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 June 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 June 30, 2000
(unaudited) and December 31, 1999..................................2
Statements of Operations For the Three Months Ended June 30, 2000
and 1999 and For the Six Months Ended June 30, 2000
and 1999 (unaudited)...............................................3
Statements of Changes in Partners' Capital for the Six Months Ended
June 30, 2000 and 1999 (unaudited).................................4
Notes to Financial Statements for the Six Months Ended June 30,
2000 (unaudited) and the Year Ended December 31, 1999..............5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation...........................................6
Item 3. Quantitative and Qualitative Disclosures About Market Risk........10
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
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE WILLOWBRIDGE FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
AS OF JUNE 30, 2000 (unaudited) AND DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------
June 30, December 31,
2000 1999
ASSETS
EQUITY IN COMMODITY FUTURES TRADING ACCOUNT:
Due from broker $ 23,730,002 $ 24,857,158
Net unrealized appreciation on open futures contracts 1,001,393 858,525
------------ ------------
24,731,395 25,715,683
CASH IN BANK 974,334 534,875
ACCOUNTS RECEIVABLE 104,560 26,253
INTEREST RECEIVABLE 2,636 -
SUBSCRIPTIONS RECEIVABLE - 24,500
OTHER - 740
------------ ------------
TOTAL ASSETS $ 25,812,925 $ 26,302,051
============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 564,379 $ 333,869
Accrued incentive fees - -
Advanced subscriptions 365,853 -
Accrued management fees 63,864 63,587
Sales commissions 3,920 -
Other accrued expenses 41,666 17,426
------------ ------------
$ 1,039,682 $ 414,882
------------ ------------
PARTNERS' CAPITAL:
Limited partners (6,359.2192 and 5,977.7063
fully redeemable units at June 30, 2000
and December 31, 1999, respectively) 23,411,775 24,440,138
General partner (369.8197 and 353.9228
fully redeemable units at June 30, 2000
and December 31, 1999, respectively) 1,361,468 1,447,031
------------ ------------
24,773,243 25,887,169
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 25,812,925 $ 26,302,051
============ ============
NET ASSET VALUE PER UNIT
(Based on 6,729.0389 and 6,331.6291 units
outstanding at June 30, 2000 and
December 31, 1999, respectively) $ 3,681.45 $ 4,088.55
============ ============
THE WILLOWBRIDGE FUND L.P.
STATEMENTS OF (unaudited)(LOSS) INCOME
- --------------------------------------------------------------------------------------------------------------------------------
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
INCOME:
Gains (losses) on trading of commodity
futures, forwards and options:
Realized gains (losses) on closed positions, net $ 522,605 $ 727,895 $ (2,471,681) $ 245,916
change in unrealized (losses) (gains) on
open positions, net (2,240,018) 2,166,973 142,868 3,284,761
------------ ----------- -------------- ----------
Total trading (losses) profits (1,717,413) 2,894,868 (2,328,813) 3,530,677
------------ ----------- -------------- ----------
Interest income 344,966 268,823 655,113 522,605
------------ ----------- -------------- ----------
Total (loss) income (1,372,447) 3,163,691 (1,673,700) 4,053,282
------------ ----------- -------------- ----------
EXPENSES:
Incentive fees - 710,036 - 806,378
Brokerage commissions 232,310 226,942 456,448 462,471
Management fees 63,864 64,902 388,348 353,177
Administrative expenses 74,507 34,660 118,241 71,369
------------ ----------- -------------- ----------
Total expenses 370,681 1,036,540 963,037 1,693,395
------------ ----------- -------------- ----------
NET (LOSS) INCOME $ (1,743,128) $ 2,127,151 $ (2,636,737) $ 2,359,887
============== ============ ============== ===========
NET (LOSS): INCOME
Limited partners $ (1,637,731) $ 2,013,335 $ (2,472,063) $ 2,228,487
============== ============ ============== ===========
General partner $ (105,397) $ 113,816 $ (164,674) $ 131,400
============== ============ ============== ===========
NET (LOSS) INCOME PER UNIT $ (257.43) $ 357.88 $ (407.10) $ 392.86
============== ============ ============== ===========
THE WILLOWBRIDGE FUND LP.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
Total
General Partner Limited Partners Partners'
Units Amount Units Amount Capital
---------------------------- ------------------------------- ---------------
PARTNERS' CAPITAL, DECEMBER 31, 1998 271.6509 $1,073,390 5,264.1580 $21,765,943 $22,839,333
Additions 59.0974 237,845 792.5667 3,270,138 3,507,983
Redemptions - - (538.0349) (2,275,955) (3,375,955)
Net income - 131,400 - 2,228,487 2,359,887
----------- ----------- -------------- ------------ -----------
PARTNERS' CAPITAL, JUNE 30, 1999 330.7484 $1,442,635 5,518.6898 $24,988,613 $ 26,431,248
=========== =========== ============== ============ =============
PARTNERS' CAPITAL, DECEMBER 31, 1999 353.9228 1,447,031 5,977.7063 24,440,138 25,887,169
Additions 56.6417 229,118 1,071.6607 4,091,089 4,320,207
Redemptions (40.7448) (150,000) (690.1478) (2,647,396) (2,797,396)
Net loss - (164,673) - (2,472,064) (2,636,737)
----------- ---------- ------------ ------------ ------------
PARTNERS' CAPITAL, JUNE 30, 2000 369.8197 $1,361,476 6,359.2192 $23,411,767 $ 24,773,243
=========== ========== ============ ============ =============
THE WILLOWBRIDGE FUND L.P.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 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 - Prior to March 31, 1997, commission charges to open and close
contracts were expensed at the time the contract positions were opened.
Commencing April 1, 1997, commission charges were based on a percentage of
the net asset value of the Partnership at the beginning of the month.
Beginning July 1, 1997 the commission rate charged was 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
Standard 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.
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 $258,872 and
$228,393 in the six months ended June 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 six months ended June
30, 2000 and the year ended December 31, 1999 were $15,160 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 ("SFAS 133") 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 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 financial statements of the
Partnership.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
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 it assets through speculative trading. Ruvane Instrument
Coporation 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 Progarm 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 June 30, 2000 and 1999
For the quarter ended June 30, 2000, the Partnership had trading profits
comprised of $522,605 in realized gains on closed positiions, ($2,240,018)
in net change in unrealized gains (losses) on open positions and $344,966 in
interest income. For the same quarter in 1999, the Partnership had trading
profits comprised of $727,895 in realized losses on closed positions,
$2,166,973 in net change in unrealized gains on open positions and $268,823
in interest income.
In April 2000, trading was unprofitable in energy, financials, grains, and
tropicals. The Partnership recorded a loss of $941,376 or $144.67 per
unit. 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. 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.
In April 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. In May 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. In June 1999, trading was profitable in foreign and
domestic financial instruments, energy complex, meats and base metals.
Unprofitable positions in foreign currencies and coffee offset some
profits. The Partnership recorded a gain of $1,961,942 or $329.74 per unit.
For the quarter ended June 30, 2000, the Partnership had expenses comprised
of $232,310 in brokerage commissions (including clearing and exchange
fees), $63,864 in management fees, and $74,507 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 $266,942 in brokerage commissions (including clearing
and exchange fees), $64,902 in management fees, $710,036 in incentive fees
and $34,660 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. As assets
under management decreased in the quarter ended June 30, 2000, as compared
to the quarter ended June 30, 1999, brokerage commissions, 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 $1,743,128 or
$257.43 per unit for the quarter compared to a gain of $2,127,151 or $357.88
per unit for the same quarter in 1999.
At June 30, 2000, the net asset value of the Partnership was $24,773,243
compared to its net asset value of $25,887,169 at December 31, 1999. The
net asset value per unit at June 30, 2000 was $3,681.45 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 Six Months Ended June 30, 2000 and 1999
For the six months ended June 30, 2000, the Partnership had trading losses
comprised of $2,271,681 in net realized losses on closed positions,
$142,868 in net change in unrealized gains (losses) on open positions and
$655,113 in interest income. For the same six month period in 1999, the
Partnership had trading profits comprised of $245,916 in realized gains on
closed positions, $3,284,761 in net change in unrealized gains on open
positions and $522,605 in interest income.
During the six months ended June 30, 2000, most of the losses incurred by
the Partnership were generated from currencies, financial 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
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
profits. The Partnership recorded a gain of $1,961,942 or $329.74 per unit
during June 1999.
For the six months ended June 30, 2000, the Partnership had expenses
comprised of $456,448 in brokerage commissions (including clearing and
exchange fees), $388,348 in management fees, and $118,241 in administrative
expenses. The Partnership had no incentive fee expense for the six months
ended June 30, 2000 as trading losses were not recouped. For the same six
months in 1999, the Partnership had expenses comprised of $462,471 in
brokerage commissions (including clearing and exchange fees), $353,177 in
management fees, $808,378 in incentive fees and $71,369 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. As assets under management decreased in the six
months ended June 30, 2000, as compared to the six months ended June 30,
1999, brokerage commissions, management fees also decreased for the six
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 $2,636,737 or
$407.10 for the six month period compared to a gain of $2,359,887 or
$392.86 per unit for the same period in 1999.
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.
Year 2000 Compliance:
It is still possible that some computer systems could malfunction in the
future because of the Year 2000 Problem or as a result of actions taken to
address the Year 2000 problem. The General Partner does not anticipate
that its services or those of the Partnership's other service providers
will be adversely affected, but the General Partner will continue to
monitor the situation. If malfunctions related to the year 2000 Problem
do arise, the Partnership and its investments could be negatively affected.
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 June 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 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 soybeans and soybean derivative
products, wheat, corn, cattle and hogs at June 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
June 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.
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 June 30, 2000.
The potential loss in earnings for each market risk exposure as of June 30,
2000 was:
Trading portfolio:
Commodity price risk $3,246,324
Interest rate risk $2,010,332
Currency exchange rate risk $3,507,749
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.
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.
THE WILLOWBRIDGE FUND L.P.
Date: August 14, 2000 By: Ruvane Investment Corporation
Its General Partner
By: /s/ Robert L. Lerner
------------------------
Robert L. Lerner
President