FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
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
(Exact name of registrant as specified in its charter)
Delaware 51-0387638
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
505 Brookfield Drive, Dover, DE 19901
(Address of principal executive offices, including zip code)
(800) 331-1532
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2)
Yes No X
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
The reviewed financial statements for the Registrant for the nine months
ended September 30, 2005 are attached hereto and made a part hereof.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General Information
The Fund suspended trading on January 10, 2005. All but the General Partner
and one affiliated limited partner redeemed their Units. Fund Management, on
behalf of the Fund stopped all trading on January 10, 2005 and terminated the
commodity trading advisor with the view that a new trading advisor would be
selected and the fund would reopen for new investment. At some time in the
future, Registrant will, pursuant to the terms of the Limited Partnership
Agreement, engage in the business of speculative and high risk trading of
commodity futures and options markets through the services of one or more
commodity trading advisors its management selects.
The partnership filed a post effective amendment on March 31, 2005 that went
effective April 13, 2005 to change the trading advisor and offering terms.
No offers or solicitations have been made pursuant to that prospectus.
The Partnership is in the process of filing another post effective amendment
to the prospectus to change the business terms and is otherwise preparing to
sell the balance of the registered but un-issued partnership interests in the
face amount of $4,474,938 that are available for sale.
Description of Fund Business
The Fund grants one or more commodity trading advisors ("CTA") a power of
attorney that is terminable at the will of either party to trade the equity
assigned to each CTA by Fund management. From November 1, 2003 to January
10, 2005, Fall River Capital Management, Inc. was the sole commodity trading
advisor of the Fund. The commodity trading advisors have sole discretion to
select the trades and do not disclose the methods they use to make those
determinations in their disclosure documents or to the Fund or to Fund
management. There is no promise or expectation of a fixed return to the
partners. The partners must look solely to trading profits for a return
their investment as the interest income is expected to be less than the fixed
expenses to operate the Fund.
Assets
The Fund assets consist of cash used as margin to secure futures (formerly
called commodity) trades entered on its behalf by the commodity trading
advisors it selects. The Fund deposits its cash with one or more futures
commission merchants (brokers) who hold and allocate the cash to use as
margin to secure the trades made. The futures held in the Fund accounts are
valued at the market price on the close of business each day by the Futures
Commission Merchant or Merchants that hold the Fund equity made available for
trading. The Capital accounts of the Partners are immediately responsible
for all profit and losses incurred by trading and payment and accrual of the
expenses of offering partnership interests for sale and the operation of the
partnership. The fixed costs of operation until the cessation of trading on
January 10, 2005 were a management fee of 1% and incentive fee of 20% paid to
the commodity trading advisor, fixed annual brokerage commissions of 4%, an
annual continuing service fee of 4%, and accounting and legal fees that must
be paid before the limited partners may earn a profit on their investment.
It expects to re-open to sell the balance of its registered but un-issued
partnership interests on terms to be established by Fund management.
The Fund does not intend to borrow from third parties. Its trades are
entered pursuant to a margin agreement with the futures commission merchant
which obligates the fund to the actual loss, if any, without reference or
limit by the amount of cash posted to secure the trade. The limited partners
are not personally liable for the debts of the Fund, including any trading
losses. The Registrant will in the future offer Units for sale to the public
until the balance of $4,474,938 in face amount of Units are sold. Of the
$7,000,000 of Units registered, $2,525,062 have been sold, have been redeemed
and will not be resold. Capital available will be dependent upon the
marketing and sales effort put in place by Fund management to sell the
remaining $4,474,938 in face amount of limited partnership interests.
Value an Investment in the Fund Depends upon Redemption of Fund Units
The Fund Units are not traded and they have no market value. Liquidity of an
investment in the Fund depends upon the credit worthiness of the exchanges,
brokers, and third parties of off exchange traded futures that hold Fund
equity or have a lien against Fund assets for payment of debts incurred.
Those parties must honor their obligations to the Fund for the Fund to be
able to obtain the return of its cash from the futures commission merchant
that holds the Fund account.
The commodity trading advisors select the markets and the off exchange
instruments to be traded. The General Partner selects the futures commission
merchants to hold the Fund assets. Both the commodity trading advisors and
the general partner believe all parties who hold Fund assets or are otherwise
obligated to pay value to the Fund are credit worthy. Margin is an amount to
secure the entry of a trade and is not a limit of the profit or loss to be
gained from the trade. The general partner intends to allocate approximately
97% of the Fund equity to be used as margin to enter trades. Although it is
customary for the commodity trading advisors to use 40% or less of the equity
available as margin, there is no limit imposed by the Fund upon the amount of
equity the advisors may commit to margin. It is possible for the Fund to
suffer losses in excess of the margin it posts to secure the trades made.
To have the purchase price or appreciation, if any, of the Units, paid to
them, partners must use the redemption feature of the Partnership.
Distributions, although possible in the sole discretion of the general
partner, are not expected to be made. There is no current market for the
Units sold, none is expected to develop and the partnership agreement limits
the ability of a partner to transfer the Units.
Results of Operations
The Fund results after payment and accrual of expenses for the first nine
months of 2005 was a loss of (14.54)% and for the first nine months of 2004
was a loss of (13.41)%. The profits were generated by the commodity trading
advisors by methods that are proprietary to them. These results are not to
be construed as an expectation of similar profits in the future.
Quantitative and Qualitative Disclosures about Market Risk
The business of the Fund is speculative and involves a high degree of risk of
loss.
Controls and Procedures
The Registrant has adopted procedures in connection with the operation of its
business including, but not limited to, the review of account statements sent
to the general partner before the open of business each day that disclose the
positions held overnight in the Fund accounts, the margin to hold those
positions, and the amount of profit or loss on each position, and the net
balance of equity available in each account. The Fund brokerage account
statements and financial books and records accounts are prepared by an
independent Certified Public Accounting Firm and then are reviewed each
quarter and audited each year by a different independent CPA firm.
Internal Control over Financial Reporting
Each month, the general partner reviews the profit and loss statements for
the month and once approved each partner is sent a statement to disclose
total Fund performance and the amount in the partner's capital account.
Checks are paid for expenses only upon approval of invoices submitted to the
general partner or pursuant to standing authorizations for periodic fixed
expenses. Payment of a redemption is only upon receipt of a request form
signed by the person with authority over the partner's account. The general
partner balances the daily account information with the monthly compilation
and financial statements prepared by the independent CPA.
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, 2005, 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 14, 2005
******************************************************************************
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, 2005 and December 31, 2004 F-3
Schedule of Investments as of December 31, 2004 F-4 - F-6
Statements of Operations for the Three and Nine Months
Ended September 30, 2005 and 2004 F-7
Statements of Partners' Equity for the Nine Months Ended
September 30, 2005 and 2004 F-8
Statements of Cash Flows for the Nine Months Ended
September 30, 2005 and 2004 F-9
Notes to Financial Statements F-10 - F-16
F-1
Frank L. Sassetti & Co.
Certified Public Accountants
To The Partners
Bromwell Financial Fund, Limited Partnership
Dover, Kent County, Delaware
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have reviewed the balance sheet, including
the schedule of investments, of BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
as of September 30, 2005 and the related statements of operations for the
three and nine months ended September 30, 2005 and 2004, and the statements
of partners' equity and cash flows for the nine months ended September 30,
2005 and 2004. These financial statements are the responsibility of the
Partnership's management.
We conducted our review in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
A review of interim financial information consists principally of applying
analytical procedures 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 of the Public Company Accounting Oversight Board (United
States), the balance sheet, including the schedule of investments, of
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP as of December 31, 2004 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,
2005, 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, 2004 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 8, 2005
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, 2005 AND DECEMBER 31, 2004
ASSETS
September 30,
2005 December 31,
(A Review) 2004
Equity in Commodity Futures Trading Accounts -
Cash and cash equivalents $ - $ 255,008
US Treasury obligations 362,330
Net unrealized gains on open commodity
futures contracts - 7,630
Net unrealized gains (losses) on open commodity
forward contracts (22,511)
- 602,457
Cash 4,619 121,848
Accumulated reorganization expenses 20,178 -
Accrued interest receivable - 7,252
$ 24,797 $ 731,557
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Partner redemptions payable $ 21,641 $ -
Accrued trading commissions payable - 1,093
Accrued management fees payable - 8,877
Accrued incentive fees payable - 2,750
Other accrued liabilities 1,517 6,386
Total Liabilities 23,158 19,106
PARTNERS' CAPITAL
Limited partners - (1.57 and 918.35 units) 1,000 686,382
General partner - (1 and 34.88 units) 639 26,069
Total Partners' Capital 1,639 712,451
$ 24,797 $731,557
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
DECEMBER 31, 2004
Contracts Value Percent
United States Commodity Futures Postions, Held Long:
2 Mar '05 NBT Coffee $ 3,188 0.53%
2 Feb '05 CMX Gold (2,160) (0.36)
2 Feb '05 CME Lean Hogs 2,040 0.34
1 Mar '05 IMM Euro FX 1,500 0.25
2 Mar '05 IMM New Zealand Dollar 2,380 0.40
2 Mar '05 IMM British Pound (2,738) (0.45)
1 Mar '05 IMM Canadian Dollars 40 0.01
1 Mar '05 IMM Swiss Franc (288) (0.05)
8 Mar '05 IMM Mexican Peso 700 0.12
4 Mar '05 CME E-mini NASDAQ 2,160 0.36
3 Mar '05 CME E-mini S&P 500 5,070 0.84
Total United States Commodity Futures Positions 11,893 1.99
Hong Kong Commodity Futures Positions, Held Long:
2 Jan '05 HKFE Hang Seng Index (463) (0.08)
Canadian Commodity Futures Positions, Held Long:
2 Mar '05 ME 10 Year Canadian Gvt Bond 2,487 0.41
Japanese Commodity Futures Positions, Held Long:
1 Mar '05 NBT Euroyen CHF/JPY Cross (605) (0.10)
2 Mar '05 NBT Euroyen EUR/JPY Cross (1,133) (0.19)
13 Jun '05 SGX Euro/Yen Tibor 793 0.13
Total Japanese Commodity Futures Positions (945) (0.16)
British Commodity Futures Positions, Held Long:
2 Mar '05 NBT EUR/GBP Cross 1,043 0.17
2 Mar '05 LIFFE LONG GILT 2,163 0.36
1 Mar '05 FTSE 100 Index 1,091 0.18
Total British Commodity Futures Positions 4,297 0.71
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
DECEMBER 31, 2004
Contracts Value Percent
Australian Commodity Futures Positions, Held Long:
1 Mar '05 SFE SPI 200 Equity Index Futures $ 2,163 0.36%
5 Mar '05 SFE 10YR T-Bond (4,966) (0.82)
11 Mar '05 SFE 3YR T-Bond (4,313) (0.72)
Total Australian Commodity Futures Positions (7,116) (1.18)
European Commodity Futures Positions, Held Long:
6 Sep '05 LIFFE 3M Euribor (3,376) (0.56)
1 Jan '05 MEF IBEX 35 2,428 0.40
6 Mar '05 ERX 2 YR Bond (2,455) (0.41)
1 Mar '05 ERX DAX Index (443) (0.07)
Total European Commodity Futures Positions (3,846) (0.64)
Total Commodity Futures Positions, Held Long 6,306 1.05
United States Commodity Futures Positions, Sold Short:
2 Mar '05 CBT Wheat 375 0.06
4 Mar '05 CBT Corn 700 0.12
3 Mar '05 CBT Soybeans 413 0.07
Total United States Commodity Futures Positions 1,488 0.25
South African Commodity Futures Positions, Sold Short:
1 Mar '05 NBT S. African Rand 4,418 0.73
Swedish Commodity Futures Positions, Sold Short:
3 Mar '05 NBT EUR/SEK FX Cross Forward (4,582) (0.76)
Total Commodity Futures Sold Short 1,324 0.22
Net Commodity Futures Positions 7,630 1.27
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, 2004
Contracts Value Percent
United States Forward Positions, Held Long:
3 Jan '05 LME Standard Lead $ 7,555 1.25%
3 Feb '05 LME Standard Lead 3,710 0.62
1 Mar '05 LME Standard Lead (491) (0.08)
2 Jan '05 LME Zinc 3,208 0.53
2 Mar '05 LME Zinc 1,715 0.28
1 Jan '05 LME Copper 4,404 0.73
2 Mar '05 LME Aluminum 2,342 0.39
Total United States Forward Positions, Held Long 22,443 3.73
United States Forward Positions, Sold Short:
3 Jan '05 LME Standard Lead (14,086) (2.34)
3 Feb '05 LME Standard Lead (7,425) (1.23)
2 Jan '05 LME Zinc (10,810) (1.79)
1 Jan '05 LME Copper (12,633) (2.10)
Total Forward Positions Sold Short (44,953) (7.46)
Net Forward Positions (22,511) (3.74)
U.S. Treasury obligations:
United States Treasury Notes- Series C 2010
($329,000 Face Value) 362,330 60.14
Cash and Cash Equivalents in Trading Accounts:
United States Markets 261,134 43.35
Eurodollar Markets (1,424) (0.24)
British Pound Markets (4,810) (0.80)
Swiss Franc Markets (1,511) (0.25)
Hong Kong Dollar Markets 2,685 0.45
S. African Rand Markets (1,066) (0.18)
Total Cash and Cash Equivalents
in Trading Accounts 255,008 42.33
Total Investments $602,457 100.00%
The accompanying notes are an integral part of the financial statements.
F-6
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(A Review)
Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
INVESTMENT AND OTHER INCOME
Interest income $ - $ 7,029 $ 1,333 $ 11,078
Redemption penalty - - - -
Total Income - 7,029 1,333 11,078
EXPENSES
Commissions - 8,085 1,782 24,647
Management fees - 2,029 - 7,205
Continuing service fees - 7,653 208 28,077
Incentive fees - - - 27,290
Professional accounting and legal fees - 34,468 21,410 84,059
Registration costs - - - 3,256
Other operating and administrative
expenses - 3,850 - 13,366
Total Expenses - 56,085 23,400 187,900
Net Investment Loss - (49,056) (22,067) (176,822)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain/(loss) from trading
futures - 12,306 (99,541) 65,544
Change in unrealized gain/(loss) on
open commodity futures contracts - 29,026 9,160 (11,085)
Realized gain from trading options - - - -
Realized gain from trading forward
contracts - (28,898) - (13,170)
Change in unrealized gain/(loss) on
forward contracts - 12,344 - (7,369)
Realized gain/(loss) on exchange
rate fluctuation - (1,066) - (1,369)
Total Realized and Unrealized Gain
(Loss) on Investments - 23,712 (90,381) 32,551
NET LOSS $ - $ (25,344) $(112,448) $(144,271)
NET LOSS -
Limited partnership unit $ - $ (27.93) $ (323.15) $ (89.98)
General partnership unit $ - $ (27.93) $ (108.62) $ (27.93)(1)
Weighted average partnership units outstanding:
Limited units - 1,237.69 336.25 1,235.26
General units - 3.29 34.88 3.29
(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-7
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(A Review)
Limited Partners General Partners Total Partners
Amount Units Amount Units Amount Units
Balance -
Jan 1, 2005 $ 686,382 918.35 $ 26,069 34.88 $ 712,451 953.23
Partner additions 51,007 65.95 - - 51,007 65.95
Partner withdrawals (627,730) (982.73) (21,641) (33.88)(649,371)(1,016.61)
Net loss (108,659) (3,789) (112,448) -
Balance -
Sep 30, 2005 $ 1,000 1.57 $ 639 1.00 $ 1,639 2.57
Balance -
Jan 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 -
Sep 30, 2004 $ 423,598 593.18 $ 24,908 34.88 $ 448,506 628.06
2005 2004
Value per unit $637.74 $714.11
Total partnership units 2.57 628.06
The accompanying notes are an integral part of the financial statements.
F-8
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(A Review)
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(112,448) $(144,271)
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 (14,881) 48,316
Other assets (T-Notes and accrued interest) 369,582
Accrued interest receivable - (3,152)
Accrued commissions payable (1,093) (1,015)
Management and incentive fees payable (11,627) (6,365)
Other payables and accruals (4,869) (3,857)
Net Cash Provided By (Used In)
Operating Activities 224,664 (110,344)
CASH FLOWS FROM FINANCING ACTIVITIES
Partner additions 51,007 25,000
Syndication/reorganization costs (20,178) (16,137)
Partner redemptions (627,730) (239,624)
Net Cash Used In
Financing Activities (596,901) (230,761)
NET DECREASE IN CASH (372,237) (341,105)
CASH
Beginning of period 376,856 996,054
End of period $ 4,619 $654,949
End of period cash and cash equivalents consists of:
Cash and cash equivalents in broker
trading accounts $ - $608,865
Cash 4,619 46,084
$ 4,619 $654,949
The accompanying notes are an integral part of the financial statements.
F-9
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
(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) is the general
partner and commodity pool operator (CPO) of the Fund. The commodity trading
advisor (CTA) was Fall River Capital, LLC, which had the authority to trade
as much of the Fund's equity as is allocated to them by the General Partner.
The selling agent was Futures Investment Company (Futures), which is
controlled by Michael Pacult and his wife. As of April 1, 2005, the selling
agent was eliminated and all units will be sold issuer direct.
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.
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.
F-10
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
(A Review)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Net Income (Loss) Per Unit - Net income (loss) per unit is calculated based
on the weighted average number of units outstanding through the date trading
ceased.
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, 2005 and 2004.
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.
Fund Reopening - The Fund at September 30, 2005 was closed, and no trading
profits were recorded in the third quarter of 2005. Bromwell Financial Fund,
LP will reopen to new funds at a time set by the general partner. The amount
of funds that the general partner expects to require to reopen the fund is
$1,000,000.
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-11
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
(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 Partner.
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, 2005, the Fund is charged the following fees:
A selling commission of 6% to be deducted from the subscription amount.
A management fee of 3% (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 brokerage commission of 7% (annual rate) fixed fee of the investment in
the fund (as defined) will be paid to the affiliated introducing broker on a
monthly basis.
A 4% management fee on net assets will be paid to the general partner.
Prior to November 1, 2005 and subsequent to April 1, 2005, the Fund was
organized under a different fee structure, but was not operational.
Prior to April 1, 2005, the fund was charged the following fees:
A management fee of 1% (annual rate) paid on a monthly basis and a 20%
quarterly incentive fee on all new net profits to each CTA.
A continuing service fee of 4% (annual rate) of the investment in the fund
was paid to the selling agent.
F-12
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
(A Review)
4. FEES - CONTINUED
A brokerage commission of 4% (annual rate) of the equity deposit for
trading as a fixed annual brokerage commission, paid on a monthly basis and a
5% quarterly incentive fee on all new net profits was paid to the general
partner.
The General Partner has reserved the right to change the management fee and
the incentive fee at its sole discretion.
5. RELATED PARTY TRANSACTIONS
The Fund paid the following expenses to related parties during the nine
months ended September 30, 2005 and 2004
2005 2004
Commissions/Management Fees - Belmont $634 $17,872
Commission/Continuing Service Fees -
Futures $207 $25,171
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.
F-13
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
(A Review)
6. TRADING ACTIVITIES AND RELATED RISKS- CONTINUED
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 December 31, 2004 was
$882,252, which equals approximately 94% of Net Asset Value. Since trading
ceased, no cash is deposited in trading accounts at September 30, 2005.
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
$0 and $19,243,328 on long positions at September 30, 2005 and December 31,
2004, 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,
2005 and December 31, 2004, was $0 and $7,630 respectively.
The unrealized losses on open commodity forward contracts at September 30,
2005 and December 31, 2004, were $0 and $(22,511), respectively.
Open contracts generally mature within three months and as of September 30,
2005, there were no open contracts.
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.
F-14
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
(A Review)
6. TRADING ACTIVITIES AND RELATED RISKS- CONTINUED
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.
7. FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Performance per Unit (5)
Net unit value, beginning of period $637.74 $716.77 $747.40 $824.69
Net realized and unrealized gains/
losses on commodity transactions - 51.40 (88.34) 41.98
Investment and other income - 7.74 1.29 9.56
Expenses (1) - (61.80) (22.61) (162.12)
Net increase (decrease) for the period - (2.66) (109.66) (110.58)
Net unit value, end of period $637.74 $714.11 $637.74 $714.11
Net assets, end of period (000) $ 2 $ 449 $ 2 $ 449
Total return (3) 0.00% (0.37)% (14.54)% (13.41)%
Ratio to average net assets (4)
Investment and other income 0.00% 4.30% 1.45% 1.84%
Expenses (2) (00.00)% (29.37)% (27.38)% (27.09)%
(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-15
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2005 AND 2004
(A Review)
8. OPERATIONS OF FUND
Because the CTA selected to trade for the Fund did not perform as expected,
the general partner suspended trading on January 10, 2005 and recommended to
the limited partners to redeem their partnership units voluntarily. All
limited unit holders, except for 22.89 units had requested redemption as of
January 31, 2005 and were paid on February 1, 2005. The remaining
unaffiliated limited unit holders (22.89 units) requested redemption in
February 2005 and were paid on March 1, 2005. Shira Pacult invested $1,000 in
the Fund as a limited unit holder during February, 2005.
The general partner and the affiliated limited partner intend to reopen the
Fund under revised business terms with one or more different CTA's.
Effective April 1, 2005, the general partner redeemed 33.88 units of the
fund, leaving 1 remaining general partner unit.
F-16