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 Sept. 30, 2001
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( ) 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 Limited Partnership)
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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1
THE WILLOWBRIDGE FUND L.P.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Page
Item 1. Unaudited Condensed Financial Statements..............................3
Interim Condensed Statements of Financial Condition as of
Sept. 30, 2001 (Unaudited) and December 31, 2000......................3
Unaudited Interim Condensed Statements of Loss for the
Three Months Ended Sept. 30, 2001 and 2000 and for the Nine Months
Ended Sept. 30, 2001 and 2000 ........................................4
Unaudited Interim Condensed Statements of Changes in Partners'
Capital for the Nine Months Ended Sept. 30, 2001 and 2000.............5
Notes to Interim Condensed Financial Statements for the Nine Months
Ended Sept. 30, 2001(Unaudited) and for the Year Ended
December 31, 2000.....................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation..................................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk...........12
Item 4. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters......................................14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................15
Item 2. Changes in Securities and Use of Proceeds...........................15
Item 3. Defaults Upon Senior Securities.....................................15
Item 4. Submission of Matters to a Vote of Security Holders.................15
Item 5. Other Information...................................................15
Item 6. Exhibits and Reports on Form 8-K....................................15
2
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Condensed Financial Statements
THE WILLOWBRIDGE FUND L.P.
INTERIM CONDENSED STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 2001 (UNAUDITED) AND DECEMBER 31, 2000
- ---------------------------------------------------------------------------------------------------------
September 30, December 31,
2001 2000
ASSETS
EQUITY IN COMMODITY FUTURES TRADING ACCOUNT:
Due from broker $ 18,055,390 $ 21,944,863
Net unrealized appreciation on open positions 4,503,546 8,003,325
------------ ------------
22,558,936 29,948,188
CASH IN BANK 3,371,731 1,050,129
ACCOUNTS RECEIVABLE 206,432 90,428
PREPAID EXPENSES 69,258 -
INTEREST RECEIVABLE 48,396 61,849
SUBSCRIPTIONS RECEIVABLE - 3,359
OTHER - 4,146
------------ ------------
TOTAL ASSETS $ 26,254,753 $ 31,158,099
============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Redemptions payable $ 268,680 $ 2,502,846
Advanced Subscriptions 88,343 -
Accrued Advisory Fees 61,859 62,051
Sales Commissions 1,663 2,745
Accrued Incentive Fees - 780,847
Other accrued expenses 103,305 106,277
------------ ------------
523,850 3,454,766
PARTNERS' CAPITAL:
Limited partners (5,586.0493 and 5,275.1221 fully
redeemable units at September 30, 2001 and
December 31, 2000, respectively) 24,881,694 26,701,217
General partner (190.6509 and 197.9790 fully redeemable
units at September 30, 2001 and
December 31, 2000, respectively) 849,209 1,002,116
------------ ------------
25,730,903 27,703,333
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 26,254,753 $ 31,158,099
============ ============
NET ASSET VALUE PER UNIT
(Based on 5,776.7002 and 5,473.1011 units outstanding
at September 30, 2001 and December 31, 2000, respectively) $ 4,454.26 $ 5,061.73
============ ============
SEE NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
3
THE WILLOWBRIDGE FUND L.P.
UNAUDITED INTERIM CONDENSED STATEMENTS OF LOSS
- -----------------------------------------------------------------------------------------------------------------------------------
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, 2001 September 30, 2000 September 30, 2001 September 30, 2000
INCOME:
Gains (losses) on trading of commodity
futures, forwards and options:
Realized (losses) gains on closed positions, net $ (3,008,696) $ (1,004,635) 1,371,499 $ (3,476,226)
Change in unrealized gains (losses) on
open positions, net 2,859,312 (1,420,800) (3,499,778) (1,278,022)
------------ ----------- ----------- ------------
Total trading losses (149,384) (2,425,435) (2,128,279) (4,754,248)
Interest income 178,942 324,855 846,030 979,968
------------ ----------- ----------- ------------
Total gains (loss) 29,558 (2,100,580) (1,282,249) (3,774,280)
------------ ----------- ----------- ------------
EXPENSES:
Brokerage commissions 217,423 205,210 686,814 661,658
Management fees 131,118 56,607 402,053 444,955
Administrative expenses 57,146 49,713 168,758 167,953
Incentive fees - - 498,003 -
------------ ------------ ----------- ------------
Total expenses 405,687 311,530 1,755,628 1,274,566
------------ ------------ ----------- ------------
NET LOSS $ (376,129) $ (2,412,110) $(3,037,877) $ (5,048,846)
============ ============ =========== ============
NET LOSS:
Limited partners $ (362,361) $ (2,301,764) $(2,924,749) $ (4,773,826)
============ ============ =========== ============
General partner $ (13,768) $ (110,346) $ (113,128) $ (275,020)
============ ============ =========== ============
NET LOSS PER UNIT $ (65.11) $ (353.55) $ (525.89) $ (760.65)
============ ============ =========== ============
SEE NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
4
THE WILLOWBRIDGE FUND L.P.
UNAUDITED INTERIM CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Total
General Partner Limited Partners Partners'
Units Amount Units Amount Capital
---------------------------- ------------------------------- --------------------
PARTNERS' CAPITAL, DECEMBER 31, 1999 353.9228 $ 1,447,031 5,977.7063 $ 24,440,138 $ 25,887,169
Additions 59.2194 238,334 1,256.6659 4,754,651 4,992,985
Redemptions (132.0742) (475,000) (1,054.9056) (3,856,288) (4,331,288)
Net Loss - (275,020) - (4,773,826) (5,048,846)
--------- -------------- ---------- --------------- -------------
PARTNERS' CAPITAL, SEPTEMBER 30, 2000 281.0680 $ 935,345 6,179.4666 $ 20,564,675 $ 21,500,020
========= ============== ========== =============== =============
PARTNERS' CAPITAL, DECEMBER 31, 2000 197.9790 $ 1,002,116 5,275.1221 $ 26,701,217 $ 27,703,333
Additions 7.5614 35,221 1,030.2968 4,672,692 4,707,913
Redemptions (14.8895) (75,000) (719.3696) (3,567,466) (3,642,466)
Net Loss - (113,128) - (2,924,749) (3,037,877)
--------- -------------- ----------- --------------- -------------
PARTNERS' CAPITAL, SEPTEMBER 30, 2001 190.6509 $ 849,209 5,586.0493 $ 24,881,694 $ 25,730,903
========= ============== =========== =============== =============
SEE NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
5
THE WILLOWBRIDGE FUND L.P.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 2000
- -------------------------------------------------------------------------------
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.
Prepaid Expenses - Prepaid expenses represents the fiscal year 2001
management fees paid by the Partnership to the General Partner in January
2001. This amount is being amortized (straight-line) by the Partnership
over the twelve-month period ending December 31, 2001. As of September 30, 2001,
approximately $207,775 had been amortized by the Partnership.
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 presented 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.
6
Commissions - Commission charges are based on a percentage of the net asset
value of the partnership at the beginning of the month. The commission rate
charged is 3.5 percent annually of the net asset value of the Partnership.
Statement of Cash Flows - The Partnership has elected not to provide a
Statement of Cash Flows as permitted by Statement of Financial Accounting
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 approximately 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
$207,775 and $261,361 for the nine months ended September 30, 2001 and the year
ended December 31, 2000, 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 rebates to the Partnership are included in the
additions amounts as presented in the Statements of Changes in Partners'
Capital. The incentive and management fees rebated to these partners during
the nine months ended September 30, 2001 and the year ended December 31, 2000
were $21,869 and $27,570, 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.
7
Derivative Instruments. - In June 1998, the Financial Account Standards
Board issued Statement of Financial Accounting Standard ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("the
Statement"), effective for fiscal years beginning after June 15, 2000, as
amended by SFAS No. 137. SFAS No. 133 is further amended by SFAS No. 138,
which clarifies issues surrounding interest rate risk, foreign currency
denominated items, normal purchases and sales and net hedging. This
Statement supercedes SFAS No. 119 "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments" and SFAS No. 105
"Disclosure of Information about Financial Instruments with Off-Balance
Sheet Risk and Financial Instruments with Concentrations of Credit Risk",
whereby disclosure of average fair values and contract/notional values,
respectively, of derivative financial instruments is no longer required for
an entity such as the Partnership which carries its assets at fair value.
Such Statement sets forth a much broader definition of a derivative
instrument. The application of the provisions of SFAS No. 133, as amended
by SFAS No. 137 and SFAS No. 138, did not have a significant effect on the
financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Willowbridge Fund L.P. (the "Partnership") is engaged in the
speculative trading of commodity futures contracts, options on commodities
or commodity futures contracts and forward contracts. The objective of the
Partnership is the appreciation of its assets through speculative trading.
Ruvane Investment Corporation is the General Partner of the Partnership
(the "General Partner") and Willowbridge Associates Inc. is the
Partnership's trading advisor (the "Advisor").
The success of the Partnership is dependent upon the ability of the Advisor
to generate trading profits through the speculative trading of commodity
interests sufficient to produce capital payments after payment of all fees
and expenses. Future results will depend in large part upon the commodity
interests markets in general, the performance of the Advisor, the amount of
additions to and redemption's 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.
8
Results of Operations
Comparison of Three Months Ended September 30, 2001 and 2000
For the quarter ended September 30, 2001, the Partnership had trading losses
comprised of $3,008,696 in net realized losses on closed positions, $2,859,312
in net change in unrealized gains/losses on open positions and $178,942 in
interest income. For the same quarter in 2000, the Partnership had trading
losses comprised of $1,004,635 in net realized losses on closed positions,
$1,420,800 in net change in unrealized gains/losses on open positions and
$324,855 in interest income.
In July 2001, trading was unprofitable in foreign currencies, tropicals and
energy. The Partnership recorded a loss of $1,552,179 or $294.36 per unit
during July 2001. In August 2001, trading was profitable in financials and
foreign currencies. The Partnership recorded a gain of $1,609,783 or $289.42
per unit during August 2001. In September 2001, trading was unprofitable in
energy and foreign currencies. The Partnership recorded a loss of $395,180 or
$68.41 Per unit during September 2001.
In July 2000, trading was unprofitable in energy, financials, foreign
currencies, meats and tropicals. The Partnership recorded a loss of
$4,120,390 or $619.73 per unit during July 2000. In August 2000, trading was
profitable in energy, financials, foreign currencies, meats, and tropicals. The
Partnership recorded a gain of $4,372,978 or $669.93 per unit during
August 2000. In September 2000, trading was unprofitable in energy, financials,
meats, grains and tropicals. Profitable positions in foreign currencies and
metals failed to offset these losses. The Partnership recorded a loss of
$2,664,698 or $412.46 per unit during September 2000.
For the quarter ended September 30, 2001, the Partnership had expenses
comprised of $217,423 in brokerage commissions (including clearing and
exchange fees), $131,118 in management fees, and $57,146 in administrative
expenses. The Partnership had no incentive fee expense for this quarter as
trading losses were not recouped. For the same quarter in 2000, the
Partnership had expenses comprised of $205,210 in brokerage commissions
(including clearing and exchange fees), $56,607 in management fees, and
$49,713 in administrative expenses. The Partnership had no incentive fee
expense for this quarter as trading losses were not recouped. 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 increased in the quarter ended September 30,
2001, as compared to the quarter ended September 30, 2000, brokerage
commissions and management fees also increased 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 $376,129 or
$65.11 per unit for the quarter compared to a loss of $2,412,110 or $353.55
per unit for the same quarter in 2000.
At September 30, 2001, the net asset value of the Partnership was
$25,730,903 compared to its net asset value of $27,703,333 at December 31,
2000. The net asset value per unit at September 30, 2001 was $4,454.26
compared to $5,061.73 at December 31, 2000.
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.
9
Comparison of Nine Months Ended Septmeber 30, 2001 and 2000
For the nine months ended September 30, 2001, the Partnership had trading
losses comprised of $1,371,499 in net realized gains on closed positions,
$3,499,778 in net change in unrealized gains/losses on open positions and
$846,030 in interest income. For the same nine month period in 2000, the
Partnership had trading losses comprised of $3,476,226 in realized losses
on closed positions, $1,278,022 in net change in unrealized gains/losses on open
positions and $979,968 in interest income.
During the nine months ended September 30, 2001, most of the losses
incurred by the Partnership were generated from foreign currencies,
tropicals, metals and energy.
In January 2001, trading was profitable in financials and foreign currencies.
The Partnership recorded a gain of $513,388 or $94.99 per unit during
January 2001. For the same month in 2000, trading was unprofitable in foreign
currencies, metals and tropicals. The Partnership recorded a loss of $915,394
or $232.02 per unit during January 2000. In February 2001, the Partnership was
unprofitable in metals, financials and foreign currencies. The Partnership
recorded a loss of $406,588 or $76.93 per unit during February 2001. For the
same month in 2000, trading was unprofitable in foreign currencies, financials
and tropicals. The Partnership recorded a loss of $2,040,073 or $561.37 per
unit during February 2000. In March 2001, foreign currencies produced most of
the trading gains, in addition to the gains in agriculture and energy. The
Partnership recorded a gain of $1,387, 209 or $275.68 per unit during
March 2001. For the same month in 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 during March 2000. In April
2001, trading was unprofitable in tropicals and foreign currencies. The gains
in energy and financials failed to offset these losses. The Partnership
recorded a loss of $2,146,681 or $423.24 per unit during April 2001. For the
same month in 2000, trading was unprofitable in energy, financials, grains, and
tropicals. The Partnership recorded a loss of $941,376 or $144.67 per unit
during April 2000. In May 2001, the Partnership was profitable in foreign
currencies. The Partnership recorded a gain of $1,038,798 or $204.94 per unit
during May 2001. For the same month in 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 during May 2000. In June 2001, foreign currencies and
financials produced most of the trading loss. The Partnership recorded a loss
of $3,047,874 or $593.61 per unit during June 2001. For the same month in 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 during June 2000. In July
2001, trading was unprofitable in foreign currencies, tropicals and energy. The
Partnership recorded a loss of $1,552,179 or $294.36 per unit during July 2001.
For the same month in 2000, trading was unprofitable in energy, financials,
foreign currencies, meats and tropicals. The Partnership recorded a loss of
$4,120,390 or $619.73 per unit during July 2000. In August 2001, trading was
profitable in financials and currencies. The Partnership recorded a gain of
$1,609,783 or $289.42 per unit during August 2001. For the same month in 2000,
trading was profitable in energy, financials, foreign currencies, meats, and
tropicals. The Partnership recorded a gain of $4,372,978 or $669.93 per unit
during August 2000. In September 2001, trading was unprofitable in energy and
foreign currencies. The Partnership recorded a loss of $395,180 or $68.41 per
unit during September 2001. For the same month in 2000, trading was
unprofitable in energy, financials, meats, grains and tropicals. Profitable
positions in foreign currencies and metals failed to offset these losses. The
Partnership recorded a loss of $2,664,698 or $412.46 per unit during
September 2000.
10
For the nine months ended September 30, 2001, the Partnership had expenses
comprised of $686,814 in brokerage commissions (including clearing and
exchange fees), $402,053 in management fees, $498,003 in incentive fees and
$168,758 in administrative expenses. For the same nine months in 2000, the
Partnership had expenses comprised of $661,658 in brokerage commissions
(including clearing and exchange fees), $444,955 in management fees and
$167,953 in administrative expenses. The Partnership had no incentive fee
expense for the nine months ended September 30, 2000 as trading losses were
not recouped. Brokerage commissions and management fees vary primarily as a
result of changes in assets under management. Incentive fees are generated
by quarterly profits. Administrative fees consist primary of legal and
other expenses relating to the Partnership's reporting requirements under
the Securities Exchange Act of 1934, as amended. The Partnership became
subject to such reporting requirements in April 1998.
As a result of the above, the Partnership recorded a loss of $3,037,877 or
$525.89 for the nine month period compared to a loss of $5,048,846 or
$760.65 per unit for the same period in 2000.
11
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 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Partnership is a commodity pool engaged in the speculative trading of
commodity futures contracts (including agricultural and non-agricultural
commodities, currencies and financial instruments),options on commodities
or commodity futures contracts, and forward contracts. The risk of market
sensitive instruments is integral to the Partnership's primary business
activities. The futures interests traded by the Partnership involve varying
degrees of related market risk. Such market risk is often dependent upon
changes in the level or volatility of interest rates, exchange rates,
and/or market values of financial instruments and commodities. Fluctuations
in related market risk based upon the aforementioned factors result in
frequent changes in the fair value of the Partnership's open positions,
and, consequently, in its earnings and cash flow. The Partnership accounts
for open positions on the basis of mark-to-market accounting principles. As
such, any gain or loss in the fair value of the Partnership's open
positions is directly reflected in the Partnership's earnings, whether
realized or unrealized. The Partnership's total market risk is influenced
by a wide variety of factors including the diversification effects among
the Partnership's existing open positions, the volatility present within
the markets and the liquidity of the markets. At varying times, each of
these factors may act to exacerbate or mute the market risk associated with
the Partnership. The following were the primary trading risk exposures of
the Partnership as of September 30, 2001, by market sector:
12
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 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 United States. 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, although it is difficult at this point to
predict the effect of the introduction of the Euro on the Trading Advisors'
currency trading strategies.
13
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
energies (gas, oil) as of September 30, 2001, 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
September 30, 2001 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 September 30, 2001.
The potential loss in earnings for each market risk exposure as of
September 30, 2001 was:
Trading portfolio:
Commodity price risk $ 402,000
Interest rate risk $1,047,000
Currency exchange rate risk $ 785,000
Item 4. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
There currently is no established public trading market for the Limited
Partnership Units. As of September 30, 2001, approximately 5,776.70 Partnership
Units were held by 283 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.
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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, 2001 through September 30, 2001, a total of 303.60 Partnership
Units were subscribed for the aggregate net subscription amount of $1,065,447.
Details of the subscriptions and (redemptions) of these Partnership Units are
as follows:
Date of Sales/Redemptions Amount of Sales/Redemptions
- ------------------------- ---------------------------
January 2001 $ (352,373)
February 2001 $ (606,691)
March 2001 $ (1,360,400)
April 2001 $ 56,678
May 2001 $ 121,161
June 2001 $ 356,925
July 2001 $ 664,283
August 2001 $ 1,211,155
September 2001 $ 974,709
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.
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.
None.
Reports on Form 8-K
None.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WILLOWBRIDGE FUND L.P.
Date: November 14, 2001 By: Ruvane Investment Corporation
Its General Partner
By: /s/ Robert L. Lerner
-----------------------
Robert L. Lerner
President
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