading Management
No Affiliation With Commodity Trading Advisor
The trading advisor is not affiliated with either general partner.
Additionally, the general partner will not serve as a trading advisor or
select any other trading advisors to trade that are affiliated with either
general partner. See The Commodity Trading Advisor for a summary of the
trading advisor's performance information.
Rights of the General Partner With Respect To Commodity Trading Advisor
Selection And Allocation Of Equity
The general partner believes that a trading advisor should be retained on a
medium to long-term basis and should be allowed to implement fully its
trading strategy. However, the general partner may, in its sole discretion
and without prior notice to you:
* terminate any current or future trading advisor
* select additional trading advisors, or
* change the allocation of equity to any trading advisor.
The general partner periodically reviews our performance to determine if the
trading advisor should be changed or if others should be added. In doing so,
the general partner may use computer generated correlation analysis or other
types of automated review procedures to evaluate trading advisors.
If the trading advisor is replaced, the new trading advisor will receive
incentive fees independent of the previous trading advisor's performance.
If the general partner engages more than one trading advisor, the following
may possibly occur:
* we may pay an incentive fee to one trading advisor which is trading
profitably while the other trading advisor produces losses which cause us to
be unprofitable overall
* as the trading advisors will trade independently, they may compete for
similar positions or take positions opposite each other, which may limit our
profitability.
Performance Record of the Partnership
Effective November 4, 2003, 100% of the trading equity was assigned to Fall
River Capital, LLC to trade. The following capsule that shows our past
performance for the period from inception of trading in July, 2000 through
December 31, 2003 was produced by commodity trading advisors that no longer
trade for us..
Accordingly, the following past performance is not indicative of future
results.
Bromwell Financial Fund, Limited Partnership
Percentage Rate of Return
(Computed on a compounded monthly basis)*
Month 2003 2002 2001 2000
January 2.73 3.74 3.92 N/A
February 6.27 4.69 2.37 N/A
March (4.43) (2.96) (1.12) N/A
April 2.52 3.44 (16.49) N/A
May 2.49 2.36 3.87 N/A
June (2.65) 2.05 0.58 N/A
July (0.28) (4.46) (3.57) (0.92)
August (1.37) 2.57 8.58 (1.01)
September (1.90) 5.44 4.77 9.11
October (9.20) (15.88) 0.84 (9.90)
November (6.56) (8.70) (5.51) 4.18
December 3.84 5.34 2.33 (3.15)
Year (9.27) (4.82) (1.84) (2.71)
Name of Pool: Bromwell Financial Fund, LP
How Offered: Publicly offered pursuant to Form S-1 Registration Statement
Name of Commodity Trading Advisor: Fall River Capital, LLC
Principal Protected: No
Date of Inception of trading: July, 2000
Aggregate subscriptions: $2,280,100
Net Asset Value of the pool: $1,036,900 on total units outstanding: 1,257
Net Asset Value Per Unit: $824.69
Largest Monthly Draw-Down**: 4-01/16.49%
Worst Peak-to-Valley Draw-Down***: 9-02 to 11-03/29.32%
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or withdrawals
exceed ten percent of beginning net assets, the Time-Weighting of Additions
and Withdrawals method is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by a pool over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool
during any period in which the initial month-end net asset value is not
equaled or exceeded by a subsequent month-end net asset value.
The Commodity Trading Advisor -
Fall River Capital, LLC
Fall River Capital, LLC, a Wisconsin limited liability company, is a
commodity trading advisor, and its main business office and main business
telephone are: 11740 North Port Washington Road, Mequon, Wisconsin 53092;
(262) 241-8020. The trading advisor's books and records will be kept and made
available for inspection at its main business office.
Fall River and its principals have no present or future expectation of any
beneficial interest in the pool or its general partner.
Business Background
The business background for at least five (5) years for the advisor is as
follows:
The advisor became registered as a commodity trading advisor with the
Commodity Futures Trading Commission in January 2000 and as a commodity pool
operator in June 2000. The advisor is also a member of the National Futures
Association.
The programs developed by the trading advisor are technical; i.e., computer
generated rather than fundamental; i.e., dependant upon analysis of supply
and demand factors. Accordingly, the personnel assigned by the advisor to
supervise the day to day trading are involved in account management rather
than trade selection because the trades are generated by predetermined
factors contained in the advisors proprietary computer programs. Having said
that, the principals of the advisor are Robert Friedl, President, and Charles
Wright, Chairman. The principals and members of their staff under their
direct supervision will direct our trading pursuant to the advisory agreement
attached as an exhibit to this prospectus and a power of attorney granted by
us on the standard form supplied by the futures commission merchant.
Mr. Friedl was a trading principal of Webster Management Group, Inc., a
registered commodity trading advisor. The performance record of Webster
Management Group, Inc. during the period Mr. Friedl was associated with the
firm is presented below in Performance Record Of The Commodity Trading
Advisor.
Robert Friedl, President. Mr. Friedl has worked in the futures industry
since 1987 and brings more than twelve
years of experience to the advisor in the areas of trading-room operations,
systems research, and trading advisor back-office management.
From September 1988 to September 1989, he was employed by Limitless Options
Partners (a proprietary trading and floor brokerage group) and supervised its
back-office operations. Mr. Friedl's responsibilities included daily option
valuations and risk management for Limitless Options Partners' options,
futures and cash/currency positions in addition to account reconciliation and
internal trade accounting.
Mr. Friedl worked with the Fall River Group, Inc., a group of foundries in
Wisconsin as an in-house trader for the company's proprietary commodity
account (October 1989 to September 1991). He has been involved in the back-
office operations of several brokerage and trading firms including: B.L.
Rice, Inc., a proprietary trading firm in Chicago, Illinois (May 1987 to
September 1987) and KTZ Trading, a proprietary trading firm in Chicago,
Illinois (September 1987 to August 1988).
Mr. Friedl was a founding principal of the Webster Management Group
("Webster"), a Commodity Trading Advisor, which was started in September
1991. He co-designed the initial trading strategies and remained a member of
the research team through 1996. Mr. Friedl was the principal in charge of
Webster's trading desk from 1993 through 1995. During that time he
coordinated the design and implementation of Webster's back office software
and account management systems.
In 1996, Mr. Friedl began a transition from Webster's trading desk into full-
time research. In January 1997, he moved into full time research and product
development for Webster. He left Webster in January 2000 and started the
advisor thereafter.
Mr. Friedl holds a Bachelor of Science degree in Small Business Management
from the University of Wyoming (1986). He is a registered Associated Person,
effective January 5, 2000, and a founding principal of the advisor.
Charles F. Wright, Chairman. Mr. Wright is the chairman of the Fall River
Group, Inc. (a manufacturing company in Wisconsin) and has been associated
with the Fall River Group since 1973. Since October 2001 he has also been
the chairman and co-owner of Quaestus & Co., Inc., a venture capital firm
located in Milwaukee, Wisconsin, and chairman, president and co-owner of
Kilbourn Capital Management Inc., a commodity pool operator that manages the
Kilbourn Diversified Strategy Fund, a hedge fund of funds.
Mr. Wright serves on the board of directors of several firms in Wisconsin.
In the non-profit sector he is the chairman of Goodwill Industries of
Southeastern Wisconsin and Metropolitan Chicago, and serves as president of
the Second Harvest Food Bank Foundation. He is a commissioner of the
Milwaukee Social Development Commission, and a member of the Greater
Milwaukee Committee. In the private sector he sits on the board of Directors
of U-Line Corporation, and TradeStation Group, Inc.
Mr. Wright served as president of the Private Industry Council of Milwaukee
County from June 1996 through September 1997. The Private Industry Council
was responsible for implementing and overseeing "Wisconsin Works" or "W2",
Wisconsin's innovative welfare reform program, in Milwaukee County, Wisconsin
during his tenure as President.
From 1992 to 1997, Mr. Wright served as chairman of Caribbean Communications
Company Ltd ("CCC"). During this time CCC continued building and operated a
radio network throughout the English-speaking Caribbean Islands. In 1997,
Cumulus Media, Inc. (CMLS) acquired CCC.
During the 1980's, Mr. Wright was an IOM member of the Chicago Mercantile
Exchange and actively day-traded S&P futures. He served as editor of the
System Trading and Development Newsletter, published by Omega Research, Inc.
He has taught several different trading seminars over the years, including
System Trading and Development, and Trading as a Business. Mr. Wright is
credited with having taught many traders how to develop winning trading
systems. There are many individual traders in the world today who use his
techniques to trade for a living.
Mr. Wright is the author of the book, Trading as a Business, published by
Omega Research, Inc. (1998).
Mr. Wright holds a Bachelor of Arts degree from the University of South
Florida (1973) and a Masters Degree in Business Administration from the
Harvard University Graduate School of Business (1977). He is a registered
Associated Person, effective January 5, 2000, and a founding principal of the
advisor.
The past performance record of the advisor and its principals is set forth
below under Performance Record Of The Commodity Trading Advisor.
The advisor and its principals may trade commodity interests for their own
accounts, and the records of such trading, and any written policies relating
to such trading, will not be made available to you for inspection.
Description Of Advisor's Trading Programs
The advisor's programs consist of a selection of a diversified portfolio of
international commodity interests on major commodity and futures exchanges
worldwide. The programs use computerized, technical systems that have been
developed by the advisor.
The goal of the advisor's programs is to provide superior risk-adjusted
investment returns. The advisor's programs use various risk management
techniques to reduce portfolio risk. These techniques include, but are not
limited to:
* market diversification (committing assets to multiple markets);
* system diversification (trading with multiple trading strategies); and
* a money management structure that determines and limits the amount of
equity committed to each trade and each market.
The advisor's programs trade in easily accessible and liquid U.S. and non-
U.S. futures and forward contracts that are practicable. Forward markets may
include major currencies and metals, which are currently being traded on the
London Metal Exchange. The advisor intends to trade the U.S. and foreign
interest rate markets, foreign currencies, stock indexes, agriculture,
metals, and energy markets on our behalf. In addition, the advisor
continually monitors numerous markets, both U.S. and non-U.S., and will
initiate trades at any point it determines that a market is sufficiently
liquid and tradable.
The advisor may also trade an account in physical commodities, including
exchange of futures for physicals transactions, or EFP. An EFP is a
transaction permitted under the rules of many futures exchanges in which two
parties exchange a cash market position for a futures market position (or
vice versa) without making an open, competitive trade on the exchange. The
prices at which such transactions are executed are negotiated between the
parties.
The advisor estimates that generally, between 10% and 30% of an account's
assets will be committed as original margin. However, these ratios are
difficult to predict and may vary substantially from this range and be
materially higher.
Trading decisions require the exercise of judgment by the advisor.
Therefore, the success of trading depends on the advisor's trading ability,
knowledge and judgment.
The advisor will exercise its judgment and discretion in interpreting the
data generated by its trading methodology, and will make all decisions
regarding the trading in the partnership's account, including selecting the
markets which will be followed and actively traded. In addition, the advisor
will determine the method by which orders are placed, the types of orders
that are to be placed, the overall leverage for the portfolio, and, when
applicable, the time at which orders are placed with, and executed by, a
broker.
The trading program to be followed by the advisor does not assure successful
trading. Investment decisions made in accordance with the advisor's programs
will be based on an assessment of available facts. However, because of the
large quantity of facts at hand, the number of available facts that may be
overlooked and the variables that may shift, any investment decision must, in
the final analysis, be based on the judgment of the advisor.
The advisor's business plan includes continued refinement and testing of its
programs. Therefore, the advisor retains the right to revise any methods or
strategy, including the technical trading factors used, the commodity
interests traded and/or the money management principles applied. It will do
this without your approval if it determines that the changes are in the best
interest of your account.
The advisor's programs are proprietary and confidential, and the descriptions
herein are, of necessity, general and are not intended to be exhaustive.
Consequently, you will not be able to determine the full details of the
program, or whether the program is being followed. There can be no assurance
that any trading strategy of the advisor will produce profitable results or
will not result in losses.
Trading Program and Markets Traded
Fall River Capital, LLC is currently trading its Global Strategies HL program
and will move to trade its Global Trends program once the partnership account
attains two million ($2,000,000) or more in equity to trade. The descriptions
and track records of these programs follow.
Performance Record Of The Commodity Trading Advisor's Programs
The following presents the past performance of the advisor.
* Table 1 presents the customer performance record of the Global Trends
Program.
* Table 2 presents the customer performance record of the Global Strategies
Program.
* Table 3 presents the customer performance record of the Global Strategies
LL Program.
* Table 4 presents the customer performance record of the Global Strategies
HL Program.
The advisor believes that the past performance information presented herein
may be of interest to prospective investors, but encourages investors to look
at such information more as a statement of the advisor's objectives than as
any reliable indication that such objectives will, in fact, be achieved.
Fall River Capital, LLC - Table 1 - Global Trends Program
Past performance is not necessarily indicative of future results. A purchase
of units pursuant to this offering does not include any interest in this
program.
Fall River Capital, LLC - Table 1 - Global Trends Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2003 2002 2001 2000 (Aug - Dec)
36.36 40.90 12.15 31.14
Name of Commodity Trading Advisor: Fall River Capital, LLC Name of the
Trading Program: Global Trends Program
Date of Commencement of Program Trading: August, 2000
Number of Accounts in Trading Program: 2
Total Assets Under Management (incl. notional funds): $150,495,607
Total Assets Under Management (excl. notional funds): $77,914,413
Total Assets Traded Pursuant to Program (incl. notional funds): $18,773,594
Total Assets Traded Pursuant to Program (excl. notional funds): $15,773,594
Largest Monthly Draw-down**: 03-03 / 15.36%
Worst Peak to Valley Draw-down***: 03-03 to 03-03 / 15.36%
* Monthly Rate of Return is calculated by dividing net performance by
beginning net asset value. The monthly rates are then compounded to arrive
at the annual rate of return.
** Worst Monthly Percentage Draw-down is the largest monthly loss experienced
by the program in any calendar month expressed as a percentage of the total
equity in the account and includes the month and year of such draw-down.
*** Worst Peak to Valley Draw-down is the greatest cumulative percentage
decline in month end net asset value of the program due to losses sustained
by an account during any period in which the initial month-end net asset
value of an account is not equaled or exceeded by a subsequent month-end net
asset value of the account and includes the time period in which it occurred.
Fall River Capital, LLC - Table 2 - Global Strategies Program
Past performance is not necessarily indicative of future results. A purchase
of units pursuant to this offering does not include any interest in this
program.
Fall River Capital, LLC - Table 2 - Global Strategies Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2003 2002 (Jun - Dec)
6.96 11.53
Name of Commodity Trading Advisor: Fall River Capital, LLC
Name of the Trading Program: Global Strategies Program
Date of Commencement of Program Trading: April, 2002
Number of Accounts in Trading Program: 10
Total Assets Under Management (incl. notional funds): $150,495,607
Total Assets Under Management (excl. notional funds): $77,914,413
Total Assets Traded Pursuant to Program (incl. notional funds): $29,354,576
Total Assets Traded Pursuant to Program (excl. notional funds): $29,354,576
Largest Monthly Draw-down**: 03-03 / 7.22%
Worst Peak to Valley Draw-down***: 03-03 to 03-03 / 7.22%
* Monthly Rate of Return is calculated by dividing net performance by
beginning net asset value. The monthly rates are then compounded to arrive
at the annual rate of return.
** Worst Monthly Percentage Draw-down is the largest monthly loss experienced
by the program in any calendar month expressed as a percentage of the total
equity in the account and includes the month and year of such draw-down.
*** Worst Peak to Valley Draw down is the greatest cumulative percentage
decline in month end net asset value of the program due to losses sustained
by an account during any period in which the initial month-end net asset
value of an account is not equaled or exceeded by a subsequent month-end net
asset value of the account and includes the time period in which it occurred.
Fall River Capital, LLC - Table 3 - Global Strategies LL Program
Past performance is not necessarily indicative of future results. A purchase
of units pursuant to this offering does not include any interest in this
program.
Fall River Capital, LLC - Table 3 - Global Strategies LL Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2003 2002 2001 (Sep - Dec)
5.36 6.80 5.86
Name of Commodity Trading Advisor: Fall River Capital, LLC Name of the
Trading Program: Global Strategies LL Program
Date of Commencement of Program Trading: September 2001
Number of Accounts in Trading Program: 1
Total Assets Under Management (incl. notional funds): $150,495,607
Total Assets Under Management (excl. notional funds): $77,914,413
Total Assets Traded Pursuant to Program (incl. notional funds): $3,160,889
Total Assets Traded Pursuant to Program (excl. notional funds): $3,160,889
Largest Monthly Draw-down**: 03-03 / 3.48%
Worst Peak to Valley Draw-down***: 03-03 to 08-03 / 4.35%
* Monthly Rate of Return is calculated by dividing net performance by
beginning net asset value. The monthly rates are then compounded to arrive
at the annual rate of return.
** Worst Monthly Percentage Draw-down is the largest monthly loss experienced
by the program in any calendar month expressed as a percentage of the total
equity in the account and includes the month and year of such draw-down.
*** Worst Peak to Valley Draw down is the greatest cumulative percentage
decline in month end net asset value of the program due to losses sustained
by an account during any period in which the initial month-end net asset
value of an account is not equaled or exceeded by a subsequent month-end net
asset value of the account and includes the time period in which it occurred.
Fall River Capital, LLC - Table 4 - Global Strategies HL Program
Past performance is not necessarily indicative of future results. A purchase
of units pursuant to this offering does not include any interest in this
program.
Fall River Capital, LLC - Table 4 - Global Strategies HL Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2003 2002 (Apr - Dec)
24.69 33.22
Name of Commodity Trading Advisor: Fall River Capital, LLC
Name of the Trading Program: Global Strategies HL Program
Date of Commencement of Program Trading: April, 2002
Number of Accounts in Trading Program: 20
Total Assets Under Management (incl. notional funds): $150,495,607
Total Assets Under Management (excl. notional funds): $77,914,413
Total Assets Traded Pursuant to Program (incl. notional funds): $99,206,548
Total Assets Traded Pursuant to Program (excl. notional funds): $29,625,354
Largest Monthly Draw down**: 03-03 / 12.17%
Worst Peak to Valley Draw down***: 10-02 to 11-02 / 13.53%
* Monthly Rate of Return is calculated by dividing net performance by
beginning net asset value. The monthly rates are then compounded to arrive
at the annual rate of return.
** Worst Monthly Percentage Draw-down is the largest monthly loss experienced
by the program in any calendar month expressed as a percentage of the total
equity in the account and includes the month and year of such draw-down.
*** Worst Peak to Valley Draw-down is the greatest cumulative percentage
decline in month end net asset value of the program due to losses sustained
by an account during any period in which the initial month-end net asset
value of an account is not equaled or exceeded by a subsequent month-end net
asset value of the account and includes the time period in which it occurred.
Performance Record Of Other Programs Sponsored By The General Partner
The following is a summary of the prior performance of the other programs
sponsored by the general partner and its affiliates.
Mr. Michael Pacult has sponsored two other public commodity pools, Atlas
Futures Fund, LP that is actively trading and Providence Select Fund, LP,
which has not yet commenced business.
Performance Record Of Atlas Futures Fund, Limited Partnership
Mr. Pacult serves as an individual general partner and as the principal of a
corporate general partner, Ashley Capital Management, Inc., both of which
manage another commodity pool called Atlas Futures Fund, Limited Partnership.
Atlas Futures Fund, LP was declared effective by the Securities and Exchange
Commission on September 3, 1999. It commenced trading on October 15, 1999.
Clarke Capital Management, Inc trades Atlas Futures Fund, Limited
Partnership.
Atlas Futures Fund pays various expenses in relation its operation including:
* a quarterly incentive fee of 25% on all new net profits to its trading
advisor
* a monthly brokerage commission of 7/12%, or 7% annually, to its corporate
general partner.
* a 4% continuing service fee paid to the sales agents for so long as the
investment remains in the pool.
The following capsule shows the past performance of Atlas Futures Fund, LP
for the period from inception of trading in October 1999 through December 31,
2003.
You will receive no interest in Atlas Futures Fund or any other entity except
Bromwell by your purchase of partnership interests in Bromwell Financial Fund
offered by this prospectus.
Past Performance Is Not Necessarily Indicative Of Future Results.
Atlas Futures Fund, Limited Partnership
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2003 2002 2001 2000 1999 (Oct-Dec)
33.47 10.97 (5.70) 31.76 (4.88)
Name of Pool: Atlas Futures Fund, LP
How Offered: Publicly offered pursuant to Form S-1 Registration Statement
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Principal Protected: No
Date of Inception of trading: October, 1999
Net Asset Value of the pool: $7,689,797 on total units outstanding: 4,393
Net Asset Value Per Unit: $1,750Largest Monthly Draw-Down**: 10-02 / 12.94
Worst Peak-to-Valley Draw-Down***: 9-02 to 11-02 / 17.86
* Rate of Return is computed by dividing net performance by beginning net
asset value for the period. For those months when additions or withdrawals
exceed ten percent of beginning net assets, the Time-Weighting of Additions
and Withdrawals method is used to compute rates of return.
** "Draw-down" is defined by applicable CFTC regulations to mean losses
experienced by an account over the specified period.
*** Worst Peak-to-Valley Draw-Down means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by a pool,
account or trading program during any period in which the initial month-end
net asset value is not equaled or exceeded by a subsequent month-end net
asset value.
The Futures Commission Merchant
The general partner has selected Citigroup Global Markets, Inc. (formerly
Salomon Smith Barney Inc.), 388 Greenwich St., New York, New York 10013,
under the supervision of its managing directors, Michael Joseph Day and
William Heinzerling, to serve as our futures commission merchant. It holds,
supervises and controls approximately 97% of all of our equity that is used
for trading by the commodity trading advisor. Citigroup is a registered
futures commission merchant pursuant to the Commodity Exchange Act and is a
member of the National Futures Association. As required by law, the general
partner will provide notice to you of any change in the futures commission
merchant.
Regulations of the Commodity Futures Trading Commission require disclosure of
any material administrative, civil, or criminal actions against the futures
commission merchant, or any of its principals, within five years of the date
of this prospectus. These disclosures are made in the prospectus under the
caption Legal Matters - Litigation and Claims.
The inclusion in this prospectus of the identity and certain disclosure
information for Citigroup as the futures commission merchant does not mean
that it has endorsed or passed upon the sufficiency of this prospectus or the
suitability of an investment in this partnership for any prospective
purchaser, or that it will be involved in the management of the partnership
or the sale of units.
All equity of the partnership used for trading by the commodity trading
advisor is held on deposit under the supervision and control of Citigroup.
Currently, it charges the partnership the exchange minimums for margin for
each position held over-night; provided, however, for positions traded on the
Chicago Board of Trade, the margin for the partnership is 125% of exchange
minimum. The various exchanges and Citigroup revise the margin requirements,
from time to time. The general partner has instructed the trading advisor to
make no trades that are outside the United States or that require margin in
other than U.S. Currency. If those trades were permitted at some time in the
future, certain exchanges outside the U.S. would be margined in the local
currency. Accordingly, for trades selected by the commodity trading advisor
on those exchanges, the partnership would be exposed to changes in the
exchange rate for those currencies while any of those positions are held.
See disclosures as to litigation during the past 5 years regarding Citigroup
under Legal Matters.
Federal Income Tax Aspects
Scope Of Tax Presentation
This presentation is based on:
* the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder which were in effect on December 31, 2003,
and
* the express intent of the general partner to:
* operate the partnership as authorized and limited by the limited
partnership agreement, and
* cause us to invest only our equity capital and not to borrow money to
operate the partnership , and
* the belief by the general partner that no less than ninety percent of the
income generated by us will be from interest income and the trade of
commodities.
Any change in the Internal Revenue Code or deviation from the above
intentions of operation could alter this presentation and also have adverse
tax consequences on this partnership and you. For instance, if we were taxed
as a corporation, we would pay tax and you would have to pay a second tax.
In addition, if we were taxed as a corporation, none of the deductions for
expenses would pass through to your tax return.
Any adjustment made to our return by our auditors or the IRS will flow
through to your return and could result in a separate audit of your
individual return. If we or you are audited by the IRS, significant factual
questions may arise which, if challenged by the IRS, might only be resolved
at considerable legal and accounting expense. We will report our income for
tax and book purposes under the accrual method of accounting and our tax year
will be the calendar year. During taxable years in which little or no profit
is generated from trading activities, you may still have interest income that
will be taxed to you as ordinary income.
Subject to the above scope of presentation and assumption, following is the
opinion of The Scott Law Firm, P.A. that summarizes the material Federal
income tax consequences to individual investors in the partnership.
This discussion assumes you are an individual and is not intended as a
substitute for careful planning; particularly, since the income tax
consequences of an investment in the partnership will not be the same for all
taxpayers. Accordingly, you are urged to consult your tax advisors with
specific reference to your tax situation.
No Legal Opinion As To Certain Material Tax Aspects
We will not request a legal opinion in regard to any State income tax issue.
In addition, our tax counsel cannot opine upon:
* any Federal income tax issue that involves a determination by the IRS of
the facts related to our operation, or
* any other matter that may be subject to IRS interpretation or adjustment
upon audit.
For an example of an item that could be subject to determination by the IRS,
commodity trading advisor fees are aggregated with employee business expenses
and other expenses of producing income, and the aggregate of such expenses is
deductible only to the extent such amount exceeds 2% of the your adjusted
gross income. The Federal income tax deductibility of these expenses depends
upon factual determinations related to our operation by the general partner.
Partnership Tax Status And Net Worth Of The General Partner
The Internal Revenue Code, at Section 7701, and the regulations promulgated
thereunder, provide the criteria used to identify a corporation which cannot
be present if a partnership is to be taxed as a partnership. A partnership
must have two or more of the following:
* decentralized management
* unlimited liability
* limited transferability of shares, and
* limited continuation of existence.
The limited partnership agreement obligates the general partner to operate
the partnership in a manner which meets this test.
If we were taxed as a corporation:
* we would pay taxes at the corporate rates upon our income and gains
* items of deduction and losses would be deductible only by us and not by
you
* tax credits would be available only to us and not to you, and
* all or a part of any distributions we make to you could be taxable as
dividend income and would not be deductible by us in computing our taxable
income.
This would substantially increase the total amount of taxes paid on your
investment income and potentially limit your expense deductions.
Historically, the right of redemption, similar to your right to redeem your
partnership interests, renders a pool, such as ours, to be deemed a publicly
traded partnership, taxed as a corporation. However, the Revenue Act of 1987
provides an exception. The exception requires 90% or more of our gross
income to be derived from interest and the trade of commodities. Provided
the principal activity of the partnership is buying and selling commodities,
income may include interest, dividends, and income from the trade or holding
of futures, options or forward contracts on commodities. The general partner
intends to limit the principal business activity and sources of income so
that this exception will apply to us. In addition, the general partner has
placed restrictions upon the right of redemption. See The Limited
Partnership Agreement, Redemptions and Exhibit A, Right of Redemption.
No IRS Ruling
We have not applied for a ruling from the Internal Revenue Service regarding
our status as a partnership or with regard to any other tax aspect, nor do we
intend to seek a ruling. In the absence of a ruling, there can be no
assurance that the IRS will not attempt to take a position adverse to the
partnership and the opinions expressed in this prospectus.
Tax Opinion
Subject to the assumption that you are an individual United States resident
taxpayer, in the opinion of The Scott Law Firm, P.A., this prospectus
accurately summarizes all material Federal matters and tax consequences to
you. Particularly:
* we will be treated as a partnership for Federal income tax purposes;
* the allocations of profits and losses made when partners redeem their
partnership interests should be upheld for Federal income tax purposes;
* based upon our contemplated trading activities, the IRS should consider us
as conducting a trade or business; and, as a result, the ordinary and
necessary business expenses we incur while conducting our commodity futures
trading business should not be subject to limitation under Section 67 or
Section 68 of the Internal Revenue Code;
* the profit share should be respected as a distributive share of our equity
income allocable to Bromwell Financial Fund, Limited Partnership; and
* the contracts we trade, as described in this prospectus, should satisfy
the commodities trading safe harbor as described in section 864(b) of the
Internal Revenue Code.
Such opinion is based on the Internal Revenue Code as of December 31, 2003
and a review of the Limited Partnership Agreement, and is conditioned upon
the following representations of facts by the general partner:
* at all times, we will be operated in accordance with the Delaware Uniform
Limited Partnership Act and the Limited Partnership Agreement attached hereto
as Exhibit A
* for our first two years of operation, the aggregate deductions claimed by
the partners as their distributive shares of our net losses will not exceed
the equity capital invested in the partnership
* no creditor who makes us a loan, including margin accounts, will have or
acquire, as a result of making the loan, any direct or indirect interest in
our capital, profits or property, other than as a secured creditor
* the general partner will at all times actively direct the affairs of the
Partnership
* the general partner:
* will possess substantial assets, exclusive of its interest in us or any
other limited partnership, which can be reached by our general creditors
within the meaning of Treasury Regulation Section 301.7701 2(d)(2) or
* will otherwise comply with the Federal tax code with respect to general
partner requirements imposed upon sole corporate general partners of limited
partnerships
* interests in the partnership:
* will be transferable or redeemed only upon approval of the general
partner
* will not be traded on an established securities market, and
* will not be readily tradable on a secondary market or the substantial
equivalent thereof
* we will not be registered under the Investment Advisor's Act of 1940; and
* over 90% of our earned income will be qualifying income as that term is
defined in the Revenue Act of 1987.
The Scott Law Firm, P.A. is not able to opine upon the tax treatment of
expenses because that determination depends upon questions of fact to be
resolved by the general partner on our behalf.
In addition, commodity trading advisor fees are aggregated with employee
business expenses and other expenses of producing income, and the aggregate
of such expenses is deductible only to the extent such amount exceeds 2% of
your adjusted gross income. It is the general partner's position that our
intended operations will qualify as a trade or business. If this position is
sustained, the brokerage commissions and performance fees will be deductible
as ordinary and necessary business expenses. Syndication costs to organize
the partnership and offering expenses are subject to limitations upon
deduction imposed by the Internal Revenue Code.
Any change in the representations of the general partner or the operative
facts will prevent you and us from relying upon the legal opinion from The
Scott Law Firm, P.A.
Passive Loss And Unrelated Business Income Taxes Rules
In addition to the imposition of a corporate level tax on publicly traded
partnerships, special rules apply to partnerships in regard to the
application of the passive loss and unrelated business income tax rules. In
Notice 88-75 issued on June 17, 1988, the IRS provided guidance as to
partnership operation. The general partner intends to cause us to comply
with the applicable provisions of these guidelines. In the event our
expenses were deemed not to qualify as deductions from trading profits, your
total taxes would increase while your distributions would remain the same.
Basis Loss Limitation
Generally, the basis of your interest in the partnership for tax purposes is
equal to the cost
* decreased, but not below zero, by your share of any partnership losses and
distributions, and
* increased by your share of any partnership income.
You may not deduct losses in excess of the adjusted basis for your interest
in the partnership at the end of the partnership year in which such losses
occurred. However, you may carry forward any excess to such time, if ever,
as the basis for the interest in the partnership is sufficient to absorb the
loss. Upon the sale or liquidation of your interest in the partnership, you
will recognize a gain or loss for Federal income tax purposes equal to the
difference between the amount you realize in the transaction and the basis
for your interest in the partnership at the time of such sale. For
individuals, capital losses would offset capital gains on a dollar for dollar
basis, with any excess capital losses subject to a $3,000 annual limitation.
Accordingly, it is possible for you to sustain a loss from our operation that
will not be allowed as a deduction for tax purposes or will be limited to a
$3,000 annual limitation.
At-Risk Limitation
If you borrow money to invest in the partnership, there are at risk
limitations that will apply to you. Section 465 of the Internal Revenue Code
provides that the amount of any loss allowable for any year to be included in
your personal tax return is limited to the amount paid for the partnership
interests, or tax basis, of the amount at risk. Losses already claimed may
be subject to recapture if the amount at risk is reduced as a result of:
* cash distributions from the activity
* deduction of losses from the activity
* changes in the status of indebtedness from recourse to non-recourse
* the commencement of a guarantee, or
* other events that affect your risk of loss.
You should consider the at risk provisions in arranging debt financing for
purchasing a partnership interest.
Income And Losses From Passive Activities
Internal Revenue Code Section 469 limits the deductibility of what are called
passive losses from business activities in which the taxpayer does not
materially participate. Under temporary Treasury regulations,
* the trading of personal property, such as futures contracts, will not be
treated as a passive activity,
* partnership gains allocable to you will not be available to offset passive
losses from sources outside the partnership, and
* partnership losses will not be subject to limitation under the passive
loss rules.
Allocation Of Profits And Losses
The allocation of profits, losses, deductions and credits contained in the
Limited Partnership Agreement will be recognized for tax purposes only if the
allocations have substantial economic effect. While the general partner
believes that the Limited Partnership Agreement either meets the requirements
or satisfies a substitute capital account equivalency test, the Limited
Partnership Agreement does not meet a third requirement, that a partner must
make a capital contribution to the partnership equal to any deficit in its
capital account. Accordingly, under the regulations and the Limited
Partnership Agreement, losses would not be allocable to you in excess of your
capital contribution plus properly allocated profits less any prior
distributions. The general partner intends to allocate income and losses in
accordance with the Limited Partnership Agreement that it believes complies
with applicable Internal Revenue Code Section 704. However, no assurances
can be given that the IRS will not attempt to change any allocation that is
made among partners admitted on different dates, which could adversely affect
the amount of taxable income to one partner as opposed to another partner.
Taxation Of Futures And Forward Transactions
The commodity trading advisor selected to trade for us is expected to trade
primarily in Section 1256 Contracts, which is any:
* regulated futures contract
* foreign currency contract
* non-equity option, or
* dealer equity option.
A regulated futures contract is a futures contract:
* if it is traded on or subject to the rules of:
* a national securities exchange which is registered with the Securities
and Exchange Commission,
* a domestic board of trade designated as a contract market by the
Commodity Futures Trading Commission or any other board of trade, exchange or
other market designated by the Secretary of Treasury, and
* which is marked-to-market to determine the amount of margin that must be
deposited or may be withdrawn. Marked-to-market means that the position is
taken in the account on day one at that price. Each day the position is
held, it is valued for account purposes at the price of the contract on the
close of that day.
A foreign currency contract is negotiated between banks and accepted for
trade among banks and private investors. The partnership is expected to
purchase or sell these contracts to speculate on the value of foreign
currency as contrasted with the U. S. dollar. These contracts are exempt
from the Commodity Exchange Act and are excluded from marked-to-market
treatment.
A non-equity option means an option which is treated on a qualified board or
exchange and the value of which is not determined directly or indirectly by
reference to any stock, group of stocks, or stock index unless there is in
effect a designation by the Commodity Futures Trading Commission of a
contract market for a contract bond or such group of stocks or stock index.
A dealer equity option means, with respect to an options dealer, only a
listed option which is an equity option, is purchased or granted by such
options dealer in the normal course of his activity of dealing in options,
and is listed on the qualified board or exchange on which such options dealer
is registered.
All Section 1256 contracts will be marked-to-market upon the closing of every
contract, including closing by taking an offsetting position or by making or
taking delivery, by exercise or being exercised, by assignment or being
assigned; or by lapse or otherwise. Also, all open Section 1256 contracts
held by us at our fiscal year-end will be treated as sold for their fair
market value on the last business day of such taxable year. This will result
in all unrealized gains and losses being recognized for Federal income tax
purposes for the taxable year. As a consequence, you may have tax liability
relating to unrealized partnership profits in open positions at year-end.
Sixty percent of any gain or loss from a Section 1256 contract will be
treated as long-term capital gain or loss, and 40% as short-term capital gain
or loss, regardless of the actual holding period of the individual contracts.
The character of a your distributive share of profits or losses of the
partnership from Section 1256 contracts will thus be 60% long-term capital
gain or loss and 40% short-term capital gain or loss. Your distributive
share of such gain or loss for a taxable year will be combined with your
other items of capital gain or loss for such year in computing your Federal
income tax liability. The Internal Revenue Code contains rules designed to
eliminate the tax benefits flowing to high-income taxpayers from the
graduated tax rate schedule and from the personal and dependency exemptions.
The effect of these rules is to tax a portion of a high-income taxpayer's
income at a marginal tax rate of 35%. Most long-term capital gains after May
6, 2003 are subject to a maximum tax rate of 15%. A limited partner, other
than a corporation, estate or trust, may elect to carry-back any net Section
1256 contract losses to each of the three preceding years. The marked-to-
market rules do not apply to interests in personal property of a nature that
are actively traded other than Section 1256 contracts.
Section 988 Foreign Currency Transactions
A Section 988 transaction is defined as the entering or acquiring of any
forward contract, futures contract, option or similar financial instrument if
the amount to be received or to be paid by reason of a transaction is
denominated in a nonfunctional currency or is determined by reference to one
or more nonfunctional currencies. If the Section 988 transaction results in
a gain or loss, it is considered to be a foreign currency gain or loss to the
extent it does not exceed gain or loss realized by reason of changes in
exchange rates.
Capital Gain And Loss Provisions
If short-term capital gains exceed long-term capital losses, the net capital
gain will be taxed at the same rates as ordinary income. Subject to an
annual limitation of $3,000, you may deduct the excess of capital losses over
capital gains against ordinary income. Excess capital losses that are not
used to reduce ordinary income in a particular taxable year may be carried
forward to, and treated as capital losses incurred in, future years.
Business For Profit
Internal Revenue Code Section 183 sets forth the general rule that no
deduction is allowable to an individual for an activity not engaged in for
profit. These are activities other than those constituting a trade or
business or engaged in for the production or collection of income or for the
management, conservation, or maintenance of property held for the production
of income. The determination of whether an activity is engaged in for profit
is based on all facts and circumstances, and no single factor is
determinative. The general partner believes that by employing independent
commodity trading advisors with strong track records of production of
profits, it is more likely than not, that our activity will be considered an
activity engaged for profit.
Self-Employment Income And Tax
Section 1402 of the Internal Revenue Code provides that an individual's net
earnings from self-employment shall not include the distributive share of
income or loss from any trade or business carried on by a partnership of
which he is a limited partner. Therefore, you should not consider that the
ordinary income from the partnership constitutes net earnings from self-
employment for purposes of either the Social Security Act or the Internal
Revenue Code.
Alternative Minimum Tax
The alternative minimum tax for individuals is imposed on certain high income
persons as a method of collection of tax although income may to sheltered or
otherwise not subject to tax. Alternative minimum taxable income consists of
income deemed taxable without regard to availability of deductions or tax
preferences provided by the tax law. Alternative minimum taxable income may
not be offset by certain deductions, including (in certain circumstances)
interest incurred to purchase or carry interests in partnership such as this
partnership. Taxpayers subject to the alternative minimum tax could be
required to make estimated payments. The extent to which the alternative
minimum tax will be imposed or estimated payments required will depend on the
overall tax situation of each limited partner at the end of each taxable year
and, therefore, this question should be referred to your tax advisor.
Interest Related To Tax Exempt Obligations
Section 265(a)(2) of the Internal Revenue Code will disallow any deduction
for interest on indebtedness of a taxpayer incurred or continued to purchase
or carry obligations the interest on which is wholly exempt from tax. The
IRS announced in Revenue Procedure 72-18 that the proscribed purpose will be
deemed to exist with respect to indebtedness incurred to finance a portfolio
investment. The Revenue Procedure further states that a limited partnership
interest will be regarded as a portfolio investment, unless rebutted by other
evidence. Therefore, if you own tax-exempt obligations, the IRS might take
the position that any interest expense incurred by you to purchase or carry
partnership interests should be viewed as incurred by you to continue
carrying tax exempt obligations, and that you should not be allowed to deduct
all or a portion of the interest on any such loans.
Not A Tax Shelter
In the opinion of tax counsel, we do not constitute a tax shelter, as defined
in Internal Revenue Code Section 6111(c), since the general partner intends
to operate the partnership so that the tax shelter ratio will not exceed two-
to-one at the close of any of the first five years. Accordingly, the general
partner has not registered us as a tax shelter with the IRS.
Taxation Of Foreign Partners
An investment in the partnership should not, by itself, cause a foreign
partner to be engaged in a trade or business within the United States. A
foreign person is subject to a 30% withholding tax, unless reduced or
exempted by treaty, on United States source income that is not effectively
connected with the conduct of a United States trade or business. The person
having control over the payment of such income must withhold this tax.
Because we have permitted the trading advisor to trade foreign currency and
other contracts on foreign exchanges or derivative transactions such as
energy or interest rate swaps or forwards, based on current law it is
uncertain whether entering into foreign and derivative transactions may cause
us, and therefore any foreign limited partners, to be treated as engaged in a
trade or business within the United States. However, the Treasury has issued
proposed regulations which, if finalized in their current form, would provide
that foreign limited partners should not be deemed to be engaged in a United
States trade or business solely by virtue of an investment as a limited
partner in the partnership even if the partnership enters into foreign
exchange trades of currency and derivative transactions. These regulations
are proposed to be effective for taxable years beginning 30 days after the
date final regulations are published in the Federal Register. We may elect to
apply the final regulations retroactively once they are finalized. The Scott
Law Firm, P. A. has not opined on the issues related to the withholding by us
from distributions to foreign investors as the determination of how the treat
this issue will be resolved at the end of each taxable year or upon receipt
of a redemption request.
Accordingly, we may be required to withhold tax on items of such income that
are included in the distributive share of a foreign partner, whether or not
the income was actually distributed. If we are required to withhold tax on
such income of a foreign partner, the general partner may pay such tax out of
its own funds and then be reimbursed out of the proceeds of any distribution
to or redemption of partnership interests by the foreign partner.
Partnership Entity-Audit Provisions-Penalties
The Internal Revenue Code provides that the tax treatment of items of
partnership income, gain, loss, deduction and credit will be determined at
the partnership level in a single partnership proceeding. The Limited
Partnership Agreement has appointed Belmont Capital Management, Inc. as the
tax matters partner to settle any issue involving any partner with less than
a 1% profits interest unless such a partner, upon notice, properly elects not
to give such authority to the tax matters partner. The tax matters partner
may seek judicial review for any adjustment to partnership income, but there
will be only one such action for judicial review to which all partners will
be bound. The Internal Revenue Code provides that a partner must report a
partnership item consistently with its treatment on the partnership return,
unless the partner specifically identifies the inconsistency or can show that
its treatment of the partnership item on its return is consistent with a
schedule furnished to the partner by the partnership. Failure to comply with
this requirement may result in penalties for underpayment of tax and could
result in an extended statute of limitations. The statute of limitations for
adjustment of tax with respect to partnership items will generally be three
years from the date of filing the partnership return.
Internal Revenue Code Section 6662 imposes a penalty for a substantial
understatement of income tax equal to 20% of the amount of any underpayment
attributable to that understatement. Understatement is defined as the excess
of the correct amount of tax required to be shown on the return over the
amount of tax that is actually shown on the return. A substantial
understatement exists for any taxable year if the amount of the
understatement for the taxable year exceeds the greater of:
* 10% of the correct tax, or
* $5,000, or $10,000, in the case of a corporation other than an S
corporation or a personal holding company.
Employee Benefit, Retirement Plans And IRA's
The Employee Retirement Income Security Act of 1974 governs:
* employee benefit plans, such as:
* a qualified pension, profit-sharing or stock bonus plan, or
* a qualified health and welfare plan; and
* individual retirement accounts, commonly called IRAs.
As a matter of policy, the general partner limits subscriptions from any of
the above plans to no more than 10% of the liquid net assets of such plan at
the time of investment, regardless of the net worth of the beneficiary of
such plan.
You may not purchase limited partnership interests with the assets of a plan
if we, the general partner, the selling agent, the futures commission
merchant, or any of their affiliates, agents or employees:
* has investment discretion over such plan,
* gives investment advice with respect to such plan assets, for a fee, or
* is an employer maintaining or contributing to such plan.
Before you invest in us through one of these qualified plans, you should
consult your own legal and financial advisors, and the fiduciary of your plan
should take into account the facts and circumstances of your plan, and
consider applicable fiduciary standards under the above act.
Acceptance of subscriptions on behalf of employee benefit plans is not a
representation by the general partner or any other party that this investment
meets all legal requirements or is appropriate with respect to investments by
any particular plan. The person with investment discretion should consult
the attorney for the plan as to the propriety of an investment in this
partnership.
The Limited Partnership Agreement
This prospectus explains all material terms of the Limited Partnership
Agreement; however, you are urged to read the entire agreement. See Exhibit
A.
Formation Of The Partnership
Our Certificate of Limited Partnership is dated and was filed on January 12,
1999 pursuant to the Delaware Uniform Limited Partnership Act.
You are not liable for our losses, debts and obligations beyond your
investment amount and your share of any of our undistributed assets, so long
as you do not take part in the management of the business of the partnership
or transact any business for the partnership.
According to the Limited Partnership Agreement, this partnership will not
terminate or dissolve upon any limited partner's death, incompetence,
withdrawal, insolvency, bankruptcy, termination, liquidation, dissolution or
other legal incapacity. Also, legal representatives of such limited partner
may redeem their partnership interests, but will not have the right to
withdraw their interest or become a substituted limited partner solely by
reason of such incapacity.
Units of Partnership Interests
The amount of partnership interests you hold will determine your percentage
interest in our net assets. The percentage interest will be calculated from
time to time by dividing the number of units of partnership interests you
hold by the aggregate number of outstanding units of partnership interests.
Management Of Partnership Affairs
Only the general partner may manage this partnership. You will not take part
in our business or affairs nor will you have any voice in our management or
operations.
The limited partners who collectively hold a majority of the partnership
interests must give written approval of any material change in either the
Limited Partnership Agreement or the partnership structure.
Without the limited partners' approval, the general partner may:
* change the management and incentive fees within the limits prescribed by
law
* add, change and delete trading advisors
* add, change and delete introducing brokers
* add, change and delete futures commission merchants
* change the commissions
* redeem and return a limited partner account
* change the commodity contracts traded, or
* change the diversification of our assets among the various types of or in
the positions held in commodity contracts.
To the extent the law permits, such limited partners who hold a majority of
the partnership interests may vote to amend any term in the Limited
Partnership Agreement and, if necessary, the Certificate of Limited
Partnership without the agreement of the general partner. This includes
removing the general partner and electing a new general partner.
The general partner may not make trades on our behalf. Independent commodity
trading advisors selected by the general partner must do the trading.
General Prohibitions
Except for the security posted for commodity trades made in the partnership
accounts on normal margin terms with the clearing broker, we may not borrow
from or loan money or any other assets to any person. However, this shall
not apply to the incurrence of debt to a partner or an affiliate with respect
to:
* the offering of partnership interests for sale
* registration, or
* initiation and maintenance of our trading positions.
We may not permit rebates or give-ups to be received by the general partner
or any of its affiliates. Nor may we permit the general partner or any of
its affiliates to engage in reciprocal business arrangements that would
circumvent the foregoing prohibition. However, an affiliate or the general
partner may provide goods or services, including brokerage, at a competitive
cost to us.
The general partner or its affiliates are not required to advance or loan
funds to the partnership. If the general partner makes any advance or loan
to the partnership, it will not receive interest in excess of its interest
costs, nor will it receive interest in excess of the amounts which would be
charged the partnership by unrelated banks on comparable loans for the same
purpose. The general partner shall not receive points or other financing
charges or fees regardless of the amount.
Additional Offerings
The general partner has sole discretion to:
* end any offering of partnership interests
* register additional partnership interests, and
* make additional public or private offerings of partnership interests.
You will not have any preemptive, preferential or other rights with respect
to the issuance or sale of any additional partnership interests. We have not
limited the amount of capital contributions or the maximum amount of
partnership interests that may be issued, offered or sold.
Partnership Accounting, Reports, And Distributions
You will have a capital account and its initial balance will be the amount
you paid for your partnership interests. The net assets of this partnership
will be determined monthly and any change from the previous month will be
passed on to your account in the ratio that your account bears to all
accounts.
The general partner has sole discretion to make distributions from profits or
net assets. You will receive a monthly report containing:
* the net unit value as of the end of both the current and previous month
* the percentage change in net unit value between the two months
* the amount of distributions during the month
* the fixed brokerage commissions, other fees, administrative expenses, and
reserves for claims and other extra-ordinary expenses incurred or accrued by
us during the month, and
* any other information required by the rules of the Commodity Futures
Trading Commission.
You or your duly authorized representative may inspect our books and records
and any records related to your account, provided:
* you give adequate notice
* you do so at a reasonable time, and
* you make copies at your expense.
Federal Tax Allocations
At the end of each fiscal year, our capital gain or loss and ordinary income
or loss will be allocated among the partners, while compensating for our fees
and expenses. You must include your share of such items in your personal
income tax return.
Transfer Of Partnership Interests Only With Consent Of The General Partner
You are admitted to this partnership and are registered on the partnership
records as the owner of the partnership interests you purchase. As a
registered investor in this partnership, you may:
* receive all distributions, allocations of losses and withdrawals, and
reductions of capital contributions, and
* vote on any matters submitted to the limited partners for voting.
You may transfer your partnership interests only with the written consent of
the general partner. The general partner may not approve the transfer if it:
* is requested before two years from the date of purchase
* is not made for all of your partnership interests or, if you are not
assigning all of your partnership interests, you will not retain more than
five units of partnership interests
* will violate any applicable laws or governmental rules or regulations,
including without limitation:
* any applicable Federal or state securities laws, or
* the Delaware limited partnership laws
* will jeopardize our ability to be taxed as a partnership and not as a
corporation, or
* will affect characterizations or treatment of income or loss.
Termination Of The Partnership
This partnership will terminate:
* at 11:59 p.m. twenty-one years from the date of the Limited Partnership
Agreement
* by election of the general partner, in its sole discretion, to terminate
and dissolve this partnership
* upon the dissolution, death, resignation, withdrawal, bankruptcy or
insolvency of the general partner, unless the limited partners unanimously
elect to carry on the business and a new general partner has been substituted
* if it does not pay its annual franchise fee and file its annual report
with the State of Delaware, which will cause it to be dissolved under
Delaware law
* upon any event which makes the continued existence of the partnership
unlawful, or
* upon the unanimous vote of the Limited Partners.
Meetings
We are not required to hold regular meetings, however, partners may call
meetings to vote on certain issues, including:
* amendment of the limited partnership agreement; provided, however, any
amendment which modifies the compensation or distributions to the general
partner or which affects the duties of the general partner requires its
consent
* removal of the general partner and election of a new general partner
* cancellation of any contract for services with the general partner,
without penalty, upon 60 days written notice; provided, however, the maximum
period of any contract between the general partner and the partnership is one
year; and, provided further, should any amendment to this partnership
agreement attempt to modify the compensation or distributions to which the
general partner is entitled or which affects the duties of the general
partner, such amendment will become effective only upon the consent of the
general partner.
* the right to approve, prior to sale, the sale or distribution, outside the
ordinary course of business, of all or substantially all of the assets of the
partnership.
* dissolution of the partnership.
* change of any of the partnership's basic investment policies or in the
structure of the partnership.
See Management of Partnership Affairs.
The general partner must receive in person or by certified mail a written
request with a check to cover the cost of sending notice of the meeting to
all partners. One or more partners who collectively own 10% or more of the
outstanding partnership interests must sign the written request. The general
partner then has 15 days to call the meeting
Redemptions
Redemption allows you to receive your share of the net assets of this
partnership. The general partner must a receive written request for
redemption no less than ten business days prior to the desired effective date
of redemption. The effective date of redemption must be the last day of the
then current or a future month.
The general partner will try its best to comply with the redemption request
within twenty days following the effective date. However, you should be
aware that the general partner may be unable to timely comply with the
request if there is not enough cash. This may be because the trading advisor
cannot liquidate the positions it has taken, or because there are contingent
claims on partnership assets.
If the general partner notifies you in writing, it may declare additional
redemption dates or cause the partnership to redeem fractions of units of
partnership interests. If the general partner notifies you in writing prior
to registering partnership interests for public sale, it may redeem your
partnership interests if you don't hold the required minimum amount of
partnership interests which it has established.
Partnership interests are redeemable effective the end of the month in which
the request is received and there will not be a fee for redemption.
Plan For Sale Of Partnership Interests
The Selling Agent
We are offering and selling the partnership interests through Futures
Investment Company, 5916 N. 300 West, P.O. Box C, Fremont, Indiana 46737, a
broker/dealer registered with the National Association of Securities Dealers
as the principal selling agent. The general partner or Futures Investment
Company may also select other broker dealers to sell the partnership
interests. However, no other selling agents have been appointed to date.
All partnership interests will be sold on a best efforts basis, which means
the selling agents will try, but not guarantee, to sell all the partnership
interests.
Although we are offering a maximum of $7,000,000 in partnership interests,
the Limited Partnership Agreement authorizes the general partner to determine
the amount of partnership interests to be sold. Accordingly, the general
partner may cause the partnership to authorize and sell an unlimited amount
of partnership interests.
Mr. and Ms. Pacult are registered with the National Futures Association as
associated persons and with the National Association of Securities Dealers,
Inc. as registered representatives of Futures Investment Company. In those
capacities, they earn sales and continuing service fees on the partnership
interests they sell and service.
Futures Investment Company is an Illinois corporation that was incorporated
on December 6, 1983 and is owned 50% each by Michael Pacult and his wife,
Shira Del Pacult. It was officially registered as a fully disclosed broker
dealer with the National Association of Securities Dealers on July 24, 1997.
Currently, Futures Investment Company principally offers and trades
securities and commodities as a Commodity Futures Trading Commission
registered introducing broker. It has and will continue to participate in
offerings of other commodity pools sponsored by the general partner or other
persons or entities in competition with us.
Escrow
New partners will be admitted to the partnership on the first business day of
the month following the month in which their subscription documents were
accepted. Until they are admitted to the partnership and assigned
partnership interests, all cash and subscription documents will be held in a
segregated escrow account maintained by the general partner as escrow agent.
No funds, while held in escrow, will be available to pay partnership debts or
claims.
The interest earned on your subscription during the escrow period will be
deposited in our account, and you will receive a corresponding amount of
additional partnership interests at the current month end net asset value per
partnership interest.
Cash from subscriptions held in the escrow account will be invested in short-
term investments that meet applicable regulatory requirements. These include
United States Treasury Bills or other comparable interest-bearing instruments
that are expected to be liquid, substantially risk-less instruments, with
correspondingly low yields.
There cannot be any assurance that any additional partnership interests will
be sold. The general partner is authorized, in its sole discretion, to
terminate this or any future offering of partnership interests.
Subscription Procedure
To purchase partnership interests, you must:
* complete and execute a suitability questionnaire and a subscription
agreement (Exhibit D), and
* deliver the executed subscription documents and check to the sales agent.
You should make out the check to "Escrow Account for Bromwell Financial Fund,
LP". Your check will then be delivered to the escrow agent within 24 hours
of receipt.
Under no circumstances should you:
* make payment in cash, or
* make any checks payable to the partnership, the general partner the
selling agent or any of their registered representatives or affiliates.
Subscription Amounts
You must purchase at least $25,000 in partnership interests; however, the
general partner may reduce this to not less than the regulatory minimum of
$5,000. You may make additional investments above $25,000 in $1,000
increments, but you may not invest more than 10% of your net worth in the
partnership. If you have not provided collectible funds, whether in the form
of a bad check or draft, or otherwise, any partnership interests recorded in
our books in your favor shall be cancelled.
Revocation and Acceptance of Subscription
Once you have purchased partnership interests, you may revoke your
subscription within five business days after you send it to us, or longer, if
there are Federal or state securities laws which allow you to do so. After
the lapse of five business days from submission, your subscription will be
irrevocable and, thereafter, you must redeem pursuant to the terms of the
Limited Partnership Agreement. The partnership interests offered to you are
subject to prior sale. The general partner has sole discretion to reject any
subscription, in whole or in part, within five days. If your subscription is
accepted, the general partner will send you written confirmation of your
purchase, and you will be admitted as a limited partner on the first business
day of the following month.
Net Worth Tests
To purchase partnership interests, you must have at least:
* a minimum net worth of $150,000, exclusive of home, home furnishings and
automobiles, or
* a minimum annual gross income of $45,000 and a minimum net worth of
$45,000, exclusive of home, home furnishings and automobiles.
You may have to satisfy higher amounts if you live in certain states. See
Exhibit D.
In the case of sales to fiduciary accounts, the beneficiary, the fiduciary
account, or the donor or grantor who supplies the funds to purchase the
partnership interests, if the donor or grantor is the fiduciary, may meet the
net worth and income standards.
Investor Warranties
When you execute and deliver your Subscription Agreement and Power of
Attorney, you are making representations and warranties to the general
partner, the futures commission merchant and the selling agent including, but
not limited to:
(a) you are of legal age to execute the Subscription Agreement and Power of
Attorney and are legally competent to do so;
(b) you acknowledge that you have received the prospectus, including the
Limited Partnership Agreement, prior to subscribing for partnership
interests;
(c) all information you have given to the general partner or that is set
forth in the Subscription Agreement and Power of Attorney submitted by you is
correct and complete as of the date of submission. Also, if there are any
changes in such information prior to acceptance of your subscription, you
will immediately furnish the revised or corrected information to the general
partner
(d) unless (e) or (f) below apply to you, your subscription is made with
your own funds for your own account and not as trustee, custodian or nominee
for another.
(e) the subscription, if made as custodian for a minor, is a gift you have
made to the minor and is not made with the minor's funds; or, if not a gift,
the representations as to net worth and annual income apply only to such
minor.
(f) if you are subscribing in a representative capacity:
* you have full power and authority to purchase the partnership interests
and enter and be bound by the Subscription Agreement and Power of Attorney on
behalf of the entity for which you are purchasing the partnership interests,
and
* such entity has full right and power to purchase the partnership
interests and enter and be bound by the Subscription Agreement and Power of
Attorney and become a limited partner pursuant to the Limited Partnership
Agreement attached as Exhibit A.
The general partner, the futures commission merchant and the selling agent
may rely upon any of the above representations and warranties as a defense to
any claim made against it.
Legal Matters
Litigation And Claims
Within the past 5 years as of the date of this prospectus, there have been no
material administrative, civil or criminal actions against either general
partner, the commodity trading advisor, the principal selling agent, or any
principal or affiliate of any of them. This includes any actions pending, on
appeal, concluded, threatened, or otherwise known to them. The futures
commission merchant, Citigroup Global Markets, Inc., does have litigation
material to it that is unrelated to us and which Citigroup believes is
immaterial to the clearing services performed for the partnership.
Citigroup Global Markets Inc. ("CGM") (formerly known as Salomon Smith Barney
Inc. ("SSB")), is a New York corporation with its principal place of business
at 388 Greenwich St., New York, New York 10013. CGM is registered as a
broker-dealer and futures commission merchant ("FCM"), and provides futures
brokerage and clearing services for institutional and retail participants in
the futures markets. CGM and its affiliates also provide investment banking
and other financial services for clients worldwide.
There have been no administrative, civil or criminal actions pending, on
appeal or concluded against CGM or any of its individual principals within
the past five years that management believes may have a material impact on
CGM's ability to act as an FCM. In the ordinary course of its business, CGM
is a party to various claims and regulatory inquiries. The following
proceedings are deemed to be material for purposes of CFTC disclosure
requirements.
Both the Department of Labor and the Internal Revenue Service ("IRS") have
advised CGM that they were or are reviewing transactions in which Ameritech
Pension Trust purchased from CGM and certain affiliates approximately $20.9
million in participations in a portfolio of motels owned by Motels of
America, Inc. and Best Inns, Inc. With respect to the IRS review, CGM and
certain affiliated entities have consented to extensions of time for the
assessment of excise taxes that may be claimed to be due with respect to the
transactions for the years 1987, 1988 and 1989.
In April 2000, CGM and several other broker-dealers entered into a settlement
with the IRS and the Securities and Exchange Commission ("SEC"), concluding
an industry-wide investigation into the pricing of Treasury securities in
advanced refunding transactions.
Since April 2002, CGM and several other broker dealers have received
subpoenas and/or requests for information from various governmental and self-
regulatory agencies and Congressional committees as part of their research
and IPO allocation inquiries. With respect to issues raised by the SEC, the
National Association of Securities Dealers ("NASD"), and the New York Stock
Exchange (the "NYSE") about CGM's and the other firms' e-mail retention
practices, CGM and several other broker/dealers and the NASD, the NYSE and
the SEC entered into a settlement agreement in December 2002. CGM agreed to
pay a penalty in the amount of $1.65 million and did not admit to any
allegations of wrongdoing.
In April 2002, consolidated amended complaints were filed against CGM and
other investment banks named in numerous putative class actions filed in the
United States District Court for the Southern District of New York alleging
violations of certain federal securities laws (including Section 11 of the
Securities Act of 1933, as amended, and Section 10(b) of the Securities
Exchange Act of 1934, as amended) with respect to the allocation of shares
for certain initial public offerings and related aftermarket transactions and
damage to investors caused by allegedly biased research analyst reports. On
February 19, 2003, the court issued an opinion denying the defendants' motion
to dismiss.
Also filed in the Southern District of New York against CGM and other
investment banks were several putative class actions that were consolidated
into a single class action alleging violations of certain federal and state
antitrust laws in connection with the allocation of shares in initial public
offerings when acting as underwriters. On November 3, 2003, the court
granted CGM's motion to dismiss the consolidated amended complaint.
On April 28, 2003, CGM, announced final agreements with the Securities and
Exchange Commission, the NASD, the NYSE and the New York Attorney General (as
lead state among the 50 states, the District of Columbia and Puerto Rico) to
resolve on a civil basis all of their outstanding investigations into its
research and IPO allocation and distribution practices (the "Research
Settlement"). As part of the Research Settlement, CGM has consented to the
entry of (1) an injunction under the federal securities laws to be entered in
the United States District Court for the Southern District of New York,
barring SSB from violating provisions of the federal securities laws and
related NASD and NYSE rules relating to research, certain IPO allocation
practices, the safeguarding of material nonpublic information, and the
maintenance of required books and records and requiring CGM to adopt and
enforce new restrictions on the operation of research; (2) an NASD Acceptance
Waiver and Consent requiring CGM to cease and desist from violations of
corresponding NASD rules and requiring CGM to adopt and enforce the same new
restrictions; (3) an NYSE Stipulation and Consent requiring CGM to cease and
desist from violations of corresponding NYSE rules and requiring CGM to adopt
and enforce the same new restrictions; and (4) an Assurance of Discontinuance
with the New York Attorney General containing substantially the same or
similar restrictions. The Research Settlement requires CGM to pay $300
million for retrospective relief, plus $25 million for investor education,
and commit to spend $75 million to provide independent third-party research
to its clients at no charge. CGM reached these final settlement agreements
without admitting or denying any wrongdoing or liability. The Research
Settlement does not establish wrongdoing or liability for purposes of any
other proceeding. The $300 million was accrued during the 2002 fourth
quarter.
To effectuate the Research Settlement, the SEC filed a Complaint and Final
Judgment in the United States District Court for the Southern District of New
York. On October 31, 2003, final judgment was entered against CGM and nine
other investment banks. The NASD has accepted the Letter of Acceptance,
Waiver and Consent entered into with CGM in connection with the Research
Settlement. In May 2003, the NYSE advised CGM that the Hearing Panel's
Decision, in which it accepts the Research Settlement, has become final. As
required by the Research Settlement, CGM also has entered into separate
settlement agreements with numerous states and certain U.S. territories.
Citigroup, CGM and certain executive officers and current and former
employees have been named as defendants - along with twenty-two other
investment banks, certain current and former WorldCom officers and directors,
and WorldCom's former auditors - in a consolidated class action brought on
behalf of individuals and entities who purchased or acquired publicly traded
securities of WorldCom between April 29, 1999 and June 25, 2002. The class
action complaint asserts claims against CGM under (i) Sections 11 and
12(a)(2) of the 1933 Securities Act in connection with certain bond offerings
in which they served as underwriters, and (ii) Sections 10(b) and 20(a) of
the 1934 Securities Exchange Act, and Rule 10b-5 promulgated under Section
10(b), alleging that they participated in the preparation and/or issuance of
misleading WorldCom registration statements and disseminated misleading
research reports concerning WorldCom stock. On May 19, 2003, the district
court denied CGM's motion to dismiss the consolidated class action complaint.
On October 24, 2003, the district court granted the plaintiffs' motion for
class certification. On December 31, 2003, the United States Court of
Appeals for the Second Circuit granted CGM's petition seeking leave for an
interlocutory appeal of the district court's class certification order. The
District Court has scheduled trial to begin in January 2005.
Pursuant to an order entered May 28, 2003, the District Court has
consolidated sixty-nine individual actions with the class action for pretrial
proceedings. The claims asserted in these individual actions are
substantially similar to the claims alleged in the class action and assert
state and federal securities law claims based on CGM's research reports
concerning WorldCom and/or CGM's role as an underwriter in WorldCom
offerings.
Twenty-three other actions asserting claims against the Company in connection
with its research reports about WorldCom and/or its role as an investment
banker for WorldCom are pending in other federal and state courts around the
country. These actions assert claims against Citigroup, CGM and/or Jack
Grubman that are substantially similar to the claims asserted in the class
action. These actions have either been remanded to various state courts, are
pending in other federal courts or have been conditionally transferred to the
United States District Court for the Southern District of New York to be
consolidated with the class action.
For additional detail concerning these actions, please refer to the
discussion set forth under Part I, Item 3 "Legal Proceedings" in Citigroup's
Annual Report on form 10-K for the fiscal year ended December 31, 2002, as
updated by its Quarterly Reports on Form 10-Q for the quarters ended March
31, 2003, June 30, 2003 and September 30, 2003, and the Current Report on
Form 8-K dated April 28, 2003.
Since May 2002, CGM and certain executive officers and current and former
employees have been named as defendants in numerous putative class action
complaints by purchasers of various securities alleging violations of federal
securities laws, including Sections 10 and 20 of the Securities Exchange Act
of 1934, as amended, for allegedly issuing research reports without a
reasonable basis in fact and for allegedly failing to disclose conflicts of
interest with companies in connection with published investment research,
including Global Crossing, Ltd., AT&T Corp., Winstar Communications, Inc.,
Rhythms NetConnections, Inc., Level 3 Communications, Inc., Metromedia Fiber
Network, Inc., XO Communications, Inc. and Williams Communications Group Inc.
Almost all of these actions are pending before a single judge in the United
States District Court for the Southern District of New York for coordinated
proceedings. The court has consolidated these actions into eight separate
categories corresponding to the companies named above. Additional actions
have been brought against CGM and certain of its affiliates in various
federal and state courts alleging substantially similar claims related to
CGM's research reports.
For additional detail concerning these actions, please refer to the
discussion set forth under Part I, Item 3 "Legal Proceedings" in Citigroup's
Annual Report on form 10-K for the fiscal year ended December 31, 2002, as
updated by its Quarterly Reports on Form 10-Q for the quarters ended March
31, 2003, June 30, 2003, and September 30, 2003 and the Current Report on
Form 8-K dated April 28, 2003.
In May 2003, the SEC, NYSE and NASD issued subpoenas and letters to CGM
requesting documents and information with respect to their continuing
investigation of individuals in connection with the supervision of the
research and investment banking department of CGM. Other parties to the
Research Settlement have received similar subpoenas and letters.
On June 23, 2003, the West Virginia Attorney General filed an action against
CGM and nine other firms that were parties to the Research Settlement. The
West Virginia Attorney General alleges that the firms violated the West
Virginia Consumer Credit and Protection Act in connection with their research
activities and seeks monetary penalties.
On July 28, 2003, Citigroup (CGM's ultimate parent) entered into a final
settlement with the SEC to resolve the SEC's outstanding investigation into
Citigroup transactions with Enron and Dynegy Inc. Pursuant to the
settlement, Citigroup has, among other terms, (1) consented to the entry of
an administrative cease and desist order, which bars Citigroup from
committing or causing violations of provisions of the federal securities
laws, and (2) agreed to pay $120 million ($101.25 million allocable to Enron
and $18.75 million allocable to Dynegy). Citigroup entered into this
settlement without admitting or denying any wrongdoing or liability, and the
settlement does not establish wrongdoing or liability for purposes of any
other proceeding. On July 28, 2003, Citibank, N.A. entered into an agreement
with the Office of the Comptroller of the Currency ("OCC") and Citigroup
entered into an agreement with the Federal Reserve Bank of New York ("FED")
to resolve their inquiry into certain of Citigroup's transactions with Enron.
Pursuant to the agreements, Citibank and Citigroup have agreed to submit
plans to the OCC and FED, respectively, regarding the handling of complex
structured finance transactions. Also, on July 28, 2003, Citigroup entered
into a settlement agreement with the Manhattan District Attorney's Office to
resolve its investigation into certain of Citigroup's transactions with
Enron. Pursuant to that settlement, Citigroup has agreed to pay $25.5
million and to abide by its agreements with the SEC, OCC and FED.
CGM, Citigroup and various other Citigroup-related entities have been named
as defendants in over 20 civil lawsuits pending in state and federal courts
throughout the United States, alleging claims against Citigroup and CGM based
on their dealings with Enron. The majority of these cases have been brought
by purchasers and sellers of Enron equity and debt securities and Enron-
linked securities. Many of the plaintiffs in these actions are large,
institutional investors that had substantial Enron and Enron-linked holdings.
The lawsuits collectively allege as against Citigroup and/or its affiliates
and subsidiaries, among other things, federal securities fraud, state law
claims of negligent misrepresentation, fraud, breach of fiduciary duty,
aiding and abetting a breach of fiduciary duty and related claims. In most
of these lawsuits, Citigroup is named as a co-defendant along with other
investment banks alleged to have had dealings with Enron. The majority of
cases pending in the federal courts have been, or are in the process of
being, consolidated before a single judge in the United States District Court
for the Southern District of Texas. In addition, in two adversary
proceedings in the Enron Chapter 11 bankruptcy, Enron and its co-debtor
affiliates and subsidiaries, and the Official Committee of Unsecured
Creditors of In re Enron Corp. et al. (the "Committee"), have named Citigroup
and its affiliates or subsidiaries as defendants.
For additional detail concerning the Enron-related civil actions, please
refer to the discussion set forth under Part I, Item 3 "Legal Proceedings" in
Citigroup's Annual Report on Form 10-K for the fiscal year ended December 31,
2002, as updated by its Quarterly Report on Form 10-Q for the quarters ended
March 31, 2003, June 30, 2003 and September 30, 2003, and Citigroup's Current
Report on Form 8-K dated April 28, 2003.
Plaintiffs brought a putative federal securities fraud class action on behalf
of holders of publicly-traded Dynegy debt and equity securities. On June 6,
2003, plaintiffs filed an amended consolidated complaint adding a number of
financial institutions, including Citigroup, Citibank and CGM, to a roster of
defendants that includes Dynegy, several of its officers and directors and
Arthur Andersen. The complaint alleges violations of Sections 10(b) and
20(a) of the Securities and Exchange Act of 1934 arising out of Citigroup's
involvement in two transactions with Dynegy as well as CGM's statements
concerning Dynegy. The action is pending in the United States District Court
for the Southern District of Texas. On January 29, 2004, plaintiffs were
granted further leave to amend the complaint. Defendants have until March 22
to respond.
For additional detail concerning the Dynegy-related civil action, please
refer to the discussion set forth under Part I, Item 3 "Legal Proceedings" in
Citigroup's Annual Report on Form 10-K for the fiscal year ended December 31,
2002, as updated by its Quarterly Report on Form 10-Q for the quarters ended
March 31, 2003, June 30, 2003 and September 30, 2003, and Citigroup's Current
Report on Form 8-K dated April 28, 2003.
In July 2002, Citigroup, CGM and certain officers were named as defendants in
a purported class action filed in the United States District Court for the
Southern District of New York, brought on behalf of purchasers of Citigroup
common stock between July 24, 1999 and July 23, 2002. The complaint seeks
unspecified compensatory and punitive damages for alleged violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and for
common law fraud. Fourteen virtually identical complaints have been filed
and consolidated. The complaints allege that Citigroup misstated the extent
of its Enron-related exposure, and that Citigroup's stock price fell once the
true extent of the company's Enron involvements became known. Plaintiffs
filed an amended complaint on March 10, 2003, which incorporated the
allegations in the 15 separate actions and added new material as well. The
amended complaint focuses on certain transaction Citigroup did with Enron and
alleged analyst conflicts of interest. The class period for the consolidated
amended complaint is July 24, 1999 to December 11, 2002. On June 2, 2003,
Citigroup filed a motion to dismiss the consolidated amended complaint.
Plaintiffs' response was filed on July 30, and Citigroup's reply was filed on
October 3, 2003. Oral argument before Judge Swain was held on November 20,
2003.
For additional detail concerning the Citigroup shareholder litigation, please
refer to the discussion set forth under Part I, Item 3 "Legal Proceedings" in
Citigroup's Annual Report on Form 10-K for the fiscal year ended December 31,
2002, as updated by its Quarterly Report on Form 10-Q for the quarters ended
March 31, 2003, June 30, 2003 and September 30, 2003, and Citigroup's Current
Report on Form 8-K dated April 28, 2003.
In December 2003, Citigroup and/or CGM received subpoenas or requests for
information from various governmental and regulatory agencies relating to
certain of their transactions with Parmalat Finanziaraia, SpA and its
subsidiaries. Citigroup and CGM are cooperating fully with all such
requests. In addition, Citigroup has been named as a defendant in a number
of putative class actions based on certain of its transactions with Parmalat.
Additional lawsuits containing similar claims to those described above may be
filed in the future.
Legal Opinion
The Scott Law Firm, P.A., 940 Northeast 79th Street, Suite A, Miami, FL
33138, is special securities counsel to the partnership and the general
partner with respect to:
* the offering of partnership interests
* the preparation of this prospectus
* the legality of the partnership interests offered, and
* the classification of the partnership as a partnership for tax purposes.
From time to time, The Firm will also advise the partnership and the general
partner regarding the maintenance of our tax status, the legality of any
subsequent offers, and the legality of any transfers by partners.
The general partner has granted the firm the right to employ other law firms
to help in matters that relate to the sale of partnership interests or our
operation.
The Scott Law Firm, P.A. will not give you or any persons affiliated with you
legal advice. You should seek investment, legal, and tax advice from your
own legal counsel and other professionals of your choice.
Experts
We rely on various experts to perform services for us.
Frank L. Sassetti, & Co., 6611 West North Avenue, Oak Park, IL 60302 is our
accounting and auditing expert, and is responsible for auditing the books and
records of both us and Belmont Capital Management, Inc. Frank L. Sassetti, &
Co. has audited the financial statements in this prospectus and prepares our
tax returns.
Mr. James Hepner, certified public accountant, 1824 N. Normandy, Chicago, IL
60635 is another accounting expert who:
* has established our original books and records
* handles the journal entries
* prepares the monthly and annual financial statements and statements of
account, and
* prepares our K-1s.
The corporate general partner serves as our tax partner. The general partner
is required by the rules and regulations of the Commodity Futures Trading
Commission to send you unaudited monthly and annual account statements, and
financial statements audited by an independent certified public accountant.
We will send you the unaudited monthly statements as soon as practicable
after the end of each month, and will send you the audited annual financial
statements within 90 days after the end of each calendar year.
Additional Information
By our general partner, we have filed a registration statement on Form S-1
with the Securities and Exchange Commission under the Securities Act of 1933
to allow us to issue and sell our limited partnership interests.
This prospectus does not contain all of the information in the Form S-1
filing, for example, the Selling Agreement and the futures commission
merchant Customer Agreements that established the partnership accounts. The
descriptions in this prospectus of these exhibits are summaries. For further
information regarding the partnership and the partnership interests offered,
you may inspect and copy, without charge, our complete filings, including
this prospectus, the exhibits and periodic reports, at the public reference
facilities of the Securities and Exchange Commission at 450 Fifth Street, NW,
Washington, D.C. 20549
Also, the Securities and Exchange Commission offices will send you copies of
all or any part of this filing by mail, upon payment of the prescribed rates.
This prospectus and other electronic filings made through the Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system are publicly available
through the Commission's Web site, <http://www.sec.gov>.
In addition, our books and records will be maintained for six years at the
office of the corporate general partner Belmont Capital Management, Inc. ,
5916 N. 300 west, P.O. Box C, Fremont, IN 46737, (260) 833-1306, with a
duplicate set maintained at the offices of Mr. James Hepner, Certified Public
Accountant, at 1824 N. Normandy, Chicago, IL 60635, (773) 804-0074.
You are invited to review any materials available to the general partner
relating to:
* this partnership
* our operations
* this offering
* the commodity experience and trading history of:
* the commodity trading advisor
* the general partner
* the commodity brokers, and
* their respective officers, directors and affiliates
* the Advisory Agreement between us and the commodity trading advisor
* the Customer Agreements between us and our Commodity Brokers
* the commodity trading advisor's disclosure document
* the forms filed with the National Futures Association for any registered
entity or person related to this partnership, and
* any other matters relating to the laws applicable to this offering or this
partnership.
The officer and staff of the general partner will answer all reasonable
inquiries you may have. All the above materials will be made available at
any mutually convenient location at any reasonable hour after reasonable
prior notice.
The general partner will allow you to obtain any additional information from
third parties necessary to verify any representations or information in this
prospectus and its exhibits, assuming the general partner possesses such
information or has a right to acquire it with reasonable effort and expense.
However, your review is limited by the proprietary and confidential nature of
the commodity trading advisor's trading systems and by the confidentiality of
personal information relating to other investors.
[The balance of this page has been intentionally left blank.]
*****************************************************************************
Part II
Statement of Additional Information
Bromwell Financial Fund, Limited Partnership
This Statement of Additional Information is the second part of a two-part
document and should be read in conjunction with Bromwell Financial Fund's
disclosure document dated _______________, 2004, both of which are combined
in this single prospectus.
Table of Contents
Financial Statements
A. Bromwell Financial Fund, Limited Partnership
Audited Financial Statements for the Years Ended 2003, 2002 and 2001
B. Belmont Capital Management, Inc.
Audited Financial Statements for the Years Ended 2003, 2002 and 2001
Appendix I - Commodity Terms And Definitions; State Regulatory Glossary
Exhibit A - Limited Partnership Agreement
Exhibit B - Request For Redemption
Exhibit C - Suitability Information
Exhibit D - Subscription Agreement And Power Of Attorney
Exhibit E - Escrow Agreement
Exhibit F - Investment Advisory Contracts
The date of this Statement of Additional Information is ____________, 2004
*****************************************************************************
LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
INDEX TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31,
2003, 2002 AND 2001
Page
Independent Auditors' Report F-2
Financial Statements
Balance Sheets F-3
Schedules of Investments F-4 - F-6
Statements of Operations F-7
Statements of Partners' Equity F-8
Statements of Cash Flows F-9
Notes to Financial Statements F-10 - F-15
F-1
Frank L. Sassetti & Co.
Certified Public Accountants
To The Partners
Bromwell Financial Fund, Limited Partnership
Dover, Kent County, Delaware
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets, including the
schedules of investments, of BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP as
of December 31, 2003 and 2002, and the related statements of operations,
partners' equity and cash flows for each of the three years in the period
ended December 31, 2003. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of BROMWELL
FINANCIAL FUND, LIMITED PARTNERSHIP as of December 31, 2003 and 2002, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States.
/s/ Frank L. Sassetti & Co.
February 3, 2004
Oak Park, Illinois
6611 W. North Avenue * Oak Park, Illinois 60302
* Phone (708) 386-1433 * Fax (708) 386-0139
F-2
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
ASSETS
2003 2002
Equity in Commodity Futures Trading Accounts -
Cash and cash equivalents $973,657 $1,578,725
Net unrealized gains on open commodity
futures contracts 72,792 71,746
Net unrealized gains on open commodity
forward contracts 7,369
1,053,818 1,650,471
Cash 22,397 19,491
Accrued interest receivable 1,884
$1,076,215 $1,671,846
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Partner redemptions payable $7,405 $4,613
Accrued trading commissions payable 3,132 987
Accrued management fees payable 9,323 6,007
Accrued incentive fees payable 9,455 2,751
Other accrued liabilities 10,000 7,500
Total Liabilities 39,315 21,858
PARTNERS' CAPITAL
Limited partners -
(1,257.32 and 1,815.19 units) 1,036,900 1,649,988
General partner - (0 units)
Total Partners' Capital 1,036,900 1,649,988
$1,076,215 $1,671,846
The accompanying notes are an integral part
Of the financial statements.
F-3
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
Contracts Value Percent
United States Commodity Futures Positions, Held Long
2 Mar '04 Silver $7,000 0.66%
4 Feb '04 Gold 8,320 0.79
2 Feb '04 Unleaded Gas (8) (0.00)
1 Mar '04 Soybeans 950 0.09
2 Mar '04 Soybean Meal 1,380 0.13
3 Mar '04 Soybean Oil 4,932 0.47
1 Mar '04 Euro FX 4,319 0.41
1 Mar '04 New Zealand Dollar 950 0.09
3 Mar '04 British Pound 9,862 0.94
1 Mar '04 Canadian Dollars 500 0.05
2 Mar '04 Swiss Franc 3,725 0.35
1 Mar '04 Japanese Yen (488) (0.05)
2 Mar '04 Australian Dollar 2,560 0.24
2 Mar '04 E-mini NASDAQ 3,326 0.32
1 Mar '04 E-mini S&P 500 2,572 0.24
2 Jan '04 Taiwan Stock Index 640 0.06
Total United States Commodity Futures Positions 50,540 4.79
Swiss Commodity Futures Positions, Held Long
19 Jun '04 3 Month Euroswiss 6,549 0.62
Canadian Commodity Futures Positions, Held Long
8 Jun '04 3 Month Bankers Acceptance 4,046 0.38
Japanese Commodity Futures Positions, Held Long
19 Mar '04 Euroyen Tibor 444 0.04
British Commodity Futures Positions, Held Long
3 Mar '04 FTSE 100 Index 7,179 0.68
Australian Commodity Futures Positions, Held Long
6 Mar '04 SPI 200 Equity Index Futures 7,781 0.74
European Commodity Futures Positions, Held Long
2 Jan '04 IBEX 35 7,200 0.68
Total Commodity Futures Positions, Held Long 83,739 7.93
The accompanying notes are an integral part
of the financial statements.
F-4
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
Contracts Value Percent
United States Commodity Futures Positions, Sold Short
2 Mar '04 Coffee $(1,537) (0.15)%
17 Mar '04 Sugar 2,666 0.25
7 Feb '04 Lean Hogs (2,590) (0.25)
Total United States Commodity Futures Positions (1,461) (0.15)
British Commodity Futures Positions, Sold Short
1 Mar '04 Long Gilt (4,373) (0.41)
Swedish Commodity Futures Positions, Sold Short
3 Mar '04 EUR/SEK FX Cross Forward (5,113) (0.49)
Total Commodity Futures Sold Short (10,947) (1.05)
Net Commodity Futures Positions 72,792 6.88
United States Forward Positions, Held Long
5 Jan '04 Standard Lead 10,937 1.04
8 Jan '04 Zinc 8,400 0.80
1 Jan '04 Copper 4,750 0.45
5 Jan '04 Aluminum 7,094 0.67
Total United States Forward Positions, Held Long 31,181 2.96
United States Forward Positions, Sold Short
2 Jan '04 Lead (5,174) (0.49)
6 Jan '04 Zinc (9,600) (0.91)
1 Jan '04 Copper (5,475) (0.52)
2 Jan '04 Aluminum (3,563) (0.34)
Total Forward Positions Sold Short (23,812) (2.26)
Net Forward Positions 7,369 0.70
Cash in Trading Accounts 973,657 92.42
Total Investments $1,053,818 100.00%
The accompanying notes are an integral part
of the financial statements.
F-5
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2002
Contracts (All securities are from U.S. markets) Value Percent
Commodity Futures Positions, Held Long
1 Mar '03 British Pounds $2,138 0.13%
3 Mar '03 Treasury Notes 5,765 0.35
9 Mar '03 Euro Dollars 11,463 0.69
2 Mar '03 European Currency Unit 10,525 0.64
6 Mar '03 Swiss Francs 29,700 1.80
3 Mar '03 US Dollar Index 10,170 0.62
3 Mar '03 Cotton 1,305 0.08
5 Feb '03 New York Crude Oil 17,400 1.05
2 Apr '03 Platinum 1,240 0.08
Total Commodity Futures Positions, Held Long 89,706 5.44
Commodity Futures Positions Sold Short
4 Mar '03 Hi-Grade Copper (4,150) (0.25)
4 Mar '03 Canadian Dollars (2,320) (0.14)
3 Feb '03 Natural Gas (11,490) (0.70)
Total Commodity Futures Sold Short (17,960) (1.09)
Net Commodity Futures Positions 71,746 4.35
Cash in Trading Accounts 1,578,725 95.65
Total Investments $1,650,471 100.00%
The accompanying notes are an integral part
Of the financial statements.
F-6
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
2003 2002 2001
INVESTMENT AND OTHER INCOME
Interest income $ 3,464 $ 6,435 $ 16,870
Redemption penalty 304 4,554 1,416
Total Investment and Other Income 3,768 10,989 18,286
EXPENSES
Commissions 150,080 207,515 179,143
Management fees 59,107 72,904 69,029
Incentive fees 10,179 62,248 12,893
Professional accounting and legal fees 60,553 48,539 39,981
Other operating and administrative expenses 1,957 1,428 1,092
Total Expenses 281,876 392,634 302,138
Net Investment Income (278,108) (381,645) (283,852)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain/(loss) on trading futures $102,824 $ 83,402 $106,053
Realized gain/(loss) on exchange rate
fluctuation (294)
Change in unrealized gain/(loss) on
open commodity futures contracts 1,046 49,936 (31,224)
Realized gain from trading options 95,986 201,197 176,809
Change in unrealized gain/(loss) on
forward contracts 7,369 (26,775) (13,225)
Total Realized and Unrealized Gain (Loss)
on Investments 206,931 307,760 238,413
NET LOSS $(71,177) $(73,885) $(45,439)
NET LOSS PER UNIT-
Limited partnership unit $ (46.57) $ (41.70) $ (24.48)
General partnership unit $ $ $
The accompanying notes are an integral part
Of the financial statements.
F-7
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
TOTAL
LIMITED PARTNERS GENERAL PARTNERS PARTNERS' CAPITAL
Amount Units Amount Units Amount Units
Balance -
January 1, 2001 $1,718,208 1,766.04 $1,718,208 1,766.04
Additions of
244.29 units 238,080 244.29 238,080 244.29
Syndication costs (4,943) (4,943)
Redemptions of
88.27 units (70,267) (88.27) (70,267) (88.27)
Net loss (45,439) (45,439)
Balance -
December 31, 2001 1,835,639 1,922.06 1,835,639 1,922.06
Additions of
244.50 units 230,750 244.50 230,750 244.50
Syndication costs (18,337) (18,337)
Redemptions of
351.37 units (324,179) (351.37) (324,179) (351.37)
Net loss (73,885) (73,885)
Balance -
December 31, 2002 1,649,988 1,815.19 1,649,988 1,815.19
Syndication costs (14,050) (14,050)
Redemptions of
557.87 units (527,861) (557.87) (527,861) (557.87)
Net loss (71,177) (71,177)
Balance -
December 31, 2003 $1,036,900 1,257.32 $1,036,900 1,257.32
Dec 31, 2003 Dec 31, 2002 Dec 31, 2001
Net value per partnership unit $824.69 $908.99 $955.04
Total partnership units 1,257.32 1,815.19 1,922.06
The accompanying notes are an integral part
Of the financial statements.
F-8
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
2003 2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (71,177) $ (73,885) $ (45,439)
Adjustments to reconcile net loss to
net cash used in operating activities -
Changes in operating assets and
liabilities -
Equity in Commodity Futures
Trading Accounts (8,415) (85,561) 30,049
Prepaid commissions 3,677
Accrued interest receivable 1,884 (762) 428
Accrued management and incentive fees 10,020 1,913 (5,123)
Other payables and accruals 4,645 (1,135) 1,681
Net Cash Used In
Operating Activities (63,043) (159,430) (14,727)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of units, net
of sales commissions 230,750 288,080
Syndication costs (14,050) (18,337) (4,943)
Partner redemptions (525,069) (319,566) (70,267)
Net Cash Provided By (Used In)
Financing Activities (539,119) (107,153) 212,870
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (602,162) (266,583) 198,143
CASH AND CASH EQUIVALENTS
Beginning of period 1,598,216 1,864,799 1,666,656
End of period $ 996,054 $1,598,216 $1,864,799
End of period cash and cash equivalents
consists of:
Cash and cash equivalents in broker
trading accounts $ 973,657 $1,578,725 $1,825,664
Cash 22,397 19,491 39,135
$ 996,054 $1,598,216 $1,864,799
The accompanying notes are an integral part
Of the financial statements.
F-9
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Bromwell Financial Fund, Limited Partnership (the Fund) was formed
January 12, 1999 under the laws of the State of Delaware. The Fund is
engaged in the speculative trading of futures contracts in commodities, which
commenced in July, 2000. Belmont Capital Management, Inc. (Belmont) and
Michael Pacult are the general partners and commodity pool operators (CPOs)
of the Fund. The commodity trading advisor (CTA) is Fall River Capital, LLC
(previous to November 3, 2003, Ansbacher Investment Management, Inc. and
Mangin Capital Management, Inc. were the CTAs), which have the authority to
trade as much of the Fund's equity as is allocated to them by the General
Partner. The selling agent is Futures Investment Company (Futures), which is
controlled by Michael Pacult and his wife.
Regulation - The Fund is a registrant with the Securities and Exchange
Commission (SEC) pursuant to the Securities and Exchange Act of 1934 (the
Act). The Fund is subject to the regulations of the SEC and the reporting
requirements of the Act. The Fund is also subject to the regulations of the
Commodities Futures Trading Commission (CFTC), an agency of the U.S.
government which regulates most aspects of the commodity futures industry,
the rules of the National Futures Association and the requirements of various
commodity exchanges where the Fund executes transactions. Additionally, the
Fund is subject to the requirements of futures commission merchants and
interbank market makers through which the Fund trades.
Registration Costs - Costs incurred for the initial filings with the
Securities and Exchange Commission, Commodity Futures Trading Commission,
National Futures Association and the states where the offering was made were
accumulated, deferred and charged against the gross proceeds of offering at
the initial closing as part of the offering expenses. The Fund remains open
to new partners and incurs costs required to retain the ability to issue new
units. Such costs are treated in a similar manner. Costs of recurring
annual and quarterly filings with regulatory agencies are expensed as
incurred.
Revenue Recognition - Commodity futures contracts are recorded on the
trade date and are reflected in the balance sheet at the difference between
the original contract amount and the market value on the last business day of
the reporting period.
Market value of commodity futures contracts is based upon exchange or
other applicable market best available closing quotations.
Use of Accounting Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
F-10
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income Taxes - The Fund is not required to provide a provision for
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual partners. The Fund may be subject to state and
local taxes in jurisdictions in which it operates.
Statement of Cash Flows - For purposes of the Statement of Cash Flows,
the Fund considers only cash and money market funds to be cash equivalents.
Net cash used in operating activities includes no cash payments for interest
or income taxes.
Reclassifications - Certain reclassifications have been made to the
2002 and 2001 financial statements to conform to the 2003 presentation.
Foreign Currency Transactions - The Fund's functional currency is the
U.S. dollar; however, it transacts business in currencies other than the U.S.
dollar. Assets and liabilities denominated in currencies other than U.S.
dollar are translated into U.S. dollars at the rates in effect at the date of
the statement of financial condition. Income and expense items denominated
in currencies other than the U.S. dollar are translated into U.S. dollars at
the rates in effect at each month end. Gains and losses resulting from the
translation to U.S. dollars are reported in income currently.
2. GENERAL PARTNER DUTIES
The responsibilities of the General Partner, in addition to directing
the trading and investment activity of the Fund, including suspending all
trading, include executing and filing all necessary legal documents,
statements and certificates of the Fund, retaining independent public
accountants to audit the Fund, employing attorneys to represent the Fund,
reviewing the brokerage commission rates to determine reasonableness,
maintaining the tax status of the Fund as a limited partnership, maintaining
a current list of the names, addresses and numbers of units owned by each
Limited Partner and taking such other actions as deemed necessary or
desirable to manage the business of the Partnership.
If the daily net unit value of the partnership falls to less than 50%
of the highest value earned through trading, then the General Partner will
immediately suspend all trading, provide all limited partners with notice of
the reduction and give all limited partners the opportunity, for fifteen days
after such notice, to redeem partnership interests. No trading will commence
until after the lapse of the fifteen day period.
3. THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partnership Agreement provides, among other things, that:
Capital Account - A capital account shall be established for each
partner. The initial balance of each partner's capital account shall be the
amount of the initial contributions to the partnership.
F-11
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
3. THE LIMITED PARTNERSHIP AGREEMENT - CONTINUED
Monthly Allocations - Any increase or decrease in the Partnership's net
asset value as of the end of a month shall be credited or charged to the
capital account of each Partner in the ratio that the balance of each account
bears to the total balance of all accounts.
Any distribution from profits or partners' capital will be made solely
at the discretion of the General Partners.
Federal Income Tax Allocations - As of the end of each fiscal year, the
Partnership's realized capital gain or loss and ordinary income or loss shall
be allocated among the Partners, after having given effect to the fees and
expenses of the Fund.
Subscriptions - Investors must submit subscription agreements and funds
at least five business days prior to month end. Subscriptions must be
accepted or rejected by the general partner within five business days. The
investor also has five business days to withdraw his subscription. Funds are
deposited into an interest bearing escrow account and will be transferred to
the Fund's account on the first business day of the month after the
subscription is accepted. Interest earned on the escrow funds will accrue to
the account of the investor.
Redemptions - A limited partner may request any or all of his
investment be redeemed at the net asset value as of the end of a month. The
written request must be received by the general partner no less than ten
business days prior to a month end. Redemptions will generally be paid within
twenty days of the effective month end. However, in various circumstances due
to liquidity, etc. the general partner may be unable to comply with the
request on a timely basis. There are no fees for redemption.
4. FEES
Effective November 1, 2003, the Fund is charged the following fees:
A management fee of 1% (annual rate) of the equity assigned to each
CTA, paid on a monthly basis and a 20% quarterly incentive fee on all new net
profits (as defined).
A continuing service fee of 4% (annual rate) of the investment in the
Fund (as defined) will be paid to the selling agent.
A $22 per round turn brokerage commission (from which brokerage
commissions will be paid to the futures commission merchant) and a 5%
quarterly incentive fee on all new net profits (as defined) will be paid to
the general partner.
The General Partner has reserved the right to change the management fee
and the incentive fee at its sole discretion.
F-12
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
5. RELATED PARTY TRANSACTIONS
The Fund paid the following expenses to related parties during the
years ended December 31, 2003, 2002 and 2001:
2003 2002 2001
Management Fees - Belmont $41,793 $54,070 $52,753
Commission/Continuing Service Fees -
Futures $95,059 $131,973 $113,263
Financial Accounting Standards Board Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, identifies certain disclosures to be
made by a guarantor in its financial statements about its obligations under
certain guarantees that it has issued. In the normal course of business, the
Fund has provided general indemnifications to the General Partner, its CTA
and others when they act, in good faith, in the best interests of the Fund.
The Fund is unable to develop an estimate for future payments resulting from
hypothetical claims, but expects the risk of having to make any payments
under these indemnifications to be remote.
6. TRADING ACTIVITIES AND RELATED RISKS
The Fund is engaged in speculative trading of U.S. and foreign futures
contracts in commodities. The Fund is exposed to both market risk, the risk
arising from changes in market value of the contracts, and credit risk, the
risk of failure by another party to perform according to the terms of a
contract.
A certain portion of cash in trading accounts is pledged as collateral
for commodities trading on margin. Additional deposits may be necessary for
any loss on contract value. The Commodity Exchange Act requires a broker to
segregate all customer transactions and assets from such broker's proprietary
activities.
The amount of required margin with the broker and interbank market
makers is subject to management judgment, but should never fall below 10% of
the Net Asset Value. The cash deposited in trading accounts at December 31,
2003 and 2002 was $973,657 and $1,578,725, respectively, which equals
approximately 94% and 96% of Net Asset Value, respectively.
F-13
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
5. TRADING ACTIVITIES AND RELATED RISKS- CONTINUED
Trading in futures contracts involves entering into contractual
commitments to purchase or sell a particular commodity at a specified date
and price. The gross or face amount of the contract, which is typically many
times that of the Fund's net assets being traded, significantly exceeds the
Fund's future cash requirements since the Fund intends to close out its open
positions prior to settlement. As a result, the Fund is generally subject
only to the risk of loss arising from the change in the value of the
contracts. The market risk is limited to the gross or face amount of the
contracts held of $12,789,512 and $1,407,885 on long positions at December
31, 2003 and 2002, respectively. However, when the Fund enters into a
contractual commitment to sell commodities, it must make delivery of the
underlying commodity at the contract price and then repurchase the contract
at prevailing market prices or settle in cash. Since the repurchase price to
which a commodity can rise is unlimited, entering into commitments to sell
commodities exposes the Fund to unlimited potential risk.
Market risk is influenced by a wide variety of factors including
government programs and policies, political and economic events, the level
and volatility of interest rates, foreign currency exchange rates, the
diversification effects among the derivative instruments the Fund holds and
the liquidity and inherent volatility of the markets in which the Fund
trades.
The unrealized gains on open commodity futures contracts at December
31, 2003, and 2002 was $72,792 and $71,746, respectively.
Open contracts generally mature within three months and as of December
31, 2003, the latest maturity date for open futures contracts is June, 2004.
However, the Fund intends to close all contracts prior to maturity.
Credit risk is the possibility that a loss may occur due to the failure
of a counter party to perform according to the terms of a contract.
The Fund has a substantial portion of its assets on deposit with
financial institutions. In the event of a financial institution's insolvency,
recovery of Fund deposits may be limited to account insurance or other
protection afforded deposits.
The Fund has established procedures to actively monitor market risk and
minimize credit risk although there can be no assurance that it will succeed.
The basic market risk control procedures consist of continuously monitoring
open positions, diversification of the portfolio and maintenance of a
desirable margin-to-equity ratio. The Fund seeks to minimize credit risk
primarily by depositing and maintaining its assets at financial institutions
and brokers which it believes to be creditworthy.
F-14
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
7. FINANCIAL HIGHLIGHTS
Year to Date
2003 2002 2001 2000 (6)
Performance per Unit (5)
Net unit value, beginning of period $908.99 $955.04 $972.92 $980.64
Net realized and unrealized gains/losses
on commodity transactions 97.66 169.37 123.33 48.00
Investment and other income 2.47 6.20 9.72 3.98
Expenses (1) (184.43)(221.62)(150.93) (59.70)
Net increase (decrease) for the period (84.30) (46.05) (17.88) (7.72)
Net unit value, end of period $824.69 $908.99 $955.04 $972.92
Net assets, end of period (000) $1,037 $1,650 $1,836 $1,718
Total return (3) (9.27)% (4.83)% (1.84)%(0.79)%
Ratio to average net assets (4)
Investment and other income 0.29% 0.60% 1.01% 1.10%
Expenses (2) (10.16)%(10.16)% (5.79)%(9.46)%
(1) Includes brokerage commissions
(2) Excludes brokerage commissions
(3) Not annualized for periods less than one year
(4) Annualized for all periods
(5) Investment and other income and expenses is calculated using
average number of units outstanding during the year. Net
realized and unrealized gains/losses on commodity transactions
is a balancing amount necessary to reconcile the change in net
unit value.
(6) Period from July 1, 2000 (inception of trading) to December 31,
2000. Beginning net unit value based on new subscriptions during
period, net of syndication costs.
F-15
*****************************************************************************
BELMONT CAPITAL MANAGEMENT, INC.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003,
2002 AND 2001
(WITH AUDITORS' REPORT THEREON)
Purchase of units in the partnership will not acquire or
otherwise have any interest in this Company
BELMONT CAPITAL MANAGEMENT, INC.
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
TABLE OF CONTENTS
Page
Independent Accountants' Report 1
Financial Statements -
Balance Sheets 2
Statements of Income and Retained Earnings 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 6
Purchase of units in the partnership will not acquire or
otherwise have any interest in this Company
To The Shareholders
Belmont Capital Management, Inc.
Dover, Kent County, Delaware
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of BELMONT CAPITAL
MANAGEMENT, INC. as of December 31, 2003 and 2002, and the related statements
of income and retained earnings and cash flows for the three years ended
December 31, 2003, 2002 and 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of BELMONT CAPITAL
MANAGEMENT, INC. as of December 31, 2003 and 2002, and the results of its
operations and its cash flows for the years ended December 31, 2003, 2002 and
2001 in conformity with accounting principles generally accepted in the
United States.
/s/ Frank L. Sassetti & Co.
February 2, 2004
Oak Park, Illinois
Purchase of units in the partnership will not acquire or
otherwise have any interest in this Company
1
BELMONT CAPITAL MANAGEMENT, INC.
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
ASSETS
2003 2002
CURRENT ASSETS
Cash $3,808 $4,111
Commissions receivable 140
$3,948 $4,111
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
$ $
STOCKHOLDER'S EQUITY
Capital stock (common 1,500 shares
authorized, no par value; 1,000
issued and outstanding) 1,000 1,000
Retained earnings 2,948 3,111
Total Stockholder's Equity 3,948 4,111
$3,948 $4,111
Purchase of units in the partnership will not acquire or
otherwise have any interest in this Company
The accompanying notes are an integral part of
The financial statements.
2
BELMONT CAPITAL MANAGEMENT, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 30, 2003, 2002 AND 2001
2003 2002 2002
REVENUES $41,793 $54,071 $52,205
EXPENSES
Dues and registration fees 1,230
Bank fees 84 20
Total Expenses 1,314 20
INCOME FROM OPERATIONS 41,793 52,757 52,185
OTHER INCOME 44
NET INCOME 41,837 52,757 52,185
RETAINED EARNINGS
Beginning of period 3,111 10,354 2,669
Less: shareholder distributions (42,000) (60,000) (44,500)
End of period $ 2,948 $ 3,111 $10,354
Purchase of units in the partnership will not acquire or
otherwise have any interest in this Company
The accompanying notes are an integral part of
The financial statements.
3
BELMONT CAPITAL MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
2003 2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $41,837 $52,757 $52,185
Adjustments to reconcile net income to net cash
provided by operating activities -
Changes in operating assets and liabilities
Receivables (140) 4,483 (164)
Net Cash Provided By Operating Activities 41,697 57,240 52,021
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of advance (3,000)
Distributions to stockholder (42,000) (60,000) (44,500)
Advances to affiliate 1,100 (1,100)
Net Cash Used in Financing Activities (42,000) (58,900) (48,600)
NET INCREASE (DECREASE) IN CASH (303) (1,660) 3,421
CASH -
Beginning of period 4,111 5,771 2,350
End of period $ 3,808 $ 4,111 $ 5,771
Purchase of units in the partnership will not acquire or
otherwise have any interest in this Company
The accompanying notes are an integral part of
The financial statements.
4
BELMONT CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Belmont Capital Management, Inc. (the Company) was formed on January
12, 1999 under the laws of the State of Delaware to act as a general partner
and commodity pool operator of the Bromwell Financial Fund, Limited
Partnership (the Fund). It became registered as a commodity pool operator
and a member of the National Futures Association on August 5, 1999.
The responsibilities of the General Partner, in addition to the
selection of trading advisors and other activities of the Fund, include
executing and filing all necessary legal documents, statements and
certificates of the Fund, retaining independent public accountants to audit
the Fund, employing attorneys to represent the Fund, reviewing the brokerage
commission rates to determine reasonableness, maintaining the tax status of
the Fund as a limited partnership, maintaining a current list of the names,
addresses and numbers of units owned by each Limited Partner and taking such
other actions as deemed necessary or desirable to manage the business of the
Partnership.
Organizational Costs - Organizational costs are charged to expense as
incurred.
Use of Accounting Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
Statement of Cash Flows - For purposes of the statement of cash flows,
the Company will consider only money market funds to be cash equivalents. As
of the balance sheet date, the Company has no cash equivalents. Net cash
provided by operating activities includes no cash payments for interest nor
income taxes for the years ended December 31, 2003, 2002 and 2001.
Income Taxes and S-Corporation Election - Effective January 12, 1999,
the Company elected S-Corporation status under the Internal Revenue Code. S-
Corporations pay no federal income taxes (under most circumstances), since
their earnings are taxed directly to the shareholders.
Purchase of units in the partnership will not acquire or
otherwise have any interest in this Company
5
BELMONT CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
2. CORPORATE AFFILIATIONS
The Company's sole shareholder is also a joint owner of Futures
Investment Company. In addition, the Company is a general partner of
Bromwell Financial Fund, a limited partnership (the Fund).
3. INVESTMENTS
The Company purchased an interest as the general partner in a limited
partnership (a development stage enterprise) with an initial investment of
$1,000. The investment was accounted for under the equity method. The
$1,000 investment was returned in 2000. The Company is liable for the debts
of the partnership including, but not limited to, any losses from trading in
the pool account not covered by equity on deposit.
4 GUARANTEES
The Fund pays both the Company and the Futures Commission Merchant
(FCM) a commission. The Company has guaranteed the round turn commission to
the FCM and will pay it if the Fund defaults payment.
Purchase of units in the partnership will not acquire or
otherwise have any interest in this Company
6
*****************************************************************************
APPENDIX I
Commodity Terms And Definitions
Identification of the parties and knowledge of various terms and concepts
relating to trading in futures and forward contracts and this offering are
necessary for a potential investor to identify the risks of investment in the
Fund.
1256 Contract. See Taxation - Section 1256 Contract.
Additional Sellers. Brokers other than Futures Investment Company selected
to sell partnership interests. See definition of Selling Agent.
Associated Persons. The persons registered pursuant to the Commodity
Exchange Act with the futures commission merchant, the selling agent, or
additional sellers who are eligible to service the partnership, the partners
and to receive continuing service fees.
Average Price System. The method approved by the Commodity Futures Trading
Commission to permit the commodity trading advisor to place positions sold or
purchased in a block to the numerous accounts managed by the advisor. See
The Commodity Trading Advisor in the main body of the prospectus.
Best Efforts. The term to describe that the party is liable only in the
event they intentionally fail or are grossly negligent in the performance of
the task described.
Broker. See definitions of Futures Commission Merchant.
Capital means cash invested in the partnership by any partner and placed at
risk for the business of the partnership.
Commodity Futures trading Commission (CFTC). Commodity Futures Trading
Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C.,
20581. An independent regulatory commission of the United States government
empowered to regulate commodity futures transactions under the Commodity
Exchange Act.
Commodity. Goods, wares, merchandise, produce, currencies, and stock indices
and in general everything that is bought and sold in commerce. Traded
commodities on U. S. Exchanges are sold according to uniform established
grade standards, in convenient predetermined lots and quantities such as
bushels, pounds or bales, are fungible and, with a few exceptions, are
storable over periods of time.
Commodity Broker. See definitions of Futures Commission Merchant.
Commodity Exchange Act. The statute providing the regulatory scheme for
trading in commodity futures and options contracts in the United States under
the administration of the Commodity Futures Trading Commission which will
provide the opportunity for reparations and other redress for claims.
Commodity Pool Operator (CPO). Belmont Capital Management, Inc., 5916 N. 300
West, P. O. Box C, Fremont, IN 46737, (260) 833-1306; and, Mr. Michael P.
Pacult, 5916 N. 300 West, P.O. Box C, Fremont, IN 46737. A person that
raises capital through the sale of interests in an investment trust,
partnership, corporation, syndicate or similar form of enterprise, and uses
that capital to invest either entirely or partially in futures contracts.
Continuing Service Fee. A percentage of the Capital of the partnership paid
to the selling agents who will pay their individual associated persons who
work for them who have either sold the partnership interests to the partners
or are providing services to the general partner or the other partners. The
partnership will pay these fees to the principal selling agent, Futures
Investment Company, which will pay a share these fees to Mr. Pacult and his
wife on Units they sold.
Commodity Trading Advisor (CTA). Fall River Capital, LLC, 11740 North Port
Washington Road, Mequon, Wisconsin 53092; (262) 241-8020. A person or entity
which renders advice about commodities or about the trading of commodities,
as part of a regular business, for profit. Particularly, those who will be
responsible for the analysis and placement of trades for the partnership.
Daily Price Limit. The maximum permitted movement in a single direction
(imposed by an exchange and approved by the CFTC) in the price of a commodity
futures contract for a given commodity that can occur on a commodity exchange
on a given day in relation to the previous day's settlement price, which is
subject to change, from time to time, by the exchange (with CFTC approval).
Escrow Agent and Escrow Account. The corporate general partner will maintain
an escrow account which will hold all the subscription documents and proceeds
until such time as either the subscription is accepted or the offering is
terminated.
Exchange for Physicals (EFP). A practice whereby positions in futures
contracts may be initiated or liquidated by first executing the transaction
in the appropriate cash market and then arbitraging the position into the
futures market (simultaneously buying the cash position and selling the
futures position, or vice versa).
Fixed Brokerage Commission. The percentage of equity charged to clear the
round turn trades entered for an account. The entity charging the fixed
commission takes the risk that the number of trades entered will not exceed
the costs on a round turn basis in exchange for the retention in the
difference between the round turn costs and the percentage charged. The
percentage is usually expressed at an annual rate but paid monthly.
Form K-1. The section of the Federal Income Tax Return filed by the
partnership which identifies the amount of investment in the partnership, the
gains and losses for the tax year, and the amount of such gains and losses
reportable by a partner on the partner's tax return.
Fully-Committed Position. Each commodity trading advisor has an objective
percentage of equity to be placed at risk. In addition, the CFTC places
limits upon the number of positions a single commodity trading advisor may
have in commodities. When either the objective percentage of equity is
placed at risk or the commodity trading advisor reaches the limit in number
of positions, the account or accounts have a fully-committed position.
Futures Commission Merchant (FCM). Citigroup Global Markets, Inc. 388
Greenwich St., New York, New York 10013 The person that solicits or
accepts orders for the purchase or sale of any commodity for future delivery
subject to the rules of any contract market and in connection with such
solicitation or acceptance of orders, accepts money or other assets to
margin, guarantee, or secure any trades or contracts that result from such
orders for a commission. The corporate general partner is responsible for
the negotiation and payment of the commission to the futures commission
merchant.
Futures Contract. A contract providing for (1) the delivery or receipt at a
future date of a specified amount and grade of a traded Commodity at a
specified price and delivery point, or (2) cash settlement of the change in
the value of the contract. The terms of these contracts are standardized for
each commodity traded on each exchange and vary only with respect to price
and delivery months. A futures contract should be distinguished from the
actual physical commodity, which is termed a cash commodity. Trading in
futures contracts involves trading in contracts for future delivery of
commodities and not the buying and selling of particular physical lots of
commodities. A contract to buy or sell may be satisfied either by making or
taking delivery of the commodity and payment or acceptance of the entire
purchase price therefore, or by offsetting the contractual obligation with a
countervailing contract on the same exchange prior to delivery.
Futures Investment Company. The principal selling agent 5916 N. 300 West,
P.O. Box C, Fremont, IN 46737 Michael Pacult and his wife, Shira Del
Pacult, each own 50% of Futures Investment Company.
General Partner. Belmont Capital Management, Inc., 5916 N. 300 West, P. O.
Box C, Fremont, IN 46737, (260) 833-1306; and, Mr. Michael P. Pacult, 5916 N.
300 West, P.O. Box C, Fremont, IN 46737. The managers of the fund.
Gross Profits. The income or loss from all sources, including interest
income and profit and loss from non-trading activities, if any.
Initial Closing. When the minimum offering amount has been raised and escrow
funds are released to the partnership for commencement of trading.
Introducing Broker (IB). This term is not applicable to the operation of
this partnership. Its corporate general partner will introduce the
partnership to the futures commission merchant.
Limited Partner. Persons admitted without management authority pursuant to
the partnership agreement.
Margin. A good faith deposit with a broker to assure fulfillment of the
terms of a futures contract.
Margin Call. A demand for additional monies to hold positions taken to
maintain a customer's account in compliance with the requirements of a
particular commodity exchange or of an futures commission merchant.
Minimum Offering/Maximum Offering. The Minimum is the amount required to be
invested before trading will commence, and the Maximum is the amount the
general partner establishes as the amount that will terminate this offering.
We raised in excess of the Minimum of $700,000 on July 11, 2000, and,
therefore, that term is no longer applicable to this offering. We are
currently offering the balance of the partnership up to the Maximum of
$7,000,000.
National Association of Securities Dealers (NASD). National Association of
Security Dealers, Inc., the self-regulatory organization responsible for the
legal and fair operation of broker dealers, such as the selling agent.
Net Assets or Net Asset Value means the total assets, including all cash and
cash equivalents (valued at cost plus accrued interest and earned discount),
less total liabilities, of the partnership (each determined on the basis of
generally accepted accounting principles, consistently applied under the
accrual method of accounting or as required by applicable laws, regulations
and rules including those of any authorized self regulatory organization).
See Exhibit A, The Limited Partnership Agreement, 1.2(e).
Net Unit Value. The net assets of the partnership divided by the total
number of units of partnership interests outstanding.
Net Gains. The net profit from all sources.
New Net Profit. The amount of income earned from trading, less the trading
losses and brokerage commissions and fees paid to clear the trades which are
incurred or accrued during the then current accounting period. See Charges
to the Partnership.
Net Worth. The excess of total assets over total liabilities as determined
by generally accepted accounting principles. Net worth for a prospective
investor shall be exclusive of home, home furnishings and automobiles.
Offering Expenses. The present partners have paid offering expenses of
$74,007. North American Securities Administrator Association Guidelines for
Commodity Pools define offering and organizational expenses to include
selling commissions and redemption fees as well; and, for purposes of
limitation, the total expenses cannot exceed 15% of capital raised pursuant
to the offering. Specifically, these expenses include the Securities and
Exchange Commission registration fee, the National Association of Securities
Dealers filing fee, legal fees, accounting fees, Blue Sky expenses, printing
costs, mailing costs, and licenses and permits. The offering expenses do not
include the first year's accounting, legal and other operating costs.
Option Contract. An option contract gives the purchaser the right (as
opposed to the obligation) to acquire (call) or sell (put) a given quantity
of a commodity or a futures contract for a specified period of time at a
specified price to the seller of the option contract. The seller has
unlimited risk of loss while the loss to a buyer of an option is limited to
the amount paid (premium) for the option.
Organizational Expenses. The costs to form the partnership and qualify it to
do business, which were $2,399. The partnership previously paid $2,399 in
organization expenses and $74,007 in offering expenses that currently remain
allocated to present partnership accounts. After an investment has been held
for twelve months, the incoming partners will be allocated their pro rata
share of these expenses.
Partners. The general partners and all limited partners in the partnership.
Partnership or Limited Partnership or Commodity Pool or Pool or Fund. The
Belmont Financial Fund, Limited Partnership, evidenced by Exhibit A to this
Prospectus, 5916 N. 300 West, P. O. Box C, Fremont, IN 46737, (260) 833-1306.
Position Limits. The Commodity Futures Trading Commission has established
maximum positions that can be taken in some, but not in all commodity
markets, to prevent the corner or control of the price or supply of those
commodities. These maximum number of positions are called position limits.
Principal. Mr. Michael P. Pacult, one of the general partners and the
principal of the corporate general partner. Mr. Pacult is also a principal
of the principal selling agent, Futures Investment Company.
Round-turn Trade. The initial purchase or sale of a futures or forward
contract and the subsequent offsetting sale or purchase of such contract.
Redemption. The right of a partner to tender its partnership interests to
the partnership for surrender at the net unit value. See the Limited
Partnership Agreement attached as Exhibit A.
Scale in Positions. The commodity trading advisor selected by the general
partner presently has a large amount of equity under management. In some
situations, the positions desired to be taken on behalf of the partnership
and other accounts under management will be too large to be executed at one
time. The trading advisor intends to take positions at different prices, at
different times and allocate those positions on a ratable basis in accordance
with rules established by the Commodity Futures Trading Commission. This
procedure is defined as to scale in positions. The same definition and rules
apply when the trading advisor elects to exit a position.
Selling Agent. The National Association of Securities Dealers member broker
dealer, Futures Investment Company, 5916 N. 300 West, P.O. Box C, Fremont, IN
46737, selected by the general partner to offer the partnership interests for
sale. The general partner and the selling agent may select additional
selling agents to also offer partnership interests for sale. See Plan of
Distribution.
Selling Commissions. This term is not applicable to this offering.
Taxation - Section 1256 Contract is defined to mean: (1) any regulated
futures contract (RFC); (2) any foreign currency contract; (3) any non-equity
option; and (4) any dealer equity option.
The term RFC means a futures contract whether it is traded on or subject to
the rules of a national securities exchange which is registered with the
Securities and Exchange Commission, a domestic board of trade designated as a
contract market by the Commodity Futures Trading Commission or any other
board of trade, exchange or other market designated by the Secretary of
Treasury (a qualified board of exchange) and which is marked-to-market to
determine the amount of margin which must be deposited or may be withdrawn.
A "foreign currency contract" is a contract which requires delivery of, or
the settlement of, which depends upon the value of foreign currency which is
currency in which positions are also entered at arm's length at a price
determined by reference to the price in the interbank market. (The Secretary
of Treasury is authorized to issue regulations excluding certain currency
forward contracts from marked-to-market treatment.) A non-equity option means
an option which is treated on a qualified board or exchange and the value of
which is not determined directly or indirectly by reference to any stock (or
group of stocks) or stock index unless there is in effect a designation by
the Commodity Futures Trading Commission of a contract market for a contract
bond or such group of stocks or stock index. A dealer equity option means,
with respect to an options dealer, only a listed option which is an equity
option, is purchased or granted by such options dealer in the normal course
of his activity of dealing in options, and is listed on the qualified board
or exchange on which such options dealer is registered. See Federal Income
Tax Aspects.
Trading Advisor. See Commodity Trading Advisor.
Taking Positions Ahead of the Partnership. The allocation of trades by other
than legally accepted methods by the commodity trading advisor or other
trader which favors parties who took the position unfairly.
Trading Matrix. The dollar value used by a commodity trading advisor to
define the number of positions to be taken by the accounts under management.
Some commodity trading advisors have different trading matrices for different
sized accounts. For example, they may trade all accounts over one million in
size differently than accounts under one million.
Unit. The term used to describe the Net Asset Value of general and limited
partner interests of the partnership.
Unrealized Profit Or Loss. The profit or loss that would be realized on an
open position if it were closed at the current settlement price or the most
recent appropriate quotation as supplied by the broker or bank through which
the transaction is effected.
Underwriter. This term is not applicable to this offering. All sales of
partnership interests will be on a best efforts basis. The price of the
units will not be guaranteed, supported or underwritten in any way. See
Selling Agent.
State Regulatory Glossary
The following definitions are supplied by the state securities
administrators responsible for the review of public futures fund (commodity
pool) offerings made to residents of their respective states. They belong to
the North American Securities Administrators Association, Inc. that publish
"Guidelines for the Registration of Commodity Pool Programs", such as the
Fund, which contain these definitions. The following definitions are
published from the Guidelines; however, the general partner has made
additions to, but no deletions from, some of these definitions to make them
more relevant to an investment in the Fund.
Administrator-The official or agency administering the security laws of
a state. This will usually be the State of residence of the Fund or the
domicile of the broker or brokerage firm which makes the offer or the
residence of the potential investor.
Advisor-Any person who, for any consideration, engages in the business
of advising others, either directly or indirectly, as to the value, purchase,
or sale of commodity contracts or commodity options. This definition applies
to the commodity trading advisors and, when it provides such advice, to the
general partner.
Affiliate-An Affiliate of a Person means: (a) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of
the outstanding voting securities of such Person; (b) any Person 10% or more
of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote, by such Person; (c) any Person,
directly or indirectly, controlling, controlled by, or under common control
of such Person; (d) any officer, director or partner of such Person; or (e)
if such Person is an officer, director or partner, any Person for which such
Person acts in any such capacity. See "Conflicts". This applies to the fact
that Mr. Michael P. Pacult one of the general partners, is the sole
shareholder and principal of the other general partner and also owns 50% of
the outstanding voting shares and is a principal in the affiliated selling
agent, Futures Investment Company.
Capital Contributions-The total investment in a Program by a
Participant or by all Participants, as the case may be. The purchase price,
less sales commissions, for the partnership interests.
Commodity Broker-Any Person who engages in the business of effecting
transactions in commodity contracts for the account of others or for his own
account. See Futures Commission Merchant and Introducing Broker.
Commodity Contract-A contract or option thereon providing for the
delivery or receipt at a future date of a specified amount and grade of a
traded commodity at a specified price and delivery point.
Cross Reference Sheet-A compilation of the Guideline sections,
referenced to the page of the prospectus, Program agreement, or other
exhibits, and justification of any deviation from the Guidelines. This sheet
is used by the State Administrator to review this prospectus.
Net Assets-The total assets, less total liabilities, of the Program
determined on the basis of generally accepted accounting principles. Net
Assets shall include any unrealized profits or losses on open positions, and
any fee or expense including Net Asset fees accruing to the Program.
Net Asset Value Per Program Interest-The Net Assets divided by the
number of Program Interests outstanding.
Net Worth-The excess of total assets over total liabilities are
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
New Trading Profits-The excess, if any, of Net Assets at the end of the
period over Net Assets at the end of the highest previous period or Net
Assets at the date trading commences, whichever is higher, and as further
adjusted to eliminate the effect on Net Assets resulting from new Capital
Contributions, redemptions, or capital distributions, if any, made during the
period decreased by interest or other income, not directly related to trading
activity, earned on Program assets during the period, whether the assets are
held separately or in a margin account. See New Net Profit.
Organizational and Offering Expenses-All expenses incurred by the
Program in connection with and in preparing a Program for registration and
subsequently offering and distributing it to the public, including, but not
limited to, total underwriting and brokerage discounts and commissions
(including fees of the underwriter's attorneys), expenses for printing,
engraving, mailing, salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow holders,
depositories, experts, expenses of qualification of the sale of its Program
Interest under Federal and state law, including taxes and fees, accountants'
and attorneys' fees.
Participant-The holder of a Program Interest. A Partner in the Fund.
Person-Any natural Person, partnership, corporation, association or
other legal entity.
Pit Brokerage Fee-Pit Brokerage Fee shall include floor brokerage,
clearing fees, National Futures Association fees, and exchange fees. These
fees will be paid by the corporate general partner from the fixed brokerage
commissions.
Program-A limited partnership, joint venture, corporation, trust or
other entity formed and operated for the purpose of investing in Commodity
Contracts. The Fund.
Program Broker-A Commodity Broker that effects trades in Commodity
Contracts for the account of a Program. See the Futures Commission Merchant.
Program Interest-A limited partnership interest or other security
representing ownership in a program. The units in the Fund. See Exhibit A,
the Limited Partnership Agreement.
Pyramiding-A method of using all or a part of an unrealized profit in a
Commodity Contract position to provide margin for any additional Commodity
Contracts of the same or related commodities.
Sponsor-Any Person directly or indirectly instrumental in organizing a
Program or any Person who will manage or participate in the management of a
Program, including a Commodity Broker who pays any portion of the
Organizational Expenses of the Program, and the general partner(s) and any
other Person who regularly performs or selects the Persons who perform
services for the Program. Sponsor does not include wholly independent third
parties such as attorneys, accountants, and underwriters whose only
compensation is for professional services rendered in connection with the
offering of the partnership interests. The term Sponsor shall be deemed to
include its Affiliates.
Valuation Date-The date as of which the Net Assets of the Program are
determined. For the Fund, this will be after the close of business on the
last business day of each month.
Valuation Period-A regular period of time between Valuation Dates. For
the Fund, this will be the close of business for each calendar month and each
calendar year.
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EXHIBIT A TO BROMWELL FINANCIAL FUND DISCLOSURE DOCUMENT
AGREEMENT OF LIMITED PARTNERSHIP OF
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT, (the "Agreement") dated the 1st of March,
2004, by and among Belmont Capital Management, Incorporated, a
Delaware corporation ("Belmont" or "Corporate General Partner and Michael P.
Pacult ("Pacult" or "Other General Partner") (Pacult and Belmont are
hereinafter referred to collectively as the "General Partner"), and those who
are admitted as partners, (hereinafter referred to as either "Limited Partners"
or "Additional General Partners"), pursuant to the terms of this Agreement,
(the General Partner, any Additional General Partners, and the Limited Partners
are hereinafter collectively referred to as the "Partners") is to amend and
restate in full that certain agreement entered on the 1st day of August 1999,
that formed Bromwell Financial Fund, Limited Partnership, a Delaware limited
partnership, (hereinafter called either "Partnership" or the "Fund").
WITNESSETH:
IN CONSIDERATION of good and valuable consideration, the receipt of which is
hereby acknowledged, Belmont Capital Management, Incorporated, the Corporate
General Partner, Michael P. Pacult, the Other General Partner, and Belmont as
agent for the Limited Partners, pursuant to the authority granted to the
General Partner by this Agreement at formation and the powers of attorney
granted by the Limited Partners to Belmont at the time of their admission to
the Partnership, hereby adopt this Amended and Fully Restated Limited
Partnership Agreement to govern and control the operation of the Partnership
pursuant and subject to the Delaware Uniform Limited Partnership Act (the
"Act").
The resignation of Shira Del Pacult ("Ms. Pacult") pursuant to her prior 120-
day notice to the Partners given on August 19, 2003, became effective on
December 21, 2003. Ms. Pacult is no longer a General Partner of this
partnership.
ARTICLE I
Definitions and Risk Disclosure Statement
Certain terms used in this Agreement shall have the special meaning designated
below:
1.1 The term AFFILIATE means (1) any person controlled by or under common
control with another person, (2) a person owning or controlling 10% or more
of the outstanding voting securities of such other person, (3) any officer
or director of such other person, and (4) if such other person is an
officer or director, any other company for which such person acts as an
officer or director.
1.2 When referring to the capital of the Partnership:
(a) the term CAPITAL shall mean cash invested in the Partnership by any
Partner and placed at risk for the business of the Partnership;
(b) the term CAPITAL CONTRIBUTION shall mean, with respect to any Partner,
the sum of all Capital contributed to the Partnership pursuant to
Article I;
(c) the term CAPITAL SUBSCRIPTION shall mean the amount set forth opposite
the name of such Partner in the schedule of Partners, which amount shall
be the purchase price, less sales commissions, if any, to be paid or
paid by such Partner for the Unit or Units in the Partnership purchased
by such Partner;
(d) the term INITIAL CAPITAL shall mean the sum of all Capital
Subscriptions received by the General Partner prior to commencement of
trading;
(e) the term INTEREST INCOME shall mean the interest earned on the equity
the Partnership places on deposit with the Futures Commission Merchant.
All such Interest Income will be paid to the Partnership and used for
its benefit.
(f) the term NET ASSETS OR NET ASSET VALUE means the total assets,
including all cash and cash equivalents (valued at cost plus accrued
interest and earned discount), less total liabilities, of the
Partnership (each determined on the basis of generally accepted
accounting principles, consistently applied under the accrual method
of accounting or as required by applicable laws, regulations and rules
including those of any authorized self regulatory organization),
specifically:
(i) Net Asset Value includes any unrealized profit or loss on open
security and commodity positions subject to reserves for loss
established, from time to time, by the General Partner;
(ii) All open stock, option, and commodity positions are calculated on
the then current market value, which shall be based upon the
settlement price for that particular position on the date with
respect to which Net Asset Value is being determined; provided,
however, that if a position could not be liquidated on such day
due to the operation of the daily limits or other rules of the
exchange upon which that position is traded or otherwise, the
settlement price on the first subsequent day on which the position
could be liquidated shall be the basis for determining the market
value of such position for such day. As used herein, "settlement
price" includes, but is not limited to: (1) in the case of a
futures contract, the settlement price on the commodity exchange
on which such futures contract is traded; and (2) in the case of a
foreign currency forward contract which is not traded on a
commodity exchange, the average between the lowest offered price
and the highest bid price, at the close of business on the day Net
Asset Value is being determined, established by the bank or broker
through which such forward contract was acquired or is then
currently traded;
(iii) Brokerage commissions to close security and commodity positions,
if charged on a round-turn basis, are accrued in full at the time
the position is initiated (i.e., on a round-turn basis) as a
liability of the Partnership;
(iv) Interest earned on all Partnership accounts is accrued at least
monthly;
(v) The amount of any distribution made by the Partnership is a
liability of the Partnership from the day when the distribution is
declared by the General Partner or as provided in this Agreement
and the amount of any redemption is a liability of the Partnership
as of the valuation date; and
(vi) Syndication Costs incurred in organizing and all present and
future costs to increase or maintain the qualification of the
Units available for sale and the cost to present the initial and
future offering of Units for sale shall be capitalized when
incurred and amortized and paid from Capital or Monthly Profit as
required by applicable law.
(g) the term PROFIT (LOSS) ATTRIBUTABLE TO UNITS means the product of A) the
number of Units divided into B) an amount equal to the Net Profit (Loss)
determined as follows: (1) the net of profits and losses realized on all
trades closed out, plus (2) the net of any unrealized profits and losses
an open positions as of the end of the period, less (3) the net of any
unrealized profits and losses on open positions as of the end of the
preceding period, minus, (4) the Expenses attributable to Units. Profit
(Loss) shall include interest earned on Partnership assets, realized and
unrealized capital gains or losses on U.S. Treasury bills, and other
securities;
(h) the term MANAGEMENT FEE shall mean up to six percent (6%) annually of
the Net Assets of the Partnership computed on the close of business on
the last day of each month and payable to the General Partner or
independent Commodity Trading Advisor, or both, without regard to the
income or loss of the Partnership for that period; presently, Belmont,
receives no management fee and the Commodity Trading Advisor receives
one sixth (1/6) of a percent per month (1% to the CTA per year) of the
Net Assets of the Partnership;
(i) the term INCENTIVE FEE means a percentage of the profits accrued and
paid to the General Partner, or its Affiliates, of up to fifteen percent
(15%) annually of New Net Profit earned from inception of trading,
through the date of the computation, based upon the Capital allocated by
the General Partner to trading. The General Partner has reserved the
right to both reduce the Incentive Fee below fifteen percent (15%) and
increase the Incentive Fee to a maximum of twenty-seven percent (27%),
provided that in such case the Management Fee is correspondingly lowered
to 0%; presently, the management fee is one percent (1%) per year to the
trading advisor, and the Incentive Fee paid to Belmont is five percent
(5%) and the CTA is paid twenty percent (20%);
(j) the term GROSS PROFIT OR LOSS means the income or loss from all sources,
including Interest Income and profit and loss from non-trading
activities, if any.
(k) the term NEW NET PROFIT OR LOSS means the amount of income earned from
trading, less the trading losses and brokerage commissions and fees paid
to clear the trades which are incurred or accrued during the then
current accounting period; and,
(l) the term NET GAINS means net profit from all sources.
(m) the term UNIT shall mean a partnership interest in the Partnership
requiring an initial Capital Contribution of the Net Asset Value of the
initial Unit, as adjusted to reflect increases and decreases caused by
receipt, accrual, and payment of profit, Expenses, losses, bonuses, and
fees, less a sales commission, if any, as established from time to time.
1.3 When referring to costs and expenses of the Partnership to be allocated
and charged pursuant to this Agreement:
(a) the term EXPENSES shall mean costs allocated, incurred, paid, accrued,
or reserved, including the fixed brokerage commissions of 4% payable to
the Corporate General Partner which are, in the opinion of the General
Partner, required, necessary or desirable to establish, manage, continue
and promote the business of the Partnership including, but not limited
to, all deferred organization costs, brokerage commissions, and all
management and incentive fees payable to the General Partner or to
independent investment and Commodity Trading Advisor by the Partnership
as negotiated and determined by the General Partner on behalf of the
Partnership on a basis consistently applied in accordance with generally
accepted accounting principals under the accrual method of accounting or
as required by applicable laws, regulations and rules including those of
any authorized self regulatory organization with proper jurisdiction
over the business of the Partnership; provided, however, Expenses shall
not include salaries, rent, travel, expenses and other items of General
Partner overhead and, provided, further, management fees, advisory
fees and all other fees, except for incentive fees and commodity
brokerage commissions, the actual cost of legal and audit services and
extraordinary expenses, shall not exceed one half of one percent of
Net Assets per month (not to exceed six percent annually). If
necessary, the General Partner shall reimburse the Partnership no less
frequently than quarterly, for the amount by which such aggregate fees
and expenses exceed the limitations provided by NASAA Guideline IVC.1.
During the period for which reimbursement is made up to an amount not
exceeding the aggregate compensation received by the General Partner,
including direct or indirect participations in commodity brokerage
commissions charged to the Partnership. In addition, if reimbursement
is required or ordinary expenses are incurred, the General Partner
shall include in the Partnership's next regular report to the auditors
a discussion of the circumstances or events which resulted in the
reimbursement or extraordinary expenses;
(b) the term NET UNIT VALUE shall mean the Net Asset Value divided, from
time to time, by the total number of Units outstanding;
(c) the term OFFERING PERIOD means the period of time established by the
General Partner after the Partnership begins to offer to sell Units at
the Net Unit Value ; and,
(d) the term SYNDICATION COSTS shall mean the promotion and syndication
costs of the Partnership and the costs of the offering of Units, and to
establish the initial business relationships on behalf of the
Partnership, including all legal and printing costs to prepare the
Disclosure Documents, registrations and filing fees, contract
negotiation, and travel incurred which are deemed necessary or desirable
by the General Partner to form the Partnership, be ready to engage in
business, and to sell the Units.
1.4 The terms DISCLOSURE DOCUMENT, MEMORANDUM, OFFERING CIRCULAR, PROSPECTUS
and REGISTRATION STATEMENT shall mean the document or documents, together
with the exhibits and any subsequent continuations thereof, which describes
this Partnership to persons selected by the General Partner including, but
not limited to, potential purchasers of Units, or the Partners or to any
government or self regulatory agency or to persons selected by the General
Partner to participate in the affairs or provide services to the
Partnership.
1.5 When referring to this Agreement and the Partners of the Partnership:
(a) the term ACT shall refer to the partnership act of Delaware.
(b) the term AGREEMENT refers to this Partnership agreement;
(c) the term GENERAL PARTNER shall refer to both Belmont Capital
Management, Incorporated, c/o Corporate Systems, Inc., 101 North
Fairfield Drive, Dover, DE 19901 (302) 697-2139 ("Belmont") and Michael
P. Pacult, 5916 N. 300 West, P.O. Box C, Fremont, IN 46737 (260) 833-
1306 ("Mr. Pacult"), collectively or singularly, as the context
requires;
(d) the term LIMITED PARTNER shall refer to any party listed on the Schedule
of Limited Partners attached to this Agreement as Attachment I, as
amended, from time to time, pursuant to Article VI hereof;
(e) the term MAJORITY IN INTEREST shall refer to that number of Partners who
collectively hold over 50% of all of the outstanding Units held by all
Partners in the Partnership; provided, however, the Units held by the
General Partner cannot be considered to determine a MAJORITY IN
INTEREST or otherwise vote or consent regarding the question of removal
of the General Partner or other matters specifically expressed in
Article V, Section 5.3. In addition, see the rights and duties of the
General Partner in Article IV and of the Limited Partners in Articles V;
(f) the term OTHER GENERAL PARTNER refers to any General Partner other than
Belmont Capital Management, Incorporated ; and
(g) the term PARTNERS refers to the General Partner, any Other General
Partner, and the Limited Partners, collectively.
1.6 RISK DISCLOSURE STATEMENT.
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO
PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS
GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE
POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION,
RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR
PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE
POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS
TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THE PARTNERSHIP'S
DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE
CHARGED THIS POOL AT PAGE 5 AND A STATEMENT OF THE PERCENTAGE RETURN
NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL
INVESTMENT, AT PAGE 14.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL.
THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU
SHOULD CAREFULLY STUDY THIS AGREEMENT AS WELL AS THE PARTNERSHIP'S
DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS
OF THIS INVESTMENT, AT PAGE 5.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO
THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY
AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF
REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE
TRANSACTIONS FOR THE POOL MAY BE EFFECTED.
ARTICLE II
Partnership Organization and Purpose
2.1 PARTNERSHIP NAME AND LOCATION OF BOOKS AND RECORDS. The name of the
Partnership, as filed with the state of Delaware, shall be Bromwell
Financial Fund, Limited Partnership. The books and records of the
Partnership will be maintained for inspection by the Partners c/o Belmont
Capital Management, Inc., 5916 N. 300 West, P. O. Box C, Fremont, IN 46737
(260) 833-1306 or such other address and telephone number as the General
Partner shall, from time to time, determine.
2.2 PARTNERSHIP AFFILIATES.
(a) POOL OPERATOR NAME AND PRINCIPALS. The General Partner shall serve as
the commodity pool operator for the Partnership. In addition to being
one of the general partners, Michael P. Pacult is the sole principal,
shareholder, director and officer of Belmont Capital Management, Inc.,
the other general partner and is solely responsible for the business
decisions of the Partnership, including, but not limited to, selection
of the Commodity Trading Advisors (the "CTAs"). The signature of either
Mr. Pacult or Belmont may bind the Partnership. Belmont and Mr. Pacult
are registered commodity pool operators with the Federal Commodity
Futures Trading Association pursuant to the Commodity Exchange Act and
members of the futures self regulatory organization, the National
Futures Association.
THE REGULATIONS OF THE FEDERAL COMMODITY FUTURES TRADING COMMISSION AND
THE NATIONAL FUTURES ASSOCIATION PROHIBIT ANY REPRESENTATION BY A PERSON
REGISTERED WITH THE CFTC OR BY ANY MEMBER OF THE NFA, RESPECTIVELY, THAT
SUCH REGISTRATION OR MEMBERSHIP IN ANY RESPECT INDICATES THAT THE CFTC
OR THE NFA, AS THE CASE MAY BE, HAS APPROVED OR ENDORSED SUCH PERSON OR
SUCH PERSON'S TRADING PROGRAMS OR OBJECTIVES. THE REGISTRATIONS AND
MEMBERSHIPS DESCRIBED IN THIS PARTNERSHIP AGREEMENT MUST NOT BE
CONSIDERED AS CONSTITUTING ANY SUCH APPROVAL OR ENDORSEMENT. LIKEWISE,
NO COMMODITY EXCHANGE HAS GIVEN OR WILL GIVE ANY SUCH APPROVAL OR
ENDORSEMENT.
Mr. Pacult, has been supervising individual managed commodity accounts
for over 22 years and serves as the principal of the corporate general
partner and individual general partner for two other funds.
(b) COMMODITY TRADING ADVISOR NAMES AND PRINCIPALS. The General Partner has
selected one independent CTA, Fall River Capital, LLC to trade the
assets of the Partnership. The CTA's performance record and business
background are disclosed in the Partnership's Prospectus under "Trading
Management". The CTA will have no ownership in the Partnership. The
CTA will enter trades on behalf of the Partnership directly with the FCM
without the prior knowledge or approval of the General Partner of the
methods used by the CTA to select the trades, the number of contracts,
or the margin required. Under normal circumstances, from 20% to 40% of
the Net Asset Value on deposit with the FCM will be committed to margin
to hold positions taken by the CTA for the account of the Partnership.
(c) COMMODITY POOL OPERATOR FUTURES COMMISSION MERCHANT NAMES AND
PRINCIPALS. Belmont Financial Management, Inc., 5916 N. 300 West, P.O.
Box C, Fremont, IN 46737 (260) 833-1306 the Corporate General Partner,
will serve as one of the Commodity Pool Operators ("CPO") of the
Partnership and will be paid fixed brokerage commissions of 4% annually
by the Partnership, for clearing trades through the futures commission
merchant, Citigroup Global Markets, Inc. (formerly Salomon Smith Barney
Inc.), 388 Greenwich Street, New York, NY 10013 under the supervision of
its managing directors, Michael Joseph Day and William Heinzerling, or
their successors, (the "FCM"). Michael P. Pacult is the sole
Principal of the Corporate General Partner and also an Individual
General Partner and CPO for the Partnership. The Corporate General
Partner will pay the round-turn brokerage commissions, pit brokerage and
other clearing expenses to the FCM. The FCM is the clearing broker,
holds the equity assigned by the General Partner for trading and accepts
the trades made by the CTA on behalf of the partnership. The CTA enters
the trades pursuant to the Advisory Agreement granted by the General
Partner to the CTA and the standard form FCM Power of Attorney.
(d) The General Partner, at either of their sole discretions, has the right
to change the CTA and the FCM subject only to notice of any such change
to the other Partners that is required by law.
2.3 MATERIAL ADMINISTRATIVE AND/OR CIVIL ACTIONS. There have been no material
administrative, civil or criminal actions against Bromwell or Mr. Pacult
(who are the general partners and Commodity Pool Operators), the Commodity
Trading Advisor, the Selling Broker or any principal or any Affiliate of
any of them, pending, on appeal, or concluded, threatened or otherwise
known to them, within the five (5) years preceding the date of this
Partnership Agreement. There have been such actions against the Futures
Commission Merchant (the "FCM") that are fully disclosed in the Prospectus
but, in the opinion of the FCM, are not material to the fulfillment of the
duties the FCM will perform for this Partnership.
2.4 CHARACTER OF THE BUSINESS. The Partnership's business purpose is to
increase Capital through the speculative and hedge trading of futures and
options on futures. The General Partner is authorized to do any and all
things on behalf of the Partnership incident thereto or connected therewith
including, but not limited to:
(a) trade, buy, sell or otherwise acquire, hold or dispose of all forms of
investments (including tangibles and intangibles, foreign currencies,
mortgage-backed securities, money market instruments, stock and futures
options, and any other securities or items which are now, or may
hereafter be, the subject of barter or stock or futures trading),
commodity futures, and forward contracts and any rights pertaining
thereto. The Partnership shall carry on the foregoing activities
through the exercise of judgment by its General Partner and/or the
Investment and/or Commodity Trading Advisors and consultants and brokers
selected by the General Partner. The General Partner may serve as an
investment or trading advisor to the Partnership for management fees,
reimbursement of costs and other remuneration, at the lesser of (i) the
rates charged either by independent third parties for similar services
to other partnerships, or (ii) the rates charged by the General Partner
to others for the same service.
(b) invest and trade, on margin or otherwise, in capital stocks, bonds,
debentures, trust receipts and other obligations, instruments or
evidences of indebtedness, gold, silver, cattle, corn, wheat, soybeans,
or any other asset for which a trading market is maintained or otherwise
paid for by cash or otherwise including, but not limited to, the right
to sell short and to cover such short sales.
(c) possess, sell, exchange, discount, transfer, mortgage, pledge, deal in,
maintain multiple accounts for, and to exercise all rights, powers,
privileges and other rights, incidental to ownership of the assets held
by the Partnership.
(d) borrow or raise monies and, from time to time without limit as to
amount, to issue, accept, endorse and execute promissory notes, draft
bills of exchange, warrants, bonds, debentures and other negotiable or
non-negotiable instruments and evidences of indebtedness, and to secure
the payment of any thereof and the interest thereon by mortgage or
pledge, conveyance or assignment in trust of the whole or any part of
the property of the Partnership, whether at the time owned or thereafter
acquired, and to sell, pledge of otherwise dispose of such instruments
issued by the Partnership for its purposes; form and own one or more
corporations to engage in such businesses as the General Partner shall
deem advisable.
(e) lend any of its properties or funds, either with or without security in
furtherance of the objects and purposes of the Partnership as the
General Partner shall deem advisable and consent.
(f) rent or own and maintain one or more offices staffed as the General
Partner shall determine and to do such other acts attendant thereto as
may be necessary or desirable.
(g) waive the sales commission to acquire investment Capital as the General
Partner, in its sole discretion, may determine.
(h) enter, make and perform all contracts, surety and guarantees as may be
necessary or advisable or incidental to the carrying out of the
foregoing objects and purposes.
2.5 ADDRESS OF PARTNERS. The General Partner's address is listed in paragraph
2.1 hereof and the Limited Partners' addresses are on record at the office
of the General Partner to the Partnership.
2.6 TERM OF PARTNERSHIP. The term of the Partnership shall commence on the
date of this Agreement and shall continue until dissolved or terminated
pursuant to Article IX.
2.7 REGISTRATION AND OTHER OFFERINGS. The General Partner, on behalf of the
Partnership, shall have the authority, but not the obligation, to cause a
Registration statement to be filed, and such amendments thereto as the
General Partner deems advisable, with the appropriate Federal and state
regulatory agencies, including the United States Securities and Exchange
Commission and the securities commissions to register and increase the
number of Units registered under the Federal and state securities laws and
any other jurisdiction desirable or proper to qualify the Units for sale as
a public offering. Each of the Limited Partners hereby confirms and
ratifies all action taken and things done by the General Partner with
respect to such filings and public offerings. The General Partner may make
such other arrangements for the sale of Units, including the private
placement of Units, as it deems appropriate.
ARTICLE III
Capital Contributions and Allocation of Profits and Losses
3.1 CAPITAL CONTRIBUTIONS OF LIMITED PARTNERS.
(a) Each Limited Partner has delivered to the Partnership an executed
Subscription that has been accepted by the General Partner on behalf of
the Partnership, an Amended Certificate of Limited Partnership, and a
check for his subscription amount. The Partnership shall use the funds
thus contributed to pay, sales commissions, if any, Expenses,
Organization Costs, other expenses of the Partnership, and to provide
capital to engage in trading and to pay the management fees, if any,
and, from profits, the incentive fees and distributions to Partners
Capital Accounts.
(b) The General Partner has filed a Form S-1 to qualify the Partnership
Units for public sale. Except for payment of Partnership expenses from
Capital as provided in this Agreement, there will be no required
contribution or assessments of the Limited Partners.
3.2 CAPITAL CONTRIBUTIONS OF GENERAL PARTNER.
(a) The General Partner has not made and shall not be required to make any
capital contribution to the Partnership except for purchases that are
required by law. Currently, the General Partner is required by the
applicable securities and tax laws to purchase (i) one percent (1%) or
(ii) $25,000 of the total Capital paid in by the Limited Partners, which
ever is greater.
(b) As the result of the admission of additional Limited Partners, the
General Partner shall make such additional contribution to its capital
or to the Partnership so as to be certain that the General Partner has
sufficient Capital at risk to prevent the Partnership from loss of
that element of the Partnership test imposed by the Federal Internal
Revenue Code and the Regulations promulgated thereunder to permit the
Partnership to be taxed as a partnership and not as a corporation.
The General Partner shall not reduce its Capital nor shall it make any
assignment or transfer of its interest or withdrawal of its
contribution while it is the General Partner that would reduce its
percentage interest in the Partnership to less than its percentage
interest at the time the Partnership commences trading. The General
Partner may withdraw any excess above the required percentage without
notice to the Limited Partners. For so long as the Partnership has an
individual limited partner, the Corporate General Partner's net worth
will not be relevant to the determination of unlimited liability of
the partnership for tax purposes.
(c) The General Partner, on behalf of the Partnership, may, in accordance
with applicable law and the Offering Memorandum of the Partnership,
issue Units or provide notice of account to persons who become Limited
Partners. A Partner shall contribute an amount equal to the Net Asset
Value of a Unit, plus the sales commission, if any, on the valuation
date following receipt of the subscription agreements. The General
Partner and Affiliates of the General Partner may purchase Limited
Partnership Units with the same rights as other Limited Partners.
(d) All subscriptions for Units made pursuant to the offering of the Units
must be on the form provided with the Prospectus.
(e) Upon the sale and acceptance of Units by the General Partner,
subscription proceeds will be transferred from the escrow account in the
name of the Corporate General Partner at Star Financial Bank, 2004 N.
Wayne St., Angola, IN 46703, to the Partnership's bank and trading
accounts, and the General Partner shall cause the Partnership to pay its
organization and administrative costs pursuant to the agreements
negotiated by the General Partner and as provided in the Prospectus and
the aggregate of all contributions to the Partnership, less all costs
and expenses, shall be available to the Partnership to carry on its
business.
3.3 ALLOCATION OF PROFITS AND LOSSES
(a) A distribution account shall be established for each Partner that shall
include, as the initial balance thereof, each Partners' initial
contribution to the Partnership expressed in total dollars and Units
purchased. As of the close of business each month, allocations shall be
made as follows:
(i) The Incentive Fee. The incentive fee upon New Net Profit at the
rate of five percent (5%) to the Corporate General Partner and
twenty percent (20%), or such other rate as may be established
pursuant to 1.2(h), shall be paid quarterly to the CTA but allocated
to the Partners monthly.
(ii) The Profit (Loss) Attributable to Units shall be added to
(subtracted from) the distribution accounts of the Partners. Items
of income, gain or loss, accrued and paid Expenses shall be added to
(subtracted from) the distribution account of each Partner in
accordance with the ratio that such distribution account bears to
the sum of all of the Partners' distribution accounts.
(iii) The amount of any cash distributions to a Partner during such month
and any amount paid upon Redemption of Units as of the end of such
month shall be subtracted from the distribution account of such
Partner.
(iv) The General Partner, may, from time to time, establish a redemption
fee. The distribution account of any Unit that was redeemed shall
be reduced by the Redemption Charge per Unit multiplied by the
number of Units that were redeemed by the Partner represented by
such distribution account. The Redemption Charge, if any, shall be
first used to defray expenses and any excess treated as interest
earned by the Fund. At present, there is no redemption fee.
(b) The Partnership books and records shall be closed on the last
business day of each month and a statement of account prepared and sent
to each partner to disclose the Net Unit Value.
ARTICLE IV
Rights and Obligations of the General Partner
4.1 GENERAL. The General Partner shall have full, exclusive and complete
discretion in the management and control of the affairs of the Partnership
to the best of its ability and shall use its best efforts to carry out the
purposes of the Partnership set forth in Article II. In connection
therewith, it shall have all powers of a general partner under the Act,
including, without limitation, the power to:
(a) enter, execute and maintain contracts, agreements and any or all other
instruments, and to do and perform all such things, as may be required
or desirable in furtherance of Partnership purposes or necessary or
appropriate to the conduct of Partnership activities including, but not
limited to, contracts with third parties for:
(i) brokerage services on behalf of the Partnership (which brokerage
services may be performed by the General Partner or an Affiliate or,
an Affiliated introducing broker of the General Partner), may clear
the trades and pay trailing commissions or continuing service fees
to its associated persons, including Affiliates of the General
Partner and the General Partner, in consideration of the payment of
brokerage commissions established, from time to time, and paid to
the General Partner and will cause and pay for the trades to be
cleared through one or more futures commission merchants selected by
the General Partner;
(ii) trading advisory services relating to the purchase and sale of all
stocks, options, commodity futures contracts, commodity options and
contracts for forward delivery of foreign currencies on behalf of
the Partnership (which advisory services may be performed by the
General Partner or an Affiliate of the General Partner); and
(iii) rent, salaries, computer, accounting, legal and other services
attendant to the maintenance of the Fund.
(b) open and maintain bank accounts on behalf of the Partnership with
banks and money market funds.
(c) deposit, withdraw, pay, retain and distribute the Partnership's funds
in any manner consistent with the provisions of this Agreement.
(d) supervise the preparation and filing of all documentation required by
law including, but not limited to, Registration Statements to be filed
with Federal and state agencies.
(e) pay or authorize the payment of distributions to the Partners and pay
Expenses of the Partnership.
(f) invest or direct the investment of funds of the Partnership not
involving the purchases or sale of stocks, futures contracts, options,
and contracts for forward delivery of foreign currencies.
(g) purchase, at the expense of the Partnership, liability and other
insurance to protect the Partnership's proprieties and business.
(h) borrow money from banks and other lenders for Partnership purposes,
and may pledge any or all of the Partnership's assets for such loans.
No bank or other lender to which application is made for a loan by the
lender to which application is made for a loan by the General Partner
shall be required to inquire as to the purposes for which such loan is
sought and, as between the Partnership and such bank or other lender,
it shall be conclusively presumed that the proceeds of such loan are
to be and will be used for the purposes authorized under this
Agreement.
(i) confess judgment for and against the Partnership and control any
matters affecting the rights and obligations of the Partnership,
including the employment of attorneys, in the conduct of litigation
and otherwise incur legal expenses and costs of consultation,
settlement of claims, and litigation against or on behalf of the
Partnership.
4.2 LOANS BY GENERAL PARTNER. The General Partner or its Affiliates will be
not be required to advance or loan funds to the Partnership. In the event
the General Partner makes any advance or loan to the Partnership, the
General Partner will not receive interest in excess of its interest
costs, nor will the General Partner receive interest in excess of the
amounts which would be charged the Partnership (without reference to the
General Partner's financial abilities or guarantees) by unrelated banks
on comparable loans for the same purpose and the General Partner shall
not receive points or other financing charges or fees regardless of the
amount.
4.3 TRANSACTION WITH PARTNERSHIP. Notwithstanding anything to the contrary
which may be contained herein, the General Partner shall not:
(a) sell, or otherwise dispose of, any of the Partnership's assets to the
General Partner or its Affiliates.
(b) subject to the provisions regarding and without diminishment of the
right of the General Partner or any Affiliate to compensation for
services provided to the Partnership as set forth in this Agreement,
cause or permit the Partnership to enter any agreement with the General
Partner or an Affiliate which is not in the best interest of and for the
benefit of the Partnership or which would be in contravention of the
General Partner's fiduciary obligations to the Partnership or pursuant
to which the General Partner or any Affiliate;
(i) would provide or sell any services, equipment, or supplies at other
than rates charged to others; or
(ii) would receive from the Partnership, Units of Partnership interest in
consideration for services rendered.
4.4 OBLIGATIONS OF GENERAL PARTNER. In addition to the obligations provided
by law or this Agreement, the General Partner shall:
(a) Devote such of its time to the business and affairs of the Partnership
as it shall, in its discretion exercised in good faith, determine to be
necessary to conduct the business and affairs of the Partnership for the
benefit of the Partnership and the Limited Partners.
(b) Execute, file, record and/or publish all certificates, statements and
other documents and do any and all other things as may be appropriate
for the formation, qualification and operation of the Partnership and
for the conduct of its business in all appropriate jurisdictions
including, but not limited to, the compliance, at its expense, with all
laws related to its qualification to serve as the commodity pool
operator of the Fund.
(c) Retain independent public accountants to audit the accounts of the
Partnership.
(d) Employ attorneys to represent the Partnership.
(e) Use its best efforts to maintain the status of the Partnership as a
partnership for United States Federal income tax purposes.
(f) Employ only independent CTAs that are registered pursuant to the
Commodity Exchange Act to conduct trading and to otherwise establish and
monitor the trading policies of the Partnership; and the activities of
the partnership's trading advisor(s) in carrying out those policies.
(g) Review, not less often than annually, the brokerage commission rates
charged to comparable funds to determine that the commission rates paid
by the Partnership are comparable with such other rates.
(h) Have fiduciary responsibility for the safekeeping and use of all funds
and assets of the Partnership, whether or not in the General Partner's
immediate possession or control, and the General Partner will not employ
or permit others to employ such funds or assets in any manner except for
the benefit of the Partnership. Additionally, no contract shall permit
the General Partner to contract away its fiduciary obligation under
common law.
(i) Agree that if it becomes the sole General Partner of the Partnership, it
will use its best efforts to maintain the Partnership as a limited
partnership as required by all applicable laws including, but not
limited to the requirement of the United States Department of the
Treasury, Internal Revenue Service, for a sole corporate general partner
of a limited partnership to maintain its "Net Worth" (as defined below)
to establish the sufficient assets test for a sole corporate general
partner to be liable for the debts of the Partnership. Mr. Pacult
intends to resign as a general partner once Belmont has sufficient net
assets to meet the NASAA Guidelines to continue to offer Units in the
Partnership. Although there can be no assurance that Belmont, as the
sole Corporate General Partner, will satisfy the IRS "safe harbor"
test to permit the Partnership to continue to be taxed as a
partnership, before Mr. Pacult resigns, Belmont will secure an opinion
of counsel to the effect that sufficient other IRS elements exist to
permit the Partnership to continue to be taxed as a partnership and
not as a corporation. Belmont, as the sole Corporate General Partner
may reach the safe harbor for one of those tests with a Net Worth of an
amount equal to no less than (i) $50,000 or 15% of the aggregate capital
contributions of any limited partnerships (including this Partnership)
up to a maximum of $250,000 or (ii) 10% of the aggregate capital
contributions of any limited partnerships (including this Partnership)
for which it shall act as general partner and which are capitalized at
greater than or equal to $2,500,000 up to a maximum net worth of the
general partner $2,500,000. The general partner may use promissory
notes (valued at their fair market value) issued to the General Partner
by one or more of its principals. For the purposes of this
subparagraph, "Net Worth" shall be calculated in accordance with
generally accepted accounting principles, consistently applied, provided
that all current assets shall be based on the lower of cost or the then
current market value. The Units owned by either general partner in the
Partnership and in other partnerships in which they act as a general
partner shall not be included in calculating their Net Worth. A letter
of credit may be included. The requirements of this subparagraph (i)
may be modified if the General Partner obtains an opinion of counsel for
the Partnership to effect that a proposed modification will not (1)
adversely affect the classification of the Partnership as a partnership
for Federal income tax purposes; (2) will not adversely affect the
status of the Limited Partners as limited partners under the Act; (3)
will not violate any applicable state securities or Blue Sky law or any
rules, regulations, guidelines or statements of policy promulgated or
applied thereunder including, but not limited to, the net worth required
by Section II.B of the Guidelines for Registration of Commodity Pool
Programs, as adopted in revised form by the North American Securities
Administrators Association, Inc. as are in effect on the date of such
proposed modification. (4) or otherwise adversely affect the Limited
Partners.
(j) Maintain a current list of the name, address, and number of Units owned
by each Limited Partner at the General Partner's principal office. Such
list shall be disclosed to any Partner or their representative at
reasonable times, upon request, either in person or by mail, upon
payment, in advance, of the reasonable cost of reproduction and mailing.
The Partners and their representatives shall be permitted access to
all other records of the Partnership, after adequate notice, at any
reasonable time, at the offices of the Partnership. The General
Partner shall maintain and preserve such records for a period of not
less than six (6) years.
4.5 GENERAL PROHIBITIONS. The Partnership shall not:
(a) borrow from or loan to any person, except that the foregoing is not
intended to prohibit the incurring of any indebtedness to a Partner or
an Affiliate with respect to the offering of Units for sale,
Registration, or initiation and maintenance of the Partnership's trading
positions.
(b) commingle its assets with those of any other person, except to the
extent permitted under the Securities and Exchange Act or the Commodity
Exchange Act and the regulations promulgated under each.
(c) permit rebates or give-ups to be received by the General Partner or any
Affiliate of the General Partner, or permit the General Partner or any
Affiliate of the General Partner to engage in reciprocal business
arrangements which would circumvent the foregoing prohibition; provided,
however, that an Affiliate or the General Partner may provide goods or
services, including brokerage, at a competitive cost to the Partnership.
(d) engage in the pyramiding of its positions (i.e., the use of unrealized
profits on existing positions to provide margins for additional
positions in the same or a related stock or commodity); provided,
however, that there may be taken into account the Partnership's open
trade equity on existing positions in determining whether to acquire
additional unrelated stock or commodity positions.
(e) margins of all open positions in all stocks and commodities combined
would exceed 250% of the partnership's Net Asset Value at the time such
position would otherwise be initiated.
(f) permit churning of the Partnership's trading account for the purpose of
generating brokerage commissions to any person.
(g) directly or indirectly pay or award any finder's fees, commissions or
other compensation to any persons engaged by a potential limited partner
for independent investment advice as an inducement to such advisor to
advise the potential limited partner to purchase Units in the
Partnership without the knowledge of such potential limited partner.
(h) no Partnership funds will be held outside the United States. The
Partnership funds committed to trading will be on deposit with and
under the control of a futures commission merchant regulated pursuant
to the Commodity Exchange Act, as may be amended, from time to time.
The funds not committed to trading will be in investments which are
properly registered under the United States securities or other
financial institution regulations.
(i) the CTA may not receive a management fee pursuant to the terms of this
Partnership Agreement if it shares or participates, directly or
indirectly, in any commodity brokerage commissions generated by the
Partnership.
4.6 FEES AND EXPENSES.
(a) The Partnership shall pay all Organization Costs and offering Expenses
incurred in the creation of the Partnership and sale of Units. The
foregoing expenses may be paid directly by the Partnership or may be
reimbursed by the Partnership to the General Partner or an Affiliate of
the General Partner. Notwithstanding the foregoing, in no event will
reimbursement by the Partnership to the General Partner for Organization
Costs and offering Expenses charged to the Partnership exceed an amount
equal to 15% of the gross proceeds from the sale of Units. Organization
Costs and Offering Expenses shall mean those Expenses incurred in
connection with the formation, qualification and Registration of the
Partnership and in distributing and processing the Units under
applicable Federal and state law, sales commissions, if any, and any
other expenses such as: (i) registration fees, filing fees and taxes
including publication by website; (ii) the costs of qualifying,
printing, amending, supplementing, publication by website, mailing and
distributing the Registration Statement and Prospectus; (iii) the costs
of qualifying, printing, amending, supplementing, mailing and
distributing sales materials used in connection with the issuance of the
Units; (iv) salaries of officers and employees of the General Partner
and any Affiliate of the General Partner while directly engaged in
distributing and processing the Units and establishing records therefor;
(v) rent, travel, remuneration of personnel, telegraph, telephone and
other expenses in connection with the offering of the Units; (vi)
accounting, auditing, and legal fees incurred in connection therewith;
and (vii) any extraordinary expenses related thereto. Organization Costs
and Offering Expenses do not include salaries, rent, travel, expenses
and other items of General Partner overhead.
(b) All operating expenses of the Partnership shall be billed directly to
and paid by the Partnership.
(c) The General Partner or any Affiliate of the General Partner may be
reimbursed for the actual costs of any Expense including, but not
limited to, legal, accounting and auditing services used for or by the
Partnership, as well as printing and filing fees and extraordinary
expenses incurred for or by the Partnership; provided, however, the
limitations of contained in Article X - Exoneration and Indemnification
contained in this Agreement will apply to restrict the purchase of
certain insurance coverage and the assumption of the defense of certain
claims.
(d) The General Partner may establish compensation to be paid to it or any
of its Affiliates, from time to time; provided, however, such charges
shall be no more than:
(i) A sales commission of up to six percent (6%) to be established, from
time to time, by the General Partner, for sales of Units;
(ii) A management fee of one half of one percent (1/2 of 1%) per month
(6% per year) of the Net Asset Value of the Partnership, computed
and paid to the General Partner and/or non-affiliated independent
investment or trading advisor on the close of business on the last
day of each month;
(iii) An incentive fee, paid quarterly, of up to fifteen percent (15%) of
the first one hundred percent (100%) of New Net Profit, or less
earned upon Capital, and prorated to consider the date of deposit of
such Capital to the Partnership each year. The incentive fee may be
increased up to 27%, provided that the management fee is
correspondingly reduced to 0%. Should there be multiple trading
advisors, each trading sub-account assigned to a trader shall be
considered separately for purposes of incentive fee. The incentive
fee will be non-refundable; i.e., in the event that the Partnership
earns substantial New Net Profit during any year and, thereafter,
suffers losses, the General Partner and the CTA will not refund any
of the profit incentive fee paid for the prior month or months.
However, the Partnership will not pay or accrue to the General
Partner or the CTA any further incentive fee during that year until
such time as the New Net Profit, when added to Net Asset Value,
after additions, deductions of Redemptions and distributions,
exceeds the highest Net Asset Value, computed for that year; i.e.,
incentive fees will only be earned and paid or accrued upon New Net
Profit for that year; and
(iv) A share of the brokerage commissions paid for trades made by the
Partnership. Such commissions shall not be more than 80% of the
average published rate charged, from time to time, to public
commodity pools or 14% of the Partnership's Net Assets utilized for
trading.
(e) The General Partner is hereby authorized to employ brokers, attorneys,
accountants, consultants, and administrative personnel, who may be
Affiliated with the General partner, to perform Partnership business at
the expense of the Partnership. The Partnership is subject to yearly
legal and accounting fees currently estimated to be $20,000 and $5,000,
respectively.
(f) The General Partner is hereby authorized, individually or through an
Affiliate, to employ non-affiliated independent investment and trading
advisors to trade the assets of all or a portion of the Fund to be paid
(i) an annual management fee not to exceed six percent (6%) of the
assigned trading equity when combined with the General Partner's
management fee, if any; and, (ii) an incentive fee of up to fifteen
percent (15%) on New Net Profit earned by such advisor, which may be
increased or decreased as described in this Agreement. All incentive
fees may be prorated monthly but may be paid no more often than
quarterly.
4.7 HISTORY OF PARTNERSHIP AND ACTIVITIES OF PARTNERS.
(a) The General Partner and its Affiliates shall devote to the Partnership
only such time as shall be reasonably required to fulfill their
responsibilities hereunder.
(b) Any Partner may, notwithstanding the existence of this Agreement, engage
in whatever other activities they may choose, whether the same be
competitive with the Partnership or otherwise, without having or
incurring any obligation or conflict of interest in such activities with
the Partnership or to any party hereto. The Partners are specifically
authorized to deal with other partnerships and to acquire interests in
positions and trading without having to offer participation therein to
the Partnership or the other Partners. Neither this Agreement nor any
activities undertaken pursuant hereto shall prevent any Partner,
including the General Partner and its Affiliates and their officers,
directors and employees, from engaging in the trading contemplated by
this Partnership individually, jointly with others, or as a part of any
other association to which any of them are or may become parties, in the
same trades as the Partnership, or require any of them to permit the
Partnership, the General Partner or any other Partner to participate in
any of the foregoing. As a material part of the consideration for each
party's execution hereof, each Partner hereby waives, relinquishes and
renounces any such right or claim of conflict of interest and
participation from any other Partner.
(c) Belmont is a corporation that was formed on January 12, 1999, and has
over three years experience of operating this partnership. In addition,
Mr. Pacult, has been engaged in supervision of individual managed
commodity accounts for over 22 years and serves as the principal of a
corporate general partner for two other funds and as an individual
general partner for those funds. The past and future results of trading
by Mr. Pacult, or any future principal of Belmont, will be confidential
and not disclosed to the other Partners. Such positions taken by the
Partnership or the CTA may be the same as or different from any
positions to the Fund. Nothing in this Section, or elsewhere in the
Partnership Agreement, shall permit the General Partner to violate its
fiduciary or legal obligations to the Partnership.
4.8 CONFLICTS OF INTEREST. Significant actual and potential conflicts of
interest exist in the structure and operation of the Partnership. The
General Partner has used its best efforts to identify and describe all
potential conflicts of interest which may be present under this heading and
elsewhere in the Partnership's Prospectus and the Exhibits attached thereto.
Prospective investors should consider that the General Partner intends to
assert that Partners have, by subscribing to the Partnership, consented to
the existence of such potential conflicts of interest as are described in
this Agreement and the Prospectus and its Exhibits, in the event of any
claim or other proceeding against the General Partner, any principal of the
General Partner, the CTA, any Principal of the CTA, the Partnership's FCM,
or any principal of the FCM, the Selling Agent or any principal or any
Affiliate of any of them alleging that such conflicts violated any duty owed
by any of them to said subscriber. For example, the Principal Selling Agent
will not make any independent due diligence of the Partnership or the
General Partner.
(a) MANAGEMENT OF OTHER EQUITY AND FOR THEIR OWN ACCOUNTS BY THE GENERAL
PARTNER, THE CTAs, AND THEIR PRINCIPALS. The right of both Mr. Pacult,
in any capacity, and Belmont to manage and the actual management by the
CTA of accounts they or their Affiliates own or control and other
commodity accounts and pools presents the potential for conflicts of
interest. There is no limitation upon the right of Mr. Pacult, Belmont,
the CTA, or any of their Affiliates to engage in trading commodities for
their own account. It is possible for these persons to take their
positions in their personal accounts prior to the orders they know they
are going to place for the money they manage for others. The General
Partner will obtain representations from all of these persons and their
Affiliates that no such prior orders will be entered for their personal
accounts. The Partnership's CTA will be effecting trades for its own
accounts and for others (including other commodity pools in competition
with this Pool) on a discretionary basis. It is possible that positions
taken by the CTA for other accounts may be taken ahead of or opposite
positions taken on behalf of the Partnership. Conflicts may arise as a
result of the involvement of Mr. Pacult in the management of Atlas
Futures Fund, L. P. and Providence Select Fund, L. P. and other
conflicts could arise should either Belmont or he exercise their right
to form other commodity pools in the future. Conflicts could also arise
because the CTA may have financial incentives to favor other accounts
over the Partnership. In the event Mr. Pacult, Belmont or the CTA, or
any of their principals trade for their own account, such trading
records shall not be made available for inspection by the Partners.
Belmont does not presently intend to engage in trading for its own
account; however, Mr. Pacult reserves the right to trade for his own
account. The CTA also reserves the right to trade for its own account
and other public and private commodity pools in competition with the
Fund. Any trading for their personal accounts or other commodity pools
by the General Partner, any Commodity Trading Advisor selected to trade
for the Partnership or any of their principals could present a conflict
of interest in regard to position limits, timing of the taking of
positions or other similar conflicts. The result to the Partnership
could be a reduction in the potential for profit should the entry or
exit of positions be at unfavorable prices by virtue of position limits
or entry of other trades in front of the Partnership trades by the
General Partner or CTA responsible for the management of the
Partnership.
(b) POSSIBLE RETENTION OF VOTING CONTROL BY THE GENERAL PARTNER. There is
no limit upon the number of Units in the Partnership the General Partner
and its principal and Affiliates may purchase. It will be possible for
them to vote, individually or as a block, to create a conflict with the
best interests of the Partnership, in regard to the selection of
Commodity Trading Advisors to protect its share of the brokerage
commissions and other issues.
(c) GENERAL PARTNER TO REMAIN AGAINST POSSIBLE BEST INTEREST OF PARTNERSHIP.
Because Belmont has financial interest in the operation of the
Partnership by virtue of a share of the 4% annual fixed brokerage
commission and the possible receipt of a 5% incentive fee on New Net
Profits, and because Mr. Pacult serves is a general partner and is also
the sole principal of Belmont, it is unlikely that either general
partner would voluntarily resign, even if such resignation would be in
the best interest of the Partnership.
(d) FEES AND CHARGES TO THE PARTNERSHIP PAID TO GENERAL PARTNER NOT
NEGOTIATED. The fixed brokerage commissions of 4% annually payable
monthly to Belmont have not been negotiated at arm's length. The
General Partner has a conflict of interest between its responsibility to
manage the Partnership for the benefit of the Limited Partners and its
interest in receiving the difference between the 4% annual brokerage
commission charged the Partnership and the actual transaction costs
incurred by the FCM as a result of the frequency of trades entered by
the CTA. The General Partner will select the CTAs to manage the
Partnership assets and the CTAs determine the frequency of trading.
Because the General Partner will receive the difference between the
brokerage commissions and other costs which will be paid on behalf of
the Partnership, the General Partner's best interests are served if it
selects trading advisors which will trade the Partnership's Net Assets
assigned to them in a way to minimize the frequency of trades to
maximize the difference between the fixed brokerage commissions and the
costs to trade charged by the FCM; i.e., it is in the best interest of
the General Partner to decrease the frequency of trading rather than
concentrate on the expected profitability of the CTAs without regard to
frequency of trades. This conflict is offset by the fact the General
Partner does not select any of the trades and the CTA is paid an
incentive of 20% and the General Partner an incentive fee of 5% of New
Net Profits. The arrangements between the General Partner and the
Partnership with respect to the payment of the commissions are
consistent in costs incurred by other comparable commodity pools. In
the opinion of the general partner a 4% annual fixed brokerage
commissions is fair and reasonable to the partnership.
(e) CONFLICTS OF INTEREST IN THE PARTNERSHIP STRUCTURE. Certain actual and
potential conflicts of interest do exist in the structure and operation
of the Partnership that must be considered by investors before they
purchase Units in the Partnership. In addition, the Selling Agent is
Affiliated with Mr. Pacult and, therefore, no independent due diligence
of the offering will be conducted for the protection of the investors.
The General Partner has taken steps to insure that the Partnership
equity is held in segregated accounts at the banks and the futures
commission merchant selected and has otherwise assured the Selling Agent
that all money on deposit is in the name of and for the beneficial use
of the Partnership.
(f) GENERAL PARTNER TO DISCOURAGE REDEMPTIONS. A decrease in the amount of
equity on deposit would decrease the number of trades entered and the
amount of potential New Net Profit earned by this partnership.
Accordingly, the General Partner has an incentive to withhold
distributions and to discourage Redemption to maintain the equity on
deposit to preserve its share of the 4% annual fixed brokerage
commissions and its opportunity to be paid a 5% incentive fee.
(g) HIGH RISK TRADING BY THE CTAs TO GENERATE INCENTIVE FEES. As a general
rule, the greater the risk assumed, the greater the potential for
profit. Because the CTA is compensated by the General Partner based on
20% of the New Net Profit of the Partnership and the Corporate General
Partner is also paid a 5% incentive fee, it is possible that the CTA,
with the direct or indirect approval of the Corporate General Partner,
will select trades which are otherwise too risky for the Partnership to
attempt to earn the incentive fees.
(h) NO RESOLUTION OF CONFLICTS PROCEDURES. As is typical in many futures
partnerships, the General Partner has not established formal procedures,
and none are expected to be established in the future, to resolve the
potential conflicts of interest that may arise. It will be extremely
difficult, if not impossible, for the General Partner to assure that
these and future potential conflicts will not, in fact, result in
adverse consequences to the Partnership or the Limited Partners. The
foregoing list of risk factors and conflicts of interest is complete as
of the date of this Partnership Agreement, however, additional risks and
conflicts may occur which are not presently foreseen by the General
Partner. Before determining to invest in the Units, potential
investors should read this entire Agreement as well as the Partnership's
Prospectus and the subscription agreement, and consult with their own
personal legal, tax, and other professional advisors as to the legal,
tax, and economic aspects of a purchase of Units and the suitability of
such purchase for them.
(i) INTERESTS OF NAMED EXPERTS AND COUNSEL. The General Partner has
employed The Scott Law Firm, P.A. to prepare this Partnership Agreement,
provide certain tax advice and opine upon the legality of the issuance
of the Units. Neither the Law Firm nor its principal, nor any
accountant or other expert employed by the General Partner to render
advice in connection with the preparation of this Partnership Agreement
and the Prospectus or any documents attendant thereto, have been
retained on a contingent fee basis nor do they have any present interest
or future expectation of ownership in the Partnership or its General
Partner or the Underwriter or the CTAs or the IB or the FCM.
4.9 LIMITATION OF POWERS. Without concurrence of a Majority in Interest, the
General Partner may not:
(a) Amend this Agreement except for those amendments that do not adversely
affect the rights of the Limited Partners.
(b) Voluntarily withdraw as a General Partner other than on 120 days
notice.
(c) Appoint a new General Partner or additional general partners;
provided, however, additional general partners may be appointed
without obtaining the consent of a Majority in Interest if the
addition of such person is necessary to preserve the tax status of the
Partnership as a partnership and not as a corporation; and the
admission of such additional general partner does not materially
adversely affect the Limited Partners.
(d) Sell all or substantially all of the Partnership assets other than in
the ordinary course of business.
(e) Cause the merger or other reorganization of the Partnership.
(f) Dissolve the Partnership other than because of an event, which by law,
requires such dissolution.
ARTICLE V
Rights and Obligations of Limited Partners
5.1 LIMITATION OF LIABILITY. No Limited Partner shall be personally liable
for any of the debts of the Partnership or any of the losses thereof.
However, the amount committed by him to the Capital of the Partnership and
his interest in Partnership assets shall be subject to liability for
Partnership debts and obligations. Limited Partners may be liable to repay
any wrongful distribution of profits to them and may be liable for
distributions (with interest thereon) considered to be a return of Capital
if necessary to satisfy creditors of the Partnership.
5.2 NO MANAGEMENT RIGHTS. No Limited Partner shall take part in the
management of the business of the Partnership or transact any business for
the Partnership. No Limited Partner, as such, shall have the power to sign
for or to bind the Partnership.
5.3 CERTAIN RIGHTS. Provided the following, does not either (i) subject the
Limited Partners to unlimited liability or (ii) subject the Partnership to
be taxable as a Corporation for purposes of Federal Income tax laws, the
Partners, by a vote of a Majority in Interest, without the necessity for
concurrence by the General Partner, shall have the following rights in
addition to those granted elsewhere in this Agreement:
(a) Amend the Partnership Agreement; provided, however, any amendment which
modifies the compensation or distributions to the General Partner or
which affects the duties of the General Partner requires the consent of
the General Partner.
(b) The General Partner may be removed and a new General Partner elected in
accordance with the terms of this Agreement.
(c) Cancel any contract for services with the General Partner, without
penalty, upon 60 days written notice; provided, however, the maximum
period of any contract between the General Partner and the Partnership
is one year; and, provided further, should any amendment to this
Partnership Agreement attempt to modify the compensation or
distributions to which the General Partner is entitled or which
affects the duties of the General Partner, such amendment will become
effective only upon the consent of the General Partner.
(d) The right to approve, prior to sale, the sale or distribution, outside
the ordinary course of business, of all or substantially all of the
assets of the Partnership.
(e) Dissolve the Partnership.
(f) Any material changes in the Partnership's basic investment policies
identified in Article III including, but not limited to, the
speculation and trade in commodity futures, forward futures contracts,
and options upon those contracts both within and without the United
States or the structure of the Partnership as a limited partnership
requires prior written notification of a meetings which identifies the
purpose of the meeting and the approval by a vote of the Majority in
Interest of the Partners.
5.4 GENERAL PARTNER ACTION WITHOUT LIMITED PARTNER APPROVAL.
Notwithstanding anything in this Agreement, particularly section 5.3, to the
contrary, the General Partner may amend this Agreement without any vote,
consent, approval, authorization or other action of any other Partner and
without notice to any other Partner to:
(a) add to the representations, duties or obligations of the General
Partner or its Affiliates or surrender any right or power granted to
the General Partner or its Affiliates in this Agreement for the
benefit of the Limited Partners;
(b) cure any ambiguity, correct or supplement any provision in this
Agreement which may be inconsistent with any other provision in this
Agreement, or make any other provisions with respect to matters or
questions arising under this Agreement which will not be inconsistent
with the intent of this Agreement;
(c) delete or add any provision of this Agreement required to be so
deleted or added by the staff of the Securities and Exchange
Commission, or by a state securities law administrator or similar such
official, which addition or deletion is deemed by such official to be
for the benefit or protection of the Limited Partner or does not have
a material adverse effect on the Limited Partners generally or the
Partnership;
(d) reflect the withdrawal, expulsion, addition or substitution of
Partners;
(e) reflect the proposal, promulgation or amendment of Regulations under
Code section 704, or otherwise, to preserve the uniformity of interest
in the Partnership issued or sold from time to time, if, in the
opinion of the General Partner, the amendment does not have a material
adverse effect on the Limited Partners generally;
(f) elect for the Partnership to be bound by any successor statute to the
Act, if, in the opinion of the General Partner, the amendment does not
have a material adverse effect on the Limited Partners generally;
(g) conform this Agreement to changes in the Act or interpretations
thereof which, in the exclusive desecration of the General Partner, it
believe appropriate, necessary or desirable, if, in the General
Partner's reasonable opinion, such amendment does not have a
materially adverse effect on the Limited Partners generally or the
Partnership;
(h) change the name of the Partnership;
(i) conform the provisions of this Agreement to any applicable
requirements of Federal of state law which, in the exclusive
discretion of the General Partner, it believes appropriate, necessary
or desirable, if, in the General Partner's reasonable opinion, such
amendment does not have a material adverse effect on the Limited
Partners generally or the Partnership;
(j) make any change which, in the exclusive discretion of the General
Partner, is advisable to qualify or to continue the qualification of
the Partnership as a limited partnership or a partnership in which the
Limited Partners have limited liability under the laws of any state or
that is necessary or advisable, in the exclusive discretion of the
General Partner, so that the Partnership will not be treated as an
association taxable as a corporation for Federal income tax purposes;
and
(k) make any change, which in the sole judgment of the General Partner,
effects a reduction in operating costs or otherwise benefits the
partnership or its Partners.
5.5 EXPULSION OF LIMITED PARTNERS. Anything herein to the contrary
notwithstanding,
(a) without approval of the general partner, no Partner, including any
corporation, partnership, trust or other entity may, at any time, have
an ownership percentage of ten percent or more of the aggregate
ownership percentages of the Limited Partners. If, at any time, the
General Partner determines that any Limited Partner has an ownership
percentage of ten percent or more, the Partnership may, in the General
Partner's exclusive discretion, cause a Redemption by that Limited
Partner of the number of Units necessary or advisable to reduce that
Limited Partner's ownership percentage to less than ten percent. The
Redemption shall be effective as of the next Redemption date or such
other Redemption date, at the discretion of the General Partner.
(b) the General Partner has the right, in its sole discretion, to raise
or lower the minimum investment in the Partnership required for the
admission or retention of Units in the Partnership by a Partner. In
the event the General Partner does raise the minimum investment in the
Partnership to an amount in excess of any Partners Capital account,
the Partnership shall provide notice to the Partner of such event and
allow the Partner 30 days to raise the Capital account for that
Partner to such raised amount, or more. In the event the Partner does
not so raise his Capital account to such minimum amount, the Partner
shall be deemed to have elected to withdraw from the Partnership and
all of his Units shall be redeemed at the next redemption date as
provided in this Agreement.
5.6 NOTIFICATION. Notice shall be sent to each Partner within seven business
days from the date of:
(a) any decline in the Net Unit Value to less than 50% of the Net Asset
Value on the last Valuation Date;
(b) any material change in contracts with the FCM or CTA including, but not
limited to, any change in CTAs or any modification in connection with
the method of calculating the incentive fee;
(c) any other material change affecting the compensation of the General
Partner, FCM, CTA or any Affiliated party;
5.7 NOTIFICATION CONTENTS.
(a) a material change related to brokerage commissions shall not be made
until notice is given and the Partners, after such notice, have the
opportunity to Redeem pursuant to Article IX;
(b) in addition, in regard to all other changes, the required notification
shall describe the change in detail, include a description of the
Partners' Redemption rights pursuant to Article IX and voting rights
pursuant to this Article V and a description of any material effect such
changes may have on the interests of the Partners.
5.8 EXERCISE OF RIGHTS. Upon receipt of a written request, executed by the
holders of Units aggregating ten percent (10%) or more of the Units, for a
vote upon and to take action with respect to any rights of the Partners
under this Agreement, together with a check for the costs to distribute the
request to all of the Partners, the General Partner shall call a meeting of
all Partners of the Partnership in the time and manner as provided in
Section 8.7 hereof.
5.9 EXAMINATION OF BOOKS AND RECORDS. A Limited Partner shall have the right
to examine the books and records of the Partnership at all reasonable
times, including the right to have such examination conducted at his sole
expense by any reasonable number of representatives. Notwithstanding the
foregoing, the General Partner may keep and withhold the names of the other
Partners, specific trading and other designed information confidential from
the Partners.
ARTICLE VI
Assignment of Limited Partnership Units;
Admission of Limited Partners
6.1 RESTRICTION ON ASSIGNMENT. A Partner may not assign or transfer some or
all of his Units in the Partnership without the written consent of the
General Partner; provided, however, that in no event may an assignment be
made or permitted until after two years from the date of purchase of such
assigned or transferred Units(s) by said Partner; and, provided, further,
that full Units must be assigned and the assignor, if he is not assigning
all of his Units, will retain more than five Units. Any such assignment
shall be subject to all applicable securities, commodity, and tax laws and
the regulations promulgated under each such law. The General Partner shall
review any proposed assignment and shall withhold its consent in the event
it determines, in its sole discretion, that such assignment could have an
adverse effect on the business activities or the legal or tax status of the
Partnership.
6.2 QUALIFIED PLAN RESTRICTIONS. In no event shall a Partner be entitled to
transfer all or part of a Partnership interest if, under applicable
United States Department of Labor law or regulations, such transfer would
result in a violation of such law or regulations.
6.3 DOCUMENTATION OF ASSIGNMENT. The General Partner shall furnish to the
assigning Limited partner a proper form to duly effect such assignment.
The General Partner shall not be required to recognize any assignment and
shall not be liable to the assignee for any distributions made to the
assigning Limited Partner until the General Partner has received such form
of assignment, properly executed with signature guaranteed, together with
the Certificate of Ownership originally issued to the Limited Partner (or
an indemnity bond in lieu therefor) and such evidence of authority as the
General Partner may reasonably request and the General Partner shall have
accepted such assignment.
ARTICLE VII
Accounting Records, Reports and Distributions
7.1 DISTRIBUTIONS. Each Partner will have a Capital account, and its initial
balance will be the amount the Partner paid for the Partner's Units. The
Net Assets of the Partnership will be determined monthly, and any increase
or decrease from the end of the preceding month will be added to or
subtracted from the accounts of the Partners in the ratio that each account
bears to all accounts. Distributions from profits or Capital will be made
solely at the discretion of the General Partner.
7.2 BOOKS OF ACCOUNT. Proper books of account shall be kept and there shall
be entered therein all transactions, matters and things relating to the
Partnership's business as required by applicable law and the regulations
promulgated thereunder and as are usually entered into books of account
kept by persons engaged in business of like character. The books of
account shall be kept at the principal office of the General Partner and
each Limited Partner (or any duly constituted agent of a Limited Partner)
shall have, at all times during reasonable business hours, free access,
subject to rules of confidentiality established by the General Partner, the
right to inspect and copy the same. Such books of account shall be kept on
an accrual basis. A Capital account shall be established and maintained
from each Partner, as set forth above.
(a) Each Partner shall be furnished as of the end of each Fiscal Year with
(1) annual financial statements, audited by a certified public
accountant, within 90 days from the end of such year; together with
such other reports (in such detail) as are required to be given to
Partners by applicable law, specifically, annual and periodic reports
will be supplied by the General Partner to the other Partners in
conformance with the provisions of CFTC regulations for Reporting to
Pool Participants, 17 C.F.R. Section 4.22, as amended, from time to
time, and, (2) any other reports or information which the General
Partner, in its sole discretion, determines to be necessary or
appropriate.
(b) Appropriate tax information (adequate to enable each Partner to complete
and file his Federal tax return) shall be delivered to such Partner as
soon as possible following the end of each Calendar Year.
7.3 CALCULATION OF NET ASSET VALUE. Net Asset Value shall be calculated daily
and reports delivered to Partners as of the last day of each month by the
20th of the following month. Upon request, the General Partner shall make
available to any Partner the Net Unit Value.
7.4 MAINTENANCE OF RECORDS. The General Partner shall maintain all records as
required by law including, but not limited to, (1) all books of account
required by paragraph 7.1 of this Article VII; and, (2) a record of the
information obtained to indicate that a Partner meets the applicable
investor suitability standards.
7.5 TAX RETURNS The General Partner shall cause tax returns for the
Partnership to be prepared and timely filed with the appropriate
authorities. The General Partner shall cause the Partnership to pay any
taxes payable by the Partnership; provided, however, that the General
Partner shall not be required to cause the Partnership to pay any tax so
long as the General Partner or the Partnership shall be in good faith and
by appropriate means contesting the applicability, validity or amount
thereof and such contest shall not materially endanger any right or
interest of the Partnership.
7.6 TAX ELECTIONS The General Partner shall from time to time, make such tax
elections or allocations deemed necessary or desirable to carry out the
business of the Partnership or the purposes of this Agreement. Belmont
shall be authorized to perform all duties imposed by Sections 6221 through
6232 of the Internal Revenue Code on the General Partner as "tax matters
partner" of the Partnership, including, but not limited to, the following:
(i) the power to conduct all audits and other administrative proceedings
with respect to Partnership tax items; (ii) the power to extend the statute
of limitations for all Limited Partners with respect to Partnership tax
items; (iii) the power to file a petition with an appropriate federal court
for a review of a final Partnership administrative adjustment; and, (iv) a
power of attorney on behalf of each Limited Partner having less than a 1%
interest in the Partnership to enter a settlement with the Internal Revenue
Service on behalf of, and binding upon, those Limited Partners unless any
said Limited Partner shall have notified the Internal Revenue Service and
the General Partner, within 30 days of service of the notice of claim up
said Limited Partner, that the General Partner may not act on such Limited
Partner's behalf.
ARTICLE VIII
Amendments of Partnership Agreement
8.1 RESTRICTION ON AMENDMENTS. No amendment to this Agreement shall be
effective or binding upon the partners unless the same shall have been
approved by a Majority in Interest of the Partners; provided, however, the
General Partner may adopt amendments without such approval which are, in
the sole judgment of the General Partner, deemed necessary or desirable to
maintain the business or limited partnership or other favorable tax status
of the Partnership, or permit a Public Offering of the Units, or to
maintain the Partnership and the General Partner and its principals in
compliance with the laws which govern the business, including the
requirements of any self regulatory organization, or to substitute or add
persons as Limited Partners or to effect a reduction in costs or other
benefits to the partnership or the Partners.
8.2 ADMISSION OF ADDITIONAL PARTNERS. At any time, the General Partner may,
in its sole discretion and subject to applicable law, admit additional
Partners. Each newly admitted Partner shall contribute cash equal to the
Net Unit Value of the Partnership for each Unit to be acquired. The terms
of any additional offering may be different from the terms of the initial
offering. All expenses of any such additional offering shall be borne by
the either the Partnership or the subscribers thereto, as determined in the
sole discretion of the General Partner. Pursuant to Article VI, the
General Partner may consent to and admit any assignee of Units as a
substituted Partner. There is no maximum aggregate amount of Units which
may be offered and sold by the Partnership or on the amount of
contributions which may be received by the Partnership. The subscriber has
five (5) days to rescind his subscription, after which time period all
subscriptions will be irrevocable, subject to any applicable law which may
extend the rescission period.
8.3 TERMINATION OF OFFERINGS; ADDITIONAL OFFERINGS. Notwithstanding anything
stated herein to the contrary, the General Partner may from time to time,
in its sole discretion, limit the number of Units to be offered, terminate
any offering of Units, or register additional Units and/or make additional
public or private offerings of Units. No Limited Partner shall have any
preemptive, preferential or other rights with respect to the issuance or
sale of any additional Units. No Limited Partner shall have the right to
consent to the admission of any additional Limited Partners.
8.4 NOTICE OF RESTRICTED TRANSFER. Should the General Partner elect to issue
certificates of Limited Partnership, each certificate shall be subject to
and contain the following notice:
THESE LIMITED PARTNERSHIP INTERESTS SHALL NOT BE TRANSFERABLE BY
THE REGISTERED HOLDER EXCEPT BY CONSENT OF THE GENERAL PARTNER AND
AS OTHERWISE PROVIDED IN THE PARTNERSHIP AGREEMENT.
8.5 MEETINGS OF PARTNERS. Upon receipt of a written request, together with
the costs to distribute such request to all Partners, executed by Partners
holding ten percent (10%) or more of the Units, for the calling of a
meeting of the Partners or should the General Partner desire a meeting for
any purpose, the General Partner shall, within fifteen (15) days
thereafter, provide written notice, either in person or by certified
mail, after the date of receipt of said notice. Such written notice shall
state the purpose of the meeting, specify a reasonable time, place, and
date, which shall be not less than thirty (30) or more than sixty (60) days
thereafter. An Amendment shall be adopted and binding upon all parties
hereto if a Majority in Interest of the Partners votes for the adoption of
such amendment. Partners may vote in person or by written proxy delivered
to any such meeting. Meetings of Partners may also be held by conference
telephone where all Partners can hear one another.
8.6 RIGHT OF GENERAL PARTNER TO RESIGN. The individual General Partner, Mr.
Pacult, may resign upon 120 days notice to all other Partners. The
Corporate General Partner, Belmont, may resign or assign any portion of its
interest in the Partnership at anytime to a third party and become a
Limited Partner with respect to the balance of its interest in the
Partnership, if any, if it provides one hundred twenty (120) days prior
written notice to all other Partners of its intention to resign and states
in such notice the name of the intended assignee who is to become
substitute Corporate General Partner and the information reasonably
appropriate to enable the Partners to decide whether or not to approve the
substitution or, in the alternative, provide that the partners must elect a
successor general partner. In the event of the voluntary withdrawal by the
Corporate General Partner, the Corporate General Partner shall pay the
legal fees, recording fees and all other expenses incurred as a result of
its withdrawal. Upon resignation, the Corporate General Partner shall be
paid the items identified in Section 8.7 below.
8.7 AMENDMENT INVOLVING SUCCESSOR CORPORATE GENERAL PARTNER. Should a
resignation or an amendment to the Agreement provide for a change in the
general partner upon the conditions provided in this Agreement, the
election and admission of a person or persons as a successor or successors
to the Corporate General Partner, shall require the following conditions:
the General Partner shall retire and withdraw as General Partner and the
Partnership business shall be continued by the successor general partner or
general partners, and such amendment shall expressly provide that on or
before the effective date of removal.
(a) The Corporate General Partner shall be permitted to Redeem 100% of its
Units ten (10) days prior to the effective date of its removal in cash
equal to the Net Asset Value of such Corporate General Partner's
interest in the Partnership.
(b) The Partnership shall pay to the removed Corporate General Partner an
amount equal to the Appraised Value of such General Partner's assets to
be transferred to the successor General Partner to enable the successor
to continue the business of the Partnership. The Appraised Value of the
withdrawing Corporate General Partner's interest in the Partnership
shall equal such General Partner's interest in the sum of (1) the
Expenses advanced by the Corporate General Partner to the Partnership,
(2) all cash items, (3) all prepaid expenses and accounts receivable
less a reasonable discount for doubtful accounts, and (4) the net book
value of all other assets, unless the withdrawing General Partner of the
successor Corporate General Partner believes that the net book value of
an asset does not fairly represent its fair market value in which event
such Corporate General Partner shall cause, at the expense of the
Partnership, an independent appraisal to be made by a person selected by
the General Partner with approval of a Majority in Interest of the
Partners to determine its value.
(c) The successor General Partner or Partners shall indemnify the former
General Partner for all future activities of the Fund.
ARTICLE IX
Dissolution, Liquidation and Redemption
9.1 DISSOLUTION. The Partnership shall be dissolved, and shall terminate and
wind-up its affairs, upon the first to occur of the following:
(a) the affirmative vote of a Majority in Interest of the Partners adopting
an amendment to this Agreement providing for the dissolution of the
Partnership;
(b) the sale, exchange, forfeiture or other disposition of all or
substantially all the properties of the Partnership out of the ordinary
course of business;
(c) the resignation of the General Partner after one hundred twenty days
notice to the Partners, of the bankruptcy, insolvency or dissolution, or
failure of the General Partner to maintain sufficient Net Worth to
qualify the Partnership as a partnership for Federal Income Tax purposes
or as required by the NASAA Guidelines in effect at the time the Units
were sold, without a successor, promptly after any such event, but in no
event beyond one hundred twenty (120) days after the effective date of
such event;
(d) at 11:59 p.m. on the day which is twenty-one (21) years from August 1,
1999; or
(e) any event which legally dissolves the Partnership.
9.2 EFFECT OF LIMITED PARTNER STATUS. The death, legal disability,
bankruptcy, insolvency, dissolution, or withdrawal of any Limited Partner
shall not result in the dissolution or termination of the Partnership,
and such Limited Partner, his estate, custodian or personal
representative shall have no right to withdraw or value such Limited
Partner's interest in the Partnership except as provided in Paragraph
9.3. Each Limited Partner (any assignee thereof) expressly agrees that
the provisions of the Act, as amended, titled "Powers of Legal
Representative or Successor of Deceased, Incompetent, Dissolved or
Terminated Partner", shall not apply to his interest in the Partnership
and expressly waives any rights and benefits thereunder. Each Limited
Partner (and any assignee of such Partner's interest) expressly agrees
that in the event of his death, that he waives on behalf of himself and
his estate, and he directs the legal representative of his estate and any
person interested therein to waive the furnishing of any inventory,
accounting or appraisal of the assets and any right to an audit or
examination of the books of the Partnership. The General Partner may
assign, sell, or otherwise dispose of all or any portion of its shares of
common stock without any legal effect upon the operation of the
Partnership and no Limited Partner may object to any such transfer.
9.3 LIQUIDATION. Upon the termination and dissolution of the Partnership,
the General Partner (or in the event the dissolution is caused by the
dissolution or the cessation to exist as a legal entity of the General
Partner, voluntary withdrawal, bankruptcy or insolvency, such person as
the Majority in Interest of the Partners may select) shall act as
liquidating trustee and shall take full charge of the Partnership assets
and liabilities. Thereafter, the business and affairs of the Partnership
shall be wound up and all assets shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds
therefrom shall be applied and distributed in the following order: (i)
to the expenses of liquidation and termination and to creditors,
including the General Partner, in order or priority as provided by law,
and (ii) to the Partners pro rata in accordance with his or its Capital
account, less any amount owed by such Partner to the Partnership.
9.4 RETURN OF CAPITAL CONTRIBUTION SOLELY OUT OF ASSETS. A Partner shall look
solely to the properties and assets of the Partnership for the return of
his Capital Contribution, and if the properties and assets of the
Partnership remaining after the payment or discharge of the debts and
liabilities of the Partnership are insufficient to return his Capital
Contribution, he shall have no recourse against the General Partner or any
other Limited Partner for that purpose.
9.5 REDEMPTION. A Partner (including any approved assignee who becomes a
Limited Partner) may withdraw any part or all of his Capital Contribution
and undistributed profits, if any, by requiring the Partnership to redeem
any or all of his Units at the Net Asset Value thereof (such withdrawal
being herein referred to as "Redemption"). Redemption shall be effective
as of the last day of the period established, from time to time, by the
General Partner for Redemptions. Such Redemptions shall be no less often
than quarterly; provided, however, Redemption may be deferred until after
the lapse of six months from the date of purchase of the Units.
9.6 REDEMPTION PROCEDURES. Redemption shall be after all liabilities,
contingent, accrued, reserved in amounts determined by the General Partner
have been deducted and there remains property of the Partnership sufficient
to pay the Net Unit Value as defined in Paragraph 1.3(b). As used herein,
"request for Redemption: shall mean a letter mailed or delivered by a
Partner and received by the General Partner. The General Partner has the
right to establish the redemption notice cut-off date. Currently, the
notice cut-off date is no less than 10 days in advance of the effective
date for which Redemption is requested. Upon Redemption, a Partner shall
receive, on or before the last day of the following month, an amount equal
to the Net Unit Value redeemed as of the date for which the request for
Redemption was received, less accrued expenses and any amount owed by such
Partner to the Partnership. Redemption is subject to a Redemption fee to be
paid by the Partners as provided below; provided, however, no Partner other
than the initial Limited Partner, may redeem any Units until the last day
of the sixth month after the commencement of trading. All Redemption
requests shall be subject to the following:
(a) Under special circumstances including, but not limited to, the inability
to liquidate positions as of such Redemption date or default or delay in
payments due the Partnership from banks, brokers, or other persons, the
Partnership may in turn delay payment to Partners requesting Redemption
of Units of the proportionate part of the Net Unit Value represented by
the sums which are the subject of such delay or default.
(b) The General Partner in its sole discretion may, upon notice to the
Partners, declare additional Redemption dates and may cause the
Partnership to redeem fractions of Units and, prior to registration of
Units for public sale, redeem Units held by Partners who do not hold the
required minimum amount of Units established, from time to time, by the
General Partner.
(c) The General Partner may establish or waive a redemption fee at any time.
Currently, for Partners admitted after the effective date of the Partnership's
prospectus, there is no redemption fee. For Partners admitted prior the
effective date of the Partnership's prospectus, there
is a redemption fee, payable to the Partnership, to be applied first to
pay organization costs and, thereafter, to the benefit of the other
Partners in proportion to their Capital accounts, equal to four percent
(4%) for all Redemptions effective during the first six (6) months after
commencement of trading. Thereafter, there will be a reduction of one
percent (1%) for each six (6) months the investment in the Units
remained invested in the Fund after the initial six months; i.e., 7-12
months a Redemption fee of 3%, 12-18 months 2%, 18-24 months 1%, and,
thereafter, no redemption fee. The General Partner may withdraw from the
Partnership at any time and have return of the proceeds attributable to
its or his Units without any delay or payment of redemption fees.
9.7 SPECIAL REDEMPTION. In the event the Net Unit Value falls to less than
fifty percent (50%) of the Net Asset Value established by the greater of
the initial offering price of one thousand dollars ($1,000), less
commissions and other charges, or such higher value earned after payment of
the incentive fee for the addition of profits, the General Partner shall
immediately suspend all trading, provide immediate notice, in accordance
with the terms of this Agreement, to all Partners of the reduction in Net
Asset Value, and afford all Partners the opportunity for fifteen (15) days
after the date of such notice to Redeem their Units in accordance with the
provisions of Section 9.5 and 9.6, above. No trading shall commence until
after the lapse of such fifteen-day period.
ARTICLE X
Nature of Partner's Liabilities for Claims
10.1 PROSECUTION OF CLAIMS. The General Partner shall arrange to prosecute,
defend, settle or compromise actions at law or in equity or with any self-
regulatory organizations at the expense of the Partnership as such may be
necessary or desirable to enforce, protect, or maintain Partnership
interests.
10.2 SATISFACTION OF CLAIMS. The General Partner shall satisfy any claims
against, errors asserted, or other liability of the Partnership and any
judgment, decree, decision or settlement, first out of any insurance
proceeds available therefor, next, out of Partnership assets and income,
and finally out of the assets and income of the General Partner.
10.3 GENERAL PARTNER DECISION. The decisions made by the General Partner in
regard to the prosecution or settlement of claims, errors, and other
liabilities, will be final and binding without right of appeal or other
legal action by the other Partners or the Partnership.
10.4 EXONERATION, INDEMNIFICATION, AND NO ANTICIPATION OF PAYMENTS. The
General Partner shall not be liable to the Partnership or the Partners for
any failure to comply with its obligations hereunder except for breach of
fiduciary obligation owed to the partnership or negligence on its part in
the management of Partnership affairs or violation of Federal and state
securities laws in connection with the offering of Units for sale. In
addition:
(a) The General Partner will be indemnified for liabilities and expenses
arising from any threatened, pending or completed action or suit in
which it or any affiliate is a party or is threatened to be made a party
by reason of the fact that it is or was the General Partner of the
Partnership (other than an action by the Partnership or a Partner
against the General Partner which is finally resolved in favor of the
Partnership or Partner). The Partnership will indemnify the General
Partner and its affiliates against expenses, including attorney's fees,
judgments and amounts paid in settlement of an action, suit or
proceeding if it has acted in good faith and in a manner it reasonably
believed to be in or not opposed to the best interest of the
Partnership, and provided that its conduct did not constitute
negligence, misconduct or a breach of fiduciary obligations in the
performance of its duty to the Partnership or a violation of the
securities laws. The termination of any action, suit or proceeding by
judgment, order or settlement against the Partnership shall not of
itself create a presumption that the General Partner or any affiliate
did not act in good faith and not in the best interest of the
Partnership; provided, however, any advance of funds to the General
Partner to pay such costs and expenses must be preceded by all of the
following: (i) a determination by the General Partner that, in good
faith, the course of conduct which caused the loss or liability was in
the best interests of the Partnership; and, (ii) the General Partner was
acting on behalf of or performing services for the Partnership; and,
(iii) such asserted claim or liability or loss to the claimant was not
the result of negligence or misconduct by the General Partner; and, (iv)
such indemnification or agreement to hold harmless is recoverable only
out of the assets of the Partnership and not from the Partners.
In any threatened, pending or completed action or suit by or in the
right of the Partnership, to which the General Partner or an Affiliate
was or is a party or is threatened to be made a party, involving an
alleged cause of action by a Partner for damages arising from the
activities of the General Partner in the performance of the sale of
Units or management of the internal affairs of the partnership as
proscribed by this Agreement or by Federal or the State of Delaware or
any other state laws, the Partnership shall indemnify such General
Partner against expenses, including attorneys' fees and costs, actually
and reasonably incurred by such General Partner or Affiliate in
connection with the defense or settlement of such action or suit if it
acted in good faith and in a manner it reasonably believed to be in or
not opposed to the best interests of the Partnership, except that no
indemnification shall be made in respect of any claim, issue or matter
as to which the General Partner shall have been adjudged to be liable
for intentional misconduct, or breach of fiduciary obligations or
violation of securities laws in the performance of its duty to the
Partnership unless and only to the extent that the court or
administrative proceeding in which such action or suit was brought shall
determine upon application, that, despite the adjudication of liability,
in view of all circumstances of the case, the General Partner or
Affiliate is reasonably entitled to indemnification for such expenses as
such court shall deem proper; provided, however, notwithstanding any
other provisions of this Agreement, the Partnership shall advance or pay
the General Partner or any of its Affiliates for legal expenses and
other costs incurred as a result of any legal action which alleges a
breach of the Federal or state securities laws only if the following
conditions are satisfied: (i) the legal action relates to acts or
omissions with respect to the performance of duties or services on
behalf of the Partnership; (ii) the legal action is initiated by a third
party who is not a Limited Partner, or the legal action is initiated by
a Limited Partner and an independent arbitration panel, administrative
law judge, or court of competent jurisdiction specifically approves such
advancement; and, (iii) the General Partner or its Affiliates undertake
to repay the advanced funds to the Partnership, together with the
applicable legal rate of interest thereon, in cases which such party is
not entitled to indemnification under NASAA Guideline II.F.
To the extent that a General Partner or an Affiliate has been successful
on the merits or otherwise in defense of any action, suit or proceeding
referred to above or in defense of any claim, issue or other matter
related to the Partnership or any other Partner or person who applied to
be a Partner, the Partnership shall indemnify such General Partner
against the expenses, including attorneys' fees and costs, actually and
reasonably incurred by it in connection therewith.
(b) The indemnification of a General Partner shall be limited to and
recoverable only out of the assets of the Partnership. Notwithstanding
the foregoing, the Partnership's indemnification of the General Partner
shall be limited to the amount of such loss, liability or damage which
is not otherwise compensated for by insurance carried for the benefit of
the Partnership.
(c) Notwithstanding any provision in this Agreement to the contrary, the
Partnership shall not advance the expenses or pay for any insurance to
pay for the costs of the defense or any liability that is prohibited
from being indemnified pursuant to NASAA Guideline II.F. Specifically,
no indemnification which is the result of negligence or misconduct by
the General Partner or for any allegation of a violation of the Federal
or state securities laws by or against the General Partner, any
broker/dealer or any other party unless there has been a successful
adjudication on the merits of each count involving alleged securities
law violation as to the General Partner or broker/dealer or such other
party; or a court of competent jurisdiction approves a settlement of the
claims against the General Partner or any broker/dealer or any other
party and finds, specifically, that the indemnification of the
settlement and related costs should be made after the court of law has
been made aware that the Securities and Exchange Commission opposes such
indemnification and the position of any applicable state securities
regulatory authority where the Partnership Interests were offered or
sold without the compliance with specific conditions upon such
indemnification and the action covered satisfies the provisions of
Section 10.4 (a) of this Agreement. Any change in the requirements
imposed by the Securities and Exchange Commission and the state
securities administrators in regard to indemnification shall cause a
corresponding change in the right of the General Partner to
indemnification.
(d) The indemnification of the General Partner provided in this Article
shall extend to any employee, agent, attorney, certified public
accountant, or Affiliate of the Partnership and the General Partner.
(e) The Partnership shall indemnify, to the extent of the Partnership
assets, each Partner against any claims of liability asserted against a
Partner solely because he is a Partner in the Partnership.
(f) In the event the Partnership or any Partner is made a party to any
claim, dispute or litigation or otherwise incurs any loss or expense, as
a result of or in connection with any Partner's activities unrelated to
the Partnership business or as a result of an unfounded claim against
the Partnership or any other Partner brought as a result of alleged
actions by said Partner, the Partner which was responsible for the
allegations which caused such loss or expense shall indemnify and
reimburse the Partnership and all other Partners for all loss and
expense incurred, including attorneys' fees and costs.
(g) No creditor of a Partner shall have a right to vote Units. Nor may
any Partner or creditor of a Partner anticipate any principal or income
from the Fund prior to the approval of a Redemption Request or the
payment of a distribution from the Fund.
ARTICLE XI
Power of Attorney
11.1 POWER OF ATTORNEY EXECUTED CONCURRENTLY. Concurrent with the written
acceptance and adoption of the provisions of this Agreement, each Partner
shall execute and deliver to the General Partner, a Power of Attorney
(paragraph 5 of the Subscription Agreement). Said Power of Attorney
irrevocably constitutes and appoints the General Partner as a true and
lawful attorney-in-fact and agent for such Partner with full power and
authority to act in his name and on his behalf in the execution,
acknowledgment and filing of documents, which will include, but shall not
be limited to, the following:
(a) Any certificates and other instruments, including but not limited to, a
Certificate of Limited partnership and amendments thereto and a
certificate of doing business under an assumed name, which the General
Partner deems appropriate to qualify or continue the Partnership as a
limited partnership in the jurisdictions in which the Partnership may
conduct business, so long as such qualifications and continuations are
in accordance with the terms of this Agreement or any amendment hereto,
or which may be required to be filed by the Partnership or the Partners
under the laws of any jurisdiction;
(b) Any other instrument which may be required to be filed by the
Partnership under Federal or any state laws or by any governmental
agency or which the General Partner deems advisable to file; and
(c) Any documents required to effect the continuation of the Partnership,
the admission of the signer of the Power as a Limited Partner or of
others as additional or substituted Partners or Limited Partners, or the
dissolution and termination of the Partnership, provided such
continuation, admission, dissolution or termination is pursuant to the
terms of this Agreement.
11.2 EFFECT OF POWER OF ATTORNEY. The Power of Attorney concurrently granted
by each Partner to the General Partner is a special Power of Attorney
coupled with an interest, is irrevocable, and shall survive the death or
legal incapacity of the Partner; and may be exercised by the General
Partner for each Partner by a facsimile signature of one of its officers or
by listing all of the Partners executing any instrument with a single
signature of one of its officers acting as attorney-in-fact for all of
them; and shall survive the delivery of an assignment by a Partner of the
whole or any portion of his interest in the Partnership; except that where
the assignee thereof has been approved by the General Partner for admission
to the Partnership as a substituted partner, the Power of Attorney shall
survive the delivery of such assignment for the sole purpose of enabling
the General Partner to execute, acknowledge and file an instrument
necessary to effect such substitution.
11.3 FURTHER ASSURANCES. Upon request, each Limited Partner agrees to execute
and deliver to the Partnership, within thirty (30) days after receipt of a
written request from the General Partner, a separate form of power of
attorney granting the same powers described above; and such other further
statements of interest, holdings, designations, powers of attorney and
other instruments as the General Partner deems necessary or desirable.
ARTICLE XII
Miscellaneous Provisions
12.1 NOTICES. Notices, requests, reports, payments or other communications
required to be given or made hereunder shall be in writing and shall be
deemed to be delivered when properly addressed and posted by United States
registered or certified mail or delivered by independent courier which
provides an record of receipt, postage or delivery fees prepaid, properly
addressed to the party being given such notice at its last known address.
Addresses shown on the Schedule of Limited Partners records of the
Partnership shall be considered the last known address of each said party
unless the General Partner is otherwise notified in writing.
12.2 NATURE OF INTEREST OF PARTNERS. The interest of each Partner in the
Partnership is personal property. No Partner may anticipate the
distribution or redemption of principal or income from the Partnership and
no assignment to secure the position of a lender to a Partner shall be
valid without the express written consent of the General Partner.
12.3 GOVERNING LAW. This Agreement shall be construed in accordance with and
governed in all respects by the laws of the State of Delaware. All
Partners agree to consent to the jurisdiction and to bring all actions for
claims related to the Partnership and the sale of the Units in the State
and County of the principal office of the Partnership as it is established,
from time to time, by the General Partner. Currently, the principal office
of the Partnership is located in Kent County, Delaware.
12.4 SUCCESSORS IN INTEREST. This Agreement shall be binding on and inure to
the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective heirs, executors, administrators, personal
representatives, successors and assigns.
12.5 INTEGRATION. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
and contemporaneous agreements and understandings of such parties in
connection herewith. Any amendment or supplement made hereto must be in
writing.
12.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts. In such event, each counterpart shall constitute an original
and all such counterparts shall constitute one agreement. The addition of
Limited Partners pursuant to the power of attorney granted to the General
Partner shall not be deemed amendments to alter the rights of the other
Partners under this Agreement.
12.7 SEVERABILITY. Any provision of this Agreement which is invalid, illegal,
or unenforceable in any respect in any jurisdiction shall be, as to such
jurisdiction, ineffective to the extent of such invalidity, illegality or
unenforceability. The remaining provisions hereof in such jurisdiction
shall be and remain effective. Any such invalidity, illegality or
unenforceability in any jurisdiction shall not invalidate or in any way
effect the validity, legality or enforceability of such provision or the
remainder of this Agreement in any other jurisdiction.
12.8 WAIVERS. The failure of any Partner to seek redress for violation of or
to insist upon the strict performance of any covenant or condition of this
agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
12.9 HEADINGS. The headings in this Agreement are inserted for convenience
and identification only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any
provision hereof.
12.10 RIGHTS AND REMEDIES CUMULATIVE. This rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by
any Partner shall not preclude or waive his right to use addition to any
other rights such Partner may have by law, statute, ordinance or
otherwise.
12.11 WAIVER OF RIGHT TO PARTITION. Each of the Partners irrevocably waives,
during the term of the Partnership, any right that it may have to maintain
any action for partition with respect to the property and assets of the
Partnership.
12.12 INTEREST OF CERTAIN SECURED CREDITORS. No creditor who makes
nonrecourse loan to the Partnership shall have or acquire at any time as a
result of making the loan, any direct or indirect interest in the profits,
Capital, or property of the Partnership other than as a secured creditor.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
Corporate General Partner:
BELMONT CAPITAL MANAGEMENT, INCORPORATED
By: s/ Michael P. Pacult
Michael P. Pacult
President
Other General Partner:
By: s/ Michael P. Pacult
Michael P. Pacult
Agent for Limited Partners:
Belmont Capital Management, Inc.
By: s/ Michael P. Pacult
Michael P. Pacult
President
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EXHIBIT B TO BROMWELL FINANCIAL FUND DISCLOSURE DOCUMENT
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
REQUEST FOR REDEMPTION
To: Belmont Capital Management, Inc.
General Partner ____________________________
5916 N. 300 West Our Social Security Number or
P. O. Drawer C Taxpayer ID Number
Fremont, IN 46737
Dear General Partner:
The undersigned hereby requests redemption ("Redemption"), as defined in
and subject to all the terms and conditions disclosed in the Offering Circular
(the "Prospectus") delivered to the undersigned at the time of our purchase of
limited partnership interests (the "Units") in Bromwell Financial Fund,
Limited Partnership, (the "Fund"), of _______________Units (insert the number
of Units to be Redeemed). This Redemption request, once approved and accepted
by you as General Partner, will be at the Net Asset Value per Unit, as
described in the Prospectus, as of the close of business at the end of the
month following such approval.
The undersigned hereby represents and warrants that the undersigned is
the true, lawful and beneficial owner of the Units to which this Request
relates with full power and authority to request Redemption of such Units.
Such Units are not subject to any pledge or otherwise encumbered.
United States Taxable Limited Partners Only - Under penalty of perjury, the
undersigned hereby certifies that the Social Security Number or Taxpayer ID
Number indicated on this Request for Redemption is the undersigned's true,
cared and complete Social Security Number or Taxpayer ID Number and that the
undersigned is not subject to backup withholding under the provisions of
section 3406(a)(1)(C) of the Internal Revenue Code.
Non United States Limited Partners Only - Under penalty of perjury, the
undersigned hereby certifies that (a) the undersigned is not a citizen or
resident of the United States or (b) (in the case of an investor which is not
an individual) the investor is not a United States corporation, partnership,
estate or trust.
SIGNATURE(S) MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED
Please forward redemption funds by mail to the undersigned at:
___________________________________________________________________________
Name Street City, State and Zip Code
Entity Limited Partner Individual Limited Partners(s)
__________________________________ _________________________________
(Name of Entity) (Signature of Limited Partner)
By: _______________________________ _________________________________
(Authorized corporate officer, (Signature of Limited Partner)
partner, custodian or trustee)
_______________________________
(Title)
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EXHIBIT C TO BROMWELL FINANCIAL FUND DISCLOSURE DOCUMENT
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
SUBSCRIPTION REQUIREMENTS
By executing the Subscription Agreement and Power of Attorney for Bromwell
Financial Fund Limited Partnership (the "Fund"), each purchaser ("Purchaser") of
Limited Partnership Interests (the "Units") in the Partnership irrevocably
subscribes for Units at a price equal to the Net Asset Value per Unit as of the
end of the month in which the subscription is accepted as described in the
Partnership's Offering Circular dated __________, 2004, (the "Prospectus"). The
minimum subscription is $25,000, however, it may be lowered to not less than
$5,000 by the General Partner; additional Units may be purchased in multiples of
$1,000. Subscriptions must be accompanied by a check in the full amount of the
subscription and made payable to "Escrow Account for Bromwell.
Purchaser is also delivering to the Selling Agent an executed Subscription
Agreement and Power of Attorney (Exhibit D to the Prospectus). Upon acceptance
of Purchaser's Subscription Agreement and Power of Attorney Purchaser agrees to
contribute Purchaser's subscription to the Partnership and to be bound by the
terms of the Partnership's Limited Partnership Agreement, attached as Exhibit A
to the Prospectus. Purchaser agrees to reimburse the Partnership and Belmont
Capital Management, Incorporated (the "General Partner") for any expense or
loss incurred as a result of the cancellation of Purchaser's Units due to a
failure of Purchaser to deliver good funds in the amount of the subscription
price. By execution of the Subscription Agreement and Power of Attorney,
Purchaser shall be deemed to have executed the Limited Partnership Agreement.
As an inducement to the General Partner to accept this subscription,
Purchaser (for the Purchaser and, if Purchaser is an entity, on behalf of and
with respect to each of Purchaser's shareholders, partners or beneficiaries), by
executing and delivering Purchaser's Subscription Agreement and Power of
Attorney, represents and warrants to the General Partner, the Commodity Broker
and the Selling Agent who solicited Purchaser's subscription and the Fund, as
follows:
(a) Purchaser is of legal age to execute the Subscription Agreement
and Power of Attorney and is legally competent to do so. Purchaser
acknowledges that Purchaser has received a copy of the Prospectus,
including the Limited Partnership Agreement, prior to subscribing for
Units.
(b) All information that Purchaser has heretofore furnished to the
General Partner or that is set forth in the Subscription Agreement and
Power of Attorney submitted by Purchaser is correct and complete as of the
date of such Subscription Agreement and Power of Attorney, and if there
should be any change in such information prior to acceptance of Purchaser's
subscription, Purchaser will immediately furnish such revised or corrected
information to the General Partner.
(c) Unless (d) or (e) below is applicable, Purchaser's subscription is
made with Purchaser's funds for Purchaser's own account and not as trustee,
custodian or nominee for another.
(d) The subscription, if made as custodian for a minor, is a gift
Purchaser has made to such minor and is not made with such minor's funds
or, if not a gift, the representations as to net worth and annual income
set forth below apply only to such minor.
(e) If Purchaser is subscribing in a representative capacity,
Purchaser has full power and authority to purchase the Units and enter and
be bound by the Subscription Agreement and Power of Attorney on behalf of
the entity for which he is purchasing the Units, and such entity has full
right and power to purchase such Units and enter and be bound by the
Subscription Agreement and Power of Attorney and become a Limited Partner
pursuant to the Limited Partnership Agreement which is attached to the
Prospectus as Exhibit A.
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EXHIBIT D TO BROMWELL FINANCIAL FUND DISCLOSURE DOCUMENT
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
UNITS OF LIMITED PARTNERSHIP INTEREST
SUBSCRIPTION INSTRUCTIONS
Any person considering subscribing for Units should carefully read and
review the Prospectus.
The Units are speculative and involve a high degree of risk. No person
may invest more than 10% of his or her liquid net worth (exclusive of home,
furnishings and automobiles) in the Partnership. No entity-and, in
particular, no ERISA plan-may invest more than 10% of its liquid net worth
(readily marketable securities) in the Partnership. If a purchaser is
allowed to purchase less than $25,000 in Units, then the purchaser must have
a minimum annual gross income of $45,000 and a minimum net worth of $45,000
or, in the alternative, a minimum net worth of $150,000.
A Subscription Agreement and Power of Attorney Signature Page (the
"Signature Page") is attached to these Subscription Instructions and the
following Subscription Agreement and Power of Attorney. The Signature Page is
the document which you must execute if you wish to subscribe for Units. One
copy of such Signature Page should be retained by you for your records and
the others delivered to your Registered Representative.
FILL IN ALL OF THE INFORMATION ON THE ATTACHED SIGNATURE PAGE, USING
BLACK INK ONLY, AS FOLLOWS
Item 1 - Enter the dollar amount (no cents) of the purchase.
Items 2 -7 - Enter the Social Security Number or Taxpayer ID
Number and check the appropriate box to indicate the type of individual
ownership desired or of the entity that is subscribing. In the case of joint
ownership, either Social Security Number may be used.
The Signature Page is self-explanatory for most ownership types;
however, the following specific instructions are provided for certain of the
ownership types identified on the Signature Page:
Trusts-Enter the trust's name on Line 3 and the trustee's name on Line
4, followed by "Ttee." If applicable, use Line 7 also for the custodian's
name. Be sure to furnish the Taxpayer ID Number of the trust.
Custodian Under Uniform Gifts to Minors Act-Complete Line 3 with the
name of minor followed by "UGMA." On Line 7, enter the custodian's name
followed by "Custodian." Be sure to furnish the minor's Social Security
Number.
Partnership or Corporation-The partnership's or corporation's name is
required on Line 4. Enter a partner's or officer's name on Line 4. Be sure to
furnish the Taxpayer ID Number of the partnership or corporation. A
subscriber who is not an individual must provide a copy of documents
evidencing the authority of such entity to invest in the Partnership.
Item 8 - The investor(s) must execute the Subscription
Agreement and Power of Attorney Signature Page and review the representations
relating to backup withholding tax or non-resident alien status underneath
the signature and telephone number lines in Item 8.
Item 9 - Registered Representative must complete.
The Selling Agent's copy of the Subscription Agreement and Power of Attorney
Signature Page may be required to be retained in the Branch Office.
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
UNITS OF LIMITED PARTNERSHIP INTEREST
BY EXECUTING THIS SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
SUBSCRIBERS ARE NOT WAIVING ANY RIGHTS UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934
SUBSCRIPTION AGREEMENT AND
POWER OF ATTORNEY
Belmont Capital Management, Inc.
General Partner ________________________________
5916 N. 300 West Social Security Number or
P. O. Drawer C Taxpayer ID Number
Fremont, IN 46737
Dear General Partner:
1. Subscription For Units. I hereby subscribe for the number of Limited
Partnership Units ("Units") in Bromwell Financial Fund, Limited Partnership
(the "Fund") set forth below (minimum $25,000) in the Subscription Agreement
and Power of Attorney Signature Page, at a price per Unit as set forth in the
Fund disclosure document dated ___________, 2004, (the "Prospectus"). I have
completed and executed a Subscription Agreement and Power of Attorney
Signature Page in the form attached hereto as Exhibit "D", and delivered the
executed Subscription Documents to the Sales Agent and executed a check made
payable to "Escrow Account for Bromwell" to be delivered by the Sales Agent
to the Escrow Agent within 24 hours after receipt for deposit to the Escrow
Account. The General Partner may, in its sole and absolute discretion,
accept or reject this subscription, in whole or in part. If this subscription
is accepted, I understand subscribers will earn additional Units in lieu of
interest earned on the undersigned's subscription during any period of time,
if any, such subscription is held in escrow. If this subscription is
rejected, all funds remitted by the undersigned will be returned, together
with any interest earned from escrow, if any.
2. Representations and Warranties of Subscriber. I have received, read, and
understand the prospectus dated _______________, 2004. I understand that by
submitting this Subscription Agreement and Power of Attorney I am making the
representations and warranties set forth in "Exhibit C - Subscription
Requirements" contained in the Prospectus, including, without limitation,
representations and warranties relating to my net worth and annual income.
Additionally, I understand that my broker/dealer account application will be
forwarded to the General Partner to review my suitability for this investment.
3. Power of Attorney. In connection with my acceptance of an Interest in the
Partnership, I do hereby irrevocably constitute and appoint the General
Partner, and its successors and assigns, as my true and lawful Attorney-in-
Fact, with full power of substitution, in my name, place and stead, to (i)
file, prosecute, defend, settle or compromise litigation, claims or
arbitration on behalf of the Partnership; and, (ii) make, execute, sign,
acknowledge, swear to, deliver, record and file any documents or instruments
which may be considered necessary or desirable by the General Partner to
carry out fully the provisions of the Limited Partnership Agreement of the
Partnership, which is attached as Exhibit A to the Prospectus, including,
without limitation, the execution of the said Agreement itself and by
effecting all amendments permitted by the terms thereof. The Power of
Attorney granted hereby shall be deemed to be coupled with an interest and
shall be irrevocable and shall survive, and shall not be affected by, my
subsequent death, incapacity, disability, insolvency or dissolution or any
delivery by me of an assignment of the whole or any portion of my interest in
the Partnership.
4. Irrevocability; Governing Law. You may revoke your subscription for five
business days after you send it to us (the "Revocation Period". After the
lapse of five business days from submission, your subscription will be
irrevocable. The Units offered to you are subject to prior sale. I hereby
acknowledge and agree that after the Revocation Period I am not entitled to
cancel, terminate or revoke this subscription or any of my agreements
hereunder and that this subscription and such agreements shall survive my
death or disability. This Subscription Agreement and Power of Attorney shall
be governed by and interpreted in accordance with the laws of the State of
Delaware.
5. Suitability and Acceptance of Risks. In addition to the suitability
requirements set forth in Exhibit C, I represent and warrant to the General
Partner and Selling Agent that (i) I have the capacity of understanding the
fundamental aspects of the Partnership (or, if I do not have such fundamental
understanding, I have so advised the Selling Agent of such fact); and, (ii) I
understand the fundamental risks and possible financial hazards of an
investment in the Partnership (disclosed in the Prospectus under "Risk
Factors" identified on the face page, in the Summary, and described in the
Prospectus at page 5), including, but not limited to, the lack of liquidity
of my investment in the Partnership, the management and control by the
General Partner, and the tax consequences of the investment.
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
Units of Limited Partnership Interests
Subscription Agreement and Power of Attorney
Signature Page
The investor named below, by execution and delivery of this Subscription
Agreement and Power of Attorney, by payment of the purchase price for Limited
Partnership Interests (the "Units") in Bromwell Financial Fund, Limited
Partnership (the "Partnership"), and by enclosing a check payable to "Escrow
Account for Bromwell", hereby subscribes for the purchase of Units, at a price
per Unit as set forth in the Prospectus.
The named investor further, by signature below, acknowledges (i) receipt and
that he has read the Prospectus of the Partnership dated ___________, 2004;
(ii) that such Prospectus includes the Partnership's Limited Partnership
Agreement, the Subscription Requirements, and the Subscription Agreement and
Power of Attorney set forth therein, the terms of which govern the investment
in the Units being subscribed for hereby; (iii) that this subscription may be
revoked within five business days after submission; and, (iv) after the lapse
of five business days from submission, this subscription will be irrevocable.
By my signature below, I represent that I satisfy the requirements relating
to net worth and annual income as set forth in Exhibit C to the Prospectus.
1) Total $ Amount __________________ (minimum of $25,000, unless lowered to
less than $25,000 but not less than $5,000 by the General Partner; $1,000
minimum for investors making an additional investment)
2) Social Security Number _____-___-_____
Taxpayer ID # _____-___-_____
Taxable Investors (check one):
O Individual Ownership
O Trust other than a Grantor or Revocable Trust
O Joint Tenants with Right of Survivorship
O Estate
O UGMA/UTMA (Minor)
O Tenants in Common
O Community Property
O Partnership
O Corporation
O Grantor or Other Revocable Trust
Non-Taxable Investors (check one):
O IRA
O Profit Sharing
O IRA Rollover
O Defined Benefit
O Pension
O Other (specify)
O SEP
3) Investor's Name _________________________________________________________
4) _________________________________________________________________________
Additional Information (for Estates, Trusts, Partnerships and Corporations)
5) Resident Address of Investor
_________________________________________________________________________
Street (P.O. Box not acceptable) City State Zip Code
6) Mailing Address(if different)
_________________________________________________________________________
Street City State Zip Code
7) Custodian Name and Mailing Address
_________________________________________________________________________
Name Street (P.O. Box not acceptable) City State Zip Code
SIGNATURE(S) - DO NOT SIGN WITHOUT FAMILIARIZING YOURSELF WITH THE
INFORMATION IN THE PROSPECTUS, INCLUDING: (I) THE FUNDAMENTAL
RISKS AND FINANCIAL HAZARDS OF THIS INVESTMENT, INCLUDING THE RISK OF LOSING
YOUR ENTIRE INVESTMENT; (II) THAT THE PARTNERSHIP IS THE FIRST CLIENT ACCOUNT
TO TRADE IN THE BROMWELL FINANCIAL FUND PORTFOLIO; (III) THE PARTNERSHIP'S
SUBSTANTIAL CHARGES; (IV) THE PARTNERSHIP'S HIGHLY LEVERAGED TRADING
ACTIVITIES; (V) THE LACK OF LIQUIDITY OF THE UNITS; (VI) THE EXISTENCE OF
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST IN THE STRUCTURE AND OPERATION OF
THE PARTNERSHIP; (VII) THAT UNITHOLDERS MAY NOT TAKE PART IN THE MANAGEMENT
OF THE PARTNERSHIP; AND (VIII) THE TAX CONSEQUENCES OF THE PARTNERSHIP.
8) INVESTOR(S) MUST SIGN
X_________________________________________________________
Signature of Investor Date Telephone No.
X_________________________________________________________
Signature of Joint Investor (if any) Date
Executing and delivering this Subscription Agreement and Power of Attorney
shall in no respect be deemed to constitute a waiver of any rights under the
Securities Act of 1933 or under the Securities Exchange Act of 1934.
UNITED STATES INVESTORS ONLY
I have checked the following box if I am subject to backup withholding under
the provisions of Section 3406(a)(1)(C) of the Internal Revenue Code: __.
Under the penalties of perjury, by signature above I hereby certify that the
Social Security Number or Taxpayer ID Number set forth in Item 2 above is my
true, correct and complete Social Security Number of Taxpayer ID Number and
that the information given in the immediately preceding sentence is true,
correct and complete.
NON-UNITED STATES INVESTORS ONLY
Under the penalties of perjury, by signature above, I hereby certify that (a)
I am not a citizen or resident of the United States or (b) (in the case of an
investor which is not an individual) the investor is not a United States
corporation, partnership, estate or trust: __.
9) REGISTERED REPRESENTATIVE MUST SIGN
I hereby certify that I have informed the investor of all pertinent facts
relating to the: risks; tax consequences; liquidity and marketability;
management; and control of the Managing Owner with respect to an investment
in the Units, as set forth in the Prospectus and Amendment. I have also
informed the investor of the unlikelihood of a public trading market
developing for the Units. I do not have discretionary authority over the
account of the investor.
I have reasonable grounds to believe, based on information obtained from the
investor concerning his/her investment objectives, other investments,
financial situation and needs and any other information known by me, that an
investment in the Partnership is suitable for such investor in light of
his/her financial position, net worth and other suitability characteristics.
The Registered Representative MUST sign below in order to substantiate
compliance with Article III, Section 34 of the NASD's Rules of Fair Practice.
X__________________________________________________________
Registered Representative Signature Date
X__________________________________________________________
Office Manager Signature Date
(if required by Selling Agent procedures)
10) REGISTERED REPRESENTATIVE
Name: Shira Del Pacult
Address: 5916 N. 300 West
Fremont, IN 46737
Tel. Number: (260) 833-1306
11) SELLING AGENT
Name: Futures Investment Company
Address: 5916 N. 300 West
Fremont, IN 46737
Tel. Number: (260) 833-1306
*******************************************************************************
EXHIBIT E TO BROMWELL FINANCIAL FUND DISCLOSURE DOCUMENT
AMENDED AND FULLY RESTATED ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of
the 23rd day of December 2003, by and among Futures Investment Company, an
Illinois corporation (the "Broker Dealer"), Bromwell Financial Fund, Limited
Partnership, a Delaware Limited Partnership (the "Partnership") and Belmont
Capital Management, Inc., a Delaware Corporation, the ("Escrow Agent") for the
benefit of subscribers to hold the subscription proceeds in escrow during the
time between when their check is cleared and they are admitted as Limited
Partners to the Partnership.
A. WHEREAS, the Partnership, through the Broker Dealer, presently offers to
sell to subscribers limited partnership interests (the "Securities" or
"Units") in the Partnership at an offering price equal to the Net Asset Value
per Unit computed after the close of business on the last business day of each
month until a total of $7,000,000 in value of Units are sold (the "Offering");
and
B. WHEREAS, the Partnership and the Broker Dealer desire to establish an
escrow account with the General Partner acting as the Escrow Agent in which
checks or wire transfer of funds will be received from subscribers for sales
which will be deposited and cleared to be held until the close of business at
the end of that month at which time the deposits will be delivered to the
Partnership and the investors will be admitted as Limited Partners to the
Partnership; and
C. WHEREAS, the escrow is to exist for the benefit of investors during the
period between receipt of their investment and their acceptance into the
Partnership until the Offering is sold or is withdrawn or terminates,
whichever occurs first, (the "Escrow Period"); and,
D. WHEREAS, Escrow Agent desires to serve as escrow agent, all in
accordance with the terms and conditions set forth herein.
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree, as
follows:
1. Establishment of Escrow Account. Within ten (10) days following the
signing of this Escrow Agreement, the parties shall establish an interest-
bearing escrow account with the Escrow Agent, which escrow account shall be
entitled the "Escrow Account for Bromwell" (the "Escrow Account"). During the
Escrow Period, the Broker Dealer, through its registered representatives, will
instruct subscribers, pursuant to the disclosures made in the Subscription
Agreement to the Disclosure Document, Prospectus, or Offering Circular, as the
case may be, and the Broker/Dealer Selling Agreement, to make checks for
subscriptions payable to "Escrow Account for Bromwell". Any checks received
that are made payable other than to the Escrow Account shall be returned to
the subscriber by the Broker Dealer.
2. Escrow Period. The escrow period shall begin with the commencement of
the Offering and shall terminate upon the earlier to occur of the following
dates (the "Escrow Period"):
A. the date upon which the General Partner confirms that a total in face
amount of $7,000,000 in Units have been sold and accepted by the Partnership;
B. The expiration of nine (9) months from the date of the Offering
Circular, or any extension thereof, utilized by the Partnership in offering
the Securities; or
C. The date upon which the General Partner has elected to terminate the
Offering.
3. Deposits into the Escrow Account. The Partnership and the Broker Dealer
agree that they shall promptly review the subscription documents to determine
the suitability of the subscriber for admission to the Partnership and reject
or accept and transmit (and in all events by 12:00 noon of the next business
day after receipt by them) all monies received from subscribers for the
payment of Securities to the Escrow Agent for deposit in the Escrow Account
together with a written account of each sale, which account shall set forth,
among other things, the subscriber's name and address, the number of
Securities purchased, the amount paid therefor, and whether the consideration
received was in the form of a check, draft, or money order. All monies so
deposited in the Escrow Account are hereinafter referred to as the "Escrow
Funds".
4. Collection Procedure. The Escrow Agent is hereby authorized to forward
each check, draft, or money order for collection and, upon collection of the
proceeds of such instrument, deposit the collected proceeds in the Escrow
Account. As an alternative, the Escrow Agent may telephone the bank on which
the instrument is drawn to confirm that it has been paid.
Any instrument returned unpaid to the Escrow Agent shall be returned to
the Broker Dealer. In such cases, the Escrow Agent will promptly notify the
Partnership of such return.
If, for any reason, the Partnership elects to reject any subscription
for which the Escrow Agent has already collected funds, the Escrow Agent shall
promptly issue a refund check to the rejected subscriber. If the Partnership
rejects any subscription for which the Escrow Agent has not yet collected
funds but has submitted the subscriber's check for collection, the Escrow
Agent shall promptly issue a check in the amount of the subscriber's check to
the rejected subscriber after the Escrow Agent has cleared such funds. If the
Escrow Agent has not yet submitted a rejected subscriber's check for
collection, the Escrow Agent shall promptly return the subscriber's check
directly to the subscriber.
Only collected funds will be released from the Escrow Account to the
Partnership. "Collected funds" shall mean all funds received by the Escrow
Agent which have cleared normal banking channels and are in the form of good
funds on deposit.
During the Escrow Period, the Partnership and the Broker Dealer are
aware and they understand and agree that they are not entitled to any funds
received into escrow and no amounts deposited in the Escrow Account shall
become the property of the Partnership, the Broker Dealer, or any other entity
or person, or be subject to the debts of the Partnership, the Broker Dealer,
or any other entity or person.
5. Investment of Escrow Funds. The Escrow Agent may invest the Escrow
Funds only in such accounts or investments as the Partnership may specify by
written notice from a list of investments made available by the Escrow Agent
for such purpose. The Partnership may only specify and the Escrow Agent may
only make available investments in (1) bank accounts, (2) bank money market
accounts, (3) short-term certificates of deposit issued by a bank, or (4)
short-term securities issued or guaranteed by the U.S. Government. Upon
release of the subscription amount from escrow, the interest will either be
used to purchase additional Units or returned to the subscriber, as the case
may be. The Partnership shall be solely responsible for the allocation of the
interest earned on the deposits to the subscribers.
6. Compensation of Escrow Agent. The Escrow Agent will collect no fees for
performing its duties.
7. Disbursements from the Escrow Account.
A. The Escrow Agent shall pay the escrow funds in a written statement as of
the close of business each month which shall identify the amount to be paid to
the Broker Dealer for commissions, the amount to be paid to the Partnership to
purchase Units, the amount to be returned to subscribers, if any, and the
amount to be retained in the Escrow Account. The Escrow Agent will be
responsible for the payments pursuant to the written direction, only. It will
have no responsibility for the application of the funds paid. None of the
money on deposit in the Escrow Account may be anticipated or made available to
pay the creditors of the Partnership or its general partners.
B. In the event the Escrow Agent is directed to return any portion of the
escrow account to a subscriber, such return will be without deduction,
penalty, or expense to the subscriber, along with each subscriber's pro-rata
share of any interest earned on the Escrow Account at the rate established by
the Escrow Agent, and the Escrow Agent shall notify the Partnership and the
Broker Dealer of the completion of the return and the amount paid. The
purchase money returned to each subscriber shall be free and clear of any and
all claims of the Partnership, the Broker Dealer, and the Escrow Agent or any
of their creditors.
8. Obligations of Escrow Agent. Escrow Agent shall be obligated only for
the performance of such duties as are specifically set forth in this
Agreement, and no additional duties shall be inferred herefrom or implied
hereby. The Escrow Agent may rely upon and shall be protected in acting or
refraining from acting on any instrument believed by it to be genuine and to
have been signed or presented by the proper party or parties.
9. Controversies. Should any controversy arise among the undersigned with
respect to this Agreement, or with respect to the right to receive all or part
of the Escrow Funds, including accrued interest thereon, Escrow Agent shall
have the right to institute an interpleader action in any court of competent
jurisdiction in Steuben County, IN, to determine the rights of the parties.
Should such an action be instituted, or should the General Partner acting as
Escrow Agent become involved in litigation in any manner on account of this
Agreement or the Escrow Funds (not involving willful misconduct, fraud, gross
negligence or bad faith on the part of Escrow Agent), the Partnership shall
either assume the defense or pay to Escrow Agent the reasonable attorneys'
fees incurred by Escrow Agent, whichever the Partnership shall elect, together
with any other expenses, losses, costs and damages suffered by Escrow Agent,
in connection with and resulting from such litigation.
10. Limit of Escrow Agent Liability. The duties of Escrow Agent are purely
ministerial in nature, and that Escrow Agent shall incur no liability
whatsoever under this Agreement, except for acts or omissions of the Escrow
Agent involving or constituting willful misconduct, fraud, gross negligence or
bad faith.
11. Resignation. Escrow Agent may, at any time, resign hereunder by giving
written notice of its intent to resign to the other parties hereto, at their
respective addresses set forth below, at least ten (10) days prior to the date
specified for such resignation to take effect, and upon the effective date of
such resignation the Escrow Funds, including all accrued interest, shall be
delivered by Escrow Agent to the person designated in writing by the Broker
Dealer and the Partnership, whereupon all of Escrow Agent's obligations
hereunder shall cease and terminate (except as hereinafter provided in this
paragraph). If no such person shall have been designated prior to the
effective date of such resignation, all obligations of Escrow Agent hereunder
shall, nevertheless, cease and terminate (except as hereinafter provided in
this paragraph). Escrow Agent's sole responsibility thereafter shall be to
hold the Escrow Funds until such time as the Escrow Agent delivers the Escrow
Funds and accrued interest to a person designated by the Partnership and the
Broker Dealer or to the person designated by a court of competent
jurisdiction. Notwithstanding the foregoing, nothing in this paragraph
releases Escrow Agent or relieves it of any of its obligations that existed
prior to the effective date of Escrow Agent's resignation, including, without
limitation, liability for willful misconduct, fraud, gross negligence or bad
faith.
12. Indemnification. The Broker Dealer and the Partnership agree to
indemnify, defend and hold Escrow Agent harmless from and against any and all
loss, damage, tax, liability and expense that may be incurred by Escrow Agent
and arising out of or in connection with its acceptance of appointment as
escrow agent hereunder, including reasonable attorneys' fees and other legal
costs and expenses of defending itself against any claim or liability in
connection with its performance hereunder, except in the case of willful
misconduct, fraud, gross negligence or bad faith on the part of Escrow Agent.
The Partnership, and not the Broker Dealer, shall pay for the cost of
any indemnification of the Escrow Agent pursuant to this Agreement. The
provisions of this paragraph shall survive the termination of this Agreement.
Escrow Agent may consult with and rely on its attorneys with respect to
any dispute not assumed or defended by the Partnership and the indemnification
referred in this paragraph 12 shall include all reasonable and necessary
attorneys' fees of Escrow Agent in connection with such consultation.
13. Notices. Any notice or demand desired or required to be given hereunder
shall be in writing and deemed given when personally delivered (including
delivery by commercial overnight courier service), or when deposited in the
United States mail, postage prepaid, sent certified or registered, and
addressed as follows:
(a) If to the Partnership, to:
Bromwell Financial Fund, Limited Partnership, 5916 N. 300 West, Fremont,
IN 46737 with a copy to William S. Scott of The Scott Law Firm, P.A., 940
Northeast 79th Street, Suite A, Miami, FL 33138.
(b) If to the Broker Dealer, to:
Futures Investment Company, 5916 N. 300 West, P. O. Box C, Fremont, IN
46737, Attn.: Compliance Department
(c) If to the Escrow Agent/General Partner, to:
Belmont Capital Management, Inc., 5916 N. 300 West, P. O. Box C, Fremont, IN
46737
or to such other address or person as hereafter shall be designated in writing
by the party providing notice.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
15. Titles or Captions. The titles or captions of sections and paragraphs in
this Agreement are provided for convenience of reference only and should not
be considered a part hereof for purposes of interpreting or applying this
Agreement, and such titles or captions do not define, limit, extend, explain
or describe the scope or extent of this Agreement or any of its terms or
conditions.
16. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original but all of which
together shall constitute one and the same instrument, and in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
17. Amendments. No amendment, modification, supplement, termination or
waiver of or to any provision of this Agreement nor consent to any departure
therefrom, shall be effective unless the same shall be in writing and signed
by or on behalf of each of the parties to this Agreement.
18. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns.
19. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matters hereof and
supersedes all negotiations, preliminary agreements and all prior or
contemporaneous discussions and understandings of the parties hereto in
connection with the subject matters hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
BROMWELL FINANCIAL FUND, BELMONT CAPITAL MANAGEMENT, INC.
LIMITED PARTNERSHIP
By: Belmont Capital Management, Inc. By: s/ Michael Pacult
The General Partner Mr. Michael Pacult
President
By: s/ Michael Pacult FUTURES INVESTMENT COMPANY
Mr. Michael Pacult
President
By: s/ Michael Pacult
Mr. Michael Pacult
President
*******************************************************************************
EXHIBIT F TO BROMWLL FINANCIAL FUND DISCLOSURE DOCUMENT
BROMWELL INVESTMENT ADVISORY CONTRACT WITH
FALL RIVER CAPITAL MANAGEMENT, INC.
THIS AGREEMENT is made and entered as of this 9th day of February 2004,
between Bromwell Financial Fund, Limited Partnership, (the "Fund") and Fall
River Capital, LLC, a Wisconsin limited liability company, (the "CTA").
WITNESSETH:
In consideration of the deposit by the Fund of equity to Citigroup
Global Markets, Inc. (the "FCM") account number 261-53967 in the name of the
Fund (this account and any other accounts, which may be assigned to the CTA in
the future are collectively hereinafter called the "Account") in the amount of
one million dollars ($1,000,000), or more, and the grant of the power of
attorney on the standard form of the FCM to the CTA to permit the CTA to enter
trades for the Fund in the Account, the parties hereto agree as follows:
1. The Fund shall deposit in the Account with the FCM or some other futures
commission merchant, U.S. funds of up to seven million dollars ($7,000,000),
which the CTA agrees to manage pursuant to the terms of this Agreement.
Subsequent deposits and accumulation of profits in the Account, less
withdrawals and losses, shall also be subject to this Agreement. At its sole
discretion, the Fund may add or withdraw funds at any time from the Account by
written request to the FCM with a copy to the CTA.
2. The CTA will cause futures contracts, and when deemed advisable, options
on futures and forward contracts, to be bought and sold on behalf of the Fund
in the Account. The CTA will have the sole authority to issue all necessary
instructions to effect trading with the FCM for the Account. All such
transactions shall be for the account and risk of the Fund. The CTA agrees to
use its best efforts to exit all futures trades prior to delivery of any
commodity that requires storage or other costs. During the term of this
agreement, the Fund agrees that it will not place orders in the Account
without the prior written consent of the CTA.
3. The CTA's services are not rendered exclusively for the Fund, and the
CTA shall be free to render similar services to others. The General Partner
may change the FCM for the account assigned to the CTA at any time upon
written direction to the FCM and the CTA, and CTA agrees to effect the
transfer and sign the forms necessary to complete such change, provided such
transfer does not conflict with any prior agreements the CTA has with the FCM.
4. A. Until March 1, 2004, Belmont Capital Management, Inc. (the "General
Partner") will charge the Fund a commission of $22 per round turn on domestic
markets. The round turn commission be for entry and exit from all trades, pit
brokerage, exchange, NFA fees and other clearing expenses arising from the
trades placed by the CTA in the account. The round turn commission does not
include delivery or other exchange for physicals or trades made on foreign
exchanges or forward markets account or costs to accept delivery incurred on
trades made on any exchange. Those costs will be at rates to be negotiated by
the Corporate General Partner with the FCM or other party, as the facts
determine, and charged separately, if at all, to the Fund.
B. Commencing March 1, 2004, the General Partner will charge the Fund a
fixed commission of four percent (4%) per year, payable 1/3 of 1% per month,
for trades made on domestic markets. The fixed commission for domestic trades
is for entry and exit from all trades, pit brokerage, exchange, NFA fees and
other clearing expenses arising from the trades placed by the CTA in the
account. The 4% fixed commission does not include trades made on foreign
exchanges or forward markets or costs to accept delivery incurred on trades
made on any exchange. Those costs will be at rates to be negotiated by the
Corporate General Partner with the FCM or other party, as the facts determine,
and charged separately, if at all, to the Fund.
5. The CTA will use its best efforts to obtain an equity run from the FCM
before the opening of business the next trading day. Unless authorized in
writing by the General Partner, the CTA will use only the equity in the
Account assigned to the CTA by the General Partner for margins to hold the
positions taken by the CTA. No equity in the Account assigned to the CTA will
be commingled or margined, for any purpose, with any other account at the FCM.
The General Partner, upon written instruction to the FCM, may terminate, for
any reason, the power of attorney and suspend the trading authority of the CTA
to enter trades with the FCM. In the event of a termination of the power of
attorney, the CTA agrees that the FCM shall accept no further instructions
from the CTA but shall place the Account upon liquidation only to be handled
in written instructions from the General Partner to the FCM.
6. The Fund agrees to execute, from time to time, the Acknowledgment of
Receipt of Disclosure Document from the CTA. By signing, the Fund agrees that
it has received and understands and the CTA represents that it has supplied
the most recent copy of the CTA's Risk Disclosure Document.
7. The Fund agrees to execute the CTA's Managed Account Compensation
Agreement authorizing the CTA to be paid a one percent (1%) annual management
fee, payable monthly, from the Account. In addition to the management fee,
the CTA will be paid an incentive fee of twenty percent (20%), of the New Net
Profit earned each quarter. New Net Profit is determined after deduction of
the fixed commission; i.e., the CTA must earn back the 4% fixed commission
before incentive fees are paid. And, New Net Profit excludes interest earned
on cash and cash equivalents, such as treasury bills. The Fund accountant
will make the incentive fee determination on the close of the last business
day of each quarter and submit his calculations to the CTA and general partner
for approval. Once approved, the invoice for the quarterly incentive fee will
be submitted to the futures commission merchant for payment from the Account.
8. The Fund and the CTA agree that they have properly executed all the
necessary account forms for opening the Account with the FCM; provided,
however, any disputes between the Fund and the CTA will be submitted to
arbitration before a single arbitrator selected by the American Arbitration
Association, not the National Futures Association, and only upon written
agreement of the parties at the time such dispute arises. The terms of this
Agreement will supersede, and in the event of conflicts with any other
agreement, the terms of this Agreement shall control. This Agreement will be
governed by the laws of the State of Illinois and any dispute concerning
arbitration will be resolved by a Federal or State court of competent
jurisdiction located in Chicago, Illinois.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
Bromwell Financial Fund, Limited Partnership Fall River Capital, LLC.
By: Belmont Capital Management, Inc.
s/ Michael Pacult s/ Charles Wright
Michael Pacult Charles Wright
President Chairman
*******************************************************************************
FORM S-1 - Post Effective Amendment No. 8
Registration No. 333-85755
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
(b) The Selling Agreement between Futures Investment Company and the
Registrant contains an indemnification from the General Partner to the effect
that the disclosures in the Prospectus and this Amendment are in compliance
with Rule 10b5 and otherwise true and complete. This indemnification speaks
from the date of the first offering of the Units through the end of the
applicable statute of limitations. The Partnership has assumed no
responsibility for any indemnification to Futures Investment Company and the
General Partner is prohibited by the Partnership Agreement from receiving
indemnification for breach of any securities laws or for reimbursement for
insurance for coverage for any such claims. See Article X, Section 10.4 (b)
and (e).
(d) There are no indemnification agreements which are not contained in the
Limited Partnership Agreement attached as Exhibit A, the Selling Agreement or
the Clearing Agreement.
Item 16. Exhibits and Financial Statement Schedules.
The following documents (unless indicated) are filed herewith and made a part
of this Registration Statement:
(a) Exhibits.
Exhibit
Number Description of Document
(1) - 01 Selling Agreement dated August 1, 1999 among the Partnership, the
General Partner, and Futures Investment Company, the Selling Agent
(2) None
(3) - 01 Articles of Incorporation of the General Partner
(3) - 02 By-Laws of the General Partner
(3) - 03 Board Resolution of General Partner to authorize formation of
Delaware Limited Partnership
(3) - 04 Agreement of Limited Partnership of the Registrant dated
August 1, 1999 (included as Exhibit A to the Prospectus)
(3) - 05 Certificate of Limited Partnership, Designation of Registered Agent,
Certificate of Initial Capital filed with the Delaware Secretary of
State, and Delaware Secretary of State acknowledgment of filing of
Certificate of Limited Partnership
(4) - 01 Agreement of Limited Partnership of the Registrant dated
August 1, 1999 (included as Exhibit A to the Prospectus)
(5) - 01 Opinion of The Scott Law Firm, P.A. relating to the legality of the
Partnership Units.
(6) Not Applicable
(7) Not Applicable
(8) - 01 Opinion of The Scott Law Firm, P.A. with respect to Federal income
tax consequences.
(9) None
(10) - 01 Form of Advisory Agreement between the Partnership and the Commodity
Trading Advisor (included as Exhibit F to the Prospectus)
(10) - 02 Form of New Account Agreement between the Partnership and the
Futures Commission Merchant
(10) - 03 Form of Subscription Agreement and Power of Attorney
(included as Exhibit D to the Prospectus).
(10) - 04 Escrow Agreement among Escrow Agent, Underwriter, and the
Partnership. (included as Exhibit E to the Prospectus).
(10) - 05 Introducing Broker Clearing Agreement by and between Vision Limited
Partnership as Futures Commission Merchant and Futures Investment
Company as Introducing Broker
(11) Not Applicable - start-up business
(12) Not Applicable
(13) Not Required
(14) None
(15) None
(16) Not Applicable
(17) Not Required
(18) Not Required
(19) Not Required
(20) Not Required
(21) None
(22) Not Required
(23) - 01 Consent of Frank L. Sassetti & Co., Certified Public Accountants
(23) - 02 Consent of James Hepner, Certified Public Accountant
(23) - 03 Consent of The Scott Law Firm, P.A.
(23) - 04 Consent of Ansbacher Investment Management, Inc.
(23) - 05 Consent of Futures Investment Company, as Selling Agent
(23) - 06 Consent of Futures Investment Company, as Introducing Broker
(23) - 07 Consent of Star Financial Bank, Angola, Indiana, Escrow Agent
(23) - 08 Consent of Vision Limited Partnership, Futures Commission Merchant
(23) - 09 Consent of ABN AMRO Incorporated
(23) - 10 Consent of Bell Fundamental Futures, LLC
(23) - 11 Consent of Mangin Capital Management, Inc.
(24) None
(25) None
(26) None
(27) Not Applicable
(28) Not Applicable
(99) - 01 Subordinated Loan Agreement for Equity Capital
(99) - 02 Representative's Agreement between Futures Investment Company and
Shira Del Pacult
(b) Financial Statement Schedules.
No Financial Schedules are required to be filed herewith.
Item 17. Undertakings.
(a) (1) The undersigned registrant hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represents a fundamental: change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) The General Partner has provided an indemnification to Futures
Investment Company, the best efforts selling agent. The Partnership (issuer)
has not made any indemnification to Futures Investment Company.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
Registrant including, but not limited to, the General Partner pursuant to the
provisions described in Item 14 above, or otherwise, the Registrant had been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any such action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
*******************************************************************************
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, in the City of
Fremont in the State of Indiana on this 18th of February, 2004, Mr. Michael
Pacult, the individual general partner of the Registrant, signed this
Registration Statement; and Belmont Capital Management, Inc., the corporate
general partner of the Registrant, has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
BELMONT CAPITAL MANAGEMENT, INC. BROMWELL FINANCIAL FUND, L.P.
BY BELMONT CAPITAL MANAGEMENT, INC.
GENERAL PARTNER
By: /s/ Michael Pacult By: /s/ Michael Pacult
MR. MICHAEL PACULT MR. MICHAEL PACULT
PRESIDENT PRESIDENT
BROMWELL FINANCIAL FUND, L.P.
BY MR. MICHAEL PACULT
GENERAL PARTNER
By: /s/ Michael Pacult By: /s/ Michael Pacult
MR. MICHAEL PACULT MR. MICHAEL PACULT
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following person on behalf of Belmont
Capital Management, Inc., General Partner of the Registrant in the capacities
and on the date indicated.
/s/ Michael Pacult
MR. MICHAEL PACULT
PRESIDENT
Date: February 18, 2004
(Being the principal executive officer, the principal financial and accounting
officer and the sole director of Belmont Capital Management, Inc., General
Partner of the Partnership)