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, 2004
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.)
5916 N. 300 West, Fremont, IN 46737
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (260) 833-1505
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Former Name, Address and Fiscal Year, if Changed, Since Last Report
No such changes occurred
Indicate by check mark 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
and Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
The reviewed financial statements for the Registrant for the nine months
ended September 30, 2004, and audited results for the calendar year 2003 are
attached hereto and made a part hereof.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
During the past quarter and in the future, Registrant, did and 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, Fall River Capital, LLC.
The Units are sold through the broker dealer selected by the General Partner,
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 subscriptions are received
by the General Partner.
The Registrant will continue to offer Units for sale to the public via its
prospectus dated March 9, 2004 as supplemented September 24, 2004 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
None.
Item 6. Exhibits and Reports on Form 8-K
(a) None
(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, 2004, 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: /s/ Michael Pacult
Mr. Michael Pacult
Sole Director, Sole Shareholder, President,
and Treasurer of the General Partner
Date: November 23, 2004
BROMWELL FINANCIAL FUND,
LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
INDEX TO FINANCIAL STATEMENTS
Page
Accountants' Review Report F-2
Financial Statements
Balance Sheets as of September 30, 2004 and December 31, 2003 F-3
Schedules of Investments as of September 30, 2004 and
December 31, 2003 F-4 - F-7
Statements of Operations for the Three and Nine Months
Ended September 30, 2004 and 2003 F-8
Statements of Partners' Equity for the Nine Months Ended
September 30, 2004 and 2003 F-9
Statements of Cash Flows for the Nine Months Ended
September 30, 2004 and 2003 F-10
Notes to Financial Statements F-11 - F-16
F-1
Frank L. Sassetti & Co.
Certified Public Accountants
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, 2004 and the related statements of operations for the
three and nine months ended September 30, 2004 and 2003, and the statements
of partners' equity and cash flows for the nine months ended September 30,
2004 and 2003. 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, 2003 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 3, 2004, 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,
2003 is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
/s/ Frank L. Sassetti & Co.
November 11, 2004
Oak Park, Illinois
6611 W. North Avenue * Oak Park, Illinois 60302
* Phone (708) 386-1433 * Fax (708) 386-0139
F-2
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
BALANCE SHEETS
SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
ASSETS
September 30,
2004 December 31,
(A Review) 2003
Investments
Equity in Commodity Futures Trading Accounts -
Cash and cash equivalents $130,597 $ 973,657
U.S Treasury obligations 478,268
Net unrealized gains on open commodity
futures contracts 31,845 72,792
Net unrealized gains on open commodity
forward contracts - 7,369
640,710 1,053,818
Cash 46,084 22,397
Accrued interest receivable 3,152 -
$689,946 $1,076,215
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Partner redemptions payable $220,767 $ 7,405
Accrued trading commissions payable 2,117 3,132
Accrued management fees payable 9,662 9,323
Accrued incentive fees payable 2,751 9,455
Other accrued liabilities 6,143 10,000
Total Liabilities 241,440 39,315
PARTNERS' CAPITAL
Limited partners - (593.18 and 1,257.32 units) 423,598 1,036,900
General partner - (34.88 and 0 units) 24,908 -
Total Partners' Capital 448,506 1,036,900
$689,946 $1,076,215
The accompanying notes are an integral part of the financial statements.
F-3
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2004
(A Review)
Contracts Value Percent
United States Commodity Futures Positions, Held Long:
1 Nov '04 Nymex Light Sweet Crude $ 6,090 0.95%
1 Nov '04 Nymex Unleaded Gas 4,624 0.72
2 Dec '04 CBT T Bonds (3,187) (0.50)
2 Dec '04 CME Lean Hogs 4,020 0.63
1 Oct '04 IPE Gas/Oil 7,375 1.15
1 Dec '04 IPE Brent Crude (110) (0.01)
Total United States Commodity Futures Positions 18,812 2.94
British Commodity Futures Positions, Held Long:
5 Dec '04 LIFFE FTSE 100 Index (1,900) (0.30)
Euro Commodity Futures Positions, Held Long:
4 Dec '04 10 ERX Yr Bund 1,838 0.29
Japanese Commodity Futures Positions, Held Long:
16 Mar '05 SGX EuroYen Tibor 907 0.14
6 Dec '04 SGX Mini JGB 3,429 0.54
Total Japanese Commodity Futures Positions 4,336 0.68
Australian Commodity Futures Positions, Held Long:
5 Dec '04 SFE SPI 200 Equity Index Futures 5,794 0.90
6 Dec '04 SFE 10 Yr T Bond (3,579) (0.56)
14 Dec '04 SFE 3YR T Bond (3,100) (0.48)
Total Australian Commodity Futures Positions (885) (0.14)
Total Commodity Futures Positions, Held Long 22,201 3.47
The accompanying notes are an integral part of the financial statements.
F-4
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2004
(A Review)
Contracts Value Percent
United States Commodity Futures Postions, Sold Short:
5 Dec '04 CBT Wheat $ 5,313 0.83%
4 Dec '04 CBT Corn 5,006 0.78
5 Nov '04 LIFFE Coffee (225)(0.04)
3 Nov '04 CBT Soybeans (450)(0.07)
Total United States Commodity Futures Positions 9,644 1.50
Total Commodity Futures Sold Short 9,644 1.50
Net Commodity Futures Positions 31,845 4.97
U.S. Treasury obligations:
Ser. C 2010 United States Treasury Note
($429,000 Face Value) 478,268 74.65
Cash and Cash Equivalents in Trading Accounts:
United States Markets 132,032 20.60
British Pound Markets (1,435)(0.22)
Total Cash and Cash Equivalents in Trading Accounts 130,597 20.38
Total Investments $640,710 100.00%
The accompanying notes are an integral part of the financial statements.
F-5
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
Contracts Value Percent
United States Commodity Futures Positions, Held Long
2 Mar '04 Silver $7,000 0.66%
4 Feb '04 Gold 8,320 0.79
2 Feb '04 Unleaded Gas (8) (0.00)
1 Mar '04 Soybeans 950 0.09
2 Mar '04 Soybean Meal 1,380 0.13
3 Mar '04 Soybean Oil 4,932 0.47
1 Mar '04 Euro FX 4,319 0.41
1 Mar '04 New Zealand Dollar 950 0.09
3 Mar '04 British Pound 9,862 0.94
1 Mar '04 Canadian Dollars 500 0.05
2 Mar '04 Swiss Franc 3,725 0.35
1 Mar '04 Japanese Yen (488) (0.05)
2 Mar '04 Australian Dollar 2,560 0.24
2 Mar '04 E-mini NASDAQ 3,326 0.32
1 Mar '04 E-mini S&P 500 2,572 0.24
2 Jan '04 Taiwan Stock Index 640 0.06
Total United States Commodity Futures Positions 50,540 4.79
Swiss Commodity Futures Positions, Held Long
19 Jun '04 3 Month Euroswiss 6,549 0.62
Canadian Commodity Futures Positions, Held Long
8 Jun '04 3 Month Bankers Acceptance 4,046 0.38
Japanese Commodity Futures Positions, Held Long
19 Mar '04 Euroyen Tibor 444 0.04
British Commodity Futures Positions, Held Long
3 Mar '04 FTSE 100 Index 7,179 0.68
Australian Commodity Futures Positions, Held Long
6 Mar '04 SPI 200 Equity Index Futures 7,781 0.74
European Commodity Futures Positions, Held Long
2 Jan '04 IBEX 35 7,200 0.68
Total Commodity Futures Positions, Held Long 83,739 7.93
The accompanying notes are an integral part of the financial statements.
F-6
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
Contracts Value Percent
United States Commodity Futures Positions, Sold Short
2 Mar '04 Coffee $(1,537) (0.15)%
17 Mar '04 Sugar 2,666 0.25
7 Feb '04 Lean Hogs (2,590) (0.25)
Total United States Commodity Futures Positions (1,461) (0.15)
British Commodity Futures Positions, Sold Short
1 Mar '04 Long Gilt (4,373) (0.41)
Swedish Commodity Futures Positions, Sold Short
3 Mar '04 EUR/SEK FX Cross Forward (5,113) (0.49)
Total Commodity Futures Sold Short (10,947) (1.05)
Net Commodity Futures Positions 72,792 6.88
United States Forward Positions, Held Long
5 Jan '04 Standard Lead 10,937 1.04
8 Jan '04 Zinc 8,400 0.80
1 Jan '04 Copper 4,750 0.45
5 Jan '04 Aluminum 7,094 0.67
Total United States Forward Positions, Held Long 31,181 2.96
United States Forward Positions, Sold Short
2 Jan '04 Lead (5,174) (0.49)
6 Jan '04 Zinc (9,600) (0.91)
1 Jan '04 Copper (5,475) (0.52)
2 Jan '04 Aluminum (3,563) (0.34)
Total Forward Positions Sold Short (23,812) (2.26)
Net Forward Positions 7,369 0.70
Cash in Trading Accounts 973,657 92.42
Total Investments $1,053,818 100.00%
The accompanying notes are an integral part of the financial statements.
F-7
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(A Review)
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
INVESTMENT AND OTHER INCOME
Interest income $ 7,029 $ 617 $ 11,078 $ 2,181
Redemption penalty - - - 304
Total Income 7,029 617 11,078 2,485
EXPENSES
Commissions 8,085 35,864 24,647 126,864
Management fees 2,029 13,144 7,205 46,170
Continuing service fees 7,653 - 28,077 -
Incentive fees - - 27,290 3,474
Professional accounting and
legal fees 34,468 15,302 84,059 45,833
Registration costs - - 3,256 -
Other operating and administrative
expenses 3,850 70 13,366 356
Total Expenses 56,085 64,380 187,900 222,697
Net Investment Loss (49,056) (63,763) (176,822) (220,212)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain/(loss) from trading
futures 12,306 (135,196) 65,544 155,311
Change in unrealized gain/(loss) on
open commodity futures contracts 29,026 144,937 (11,085) 41,579
Realized gain from trading options - 13,586 - 93,061
Realized gain from trading forward
contracts (28,898) - (13,170) -
Change in unrealized gain/(loss)
on forward contracts 12,344 (5,850) (7,369) 325
Realized gain/(loss) on exchange
rate fluctuation (1,066) - (1,369) -
Total Realized and Unrealized Gain
(Loss) on Investments 23,712 17,477 32,551 290,276
NET INCOME (LOSS) $ (25,344) $(46,286) $(144,271) $ 70,064
NET INCOME (LOSS) -
Limited partnership unit $ (27.93) $ (33.86) $ (89.98) $ 43.68
General partnership unit $ (27.93) $ - $(27.93)(1)$ -
(1) General partner units were outstanding and shared in net loss only for
the three months ended September 30, 2004.
The accompanying notes are an integral part of the financial statements.
F-8
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(A Review)
Limited Partners General Partners Total Partners
Amount Units Amount Units Amount Units
Balance -
January 1, 2004 $1,036,900 1,257.32 $ - - $1,036,900 1,257.32
Partner additions - - 25,000 34.88 25,000 34.88
Partner withdrawals (452,986) (664.14) (452,986) (664.14)
Syndication costs (16,137) (16,137) -
Net loss (144,179) (92) (144,271) -
Balance -
September 30, 2004 $423,598 593.18 $24,908 34.88 $ 448,506 628.06
Balance -
January 1, 2003 $1,649,988 1,815.19 $ - - $1,649,988 1,815.19
Partner additions - - - - - -
Partner withdrawals (479,347) (497.13) - - (479,347) (497.13)
Syndication costs (6,900) - - - (6,900) -
Net income 70,064 - - - 70,064 -
Balance -
September 30,
2003 $1,233,805 1,318.06 $ - - $1,233,805 1,318.06
2004 2003
Value per unit $714.11 $936.07
Total partnership units 628.06 1,318.06
The accompanying notes are an integral part of the financial statements.
F-9
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(A Review)
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(144,271) $70,064
Adjustments to reconcile net income (loss) to
net cash provided by(used in) operating activities -
Changes in operating assets and liabilities -
Equity in Commodity Futures
Trading Accounts 48,316 (13,629)
Accrued interest receivable (3,152) (7,000)
Accrued commissions payable (1,015) (529)
Management and incentive fees payable (6,365) 4,220
Other payables and accruals (3,857) (1,200)
Net Cash Provided By (Used In)
Operating Activities (110,344) 51,926
CASH FLOWS FROM FINANCING ACTIVITIES
Partner additions 25,000
Syndication costs (16,137) (6,900)
Partner redemptions (239,624) (460,586)
Net Cash Used In
Financing Activities (230,761) (467,486)
NET DECREASE IN CASH (341,105) (415,560)
CASH
Beginning of period 996,054 1,598,216
End of period $ 654,949 $1,182,656
End of period cash and cash equivalents consists of:
Cash and cash equivalents in broker
trading accounts $ 608,865 $1,168,493
Cash 46,084 14,163
$ 654,949 $1,182,656
The accompanying notes are an integral part of the financial statements.
F-10
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003
(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. (Belmont) and
Michael Pacult are the general partners and commodity pool operators (CPOs)
of the Fund. The commodity trading advisor (CTA) is Fall River Capital, LLC
(previous to November 3, 2003, Ansbacher Investment Management, Inc. and
Mangin Capital Management, Inc. were the CTAs), which have the authority to
trade as much of the Fund's equity as is allocated to them by the General
Partner. The selling agent is Futures Investment Company (Futures), which is
controlled by Michael Pacult and his wife.
Regulation - The Fund is a registrant with the Securities and Exchange
Commission (SEC) pursuant to the Securities and Exchange Act of 1934 (the
Act). The Fund is subject to the regulations of the SEC and the reporting
requirements of the Act. The Fund is also subject to the regulations of the
Commodities Futures Trading Commission (CFTC), an agency of the U.S.
government which regulates most aspects of the commodity futures industry,
the rules of the National Futures Association and the requirements of various
commodity exchanges where the Fund executes transactions. Additionally, the
Fund is subject to the requirements of futures commission merchants and
interbank market makers through which the Fund trades.
Registration Costs - Costs incurred for the initial filings with the
Securities and Exchange Commission, Commodity Futures Trading Commission,
National Futures Association (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.
F-11
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003
(A Review)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income Taxes - The Fund is not required to provide a provision for
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual partners. The Fund may be subject to state and
local taxes in jurisdictions in which it operates.
Statement of Cash Flows - For purposes of the Statement of Cash Flows,
the Fund considers only cash and money market funds to be cash equivalents.
Net cash used in operating activities includes no cash payments for interest
or income taxes for the Nine months ended September 30, 2004 and 2003.
Foreign Currency Transactions - The Fund's functional currency is the
U.S. dollar; however, it transacts business in currencies other than the U.S.
dollar. Assets and liabilities denominated in currencies other than U.S.
dollar are translated into U.S. dollars at the rates in effect at the date of
the statement of financial condition. Income and expense items denominated
in currencies other than the U.S. dollar are translated into U.S. dollars at
the rates in effect at each month end. Gains and losses resulting from the
translation to U.S. dollars are reported in income currently.
2. GENERAL PARTNER DUTIES
The responsibilities of the General Partner, in addition to directing
the trading and investment activity of the Fund, including suspending all
trading, includes executing and filing all necessary legal documents,
statements and certificates of the Fund, retaining independent public
accountants to audit the Fund, employing attorneys to represent the Fund,
reviewing the brokerage commission rates to determine reasonableness,
maintaining the tax status of the Fund as a limited partnership, maintaining
a current list of the names, addresses and numbers of units owned by each
Limited Partner and taking such other actions as deemed necessary or
desirable to manage the business of the Partnership.
If the daily net unit value of the partnership falls to less than 50%
of the highest value earned through trading, then the General Partner will
immediately suspend all trading, provide all limited partners with notice of
the reduction and give all limited partners the opportunity, for fifteen days
after such notice, to redeem partnership interests. No trading will commence
until after the lapse of the fifteen day period.
3. THE LIMITED PARTNERSHIP AGREEMENT
The Limited Partnership Agreement provides, among other things, 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.
F-12
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003
(A Review)
3. THE LIMITED PARTNERSHIP AGREEMENT - CONTINUED
Monthly Allocations - Any increase or decrease in the Partnership's net
asset value as of the end of a month shall be credited or charged to the
capital account of each Partner in the ratio that the balance of each account
bears to the total balance of all accounts.
Any distribution from profits or partners' capital will be made solely
at the discretion of the General Partners.
Federal Income Tax Allocations - As of the end of each fiscal year, the
Partnership's realized capital gain or loss and ordinary income or loss shall
be allocated among the Partners, after having given effect to the fees and
expenses of the Fund.
Subscriptions - Investors must submit subscription agreements and funds
at least five business days prior to month end. Subscriptions must be
accepted or rejected by the general partner within five business days. The
investor also has five business days to withdraw his subscription. Funds are
deposited into an interest bearing escrow account and will be transferred to
the Fund's account on the first business day of the month after the
subscription is accepted. Interest earned on the escrow funds will accrue to
the account of the investor.
Redemptions - A limited partner may request any or all of his
investment be redeemed at the net asset value as of the end of a month. The
written request must be received by the general partner no less than ten
business days prior to a month end. Redemptions will generally be paid within
twenty days of the effective month end. However, in various circumstances due
to liquidity, etc. the general partner may be unable to comply with the
request on a timely basis. There are no fees for redemption.
4. FEES
Effective November 1, 2003, the Fund is charged the following fees:
A management fee of 1% (annual rate) of the equity assigned to each
CTA, paid on a monthly basis and a 20% quarterly incentive fee on all new net
profits (as defined).
A continuing service fee of 4% (annual rate) of the investment in the
Fund (as defined) will be paid to the selling agent.
A $22 per round turn brokerage commission (from which brokerage
commissions will be paid to the futures commission merchant) and a 5%
quarterly incentive fee on all new net profits (as defined) will be paid to
the general partner. Effective March 1, 2004, the brokerage commission was
changed from $22 per round turn to a 4% (annual rate) of the equity deposit
for trading as a fixed annual brokerage commissions, paid on the monthly
basis.
The General Partner has reserved the right to change the management fee
and the incentive fee at its sole discretion.
F-13
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003
(A Review)
5. RELATED PARTY TRANSACTIONS
The Fund paid the following expenses to related parties during the nine
months ended September 30, 2004 and 2003:
2004 2003
Commissions/Management Fees - Belmont $17,872 $24,751
Commission/Continuing Service Fees -
Futures $25,171 $57,918
Financial Accounting Standards Board Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, identifies certain disclosures to be
made by a guarantor in its financial statements about its obligations under
certain guarantees that it has issued. In the normal course of business, the
Fund has provided general indemnifications to the General Partner, its CTA
and others when they act, in good faith, in the best interests of the Fund.
The Fund is unable to develop an estimate for future payments resulting from
hypothetical claims, but expects the risk of having to make any payments
under these indemnifications to be remote.
6. TRADING ACTIVITIES AND RELATED RISKS
The Fund is engaged in speculative trading of U.S. and foreign futures
contracts in commodities. The Fund is exposed to both market risk, the risk
arising from changes in market value of the contracts, and credit risk, the
risk of failure by another party to perform according to the terms of a
contract.
A certain portion of cash in trading accounts is pledged as collateral
for commodities trading on margin. Additional deposits may be necessary for
any loss on contract value. The Commodity Exchange Act requires a broker to
segregate all customer transactions and assets from such broker's proprietary
activities.
The amount of required margin with the broker and interbank market
makers is subject to management judgment, but should never fall below 10% of
the Net Asset Value. The cash deposited in trading accounts at September 30,
2004 and December 31, 2003 was $130,597, and $973,657, respectively, which
equals approximately 29% and 94% of Net Asset Value, respectively. The Fund
also purchases United States Treasury Notes as a form of margin. At September
30, 2004, $478,268 was invested in U.S. Treasury Notes, which approximates
107% of the Net Asset Value.
F-14
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003
(A Review)
6. TRADING ACTIVITIES AND RELATED RISKS- CONTINUED
Trading in futures contracts involves entering into contractual
commitments to purchase or sell a particular commodity at a specified date
and price. The gross or face amount of the contract, which is typically many
times that of the Fund's net assets being traded, significantly exceeds the
Fund's future cash requirements since the Fund intends to close out its open
positions prior to settlement. As a result, the Fund is generally subject
only to the risk of loss arising from the change in the value of the
contracts. The market risk is limited to the gross or face amount of the
contracts held of $12,044,763 and $12,789,512 on long positions at September
30, 2004 and December 31, 2003, respectively. However, when the Fund enters
into a contractual commitment to sell commodities, it must make delivery of
the underlying commodity at the contract price and then repurchase the
contract at prevailing market prices or settle in cash. Since the repurchase
price to which a commodity can rise is unlimited, entering into commitments
to sell commodities exposes the Fund to unlimited potential risk.
Market risk is influenced by a wide variety of factors including
government programs and policies, political and economic events, the level
and volatility of interest rates, foreign currency exchange rates, the
diversification effects among the derivative instruments the Fund holds and
the liquidity and inherent volatility of the markets in which the Fund
trades.
The unrealized gains on open commodity futures contracts at September
30, 2004 and December 31, 2003, was $31,845 and $72,792, respectively.
Open contracts generally mature within three months and as of September
30, 2004, the latest maturity date for open futures contracts is March, 2005.
However, the Fund intends to close all contracts prior to maturity.
Credit risk is the possibility that a loss may occur due to the failure
of a counter party to perform according to the terms of a contract.
The Fund has a substantial portion of its assets on deposit with
financial institutions. In the event of a financial institution's insolvency,
recovery of Fund deposits may be limited to account insurance or other
protection afforded deposits.
The Fund has established procedures to actively monitor market risk and
minimize credit risk although there can be no assurance that it will succeed.
The basic market risk control procedures consist of continuously monitoring
open positions, diversification of the portfolio and maintenance of a
desirable margin-to-equity ratio. The Fund seeks to minimize credit risk
primarily by depositing and maintaining its assets at financial institutions
and brokers which it believes to be creditworthy.
F-15
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003
(A Review)
7. FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Performance per Unit (5)
Net unit value, beginning of
period $ 716.77 $ 970.11 $ 824.69 $ 908.99
Net realized and unrealized gains/
losses on commodity transactions 51.40 12.60 41.98 164.35
Investment and other income 7.74 0.45 9.56 1.55
Expenses (1) (61.80) (47.09) (162.12) (138.82)
Net increase (decrease) for
the period (2.66) (34.04) (110.58) 27.08
Net unit value, end of period $ 714.11 $ 936.07 $ 714.11 $ 936.07
Net assets, end of period (000) $ 449 $ 1,234 $ 449 $ 1,234
Total return (3) -0.37% -3.51% -13.41% 2.98%
Ratio to average net assets (4)
Investment and other income 4.30% .19% 1.84% .23%
Expenses (2) (29.37)% (8.87)% (27.09)% (8.81)%
(1) Includes brokerage commissions
(2) Excludes brokerage commissions
(3) Not annualized
(4) Annualized for all periods
(5) Investment and other income and expenses is calculated using
average number of units (limited and general) outstanding during the year.
Net realized and unrealized gains/losses on commodity transactions is a
balancing amount necessary to reconcile the change in net unit value.
F-16