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, 2006
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, 2006 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.
No sales were made pursuant to the Fund' prospectus dated December 12, 2005
as of September 30, 2006. The Partnership will sell the balance of un-issued
registered securities of $4,474,938, as of September 30, 2006 until the total
amount of registered securities, $7,000,000, is sold or the offering
terminates. Upon the sale of $1,000,000 in Units, the Fund will recommence
trading with NuWave Investment Corp., 1099 Mount Kemble Avenue, Morristown,
New Jersey 07960, as sole CTA.
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 different terms.
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 advisor selects 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 advisor 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 six
months of 2006 was a loss of $0 and for the first nine months of 2005 was a
loss of $112,148. The profits/losses of 2005 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.
Subsequent Events
Effective October 25, 2006, the auditor of the Fund was changed from Frank L.
Sassetti & Co., 6611 W. North Avenue, Oak Park, Illinois 60302-1043, to the
CPA firm of Jordan, Patke & Associates, Ltd., 300 Village Green Drive Ste
210, Lincolnshire, IL 60069 for normal business considerations without any
disagreement between the former auditor and the Fund or its management.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The business of the Fund is speculative and involves a high degree of risk of
loss.
Item 4. 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.
As of the end of the period covered by this report, the general partner
carried out an evaluation, under the supervision and with the participation
of the general partner's management, including its principal executive
officer and principal financial officer, of the effectiveness of the design
and operation of the Fund's disclosure controls and procedures as
contemplated by Rule 13a-15 of the Securities Exchange Act of 1934, as
amended. Based on and as of the date of that evaluation, the general
partner's principal executive officer and principal financial officer
concluded that the Fund's disclosure controls and procedures are effective,
in all material respects, in timely alerting them to material information
relating to the Fund required to be included in the reports required to be
filed or submitted by the Fund with the SEC under the Exchange Act.
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 limited partner's account. The
general partner balances the daily account information with the monthly
compilation and financial statements prepared by the independent CPA. There
was no change in the Fund's internal control over financial reporting in the
quarter ended September 30, 2006 that has materially affected, or is
reasonably likely to materially affect, the Fund's internal control over
financial reporting.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
(a) Report filed on 8-K subsequent to reporting period of this 10-Q
The Fund filed a Form 8-K on October 26, 2006 and Form 8-K/A on November 2,
2006 to disclose the change of the Fund's auditor effective October 25, 2006
from Frank L. Sassetti & Co., 6611 W. North Avenue, Oak Park, Illinois 60302-
1043, to the CPA firm of Jordan, Patke & Associates, Ltd., 300 Village Green
Drive Ste 210, Lincolnshire, IL 60069 for normal business considerations
without any disagreement between the former auditor and the Fund or its
management.
(b) None
Item 6. Exhibits
31.1 Certification of Principal Executive Officer and Principal Financial
Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
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, 2006, 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 15, 2006
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, 2006 and December 31, 2005 F-3
Statements of Operations for the Three and Nine Months Ended
September 30, 2006 and 2005 F-4
Statements of Partners' Equity for the Nine Months Ended
September 30, 2006 and 2005 F-5
Statements of Cash Flows for the Nine Months Ended
September 30, 2006 and 2005 F-6
Notes to Financial Statements F-7 - F-13
F-1
Jordan, Patke & Associates, Ltd.
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, 2006 and the related statements of operations for the
three and Nine months ended September 30, 2006 and 2005, and the statements
of partners' equity and cash flows for the Nine months ended September 30,
2006 and 2005. 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.
Frank L. Sassetti & Co. 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, 2005 and the
related statements of operations, partner's equity and cash flows for the
year then ended (not presented herein); and in their report dated March 1,
2006, they expressed an unqualified opinion on these financial statements.
In our opinion, the information set forth in the accompanying balance sheet
as of December 31, 2005 is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.
/s/ Jordan, Patke & Associates
November 15, 2006
Lincolnshire, Illinois
F-2
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
BALANCE SHEETS
SEPTEMBER 30, 2006 AND DECEMBER 31, 2005
ASSETS
September 30,
2006 December 31,
(A Review) 2005
Cash $ 268 $ 3,738
Accumulated reorganization expenses 33,561 24,091
Accrued Interest Receivable
$ 33,829 $ 27,829
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Partner redemptions payable $ 21,641 $ 21,641
Other accrued liabilities 10,549 4,549
Total Liabilities 32,190 26,190
PARTNERS' CAPITAL
Limited partners - (1.57 and 1.57 units) 1,000 1,000
General partner - (1 unit and 1 unit) 639 639
Total Partners' Capital 1,639 1,639
$ 33,829 $ 27,829
The accompanying notes are an integral part of the financial statements.
F-3
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(A Review)
Three months ended Nine months ended
Sep 30, Sep 30,
2006 2005 2006 2005
INVESTMENT AND OTHER INCOME
Interest income $ - $ - $ - $ 1,333
Redemption penalty - - - -
Total Income - - - 1,333
EXPENSES
Commissions - - - 1,782
Management fees - - - -
Continuing service fees - - - 208
Incentive fees - - - -
Professional accounting and
legal fees - - - 21,410
Registration costs - - - -
Other operating and administrative
expenses - - - -
Total Expenses - - - 23,400
Net Investment Loss - - - (22,067)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain/(loss) from trading
futures - - - (99,541)
Change in unrealized gain/(loss) on
open commodity futures contracts - - - 9,160
Realized gain from trading options - - - -
Realized gain from trading forward
contracts - - - -
Change in unrealized gain/(loss) on
forward contracts - - - -
Realized gain/(loss) on exchange
rate fluctuation - - - -
Total Realized and Unrealized Gain
(Loss) on Investments - - - (90,381)
NET INCOME (LOSS) $- $- $- $(112,448)
NET INCOME (LOSS) -
Limited partnership unit $- $- $- $(323.15)
General partnership unit $- $- $- $(108.62)
(1) General partner units were outstanding and shared in net loss only for
the three months and nine months ended September 30, 2005.
The accompanying notes are an integral part of the financial statements.
F-4
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(A Review)
Total
Limited Partners General Partners Partners' Equity
Amount Units Amount Units Amount Units
Balance -
January 1, 2006 $ 1,000 1.57 $ 639 1.00 $ 1,639 2.57
Partner additions - - - - - -
Partner withdrawals - - - - - -
Syndication costs - - - -
Net loss - - - - -
Balance -
September 30, 2006 $1,000 1.57 $639 1.00 $1,639 2.57
Balance -
January 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)
Syndication costs - - - - - -
Net loss (108,659) - (3,789) - (112,448) -
Balance -
September 30, 2005 $1,000 1.57 $639 1.00 $1,639 2.57
2006 2005
Value per unit $637.74 $637.74
Total partnership units 2.57 2.57
The accompanying notes are an integral part of the financial statements.
F-5
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(A Review)
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ - $(112,448)
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)
Other assets (T-Notes and accrued interest) - 362,330
Accrued interest receivable - 7,252
Accrued commissions payable - (1,093)
Management and incentive fees payable - (11,627)
Other payables and accruals (3,470) (4,869)
Net Cash Provided By (Used In)
Operating Activities (3,470) 224,664
CASH FLOWS FROM FINANCING ACTIVITIES
Partner additions - 51,007
Syndication costs - (20,178)
Partner redemptions - (627,730)
Net Cash Used In
Financing Activities - (596,901)
NET DECREASE IN CASH (3,470) (372,237)
CASH
Beginning of period 3,738 376,856
End of period $ 268 $ 4,619
End of period cash and cash equivalents consists of:
Cash and cash equivalents in broker
trading accounts $- $-
Cash 268 4,619
$268 $4,619
The accompanying notes are an integral part of the financial statements.
F-6
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006 AND 2005
(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 NuWave Investment Corporation (up to
cessation of trading on January 12, 2005, Fall River Capital, LLC was the
CTA, and previous to November 3, 2003, Ansbacher Investment Management, Inc.
and Mangin Capital Management, Inc. were the CTAs), which has the authority
to trade as much of the Fund's equity as is allocated to it by the General
Partner. The Fund sells issuer direct on a best efforts basis.
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-7
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006 AND 2005
(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. 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, 2006 and 2005.
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 was closed at September 30, 2006 (See Note 8).
No trading profits or losses were recorded in the third quarter of 2006. The
Fund will reopen to new funds at a time set by the general partner. The
minimum amount of interests that the general partner expects to require to
reopen the fund in $1,000,000 and the maximum available registered interests
are $7,000,000.
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-8
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006 AND 2005
(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, 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 the current
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) of the investment in the fund
(as defined) will be paid to the affiliated introducing broker on a monthly
basis, from which round turn commissions on domestic trades will be paid to
the futures commission merchant.
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.
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.
F-9
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006 AND 2005
(A Review)
4. FEES - CONTINUED
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.
5. RELATED PARTY TRANSACTIONS
The Fund paid the following expenses to related parties during the Nine
months ended September 30, 2006 and 2005
2006 2005
Commissions/Management Fees - Belmont $ - $ 634
Commission/Continuing Service Fees -
FIC $ - $ 207
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-10
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006 AND 2005
(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, 2006.
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
$0.00 and $0.00 on long positions at September 30, 2006 and December 31,
2005, 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,
2006 and December 31, 2005, was $0.00 and $0.00, 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-11
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006 AND 2005
(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
Sep 30, Sep 30,
2006 2005 2006 2005
Performance per Unit (5)
Net unit value, beginning of
period $ 569.65 $ 638.78 $ 637.74 $ 747.40
Performance per Unit (5)
Net unit value, beginning of
period $ 637.74 $ 637.74 $ 637.74 $ 747.40
Net realized and unrealized
gains/losses on commodity
transactions - - - (88.34)
Investment and other income - - - 1.29
Expenses (1) - - - (22.61)
Net increase (decrease) for
the period - - - (109.66)
Net unit value, end of period $ 637.74 $ 637.74 $ 637.74 $ 637.74
Net assets, end of period (000) $2 $2 $2 $2
Total return (3) 0.00% 0.00% 0.00% (14.54)%
Ratio to average net assets (4)
Investment and other income 0.00% 0.00% 0.00% 1.45%
Expenses (2) (00.00)% (0.00)% (00.00)% (27.38)%
(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-12
BROMWELL FINANCIAL FUND, LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006 AND 2005
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.
9. SUBSEQUENT EVENTS
Effective October 2006, we changed the auditor of the Fund from Frank L.
Sassetti & Co., 6611 West North Avenue, Oak Park, Illinois 60302-1043 to the
CPA firm of Jordan, Patke & Associates, Ltd., 300 Village Green Drive, Suite
210, Lincolnshire, Illinois 60069.
F-13