UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORN 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
-------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
fOR THE tRANSITION pERIOD FROM ______________ TO _____________
COMMISSION FILE NO. 000-23529
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I.R.S. Employer Identification No. 22-678474
THE WILLOWBRIDGE FUND L.P.
(a Delaware Corporation)
4 Benedek Road,
Princeton, New Jersey 08540
Telephone 609-921-0717
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________
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THE WILLOWBRIDGE FUND L.P.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION Page
Item 1. Unaudited Consolidated Financial Statements .........................2
Statements of Financial Condition as of September 30, 2000
(unaudited) and December 31, 1999....................................2
Statements of Operations For the Three Months Ended September 30, 2000
and 1999 and For the Nine Months Ended September 30, 2000 and 1999
(unaudited)..........................................................3
Statements of Changes in Partners' Capital for the Nine Months
Ended September 30, 2000 and 1999 (unaudited)........................4
Notes to Financial Statements for the Nine Months Ended September
30, 2000 (unaudited) and the Year Ended December
31, 1999.............................................................5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................12
Item 2. Changes in Securities and Use of Proceeds...........................12
Item 3. Defaults Upon Senior Securities.....................................12
Item 4. Submission of Matters to a Vote of Security Holders.................12
Item 5. Other Information...................................................12
Item 6. Exhibits and Reports on Form 8-K....................................12
Page 1
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PART 1 - FINANCIAL INFORMTION
Item 1. Financial Statements
THE WILLOWBRIDGE FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 30,2000 (unaudited) AND DECEMBER 31, 1999
--------------------------------------------------------------------------------
September 30, December 31,
2000 1999
ASSETS
EQUITY IN COMMODITY FUTURES TRADING ACCOUNT:
Due from Broker $ 22,098,275 $ 24,857,158
Net unrealized (depreciation) appreciation
on open futures contracts (419,497) 858,525
-------------- -------------
21,678.778 25,715,683
CASH IN BANK 223,213 534,875
ACCOUNTS RECEIVABLE 54,626 26,253
INTEREST RECEIVABLE 35,542 -
SUBSCRIPTIONS RECEIVABLE 86,500 24,500
OTHER 2,211 740
------------- -------------
TOTAL ASSETS $ 22,080,870 $ 26,302,051
============= =============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 379,545 $ 333,869
Accrued management fees 120,471 63,587
Sales commissions payable 4,480 -
Other accrued expenses 76,354 17,426
------------- -------------
$ 580,850 $ 414,882
PARTNERS' CAPITAL:
Limited partners' (6,179.4666 and 5,977.7063 fully
redeemable units at September 30, 2000 and
December 31, 1999, respectively} 20,564,675 24,440,138
General partner (281.0681 and 353.9228 fully
redeemable units at September 30, 2000 and
December 31, 1999, respectively) 935,345 1,447,031
------------ ------------
21,500,020 25,887,169
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 22,080,870 $ 26,302,051
============= =============
NET ASSET VALUE PER UNIT
(Based on 6,460.5347 and 6,331.6291 units outstanding
at September 30, 2000 and December 31, 1999,
respectively) 3,327.90 $ 4,088.55
========== =============
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<TABLE>
<CAPTION>
THE WILLOWBRIDGE FUND L.P.
STATEMENTS OF (LOSS) INCOME (unaudited)
------------------------------------------------------------------------------------------------------------------------------------
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
<S> <C> <C> <C> <C>
INCOME:
(Losses) gains on trading of commodity
futures, forwards and options:
Realized (losses) gains on closed positions, net $ (1,004,635) $ 1,666,095 $ (3,476,226) $ 1,912,011
Change in unrealized (losses) gains on
open positions, net (1,420,800) (1,627,225) (1,278,022) 1,657,536
--------------- -------------- ------------- ------------
Total trading (losses) profits (2,425,435) 38,870 (4,754,248) 3,569,547
Interest income 324,855 298,873 979,968 821,479
--------------- -------------- ------------- ------------
Total (loss) income ( 2,100,580) 337,743 (3,774,280) 4,391,026
--------------- -------------- ------------- ------------
EXPENSES:
Incentive fees - - - 806,378
Brokerage commissions 205,210 239,163 661,658 701,634
Management fees 56,607 67,305 444,955 420,482
Administrative expenses 49,713 26,227 167,953 97,596
-------------- --------------- ------------- -----------
Total expenses 311,530 332,695 1,274,566 2,026,090
-------------- --------------- ------------- -----------
NET (LOSS) INCOME $ (2,412,110) $ 5,048 $ (5,048,846) $ 2,364,936
============== ============== ============== ============
NET (LOSS) INCOME:
Limited partners' $ (2,301,764) $ 5,063 $ (4,773,826) $ 2,233,550
============== ============== ============== ============
General partner $ (110,346) $ (15) $ (275,020) $ 131,386
============== ============== ============= ============
NET (LOSS) INCOME PER UNIT $ (353.55) $ (0.05) $ (760.65) $ 392.81
============== ============== ============= ============
</TABLE>
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<TABLE>
<CAPTION>
THE WILLOWBRIDGE FUND L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (unaudited)
-------------------------------------------------------------------------------------------------------------------------
Total
General Partner Limited Partners' Partners'
Units Amount Units Amount Capital
--------------------------- -------------------------------- --------------
<S> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL,
DECEMBER 31, 1998 271.6509 $ 1,073,390 5,264.1580 $ 21,765,943 $ 22,839,333
Additions 62.5111 253,266 975.4617 4,094,579 4,347,845
Redemptions - - (612.9880) (2,617,993) (2,617,993)
Net income - 131,386 - 2,233,550 2,364,936
----------- ------------- ------------ -------------- ---------------
PARTNERS' CAPITAL
SEPTEMBER 30, 1999 334.1620 $ 1,458,042 5,626.6317 $ 25,476,079 $ 26,934,121
=========== ============= ============ ============== ===============
PARTNERS' CAPITAL
DECEMBER 31, 1999 353.9228 1,447,031 5,977.7063 24,440,138 25,887,169
Additions 59.2194 238,334 1,256.6659 4,754,651 4,992,985
Redemptions (132.0742) (475,000) (1,054.9056) (3,856,288) (4,331,288)
Net loss - (275,020) - (4,773,826) (5,048,846)
----------- ------------ ------------ -------------- --------------
PARTNERS' CAPITAL
SEPTEMBER 30, 2000 281.0681 $ 935,345 6,179.4666 $ 20,564,675 $ 21,500,020
=========== ============ ============ ============== ==============
</TABLE>
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THE WILLOWBRIDGE FUND L.P.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (unaudited)
AND THE YEAR ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
1. GENERAL
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements are not included herein. Interim statements are
subject to possible adjustments in connection with the annual audit of the
Partnership's financial statements for the full year. In the Partnership's
opinion, all adjustments necessary for a fair presentation of these interim
statements have been included and are of a normal and recurring nature.
2. ORGANIZATION
The Willowbridge Fund L.P. (the "Partnership"), a Delaware limited
partnership, was organized on January 24, 1986. The Partnership is engaged
in the speculative trading of commodity futures contracts, options on
commodities or commodity futures contracts and forward contracts. The
General Partner, Ruvane Investment Corporation ("General Partner"), is
registered as a Commodity Pool Operator and a Commodity Trading Advisor
with the Commodity Futures Trading Commission. The General Partner is
required by the Limited Partnership Agreement, as amended and restated (the
"Agreement") to contribute an amount equal to one percent of the aggregate
capital raised by the Partnership. The Agreement requires that all
subscriptions are subject to a one percent administrative charge payable to
the General Partner.
The Partnership shall end on December 31, 2006 or earlier upon withdrawal,
insolvency or dissolution of the General Partner or a decline of greater
than fifty percent of the net assets of the Partnership as defined in the
Agreement, or the occurrence of any event which shall make it unlawful for
the existence of the Partnership to be continued.
3. SIGNIFICANT ACCOUNTING POLICIES
Due from Broker - Due from broker represents cash required to meet margin
requirements and excess funds not required for margin that are typically
invested in 30 day commercial paper and U.S. Treasury bills by the broker.
Revenue Recognition - Commodity futures, options and forward contract
transactions are recorded on the trade date and open contracts are
presented in the financial statements at their fair value on the last
business day of the reporting period. The difference between the original
contract amount and fair value is reflected in income as an unrealized gain
or loss. Fair value is based on quoted market prices. All commodity
futures, options and forward contracts and financial instruments are
presented at fair value in the financial statements.
Commissions - Commission charges are based on a percentage of the net asset
value of the Partnership at the beginning of the month. The commission rate
charged is 3.5 percent annually of the net asset value of the Partnership.
Statement of Cash Flows - The Partnership has elected not to provide a
Statement of Cash Flows as permitted by Statement of Financial Accounting
Standards No. 102, Statement of Cash Flows - Exemption of Certain Enterprises
and Classification of Cash Flows from Certain Securities Acquired for
Resale.
Allocation of Profits (Losses) and Fees - Net realized and unrealized
trading gains and losses, interest income and other operating income and
expenses are allocated to the partners monthly in proportion to their
capital account balance, as defined in the Agreement.
Page 5
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The General Partner was paid a management fee equal to one percent of the
net assets of the Partnership (as defined in the Agreement) as of the last
day of the previous fiscal year-end. Such fees amounted to $261,361 and
$228,393 in the nine months ended September 30, 2000 and the year ended
December 31, 1999, respectively.
Willowbridge Associates, the Commodity Trading Advisor ("CTA") of the
Partnership is entitled to an incentive fee based on an increase in the
adjusted net asset value of the allocated assets of the Partnership. The
CTA receives 25% of any new profits, as defined in the Agreement. The term
"new profits" is defined as the increase, if any, in the adjusted net asset
value of the allocated assets. In addition, the Partnership pays the CTA a
quarterly management fee of 0.25% (1% per year) of the net asset value of
the Partnership.
The CTA rebates to the Partnership the incentive and management fees
incurred by certain partners including Willowbridge employees who are also
limited partners in the Partnership. Incentive and management fees are
presented in the Partnership's financial statements gross of any amounts
rebated by the CTA. The rebate to the Partnership is recorded on the
Partnership's financial statements as a capital addition. The incentive and
management fees rebated to these partners in the nine months ended
September 30, 2000 and the year ended December 31, 1999 were $21,450 and
$71,365, respectively.
Administrative Expense - Administrative expenses include professional fees,
bookkeeping costs, and other charges such as registration fees, printing
costs and bank fees.
Income Taxes - Income taxes have not been provided in the accompanying
financial statements as each partner is individually liable for taxes, if
any, on his/her share of the Partnership's profits.
Redemptions - Limited partners may redeem some or all of their units at net
asset value per unit as of the last business day of each month on at least
ten days written notice to the General Partner.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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 the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Recently Issued Accounting Pronouncements - In June 2000, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 138, Accounting for Certain Derivative Instruments
and Certain Hedging Activities - an amendment of FASB Statement No. 133
("SFAS 138"). In June 1999, the FASB also issued Statement of Financial
Accounting Standards No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133" ("SFAS 137"). SFAS 137 defers the provisions of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" until January 1, 2001. SFAS 133, as amended by SFAS
138, requires, among other things, that all derivatives be recognized in
the consolidated balance sheets as either assets or liabilities and
measured at fair value. The corresponding derivative gains and losses
should be reported based upon the hedge relationship, if such a
relationship exists. Changes in the fair value of the derivatives that are
not designated as hedges or that do not meet the hedge accounting criteria
in SFAS 133 are required to be reported in income. The General Partner does
not believe that the Statement will have a significant effect on the
financial statements of the Partnership.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements ("SAB 101"). SAB 101 summarizes certain of the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. The Company is required to adopt SAB 101 as of
January 1, 2001. The General Partner does not believe that the Bulletin
will have a significant effect on the Partnership.
Page 6
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Willowbridge Fund L.P. (the "Partnership") is engaged in the
speculative trading of commodity futures contracts, options on commodities
or commodity futures contracts and forward contracts. The objective of the
Partnership is the appreciation of its assets through speculative trading.
Ruvane Investment Corporation is the general partner of the Partnership
("the General Partner") and Willowbridge Associates Inc. is the
Partnership's trading advisor (the "Advisor").
The success of the Partnership is dependent upon the ability of the Advisor
to generate trading profits through the speculative trading of commodity
interests sufficient to produce capital payments after payment of all fees
and expenses. Future results will depend in large part upon the commodity
interests markets in general, the performance of the Advisor, the amount of
additions to and redemptions from the Partnership and changes in interest
rates. Due to the highly leveraged nature of the Partnership's trading
activity, small price movements in commodity interests may result in
substantial gains or losses to the Partnership. As a result of these
factors, the Partnership's past performance is not indicative of future
results and any recent increases in net realized or unrealized gains may
have no bearing on any results that may be obtained in the future.
Until the close of business on May 1, 1998, the assets of the Partnership
were allocated evenly between the Advisor's Primary Program and the
Advisor's Mtech Trading Approach. The Primary Program consists of three
computer-based, quantitative trading systems. The Mtech Trading Approach is
a highly discretionary approach managed by Michael Y. Gan, the Executive
Vice President of the Advisor. Effective June 1, 1998, the General Partner
re-allocated all of the Partnership's assets to the Primary Program because
the Mtech Trading Approach experienced year-to-date losses of greater than
35%.
Results of Operations
Comparison of Three Months Ended September 30, 2000 and 1999
For the quarter ended September 30, 2000, the Partnership had trading
losses comprised of $1,004,635 in net realized losses on closed positions,
$1,420,800 in net change in unrealized losses on open positions and $324,855
in interest income. For the same quarter in 1999, the Partnership had
trading profits comprised of $1,666,095 in net realized gains on closed
positions, $1,627,225 in net change in unrealized losses on open positions
and $298,873 in interest income.
In July 2000, trading was unprofitable in energy, financials, currencies,
meats and tropicals. The Partnership recorded a loss of $4,120,390 or $619.73
per unit. In August 2000, trading was profitable in energy, financials,
currencies, meats, and tropicals. The Partnership recorded a gain of
$4,372,978 or $669.93 per unit. In September 2000, trading was unprofitable
in energy, financials, meats, grains and tropicals. Profitable positions in
currencies and metals failed to offset these losses. The Partnership recorded
a loss of $2,664,698 or $412.46 per unit.
In July 1999, trading was profitable in the energy complex and foreign
financial instruments. The Partnership recorded a gain of $608,326 or
$103.00 per unit. In August 1999, trading was unprofitable in European
currencies and foreign and domestic financial instruments. The Partnership
recorded a loss of $939,937 or $159.26 per unit. In September 1999,
trading was profitable in the energy complex and metals. The Partnership
recorded a gain of $336,659 or $56.21 per unit.
For the quarter ended September 30, 2000, the Partnership had expenses
comprised of $205,210 in brokerage commissions (including clearing and
exchange fees), $56,607 in management fees, and $49,713 in administrative
expenses. The Partnership had no incentive fee expense for this quarter as
trading losses were not recouped. For the same quarter in 1999, the
Partnership had expenses comprised of $239,163 in brokerage commissions
(including clearing and exchange fees), $67,305 in management fees, and
$26,227 in administrative expenses. The Partnership had no incentive fee
expense for this quarter as trading losses were not recouped. Brokerage
commissions and management fees vary primarily as a result of changes in
assets under management. Incentive fees are generated by quarterly profits.
Page 7
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As assets under management decreased in the quarter ended September 30,
2000, as compared to the quarter ended September 30, 1999, brokerage
commissions and management fees also decreased for the three month period.
Administrative fees consist primary of legal and other expenses relating to
the Partnership's reporting requirements under the Securities Exchange Act
of 1934, as amended. The Partnership became subject to such reporting
requirements in April 1998.
As a result of the above, the Partnership recorded a loss of $2,412,110 or
$353.55 per unit for the quarter compared to a gain of $5,048, or a loss of
$0.05 per unit for the same quarter in 1999. Although the Partnership
recorded a gain for the quarter ended September 30, 1999, a loss per unit
was incurred as a decrease in income per unit was experienced for this
quarter.
At September 30, 2000, the net asset value of the Partnership was
$21,500,020 compared to its net asset value of $25,887,169 at December 31,
1999. The net asset value per unit at September 30, 2000 was $3,327.90,
compared to $4,088.55 at December 31, 1999.
During the quarter, the Partnership had no credit exposure to a
counterparty that is a foreign commodities exchange or to any counterparty
dealing in over the counter contracts which was material.
Comparison of Nine Months Ended Septmeber 30, 2000 and 1999
For the nine months ended September 30, 2000, the Partnership had trading
losses comprised of $3,476,226 in net realized losses on closed positions,
$1,278,022 in net change in unrealized losses on open positions and
$979,968 in interest income. For the same nine month period in 1999, the
Partnership had trading profits comprised of $1,912,011 in realized gains
on closed positions, $1,657,536 in net change in unrealized gains on open
positions and $821,479 in interest income.
During the nine months ended September 30, 2000, most of the losses
incurred by the Partnership were generated from currencies, financials,
grains, and tropicals. In January 2000, trading was unprofitable in foreign
currencies, metals, and tropicals. The Partnership recorded a loss of $915,394
or $232.02 per unit. For the same month in 1999, trading was unprofitable in
domestic financial instruments and foreign currencies. The Partnership
recorded a loss of $754,373 or $132.99 per unit during January 1999. In
February 2000, the Partnership was unprofitable in foreign currencies,
financials and tropicals. The Partnership recorded a loss of $2,040,073 or
$561.37 per unit. For the same month in 1999, trading was profitable in
foreign and domestic financial instruments, foreign currencies, and base
metals. The Partnership recorded a gain of $1,542,118 or $263.58 per unit
during February 1999. In March 2000, foreign currencies produced most of
the gains, with smaller gains recorded in financials and grains. The
Partnership recorded a gain of $2,061,857 or $523.46 per unit. For the same
month in 1999, trading was unprofitable in European currencies, coffee and
silver. Profitable positions in foreign currencies, foreign financial
instruments and natural gas offset some losses. The Partnership recorded a
loss of $555,009 or $95.61 per unit during March 1999. In April 2000,
trading was unprofitable in energy, financials, grains, and tropicals. The
Page 8
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Partnership recorded a loss of $941,376 or $144.67 per unit. For the same
month in 1999, trading was profitable in foreign currencies, European
curriences, energy complex and meats. Unprofitable positions in domestic
financial instruments, corn and wheat offset some gains. The Partnership
recorded a gain of $1,473,033 or $252.22 per unit during April 1999. In May
2000, trading was profitable in energy and financials. However,
unprofitable positions in currencies and tropicals offset some of these
gains. The Partnership recorded a gain of $392,065 or $58.63 per unit. For
the same month in 1999, trading was unprofitable in foreign currencies,
energy complex, base metals and coffee. Profitable positions in foreign and
domestic financial instruments failed to offset the losses. The Partnership
recorded a loss of $1,307,824 or $224.08 per unit during May 1999. In June
2000, trading was unprofitable in currencies, financials, and metals.
Profitable positions in energy and grains failed to offset these losses.
The Partnership recorded a loss of $1,193,817 or $177.41 per unit. For the
same month in 1999, trading was profitable in foreign and domestic
financial instruments and energy complex, meats and base metals.
Unprofitable positions in foreign currencies and coffee offset some of these
profits. The Partnership recorded a gain of $1,961,942 or $329.74 per unit
during June 1999. In July 2000, trading was unprofitable in energy, financials,
currencies, meats, and tropicals. The Partnership recorded a loss of
$4,120,390 or $619.73 per unit. For the same month in 1999, trading was
profitable in the energy complex and foreign financial instruments. The
Partnership recorded a gain of $608,326 or $103.00 per unit. In August 2000,
trading was profitable in energy, financials, currencies, meats, and tropicals.
The Partnership recorded a gain of $4,372,978 or $669.93 per unit. For the
same month in 1999, trading was unprofitable in European currencies and foreign
and domestic financial instruments. The Partnership recorded a loss of
$939,937 or $159.26 per unit. In September 2000, trading was unprofitable in
energy, financials, meats, grains and tropicals. Profitable positions in
currencies and metals failed to offset these losses. The Partnership
recorded a loss of $2,664,698 or $412.46 per unit. For the same month in 1999,
trading was profitable in the energy complex and metals. The Partnership
recorded a gain of $336,659 or $56.21 per unit.
For the nine months ended September 30, 2000, the Partnership had expenses
comprised of $661,658 in brokerage commissions (including clearing and
exchange fees), $444,955 in management fees, and $167,953 in administrative
expenses. The Partnership had no incentive fee expense for the nine months
ended September 30, 2000 as trading losses were not recouped. For the same
nine months in 1999, the Partnership had expenses comprised of $701,634 in
brokerage commissions (including clearing and exchange fees), $420,482 in
management fees, $806,378 in incentive fees and $97,596 in administrative
expenses. Brokerage commissions and management fees vary primarily as a
result of changes in assets under management. Incentive fees are generated
by quarterly profits. Administrative fees consist primary of legal and
other expenses relating to the Partnership's reporting requirements under
the Securities Exchange Act of 1934, as amended. The Partnership became
subject to such reporting requirements in April 1998.
As a result of the above, the Partnership recorded a loss of $5,048,846 or
$760.65 for the nine month period compared to a gain of $2,364,936 or
$392.81 per unit for the same period in 1999.
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Liquidity and Capital Resources
In general, the Advisor trades only those commodity interests that have
sufficient liquidity to enable it to enter and close out positions without
causing major price movements. Notwithstanding the foregoing, most United
States commodity exchanges limit the amount by which certain commodities
may move during a single day by regulations referred to as "daily price
fluctuation limits" or "daily limits." Pursuant to such regulations, no
trades may be executed on any given day at prices beyond daily limits. The
price of a futures contract occasionally has exceeded the daily limit for
several consecutive days, with little or no trading, thereby effectively
preventing a party from liquidating its position. While the occurrence of
such an event may reduce or eliminate the liquidity of a particular market,
it will not eliminate losses and may, in fact, substantially increase
losses because of the inability to liquidate unfavorable positions. In
addition, if there is little or no trading in a particular futures or
forward contract that the Partnership is trading, whether such illiquidity
is caused by any of the above reasons or otherwise, the Partnership may be
unable to liquidate its position prior to its expiration date, thereby
requiring the Partnership to make or take delivery of the underlying
interests of the commodity investment.
The Partnership's capital resources are dependent upon three factors: (a)
the income or losses generated by the Advisor; (b) the money invested or
redeemed by the limited partners; and (c) the capital invested or redeemed
by the General Partner.
The Partnership sells limited partnership units to investors from time to
time in private placements pursuant to Regulation D of the Securities Act
of 1933, as amended. As of the last day of any month, a limited partner may
redeem all of its limited partnership units on 10 days' prior written
notice to the General Partner.
The General Partner must maintain a capital account in such amount as is
necessary for the General Partner to maintain a one percent (1%) interest
in the capital, income and losses of the Partnership. All capital
contributions by the General Partner necessary to maintain such capital
account balance are evidenced by units of general partnership interest,
each of which has an initial value equal to the net asset value per unit at
the time of such contribution. The General Partner may withdraw any excess
above its required capital contribution without notice to the limited
partners and may also contribute any greater amount to the Partnership.
Page 10
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Partnership is a commodity pool engaged in the speculative trading of
commodity futures contracts (including agricultural and non-agricultural
commodities, currencies and financial instruments), options on commodities
or commodity futures contracts, and forward contracts. The risk of market
sensitive instruments is integral to the Partnership's primary business
activities. The futures interests traded by the Partnership involve varying
degrees of related market risk. Such market risk is often dependent upon
changes in the level or volatility of interest rates, exchange rates,
and/or market values of financial instruments and commodities. Fluctuations
in related market risk based upon the aforementioned factors result in
frequent changes in the fair value of the Partnership's open positions,
and, consequently, in its earnings and cash flow. The Partnership accounts
for open positions on the basis of mark-to-market accounting principles. As
such, any gain or loss in the fair value of the Partnership's open
positions is directly reflected in the Partnership's earnings, whether
realized or unrealized. The Partnership's total market risk is influenced
by a wide variety of factors including the diversification effects among
the Partnership's existing open positions, the volatility present within
the markets and the liquidity of the markets. At varying times, each of
these factors may act to exacerbate or mute the market risk associated with
the Partnership. The following were the primary trading risk exposures of
the Partnership as of September 30, 2000, by market sector:
Interest Rate: Interest rate risk is the principal market exposure
of the Partnership. Interest rate movements in one country as well
as relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's primary
interest rate exposure is to interest rate fluctuations in the
United States and the other G-7 countries. The General Partner
anticipates that G-7 interest rates will remain the primary market
exposure of the Partnership for the foreseeable future.
Currency: The Partnership's currency exposure is to exchange rate
fluctuations, primarily in the following countries: England,
Japan, Switzerland and other G-7 countries. Additionally, the
Partnership has exposure to countries comprising the Euro. These
fluctuations are influenced by interest rate changes as well as
political and general economic conditions. The General Partner
does not anticipate that the risk profile of the Partnership's
currency sector will change significantly in the future.
Commodity: The Partnership's primary metals market exposure is to
fluctuations in the price of gold, silver, and copper.
Additionally, the Partnership has commodity exposures in coffee,
sugar, soybeans and soybean derivative products, wheat, corn, cattle
and hogs at September 30, 2000 which are often affected by weather
matters as well as seasonal supply and demand factors. The Partnership
also has exposure in the primary energy commodities; namely crude oil,
heating oil, gasoline and natural gas. The price of these
commodities is highly influenced by political conditions in the
Middle East, as well as general supply and demand factors.
The Partnership measures its market risk related to its holdings of
commodity interests based on changes in interest rates, foreign currency
rates, and commodity prices utilizing a sensitivity analysis. The
sensitivity analysis estimates the potential change in fair values, cash
flows and earnings based on a hypothetical 10% change (increase and
decrease) in interest, currency and commodity prices. The Partnership used
September 30, 2000 market rates and prices on its instruments to perform
the sensitivity analysis. The sensitivity analysis has been prepared
separately for each of the Partnership's market risk exposures (interest
rate, currency rate, and commodity price) instruments.
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The estimates are based on the market risk sensitive portfolios described
in the preceding paragraph above. The potential loss in earnings is based
on an immediate change in:
The prices of the Partnership's interest rate positions resulting
from a 10% change in interest rates.
The U.S. dollar equivalent balances of the Partnership's currency
exposures due to a 10% shift in currency exchange rates.
The market value of the Partnership's commodity instruments due to
a 10% change in the price of the instruments.
The Partnership has determined that the impact of a 10% change in market
rates and prices on its fair values, cash flows and earnings would not be
material. The Partnership has elected to disclose the potential loss to
earnings of its commodity price, interest rate and currency exchange rate
sensitivity positions as of September 30, 2000.
The potential loss in earnings for each market risk exposure as of
September 30, 2000 was:
Trading portfolio:
Commodity price risk $1,297,766
Interest rate risk $2,409,420
Currency exchange rate risk $3,890,987
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The General Partner is not aware of any pending legal proceedings to which
the Partnership or the General Partner is a party or to which any of their
assets are subject
Item 2. Changes in 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.
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits--The following exhibit is filed as part of this report on Form
10-Q:
27 Financial Data Schedule
Reports on Form 8-K
None.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this reporr to be signed on its behalf by the
undersigned thereunto duly authoried.
THE WILLOWBRIDGE FUND L.P.
Date: November 14, 2000 By: Ruvane Investment Corporation
Its General Partner
By: /s/ Robert L. Lerner
--------------------------------
Robert L. Lerner
President
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