UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2009
( ) 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
RFMC WILLOWBRIDGE FUND, L.P.
Delaware | | 22-678474 |
(a Delaware Partnership) | | (I.R.S. Employer
Identification No.) |
4 Benedek Road
Princeton, New Jersey 08540
(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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | | | Accelerated Filer | |
| | | | |
Non-accelerated filer | | (do not check if a
Smaller reporting company) | Smaller Reporting Company | X |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
PART I – FINANCIAL INFORMATION
| | Page |
Item 1. | Condensed Financial Statements | 3 |
| Condensed Statements of Financial Condition | 3 |
| Condensed Statements of Income | 4 |
| Condensed Statements of Changes in Partners’ Capital | 5 |
| Notes to Condensed Financial Statements | 6 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 17 |
Item 4T. | Controls and Procedures | 18 |
PART II – OTHER INFORMATION
| | |
Item 1. | Legal Proceedings | 19 |
Item 1A. | Risk Factors | 19 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 19 |
Item 3. | Defaults Upon Senior Securities | 19 |
Item 4. | Submission of Matters to a Vote of Security Holders | 19 |
Item 5. | Other Information | 19 |
Item 6. | Exhibits | 20 |
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
RFMC WILLOWBRIDGE FUND, L.P.
CONDENSED STATEMENTS OF FINANCIAL CONDITION
As of March 31, 2009 (Unaudited) and December 31, 2008
_______________
| | | March 31,
2009 | | | December 31,
2008 | |
ASSETS | | | | | | | |
EQUITY IN COMMODITY FUTURES TRADING ACCOUNT: | | | | | | | |
Due from broker (including margin deposits of
$7,591,408 for 2009 and $7,174,146 for 2008) | | $ | 7,623,896 | | $ | 15,776,688 | |
Net unrealized gains on open positions | | | 1,009,819 | | | 1,855,939 | |
| | | 8,633,715 | | | 17,632,627 | |
CASH AND CASH EQUIVALENTS | | | 70,201,744 | | | 71,244,781 | |
DUE FROM GENERAL PARTNER | | | 56,141 | | | 22,837 | |
PREPAID EXPENSES | | | 627,097 | | | 0 | |
TOTAL ASSETS | | $ | 79,518,697 | | $ | 88,900,245 | |
LIABILITIES AND PARTNERS’ CAPITAL (NET ASSET VALUE) LIABILITIES: | | | | | | | |
Prepaid subscriptions | | $ | 680,000 | | $ | 2,244,600 | |
Redemptions payable | | | 2,723,896 | | | 1,161,160 | |
Other accrued expenses | | | 264,225 | | | 295,351 | |
Accrued management fees | | | 204,841 | | | 200,286 | |
Accrued incentive fees | | | 0 | | | 1,385,933 | |
TOTAL LIABILITIES | | | 3,872,962 | | | 5,287,330 | |
PARTNERS’ CAPITAL (NET ASSET VALUE) | | | | | | | |
Limited partners – Class A (3,474.8990 and 3,484.3295 fully redeemable units at March 31, 2009 and December 31, 2008, respectively) | | | 30,750,488 | | | 34,906,553 | |
Limited partners – Class B (44,749.0321 and 42,617.9896 fully redeemable units at March 31, 2009 and December 31, 2008, respectively) | | | 43,888,085 | | | 47,577,754 | |
General partner – Class A (113.8123 and 112.6562 fully redeemable units at March 31, 2009 and December 31, 2008, respectively) | | | 1,007,162 | | | 1,128,608 | |
TOTAL PARTNERS’ CAPITAL (NET ASSET VALUE) | | | 75,645,735 | | | 83,612,915 | |
TOTAL LIABILITIES AND PARTNERS’ CAPITAL (NET ASSET VALUE) | | $ | 79,518,697 | | $ | 88,900,245 | |
NET ASSET VALUE PER UNIT – | | | | | | | |
Class A (based on Partners’ Capital of $31,757,650 and $36,035,161
and 3,588.7113 and 3,596.9857 fully redeemable units outstanding) | | $ | 8,849.32 | | $ | 10,018.16 | |
Class B Series 1 – (based on Partners’ Capital of $3,482,357 and $4,038,256 and 3,077.3239 and 3,160.4326 fully redeemable units outstanding) | | $ | 1,131.62 | | $ | 1,277.75 | |
Class B Series 2 – (based on Partners’ Capital of $40,320,564 and $43,442,833 and 41,600.9548 and 39,386.8036 fully redeemable units outstanding) | | $ | 969.22 | | $ | 1,102.98 | |
Class B Series 3 – (based on Partners’ Capital of $85,164 and $96,665
and 70.7534 and 70.7534 fully redeemable units outstanding) | | $ | 1,203.67 | | $ | 1,366.22 | |
See Notes to Condensed Financial Statements.
| |
RFMC WILLOWBRIDGE FUND, L.P.
CONDENSED STATEMENTS OF INCOME (LOSS)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
| | | Three Months Ended
March 31, | |
| | | 2009 | | | 2008 | |
NET INVESTMENT INCOME (LOSS) | | | | | | | |
Income: | | | | | | | |
Interest income | | $ | 140,403 | | $ | 424,511 | |
Expenses: | | | | | | | |
Brokerage commissions | | | 1,068,876 | | | 828,743 | |
Management fees | | | 413,874 | | | 329,041 | |
Incentive fees | | | 0 | | | 1,329,295 | |
Professional fees | | | 57,144 | | | 53,138 | |
Accounting and administrative | | | 98,747 | | | 51,613 | |
Other expenses | | | 98,455 | | | 25,327 | |
Total expenses | | | 1,737,096 | | | 2,617,157 | |
Net investment loss | | | (1,596,693 | ) | | (2,192,646 | ) |
TRADING PROFITS (LOSSES) | | | | | | | |
Profits (losses) on trading of commodity futures: | | | | | | | |
Net realized gains (losses) on closed positions | | | (8,045,375 | ) | | 7,599,457 | |
Change in net unrealized gains on open positions | | | (846,120 | ) | | (1,418,927 | ) |
Total trading profits (losses) | | | (8,891,495 | ) | | 6,180,530 | |
NET INCOME (LOSS) | | $ | (10,488,188 | ) | $ | 3,987,884 | |
NET INCOME (LOSS) PER UNIT (based on weighted average number of untis outstanding during the period) | | | | | | | |
Class A | | $ | (1,171.45 | ) | $ | 504.22 | |
Class B – Series 1 | | $ | (150.21 | ) | $ | 64.69 | |
Class B – Series 2 | | $ | (134.37 | ) | $ | 48.46 | |
Class B – Series 3 | | $ | (162.54 | ) | $ | 64.64 | |
See Notes to Condensed Financial Statements.
|
RFMC WILLOWBRIDGE FUND, L.P.
CONDENSED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (NET ASSET VALUE)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
| | CLASS A |
| | General Partner | | Limited Partners | | |
| | Units | | | Amount | | Units | | | Amount | | Total
Class A |
PARTNERS’ CAPITAL,
JANUARY 1, 2009 | | 112.6562 | | $ | 1,128,608 | | 3,484.3295 | | $ | 34,906,553 | | $ | 36,035,161 |
Subscriptions | | 1.1561 | | | 11,286 | | 161.2778 | | | 1,585,273 | | | 1,596,559 |
Redemptions | | — | | | — | | (170.7083 | ) | | (1,539,404 | ) | | (1,539,404) |
Net (loss) | | — | | | (132,732 | ) | — | | | (4,201,934 | ) | | (4,334,666) |
PARTNERS’ CAPITAL,
MARCH 31, 2009 | | 113.8123 | | $ | 1,007,162 | | 3,474.8990 | | $ | 30,750,488 | | $ | 31,757,650) |
| | CLASS B LIMITED PARTNERS | |
| | Series 1 | | Series 2 | | Series 3 | | | |
| | Units | | | Amount | | Units | | | Amount | | Units | | | Amount | | | Total Class B | |
PARTNERS’ CAPITAL,
JANUARY 1, 2009 | | 3,160.4326 | | $ | 4,038,256 | | 39,386.8036 | | $ | 43,442,833 | | 70.7534 | | $ | 96,665 | | $ | 47,577,754 | |
Subscriptions | | 447.1053 | | | 542,500 | | 4,732.6997 | | | 5,097,500 | | — | | | — | | | 5,640,000 | |
Redemptions | | (530.2140 | ) | | (600,000 | ) | (2,518.5485 | ) | | (2,576,147 | ) | — | | | — | | | (3,176,147 | ) |
Net (loss) | | — | | | (498,399 | ) | — | | | (5,643,622 | ) | — | | | (11,501 | ) | | (6,153,522 | ) |
PARTNERS’ CAPITAL,
MARCH 31, 2009 | | 3,077.3239 | | $ | 3,482,357 | | 41,600.9548 | | $ | 40,320,564 | | 70.7534 | | $ | 85,164 | | $ | 43,888,085 | |
| | CLASS A | |
| | | | General Partner | | | | Limited Partners | | | | Total | |
| | | | Units | | Amount | | | | Units | | Amount | | | | Class A | |
PARTNERS’ CAPITAL,
JANUARY 1, 2008 | | | | 110.0239 | | $ | 832,567 | | | | 4,010.8244 | | $ | 30,350,478 | | | | $ | 31,183,045 | |
Subscriptions | | | | 0.2998 | | | 2,410 | | | | 78.4087 | | | 608,262 | | | | | 610,672 | |
Redemptions | | | | — | | | — | | | | (180.3390 | ) | | (1,499,579 | ) | | | | (1,499,579 | ) |
Net income | | | | — | | | 53,819 | | | | — | | | 2,031,906 | | | | | 2,085,725 | |
PARTNERS’ CAPITAL,
MARCH 31, 2008 | | | | 110.3237 | | $ | 888,796 | | | | 3,908.8941 | | $ | 31,491,067 | | | | $ | 32,379,863 | |
| | CLASS B LIMITED PARTNERS |
| | Series 1 | | Series 2 | | Series 3 | | Total |
| | Units | | Amount | | Units | | Amount | | Units | | Amount | | Class B |
PARTNERS’ CAPITAL,
JANUARY 1, 2008 | | 3,094.0204 | | $ | 2,957,099 | | 33,860.2888 | | $ | 28,767,879 | | 70.7534 | | $ | 73,733 | | $ | 31,798,711 |
Subscriptions | | — | | | — | | 2,325.1686 | | | 2,105,000 | | — | | | — | | | 2,105,000 |
Redemptions | | (16.7485 | ) | | (18,000 | ) | (93.8418 | ) | | (85,000 | ) | — | | | — | | | (103,000) |
Net income | | — | | | 199,787 | | — | | | 1,697,799 | | — | | | 4,573 | | | 1,902,159 |
PARTNERS’ CAPITAL,
MARCH 31, 2008 | | 3,077.2719 | | $ | 3,138,886 | | 36,091.6156 | | $ | 32,485,678 | | 70.7534 | | $ | 78,306 | | $ | 35,702,870 |
See Notes to Condensed Financial Statements. |
RFMC WILLOWBRIDGE FUND, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
The interim condensed financial statements of RFMC Willowbridge Fund, L.P. (the “Partnership”), included herein, have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. These condensed financial statements are unaudited and should be read in conjunction with the audited financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008. The Partnership follows the same accounting policies in the preparation of interim reports as set forth in the annual report. In the opinion of management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and changes in partners’ capital for the interim periods presented and are not necessarily indicative of a full year’s results.
2. | PARTNERSHIP ORGANIZATION |
The Partnership, a Delaware limited partnership, was organized on January 24, 1986. The Partnership may engage in the speculative trading of commodity futures contracts, options on commodities or commodity futures contracts, and forward contracts. Ruvane Fund Management Corporation is the general partner of the Partnership (the “General Partner”) and is registered as a Commodity Pool Operator and an Introducing Broker with the Commodity Futures Trading Commission. The General Partner is required by the Limited Partnership Agreement, as amended and restated (the “Agreement”), to contribute $1,000 to the Partnership.
In accordance with the amendment to Section 5 of the Agreement, effective January 16, 2003, the Partnership offers separate classes of limited partnership interests, whereby interests which were issued prior to January 16, 2003 by the Partnership will be designated as Class A interests. The Partnership also offers Class B limited partnership interests through a private offering pursuant to Regulation D as adopted under section 4(2) of the Securities Act of 1933, as amended. The Partnership will offer the Class B interests up to an aggregate of $100,000,000; provided that the General Partner may increase the amount of interests that will be offered in increments of $10,000,000 after notice to the limited partners. Commissions and redemption charges for the Class B interests will differ from those of the Class A interests, but in all other respects the Class A interests and the Class B interests will be identical. The Class A interests and Class B interests will also be traded pursuant to the same trading program.
The Partnership shall end 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 |
The Partnership’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. 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 income (loss) and expenses during the reporting period. Estimates include accrual of expenses such as professional fees. Actual results could differ from these estimates.
The Partnership has elected not to provide a Statement of Cash Flows as permitted by the Financial Accounting Standard Board ("FASB") Statement of Financial Accounting Standard No. 102, “Statement of Cash Flows – Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale.”
RFMC WILLOWBRIDGE FUND, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
3. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| B. | Cash and Cash Equivalents |
The Partnership has defined cash and cash equivalents as cash and short-term, highly liquid investments with maturities of three months or less when acquired. Money market mutual funds, which are included in cash equivalents, are classified as Level 1 fair value estimates (quoted prices in active markets for identical assets) under the provisions of Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”).
Due from broker represents deposits required to meet margin requirements and excess funds not required for margin. Due from broker at March 31, 2009 and December 31, 2008 consisted of cash on deposit with the broker of $7,623,896 and $15,776,688, respectively. The Partnership is subject to credit risk to the extent any broker with whom the Partnership conducts business is unable to deliver cash balances or securities, or clear securities transactions on the Partnership’s behalf. The General Partner monitors the financial condition of the brokers with which the Partnership conducts business and believes that the likelihood of loss under the aforementioned circumstances is remote.
Investments in commodity futures contracts are recorded on the trade date and open contracts are recorded in the financial statements at their fair value on the last business day of the reporting period, based on quoted market prices. Accordingly, such contracts are classified as Level 1 fair value estimates under the provisions of FAS 157. Gains or losses are realized when contracts are liquidated, on a first-in-first-out basis. Realized gains are netted with realized losses for financial reporting purposes and shown under the caption “Net realized gains (losses) on closed positions” in the Condensed Statements of Income (Loss). “Net unrealized gains on open positions” are reflected in the Condensed Statements of Financial Condition. Any change in net unrealized gain or loss from the preceding period is reported in the Condensed Statements of Income (Loss) under the caption “Change in net unrealized gains on open positions.” Interest income is recognized on an accrual basis.
The Class A partners pay to the General Partner a flat commission of 4.0% annually of the net asset value of the Class A partners’ capital as of the beginning of each month. Class B limited partners pay to the General Partner a flat commission equal to the following percentages of each Series applicable net asset value: Series 1 – 3%, Series 2 – 6%, and Series 3 – 5%. From these amounts, the General Partner will pay for actual trading commissions incurred by the Partnership, and will pay up to 3.0% from this amount to properly registered selling agents as their ongoing compensation for servicing Class B limited partners.
Commissions charged to each class or series of class were as follows:
| Three Months
Ended March 31, |
| 2009 | | 2008 |
Class A | $ | 361,110 | | $ | 332,595 |
Class B – Series 1 | | 30,969 | | | 23,705 |
Class B – Series 2 | | 675,621 | | | 471,468 |
Class B – Series 3 | | 1,176 | | | 975 |
Total | $ | 1,068,876 | | $ | 828,743 |
RFMC WILLOWBRIDGE FUND, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
3. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| E. | Commissions (continued) |
For the three months ended March 31, 2009 and 2008, the General Partner received net brokerage commissions of $995,710 and $682,678, respectively, from the Partnership. Net brokerage commissions represents commissions charged to Class A and Class B partners less actual brokerage commissions paid to clearing brokers and amounts paid to selling agents for servicing Class B limited partners. As of March 31, 2009 and December 31, 2008, $56,141 and $22,837, respectively, were due from the General Partner for reimbursement of brokerage commissions advanced by the Partnership.
| F. | Allocation of Income (Loss) |
Net realized and unrealized trading profits and losses, interest income and other operating income and expenses, except class or series specific commission charges, are allocated to the partners monthly in proportion to their capital account balance, as defined in the Agreement. Class and/or series specific commission charges are allocated monthly to the partners of the respective class and/or series in proportion to their respective capital account balances within the class and/or series.
Willowbridge Associates, Inc., the Commodity Trading Advisor (“Advisor”) of the Partnership, is entitled to a quarterly incentive fee based on an increase in the adjusted net asset value of the Partnership’s assets allocated to trading. The Advisor receives 25% of any new profits, as defined in the Agreement. The term “new profits” for the purpose of calculating the Advisor’s incentive fee only, is defined as the excess (if any) of (A) the net asset value of the Partnership as of the last day of any calendar quarter (before deduction of incentive fees paid or accrued for such quarter), over (B) the net asset value of the Partnership as of the last day of the most recent quarter for which an incentive fee was paid or payable (after deduction of such incentive fee). In computing New Profits, the difference between (A) and (B) above shall be (i) increased by the amount of any distributions or redemptions paid or accrued by the Partnership as of or subsequent to the date in (B) through the date in (A), (ii) adjusted (either decreased or increased, as the case may be) to reflect the amount of any additional allocations or negative reallocations of Partnership assets from the date in (B) to the last day of the quarter as of which the current incentive fee calculation is made, and (iii) increased by the amount of any losses attributable to redemptions. For the period ended March 31, 2009 and 2008, the Advisor earned incentive fees of $0 and $1,329,295, respectively.
The General Partner is paid an annual 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. Such annual fee is paid in advance at the beginning of the respective year and is amortized by the Partnership on a straight-line basis over twelve months. The total management fee paid to the General Partner in 2009 and 2008 was $836,130 and $629,818, respectively. For the three-month period ended March 31, 2009 and 2008, the Partnership recorded management fee expense earned by the General Partner of $209,033 and $157,454, respectively. As of March 31, 2009 and December 31, 2008, the unamortized prepaid management fees were $627,097 and $0, respectively.
In addition to the management fee paid to the General Partner, the Partnership pays the Advisor quarterly management fee of 0.25% (1% per year) of the net asset value of the Partnership. These fees amounted to $204,841 and $171,587 for the three months ended March 31, 2009 and 2008, respectively. As of March 31, 2009 and December 31, 2008, $204,841 and $200,286 were due to the Advisor, respectively.
RFMC WILLOWBRIDGE FUND, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
3. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
| I. | Administrative Expenses |
Administrative expenses include professional fees, bookkeeping costs and other charges such as registration fees, printing costs and bank fees.
No provision for income taxes has been provided in the accompanying financial statements as each partner is individually liable for taxes, if any, on his or her share of the Partnership’s profits.
The Partnership accounts for uncertainties in income tax positions taken or expected to be taken under the provisions of FASB Interpretation No. 48 (“FIN 48”) entitled “Accounting For Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” and classifies interest and penalties, if any, as interest expense. FIN 48 had no impact on the Partnership’s financial statements.
The Partnership files U.S. federal and state tax returns. The 2005 through 2008 tax years generally remain subject to examination by U.S. federal and most state authorities.
Partnership units may be purchased on the first day of each month at the net asset value per unit determined on the last business day of the previous month. Partners’ contributions received in advance for subscriptions are recorded as prepaid subscriptions in the Condensed Statements of Financial Condition. The General Partner charges a one percent initial administrative fee on all limited partner unit subscriptions. The General Partner may waive this charge for limited partners who are its affiliates or for other limited partners in its sole discretion. Subscription proceeds to the Partnership are recorded net of these charges. For the three months ended March 31, 2009 and 2008, the General Partner received initial administrative fees of $0 and $750, respectively.
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 with at least ten days written notice to the General Partner. Class B interests are subject to an early redemption charge of up to 4 percent if such interests are redeemed within 12 months of their purchase.
| M. | Foreign Currency Transactions |
The Partnership’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 the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the Condensed 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 during the period. Gains (losses) resulting from the translation to U.S. dollars totaled $(27,284) and $74,501 for the three months ended March 31, 2009 and 2008, respectively, and are reported as a component of "Net realized gains (losses) on closed positions" in the Condensed Statements of Income (Loss).
| N. | Recently Issued Accounting Pronouncements |
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities – An Amendment to FASB Statement No. 133” (“FAS 161”). FAS 161 amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS 133”) to provide enhanced disclosures regarding how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under FAS 133, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The Partnership adopted FAS 161 as of January 1, 2009. The adoption of FAS 161 did not have a material impact on the Partnership’s financial statements. The disclosures required by FAS 161 are included in Note 5 to these financial statements.
RFMC WILLOWBRIDGE FUND, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
3. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
The Partnership has entered into agreements, which provide for the indemnifications against losses, costs, claims and liabilities arising from the performance of their individual obligations under such agreements, except for gross negligence or bad faith. The Partnership has had no prior claims or payments pursuant to these agreements. The Partnership’s individual maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. However, based on previous experience, the Partnership expects the risk of loss to be remote.
Certain prior-period amounts have been reclassified to conform to the current-period presentation.
4. | FAIR VALUE |
| Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price). FAS 157 established a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. Investments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level 1 are publicly traded investments. As required by FAS 157, the Partnership does not adjust the quoted price for these investments even in situations where the Partnership holds a large position and a sale could reasonably impact the quoted price. Level 2 – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments which are generally included in this category are investments valued using market data. Level 3 – Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments are determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities. |
RFMC WILLOWBRIDGE FUND, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
4. | FAIR VALUE (CONTINUED) |
| In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The General Partner’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The following table summarizes the valuation of the Partnership’s investments by the above FAS 157 fair value hierarchy levels: |
| | As of March 31, 2009 |
| | Total | | Level 1 | | Level 2 | | Level 3 |
Net unrealized gains on open positions | | $ | 1,009,819 | | $ | 1,009,819 | | N/A | | N/A |
Money market mutual funds | | | 66,235,976 | | | 66,235,976 | | N/A | | N/A |
Total Fair Value | | $ | 67,245,795 | | $ | 67,245,795 | | | | |
| | | As of December 31, 2008 |
| | | Total | | | Level 1 | | Level 2 | | Level 3 |
Net unrealized gains on open positions | | $ | 1,855,939 | | $ | 1,855,939 | | N/A | | N/A |
Money market mutual funds | | | 66,112,178 | | | 66,112,178 | | N/A | | N/A |
Total Fair Value | | $ | 67,968,117 | | $ | 67,968,117 | | | | |
5. | DERIVATIVE INSTRUMENTS |
| The Partnership engages in the speculative trading of futures contracts in currencies, interest rates and a wide range of commodities, including energy and metals. FAS 133 requires entities to recognize all derivative instruments as either assets or liabilities at fair value in the statement of financial position. Investments in commodity futures contracts are recorded in the Condensed Statements of Financial Condition as “Net unrealized gains on open positions.” Since the derivatives held or sold by the Partnership are for speculative trading purposes, the derivative instruments are not designated as hedging instruments under the provisions of FAS 133. Accordingly, all realized gains and losses, as well as any change in net unrealized gains or losses on open positions from the preceding period, are recognized as part of the Partnership’s trading profits and losses in the Condensed Statements of Income (Loss). |
RFMC WILLOWBRIDGE FUND, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
5. | DERIVATIVE INSTRUMENTS (CONTINUED) |
Information concerning the fair value of the Partnership’s derivatives held long or sold short, including information related to the volume of the Partnership’s derivative activity, is as follows:
| As of March 31, 2009 | | |
| Long Contracts Outstanding | | Long Positions Gross Unrealized
Gains Losses | | Short Contracts Outstanding | | Short Positions
Gross Unrealized
Grains Losses | Net Unrealized Gain (Loss) on Open Positions | | |
Currencies | 491 | $ | 999,558 | | $ | (323,628) | | 140 | | $ | 53,725 | | $ | 0 | $ | 729,655 | | | |
Interest rates | 1,296 | | 190,482 | | | (227,769) | | 16 | | | 30,015 | | | (6,367) | | (13,639) | | | |
Grains | 210 | | 138,088 | | | 0 | | 123 | | | 0 | | | (140,050) | | (1,962) | | | |
Livestock | 0 | | 0 | | | 0 | | 26 | | | 0 | | | (4,890) | | (4,890) | | | |
Tropical Products | 0 | | 0 | | | 0 | | 131 | | | 4,725 | | | (40,318) | | (35,593) | | | |
Energy | 263 | | 139,097 | | | (402,107) | | 61 | | | 39,450 | | | (26,690) | | (250,250) | | | |
Metals | 193 | | 586,498 | | | 0 | | 0 | | | 0 | | | 0 | | 586,498 | | | |
Total | | $ | 2,053,723 | | $ | (953,504) | | | | $ | 127,915 | | $ | (218,315) | $ | 1,009,819 | | | |
The Partnership’s trading results by market sector were as follows:
| | For the three months ended March 31, 2009 | |
| | Realized
Losses, Net | | Change in
Net Unrealized Gains (Losses) | | Net Trading
Losses | |
Currencies | | $ | (2,106,279) | | $ | 555,250 | | $ | (1,551,029) | |
Interest rates | | | (1,747,855) | | | (1,482,835) | | | (3,230,690) | |
Grains | | | (862,512) | | | (268,155) | | | (1,130,667) | |
Livestock | | | (66,080) | | | (4,890) | | | (70,970) | |
Tropical products | | | (615,784) | | | (47,968) | | | (663,752) | |
Energy | | | (1,723,066) | | | (245,530) | | | (1,968,596) | |
Metals | | | (923,799) | | | 648,008 | | | (275,791) | |
Total trading losses | | $ | (8,045,375) | | $ | (846,120) | | $ | (8,891,495) | |
Derivative financial instruments involve varying degrees of off-balance sheet market risk whereby changes in the level of volatility of interest rates, foreign currency exchange rates or market values of the underlying financial instruments or commodities may result in cash settlements in excess of the amounts recognized in the Condensed Statements of Financial Condition. The Partnership’s exposure to market risk is directly influenced by a number of factors, including the volatility of the markets in which the financial instruments are traded and the liquidity of those markets.
The derivative instruments used in the Partnership’s trading activities are reported at fair value with the resulting unrealized gains recorded in the Condensed Statements of Financial Condition and the related trading profits (losses) reflected in "Trading Profits (Losses)" in the Condensed Statements of Income (Loss). Open contracts generally mature within 90 days; as of March 31, 2009 and December 31, 2008, the latest maturity dates for open contracts are June 2010 and March 2010, respectively.
RFMC WILLOWBRIDGE FUND, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
5. | DERIVATIVE INSTRUMENTS (CONTINUED) |
Futures are contracts for delayed delivery of financial interests in which the seller agrees to make delivery at a specified future date of a specified financial instrument at a specified price or yield. Risk arises from changes in the fair value of the underlying instruments. Credit risk due to counterparty nonperformance associated with these instruments is reflected in the net unrealized gains (losses) on open positions, if any, included in the Condensed Statements of Financial Condition. The Partnership’s counterparties are major brokerage firms and banks located in the United States, or their foreign affiliates.
The risks associated with exchange-traded contracts are typically perceived to be less than those associated with over-the-counter transactions, because exchanges typically (but not universally) provide clearing house arrangements in which the collective credit (in some cases limited in amount, in some cases not) of the members of the exchange is pledged to support the financial integrity of the exchange, whereas in over-the-counter transactions, traders must rely solely on the credit of their respective individual counterparties. Margins, which may be subject to loss in the event of a default, are generally required in exchange trading, and counterparties may require margin in the over-the-counter markets.
RFMC WILLOWBRIDGE FUND, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
For the Three Months Ended March 31, 2009 and 2008
(Unaudited)
_______________
The following sets forth the financial highlights for the periods presented:
| | Three Months Ended March 31, 2009 |
| | | Class A | | | Class B Series 1 | | | Class B Series 2 | | | Class B Series 3 | |
Per Unit Operating Performance (for a Unit outstanding for the entire period) | | | | | | | | | | | | | |
Net Asset Value, Beginning of the period | | $ | 10,018.16 | | $ | 1,277.75 | | $ | 1,102.98 | | $ | 1,366.22 | |
Loss from operations | | | | | | | | | | | | | |
Net investment loss | | | (157.85) | | | (17.09) | | | (22.72) | | | (24.82) | |
Net trading loss | | | (1,010.99) | | | (129.04) | | | (111.04) | | | (137.73) | |
Net loss | | | (1,168.84) | | | (146.13) | | | (133.76) | | | (162.55) | |
Net Asset Value, End of the period | | $ | 8,849.32 | | $ | 1,131.62 | | $ | 969.22 | | $ | 1,203.67 | |
Total Return(1), (4) | | | (11.67) | % | | (11.44) | % | | (12.13) | % | | (11.90) | % |
Supplemental Data | | | | | | | | | | | | | |
Ratios to average net asset value | | | | | | | | | | | | | |
Expenses (5) | | | 7.44 | % | | 6.63 | % | | 9.67 | % | | 8.33 | % |
Net investment loss(5) | | | (6.75) | % | | (5.92) | % | | (8.96) | % | | (7.65) | % |
| | Three Months Ended December 31, 2008 |
| | Class A | | Class B
Series 1 | | Class B
Series 2 | | Class B
Series 3 | |
Per Unit Operating Performance (for a Unit outstanding for the entire year) | | | | | | | | | | | | | |
Net Asset Value, Beginning of the year | | $ | 7,567.14 | | $ | 955.75 | | $ | 849.61 | | $ | 1,042.12 | |
Income (loss) from operations | | | | | | | | | | | | | |
Net investment loss | | | (1,196.76) | | | (139.86) | | | (152.04) | | | (175.85) | |
Net trading profits | | | 3,647.78 | | | 461.86 | | | 405.41 | | | 499.95 | |
Net income | | | 2,451.02 | | | 322.00 | | | 253.37 | | | 324.10 | |
Net Asset Value, End of the year | | $ | 10,018.16 | | $ | 1,277.75 | | $ | 1,102.98 | | $ | 1,366.22 | |
Total Return(1) | | | 32.39 | % | | 33.69 | % | | 29.82 | % | | 31.10 | % |
Total Return (excluding incentive fees)(2) | | | 42.87 | % | | 44.07 | % | | 40.09 | % | | 41.48 | % |
Supplemental Data | | | | | | | | | | | | | |
Ratios to average net asset value | | | | | | | | | | | | | |
Expenses prior to incentive fee | | | 6.86 | % | | 5.81 | % | | 8.88 | % | | 7.77 | % |
Incentive fees | | | 9.20 | % | | 8.96 | % | | 9.05 | % | | 9.01 | % |
Total expenses | | | 16.06 | % | | 14.77 | % | | 17.93 | % | | 16.78 | % |
Net investment loss(3) | | | (4.69) | % | | (3.68) | % | | (6.72) | % | | (5.63) | % |
Total returns are calculated based on the change in value of a unit during the periods presented. An individual partner’s total returns and ratios may vary from the above total returns and ratios based on the timing of subscriptions and redemptions.
______________
| 1) | Total return is derived as ending net asset value less beginning net asset value divided by beginning net asset value, and excludes the effect of sales commissions and initial administrative charges on subscriptions. |
| (2) | Total return (excluding incentive fee) is derived as net income per unit and adding back incentive fees per unit divided by opening net asset value per unit. |
| (3) | Net investment loss ratio excludes the effects of incentive fees. |
* * * * *
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
RFMC Willowbridge Fund, L.P. (the “Partnership”) engages in the speculative trading of commodity futures contracts, options on commodities or commodity futures contracts and forward contracts (“Commodity Interests”). The objective of the Partnership is the appreciation of its assets through speculative trading. Ruvane Fund Management 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 appreciation after payment of all fees and expenses. Future results will depend in large part upon the Commodity Interests markets in general, the performance of its advisor, the amount of additions and redemptions and changes in interest rates. Due to the leveraged nature of the Partnership's trading activity, small price movements in Commodity Interests may result in substantial gains or losses to the Partnership. Because of the nature of these factors and their interaction, past performance is not indicative of future results. As a result, any recent increases in net realized or unrealized gains may have no bearing on any results that may be obtained in the future.
The Partnership incurs substantial charges from the payment of brokerage commissions to the General Partner, payment of management and incentive fees to the Advisor, payment of management fees to the General Partner and administrative expenses. The Partnership is required to make trading profits to avoid depleting and exhausting its assets from the payment of such fees and expenses.
The markets in which the Commodity Interests trade are constantly changing in character and in degree of volatility. Although the Advisor has been the sole advisor trading on behalf of the Partnership since April 1991, the General Partner continues to evaluate and analyze from both quantitative and qualitative perspectives the ability of the Advisor to trade effectively on the Partnership's behalf in the context of the current market environment. The General Partner seeks to limit market and credit risks by monitoring daily income and margin levels. The General Partner also relies upon the risk management strategies inherent in the Advisor's trading programs. In the future, the General Partner may utilize additional strategies or appoint additional advisors to trade on behalf of the Partnership.
Class A Interests paid to the General Partner a flat-rate monthly brokerage commission of approximately 0.29% of the net asset value of the Class A Interests as of the beginning of each month (a 3.5% annual rate) for the period, January 1, 2001 to July 31, 2002. Beginning August 1, 2002, the Class A Interests pay to the General Partner a flat-rate monthly brokerage commission of approximately 0.33% of the net asset value of the Class A Interests as of the beginning of each month (a 4.0% annual rate).
Class B Interests pay to the General Partner commissions of up to 6.0% annually of the net asset value of the Class B partners' capital. The General Partner will pay up to 3.0% from this amount to properly registered selling agents as their compensation, and to the extent the amount is less than 3.0% the brokerage fee with respect to such Class B limited partnership interests will be reduced accordingly. The General Partner pays from this amount all commission charges and fees with respect to the Partnership's trading in Commodity Interests. The flat-rate monthly commission is common among programs such as the Partnership.
Summary of Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the Partnership's financial statements. The critical accounting estimates and related judgments underlying the Partnership's financial statements are summarized below. In applying these policies, management makes judgments that frequently require estimates about matters that are inherently uncertain. The Partnership's significant accounting policies are described in detail in Note 3 of the Notes to the Condensed Financial Statements.
Investments in commodity futures, options and forward contracts are recorded on the trade date and open contracts are recorded in the financial statements at their fair value on the last business day of the reporting period. The difference between the original cost basis of the contract and fair value is recorded in income as a net unrealized gain or loss on open positions in the Condensed Statements of Financial Condition. Realized gains and losses on closed contracts are recorded on a first-in-first-out basis. Interest income is recognized on an accrual basis. All Commodity Interests and financial instruments are recorded at fair value in the financial statements. Fair value is based on quoted market prices or estimates of fair value.
The Partnership records all investments at fair value in its financial statements, with changes in fair value reported as a component of "Trading Profits (Losses)" in the Condensed Statements of Income. Generally, fair values are based on quoted market prices; however, in certain circumstances, significant judgments and estimates are involved in determining fair value in the absence of an active market closing price.
Results of Operations
Comparison of the Three Months Ended March 31, 2009 and 2008
For the quarter ended March 31, 2009, the Partnership had total losses comprised of net trading losses representing $(8,045,375) in realized losses on closed positions, and $(846,120) in change in net unrealized gains on open positions, and $140,403 in interest income. For the same quarter in 2008 the Partnership had total profits comprised of net trading gains representing $7,599,457 in realized gains on closed positions, and $(1,418,927) in change in net unrealized profits on open positions, and $424,511 in interest income.
In January 2009, the Partnership had a loss. The Partnership produced losses on its positions in Japanese Yen, US, Japanese and European fixed income markets and copper; the Partnership generated profits in the Euro currency, natural gas and silver. The Partnership recorded a net loss of $2,149,279. In February 2009, trading was unprofitable as the Partnership had losses in gasoline, the Euro, copper, crude oil and the Australian Dollar; the Partnership had gains the Japanese Yen, silver, coffee, gold and natural gas. The Partnership recorded a net loss of $2,665,073. In March 2009, trading was not profitable. The Partnership had losses in US fixed income markets, Swiss Franc, British Pound, gold, crude oil, the Euro and the soybean complex; the Partnership had gains in EUR/JPY, copper and the Australian Dollar. The Partnership recorded a net loss of $5,673,836.
In January 2008, the Partnership had a small gain. The Partnership earned profits trading in silver, US fixed income instruments, the Japanese Yen and soybean oil; the Partnership generated losses in the energy markets, copper and the Euro. The Partnership recorded a net gain of $322,290. In February 2008, trading was quite profitable as the Partnership had gains in silver, soybeans and soybean oil, copper, coffee and the energy markets; the Partnership had losses in UK and US fixed income instruments and the Japanese Yen. The Partnership recorded a net gain of $7,461,150. In March 2008, trading was not profitable. The Partnership had losses in the soybean complex, gasoline, coffee and silver; the Partnership had gains in heating oil, crude oil and Japanese fixed income instruments. The Partnership recorded a net loss of $3,795,556
For the quarter ended March 31, 2009, the Partnership had expenses comprised of $1,068,876 in brokerage commissions (including clearing and exchange fees), $0 in incentive fees, $413,874 in management fees, $57,144 in professional fees, $98,747 in accounting and administrative expenses, and $98,455 in other expenses. For the same quarter in 2008, the Partnership had expenses comprised of $828,743 in brokerage commissions (including clearing and exchange fees), $1,329,295 in incentive fees, $329,041 in management fees, $53,138 in professional fees, $51,613 in accounting and administrative expenses, $0 in interest expense and $25,327 in other expenses. Brokerage commissions and management fees vary primarily as a result of change in assets under management, which are affected by net income, and capital subscriptions and redemptions. Accounting and administrative expenses consist primarily of professional fees and other expenses relating to the Partnership’s reporting requirements under the Securities Exchange Act of 1934, as amended.
As a result of the activity discussed above, the Partnership recorded a net loss of $(10,488,188) for the quarter compared to a net gain of $3,987,884 for the same quarter in 2008.
At March 31, 2009, the net asset value of the Partnership was $75,645,735, compared to its net asset value of $83,612,915 at December 31, 2008.
During the quarter, the Partnership had no credit exposure to counterparties that are participants of foreign commodities exchanges or to counterparties dealing in over the counter contracts which is considered to be material.
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 liquidity is caused by any 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 Interests.
The Partnership's capital resources are dependent upon three factors: (a) the income or losses generated by the Advisor; (b) the capital 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 is required to contribute $1,000 to 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.
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 a timely 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 March 31, 2009, by market sector:
Interest Rate
Interest rate risk is a significant 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 interest rate 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: Germany, England, Japan, France, Switzerland, Australia, Canada and the United States of America. 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. The Partnership also has commodity exposures in the price of soft commodities, which are often directly affected by severe or unexpected weather conditions. The General Partner anticipates that the Advisor will maintain an emphasis in the commodities described above. Additionally, the Partnership had exposure to the energy markets (natural gas, crude oil, heating oil and unleaded gasoline) as of March 31, 2009, and it is anticipated that positions in this sector will continue to be evaluated on an ongoing basis.
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 March 31, 2009 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. 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 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 Interests due to a 10% change in the price of the Commodity 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 disclosed the potential loss to earnings of its commodity price, interest rate and currency exchange rate sensitivity positions as of March 31, 2009. |
The potential loss in earnings for each market risk exposure as of March 31, 2009 was approximately:
Trading portfolio:
Commodity price risk | $ | 1,464,619 |
Interest rate risk | $ | 751,131 |
Currency exchange rate risk | $ | 1,364,405 |
Item 4T. Controls and Procedures
The President of the General Partner (who serves as the principal executive officer and financial officer of the Partnership) evaluated the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures, which are designed to ensure that the Partnership records, processes, summarizes and reports in a timely and effective manner the information required to be disclosed in the reports filed with or submitted to the Securities and Exchange Commission. Based upon this evaluation, the General Partner concluded that, as of March 31, 2009 the Partnership’s disclosure controls are effective and ensure that information required to be disclosed in the reports filed under the Securities Exchange Act of 1934 are accumulated and communicated to management of the General Partner (which consists of the principal of the General Partner) to allow timely decisions regarding required disclosure. During the first quarter of 2009, there were no changes in the Partnership’s internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially effect, the partnership's internal control over financial reporting.
.
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 1A. Risk Factors
There are no material changes from the risk factors disclosed in the Partnership’s latest Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There currently is no established public trading market for the Limited Partnership Units. As of March 31, 2009, 48,337.7434 Partnership Units were held by 827 Limited Partners and the General Partner. All of the Limited Partnership Units are “restricted securities” within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and may not be sold unless registered under the Securities Act or sold in accordance with an exemption therefrom, such as Rule 144. The Partnership has no plans to register any of the Limited Partnership Units for resale. In addition, the Partnership Agreement contains certain restrictions on the transfer of Limited Partnership Units. Pursuant to the Partnership Agreement, the General Partner has the sole discretion to determine whether distributions (other than on redemption of Limited Partnership Units), if any, will be made to partners. The Partnership has never paid any distributions and does not anticipate paying any distributions to partners in the foreseeable future. From January 1, 2009 through March 31, 2009, a total of 5,342.2399 Partnership Units were subscribed for the aggregate subscription amount of $7,236,559. The monthly subscriptions of these Partnership Units are as follows:
Date of Subscription | | Amount of
Subscriptions |
January 2009 | | $ | 2,691,639 |
February 2009 | | $ | 2,652,573 |
March 2009 | | $ | 1,942,347 |
Investors in the Partnership who subscribed through a selling agent may have been charged a sales commission at a rate negotiated between such selling agent and the investor. Such sales commission in no event exceeded 4% of the subscription amount. All of the sales of Partnership Units were exempt from registration pursuant to Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
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
31.1 | Rule 13a - 14(a)/15d-14(a) Certification |
32.1 | Section 1350 Certification |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | RFMC WILLOWBRIDGE FUND L.P. |
| | |
| | |
Date: May 15, 2009 | | By: Ruvane Fund Management Corporation
Its: General Partner |
| | |
| | By: /s/ Robert L. Lerner
Robert L. Lerner
President, Principal Executive Officer and Principal Financial Officer |
