SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number ____333-85755______
Bromwell Financial Fund, Limited Partnership
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 51-0387638
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6916 N. 300 West, Fremont, IN 46737
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (219) 833-1505
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Former Name, Address and Fiscal Year, if Changed, Since Last Report
No such changes occurred
Indicate by check [X] whether the registrant (1)has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements for the Registrant for the third quarter ended
September 30, 2003 prepared under the supervision of Registrant by James
Hepner, Certified Public Accountant, and reviewed by Registrant's auditor,
Frank L. Sassetti & Co., Certified Public Accountants, are attached hereto
and made a part hereof.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Registrant, pursuant to the terms of a Limited Partnership Agreement, engages
in the business of speculative trading of commodity futures and options
markets pursuant to a power of attorney to enter trades granted to its
commodity trading advisor.
Effective September 23, 2003, Michael P. Pacult was added as an additional
general partner and commodity pool operator to the Registrant.
Effective November 1, 2003, the management fee to Belmont Capital Management,
Incorporated, the Corporate General Partner and one of the commodity pool
operators of Registrant, of three percent (3%) is reduced to zero percent
(0%) and Belmont will be paid an incentive fee of five percent (5%).
Effective November 1, 2003, Futures Investment Company will no longer serve
the Registrant as the introducing broker and no further sales commission of
six percent (6%) will be charged to new investors in Registrant.
Effective November 3, 2003, the fee structure of Registrant will be changed
from an annual eleven percent (11%) fixed fee, paid monthly, on the assets on
deposit with the futures commission merchant to a continuing service fee to
the sales agent that sold the investment of four percent (4%) per year,
payable monthly, for so long as the investment remains in the Fund and a
round-turn commission of approximately $22 per contract plus give-up fees on
US exchanges to the corporate General Partner and one of the commodity pool
operators of Registrant (the "CPO"). The CPO will be responsible for all
charges paid to the futures commission merchant. Some Foreign exchanges may
average more than $22 per round turn.
Until, November 3, 2003 the advisors were Ansbacher Management, Inc. and
Mangin Capital Management, Inc. On that date, Fall River Capital, LLC became
the sole commodity trading advisor to the Registrant. Fall River is a
Wisconsin limited liability company with its main business office and main
business telephone: 11740 North Port Washington Road, Mequon, Wisconsin
53092; (262) 241-8020. The trading advisor's books and records will be kept
and made available for inspection at its main business office. Prospective
investors must obtain a copy of the Registrant's Prospectus before making a
decision to invest in the Registrant to obtain a full description of the
Registrant and Fall River.
Effective November 3, 2003, Vision, L.P. no longer serves as the futures
commission merchant.
Effective on or about November 3, 2003, the futures commission merchant (sic
clearing broker) for all trades entered on behalf of Registrant is Citigroup
Global Markets, Inc. ("Citigroup"), 388 Greenwich St., New York, New York
10013. Citigroup is a New York corporation and a subsidiary of Citibank,
N.A., 390 Greenwich St., 5th Floor, New York, New York 10013. Citigroup
(formerly Salomon Smith Barney Inc.) is registered as a broker-dealer and
futures commission merchant. The Citigroup acts only as the clearing broker
for the Fund and, as such, is paid commissions for executing and clearing
trades. It has not passed upon the adequacy or accuracy of the
Registrant's prospectus or any amendment. Citigroup will not act in any
supervisory capacity with respect to the general partner nor participate in
the management of the general partner or the Registrant. Therefore,
prospective investors should not rely on Citigroup's agreement to clear
trades for the Registrant or for any other reason related to Citigroup in
deciding whether or not to purchase interests in the Registrant.
Registrant will, pursuant to the terms of the Limited Partnership Agreement,
engage in the business of speculative trading of commodity futures and
options markets through the services of its commodity trading advisor(s)
selected from time to time by its General Partner.
The Units are sold on a best efforts basis through the broker dealer and
selling agent, Futures Investment Company, at the Net Asset Value per Unit as
of the close of business on the last day of the month in which the General
Partner receives subscriptions.
The Registrant intends to continue to offer Units for sale to the public via
its prospectus, as amended and restated from time to time, at the month end
Net Asset Value per Unit until the total amount of registered securities,
$7,000,000, is sold or the offering terminates.
To obtain a return of invested capital or appreciation, if any, purchasers of
Units must look solely to the redemption feature of the Partnership or to the
General Partner, in its sole judgment, to elect to make distributions. There
is no current market for the Units sold and none is expected to develop nor
is the General Partner expected to make distributions.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Effective August 21, 2003, Michael P. Pacult became the sole shareholder and
sole Director and President of Belmont Capital Management, Inc, the Corporate
GP and a commodity pool operator of the Registrant. Effective that same
date, Shira Del Pacult transferred her 100% shareholding in the Corporate GP
to her husband, Michael Pacult and she resigned as a Director and President
of the Corporate GP. She remains as an officer in charge of client relations
for the Corporate GP.
On August 19, 2003, the Partners of the Registrant were provided with notice
that Ms. Shira Del Pacult will resign as an individual General Partner of
Registrant effective 120 days from the date of the Notice. After her
resignation, the Corporate GP and Michael P. Pacult, individual GP will
continue to mange the Registrant.
Item 6. Exhibits and Reports on Form 8-K
(a) The Registrant filed Forms 8-K on September 19 and November 10, 2003
that are incorporated by reference in this Form 10Q.
(b) None
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-Q for the
period ended September 30, 2003, to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant: Bromwell Financial Fund, Limited Partnership
By Belmont Capital Management, Incorporated
Its General Partner
By: Michael P. Pacult
Mr. Michael P. Pacult
Sole Director, Sole Shareholder,
President, and Treasurer of the
General Partner
Date: November 14, 2003
BROMWELL FINANCIAL FUND,
LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2003 AND 2002
(A Review)
GENERAL PARTNER:
Belmont Capital Management, Inc.
% Corporate Systems, Inc.
101 North Fairfield Drive
Dover, Kent County, Delaware 19901
To The Partners
Bromwell Financial Fund, Limited Partnership
Dover, Kent County, Delaware
We have reviewed the balance sheet, including
the schedule of investments, of BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
as of September 30, 2003 and the related statements of operations for the
three and nine months ended September 30, 2003 and 2002, and the statements
of partners' equity and cash flows for the nine months ended September 30,
2003 and 2002. These financial statements are the responsibility of the
Partnership's management.
We conducted our review in accordance with
standards established by the American Institute of Certified Public
Accountants. A review of interim financial information consists principally
of applying analytical procedures to financial data and making inquires of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
auditing standards generally accepted in the United States, the objective of
which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review we are not aware of any
material modifications that should be made to the financial statements
referred to above for them to be in conformity with accounting principles
generally accepted in the United States.
We have previously audited, in accordance with
auditing standards generally accepted in the United States, the balance
sheet, including the schedule of investments, of BROMWELL FINANCIAL FUND,
LIMITED PARTNERSHIP as of December 31, 2002 and the related statements of
operations, partner's equity and cash flows for the year then ended (not
presented herein); and in our report dated February 13, 2003, we expressed an
unqualified opinion on these financial statements. In our opinion, the
information set forth in the accompanying balance sheet as of December 31,
2002 is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
s/ Frank L. Sassetti & Co.
October 21, 2003
Oak Park, Illinois
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
ASSETS
September 30,
2003 December 31,
(A Review) 2002
Cash (Note 5) $ 14,163 $ 19,491
Accrued interest receivable 8,884 1,884
Equity in Commodity Futures Trading Accounts -
Cash (Note 6) 1,168,493 1,578,725
Net unrealized gains on open commodity
futures contracts (Note 7) 113,325 71,746
Open options, long positions, at market value
(cost $6,825 and $0) 9,100
$1,313,965 $1,671,846
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Open options, short positions, at market value
(cost $35,100 and $0) $ 37,050 $
Partner redemptions payable 23,374 4,613
Accrued trading commissions payable (Note 4) 458 987
Accrued management fees payable (Note 4) 10,227 6,007
Accrued incentive fees payable (Note 4) 2,751 2,751
Accrued auditing fees payable 6,300 7,500
Total Liabilities 80,160 21,858
PARTNERS' CAPITAL
Limited partners -
( 1,318.06 and 1,815.19 units) 1,233,805 1,649,988
General partner - (0 and 0 units)
Total Partners' Capital 1,233,805 1,649,988
$1,313,965 $1,671,846
The accompanying notes are an integral
part of the financial statements
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(A Review)
Three Nine Three Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, 2003 September 30, 2002
REVENUES
Realized gain (loss) on
trading futures $ (135,196)$ 155,311 $ 144,960 $ 207,667
Change in unrealized gain
(loss) on open commodity
futures contracts 144,937 41,579 (47,328) 15,734
Realized gain from trading
options 13,586 93,061 71,712 425,160
Change in unrealized gain
(loss) on open options (5,850) 325 (6,737) (33,512)
Interest income 617 2,181 2,137 4,918
Redemption penalty (Note 3) 304 - 4,554
Total Revenues 18,094 292,761 164,744 624,521
EXPENSES
Registration costs 4,316 10,611
Commissions (Note 4) 35,864 126,864 72,256 159,839
Management fees (Note 4) 13,144 46,170 11,531 117,640
Incentive fees (Note 4) 3,474
Professional accounting and
legal fees 15,302 45,833 12,169 39,516
Other operating and
administrative expenses 70 356 698 1,273
Total Expenses 64,380 222,697 100,970 328,879
NET INCOME (LOSS) - $ (46,286)$ 70,064 $ 63,774 $ 295,642
NET INCOME (LOSS) -
Limited partnership unit $ (33.86)$ 43.68 $ 36.01 $ 167.83
General partnership unit $ $ $ $
The accompanying notes are an integral
part of the financial statements
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(A Review)
2003 2002
Amount Units Amount Units
December 31 $1,649,988 1,815.19 $1,835,639 1,931.43
Partner additions 88,188 80.53
Partner withdrawals (479,347) (497.13) (227,680) (239.09)
Syndication costs paid (6,900)
Net income 70,064 295,642
September 30 $1,233,805 1,318.06 $1,991,789 1,772.87
2003 2002
Value per unit $ 936.07 $1,123.48
Total partnership units 1,318.06 1,772.87
The accompanying notes are an integral part
of the financial statements
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(A Review)
2003 2002
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 70,064 $ 295,642
Adjustments to reconcile net income
to net cash provided by
operating activities -
Changes in operating assets
and liabilities -
Equity in Commodity Futures
Trading Accounts 396,603 (167,309)
Prepaid commissions (401)
Accrued interest receivable (7,000) (13,854)
Accrued commissions payable (529) (2,906)
Management and incentive
fees payable 4,220 16,176
Accounting and auditing
fees payable (1,200) (3,150)
Net Cash Provided By
Operating Activities 462,158 124,198
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from sale of units, net
of sales commissions 88,188
Syndication and registration costs (6,900)
Partners cash redemptions (460,586) (227,680)
Net Cash (Used In)
Financing Activities (467,486) (139,492)
NET (DECREASE) IN CASH (5,328) (15,294)
CASH
Beginning of period 19,491 39,135
End of period $ 14,163 $ 23,841
The accompanying notes are an integral
part of the financial statements
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2003
(A Review)
Contracts Value Percent
United States Commodity Futures Positions, Held Long
6 Dec '03 Treasury Bonds $ 14,438 1.12 %
4 Dec '03 Treasury Notes 10,437 0.81
4 Dec '03 Copper Hi-grade 2,150 0.17
3 Dec '03 Gold 8,490 0.66
3 Dec '03 British Pounds 2,175 0.17
4 Dec '03 Canadian Dollar 4,360 0.34
16 Mar '04 Eurodollar 5,000 0.39
7 Dec '03 Swiss Franc 11,288 0.87
9 Dec '03 Japanese Yen 46,125 3.57
3 Dec '03 European Currency Unit 7,087 0.55
Total Commodity Futures Positions, Held Long 111,550 8.65
Commodity Futures Positions Sold Short
3 Dec '03 S&P Index (975) (0.08)
3 Dec '03 US Dollar Index 7,650 0.59
7 Nov '03 Crude Oil (4,900) (0.38)
Total Commodity Futures Sold Short 1,775 0.13
Net Commodity Futures Positions 113,325 8.78
Option Positions, Held Long
26 Calls October '03 S&P Index @ 1140 975 0.08
26 Puts October '03 S&P Index @ 890 8,125 0.63
Total Option Positions, Held Long (Cost $6,825) 9,100 0.71
Cash in Trading Accounts 1,168,493 90.51
Total Investments $1,290,918 100.00 %
Securities Sold Short
Options
26 Calls October '03 S&P Index @ 1045 $ (15,600) 42.11
26 Puts October '03 S&P Index @ 930 (21,450) 57.89
Total Options Sold Short (proceeds $35,100) $ (37,050) 100.00 %
The accompanying notes are an integral
part of the financial statements
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2002
Contracts (All securities are from U.S. markets) Value Percent
Commodity Futures Positions, Held Long
1 Mar '03 British Pounds $ 2,138 0.13%
3 Mar '03 Treasury Notes 5,765 0.35
9 Mar '03 Euro Dollars 11,463 0.69
2 Mar '03 European Currency Unit 10,525 0.64
6 Mar '03 Swiss Francs 29,700 1.80
3 Mar '03 US Dollar Index 10,170 0.62
3 Mar '03 Cotton 1,305 0.08
5 Feb '03 New York Crude Oil 17,400 1.05
2 Apr '03 Platinum 1,240 0.08
Total Commodity Futures Positions,
Held Long 89,706 5.44
Commodity Futures Positions Sold Short
4 Mar '03 Hi-Grade Copper (4,150) (0.25)
4 Mar '03 Canadian Dollars (2,320) (0.14)
3 Feb '03 Natural Gas (11,490) (0.70)
Total Commodity Futures Sold Short (17,960) (1.09)
Net Commodity Futures Positions 71,746 4.35
Cash in Trading Accounts 1,578,725 95.65
Total Investments $1,650,471 100.00%
The accompanying notes are an integral
part of the financial statements
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
(A Review)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Bromwell Financial Fund, Limited Partnership (the Fund) was formed
January 12, 1999 under the laws of the State of Delaware. The Fund is
engaged in the speculative trading of futures contracts in commodities, which
commenced in July, 2000. Belmont Capital Management, Inc. and Michael
Pacult are the general partners and commodity pool operators of Bromwell
Financial Fund, Limited Partnership. The commodity trading advisors (CTAs)
are Ansbacher Investment Management, Inc. and Mangin, which have the
authority to trade so much of the Fund's equity as is allocated to them by
the General Partners. Subsequent to September 30, 2003, the allocation of
equity to trade will be changed from Ansbacher Investment Management, Inc.
and Mangin to Fall River Capital Management, Inc.
Income Taxes - In accordance with the generally accepted method of
presenting partnership financial statements, the financial statements do not
include assets and liabilities of the partners, including their obligation
for income taxes on their distributive shares of the net income of the Fund
or their rights to refunds on its net loss.
Registration Costs - Costs incurred for the initial filings with the
Securities and Exchange Commission, Commodity Futures Trading Commission,
National Futures Association (the "NFA") and the states where the offering
was made were accumulated, deferred and charged against the gross proceeds of
offering at the initial closing as part of the offering expenses. The Fund
remains open to new partners and incurs costs required to retain the ability
to issue new units. Such costs are treated in a similar manner. Costs of
recurring annual and quarterly filings with regulatory agencies are expensed
as incurred.
Revenue Recognition - Commodity futures contracts are recorded on the
trade date and are reflected in the balance sheet at the difference between
the original contract amount and the market value on the last business day of
the reporting period.
Market value of commodity futures contracts is based upon exchange or
other applicable market best available closing quotations.
Use of Accounting Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
(A Review)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Statement of Cash Flows - For purposes of the Statement of Cash Flows,
the Fund considers only cash and money market funds to be cash equivalents.
As of the balance sheet dates, the Fund has no cash equivalents. Net cash
used in operating activities includes no cash payments for interest or income
taxes for the nine months ended September 30, 2003 and 2002.
2. GENERAL PARTNER DUTIES
The responsibilities of the General Partner, in addition to directing
the trading and investment activity of the Fund, including suspending all
trading, include executing and filing all necessary legal documents,
statements and certificates of the Fund, retaining independent public
accountants to audit the Fund, employing attorneys to represent the Fund,
reviewing the brokerage commission rates to determine reasonableness,
maintaining the tax status of the Fund as a limited partnership, maintaining
a current list of the names, addresses and numbers of units owned by each
Limited Partner and taking such other actions as deemed necessary or
desirable to manage the business of the Partnership.
If the net unit value of the partnership falls to less than 50% of the
greater of the original $1,000 selling price, less commissions and other
charges or such higher value earned through trading, then the General Partner
will immediately suspend all trading, provide all limited partners with
notice of the reduction and give all limited partners the opportunity, for
fifteen days after such notice, to redeem partnership interests.
3. THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partnership Agreement provides, among other things, the
following:
Capital Account - A capital account shall be established for each
partner. The initial balance of each partner's capital account shall be the
amount of the initial contributions to the partnership.
Monthly Allocations - Any increase or decrease in the Partnership's net
asset value as of the end of a month shall be credited or charged to the
capital account of each Partner in the ratio that the balance of each account
bears to the total balance of all accounts.
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
(A Review)
3. THE LIMITED PARTNERSHIP AGREEMENT - CONTINUED
Any distribution from profits or partners' capital will be made solely
at the discretion of the General Partners.
Allocation of Profit and Loss for Federal Income Tax Purposes - As of
the end of each fiscal year, the Partnership's realized capital gain or loss
and ordinary income or loss shall be allocated among the Partners, after
having given effect to the fees of the General Partner and the Commodity
Trading Advisors and each Partner's share of such items are includable in the
Partner's personal income tax return.
Redemption - No partner may redeem or liquidate any units until after
the lapse of six months from the date of the investment. Thereafter, a
Limited Partner may withdraw, subject to certain restrictions, any part or
all of his units from the partnership at the net asset value per unit on the
last day of any month with ten days prior written request to the General
Partner. A redemption fee payable to the Partnership of a percentage of the
value of the redemption request is charged pursuant to the following
schedule:
4% if such request is received ten days prior to the last trading day
of the month in which the redemption is to be effective from the sixth month
to the twelfth month after the date of the investment in the Fund.
3% if such request is received during the next six month period.
2% if such request is received during the next six month period.
1% if such request is received during the next six month period.
0% thereafter.
4. FEES
The Fund is charged the following fees on a monthly basis since the
commencement of trading.
A management fee of 1% (annual rate) of the Fund's total assets
available for trading allocated to each CTA to trade will be paid to each CTA
and 3% of the Fund's net assets allocated to all CTA's will be paid to the
Fund's Corporate General Partners.
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002
(A Review)
4. FEES - CONTINUED
An incentive fee of 20% of "new trading profits" will be paid to each
CTA. "New trading profits" includes all income earned by a CTA and expense
allocated to his activity. In the event that trading produces a loss, no
incentive fees will be paid and all losses will be carried over to the
following months until profits from trading exceed the loss. It is possible
for one CTA to be paid an incentive fee during a quarter of a year when the
Fund experienced a loss.
The Fund will pay fixed commissions of 11% (annual rate) of assets
assigned to be traded, payable monthly, to the introducing broker affiliated
with the General Partners. The Affiliated Introducing Broker will pay the
costs to clear the trades to the futures commission merchant and all PIT
Brokerage costs which shall include the NFA and exchange fees. Subsequent to
September 30, 2003, the fee structure will be changed from an annual 11%
fixed fee to a round-turn commission.
The General Partner has reserved the right to change the management fee
and the incentive fee at its sole discretion.
5. CONCENTRATIONS OF CREDIT RISK
The Fund maintains its cash balances at a high credit financial
institution. The balances may, at times, exceed federally insured credit
limits.
6. PLEDGED ASSETS
The cash in trading accounts is pledged as collateral for commodities
trading on margin.
7. OFF BALANCE SHEET RISK
As discussed in Note 1, the Fund is engaged in speculative trading of
futures contracts in commodities. The carrying amounts of the Fund's
financial instruments and commodity contracts generally approximate their
fair values as of the balance sheet date. Open commodity contracts had gross
contract value of $7,797,000 and $2,264,960 on long positions and $1,341,000
and $1,257,405 on short positions at September 30, 2003 and 2002,
respectively.
Although the gross contract values of open commodity contracts
represent market risk they do not represent exposure to credit risk, which is
limited to the current cost of replacing those contracts in a gain position.
The unrealized gain on open commodity futures contracts at September 30, 2003
and 2002 was $113,325 and $37,544, respectively.