ALTERNATIVE INVESTMENT DISCLOSURE FORM

Transcription

1 ALTERNATIVE INVESTMENT DISCLOSURE FORM J.W. Cole Financial, Inc. (Broker/Dealer) requires that investors meet certain suitability criteria in order to invest in alternative investments. Alternative investments include such investments as DPPs, REITs, BDCs, Leasing, Oil & Gas, etc. In certain cases, State suitability requirements may be more restrictive which will supersede the Firms minimum requirements. As a general policy, investors may invest up to 10% of their investable assets in one alternative investment, 15% in any two, or up to 20% in any three combined. Certain investments, such as those that fall under Regulation D, require investors to qualify as an accredited investor. DEFINITIONS Investable Assets Is the sum of money an investor has available to invest, or has already invested, including money invested in retirement accounts/plans. Excluded from this definition are physical assets such as Collectibles, Real Estate, and Business Interests. Some institutions may refer to investable assets as financial assets and some States may refer to it as Liquid Net Worth. Accredited Investor An individual may qualify as an accredited investor by meeting the below requirements (please refer to Rule 501 (a) for complete details) a. a natural person whose individual net worth, or joint net worth with that person s spouse, exceeds $1,000,000 excluding the value of the person s primary residence; or b. a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or c. a trust with assets in excess of $5 million, not formed to acquire the securities offered whose purchases a sophisticated person makes. Liquid Assets Assets that can be converted into cash within a reasonable period of time without significant loss of principal or materially impacting the price of the asset. Reasonable period of time is hereby defined as within 4 business days. Marketability assesses whether there is a readily available marketplace to buy, sell, or exchange an asset. Any asset with a surrender (liquidation fee) of 1% or less is considered liquid. SECTION A - OVERVIEW I (we) acknowledge purchasing Registered Representative. through my (our) Prospectus/Private Placement Memorandum Receipt: I (we) have received, reviewed and understand the materials contained within the prospectus or PPM dated and acknowledge that my (our) representative has answered all questions regarding this investment to my (our) satisfaction. Offering Type: In review, I (we) acknowledge that this offering is a Private Placement Offering (Regulation D) Public Offering Disclosure Form of 3

2 Client Name: Liquidity: Considering the illiquid nature of the investment, I (we) agree that we have sufficient liquid assets and do not expect to require the use of these funds for an extended period of time. Risk Factors: I (we) have reviewed and understand the various risk factors identified within the materials provided. I (we) understand that the investment may not return the principal investment and that the investment is considered illiquid. This investment is not FDIC insured and not guaranteed by an agency of the Federal Government. Distributions: I (we) acknowledge that all or a portion of any distributions may come in the form of a Return of Capital (ROC). Share Class: I (we) understanding that like most investments, all non-traded alternative investments charge fees and expenses that are paid by investors. I (we) also understand that these fees and expenses may vary from offering to offering and/or share class to share class. Because even small differences in expenses can make a big difference in my (our) investment return over time, I (we) have reviewed and compared share classes and related sales loads, fees, and other offering charges that can impact our investment. SECTION B - FINANCIALS AND ATTESTATION I (we) have reviewed and understand the various risk factors identified within the materials provided. I (we) understand that the investment may not return the principal investment made and that the investment is illiquid. While certain liquidity provisions may exist, no secondary market exists and any form of liquidity cannot be expected. Net Worth: My (our) current Net Worth (excluding primary residence) is $ $, (combined for all investors of this product) and my (our) current Annual Income is Investable Assets: Based on the above definition, current investable assets are $. Liquid Assets: Based on the above definition, current liquid assets are $. Accredited Investor: Based on the above definition, I (we) are Accredited Investor(s) Yes No Please note: If investing in a Private Placement offering, you must be an accredited investor to participate. Alternative Investment Concentration Total $ % of Investable Assets 1. Current Alternative Investment holdings: $ % 2. Amount currently invested in this offering: $ % 3. New Investment Amount: $ % 4. Total holdings including new investment: $ % Principal Signature Date Disclosure Form of 3

3 Client Name: I (we) have carefully read and discussed this investment with my (our) Representative and I (we) understand the risks involved in this transaction. I (we) certify that all of the information provided on this form is true, correct and complete, including my (our) Net Worth, Investable Assets and Liquid Assets. I (we) also understand I (we) have an affirmative obligation to notify J.W. Cole, in writing, should my (our) financial condition adversely change, or should my (our) investment objectives become more conservative from what is shown on my (our) current J.W. Cole Financial New Account Application or National Financial Account Application. Furthermore, I (we) agree and understand that nothing outlined in this disclosure form supersedes the risks as outlined in the prospectus/ppm and provided to me by my (our) Registered Representative. I certify that the client(s) meets the product suitability guidelines of J.W. Cole and their resident state restrictions (if applicable) and I have done my own due diligence of the product(s) being offered to my client(s). My client(s) is/are well known to me, and I validate the accuracy of the information provided on this form and the attached documents as well as the fact that the customer s signature(s) is/are genuine. I acknowledge that J.W. Cole Financial, its Officers, Directors, Principals or Employees have provided no added influence or incentive to me in exchange for the offering of this product over any other securities product and that their due diligence reviews provide no guarantee for the success of the offering or the return of principal. I have disclosed the risks of this product clearly to my client(s) and presented this investment only after a personal review of the product along with a careful consideration of my client s unique objectives, risk tolerance and time horizon. Registered Representative Signature Date PLEASE COMPLETE ONE OF THE FOLLOWING PRODUCT DISCLOSURES TITLED IMPORTANT FACTORS FOR CONSIDERATION THAT CORRESPONDS TO THE TYPE OF ALTERNATIVE INVESTMENT CHOSEN BY THE CUSTOMER. Disclosure Form of 3

4 ALTERNATIVE INVESTMENT DISCLOSURE NON-TRADED REAL ESTATE INVESTMENT TRUST (REIT) IMPORTANT FACTORS FOR CONSIDERATION There are many factors to consider prior to purchasing an Alternative Investment. All investors should carefully understand the investment decisions they are about to make and educate themselves on the factors involved. Prior to making any investment decision, carefully discuss your investment objectives and risk tolerance with your Registered Representative to ensure that you fully understand the investment along with its risks and liquidity. The items listed below are NOT encompassing of all Factors for Consideration associated with this product, do not replace disclosure materials provided with the investment and careful review of the prospectus should be completed prior to purchase. An investment into a REIT does contain risk. REITS should not be purchased by anyone who cannot afford the loss of some or all of the principal invested. Distributions from REITs may come from various sources. They may come from earnings, proceeds of the offering, or from borrowings in anticipation of future cash flow. These distributions may constitute a taxable dividend, a return of capital, or a combination of both. A return of capital may reduce the amount of capital invested in properties and can negatively impact the value of the investment. Distribution practices will vary with different offerings and sponsors. A discussion of the distribution strategy of each REIT offering is contained in the prospectus and subsequent filings. Therefore it is important to seek the advice of 3rd party tax counsel. REITs will often use leverage (or borrow money) in order to purchase properties in greater value than the amount of capital that was raised in the REIT. The amount of leverage or money borrowed against the REIT properties should be carefully considered and its impact on the REIT understood prior to making an investment. The use of leverage can significant increase the risk associated with the investment. A non-traded REIT should be considered a long term investment and illiquid. Lack of liquidity or a secondary market for the investment makes it difficult, if not impossible, to sell this investment to another party. Even then, the sales price will likely be substantially lower than the original investment. Most REITs have a provision and calculation method for accepting redemptions from the REIT. It is not uncommon for these redemption provisions to be at the discretion of the REIT management. Both the liquidity features and calculation provisions should be reviewed in the prospectus and carefully considered prior to investing. While most REITs will declare an expected hold time of the REIT, the exact timeframe and method for liquidity is not guaranteed. The REIT is likely to extend through a follow-on offering. REITs often declare their exit strategy in the form of a liquidation of the individual REIT properties, selling of the entire REIT to another institution, or taking the REIT public via a formal stock offering. Investors must understand that market conditions, portfolio value, REIT property types, leverage, and REIT management are all factors in a REITs liquidation. The timing, method and/or value of the REITs liquidation is not guaranteed and potential loss of principal at liquidation should be carefully considered. Non-traded REITs are blind pool offerings. Investors may not have an opportunity to evaluate investments/properties in the underlying portfolio prior to the purchase of those acquisitions. Note: Some related investments may not be a blind pool. Investors rely on the ability and expertise of the Advisor to the REIT; not a J.W. Cole Financial Advisor. The qualified associates of the Advisor make decisions on behalf of the REIT. The roles of the Advisor, as well as the individuals who perform the various functions for the REIT, are detailed in the prospectus and should be carefully considered. I/We have read and discussed with my Registered Representative each of the line items above and understand the risks and details of this transaction as outlined in the Prospectus. I/We have carefully reviewed the prospectus and had all questions answered with great detail and understand through this investment that there is limited liquidity and it may lose some, or all, of the principal invested. It is with careful consideration I/We acknowledge that this investment adequately meets my/our financial objectives and risk tolerance. Disclosure Form REIT Important Factors

5 ALTERNATIVE INVESTMENT DISCLOSURE OIL & GAS RELATED PROGRAMS IMPORTANT FACTORS FOR CONSIDERATION There are many factors to consider prior to purchasing an Alternative Investment. All investors should carefully understand the investment decisions they are about to make and educate themselves on the factors involved. Prior to making any investment decision, carefully discuss your investment objectives and risk tolerance with your Registered Representative to ensure that you fully understand the investment along with its risks and liquidity. The items listed below are NOT encompassing of all Factors for Consideration associated with this product, do not replace disclosure materials provided with the investment and careful review of the prospectus should be completed prior to purchase. An investment into Oil and Gas (Energy) related Programs contain risk. These programs should not be purchased by anyone who cannot afford the loss of some, or all, of the principal invested. The number of actual, active oil and gas wells which generate distributions for the Partnership will fluctuate for a variety of reasons including the life of a given well and its declining productivity. Distributions may be directly related to production, energy costs, and the ability to market the oil and gas and its price; which is volatile and cannot be predicted. Distributions, should they occur, may take some time to begin and will fluctuate. Program and Operating costs are high and may adversely impact the performance of the offering. These programs often provide a tax benefit through IDC (Intangible Drilling Cost) deductions. These benefits cannot be guaranteed and vary from offering to offering. Investing solely for the tax benefit may not be an appropriate investment strategy. Price decline can adversely affect your return on your investment. Factors include but are not limited to the following: economic conditions inside and outside the United States, actions of OPEC (Organization of Petroleum Exporting Companies), political instability in the Middle East or other oil and gas producing regions, activities of oil-producing countries to limit production, domestic and foreign governmental regulations, tax and monetary policies. If entering this program as a general partner, it is understood and accepted that all general partners carry unlimited liability during the drilling phase for partnership obligations until the general partners are converted to a limited partner. As a general partner, you should fully understand the risks associated with being a general partner and assume full responsibility of this risk. An Oil & Gas Related Program should be considered a long term investment. Lack of liquidity or a secondary market for the investment makes it difficult, if not impossible, to sell this investment to another party. Even then, the sales price may, and probably will, be substantially lower than the original investment. Investing in Oil & Gas Related Programs may involve sophisticated tax planning as these programs tax structure can vary based on your involvement and individual circumstances. Investors should consult a 3rd party tax professional. At the end of Oil & Gas Related programs they may not provide a lump sum return of principal. Invested principal will be depleted to develop and maintain the wells in the program. Investors should consider overall returns through the distributions received from the program as well as any tax benefits derived upon initial investment. I/We have read and discussed each of the line items above with my Registered Representative and understand the risks and details of this transaction and have carefully reviewed the Private Placement Memorandum and had all questions answered with great detail. I/We understand that through this investment that there is limited liquidity and it may lose some, or all, of the principal invested. It is with careful consideration I/We acknowledge that this investment adequately meets my/our financial objectives and risk tolerance. Disclosure Form Oil & Gas Important Factors

6 ALTERNATIVE INVESTMENT DISCLOSURE BUSINESS DEVELOPMENT COMPANIES (BDC) EQUITY/DEBT INVESTMENTS IMPORTANT FACTORS FOR CONSIDERATION There are many factors to consider prior to purchasing an Alternative Investment. All investors should carefully understand the investment decisions they are about to make and educate themselves on the factors involved. Prior to making any investment decision carefully discuss your investment objectives and risk tolerance with your Registered Representative to ensure that you fully understand the investment along with its risks and liquidity. The items listed below are NOT encompassing of all Factors for Consideration associated with this product, do not replace disclosure materials provided with the investment and careful review of the prospectus should be completed prior to purchase. An investment into Private Equity/Debt through a BDC contains risk. Such investment should not be purchased by anyone who cannot afford the loss of some or all of the principal invested. The amount of distributions made from this investment is uncertain and that distribution proceeds may exceed earnings and therefore represent a return of capital. In some cases distributions may be fully covered but on a tax basis may still be considered return of capital. Distributions considered a return of capital decreases the costs basis of the investment. I /We understand that it may be the intention of the investment to qualify as a RIC (Registered Investment Company) and that failure to do so would subject all income received by the BDC to increased federal income taxation; having a material adverse effect on the financial performance of this investment. As a result of the annual distribution requirement to qualify as a RIC, a BDC investment will likely need to continually raise cash or borrow money to fund new investments and that at times such sources of funding may not be available. These investments are subject to financial market risks, including changes in interest rates which may have a substantial negative impact on these investments. Defaults and low recovery ratios can significantly impair performance. The portfolio may be recorded at fair value and determined in good faith and, as a result, there will be uncertainty as to the value of the portfolio investments. Board Members have discretion when determining the NAV of an offering. The investment should be considered a long term investment. Lack of liquidity or a secondary market for the investment makes it difficult, if not impossible, to sell this investment to another party. Even then the sales price may and probably will be substantially lower than the original investment. I/We understand that this investment may be deemed to be a blind pool offering and that I/we will not have the opportunity to evaluate historical data or assess any investments prior to purchasing shares of this BDC investment. I/We have read and discussed with my Registered Representative each of the items above and understand the risks and details of this transaction. I/ We have carefully reviewed the prospectus and had all questions answered with great detail and understand that through this investment there is limited liquidity and it may lose some, or all, of the principal invested. It is with careful consideration I/We acknowledge that this investment adequately meets my/our financial objectives and risk tolerance. Disclosure Form BDC Important Factors