As Filed with the Securities and Exchange Commission on June 15, 2012
Registration No. 333-177268
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Pre-Effective Amendment 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)
505 Brookfield Drive
Dover, DE 19901
Telephone: (800) 331-1532
(address and telephone number of registrant's principal executive offices)
c/o Mr. Michael Pacult
Belmont Capital Management, Inc.
5914 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, Ltd.
470 Broadway, Suite 160
Bayonne, NJ 07002
(201) 800-4606
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. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One):
Large Accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [X] Smaller reporting company [ ]
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
Prospectus to Offer
$1,000,000 Minimum / $20,000,000 Maximum of
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 contracts
and options on futures in a diversified portfolio that includes currencies,
interest rates, energy, metals and commodities in both U.S. and global
markets. An independent trading advisor is employed with the primary
objective of the Fund appreciating in value over time. An investment in the
Fund may provide valuable diversification to a traditional portfolio of stocks
and bonds.
Belmont Capital Management, Inc., the general partner, manages the partnership
and 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.
This is a best efforts offering. The selling agent is not required to sell any
specific number or dollar amount of securities but will use its best efforts
to sell the securities offered. Compensation to the selling agent will be a
6% selling commission of the gross subscription amount in addition to $2,000
in legal fees the partnership has paid associated with the review of this
offering by FINRA. You must purchase at least $25,000 in partnership
interests, though the general partner may reduce this to no less than $5,000.
The initial net asset value per unit will be fixed at $637.74 until the
minimum is sold. 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 after twelve months by
redeeming your partnership interests. We will be treated as a partnership for
Federal income tax purposes, and you will receive a Schedule K-1 that reports
your allocable portion of tax items.
All subscriptions received will be placed in a depository account maintained
by the general partner at Star Financial Bank, Angola, IN until the minimum,
$1,000,000 is sold. Neither the general partner nor its affiliates may
purchase partnership interests to meet the minimum. The offering will
terminate one year from the date of this prospectus, June __, 2012, if the
minimum is not sold, or upon three years from the date of this prospectus,
June__, 2015, if the minimum is sold. If the minimum is not sold, the general
partner will direct the depository agent to promptly return your original
investment within five days after the offering is terminated, together with
any interest accrued and without deduction for any fees, costs or other
charges. See Summary, Subscription Procedure in this prospectus.
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 commission and other costs. There is
no guarantee that you will receive a return on your investment.
* To receive your investment back after the first year of investment, the
partnership must currently generate a return of 21.07% and 15.68% should we
sell the minimum or maximum amount, respectively, of partnership interests
offered. To receive your investment back after the second year of investment,
the partnership must return 8.70% in that year.
* 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 earned by this
partnership.
* The general partner and affiliates have conflicts of interest with
regard to the management of this partnership.
You are encouraged 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
supplement to 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.
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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
COMMODITY INTEREST 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 19 AND A
STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO
RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 15.
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
Suitability Standards v
Summary of the Offering 1
The Partnership 1
Description of Securities Offered for Sale 1
Plan for Sale of Partnership Interests and Use of Depository Account 1
Subscription Procedure 1
Who Will Benefit From an Investment in the Partnership 2
Business Objectives and Expenses 2
Summary Risk Factors 2
Charges to the Partnership 2
Use of Proceeds 3
Selection of Commodity Trading Advisors and Allocation of Equity 4
Federal Income Tax Aspects 4
Redemptions 4
Material Terms of Agreements 4
Security ownership of certain beneficial owners 4
Diagram of Partnership Structure & Commissions Bromwell Financial Fund,
Limited Partnership 4
The Risks You Face 5
We must pay substantial charges, which may limit your ability to receive a
return on your investment. 5
You may not transfer your partnership interests and must rely on our
redemption procedures to receive your investment back. 5
Your right of redemption is limited. 5
The partnership depends upon the principal of the general partner, 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 which may limit
our profits. 6
You will be taxed on profits regardless of whether they are distributed and
may be required to engage sophisticated tax experts. 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 a new trading advisor, it may not be as
profitable as the one replaced, and the new advisor 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
Factors beyond a Trading Advisor's control may cause a Trading Advisor to
deviate from its trading program or strategy. 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.
7
The General Partner may employ leverage with the trading advisor, which may
increase volatility and negatively impact partnership performance 7
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
Denomination of Partnership Assets at the Futures Commission Merchants in
Foreign Currencies 8
Failure of commodity brokers or banks could result in loss of assets. 8
When trading in foreign exchanges, if the creditworthiness of the other
parties or the value of the currency is not maintained, we may lose the value
of our positions in those markets. 8
Option trading is highly risky and requires less equity to secure a trade,
thus providing greater potential for loss. 8
Position Limits May Limit Profitability and Changes Thereof Can Produce
Dramatic Price Swings. 8
Use of Contingent Orders Does Not Necessarily Limit Losses to the Intended
Amounts. 8
We may not be able to compete with others with greater resources. 9
Resignation of general partner may cause suspension of trading or taxation as
a corporation. 9
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
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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 cause higher fees to be paid or riskier trading by
altering the management and incentive fees without prior notice to you. 10
Conflicts Of Interest 10
The general partner, the commodity trading advisor, the futures commission
merchants, the introducing broker, the selling agent and their principals may
preferentially trade for themselves and others. 10
Possible retention of voting control by the general partner may limit your
ability to control issues. 10
The general partner is not likely to resign, even if it would be in your best
interest. 10
The introducing broker and selling agent is affiliated with the general
partner. 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 lessened due to the
nature of the general partner's compensation. 11
The commodity trading advisor may engage in high risk trading to generate
fees. 11
The principal of the general partner 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
Cautionary Note Regarding Forward-Looking Statements 11
Management's Discussion and Analysis 12
The Partnership 12
The General Partner 12
Experience 12
Authority 13
Partnership Books and Records 13
The Commodity Trading Advisors 13
Transactions With Related Persons 13
The Advisory Agreement 13
Leverage 14
Business Objective and Expenses 14
Explanatory Notes: 15
Securities Offered 16
Management's Discussion 16
Description of Intended Operations 16
Risk Control 16
Trading Risks 17
Fiduciary Responsibility of the General Partner 17
Indemnification 17
Provisions of Limited Partnership Agreement 17
Provisions of Law 18
Provisions of Federal and State Securities Laws 18
Provisions of the Securities Act of 1933 and NASAA Guidelines 18
Provisions of the Clearing Agreement 18
Other Indemnification Provisions 18
Relationship with the Futures Commission Merchants, the Introducing Broker and
the General Partner 18
Fixed Commissions are Competitive 18
Relationship with the Commodity Trading Advisors 19
The Commodity Trading Advisors Will Trade for Other Accounts 19
Non-Disclosure of the Commodity Trading Advisor's Methods 19
Charges to the Partnership 19
Compensation of the Commodity Trading Advisors 19
Restrictions on Management Fees 20
Compensation of Futures Commission Merchants, Introducing Broker, Selling
Agent and General Partner 20
Fee Paid By Partnership to the General Partner 20
Fee Paid By Partnership to the Introducing Broker 20
Selling Commission 20
Brokerage Fees Paid By to the Futures Commission Merchants 20
Miscellaneous Fees to Futures Commission Merchants 20
Rights of General Partner 20
Other Expenses 20
Charges to the Partnership 21
Investor Suitability 22
Potential Advantages 22
Equity Management 22
Investment Diversification 22
Limited Liability 22
Administrative Convenience 22
Access to the Commodity Trading Advisors 23
Use of Proceeds 23
Determination of the Offering Price 23
The General Partner 23
Identification 23
Michael P. Pacult 24
Ownership in Commodity Trading Advisors and Futures Commission Merchants
24
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Ownership in the Partnership 24
Trading By the General Partner; Interest in the Pool 25
Regulatory Notice 25
Trading Management 25
No Affiliation with Commodity Trading Advisor 25
Rights of the General Partner With Respect To Commodity Trading Advisor
Selection and Allocation of Equity 25
Performance Record of the Partnership 25
Performance Record of Other Programs Sponsored By the General Partner 25
Performance Record of Providence Select Fund, Limited Partnership 26
Performance Record of Atlas Futures Fund, Limited Fund 26
Performance Record of Strategic Opportunities Fund, LLC 27
Performance Record of TriView Global Fund, LLC 28
The Commodity Trading Advisor 28
Covenant Capital Management, LLC 28
Principals and Backgrounds 29
Description of Trading Program 29
Performance History 30
Covenant Capital Management, LLC - Aggressive Program 30
The Futures Commission Merchants 31
The Introducing Broker 32
Federal Income Tax Aspects 32
Scope of Tax Presentation 32
No Legal Opinion as To Certain Material Tax Aspects 32
Partnership Tax Status 33
No IRS Ruling 33
Tax Opinion 33
Passive Loss and Unrelated Business Income Taxes Rules 34
Basis Loss Limitation 34
At-Risk Limitation 34
Income and Losses from Passive Activities 34
Allocation of Profits and Losses 34
Taxation of Futures and Forward Transactions 35
Section 988 Foreign Currency Transactions 35
Capital Gain and Loss Provisions 35
Business for Profit 36
Self-Employment Income and Tax 36
Alternative Minimum Tax 36
Interest Related To Tax Exempt Obligations 36
Not a Tax Shelter 36
Taxation of Foreign Partners 36
Partnership Entity-Audit Provisions-Penalties 36
Employee Benefit, Retirement Plans and IRA's 37
The Limited Partnership Agreement 37
Formation of the Partnership 37
Units of Partnership Interests 37
Management of Partnership Affairs 37
General Prohibitions 38
Additional Offerings 38
Partnership Accounting, Reports, and Distributions 38
Income, Loss and Expense Allocations 38
Transfer of Partnership Interests Only With Consent of the General Partner
38
Termination of the Partnership 39
Meetings 39
Redemptions 39
Plan for Sale of Partnership Interests 39
The Selling Agent 39
FINRA Rule 2310 Offering 40
Depository Account 40
Underwriting Compensation 40
Subscription Procedure 40
Subscription Amounts 41
Revocation and Acceptance of Subscription 41
Investor Suitability 41
Investor Warranties 41
Compliance with Anti-Money Laundering Laws 41
Legal Matters 42
Litigation and Claims 42
Legal Opinion 42
Experts 42
Additional Information 42
A. Bromwell Financial Fund, Limited Partnership
Audited Financial Statements - years ended December 31, 2011, 2010, and 2009
Reviewed Financial Statements for the three months ended March 31, 2012
B. Belmont Capital Management, Inc.
Audited Financial Statements - years ended December 31, 2011, 2010, and 2009
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Suitability Standards
You should only invest a limited amount of the risk portion of your total
portfolio and should not invest more than you can afford to lose.
To invest the minimum $25,000 in this partnership, you must have either:
* a net worth of at least $250,000, exclusive of home, furnishings and
automobiles, or
* an annual gross income of at least $70,000 and a net worth, similarly
calculated of at least $70,000.
Residents of the following States must meet the specific requirements set
forth below. Net worth, is in all cases, to be calculated exclusive of home,
furnishings and automobiles. You may not invest more than 10% of your net
worth, exclusive of home, furnishings and automobiles, in the partnership. No
entity, including ERISA plans, should invest more than 10% of its liquid net
worth (readily marketable securities) in the partnership.
1. California-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
2. Kansas-It is recommended by the Office of the Kansas Securities
Commissioner that Kansas investors not invest, in the aggregate, more than 10%
of their "liquid net worth" in this and similar direct participation programs.
For these purposes, "liquid net worth" is defined as that portion of net worth
which consists of cash, cash equivalents and readily marketable securities.
3. Nebraska-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
4. South Carolina-Net worth of at least $250,000 or a net income in the
preceding year some portion of which was subject to maximum federal and State
income tax.
In the case of sales to fiduciary accounts, the net worth and income standards
may be met by the beneficiary, the fiduciary account, or, if the donor or
grantor is the fiduciary, by the donor or grantor who supplies the funds to
purchase the partnership interests.
The foregoing suitability standards are regulatory minimums only. Merely
because you meet such requirements does not necessarily mean that a high risk,
speculative and illiquid investment such as one in the partnership is, in
fact, suitable for you.
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v
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Summary of the Offering
This summary is to assist your understanding of the offer. To help obtain an
understanding of the risks of this investment, you should carefully review the
entire document, including the exhibits.
The Partnership
The Bromwell Financial Fund, LP allows you to participate in alternative or
non-traditional investments, namely the U.S. and international futures
markets. Futures contracts are traded on a wide variety of commodities,
including agricultural products, metals, energies, livestock products,
government securities, currencies and stock market indices. Options on
futures contracts are also traded on U.S. and foreign commodity exchanges.
The general partner uses its discretion to employ advisors that look to manage
risk and volatility.
The principal of the general partner has provided advisory services for
individual managed accounts for 32 years similar to the services he is
providing for the partnership, and he has developed and refined his approach
to evaluating professional advisors over that period.
Bromwell Financial Fund, Limited Partnership is a Delaware limited partnership
organized on January 12, 1999 and maintains its main business office at 505
Brookfield Drive, Dover, DE 19901, (800) 331-1532. Its books and records are
kept at the offices of the general partner, 5914 N. 300 West, Fremont, IN
46737, (260) 833-1306. The partnership is operated pursuant to a limited
partnership agreement which is included as Exhibit A and 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 independent registered trading managers called
commodity trading advisors to select trades for the partnership. Upon
effectiveness of this prospectus, the pool will be continuously offered to the
public. The pool currently employs a single trading advisor.
Description of Securities Offered for Sale
Pursuant to previous offerings, we sold a total of $2,552,062 of partnership
interests; however, the partnership has not been operational since January 10,
2005. As of the effective date of this prospectus, we are offering by this
prospectus an additional $20,000,000, in value of partnership interests, which
will be sold at the partnership's net asset value per partnership interest on
the close of business on the last day of the month in which the subscription
agreement is received. This offering has a $1,000,000 minimum and will
terminate three years from the date of this prospectus, or at an earlier date
at the sole discretion of the general partner. The initial net asset value
per unit will be fixed at $637.74 until the minimum is sold, which is the
prior closing net asset value per unit. This has been the net asset value per
unit for subscription and redemption purposes since the January 10, 2005
closing. After the sale of the minimum, interests will be sold at the closing
month-end net asset value per unit, which is disclosed to investors in monthly
statements that are mailed two to three weeks after the close of the prior
month.
Plan for Sale of Partnership Interests and Use of Depository Account
All sales will be made through the selling agent, which will receive a 6% up
front selling commission on gross proceeds of the offering. It will use its
best efforts, which means it will try, but not guarantee, to sell the
partnership interests.
All subscriptions accepted by the general partner will be placed by the
selling agent in a depository account maintained at Star Financial Bank,
Angola, IN until the minimum, $1,000,000 is sold. Neither the general partner
nor its affiliates may purchase partnership interests to meet the minimum. If
the minimum is sold, the depository account will be distributed into accounts
in the name of the partnership. Interest accrued on your subscription amount
will be used to buy additional partnership interests for you. If the minimum
is not sold after one year from the date of this prospectus, the general
partner has directed the bank to promptly return within five days your
original investment, with any interest accrued and without any deduction for
any expenses.
This offering will continue until the maximum of $20,000,000 is sold. The
general partner may terminate this offering at any time.
Subscription Procedure
To purchase partnership interests, you must complete and execute a
subscription agreement (Exhibit D), deliver your executed subscription
documents and check for your investment, which should be made payable to "Star
Financial Bank for the exclusive benefit of the customers of Bromwell
Financial Fund, LP," and pay for at least $25,000 in partnership interests,
though the general partner may reduce this amount to not less than $5,000.
You must also 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: (i) a minimum net worth, exclusive of
your home, home furnishings and automobiles, of $250,000, or (ii) a minimum
annual gross income of $70,000 and a minimum net worth of $70,000, both
exclusive of your home, home furnishings and automobiles.
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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. Recent volatility in the U.S. equity market
has made clear the risks associated with investments concentrated within a
single market. 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, 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, both domestic and globally. We
also trade options on futures 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 charges. To return your initial investment
after one year, we must earn a profit of 21.07%, assuming only the minimum is
sold, or 15.68% if the maximum is sold. To return your investment after the
second year of investment, we must earn a profit of 8.70% in that year.
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 contracts, and options on
futures 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 substantial fixed management fees 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. You will
receive a Schedule K-1 that reports your allocable portion of tax items, which
may be complex and require the engagement of sophisticated tax experts.
The general partner and affiliates have conflicts of interest with regard to
the management of this partnership. Specifically, the sole principal of the
general partner is a 50% owner of the affiliated selling agent and introducing
broker. Accordingly, their fees have not been negotiated at arm's length and
there will be no independent due diligence performed in regard to interests
sold. However, the brokerage commissions are less than the presumptive fair
and reasonable limit provided by the guidelines of the North American
Securities Administrators Association.
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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 / Nature of Service / Amount of Compensation
The general partner
(Belmont Capital Management, Inc.)
Negotiates and pays trading costs; assumes credit risk of the partnership to
the futures commission merchants
The partnership pays the general partner fixed annual brokerage commissions
for trades made on domestic markets of 6%, calculated on the partnership's
prior month-end net assets, paid monthly, from which it pays 4% to the
introducing broker. [$500+]
-------------------------------------
The commodity trading advisor
(Covenant Capital Management, LLC)
Makes trades for the partnership
The trading advisor is paid an annual management fee of 1% of the prior month-
end equity allocated to it to trade, paid monthly. [$250+]
The advisor is also paid 20% quarterly incentive fee on all new net profits it
has generated (this includes all new profits generated during the quarter,
adjusted for changes in trading equity and losses in previous quarters)
-------------------------------------
The futures commission merchants
(Vision Financial Markets LLC,
ADM Investor Services, Inc.)
Accepts trades from the advisor, clears the trades; holds the partnership's
trading equity
The introducing broker pays the futures commission merchants for the per round
turn commissions for domestic trades entered by the trading advisor. The
partnership pays the per round turn commission for trades made on foreign
exchanges.
-------------------------------------
The introducing broker
(Futures Investment Company)
Introduces the trades from the advisor to the futures commission merchants
From its 6%, the general partner pays the introducing broker fixed annual
brokerage commissions of 4%, with which it pays the futures commission
merchants the round turn brokerage commissions for trades made on domestic
markets by the trading advisor. [$1,000+]
-------------------------------------
The selling agent
(Futures Investment Company)
Sells investment in the partnership
FIC, as selling agent, will receive a 6% selling commission of the gross
subscription amount. Other compensation to it includes $2,000 paid by the
partnership for legal fees associated with the review of the offering by
FINRA. [$1,500+]
-------------------------------------
Lawyers and Accountants
(The Scott Law Firm, Ltd., Patke & Associates, Ltd., CPA, and other
accountants)
Continuing legal and accounting work
Offering and reorganizational expenses
Upon the commencement of business, the partnership will reimburse the general
partner and its affiliates for incurred reorganization and offering expenses
be $235,000 and will be amortized by the partnership over 60 months, or paid
off sooner at the general partner's discretion. [$294+] Annual operating
costs of approximately $30,000 if the minimum is sold and $90,000 if the
maximum is sold, plus annual ongoing offering costs of approximately $5,000.
[$119+].
-------------------------------------
+ Each $25,000 investment pays this amount per year for these particular
expenses. When the expense is not based on a percentage, but rather a fixed
amount, we have computed the expense upon the partnership's current net asset
value.
Use of Proceeds
Upon the commencement of business, the partnership will reimburse the general
partner and its affiliates for offering and organizational expenses of this
offering, which are estimated to be $235,000. At no time will reimbursements
exceed 15% of the gross subscription proceeds. Such expenses will be
amortized by the partnership over 60 months on a straight line basis, or paid
off sooner at the general partner's discretion. Any limited partner in the
partnership during this sixty month period will be exposed to this per month
charge on a pro rata basis. After the commencement of business, additional
offering expenses will be paid by the partnership as incurred which, if the
maximum is sold, are estimated by the general partner to be $5,000 annually,
or $15,000 total if the offering were to continue for the statutory limit of
three years. Accordingly, if the maximum is sold and the offering continues
for three years, the maximum expected offering and organizational expenses,
including underwriting compensation of $1,200,000, are estimated by the
general partner to be $1,450,000, or 7.25% of the maximum offering amount. If
only the minimum is sold, the general partner will pay $150,000, or 15%, for
offering and organizational expenses, including underwriting compensation.
The general partner will initially apply all of the partnership assets toward
trading commodities and cash reserves, including investments in U.S.
Treasuries, and cash management funds that invest in only U.S. Treasuries, all
held in the name of the partnership.
3
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Selection of Commodity Trading Advisors and Allocation of Equity
The general partner will allocate substantially all trading equity to Covenant
Capital Management, LLC to trade as the sole commodity trading advisor to the
partnership. The trading advisor is responsible for selecting the markets
traded and the number of contracts per trade entered on behalf of the
partnership under the authority granted by a power of attorney from the
partnership to the trading advisor. The trading advisor will trade only
futures contracts and options on futures contracts, primarily in the sectors
of agricultural, metals, energies, livestock, fixed income, currencies and
stock market indices. The advisor is authorized to make short sales, with
unlimited risk of loss, on behalf of the partnership. The general partner,
without prior notice to you, in its sole discretion, may adjust the allocation
of equity to the advisor and terminate or add trading advisors.
Federal Income Tax Aspects
Although you will not be paid distributions, you will have to pay income taxes
on profits and interest, if any, for the taxable year in which it is earned.
The partnership reports on a December 31 year end.
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 use its best efforts to comply with all redemption requests, but
may not be able to do so because of insufficient liquid assets. You will not
be allowed to make any redemption during the first twelve months of your
initial investment. There will be no charge for redemptions. See, The
Limited Partnership Agreement, Redemptions.
Material Terms of Agreements
The Limited Partnership Agreement. Only the general partner may manage this
partnership, and you will not take part in our business affairs or operations
other than to vote on matters as a limited partner, such as removal of the
general partner. The general partner may make certain changes to the
partnership structure without your prior approval, though material changes
will be communicated to you. The Fund has a limited existence of 21 years,
but can be terminated sooner by the general partner or the limited partners in
certain circumstances. See, The Limited Partnership Agreement.
The Advisory Agreement. 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 agreement and power of attorney between us and the
trading advisor. See Exhibit F. This agreement provides the trading advisor
with revocable powers 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 merchants.
The Brokerage Agreement. The Fund has entered brokerage agreements with the
futures commission merchants that govern the clearing of the futures and
options on futures contracts the trading advisor will enter on behalf of the
Fund. The Fund will be liable for any deficits created in any of its accounts
at the futures commission merchants, though your liability is limited to the
value of your investment. The affiliated introducing broker is obligated to
pay the futures commission merchants from the amounts paid to it by the
partnership and the introducing broker assumes the credit risk for these
payments. The agreement may be terminated, at any time, upon notice from one
party to the other.
??
Security ownership of certain beneficial owners
1) Title of class* (2) Name and address of beneficial owner (3) Amount
and nature of beneficial ownership (4) Percent of class**
Units of Limited Partnership Interest Belmont Capital Management, Inc.,
general partner, 5914 N. 300 West, Fremont, IN 46737*** 1 Unit of Limited
Partnership Interest valued at $637.74
38.9%
Units of Limited Partnership Interest Shira Del Pacult, individually, 5914
N. 300 West, Fremont, IN 46737 1.57 Units of Limited Partnership Interest
initially valued at $1,001.25
61.1%
* There is only one class of securities offered by this prospectus, which is
the units of limited partnership interest.
** As of the date of this prospectus, the general partner and an affiliate of
the principal of the general partner own all of the outstanding limited
partnership interests. Upon the sale of the minimum amount of units required
to commence business, the investors will be admitted to the partnership and
will own substantially all partnership units.
*** Mr. Michael Pacult is the natural person who holds voting and investment
power over the shares beneficially owned by Belmont Capital Management, Inc.
4
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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.
5
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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 charges, which may limit your ability to receive a
return on your investment.
We must pay our expenses before you will realize a profit. They are (i) fixed
brokerage commissions totaling 6% per year, which is not considered a
management fee, calculated upon the partnership's net assets for domestic
trades plus actual commissions charged by the futures commission merchants for
trades made on foreign futures exchanges; (ii) an annual management fee of 1%
to the trading advisor of allocated equity, and an incentive fee of 20% of its
new net profits; (iii) yearly expenses estimated at $90,000, if the maximum is
sold, and (iv) 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 commodity trading advisor. We may be subject to substantial incentive
fees in the initial quarters of any given year which will not be refunded,
even if we experience subsequent losses which 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 only 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. You
may not redeem your partnership interests during the first twelve months of
investment. See The Limited Partnership Agreement, Redemptions.
Your right of redemption is limited.
Our redemption procedures provide that 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. The redemption
request must be received no less than 10 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. In such circumstances, the
general partner will use its best efforts to cause partnership assets,
including open trading positions, if any, to be converted into cash to meet
redemption requests and fulfill them as soon as is practicable. However, if
this cannot be done in a timely fashion due to illiquid markets, for instance,
those non-cash assets could be further devalued and reduce the partnership's
net asset value per unit, thus potentially having a negative effect on the
eventual redemption amount. 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 the principal of the general partner, 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 advisors selected for the partnership. If
the sole principal and officer of the general partner 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 principal of the general partner currently manages other commodity pools
and expects to manage additional pools in the future. He may negotiate better
terms for advisors, 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. The commodity trading advisor has
developed special trading programs to trade this partnership's account.
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 the general partner or the
trading advisor to devote sufficient time to the partnership affairs. See
Risk Factors, Trading Management, and The Commodity Trading Advisors.
6
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There are conflicts of interest in the partnership structure which 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, the principal of the general partner is also a principal of
Futures Investment Company, the selling agent and introducing broker.
Therefore, the general partner will probably not replace Futures Investment
Company in either of such capacities because it receives 4% brokerage
commissions as introducing broker and a 6% selling commission as selling
agent.
In addition, because the selling agent is affiliated with the general partner,
no independent due diligence of this offering will be conducted in regard to
interests it sells. The principal of the general partner, through its 50%
ownership in the introducing broker, retains a portion of the fixed brokerage
commissions 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 and
may be required to engage sophisticated tax experts.
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. Also, we will be treated as a
partnership for Federal income tax purposes, and you will receive a Schedule
K-1 that reports your allocable portion of tax items, which may be complex and
require you to engage sophisticated tax experts.
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 a new trading advisor, it may not be as
profitable as the one replaced, and the new advisor will not be responsible
for recouping any previous losses.
We rely upon a commodity trading advisor to generate profits pursuant to an
Advisory Contract and Power of Attorney (Exhibit F). Either the general
partner or a trading advisor may terminate the relationship at any time. If
this happens, or if a trading advisor becomes unable to serve us for any other
reason, the general partner may 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 would be retained on
terms which 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.
Factors beyond a Trading Advisor's control may cause a Trading Advisor to
deviate from its trading program or strategy.
Economic, market and other conditions may cause a trading advisor to deviate
from its stated trading program or strategy. There can be no guarantee that
any trading advisor would alert the general partner to such a change.
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 and option contract prices have a high risk of loss and are
volatile. Specifically (i) 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; (ii) even if the
analysis of the fundamental conditions by a commodity trading advisor is
correct, prices still may not react as predicted; (iii) analysis by the use of
a computer program to measure price, historical price averages, momentum and
other technical factors deemed important by a commodity trading advisor may
also fail to predict price direction; (iv) it is possible for most of our open
positions to be unprofitable at the same time; (v) 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; (vi) losses are not limited to the margin allocated to hold the
position and may exceed the total equity in our account, though the general
partner assumes the risk in this event; and (vii) short positions, which have
unlimited risk of loss, will be taken on our behalf by the trading advisor.
7
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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 5% and 15% 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, though the partners will not be
subject to margin calls.
The General Partner may employ leverage with the trading advisor, which may
increase volatility and negatively impact partnership performance
The general partner, at its sole discretion and without notice to you, may
cause the trading advisor to trade the partnership's assets allocated to it at
a higher or lower trading level normally utilized by the trading advisor
employing the trading program that will be traded on behalf of the
partnership. The general partner does not intend to change leverage often and
would likely do so in response to large changes in market conditions. For
instance, in a financial panic, such as that experienced in 2008, leverage may
be reduced to attempt to reduce trading risk to the Fund, which may also limit
profit potential.
Accordingly, other than to provide a range of leverage, it is not possible to
quantify how the general partner intends to vary leverage, since it is based
on the discretion of its sole principal. The range of leverage may be from
0.5 to 2.0. This means general partner may request the trading advisor to
trade each $1,000,000 of partnership equity as though it were only $500,000
(0.5 times, or half, leverage), or as though it were $2,000,000 (2 times
leverage). At 0.5 leverage, the trading advisor will trade about half the
number of contracts for each trade that it would normally trade for a given
account size, and at 200%, the trading advisor will trade about twice the
number of contracts it would for a given account size.
The partnership could experience either greater or less volatility relative to
accounts that invest with the advisor at the normal (100%) trading level of
the trading program, depending on the amount of leverage utilized. Increased
leverage will magnify both profits and losses to the partnership while
decreased leverage will diminish both profits and losses to the partnership.
Neither the trading advisor management fee nor the fixed brokerage commission
paid by the partnership will vary if leverage is increased or decreased. Nor,
will the 20% incentive fee paid to the trading advisor change with leverage;
although, the dollar amount paid due to profits, if any, will vary with
leverage.
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 merchants. The general partner does not know the trades
before they are made, nor does it know the trading advisor's 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, for which the general partner, not the limited partners, is
responsible.
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 (i) the larger amount of equity under
management requires larger trades to be made, which may be more difficult to
execute, (ii) there are legal limits called position limits upon the number of
positions that may be taken on a particular commodity, and (iii) 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.
8
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The commodity trading advisor may 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.
Denomination of Partnership Assets at the Futures Commission Merchants in
Foreign Currencies
The general partner may change the currency denomination in which the
partnership assets are held at the futures commission merchants (e.g., U.S.
Dollars, Euros, British Pound, Yen, etc.). Although the assets will be
physically held by the merchants selected by the general partner in a United
States account, they will be subject to currency rate fluctuations, which may
work to the benefit or detriment of fund assets.
Failure of commodity brokers or banks could result in loss of assets.
If the futures commission merchants 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. Futures commission merchants are required to segregate customer
funds and, even if funds are properly segregated, the partnership and,
therefore the investors, may lose all funds deposited at the futures
commission merchants. The deposits in our bank accounts will be insured for
only $250,000 and payment on insured deposits may be delayed. The General
partner reserves the right to put partnership equity not used for margin in
accounts not maintained by or accessible by the futures commission merchants.
This includes U.S. Treasuries held at the U.S. Treasury, investments in cash
management funds that invest in only U.S. Treasuries, and bank accounts, all
held in the name of the partnership.
When trading in foreign exchanges, if the creditworthiness of the other
parties or the value of the 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. 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
currency in a particular contract or option to be large enough to destroy the
creditworthiness 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. In addition, the price of any
foreign futures or foreign options contract and, therefore, the potential
profit and loss thereon, may be affected by any variance in the foreign
exchange rate between the time a position is established and the time it is
liquidated, offset or exercised.
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 in the case of selling option
premium.
Position Limits May Limit Profitability and Changes Thereof Can Produce
Dramatic Price Swings.
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. A
material change in the position limits of one or more futures markets could
cause a large liquidation of or large addition to positions in such markets,
which could cause dramatic price swings.
Use of Contingent Orders Does Not Necessarily Limit Losses to the Intended
Amounts.
The trading advisor uses stops to limit risk in given positions. These stops
do not guarantee an exit at the price or even at all. The placement of
contingent orders, such as a "stop-loss" or "stop-limit" order, will not
necessarily limit partnership losses to the intended amounts, since market
conditions may make it impossible to execute such orders.
9
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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 general partner may cause suspension of trading or taxation as
a corporation.
If the general partner wishes to voluntarily withdraw from the partnership, it
must give 120 days prior written notice to the limited partners. If the
general partner withdraws and the limited partners elect 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.
No tax IRS ruling has been or will be requested to confirm the tax opinions
expressed in this prospectus. If we were taxed as a corporation for Federal
income tax purposes, 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 in computing our taxable income.
However, the partnership tax counsel 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. See Federal Income
Tax Aspects.
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, the general partner, 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 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 6% 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, Ltd. 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.
10
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The general partner may cause higher fees to be paid or riskier trading by
altering the management and incentive fees 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%. Also,
the general partner may institute or raise the total management fees to 6%
provided the total incentive fees are lowered to 15%. In general, a lower
management fee and higher incentive fee may result in higher fees being paid
during times of profit, whereas a higher management fee and lower incentive
fee would result in higher fees being paid in times of losses. The general
partner does not expect to make changes in the management and incentive fees
often, and will only make changes effective as of the first business day of a
subsequent month. 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 the general partner, the
commodity trading advisor, the introducing broker, the selling agent, the
futures commission merchants or any principal or affiliate, agent or employee
of any of them.
The general partner, the commodity trading advisor, the futures commission
merchants, the introducing broker, the selling agent and their principals may
preferentially trade for themselves and others.
Because the general partner, the commodity trading advisor, the introducing
broker, the selling agent, the futures commission merchants 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 these people
trade their own account, you will not have access to their trading records.
They could possibly take their positions prior to the 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. 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, the general partner may not
vote, directly or indirectly, on the issue of its removal.
The general partner is not likely to resign, even if it would be in your best
interest.
It is unlikely that the general partner would voluntarily resign, even if it
would be in your best interest, because it retains a portion of the fixed
brokerage commissions paid to it, and is affiliated with the introducing
broker and selling agent.
The introducing broker and selling agent is affiliated with the general
partner.
The president and 50% owner of the introducing broker and selling agent,
Futures Investment Company, is the sole principal, officer and director of the
general partner. As introducing broker, it will receive a portion of the
brokerage commissions for trades placed by the trading advisor. As selling
agent, it will receive a 6% selling commission.
Partnership fees may be higher than they would be if they were negotiated.
The fixed brokerage commissions paid to the general partner and commodity pool
operator for domestic trades have not been negotiated at arm's length, though
they are less than the presumptive fair and reasonable limit provided by the
guidelines of the North American Securities Administrators Association. The
general partner accepts the credit risk of the partnership to the futures
commission merchants, reviews the daily positions and margin requirements of
the partnership, and pays the introducing broker, which in turn pays the
futures commission merchants' domestic charges. Some of the remaining portion
of the fixed brokerage commissions will be kept by the general partner.
Conversely, the general partner will pay the introducing broker any domestic
round turn commissions incurred that exceed the fixed brokerage commissions.
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. If it appoints multiple trading advisors, each
will trade independently of the others. 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. As incentive fees are paid based upon each trading advisor's
performance, it would be possible for us to experience a net loss and be
required to pay out incentive fees to one or more of the traders.
11
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Your ability to redeem your partnership interests may be lessened due to the
nature of the general partner's compensation.
The general partner receives a fee based upon our net asset value available
for trading. This gives it an incentive to withhold distributions and to
discourage redemption. 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.
Though past performance is no guarantee of future results, all redemption
requests made to pools that the principal of the general partner has managed
since he began managing commodity pools in August, 2003 were fulfilled on
time.
The 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 incentive fees on our
new net profits, it might select trades which are too risky for us.
The principal of the general partner has sole control over the time he will
allocate to the management of the partnership.
The principal of the general partner is responsible for managing this
partnership and managing three other commodity pools, Atlas Futures Fund,
Limited Partnership, TriView Global Fund, LLC, and Strategic Opportunities
Fund, LLC. He also sells limited partnership interests in some of the above
commodity pools, from time to time and performs other investor relations
services as a principal and registered representative of Futures Investment
Company, an introducing broker and broker dealer of which he is a 50% owner.
He has also reserved the right to trade for his own account and to form and
manage other commodity pools and ventures. He 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. He 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. He
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
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 assured
the partners that all partnership money on deposit in the partnership's
various accounts is held 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, Ltd., an New Jersey
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 has been hired on a
contingent fee basis. The foregoing persons do not have any present or future
expectation of interest in the general partner, the commodity trading advisor,
the introducing broker, the selling agent or the futures commission merchants.
Cautionary Note Regarding Forward-Looking Statements
This prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act that
reflect the general partner's current expectations about the future results,
performance, prospects and opportunities of the Trust. All statements other
than statements of historical facts included in this prospectus may constitute
forward-looking statements. The general partner has tried to identify these
forward-looking statements by using words such as "may," "will," "expect,"
"anticipate," "believe," "intend," "should," "estimate," "foresee,"
"continue," "plan" or the negative of those terms or similar expressions.
These forward-looking statements are based on information currently available
to the general partner and are subject to a number of risks, uncertainties and
other factors, both known, such as those described in "Risk Factors" and
elsewhere in this prospectus, and unknown, that could cause the Trust's actual
results, performance, prospects or opportunities to differ materially from
those expressed in, or implied by, these forward-looking statements. Although
the general partner believes that the expectations and underlying assumptions
reflected in these forward-looking statements are reasonable, there can be no
assurance that these expectations or underlying assumptions ultimately will
prove to have been correct. Important factors that could cause actual results
to differ materially from projected or forecasted results or stated
expectations are disclosed in this prospectus, including under the heading
"Risk Factors."
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You should not place undue reliance on any forward-looking statements. In
light of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by the general partner or any other person that
the objective and expectations of the partnership will be achieved. Except as
expressly required by the Federal securities laws, the general partner
undertakes no obligation to publicly update or revise any forward-looking
statements or the risks, uncertainties or other factors described in this
prospectus, as a result of new information, future events or changed
circumstances or for any other reason after the date of this prospectus.
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 505
Brookfield Drive, Dover, DE 19901, (800) 331-1532. It is a commodity pool
that intends to engage in the speculative trading of futures and options on
futures contracts on currencies, interest rates, energy and agriculture
products, metals, and stock indices. The partnership has no performance
history over the last five years. See page 25 for the performance record of
the general partner's affiliated commodity pools.
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. The partnership does not have officers, 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 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 Partner
The general partner is Belmont Capital Management, Inc., a Delaware
corporation incorporated on January 12, 1999. It was registered as a
commodity pool operator and became an NFA member on August 5, 1999 and
maintains its main business office at 5914 N. 300 West, P.O. Box 760, Fremont,
IN 46737, (260) 833-1306. It is managed by Michael P. Pacult, its sole
shareholder, director and president.
The principal of the general partner is Michael P. Pacult, who was registered
as a commodity pool operator and became an NFA member on July 28, 2003 and
maintains his main business office at 5914 N. 300 West, P.O. Box 760, Fremont,
IN 46737, (260) 833-1306. The general partner and the partnership will comply
with all applicable registration requirements under the Commodity Exchange Act
as amended.
The general partner manages all aspects of the Fund's business disclosed
herein, and the principal of the general partner uses his 32 years experience
in the futures industry, including nearly nine years as a commodity pool
operator, to make decisions for the Fund through the general partner. As part
of these duties, he negotiates contracts with service providers to the Fund,
such as trading advisors, futures commission merchants, accountants, attorneys
and others. For instance, the general partner may replace a trading advisor
based on performance uncharacteristic of its history, or it may add a trading
advisor whose performance is believed to be complementary to the other
advisor(s), so as to reduce Fund performance volatility and maximize potential
returns. Similarly, the general partner may change futures commission
merchants depending upon commission rates, trade execution performance, or
assessment of counterparty risk. He also supervises the bookkeeping and other
operational aspects of Fund business, and engages and consults with experts,
as necessary, to complete these tasks. As discussed at The Limited
Partnership Agreement herein, you will not have a voice in the operational
decisions of the Fund made by the general partner, though you do have voting
rights regarding certain matters, such as removal of the general partner.
Experience
The general partner has managed this commodity pool since its inception on
January 12, 1999. The sole principal of the general partner has been
supervising individual managed commodity accounts for over 32 years and serves
in several capacities in four other commodity pools, as follows:
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Commodity Pool Mr. Pacult Serves As
Atlas Futures Fund, LP (publicly offered, commenced business 10/99)
Individual general partner and sole principal of the corporate general
partner
Providence Select Fund, LP (publicly offered, closed as of 1/10) Individual
general partner and sole principal of the corporate general partner
TriView Global Fund, LLC (publicly offered, commenced business 7/2011)
Individual managing member and sole principal of the corporate managing
member
Strategic Opportunities Fund, LLC (commenced business 11/05) Sole
principal of the corporate managing member
Authority
Mr. Pacult is the sole shareholder, director and principal of Belmont Capital
Management, Inc., and is the sole decision maker of this partnership. The
signature of the general partner 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 the office of the
general partner, 5914 N. 300 West, Fremont, IN 46737. You may access our
books and records by visiting the general partner's 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. The CPA firm of Patke & Associates, Ltd., 300 Village Green
Drive Ste 210, Lincolnshire, IL 60069 conducts our annual audit and the annual
audit of the general partner, and prepares our tax returns and sends the IRS
Form K-1s to the partners.
The Commodity Trading Advisors
To conduct trading on our behalf, the general partner has selected an
independent commodity trading advisor, Covenant Capital Management, LLC.
Without prior notice to you, the general partner has sole discretion to employ
additional trading advisors, terminate any 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 advisor within seven days of such
change. Such notice will include a description of your right to redemption.
The general partner, at its sole discretion and without notice to you, may
cause the trading advisor to trade the partnership's assets allocated to it at
a higher or lower trading level normally utilized by the advisor employing the
trading program that will be traded on behalf of the partnership. Increased
leverage will increase volatility, while decreased leverage may limit
performance. The management fee to the trading advisor and fixed brokerage
commission paid by the partnership will not vary if leverage is increased or
decreased. Nor, will the 20% incentive fee paid to the trading advisor change
with leverage; although, the dollar amount paid due to profits, if any, will
vary with leverage. No change in trading advisor will constitute a material
change to the limited partnership agreement or the structure of our operation.
Any trading advisor 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.
Transactions With Related Persons
Since the beginning of the Fund's last fiscal year, there have been no
transactions that require disclosure pursuant to Item 404 of Regulation S-K of
the Securities Act of 1933 regarding transactions with related persons,
promoters and certain control persons. Upon the commencement of business, the
Fund intends to repay the affiliated selling agent for advanced offering and
organizational expenses of $173,750 as of March 31, 2012, on which no interest
is charged. The sole principal of the general partner, along with his spouse,
own the selling agent; therefore, his interest in the transaction reflects the
entire aforementioned amount.
Total reimbursable offering and organizational costs as of March 31, 2012 were
$205,324 to affiliates and $29,249 to non-affiliates.
As sole decision maker for the Fund, the president of the general partner
reviews and approves all transactions with related person, and they are
ratified by the general partner in its corporate minutes, recorded by Fund
accountants, and reviewed quarterly and audited annually by the independent
accountant. Such transactions are limited to advancement of offering and
organizational expenses by affiliates of the general partner, and will remain
so until the commencement of business. After the commencement of business,
the only expected related party transactions are those regarding repayment of
offering and organizational expenses to affiliates of the general partner
pursuant to the terms described in this prospectus. The Fund has not had any
promoters or control persons pursuant to Item 404 of Regulation S-K in the
last five fiscal years.
The Advisory Agreement
The general partner has assigned a substantial portion of our assets to the
trading advisor, the terms of which are governed by an advisory agreement and
power of attorney between us and the trading advisor. See Exhibit F.
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This agreement provides the trading advisor with revocable powers of attorney,
which gives them 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 agreements may be
terminated, at any time, upon notice from one party to the other and to the
futures commission merchants.
Leverage
The general partner, at its sole discretion and without notice to you, may
cause the trading advisor to trade the partnership's assets allocated to it at
a higher or lower trading level normally utilized by the trading advisor
employing the trading program that will be traded on behalf of the
partnership. The general partner does not intend to change leverage often and
would likely do so in response to large changes in market conditions. For
instance, in a financial panic, such as that experienced in 2008, leverage may
be reduced to attempt to reduce trading risk to the Fund, which may also limit
profit potential.
Accordingly, other than to provide a range of leverage, it is not possible to
quantify how the general partner intends to vary leverage, since it is based
on the discretion of its sole principal. The range of leverage may be from
0.5 to 2.0. This means general partner may request the trading advisor to
trade each $1,000,000 of partnership equity as though it were only $500,000
(0.5 times, or half, leverage), or as though it were $2,000,000 (2 times
leverage). At 0.5 leverage, the trading advisor will trade about half the
number of contracts for each trade that it would normally trade for a given
account size, and at 200%, the trading advisor will trade about twice the
number of contracts it would for a given account size.
The partnership could experience either greater or less volatility relative to
accounts that invest with the advisor at the normal (100%) trading level of
the trading program, depending on the amount of leverage utilized. Increased
leverage will magnify both profits and losses to the partnership while
decreased leverage will diminish both profits and losses to the partnership.
Neither the trading advisor management fee nor the fixed brokerage commission
paid by the partnership will vary if leverage is increased or decreased. Nor,
will the 20% incentive fee paid to the trading advisor change with leverage;
although, the dollar amount paid due to profits, if any, will vary with
leverage.
The Fund's governing documents do not impose restrictions on the amount of
leverage we may use.
Business Objective and Expenses
Our objective is to achieve the potentially high rates of return that are
possible through the speculative trading of futures and options on futures
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 independent
commodity trading advisors 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 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 fixed 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 over the twelve
months following the date of this prospectus. All interest income is paid to
the partnership. The chart below assumes the value of each unit of
partnership interest will remain constant during the next twelve months.
15
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Expenses per $1,000 of Investment of Partnership Interest
for the First and Second 12-Month Periods of Investment
<table>
<s> <c> <c> <c> <c> <c> <c>
First 12-Month Second 12-Month
Period of Investment Period of Investment
----------------------------------------------- ---------------------
Based Upon Minimum Based Upon Maximum Based Upon Maximum
Units Sold Units Sold Units Sold
Units / Amount 1,568 Units 31,361 Units $20,000,000
$1,000,000 31,361 Units $20,000,000
Base Price (1) $1,000.00 $1,000.00 $1,000.00
Selling Commission (1) $60.00 6.00% $60.00 6.00% $0.00 0.00%
Investment Amount After Selling Commission (2) $940.00 $940.00 $1,000.00
Annual Expenses (3) $32.90 3.29% $4.47 0.45% $4.75 0.48%
Offering and Reorganizational Expenses (4) $16.92 1.69% $2.21 0.22% $2.35 0.24%
Brokerage Commissions and Trading Fees (5) $56.40 5.64% $56.40 5.64% $60.00 6.00%
Management Fee to Trading Advisor (7) $9.40 0.94% $9.40 0.94% $10.00 1.00%
Trading Advisors' Incentive Fees on New
Net Profits (7) $36.50 3.65% $25.72 2.57% $11.42 1.14%
Interest Income (8) $(1.41) (0.14)% $(1.41) (0.14)% $(1.50) (0.15)%
Amount of Trading Income Required to Redeem
Unit At Selling Price After One Year (9) $210.71 $156.79 $87.02
Percentage of Initial Selling Price Per Unit 21.07% 15.68% 8.70%
</table>
Explanatory Notes:
(1) Investors will purchase partnership interests at the partnership's prior
month end net asset value per partnership interest, which is $637.74; however,
the table is presented to reflect expenses per $1,000 investment. The initial
allocation of partnership interests to an investor will be after deduction of
a 6% up front selling commission on the gross subscription proceeds. For the
first twelve month period in which a selling commission is charged, the
remaining fees are calculated based on the remaining proceeds after deduction
of the selling commission ($940). For the second twelve month period, the
remaining fees are calculated on the full $1,000 because there is no selling
commission in this period.
(2) This is the amount of your investment after the selling commission is
deducted or, in the case of the second year of investment, the full beginning
investment amount of $1,000. The remaining fees and expenses are calculated
on this amount.
(3) The partnership is expected to pay yearly expenses of approximately
$30,000 if the minimum is sold and $90,000 if the maximum is sold, in addition
to $5,000 in annual offering expenses until the termination of this offering.
(4) Upon the commencement of business, the partnership will begin to reimburse
the general partner and its affiliates for offering and reorganizational
expenses estimated to be $235,000. For the minimum offering amount, $90,000
would be reimbursable. Such expenses will be amortized by the partnership
over 60 months, or less.
(5) Brokerage commissions for trades made on domestic markets are fixed by the
general partner at 6% annually, of partnership net assets. The partnership
pays separately for any trades made on foreign exchanges, which are estimated
by the general partner to be 0.1% annually.
(6) The trading advisor is paid an annual management fee of 1% of the trading
equity allocated to it, calculated as of the close of business of the last
trading day during the previous month.
(7) This is the amount of incentive fees the trading advisor would earn if it
produced only enough profits to allow you to redeem after one year your
partnership interests at the net asset value used in this table. The trading
advisor is not paid an incentive fee on its management fee nor brokerage
commissions paid to the futures commission merchants which, for purposes of
this table, are estimated to be half of the total 6% annual fixed commissions.
(8) We earn interest on our accounts. Based on current interest rates,
interest income is estimated at 0.15% annually of our net assets.
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(9) This computation assumes there will be no claims or other extra-ordinary
expenses during the first year. You may not redeem your partnership interests
within the first twelve months of investment.
We do not represent that the above table will reflect our actual offering
expenses, 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 the initial price of $637.74.
After the sale of the minimum and commencement of business, the limited
partnership interests will be sold at the month end net asset value per
limited partnership interest 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 and the right to vote on partnership matters
such as the replacement of the general partner. See The Limited Partnership
agreement attached as Exhibit A. You will not be responsible for our debts in
excess of your investment amount, unless, (i) 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, (ii)
acquire any interest in the general partner, Belmont Capital Management, Inc.,
or (iii) manage this partnership. See Plan For Sale of Partnership Interests
and Subscription Requirements.
Your subscription agreement and check (i) 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, (ii) becomes irrevocable and may not be
withdrawn five days after submission, unless, a longer statutory withdrawal
period applies to you, and (iii) will be deposited and held until you are
admitted into the partnership in a depository account maintained by Star
Financial Bank.
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
Pursuant to previous offerings, we sold a total of $2,552,062 of partnership
interests; however, the partnership has not been operational since January 10,
2005. At such time, the general partner made the decision to terminate
operations and redeem all non-affiliated investors because of poor performance
of the trading advisor. We may conduct future offerings after the close of
this offering and intend to raise money only through offerings, such as this
one, and do not intend to borrow any money. We 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. We allocate substantially all our net assets to trading and other
investments, except those assets used to pay capital and operating expenses.
We 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 Vision Financial Markets LLC and/or ADM
Investor Services, Inc. to serve as the futures commission merchants and has
selected Futures Investment Company to serve as the introducing broker. The
partnership will deposit its funds to one or both of the futures commission
merchants to hold as security for the trades selected by the commodity trading
advisor. The general partner reserves the right to put partnership equity not
used for margin in accounts not maintained by or accessible by the futures
commission merchants. This includes U.S. Treasuries held at the U.S. Treasury
and investments in cash management funds that invest in only U.S. Treasuries,
all held in the name of the partnership. The futures commission merchants
have been directed to send the general partner, before the open of business
each day, a computer or fax report which 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 merchants and makes appropriate adjustments to the allocation of
trading equity. Based upon the amount of available trading equity, the
trading advisor has discretion to make specific trades, determine the number
of positions taken, and decide the timing of entry and departure from each
trade made. In managing the partnership's business and affairs, the general
partner may contract with, and rely upon, information, research and advice
provided by third parties.
The general partner will use its best efforts to monitor the daily value of
the partnership, which it calculates from the daily information provided by
the futures commission merchants, and will make such information available to
limited partners upon request. However, the independent accountant calculates
the net asset value at the end of the last business day of each month. If the
daily unit value falls to less than 50% of the initial value of $637.74 or the
highest value earned through trading after the commencement of business, 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.
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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
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 merchants establish
minimum margin requirements for each traded contract. The futures commission
merchants will require the margin assigned for each account to be on deposit
before a trade will be accepted. The futures commission merchants 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 to 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:
In the event, 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 disclosed in
the prospectus. The general partner intends to raise the disclosures made in
this prospectus and the representations you made 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 the 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.
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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 (i) 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, (ii) 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, (iii) such liability or loss 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, 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 (i) 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, (ii) 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
(iii) 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 merchants, Vision Financial
Markets LLC and/or ADM Investor Services, Inc. According to the clearing
agreements that govern these trades, we must indemnify them 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 that there are no
misstatements or omissions of material facts in this prospectus.
Relationship with the Futures Commission Merchants, the Introducing Broker and
the General Partner
Belmont Capital Management, Inc., the general partner, supervises the
relationship with the futures commission merchants and the affiliated
introducing broker, including the negotiation of the round turn commission
rates incurred through trading via the commodity trading advisor, and review
of the daily reports.
Belmont has engaged two futures commission merchants to open and close the
trades selected by the trading advisor, and may hold partnership equity at
either or both, at its sole discretion. It has also engaged Futures
Investment Company to introduce the trades to the futures commission merchant.
Fixed Commissions are Competitive
The fixed brokerage commissions that we pay to clear our trades plus actual
costs for foreign markets, if any, are less than the presumptive fair and
reasonable limit provided by the guidelines of the North American Securities
Administrators Association. Also, the general partner has the right to select
any substitute or additional futures commission merchants or introducing
brokers at any time, for any reason.
The futures commission merchants act for other commodity pools that have
retained the principal of the general partner of this partnership. The
general partner, its principal, or any other commodity pool may obtain rates
to clear trades from the general partner which are more favorable to their
accounts than the fixed commissions the general partner charges the
partnership.
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Relationship with the Commodity Trading Advisors
The Commodity Trading Advisors 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 which 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, which
presents 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 advisor 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 a 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 Advisors, 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. See
Risk Factors, No Notice of Trades or Trading Method.
Charges to the Partnership
As an investor in this partnership, you will pay your prorated share of the
cost of our operation. These charges are described in narrative form and in
the chart which 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 will earn in connection with
this offering. Most of these charges were not negotiated at arm's length, but
rather were determined by the general partner.
Compensation of the Commodity Trading Advisors
Covenant Capital Management, LLC, the commodity trading advisor, will be
allocated equity to trade, which will be deposited in accounts with the
futures commission merchants, investments in U.S. Treasuries held at the U.S.
Treasury, and investments in cash management funds that invest only in U.S.
Treasuries, all held only in the name of the partnership.
The partnership pays the trading advisor a monthly management fee of 1/12%
monthly (1% annually), calculated on the prior month-end partnership equity
allocated to it to trade. The general partner has reserved the right to
change management fees at its sole discretion. See Charges to the
Partnership, Restrictions on Management Fees.
The partnership pays the trading advisor incentive fees of the new net profit
produced by it of 20%. 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 after the payment of brokerage costs to the futures
commission merchants
* 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 merchants, and
* any other income earned on our assets which are not related to such
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 earned by a trading advisor based on the net income, as calculated
above, that it has earned for the partnership.
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Qtr Net Income Incentive Fee (20%)
1 $1,000 $200
2 (200) 0
3 1,000 160
4 500 100
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 those of the general partner and the commodity
trading advisor, may not exceed 6% of our net assets, and the total incentive
fees, including those of the general partner and commodity trading advisor,
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. 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.
Compensation of Futures Commission Merchants, Introducing Broker, Selling
Agent and General Partner
Fee Paid By Partnership to the General Partner
The partnership pays the general partner monthly fixed brokerage commissions
of 1/12 of 6% (6% annually) upon the partnership's prior month-end net assets
for trades made in domestic markets. From this, it pays 4% annually to the
introducing broker, which is responsible for payment of the round turn
brokerage commissions to the futures commission merchants. See The Futures
Commission Merchants.
Fee Paid By Partnership to the Introducing Broker
From its 6%, the general partner pays the affiliated introducing broker
monthly fixed brokerage commissions of 1/12 of 4% (4% annually) upon the
partnership's prior month-end net assets to trade domestic markets. The
introducing broker is responsible for payment of costs to clear the domestic
trades made by the trading advisor through the futures commission merchants.
The introducing broker will retain approximately 1% of this 4% annual charge.
For bookkeeping purposes, the partnership may pay the 4% annual charge for
domestic trades directly to the introducing broker, with 2% annually to the
general partner. The fixed commission that we pay to clear our trades plus
actual costs for foreign markets, if any, is less than the presumptive fair
and reasonable limit provided by the guidelines of the North American
Securities Administrators Association.
Selling Commission
On the admission date of a new investment, which will be the commencement of
business or the first business day of a subsequent month, prior to allocation
of partnership interests, 6% of the gross subscription proceeds will be paid
to the selling agent as a selling commission. The remaining amount, including
100% of any interest earned while in the depository account, will be used to
allocate partnership interests in the capital account of the investor based on
the month-end net asset value per partnership interest.
Brokerage Fees Paid By to the Futures Commission Merchants
The introducing broker pays the futures commission merchants for round turn
commissions for trades made on domestic exchanges. The partnership pays the
futures commission merchants for round turn commissions for trades made on
foreign exchanges, if any. Costs for trades on foreign exchanges can vary
widely, are estimated by the general partner to range from $9 to $27, and are
estimated by the general partner to constitute a negligible portion of the
trading advisor's trades. The round turn charge covers all clearing costs,
including the pit brokerage fees, National Futures Association fees, and
exchange fees.
Miscellaneous Fees to Futures Commission Merchants
We will reimburse the futures commission merchants 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 (i) add, change and delete broker/dealers as selling agents, (ii) add,
change and delete introducing brokers, (iii) change the management and
incentive fees within the limits prescribed herein, (iv) add, change and
delete commodity trading advisors, (v) add, change and delete futures
commission merchants, (vi) change the fixed brokerage commission rate, and
(vii) 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 are presumed
reasonable if they do not exceed 80% of the published retail rate of the
affiliated introducing broker plus pit brokerage fees, or 14% annually,
including pit brokerage fees, of the average net assets related to trading
activity.
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Other Expenses
We must pay legal and accounting fees, as well as other expenses and claims.
For each year of normal operations, based on the current net asset value, we
must pay yearly costs of approximately $30,000 if the minimum is sold, and
$90,000 if the maximum is sold. Costs to continue the offering after initial
effectiveness, such as the cost to prepare and file periodic amendments and
restatements of the registration statement, are estimated to be $5,000
annually. The general partner has included in the estimated annual expenses
$1,000 and $3,000, respectively, depending upon whether the minimum or maximum
is sold, respectively, for miscellaneous expenses, which may consist of
unanticipated legal or accounting charges, or fees to the futures commission
merchants. See Miscellaneous Fees to Futures Commission Merchants. There are
no termination fees or other fees associated with terminating any of the
arrangements described in this section.
Since the cessation of business in January, 2005, the partnership has been
advanced expenses to maintain regulatory compliance by affiliates of the
general partner. Upon the commencement of business, the general partner
estimates such expenses will total $235,000 and will be reimbursed and
amortized by the partnership for 60 months on a straight line basis, or paid
off sooner at the general partner's discretion.
Charges to the Partnership
The following table includes all charges to the partnership.
Entity / Form of Compensation / Amount of Compensation
------------------------------
General Partner
(Belmont Capital Management, Inc.)
Fixed brokerage commission
The partnership pays the general partner fixed annual brokerage commissions
for trades made on domestic markets of 6%, calculated on the partnership's
prior month-end net assets, paid monthly, from which it pays 4% to the
introducing broker. [$500+]
------------------------------
Commodity Trading Advisors
(Covenant Capital Management, LLC)
Management Fee;
Incentive Fee
The trading advisor is paid an annual management fee of 1% of the prior month-
end equity allocated to it to trade, paid monthly. [$250+]
The advisor is also paid 20% quarterly incentive fee on all new net profits it
has generated (this includes all new profits generated during the quarter,
adjusted for changes in trading equity and losses in previous quarters)
------------------------------
Futures Commission Merchants
(Vision Financial Markets LLC, ADM Investor Services, Inc.)
Round-turn commissions for trades entered by the trading advisor
The introducing broker pays the futures commission merchants for the per round
turn commissions for domestic trades entered by the trading advisor. The
partnership pays the per round turn commission for trades made on foreign
exchanges, if any.
Reimbursement of delivery, insurance, storage and any other charges incidental
to trading and paid to third parties
Reimbursement by the partnership of actual payments to third parties in
connection with partnership trading
------------------------------
The introducing broker
(Futures Investment Company)
Fixed brokerage commissions
From its 6%, the general partner pays the introducing broker fixed annual
brokerage commissions of 4%, , with which it pays the futures commission
merchants the round turn brokerage commissions for trades made on domestic
markets by the trading advisor. [$1,000+]
------------------------------
The selling agent
(Futures Investment Company)
Selling Commission
FIC, as selling agent, will receive a 6% selling commission of the gross
subscription amount. Other compensation to it includes $2,000 paid by the
partnership for legal fees associated with the review of the offering by
FINRA. [$1,500+]
------------------------------
Third Parties
(The Scott Law Firm, Ltd., Patke & Associates, Ltd., CPA, and other
accountants)
Legal, accounting fees, and other actual expenses necessary to the operation
of the partnership, and all claims and other extraordinary expenses of the
partnership.
Upon the commencement of business, the partnership will reimburse the general
partner and its affiliates for incurred reorganization and offering expenses
be $235,000 and will be amortized by the partnership over 60 months, or paid
off sooner at the general partner's discretion. [$294+] Annual operating
costs of approximately $30,000 if the minimum is sold and $90,000 if the
maximum is sold, plus annual ongoing offering costs of approximately $5,000.
[$119+]
------------------------------
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+ Each $25,000 investment pays this amount per year for these particular
expenses. When the expense is not based on a percentage, but rather a fixed
amount, we have computed the expense upon the partnership's current net asset
value. 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).
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 a net worth
of at least $250,000, exclusive of your home, furnishings and automobiles, or
an annual gross income of at least $70,000 and a net worth, as calculated
above, of at least $70,000, 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 registered commodity trading advisors which have
demonstrated an ability to trade profitably based on its track record,
* have that equity allocated to the trading advisors in a manner which is
intended by the general partner to optimize future profit potential, and
* with limited liability, invest a fraction of what is typically required
by a trading advisor.
The principal of the general partner has experience managing several other
commodity pools and has over thirty-one 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 legal conditions are met.
In the opinion of our legal counsel, The Scott Law Firm, Ltd., there are no
circumstances, including bankruptcy of this partnership, which will subject
your personal assets that were never invested 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. We also prepare all tax information relating to your
investment in this partnership.
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Access to the Commodity Trading Advisors
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, Covenant currently requires a minimum
investment of $3,000,000 for most clients 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
After sale of the minimum and the commencement of business, the partnership
will begin to reimburse the general partner and its affiliates for offering
and organizational expenses of this offering, which are estimated to be
$235,000. At no time will reimbursements, defined as organization and
offering expenses under FINRA Rule 2310(b)(4)(C), including selling
commissions, exceed 15% of the gross proceeds of the offering. Such expenses
will be amortized by the partnership over 60 months on a straight line basis,
or paid off sooner at the general partner's discretion. Any limited partner
in the partnership during this sixty month period will be exposed to this per
month charge on a pro rata basis.
After the commencement of business, additional offering expenses will be paid
by the partnership as incurred which, if the maximum is sold, are estimated by
the general partner to be $5,000 annually, or $15,000 total if the offering
were to continue for the statutory limit of three years. Accordingly, if the
maximum is sold, the maximum expected offering and organizational expenses,
including underwriting compensation of $1,200,000, are estimated by the
general partner to be $1,450,000, or 7.25% of the maximum offering amount. If
only the minimum is sold, the general partner will pay $150,000, or 15%, for
offering and organizational expenses, including underwriting compensation.
The general partner will initially apply all of the partnership assets toward
trading commodities and cash reserves, including investments in U.S.
Treasuries, and cash management funds that invest in only U.S. Treasuries, all
held in the name of the partnership. The cash management fund is Wells Fargo
100% Treasury Money Market Fund managed by Wells Fargo Advisors Funds
Management, LLC, One North Jefferson Avenue, St. Louis, MO 63103. There is
no redemption charge and you must retain your full initial investment in the
partnership for at least twelve months. All entities that will hold or trade
our assets in the United States will be based in the United States and will be
subject to United States regulations.
At the end of each month, the management fee and fixed brokerage commissions
are paid by the partnership. At the end of each quarter, the incentive fees,
if any are due, are paid to the trading advisor. See Charges to the
Partnership.
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 0.15% interest on our deposits.
The futures commission merchants, a government agency or commodity exchange
could increase margins applicable to us to hold trading positions or reduce
the number of contracts in a particular market that we are permitted to hold.
This could force us to liquidate positions in a market at a loss that would
not have occurred had we been permitted to hold the positions as the advisor
intended.
Determination of the Offering Price
The general partner has established the amount of units to be offered at
twenty million dollars ($20,000,000) with the amount that must be sold to
raise the minimum and commence business at one million dollars ($1,000,000),
and set the value of each unit of limited partnership interest for sale at
$637.74, which was the prior closing net asset value per unit. Subsequent to
the commencement of business, partnership interests will be offered at their
month-end 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 subscription amount from you. After the commencement of
business, 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
Belmont Capital Management, Inc. is the general partner of this partnership
and manages it. 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.
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You will not acquire or otherwise have any interest in Belmont, or any entity
other than Bromwell Financial Fund, LP, by purchasing the partnership
interests offered by the prospectus.
Michael P. Pacult
Mr. Pacult, age 67, is the sole shareholder, director, principal, and officer
of the general partner. He 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.
Mr. Pacult worked as a commodities broker for Heinold Commodities Inc. from
May, 1980 until December, 1983. Heinold was an FCM and became registered with
the CFTC as such on June 30, 1982. On July 1, 1982, it became registered with
the CFTC as a CPO as well as an NFA member. On December 31, 1988, Heinold
withdrew its registrations and NFA membership. In December, 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. In addition to his positions at Future Investment Company and sole
principal of the general partner of the partnership, Mr. Pacult's business
background since 1983 is as follows:
<table>
<s> <c> <c> <c> <c> <c>
Employed Listed Registered As
From To As Principal Associated Person Employer Name & Address Position Held and Type of Business
1983 Present 2/3/87 2/3/87 Futures Investment Company, 5914 N. President, Director and 50% Owner of Broker-
300 West, Fremont, IN 46737 Dealer/Introducing Broker
9/03 Present 8/21/03 8/21/03 Belmont Capital Management, Inc., President, Director and Owner of Commodity
5914 N. 300 West, Fremont, IN 46737 Pool Operator*
8/03 Present 9/10/03 1/07/04 Ashley Capital Management, Inc., President, Director and Owner of Commodity
5914 N. 300 West, Fremont, IN 46737 Pool Operator
04/03 6/10 5/14/03 to 5/14/03 to 6/27/10 White Oak Financial Services, Inc., President, Director and Owner of Commodity
6/27/10 5914 N. 300 West, Fremont, IN 46737 Pool Operator*
10/04 Present 6/10/05 7/5/05 TriView Capital Management, Inc., President, Director and Owner of Commodity
5914 N. 300 West, Fremont, IN 46737 Pool Operator*
05/05 Present 5/16/05 6/1/05 Evergreen Capital Management, Inc., President, Director and Owner of Commodity
5914 N. 300 West, Fremont, IN 46737 Pool Operator
05/99 Present N/A N/A Tree King, Inc., 5914 N. 300 West, President of Landscaping Business
Fremont, IN 46737
</table>
* On August 4, 2011, Belmont and TriView withdrew their registration as
commodity trading advisors, because they never conducted any business in this
capacity. White Oak was also a registered commodity trading advisor; however
it did not conduct any business in this capacity.
His duties as a director and officer of the above named corporations, as a
general partner of those partnerships, and as a general partner of those
limited liability companies 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 Master Brokers-
Interviews with Top Futures Brokers by John Walsh that was published by the
Center for Futures Education.
Mr. Pacult also manages two other public and one private commodity pool.
Though he 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 principal of the general partner. See Management's
Discussion and Analysis of Financial Condition, The General Partner.
Ownership in Commodity Trading Advisors and Futures Commission Merchants
Neither the general partner nor its principal, nor any of their affiliates,
has any ownership in the commodity trading advisor, or the futures commission
merchants.
Ownership in the Partnership
As of March 31, 2012, the general partner maintained an investment of 1 unit
of limited partnership interest in the partnership, and an affiliate of the
general partner maintained an investment of 1.57 units. Neither the trading
advisor nor any of its principals has any interest in the partnership.
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Trading By the General Partner; Interest in the Pool
The general partner and its principal, 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. They will not 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 the 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 it. However, in its
capacity as commodity pool operator, the general partner may consult with the
trading advisor with regard to money management and trading strategy issues.
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 the current or any future trading
advisor, select additional trading advisors, or change the allocation of
equity to any trading advisor.
Should any change in advisors be made, you will be notified within seven
business days. The notice will also remind you of your right to request a
redemption of your partnership interest pursuant to our redemption procedures.
The general partner periodically reviews our performance to determine if a
current 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 a 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, 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. Because trading advisors trade independently, they may compete for
similar positions or take positions opposite each other, which may limit our
profitability.
Performance Record of the Partnership
Due to poor trading performance by the then-current trading advisor, the
partnership temporarily ceased business operations on January 10, 2005 and, as
such, has no performance history that may be disclosed pursuant to Commodity
Futures Trading Commission regulations. Activities since then are limited to
maintenance of regulatory compliance and reorganization pursuant to the
current offering.
Performance Record of Other Programs Sponsored By the General Partner
Within the last ten years, the principal of the general partner of the
partnership, Michael Pacult, has managed four other commodity pools, one of
which, Strategic Opportunities Fund, LLC, is privately offered and commenced
business in July, 2005. Mr. Pacult is the sole principal of Evergreen Capital
Management, Inc., the corporate general partner of Strategic Opportunities
Fund, LLC. The other three pools are publicly offered: Atlas Futures Fund,
LP, Providence Select Fund, LP and TriView Global Fund, LLC. Providence
commenced business on March 5, 2007 and was closed as of January, 2010 because
it was not profitable. TriView commenced business as of July 7, 2011. The
partnership's corporate general partner has not managed any other commodity
pools. Mr. Pacult has been the individual managing member and principal of
the corporate managing member of TriView since inception, and has been the
individual general partner and sole principal of the corporate general partner
of Atlas since August, 2003. He was also the individual general partner and
principal of the corporate general partner of Providence from inception to
close. As of March 31, 2012, (1) the total amount of money raised for Atlas
was $14,213,748 and the total number of investors was 125 and, (2) the total
amount of money raised for Providence was $4,053,883 and the total number of
investors was none, and (3) the total amount of money raised for TriView was
$2,458,315 and the total number of investors was 34.
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All rates of return in the following tables are inclusive of all fees and
expenses.
Performance Record of Providence Select Fund, Limited Partnership
The principal of the general partner of the partnership served as the
principal of a corporate general partner, White Oak Financial Services, Inc.,
which managed another commodity pool called Providence Select Fund, Limited
Partnership. Providence was declared effective by the Securities and Exchange
Commission on September 12, 2005 and commenced business on March 2, 2007.
The following capsule shows the past performance of Providence for the period
from inception of trading on March 2, 2007 through termination of business as
of January 31, 2010. From inception to June 3, 2008, NuWave Investment Corp.
was the sole trading advisor to the partnership. Since then, Clarke Capital
Management traded its Alpha program on behalf of the partnership.
You will receive no interest in Providence Select Fund, LP or any other entity
except Bromwell by your purchase of membership interests in Bromwell Financial
Fund, LP offered by this prospectus.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Providence Select Fund, Limited Partnership
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2010 2007
(Jan) 2009 2008 (Mar-Dec)
(14.76) (34.73) (9.71) (9.70)
Name of Pool: Providence Select Fund, LP
How Offered: Closed as of January 31, 2010
Name of Commodity Trading Advisor: Clarke Capital Management, Inc.
Principal Protected: No
Date of Inception of trading: March 2, 2007
Aggregate Gross Capital Subscriptions: $4,053,883
Largest Monthly Draw-Down**: 8-07 / 15.62%
Worst Peak-to-Valley Draw-Down***: 7-07 to 1-10 / 55.86%
* 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.
Performance Record of Atlas Futures Fund, Limited Fund
The principal of the general partner of the partnership 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. Hamer Trading
Inc. is currently the sole trading advisor for Atlas Futures Fund, Limited
Partnership.
You will receive no interest in Atlas Futures Fund, LP or any other entity
except Bromwell by your purchase of membership interests in Bromwell Financial
Fund, LP offered by this prospectus.
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PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Atlas Futures Fund, Limited Partnership
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2012
(Jan-Mar) 2011 2010 2009 2008 2007
(7.08) (23.88) 3.61 (24.46) 29.46 19.65
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
Aggregate Subscriptions: $14,213,748
Net Asset Value of the pool: $4,271,288 on total units outstanding: 1,427.58
Net Asset Value Per Unit: $2,991.98
Largest Monthly Draw-Down**: 10-11 / 14.64%
Worst Peak-to-Valley Draw-Down***: 7-08 to 3-12 / 46.99%
* 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.
Performance Record of Strategic Opportunities Fund, LLC
The principal of the general partner of the partnership serves as the
principal of the corporate general partner, Evergreen Capital Management,
Inc., which manages another privately offered commodity pool called Strategic
Opportunities Fund, LLC. It commenced trading in November, 2005, with Clarke
Capital Management, Inc. as the sole trading advisor through January, 2010.
Subsequently, the trading advisor for the partnership, GT Capital CTA, was
engaged as trading advisor for Strategic.
You will receive no interest in Strategic Opportunities Fund, LLC or any other
entity except Bromwell by your purchase of membership interests in Bromwell
Financial Fund, LP offered by this prospectus.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Strategic Opportunities Fund, LLC
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2012
(Jan-Mar) 2011 2010* 2009 2008 2007
(3.96)**** 11.70 (16.14) (23.87) 24.92 20.85
Name of Pool: Strategic Opportunities Fund, LLC
How Offered: Privately offered pursuant to Rule 506 of Regulation D
Name of Commodity Trading Advisor****: GT Capital CTA
Principal Protected: No
Date of Inception of trading: November, 2005
Aggregate Gross Capital Subscriptions: $9,837,257
Net Asset Value of the pool: $1,893,276
Largest Monthly Draw-Down**: 4-11 / 15.14%
Worst Peak-to-Valley Draw-Down***: 7-08 to 2-11/46.16%
* 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.
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*** 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.
**** As a result of the liquidation of the fund's prior futures commission
merchant that commenced October 31, 2011, its assets on deposit with that
futures commission merchant in the months of November, 2011 through March 31,
2012 were not fully under its control and, therefore, are excluded from the
monthly performance calculation and statement of current net asset value. The
amount of assets that are excluded for November, 2011 is $1,661,078, and the
amount of assets that are excluded for December, 2011 through March 31, 2012
is $568,500. The fund suspended unit accounting as of October, 2011, which
does not affect the calculation of the value of members' interest in the fund.
Performance Record of TriView Global Fund, LLC
The principal of the general partner of the partnership serves as an
individual managing member and principal of the corporate managing member,
TriView Capital Management, Inc., which manage another publicly offered
commodity pool called TriView Global Fund, LLC. It commenced trading in July,
2011, with GT Capital CTA as its sole trading advisor.
You will receive no interest in TriView Global Fund, LLC or any other entity
except Bromwell by your purchase of membership interests in Bromwell Financial
Fund, LP offered by this prospectus.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
TriView Global Fund, LLC
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2012
(Jan-Mar) 2011
(6.76) (7.79)
Name of Pool: TriView Global Fund, LLC
How Offered: Publicly offered pursuant to Form S-1 Registration Statement
Name of Commodity Trading Advisor: GT Capital CTA
Principal Protected: No
Date of Inception of trading: July, 2011
Aggregate Subscriptions: $2,458,315
Net Asset Value of the pool: $1,960,099 on total units outstanding:
Net Asset Value Per Unit: $859.76
Largest Monthly Draw-Down**: 8-11 / 4.98%
Worst Peak-to-Valley Draw-Down***: 7-11 to 3-12 / 14.02%
* 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 Commodity Trading Advisor
Covenant Capital Management, LLC
The general partner has engaged Covenant Capital Management, LLC ("CCM") to
trade for the partnership, and will assign to it most of the partnership's
equity. The general partner, in its sole discretion, may adjust the
allocation of equity allocated any time in the future.
Covenant Capital Management of Tennessee, LLC which also does business as
Covenant Capital Management may be referred to in this document as "CCM".
CCM is a Limited Liability Company organized June 1, 1999, originally existing
under the laws of the state of Delaware as Covenant Capital Management of
Tennessee, LLC. It is registered to do business in the state of Tennessee as
Covenant Capital Management, LLC. CCM was reorganized in the state of
Tennessee on August 29, 2000. At this time it dissolved its organization in
the state of Delaware. Its principal business address and telephone are 3100
West End Avenue, Suite 1090, Nashville, TN 37203, and (615) 678-6742. Scot
Billington and Brince Wilford are the only principals of CCM. CCM is
registered with the Commodity Futures Trading Commission (CFTC) as a Commodity
Trading Advisor (CTA) and became a member of the National Futures Association
(NFA) in such capacity on July 30, 1999. The books and records of CCM will be
kept and made available for inspection at its main business office. CCM's
trading performance may be found on page 30 of this prospectus.
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Principals and Backgrounds
The business background of CCM and its principals for at least five (5) years
is as follows:
Scot Billington is the Chief Manager, the Head Trader, and a 45.05% equity
holder of CCM. Mr. Billington is registered with the CFTC as a principal and
associated person of CCM. Mr. Billington developed the trading systems that
will be used by CCM. He is actively involved in every aspect of CCM's
business and trading. Mr. Billington worked as an assistant trader for
Bradford & Co., Incorporated, a Futures Commission Merchant (FCM) and division
of J. C. Bradford & Co. from July 1993 until May 1999 when he began forming
CCM. At J.C. Bradford he was responsible for executing client orders,
advising clients, and developing systems. Beginning in April of 2002, Mr.
Billington worked for Ronin Capital, an Option Trading Investment Company at
the Chicago Board Options Exchange where his main function was making markets
in the OEX 100 Index options market. Mr. Billington was a member of the
Chicago Board Options Exchange and a Market Maker at Ronin Capital in OEX 100
Index options until January 4, 2005. Mr. Billington has been a principal and
associated person of the advisor since inception on July 30, 1999 and he
became a branch office manager of the advisor on July 13, 2005.
Brince Wilford is the Secretary and is a 45.05% equity holder of CCM. He is
registered with the CFTC as a principal and associated person of CCM. Mr.
Wilford assists in the execution of trades as directed by Mr. Billington. He
is actively involved in every aspect of CCM's business and trading. From
August of 1999 to July of 2002 he served as Director of Business Development
for Inphact, Inc. His primary responsibility was directing sales and national
accounts. Inphact was a provider of radiology services over the Internet.
Mr. Wilford worked for Healthcare Realty Trust, Inc. in the Investments
Department from August of 2002 through January of 2006 where his primary
responsibilities included business development, financial modeling, consulting
and acquisitions work. Healthcare Realty Trust is a publicly traded Real
Estate Investment Trust (NYSE:HR). Mr. Wilford resigned from Healthcare
Realty in 2006 to focus full time on the advisory. He returned to Healthcare
Realty in January of 2008 when he assumed the role of Senior Vice President of
Investments until the end of 2010. Mr. Wilford currently directs all business
activity for CCM at the home office and has been registered as a principal and
associated person of the advisor since July 30, 1999. Mr. Billington and Mr.
Wilford both spend a limited amount of time volunteering in consulting roles
or as board members for non-profit organizations and may continue to do so in
the future.
There have never been any administrative, civil, or criminal proceedings
against Covenant Capital Management, LLC or any of its principals.
Either of the two principals may direct the trades CCM enters on behalf of the
partnership.
Description of Trading Program
The exact nature of CCM's trading strategy is proprietary and confidential.
The following description is of necessity general and is not intended to be
all-inclusive.
CCM will trade the Aggressive Program for the partnership, which is 1.75 times
the position size than the same account would take in its Original Program.
This will result in considerably larger swings in account equity. This
program began trading January 15, 2004.
CCM takes positions based on a long-term, technical, trend following system
created by Mr. Billington and Mr. Wilford. Discretion is used only in
extremely rare cases to interpret the existing rules of the system. For
instance, when an unanticipated situation arises that the exact existing rules
of the existing system do not cover, the spirit of the existing rules is
interpreted and taken into consideration. Other than that, there is not a
discretionary component to the program. Technical analysis uses the theory
that a study of the markets themselves will provide a means of anticipating
price changes. The system attempts to participate in long-term market trends.
It does not try to predict trends. The system does not try to predict when a
trend will start, how long it will last, or how high or low it will move.
After a trend has occurred, CCM does not seek to explain why a trend may have
occurred or why it behaved as it did. The only prediction made is that trends
will continue to exist as a phenomenon of the market place.
CCM can only recognize a trend after some, most or all of it has already
occurred. The system identifies when a trend may be beginning and enters the
market at that point. The same technical analysis indicates when the trend may
be ending, and signals to exit the market at that point. The system is set up
to minimize commissions and the number of trades per market when compared to
other futures trading systems. Stop losses will be placed in the market as
soon as entries are made, and they will be modified weekly. A stop may not
necessarily be changed from week to week. The system does not allow more
than one round turn trade a week in a given market. Initial risk will be
limited to a fixed percentage of the core equity (core equity is the total
equity in the account less the total amount at risk in other open positions)
of the account. As profits accumulate in a position, a greater
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percentage of risk will be tolerated; however, at a constant pre-determined
level, CCM may use options or may decrease the position size to reduce risk.
Exits are executed on trailing stops. Position size may be dramatically
reduced to lower risk, but a position will not be exited until the market hits
the pre-determined trailing stop level. CCM may use multiple triggers to
enter and exit a position incrementally and at different times. CCM trades a
diverse portfolio of markets and market sectors including but not limited to,
metals, meats, grains, energies, softs, foreign currencies, domestic and
foreign interest rates, and domestic and foreign stock indices. By broadly
diversifying across a wide array of markets, CCM attempts to diminish the
importance of any one position in the portfolio. The individual positions are
designed to be relatively small and the stops are designed to be relatively
wide to avoid multiple entries and exits that increase the commission burden
on an account. Larger initial risks per contract minimize the effects of
large gap moves through the stop levels as a percentage of the original risk.
Historically, the program has experienced annual drawdowns averaging 10-15% in
this program; however, past performance is not necessarily indicative of
future results.
CCM conducts continuing research to improve its trading methodology and risk
management parameters, which govern the markets that are traded, trade size
for a given market and stop loss levels. Markets may be added to or
subtracted from the portfolio. Initial and maintenance margin levels, or the
amount of money needed to secure a contract, are set by both futures
regulatory authorities, such as the CFTC, and the individual exchanges.
Changes in margin requirements, though not frequent, can influence allocations
of trades per CCM's risk management parameters and, hence, influence trading
results. For instance, a raise in margin for a given futures contract could
affect trade size per the risk management parameters. CCM may make changes to
its investment strategies without notifying current investors. Prospective
clients should be aware that CCM may trade markets on foreign exchanges and
may trade options as well as futures contracts. However, CCM expects its
allocation of trades on behalf of the Fund to be mostly in futures contracts.
The principals of CCM and members of the CCM's staff under their direct
supervision, direct the trading of the partnership pursuant to the advisory
agreement attached to this prospectus as an exhibit and the standard power of
attorney to grant trading authority to the advisor provided by the futures
commission merchants.
CCM, its principal and affiliates, have no present or future expectation of a
beneficial interest in the pool or its corporate general partner but look
solely to its incentive fee for compensation for its services.
A PURCHASE IN BROMWELL DOES NOT INCLUDE A PURCHASE OF COVENANT OR ITS
PROGRAMS.
Performance History
Covenant Capital Management, LLC - Aggressive Program
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. A purchase
of limited partnership interests pursuant to this offering does not include
any interest in this program.
Covenant Capital Management, LLC - Aggressive Program
Percentage Rate of Return
(Computed on a compounded monthly basis)*
2012 2011 2010 2009 2008 2007
January -1.42 -2.05 -5.87 3.27 5.26 -4.70
February 2.73 2.40 0.10 1.40 21.53 0.81
March -2.82 -0.89 -1.67 -5.13 -5.01 -9.69
April 5.51 5.42 2.82 3.92 8.50
May -4.87 -0.45 9.06 3.83 0.60
June -2.53 0.44 -3.96 6.38 0.45
July 2.20 -0.34 1.89 -7.46 3.66
August 2.08 1.76 10.02 -5.42 -9.69
September -0.54 10.55 3.40 0.8 12.42
October -4.47 6.82 -6.92 3.4 6.15
November 1.14 -0.61 12.29 0.49 -0.03
December 0.88 7.08 -2.21 -0.24 -2.02
Year-to-Date -1.59 -1.64 24.44 26.76 27.58 4.1
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Name of Commodity Trading Advisor: Covenant Capital Management, LLC
Name of the Trading Program: Aggressive Program
Date of Commencement of Trading by Advisor: September 1999
Date of Commencement of Program Trading: January, 2004
Number of Accounts in Trading Program: 55
Aggregate assets in all programs: $520,523,090
Aggregate assets in program: $110,242,663
Largest Monthly Draw-down**: 3-07 / 9.69%
Worst Peak to Valley Draw-down***: 2-06 to 3-07 / 20.41%
* 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.
The Futures Commission Merchants
The general partner has selected two unaffiliated futures commission merchants
to hold, supervise and control the equity that is used for margin for trading
by the commodity trading advisor. At its sole discretion, the general partner
may hold partnership equity at either or both. As required by law, the
general partner will provide notice to you within 21 days of any change in
futures commission merchant. At its sole discretion, the general partner may
change the allocation of trade execution and equity held on deposit with
either futures commission merchant at any time.
At any given time, a futures commission merchant may be involved in numerous
legal actions and administrative proceedings, which in the aggregate, are not,
as of the date of this prospectus, expected to have a material effect upon its
condition, financial or otherwise, or to the services it will render to the
partnership.
Vision Financial Markets LLC
Vision, a Delaware limited liability company, is registered with the Commodity
Futures Trading Commission as a futures commission merchant and is a member of
the National Futures Association. Vision is also a clearing member of the
Chicago Mercantile Exchange, New York Mercantile Exchange and Chicago Board
of Trade. Vision is also a self-clearing securities broker/dealer registered
with the Securities and Exchange Commission and holds memberships with the
Chicago Board Options Exchange and the International Securities Exchange.
Vision is a member of the Options Clearing Corporation, the Depository Trust
Clearing Corporation, Financial Industry Regulatory Authority and Securities
Investor Protection Corporation. Vision maintains its principal place of
business at One Whitehall Street, 15th Floor, New York, New York 10004,
telephone (212) 859-0200.
There have been no administrative or criminal actions, whether pending or
concluded, against Vision or any of its individual principals during the past
five years which would be considered "material" as that term is defined in
Section 4.24(l)(2) of the Regulations of the Commodity Futures Trading
Commission, except as follows:
On May 18, 2011, simultaneously with the issuance of a complaint by the NFA,
Vision Financial Markets LLC ("Vision") consented to a finding based on a one-
count complaint for failure to supervise guaranteed IBs in violation of NFA
Compliance Rule 2-9(a). The alleged activities occurred prior to 2009.
Without admitting or denying the findings in the Committee's Decision, Vision
consented to pay a fine of $500,000 and to retain an independent consultant to
review its supervisory procedures relating to guaranteed IBs. Vision
undertook to implement revised procedures for supervising GIBs within 6
months. Finally, Vision consented to a restriction on guaranteeing new
introducing brokers until 2013, unless it petitions the NFA to lift the
restriction earlier.
ADM Investor Services, Inc.
ADM Investor Services, Inc is registered with the Commodity Futures Trading
Commission as a futures commission merchant and is a member of the National
Futures Association. ADM is a clearing member of most global futures
exchanges and maintains its principal place of business at 141 West Jackson
1600A, Chicago, IL 60604, telephone (312) 242-7700.
There have been no administrative or criminal actions, whether pending or
concluded, against ADM or any of its individual principals during the past
five years which would be considered "material" as that term is defined in
Section 4.24(l)(2) of the Regulations of the Commodity Futures Trading
Commission.
The futures commission merchants act only as clearing brokers for the
partnership and, as such, are paid commissions for executing and clearing
trades. They have not passed upon the adequacy or accuracy of this
prospectus. The futures commission merchants will not act in any supervisory
capacity with respect to the general partner nor participate in the management
of the general partner or the partnership. Therefore, prospective investors
should not rely on the futures commission merchants' agreements to clear
trades for the partnership or for any other reason related to it in deciding
whether or not to purchase interests in the partnership.
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The partnership is not aware of any threatened or potential claims or legal
proceedings to which the partnership is a party or to which any of its assets
are subject. The partnership has no involvement in the claims described
above. The futures commission merchants have assured the partnership that
none of the above events will interfere with their ability to perform their
duties on behalf of the partnership.
The Introducing Broker
The partnership trading accounts were introduced to the futures commission
merchants by the affiliated introducing broker, Futures Investment Company,
5914 N. 300 West, Fremont, IN 46737, (260) 833-1306. Futures Investment
Company is a registered introducing broker under the Commodity Exchange Act,
as amended, and is a member of the National Futures Association in such
capacity. It receives 4% annual brokerage commissions paid by the general
partner, which it uses to pay the round turn commissions to the futures
commission merchants for the trades entered by the trading advisor on behalf
of the partnership.
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 the date of this
prospectus, 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 which 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, Ltd. 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,
the Code provides that, for non-corporate taxpayers who itemize deductions
when computing taxable income, expenses of producing income, including
investment advisory fees, are to be aggregated with unreimbursed employee
business expenses and other expenses of producing income (collectively, the
"Aggregate Investment Expenses"), and the aggregate amount of such expenses
will be deductible only to the extent such amount exceeds 2% of a taxpayer's
adjusted gross income. In addition, for taxpayers whose adjusted gross income
exceeds a certain threshold amount (the "AGI Threshold"), Aggregate Investment
Expenses in excess of the 2% threshold, when combined with certain of a
taxpayer's other miscellaneous deductions, are subject to a reduction
(scheduled to be phased out between 2006 and 2010) equal to the lesser of 3%
of the taxpayer's adjusted gross income in excess of the AGI Threshold and 80%
of the amount of certain itemized deductions otherwise allowable for the
taxable year (the "Phase-out"). Moreover, such Aggregate Investment Expenses
are miscellaneous itemized deductions which are not deductible by a non-
corporate taxpayer in calculating its alternative minimum tax liability. The
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IRS could contend that some or all of the management fees and incentive fees,
as well as other ordinary expenses of the partnership, constitute "investment
advisory fees." If this contention were sustained, each non-corporate limited
partner's pro rata share of the amounts characterized would be deductible only
to the extent that such limited partner's Aggregate Investment Expenses exceed
2% of such limited partner's adjusted gross income and, when combined with
certain other itemized deductions, exceed the Phase-out.
PROSPECTIVE INVESTORS MUST CONSULT THEIR OWN TAX ADVISERS CONCERNING THE
FOREGOING "INVESTMENT ADVISORY FEES" ISSUE, WHICH IS A MATTER OF UNCERTAINTY
AND COULD HAVE A MATERIAL IMPACT ON AN INVESTMENT IN THE FUND.
Partnership Tax Status
The Internal Revenue Code, at Section 7701, provides 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: (i)
decentralized management, (ii) unlimited liability, (iii) limited
transferability of shares, and (iv) 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 and options on futures contracts. 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, Ltd., this prospectus
accurately summarizes all material Federal tax matters and consequences or
identifies those matters that cannot presently be determined. Particularly,
(i) we will be treated as a partnership for Federal income tax purposes; (ii)
the allocations of profits and losses made when partners redeem their
partnership interests should be upheld for Federal income tax purposes; (iii)
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; (iv) the profit share should be respected as a
distributive share of our equity income allocable to Bromwell Financial Fund,
Limited Partnership; and (v) 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 the date of this
Prospectus 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
* 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
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* 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.
No opinion is expressed in regard to 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.
The discussions in this prospectus under the headings, "Federal Income Tax
Aspects" and "Summary of the United States Federal Income Tax Consequences"
are counsel's opinions. Any change in the representations of the general
partner or the operative facts will prevent us and you from relying upon the
tax opinion from The Scott Law Firm, Ltd.
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 which
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.
The at risk provisions must be considered should you elect to arrange 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 which 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.
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Taxation of Futures and Forward Transactions
The commodity trading advisor selected to trade for us is expected to trade
primarily, but not exclusively, 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 which 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 which 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 which 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.
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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 which 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.
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.
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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 meaning 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.
You may not purchase partnership interests with the assets of a plan if we,
the general partner, the selling agent, the introducing broker, the futures
commission merchants, or any of their affiliates, agents or employees have
investment discretion over such plan, give investment advice with respect to
such plan assets for a fee, or are 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
The partnership agreement was amended and fully restated on November 8, 2005
and is attached to this prospectus as Exhibit A. Following is an explanation
of the 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 other than exercise your right to
vote on partnership matters as a limited partner.
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 value of a single unit will be calculated
from time to time by dividing the net assets of the partnership by the number
of outstanding units of partnership interests. The value of your partnership
interest will be determined by multiplying the number of units of partnership
interests you hold by the value of a single unit. Your percentage interest in
the partnership will also be determined by dividing the number of units you by
the total number of units outstanding.
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 other than to vote on partnership matters as a limited partner.
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; provided, however,
without the limited partners' approval, the general partner is allowed to (i)
change the management and incentive fees within the limits prescribed herein,
(ii) add, change and delete trading advisors, (iii) add, change and delete
introducing brokers, (iv) add, change and delete futures commission merchants,
(v) add, change and delete selling agents, (vi) redeem and return a limited
partner account, (vii) change the commodity contracts traded, or (viii) change
the diversification of our assets among the various types of or in the
positions held in commodity contracts.
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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.
In its capacity as commodity pool operator, the general partner may consult
with the trading advisor with regard to money management and trading strategy
issues, but the general partner will not serve as a trading advisor or select
any other trading advisors to trade that are affiliated with it.
General Prohibitions
We may not borrow from or loan money or any other assets to any person;
provided, however, this shall not apply to the incurrence of an obligation to
a futures commission merchant or debt to a partner or any of their affiliates
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. Currently, no agreement exists for the general
partner to make any loan to the partnership nor does the general partner
expect to enter one; however, you will be notified of such an agreement,
should one be entered.
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. Although we are
offering a maximum of $20,000,000 in partnership interests pursuant to this
offering, we have not limited the amount of capital contributions or the
maximum amount of partnership interests that may be issued, offered or sold
pursuant to other offerings.
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. On a monthly basis you will receive a report containing (i) the
net unit value as of the end of both the current and previous month, (ii) the
percentage change in net unit value between the two months, (iii) the amount
of distributions during the month (iv) the aggregate fixed commission in lieu
of round-turn brokerage commissions, other fees, administrative expenses, and
reserves for claims and other extra-ordinary expenses incurred or accrued by
us during the month, and (v) any other information required by the rules of
the Commodity Futures Trading Commission.
The general partner will notify you within seven days of any change in trading
advisor or partnership fee structure, including a notice of your right to
redemption. For all other material changes to the disclosures made in this
document, the general partner will notify you of such change within 21 days.
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.
Income, Loss and Expense Allocations
At the end of each fiscal year, our capital gain or loss and ordinary income
or loss and expenses will be allocated to units held by all partners. You are
responsible for the proper reporting of these items on 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.
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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
(i) is requested before six months from the date of purchase, (ii) is not made
for all of your partnership interests or, if you are not assigning all of your
partnership interests, you will retain more than $5,000 of partnership
interests, (iii) 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, (iv) will
jeopardize our ability to be taxed as a partnership and not as a corporation,
or (v) will affect characterizations or treatment of income or loss.
Termination of the Partnership
This partnership will terminate (i) at 11:59 p.m. twenty-one years from the
date of the Certificate of Limited Partnership, (ii) by election of the
general partner, in its sole discretion, to terminate and dissolve this
partnership, (iii) upon the dissolution, death, resignation, withdrawal,
bankruptcy or insolvency of the general partner, unless the partners, by
majority interest, vote to carry on the business and elect a new general
partner, (iv) 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, (v) upon any event which makes the continued existence of the
partnership unlawful, or (vi) upon the majority vote of the partners.
Meetings
We are not required to hold regular meetings, however, partners may call
meetings to vote on certain issues, including (i) 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; (ii) removal of the
general partner and election of a new general partner; (iii) 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; (iv) 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; (v)
dissolution of the partnership; and (vi) 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 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. You may not redeem or liquidate any partnership interests until
twelve months after you have been allocated partnerships interests from your
subscription proceeds. The general partner must receive a written request for
redemption no less than ten 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. We will not charge a redemption fee.
Plan for Sale of Partnership Interests
The Selling Agent
We are offering and selling the partnership interests solely through Futures
Investment Company, an Illinois corporation incorporated on December 6, 1983,
the address of which is 5914 N. 300 West, P.O. Box 760, Fremont, Indiana
46737. It was registered as a fully disclosed broker/dealer registered with
the Financial Industry Regulatory Authority on July 24, 1997 and has been
appointed the selling agent. All partnership interests will be sold on a best
efforts basis, which means the selling agent will try, but not guarantee, to
sell the partnership interests.
Currently, Futures Investment Company principally offers securities and
interests in futures. 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.
The principal of the general partner and his spouse own Futures Investment
Company. They are also registered with the National Futures Association as
associated persons and with the Financial Industry Regulatory Authority as
registered representatives of Futures Investment Company.
40
<page>
Although we are offering a maximum of $20,000,000 in partnership interests
pursuant to this registration statement, the Limited Partnership Agreement
authorizes the general partner to determine the amount of partnership
interests to be sold. If the partnership is to sell any partnership interests
in excess of the $20,000,000, such partnership interests must also be
registered with the Securities and Exchange Commission or sold by private
offering pursuant to applicable exemption from registration. Accordingly, the
partnership may sell an unlimited amount of partnership interests.
FINRA Rule 2310 Offering
The offering of the partnership will be conducted in general compliance with
FINRA Rule 2310. Pursuant to FINRA Rule 2310(b)(2)(C), there will be no
executed transaction in a discretionary account without the prior specific
written approval of the transaction by the customer. Pursuant to the
liquidity track record requirements of FINRA Rule 2310(b)(3)(D), the selling
agent has informed the general partner that it has not offered any prior
investment programs for which the prospectus disclosed a date or time period
when the program might be liquidated.
Depository Account
All subscriptions accepted by the general partner will be placed by the
selling agent in a segregated depository account maintained at Star Financial
Bank, Angola, IN until the minimum, $1,000,000 in face amount of limited
partnership interests are sold. If the minimum is sold, the account will be
delivered to the partnership. Interest accrued on your subscription amount
will be used to buy additional limited partnership interests for you. If the
minimum is not sold after twelve months from the date of initial
effectiveness, the general partner has directed the bank to promptly return
within five days your original subscription amount, plus accrued interest,
without deduction for any expenses and fees.
After the sale of the minimum, this offering will continue for up to three
years from the effective date of this prospectus until the maximum of
$20,000,000 in face amount of limited partnership interests is sold. The
general partner may terminate this offering at any time.
After the sale of the minimum, new limited 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 limited partnership interests, all cash and
subscription documents will be held in a segregated depository account. No
funds, while held in the depository account, will be available to pay debts or
claims of the partnership or the general partner.
After the commencement of business, if you are investing in the partnership
through a custodial account by transferring funds from a managed account at a
futures commission merchant, your funds may be invested in the partnership on
the admission date without use of the depository account; provided, the
partnership has commenced business.
The limited partnership interests are sold at the month end net asset value
per limited partnership interest of the partnership, which is the net asset
value of the partnership divided by the number of outstanding limited
partnership interests. Initially, this is $637.74, which was the month-end
net asset value per unit for subscription purposes when the partnership ceased
operations. After the commencement of business, the net asset value of the
partnership is calculated before the open of the markets on the first business
day of each month and limited partners will be admitted and issued limited
partnership interests as of this date and price. Net asset value is
calculated and limited partnership interests are issued on a monthly basis.
Net asset value takes into consideration 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).
Cash from subscriptions held in the depository 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 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.
Underwriting Compensation
The selling agent will be paid a six percent (6%) selling commission of the
gross subscription proceeds upon admission of an investment to the
partnership. The selling agent will also receive compensation of $2,000 paid
by the partnership for legal fees, which are associated with FINRA's review of
this offering submitted to it by the selling agent. Neither the partnership
nor the selling agent will engage in wholesaling.
41
<page>
Subscription Procedure
To purchase partnership interests, you must complete and execute an
acknowledgement of suitability and a subscription agreement (Exhibit D), and
deliver the executed subscription documents and check to the partnership.
You should make out the check to "Star Financial Bank for the exclusive
benefit of the customers of Bromwell Financial Fund, LP". Your check will
then be sent by the selling agent to the bank by noon of the second business
day following its receipt. Under no circumstances should you make payment in
cash, or make any checks payable to the partnership, the general partner or
any of their affiliates or any other party.
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. However, 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
on our books in your favor shall be cancelled.
Revocation and Acceptance of Subscription
Once you have delivered your subscription agreement and sent us your check,
you may revoke your subscription within five business days after you send it
to us. 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, at any time prior
to admission of the subscriber as a partner. 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.
Investor Suitability
See Suitability Standards in Exhibit C and on page ii of this prospectus. To
purchase partnership interests, you must have at least a minimum net worth of
$250,000, exclusive of your home, home furnishings and automobiles, or a
minimum annual gross income of $70,000 and a minimum net worth of $70,000,
exclusive of your home, home furnishings and automobiles. You may have to
satisfy higher amounts if you live in certain states.
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 selling agent, the introducing broker and the futures commission
merchants. Specifically:
(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 the agreement and 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 applies 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 introducing broker, the selling agent, and the
futures commission merchants may rely upon any of the above representations
and warranties as a defense to any claim made against it.
Compliance with Anti-Money Laundering Laws
To satisfy the partnership's, the general partner's and the selling agent's
obligations under applicable anti-money laundering laws and regulations,
subscribers will be required to make representations and warranties in the
subscription agreement concerning the nature of the subscriber, its source of
investment funds and other related matters. The general partner and the
selling agent reserve the right to request additional information from
subscribers as either, in its sole discretion, requires in order to satisfy
applicable anti-money laundering obligations. By subscribing for units in the
partnership, each subscriber agrees to provide this information upon request.
42
<page>
A PURCHASE OF THE UNITS SHOULD BE MADE ONLY BY THOSE PERSONS WHOSE FINANCIAL
CONDITION WILL PERMIT THEM TO BEAR THE RISK OF A TOTAL LOSS OF THEIR
INVESTMENT IN THE FUND. AN INVESTMENT IN THE UNITS SHOULD BE CONSIDERED ONLY
AS A LONG-TERM INVESTMENT.
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 the general
partner, the commodity trading advisor, the introducing broker, the 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.
There is litigation against one of the futures commission merchants within the
past 5 years, which is disclosed beginning on page 15 of this prospectus.
Legal Opinion
The Scott Law Firm, Ltd., 470 Broadway, Suite 160, Bayonne, NJ 07002 serves as
special counsel to us 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 general partner and us in
regard to 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, Ltd. will not give you or any other partner 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.
Patke & Associates, Ltd. is our independent registered public accounting firm
expert, and is responsible for auditing the books and records of us and
Belmont Capital Management, Inc., as well as preparing the partnership K-1's
and our tax returns. All audited financial statements appearing in this
prospectus were conducted by Patke & Associates, Ltd.
The 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 statements and annual financial
statements audited by an independent certified public accountant.
We will send you the unaudited monthly statements within 30 days of month end,
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
merchants' Customer Agreements which 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 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 general partner, 5914 N. 300 West, Fremont, IN 46737.
You are invited to review any materials available to the general partner
relating to this partnership, our operations, this offering, 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.
43
<page>
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
necessary to verify any representations or information in this prospectus and
its exhibits, assuming the general partner possess such information or can
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.]
44
<page>
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
ANNUAL REPORT
December 31, 2011
GENERAL PARTNER:
Belmont Capital Management, Inc.
% Corporate Systems, Inc.
505 Brookfield Drive
Dover, Kent County, Delaware 19901
<Page>
Index to the Financial Statements
Page
Report of Independent Registered Public Accounting Firm F-2
Statements of Assets and Liabilities F-3
Statements of Operations F-4
Statements of Changes in Net Assets F-5
Statements of Cash Flows F-6
Notes to the Financial Statements F-7 - F-10
Affirmation of the Commodity Pool Operator F-11
F-1
<page>
Patke & Associates, Ltd.
Certified Public Accountants
Report of Independent Registered Public Accounting Firm
To the Partners of
Bromwell Financial Fund, Limited Partnership
Dover, Delaware
We have audited the accompanying statements of assets and liabilities of
Bromwell Financial Fund, Limited Partnership, as of December 31, 2011 and
2010, and the related statements of operations, changes in net assets and cash
flows for each of the three years in the period ended December 31, 2011.
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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Partnership is
not required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Partnership's internal
control over financial reporting. Accordingly, we do not express such an
opinion. An audit includes, examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements, 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, 2011 and 2010, and the results of its
operations, its changes in net assets and its cash flows for each of the three
years in the period ended December 31, 2011 in conformity with accounting
principles generally accepted in the United States of America.
/s/ Patke & Associates, Ltd.
Patke & Associates, Ltd.
Lincolnshire, Illinois
March 9, 2012
300 Village Green Drive, Suite 210 * Lincolnshire, Illinois 60069
Phone: (847) 913-5400 * Fax: (847) 913-5435
F-2
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Assets and Liabilities
December 31, 2011 and 2010
<table>
<s> <c> <c>
2011 2010
Assets
Cash $508 $175
Total assets 508 175
Liabilities
Accrued expenses 30,863 29,684
Due to related parties 189,024 146,374
Total liabilities 219,887 176,058
Net assets $(219,379) $(175,883)
Analysis of net assets
Limited partners $(134,018) $(107,446)
General partner (85,361) (68,437)
Net assets (equivalent to $(85,361.51)
and $(68,436.77) per unit) $(219,379) $(175,883)
Partnership units outstanding
Limited partners units outstanding 1.57 1.57
General partner units outstanding 1.00 1.00
Total partnership units outstanding 2.57 2.57
</table>
The accompanying notes are an integral part of the financial statements
F-3
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Operations
For the Years Ended December 31, 2011, 2010 and 2009
<table>
<s> <c> <c> <c>
2011 2010 2009
Investment income
Interest income $- $- $-
Total investment income - - -
Expenses
Professional fees 37,093 28,491 32,904
Other expenses 6,403 1,459 1,325
Total expenses 43,496 29,950 34,229
Net investment (loss) (43,496) (29,950) (34,229)
Net (decrease) in net assets
resulting from operations $(43,496) $(29,950) $(34,229)
Net (decrease) per unit
Limited partner Limited partner unit $(16,924.74) $(11,653.50) $(13,318.68)
General partner General partner unit $(16,924.74) $(11,653.50) $(13,318.68)
</table>
The accompanying notes are an integral part of the financial statements
F-4
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Changes in Net Assets
For the Years Ended December 31, 2011, 2010 and 2009
<table>
<s> <c> <c> <c> <c> <c> <c>
Partners' Capital
General Limited Total
Units Net Assets Units Net Assets Units Net Assets
Net assets at December 31, 2008 1.00 $(43,465) 1.57 $(68,239) 2.57 $(111,704)
(Decrease) in net assets from operations:
Net investment (loss) (13,318) (20,911) (34,229)
Net (decrease) in net assets resulting from operations (13,318) (20,911) (34,229)
Net assets at December 31, 2009 1.00 (56,783) 1.57 (89,150) 2.57 (145,933)
(Decrease) in net assets from operations:
Net investment (loss) (11,654) (18,296) (29,950)
Net (decrease) in net assets resulting from operations (11,654) (18,296) (29,950)
Net assets at December 31, 2010 1.00 (68,437) 1.57 (107,446) 2.57 (175,883)
(Decrease) in net assets from operations:
Net investment (loss) (16,925) (26,571) (43,496)
Net (decrease) in net assets resulting from operations (16,925) (26,571) (43,496)
Net assets at December 31, 2011 1.00 $(85,362) 1.57 $(134,017) 2.57 $(219,379)
</table>
The accompanying notes are an integral part of the financial statements
F-5
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 2011, 2010 and 2009
<table>
<s> <c> <c> <c>
2011 2010 2009
Cash Flows from Operating Activities
Net (decrease) in net assets resulting from operations $(43,496) $(29,950) $(34,229)
Adjustments to reconcile net (decrease) in net assets from
operations to net cash (used in) operating activities:
Increase (decrease) in accrued expenses 1,179 (1,738) 4,299
Net cash (used in) operating activities (42,317) (31,688) (29,930)
Cash Flows from Financing Activities
Increase in due to related parties 42,650 31,700 29,600
Net cash provided by financing activities 42,650 31,700 29,600
Net increase (decrease) in cash 333 12 (330)
Cash at the beginning of the year 175 163 493
Cash at the end of the year $508 $175 $163
</table>
The accompanying notes are an integral part of the financial statements
F-6
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2011
1. Nature of the Business
Bromwell Financial Fund, Limited Partnership (the "Fund") was formed January
12, 1999 under the laws of the State of Delaware. The general partner and
commodity pool operator ("CPO") of the Fund is Belmont Capital Management,
Inc. ("General Partner"). The Fund was actively engaged in the speculative
trading of futures contracts in commodities from its commencement of business
in July 2000 to January 10, 2005, when it ceased trading. In the near future,
the Fund expects to file a post effective amendment to allow it to resume the
sale of its limited partnership interests on an issuer direct best efforts
basis. Once the Fund sells a to be determined minimum in limited partnership
units, it will restart active trading of futures and options on futures
through Covenant Capital Management of Tennessee, LLC, a commodity trading
advisor ("CTA") selected by the General Partner.
On October 12, 2011, the Fund filed an S-1 registration statement with the
Securities and Exchange Commission at registration number 333-177268 to
register $20,000,000 in Units of Limited Partnership Interests. Upon
effectiveness and the subsequent sale of the $1,000,000 minimum offering
amount, it will re-commence business, and an independent trading advisor will
trade the equity allocated to it by the General Partner.
2. Significant Accounting Policies
Regulation - The Fund is a registrant with the Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933 (the "Act"). The
Fund is subject to the regulations of the SEC and the reporting requirements
of the Securities and Exchange Act of 1934. 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 ("NFA") 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.
Reorganization Costs and Operating Expenses - For financial reporting
purposes in conformity with U.S. Generally Accepted Accounting Principles
("GAAP"), all accumulated reorganization costs since January 10, 2005 have
been expensed as incurred. The Fund has incurred $221,018 in reorganization
costs from the cessation of trading on January 10, 2005 through December 31,
2011. For all other purposes, including determining the Net Asset Value per
Unit for subscription and redemption purposes, the Fund will not reflect these
costs in capital until after the reimbursement is made on the resumption of
trading and, thereafter, all costs will be expensed as incurred. The
resumption of business is contingent upon the sale of a to be determined
amount of partnership interests. The Fund has agreed to reimburse the General
Partner, and other affiliated companies for all such expenses upon the sale of
the minimum and resumption of business. All costs after the resumption of
business will be paid directly by the Fund.
Consequently, as of December 31, 2011 and December 31, 2010, the Net Asset
Value and Net Asset Value per unit for financial reporting purposes and for
all other purposes are as follows:
<table>
<s> <c> <c> <c> <c>
Balance Per Unit Calculation
December 31, December 31, December 31, December 31,
2011 2010 2011 2010
Net Asset Value for financial reporting purposes $(219,379) $(175,883) $(85,361.51) $(68,436.77)
Adjustment for reorganization costs and other
operating expenses 221,018 177,522 85,999.25 69,074.51
Net Asset Value for all other purposes $1,639 $1,639 $637.74 $637.74
Number of Units 2.57 2.57
</table>
Registration Costs - Costs incurred for the initial filings with the SEC,
CFTC, NFA 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. Costs to maintain the Fund's
registration of its securities and recurring registration costs incurred since
the cessation of trading on January 10, 2005 are treated as reorganization
expenses and, accordingly, are accounted for as described above under
"Reorganization Costs and Operating Expenses".
Revenue Recognition - 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 fair value on the last business day of the reporting
period.
Fair value of futures contracts is based upon exchange or other applicable
market best available closing quotations.
Interest income is recognized when it is earned.
F-7
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2011
2. Significant Accounting Policies - Continued
Use of Accounting Estimates - The preparation of financial statements in
conformity with GAAP 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.
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.
Management has continued to evaluate the application of Financial Accounting
Standards Board Accounting Standards Codification ("ASC") 740, "Income Taxes",
to the Fund and has determined that ASC 740 does not have a material impact on
the Fund's financial statements. The Fund files federal and state tax
returns. The 2008 through 2011 tax years generally remain subject to
examination by the U.S. federal and most state tax authorities.
Statement of Cash Flows - For purposes of the Statement of Cash Flows, the
Fund considers money market funds to be cash equivalents. Net cash used in
operating activities includes no cash payments for interest or income taxes
for the years ended December 31, 2011, 2010 and 2009.
Fund Reopening - The Fund was closed as of December 31, 2011. The Fund will
reopen to new funds at a time to be set by the General Partner.
Reclassifications - Prior year investment and other income ratios to average
net assets were reclassified to net investment income (loss) to average net
assets to conform to current year presentation.
Fair Value Measurement and Disclosures - ASC 820 establishes a fair value
hierarchy which prioritizes the inputs to valuation techniques used to measure
fair value into three broad levels. The fair value hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements).
Level 1 inputs are unadjusted quoted prices in active markets for identical
assets or liabilities that the Fund has the ability to access at the
measurement date.
Level 2 inputs are inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for an asset or liability, including
the Fund's own assumptions used in determining the fair value of investments.
Unobservable inputs shall be used to measure fair value to the extent that
observable inputs are not available, thereby allowing for situations in which
there is little, if any, market activity for the asset or liability at the
measurement date. As of and for the years ended December 31, 2011 and December
31, 2010, the Fund had no investments.
3. 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,
includes 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
Fund.
If the daily net unit value of the Fund falls to less than 50% of the
highest value earned through trading subsequent to the resumption of business,
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.
F-8
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2011
4. The Limited Partnership Agreement
The Limited Partnership Agreement provides, among other things, the
following:
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 Fund.
Monthly Allocations - Any increase or decrease in the Fund's net asset value
as of the end of a month shall be credited or charged to the capital account
of each Fund 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 Partner.
Federal Income Tax Allocations - As of the end of each fiscal year, the
Fund'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 days prior to a month
end. Redemptions are generally paid within twenty days of the effective month
end. However, in various circumstances the General Partner may be unable to
comply with the request on a timely basis. There are no fees for redemption.
5. Fees
The Fund will be charged various fees upon the sale of the minimum and
resumption of business. These terms are currently being negotiated.
The General Partner has reserved the right to change the fee structure at
its sole discretion.
6. Related Party Transactions
Due to related parties at December 31, 2011 and December 31, 2010 consisted
of amounts due to Ashley Capital Management, Inc., Futures Investment Company,
the introducing broker, Michael Pacult, president of Futures Investment
Company, and the General Partner. The balances result from operating and
reorganization costs paid by the related parties on behalf of the Fund and
cash advances. These amounts bear no interest or due dates and are unsecured.
The balances are expected to be paid back upon the resumption of trading. The
following balances were outstanding as of December 31, 2011 and December 31,
2010:
December 31, December 31,
2011 2010
Futures Investment Company $157,450 $114,800
General Partner 27,541 27,541
Ashley Capital Management, Inc. 3,033 3,033
Michael Pacult 1,000 1,000
Total due to related parties $189,024 $146,374
ASC 460, "Guarantees", 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.
7. Indemnifications
In the normal course of business, the Fund enters into contracts and
agreements that contain a variety of representations and warranties and which
provide general indemnifications. The Fund's maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the Fund that have not yet occurred. The Fund expects the risk of any
future obligation under these indemnifications to be remote.
F-9
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
December 31, 2011
8. Financial Highlights
<table>
<s> <c> <c> <c> <c> <c>
For the Years Ended December 31,
2011 2010 2009 2008 2007
Performance per unit (1)
Net unit value, beginning of year $(68,436.77) $(56,783.27) $(43,464.59) $(30,563.04) $(19,798.83)
Expenses (16,924.74) (11,653.50) (13,318.68) (12,901.55) (10,764.21)
Net (decrease) for the year (16,924.74) (11,653.50) (13,318.68) (12,901.55) (10,764.21)
Net unit value, end of year $(85,361.51) $(68,436.77) $(56,783.27) $(43,464.59) $(30,563.04)
Net assets, end of year (000) $(219) $(176) $(146) $(112) $(79)
Total return (24.73)% (20.52)% (30.64)% (42.21)% (45.35)%
Number of units outstanding at the
end of the year 2.57 2.57 2.57 2.57 2.57
Supplemental Data:
Ratio to average net assets
Net investment (loss) (24.73)% (20.52)% (30.64)% (42.21)% (45.35)%
Expenses (24.73)% (20.52)% (30.64)% (42.21)% (45.35)%
</table>
Total returns are calculated based on the change in value of a unit during
the period. An individual partner's total returns and ratios may vary from
the above total returns and ratios based on the timing of additions and
redemptions.
(1) Expenses are calculated based on a single unit outstanding during the
period.
F-10
<page>
Bromwell Financial Fund, Limited Partnership
Affirmation of the Commodity Pool Operator
For the Years Ended December 31, 2011, 2010 and 2009
*****************************************************************************
To the best of the knowledge and belief of the undersigned, the information
contained in this report is accurate and complete.
/s/ Michael Pacult
Michael Pacult
President, Belmont Capital Management, Inc.
General Partner
Bromwell Financial Fund, Limited Partnership
F-11
<page>
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
QUARTERLY REPORT
March 31, 2012
GENERAL PARTNER:
Belmont Capital Management, Inc.
% Corporate Systems, Inc.
505 Brookfield Drive
Dover, Kent County, Delaware 19901
<page>
Index to the Financial Statements
Page
Report of Independent Registered Public Accounting Firm F-2
Statements of Assets and Liabilities F-3
Statements of Operations F-4
Statements of Changes in Net Assets F-5
Statements of Cash Flows F-6
Notes to the Financial Statements F-7 - F-10
Affirmation of the Commodity Pool Operator F-11
F-1
<page>
Patke & Associates, Ltd.
Certified Public Accountants
Report of Independent Registered Public Accounting Firm
To the Partners of
Bromwell Financial Fund, Limited Partnership
Dover, Delaware
We have reviewed the accompanying statements of assets and liabilities of
Bromwell Financial Fund, Limited Partnership, as of March 31, 2012 and the
related statements of operations, changes in net assets, and cash flows for
the three months ended March 31, 2012 and 2011. These financial statements
are the responsibility of the Partnership's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States),
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such interim financial statements for them to be in
conformity with accounting principles generally accepted in the United States
of America.
We have previously audited, in accordance with the auditing standards of the
Public Accounting Oversight Board (United States), the statement of assets and
liabilities of Bromwell Financial Fund, Limited Partnership as of December 31,
2011 and the related statements of operations, changes in net assets and cash
flows for the year ended (not presented herein) and in our report dated March
9, 2012, we expressed an unqualified opinion on those financial statements.
In our opinion, the information set forth in the accompanying statement of
assets and liabilities as of December 31, 2011 is fairly stated, in all
material respects, in relation to the statement of assets and liabilities from
which it has been derived.
/s/ Patke & Associates, Ltd.
Patke & Associates, Ltd.
Lincolnshire, Illinois
May 8, 2012
300 Village Green Drive, Suite 210 * Lincolnshire, Illinois 60069
Phone: (847) 913-5400 * Fax: (847) 913-5435
F-2
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Assets and Liabilities
March 31, December 31,
2012 2011
(A Review)
Assets
Cash $981 $508
Total assets 981 508
Liabilities
Accrued expenses 29,250 30,863
Due to related parties 205,324 189,024
Total liabilities 234,574 219,887
Net assets $(233,593) $(219,379)
Analysis of net assets
Limited partners $(142,701) $(134,018)
General partner (90,892) (85,361)
Net assets (equivalent to $(90,892.08)
and $(85,361.51) per unit) $(233,593) $(219,379)
Partnership units outstanding
Limited partners units outstanding 1.57 1.57
General partner units outstanding 1.00 1.00
Total partnership units outstanding 2.57 2.57
F-3
The accompanying notes are an integral part of the financial statements.
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Operations
(A Review)
Three Months Ended March 31,
2012 2011
Investment income
Interest income $- $-
Total investment income - -
Expenses
Professional fees 14,176 11,778
Other expenses 38 205
Total expenses 14,214 11,983
Net investment (loss) (14,214) (11,983)
Net (decrease) in net assets
resulting from operations $(14,214) $(11,983)
Net (decrease) per unit
Limited partner Limited partner unit $(5,530.57) $(4,662.84)
General partner General partner unit $(5,530.57) $(4,662.84)
F-4
The accompanying notes are an integral part of the financial statements.
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Changes in Net Assets
(A Review)
<table>
<s> <c> <c> <c> <c> <c> <c>
Partners' Capital
General Limited Total
Units Net Assets Units Net Assets Units Net Assets
Net assets at December 31, 2010 1.00 $(68,437) 1.57 $(107,446) 2.57 $(175,883)
(Decrease) in net assets from operations:
Net investment (loss) (4,663) (7,320) (11,983)
Net (decrease) in net assets resulting from operations (4,663) (7,320) (11,983)
Net assets at March 31, 2011 1.00 (73,100) 1.57 (114,766) 2.57 (175,883)
Net assets at December 31, 2011 1.00 $(85,362) 1.57 $(134,017) 2.57 $(219,379)
(Decrease) in net assets from operations:
Net investment (loss) (5,531) (8,683) (14,214)
Net (decrease) in net assets resulting from operations (5,531) (8,683) (14,214)
Net assets at March 31, 2012 1.00 $(90,893) 1.57 $(142,700) 2.57 $(233,593)
</table>
F-5
The accompanying notes are an integral part of the financial statements.
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Statements of Cash Flows
(A Review)
<table>
<s> <c> <c>
Three Months Ended March 31,
2012 2011
Cash Flows from Operating Activities
Net (decrease) in net assets resulting from operations $(14,214) $(11,983)
Adjustments to reconcile net (decrease) in net assets from
operations to net cash (used in) operating activities:
(Decrease) in accrued expenses (1,613) (435)
Net cash (used in) operating activities (15,827) (12,418)
Cash Flows from Financing Activities
Increase in due to related parties 16,300 12,400
Net cash provided by financing activities 16,300 12,400
Net increase (decrease) in cash 473 (18)
Cash at the beginning of the period 508 175
Cash at the end of the period $981 $157
</table>
F-6
The accompanying notes are an integral part of the financial statements.
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
March 31, 2012
(A Review)
1. Nature of the Business
Bromwell Financial Fund, Limited Partnership (the "Fund") was formed January
12, 1999 under the laws of the State of Delaware. The general partner and
commodity pool operator ("CPO") of the Fund is Belmont Capital Management,
Inc. ("General Partner"). The Fund was actively engaged in the speculative
trading of futures contracts in commodities from its commencement of business
in July 2000 to January 10, 2005, when it ceased trading. In the near future,
the Fund expects to file a post effective amendment to allow it to resume the
sale of its limited partnership interests on an issuer direct best efforts
basis. Once the Fund sells a to be determined minimum in limited partnership
units, it will restart active trading of futures and options on futures
through Covenant Capital Management of Tennessee, LLC, a commodity trading
advisor ("CTA") selected by the General Partner.
On October 12, 2011, the Fund filed an S-1 registration statement with the
Securities and Exchange Commission at registration number 333-177268 to
register $20,000,000 in Units of Limited Partnership Interests. Upon
effectiveness and the subsequent sale of the $1,000,000 minimum offering
amount, it will re-commence business, and an independent trading advisor will
trade the equity allocated to it by the General Partner.
2. Significant Accounting Policies
Regulation - The Fund is a registrant with the Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933 (the "Act"). The
Fund is subject to the regulations of the SEC and the reporting requirements
of the Securities and Exchange Act of 1934. 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 ("NFA") 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.
Reorganization Costs and Operating Expenses - For financial reporting
purposes in conformity with U.S. Generally Accepted Accounting Principles
("GAAP"), all accumulated reorganization costs since January 10, 2005 have
been expensed as incurred. The Fund has incurred $235,232 in reorganization
costs from the cessation of trading on January 10, 2005 through March 31,
2012. For all other purposes, including determining the Net Asset Value per
Unit for subscription and redemption purposes, the Fund will not reflect these
costs in capital until after the reimbursement is made on the resumption of
trading and, thereafter, all costs will be expensed as incurred. The
resumption of business is contingent upon the sale of a to be determined
amount of partnership interests. The Fund has agreed to reimburse the General
Partner, and other affiliated companies for all such expenses upon the sale of
the minimum and resumption of business. All costs after the resumption of
business will be paid directly by the Fund.
Consequently, as of March 31, 2012 and December 31, 2011, the Net Asset
Value and Net Asset Value per unit for financial reporting purposes and for
all other purposes are as follows:
<table>
<s> <c> <c> <c> <c>
Balance Per Unit Calculation
March 31, December 31, March 31, December 31,
2012 2011 2012 2011
Net Asset Value for financial reporting purposes $(233,593) $(219,379) $(90,892.08) $(85,361.51)
Adjustment for reorganization costs and other
operating expenses 235,232 221,018 91,529.82 85,999.25
Net Asset Value for all other purposes $1,639 $1,639 $637.74 $637.74
Number of Units 2.57 2.57
</table>
Registration Costs - Costs incurred for the initial filings with the SEC,
CFTC, NFA 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. Costs to maintain the Fund's
registration of its securities and recurring registration costs incurred since
the cessation of trading on January 10, 2005 are treated as reorganization
expenses and, accordingly, are accounted for as described above under
"Reorganization Costs and Operating Expenses".
Revenue Recognition - 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 fair value on the last business day of the reporting
period.
Fair value of futures contracts is based upon exchange or other applicable
market best available closing quotations.
Interest income is recognized when it is earned.
F-7
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
March 31, 2012
(A Review)
2. Significant Accounting Policies - Continued
Use of Accounting Estimates - The preparation of financial statements in
conformity with GAAP 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.
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.
Management has continued to evaluate the application of Financial Accounting
Standards Board Accounting Standards Codification ("ASC") 740, "Income Taxes",
to the Fund and has determined that ASC 740 does not have a material impact on
the Fund's financial statements. The Fund files federal and state tax
returns. The 2008 through 2011 tax years generally remain subject to
examination by the U.S. federal and most state tax authorities.
Statement of Cash Flows - For purposes of the Statement of Cash Flows, the
Fund considers money market funds to be cash equivalents. Net cash used in
operating activities includes no cash payments for interest or income taxes
for the three months ended March 31, 2012 and 2011.
Fund Reopening - The Fund was closed as of March 31, 2012. The Fund will
reopen to new funds at a time to be set by the General Partner.
Reclassifications - Prior year investment and other income ratios to average
net assets were reclassified to net investment income (loss) to average net
assets to conform to current year presentation.
Fair Value Measurement and Disclosures - ASC 820 establishes a fair value
hierarchy which prioritizes the inputs to valuation techniques used to measure
fair value into three broad levels. The fair value hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements).
Level 1 inputs are unadjusted quoted prices in active markets for identical
assets or liabilities that the Fund has the ability to access at the
measurement date.
Level 2 inputs are inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for an asset or liability, including
the Fund's own assumptions used in determining the fair value of investments.
Unobservable inputs shall be used to measure fair value to the extent that
observable inputs are not available, thereby allowing for situations in which
there is little, if any, market activity for the asset or liability at the
measurement date. As of and for the three months ended March 31, 2012 and year
ended December 31, 2011, the Fund had no investments.
3. 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,
includes 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
Fund.
If the daily net unit value of the Fund falls to less than 50% of the
highest value earned through trading subsequent to the resumption of business,
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.
F-8
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
March 31, 2012
(A Review)
4. The Limited Partnership Agreement
The Limited Partnership Agreement provides, among other things, the
following:
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 Fund.
Monthly Allocations - Any increase or decrease in the Fund's net asset value
as of the end of a month shall be credited or charged to the capital account
of each Fund 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 Partner.
Federal Income Tax Allocations - As of the end of each fiscal year, the
Fund'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 days prior to a month
end. Redemptions are generally paid within twenty days of the effective month
end. However, in various circumstances the General Partner may be unable to
comply with the request on a timely basis. There are no fees for redemption.
5. Fees
The Fund will be charged various fees upon the sale of the minimum and
resumption of business. These terms are currently being negotiated.
The General Partner has reserved the right to change the fee structure at
its sole discretion.
6. Related Party Transactions
Due to related parties at March 31, 2012 and December 31, 2011 consisted of
amounts due to Ashley Capital Management, Inc., Futures Investment Company,
the introducing broker, Michael Pacult, president of Futures Investment
Company, and the General Partner. The balances result from operating and
reorganization costs paid by the related parties on behalf of the Fund and
cash advances. These amounts bear no interest or due dates and are unsecured.
The balances are expected to be paid back upon the resumption of trading. The
following balances were outstanding as of March 31, 2012 and December 31,
2011:
March 31, December 31,
2012 2011
Futures Investment Company $173,750 $157,450
General Partner 27,541 27,541
Ashley Capital Management, Inc. 3,033 3,033
Michael Pacult 1,000 1,000
Total due to related parties $205,324 $189,024
ASC 460, "Guarantees", 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.
7. Indemnifications
In the normal course of business, the Fund enters into contracts and
agreements that contain a variety of representations and warranties and which
provide general indemnifications. The Fund's maximum exposure under these
arrangements is unknown, as this would involve future claims that may be made
against the Fund that have not yet occurred. The Fund expects the risk of any
future obligation under these indemnifications to be remote.
F-9
<page>
Bromwell Financial Fund, Limited Partnership
(A Delaware Limited Partnership)
Notes to the Financial Statements
March 31, 2012
(A Review)
8. Financial Highlights
Three Months Ended March 31,
2012 2011
Performance per unit (1)
Net unit value, beginning of period $(85,361.51) $(68,436.77)
Expenses (5,530.57) (4,662.84)
Net (decrease) for the period (5,530.57) (4,662.84)
Net unit value, end of period $(90,892.08) $(73,099.61)
Net assets, end of period (000) $(234) $(188)
Total return (2) (6.48)% (6.81)%
Number of units outstanding at the end of
the period 2.57 2.57
Supplemental Data:
Ratio to average net assets (3)
Net investment (loss) (25.92)% (27.25)%
Expenses (25.92)% (27.25)%
Total returns are calculated based on the change in value of a unit during
the period. An individual partner's total returns and ratios may vary from
the above total returns and ratios based on the timing of additions and
redemptions.
(1) Expenses are calculated based on a single unit outstanding during the
period.
(2) Not annualized
(3) Annualized
F-10
<page>
Bromwell Financial Fund, Limited Partnership
Affirmation of the Commodity Pool Operator
For the Three Months Ended March 31, 2012 and 2011
*****************************************************************************
To the best of the knowledge and belief of the undersigned, the information
contained in this report is accurate and complete.
/s/ Michael Pacult
Michael Pacult
President, Belmont Capital Management, Inc.
General Partner
Bromwell Financial Fund, Limited Partnership
F-11
<page>
Index to the Consolidated Financial Statements
Page
Independent Auditor's Report F-2
Financial Statements
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statements of Changes in Equity F-5
Consolidated Statements of Cash Flows F-6
Consolidated Notes to Financial Statements F-7 - F-11
F-1
<page>
Patke & Associates, Ltd.
Certified Public Accountants
Independent Auditor's Report
To the Board of Directors of
Belmont Capital Management, Inc.
Dover, Delaware
We have audited the accompanying consolidated balance sheets of Belmont
Capital Management, Inc. (an S-Corporation) and subsidiary as of December 31,
2011 and 2010, and the related consolidated statements of income, changes in
equity and cash flows for each of the three years in the period ended December
31, 2011. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement. An audit involves
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Belmont
Capital Management, Inc. and subsidiary as of December 31, 2011 and 2010 and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2011 are in conformity with accounting
principles generally accepted in the United States of America.
/s/ Patke & Associates, Ltd.
Patke & Associates, Ltd.
Lincolnshire, Illinois
March 12, 2012
300 Village Green Drive, Suite 210 * Lincolnshire, Illinois 60069
Phone: (847) 913-5400 * Fax: (847) 913-5435
F-2
<page>
Belmont Capital Management, Inc. and Subsidiary
Consolidated Balance Sheets
December 31, 2011 and 2010
<table>
<s> <c> <c>
2011 2010
Assets
Current assets
Cash $808 $476
Total current assets 808 476
Total assets $808 $476
Liabilities
Current liabilities
Due to stockholder $4,000 $4,000
Accrued liabilities 30,863 29,684
Due to related parties 162,483 119,833
Total current liabilities 197,346 153,517
Equity
Stockholder's equity
Common stock, no par value; 1,500 shares authorized,
1,000 shares issued and outstanding 1,000 1,000
Retained earnings (deficit) (63,520) (46,595)
Partner's (deficit)
Noncontrolling interest (134,018) (107,446)
Total equity (196,538) (153,041)
Total liabilities and equity $808 $476
</table>
The accompanying notes are an integral part of the
consolidated financial statements
F-3
<page>
Belmont Capital Management, Inc. and Subsidiary
Consolidated Statements of Income
For the Years Ended December 31, 2011, 2010 and 2009
<table>
<s> <c> <c> <c>
2011 2010 2009
Income
Management fees $- $- $-
Total income - - -
Expenses
Professional, accounting and legal fees 37,094 28,491 32,904
Other operating and administrative expenses 6,403 1,459 1,325
Total expenses 43,497 29,950 34,229
Net (loss) (43,497) (29,950) (34,229)
Net (loss) attributable to the noncontrolling interest (26,572) (18,296) (20,911)
Net (loss) attributable to the controlling interest $(16,925) $(11,654) $(13,318)
</table>
The accompanying notes are an integral part of the
consolidated financial statements
F-4
<page>
Belmont Capital Management, Inc. and Subsidiary
Consolidated Statements of Changes in Equity
For the Years Ended December 31, 2011, 2010 and 2009
<table>
<s> <c> <c> <c> <c>
Stockholder's Equity Partner's (Deficit)
Retained
Earnings Noncontrolling
Common Stock (Deficit) Interest Total
Beginning balance as of December 31, 2009 $1,000 $(21,623) $(68,239) $(88,862)
Net (loss) (13,318) (20,911) (34,229)
Balance as of December 31, 2009 1,000 (34,941) (89,150) (123,091)
Net (loss) (11,654) (18,296) (29,950)
Balance as of December 31, 2010 1,000 (46,595) (107,446) (153,041)
Net (loss) (16,925) (26,572) (43,497)
Balance as of December 31, 2011 $1,000 $(63,520) $(134,018) $(196,538)
</table>
The accompanying notes are an integral part of the
consolidated financial statements
F-5
<page>
Belmont Capital Management, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2011, 2010 and 2009
<table>
<s> <c> <c> <c>
2011 2010 2009
Cash Flows from Operating Activities
Net (loss) $(43,497) $(29,950) $(34,229)
Adjustments to reconcile net (loss) to net
cash provided by (used in)
operating activities:
Increase (decrease) in accrued liabilities 1,179 (1,738) 4,299
Net cash (used in) operating activities (42,318) (31,688) (29,930)
Cash Flows from Financing Activities
Increase to due to related parties 42,650 31,700 29,600
Net cash provided by financing activities 42,650 31,700 29,600
Net increase (decrease) in cash 332 12 (330)
Cash at the beginning of the year 476 464 794
Cash at the end of the year $808 $476 $464
</table>
The accompanying notes are an integral part of the
consolidated financial statements
F-6
<page>
Belmont Capital Management, Inc. and Subsidiary
Consolidated Notes to the Financial Statements
December 31, 2011
1. Nature of the Business
Belmont Capital Management, Inc. (the "General Partner") 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 Bromwell Financial Fund, Limited Partnership
(the "Fund"), its subsidiary, collectively referred to as the "Company". It
became registered as a commodity pool operator and a member of the National
Futures Association on August 5, 1999.
The Fund was actively engaged in the speculative trading of futures contracts
in commodities from its commencement of business in July 2000 to January 10,
2005, when the Fund ceased trading. The General Partner and an affiliated
limited partner intend to reopen the Fund under revised business terms.
2. Significant Accounting Policies
Regulation - The Fund is a registrant with the Securities and Exchange
Commission ("SEC") pursuant to the Securities and Exchange Act of 1933. The
Fund is subject to the regulations of the SEC and the reporting requirements
of the Securities and Exchange Act of 1934. The Fund, once it begins trading,
will also be 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 ("NFA") and the requirements of various commodity exchanges where
the Fund executes transactions. Additionally, the Fund will be subject to the
requirements of futures commission merchants and interbank market makers
through which the Fund trades.
Reorganization Costs and Operating Expenses - For financial reporting purposes
in conformity with accounting principles generally accepted in the United
States of America ("GAAP"), all accumulated reorganization costs related to
the Fund since January 10, 2005 have been expenses as incurred. The Fund has
incurred $221,018 in reorganization costs and other operating costs from the
cessation of trading on January 10, 2005 through December 31, 2011. For all
other purposes, including determining Net Asset Value per unit for
subscription and redemption purposes, the Fund will not reflect these costs in
capital until after the reimbursement is made on the resumption of trading
and, thereafter, all costs will be expensed as incurred. The resumption of
business is contingent upon the sale of at least $1,000,000 of partnership
interests. The Fund has agreed to reimburse the General Partner and other
affiliated companies for all such expenses upon the sale of the minimum and
resumption of business. All costs after the resumption of business will be
paid directly by the Fund.
Registration Costs - Costs incurred for the initial filings with Securities
and Exchange Commission, CFTC, NFA 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. Costs to maintain
the Fund's registration of its securities and recurring registration costs
incurred since the cessation of trading on January 10, 2005 are treated as
reorganization expenses and, accordingly, are accounted for as described above
under "Reorganization Costs and Operating Expenses".
Offering Expenses and Organizational Costs - Organizational costs are charged
to expense as incurred.
Purchase of units in the Fund will not acquire or
otherwise have any interest in the General Partner.
F-7
<page>
Belmont Capital Management, Inc. and Subsidiary
Consolidated Notes to the Financial Statements
December 31, 2011
2. Significant Accounting Policies, Continued
Use of Accounting Estimates - The preparation of financial statements in
conformity with GAAP 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.
Principles of Consolidation - On March 1, 2005, all but one limited partner in
the Fund had fully redeemed their interest. As of March 2, 2005, the one
remaining limited partner was an affiliate of the General Partner.
Accordingly, as of that date the General Partner had an variable interest in
the Fund and became the primary beneficiary. The General Partner has a
controlling interest in the Fund since it is the only voting member. The
General Partner is the primary beneficiary since it has the obligation to
absorb the losses of the Fund. The General Partner has consolidated the
accounts of the Fund for the period March 2, 2005 to December 31, 2011. All
significant intercompany accounts and transactions have been eliminated.
Income Tax Status - No provision for income taxes has been made in these
consolidated financial statements because each stockholder / partner is
individually responsible for reporting income or loss based on his respective
share of the Company's income and expenses as reported for income tax
purposes.
Management has continued to evaluate the application of ASC 740, "Income
Taxes", and has determined that no reserves for uncertain tax positions were
required to have been recorded as a result of the adoption of ASC 740. There
are no tax positions for which it is reasonably possible that the total
amounts of unrecognized tax benefits will significantly increase or decrease
within twelve months. The 2008 through 2011 tax years generally remain subject
to examination by the U.S. federal and most state tax authorities.
Statement of Cash Flows - Net cash used in operating activities includes no
cash payments for interest or income taxes for the years ended December 31,
2011, 2010 and 2009.
Fair Value Measurement and Disclosures - ASC 820, "Fair Value Measurements and
Disclosures", provides guidance for determining fair value and requires
increased disclosure regarding the inputs to valuation techniques used to
measure fair value. ASC 820 clarifies the definition of fair value as the
price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.
ASC 820 establishes a fair value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels. The
fair value hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1 measurements) and
the lowest priority to unobservable inputs (Level 3 measurements).
Level 1 inputs are unadjusted quoted prices in active markets for identical
assets or liabilities that the Fund has the ability to access at the
measurement date.
Level 2 inputs are inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly or indirectly.
Purchase of units in the Fund will not acquire or
otherwise have any interest in the General Partner.
F-8
<page>
Belmont Capital Management, Inc. and Subsidiary
Consolidated Notes to the Financial Statements
December 31, 2011
2. Significant Accounting Policies, Continued
Level 3 inputs are unobservable inputs for an asset or liability, including
the Fund's own assumptions used in determining the fair value of investments.
Unobservable inputs shall be used to measure fair value to the extent that
observable inputs are not available, thereby allowing for situations in which
there is little, if any, market activity for the asset or liability at the
measurement date. As of and for the years ended December 31, 2011 and 2010,
the Fund had no investments.
3. Related Party Transactions
Due to stockholder at December 31, 2011 and 2010 was a cash advance, which
bears no interest or due date and is unsecured. The balance is expected to be
paid back within a year from the date the Fund begins to trade or when the
Company is financially capable of repaying the advance.
Due to related parties at December 31, 2011 and 2010 consisted of amounts due
to Futures Investment Company, Ashley Capital Management, Inc., and Michael
Pacult, president of Futures Investment Company. The balances result from
operating and reorganization costs paid by the related parties on behalf of
the Fund and cash advances. These amounts bear no interest or due dates and
are unsecured. The balances are usually paid back within a year from the date
the Fund begins to trade or when the Fund is financially capable of repaying
the advance. The following balances were outstanding as of December 31, 2011
and 2010:
December 31,
2011 2010
Futures Investment Company $158,450 $115,800
Ashley Capital Management, Inc. 3,033 3,033
Michael Pacult 1,000 1,000
Due to related parties $162,483 $119,833
The Fund has an agreement to pay commissions to the General Partner. There
were no commissions for the years ended December 31, 2011, 2010 and 2009.
The Fund owed the General Partner $27,541 at December 31, 2011 and 2010.
These balances were eliminated in consolidation.
ASC 460, "Guarantees", 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.
Purchase of units in the Fund will not acquire or
otherwise have any interest in the General Partner.
F-9
<page>
Belmont Capital Management, Inc. and Subsidiary
Consolidated Notes to the Financial Statements
December 31, 2011
4. The Limited Partnership Agreement
The limited partnership agreement of the Fund 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 Fund.
Monthly Allocations - Any increase or decrease in the Fund'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 Partner.
Federal Income Tax Allocations - As of the end of each fiscal year, the Fund'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 are generally 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.
5. Fees
The Fund will be charged various fees upon the sale of the minimum and
resumption of business. These terms are currently being negotiated.
The General Partner has reserved the right to change the fee structure at its
sole discretion.
6. Guarantees
The General Partner is liable for the debts of the Fund.
Purchase of units in the Fund will not acquire or
otherwise have any interest in the General Partner.
F-10
<page>
Belmont Capital Management, Inc. and Subsidiary
Consolidated Notes to the Financial Statements
December 31, 2011
7. Fund Reopening
The Fund was closed as of December 31, 2011. The Fund will reopen to new
funds at the time to be set by the General Partner.
8. Subsequent Events
Management evaluated subsequent events through March 12, 2012, the date the
financial statements were available to be issued. There were no subsequent
events to disclose.
Purchase of units in the Fund will not acquire or
otherwise have any interest in the General Partner.
F-11
<page>
Part II
Statement of Additional Information
Bromwell Financial Fund, LLC
This Statement of Additional Information is the second part of a two-part
document and should be read in conjunction with Part I of Bromwell Financial
Fund's disclosure document dated June __, 2012, both of which are combined in
this single prospectus. A free copy of Part I may be requested by writing to
the General Partner at 5914 N. 300 West, Fremont, IN 46737.
Appendixes & Exhibits
Summary Of The Fund 3
Correlation Comparison 6
Fund And Offering Details 7
The Opportunity 8
Why Bromwell Financial Fund? 8
Investment Factors 8
Managed Futures Vs. Stocks During Draw-Downs 9
Value Of Diversification - Managed Futures Industry 11
Advantages Of Managed Futures Fund Investments 12
Important Disclosures 13
General Partner: 14
Appendix I - Commodity Terms and Definitions; State Regulatory Glossary
Appendix II - Privacy Statement
Appendix A - Limited Partnership Agreement
Appendix B - Request for Redemption
Appendix C - Suitability Information
Appendix D - Subscription Agreement and Power Of Attorney
Appendix E - Depository Agreement
Appendix F - Investment Advisory Contract - Covenant Capital Management,
LLC
The date of this Statement of Additional Information is June __, 2012
SAI 1
<page>
BELMONT CAPITAL MANAGEMENT, INC.
Bromwell Financial Fund, LLC
* Principal of Commodity Pool Operator has 30 years experience in managed
futures
* Trading advisor has twelve years trading experience
* Low historical correlation to stocks and bonds
* Profit potential (and risk of loss) in both rising and falling markets
* Participation in a wide variety of global markets
* Monthly liquidity after first twelve months
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE OFFERING OF UNITS IN BROMWELL FINANCIAL FUND, LLC (THE "FUND") CAN ONLY BE
MADE IN CONJUNCTION WITH PART I OF THIS PROSPECTUS, WHICH CONTAINS IMPORTANT
INFORMATION REGARDING CERTAIN RISKS ASSOCIATED WITH THE FUND AND SHOULD BE
READ CAREFULLY AND RETAINED BY ANYONE CONSIDERING INVESTMENT IN THE FUND. THE
UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE SECURITIES EXCHANGE COMMISSION, THE COMMODITY FUTURES
TRADING COMMISSION, OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. AN INVESTMENT IN THE FUND IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK.
SAI 2
<page>
SUMMARY OF THE FUND
Fund Objectives
Bromwell Financial Fund, LLC allows investors to participate in a range of
markets within a single investment. With access to an array of market sectors
and investment opportunities, an investment in the Fund may encompass
everything from stock index futures to commodity futures. Bromwell also
provides investors with the potential for above average rates of return, as
well as an important diversification from stocks, bonds and mutual funds
through professionally managed futures investment. Markets traded by the Fund
may include global equity indices, global interest rates, foreign currencies,
metals, energy products, and agricultural commodities.
Professional Management
The advisor selected by the General Partner to trade on behalf of the Fund is
Covenant Capital Management, LLC. It has over six years experience as a
commodity trading advisor, though past performance is not necessarily
indicative of future results. Covenant Capital's performance record appears
in Part I of this prospectus .
Portfolio Diversification
The ability of futures trading advisors to trade in a market by going either
long or short creates profit potential in both rising and falling markets. The
strategy of the Fund acts independently of economic prosperity, interest rates
or currency stability. Futures trading advisors can perform as well in a bear
market as in a bull market. Of course, where there is profit potential, there
is also risk of loss. The correlation between the performance of managed
futures funds and stocks and bonds has historically been very low. Thus,
managed futures funds provide vital diversification for suitable investors.
Limited Risk
An investor in the Fund has limited liability and is liable for principal and
profits only.
Liquidity
Investors in the Fund can generally withdraw their capital at the net asset
value as of the end of any month, with ten days advance written notice. Please
note, there is a twelve month lock-in before investors are eligible for
redemption.
Administrative Convenience
The Fund's General Partner sends each investor a comprehensive monthly
statement showing the results of the Fund's previous month's trading. The
General Partner provides audited reports for the Fund and a year-end statement
containing a Form K-1 for investor income tax preparation. Investors may call
their financial advisor, or the General Partner, for intra-month updates if
desired.
The General Partner
The Fund's General Partner is Belmont Capital Management, Inc., whose
principal is Mr. Michael Pacult, experienced in the field of managed futures
in the United States since 1980. The General Partner of the Fund encourages
you to read the accompanying prospectus for a more detailed description of the
advantages and risks associated with an investment in the Fund.
Selling Agent
The Fund is offered through Futures Investment Company, which is registered
with the Financial Industry Regulatory Authority. Futures Investment Company,
through its affiliate relationship with Belmont Capital Management, Inc., is
the selling agent for the Fund. Futures Investment Company is also a member
of SIPC, and registered with the SEC and CFTC, and is an NFA member.
Fund Advantage
One of the major advantages of the Bromwell Financial Fund, LLC is that the
Fund allows access to the trading advisor at the substantially lower minimum
investment requirement of $25,000. To invest with this advisor separately,
through an individually managed account, would require a substantially higher
minimum investment.
SAI 3
<page>
Checks and Balances
The following is to advise you of the structure of the Fund's business, which
is a combination of independently functioning and regulated organizations that
provide a system of checks and balances on the accuracy and integrity of one
another and your investment.
Broker: Your broker and his or her Broker/Dealer are regulated by the
Securities and Exchange Commission (SEC), the Financial Industry Regulatory
Authority (FINRA), formerly the National Association of Securities Dealers
(NASD), and the various state securities boards in which they operate.
CPO: The Fund managers are registered pursuant to the US Commodity Exchange
Act in accordance with rules established by the US Commodity Futures Trading
Commission (CFTC) as Commodity Pool Operators (CPOs). The Fund CPOs are
regulated by the National Futures Association (NFA), a CFTC authorized self
regulatory organization. The corporate CPO's financial statements are
audited annually by an independent Certified Public Accounting firm, Patke &
Associates, Ltd. In addition to auditing the financial statements of the
CPO, Patke also audits the Fund financial statements.
CTA: The CPO selects one or more independent traders who are registered
pursuant to the US Commodity Exchange Act as Commodity Trading Advisors
(CTAs). The CTA is then granted authority to enter trades utilizing the
amount of money the CPO grants the CTA for that purpose. The CTA is regulated
by the NFA.
FCM: The CTA executes the Fund trades with two independent Futures Commission
Merchant (FCM), Vision Financial 4
Markets LLC and ADM Investor Services, Inc., which are registered members of
various world-wide futures exchanges. Both the FCMs and the US exchanges are
regulated pursuant to the Commodity Exchange Act and are audited by the NFA.
All Fund trades are executed as standardized futures contracts that have
complete transparency.
Assets: All investor funds are pooled and held in the name of the Fund, with
some assets held at the FCM as margin for trading, and 0 to 3% held in a Fund
checking account to pay Fund expenses as necessary. The balances of the
assets are held in the Fund's name in T-Bills in a Treasury Direct account at
the US Treasury, or may also be held at Wells Fargo 100% Treasury Money Market
Fund, which invests only in US Treasuries, or in foreign treasuries held at
the respective foreign department of treasury.
Statements: At the end of each trading day, the FCM generates an account
statement that shows the day's trading activity, if any, and the Fund's open
market positions, if any, which shows the original date and price of each
commodity contract marked to the market's daily close. This produces a
resulting unrealized profit or loss on each position, as well as the total
value of the Fund account. The CPO, CTA, and independent Fund bookkeeper all
review the account statements daily.
Bookkeeper: The independent bookkeeper produces a daily and monthly report of
the Fund's Net Asset Value (NAV) per Unit, both of which are immediately
reviewed by the CPO when completed, and compared to the CPO's own records. In
addition to the Fund bookkeeping, the bookkeeper completes the accounting and
sends out the monthly individual investor statements.
Auditor: All of the bookkeeper's activities with respect to the preparation
of the Fund financial statements are reviewed and audited by Patke &
Associates, Ltd., the Fund's independent CPA, which in turn is subject to the
rules and regulations of the American Institute of Certified Public
Accountants (AICPA) and the Public Company Accounting Oversight Board (PCAOB).
Legal: The Fund employs independent law firms to work with the bookkeeper and
auditor to produce and update the Fund prospectus and to keep in compliance
and interface with the SEC, FINRA, NFA, CFTC, and various state securities
administrators to submit the required regulatory filings as periodically
required.
Although your investment in futures presents the risk of loss from the trades
made, please be assured that all of us-your broker, the CPO, CTA, FCM,
bookkeeper, auditor, and attorneys -while independent from each other, are
working together in a system of checks and balances to monitor your investment
for performance, accuracy, integrity, and safety to be certain the reports of
earnings and losses to you are accurate and complete.
SAI 4
<page>
Pro Forma Performance
The below capsule reflects the performance of Covenant Capital Management,
LLC's Aggressive Program that will be traded on behalf of the Fund. It is a
pro forma presentation that includes all Fund fees and expense estimations
that are disclosed in Part I of this disclosure document and assumes sale of
the maximum offering amount. Though the Fund will allocate interest income to
the benefit of its investors, the below pro formas do not include interest
income. You will acquire no interest in the program below through a
purchase in Bromwell Financial Fund.
Pro Forma Performance of the Trading Advisor's Aggressive Program
January 2004 (inception) - Mar 2012
<table>
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. AROR
2012 -1.85 2.30 -3.25
2011 -2.48 1.94 -1.32 5.05 -5.30 -2.96 1.77 1.65 -0.97 -4.30 0.71 0.45 -6.64
2010 -6.30 -0.33 -2.10 4.99 -0.88 0.01 -0.77 1.33 10.04 6.38 -1.04 6.62 18.19
2009 2.68 0.81 -5.72 2.23 8.76 -4.55 1.30 9.48 2.82 -7.51 11.74 -2.80 18.61
2008 4.80 21.55 -5.60 3.33 3.29 5.80 -8.05 -6.01 0.21 2.81 -0.10 -0.83 19.74
2007 -5.29 0.22 -10.28 7.91 0.01 -0.14 3.07 -10.28 11.83 5.56 -0.62 -2.61 -3.08
2006 7.91 -7.36 -0.02 -0.55 -9.30 -1.51 -2.53 -0.19 0.06 2.77 0.77 3.56 -7.34
2005 -3.36 16.56 1.61 2.27 5.61 0.39 3.26 3.14 8.78 -1.37 13.59 9.54 76.47
2004 0.00 0.70 6.39 -6.16 -4.19 2.73 -5.84 3.87 3.54 0.92 22.70 9.76 36.16
</table>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
Value of Initial $10,000 Investment Performance vs. Benchmarks
January 2004 (inception) - March 2012 January 2004 (inception) - March
2012
The S&P 500 and NASDAQ 100 indices are unmanaged and are generally
representative of certain portions of the U.S. equity markets. The Barclay CTA
Index is representative of the average performance of Commodity Trading
Advisors reporting to the Barclay CTA Database. These indices are shown for
illustrative purposes only and are not indicative of any fund's performance.
An investor cannot invest directly in an index. Moreover, indices do not
reflect commissions or fees which might be charged to a similar fund and which
might materially affect the performance data presented.
THE ABOVE TABLE AND TWO GRAPHS WERE PREPARED BY THE FUND AND REFLECTS THE
TRADING ADVISOR'S PROGRAM PERFORMANCE ADJUSTED TO REFLECT THE FUND'S ESTIMATED
EXPENSES AND FEE STRUCTURE. AN INVESTMENT IN BROMWELL FINANCIAL FUND, LLC
INVOLVES SUBSTANTIAL RISK AND MAY RESULT IN THE COMPLETE LOSS OF PRINCIPAL
INVESTED. A PURCHASE OF UNITS IN THE FUND DOES NOT RESULT IN ANY INTEREST IN
THE GENERAL PARTNER, THE TRADING ADVISOR, OR ANY COMMODITY POOL EXCEPT
BROMWELL FINANCIAL FUND. TRADING IN THE FUTURES AND OPTION MARKETS IS
SPECULATIVE, INVOLVES SUBSTANTIAL RISK, AND IS NOT SUITABLE FOR ALL INVESTORS.
SAI 5
<page>
Correlation Comparison
Performance through Diversification
The value of diversification can be seen by looking at the correlation
comparison of the principal of the Advisor's Aggressive Program pro forma
performance versus benchmark stock market and trading advisor indices. Since
inception in March, 2004, not only has the program outperformed the major
indices, but was also not correlated to such indices. In general, this
attribute will allow investors to potentially reduce the risk and improve the
performance in their portfolios through diversification.
The below capsule reflects the performance of Covenant Capital Management,
LLC's Aggressive Program that will be traded on behalf of the Fund. It is a
pro forma presentation that includes all Fund fees and expense estimations
that are disclosed in Part I of this disclosure document and assumes sale of
the maximum offering amount. Though the Fund will allocate interest income to
the benefit of its investors, the below pro formas do not include interest
income. You will acquire no interest in the program below through a purchase
in Bromwell Financial Fund.
Annual Rates of Return of Covenant Pro Forma, vs. Benchmarks
January 2004 (Inception) - March 2012
Covenant S&P 500 NASDAQ 100 Barclay CTA
Pro Forma
2004 36.16% 9.00% 10.45% 3.31%
2005 76.47% 3.01% 1.48% 1.71%
2006 -7.34% 13.62% 6.78% 3.55%
2007 -3.08% 3.55% 18.67% 7.66%
2008 19.74% -38.50% -41.90% 14.09%
2009 18.61% 23.45% 53.54% -0.10%
2010 18.19% 12.79% 19.23% 7.05%
2011 -6.64% -0.02% 2.71% -2.99%
2012 -2.85% 11.89% 20.97% -0.17%
Value of Initial $10,000 Investment in Covenant Pro Forma vs. Benchmarks
<table>
<s> <c> <c> <c>
January 2004 (Inception) - March 2012
Total Value Ave. Annual ROR
$10,000 invested January 2004 in Covenant would be worth $32,850 Covenant $32,850 19.68%
$10,000 invested January 2004 in the S&P 500 would be worth $12,656 S&P 500 $12,656 5.12%
$10,000 invested January 2004 in the NASDAQ 100 would be worth $18,770 NASDAQ 100 $18,770 12.12%
$10,000 invested January 2004 in Barclay CTA would be worth $13,843 Barclay CTA $13,843 4.50%
</table>
<table>
<s> <c> <c> <c> <c> <c>
Correlation Comparison
January 2004 - March 2012 Total Months: 100 Covenant Pro Forma S&P 500 NASDAQ 100 Barclay CTA
Performance Total Rate of Return 228.50% 26.56% 87.70% 38.43%
Ave. Annual Rate of Return 19.68% 5.12% 12.12% 4.50%
Risk Worst Peak-to-Valley Drawdown* -27.15% -52.56% -50.12% -7.73%
Standard Deviation of Annual Returns** 27.07% 17.53% 25.01% 5.16%
Statistics Sharpe Ratio*** 0.64 0.08 0.27 0.47
Correlation to GT Pro Forma 1.00 -0.09 -0.13 0.05
</table>
* Worst Peak-to-Valley Drawdown 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.
** Standard Deviation shows the annualized performance volatility by
quantifying the amount of dispersion you can expect performances to fall
around the average or mean return.
*** Sharpe Ratio is a risk-adjusted measure used to determine reward per unit
of risk. The higher the ratio, the better the fund's historical risk-adjusted
performance. The measure uses a compounded annual return minus the available
annual risk free rate in 13-week T-Bill returns divided by average annual
standard deviation.
The S&P 500 and NASDAQ 100 indices are unmanaged and are generally
representative of certain portions of the U.S. equity markets. The Barclay CTA
Index is representative of the average performance of Commodity Trading
Advisors reporting to the Barclay CTA Database. These indices are shown for
illustrative purposes only and are not indicative of any fund's performance.
An investor cannot invest directly in an index. Moreover, indices do not
reflect commissions or fees which might be charged to a similar fund and which
might materially affect the performance data presented.
THE ABOVE TABLES WERE PREPARED BY THE FUND AND REFLECTS THE TRADING ADVISOR'S
PROPRIETARY PERFORMANCE ADJUSTED TO REFLECT THE FUND'S ESTIMATED EXPENSES AND
FEE STRUCTURE. AN INVESTMENT IN BROMWELL FINANCIAL FUND, LLC INVOLVES
SUBSTANTIAL RISK AND MAY RESULT IN THE COMPLETE LOSS OF PRINCIPAL INVESTED.
A PURCHASE OF UNITS IN THE FUND DOES NOT RESULT IN ANY INTEREST IN THE GENERAL
PARTNER, THE TRADING ADVISOR, OR ANY COMMODITY POOL EXCEPT BROMWELL. PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. TRADING IN THE
FUTURES AND OPTION MARKETS IS SPECULATIVE, INVOLVES SUBSTANTIAL RISK, AND IS
NOT SUITABLE FOR ALL INVESTORS. PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS.
SAI 6
<page>
Fund and Offering Details
The Fund
Investment Goal Medium to Long-Term Capital Appreciation
General Partner Belmont Capital Management, Inc.
Trading Advisors Covenant Capital Management, LLC
Clearing Brokers Vision Financial Markets LLC and ADM Investor Services, Inc.
The Offering
Minimum Investment $25,000
Increment Amount $1,000
Subscription Fee None
Subscription Price Net Asset Value
Subscription Notice Subscriptions Available Monthly with Five Business
Days Notice
Subscription Procedure Subscribers Must Complete, Execute and Deliver to
Their Selling Agents the Subscription Agreement and Power of Attorney
Signature Page attached to this Prospectus as Appendix D.
Redemption Notice Liquidity Available Monthly, Beginning Thirteenth Month with
Ten Days Notice
Investor Liability Limited to the Amount of Capital Invested
Investor Suitability Net Worth of $250,000 -or-
Income of $70,000 and Net Worth of $70,000
Plus Specific State Requirements
Please Refer to Part I of the Prospectus
for Additional Information
Fees and Expenses
Selling Agent Compensation 6% up front selling commission and $2,000 in
legal fees associated with the review of this offering
by FINRA that the Fund has paid.
Introducing Broker Compensation 4% Fixed Brokerage Commissions
General Partner Compensation 2% Fixed Brokerage Commissions
Trading Advisor Compensation Management Fee of 1% Annually of Assets
Allocated to Trading
Incentive Fee of 20% of New Net Profit Quarterly
Accounting, Legal & Misc. Estimated $30,000 annually if the minimum is
sold and $90,000 annually if the maximum is sold
Reimbursement of Offering &
Reorganizational Expenses Estimated $235,000,
amortized over 60 months after the commencement of business
Redemption Fee / Lock-in No Redemption Fee; Twelve Month Lock-In
SAI 7
<page>
The Opportunity
* Professionally managed futures funds offer access to global markets,
along with the potential to profit from rising or falling markets.
* Professionally managed futures funds add an important component to a
diversified growth portfolio.
* In the opinion of the General Partner, Bromwell Financial Fund, LLC
offers a more simple and effective way to participate in futures through use
of a successful futures trading advisor than through a managed account or
discretionary trading yourself.
How to Subscribe
* After reviewing the Prospectus, please complete and sign the items in
the Subscription Agreement attached as Appendix D.
* Forward the Subscription Agreement and a check made payable to "Star
Financial Bank for the exclusive benefit of the customers of Bromwell
Financial Fund, LLC" to your broker or investment advisor.
The Fund is open to qualified investors and the current minimum investment is
$25,000. New investments are entered into the Fund at the end of the month in
which they are received and must be received on the 5th business day prior to
the end of the month.
WHY BROMWELL FINANCIAL FUND?
WHY A MANAGED FUTURES FUND?
Managed futures investments are intended to generate long-term capital growth
by providing global portfolio diversification. This diversification can be
utilized by investing in the Fund. A primary reason to invest in a managed
futures (alternative investment) product, such as Bromwell Financial Fund, is
to obtain a diversified portfolio of investments that has the potential to
improve returns while protecting against risk. This is possible because
managed futures (alternative investment) products historically have not been
correlated to traditional markets, such as stocks and bonds.
The Bromwell Financial Fund employs a professional commodity trading advisor,
Covenant Capital Management, LLC, that trades as many as 15 futures markets
worldwide using proprietary trading systems. The principal of the trading
advisor has consistently produced positive returns in his proprietary account,
even during down markets, due to diversified trades and the ability to spot
trends, while insuring strict risk controls are always in place. Of course,
past performance is not necessarily indicative of future results.
WHY NOW?
The recent fluctuation in world markets has demonstrated that long-only equity
portfolios cannot make money during downward cycles. The Fund adds much needed
diversification in the form of an asset class that does not correlate to
stocks, bonds or real estate.
INVESTMENT FACTORS
THE ADVANTAGES OF NON-CORRELATION AND DIVERSIFICATION OF YOUR PORTFOLIO
The Nobel Prize for Economics in 1990 was awarded to Dr. Harry Markowitz for
demonstrating that the total return can increase, and/or risk can be reduced,
when portfolios have positively performing asset categories that are
essentially non-correlated. Even many seemingly diverse portfolios may
actually be quite correlated. For instance, over time, alternative investment
classes such as real estate and international stocks and bonds may correlate
closely with domestic equities as the global economy expands and contracts.
Historically, alternative investments such as managed futures funds have had
very little correlation to the stock and bond markets. Belmont Capital
Management, Inc. believes that the performance of the Fund should also exhibit
a substantial degree of non-correlation (not necessarily, however, negative
correlation) with the performance of traditional equity and debt portfolio
components, in part because of the ease of selling futures short. This feature
of futures -- being able to be long or short a futures position with similar
ease - means that profit and loss from futures trading is not dependent upon
economic or geopolitical prosperity or stability.
SAI 8
<page>
However, non-correlation will not provide any diversification advantages
unless the non-correlated assets are outperforming other portfolio assets, and
there is no guarantee that the Fund will outperform other sectors of an
investor's portfolio (or not produce losses). Additionally, although adding
managed futures funds to a portfolio may provide diversification, managed
futures funds are not a hedging mechanism and there is no guarantee that
managed futures funds will appreciate during periods of inflation or stock and
bond market declines.
Non-correlated performance should not be confused with negatively correlated
performance. Non-correlation means only that the Fund's performance will
likely have no relation to the performance of equity and debt instruments,
reflecting Belmont Capital's belief that factors that affect equity and debt
prices may affect the Fund differently and that certain factors which affect
the former may not affect the latter. The net asset value per unit may decline
or increase more or less than equity and debt instruments during both rising
and falling markets. Belmont Capital has no expectation that the Fund's
performance will be negatively correlated to the general debt and equity
markets, i.e., likely to be profitable when the latter are unprofitable or
vice versa.
MANAGED FUTURES VS. STOCKS DURING DRAW-DOWNS
The following charts show the comparison between the performance of managed
futures and stocks during the five worst declines for each since 1980. These
charts demonstrate the historical non-correlation between these two asset
classes over the stated time periods. The managed futures portion is
represented by the Barclay CTA Index and the stocks portion is represented by
the S&P 500 Index.
Managed Futures vs. Stocks During Stock Market Drawdowns.
(January 1980* - March 2012)
Source: Stocks: S&P 500 Index
Managed Futures: Barclay CTA Index
* Barclay CTA data was not available prior to 1980.
This chart was prepared by the Fund. See the glossary in Appendix I of this
Statement of Additional Information for information integral to this chart.
This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular. The S&P 500 index is unmanaged and is
generally representative of a certain portion of the U.S. equity markets. The
Barclay CTA Index reflects the unweighted performance of CTAs with at least
four years of experience. These indices are shown for illustrative purposes
only and are not indicative of any fund's performance. An investor cannot
invest directly in an index. Moreover, indices do not reflect commissions or
fees which might be charged to a similar fund and which might materially
affect the performance data presented.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
SAI 9
<page>
Worst-Case Declines
Worst-Case Declines
January 1980* - March 2012
[Amounts in Percents]
* Barclay CTA data was not available prior to 1980.
This chart was prepared by the Fund. See the glossary in Appendix I of this
Statement of Additional Information for information integral to this chart.
This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular. The S&P 500, NASDAQ composite, and MSCI
Europe, Australia, Far East indices are unmanaged and are generally
representative of certain portions of the U.S. and global equity markets. The
Barclay Govt. Bond Index is unmanaged and generally representative of the
global sovereign bond market. The Barclay CTA Index reflects the unweighted
performance of CTAs with at least four years of experience. These indices are
shown for illustrative purposes only and are not indicative of any fund's
performance. An investor cannot invest directly in an index. Moreover, indices
do not reflect commissions or fees which might be charged to a similar fund
and which might materially affect the performance data presented.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
HISTORICAL CORRELATION
The chart below shows the historical correlation of the monthly returns of the
S&P 500 Index with (2) the NASDAQ Composite Index, (3) the MSCI Europe,
Australasia, Far East (EAFE) Index, (4) global bonds, as represented by the
Barclay Aggregate Bond Index, and (5) managed futures investments, as
represented by the Barclay CTA Index. This low correlation shows that managed
futures have a tendency to behave somewhat independently from stocks.
SAI 10
<page>
Historical Correlation of Monthly Returns
With The S&P 500 Index
January 1980* - March 2012
* Barclay CTA data was not available prior to 1980.
This chart was prepared by the Fund. See the glossary in Appendix I of this
Statement of Additional Information for information integral to this chart.
This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular. The S&P 500, NASDAQ composite, and MSCI
Europe, Australia, Far East indices are unmanaged and are generally
representative of certain portions of the U.S. and global equity markets. The
Barclay Aggregate Bond Index is unmanaged and generally representative of the
global bond market. The Barclay CTA Index reflects the unweighted performance
of CTAs with at least four years of experience. These indices are shown for
illustrative purposes only and are not indicative of any fund's performance.
An investor cannot invest directly in an index. Moreover, indices do not
reflect commissions or fees which might be charged to a similar fund and which
might materially affect the performance data presented.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
MARKET DIVERSIFICATION
The trading advisor's proprietary systems are designed to ensure minimal
correlation to traditional investments. The spectrum of traded instruments
globally consists of up to 15 futures markets in both commodity and financial
futures. Fundamental to the Fund's selection of CTA's is low correlation
among the different instruments it trades and high liquidity for order
execution.
This chart was prepared by the Fund. See the glossary in Appendix I of this
Statement of Additional Information for information integral to this chart.
This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
VALUE OF DIVERSIFICATION - MANAGED FUTURES INDUSTRY
Money Under Management in Managed Futures
Money Under Management in Managed Futures is updated on a quarterly basis and
is usually ready by month end of the month following the quarter. Money Under
Management as of the end of 2011 was $314.6 billion.
SAI 11
<page>
This chart was prepared by the Fund and shows industry growth since 1980 using
data obtained from Barclay Trading Group, Ltd. See the glossary in Appendix I
of this Statement of Additional Information for information integral to this
chart. This chart reflects the managed futures industry as a whole and is not
indicative of the Fund in particular.
RISK PERSPECTIVE
The proper evaluation of any investment must include an assessment of the risk
which must be taken to achieve the prospective return. Another measure of
risk, in addition to standard deviation, is historical worst-case decline, or
largest draw-down. In other words, if you had purchased an investment at a
month-end peak in performance and then subsequently sold at the lowest month-
end price thereafter, the worst-case decline would be the largest percentage
loss experienced. The chart below shows the worst-case cumulative monthly
decline in the Barclay Aggregate Bond Index, the Barclay CTA Index, the S&P
500 Index, the MSCI EAFE Index and the NASDAQ Composite Index since 1980. The
Barclay CTA Index experienced a smaller peak to valley decline than the
equities indices, and only slightly greater than the bond index. This does not
imply that managed futures are necessarily safer than the benchmarks compared;
it is merely intended to put risk in a historical perspective.
ADVANTAGES OF MANAGED FUTURES FUND INVESTMENTS
Both the futures and options markets and funds investing in those markets
offer many structural advantages that make managed futures an efficient way to
participate in global markets. The Fund believes that this investment should
be considered as a medium to long-term investment and should not be purchased
with the intent to redeem the investment within the first three years.
PROFIT POTENTIAL
Futures and related contracts can easily be leveraged, which magnifies the
potential profit or loss.
INTEREST CREDIT
Unlike some other alternative investment funds, the Fund does not borrow money
in order to obtain leverage, so the Fund does not incur any interest expense.
Rather, the Fund's margin deposits are maintained in cash and cash
equivalents, such as U.S. Treasury bills.
GLOBAL DIVERSIFICATION WITHIN A SINGLE INVESTMENT
Futures and related contracts can be traded in many countries, which makes it
possible to diversify risk around the world. This diversification is available
both geographically and across market sectors. For example, an investor can
trade interest rates, stock indices and currencies in several countries around
the world, as well as energy and metals. While the Fund itself trades across a
diverse selection of global markets, an investment in the Fund is not a
substitute for overall portfolio diversification.
SAI 12
<page>
ABILITY TO PROFIT OR LOSE IN A RISING OR FALLING MARKET ENVIRONMENT
The Fund can establish short positions and thereby profit from declining
markets as easily as it can establish long positions. This potential to make
or lose money, whether markets are rising or falling around the world, makes
managed futures particularly attractive to sophisticated investors. Of course,
if markets go higher while the Fund has a short position, the Fund will lose
money until the short position is exited and vice versa.
PROFESSIONAL TRADING
Belmont Capital's approach includes the following elements:
* Disciplined Money Management. The CTA selected by the General Partner
generally allocates a portion of portfolio equity to any single market
position. However, no guarantee is provided that losses will be limited to
these percentages.
* Balanced Risk. The Fund's capital is allocated to as many as 15 markets
24 hours a day. Among the factors considered for determining the portfolio mix
are market volatility, liquidity and trending characteristics.
* Capital Management. When proprietary risk/reward indicators reach
predetermined levels, the Fund may increase or decrease commitments in certain
markets in an attempt to reduce performance volatility.
* Multiple Systems. While the Fund's approach is to find emerging trends
and follow them to conclusion, no one system is right all of the time. The CTA
utilizes a multi-system trading strategy on behalf of the Fund that divides
capital among different trading systems in an attempt to reduce performance
volatility and manage risk.
CONVENIENCE
Through the Fund, investors can participate in global markets and
opportunities without needing to master complex trading strategies and monitor
multiple international markets.
LIQUIDITY
In most cases, the underlying markets have sufficient liquidity. Some markets
trade 24 hours a day when global markets are open. While there can be cases
where there may be no buyer or seller for a particular contract, the Fund
tries to select markets for investment based upon, among other things, their
perceived liquidity. However, unexpected market illiquidity has caused major
losses in recent years in such sectors as emerging markets and mortgage-backed
securities. There can be no assurance that the same will not happen to the
Fund at any time or from time to time.
Important Disclosures
Bromwell Financial Fund, LLC is a registered commodity pool and is not subject
to the same regulatory requirements as a mutual fund, including mutual fund
requirements to provide certain daily standardized pricing and evaluation
information to investors. The following should be noted:
* The Fund is a speculative investment and involves a high degree of risk.
An investor could lose all of his/her investment.
* The Fund has not been operational since January, 2005 and has no
performance history since that date.
* An investment in the Fund is not suitable for all investors.
* The Fund may be leveraged and the Fund's performance can be volatile.
* A substantial portion of the Fund's trades may be executed on foreign
exchanges, which could mean higher risk.
* An investment in the Fund may be illiquid (monthly redemptions are
available subject to market disruption) and there are significant restrictions
on transferring interests in the Fund. There is no secondary market for an
investor's investment in the Fund and none is expected to develop.
* The Fund's fees and expenses - which may be substantial regardless of
any positive return - are deducted from profits, and returns to clients will
be net of fees.
* Diversification does not assure a profit or provide a guarantee against
loss in a declining market.
This summary is not a complete list of the risks and other important
disclosures involved in investing in the Fund and is subject to the more
complete disclosures contained in Part I of the Fund's Prospectus, which
should be reviewed carefully.
SAI 13
<page>
BELMONT CAPITAL MANAGEMENT, INC.
General Partner:
Belmont Capital Management, Inc.
P.O. Box 760
5914 N. 300 West
Fremont, IN 46737
(260) 833-1306
THE OFFERING OF UNITS IN BROMWELL FINANCIAL FUND, LLC (THE "FUND") CAN ONLY BE
MADE IN CONJUNCTION WITH PART I OF THIS PROSPECTUS, WHICH CONTAINS IMPORTANT
INFORMATION REGARDING CERTAIN RISKS ASSOCIATED WITH THE FUND AND SHOULD BE
READ CAREFULLY AND RETAINED BY ANYONE CONSIDERING INVESTMENT IN THE FUND. THE
UNITS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE SECURITIES EXCHANGE COMMISSION, THE COMMODITY FUTURES
TRADING COMMISSION, OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. AN INVESTMENT IN THE FUND IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK.
SAI 14
<page>
APPENDIX I
Commodity Terms and Definitions
Identification of the parties and knowledge of various terms and concepts
relating to trading in futures contracts and this offering are necessary for a
potential investor to identify the risks of investment in the partnership.
1256 Contract. See Taxation - Section 1256 Contract.
Additional Sellers. See definition of Selling Agent.
Associated Persons. The persons registered pursuant to the Commodity Exchange
Act with the futures commission merchants, who are eligible to service the
partnership or the partnership accounts.
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 will try to accomplish a
result without any contractual obligation to achieve that result.
Broker. See definitions of Futures Commission Merchant and Introducing
Broker.
Capital means cash invested in the partnership by any partner and placed at
risk for the business of the partnership.
Commodity Futures trading Commission. Commodity Futures Trading Commission,
1155 21st St NW, Washington, D.C., 20036. An independent regulatory
commission of the United States government empowered to regulate commodity
futures transactions and the registration of the general partner, futures
commission merchants, trading advisor and commodity exchanges pursuant to the
U.S. 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 and
Introducing Broker.
Commodity Exchange Act. The statute providing the regulatory scheme for
trading in commodity futures and options contracts and the commodity pool
operators, futures commission merchants, and trading advisors in the United
States under the administration of the Commodity Futures Trading Commission.
Commodity Pool Operator. Belmont Capital Management, Inc., 5914 N. 300 West,
P. O. Box 760, Fremont, IN 46737, (260) 833-1306; and, Mr. Michael P. Pacult,
5914 N. 300 West, P.O. Box 760, Fremont, IN 46737. A person who raises
capital through the sale of interests in an investment trust, partnership,
corporation, syndicate or similar form of enterprise, that uses that capital
to invest either entirely or partially in futures contracts.
Commodity Trading Advisor. 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).
Depository Account. An account maintained by the general partner that will
hold all the subscription documents and proceeds until such time as either the
subscription is accepted or rejected or the offering is terminated.
1
<page>
Exchange for Physicals. 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).
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. The entity 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
introducing broker is responsible for the negotiation and payment of the
commission to the futures commission merchants.
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.
General Partner. Belmont Capital Management, Inc., 5914 N. 300 West, P. O.
Box 760, Fremont, IN 46737, (260) 833-1306; and, Mr. Michael P. Pacult, 5914
N. 300 West, P.O. Box 760, 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.
Introducing Broker (IB). An entity that may share the brokerage commissions
and is responsible for introducing trades to the futures commission merchants.
Futures Investment Company, 5914 N. 300 West, P. O. Box 760, Fremont, IN
46737, (260) 833-1306, is the affiliated introducing broker of the
partnership.
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 a 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 which will terminate this offering.
National Futures Association (NFA). The self regulatory organization that is
responsible for the legal and fair operation of commodity pool operators, such
as the general partner of the partnership, commodity trading advisors, such as
the trading advisor for the partnership, introducing brokers, such as the
introducing broker for the partnership, for futures commission merchants, such
as the clearing broker of the partnership, and such other matters within the
authority granted to it by the CFTC pursuant to the Commodity Exchange Act.
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),
including investments in U.S. Treasuries, and cash management funds that
invest in only U.S. Treasuries, , 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).
2
<page>
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 and Organizational Expenses. The partnership has paid the offering
and organizational expenses from the gross proceeds of the offering at the
time of the sale of the minimum and the subsequent initial closing. 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, these expenses
cannot exceed 15% of capital raised pursuant to the offering.
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.
Partners. The general partner and all limited partners in the partnership.
Partnership or Limited Partnership or Commodity Pool or Pool or Fund. The
Bromwell Financial Fund, Limited Partnership, evidenced by Exhibit A to this
Prospectus, 505 Brookfield Drive, Dover, DE 19901, (800) 331-1532.
Position Limits. The Commodity Futures Trading Commission has established
maximum positions which 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, the principal of the general partner.
Round-turn Trade. The initial purchase or sale of a futures contract or
option on a futures contract and the subsequent offsetting sale or purchase of
such contract.
Redemption. The right of a partner to tender its or his or her partnership
interests to the partnership for surrender at the net unit value. See the
Limited Partnership Agreement attached as Exhibit A.
Selling Agent. Futures Investment Company, 5914 N. 300 West, Fremont, IN
46737, which is to offer the partnership interests for sale on a best efforts
basis. See Plan of Distribution.
Selling Commissions. A commission paid from the subscription amount for
selling the partnership interests. There is a 6% up front selling commission
on gross subscription amounts in this offering.
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.
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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 which 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.
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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. which publishes
"Guidelines for the Registration of Commodity Pool Programs", such as the
partnership, 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 partnership.
Administrator-The official or agency administering the security laws of a
state. This will usually be the State of residence of the partnership 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 advisor 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".
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.
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Participant-The holder of a Program Interest. A Partner in the partnership.
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 general partner from the fixed commissions.
Program-A limited partnership, joint venture, corporation, trust or other
entity formed and operated for the purpose of investing in Commodity
Contracts. The partnership.
Program Broker-A Commodity Broker that effects trades in Commodity Contracts
for the account of a Program. See the Futures Commission Merchant and
Introducing Broker.
Program Interest-A limited partnership interest or other security representing
ownership in a program. The units in the partnership. 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. The general partner is a sponsor of this partnership.
Valuation Date-The date as of which the Net Assets of the Program are
determined. For the partnership, 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
partnership, this will be the close of business for each calendar month and
each calendar year.
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APPENDIX II
PRIVACY STATEMENT
BROMWELL FINANCIAL FUND, LP
505 Brookfield Drive
Dover, DE 19901
Telephone: (800) 331-1532
Bromwell Financial Fund, LP is committed to safeguarding the confidential
information of its partners. We hold all personal information provided to us
in the strictest confidence. These records include all personal information
that we collect from you. We have never disclosed information to
nonaffiliated third parties, except as directed by you or required by law, and
we do not anticipate any change in these procedures in the future. If we were
to change this disclosure policy, we would not take such action without your
permission.
A full statement of our privacy policy with respect to personal information
about you is as follows:
* We limit employee and independent contractor representatives of ours
access to information in your file to only to those persons who have a
business or professional reason for knowing.
* We limit the delivery of your information to only those nonaffiliated
parties who directly service your account such as trustees and clearing
brokers, or as directed by you or as required by law. As examples, Federal
regulations permit us to share a limited amount of information about you with
a clearing brokerage firm in order to execute securities transactions on your
behalf and we have implied permission from you to discuss your financial
situation with your accountant or other professional.
* We use our best efforts to maintain a secure office and computer
environment to ensure that your information is not placed at unreasonable
risk. Your personal information is not released to other investors.
* The categories of nonpublic personal information that we collect from a
prospect, partner, client and independent third parties depend upon the scope
of the client engagement. It will include information about your personal
finances, information about your health to the extent that it is needed for
the planning process, information about transactions between you and third
parties, and information from consumer reporting agencies.
* For unaffiliated third parties that require access to your personal
information, including financial service companies, consultants, and auditors,
we also require strict confidentiality in our agreements with them and expect
them to keep this information private. Federal and state regulators also may
review firm records as permitted under law.
* Personally identifiable information about you will be maintained during
the time you are a partner or client, and for the required time thereafter
that such records are required to be maintained by Federal and state
securities laws. After this required period of record retention, all such
information is expected to be destroyed.
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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 8th of
November, 2005, by and among Belmont Capital Management, Incorporated, a
Delaware corporation ("Belmont" or "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 12th day of January,
1999, that formed Bromwell Financial Fund, Limited Partnership, a Delaware
limited partnership, (hereinafter called either "Partnership" or the "Fund")
that was previously amended and restated in full on October 11, 2011.
WITNESSETH:
IN CONSIDERATION of good and valuable consideration, the receipt of which is
hereby acknowledged, Belmont Capital Management, Incorporated, the 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").
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:
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(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 an annual percentage 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 the Commodity Trading Advisor receives a management fee
of one twelfth (1/12) of a percent per month (1% annually) of the Net Assets
of the Partnership;
(i) the term INCENTIVE FEE means a percentage of the profits accrued and
paid to the CTA and General Partner, or its Affiliates, 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. Presently, CTA
is paid a twenty percent (20%) incentive fee;
(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,
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(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 6% annually for
trades made on domestic markets payable to the 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.
In addition, if extraordinary 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 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, web design and promotion 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 Belmont Capital Management,
Incorporated, 5914 N. 300 West, Fremont, IN 46737, (260) 833-1306 ("Belmont");
(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;
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(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 DOING SO, YOU SHOULD BE AWARE THAT
COMMODITY INTEREST 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 20 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 at the offices of the General
Partner, 5914 N. 300 West, Fremont, IN 46737 or such other address and
telephone number as the General Partner shall, from time to time, determine.
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2.2 PARTNERSHIP AFFILIATES.
(a) POOL OPERATOR NAME AND PRINCIPALS. The General Partner shall serve as the
commodity pool operator for the Partnership. Michael P. Pacult is the sole
principal, shareholder, director and officer of the 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").
Belmont is registered as a commodity pool operator with the Commodity Futures
Trading Commission pursuant to the Commodity Exchange Act and as a member 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.
(b) COMMODITY TRADING ADVISOR NAMES AND PRINCIPALS. The General Partner
selects and assigns partnership equity to one or more independent CTAs 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, INTRODUCING BROKER & FUTURES COMMISSION
MERCHANT NAMES AND PRINCIPALS. Belmont Financial Management, Inc., 5914 N. 300
West, P.O. Box 760, Fremont, IN 46737 (260) 833-1306 the General Partner, will
serve as the Commodity Pool Operator ("CPO"). Futures Investment Company, 5914
N. 300 West, P.O. Box 760, Fremont, IN 46737 (260) 833-1306 will serve as the
affiliated Introducing Broker ("IB") of the Partnership and will be paid fixed
brokerage commissions by the Partnership for clearing trades through the
futures commission merchant (the "FCM"). From the 4% fixed brokerage
commissions paid to it by the General Partner, the IB will pay the round-turn
brokerage commissions for domestic trades, 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 its sole discretion, 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 the General Partner and
Commodity Pool Operator, the Commodity Trading Advisor, the Futures Commission
Merchant, Introducing 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.
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:
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(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.
(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 any 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.
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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 shall not be required to make any capital
contribution to the Partnership except for purchases that are required by law.
(b) 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.
(c) All subscriptions for Units made pursuant to the offering of the Units
must be on the form provided with the Prospectus.
(d) Upon the sale and acceptance of Units by the General Partner,
subscription proceeds will be transferred from the depository account 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
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.
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(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 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
domestic 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.
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(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) 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.
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(h) 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.
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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 by web design, promotion, and other means used in connection with
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 ten percent (10%) to be established, from
time to time, by the General Partner, for sales of Units;
(ii) Total management fees of up to 6% annually, paid monthly to the General
Partner and/or non-affiliated independent investment or trading advisor;
(iii) An incentive fee, paid quarterly, of up to twenty-five percent (27%) 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. 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.
(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 accounting, audit and
legal fees.
(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 of a percentage of the assigned trading equity; and,
(ii) an incentive fee 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.
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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
operated this partnership since inception. In addition, Mr. Pacult, has been
engaged in supervision of individual managed commodity accounts for over 31
years, serves as the principal of a general partner for three other funds and
as an individual commodity pool operator for those funds, and has operated
this partnership since August, 2003. 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 Introducing Broker 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 Partnership is selling its Units through an
affiliated broker/dealer and, therefore, no independent due diligence of the
Offering or the Partnership or the General Partner will be made by a Financial
Industry Regulatory Authority, Inc. member.
(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, as
principal of Belmont, 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 TriView Global Fund, LLC and other conflicts could arise
should either Belmont or he exercise their right to form other commodity
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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 and the affiliated Introducing Broker have financial interest
in the operation of the Partnership by virtue of fixed brokerage commissions,
it is unlikely that the 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 for domestic trades entered by the
CTA payable monthly to the General Partner have not been negotiated at arm's
length, nor has the selling commission to the affiliated Selling Agent. 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 its affiliate receiving the fixed brokerage commissions 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 affiliated Introducing Broker 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% of New Net Profits. The
arrangements between the General Partner and the Partnership with respect to
the payment of the commissions are believed to be fair and reasonable.
(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 Partnership is selling its Units through an
affiliated selling agent 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 merchants and
other accounts, and has otherwise assured the Partnership 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 management fee.
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(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, it is possible that the CTA, with the direct or
indirect approval of the 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, Ltd. 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 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.
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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;
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(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.
(c) the General Partner, at its sole discretion, may cause a Redemption by a
Limited Partner of their Units as of 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 computed after the date of this agreement;
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(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 thousand dollars in value of partnership 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.
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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 no later
than March 31 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.
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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 General Partner may resign upon
120 days notice to all other Partners. The 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 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 General Partner, the
General Partner shall pay the legal fees, recording fees and all other
expenses incurred as a result of its withdrawal. Upon resignation, the General
Partner shall be paid the items identified in Section 8.7 below.
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8.7 AMENDMENT INVOLVING SUCCESSOR 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 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 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 General Partner's interest in the Partnership.
(b) The Partnership shall pay to the removed 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 General Partner's
interest in the Partnership shall equal such General Partner's interest in the
sum of (1) the Expenses advanced by the 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 General
Partner believes that the net book value of an asset does not fairly represent
its fair market value in which event such 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, of the
General Partner, 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 January 12,
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
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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 twelve months
from the date of purchase of the Units and, provided further, that the Partner
maintain an investment in the Partnership of $5,000 or more.
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 became
effective, 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) If redemption requests received from limited partners exceed funds
available, redemptions will be allocated on a prorated basis for the then
current redemption period and paid as a preference in future redemptions
periods as cash becomes available.
(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. 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.
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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 ($637.74), less commissions and other charges, or
such higher value earned after the re-commencement of business, 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
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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.
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(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.
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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.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement the day and year first above written.
General Partner:
BELMONT CAPITAL MANAGEMENT, INCORPORATED
By:
Michael P. Pacult President
Agent for Limited Partners:
Belmont Capital Management, Inc.
By:
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 _____________________________
5914 N. 300 West Our Social Security Number or
P. O. Box 760 Taxpayer ID Number
Fremont, IN 46737
_____________________________
Joint Social Security Number or
Taxpayer ID Number
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 $____________________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, partner, (Signature of Limited 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 prospectus dated June __, 2012, (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 "Star Financial Bank for the exclusive
benefit of the customers of Bromwell Financial Fund, LP". Purchaser is also
delivering to the Partnership 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 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.
(f) Purchaser either is not required to be registered with the Commodity
Futures Trading Commission ("CFTC") or to be a member of the National Futures
Association ("NFA") or if required to be so registered is duly registered with
the CFTC and is a member in good standing of the NFA.
(g) If the undersigned is acting on behalf of an "employee benefit plan," as
defined in and subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or a "plan" as defined in and subject to Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code") (a "Plan"), the
individual signing this Subscription Agreement and Power of Attorney on behalf
of the undersigned hereby further represents and warrants as, or on behalf of,
the Plan responsible for purchasing units (the "Plan Fiduciary") that: (a) the
Plan Fiduciary has considered an investment in the Fund for such plan in light
of the risks relating thereto; (b) the Plan Fiduciary has determined that, in
view of such considerations, the investment
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in the Fund is consistent with the Plan Fiduciary's responsibilities under
ERISA; (c) the Plan's investment in the Fund does not violate and is not
otherwise inconsistent with the terms of any legal document constituting the
Plan or any trust agreement thereunder; (d) the Plan's investment in the Fund
has been duly authorized and approved by all necessary parties; (e) none of
the General Partner, the Fund's advisors, the Fund's cash manager, the Fund's
futures brokers, any selling agent, any of their respective affiliates or any
of their respective agents or employees: (i) has investment discretion with
respect to the investment of assets of the Plan used to purchase units; (ii)
has authority or responsibility to or regularly gives investment advice with
respect to the assets of the Plan used to purchase units for a fee and
pursuant to an agreement or understanding that such advice will serve as a
primary basis for investment decisions with respect to the Plan and that such
advice will be based on the particular investment needs of the Plan; or (iii)
is an employer maintaining or contributing to the Plan; and (f) the Plan
Fiduciary (i) is authorized to make, and is responsible for, the decision to
invest in the Fund, including the determination that such investment is
consistent with the requirement imposed by Section 404 of ERISA that Plan
investments be diversified so as to minimize the risks of large losses, (ii)
is independent of the General Partner, the Fund's advisors, the Fund's cash
manager, the Fund's futures brokers, any selling agent, each of their
respective affiliates, and (iii) is qualified to make such investment
decision. The undersigned will, at the request of the General Partner, furnish
the General Partner with such information as the General Partner may
reasonably require to establish that the purchase of the units by the Plan
does not violate any provision of ERISA or the Code, including without
limitation, those provisions relating to "prohibited transactions" by "parties
in interest" or "disqualified persons" as defined therein.
(h) If the undersigned is acting on behalf of a trust (the "Subscriber
Trust"), the individual signing the Subscription Agreement and Power of
Attorney on behalf of the Subscriber Trust hereby further represents and
warrants that an investment in the Trust is permitted under the trust
agreement of the Subscriber Trust, and that the undersigned is authorized to
act on behalf of the Subscriber Trust under the trust agreement thereof.
(i) Purchaser represents and warrants that purchaser has (i) a net worth of at
least $250,000 (exclusive of home, furnishings and automobiles) or (ii) an
annual gross income of at least $70,000 and a net worth (similarly calculated)
of at least $70,000. Residents of the following states must meet the
requirements set forth below (net worth in all cases is exclusive of home,
furnishings and automobiles). In addition, purchaser may not invest more than
10% of his net worth (exclusive of home, furnishings and automobiles) in the
Fund.
State Suitability Requirements
1. California-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
2. Kansas-It is recommended by the Office of the Kansas Securities
Commissioner that Kansas investors not invest, in the aggregate, more than 10%
of their "liquid net worth" in this and similar direct participation programs.
For these purposes, "liquid net worth" is defined as that portion of net worth
which consists of cash, cash equivalents and readily marketable securities.
3. Nebraska-Net worth of at least $250,000 or a net worth of at least
$70,000 and annual taxable income of at least $70,000.
4. South Carolina-Net worth of at least $250,000 or a net income in the
preceding year some portion of which was subject to maximum federal and State
income tax.
5. Texas-Net worth of at least $250,000 or a net worth of at least $70,000
and annual taxable income of at least $70,000.
In the case of sales to fiduciary accounts, the net worth and income standards
may be met by the beneficiary, the fiduciary account, or, if the donor or
grantor is the fiduciary, by the donor or grantor who supplies the funds to
purchase the partnership interests.
The foregoing suitability standards are regulatory minimums only. Merely
because you meet such requirements does not necessarily mean that a high risk,
speculative and illiquid investment such as one in the Fund is, in fact,
suitable for you.
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EXHIBIT D TO BROMWELL FINANCIAL FUND DISCLOSURE DOCUMENT
BROMWELL FINANCIAL FUND, LP
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 Fund. No entity-and, in particular, no
ERISA plan-may invest more than 10% of its liquid net worth (readily
marketable securities) in the Fund. If a purchaser is allowed to purchase
less than $25,000 in Units, then the purchaser must have a minimum annual
gross income of $70,000 and a minimum net worth of $70,000 or, in the
alternative, a minimum net worth of $250,000. The offering will terminate one
year from the date of this prospectus if the minimum is not sold, or upon
three years from the date of this prospectus if the minimum is sold. However,
the General Partner reserves the right to change the termination date of the
offering pursuant to the Limited Partnership Interest.
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 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 9-10 - 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.
<page>
BROMWELL FINANCIAL FUND, LP
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
To: Belmont Capital Management, Inc.
General Partner _____________________________
5914 N. 300 West Our Social Security Number or
P. O. Box 760 Taxpayer ID Number
Fremont, IN 46737
_____________________________
Joint Social Security Number or
Taxpayer ID Number
Dear General Partner:
1. Subscription For Units. I hereby subscribe for the number of Limited
Partnership Units ("Units") in Bromwell Financial Fund, LP (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 June __, 2012, (the "Prospectus"). I have
completed and executed a Subscription Agreement and Power of Attorney
Signature Page in the form attached hereto as Appendix "D", and delivered the
executed Subscription Documents to the Sales Agent and executed a check made
payable to "Star Financial Bank for the exclusive benefit of the customers of
Bromwell Financial Fund, LP" to be delivered by the Sales Agent to the
Depository Agent by noon the second business day after receipt for deposit to
the Depository 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 the depository account. If this
subscription is rejected, all funds remitted by the undersigned will be
returned, together with any interest earned from the depository account, if
any.
2. Power of Attorney. In connection with my acceptance of an Interest in the
Fund, 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 Fund; 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 Interest of the Fund, which is attached as Appendix 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 Fund.
3. 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.
4. Representations and Warranties. By executing the Subscription Agreement
and Power of Attorney, you (for yourself and any co-subscriber, and, if you
are signing on behalf of an entity, on behalf of and with respect to that
entity and its shareholders, partners, beneficiaries or members), represent
and warrant to the General Partner and the Fund as follows (As used below, the
terms "you and your" refer to you and your co-subscriber, if any, or if you
are signing on behalf of an entity, that entity):
<page>
(Please initial each item to provide your acknowledgement or representation)
Primary Joint
1. I have received a copy of the Prospectus dated June __, 2012, including
the Limited Partnership Interest.
2. If an individual subscriber, I am of legal age to execute the
Subscription Agreement and am legally competent to do so.
3. I satisfy the applicable financial suitability and minimum investment
requirements in the Prospectus and Appendix C, including the "State
Suitability Requirements" for residents of the state in which I reside that
appear under that caption.
4. Unless representation (5) or (6) below is applicable, my subscription is
made with my funds for my own account and not as trustee, custodian, or
nominee for another.
5. If I am subscribing as a custodian for a minor, either (a) the
subscription is a gift I have made to that minor and is not made with that
minor's funds, in which case the representations as to net worth and annual
income below apply only to myself, acting as custodian, or (b) if the
subscription is not a gift, the representations as to net worth, and annual
income below apply only to that minor.
6. If I am subscribing as a trustee or custodian of an employee benefit
plan, or of an IRA, at the direction of the beneficiary of that plan or IRA,
all representations in the Subscription Agreement apply only to the
beneficiary of that plan or IRA.
7. I understand that my investment is not transferable and is illiquid
except for limited redemption provisions, as set forth in the Prospectus and
the Limited Partnership Interest.
8. This investment represents 10% or less of my total net worth.
9. I believe I have provided for my retirement and the support of those who
are dependent on me without the need for return of my investment in this Fund.
10. I have not omitted any information in the documents supplied to my
broker or sales agent that would prevent them from determining my suitability
for this investment.
5. Additional Disclosures:
The trade of futures and options on futures involves substantial risk,
including the loss of your investment.
The General Partner and the sales agent shall make every reasonable effort to
determine that the purchase of units of Limited Partnership Interest is a
suitable and appropriate investment for you, on the basis of the information
regarding your financial situation and investment objectives obtained from
this suitability questionnaire and subscription agreement signed and delivered
by you in connection with your subscription for units. On the basis of the
information provided by you, the General Partner and the sales agent shall
make every reasonable effort to ascertain that you:
(a) meet the minimum income and net worth standards established for the
Fund;
(b) can reasonably benefit from an investment in the Fund based on your
overall investment objectives and portfolio structure;
(c) are able to bear the economic risks of an investment in the Fund based
on your overall financial situation; and
(d) have an understanding of:
(i) the fundamental risks of an investment in the Fund;
(ii) the risk that you may lose your entire investment;
(iii) the restrictions on the liquidity and transferability of the units;
(iv) the background and qualification of the General Partner and the Fund's
commodity trading advisor; and
(v) the tax consequences of an investment in the Fund.
<page>
BROMWELL FINANCIAL FUND, LP
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, LP (the
"Fund"), and by either enclosing a check payable to "Star Financial Bank for
the exclusive benefit of the customers of Bromwell Financial Fund, LP", or by
instructing their brokerage firm to debit their customer securities account in
the amount set forth below, 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 of the Prospectus of the Fund dated
June __, 2012; (ii) that such Prospectus includes the Fund's Limited
Partnership Interest, 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. Investor understands that if the account is titled "for
the benefit of" ("FBO"), that the named entity will custody the Units,
purchase, hold and redeem Units in the investor's account, and will receive
copies of Fund application forms and statements for the benefit of the
investor. By my signature below, I represent that I satisfy the requirements
relating to net worth and annual income as set forth in Appendix 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 (SSN) ____________-____________-____________
Joint SSN or 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)
the Fund's substantial charges; (iii) the Fund's highly leveraged trading
activities; (iv) the lack of liquidity of the Units; (v) the existence of
actual and potential conflicts of interest in the structure and operation of
the Fund; (vi) that Limited Partners may not take part in the management of
the Fund; (vii) the tax consequences of the Fund; and (viii) the twelve month
lock-in period.
8) INVESTOR(S) MUST SIGN
X_________________________________________________________
Signature of Investor Date Telephone No.
X_________________________________________________________
Signature of Joint Investor (if any) Date
Investor must sign individually, or pursuant to a power of attorney; provided,
however, that such power of attorney has not been granted to a registered
representative of a Selling Agent. 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: 0.
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: 0.
9) REGISTERED REPRESENTATIVE MUST SIGN
I hereby certify that I have informed the investor of all pertinent facts
relating to the: risks; liquidity and marketability; management; and
control of the Managing Owner with respect to an investment in the Units, as
set forth in the Prospectus. 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 Fund 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 FINRA's Rules of Fair Practice.
X____________________________________________________________________
Registered Representative Signature Date
X____________________________________________________________________
Office Manager Signature Date
10) REGISTERED REPRESENTATIVE
Name:
Selling Agent:
Reg. Rep. No.:
Branch Office:
Address:
City, State, Zip:
Tel. Number:
Facsimile:
Email:
11) PRINCIPAL SELLING AGENT
Futures Investment Company, 5914 N. 300 West, P.O. Box 760, Fremont, IN 46737,
(260) 833-1306
<page>
EXHIBIT E TO BROMWELL FINANCIAL FUND DISCLOSURE DOCUMENT
Depository Agreement
THIS AGREEMENT (the "Agreement") is made and entered into as of the ___ day of
________, 2011, is by and among Bromwell Financial Fund, LLC, (the "Fund"),
Belmont Capital Management, Inc., 5914 N. 300 West, P. O. Box 760, Fremont, IN
46737, (the "General Partner"); Futures Investment Company, an Illinois
corporation, 5914 N. 300 West, P. O. Box 760, Fremont, IN 46737 (the "Selling
Agent"), and Star Financial Bank, 2004 N. Wayne St., Angola, IN 46703, a bank
unaffiliated with the Fund, General Partner or Selling Agent and otherwise
within the definition of Section 3(a)(6) of the 1934 Act (the "Depository").
1. Account Opened. The General Partner establishes and the Depository
accepts and opens a savings account that complies with SEC Rule 15c2-4 titled
"Star Financial Bank for the exclusive benefit of the customers of Bromwell
Financial Fund, LLC" to clear proceeds of sale of units of limited partnership
interest (the "Units") in a best efforts minimum/maximum offering of the Fund
promptly delivered by the Selling Agent from subscribers at an initial
offering price of six hundred thirty seven dollars and seventy four cents
($637.74) to be held in said bank account subject to the terms of this
Agreement until a total face amount of one million dollars ($1,000,000) of
Units (the "Minimum") are sold and, thereafter to continue to accept proceeds
of sale from subscribers sold at the Net Asset Value per Unit computed after
the close of business on the last business day of each month and transferred
to the Fund as of the open on the first business day of each month. Funds in
the Depository Account will be invested only in investments permissible under
SEC Rule 15c2-4. The Selling Agent shall direct all subscribers to make their
checks to "Star Financial Bank for the exclusive benefit of the customers of
Bromwell Financial Fund, LLC." Any instrument not so made out shall be
promptly returned to the subscriber, with notice to the Selling Agent. The
Selling Agent will supply Depository with a list of the subscribers to
identify their name, address and amount of subscription. The Selling Agent
will be solely responsible for the allocation of interest earned among the
subscribers.
2. Sale of Minimum Required. The Selling Agent shall promptly transmit all
checks for the purchase of Units by noon of the second business day directly
to the Depository. For customers that wish to make wire transfers, the Selling
Agent will provide wire instructions to them for the Depository Account and
will not take custody of any customer funds. At the time of delivery of the
proceeds to the Depository, the Selling Agent shall provide the Depository
with the name and address of the subscriber for the Units. Should the Minimum
not be sold within twelve months from the effective date of the Offering
established by the Securities and Exchange Commission (the "Offering Period")
or should the offering terminate for any reason prior to the Offering Period,
the Depository shall promptly return the proceeds to each subscriber plus
interest as allocated by the General Partner without deduction for costs or
expenses from the amounts paid to the subscribers, and the Depository shall
notify the General Partner and the Selling Agent of its distribution of the
funds. The proceeds returned to each subscriber shall be free and clear of any
and all claims of the Fund or any of its creditors. The General Partner is
solely responsible for the allocation of the interest earned to the
subscribers. Upon the receipt of deposits that total $1,000,000 to the account
before the lapse of or termination of the Offering Period, the Depository
shall deliver the proceeds plus interest by check or account transfer to the
Fund and at the end of each month thereafter, the Depository shall deliver all
proceeds plus interest by check or account transfer to the Fund. In no event
will the proceeds be released to the Fund until the Minimum is received by the
Depository in collected funds. For purposes of this Agreement, the term
"collected funds" shall mean all funds received by the Depository which have
cleared normal banking channels and are in the form of cash.
3. No Creditor's Rights. The Selling Agent and the General Partner,
individually and on behalf of the Fund agree that they are not entitled to any
funds in the Depository account prior to the sale of the Minimum and no
amounts deposited in the Depository Account shall become the property of or be
subject to the debts of the Selling Agent, General Partner, Fund or any other
entity or person.
1
<page>
4. Collection Procedure. The Depository is hereby authorized to forward
each check for collection and, upon collection of the proceeds of each check,
deposit the collected proceeds in the account. As an alternative, the
Depository may telephone the bank on which the check is drawn to confirm that
the check has been paid. Any check returned unpaid shall be returned by Star
Bank to the subscriber with notice to the Selling Agent. If the Fund rejects
any subscription for which the Depository has already collected funds, the
Depository shall promptly issue a refund check to the rejected subscriber. If
the General Partner rejects any subscription for which the Depository has not
yet collected funds but has submitted the subscriber's check for collection,
the Depository shall promptly issue a check in the amount of the subscriber's
check to the rejected subscriber after the Depository has
cleared such funds. If the Depository has not yet submitted a rejected
subscriber's check for collection, the Depository shall promptly remit the
subscriber's check directly to the subscriber.
5. Depository Liability Limited. Depository shall have no liability under,
or duty to inquire into, the terms and provisions of any other document or
instrument utilized in connection with the Offering, and it is agreed that the
duties of Depository are purely ministerial in nature, and that Depository
shall incur no liability whatsoever under this Agreement, except for acts or
omissions of the Depository involving or constituting willful misconduct,
fraud, gross negligence or bad faith.
6. Depository May Resign. Depository 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 above, 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 proceeds, including all accrued interest, shall
be delivered by Depository to the person designated in writing by the Selling
Agent and the General Partner or a court of competent jurisdiction, whereupon
all of Depository's obligations hereunder shall cease and terminate.
Notwithstanding the foregoing, nothing in this paragraph releases Depository
or relieves it of any of its obligations that existed prior to the effective
date of Depository's resignation including, without limitation, liability for
willful misconduct, fraud, gross negligence or bad faith. Notwithstanding the
foregoing, nothing in this paragraph releases the Selling Agent or the General
Partner of their obligations under the Securities and Exchange Act including,
but not limited to, Rules 15c2-4 and 1 0b-9.
7. Depository Indemnification. The Selling Agent and the General Partner
agree to indemnify, defend and hold Depository harmless from and against any
and all loss, damage, tax, liability and expense that may be incurred by
Depository and arising out of or in connection with its acceptance of
appointment as depository 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
Depository. Depository may consult with and rely on its attorneys with respect
to any dispute not assumed or defended by the Selling Agent and the General
Partner and this indemnification shall include all reasonable and necessary
attorneys' fees of Depository in connection with such consultation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above
written.
BELMONT CAPITAL MANAGEMENT, INC. STAR FINANCIAL BANK
By: By:
Mr. Michael Pacult Thad Wright
President Vice President
BROMWELL FINANCIAL FUND, LP
By: Belmont Capital Management, Inc.
By:
Mr. Michael Pacult
President
2
<page>
EXHIBIT F TO BROMWELL FINANCIAL FUND DISCLOSURE DOCUMENT
INVESTMENT ADVISORY CONTRACT
COVENANT CAPITAL MANAGEMENT, LLC
THIS AGREEMENT is made and entered as of this _____ day of , 2011, between
Bromwell Financial Fund, LLC, (the "Fund") and Covenant Capital Management,
LLC a Tennessee limited liability company (the "CTA").
WITNESSETH:
In consideration of the deposit by the Fund of equity to a futures commission
merchant (the "FCM") 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") 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 and payment of management fees to and the opportunity
to earn incentive fees by the CTA, the parties hereto agree as follows:
1. The CPO shall determine the amount the Fund shall initially deposit in
the Account with the FCM, or some other registered futures commission
merchant, in U.S. funds equity, 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 authority to issue all necessary
instructions to the FCM to effect trading for the Fund's 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.
3. The CTA's services are not rendered exclusively for the Fund and the
Fund agrees that the CTA is free to continue to provide and offer similar
services to others. The CPO may change or add another FCM for the Account
assigned to the CTA at any time upon written direction to the FCM and the CTA,
and the FCM and the CTA agree to effect the transfer and sign the forms
necessary to complete such change or addition, provided such transfer does not
conflict with any prior agreements the CTA has with the FCM.
4. 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 CPO, the CTA will use only the equity in the Account assigned
to the CTA by the CPO 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 CPO, 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
CPO to the FCM.
5. 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. The CTA will
promptly review the Fund offering documents submitted by the Fund to it, from
time to time, and will furnish its consent, in the form requested by the Fund,
to the filing of forms and offering documents with the Federal and State
security and commodity regulators.
1
<page>
6. The Fund will pay the CTA a monthly management fee equal 1/12 of 1% (1%
annually) of the prior month-end net assets assigned to the CTA to trade.
Assets assigned to the CTA may be maintained in the Account at the FCM, in a
US Treasury Direct account, in a foreign department of treasury account,
and/or in a money market fund. The CTA will be paid an incentive fee of twenty
percent (20%) of the New Net Profit, as that term is defined in the Fund's
prospectus, earned each calendar quarter. The Fund accountant will calculate
the fees subject to approval by the CTA. Interest on cash and cash equivalents
such as T-Bills and money market accounts shall not be included as profits for
incentive fee purposes.
7. The Fund and the CTA agree that they have or will properly execute all
necessary 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, LLC Covenant Capital Management, LLC
By: Belmont Capital Management, Inc.
Michael P. Pacult Name:
President Title:
2
<page>
Dealer Prospectus Delivery Obligation
Until one year from the date of this prospectus, all dealers that effect
transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation, if any, to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
[The balance of this page has been intentionally left blank.]
<page>
FORM S-1
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.
(c) The following reflects all expenses in connection with the issuance and
distribution of the securities to be registered, other than underwriting
discounts and commissions:
Expense Cost
Registration fees $4,792
Federal taxes 0
States taxes and fees 13,000
Trustees' and transfer agents' fees 0
Costs of printing and engraving 5,000
Legal 105,000
Accounting 115,000
Engineering 0
Other 7,208
$250,000
Item 15. Recent Sales of Unregistered Securities.
None within three years.
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 October 11, 2011, 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*
1
<page>
(3) - 03 Board Resolution of General Partner to authorize formation of
Delaware Limited Partnership*
(3) - 04 Amended and Restated Agreement of Limited Partnership of the
Registrant dated October 11, 2011 (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 Amended and Restated Agreement of Limited Partnership of the
Registrant dated October 11, 2011 (included as Exhibit A to the Prospectus)
(5) - 01 Opinion of The Scott Law Firm, Ltd. relating to the legality of
the Partnership Units.
(6) Not Applicable
(7) Not Applicable
(8) - 01 Opinion of The Scott Law Firm, Ltd. with respect to Federal income
tax consequences.
(9) None
(10) - 01 Form of Advisory Agreements between the Partnership and the
Commodity Trading Advisor. (included as Exhibit F to the Prospectus)
(10) - 02 Form of Subscription Agreement and Power of Attorney. (included as
Exhibit D to the Prospectus).
(10) - 03 Depository Agreement among Depository Agent, Selling Agent, and
the Partnership. (included as Exhibit E to the Prospectus).
(11) Not Applicable
(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 The Scott Law Firm, Ltd.
(23) - 02 Consent of Patke & Associates, Ltd.
(24) None
(25) None
(26) None
(27) Not Applicable
(28) Not Applicable
* Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(File No. 333-85755) and incorporated herein by reference.
(b) Financial Statement Schedules.
No Financial Schedules are required to be filed herewith.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) 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;
2
<page>
(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.
(4) That the registrant is not a foreign private issuer.
(5) That, for the purpose of determining liability under the Securities
Actof 1933:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3)shall
be deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration statement; and
each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on Rule 430B relating
to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the
purpose of providing the information required by section 10(a) of the
Securities Act of 1933 shall be deemed to be part of and included in the
registration statement as of the earlier of the date such form of prospectus
is first used after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided in Rule
430B, for liability purposes of the issuer and any person that is at that date
an underwriter, such date shall be deemed to be a new effective date of the
registration statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to
a purchaser with a time of contract of sale prior to such effective date,
supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such
document immediately prior to such effective date; or
(ii) Each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying
on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall
be deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that
is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use.
(6) That, for the purpose of determining liability of the registrant under
the Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary offering
of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such purchaser by
means of any of the following communications, the undersigned registrant will
be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned registrant or
its securities provided by or on behalf of the undersigned registrant; and
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(iv) Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A, if any pre-effective
amendment was used, and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of the time
it was declared effective.
(2) 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 Registrant (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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, in the City of
Fremont in the State of Indiana on this 15th day of June, 2012, 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
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: June 15, 2012
(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)
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