-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FqVkijuz522s8YY0WfkraBDDc+eYxyxLtZBFGkkksGQJXDBZa6x9paxrxWTt4sMe i+3RJ4AVYsx5eI4vaYua/w== 0001013167-96-000002.txt : 19961118 0001013167-96-000002.hdr.sgml : 19961118 ACCESSION NUMBER: 0001013167-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITH BARNEY MID WEST FUTURES FUND LP II CENTRAL INDEX KEY: 0001013167 STANDARD INDUSTRIAL CLASSIFICATION: [6221] IRS NUMBER: 133772374 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28336 FILM NUMBER: 96663787 BUSINESS ADDRESS: STREET 1: 390 GREENWICH ST STREET 2: FIRST FL CITY: NEW YORK STATE: NY ZIP: 10013 BUSINESS PHONE: 2127235424 MAIL ADDRESS: STREET 1: 390 GREENWICH ST STREET 2: FIRST FLOOR CITY: NEW YORK STATE: NY ZIP: 10013 10-Q 1 SMITH BARNEY MID-WEST FUTURES FUND L.P. II FORM 10Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (X) QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter ended September 30, 1996 Commission File Number 0-28336 SMITH BARNEY MID-WEST FUTURES FUND L.P. II (Exact name of registrant as specified in its charter) New York 13-3772374 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) c/o Smith Barney Futures Management Inc. 390 Greenwich St. - 1st Fl. New York, New York 10013 (Address and Zip Code of principal executive offices) (212) 723-5424 (Registrant's telephone number, including area code) 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 SMITH BARNEY MID-WEST FUTURES FUND L.P. II FORM 10-Q INDEX Page Number PART I - Financial Information: Item 1. Financial Statements: Statements of Financial Condition at September 30, 1996 and December 31, 1995. 3 Statements of Income and Expenses and Partners' Capital for the Three and Nine Months ended September 30, 1996 and 1995. 4 Notes to Financial Statements 5 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 10 PART II - Other Information 11 2 PART I Item 1. Financial Statements SMITH BARNEY MID-WEST FUTURES FUND L.P. II STATEMENTS OF FINANCIAL CONDITION September 30, DECEMBER 31, 1996 1995 Assets ----------- ----------- (Unaudited) Equity in commodity futures trading account: Cash $48,223,388 $37,848,599 Net unrealized appreciation on open futures contracts 5,683,286 1,455,058 ----------- ----------- 53,906,674 39,303,657 Interest receivable 164,202 136,317 ----------- ----------- $54,070,876 $39,439,974 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accrued expenses: Commissions on open futures contracts $ 270,354 $ 197,200 Management fees 179,335 130,809 Administrative fees 44,834 32,702 Other 8,650 41,916 Redemptions payable 1,564,387 161,340 ----------- ----------- 2,067,560 563,967 ----------- ----------- Partners' Capital General Partner, 429.1320 and 322.7075 Unit equivalents outstanding, respectively 531,240 393,077 Limited Partners, 41,578.9540 and 31,593.7100 Units of Limited Partnership Interest outstanding, respectively 51,472,076 38,482,930 ----------- ----------- 52,003,316 38,876,007 ----------- ----------- $54,070,876 $39,439,974 =========== =========== See Notes to Financial Statements. 3 SMITH BARNEY MID - WEST FUTURES FUND L. P. II STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' CAPITAL (UNAUDITED)
THREE-MONTHS ENDED NINE-MONTHS ENDED September 30, September 30, September 30, September 30, ------------------------------ ------------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------- Income: Net gains on trading of commodity futures: Realized gains (losses) on closed positions $ (2,577,793) $ 151,381 $ (780,225) $ 9,770,127 Change in unrealized gains / losses on open positions 3,441,721 (782,074) 4,228,228 (1,939,847) ------------ ------------ ------------ ------------ 863,928 (630,693) 3,448,003 7,830,280 Less, brokerage commissions and clearing fees ($14,168, $4,815, $32,747, and $17,188 respectively) (819,267) (478,425) (2,233,494) (1,266,000) ------------ ------------ ------------ ------------ Net realized and unrealized gains (losses) 44,661 (1,109,118) 1,214,509 6,564,280 Interest income 500,850 331,515 1,350,480 842,681 ------------ ------------ ------------ ------------ 545,511 (777,603) 2,564,989 7,406,961 ------------ ------------ ------------ ------------ Expenses: Management fees 519,610 308,773 1,425,693 808,832 Incentive fees - - - 829,781 Administrative fees 129,903 77,193 356,423 202,207 Other 33,194 19,086 65,025 39,364 ------------ ------------ ------------ ------------ 682,707 405,052 1,847,141 1,880,184 ------------ ------------ ------------ ------------ Net income (loss) (137,196) (1,182,655) 717,848 5,526,777 Additions 5,835,000 8,900,000 16,755,769 15,462,500 Redemptions (2,128,651) (512,171) (4,346,308) (7,012,413) ------------ ------------ ------------ ------------ Net increase in Partners capital 3,569,153 7,205,174 13,127,309 13,976,864 Partners' capital, beginning of period 48,434,163 24,831,603 38,876,007 18,059,913 ------------ ------------ ------------ ------------ Partners' capital, end of period $ 52,003,316 $ 32,036,777 $ 52,003,316 $ 32,036,777 ============ ============ ============ ============ Net asset value per Unit (42,008.0860 and 27,256.6599 Units outstanding at September 30, 1996 and 1995) $ 1,237.94 $ 1,175.37 $ 1,237.94 $ 1,175.37 ============ ============ ============ ============ Net Income (Loss) per Unit of Limited Partnership Interest and General Partnership Unit equivalent $ (4.39) $ (46.68) $ 19.88 $ 250.80 ============ ============ ============ ============
See Notes to Financial Statements. 4 Smith Barney Mid-West Futures Fund L.P. II Notes to Financial Statements September 30, 1996 (Unaudited) 1. General: Smith Barney Mid-West Futures Fund L.P. II,(the "Partnership") is a limited partnership which was organized on June 3, 1994 under the partnership laws of the State of New York to engage in the speculative trading of commodity interests, including forward contracts on foreign currencies, commodity options and commodity futures contracts including futures contracts on U.S. Treasuries and certain other financial instruments, foreign currencies and stock indices. The commodity interests that are traded by the Partnership are volatile and involve a high degree of market risk. The Partnership commenced trading operations on September 1, 1994. Smith Barney Futures Management Inc. acts as the general partner (the "General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate of the General Partner, acts as commodity broker for the Partnership. All trading decisions for the Partnership are being made by John W. Henry & Company, Inc. (the "Advisor"). The accompanying financial statements are unaudited but, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Partnership's financial condition at September 30, 1996 and the results of its operations for the three and nine months ended September 30, 1996 and 1995. These financial statements present the results of interim periods and do not include all disclosures normally provided in annual financial statements. It is suggested that these financial statements be read in conjunction with the financial statements included in the Partnership's annual report for the year ended December 31, 1995. Due to the nature of commodity trading, the results of operations for the interim periods presented should not be considered indicative of the results that may be expected for the entire year. 5 Smith Barney Mid-West Futures Fund L.P. II Notes to Financial Statements (Continued) 2. Net Asset Value Per Unit: Changes in net asset value per Unit for the three and nine months ended September 30, 1996 and 1995 were as follows: THREE-MONTHS ENDED NINE-MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net realized and unrealized gains (losses) $ (0.11) $ (43.85) $ 33.19 $ 296.65 Interest income 11.82 12.84 35.13 36.25 Expenses (16.10) (15.67) (48.44) (82.10) --------- --------- --------- --------- Increase (decrease) for period (4.39) (46.68) 19.88 250.80 Net Asset Value per Unit, beginning of period 1,242.33 1,222.05 1,218.06 924.57 --------- --------- --------- --------- Net Asset Value per Unit, end of period $1,237.94 $1,175.37 $1,237.94 $1,175.37 ========= ========= ========= ========= 3. Trading Activities: The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The results of the Partnership's trading activities are shown in the statements of income and expenses. The Customer Agreement between the Partnership and SB gives the Partnership the legal right to net unrealized gains and losses. All of the commodity interests owned by the Partnership are held for trading purposes. The fair value of these commodity interests, including options thereon, at September 30, 1996 was $5,683,286 and the average fair value during the nine months then ended, based on monthly calculation, was $3,281,845. 4. Financial Instrument Risk: The Partnership is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments, in the normal course of its business. These financial instruments include forwards, futures 6 and options, whose value is based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash flows, to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash or with another financial instrument. These instruments may be traded on an exchange or over-the-counter ("OTC"). Exchange traded instruments are standardized and include futures and certain option contracts. OTC contracts are negotiated between contracting parties and include forwards and certain options. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange traded instruments because of the greater risk of default by the counterparty to an OTC contract. Market risk is the potential for changes in the value of the financial instruments traded by the Partnership due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. Credit risk is the possibility that a loss may occur due to the failure of a counterparty to perform according to the terms of a contract. Credit risk with respect to exchange traded instruments is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transactions. The Partnership's risk of loss in the event of counterparty default is typically limited to the amounts recognized in the statement of financial condition and not represented by the contract or notional amounts of the instruments. The Partnership has concentration risk because the sole counterparty or broker with respect to the Partnership's assets is SB. The General Partner monitors and controls the Partnership's risk exposure on a daily basis through financial, credit and risk management monitoring systems and, accordingly believes that it has effective procedures for evaluating and limiting the credit and market risks to which the Partnership is subject. These monitoring systems allow the General Partner to statistically analyze actual trading results with risk adjusted performance indicators and correlation statistics. In addition, on-line monitoring systems provide account analysis of futures, forwards and options positions by sector, margin requirements, gain and loss transactions and collateral positions. The notional or contractual amounts of these instruments, while not recorded in the financial statements, reflect the extent of the Partnership's involvement in these instruments. At September 30, 1996, the notional or contractual amounts of the 7 Partnership's commitment to purchase and sell these instruments was $822,243,470 and $205,340,270, respectively, as detailed below. All of these instruments mature within one year of September 30, 1996. However, due to the nature of the Partnership's business, these instruments may not be held to maturity. At September 30, 1996, the Partnership had net unrealized trading gains of $5,683,286 as detailed below. NOTIONAL OR CONTRACTUAL NET AMOUNT OF COMMITMENTS UNREALIZED TO PURCHASE TO SELL GAIN/(LOSS) ----------- ------- ----------- Currencies * $ 94,216,157 $105,536,480 $ 474,208 Interest Rates US 0 24,744,250 (587,250) Interest Rates Non US 722,201,593 0 4,634,073 Metals 0 75,059,540 1,182,455 Indices 5,825,720 0 (20,200) ------------ ----------- ----------- $822,243,470 $205,340,270 $5,683,286 ============ ============ ========== * The notional or contractual commitment amounts and the net unrealized gain amount listed for the currency sector represent OTC contracts. All other sectors listed represent exchange traded contracts. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources The Partnership does not engage in the sale of goods or services. Its only assets are its equity in its commodity futures trading account, net unrealized appreciation (depreciation) on open futures and forward contracts and interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. While substantial losses could lead to a decrease in liquidity, no such losses occurred in the third quarter of 1996. The Partnership's capital consists of the capital contributions of the partners as increased or decreased by gains or losses on commodity futures trading, expenses, interest income, redemptions of Units and distributions of profits, if any. For the nine months ended September 30, 1996, Partnership capital increased 33.8% from $38,876,007 to $52,003,316. This increase was primarily attributable to the addition of 13,627.1330 Units resulting in an inflow of $16,755,769. This inflow was increased by net income from operations of $717,848 and was partially offset by the redemption of 3,535.4645 Units which resulted in an outflow of $4,346,308 for the nine months ended September 30, 1996. Future additions and redemptions can impact the amount of funds available for investments in commodity contract positions in subsequent periods. Results of Operations During the Partnership's third quarter of 1996, the net asset value per Unit decreased 0.4% from $1,242.33 to $1,237.94 as compared to the third quarter of 1995 in which the net asset value per Unit decreased by 3.8%. The Partnership experienced a net trading gain before commissions and expenses in the third quarter of 1996 of $863,928. Gains were recognized in the trading of commodity futures in metals and interest rates which were partially offset by losses recognized in currencies and indices. The Partnership experienced a net trading loss before commissions and expenses in the third quarter of 1995 of $630,693. These losses were attributable to the trading of metals, indices and interest rates which were partially offset by gains recognized in currencies. Commodity futures markets are highly volatile. Broad price fluctuations and rapid inflation increase the risks involved in commodity trading, but also increase the possibility of profit. The profitability of the Partnership depends on the existence of major 9 price trends and the ability of the Advisor to identify correctly those price trends. Price trends are influenced by, among other things, changing supply and demand relationships, weather, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and changes in interest rates. To the extent that market trends exist and the Advisor is able to identify them, the Partnership expects to increase capital through operations. Interest income on 80% of the Partnership's average daily equity was earned at the monthly average 30 day U.S. Treasury Bill yield. Interest income for the three and nine months ended September 30, 1996 increased by $169,335 and $507,799, respectively, as compared to the corresponding periods in 1995. The increase in interest income is primarily the result of the effect of net additions on the Partnership's equity maintained in cash in 1996 as compared to the corresponding periods of 1995. Brokerage commissions are calculated on the adjusted net asset value on the last day of each month and, therefore, vary according to trading performance, additions and redemptions. Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values. Commissions and clearing fees for the three and nine months ended September 30, 1996 increased by $340,842 and $967,494, respectively, as compared to the corresponding periods in 1995. All trading decisions for the Partnership are currently being made by the Advisor. Management fees are calculated as a percentage of the Partnership's net asset value as of the end of each month and are affected by trading performance, additions and redemptions. Management fees for the three and nine months ended September 30, 1996 increased by $210,837 and $616,861, respectively, as compared to the corresponding periods in 1995. Administrative fees are paid to the General Partner for administering the business and affairs of the Partnership. These fees are calculated as a percentage of the Partnership's net asset value as of the end of each month and are affected by trading performance, additions and redemptions. Administrative fees for the three and nine months ended September 30, 1996 increased by $52,710 and $154,216, respectively, as compared to the corresponding periods in 1995. Incentive fees are based on the new trading profits generated by the Advisor as defined in the advisory agreement between the Partnership, the General Partner and the Advisor. There were no incentive fees earned for the three and nine months ended September 30, 1996. Trading performance for the nine months ended September 30, 1995 resulted in incentive fees of $829,781. 10 PART II OTHER INFORMATION Item 1. Legal Proceedings - None Item 2. Changes in Securities - 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. (a) Exhibits - None (b) Reports on Form 8-K - None 11 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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. SMITH BARNEY MID-WEST FUTURES FUND L.P. II By: Smith Barney Futures Management Inc. (General Partner) By: /s/ David J. Vogel, President David J. Vogel, President Date: 11/11/96 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: Smith Barney Futures Management Inc. (General Partner) By: /s/ David J. Vogel, President David J. Vogel, President Date: 11/11/96 By: /s/ Daniel A. Dantuono Daniel A. Dantuono Chief Financial Officer and Director Date: 11/11/96 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 0001013167 Smith Barney Mid-West Futures Fund L.P. II 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 48,223,388 5,683,286 164,202 0 0 54,070,876 0 0 54,070,876 2,067,560 0 0 0 0 52,003,316 54,070,876 0 2,564,989 0 0 1,847,141 0 0 717,848 0 0 0 0 0 717,848 19.88 0
-----END PRIVACY-ENHANCED MESSAGE-----