-----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, LQFqPAI2ufGvGZUOOuV5gt3rcxf1tnak0izciekonOCaeIdO6QiptMGtH71Axx3e 7MIb7X0PBwRGC6b4tq2wXA== /in/edgar/work/0001013167-00-000004/0001013167-00-000004.txt : 20001115 0001013167-00-000004.hdr.sgml : 20001115 ACCESSION NUMBER: 0001013167-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 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: SEC FILE NUMBER: 000-28336 FILM NUMBER: 764735 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 0001.txt SMITH BARNEY MID-WEST FUTURES FUND L.P. II FORM 10-Q 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, 2000 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 LLC 388 Greenwich St. - 7th 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: Statement of Financial Condition at September 30, 2000 and December 31, 1999 (unaudited). 3 Statement of Income and Expenses and Partners' Capital for the three and nine months ended September 30, 2000 and 1999 (unaudited). 4 Notes to Financial Statements (unaudited) 5 -9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 11 Item 3. Quantitative and Qualitative Disclosures of Market Risk 12 - 13 PART II - Other Information 14 - 17 2 PART I Item 1. Financial Statements SMITH BARNEY MID-WEST FUTURES FUND L.P. II STATEMENT OF FINANCIAL CONDITION (Unaudited)
September 30, December 31, 2000 1999 ------------- ------------- Assets: Equity in commodity futures trading account: Cash $ 38,087,034 $ 74,847,977 Net unrealized depreciation on open contracts (2,931,177) (108,784) ------------ ------------ 35,155,857 74,739,193 Interest receivable 151,079 255,434 ------------ ------------ $ 35,306,936 $ 74,994,627 ============ ============ LIABILITIES AND PARTNERS' CAPITAL: Liabilities: Accrued expenses: Commissions $ 176,535 $ 374,973 Management fees 116,921 248,533 Administrative fees 29,230 62,133 Other 54,121 59,706 Redemptions payable 742,780 1,542,100 ------------ ------------ 1,119,587 2,287,445 ------------ ------------ Partners' Capital: General Partner, 608.9156 Unit equivalents outstanding in 2000 and 1999 611,394 859,490 Limited Partners, 33,439.7459 and 50,901.2159 Units of Limited Partnership Interest outstanding in 2000 and 1999, respectively 33,575,955 71,847,692 ------------ ------------ 34,187,349 72,707,182 ------------ ------------ $ 35,306,936 $ 74,994,627 ============ ============
See Notes to Financial Statements. 3 SMITH BARNEY MID-WEST FUTURES FUND L.P. II STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------- ------------ ------------ -------------- 2000 1999 2000 1999 ------------ ------------- ------------ -------------- Income: Net gains (losses) on trading of commodity futures: Realized gains (losses) on closed positions $ (716,972) $ (59,312) $(12,598,355) $ 7,339,318 Change in unrealized losses on open positions (2,203,446) (10,026,878) (2,822,393) (11,138,101) ------------ ------------ ------------ ------------ (2,920,418) (10,086,190) (15,420,748) (3,798,783) Less, brokerage commissions including clearing fees of $11,643, $18,767, $43,171 and $61,486, respectively (620,981) (1,285,249) (2,461,819) (4,076,432) ------------ ------------ ------------ ------------ Net realized and unrealized losses (3,541,399) (11,371,439) (17,882,567) (7,875,215) Interest income 488,287 753,167 1,733,143 2,181,689 ------------ ------------ ------------ ------------ (3,053,112) (10,618,272) (16,149,424) (5,693,526) ------------ ------------ ------------ ------------ Expenses: Management fees 391,965 817,574 1,563,662 2,525,120 Administrative fees 97,991 204,394 390,915 631,281 Other 18,685 30,087 64,356 68,457 ------------ ------------ ------------ ------------ 508,641 1,052,055 2,018,933 3,224,858 ------------ ------------ ------------ ------------ Net loss (3,561,753) (11,670,327) (18,168,357) (8,918,384) Additions -- 1,751,000 835,000 1,751,000 Redemptions (6,269,007) (1,749,789) (21,186,476) (11,799,189) ------------ ------------ ------------ ------------ Net decrease in Partners' capital (9,830,760) (11,669,116) (38,519,833) (18,966,573) Partners' capital, beginning of period 44,018,109 86,876,982 72,707,182 94,174,439 ------------ ------------ ------------ ------------ Partners' capital, end of period $ 34,187,349 $ 75,207,866 $ 34,187,349 $ 75,207,866 ============ ============ ============ ============ Net asset value per Unit (34,048.6615 and 46,625.2215 Units outstanding at September 30, 2000 and 1999, respectively) $ 1,004.07 $ 1,613.03 $ 1,004.07 $ 1,613.03 ============ ============ ============ ============ Net loss per Unit of Limited Partnership Interest and General Partner Unit equivalent $ (97.51) $ (247.38) $ (407.44) $ (175.26) ============ ============ ============ ============
See Notes to Financial Statements 4 Smith Barney Mid-West Futures Fund L.P. II Notes to Financial Statements September 30, 2000 (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 a diversified portfolio of commodity interests including futures contracts, options and forward contracts. 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 LLC acts as the general partner (the "General Partner") of the Partnership. The Partnership's commodity broker is Salomon Smith Barney Inc. ("SSB"). SSB is an affiliate of the General Partner. The General Partner is wholly owned by Salomon Smith Barney Holdings Inc. ("SSBHI"), which is the sole owner of SSB. SSBHI is a wholly owned subsidiary of Citigroup Inc. All trading decisions for the Partnership are 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, 2000 and December 31, 1999 and the results of its operations for the three and nine months ended September 30, 2000 and 1999. 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 and notes included in the Partnership's annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1999. 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 September 30, 2000 (Unaudited) (Continued) 2. Net Asset Value Per Unit: Changes in net asset value per Unit for the three and nine months ended September 30, 2000 and 1999 were as follows:
THREE-MONTHS ENDED NINE-MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 --------- --------- ---------- -------- Net realized and unrealized losses $ (96.97) $ (241.07) $ (401.23) $ (153.92) Interest income 13.15 15.92 39.52 44.73 Expenses (13.69) (22.23) (45.73) (66.07) --------- --------- --------- --------- Decrease for period (97.51) (247.38) (407.44) (175.26) Net Asset Value per Unit, beginning of period 1,101.58 1,860.41 1,411.51 1,788.29 --------- --------- --------- --------- Net Asset Value per Unit end of period $ 1,004.07 $ 1,613.03 $ 1,004.07 $ 1,613.03 ========= ========= ========= =========
6 Smith Barney Mid-West Futures Fund L.P. II Notes to Financial Statements September 30, 2000 (Unaudited) (Continued) 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 activity are shown in the statement of income and expenses. The Customer Agreement between the Partnership and SSB 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 average fair value during the periods ended September 30, 2000 and December 31, 1999, based on a monthly calculation, was $719,722 and $3,353,244, respectively. The fair value of these commodity interests, including options thereon, if applicable, at September 30, 2000 and December 31, 1999, was $(2,931,177) and $(108,784), respectively, as detailed below. Fair Value September 30, December 31, 2000 1999 ------------- ------------- Currency: - -- Exchange Traded Contracts $ (158,737) $ -- - -- OTC Contracts (2,443,740) (1,118,876) Energy (48,473) -- Grains 91,201 -- Interest Rates U.S. 136,400 888,138 Interest Rates Non-U.S (620,501) 321,323 Livestock (3,420) -- Metals (29,314) (420,062) Softs (46,839) -- Indices 192,246 220,693 ----------- ----------- Total $(2,931,177) $ (108,784) =========== =========== 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 may include forwards, futures and options, whose value is based upon an underlying asset, 7 Smith Barney Mid-West Futures Fund L.P. II Notes to Financial Statements September 30, 2000 (Unaudited) (Continued) 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, through physical delivery 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 SSB. 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 8 Smith Barney Mid-West Futures Fund L.P. II Notes to Financial Statements September 30, 2000 (Unaudited) (Continued) 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. The majority of these instruments mature within one year of September 30, 2000. However, due to the nature of the Partnership's business, these instruments may not be held to maturity. 9 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, commodity options, if applicable, 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 2000. 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, 2000, Partnership capital decreased 53.0% from $72,707,182 to $34,187,349. This decrease was primarily attributable to a net loss from operations of $18,168,357 coupled with the redemption of 18,053.0351 Units resulting in an outflow of $21,186,476 which was partially offset by additional sales of 591.5651 Units totaling $835,000 for the nine months ended September 30, 2000. Future 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 2000, the net asset value per unit decreased 8.9% from $1,101.58 to $1,004.07 as compared to an decrease of 13.3% in the third quarter of 1999. The Partnership experienced a net trading loss before brokerage commissions and related fees in the third quarter of 2000 of $2,920,418. Losses were primarily attributable to the trading of commodity contracts in currencies, non-U.S. interest rates, livestock, metals, softs and indices and were partially offset by gains in energy, grains and U.S. interest rates. The Partnership experienced a net trading loss before brokerage commissions and related fees in the third quarter of 1999 of $10,086,190. Losses were primarily attributable to the trading of commodity contracts in currencies, U.S. and non-U.S. interest rates, metals and indices. 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 price trends and the ability of the Advisor to 10 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 rate. Interest income for the three and nine months ended September 30, 2000 decreased by $264,880 and $448,546, respectively, as compared to the corresponding periods in 1999. The decrease in interest income is primarily the result of the effect of redemptions and losses on the Partnership's equity maintained in cash during the nine month period ended September 30,2000. 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 analyzed in relation to the fluctuations in the monthly net asset values. Commissions and fees for the three and nine months ended September 30, 2000 decreased by $664,268 and $1,614,613, respectively, as compared to the corresponding periods in 1999. 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, 2000 decreased by $425,609 and $961,458, respectively, as compared to the corresponding periods in 1999. 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, 2000 decreased by $106,403 and $240,366, respectively, as compared to the corresponding periods in 1999. 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, 2000 or 1999. 11 Item 3. Quantitative and Qualitative Disclosures of Market Risk The Partnership is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or substantially all of the Partnership's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Partnership's main line of business. Market movements result in frequent changes in the fair market value of the Partnership's open positions and, consequently, in its earnings and cash flow. The Partnership's market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects of the Partnership's open positions and the liquidity of the markets in which it trades. The Partnership rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Partnership's past performance is not necessarily indicative of its future results. Value at Risk is a measure of the maximum amount which the Partnership could reasonably be expected to lose in a given market sector. However, the inherent uncertainty of the Partnership's speculative trading and the recurrence in the markets traded by the Partnership of market movements far exceeding expectations could result in actual trading or non-trading losses far beyond the indicated Value at Risk or the Partnership's experience to date (i.e., "risk of ruin"). In light of the foregoing as well as the risks and uncertainties intrinsic to all future projections, the inclusion of the quantification included in this section should not be considered to constitute any assurance or representation that the Partnership's losses in any market sector will be limited to Value at Risk or by the Partnership's attempts to manage its market risk. Exchange maintenance margin requirements have been used by the Partnership as the measure of its Value at Risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95%-99% of any one-day intervals. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component, which is not relevant to Value at Risk. 12 The following table indicates the trading Value at Risk associated with the Partnership's open positions by market category as of September 30, 2000. All open position trading risk exposures of the Partnership have been included in calculating the figures set forth below. As of September 30, 2000, the Partnership's total capitalization was $34,187,349 There has been no material change in the trading Value at Risk information previously disclosed in the Form 10-K for the year ended December 31, 1999. September 30, 2000 (Unaudited)
Year to Date % of Total High Low Market Sector Value at Risk Capitalization Value at Risk - ---------------------------------------------------------------------------------- Currencies: - Exchange Traded Contracts $ 213,500 0.63% $ 620,600 $ 122,320 - OTC Contracts 1,753,808 5.13% 4,227,270 524,928 Energy 992,600 2.90% 1,177,600 621,250 Grains 103,050 0.30% 215,950 100,900 Interest Rates U.S. 203,740 0.60% 1,497,400 203,740 Interest Rates Non-U.S 1,119,157 3.27% 5,317,015 745,674 Livestock 3,150 0.01% 3,300 3,000 Metals 345,700 1.01% 1,642,000 54,000 Softs 131,533 0.39% 366,821 63,763 Indices 869,383 2.54% 1,587,303 410,355 ---------- -------- Total $5,735,621 16.78% =========== ======
13 PART II OTHER INFORMATION Item 1. Legal Proceedings For information concerning the matter entitled MKP Master Fund, LDC et al. v. Salomon Smith Barney Inc., see the description that appears in the ninth paragraph under the caption "Legal Proceedings" of the Annual Report on Form 10-K of the Partnership for the year ended December 31, 1999. In September 2000, the court denied plaintiffs' motion to dismiss SSB's counterclaims based on indemnification and contribution. Item 2. Changes in Securities and Use of Proceeds - For the nine months ended September 30, 2000, there were additional sales of 591.5651 Units totaling $835,000. The Partnership ceased to offer units as of the end of the first quarter. Proceeds from the sale of additional Units are used in the trading of commodity interests including futures contracts, options and forward contracts. 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 17 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 LLC (General Partner) By: /s/ David J. Vogel, President David J. Vogel, President Date: 11/14/00 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 LLC (General Partner) By: /s/ David J. Vogel, President David J. Vogel, President Date: 11/14/00 By: /s/ Daniel A. Dantuono Daniel A. Dantuono Chief Financial Officer and Director Date: 11/14/00 18 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 0001013167 Smith Barney Mid-West Futures Fund L.P. II 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 38,087,034 (2,931,177) 151,079 0 0 35,306,936 0 0 35,306,936 1,119,587 0 0 0 0 34,187,349 35,306,936 0 (16,149,424) 0 0 2,018,933 0 0 (18,168,357) 0 0 0 0 0 (18,168,357) (407.44) 0
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