<PAGE>
As filed with the Securities and Exchange Commission on September 29, 2000
Investment Company Act File No. 811-09935
-------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM N-2
/ / Registration Statement under the Investment Company Act of 1940
/X/ Amendment No. 1
(Check Appropriate Box or Boxes)
BMO PARTNERS FUND, L.P.
(Exact Name of Registrant as Specified in Charter)
330 Madison Avenue, 31st Floor
New York, New York 10017
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code:
(212) 661-2640
Dan I. Abrams
Beck, Mack & Oliver LLC
330 Madison Avenue, 31st Floor
New York, New York 10017
(212) 661-2640
(Name and Address of Agent for Service)
COPIES TO:
Cynthia G. Cobden.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
-------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE SHEET
PURSUANT TO RULE 495(a)
<TABLE>
<CAPTION>
N-2 ITEM NUMBER LOCATION IN PRIVATE PLACEMENT MEMORANDUM
(CAPTION)
<S> <C>
PART A
1. Outside Front Cover............................. Not Applicable
2. Cover Pages; Other Offering Information.........
Not Applicable
3. Fee Table and Synopsis
Fee Table..................................... FEES AND EXPENSES
Synopsis...................................... Not Applicable
4. Financial Highlights............................ Not Applicable
5. Plan of Distribution............................ Not Applicable
6. Selling Shareholders............................ Not Applicable
7. Use of Proceeds................................. Not Applicable
8. General Description of the Registrant........... THE FUND; INVESTMENT POLICIES AND OBJECTIVES; PRINCIPAL
RISKS OF INVESTING IN THE FUND; DESCRIPTION OF UNITS
9. Management...................................... THE FUND; MANAGEMENT OF THE PARTNERSHIP AND THE FUND
10. Capital Stock, Long-Term Debt, and Other
Securities...................................... INVESTMENT POLICIES AND OBJECTIVES; DESCRIPTION OF UNITS; TAXES
11. Defaults and Arrears on Senior Securities....... Not Applicable
12. Legal Proceedings............................... Not Applicable
13. Table of Contents of the Statement of
Additional Information.......................... Not Applicable
PART B(1)
14. Cover Page...................................... Cover Page
15. Table of Contents............................... Cover Page
16. General Information and History................. THE FUND; MANAGEMENT OF THE PARTNERSHIP AND THE FUND
17. Investment Objectives and Policies.............. INVESTMENT POLICIES AND OBJECTIVES; INVESTMENT POLICIES
AND OBJECTIVES: Use of Options; Investment Restrictions
</TABLE>
----------------------
(1) Information required in Part B is included in the Private Placement
Memorandum.
<PAGE>
<TABLE>
<CAPTION>
N-2 ITEM NUMBER LOCATION IN PRIVATE PLACEMENT MEMORANDUM
(CAPTION)
<S> <C>
18. Management...................................... MANAGEMENT OF THE PARTNERSHIP AND THE FUND; MANAGEMENT
OF THE PARTNERSHIP AND THE FUND: The Fund's
Investment Adviser; Portfolio Manager; Directors and Officers
19. Control Persons and Principal Holders of CONTROL PERSONS AND PRINCIPAL HOLDERS OF UNITS
Securities......................................
20. Investment Advisory and Other Services.......... MANAGEMENT OF THE PARTNERSHIP AND THE FUND: The Fund's
Investment Adviser; Custodian
21. Brokerage Allocation and Other Practices........ INVESTMENT POLICIES AND OBJECTIVES:Portfolio
Transactions and Brokerage Allocation
22. Tax Status...................................... TAXES
23. Financial Statements............................ Not Applicable
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
BMO PARTNERS FUND, L.P.
Private Placement Memorandum
September 29, 2000
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF THESE SECURITIES OR DETERMINED IF THIS PRIVATE
PLACEMENT MEMORANDUM IS ACCURATE OR COMPLETE. IT IS A CRIME TO STATE OTHERWISE.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE BMO PARTNERS FUND, L.P. AND THE TERMS OF THE OFFERING.
<PAGE>
PRIVATE PLACEMENT MEMORANDUM
BMO PARTNERS FUND, L.P.
UNITS OF LIMITED PARTNERSHIP INTEREST
This private placement memorandum has been furnished on a
confidential basis solely for the information of the persons to whom it has
been delivered and may not be reproduced or used for any other purpose.
Prospective investors should carefully read and retain this confidential
private placement memorandum. However, the contents of this memorandum should
not be considered to be legal, tax, investment or other advice, and each
prospective investor should consult with its own counsel and advisers as to
all legal, tax, regulatory, financial and related matters concerning an
investment in units. In making an investment decision, investors must rely on
their own examination of BMO Partners Fund, L.P. (the "Fund" or the
"Partnership") and the terms of the offering, including the merits and risks
involved.
-------------------------
The limited partnership units have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), the securities laws of
any state or the securities laws of any other jurisdiction, nor is such
registration contemplated. The units will be offered and sold under the
exemption provided by section 4(2) of the 1933 act and rule 506 of regulation
d promulgated thereunder and other exemptions. No offer to sell (or
solicitation of an offer to buy) is being made in any jurisdiction in which
such offer or solicitation would be unlawful or to any person to whom it is
unlawful to make such offer or solicitation. There is no public market for
the units and no such market is expected to develop in the future. These
units are subject to restrictions on transferability and resale and may not
be transferred or resold except as permitted under the second amended and
restated limited partnership agreement of the Fund (the "Partnership
Agreement"), the 1933 Act and other applicable state securities laws,
pursuant to registration thereunder or exemption therefrom. Investors should
be aware of their limited rights to redeem units and of the limited liquidity
of an investment in units.
-------------------------
No person has been authorized in connection with this offering to
give any information or make any representations other than as contained in
this memorandum and the accompanying exhibits and any representation or
information not contained herein or in the accompanying exhibits must not be
relied upon as having been authorized by the Fund or any of its partners or
affiliates. The delivery of this memorandum and the accompanying exhibits
does not imply that the information herein or therein is correct as of any
time subsequent to the date on the cover hereof.
-------------------------
<PAGE>
2
Each prospective investor is invited to meet with the Manager and to
discuss with, ask questions of and receive answers from it concerning the
terms and conditions of this offering of the units, and to obtain any
additional information, to the extent the manager possesses such information
or can acquire it without unreasonable effort or expense, necessary to verify
the information contained herein. Inquiries should be directed to: D.I.
Abrams, Beck, Mack & Oliver LLC, 330 Madison Avenue, 31st Floor, New York, NY
10017, (212) 661-2640.
-------------------------
This memorandum contains a summary of the Partnership Agreement of
the Fund and of other documents referred to herein. However, the discussions
set forth in this memorandum do not purport to be complete. They are subject
to and qualified in their entirety by reference to the partnership agreement,
a copy of which is attached as Exhibit A, as well as the subscription
agreement, a form of which is attached as Exhibit B, and the Fund's most
recent financial statements, copies of which are attached as Exhibit C, each
of which should be reviewed for complete information concerning the rights,
privileges and obligations of the partners.
-------------------------
For Pennsylvania investors: Each person who accepts an offer to
purchase units directly from the Fund or an affiliate of the Fund shall have
the right to withdraw its acceptance without incurring any liability to the
Fund or any other person, within two business days from the date the Fund
receives its written, binding subscription agreement.
-------------------------
For Florida investors: The limited partnership units have not been
registered under the Florida Securities Act.
If sales are made to five (5) or more investors in Florida, any
Florida investor may, at his option, void any purchase hereunder within a
period of three (3) days after he (a) first tenders or pays to the
Partnership, an agent of the Partnership or an escrow agent the consideration
required hereunder or (b) delivers his executed subscription agreement,
whichever occurs later. To accomplish this, it is sufficient for a Florida
investor to send a letter or telegram to the Partnership within such three
(3) day period, stating that he is voiding and rescinding the purchase. If an
investor sends a letter, it is prudent to do so by certified mail, return
receipt requested, to insure that the letter is received and to evidence the
time of mailing.
-------------------------
For Georgia investors: These securities have been issued or sold in
reliance on paragraph (13) of Code section 10-5-9 of the "Georgia Securities
Act of 1973," and may not be sold or transferred except in a transaction
which is exempt under such act or pursuant to an effective registration under
such act.
<PAGE>
3
SUMMARY OF TERMS
This Summary of Terms is intended only for general reference. Not
all of the material facts relating to an investment in units appear in this
Summary. This memorandum and the attached exhibits describe numerous aspects
of an investment in units of limited partnership interest which are material
to prospective investors. This memorandum, the Second Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement") and the other
exhibit documents should be read and understood in their entirety by all
prospective investors prior to making an investment in the Fund.
THE FUND: BMO Partners Fund, L.P. (the "Fund" or the "partnership")
is a Delaware limited partnership, registered under the
Investment Company Act of 1940, as amended (the "1940
Act"), as a closed-end, non-diversified, management
investment company. Prior to May 9, 2000, the Fund was
not registered under the 1940 Act.
OBJECTIVE: The Fund's investment objective is to achieve long-term
capital appreciation consistent with preservation of
capital.
STRATEGY: The Fund seeks to achieve its objective by investing
primarily in a portfolio of common stocks and securities
convertible into or exercisable for common stocks, but it
may also invest in preferred stock and fixed income
securities such as notes, bonds and debentures. The Fund may
also invest in options on stock indices for BONA FIDE
hedging purposes only.
MANAGEMENT: The Fund is managed under the supervision of the Fund's
board of directors (the "Board") which consists of three
individual general partners of the Fund (the "Directors").
The fourth general partner, Beck, Mack & Oliver LLC (the
"Manager"), manages the Fund's investment portfolio under an
investment advisory agreement (the "Investment Advisory
Agreement"). See "THE FUND" and "MANAGEMENT OF THE
PARTNERSHIP AND THE FUND."
MANAGEMENT FEE: The Fund pays the Manager a fee (the "Management Fee"),
quarterly in arrears, based on the net assets of the Fund at
the beginning of each quarter of the Fund's fiscal year,
equal to 1% per annum of the first $5 million of the Fund's
net assets, 3/4 of 1% per annum of the next $5 million of
the Fund's net assets and 1/2 of 1% per annum of the Fund's
net assets in excess of $10 million. See "FEES AND
EXPENSES."
<PAGE>
4
CUSTODIAN: The Chase Manhattan Bank serves as custodian of the Fund's
assets. See "MANAGEMENT OF THE PARTNERSHIP AND THE FUND --
Custodian."
EXPENSES: The Manager will provide the partnership, at its own
expense, with office space, facilities, equipment and
personnel. The Manager will bear the administrative and
service expenses associated with managing the partnership's
assets, including the expenses incurred in the finding and
management of the investments of the partnership. All other
operating expenses of the Fund will be borne by the Fund.
See "MANAGEMENT OF THE PARTNERSHIP AND THE FUND-- The Fund's
Investment Adviser."
<PAGE>
5
RISK FACTORS: The Fund is subject to market risks that affect the value of
its portfolio securities. The Fund's principal investment
strategy involves investing in common stocks and securities
convertible into or exercisable for common stocks.
Therefore, the Fund has significant equity exposure which
subjects it to changing conditions in the stock markets as
well as the performance of the companies or industries
selected for the Fund's portfolio. To the extent the Fund
invests in debt securities it is subject to credit risk and
interest rate risk.
You will not be able to transfer your units except by
operation of law or with the consent of the Manager in its
sole discretion. Your ability to redeem your units will be
limited to the Fund's quarterly offers to repurchase units,
which will be between 5% and 25% of the total units
outstanding. If a repurchase offer is oversubscribed, the
number of units to be repurchased from each investor may be
reduced PRO RATA. The Fund's need to fund these repurchases
may affect the Fund's ability to be fully invested, may
result in a higher expense ratio, higher turnover and less
than optimal timing of sales of portfolio securities, each
of which may adversely affect the Fund's net asset value.
The Fund may invest up to 10% of its total assets in
securities of a single issuer. As a result, it may be more
susceptible to any single economic, political or regulatory
occurrence than more widely diversified funds.
The Fund may invest in foreign securities which carry
certain risks not typically associated with securities of
U.S. issuers, including withholding taxes, exchange rate
risks, less liquidity, higher costs, transfer taxes,
transaction charges, less public information, differing
accounting standards, risk of seizure and difficulties in
enforcing judgments. The Fund may invest up to 10% of its
net assets in debt securities rated below investment-grade
which carry a greater risk of default than higher-rated debt
securities, are subject to greater fluctuations in market
value and, in some cases, lack an established retail
secondary market.
There are additional risks associated with certain of the
Fund's investments and investment strategies. See "PRINCIPAL
RISKS OF INVESTING IN THE FUND."
MINIMUM INVESTMENT: Each limited partner must make an initial investment of at
least $100,000 unless the Manager exercises its discretion
to waive this minimum. Investments must be made in cash. See
"DESCRIPTION OF UNITS."
<PAGE>
6
ADDITIONAL Additional investments by existing limited partners may be
INVESTMENTS AND accepted and new limited partners may make initial
NEW LIMITED investments in the Fund only on the first business day of
PARTNERS: each calendar quarter, unless the Manager exercises its
discretion to accept additional investments by existing
limited partners or admit new limited partners at any time
other than the first day of a calendar quarter. See
"DESCRIPTION OF UNITS."
TAX ALLOCATIONS: A capital account for Fund accounting purposes ("Capital
Account") and a capital account for income tax accounting
purposes ("Tax Account") will be established for each new
partner. The initial balance of each account will equal the
partner's original cash contribution, and it will be
adjusted from time to time to reflect additional
contributions and distributions. In addition, at the end of
each accounting period, the Capital Accounts of all partners
will be adjusted to reflect an allocation of net capital
appreciation or depreciation of the Fund during that
accounting period in proportion to the partners' respective
Capital Account balances.
Each partner's Tax Account will be increased by the
partner's share of income and taxable gain will be reduced
by the partner's share of taxable loss and deductions and
certain nondeductible expenses.
Allocations for income tax purposes generally will be made
among partners so as to reflect equitably amounts credited
or debited to each partner's Capital Account for the current
and prior years. However, for any fiscal year capital gains
and losses of the Fund will first be allocated to
withdrawing partners so as to eliminate insofar as possible
any difference between the balance in withdrawing partners'
Capital Accounts and Tax Accounts and, to the extent these
allocations are insufficient to eliminate completely this
difference, items of ordinary income, loss or deduction may
be allocated to the withdrawing partners. See "SUMMARY OF
PARTNERSHIP AGREEMENT -- Capital Accounts and Tax Accounts."
<PAGE>
7
TAXES: The Manager believes that the Fund will be treated as a
partnership and not as an association taxable as a
corporation for federal income tax purposes. In this regard,
the Manager is relying on a specified safe harbor to
preclude the Fund from being treated currently as a
"publicly traded partnership" taxable as a corporation. This
safe harbor will expire on December 31, 2005. The Fund
intends to take such actions as are necessary and advisable
to continue to be taxed as a partnership after December 31,
2005. Such actions could include limiting redemption rights.
Alternatively, the Fund may decide to liquidate at such
time. The Fund has determined that it is not practicable to
seek a ruling from the Internal Revenue Service ("IRS") that
it will not be treated as a "publicly traded partnership,"
and therefore it is not certain that the Fund will not be so
treated. If it is determined that, contrary to the Manager's
belief, the Fund should be taxed as a corporation, the
taxable income of the Fund would be subject to corporate
income tax and any distributions of profits from the Fund
would be treated as dividends.
Each limited partner must report and will be taxed based
upon his or her distributive share of the Fund's income,
gain, loss, deduction and credit each taxable year whether
or not he or she has have received any cash distributions.
See "TAXES -- Taxation of Limited Partners."
Prospective investors should consult their tax advisers with
respect to the tax consequences of their investment in the
Fund. See "TAXES".
DISTRIBUTIONS: Each partner may elect to receive distributions of
investment income and realized net capital gains in cash.
Any limited partner that does not so elect will have
distributions automatically reinvested in the Fund. The Fund
anticipates that such distributions will be made annually.
<PAGE>
8
REPURCHASES: The Fund is required each quarter to offer to repurchase at
least 5% and up to 25% of its units. Under normal market
conditions, the Board expects to authorize a 25% offer. The
deadline for responding to the Fund's repurchase offers (the
"repurchase request deadline") shall be fourteen days prior
to the last business day of each calendar quarter (or if not
a business day, the previous business day). The repurchase
price will be the per unit net asset value on the last
business day of a calendar quarter (the "repurchase pricing
date") and payment for all units repurchased pursuant to
these offers will be made not later than 7 days after the
repurchase pricing date. The Fund will mail written notice
to you setting forth the number of units the Fund will
repurchase, the repurchase request deadline and other terms
of the offer to repurchase, and the procedures for you to
follow to request a repurchase.
If the limited partners want to sell more units than the
Fund has offered to repurchase, the Board may, but is not
obligated to, increase the number of units to be repurchased
by 2% of the Fund units outstanding. If there are still more
units tendered than are offered for repurchase, units will
be repurchased on a pro rata basis. You may withdraw units
tendered for repurchase at any time prior to the repurchase
request deadline.
The Board may suspend or postpone a repurchase offer in
certain limited circumstances.
TRANSFERABILITY A limited partner may not assign its units (except by
OF UNITS: operation of law) or substitute an assignee as a limited
partner without the prior written consent of the Manager,
which may be given or withheld in the Manager's sole
discretion. See "THE FUND."
TERM: The Fund will dissolve on the first to occur of (a) December
31, 2025, (b) the Board's determination at any time and for
any reason to liquidate and dissolve the Fund, (c) the
bankruptcy or insolvency of the Manager, (d) the election to
dissolve the partnership by the holders of a "majority of
outstanding units" of the limited partnership, or (e)
termination, dissolution (other than by reason of a change
in the partners of the Manager) or withdrawal of the Manager
as general partner of the Fund without the Board designating
another investment adviser to be substituted as the Manager.
See "SUMMARY OF PARTNERSHIP AGREEMENT-- Term of the Fund."
<PAGE>
9
LIMITED PARTNER Limited partners will receive audited financial reports of
REPORTS: the Fund annually, reported on by the Fund's accountants,
and unaudited interim reports at least semi-annually. See
"DESCRIPTION OF UNITS -- Reports."
SUBSCRIPTION Investors in the Fund become parties to the Partnership
MATTERS: Agreement. Persons interested in investing in the Fund are
required to complete and return to the Manager the
subscription document attached as Exhibit B. The Manager, in
its sole discretion, may decline to accept any proposed
investor as a limited partner. See "DESCRIPTION OF UNITS --
Subscription for Units."
<PAGE>
10
FEES AND EXPENSES
The following table is to help you understand the expected annual
operating expenses of the Fund, which are deducted from Fund assets. Each is
stated as a percentage of net asset value.
<TABLE>
<CAPTION>
Expenses of the Fund
<S> <C>
Management Fees .62%
Other Expenses .31%
-----
Total Annual Operating Expenses Before Waiver .93%
Management Fee Waiver .10%
-----
Total Annual Operating Expenses After Waiver .83%
</TABLE>
The Manager has contractually agreed to cap total operating expenses
for the Fund during the first year following registration of the Fund under
the 1940 Act at .83% of net assets and, accordingly, will waive a portion of
its management fee through May 8, 2001. The amount set forth for "Other
Expenses" is based on estimates for the current fiscal year and will include
fees for limited partner services, administrative fees, custodial fees and
professional fees.
The Fund does not charge a sales load on units.
EXAMPLE: This example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other investment companies. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your units at the end of those periods. The
example also assumes that your investment has a 5% return each year (although
the actual return may be higher or lower) and that the operating expenses
remain the same (although your actual costs may be higher or lower):
ESTIMATED COST OF INVESTING IN THE FUND
<TABLE>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$84.57 $287.38 $507.49 $1,143.47
</TABLE>
This example is for comparison only. Your actual costs may be higher
or lower, depending on the amount you invest and the Fund's actual rate of
return.
<PAGE>
11
THE FUND
The Fund is a closed-end, non-diversified management investment
company formed on March 8, 1991 as a Delaware limited partnership whose
interests, called "units", are privately offered. Prior to May 9, 2000, the
Fund was not registered under the 1940 Act. On May 9, 2000, the Fund adopted
its current unit structure and existing limited partners were issued the
number of units corresponding to the value of their investments. The Fund
shall continue in business through the close of business on December 31, 2025
unless terminated earlier under the terms of the Partnership Agreement. The
Fund will have fewer than five hundred partners. If a limited partnership
interest is owned by a partnership, an "S" corporation, a limited liability
company or a trust, each partner, "S" corporation shareholder, limited
liability company member or trust beneficiary will be counted toward the five
hundred person limit.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital appreciation
consistent with the preservation of capital. The Fund is designed to provide
an equity oriented professionally managed investment program. The Fund is not
a complete financial program.
The Fund will seek to achieve its objective by investing primarily
in a portfolio of common stocks and securities convertible into or
exercisable for common stocks, but it may also invest in preferred stocks and
fixed, variable and floating rate fixed income securities such as investment
grade notes, bonds and debentures. The Manager will generally seek to invest
in equity securities of companies which it believes have sound, long-term
fundamentals. Equity investments will be made typically in companies which
the Manager believes are financially strong and which appear to have
attractive prospects for growth. The Fund may invest up to 10% of its net
assets in fixed income securities rated below investment grade. Investment
grade debt securities are debt securities rated in the category BBB- or
higher by Standard & Poor's Corporation or Baa3 or higher by Moody's
Investors Services, Inc. or the equivalent by another national rating
organization or, if unrated, determined by the Manager to be of comparable
quality. The Manager will have discretion to select the range of maturities
of the various fixed income securities in which the Fund may invest and the
weighted average life of the Fund's fixed income securities may vary
substantially from time to time depending on economic and market conditions.
Although it is anticipated that the Fund's portfolio will primarily
consist of marketable equity securities of U.S. issuers, the Fund will have
flexibility in the management of its portfolio. The Fund's portfolio
investments may include securities of foreign issuers, preferred stocks,
corporate notes, bonds and debentures and securities issued and guaranteed as
to principal and interest by the United States Government or its agencies or
instrumentalities. For temporary or defensive purposes, the Fund may invest
in high grade commercial paper, repurchase agreements, bankers' acceptances,
bank certificates of deposit, time deposits and master notes without
limitation. When such a defensive strategy is in effect the Fund may not
achieve its investment objective. The Fund may enter into repurchase
agreements with member banks of the Federal Reserve System or primary dealers
in U.S. Government securities. Under a repurchase agreement, the Fund buys
securities at one price and simultaneously promises to sell back those
securities at a higher price.
The Fund may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. These
transactions involve a commitment by the Fund to purchase or sell particular
securities with payment and delivery taking place at a future date (perhaps
one or two months later), and permit the Fund to lock in a price or yield on
a security that it owns or intends to purchase, regardless of future changes
in interest rates or market action.
<PAGE>
12
The Fund may invest up to 10% of its total assets in the securities
of other unaffiliated investment companies which invest principally in
securities in which the Fund is authorized to invest in compliance with the
provisions of the 1940 Act. To the extent that the Fund invests in other
investment companies, the limited partners will incur certain duplicative
fees and expenses, including investment advisory fees.
While the Fund is generally not limited in its ability to purchase
illiquid securities, during the period each quarter from the Fund's
notification to limited partners of an upcoming repurchase of units until the
repurchase pricing date, the Fund will keep enough of its assets in liquid
securities to fully fund the repurchase.
USE OF OPTIONS
The Fund may purchase and sell put and call options only on stock
indices. The Fund may enter into these transactions as a hedge against
declines in the value of the portfolio resulting from market conditions or as
a hedge against securities it anticipates purchasing at a later date. The
Fund will not use stock index options for speculative purposes.
An option on a stock index gives the holder the right to receive,
upon exercise of the option, an amount of cash equal to the difference
between the strike price and the closing price of the stock index upon which
the option is based if the closing level of the stock index is greater than,
in the case of a call, or less than, in the case of a put, the exercise price
of the option. The writer of the option is obligated, in return for the
premium received, to make delivery of the cash settlement. The Fund will only
purchase options traded on a national securities exchange or board of trade.
INVESTMENT RESTRICTIONS
The Fund will operate under the following investment restrictions
that, along with the Fund's investment objective and policy of making
quarterly repurchase offers, cannot be changed without the affirmative vote
of a "majority of the outstanding units" of the Fund which, as used in this
private placement memorandum, means the vote of the lesser of (i) 67% or more
of the units of the Fund present or represented by proxy at a meeting, if the
holders of more than 50% of the outstanding units of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding units of the
Fund. The Fund may not:
1. Borrow money, except as a temporary measure for
extraordinary or emergency purposes and then only from banks and only
in an amount not to exceed 10% of its total assets, or mortgage or
pledge its assets;
2. Invest 10% or more of its total assets in the securities of
any one issuer or 25% or more of its total assets in the securities of
issuers in any single industry, provided that this restriction does not
apply to investments in United States Government securities;
3. Acquire 10% or more of the voting power or value of the
stock of a foreign corporation;
4. Purchase any securities on margin (except that the Fund may
make deposits in connection with transactions in options) or make short
sales of securities;
5. Make loans (other than through the purchase of marketable
debt securities) or lend portfolio securities;
6. Underwrite securities;
7. Purchase or sell commodities, commodity contracts, futures
contracts or options thereon or purchase or sell put or call options on
securities, provided, that for bona fide hedging purposes the Fund may
purchase or sell options on stock indices;
<PAGE>
13
8. Issue any senior security (as defined in the 1940 Act),
except that (a) the Fund may engage in transactions that may result in
the issuance of senior securities to the extent permitted under
applicable regulations and interpretations of the 1940 Act; (b) the
Fund may acquire other securities, the acquisition of which may result
in the issuance of a senior security, to the extent permitted under
applicable regulations or interpretations of the 1940 Act; and (c)
subject to the restrictions set forth above, the Fund may borrow money
as authorized by the 1940 Act; or
9. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments. Investments by the Fund
in marketable securities of companies engaged in such activities are
not hereby precluded.
If a percentage restriction set forth above is adhered to at the
time the transaction is effected, later changes in percentages resulting from
changing values will not be considered a violation.
The Fund's investment objective and investment restrictions are
fundamental policies and cannot be changed without the approval of the
holders of a "majority of the outstanding units."
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Purchases and sales will be made when considered advisable by the
Manager, but generally not for trading purposes. The Fund intends to limit
portfolio trading to the extent practicable and consistent with its
investment objectives. It is expected that the Fund's annual portfolio
turnover rate will not exceed 30%, but this rate may be exceeded if, in the
Manager's opinion, conditions warrant. To the extent that there is active
trading, the Fund will incur higher transaction costs. The Manager will weigh
the added costs of short-term investment against anticipated gains, and the
Fund will engage in portfolio trading if the Manager believes a transaction,
net of costs (including custodian charges), will help it achieve its
investment objective.
Under the Investment Advisory Agreement, the Manager shall use its
best efforts to seek to execute portfolio transactions at prices which, under
the circumstances, result in total costs or proceeds being the most favorable
to the Fund. In assessing the best overall terms available for any
transaction, the Manager considers all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer,
research services provided to the Manager, and the reasonableness of the
commissions, if any, both for the specific transaction and on a continuing
basis. The Manager is not required to obtain the lowest commission or the
best net price for the Fund on any particular transaction, and is not
required to execute any order in a fashion either preferential to the Fund
relative to other accounts they manage or otherwise materially adverse to
such other accounts.
Debt securities are traded principally in the over-the-counter
market through dealers acting on their own account and not as brokers. In the
case of securities traded in the over-the-counter market (where no stated
commissions are paid but the prices include a dealer's markup or markdown),
the Manager normally seeks to deal directly with the primary market makers
unless, in its opinion, best execution is available elsewhere. In the case of
securities purchased from underwriters, the cost of such securities generally
includes a fixed underwriting commission or concession.
Under the Investment Advisory Agreement and as permitted by Section
28(e) of the Securities Exchange Act of 1934, the Manager may cause the Fund
to pay a broker-dealer which provides brokerage and research services to the
Manager, the Fund and/or other accounts for which the Manager exercises
investment discretion, an amount of commission for effecting a securities
transaction for the Fund in excess of the amount other broker-dealers would
have charged for the transaction if they determine in good faith that the
greater commission is reasonable in relation to the value of the brokerage
and research services provided by the executing broker-dealer viewed in terms
of either a particular transaction or their
<PAGE>
14
overall responsibilities to accounts over which they exercise investment
discretion. Not all of such services may be of value in advising the Fund.
The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or of purchasers or sellers of
securities, furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts, and effecting securities transactions and performing
functions incidental thereto such as clearance and settlement.
The management fees that the Fund pays to the Manager will not be
reduced as a consequence of the Manager's receipt of brokerage and research
services. To the extent the Fund's portfolio transactions are used to obtain
such services, the brokerage commissions paid by the Fund will exceed those
that might otherwise be paid by an amount which cannot be presently
determined. Such services generally would be useful and of value to the
Manager in serving one or more of their other clients and, conversely, such
services obtained by the placement of brokerage business of other clients
generally would be useful to the Manager in carrying out its obligations to
the Fund. While such services are not expected to reduce the expenses of the
Manager, the Manager would, through use of the services, avoid the additional
expenses which would be incurred if it should attempt to develop comparable
information through its own staff.
In certain instances, there may be securities that are suitable for
one or more of the accounts advised by the Manager. Investment decisions for
the Fund and for other clients are made with a view to achieving their
respective investment objectives. It may develop that the same investment
decision is made for more than one client or that a particular security is
bought or sold for only one client even though it might be held by, or bought
or sold for, other clients. Likewise, a particular security may be bought for
one or more clients when one or more clients are selling that same security.
Some simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the
same security is suitable for the investment objectives of more than one
client. When two or more clients are simultaneously engaged in the purchase
or sale of the same security, the securities are allocated among clients in a
manner believed to be equitable to each. It is recognized that in some cases
this system could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned. However, it is believed that the
ability of the Fund to participate in volume transactions will generally
produce better executions for the Fund.
No portfolio transactions are executed with any affiliate of Beck,
Mack & Oliver LLC acting either as principal or as broker.
PRINCIPAL RISKS OF INVESTING IN THE FUND
While the Fund seeks long-term capital appreciation, there is no
guarantee that units of the Fund will not lose value. This means that you can
lose money on your investment in the Fund. The Fund may not be able to
achieve its investment objective if the Manager's expectations regarding
particular securities or markets are not met.
GENERAL MARKET RISKS. The Fund is subject to market risks that
affect the value of its portfolio securities, including general economic and
market conditions. Since the Fund will typically have significant equity
exposure, the value of the Fund's units will be influenced by conditions in
the stock markets, as well as the performance of the companies or industries
selected for the Fund's portfolio.
CREDIT AND INTEREST RATE RISKS. To the extent the Fund's assets are
invested in debt securities, the Fund is subject to credit risk and interest
rate risk. Typically, when interest rates rise, the market value of debt
securities, such as those held by the Fund, will decline. Debt securities
with longer maturities are more sensitive to interest rate risk than shorter
term debt securities. When interest rates fall, the market
<PAGE>
15
value of the Fund's debt securities will tend to rise. However, during
periods of falling interest rates, the Fund's total return may be subject to
reinvestment rate risk. The Fund's total return may suffer as a result of
reinvestment rate risk if the market value gains caused by falling interest
rates are not enough to offset the lower rates of interest available for the
continuing investment of the Fund's assets. Credit risk is the risk that the
issuer of a debt security may not be able to pay principal and interest
payments on time. The market's perception that an issuer might not be able to
make such timely payments may negatively affect the market value of that
issuer's debt securities.
TRANSFERABILITY. Your units cannot be transferred (except through
inheritance or other operation of law), assigned, or sold, except to the Fund
during periodic tender offers, without the consent of the Manager which can
be withheld for any reason.
LIMITED LIQUIDITY. As the Fund is a "closed-end" investment company,
you will not be able to redeem your units on a daily basis. Although the Fund
will make quarterly offers to repurchase units, such repurchases are limited
to 5% to 25% of the total units outstanding (at the discretion of the Board)
and they may be oversubscribed with the result that you may not be able to
sell as many units as you wish to sell. The right of a limited partner who
withdraws from the Fund to receive the net asset value of his or her units
may be limited by the general partners' obligation under applicable law to
hold reserves for certain liabilities of the Fund.
EFFECT OF REPURCHASE OBLIGATIONS. Repurchase offers and the need to
fund repurchase obligations may affect the ability of the Fund to be fully
invested, which may reduce returns. Moreover, diminution in the size of the
Fund through repurchases without offsetting new sales may result in untimely
sales of portfolio securities and a higher expense ratio, and may limit the
ability of the Fund to participate in new investment opportunities.
Repurchases resulting in portfolio turnover will result in additional
expenses being borne by the Fund. The Fund may also sell portfolio securities
to meet repurchase obligations which, in certain circumstances, may adversely
affect the Fund's net asset value.
NON-DIVERSIFICATION. The Fund is classified as a "non-diversified"
investment company under the 1940 Act. The Fund may invest up to 10% of its
total assets in the securities of a single issuer. Since the Fund's assets
may be invested in the obligations of a limited number of issuers, the Fund
may be more susceptible to any single economic, political or regulatory
occurrence than more widely diversified funds.
CONCENTRATION. The Fund is permitted to invest as much as 25% of its
net assets in the securities of a single industry, and if it does so it may
be more susceptible to an economic, political or regulatory development
affecting that industry than a less concentrated investment company would be.
NON-U.S. SECURITIES. The Fund's investments in foreign securities
involve certain risks not typically associated with investments in the
securities of U.S. issuers, including risk relating to future political and
economic developments and the possible imposition of foreign withholding
taxes on dividend or interest income payable on such securities. Changes in
the exchange rates of foreign currencies in which the Fund's investments may
be denominated will affect the U.S. dollar value of the Fund's assets and the
Fund's return. Foreign securities markets may have substantially less volume
and may be smaller, less liquid and subject to greater price volatility than
U.S. markets. Delays or problems with settlement in foreign markets could
affect the liquidity of the Fund's foreign investments and adversely affect
performance. Investment in foreign securities also may result in higher
brokerage and other costs and the imposition of transfer taxes or transaction
charges. In addition, there may be less publicly available information about
a foreign issuer than about a U.S. issuer, and foreign issuers may not be
subject to the same accounting, auditing and financial recordkeeping
standards and requirements as U.S. issuers. Investments in foreign securities
also involve risks of the possible seizure or nationalization of foreign
assets and the possible establishment of exchange controls or other foreign
governmental laws or restrictions that might adversely affect the payment of
dividends on equity securities and principal of and interest on debt
securities. In the event of a default on a foreign obligation, it may be
difficult for the
<PAGE>
16
Fund to obtain or enforce a judgment against the issuer. Investments in
depositary receipts are subject to some, but not all, of the foregoing risks.
INDEX OPTIONS. Whether the Fund will realize a gain or loss on the
purchase or sale of an option on an index depends upon movements in the
prices of the stocks constituting the related index and the changes in the
premium or discount for the option rather than movements in the price of a
particular stock. Accordingly, successful use by the Fund of options on
indices would be subject to the Manager's ability to predict correctly
movements in the direction of the stock market generally. This requires
different skills and techniques than predicting changes in the price of
individual stocks.
The Fund's use of options on stock indices is also subject to
various additional risks. The correlation between movements in the price of
the stock index and the price of the securities being hedged is imperfect and
the risk from imperfect correlation increases as the composition of the
Fund's portfolio diverges from the composition of the relevant index. In
addition, the ability of the Fund to close out an option depends on an
exchange or board of trade providing a market for options on the same index
and in the same series. Although the Fund intends to purchase and sell
options on an exchange or board of trade with an active trading market, there
is no assurance that an active market will exist for any particular option at
any particular time.
CONVERTIBLE SECURITIES. Convertible securities have general
characteristics similar to both fixed-income and equity securities. Although
to a lesser extent than with fixed-income securities generally, the market
value of convertible securities tends to decline as interest rates increase
and, conversely, tends to increase as interest rates decline. In addition,
because of the conversion feature, the market value of convertible securities
tends to vary with fluctuations in the market value of the underlying common
stock, and therefore, also will react to variations in the general market for
equity securities. A unique feature of convertible securities is that as the
market price of the underlying common stock declines, convertible securities
tend to trade increasingly on a yield basis, and so may not experience market
value declines to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the prices of the
convertible securities tend to rise as a reflection of the value of the
underlying common stock.
BELOW INVESTMENT-GRADE SECURITIES. The market values of many high
yield securities, which are rated Ba or lower by Moody's or BB or lower by
S&P and are sometimes referred to as "junk bonds," tend to be more sensitive
to economic conditions than are higher rated securities and will fluctuate
more over time. These securities are considered by S&P and Moody's, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories. The Fund limits such investments to a maximum of 10% of
its portfolio.
Issuers of high yield securities often are highly leveraged and may
not have available to them more traditional methods of financing. The
issuer's ability to service its debt obligations may be affected adversely by
specific corporate developments or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing.
The risk of loss because of default by the issuer is significantly greater
for the holders of these securities because such securities generally are
unsecured and often are subordinated to other creditors of the issuer.
There is no established retail secondary market for many of these
securities, and to the extent a secondary trading market for these securities
does exist, it generally is not as liquid as the secondary market for higher
rated securities. The lack of a liquid secondary market may have an adverse
impact on market price and yield and the Fund's ability to dispose of
particular issues when necessary to meet that Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. It may make it more difficult for the Fund to
obtain accurate market quotations for purposes of valuing that Fund's
portfolio and calculating its net asset value.
<PAGE>
17
The market values of certain lower rated debt securities tend to
reflect investor perceptions and individual corporate developments to a
greater extent than do higher rated securities, which react primarily to
fluctuations in the general level of interest rates, and tend to be more
sensitive to economic conditions than are higher rated securities.
REPURCHASE AGREEMENTS. The Fund will enter into repurchase
agreements only with member banks of the Federal Reserve System and
securities dealers believed creditworthy, and only if fully collateralized by
securities in which the Fund is permitted to invest. A repurchase agreement
is subject to the risk that the seller may fail to repurchase the security.
Repurchase agreements are considered under the 1940 Act to be loans
collateralized by the underlying securities. All repurchase agreements
entered into by the Fund will be fully collateralized at all times during the
period of the agreement in that the value of the underlying security will be
at least equal to 100% of the amount of the loan, including the accrued
interest thereon, and the Fund or its custodian will have possession of the
collateral. Whether a repurchase agreement is the purchase and sale of a
security or a collateralized loan has not been conclusively established. This
might become an issue in the event of the bankruptcy of the other party to
the transaction. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities
would not be owned by the Fund, but would only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Fund may
suffer time delays and incur costs in connection with the disposition of the
collateral. The collateral underlying repurchase agreements may be more
susceptible to claims of the seller's creditors than would be the case with
securities owned by the Fund. Repurchase agreements maturing in more than
seven days are treated as illiquid.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. When-issued and
forward commitment transactions involve the risk that the price or yield
obtained in a transaction may be less favorable than the price or yield
available in the market when the securities delivery takes place.
FINANCIAL INFORMATION
Exhibit C contains audited annual financial statements of the Fund
for its two most recent fiscal years and unaudited interim statements.
However, keep in mind that the Fund's costs are likely to be higher in the
near term future due to certain requirements imposed on registered funds by
the Securities and Exchange Commission.
DESCRIPTION OF UNITS
This section will help you become familiar with the limited
partnership units and the policies that may apply to your account. The
complete terms of the units are found in the Partnership Agreement attached
as Exhibit A to this private placement memorandum.
ISSUANCE OF UNITS TO NEW LIMITED PARTNERS
On the first day of each calendar quarter, the Manager (subject to
any policies established by the Board) may at any time and without advance
notice to or consent from any other partner admit any person who shall agree
to be bound by all of the terms of the Partnership Agreement as a limited
partner. The minimum initial investment is $100,000 and subsequent
investments (other than reinvested dividends) must be in a minimum amount of
$10,000 unless the Manager decides, in its sole discretion (subject to any
policies established by the Board), to waive these minimums. The Manager may
also allow a new limited partner to be admitted other than on the first day
of a calendar quarter. The number of units issued in exchange for each
initial purchase shall be based on the net asset value per unit as of the
next date on which net asset value is determined following receipt of the
investor's completed, binding subscription agreement in the form attached as
Exhibit B. Each new limited partner shall be required to
<PAGE>
18
execute an agreement binding him or her to the terms of the Partnership
Agreement. See "SUMMARY OF PARTNERSHIP AGREEMENT."
PRICING OF PARTNERSHIP UNITS
All purchases and redemptions of units will be priced at the per
unit net asset value or NAV calculated as of the next date on which net asset
value is determined following receipt of completed, binding subscription or
redemption documents from the investor. The current net asset value of the
Fund's units shall be computed at least weekly as of the close of business on
the last business day of each calendar week, and daily during the five days
preceding a repurchase request deadline. See "DESCRIPTION OF UNITS--
Repurchase Offers."
Securities which are listed on a national securities exchange shall
be valued by the Manager at their last sales prices on the date of
determination on the principal securities exchange on which the securities
shall have traded on that date, or if trading in the securities on the
principal securities exchange on which the securities shall have traded on
that date was reported on the consolidated tape, their last sales prices on
the consolidated tape (or, if the date of determination is not a date upon
which that principal securities exchange was open for trading, on the last
prior date on which that securities exchange was open not more than 10 days
prior to the date of determination). If no sales of the securities occurred
on either of the foregoing dates, the securities shall be valued at the mean
of the "bid" and "asked" prices for the securities on the principal
securities exchange on which the securities are traded, on the date of
determination, or, if "bid" and "asked" prices for the securities on the
principal securities exchange on which the securities shall have traded on
that date was reported on the consolidated tape, the mean of "bid" and
"asked" prices for the securities on the consolidated tape (or, if the date
of determination is not a date upon which that securities exchange was open
for trading, on the last prior date on which it was open not more than 10
days prior to the date of determination). Securities which are not listed
shall be valued at their representative "bid" quotations, unless the
securities are included in the NASDAQ National Market System, in which case
they shall be valued based upon their closing "bid" prices as reported on the
NASDAQ National Market System reporting system (if these prices are
available). Securities and other assets of the Fund (except goodwill, which
shall not be taken into account) for which no such market prices are
available, or for which valuation determined pursuant to this paragraph does
not in the opinion of the Manager fairly reflect market value, shall be
valued by or under the direction of the Board.
SUBSCRIPTION FOR UNITS
Persons interested in investing in the Fund are required to complete
and return to the Manager the subscription document available from the
Manager. The Manager, in its sole discretion, may decline to accept any
proposed investor as a limited partner.
The units have not been registered under the 1933 Act and therefore
cannot be sold unless they are subsequently registered under the 1933 Act or
an exemption from registration is available. It is not contemplated that the
units will ever be registered under the 1933 Act or that certain exemptions
provided by rules promulgated under the 1933 Act (such as Rule 144) will ever
be available. The Partnership Agreement provides that a limited partner may
not assign any of its units or the interests they represent, except by
operation of law, or substitute another person as a limited partner without
the prior written consent of the Manager, which consent may be withheld for
any reason. For a description of the limited rights of limited partners to
redeem units, see "--Repurchase Offers." The foregoing limitations on
transferability and liquidity must be regarded as substantial.
Each investor will be required to represent in the subscription
agreement, a form of which is attached as Exhibit B, that the units to be
acquired by it are being acquired for the investor's own account, for the
account of one or more separate accounts maintained by it or for the account
of one or more
<PAGE>
19
pension or trust funds of which the investor is a trustee, in each case for
investment purposes only and not with a view to resale or distribution.
All subscriptions for units must be made in the form of the
subscription agreement attached as Exhibit B and forwarded along with the
other subscription documents to the Fund, c/o Beck, Mack & Oliver LLC, 330
Madison Avenue, 31st Floor, New York, New York 10017, Attention: Dan I.
Abrams. All investments in the Fund must be made in United States dollars by
check or wire transfer to a bank account designated by the Manager.
Subscriptions will be accepted in whole or in part at the discretion
of the Manager. Subscriptions will in any event only be accepted from those
persons to whom the Manager provides this private placement memorandum.
DISTRIBUTIONS
The Fund anticipates that it will make distributions of net
investment income and realized net capital gains annually. In your
subscription agreement, you must specify how you want to receive your annual
distribution. You may change your distribution option at any time by writing
the Fund at the address on page 33. A change in distribution option will be
effective if received at least 30 days before the end of the fiscal year. The
Fund offers the following options:
1. Reinvestment Option. You may reinvest your distribution from income and
gains in additional units. This option is assigned automatically if no other
choice is made.
2. Cash Option. You may receive your income dividends and capital gain
dividends in cash.
All amounts that are not so distributed will automatically be credited as
additional units to your account at the net asset value per unit as of the
date of the distribution. Payment of any such dividends shall be sent to you
within 30 days after the end of that fiscal year. The Fund reserves the right
to pay distributions in kind in the form of readily marketable portfolio
securities rather than in cash.
If we are unable to deliver to you any dividend or distribution
check and it remains outstanding for six months, we reserve the right to
cancel the check and reinvest the dividend or distribution in units of the
Fund for your account. If a check representing the Fund distribution is not
cashed within a specified period, the Fund will notify the investor that he
or she has the option of requesting another check or reinvesting the
distribution in the Fund. If the Fund does not receive the investor's
election, the distribution will be reinvested in the Fund. Similarly, if the
Fund sends the investor correspondence returned as "undeliverable,"
distributions will automatically be reinvested in the Fund. We will use the
net asset value next computed after the check is canceled. Subsequent
distributions may also be reinvested.
REPURCHASE OFFERS
As a matter of fundamental policy which cannot be changed without a
vote of a majority of the outstanding units of the Fund as defined in the
1940 Act, each quarter the Fund shall make an offer to repurchase its units.
Quarterly the Board will set the size of the offer which will be at least 5%
to up to 25% of the outstanding units. In determining the size of the offer,
the Board will consider the liquidity needs of the partners, whether any
emergency exists that renders it impracticable for the Fund to dispose of
certain of its securities, and all other factors that are appropriate for the
Fund to consider at the time. The deadline for responding to the Fund's
repurchase offers (that is, the repurchase request deadline) shall be
fourteen days prior to the last business day of each calendar quarter (or if
not a business day, the previous business day). Under normal market
conditions, the Board expects to authorize a 25% offer. The Fund may also
make a discretionary repurchase offer once every two years, but it has no
current intention to do so. The repurchase price will be the per unit net
asset value on the repurchase pricing date, which shall be the last business
day of the calendar quarter, and payment for all units repurchased pursuant
to
<PAGE>
20
these offers will be made not later than 7 days after the repurchase pricing
date. During the five business days prior to the repurchase request deadline
you may obtain the current net asset value by calling 212-661-2640.
At least 21 days prior to the repurchase request deadline the Fund
will mail written notice to you setting forth the number of units the Fund
will repurchase, the repurchase request deadline and other terms of the offer
to repurchase, and the procedures for you to follow to request a repurchase.
THE REPURCHASE REQUEST DEADLINE WILL BE STRICTLY OBSERVED. Limited partners
failing to submit repurchase requests in good order by such deadline will be
unable to liquidate units until a subsequent repurchase offer. The Fund
reserves the absolute right to reject any or all tenders of units determined
by the Manager not to be in proper form or to refuse to accept for payment,
purchase or pay for any units if, in the opinion of the Fund's counsel,
accepting, purchasing or paying for such units would be unlawful. The Fund
also reserves the absolute right to waive any of the conditions of the Offer
or any defect in any tender of units whether generally or with respect to any
particular units or limited partners.
If limited partners want to sell more units than the Fund has
offered to repurchase, the Board may, but is not obligated to, increase its
offer for units by 2% of the Fund units outstanding. If there are still more
units tendered than are offered for repurchase, units will be repurchased on
a pro rata basis. Thus, you may be unable to liquidate all or a given
percentage of your units and some limited partners may tender more units than
they wish to have repurchased in order to ensure repurchase of at least a
specific number of units. You may withdraw units tendered at any time prior
to the repurchase request deadline.
The Fund may suspend or postpone a repurchase offer only pursuant to
a vote of a majority of Directors, including a majority of the Directors that
are not affiliated with the Fund (the "Independent Directors"): (A) for any
period during which any market in which the securities owned by the Fund are
principally traded is closed, other than customary weekend and holiday
closings, or during which trading in such market is restricted; (B) for any
period during which an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable, or during which
it is not reasonably practicable for the Fund fairly to determine the value
of its net assets; or (C) for such other periods as the SEC may by order
permit for the protection of limited partners of the Fund.
REPORTS
You will receive audited financial reports of the Fund annually,
reported on by the Fund's independent accountants, and unaudited interim
reports at least semi-annually. Reminick, Aarons & Company, LLP have been
retained to serve as independent accountants to the Fund.
MANAGEMENT OF THE PARTNERSHIP AND THE FUND
THE FUND'S INVESTMENT ADVISER
The Fund's investment adviser is Beck, Mack & Oliver LLC, a New York
limited liability company. As Manager, Beck, Mack & Oliver LLC is responsible
for the day-to-day management of the investment portfolio and other business
affairs of the Fund. Beck, Mack & Oliver LLC is located at 330 Madison
Avenue, 31st Floor, New York, New York 10017. Beck, Mack & Oliver LLC is a
member of the Investment Counsel Association of America.
Founded as a partnership in 1931 by T. Edmund Beck and Lewis Mack
and converted to a limited liability company in 1996, Beck, Mack & Oliver LLC
is an independent investment counselor which is registered under the
Investment Advisers Act of 1940 and as of December 31, 1999 managed
<PAGE>
21
approximately $2.8 billion dollars in assets on behalf of individuals,
trusts, tax-exempt institutions and corporations.
Beck, Mack & Oliver LLC is responsible for the management of the
Fund's investment portfolio pursuant to a Investment Advisory Agreement. It
also oversees certain administrative, compliance and accounting services for
the Fund. In addition, members of Beck, Mack & Oliver LLC serve as officers
of the Fund and Beck, Mack & Oliver LLC provides office space for the Fund
and pays the salaries, fees and expenses of Fund officers.
CODE OF ETHICS
Rule 17j-1 under the 1940 Act requires all registered investment
companies and their investment advisers adopt written codes of ethics and
institute procedures designed to prevent "access persons" (as defined in Rule
17j-1) from engaging in any fraudulent, deceptive or manipulative trading
practices. The Fund's Board of Directors has adopted a code of ethics (the
"Fund Code") that incorporates personal trading policies and procedures
applicable to access persons of the Fund, which includes officers, directors
and other specified persons who may make, participate in or otherwise obtain
information concerning the purchase or sale of securities by the Fund. In
addition, the Manager has adopted a code of ethics (the "Manager Code"). The
Fund and Manager Codes have been designed to address potential conflict of
interests that can arise in connection with the personal trading activities
of investment company and investment advisory personnel.
Pursuant to the Fund and Manager Codes, access persons are generally
permitted to engage in personal securities transactions, provided that a
transaction does not involve securities that are being purchased or sold, are
being considered for purchase or sale, or are being recommended for purchase
or sale by or for the Company. In addition, the Adviser Code contains
specified prohibitions and blackout periods for certain categories of
securities and transactions, and requires that access persons obtain
preclearance to engage in certain personal securities transactions. Finally,
the Fund and Adviser Codes require access persons to report all personal
securities transactions periodically.
You can write the SEC's Public Reference Room and ask them to mail
you copies of the Fund Code and the Manager Code. You can also request copies
electronically at [email protected]. They will charge you a copying fee for
this service. You can also visit the Public Reference Section and copy the
documents while you are there. The address is listed below under "Securities
and Exchange Commission (SEC)."
PORTFOLIO MANAGER
Dan I. Abrams is the portfolio manager of the Fund and is
responsible for making investment decisions and for the day-to-day management
of the Fund's portfolio.
Mr. Abrams, a member since 1975 of the National Association of
Securities Dealers, has served as an investment counselor at Beck, Mack &
Oliver LLC since 1987 and is a member of the company. His responsibilities
with Beck Mack & Oliver LLC include counseling, developing investment
strategies and managing portfolios for individuals, trusts and institutional
clients. Mr. Abrams has had primary responsibility for managing the Fund
since its inception in 1991.
MANAGEMENT FEE
The Fund pays the Manager a management fee, quarterly in arrears,
based on the net assets of the Fund at the beginning of each quarter of the
Fund.
The following schedule sets forth the management fee (expressed as
an annual rate):
<PAGE>
22
<TABLE>
<CAPTION>
AVERAGE DAILY NET ANNUAL RATE
ASSETS OF FUND PERCENTAGE (%)
<S> <C>
Less than $5 Million 1.00
$5 Million but less than $10 Million 0.75
$10 Million and over 0.50
</TABLE>
DIRECTORS AND OFFICERS
The business and affairs of the partnership are managed under the
direction of the Board. The Fund has a nominating committee and an audit
committee which are each comprised of the Independent Directors.
Each Independent Director receives a fee which consists of an annual
retainer of $3,000 and a meeting fee of $500 for each meeting attended. Each
Director is also reimbursed for expenses incurred in attending each meeting
of the Board.
The Partnership Agreement provides that the general partners
(including the Directors) will not be liable to the partnership or the
limited partners for any act or omission performed or omitted by them in good
faith in connection with the conduct of the business of the Fund, but shall
only be liable for actions or omissions constituting willful misconduct,
gross negligence, a violation of federal or state securities laws or criminal
wrongdoing. Thus, the ultimate liability of any general partner to the
limited partners is more limited than would be the case without such a
provision. The general partners will be indemnified by the partnership for
any liability incurred by them arising out of their activities as general
partners except for negligence, misconduct or other breach of fiduciary duty.
The Directors and officers of the Fund and their principal
occupations for at least the past five years are set forth below.
<TABLE>
<CAPTION>
NAME, AGE, ADDRESS POSITION HELD WITH FUND PRINCIPAL OCCUPATION(S) PAST 5 YEARS
------------------ ----------------------- ------------------------------------
<S> <C> <C>
John C. Beck*, 68 Director, general partner Investment Counsel and Member, Beck,
330 Madison Avenue, 31st Floor President and Chief Mack & Oliver LLC
New York, NY 10017 Executive Officer
Margaret Ann Johnson, 53 Director and general partner Member, Ann Johnson Interiors LLC
149 East 73rd Street
New York, NY 10021
John D. Twiname, 67 Director and general partner Minister, founder of The HealthCare
307 East 60th Street Chaplaincy, Inc.
New York, NY 10022-1505
Dan I. Abrams, 60 Treasurer Investment Counsel and Member, Beck,
330 Madison Avenue, 31st Floor Mack & Oliver LLC
New York, NY 10017
Walter K. Giles, 39 Vice President and Secretary Investment Counsel and Member, Beck,
330 Madison Avenue, 31st Floor Mack & Oliver LLC
New York, NY 10017
</TABLE>
* Asterisks indicate those Directors that are "interested persons"
(as defined in the 1940 Act).
<PAGE>
23
CUSTODIAN
Pursuant to a custodian agreement, The Chase Manhattan Bank serves
as the custodian of the assets of the Fund and receives such compensation as
is agreed upon from time to time. As custodian The Chase Manhattan Bank
provides oversight and record keeping for the assets held in the Fund. The
custodian is located at 3 Metrotech Center, Brooklyn, New York 11245.
OTHER FEES AND EXPENSES
The Manager provides the partnership, at its own expense, with
office space, facilities, equipment and personnel. The Manager bears the
administrative and service expenses associated with managing the Fund's
assets, including the expenses incurred in the finding and management of the
investments of the partnership. All other operating expenses of the Fund,
including the Fund's custody expenses, the Fund's investment expenses,
including brokerage costs and interest charges with respect to transactions
in securities, 1940 Act registration fees and expenses, fees and expenses of
the Board, legal and accounting expenses and limited partner administrative
expenses will be borne by the Fund, thereby reducing the total net asset
value of the Fund, except that the Manager will bear its expenses incurred in
reporting to the partners.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
No person owns of record or beneficially five percent or more of the
units of the Fund.
SUMMARY OF PARTNERSHIP AGREEMENT
As an investor in the Fund, you will be a party to the Partnership
Agreement. A summary of certain provisions of the Partnership Agreement
follows. This summary is not definitive and is qualified in its entirety by
reference to the Partnership Agreement itself, which is attached as Exhibit
A. Each prospective investor should carefully read the Partnership Agreement
in its entirety.
CAPITAL ACCOUNTS AND TAX ACCOUNTS
A Capital Account and a Tax Account will be established for each new
partner. The initial balance of each account will equal the partner's
original cash contribution, and it will be adjusted to reflect additional
contributions and distributions. At the end of each Fiscal Period (as defined
below), the Capital Account of each partner will be (i) decreased by the
amount of any redemptions made by the partner, (ii) increased by the amount
of the partner's allocation of Net Capital Appreciation (as defined below)
and (iii) decreased by the amount of the partner's allocation of Net Capital
Depreciation (as defined below).
Each partner's Tax Account will be increased by the partner's share
of taxable gain and income and tax-exempt income and will be reduced by the
partner's share of taxable loss and certain nondeductible expenses.
Allocations for income tax purposes generally will be made among
partners so as to reflect equitably amounts credited or debited to each
partner's Capital Account for the current and prior years. However, for any
fiscal year capital gains and losses of the Fund will first be allocated to
withdrawing partners so as to eliminate insofar as possible any difference
between the balance in withdrawing partners' Capital Accounts and Tax
Accounts and, to the extent these allocations are insufficient to eliminate
completely this difference, items of ordinary income, loss or deduction may
be allocated to the withdrawing partners.
<PAGE>
24
"Fiscal Period" means the period beginning on the first day
following the last day of the immediately preceding Fiscal Period and ending
on the earliest of (i) the date immediately preceding the date on which
additional capital contributions are made to the Fund, (ii) the date on which
there are withdrawals from the Fund, (iii) the December 31st of the calendar
year within which the current Fiscal Period began and (iv) the date on which
the Fund liquidates.
"Net Capital Appreciation" for any Fiscal Period means the excess of
the Fund's net asset value at the end of that Fiscal Period over the Fund's
net asset value at the beginning of that Fiscal Period (plus the amount of
any distributions and minus the amount of capital contributions to the Fund
made during that Fiscal Period).
"Net Capital Depreciation" for any Fiscal Period means the excess of
the Fund's net asset value at the beginning of that Fiscal Period over the
Fund's net asset value at the end of that Fiscal Period (minus the amount of
distributions and plus the amount of any capital contributions to the Fund
during that Fiscal Period).
ALLOCATION OF NET CAPITAL APPRECIATION
AND NET CAPITAL DEPRECIATION
At the end of each Fiscal Period, the Capital Account of all
partners during that Fiscal Period will be adjusted by crediting (in the case
of Net Capital Appreciation) or debiting (in the case of Net Capital
Depreciation) the Net Capital Appreciation or the Net Capital Depreciation,
as the case may be, of the Fund for that Fiscal Period to the Capital
Accounts of those partners in proportion to their respective Capital Account
balances at the beginning of that Fiscal Period.
TERM OF THE FUND
The Fund will dissolve on the first to occur of (i) December 31,
2025, (ii) the Board's determination at any time and for any reason to
liquidate and dissolve the Fund, (iii) the bankruptcy or insolvency of the
Manager, (iv) the election to dissolve the partnership by the holders of a
"majority of outstanding units" of the limited partnership, or (v)
termination, dissolution (other than by reason of a change in the partners of
the Manager) or withdrawal of the Manager as manager of the Fund without the
Board designating another investment adviser to be substituted as the Manager.
The withdrawal, death, disability, incapacity, incompetency,
termination, bankruptcy, insolvency or dissolution of a general or limited
partner will not dissolve the Fund. The legal representatives of a limited
partner will succeed as assignee to a limited partner's units and the
interest in the Fund they represent upon the death, disability, incapacity,
incompetency, termination, bankruptcy, insolvency or dissolution of the
limited partner but shall not be admitted as a substituted limited partner
without the consent of the Manager. In the event of the death, disability,
incapacity, incompetency, termination, bankruptcy, insolvency or dissolution
of a limited partner, the limited partnership interest of the limited partner
will continue at the risk of the Fund business until the date on which the
limited partner's units are repurchased by the Fund or the earlier
termination of the Fund.
LIABILITY OF THE GENERAL PARTNERS AND THE MANAGER
The general partners have unlimited liability under the Delaware
Revised Uniform Limited Partnership Act (the "Partnership Act") for the
repayment and discharge of all debts and obligations of the Fund but are
entitled to require the prior exhaustion of the Fund's assets.
No general partners will be liable to any other partner or the Fund
for any losses due to any act or omission of the general partners in
connection with the conduct of the business of the Fund that is determined in
good faith by the general partner to be in or not opposed to the best
interests of the Fund, unless the act or omission constitutes willful
misconduct, gross negligence, a violation of federal or state securities laws
or criminal wrongdoing by the general partner. In addition, no general
partner will be
<PAGE>
25
liable to any other partner or the Fund for any losses due to any act or
omission of any other partner or the mistakes, negligence, misconduct or bad
faith of any broker or other agent of the Fund selected by the Directors or
the Manager with reasonable care.
The Manager and the general partners may consult with legal counsel
or accountants selected by them. Any act or omission by it on behalf of the
Fund or in furtherance of the business of the Fund in good faith in reliance
on and in accordance with the advice of such counsel or accountants will be
full justification for the act or omission, and each general partner will be
fully protected in so acting or omitting to act if the counsel or accountants
were selected with reasonable care.
INDEMNIFICATION
To the fullest extent permitted by law, each general partner, its
affiliates and their respective partners, officers, employees, directors and
shareholders (the "Indemnitees") will be indemnified by the Fund against any
losses and expenses that are incurred and arise out of or in the course of
the business of the Fund, provided that (i) the Indemnitee acted in good
faith in a manner reasonably believed to be in or not opposed to the best
interests of the Fund and (ii) the conduct did not constitute willful
misconduct, gross negligence, a violation of federal or state securities laws
or criminal wrongdoing. The satisfaction of any indemnification shall be from
and limited to Fund assets, and no partner shall have personal liability on
account thereof.
LIMITED LIABILITY OF LIMITED PARTNERS
A limited partner or former limited partner will be liable for debts
and obligations of the Fund attributable to any fiscal year during which it
is or was a limited partner of the Fund only to the extent of its interest in
the Fund in the fiscal year (or portion thereof) to which the debts and
obligations are attributable. In order to meet a particular debt or
obligation, a limited partner or former limited partner may be required to
make additional contributions or payments up to, but in no event in excess
of, the aggregate amount of returns of capital and other amounts actually
received by him from the partnership during or after the fiscal year to which
such debt or obligation is attributable.
ADDITIONAL INVESTMENTS; ADMISSION OF NEW LIMITED PARTNERS; CHANGES IN THE
GENERAL PARTNERS
With the approval of the Manager and without the consent of any
limited partner, an existing limited partner may purchase additional units in
the Fund and new limited partners may purchase units in the Fund on the first
business day of each calendar quarter, provided that each additional purchase
of units must be for at least $10,000 and the initial purchase of units of
each new limited partner must be for at least $100,000, unless the Manager
exercises its discretion to waive these minimum requirements or to accept
unit purchases by existing limited partners or admit new limited partners at
any time other than the first day of a calendar quarter.
Without the consent of the limited partners, the Manager may
withdraw as manager of the Fund and the Board, including a majority of the
Independent Directors, and, if required by the 1940 Act, the limited
partners, will select an investment adviser to be substituted as manager.
Except as required by applicable law, changes in the partners, directors,
officers or shareholders of a general partner will not require the consent of
the limited partners and will not dissolve the Fund.
OTHER ACTIVITIES OF THE MANAGER AND THE DIRECTORS
The Manager will devote that amount of its time to the affairs of
the Fund which in its judgment the conduct of the Fund's business reasonably
requires. Neither the Manager nor any Director will be obligated to do or
perform any act or thing in connection with the business of the Fund not
expressly set forth in the Partnership Agreement or, in the case of the
Manager, in the Investment Advisory Agreement. The Manager, its partners,
officers and employees, the Directors and their affiliates will not be
precluded from engaging directly or indirectly in any other business or other
activity, including, but not limited to,
<PAGE>
26
exercising investment advisory and management responsibility and buying,
selling or otherwise dealing with securities for their own accounts, for the
accounts of family members and for the accounts of individual and
institutional clients, which activities may compete with those of the Fund.
The Manager will be permitted to perform, among other things, investment
advisory and management services for individuals and entities other than the
Fund and in that connection to give advice and take action in the performance
of its duties to those individuals and entities which may differ from the
timing and nature of action taken with respect to the Fund. The Manager will
not be obligated to purchase or sell for the Fund any security or other
investment which the Manager or its affiliates may purchase or sell, or
recommend for purchase or sale, for its or their own accounts, or for the
account of any client. Neither the Fund nor the limited partners will have
any rights of first refusal, coinvestment or other rights in respect of the
investments of other accounts or in any fees, profits or other income earned
or otherwise derived therefrom. No limited partner will, by reason of being a
limited partner in the Fund, have any right to participate in any manner in
any profits or income earned or derived by or accruing to the general
partners (including the Manager), any of their affiliates or their respective
partners, directors, officers, employees or shareholders from the conduct of
any business other than the business of the Fund or from any transaction in
securities effected by any general partner (including the Manager), any of
their affiliates or their respective partners, directors, officers, employees
or shareholders for any account other than that of the Fund.
AMENDMENTS TO PARTNERSHIP AGREEMENT
The Partnership Agreement may be amended at any time with the
written consent of the Manager, of the Board and of limited partners holding
more than 50% of the outstanding units (unless approval is sought at a
meeting of limited partners, where it may be amended by the affirmative vote
of a majority of the outstanding units as defined in the 1940 Act); except
that the general partners may, without the consent of the limited partners,
amend the Partnership Agreement (i) to reflect changes validly made in the
membership of the Fund and the contributions and withdrawals by any partner,
(ii) to reflect a change in the name of the Fund, (iii) to reflect a change
in the manner in which Capital Accounts or any debits or credits thereto are
computed in accordance with the terms and conditions of the Partnership
Agreement, (iv) to effect compliance with any applicable law or regulation
and (v) to make a change that is necessary or desirable to correct any
ambiguity, to correct or supplement any provision in the Partnership
Agreement that would be inconsistent with any other provision in the
Partnership Agreement and to make any other provision with respect to matters
or questions arising under the Partnership Agreement that will not be
inconsistent with the provisions of the Partnership Agreement, in each case
if the change does not adversely affect the limited partners. The consent of
a partner must be obtained for any amendment which would reduce its Capital
Account, rights to allocations and distributions (other than by virtue of new
and additional contributions by other partners), rights of contribution or
withdrawal or which would modify the provisions of the amendment section of
the Partnership Agreement.
TAXES
The following summary discussion describes certain U.S. federal
income tax aspects of investing in the Fund. It is based on provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
regulations ("Regulations") promulgated thereunder and published
administrative rulings and judicial decisions, all as of the date of this
private placement memorandum. No assurance can be given that future
legislation, administrative rulings or court decisions will not modify the
conclusions set forth in this discussion. This discussion is necessarily
general; the actual tax and financial consequences of the purchase of units
in the Fund will vary depending upon the investor's circumstances. This
discussion does not constitute tax advice and is not intended to substitute
for individual tax planning. Further, this discussion does not take into
account the particular circumstances of each prospective
<PAGE>
27
investor some of whom, such as non-U.S. persons, tax exempt organizations,
financial institutions, dealers or traders in securities that adopt mark to
market accounting for tax purposes or other investors that do not hold their
units as capital assets may be subject to special rules. EACH PROSPECTIVE
INVESTOR IS URGED TO CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL,
STATE, LOCAL AND FOREIGN INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
OR DISPOSITION OF UNITS IN THE FUND.
PARTNERSHIP STATUS
Under current U.S. Treasury regulations, a domestic entity that has
two or more members and that is not organized as a corporation under federal
or state law will generally be classified as a partnership for federal income
tax purposes unless it elects to be treated as a corporation. Thus, subject
to the discussion of "publicly traded partnership" set forth below, the Fund
will be treated as a partnership for U.S. federal income tax purposes. The
classification of an entity as a partnership for federal income tax purposes
may not be respected for state or local tax purposes. An organization that is
classified as a partnership for federal income tax purposes is not subject to
federal income tax itself, although it must file an annual information
return. Individual partners are required to report on their federal income
tax returns their distributive units of each item of the partnership's
income, gain, loss, deduction and credits for each taxable year of the
partnership ending with or within the partner's taxable year. See "Taxation
of Limited Partners" below.
An entity that would otherwise be classified as a partnership for
federal income tax purposes may nonetheless be taxable as a corporation if it
is a "publicly traded partnership". Pursuant to IRS Notice 88-75 a
partnership which meets certain safe harbor requirements is precluded from
being classified as a "publicly traded partnership" for all taxable years
beginning on or before December 31, 2005. The Manager believes that the Fund
currently meets and intends to operate the Fund so that it will continue to
meet the requirements for safe harbor treatment set out in Notice 88-75 so
that the Fund will not be classified as a "publicly traded partnership" prior
to December 31, 2005. In this regard, the Fund will rely on representations
and undertakings of limited partners. Moreover, the Directors intend to take
such actions as are reasonably necessary or advisable in the future to ensure
that the Fund will not be treated as a "publicly traded partnership" after
December 31, 2005. Such action could include, for example, limiting the
redemption rights of limited partners. Alternatively, the Fund may determine
to liquidate at such time.
In the absence of a ruling from the IRS (which the Fund has
determined it is not practicable to seek), there can be no assurance that the
IRS will not attempt to characterize the Fund as a "publicly traded
partnership" taxable as a corporation. If the Fund were determined to be a
corporation for tax purposes, the Fund would be taxed on its earnings at
corporate rates, and any distributions to the limited partners would be
treated as corporate distributions, which would be taxable as dividends to
the limited partners to the extent of the earnings and profits of the Fund.
Subject to applicable limitations in the Code, such dividends would generally
be eligible for a dividends received deduction in the case of a limited
partner that is a corporation.
It is assumed in the following discussion of tax considerations that
the Fund will be classified as a partnership and will not be treated as
"publicly traded" for federal income tax purposes.
TAXATION OF LIMITED PARTNERS
Provided that the Fund is classified as a partnership for federal
income tax purposes, each limited partner will be taxed upon his distributive
share of each item of the Fund's income, gain, loss, deduction and credit for
each taxable year of the Fund ending with or within the limited partners'
taxable year. See "Allocations of Income, Gain, Loss and Expense" below. Each
item will have the same character and source to a limited partner as though
the limited partner realized the item directly. Limited partners must report
these items regardless of the extent to which, or whether, they receive cash
distributions from the
<PAGE>
28
Fund for a taxable year, and thus may incur income tax liabilities without
receiving sufficient distributions from the Fund to fund these liabilities.
In addition, investments in certain securities such as original issue
discount obligations, preferred stock with redemption premiums, stock of
certain foreign corporations, "Section 1256 contracts" and in positions that
constitute "straddles" as well as certain methods of accounting adopted by
the Fund, may result in the recognition of substantial amounts of taxable
income without receipt of cash, or substantial amounts of taxable income when
little economic income is realized.
ALLOCATIONS OF INCOME, GAIN, LOSS AND DEDUCTION
Section 704(b) of the Code provides that a partner's distributive
share of income, gain, loss, deduction or credit or any item thereof, will be
determined under the Partnership Agreement provided the allocations have
"substantial economic effect." In order for partnership allocations to have
substantial economic effect the Regulations under Section 704(b) of the Code,
among other things, prescribe complex requirements for the maintenance of
capital accounts. If an allocation lacks substantial economic effect the item
must be reallocated in accordance with the partner's "interest in the
partnership", which will be determined taking into account all of the facts
and circumstances.
Under the Partnership Agreement, the Fund's Net Capital Appreciation
or Net Capital Depreciation for each accounting period is allocated among the
partners without regard to the amount of income or loss actually realized by
the Fund for federal income tax purposes. For each fiscal year, under the
Partnership Agreement items of income, gain, loss, deduction or credit
realized for federal income tax purposes by the Fund are to be allocated for
income tax purposes in such a manner as to reflect equitably the amount so
allocated to each partner's Capital Account for the current and prior fiscal
years. In addition, in the case of a withdrawing partner whose tax basis
differs from his Capital Account balance the Manager may allocate
specifically to that Partner items of tax income or loss to eliminate the
difference. There can be no assurance that the IRS will accept such
allocations.
The allocations of income, gain, loss and deduction discussed above
are intended to comply generally with the requirements of Sections 704(b) and
704(c) of the Code. However, the IRS may assert that the Fund does not
maintain capital accounts in accordance with Section 704(b) of the Code and
that its allocations therefore lack substantial economic effect. Similarly,
there can be no assurance that the IRS will not challenge the validity of the
Fund's method of complying with Section 704(c).
Any challenge by the IRS with respect to the allocations of tax
items provided in the Partnership Agreement, whether as described above or on
some other ground, would, if sustained, result in the reallocation of the
items in accordance with the partners' interests in the Fund. This
reallocation could affect adversely the tax and financial consequences of a
purchase of units in the Fund.
The Manager will have the authority, without the consent of the
limited partners, to amend the tax allocation provisions to the extent
necessary to comply with Regulations or other authority issued under Sections
704(b) of the Code.
Limited partners should note that it is possible that the
allocations of the Fund's taxable income and losses among the partners will
not reflect the allocations of Net Capital Appreciation and Net Capital
Depreciation that have been made to the partners' Capital Accounts so that a
limited partner may be allocated taxable income in excess of its economic
gain. In such cases, a limited partner may be prevented from realizing the
tax benefit of any excess of tax allocations over his Capital Account
balance, if at all, until his units have been disposed of or his interest
terminated. Limited partners should note that the Manager will attempt to
allocate additional items of tax income or loss, including ordinary income or
loss, as the case may be, to limited partners who withdraw from the Fund at a
time when allocations of the Fund's tax results to them do not reflect
allocations of Fund financial income.
<PAGE>
29
FUND DISTRIBUTIONS AND REDEMPTIONS
A cash distribution from the Fund to a limited partner will reduce
the adjusted basis of the limited partner's interest and, to the extent it
exceeds the adjusted basis of the limited partner's interest, result in
treatment as gain from the sale or exchange of the interest, taxable in
accordance with the rules described under "Disposition of Units" below.
DISPOSITION OF UNITS
A limited partner will recognize gain or loss on the sale, exchange
or other disposition of units to the extent the amount realized therefor
differs from its tax basis in his units. Generally, this gain or loss will be
considered long-term capital gain or loss if the limited partner has held its
units for more than one year. Under Section 751 of the Code, however, on a
sale of units to a third party the limited partner will recognize ordinary
income to the extent the disposition proceeds are attributable to "unrealized
receivables" (including, for example, certain short-term obligations or
market discount bonds, the interest on which has not been included in the
Fund's taxable income) ("Section 751 property"). The limited partner may
recognize this ordinary income even if it would not otherwise recognize a
gain on the sale, exchange or other disposition. For tax purposes, the amount
realized by a limited partner from the sale, exchange or other disposition of
units will include its share of the Fund's outstanding non-recourse
liabilities, if any.
On a redemption of units by the Fund, a limited partner will be
subject to Section 751(b) if he receives non-Section 751 property (such as
cash) for a portion of its interest in Section 751 property. Section 751(b)
provides that in this circumstance the limited partner will be treated as
receiving a deemed distribution of Section 751 property and then exchanging
the Section 751 property for the non-Section 751 property. Both the limited
partner and the Fund would recognize gain on a deemed exchange.
LIMITATIONS ON DEDUCTIBILITY OF FUND LOSSES
BASIS. To the extent losses are incurred by the Fund, a limited
partner's share of deductions for the losses will be limited to the tax basis
of the limited partner's interest. A limited partner's initial tax basis for
its interest will be the amount paid for the units. This initial basis will
be increased by the limited partner's share of Fund income and by any
increase in the limited partner's share of Fund non-recourse indebtedness, if
any. Basis for an interest will be decreased (but not below zero) by
distributions from the Fund, by any decrease in the limited partner's share
of Fund non-recourse indebtedness, by the limited partner's share of Fund
losses and by the limited partner's share of expenditures of the Fund that
are not deductible in computing his taxable income and are not required to be
capitalized.
PASSIVE LOSSES. The Code restricts the deductibility of losses from
a "passive activity" (generally an activity in which the taxpayer does not
materially participate) against certain income which is not derived from a
passive activity. This restriction applies to individuals, personal service
corporations and closely held corporations. Pursuant to temporary Regulations
issued by the Treasury Department, income or loss from the Fund generally
will not constitute income or loss from a passive activity. Therefore,
passive losses from other sources generally could not be deducted against a
limited partner's share of income and gain, if any, from the Fund.
The Code imposes other limitations on the ability of individuals to
use losses and deductions arising from investment in entities such as the
Fund, including, limitations relating to deductions for "investment interest"
under Section 163 of the Code. Prospective investors should consult their own
tax advisors regarding the application of such rules to an investment in the
Fund.
<PAGE>
30
ALTERNATIVE MINIMUM TAX
Each limited partner will be required to take into account its
distributive share of any Fund income, gain or loss for purposes of the
alternative minimum tax. Since a limited partner's potential liability for
the alternative minimum tax will depend upon his overall tax situation,
prospective investors are urged to consult with their tax advisors concerning
the effect of an investment in the Fund on its potential liability for the
alternative minimum tax.
TAXATION OF FUND INVESTMENTS
The Fund may realize capital gains or losses from dispositions of
its investments. Interest, dividends and certain other income earned by the
Fund will generally be treated as ordinary income. Net capital gains of
individual limited partners are generally taxable at a maximum rate of 20%
whereas ordinary income is generally taxable at a 39.6% rate. Corporate
limited partners are generally taxed at the same 35% rate on both ordinary
income and capital gains. The excess of capital losses over capital gains may
be offset against the ordinary income of a non-corporate limited partner,
subject to an annual deduction limitation of $3,000. Unused capital losses
may generally be carried forward indefinitely subject to an annual reduction
based on the amount of capital losses allowed or allowable as a deduction in
the taxable year. For corporate limited partners, capital losses may be
offset only against capital gains, but unused capital losses may be carried
back three years (subject to certain limitations) and carried forward five
years.
DEDUCTIBILITY OF FUND INVESTMENT EXPENDITURES BY INDIVIDUAL PARTNERS
Under the Code miscellaneous itemized deductions of an individual,
including investment expenses (E.G., investment advisory fees), are
deductible subject to certain limitations only to the extent they exceed 2%
of the individual's adjusted gross income. This limitation on deductibility
may apply to an individual partner's share of the investment expenses of a
partnership. Whether the operating expenses of the Fund will be treated as
investment expenses subject to the foregoing rule will depend on whether the
Fund is treated as engaged in a trade or business for tax purposes. The
Manager will file the Fund's tax returns and the accompanying Schedule K-1 on
the basis that the expenses are subject to the 2% limitation. Thus, an
individual partner's share of certain of the Fund's expenses, including the
Management Fee, will be reported as subject to this rule. Moreover, the
otherwise allowable itemized deductions of individuals whose adjusted gross
income exceeds an applicable threshold amount are subject to reduction by an
amount equal to the lesser of (i) 3% of the excess of such individual's
adjusted gross income over the threshold amount or (ii) 80% of the amount of
the itemized deductions otherwise allowable. The consequences of this
limitation will vary depending upon the personal tax situation of each
taxpayer. Accordingly, individual limited partners should consult their tax
advisors with respect to the application of this limitation.
TAX EXEMPT INVESTORS
Income recognized by a tax-exempt entity is exempt from federal
income tax except to the extent of the entity's "unrelated business taxable
income" ("UBTI"). With exceptions for certain types of entities, UBTI is
generally defined as income from a trade or business regularly carried on by
a tax-exempt entity that is unrelated to its exempt purpose (including an
unrelated trade or business regularly carried on by a partnership of which
the entity is a partner). UBTI generally does not include dividends, interest
and gains from the sale of property that is neither inventory nor held for
sale to customers in the ordinary course of business. A tax-exempt entity
deriving gross income characterized as UBTI that exceeds $1,000 in any
taxable year is obligated to file a federal income tax return, even if it has
no liability for that year as a result of deductions against such gross
income, including an annual $1,000 statutory deduction.
<PAGE>
31
Notwithstanding the foregoing, if a tax exempt entity's acquisition
of an interest in the Fund is debt-financed, or the Fund incurs debt (which
it is entitled to do under certain circumstances) for the acquisition of an
investment, all or a portion of the income or gain attributed to the "debt
financed property" would be included in UBTI regardless of whether such
income or gain would otherwise be excluded as dividends, interest or other
similar income. Prospective tax-exempt investors are urged to consult their
tax advisors with respect to the consequences of investing in the Fund.
TAX ELECTIONS; RETURNS; TAX AUDITS
The Code provides for optional adjustments to the basis of
partnership property upon distributions of partnership property to a partner
and transfers of partnership interests (including by reason of death)
provided that a partnership election has been made pursuant to Section 754.
Under the Partnership Agreement, the Manager, in its sole discretion, may,
but is not required to, cause the Fund to make this election. This election,
once made, cannot be revoked without the consent of the IRS.
The Fund will file a federal partnership information return for each
calendar year and will provide each limited partner with an annual statement
containing relevant income tax information, including each limited partner's
share of the Fund's taxable income or loss and capital gains or losses for
each calendar year. The Manager decides how to report the Fund items on the
Fund's tax returns, and all limited partners are required under the Code to
treat the items consistently on their own returns, unless they file a
statement with the IRS disclosing the inconsistency. If the income tax
returns of the Fund are audited by the IRS, the tax treatment of Fund income
and deductions generally will be determined at the Fund level in a single
proceeding rather than by individual audits of the partners. The costs
relating to such an audit will be borne by the partners or the Fund. The
Manager will be designated as the "Tax Matters Partner" and will have
considerable authority to make decisions affecting the tax treatment and
procedural rights of all partners. In addition, the Tax Matters Partner will
have the right on behalf of all partners to extend the statute of limitations
relating to the partners' tax liabilities with respect to Fund items.
FOREIGN INVESTORS
The Federal income tax treatment applicable to a nonresident alien
or foreign entity investing in the Fund is complex and will vary depending
upon the particular circumstances of each such limited partner and whether
the Fund is treated as being engaged in a trade or business for United States
Federal income tax purposes. Foreign investors are urged to consult with
their tax advisors concerning the United States Federal, state, local and
foreign (including the foreign investor's country of residence) tax treatment
of an investment in the Fund.
STATE AND LOCAL TAXATION
In addition to the federal income tax consequences described above,
prospective investors should consider potential state and local tax
consequences of an investment in the Fund. State and local laws often differ
from federal income tax laws with respect to the treatment of specific items
of income, gain, loss, deduction and credit. A limited partner's distributive
share of the taxable income or loss of the Fund generally will be required to
be included in determining his reportable income for state and local tax
purposes in the jurisdiction in which he is a resident.
A state or other taxing authority in which the Fund may be deemed to
be doing business may impose a tax on that limited partner with respect his
share of Fund income. Moreover, the Fund may itself be subject to state and
local tax.
Prospective investors are urged to consult their tax advisors with
respect to the state and local tax consequences of investing in the Fund,
including the effect of applicable New York State and New York City tax laws.
<PAGE>
32
CERTAIN PROPOSED FEDERAL INCOME TAX LEGISLATION
A number of items of legislation have in the past been proposed that
could alter certain of the federal income tax consequences of an investment
in the Fund. It is uncertain whether any such proposed legislation (or
similar legislation) will be enacted. Prospective investors should consult
their own tax advisors regarding proposed legislation.
EARLY IN EACH CALENDAR YEAR, THE FUND WILL SEND YOU A NOTICE SHOWING
THE AMOUNT OF DISTRIBUTIONS YOU RECEIVED IN THE PRECEDING YEAR AND THE TAX
STATUS OF THOSE DISTRIBUTIONS. THE ABOVE IS A GENERAL SUMMARY OF TAX
IMPLICATIONS OF INVESTING IN THE FUND. PLEASE CONSULT YOUR TAX ADVISER TO SEE
HOW INVESTING IN THE FUND WILL AFFECT YOUR OWN TAX SITUATION.
CERTAIN ERISA CONSIDERATIONS
GENERAL FIDUCIARY MATTERS
In considering an investment in the Fund of a portion of the assets
of any employee benefit plan (including a "Keogh" plan), whether or not
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the Code (a "Qualified Plan"), a fiduciary should determine, in
light of the substantial restrictions on transfers and withdrawals by limited
partners and the illiquidity of the units, whether the investment is in
accordance with the documents and instruments governing the Qualified Plan
and the applicable provisions of ERISA relating to a fiduciary's duties to
the Qualified Plan.
ERISA and the Code impose certain duties on persons who are
fiduciaries of plans and prohibit certain transactions involving the assets
of a plan and its fiduciaries or other interested parties. Under ERISA and
the Code, any person who exercises any authority or control over the
management or disposition of the assets of a plan is considered to be a
fiduciary of the plan, subject to certain exceptions which are not relevant
to the Fund.
PLAN ASSETS
If the assets of the Fund were to be deemed to be "plan assets"
under ERISA, (i) the prudence and other fiduciary responsibility standards of
ERISA applicable to investments made by certain Qualified Plans and their
fiduciaries would extend to investments made by the Fund, and (ii) certain
transactions in which the Fund might seek to engage could constitute
"prohibited transactions" under ERISA and the Code.
Under current law, an entity will be deemed to hold plan assets if
the total equity investment by benefit plan investors is 25 percent or more
of the entity's equity, excluding equity interests held by the person with
discretionary authority or control over the assets of the entity and the
affiliates of such person. For purposes of this 25 percent test, all employee
benefit plans, whether or not subject to ERISA or the Code, are counted,
including "Keogh" plans, Individual Retirement Accounts and pension plans
maintained by foreign corporations. If benefit plan investors constitute 25
percent or more of the Fund's equity, the Fund will be deemed to hold "plan
assets," and the Manager and Directors will attempt to comply with the
provisions of ERISA and the Code applicable to a fiduciary of a Qualified
Plan under ERISA.
PLAN ASSET CONSEQUENCES;
PROHIBITED TRANSACTION EXEMPTION
When the Fund holds "plan assets," additional issues arise under the
prohibited transaction provisions of ERISA and the Code by virtue of a
Director's or the Manager's interest in the Fund and the possible
relationship between a Director or the Manager and any Qualified Plan which
may purchase
<PAGE>
33
units. If a prohibited transaction occurs for which no administrative
exemption is available, the Director or Manager, and any other party in
interest which has engaged in any such prohibited transaction, would be
required (i) to restore to the Qualified Plan any profit realized on the
transaction and (ii) to reimburse the Qualified Plan for any losses suffered
by the Qualified Plan as a result of the investment. In addition, each party
in interest involved could be subject to an excise tax equal to 5 percent of
the amount involved in the prohibited transaction for each year the
transaction continues and, unless the transaction is corrected within
statutorily required periods, to an additional tax of 100 percent. Plan
fiduciaries who decide to invest in the Fund could, under certain
circumstances, be liable for prohibited transactions or other violations as a
result of their investment in the Fund or as co-fiduciaries for actions taken
by the Directors or the Manager.
Furthermore, unless appropriate administrative exemptions were
available or were obtained, the Fund could be restricted from acquiring an
otherwise desirable investment or from entering into an otherwise favorable
transaction if the acquisition or transaction would constitute a "prohibited
transaction." For example, the Fund could be prohibited from investing in a
corporation whose affiliates maintain a pension or profit-sharing plan
participating in the Fund. However, because of the type of portfolio that the
Fund is expected to have, the Fund does not believe that the investment
restrictions imposed by the prohibited transaction provisions of ERISA and
the Code will materially limit the investment opportunities available to the
Fund.
ANY FIDUCIARY FOR A QUALIFIED PLAN SHOULD CONSULT ITS LEGAL ADVISOR
CONCERNING THE ERISA CONSIDERATIONS DISCUSSED ABOVE BEFORE MAKING AN
INVESTMENT IN THE FUND.
<PAGE>
34
CONTACTING THE FUND
You can contact us by calling (212) 661-2640 or writing:
BMO Partners Fund, Inc.
330 Madison Avenue, 31st Floor
New York, New York 10017
SECURITIES AND EXCHANGE COMMISSION (SEC)
You can write the SEC's Public Reference Room and ask them to mail you
information about the Fund. They will charge you a copying fee for this service.
You can also visit the Public Reference Section and copy the documents while you
are there.
Public Reference Section of the SEC
Washington, D.C. 20549-6009
1-800-SEC-0330
Reports and a copy of other information about the Fund is also
available on the SEC's website at http://www.sec.gov.
<PAGE>
EXHIBIT A
-------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
BMO PARTNERS FUND, L.P.
Dated as of May 9, 2000
-------------------------------------------------------------------------------
===============================================================================
THE LIMITED PARTNERSHIP UNITS OF BMO PARTNERS FUND, L.P. HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), THE
SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE
UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS.
THE UNITS MUST BE ACQUIRED FOR INVESTMENT ONLY, AND THE UNITS MAY NOT BE OFFERED
FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME
EXCEPT IN COMPLIANCE WITH (I) THE ACT, ANY APPLICABLE STATE SECURITIES LAWS AND
ANY OTHER APPLICABLE SECURITIES LAWS AND (II) THE TERMS AND CONDITIONS OF THIS
AGREEMENT. THE UNITS WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH
THOSE LAWS AND THIS AGREEMENT.
<PAGE>
TABLE OF CONTENTS
Page(s)
ARTICLE I
DEFINITIONS...........................................................1
ARTICLE II
GENERAL PROVISIONS....................................................4
SECTION 2.01. FORMATION..............................................4
SECTION 2.02. NAME...................................................4
SECTION 2.03. ORGANIZATIONAL CERTIFICATES AND OTHER FILINGS..........5
SECTION 2.04. PRINCIPAL PLACE OF BUSINESS............................5
SECTION 2.05. REGISTERED OFFICE AND REGISTERED AGENT.................5
SECTION 2.06. TERM...................................................5
SECTION 2.07. FISCAL YEAR............................................5
SECTION 2.08. MANAGER; DIRECTORS.....................................5
SECTION 2.09. LIMITED PARTNERS.......................................6
SECTION 2.10. BOTH GENERAL AND LIMITED PARTNER.......................6
SECTION 2.11. LIABILITY OF PARTNERS..................................6
SECTION 2.12. PURPOSES...............................................7
SECTION 2.13. INVESTMENT RESTRICTIONS................................8
SECTION 2.14. INTERESTS TO BE DENOMINATED AS UNITS...................8
ARTICLE III
MANAGEMENT OF THE FUND................................................8
SECTION 3.01. MANAGEMENT AND CONTROL.................................8
SECTION 3.02. ACTIONS BY DIRECTORS...................................9
SECTION 3.03. MEETINGS OF LIMITED PARTNERS...........................9
SECTION 3.04. MANAGEMENT SERVICES...................................10
SECTION 3.05. RELIANCE BY THIRD PARTIES.............................12
SECTION 3.06. OTHER ACTIVITIES OF THE GENERAL PARTNERS..............12
SECTION 3.07. CUSTODY OF ASSETS OF THE FUND.........................13
SECTION 3.08. EXCULPATION...........................................13
SECTION 3.09. INDEMNIFICATION.......................................14
SECTION 3.10. EXPENSES..............................................14
ARTICLE IV
TERMINATION OF STATUS AS GENERAL PARTNER,
TRANSFERS AND REPURCHASES............................................15
SECTION 4.01. TERMINATION OF STATUS OF THE MANAGER..................15
SECTION 4.02. TERMINATION OF STATUS OF A DIRECTOR...................15
SECTION 4.03. REMOVAL OF DIRECTORS..................................15
SECTION 4.04. CHANGES IN GENERAL PARTNERS...........................15
i
<PAGE>
SECTION 4.05. TRANSFER OF UNITS.....................................16
SECTION 4.06. REPURCHASE OF UNITS...................................16
ARTICLE V
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS AND ALLOCATIONS.............17
SECTION 5.01. CAPITAL CONTRIBUTIONS.................................17
SECTION 5.02. CAPITAL ACCOUNTS AND TAX ACCOUNTS.....................17
SECTION 5.03. CAPITAL ACCOUNT ALLOCATIONS...........................18
SECTION 5.04. CLOSING OF THE BOOKS..................................19
SECTION 5.05. VALUATION OF ASSETS...................................19
SECTION 5.06. LIABILITIES...........................................20
SECTION 5.07. TAX ACCOUNT ALLOCATIONS...............................20
SECTION 5.08. DETERMINATION BY THE MANAGER OF CERTAIN MATTERS.......21
ARTICLE VI
WITHDRAWALS AND DISTRIBUTIONS OF CAPITAL.............................21
SECTION 6.01. WITHDRAWALS AND DISTRIBUTIONS IN GENERAL..............21
SECTION 6.02. DISTRIBUTIONS OF NET INVESTMENT INCOME AND NET
REALIZED CAPITAL GAINS..........................................21
SECTION 6.03. METHOD OF DISTRIBUTIONS...............................22
ARTICLE VII
ADMISSION OF NEW PARTNERS............................................22
ARTICLE VIII
WITHDRAWAL, DEATH OR INCOMPETENCY OF PARTNERS........................22
SECTION 8.01. WITHDRAWAL, DEATH, ETC., OF PARTNERS..................22
SECTION 8.02. REQUIRED WITHDRAWALS OF PARTNERS......................23
SECTION 8.03. EFFECTIVE DATE OF WITHDRAWAL..........................23
SECTION 8.04. LIMITATIONS ON WITHDRAWAL OF CAPITAL ACCOUNT..........23
ARTICLE IX
DURATION AND TERMINATION OF THE FUND.................................23
SECTION 9.01. DURATION..............................................23
SECTION 9.02. TERMINATION...........................................23
SECTION 9.03. RESTORATION OBLIGATION................................24
ARTICLE X
TAX RETURNS; REPORTS TO PARTNERS.....................................24
SECTION 10.01. INDEPENDENT AUDITORS.................................24
SECTION 10.02. FILING OF TAX RETURNS................................24
ii
<PAGE>
SECTION 10.03. TAX MATTERS PARTNER..................................24
SECTION 10.04. CONSISTENT REPORTING.................................25
SECTION 10.05. REPORTS TO CURRENT PARTNERS..........................25
SECTION 10.06. REPORTS TO PARTNERS AND FORMER PARTNERS..............25
ARTICLE XI
MISCELLANEOUS........................................................25
SECTION 11.01. POWER OF ATTORNEY....................................25
SECTION 11.02. GENERAL..............................................25
SECTION 11.03. WAIVER OF PARTITION..................................26
SECTION 11.04. AMENDMENTS TO PARTNERSHIP AGREEMENT..................26
SECTION 11.05. GOVERNING LAW........................................26
SECTION 11.06. ADJUSTMENT OF BASIS OF FUND PROPERTY.................26
SECTION 11.07. NOTICES..............................................26
SECTION 11.08. GOODWILL.............................................27
SECTION 11.09. HEADINGS.............................................27
SECTION 11.10. PRONOUNS.............................................27
SCHEDULE I LIMITED PARTNERS
iii
<PAGE>
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
BMO PARTNERS FUND, L.P.
This SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
of BMO Partners Fund, L.P., a Delaware limited partnership (the "Fund"), is made
as of May 9, 2000 by and among Beck, Mack & Oliver LLC, a New York limited
liability company and a general partner of the Fund, John C. Beck, Margaret Ann
Johnson and John D. Twiname as Directors and those persons listed on Schedule I
(as such Schedule I may be amended from time to time) as Limited Partners.
The Fund was formed pursuant to a Limited Partnership
Agreement, dated as of March 8, 1991 and amended and restated as of April 19,
1991, among the General Partner (as defined therein), the Initial Limited
Partner (as defined therein), and the persons designated as limited partners in
the records of the Fund, and a Certificate of Limited Partnership, dated as of
March 7, 1991, which was filed in the office of the Secretary of State of
Delaware on March 8, 1991. The parties wish to amend the Limited Partnership
Agreement to permit the registration of the Fund as a closed-end management
investment company pursuant to the Investment Company Act of 1940, as amended,
and to make certain other modifications. Accordingly, the parties agree to amend
and restate the Amended and Restated Limited Partnership Agreement in its
entirety to read as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, unless the context otherwise
requires:
(a) "AFFILIATE" means, with respect to a Person, any other Person
which either directly or indirectly controls, is controlled by or is under
common control with the first Person.
(b) "AGREEMENT" means this Second Amended and Restated Limited
Partnership Agreement, as amended and restated from time to time.
(c) "BEGINNING VALUE", with respect to any Fiscal Period, means the
value of the Fund's Net Assets at the beginning of that Fiscal Period.
(d) "BOARD" or "BOARD OF DIRECTORS" means the board of directors of
the Fund consisting of all of the Directors.
<PAGE>
(d) "CAPITAL ACCOUNT" has the meaning specified in Section 5.02(a).
(e) "CERTIFICATE" means the Certificate of Limited Partnership of
the Fund, dated as of March 7, 1991, filed in the office of the Secretary of
State of Delaware on March 8, 1991, as amended and restated from time to time.
(f) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
(g) "DIRECTORS" means those General Partners who are natural
persons serving as directors of the Fund listed from time to time on Schedule I.
(h) "ENDING VALUE", with respect to any Fiscal Period, means the
value of the Fund's Net Assets at the end of that Fiscal Period.
(i) "FISCAL PERIOD" means the period beginning on the first day
following the last day of the immediately preceding Fiscal Period and ending
on the earliest of (i) the date immediately preceding the date on which
additional capital contributions are made to the Fund, (ii) the date on which
there are withdrawals from the Fund, (iii) the December 31st of the calendar
year within which the current Fiscal Period began and (iv) the date on which
the Fund liquidates.
(j) "FORM N-2" means the Fund's Registration Statement on Form N-2
to be filed with the Securities and Exchange Commission on or after the date
hereof, as amended from time to time.
(k) "FUND" means BMO Partners Fund, L.P., a Delaware limited
partnership.
(l) "GENERAL PARTNER" means the Manager or any Director.
(m) "INDEMNITEES" has the meaning specified in Section 3.09(a).
(n) "INDEPENDENT DIRECTORS" means those Directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund and, when used
with respect to the approval of a particular agreement, who are not parties
to such agreement or "interested persons" (as defined in the 1940 Act) of any
such party.
(o) "INITIAL CAPITAL CONTRIBUTION" has the meaning specified in
Section 5.01(a).
(p) "INTEREST" means the Capital Account that a Limited Partner or
former Limited Partner would have received, or in fact did receive, pursuant
to the terms and provisions of Articles VI or VIII upon withdrawal from the
Fund as of the end of that fiscal year, or relevant portion thereof.
(q) "INVESTMENT ADVISORY AGREEMENT" has the meaning specified in
Section 3.04(a).
(r) "LIMITED PARTNER" means any Person who shall have been admitted
to the Fund as a limited partner (including any General Partner in such
person's capacity as a limited
2
<PAGE>
partner of the Fund but excluding any General Partner in such person's
capacity as a general partner of the Fund) until the Fund repurchases all of
such Person's Units pursuant to Section 4.06 hereof or a substituted Limited
Partner or Partners are admitted with respect to any such Person's entire
Interest pursuant to Section 4.05 hereof.
(s) "MANAGEMENT FEE" means the fee payable by the Fund to the
Manager for its advisory services pursuant to a written agreement described
in Section 3.04(a).
(t) "MANAGEMENT SERVICES" has the meaning specified in Section 3.04.
(u) "MANAGER" means Beck, Mack & Oliver LLC or successor thereto as
investment manager of the Fund.
(v) "MANAGER EXPENSES" has the meaning specified in Section 3.10(a).
(w) "NEGATIVE BASIS" has the meaning specified in Section 5.07(d).
(x) "NEGATIVE BASIS PARTNER" has the meaning specified in
Section 5.07(d).
(y) "NET ASSETS" means the excess of the Fund's assets over its
liabilities.
(z) "NET CAPITAL APPRECIATION", with respect to any Fiscal Period,
means the excess of the Ending Value over the Beginning Value plus the amount
of any distributions during that Fiscal Period and minus the amount of any
capital contributions to the Fund during that Fiscal Period.
(aa) "NET CAPITAL DEPRECIATION", with respect to any Fiscal Period,
means the excess of the Beginning Value over the Ending Value minus the
amount of any distributions during that Fiscal Period plus the amount of any
capital contributions to the Fund during that Fiscal Period.
(bb) "NET INVESTMENT INCOME," with respect to any Fiscal Period,
means the excess of the aggregate dividends, interest and other items of
income during that Fiscal Period earned by the Fund from all sources over the
expenses incurred or accrued during that Fiscal Period by the Fund.
(cc) "NET REALIZED CAPITAL GAINS", with respect to any calendar
year, means the excess of the aggregate capital gains over aggregate capital
losses realized during that fiscal year and reserves established during that
fiscal year by the Fund.
(dd) "1940 ACT" means the Investment Company Act of 1940 and the
rules promulgated thereunder, as amended from time to time.
(ee) "1940 ACT MAJORITY" means the vote at a meeting of the lesser
of (i) 67% or more of the Units present or represented by proxy, if the
holders of more than 50% of the outstanding Units are present or represented
by proxy, or (ii) more than 50% of the outstanding Units.
3
<PAGE>
(ff) "PARTNERS" means the General Partners and the Limited Partners.
(gg) "PARTNERSHIP ACT" means the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time.
(hh) "PASS-THRU PARTNER" has the meaning specified in Section 10.03.
(ii) "PERSON" means any individual, partnership, corporation,
unincorporated organization or association, trust (including the trustees
thereof in their capacity as such) or other entity.
(jj) "POSITIVE BASIS" has the meaning specified in Section 5.07(d).
(kk) "POSITIVE BASIS PARTNER" has the meaning specified in
Section 5.07(d).
(ll) "SECURITIES" has the meaning specified in Section 2.12(a).
(mm) "SHARING PERCENTAGE" means the partnership percentage for each
Fiscal Period of a Partner set forth in the records of the Fund at the Fund's
principal place of business set forth in Section 2.04 and determined for that
Fiscal Period by dividing the balance of each Partner's Capital Account as of
the beginning of that Fiscal Period by the sum of the Capital Accounts of all
Partners as of the beginning of that Fiscal Period. The sum of the Sharing
Percentages shall be 100 percent.
(nn) "SUBSCRIPTION AGREEMENTS" means the Subscription Agreements
between the Fund and the Limited Partners.
(oo) "TAX ACCOUNT" has the meaning specified in Section 5.02.
(pp) "TAX MATTERS PARTNER" has the meaning specified in
Section 10.03.
(qq) "TRANSFER" means the assignment, transfer, sale, encumbrance,
pledge or other disposition of any Units, including the right to receive any
allocations and distributions attributable to a Unit.
(rr) "UNITS" means units of limited partnership interest in the Fund.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.01. FORMATION. The parties continue a limited partnership
formed on March 8, 1991 pursuant to the Partnership Act.
SECTION 2.02. NAME. The name of the Fund is "BMO Partners Fund, L.P."
The Board may make any variations in the Fund's name which the Board deems
necessary or advisable to comply with the laws of any jurisdiction in which
the Fund may conduct business provided that the name shall always contain the
words "Limited Partnership" or the letters "L.P."
4
<PAGE>
SECTION 2.03. ORGANIZATIONAL CERTIFICATES AND OTHER FILINGS. If
requested by the Manager, the Limited Partners shall promptly execute all
certificates and other documents consistent with the terms of this Agreement
necessary for the Manager to accomplish all filing, recording, publishing and
other acts that may be appropriate to comply with all requirements for (a)
the formation and operation of a limited partnership under the laws of the
State of Delaware, (b) the registration of a closed-end management investment
company under the 1940 Act and (c) the operation of the Fund as a limited
partnership, or partnership in which the Limited Partners have limited
liability, in all jurisdictions where the Fund conducts or proposes to
conduct business.
SECTION 2.04. PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Fund shall be located at 330 Madison Avenue, 31st Floor, New
York, NY 10017 or any other place that the Board of Directors may select,
provided that notice of that selection is given to the Limited Partners.
SECTION 2.05. REGISTERED OFFICE AND REGISTERED AGENT. The address of
the Fund's registered office in the State of Delaware is The Prentice-Hall
Corporation System, Inc., 32 Loockerman Square, Suite L-100, Dover, Kent
County, Delaware 19901. The name and address of the Fund's registered agent
for service of process in the State of Delaware is The Prentice-Hall
Corporation System, Inc., 32 Loockerman Square, Suite L-100, Dover, Kent
County, Delaware 19901.
SECTION 2.06. TERM. The Fund commenced upon the filing for record of
the Certificate in the office of the Secretary of State of Delaware and shall
continue in business through the first to occur of (a) the close of business
on December 31, 2025, (b) the Board's determination at any time and for any
reason to liquidate and dissolve the Fund, (c) the bankruptcy or insolvency
of the Manager, (d) the election to dissolve the partnership by the holders
of a 1940 Act majority, or (e) termination, dissolution or withdrawal of
Beck, Mack & Oliver LLC as Manager without the Board designating and, if
required by the 1940 Act, the Limited Partners approving another investment
adviser to be substituted as the Manager.
SECTION 2.07. FISCAL YEAR. The fiscal year of the Fund (the "fiscal
year") shall end on December 31 of each calendar year or any other date
deemed advisable by the Board and permitted under the Code. The Fund shall
have the same fiscal year for United States federal and state income tax
purposes and for financial and partnership accounting purposes.
SECTION 2.08. MANAGER; DIRECTORS. (a) The Directors may, subject to
the provisions of this Section 2.08 with respect to the number of and
vacancies in the position of Director, the provisions of Section 3.03 with
respect to the election of Directors by Limited Partners and the provisions
of the 1940 Act, admit any person who shall agree to be bound by all of the
terms of this Agreement as a Director. The Manager may admit to the Fund as a
new Manager any person it has designated pursuant to and in compliance with
Section 4.04 hereof and then withdraw as Manager. The Directors may admit to
the Fund any person as a new Manager if the status of the Manager is
terminated pursuant to Section 4.01 or is transferred in an "assignment" of
the Investment Advisory Agreement pursuant to Section 4.04 and both the
Directors (including a majority of the Independent Directors) and Limited
Partners holding not less than a 1940 Act majority approve a new Investment
Advisory Agreement with such new
5
<PAGE>
Manager. The names and mailing addresses of the General Partners shall be set
forth on Schedule I hereto. The General Partners shall be listed separately
as the "Directors" and the "Manager." The number of Directors shall be fixed
from time to time by the Directors.
(b) Subject to compliance with the provisions of the 1940 Act, the
Manager's service to the Fund shall continue for the term of the Fund unless
its status as the Manager shall be sooner terminated pursuant to Section 4.01
or 4.04 hereof. In the event of any vacancy in the position of a Director,
the remaining Directors may appoint an individual to serve in such capacity,
subject to the requirements of the 1940 Act.
(c) In the event that no Director remains to continue the business
of the Fund, the Manager shall promptly call a meeting of the Limited
Partners, to be held within the time period required by the 1940 Act, for the
purpose of determining whether to continue the business of the Fund and, if
the business shall be continued, of electing Directors. If the Limited
Partners shall determine at such meeting not to continue the business of the
Fund or if new Directors are not elected in compliance with the provisions of
the 1940 Act, then the Fund shall be dissolved pursuant to Section 9.01
hereof and the assets of the Fund shall be liquidated and distributed
pursuant to Section 9.02 hereof.
SECTION 2.09. LIMITED PARTNERS. The Manager (subject to any policies
established by the Board) may at any time and without advance notice to or
consent from any other Partner, sell Units to and admit as a Limited Partner
any person who shall agree to be bound by all of the terms of this Agreement
as a Limited Partner. The Manager may in its absolute discretion reject
subscriptions for Units. The admission of any Person as a Limited Partner
shall be effective upon the revision of Schedule I to this Agreement to
reflect the name and the required purchase of Units by such additional
Limited Partner.
SECTION 2.10. BOTH GENERAL AND LIMITED PARTNER. A Partner may at the
same time be a General Partner and a Limited Partner, in which event such
Partner's rights and obligations in each capacity shall be determined
separately in accordance with the terms and provisions hereof or as provided
in the Partnership Act.
SECTION 2.11. LIABILITY OF PARTNERS. (a) The names of all of the
Partners and the number of Units held by all of the Limited Partners shall be
maintained in the records of the Fund.
(b) The General Partners and any former General Partners shall have
unlimited liability for the repayment and discharge of all debts and
obligations of the Fund attributable to any fiscal year or portion thereof
during which they are or were General Partners of the Fund but shall, as
among the Partners, be entitled to require the prior exhaustion of the Fund's
assets and shall be entitled to the benefit of the indemnities set forth in
Section 3.09.
(c) Limited Partners and former Limited Partners shall be liable for
the repayment and discharge of all debts and obligations of the Fund
attributable to any fiscal year, or relevant portion thereof, during which
they are or were Limited Partners only to the extent of their respective
Interests in the Fund in the fiscal year, or relevant portion thereof, to
which any such debts and obligations are attributable, in proportion to their
Sharing Percentages for the
6
<PAGE>
relevant period or periods. The General Partners shall bear all losses,
liabilities or expenses incurred by virtue of the operation of paragraph (b) of
this Section 2.11 in excess of their Interests in the fiscal year to which the
relevant debts or obligations are attributable.
(d) As used in this Agreement, the terms "former Partners," "former
Limited Partners" and "former General Partners" refer to the Persons or
entities which from time to time cease to be Limited Partners or General
Partners, as the case may be, under this Agreement.
SECTION 2.12. PURPOSES. The Fund is organized for the purpose of
achieving long-term capital appreciation consistent with preservation of
capital by investing in Securities (as defined below). The Fund shall have
the power to engage in all activities and transactions which the Manager
deems necessary or advisable, including, without limitation, but subject to
the investment restrictions set forth in Section 2.13 and consistent with
operating as a closed-end, non-diversified, management investment company in
accordance with the 1940 Act:
(a) To invest and trade in capital stock, shares of beneficial
interest, warrants, bonds, notes, debentures, whether subordinated,
convertible or otherwise, mutual funds, money market funds, commercial paper,
certificates of deposit, bank debt, trade claims, obligations of the United
States, any State thereof and instrumentalities of any of them, bankers'
acceptances, trust receipts, master notes and other obligations, and
instruments or evidences of indebtedness commonly referred to as securities
of whatever kind or nature of any person, corporation, government or entity
whatsoever, and in options on stock indices (collectively, "Securities");
(b) To engage in any other lawful transactions in Securities which
the Manager from time to time determines;
(c) To possess, transfer or otherwise deal in, and to exercise all
rights, powers, privileges and other incidents of ownership or possession
with respect to, Securities and other property and funds held or owned by the
Fund;
(d) To borrow or raise moneys and to issue, accept, endorse and
execute promissory notes, drafts, bills of exchange, warrants, bonds,
debentures and other negotiable or non-negotiable instruments and evidences
of indebtedness;
(e) To maintain for the conduct of Fund affairs one or more offices
and in connection therewith rent or acquire office space, engage personnel,
whether part-time or full time, and do any other acts that the Manager deems
necessary or advisable in connection with the maintenance and administration
of such office or offices;
(f) To engage attorneys, independent accountants and any other
Persons that the Manager deems necessary or advisable;
(g) To do all acts on behalf of the Fund, and exercise all rights of
the Fund, with respect to its interest in any person, firm, corporation or
other entity, including without limitation participation in arrangements with
creditors, the institution and settlement or compromise of suits and
administrative proceedings and other similar matters; and
7
<PAGE>
(h) To do any other act that the Manager deems necessary or
advisable in connection with the management and administration of the Fund as
an investment company.
SECTION 2.13. INVESTMENT RESTRICTIONS. The Fund shall not (a) borrow
money, except as a temporary measure for extraordinary or emergency purposes
and then only from banks and only in an amount not to exceed 10% of its total
assets, or mortgage or pledge its assets, (b) invest (i) 10% or more of its
total assets in the Securities of any one issuer or (ii) 25% or more of its
total assets in the Securities of issuers in any single industry provided
that this restriction (b) shall not apply to investments in United States
Government Securities, (c) acquire 10% or more of the voting power or value
of a foreign corporation, (d) purchase any Securities on margin (except that
the Fund may make deposits in connection with transactions in options) or
make short sales of Securities, (e) make loans (other than through the
purchase of debt Securities) or lend Securities, (f) underwrite Securities or
(g) purchase or sell commodities, commodity contracts, futures contracts or
options thereon or purchase, sell or write put or call options on Securities,
provided, that for bona fide hedging purposes the Fund may purchase or sell
options on stock indices. The foregoing percentages of the total assets of
the Fund shall be based on the market value of its assets at the time of each
investment.
SECTION 2.14. INTERESTS TO BE DENOMINATED AS UNITS. Each Limited
Partner's Interest will be denominated in Units with an aggregate net asset
value equal to the value of such Limited Partner's Capital Account.
ARTICLE III
MANAGEMENT OF THE FUND
SECTION 3.01. MANAGEMENT AND CONTROL. (a) The ultimate authority
over the management and control of the business of the Fund shall be vested
in the Directors, who shall have the right, power and authority, on behalf of
the Fund and in its name, to exercise all rights, powers and authority of
general partners under the Partnership Act and to do all things necessary and
proper to carry out the objective and business of the Fund and their duties
hereunder. The parties hereto intend that, except to the extent otherwise
expressly provided herein, (i) each Director shall be vested with the same
powers, authority and responsibilities on behalf of the Fund as are
customarily vested in each director of a Delaware corporation and (ii) each
Independent Director shall be vested with the same powers, authority and
responsibilities on behalf of the Fund as are customarily vested in each
director of a closed-end management investment company registered under the
1940 Act that is organized as a Delaware corporation and who is not an
"interested person" of such company as such term is defined in the 1940 Act.
During any period in which the Fund shall have no Directors, the Manager
shall continue the management and control of the Fund subject to Section
2.08(c).
(b) The Manager shall be the designated Tax Matters Partner for
purposes of Section 6231(a)(7) of the Code. Each Partner agrees not to treat,
on his personal return or in any claim for a refund, any item of income,
gain, loss, deduction or credit in a manner inconsistent with the treatment
of such item by the Fund. The Manager shall have the exclusive authority and
discretion to make any elections required or permitted to be made by the Fund
under any provisions of the Code or any other revenue laws.
8
<PAGE>
(c) Limited Partners shall have no right to participate in and shall
take no part in the management or control of the Fund's business and shall
have no right, power or authority to act for or bind the Fund. Limited
Partners shall have the right to vote on any matters only as provided in this
Agreement or on any matters that require the approval of the holders of
voting securities under the 1940 Act or as otherwise required in the Delaware
Act. The exercise by any Limited Partner of any right conferred herein shall
not be construed to constitute participation by the Limited Partner in the
control of the business of the Fund so as to make the Limited Partner liable
as a general partner for the debts and obligations of the Fund for purposes
of the Partnership Act.
SECTION 3.02. ACTIONS BY DIRECTORS. (a) Unless provided otherwise in
this Agreement, the Directors shall act only: (i) by the affirmative vote of
a majority of the Directors (which majority shall include any requisite
number of Independent Directors required by the 1940 Act) present at a
meeting duly called at which a quorum of the Directors shall be present (in
person or, if in person attendance is not required by the 1940 Act, by
telephone) or (ii) by unanimous written consent of all of the Directors
without a meeting, if permissible under the 1940 Act.
(b) The Directors may designate from time to time a Principal
Director, who shall preside at all meetings. Meetings of the Directors may be
called by the Principal Director or by any two Directors, and may be held on
such date and at such time and place as the Directors shall determine. Each
Director shall be entitled to receive written notice of the date, time and
place of such meeting within a reasonable time in advance of the meeting.
Notice need not be given to any Director who shall attend a meeting without
objecting to the lack of notice or who shall execute a written waiver of
notice with respect to the meeting. Directors may attend and participate in
any meeting by telephone except where in person attendance at a meeting is
required by the 1940 Act. A majority of the Directors shall constitute a
quorum at any meeting.
SECTION 3.03. MEETINGS OF LIMITED PARTNERS. (a) Actions requiring
the vote of the Limited Partners may be taken at any duly constituted meeting
of the Limited Partners at which a quorum is present or by written consent.
Meetings of the Limited Partners may be called by the Manager, by the
Directors or by Limited Partners holding 25% or more of the total number of
votes eligible to be cast by all Limited Partners, and may be held at such
time, date and place as the Manager shall determine. The Manager shall
arrange to provide written notice of the meeting, stating the date, time and
place of the meeting and the record date therefor, to each Limited Partner
entitled to vote at the meeting within a reasonable time prior thereto.
Failure to receive notice of a meeting on the part of any Limited Partner
shall not affect the validity of any act or proceeding of the meeting, so
long as a quorum shall be present at the meeting. Only matters set forth in
the notice of a meeting may be voted on by the Limited Partners at a meeting.
The presence in person or by proxy of Limited Partners holding a majority of
the total number of votes eligible to be cast by all Limited Partners as of
the record date shall constitute a quorum at any meeting. In the absence of a
quorum, the Manager may adjourn a meeting to the time or times as determined
by the Manager without additional notice to the Partners. Except as otherwise
required by any provision of this Agreement or by applicable law, (i) those
candidates receiving a plurality of the votes cast at any meeting of Limited
Partners shall be elected as Directors and (ii) all other actions of the
Limited Partners taken at a meeting shall require the affirmative vote of
Limited Partners holding a majority of the total number of
9
<PAGE>
votes eligible to be cast by those Limited Partners who are present in person
or by proxy at such meeting.
(b) Each Limited Partner shall be entitled to cast at any meeting of
Limited Partners one vote for each Unit held as of the record date for such
meeting. The Manager shall establish a record date not less than 10 nor more
than 60 days prior to the date of any meeting of Limited Partners to
determine eligibility to vote at such meeting and the number of votes which
each Partner will be entitled to cast thereat, and shall maintain for each
such record date a list setting forth the name of each Limited Partner and
the number of votes that each Limited Partner will be entitled to cast at the
meeting.
(c) A Limited Partner may vote at any meeting of Limited Partners by
a proxy properly executed in writing by the Limited Partner and filed with
the Fund before or at the time of the meeting. A proxy may be suspended or
revoked, as the case may be, by the Limited Partner executing the proxy by a
later writing delivered to the Fund at any time prior to exercise of the
proxy or if the Limited Partner executing the proxy shall be present at the
meeting and decide to vote in person. Subject to the requirements of the 1940
Act, any action of the Limited Partners that is permitted to be taken at a
meeting of the Limited Partners may be taken without a meeting if consents in
writing, setting forth the action taken, are signed by Partners holding a
majority of the total number of votes eligible to be cast or such greater
percentage as may be required in order to approve such action.
SECTION 3.04. MANAGEMENT SERVICES. (a) The Manager shall provide
investment advice and management to the Fund, to the extent and in the manner
described in paragraph (b) of this Section 3.04 ("Management Services"),
under the general supervision of the Directors, pursuant to a written
agreement (an "Investment Advisory Agreement") between the Manager and the
Fund that is subject to initial approval by the Directors (including the vote
of a majority of the Independent Directors) at a meeting called for such
purpose and by the holders of a 1940 Act majority of the outstanding Units.
The authority of the Manager granted under this Section 3.04 shall terminate:
(i) if any period of 12 consecutive months following the first twelve
consecutive months of the effectiveness of such authority shall conclude
without the approval of the continuation of such authority by (A) the vote of
a 1940 Act majority of the outstanding Units or (B) the Directors, and in
either case, approval by a majority of the Independent Directors by vote cast
in person at a meeting called for such purpose; (ii) if revoked by the
Directors or by vote of a 1940 Act majority of the outstanding voting
securities of the Fund, in either case with 60 days' prior written notice to
the Manager; (iii) at the election of the Manager with 60 days' (or one
year's if such withdrawal is likely to cause the Fund to lose its partnership
tax classification) prior written notice to the Directors; or (iv) upon the
termination of the status of the Manager pursuant to Section 4.01(a) hereof
other than by reason of the withdrawal and designation by the Manager of a
Designee pursuant to Section 4.04 hereof that does not involve an
"assignment" within the meaning of the 1940 Act. The authority of the Manager
under this Section 3.04 shall be terminated in the event of the withdrawal
and designation by the Manager of a Designee as Manager pursuant to Section
4.04 that does not involve an "assignment" within the meaning of the 1940
Act, and shall instead be vested in such Designee. The authority of the
Manager to provide Management Services pursuant to this Section 3.04 shall
automatically terminate upon the occurrence of an "assignment" within the
meaning of the 1940 Act. If the authority of the Manager under this Section
3.04 is terminated as provided herein, the Directors
10
<PAGE>
may appoint, subject to the requirements of the 1940 Act, a person or persons
to provide Management Services to the Fund as set forth in paragraph (b) of
this Section 3.04, and shall cause the terms and conditions of such
appointment to be stated in an agreement executed on behalf of the Fund and
such person or persons.
(b) So long as the Manager has been and continues to be authorized
to provide Management Services, it shall have, subject to any policies and
restrictions set forth in any current offering memorandum issued by the Fund,
this Agreement, the Form N-2 or the 1940 Act, or adopted from time to time by
the Directors and communicated in writing to the Manager, full discretion and
authority (i) to manage the assets and liabilities of the Fund and (ii) to
manage the day-to-day business and affairs of the Fund. In furtherance of and
subject to the foregoing, the Manager shall have full power and authority on
behalf of the Fund:
(1) to purchase, sell, exchange, trade and otherwise deal in and with
Securities and other property of the Fund;
(2) to open, maintain and close accounts with brokers and dealers, to
make all decisions relating to the manner, method and timing of Securities
and other investment transactions, to select and place orders with brokers,
dealers or other financial intermediaries for the execution, clearance or
settlement of any transactions on behalf of the Fund and to pay, or
authorize the payment and reimbursement of, brokerage commissions, which
may be in excess of the lowest rates available which are paid to brokers
who execute transactions for the account of the Fund and who supply or pay
the cost of research and brokerage services (which services may be used by
the Manager in servicing clients other than the Fund, and not all of which
services will necessarily benefit the Fund), provided that the Fund in
using these brokers obtains "best execution," taking into account the
research and execution capabilities of the brokers, their financial
stability and reputation and the value to the Fund of all the services
provided by them;
(3) to open, maintain and close bank accounts and draw checks or other
orders for the payment of monies; borrow from banks or other financial
institutions; to do any and all acts on behalf of the Fund and exercise all
rights of the Fund with respect to its interest in any person, firm,
corporation or other entity, including without limitation the voting of
Securities, participation in arrangements with creditors, the institution
and settlement or compromise of suits and administrative proceedings and
other similar matters; to instruct custodians regarding the settlement of
transactions, the disbursement of payments to Limited Partners with respect
to repurchases of Units and the payment of Fund expenses, including those
relating to the registration of the Fund;
(4) to issue to any Limited Partner an instrument certifying that such
Limited Partner is the owner of Units;
(5) to assist the Directors in calling and conducting meetings of the
Directors;
(6) to engage such attorneys, accountants and other professional
advisers and consultants as the Manager may deem necessary or advisable in
connection with the affairs of the Fund or as may be directed by the
Directors;
11
<PAGE>
(7) subject to any applicable Limited Partner approval requirements
under the 1940 Act, to engage the services of others to assist the Manager
in providing, or to provide under the Manager's control and supervision,
services described in this Section 3.04(b) to the Fund at the expense of
the Manager;
(8) to assist in the preparation and filing of any required tax or
information returns to be made by the Fund;
(9) as directed by the Directors, to commence, defend and conclude any
action, suit, investigation or other proceeding that pertains to the Fund
or any assets of the Fund;
(10) if directed by the Directors or as required under the 1940 Act,
to arrange for the purchase of any insurance covering the potential
liabilities of the Fund or relating to the performance of the Directors or
the Manager, or any of their principals, directors, officers, members,
employees and agents; and
(11) to execute, deliver and perform such contracts, agreements and
other undertakings, and to engage in such activities and transactions as
are necessary and appropriate for the conduct of the business of the Fund;
(12) to organize one or more corporations formed to hold record title,
as nominee for the Fund, to Securities or funds of the Fund;
(13) to authorize any partner, director, officer, employee or other
agent of the Manager or agent or employee of the Fund to act for and on
behalf of the Fund in all matters incidental to the foregoing.
SECTION 3.05. RELIANCE BY THIRD PARTIES. Persons dealing with the Fund
are entitled to rely conclusively on a certificate of the Manager to the effect
that it is acting as the Manager and on the power and authority of the Manager
set forth herein.
SECTION 3.06. OTHER ACTIVITIES OF THE GENERAL PARTNERS. Each General
Partner shall devote that amount of its time to the affairs of the Fund which
in its judgment the conduct of the Fund's business reasonably requires. No
General Partner shall be obligated to do or perform any act or thing in
connection with the business of the Fund not expressly set forth herein.
Nothing contained in this Section 3.06 shall preclude the Manager, any of its
Affiliates or their respective partners, directors, officers, employees or
shareholders from engaging directly or indirectly in any other business or
other activity, including but not limited to exercising investment advisory
and management responsibility and buying, selling or otherwise dealing with
Securities for their own accounts, for the accounts of family members and for
the accounts of individual and institutional clients, which activities may
compete with those of the Fund. The Manager shall be permitted to perform,
among other things, investment advisory and management services for
individuals and entities other than the Fund and in that connection may give
advice and take action in the performance of its duties to those individuals
and entities which may differ from the timing and nature of action taken with
respect to the Fund. The Manager shall have no obligation to purchase or sell
for the Fund any Security or other investment which the Manager or its
Affiliates may purchase or sell, or recommend for purchase or sale, for its
or their own account, or for the account of any client. Neither the Fund nor
the
12
<PAGE>
Partners shall have any rights of first refusal, coinvestment or other rights
in respect of the investments of other accounts or in any fees, profits or
other income earned or otherwise derived therefrom. No Director or Limited
Partner shall, by reason of being a Partner in the Fund, have any right to
participate in any manner in any profits or income earned or derived by or
accruing to the Manager, any of its Affiliates or their respective partners,
members, directors, officers, employees or shareholders from the conduct of
any business other than the business of the Fund or from any transaction in
Securities effected by the Manager, any of its Affiliates or their respective
partners, members, directors, officers, employees or shareholders for any
account other than that of the Fund.
SECTION 3.07. CUSTODY OF ASSETS OF THE FUND. The Manager shall not
have any authority to hold or have possession or custody of any funds,
Securities or other properties of the Fund. The physical possession of all
funds, Securities or other properties of the Fund shall at all times, be
held, controlled and administered by one or more custodians retained by the
Fund. The Manager shall have no responsibility with respect to the collection
of income, physical acquisition or the safekeeping of the funds, Securities
or other assets of the Fund, and all such duties of collection, physical
acquisition or safekeeping shall be the sole obligation of such custodians.
SECTION 3.08. EXCULPATION. (a) No General Partner shall be liable to
the Fund or any other Partner for (i) any act or omission by such General
Partner in connection with the conduct of the business of the Fund that is
determined by such General Partner in good faith to be in or not opposed to
the best interests of the Fund, unless that act or omission constitutes
willful misconduct, gross negligence, a violation of federal or state
securities laws or criminal wrongdoing by such General Partner, (ii) any
action or omission by any other Partner or (iii) any mistake, negligence,
dishonesty or bad faith of any broker or other agent of the Fund selected,
engaged or retained by such General Partner with reasonable care. To the
extent that, at law or in equity, a General Partner has duties (including
fiduciary duties) and liabilities relating thereto to the Fund or to another
Partner, such General Partner acting under this Agreement shall not be liable
to the Fund or to any such other Partner for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they expand or restrict the duties and liabilities of the General
Partners otherwise existing at law or in equity, are agreed by the Partners
to modify to that extent such other duties and liabilities of the General
Partners.
(b) No General Partner shall have any personal liability to the Fund
or any other Partner by reason of any change in United States federal, state
or local or foreign income tax laws, or in interpretations thereof, as they
apply to the Fund or the Limited Partners, whether the change occurs through
legislative, judicial or administrative action.
(c) Each General Partner may consult with legal counsel or
accountants selected by it and any act or omission by it on behalf of the
Fund or in furtherance of the business of the Fund in good faith in reliance
on and in accordance with the advice of such counsel or accountants shall be
full justification for the act or omission, and to the fullest extent
permitted by law such General Partner shall be fully protected in so acting
or omitting to act if the counsel or accountants were selected with
reasonable care.
13
<PAGE>
SECTION 3.09. INDEMNIFICATION. (a) To the fullest extent permitted
by law, the Fund shall indemnify and save harmless the General Partners,
their Affiliates and any of their respective members, partners, officers,
employees, directors and shareholders (the "Indemnitees") from and against
any and all claims, liabilities, damages, losses, costs and expenses,
including amounts paid in satisfaction of judgments, in compromises and
settlements, as fines and penalties and legal or other costs and expenses of
investigating or defending against any claim or alleged claim, of any nature
whatsoever, known or unknown, liquidated or unliquidated, that are incurred
by any Indemnitee and arise out of or in connection with the business of the
Fund or the performance by the Indemnitee of any of such General Partner's
responsibilities hereunder, provided that an Indemnitee shall be entitled to
indemnification hereunder only if the Indemnitee acted in good faith and in a
manner the Indemnitee reasonably believed to be in or not opposed to the best
interests of the Fund and the Indemnitee's conduct did not constitute willful
misconduct, gross negligence, a violation of federal or state securities laws
or criminal wrongdoing. The termination of any proceeding by settlement,
judgment, order or upon a plea of NOLO CONTENDERE or its equivalent shall
not, of itself, create a presumption that an Indemnitee did not act in good
faith and in a manner that the Indemnitee reasonably believed to be in or not
opposed to the best interests of the Fund or that the Indemnitee's conduct
constituted willful misconduct, gross negligence, a violation of federal or
state securities laws or criminal wrongdoing. The satisfaction of any
indemnification and any saving harmless pursuant to this Section 3.09(a)
shall be from and limited to Fund assets, and no General Partner shall have
any personal liability on account thereof.
(b) Expenses incurred by an Indemnitee in defense or settlement of
any claim that may be subject to a right of indemnification hereunder may be
advanced by the Fund prior to the final disposition thereof upon receipt of
an undertaking by or on behalf of the Indemnitee to repay the amount advanced
to the extent that it shall be determined ultimately that the Indemnitee is
not entitled to be indemnified hereunder. The right of any Indemnitee to the
indemnification provided herein shall be cumulative of, and in addition to,
any and all rights to which the Indemnitee may otherwise be entitled by
contract or as a matter of law or equity and shall be extended to the
Indemnitee's successors, assigns and legal representatives. Nothing contained
in this Section 3.09 shall affect the power of the Fund to purchase and
maintain liability insurance on behalf of any General Partner or other Person.
SECTION 3.10. EXPENSES. (a) The Manager shall pay directly the
Fund's overhead expenses, including equipment, utilities, salaries, its share
of rent, postage, delivery, news and quotation machines and computer
expenses, telephone and other administrative expenses and all expenses in
connection with reporting to the Partners concerning the Fund's investment
activities and performance (collectively, "Manager Expenses").
(b) The Fund shall pay directly all of its operational and
investment expenses, including the Management Fee, interest expenses,
brokerage commissions, custodial and depository fees and transactional
expenses, litigation expenses, taxes and investment banking fees and
expenses, as well as all legal and accounting fees, and litigation and tax
expenses and all expenses incurred in processing the sale and redemption of
Units. The Fund shall also pay all fees due to its Independent Directors;
fees payable to the Securities and Exchange Commission; state securities
qualification fees; costs of preparing and printing offering memoranda for
regulatory purposes and for distribution to investors; charges of custodians
for the Fund; the
14
<PAGE>
costs of a fidelity bond and any liability insurance obtained on behalf of
the Fund or the Directors and the costs of meetings of the Limited Partners.
ARTICLE IV
TERMINATION OF STATUS AS GENERAL
PARTNER, TRANSFERS AND REPURCHASES
SECTION 4.01. TERMINATION OF STATUS OF THE MANAGER. (a) The status
of the Manager shall terminate if the Manager (i) shall be dissolved or
otherwise shall terminate its existence; (ii) shall voluntarily withdraw as
Manager; (iii) shall be removed; (iv) shall fail to have its Investment
Advisory Agreement reapproved in accordance with the terms of the 1940 Act;
(v) shall designate a new Manager as permitted under Section 4.04 hereof and
such Designee is admitted as a substitute Manager pursuant to Section 2.08(a)
hereof; or (vi) shall otherwise cease to be a general partner of the Fund
under Section 17-402(4) or (5) of the Partnership Act.
(b) The Manager may not voluntarily withdraw as Manager until the
earliest of (i) one year from the date on which the Manager shall have given
the Directors written notice of its intention to effect such withdrawal (or
upon lesser notice if in the opinion of counsel to the Fund, such withdrawal
is not likely to cause the Fund to lose its partnership tax classification or
as otherwise permitted by Rule 2a19-2 of the 1940 Act); (ii) the date on
which the authority of the Manager to provide Management Services is
terminated (other than at the election of the Manager) pursuant to Section
3.04(a) hereof, unless within 30 days after such termination, the Directors
request the Manager not to withdraw, in which case 180 days after the date of
such termination; and (iii) the date on which one or more persons shall have
agreed to assume the obligations of the Manager hereunder with the approval
of the Directors and such other approvals as may be required by the 1940 Act.
SECTION 4.02. TERMINATION OF STATUS OF A DIRECTOR. The status of a
Director shall terminate if the Director (i) shall die; (ii) shall be
adjudicated incompetent; (iii) shall voluntarily withdraw as a Director (upon
not less than 60 days' prior written notice to the other Directors unless the
Board agrees to a shorter notice period); (iv) shall be removed; (v) shall be
certified by a physician to be mentally or physically unable to perform his
duties hereunder; (vi) shall be declared bankrupt by a court with appropriate
jurisdiction, file a petition commencing a voluntary case under any
bankruptcy law or make an assignment for the benefit of creditors; (vii)
shall have a receiver appointed to administer the property or affairs of such
Partner; or (viii) shall otherwise cease to be a general partner of the Fund
under the Partnership Act.
SECTION 4.03. REMOVAL OF DIRECTORS. Any Director may be removed
either by (a) the vote or written consent of at least two-thirds (2/3) of the
Directors not subject to the removal vote or (b) the vote or written consent
of Limited Partners holding not less than two-thirds (2/3) of the total
number of votes eligible to be cast by all Partners.
SECTION 4.04. CHANGES IN GENERAL PARTNERS. Subject to the provisions
of the 1940 Act and other applicable law, the Manager may withdraw as Manager
of the Fund and
15
<PAGE>
designate an Affiliate of the Manager or any successor to the business or
assets of the Manager (the "Designee") to be substituted as Manager. Subject
to the provisions of Sections 2.08 and 3.04(a) and this Section 4.04, the
Designee shall become and have all of the rights, powers and duties of the
Manager for all purposes of this Agreement, provided that such Designee has
agreed to be bound by all of the terms of this Agreement and provided,
further, that if the Transfer would constitute an "assignment" within the
meaning of the 1940 Act, an Investment Advisory Agreement between the Fund
and such person shall have been approved by (a) the Directors (including a
majority of the Independent Directors) by vote cast in person at a meeting
called for such purpose and (b) Limited Partners holding a 1940 Act majority.
By executing this Agreement, each other Partner shall be deemed to have
consented to any such Transfer that does not constitute an "assignment"
within the meaning of the 1940 Act permitted by the preceding sentence.
Directors may not Transfer their status as Directors.
SECTION 4.05. TRANSFER OF UNITS. (a) Units owned by a Limited
Partner may be Transferred only (i) by operation of law pursuant to the
death, bankruptcy, insolvency or dissolution of such Limited Partner or (ii)
subject to applicable law, with the written consent of the Manager (which may
be withheld in its sole and absolute discretion). Any transferee which
acquires Units by operation of law as the result of the death, bankruptcy,
insolvency or dissolution of a Limited Partner or otherwise, shall be
entitled to the allocations and distributions allocable to the Units so
acquired and to Transfer such Units in accordance with the terms of this
Agreement, but shall not be entitled to the other rights of a Limited Partner
unless and until such transferee becomes a substituted Limited Partner. If a
Limited Partner transfers such Limited Partner's Units or a portion thereof
with the approval of the Manager, the Manager shall promptly take all
necessary actions so that each transferee or successor to whom such Units or
portion thereof are transferred is admitted to the Fund as a Limited Partner.
Each Limited Partner and transferee agrees to pay all expenses, including
attorneys' and accountants' fees, incurred by the Fund in connection with
such Transfer.
(b) Each Limited Partner shall indemnify and hold harmless the Fund,
the Directors, the Manager, each other Limited Partner and any Affiliate of
the foregoing against all losses, claims, damages, liabilities, costs and
expenses (including legal or other expenses incurred in investigating or
defending against any such losses, claims, damages, liabilities, costs and
expenses or any judgments, fines and amounts paid in settlement), joint or
several, to which such persons may become subject by reason of or arising
from (i) any Transfer made by such Limited Partner in violation of this
Section 4.05 and (ii) any misrepresentation by such Limited Partner in
connection with any such Transfer.
SECTION 4.06. REPURCHASE OF UNITS. (a) Each fiscal quarter the Fund
shall offer to repurchase at least 5% and up to 25% of its Units, as
determined by the Board of Directors, pursuant to the terms and conditions
set forth in Rule 23c-3 under the 1940 Act. The deadline for responding to
the Fund's repurchase offers (the "Repurchase Request Deadline") shall be
fourteen days prior to the last business day of each calendar quarter (or if
the day fourteen days prior to such day is not a business day, the previous
business day). The repurchase price will be the per unit net asset value on
the repurchase pricing date (the "Repurchase Pricing Date"), which shall be
the last business day of the calendar quarter, and payment for all units
repurchased pursuant to these offers will be made not later than 7 days after
the repurchase pricing date.
16
<PAGE>
(b) The Fund shall have all rights with respect to repurchase offers set
forth in Section 23(c) of the 1940 Act.
ARTICLE V
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS
AND ALLOCATIONS
SECTION 5.01. CAPITAL CONTRIBUTIONS. (a) The Limited Partners have
made capital contributions to the Fund consisting of cash in the amounts set
forth in the records of the Fund. Each initial capital contribution by a
Limited Partner is referred to herein as the Partner's "Initial Capital
Contribution." Additional capital contributions may be made by Partners by
purchasing additional Units only in accordance with the provisions of this
Section 5.01. Directors shall not be entitled to make voluntary contributions
of capital to the Partnership as General Partners, but may make voluntary
contributions to the capital of the Partnership as Limited Partners (as may
the Manager) if permitted by the Manager.
(b) A Limited Partner may purchase additional Units on at least 10
days' prior written notice to the Manager on the first day of each calendar
quarter, provided that additional capital contributions shall be at least
$10,000, unless the Manager exercises its sole discretion to waive that
minimum. The Manager in its sole discretion may also sell additional Units to
Limited Partners at any time.
(c) Notwithstanding any other provision in this Agreement, in no
event shall any Limited Partner or former Limited Partner be obligated to
purchase any additional Units from the Fund or have any liability for the
repayment and discharge of the debts and obligations of the Fund (apart from
his Interest), except as may be required under the Partnership Act or other
applicable law and subject to the indemnity obligations of the Limited
Partners provided in Section 6.02(b). Except as expressly set forth herein,
no Partner shall be entitled to any return of capital, interest or
compensation by reason of its ownership of Units or by reason of serving as a
Partner.
SECTION 5.02. CAPITAL ACCOUNTS AND TAX ACCOUNTS. (a) The Fund shall
establish for each Limited Partner a tax capital account for income tax
accounting purposes ("Tax Account") and a capital account for partnership
accounting purposes ("Capital Account"). The initial balance of the Tax
Account and the Capital Account for each Limited Partner shall be the Limited
Partner's Initial Capital Contribution to the Fund. Thereafter, the Tax
Account and Capital Account shall be adjusted as provided in this Article.
(b) At the end of each fiscal year of the Fund, the initial balance
of the Tax Account of each Limited Partner shall from time to time be:
(i) Increased by (x) any cash contributed to the Fund capital in
addition to the Limited Partner's Initial Capital Contribution, (y) the
Limited Partner's allocable share of Fund taxable income and (z) the
Limited Partner's allocable share of Fund income exempt from federal income
taxation; and
17
<PAGE>
(ii) Decreased by (x) the amount of cash and the adjusted basis of
other property distributed to the Limited Partner, (y) the Limited
Partner's allocable share of Fund taxable losses, including capital losses,
and (z) the Limited Partner's allocable share of Fund expenditures which
are not deductible by the Fund in computing its taxable income and not
properly chargeable to capital account.
(c) The initial balance of the Capital Account of each Limited
Partner shall from time to time be:
(i) Increased by (a) any cash contributed to the Fund capital in
addition to the Initial Capital Contribution made by the Limited Partner
and (b) the positive adjustments to the Limited Partner's Capital Account
provided for in this Article; and
(ii) Decreased by (a) the amount of cash and the fair market value of
other property distributed to the Limited Partner and (b) the negative
adjustments to the Limited Partner's Capital Account provided for in this
Article.
SECTION 5.03. CAPITAL ACCOUNT ALLOCATIONS.
(a) At the end of each Fiscal Period, the Capital Accounts of all
Limited Partners for the Fiscal Period, shall be credited to reflect the Net
Capital Appreciation or debited to reflect the Net Capital Depreciation of
the Fund during the Fiscal Period, pro rata in proportion to the Limited
Partners' Sharing Percentages at the beginning of the Fiscal Period.
(b) Notwithstanding anything to the contrary contained herein, no
allocation of Net Capital Depreciation shall be made pursuant to this Section
5.03 to the Capital Account of any Limited Partner to the extent that it
would cause or increase a deficit balance in the Limited Partner's Capital
Account as of the end of the fiscal year to which the allocation relates. In
this connection, a Limited Partner's Capital Account shall be reduced by the
amounts described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6). The amount of any Net Capital Depreciation that, but for this
Section 5.03(b), would otherwise be allocated to a Limited Partner shall be
allocated and charged to the Capital Account of the Manager.
(c) Notwithstanding anything to the contrary contained herein, any
Limited Partner who unexpectedly receives an allocation or distribution
described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6)
that creates or increases a deficit balance in the Limited Partner's Capital
Account shall be allocated items of gross income and gain for Capital Account
purposes in an amount and manner sufficient to eliminate, to the extent
required by the Treasury Regulations, the deficit balance as quickly as
possible. Any amounts allocated pursuant to this Section 5.03(c) for any
Fiscal Period shall be excluded from Net Capital Appreciation or Net Capital
Depreciation for the Fiscal Period.
(d) Any allocations made pursuant to Sections 5.03(b) or 5.03(c)
shall be taken into account in computing subsequent allocations pursuant to
this Section 5.03, so that the net amount of any items allocated to each
Limited Partner shall, to the extent possible, be equal to the net amount
that would have been allocated to each Limited Partner if allocations
pursuant to Section 5.03(b) or 5.03(c) had not been made.
18
<PAGE>
(e) To the extent, if any, that Manager Expenses and any items of
loss, expense or deduction resulting therefrom are deemed to constitute items
of Fund loss, expense or deduction rather than items of loss, expense or
deduction of the Manager, the Manager Expenses and other items of loss,
expense or deduction shall be allocated 100% to the Manager.
(f) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted
and applied in a manner consistent with those Regulations. If the Manager
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto, are computed in order to comply
with those Regulations, the Manager may make the modification, provided that
the modification is not likely to have an adverse effect on the interests of
any Limited Partner.
SECTION 5.04. CLOSING OF THE BOOKS. To determine possible varying
interests of Limited Partners during a taxable year, the Fund shall use the
interim-closing of the books method, and all income, gains, losses and
deductions shall be allocated as realized or accrued by the Fund.
SECTION 5.05. VALUATION OF ASSETS. (a) Securities which are listed
on a national securities exchange shall be valued by the Manager at their
last sales prices on the date of determination on the principal securities
exchange on which the Securities shall have traded on that date, or if
trading in the Securities on the principal securities exchange on which the
Securities shall have traded on that date was reported on the consolidated
tape, their last sales prices on the consolidated tape (or, if the date of
determination is not a date upon which that principal securities exchange was
open for trading, on the last prior date on which that securities exchange
was open not more than 10 days prior to the date of determination). If no
sales of the Securities occurred on either of the foregoing dates, the
Securities shall be valued at the mean of the "bid" and "asked" prices for
the Securities on the principal securities exchange on which the Securities
are traded, on the date of determination, or, if "bid" and "asked" prices for
the Securities on the principal securities exchange on which the Securities
shall have traded on that date was reported on the consolidated tape, the
mean of "bid" and "asked" prices for the Securities on the consolidated tape
(or, if the date of determination is not a date upon which that securities
exchange was open for trading, on the last prior date on which it was open
not more than 10 days prior to the date of determination). Securities which
are not listed shall be valued at their representative "bid" quotations,
unless the Securities are included in the NASDAQ National Market System, in
which case they shall be valued based upon their closing "bid" prices as
reported on the NASDAQ National Market System reporting system (if these
prices are available). Securities for which no such market prices are
available shall be valued by or under the direction of the Board of Directors.
(b) All other assets of the Fund (except goodwill, which shall not
be taken into account) shall be valued by or under the direction of the Board
of Directors.
(c) If the Board of Directors determines that the valuation of any
Securities or other property pursuant to this Section 5.05 does not fairly
represent market value, the Securities or other property shall be valued
under the direction of the Board in a manner which it reasonably chooses and
shall set forth the basis of that valuation in writing in the Fund's records.
19
<PAGE>
SECTION 5.06. LIABILITIES. Liabilities shall be determined in
accordance with generally accepted accounting principles, applied on a
consistent basis, provided that the Manager in its discretion may provide
reserves for estimated accrued expenses, liabilities and contingencies.
SECTION 5.07. TAX ACCOUNT ALLOCATIONS. (a) For each fiscal year,
items of income, gain, loss, deduction or credit (including items of income
or gain which are not subject to federal income taxation and items which are
not deductible for federal income tax purposes and not properly chargeable to
capital account) shall be allocated solely for income tax purposes among the
Limited Partners in a manner that reflects equitably amounts credited or
debited to each Limited Partner's Capital Account for the current and prior
fiscal years and shall be reflected in the Limited Partners' Tax Accounts.
These allocations shall be made pursuant to the general principles of
Sections 704(b) and 704(c) of the Code.
(b) If the Fund realizes capital gains or capital losses for federal
income tax purposes for any fiscal year during or as of the end of which one
or more Positive Basis Partners or Negative Basis Partners (as hereinafter
defined) withdraw from the Fund, the Manager shall (unless it determines that
allocations should be made in some other manner to satisfy the requirements
of the Code) allocate these capital gains or capital losses as follows: (i)
allocate the capital gains among the Positive Basis Partners, PRO RATA in
proportion to the respective Positive Basis (as hereinafter defined) of each
Positive Basis Partner, until either the full amount of the capital gains
shall have been allocated or the Positive Basis of each Positive Basis
Partner shall have been eliminated; (ii) allocate any capital gains not
allocated to Positive Basis Partners to the other Limited Partners in a
manner that reflects equitably the amounts credited to the Limited Partners'
Capital Accounts pursuant to Section 5.03; (iii) allocate the capital losses
among the Negative Basis Partners, PRO RATA in proportion to the respective
Negative Basis (as hereinafter defined) of each Negative Basis Partner, until
either the full amount of the capital losses shall have been allocated or the
Negative Basis of each Negative Basis Partner has been eliminated; and (iv)
allocate any capital losses not allocated to Negative Basis Partners to the
other Limited Partners in a manner that reflects equitably the amounts
credited to the Limited Partners' Capital Accounts pursuant to Section 5.03.
(c) To the extent allocations of capital gains or losses pursuant to
Section 5.07(b) are insufficient to eliminate the Positive Basis of each
Positive Basis Partner or the Negative Basis of each Negative Basis Partner,
the Manager may, in its discretion, allocate amounts of ordinary income, loss
or deduction realized for federal income tax purposes relating to the fiscal
year in which the Positive Basis Partner or Negative Basis Partner withdraws
from the Fund pro rata to the Positive Basis Partners or Negative Basis
Partners, as the case may be, until the Positive Basis or Negative Basis of
each such Limited Partner has been eliminated.
(d) As used herein, (i) the term "Positive Basis" means, with
respect to any Limited Partner and as of any time of calculation, the amount
by which the Limited Partner's Capital Account as of that time exceeds the
Limited Partner's Tax Account as of that time; (ii) the term "Positive Basis
Partner" means any Limited Partner who withdraws from the Fund and who has
Positive Basis as of the effective date of the Limited Partner's withdrawal,
but the Limited Partner shall cease to be a Positive Basis Partner at the
time the Limited Partner shall have received allocations pursuant to Section
5.07(b) or (c) equal to the Limited Partner's
20
<PAGE>
Positive Basis as of the effective date of the Limited Partner's withdrawal;
(iii) the term "Negative Basis" means, with respect to any Limited Partner
and as of any time of calculation, the amount by which the Limited Partner's
Tax Account as of that time exceeds the Limited Partner's Capital Account as
of that time; and (iv) the term "Negative Basis Partner" means any Limited
Partner who withdraws from the Fund and who has Negative Basis as of the
effective date of the Limited Partner's withdrawal, but the Limited Partner
shall cease to be a Negative Basis Partner at the time the Limited Partner
shall have received allocations pursuant to Section 5.07(b) or (c) equal to
the Limited Partner's Negative Basis as of the effective date of the Limited
Partner's withdrawal.
SECTION 5.08. DETERMINATION BY THE MANAGER OF CERTAIN MATTERS. All
matters concerning the allocation of profits, gains and losses among the
Limited Partners, including taxes thereon, and accounting procedures not
expressly provided for by the terms of this Agreement shall be determined by
or under the direction of the Manager.
ARTICLE VI
WITHDRAWALS AND DISTRIBUTIONS OF CAPITAL
SECTION 6.01. WITHDRAWALS AND DISTRIBUTIONS IN GENERAL. (a) No
Partner shall be entitled to receive distributions, withdraw any amount from
the Partner's Capital Account or withdraw from the Fund except as provided in
Sections 4.01, 4.04, 4.06, 6.02, 8.02 and 9.02.
(b) The Board of Directors may, in their sole discretion, authorize
the Fund to make distributions at any time to all of the Limited Partners on
a pro rata basis in accordance with their Sharing Percentages.
SECTION 6.02. DISTRIBUTIONS OF NET INVESTMENT INCOME AND NET
REALIZED CAPITAL GAINS. (a) Subject to Section 4.06, a Limited Partner may,
at its election, made either in the Information Supplement attached to the
Limited Partner's Subscription Agreement or subsequently by notice to the
Manager, receive at the end of each fiscal year distributions of all or any
portion of the Limited Partner's share of the Fund's Net Investment Income
and Net Realized Capital Gains for that fiscal year. All amounts which are
not elected to be distributed will be automatically credited as additional
capital contributions to the Capital Account and Tax Account of the Limited
Partner otherwise entitled thereto as of the first day of the year following
the fiscal year to which the distribution relates, for which purpose all
specified capital contribution minimums shall be waived.
(b) Notwithstanding any provision of this Agreement to the contrary,
the Manager shall withhold and pay over to the Internal Revenue Service,
pursuant to Sections 1441, 1442, 1445 or 1446 of the Code, or any successor
provisions, at the times required by those Sections, the amounts the Fund is
required to withhold under those Sections, as from time to time in effect, or
any other applicable law. Each Partner shall furnish the Manager with such
information, forms and certifications as it may require and as are necessary
to comply with the regulations governing the obligations of withholding tax
agents. Each Partner hereby agrees to indemnify the Fund and the Manager for
his allocable share of any applicable withholding tax
21
<PAGE>
(including any liability for penalties, additions to tax or interest) and
represents and warrants that the information and forms furnished by him shall
be true and accurate in all respects. For purposes of this Agreement, any
amount of withholding taxes withheld and paid over by the Manager with
respect to a foreign Partner's distributive share of the Fund's gross income
shall be treated as a cash distribution to the foreign Partner and shall be
charged against the Capital Account and Tax Account of the foreign Partner.
SECTION 6.03. METHOD OF DISTRIBUTIONS. Distributions made pursuant
to this Agreement shall be made in cash or Securities or both, as the Board
of Directors may determine.
ARTICLE VII
ADMISSION OF NEW PARTNERS
New Limited Partners may, with the consent of the Manager and
without the approval of any Limited Partner, be admitted to the Fund on the
first day of each calendar quarter, provided that the new Limited Partners
make an Initial Capital Contribution of at least $100,000, unless the Manager
exercises its sole discretion to waive that minimum. In addition, the
Directors in their discretion may also admit new Directors at any time,
subject to the provisions of the 1940 Act. Each new General Partner shall be
required to execute an agreement pursuant to which he becomes bound by the
terms of this Agreement. Admission of a new Partner shall not be a cause for
dissolution of the Fund.
ARTICLE VIII
WITHDRAWAL, DEATH OR INCOMPETENCY OF PARTNERS
SECTION 8.01. WITHDRAWAL, DEATH, ETC., OF PARTNERS. (a) The Manager
shall not have the right to withdraw from the Fund except as provided in
Section 4.04.
(b) The withdrawal, death, disability or incapacity of a Director
and the consequences thereof are set forth in Sections 2.08(b), 2.08(c) and
4.02.
(c) The withdrawal, death, disability, incapacity, incompetency,
termination, bankruptcy, insolvency or dissolution of a General or Limited
Partner will not dissolve the Fund. The legal representatives of a Limited
Partner will succeed as assignee to a Limited Partner's Units upon the death,
disability, incapacity, incompetency, termination, bankruptcy, insolvency or
dissolution of the Limited Partner but shall not be admitted as a substituted
Limited Partner without the consent of the Manager, which consent may be
given or withheld in its discretion. In the event of the death, disability,
incapacity, incompetency, termination, bankruptcy, insolvency or dissolution
of a Limited Partner, the interest of the Limited Partner will continue at
the risk of the Fund business until the date on which the Limited Partner's
Units are repurchased by the Fund or the earlier termination of the Fund. If
the Fund is continued after the date of withdrawal, the Limited Partner or
his legal representatives shall be paid the balance of its Capital Account as
soon as practicable after the end of the Fiscal Period.
22
<PAGE>
SECTION 8.02. REQUIRED WITHDRAWALS OF PARTNERS. To the extent
permitted by law, the Board of Directors may terminate the interest of any
Limited Partner in the Fund at any time upon at least five days prior written
notice if the Board determines that it would be in the best interests of the
Fund to repurchase the Units of such Limited Partner for any reason,
including, but not limited to, if the Board determines that the continued
participation of the Limited Partner in the Fund might cause the Fund or any
Partner to violate any law or if any litigation is commenced or threatened
against the Fund or any Partner arising out of, or relating to, the
participation of the Limited Partner in the Fund, or if, after a tender of
shares by a Limited Partner on a Repurchase Request Deadline, the amount
remaining in such Limited Partner's Capital Account would aggregate less than
$100,000 (which may be computed on the basis of unaudited data).
SECTION 8.03. EFFECTIVE DATE OF WITHDRAWAL. The Capital Account of a
withdrawing Limited Partner shall be determined as of the effective date of
withdrawal. For purposes of this Section 8.03, the effective date of a
Limited Partner's withdrawal shall mean, as the case may be, the last day of
the Fiscal Period (i) in which the Limited Partner ceases to be a Partner
pursuant to Section 4.06 or (ii) which coincides with the date specified in
the written notice referred to in the first sentence of Section 8.02 if the
Limited Partner shall be required to withdraw from the Fund pursuant thereto.
SECTION 8.04. LIMITATIONS ON WITHDRAWAL OF CAPITAL ACCOUNT. The
right of any withdrawn Partner or its legal representatives to have
distributed the Capital Account of the Partner is subject to the provision by
the Manager for all Fund liabilities in accordance with Section 17-607 of the
Partnership Act and other applicable law and for reserves for contingencies
and estimated accrued expenses. The unused portion of any reserve shall be
distributed after the Manager shall have determined that the need therefor
shall have ceased.
ARTICLE IX
DURATION AND TERMINATION OF THE FUND
SECTION 9.01. DURATION. The Fund shall continue until it is
dissolved on the first to occur of (i) December 31, 2025, (iii) the Board's
determination at any time and for any reason to liquidate and dissolve the
Fund, (iv) the bankruptcy or insolvency of the Manager, (v) the election to
dissolve the partnership by the holders of a 1940 Act majority, or (vi)
termination, dissolution or withdrawal of the Manager as manager of the Fund
without the Board designating another investment adviser to be substituted as
the Manager.
SECTION 9.02. TERMINATION. Upon dissolution of the Fund, the Fund
shall be wound up and liquidated. The Manager or any other person or persons
who are winding-up the affairs of the Fund shall, within no more than 30 days
after completion of a final audit of the Fund's books and records, make
distributions out of Fund assets in the following manner and order:
(a) to the payment of the expenses of the winding-up, liquidation and
dissolution of the Fund;
23
<PAGE>
(b) to pay all creditors of the Fund, other than Partners, either by
the payment thereof or the making of reasonable provision therefor;
(c) to establish reserves, in amounts established by the Manager or
such liquidator, to meet other liabilities of the Fund; and
(d) to pay, in accordance with the terms agreed among them and
otherwise on a pro rata basis, all creditors of the Fund that are Partners,
either by the payment thereof or the making of reasonable provision
therefor.
The remaining proceeds, if any, plus any remaining assets of the Fund, shall
be applied and distributed in accordance with the positive balances of the
Partners' Capital Accounts, as determined after taking into account all
adjustments to Capital Accounts for the Fund's taxable year during which the
liquidation occurs, by the end of such taxable year or, if later, within 90
days after the date of such liquidation. For purposes of the application of
this Section 9.02 and determining Capital Accounts on liquidation, all
unrealized gains, losses and accrued income and deductions of the Fund shall
be treated as realized and recognized immediately before the date of
distribution.
SECTION 9.03. RESTORATION OBLIGATION.
No Partner shall have an obligation to restore a negative balance in
its Capital Account.
ARTICLE X
TAX RETURNS; REPORTS TO PARTNERS
SECTION 10.01. INDEPENDENT AUDITORS. The books and records of the
Fund shall be audited by accountants selected by the Directors (including a
majority of the Independent Directors) in accordance with applicable law and,
if required by applicable law, ratified by the Limited Partners.
SECTION 10.02. FILING OF TAX RETURNS. The Manager shall prepare and
file, or cause the accountants of the Fund to prepare and file, a federal
information tax return in compliance with Section 6031 of the Code and any
other returns that are required thereby together with any required state and
local income tax and information returns for each tax year of the Fund.
SECTION 10.03. TAX MATTERS PARTNER. The Manager shall be designated
on the Fund's annual federal information tax return, and have full powers and
responsibilities, as the Tax Matters Partner of the Fund for purposes of
Section 6231(a)(7) of the Code. Each Person (for purposes of this Section
10.03, called a "Pass-Thru Partner") that holds or controls an interest as a
Limited Partner on behalf of, or for the benefit of, another Person or
Persons, or which Pass-Thru Partner is beneficially owned, directly or
indirectly, by another Person or Persons, shall, within 30 days following
receipt from the Tax Matters Partner of any notice, demand, request for
information or similar document, convey that notice or other document in
writing to all holders of beneficial interests in the Fund holding such
interest through the Pass-
24
<PAGE>
Thru Partner. If the Fund shall be the subject of an income tax audit by any
federal, state or local authority, to the extent the Fund is treated as an
entity for purposes of that audit, including administrative settlement and
judicial review, the Tax Matters Partner shall be authorized to act for, and
its decision shall be final and binding on, the Fund and each Partner. All
expenses incurred in connection with any audit, investigation, settlement or
review shall be borne by the Fund.
SECTION 10.04. CONSISTENT REPORTING. The Limited Partners shall not
take a position on their individual tax returns which may be inconsistent
with the reporting of tax items on the Fund's tax return.
SECTION 10.05. REPORTS TO CURRENT PARTNERS. (a) Within 90 days after
the end of each fiscal year, the Fund shall prepare and mail to each Partner:
(i) a statement showing the Net Capital Appreciation or Net Capital
Depreciation, as the case may be, for that year; and
(ii) the Partner's Capital Account as of the end of that fiscal year and
the manner of its calculation.
(b) Except as otherwise required by the 1940 Act, or as may
otherwise be permitted by rule, regulation or order, within 60 days after the
close of the fiscal year and of the second fiscal quarter, the Fund shall
furnish to each Partner an annual and a semi-annual report, respectively,
containing financial statements (which, in the case of each annual report,
shall be audited) and other information required by and otherwise conforming
to the requirements of the 1940 Act.
SECTION 10.06. REPORTS TO PARTNERS AND FORMER PARTNERS. Within 90
days after the end of each fiscal year, the Fund shall prepare and mail, or
cause its accountants to prepare and mail, to each Partner and, to the extent
necessary, to each former Partner (or its legal representatives), a report
setting forth in sufficient detail information which will enable the Partner
or former Partner (or its legal representatives) to prepare their respective
federal income tax returns in accordance with the laws, rules and then
prevailing.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. POWER OF ATTORNEY. Each Limited Partner acknowledges
and confirms that he has duly appointed the Manager as his true and lawful
attorney-in-fact for the limited purposes and on the terms and conditions
specified in the power of attorney in the form contained in the Subscription
Agreements.
SECTION 11.02. GENERAL. This Agreement shall be (a) binding on the
executors, administrators, estates, heirs and legal successors and
representatives of the Partners, (b) may be executed by the Manager as the
attorney-in-fact for each Limited Partner pursuant to the power of attorney
provided by each Limited Partner to the Manager in the form contained in
25
<PAGE>
the Subscription Agreements and (c) may be executed in one or more
counterparts, all of which shall constitute one and the same instrument.
SECTION 11.03. WAIVER OF PARTITION. Except as may be otherwise
required by law in connection with the winding-up, liquidation and
dissolution of the Fund, each Partner hereby irrevocably waives any and all
rights that he may have to maintain an action for partition of any of the
Fund's property.
SECTION 11.04. AMENDMENTS TO PARTNERSHIP AGREEMENT. (a) Except as
otherwise provided in this Section 11.04, this Agreement may be amended, in
whole or in part, with the approval of (i) the Board of Directors, (ii) the
Manager and (iii) the holders of more than 50% of the outstanding Units;
PROVIDED, however, that if approval is sought at a meeting of Limited
Partners pursuant to Section 3.03 this Agreement may be amended by the
affirmative vote of a 1940 Act majority voting in person or by proxy.
(b) Without the consent of the Limited Partners the Manager may
amend this Agreement to (i) reflect changes validly made in the membership of
the Fund and the capital contributions and withdrawals by any Partner, (ii)
reflect a change in the name of the Fund, (iii) reflect a change in the
manner in which Capital Accounts or any debits or credits thereto are
computed in accordance with Section 5.03(f), (iv) effect compliance with any
applicable law or regulation, and (v) make a change that is necessary or
desirable to correct any ambiguity, to correct or supplement any provision in
this Agreement that would be inconsistent with any other provision in this
Agreement and to make any other provision with respect to matters or
questions arising under this Agreement that will not be inconsistent with the
provisions of this Agreement, in each case so long as the change does not
adversely affect the Limited Partners.
(c) The consent of a Partner must be obtained for any amendment
which would (a) reduce its (i) Capital Account, (ii) rights to allocations
and distributions (other than by virtue of additional capital contributions
by other Partners) or (iii) rights of contribution or withdrawal or (b) amend
the provisions of this Section 11.04.
SECTION 11.05. GOVERNING LAW. Notwithstanding the place where this
Agreement may be executed by any of the parties, the parties expressly agree
that all the terms and provisions hereof shall be construed under the laws of
the State of Delaware and, without limitation thereof, that the Partnership
Act as now adopted or as may be hereafter amended shall govern the
partnership aspects of this Agreement.
SECTION 11.06. ADJUSTMENT OF BASIS OF FUND PROPERTY. In the event of
a distribution of Fund property to a Partner or an assignment or other
transfer, including by reason of death, of all or part of the interest of a
Limited Partner in the Fund, at the request of a Partner the Manager, in its
sole discretion, may cause the Fund to elect, pursuant to Section 754 of the
Code, or the corresponding provision of subsequent law, to adjust the basis
of the Fund property as provided by Sections 734 and 743 of the Code.
SECTION 11.07. NOTICES. Each notice relating to this Agreement shall
be in writing and delivered in person or by registered or certified mail. All
notices to the Fund shall be addressed to its office and principal place of
business. All notices addressed to a Partner shall be
26
<PAGE>
addressed to the Partner at the address set forth in the records of the Fund.
Any Partner may designate a new address by notice to that effect given to the
Fund. Unless otherwise specifically provided in this Agreement, a notice
shall be deemed to have been effectively given when mailed by registered or
certified mail to the proper address or delivered in person.
SECTION 11.08. GOODWILL. No value shall be placed on the name or
goodwill of the Fund, which shall belong exclusively to the Manager.
SECTION 11.09. HEADINGS. The titles of the Articles and the headings
of the Sections of this Agreement are for convenience of reference only and
are not to be considered in construing the terms and provisions of this
Agreement.
SECTION 11.10. PRONOUNS. All pronouns shall be deemed to refer to
the masculine, feminine, neuter, singular or plural, as the identity of the
person or persons, firm or corporation may require in the context thereof.
27
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the day and year first written above.
BECK, MACK & OLIVER LLC,
as Manager
By: /s/ John C. Beck
----------------------------------------
John C. Beck
Member
JOHN C. BECK
/s/ John C. Beck
-------------------------------------------
Name: John C. Beck
Director
MARGARET ANN JOHNSON
/s/ Margaret Ann Johnson
-------------------------------------------
Name: Margaret Ann Johnson
Director
JOHN D. TWINAME
/s/ John D. Twiname
-------------------------------------------
Name: John D. Twiname
Director
LIMITED PARTNERS:
By: Beck, Mack & Oliver LLC, as attorney-in-
fact for the Persons whose names are set
forth in the records of the Fund as
Limited Partners
By: /s/ John C. Beck
------------------------------------
John C. Beck
Member
28
<PAGE>
SCHEDULE I
DIRECTORS
John C. Beck
Margaret Ann Johnson
John D. Twiname
LIMITED PARTNERS
[A list of the names of the Limited Partners is maintained at the offices of
Beck, Mack & Oliver LLC.]
29
<PAGE>
EXHIBIT B
FORM OF
SUBSCRIPTION DOCUMENTS
FOR
BMO PARTNERS FUND, L.P.
<PAGE>
2
DIRECTIONS FOR THE COMPLETION OF THE SUBSCRIPTION DOCUMENTS
Prospective investors must complete all of the Subscription Documents
contained in this package in the manner described below.
1. SUBSCRIPTION AGREEMENT:
a. Fill in amount of the investment on page 1.
b. Date, print the name of the Investor and sign (and print title, if
applicable) on pages 5 and 6.
c. Complete the appropriate acknowledgment form and have the form
notarized.
2. INFORMATION SUPPLEMENT:
a. Fill in name, address, telephone number, tax identification or social
security number and cash amount invested, as indicated.
b. The Investor should indicate whether he is paying for his investment
by check or by wire transfer.
c. The Investor should indicate whether he wishes to receive
distributions of net investment income and capital gains in cash. If the
Investor elects to receive distributions of net investment income or capital
gains, he should also indicate the percentage of the amounts available for
distribution he elects to receive.
d. Date, print the name of the Investor and sign (and print title, if
applicable) on page 2.
3. INVESTOR QUESTIONNAIRE:
a. In Part I, the Investor should indicate by checking box A or B
whether he is relying on the advice of a purchaser representative in
evaluating the merits and risks of an investment in the Fund.
b. In Part II, the Investor should indicate whether he is an accredited
investor and, if so, indicate the categories under which he qualifies as an
accredited investor.
c. Entities should provide the information and respond to the questions
in Part III.
<PAGE>
3
d. Each Investor should respond to the questions in Part IV.
e. Date, print the name of the Investor and sign (and print title, if
applicable) on page 5.
4. PURCHASER REPRESENTATIVE QUESTIONNAIRE: (ONLY for Investors who checked
Box B in Part I of the Investor Questionnaire and who are not relying on the
advice of a purchaser representative.)
a. A PURCHASER REPRESENTATIVE must complete all information, execute and
date.
5. INTERNAL REVENUE SERVICE FORM W-9:
a. Complete all information requested.
b. Sign, date and print name (and title, if applicable).
6. EVIDENCE OF AUTHORIZATION:
Investors which are corporations must submit certified corporate
resolutions authorizing the subscription and identifying the corporate
officer empowered to sign the subscription documents. Partnerships must
submit a certified copy of the partnership certificate (in the case of
limited partnerships) or partnership agreement identifying the general
partners. Limited liability companies must submit a copy of their
operating agreement identifying the manager or managing member, as
applicable. Trusts must submit a copy of the trust agreement. Employee
benefit plans must submit a certificate of an appropriate officer
certifying that the subscription has been authorized and identifying
the individual empowered to sign the subscription documents. (Entities
may be requested to furnish other or additional documentation
evidencing the authority to invest in the Fund.)
<PAGE>
SUBSCRIPTION AGREEMENT
<PAGE>
BMO PARTNERS FUND, L.P.
SUBSCRIPTION AGREEMENT
BMO Partners Fund, L.P.
c/o Beck, Mack & Oliver LLC
330 Madison Avenue, 31st Floor
New York, NY 10017
Gentlemen:
1. SUBSCRIPTION. The undersigned (the "Investor")
subscribes for and agrees to purchase $_______________ worth of units
("Units") of limited partnership interest in BMO Partners Fund, L.P. (the
"Fund"). The Investor acknowledges that this subscription (i) is irrevocable,
(ii) is conditioned upon acceptance by Beck, Mack & Oliver LLC (the
"Manager") on behalf of the Fund and (iii) will expire if not accepted by the
Manager on or prior to two months from the date hereof. The Investor agrees
to be bound by all the terms and provisions of the Second Amended and
Restated Limited Partnership Agreement of the Fund (the "Partnership
Agreement").
2. PAYMENT. The Investor has enclosed herewith a check
payable to "BMO Partners Fund, L.P." or, on two business days' notice from
the Manager, will wire federal funds for the account of the Fund directly to
[insert wire instructions], in an amount equal to the amount referred to in
Paragraph 1 above. An investment made by check will be effective five
business days after the check is received and this subscription is accepted
by the Manager.
3. INVESTOR'S REPRESENTATIONS AND WARRANTIES. The Investor
represents and warrants as follows:
(a) The Units to be acquired hereunder are being acquired by
the Investor for his own account, for one or more separate accounts
maintained by him or for the account of one or more pension or trust
funds of which he is a trustee, in each case for investment purposes
only and not with a view to resale or distribution.
(b) The Investor understands that the Units have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"), or under the laws of any state or other jurisdiction, and that
the Fund does not contemplate registration of the Units under the 1933
Act or these laws. The Investor understands and agrees further that,
subject
<PAGE>
2
to limited withdrawal rights, the Units must be held indefinitely
unless they are subsequently registered under the 1933 Act and these
laws or an exemption from registration under the 1933 Act and these
laws covering the sale of Units is available. Even if such an
exemption is available, the assignability and transferability of the
Units will be governed by the Partnership Agreement which imposes
substantial restrictions on transfer. The Investor understands that
legends stating that the Units have not been registered under the
1933 Act and these laws and setting out or referring to the
restrictions on the transferability and resale of the Units will be
placed on all documents evidencing the Units. The Investor has no
need for immediate liquidity in his investment in Units.
(c) The Investor has been furnished and has carefully read the
Private Placement Memorandum dated May 9, 2000 relating to the Fund
(the "Memorandum"), the Partnership Agreement and a written disclosure
statement (as described in Rule 204-3 under the Investment Advisers Act
of 1940, as amended (the "Advisers Act")) with respect to the Manager.
The Investor has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
an investment in the Units, is able to bear the risks of an investment
in the Units and understands the risks of, and other considerations
relating to, a purchase of Units, including the matters set forth under
the caption "Principal Risks of Investing in the Fund" in the
Memorandum.
(d) To the full satisfaction of the Investor, the Investor has
been furnished any materials the Investor has requested relating to the
Fund, the offering of Units or any statement made in the Memorandum,
and the Investor has been afforded the opportunity to ask questions of
the Manager concerning the terms and conditions of the offering and to
obtain any additional information necessary to verify the accuracy of
any representations or information set forth in the Memorandum.
(e) The Investor has been furnished no offering literature
other than the Memorandum, and the Investor has relied only on the
Memorandum in determining to invest in the Fund.
(f) If the Investor is not a natural person, (i) the Investor
has the power and authority to enter into this Subscription Agreement,
the Partnership Agreement and each other document required to be
executed and delivered by the
<PAGE>
3
Investor in connection with this subscription for Units, and to
perform its obligations hereunder and thereunder and consummate the
transactions contemplated hereby and thereby and (ii) the person
signing this Subscription Agreement on behalf of the Investor has
been duly authorized to execute and deliver this Subscription
Agreement, the Partnership Agreement and each other document
required to be executed and delivered by the Investor in connection
with this subscription for Units. If the Investor is an individual,
the Investor has all requisite legal capacity to acquire and hold
the Units and to execute, deliver and comply with the terms of each
of the documents required to be executed and delivered by the
Investor in connection with this subscription for Units. The
execution and delivery by the Investor of, and compliance by the
Investor with, this Subscription Agreement, the Partnership
Agreement and each other document required to be executed and
delivered by the Investor in connection with this subscription for
Units does not represent a breach of or constitute a default under,
any instruments governing the Investor, any law, regulation or
order, or any agreement to which the Investor is a party or by which
the Investor is bound. This Subscription Agreement has been duly
executed by the Investor and constitutes, and the Partnership
Agreement, when the Investor is admitted as a Limited Partner, will
constitute, a valid and legally binding agreement of the Investor,
enforceable against it in accordance with its terms.
(g) If the Investor has retained a purchaser representative in
connection with his determination to invest in the Fund, the Investor
acknowledges that he has been advised that:
(i) in connection with the Investor's determination of whether
to invest in the Fund, the purchaser representative will receive
compensation from the Manager equal to [specify].
4. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS FOR
INVESTORS IN PENNSYLVANIA. The Investor agrees not to sell his Units within
12 months after the date of purchase unless the Units are registered under
the Securities Act or the Pennsylvania Securities Act of 1972 during this
twelve-month period.
5. CERTAIN EMPLOYEE BENEFIT PLANS. (a) If the Investor is, or
is acting on behalf of, a trust established under an employee benefit plan (a
"Plan") as defined in and
<PAGE>
4
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"): (i) it is aware of and has taken into consideration its fiduciary
duties, including the diversification requirements of Section 404(a)(1)(c) of
ERISA; (ii) it has concluded that its proposed investment in the Fund is a
prudent one; (iii) the fiduciary, trustee or other person signing this
Subscription Agreement on behalf of the Investor is independent of the
Manager; (iv) this subscription and the investment contemplated hereby are in
accordance with all requirements applicable to the Plan under its governing
instruments and under ERISA; and (v) the Investor acknowledges and agrees
that the Manager is not a "fiduciary" (within the meaning of Section 3 (21) of
ERISA) with respect to any assets of the Plan by reason of the Investor's
investment in the Fund and that the Investor has not relied and is not
relying on the Manager to provide, and it has not provided, any kind of
investment advice with respect to the Investor's purchase.
(b) If the Investor is purchasing the Units for an IRA or
Keogh Plan (even if not subject to Title I of ERISA), then the Investor
represents that no other person has exercised any discretionary authority or
control or provided any investment advice for a fee with respect to such
investment and that such investment is authorized by the appropriate
governing instrument and does not constitute a "prohibited transaction"
within the meaning of Section 4975 of the Code.
6. TAX INFORMATION. The Investor certifies under penalties
of perjury that (A) (i) the Investor's name, taxpayer identification or
social security number and address provided in the Investor Questionnaire is
correct and (ii) the Investor will complete and return with this Subscription
Agreement IRS Form W-9, Payer's Request for Taxpayer Identification Number
and Certification, and (B) (i) the Investor is not a non-resident alien
individual, foreign corporation, foreign partnership, foreign trust or
foreign estate (as defined in the Code) and (ii) the Investor will notify the
Fund within sixty (60) days of a change to foreign status. The Investor
agrees to execute properly and provide to the Fund in a timely manner any tax
documentation that may be reasonably required by the Manager in connection
with the Fund.
7. FURTHER ADVICE AND ASSURANCES. All information which the
Investor has provided to the Fund, including the information in the Investor
Questionnaire, is correct and complete as of the date hereof, and the
Investor agrees to notify the Manager immediately if (x) any representation
or warranty contained in this Subscription Agreement, including the Investor
Questionnaire, becomes untrue prior to the admission of the
<PAGE>
5
Investor as a Limited Partner or (y) any response to any question contained
in Parts III or IV of the Investor Questionnaire becomes untrue at any time.
The Investor agrees to provide such information and execute and deliver such
documents as the Fund may reasonably request to verify the accuracy of the
Investor's representations and warranties herein or to comply with any law or
regulation to which the Fund may be subject.
8. POWER OF ATTORNEY. The Investor by executing this
Subscription Agreement appoints the Manager, with full power of substitution,
as his true and lawful representative and attorney-in-fact, in his name,
place and stead to make, execute, sign, acknowledge, swear to and file:
(a) all certificates and other instruments, including the
Partnership Agreement, and any amendments thereto or to the Certificate
of Limited Partnership of the Fund, which the Manager deems appropriate
to form, qualify or continue the Fund as a limited partnership (or a
partnership in which the limited partners have limited liability) in
the State of Delaware and all other jurisdictions in which the Fund
conducts or plans to conduct business (including without limitation any
filing for the purpose of admitting the Investor and others as partners
and describing their initial or any increased capital contributions);
(b) any instrument, certificate or other document which may be
deemed necessary or desirable to effect the winding-up and termination
of the Fund (including, but not limited to, a certificate of
cancellation);
(c) any business certificate, fictitious name certificate,
amendment thereto, or other instrument or document of any kind
necessary or desirable to accomplish the business, purpose and
objectives of the Fund, or required by any applicable federal, state or
local law; and
(d) the Partnership Agreement, any amendments to the
Partnership Agreement or any other agreement or instrument which the
Manager deems appropriate to (i) admit the Investor as a Limited
Partner of the Fund, (ii) effect the addition, substitution or removal
of any Limited Partner or General Partner pursuant to the Partnership
Agreement or (iii) effect another amendment or modification to the
Partnership Agreement adopted in accordance with the terms of the
Partnership Agreement.
<PAGE>
6
This power of attorney is coupled with an interest, is irrevocable and shall
survive, and shall not be affected by, the subsequent death, disability,
incapacity, incompetency, termination, bankruptcy, insolvency or dissolution
of the Investor. This power of attorney shall survive the delivery of an
assignment or other attempted transfer by the Investor of the whole or any
part of his Interest, except that where an assignee or transferee of his
Interest has been approved as a substitute Partner, this power of attorney of
the assignor of the Interest shall survive the delivery of such assignment or
transfer for the sole purpose of enabling the Manager to execute, acknowledge
and file any instrument necessary to effect such substitution. This power of
attorney will terminate upon the complete withdrawal of an assigning Partner
from participation in the Fund.
<PAGE>
7
9. MISCELLANEOUS. This Agreement may be executed in one or
more counterparts, all of which together shall constitute one instrument, and
shall be governed by and construed in accordance with the laws of the State
of New York.
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement on the date set forth below.
Date:
------------------
INDIVIDUAL INVESTOR:
-----------------------------
(Print Name)
-----------------------------
(Signature)
PARTNERSHIP, CORPORATION, TRUST,
CUSTODIAL ACCOUNT, OTHER INVESTOR:
-----------------------------
(Print Name of Entity)
By:
--------------------------
(Signature)
-----------------------------
(Title)
Accepted:
BMO PARTNERS FUND, L.P.
By: Beck, Mack & Oliver LLC
its Managing General Partner
By:
-----------------------------
Name:
Title:
<PAGE>
PLEASE COMPLETE THE APPROPRIATE ACKNOWLEDGMENT
FORM WHICH FOLLOWS THIS SIGNATURE PAGE.
<PAGE>
ACKNOWLEDGMENT FOR INDIVIDUAL SUBSCRIBERS
STATE OF _______)
) ss.:
COUNTY OF_______)
On this __day of ____, 20__, before me, the undersigned, a
Notary Public of said State, duly commissioned and sworn, personally appeared
____________________, known to me to be the person (or persons) whose name is
(or whose names are) subscribed to on the within instrument, and acknowledged
that he (or she or they) executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[SEAL]
-----------------------------------------
Notary Public in and for said State
My commission expires on _________, 20___.
<PAGE>
ACKNOWLEDGMENT FOR PERSONS ACTING
IN A REPRESENTATIVE CAPACITY
(For Trusts, Partnerships, Corporations or Other Entities)
STATE OF _______)
) ss.:
COUNTY OF_______)
On this __day of ____, 20___, before me personally came
_______________to me known, who being by me duly sworn did depose and say that
such person is the ________of ____________described in and which executed the
foregoing instrument, and being duly authorized, signed such person's name
thereon on behalf of such entity.
[SEAL]
----------------------------------------
Notary Public in and for said State
My commission expires on ________, 20___.
<PAGE>
INFORMATION SUPPLEMENT
TO
SUBSCRIPTION AGREEMENT
<PAGE>
INFORMATION SUPPLEMENT TO SUBSCRIPTION AGREEMENT
1. Print Full Name of Investor: INDIVIDUAL:
-----------------------------
First Middle Last
PARTNERSHIP, CORPORATION,
TRUST, CUSTODIAL ACCOUNT,
OTHER:
-----------------------------
Name of Entity
2. Tax Identification or
Social Security Number:
-----------------------------
3. Residence Address:
-----------------------------
-----------------------------
-----------------------------
4. Business Address:
-----------------------------
-----------------------------
-----------------------------
5. Home Telephone Number: (___)____________
6. Business Telephone Number: (___)____________
7. Cash Amount Invested: $______________
8. Form of Payment (check one):
(a) +-------+ BY CHECK. Cash amount invested will be
+-------+ paid by check payable to BMO
Partners Fund, L.P.
(b) +-------+ BY WIRE. Cash amount invested will be
+-------+ paid by wire transfer in
federal funds.
Funds should be wired to:
The Chase Manhattan Bank
ABA # 021-000-021
Credit: A/C #189-0-07993
N/O Chase Custody Banking
Further Credit: A/C #JSD1870071
N/O BMO Partners Fund LP
<PAGE>
NOTE: An investment made by check will be effective five business days
after the check is received and the Investor's subscription is
accepted by the Manager.
9. Net Investment Income and Capital Gains Distributions:
(a) +------+ NET INVESTMENT. Check this box if you choose
+------+ INCOME to have net investment income
distributed to you in cash. If
this box is not checked,
distributions of net
investment income will be
automatically reinvested in
Units.
(b) +-------+ CAPITAL GAINS. Check this box if you choose
+-------+ to have capital gains
distributions paid to you in
cash. If this box is not
checked, capital gains
distributions will be
automatically reinvested in
Units.
(c) If you checked the box for either (a) or (b) above, specify the
percentage of the amounts available for distribution you wish to receive:
Net Investment
Income: __________%
Capital Gains: __________%
SIGNATURES:
INDIVIDUAL:
-----------------------
(Signature)
<PAGE>
3
PARTNERSHIP, CORPORATION,
TRUST, CUSTODIAL ACCOUNT,
OTHER:
------------------------
(Name of Entity)
By:
--------------------
(Signature)
-------------------
(Title)
<PAGE>
INVESTOR QUESTIONNAIRE
<PAGE>
1
BMO PARTNERS FUND, L.P.
INVESTOR QUESTIONNAIRE
BMO Partners Fund, L.P.
c/o Beck, Mack & Oliver LLC
330 Madison Avenue, 31st Floor
New York, New York 10017
Gentlemen:
This information is being furnished to enable you to determine
whether sales of limited partnership Units (the "Units") in BMO Partners Fund,
L.P. (the "Fund") may be made to the undersigned (the "Investor"). The Investor
agrees that he will notify you immediately of any material change in any of the
information set forth below occurring prior to the closing of the purchase of
the Units by him.
I. INVESTMENT EVALUATION.
[NOTE: Each Investor must retain a purchaser representative if the Investor
does not have sufficient knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of an investment in the
Fund.]
The Investor represents by initialing in box A or B below
that:
A +-----+
+-----+
The Investor has such knowledge and experience in financial
and business matters that he is capable of evaluating the
merits and risks of an investment in the Fund and of making an
informed investment decision with respect to this investment
and will not require the services of a purchaser
representative.
B +-----+
+-----+
The Investor has relied upon the advice of the following
purchaser representative in evaluating the merits and risks of
an investment in the Fund by the Investor:
<PAGE>
2
-------------------------
(Name)
[The Fund will make available, free of charge,
______________________ to serve as purchaser representative
for any Investor who is not otherwise relying on the advice of
a purchaser representative.] The above-named purchaser
representative has furnished a completed Purchaser
Representative Questionnaire to the Fund. The above-named
purchaser representative and the Investor together have such
knowledge and experience in financial and business matters
that they are capable of evaluating the merits and risks of an
investment in the Fund and of making an informed investment
decision with respect to this investment.
IF YOU HAVE CHECKED BOX B AND YOU ARE NOT RELYING ON THE SERVICES OF
______________________ AS YOUR PURCHASER REPRESENTATIVE, A COMPLETED
AND SIGNED PURCHASER REPRESENTATIVE QUESTIONNAIRE MUST ACCOMPANY THIS
INVESTOR QUESTIONNAIRE.
II. ACCREDITED INVESTOR STATUS.
Please check the box that applies.
+-----+ The Investor is an "accredited investor" within
+-----+ the meaning of Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the
"Securities Act").
[NOTE: See clauses (A) through (O) below for the
categories under which an Investor may qualify as
an "accredited investor".]
+-----+ The Investor is not an "accredited
+-----+ investor".
<PAGE>
3
If the Investor is an "accredited investor", he has checked those boxes
below which are next to the categories under which he qualifies as an accredited
investor:
FOR INDIVIDUALS:
+-+ (A) A natural person with individual net worth (or joint
+-+ net worth with spouse) in excess of $1 million. For
purposes of this item, "net worth" means the excess
of total assets at fair market value, including home,
home furnishings and automobiles (and including
property owned by a spouse), over total liabilities.
+-+ (B) A natural person with individual income (without
+-+ including any income of the Investor's spouse) in
excess of $200,000 or joint income with spouse of
$300,000 in each of the two most recent years and who
reasonably expects to reach the same income level in
the current year.
FOR ENTITIES:
+-+ (C) A general partner of the Fund or a member
+-+ of Beck, Mack & Oliver LLC.
+-+ (D) An entity, including a grantor trust, in which all of
+-+ the equity owners are accredited investors. (For this
purpose, a beneficiary of a trust is not an equity
owner but the grantor of a grantor trust may be an
equity owner. Please contact the Manager for further
information.)
+-+ (E) A bank, as defined in Section 3(a)(2) of the
+-+ Securities Act or any savings and loan association or
other institution as defined in Section 3(a)(5)(A) of
the Securities Act, whether acting in its individual
or fiduciary capacity.
+-+ (F) An insurance company as defined in Section 2(a)(13) of
+-+ the Securities Act.
<PAGE>
4
+-+ (G) A broker-dealer registered pursuant to Section 15 of
+-+ the Securities Exchange Act of 1934.
+-+ (H) An investment company registered under the Investment
+-+ Company Act of 1940.
+-+ (I) A business development company as defined in Section
+-+ 2(a)(48) of the Investment Company Act of 1940.
+-+ (J) A small business investment company licensed by the
+-+ Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958.
+-+ (K) A private business development company as defined
+-+ in Section 202(a)(22) of the Investment Advisers Act of 1940.
+-+ (L) An organization described in Section 501(c)(3) of the
+-+ Internal Revenue Code or a corporation, Massachusetts
or similar business trust, or partnership, not formed
for the specific purpose of acquiring Units, with
total assets in excess of $5 million.
+-+ (M) A trust with total assets in excess of $5 million not
+-+ formed for the specific purpose of acquiring Units,
whose purchase is directed by a person with such
knowledge and experience in financial and business
matters as to be capable of evaluating the merits and
risks of an investment in the Units.
+-+ (N) An employee benefit plan within the meaning of the
+-+ Employee Retirement Income Security Act of 1974 ("ERISA")
if the decision to invest in the Units is made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5
million or, if a self-directed plan, with investment
decisions made solely by persons that are accredited
investors.
<PAGE>
5
+-+ (O) A plan established and maintained by a state, its
+-+ political subdivisions, or any agency or
instrumentality of a state or its political
subdivisions, for the benefit of its employees, if
the plan has total assets in excess of $5 million.
III. SUPPLEMENTAL DATA FOR ENTITIES.
(a) If the Investor is not a natural person, furnish the following
supplemental data (NATURAL PERSONS MAY SKIP THIS SECTION OF THE
INVESTOR QUESTIONNAIRE):
Legal form of entity (trust, corporation, partnership, limited
liability company, etc.):
--------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Jurisdiction of organization:
-------------------------------------
(b) If the Investor is treated as a partnership for U.S. federal income
tax purposes:
(i) What is the total number of partners or members in the
Investor? ______________
(ii) Is any partner or member in the Investor itself a partnership
for U.S. federal income tax purposes, an "S" corporation or a
grantor trust?
+-+ +-+
+-+ Yes +-+ No
(c) If the Investor is a grantor trust:
(i) What is the total number of beneficiaries of the Investor?
_______________
(ii) Is any beneficiary of the Investor itself a partnership, an
"S" corporation or a grantor trust?
+-+ +-+
+-+ Yes +-+ No
(d) If the Investor is an "S" corporation:
(i) What is the total number of equity holders in the Investor?
________________
<PAGE>
6
(ii) Is any equity holder in the Investor itself a partnership, an
"S" corporation or a grantor trust?
+-+ +-+
+-+ Yes +-+ No
[If you checked the box marked "Yes" after any of (b)(ii), (c)(ii) or
(d)(ii), please contact the Fund at (212) 661-2640 for additional
information that will be required.]
IMPORTANT: YOU MUST NOTIFY THE FUND AT LEAST TEN DAYS PRIOR TO TAKING
ANY ACTION THAT WOULD RESULT IN A CHANGE TO ANY OF THE ANSWERS TO
QUESTIONS IN THIS SECTION III.
(f) If the Investor's tax year ends on a date other than December 31,
please indicate such date below:
-------------------------
IV. RELATED PARTIES.
(a) To the best of the Investor's knowledge, does the Investor
control, or is the Investor controlled by or under common
control with, any other investor in the Fund?
+-+ +-+
+-+ Yes +-+ No
(b) Will any other person or persons have a beneficial interest in
the Units to be acquired hereunder (other than as a
shareholder, partner, policy owner or other beneficial owner
of equity interests in the Investor)?
+-+ +-+
+-+ Yes +-+ No
If either question above was answered "Yes," please contact the Fund
for additional information that will be required.
<PAGE>
7
The Investor agrees that he will, if requested by the Manager, promptly
provide any additional information and execute and deliver any other documents
that the Manager may reasonably request in order to substantiate the foregoing
information.
IN WITNESS WHEREOF, the undersigned has executed this Investor
Questionnaire this ___ day of ______, 20__ and declares that it is truthful and
correct.
Signatures:
INDIVIDUAL:
-------------------------
(Signature)
PARTNERSHIP, CORPORATION,
TRUST, CUSTODIAL ACCOUNT, OTHER:
-------------------------
(Print Name of Entity)
By
----------------------
(Signature)
-------------------------
(Title)
<PAGE>
PURCHASER REPRESENTATIVE QUESTIONNAIRE
<PAGE>
BMO PARTNERS FUND, L.P.
PURCHASER REPRESENTATIVE QUESTIONNAIRE
BMO Partners Fund, L.P.
c/o Beck, Mack & Oliver LLC
330 Madison Avenue, 31st Floor
New York, New York 10017
Gentlemen:
The information contained in this Questionnaire is being furnished in
order for you to determine whether a sale of limited partnership Units (the
"Units") in BMO Partners Fund, L.P. (the "Fund") may be made to the following
Investor:
_________________________________________________________________
in light of the requirements of the Securities Act of 1933, as amended (the
"Act"). The undersigned understands that (a) you will rely upon the information
contained herein for purposes of this determination, (b) the Units will not be
registered under the Act in reliance upon the exemption from registration
afforded by Section 4(2) of the Act and (c) this Questionnaire is not an offer
to sell the Units or any other securities to the undersigned Purchaser
Representative.
I note that you have provided to the Investor a Private Placement
Memorandum dated May 9, 2000 in connection with the offering and sale of the
Units (the "Memorandum").
I represent that:
1. I have discussed the Memorandum with the Investor with a view
to determining whether an investment in the Fund by the
Investor is appropriate in light of the Investor's financial
circumstances, as these circumstances have been disclosed to
me by the Investor.
2. I am not an affiliate, partner or employee of the Fund or its
Manager (Beck, Mack & Oliver LLC) or of any of their
affiliates or counsel to any of them or a beneficial owner of
10% or more of the equity Units in the Fund except as follows:
<PAGE>
(State "No Exceptions" or set forth exceptions and give details.)
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
3. I have such knowledge and experience in financial and business
matters as to be capable of evaluating, alone, or together
with other purchaser representatives of the Investor, or
together with the Investor, the merits and risks of an
investment in the Fund. I offer as evidence of this the
following additional information (e.g., investment experience,
business experience, profession, education):
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
4. There is no material relationship between me or my affiliates
and the Fund or its affiliates which now exists or is mutually
understood to be contemplated or which has existed at any time
during the previous two years, and no compensation has been
received or will be received as a result of any such
relationship, except as follows:
<PAGE>
3
(State "No Exceptions" or set forth exceptions and give details.)
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
If any exceptions exist and are described above, I confirm that these
exceptions were disclosed to the Investor in writing prior to the date
hereof by attaching a copy of the written disclosure.
I agree to notify you promptly of any change to the information
described in this Questionnaire which occurs prior to the completion of
the sale of the Units to the Investor.
Date: ___________, 20___ Very truly yours,
------------------------------
Print or Type Name
------------------------------
Signature
------------------------------
Street Address
------------------------------
City, State and Zip Code
(---)------------
Telephone
<PAGE>
INTERNAL REVENUE SERVICE FORM W-9
<PAGE>
[Form to be attached]
<PAGE>
EXHIBIT C
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditor's Report........................................1
Financial Statements and Notes
Statement of Assets and Liabilities........................2
Condensed Schedule of Investments........................3-4
Statement of Operations....................................5
Statements of Changes in Net Assets........................6
Notes to Financial Statements............................7-9
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the General Partner
BMO Partners Fund, L.P.
(A Delaware Limited Partnership)
We have audited the accompanying statement of assets and liabilities of BMO
Partners Fund, L.P. (A Delaware Limited Partnership), including the condensed
schedule of investments as of December 31, 1999, the related statement of
operations for the year then ended and the statement of changes in net assets
for each of the two years in the period then ended. These financial
statements and schedule are the responsibility of the general partner. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material missstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of December 31,
1999 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedule referred to above
present fairly, in all material respects, the financial position of BMO
Partners Fund, L.P. as of December 31, 1999 and the results of its operations
for the year then ended and the changes in its net assets for each of the two
years in the period then ended, in conformity with generally accepted
accounting principles.
Reminick, Aarons & Company, LLP
New York, New York
February 15, 2000
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value (cost $13,447,403)... $28,161,374
Cash equivalents................................................ 1,996,930
Receivables
Receivable from tender offer for securities................... 1,195,200
Dividends..................................................... 28,986
Interest...................................................... 21,146
-----------
Total assets................................................. 31,403,636
-----------
LIABILITIES
Accrued liabilities............................................. 20,000
-----------
Total liabilities............................................ 20,000
-----------
NET ASSETS........................................................ $31,383,636
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
SECURITIES BY INDUSTRY
COMMON STOCKS (86.38%) (a)
United States
Pharmaceuticals and hospital supplies (6.85%) (b).................. $ 2,150,392
Entertainment and leisure (3.81%).................................. 1,194,600
Publishing and broadcasting (4.90%)................................ 1,536,347
Services (2.11%)................................................... 662,580
Non-ferrous metals (.39%).......................................... 122,850
Electrical equipment (8.23%).......................................
General Electric Company (6.68%).................................. 13,540 2,095,315
Other (1.55%)..................................................... 485,156
Natural gas (1.88%)................................................ 589,856
Electronics (6.42%) (b)............................................ 2,013,849
Machinery (5.16%) (b).............................................. 1,619,176
Building products (.13%)........................................... 39,516
Oil - domestic and crude (2.42%)................................... 758,132
Miscellaneous industrials (8.40%) (b).............................. 2,635,932
Banks (2.39%)...................................................... 751,475
Credit and finance (6.58%) (b)..................................... 2,064,625
Insurance (10.25%).................................................
American Int'l Group Inc. (6.70%)................................. 19,460 2,104,113
Other (3.55%)..................................................... 1,113,760
Railroads (2.35%).................................................. 736,418
Telecommunications (12.32%)........................................
AT&T Corp. Liberty Media Group (8.76%)............................ 48,370 2,748,021
Other (3.56%)..................................................... 1,117,941
Freight and shipping (1.79%)....................................... 560,844
-----------
Total common stocks (cost $12,269,026)............................ 27,100,898
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
VALUE
<S> <C>
SECURITIES BY INDUSTRY (CONTINUED)
MUNICIPAL BONDS (.84%) (a)
United States
Puerto Rico 7.7% due 7/1/2020 (.84%)........................ 264,741
-----------
Total municipal bonds (cost $308,229)...................... 264,741
-----------
U.S. GOVERNMENT OBLIGATION (2.54%) (a)
U.S. Treasury 4.750% note due 11/15/08 (2.54%)................ 795,735
-----------
Total U.S. government obligation (cost $870,148)............ 795,735
-----------
Total - 89.76% (cost $13,447,403)........................... $28,161,374
===========
</TABLE>
(a) Percent of net assets on the statement of assets and liabilities.
(b) No holdings in any one company in this category exceed 5% of net assets
on the statement of assets and liabilities.
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends...................................................... $ 262,984
Interest....................................................... 146,753
----------
Total investment income...................................... 409,737
----------
EXPENSES
Investment advisory fees....................................... 191,000
Banking and custodial fees..................................... 22,350
Professional fees.............................................. 36,970
Filing fees.................................................... 100
----------
Total expenses............................................... 250,420
----------
INVESTMENT INCOME - NET..................................... 159,317
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments............................... 2,958,690
Change in unrealized appreciation of investments............... 1,598,249
----------
Net gain on investments...................................... 4,556,939
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $4,716,256
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income - net................................... $ 159,317 $ 242,654
Net realized gain on investments.......................... 2,958,690 1,452,992
Change in unrealized appreciation of investments.......... 1,598,249 1,784,872
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 4,716,256 3,480,518
PARTNERS' CAPITAL CONTRIBUTIONS............................. 1,052,868 1,512,768
DISTRIBUTIONS TO PARTNERS................................... (4,560,458) (1,503,290)
---------- ----------
Total increase.............................................. 1,208,666 3,489,996
NET ASSETS - BEGINNING OF YEAR.............................. 30,174,970 26,684,974
---------- ----------
NET ASSETS - END OF YEAR.................................... $31,383,636 $30,174,970
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 6
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
BMO Partners Fund, L.P. ("Partnership") was organized under the laws of
the State of Delaware on March 8, 1991 as a limited partnership for the
purpose of investing in publicly traded equity and debt securities.
The Partnership maintains its general office in New York City.
SECURITY VALUATION
Investments in securities traded on a national securities exchange (or
reported on the NASDAQ national market) are stated at the last sales price
on the day of valuation. Other securities traded in the over-the-counter
market and other securities for which no sale was reported on that date
are stated at the last quoted bid price.
CASH EQUIVALENTS
Cash equivalents consist of amounts held in money market accounts whose
fair value approximates their carrying amount. At December 31, 1999 and
throughout the year, the Partnership maintained balances in excess of
insurable limits. The Partnership has not experienced any losses in such
accounts and believes it is not subject to any significant credit risk
with respect to cash equivalents.
INCOME TAXES
As a limited partnership, the partners are required to include their
proportionate share of the Partnership's taxable income or loss on their
respective income tax returns. Accordingly, there is no provision for
federal, state or city income taxes in these financial statements.
The Partnership is not subject to the New York City unincorporated
business tax since its sole activity is investing for its own account.
Page 7
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the general partner 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 the reported amounts of revenue and
expense during the reporting period. Actual results could differ from
those estimates.
OTHER
The Partnership follows industry practice and records security
transactions on the trade date. Dividend income is recognized on the
ex-dividend date, and interest income is recognized on an accrual basis.
Discounts and premiums on securities purchased are amortized over the life
of the respective securities. Realized gains and losses from securities
transactions are recorded on a first-in, first-out basis.
NOTE 2 - INVESTMENT ADVISORY FEES
The general partner is a partnership which makes all investment decisions
and is compensated solely by receiving a quarterly management fee as
defined in the partnership agreement. Under the terms of this agreement,
the general partner is entitled to investment advisory fees, calculated
quarterly, based on an annual rate of 1% of the first $5,000,000 in net
assets, 0.75% on the second $5,000,000 in net assets, and 0.50% on net
assets over $10,000,000. Investment advisory fees paid to the general
partner were $191,000 for the year ended December 31, 1999.
NOTE 3 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Partnership to
concentrations of credit risk consist primarily of cash equivalents and
investments. The Partnership maintains cash and cash equivalents, short
and long-term investments and other financial instruments at a major
financial institution.
NOTE 4 - ALLOCATION OF PARTNERS' CAPITAL
The net income of the Partnership is allocated among the partners in
proportion to their respective capital accounts as follows:
Page 8
<PAGE>
<TABLE>
<CAPTION>
TOTAL GENERAL LIMITED
PARTNER PARTNERS
<S> <C> <C> <C>
PARTNERS' CAPITAL - JANUARY 1, 1999................. $ 30,174,970 $ 305,813 $ 29,869,157
Partners' capital contributions..................... 1,052,868 -- 1,052,868
Distributions to partners........................... (4,560,458) (344,310) (4,216,148)
Net increase in net assets resulting from operations 4,716,256 38,497 4,677,759
------------ ---------- ------------
PARTNERS' CAPITAL - DECEMBER 31, 1999............... $ 31,383,636 $ -- $ 31,383,636
============ ========== ============
</TABLE>
page 9
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS........................................1
FINANCIAL STATEMENTS AND NOTES
STATEMENT OF ASSETS AND LIABILITIES...........................4
CONDENSED SCHEDULE OF INVESTMENTS.............................5
STATEMENT OF OPERATIONS.......................................7
STATEMENTS OF CHANGES IN NET ASSETS...........................8
NOTES TO FINANCIAL STATEMENTS.................................9
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the General Partner
BMO Partners Fund, L.P.
(A Delaware Limited Partnership)
We have audited the accompanying statement of assets and liabilities of BMO
Partners Fund, L.P. (A Delaware Limited Partnership), including the condensed
schedule of investments as of December 31, 1998, the related statement of
operations for the year then ended and the statement of changes in net assets
for each of the two years in the period then ended. These financial statements
and schedule are the responsibility of the general partner. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998 by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and schedule referred to above present
fairly, in all material respects, the financial position of BMO Partners Fund,
L.P. as of December 31, 1998 and the results of its operations for the year then
ended and the changes in its net assets for each of the two years in the period
then ended, in conformity with generally accepted accounting principles.
Reminick, Aarons & Company, LLP
New York, New York
January 13, 1999
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value
(cost $13,161,744)................................................................. $ 26,576,114
Cash equivalents..................................................................... 3,549,326
Receivables
Dividends.......................................................................... 24,176
Interest........................................................................... 48,354
------------
Total assets..................................................................... 30,197,970
------------
LIABILITIES
Accrued liabilities.................................................................. 23,000
------------
Total liabilities................................................................ 23,000
------------
NET ASSETS............................................................................. $ 30,174,970
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SECURITIES BY INDUSTRY
COMMON STOCKS (83.52%)(1)
United States
Pharmaceuticals and hospital supplies (9.74%)...................... $ 2,949,800
Entertainment and leisure (7.74%).................................. 2,344,538
Publishing and broadcasting (3.41%)................................ 1,031,434
Services (2.91%)................................................... 879,710
Non-ferrous metals (.57%).......................................... 172,069
Electrical equipment (7.62%)....................................... 2,307,527
Electronics (5.08%)................................................ 1,536,526
Machinery (3.76%).................................................. 1,138,004
Computers and office equipment (1.16%)............................. 351,731
Oil - domestic and crude (2.92%)................................... 883,961
Miscellaneous industrials (10.22%)
Tyco International Ltd. (5.08%).................................. 20,380 1,537,416
Other (5.14%).................................................... 1,554,959
Financial (3.25%).................................................. 982,800
Banks (4.48%)...................................................... 1,355,807
Credit and finance (5.72%)......................................... 1,732,195
Insurance (8.30%)
American Int'l Group Inc. (5.45%)................................ 17,088 1,651,128
Other (2.85%).................................................... 862,015
Railroads (4.76%).................................................. 1,441,060
Investment (1.88%)................................................. 568,872
----------
Total common stocks (cost $11,838,814)........................... 25,281,552
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
SECURITIES BY INDUSTRY (CONTINUED)
MUNICIPAL BONDS (.98%)(1)
United States
Puerto Rico 7.7% due 7/1/2020 (.98%)............................... 297,751
----------
Total municipal bonds (cost $332,930)............................ 297,751
----------
U.S. GOVERNMENT OBLIGATION (3.29%)(1)
U.S. Treasury 5.875% note due 7/31/99 (3.29%)........................ 996,811
----------
Total U.S. government obligation (cost $990,000)................. 996,811
----------
Total - 87.79% (cost $13,161,744)(1)............................. $26,576,114
===========
</TABLE>
(1) Percent of net assets on the statement of assets and liabilities.
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends............................................... $ 217,540
Interest................................................ 248,239
----------
Total investment income............................. 465,779
----------
EXPENSES
Investment advisory fees................................ 177,243
Banking and custodial fees.............................. 15,782
Professional fees....................................... 30,000
Filing fees............................................. 100
----------
Total expenses........................................ 223,125
----------
INVESTMENT INCOME - NET............................... 242,654
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments........................ 1,452,992
Change in unrealized appreciation of investments........ 1,784,872
----------
Net gain on investments............................... 3,237,864
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $3,480,518
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income - net..................................... $ 242,654 $ 156,965
Net realized gain on investments............................ 1,452,992 783,559
Change in unrealized appreciation of investments............ 1,784,872 6,101,061
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... 3,480,518 7,041,585
PARTNERS' CAPITAL CONTRIBUTIONS............................... 1,512,768 3,481,840
DISTRIBUTIONS TO PARTNERS..................................... (1,503,290) (621,477)
----------- -----------
Total increase................................................ 3,489,996 9,901,948
NET ASSETS - BEGINNING OF YEAR................................ 26,684,974 16,783,026
----------- -----------
NET ASSETS - END OF YEAR...................................... $30,174,970 $26,684,974
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
BMO Partners Fund, L.P. ("Partnership") was organized under the laws of
the State of Delaware on March 8, 1991 as a limited partnership for the
purpose of investing in publicly traded equity and debt securities. The
Partnership maintains its general office in New York City.
SECURITY VALUATION
Investments in securities traded on a national securities exchange (or
reported on the NASDAQ national market) are stated at the last sales
price on the day of valuation. Other securities traded in the
over-the-counter market and other securities for which no sale was
reported on that date are stated at the last quoted bid price.
CASH EQUIVALENTS
Cash equivalents consist of amounts held in money market accounts whose
fair value approximates their carrying amount. At December 31, 1998 and
throughout the year, the Partnership maintained balances in excess of
insurable limits. The Partnership has not experienced any losses in
such accounts and believes it is not subject to any significant credit
risk with respect to cash equivalents.
INCOME TAXES
As a limited partnership, the partners are required to include their
proportionate share of the Partnership's taxable income or loss on
their respective income tax returns. Accordingly, there is no provision
for federal, state and city income taxes in these financial statements.
The Partnership is not subject to New York City unincorporated business
tax since its sole activity is investing for its own account.
Page 7
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the general partner 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 the reported amounts of
revenue and expense during the reporting period. Actual results could
differ from those estimates.
OTHER
The Partnership follows industry practice and records security
transactions on the trade date. Dividend income is recognized on the
ex-dividend date, and interest income is recognized on an accrual
basis. Discounts and premiums on securities purchased are amortized
over the life of the respective securities. Realized gains and losses
from securities transactions are recorded on a first-in, first-out
basis.
NOTE 2 INVESTMENT ADVISORY FEES
The general partner is a partnership which makes all investment
decisions and is compensated solely by receiving a quarterly management
fee as defined in the partnership agreement. Under the terms of this
agreement, the general partner is entitled to investment advisory fees,
calculated quarterly, based on an annual rate of 1% of the first
$5,000,000 in net assets, 0.75% on the second $5,000,000 in net assets,
and 0.50% on net assets over $10,000,000. Investment advisory fees paid
to the general partner were $177,243 for the year ended December 31,
1998.
Page 8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 3 CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Partnership to
concentrations of credit risk consist primarily of cash equivalents and
investments. The Partnership maintains cash and cash equivalents, short
and long-term investments and other financial instruments at a major
bank.
NOTE 4 ALLOCATION OF PARTNERS' CAPITAL
The net income of the Partnership is allocated among the partners in
proportion to their respective capital accounts as follows:
<TABLE>
<CAPTION>
TOTAL GENERAL PARTNER LIMITED PARTNERS
<S> <C> <C> <C>
PARTNERS' CAPITAL - JANUARY 1, 1998.................... $26,684,974 $266,496 $26,418,478
Partners' capital contributions........................ 1,512,767 2,316 1,510,451
Distributions to partners.............................. (1,503,290) -- (1,503,290)
Net increase in net assets resulting from operations... 3,480,518 37,001 3,443,517
----------- -------- ----------
PARTNERS' CAPITAL - DECEMBER 31, 1998.................. $30,174,970 $305,813 $29,869,157
=========== ======== ===========
</TABLE>
Page 9
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
FINANCIAL STATEMENTS AND NOTES (UNAUDITED)
Statement of Assets and Liabilities 1
Condensed Schedule of Investments 2 - 3
Statement of Operations 4
Statements of Changes in Net Assets 5
Notes to Financial Statements 6 - 7
</TABLE>
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNDAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at market value
(cost $16,096,978) $ 29,272,315
Cash and cash equivalents 1,083,532
Receivables
Dividends 21,273
Interest 15,283
------------
Total assets 30,392,403
------------
LIABILITIES
Accrued liabilities 17,000
------------
Total liabilities 17,000
------------
NET ASSETS $ 30,375,403
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
Page 1
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
SECURITIES BY INDUSTRY
COMMON STOCKS (94.32%) (a)
United States
CONSUMER NON-DURABLES (21.67%)
Pharmaceuticals and hospital supplies (13.76%) (b) $ 4,180,235
Publishing and broadcasting (2.77%) 842,303
Entertainment and leisure (1.32%) 400,000
Services (3.82%) 1,159,706
SERVICES (5.38%)
Services (1.29%) 390,833
Telecommunications (4.09%) 1,241,656
INTERMEDIATES (1.21%)
Railroads (1.21%) 368,156
CAPITAL GOODS (32.58%)
Computer and office supplies (3.61%) 1,095,031
Electrical equipment (5.37%) (b) 1,632,604
Electronics (4.51%) 1,369,130
Machinery (4.83%) 1,467,978
Miscellaneous industrials (4.94%) 1,500,208
Telecommunications
AT&T Corp. Liberty Media Group (7.02%) 87,940 2,132,545
Other (2.30%) 699,356
ENERGY (4.17%)
Oil - domestic & crudes (4.17%) 1,267,682
MISCELLANEOUS INDUSTRIALS (4.78%)
Miscellaneous industrials - energy (4.78%) 1,452,518
TRANSPORTATION (1.96%)
Freight and shipping (1.96%) 596,600
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
Page 2
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONDENSED SCHEDULE OF INVESTMENTS
(CONTINUED)
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
SECURITIES BY INDUSTRY (CONTINUED)
COMMON STOCKS (94.34%) (a) (CONTINUED)
FINANCIAL (19.98%)
Banks (1.86%) 563,895
Credit and finance (6.33%) (b) 1,923,161
Insurance
American International Group, Inc. (6.91%) 17,860 2,098,550
Other (4.88%) 1,483,650
PUBLIC UTILITIES (2.59%)
Natural gas (2.59%) 787,893
----------
Total common stocks (cost $15,408,918) 28,653,690
----------
FIXED INCOME (2.04%)
MUNICIPAL BONDS (.84%) (a)
United States
Puerto Rico 7.7% due 7/1/2020 (.84%) 255,373
----------
Total municipal bonds (cost $302,185) 255,373
----------
U.S. GOVERNMENT OBLIGATION (1.20%) (a)
U.S. Treasury 4.750% note due 11/15/08 (1.20%) 363,252
----------
Total U.S. government obligations (cost $385,875) 363,252
----------
Total - 96.37% (cost $16,096,978) $29,272,315
===========
</TABLE>
(a) PERCENT OF NET ASSETS ON THE STATEMENT OF ASSETS AND LIABILITIES.
(b) NO HOLDINGS IN ANY ONE COMPANY IN THIS CATEGORY EXCEED 5% OF NET ASSETS
ON THE STATEMENT OF ASSETS AND LIABILITIES
SEE NOTES TO FINANCIAL STATEMENTS
Page 3
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 106,431
Interest 56,181
-----------
Total investment income 162,612
-----------
EXPENSES
Investment advisory fees 94,199
Banking and custodial fees 6,488
Professional fees 33,292
Filing fees 285
-----------
Total expenses 134,264
-----------
INVESTMENT INCOME - NET 28,348
-----------
REALIZED GAIN AND UNREALIZED LOSS ON INVESTMENTS
Net realized gain on investments 3,314,810
Change in unrealized depreciation of investments (1,558,833)
-----------
Net gain on investments 1,755,977
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,784,325
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
Page 4
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 2000 AND
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
2000 1999
(UNAUDITED) (AUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income - net $ 28,348 $ 159,317
Net realized gain on investments 3,314,810 2,958,690
Change in unrealized (depreciation) appreciation
of investments (1,558,833) 1,598,249
----------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 1,784,325 4,716,256
PARTNERS' CAPITAL CONTRIBUTIONS 620,823 1,052,868
DISTRIBUTIONS TO PARTNERS (3,413,381) (4,560,458)
----------- ----------
Total (decrease) increase (1,008,233) 1,208,666
NET ASSETS - BEGINNING OF YEAR 31,383,636 30,174,970
----------- ----------
NET ASSETS - END OF PERIOD $30,375,403 $31,383,636
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
Page 5
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES
NATURE OF BUSINESS
BMO Partners Fund, L.P. ("Partnership") was organized under the laws
of the State of Delaware in 1991 as a limited partnership for the
purpose of investing in publicly traded equity and debt securities.
The Partnership maintains its general office in New York City.
SECURITY VALUATION
Investments in securities traded on a national securities exchange (or
reported on the NASDAQ national market) are stated at the last sales
price on the day of valuation. Other securities traded in the
over-the-counter market and other securities for which no sale was
reported on that date are stated at the last quoted bid price.
CASH EQUIVALENTS
Cash equivalents consist of amounts held in money market accounts whose
fair value approximates their carrying amount. At June 30, 2000 and
throughout the year, the Partnership maintained balances in excess of
insurable limits. The Partnership has not experienced any losses in
such accounts and believes it is not subject to any significant credit
risk with respect to cash equivalents.
INCOME TAXES
As a limited partnership, the partners are required to include their
proportionate share of the Partnership's taxable income or loss on
their respective income tax returns. Accordingly, there is no provision
for federal, state or city income taxes in these financial statements.
The Partnership is not subject to the New York City unincorporated
business tax since its sole activity is investing for its own account.
Page 6
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the general partner 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 the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
OTHER
The Partnership follows industry practice and records security
transactions on the trade date. Dividend income is recognized on the
ex-dividend date, and interest income is recognized on an accrual
basis. Discounts and premiums on securities purchased are amortized
over the life of the respective securities. Realized gains and losses
from securities transactions are recorded on a first-in, first-out
basis.
NOTE 2 - INVESTMENT ADVISORY FEES
The general partner is a partnership which makes all investment
decisions and is compensated solely by receiving a quarterly management
fee as defined in the partnership agreement. Under the terms of this
agreement, the general partner is entitled to investment advisory fees,
calculated quarterly, based on an annual rate of 1% of the first
$5,000,000 in net assets, 0.75% on the second $5,000,000 in net assets,
and 0.50% on net assets over $10,000,000. Investment advisory fees paid
to the general partner were $94,199 for the six months ended June 30,
2000.
Page 7
<PAGE>
BMO PARTNERS FUND, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Partnership to
concentrations of credit risk consist primarily of cash equivalents and
investments. The Partnership maintains cash and cash equivalents, short
and long-term investments and other financial instruments at a major
financial institution.
NOTE 4 - ALLOCATION OF PARTNERS' CAPITAL
The net income of the Partnership is allocated among the partners in
proportion to their respective capital accounts as follows:
<TABLE>
<CAPTION>
GENERAL LIMITED
TOTAL PARTNER PARTNERS
<S> <C> <C> <C>
PARTNERS' CAPITAL - JANUARY 1, 2000 $31,383,636 $ - $31,383,636
Partners' capital contributions 620,823 - 620,823
Distributions to partners (3,413,381) - (3,413,381)
Net increase in net assets resulting
from operations 1,784,325 - 1,784,325
----------- ----------- -----------
PARTNERS' CAPITAL - JUNE 30, 2000 $30,375,403 $ - $30,375,403
=========== =========== ===========
</TABLE>
Page 8
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements -- Not Applicable
(2) (a) -- Limited Partnership Agreement(+)
(b) -- Not Applicable
(c) -- Not Applicable
(d) -- Not Applicable
(e) -- Automatic Dividend Reinvestment Plan(+)
(f) -- Not Applicable
(g) -- Investment Advisory Agreement(+)
(h) (1) -- Not Applicable
(2) -- Not Applicable
(i) -- Not Applicable
(j) -- Custody Account Agreement(+)
(k) -- Not Applicable
(l) -- Not Applicable
(m) -- Not Applicable
(n) -- Consent of Independent Auditors
(o) -- Not Applicable
(p) -- Not Applicable
(q) -- Not Applicable
(r) (1) -- Fund Code of Ethics(+)
(2) -- Manager Code of Ethics(+)
----------------------
(+) Previously filed.
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable.
<PAGE>
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not Applicable.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
110
ITEM 29. INDEMNIFICATION
Under the Partnership Agreement, the general partners and
officers of the partnership and Fund will be indemnified to the fullest
extent allowed and in the manner provided by Delaware law and applicable
provisions of the 1940 Act, as amended, including advancing of expenses
incurred in connection therewith. Indemnification shall not be provided
however to any officer or director against any liability to the Registrant or
its security-holders to which he or she would otherwise be subject by reasons
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office.
Insofar as indemnification for liabilities under the
Securities Act of 1933 may be permitted to the directors and officers, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in such Act and is therefore unenforceable. If a claim for
indemnification against such liabilities under the Securities Act of 1933
(other than for expenses incurred in a successful defense) is asserted
against the Fund by the directors or officers in connection with the units,
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 of whether such indemnification by it is against
public policy as expressed in such Act and will be governed by the final
adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF ADVISER
For information as to the business, profession, vocation or
employment of a substantial nature of each of the members and key investment
personnel of Beck, Mack & Oliver LLC, reference is made to Beck, Mack &
Oliver LLC's current Form ADV filed under the Investment Advisers Act of
1940, SEC File Number 801-482, incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are maintained
at the offices of Beck, Mack & Oliver LLC at 330 Madison Avenue, 31st Floor,
New York, New York 10017, of The Chase Manhattan Bank at 55 Water Street, New
York, New York 10041 and of Reminick Aarons & Co. at 685 Third Avenue, New
York, New York 10017.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(1) Not applicable.
(2) Not applicable.
(3) Not applicable.
(4) Not applicable.
<PAGE>
(5) Not applicable.
(6) Not applicable.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, as amended, the Registrant has duly caused this Registration Statement to
be signed on its behalf by the undersigned, hereunto duly authorized, in the
City of New York, State of New York on the ninth day of May, 2000.
BMO PARTNERS FUND, L.P.
By: /S/ JOHN C. BECK
--------------------
Name: John C. Beck
Title: President
<PAGE>
SCHEDULE OF EXHIBITS TO FORM N-2
(1) Financial Statements -- Not Applicable
(2) (a) -- Limited Partnership Agreement(+)
(b) -- Not Applicable
(c) -- Not Applicable
(d) -- Not Applicable
(e) -- Automatic Dividend Reinvestment Plan(+)
(f) -- Not Applicable
(g) -- Investment Advisory Agreement(+)
(h) (1) -- Not Applicable
(2) -- Not Applicable
(i) -- Not Applicable
(j) -- Form of Custody Account Agreement(+)
(k) -- Not Applicable
(l) -- Not Applicable
(m) -- Not Applicable
(n) -- Consent of Independent Auditors
(o) -- Not Applicable
(p) -- Not Applicable
(q) -- Not Applicable
(r) (1) -- Fund Code of Ethics(+)
(2) -- Manager Code of Ethics(+)
----------------------
(+)Previously filed.
