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 March 31, 2001
--------------
Commission File Number 0-28336
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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 March 31, 2001 and December 31,
2000 (unaudited). 3
Statement of Income and Expenses and Partners'
Capital for the three months ended March 31, 2001
and 2000 (unaudited). 4
Notes to Financial Statements
(unaudited) 5 - 9
JWH Strategic Allocation Master Fund LLC
Financial Statements:
Statement of Financial Condition
at March 31, 2001 (unaudited). 10
Statement of Income and Expenses and Partners'
Capital for the period from January 26, 2001 to
March 31, 2001 (unaudited). 11
Notes to Financial Statements
(unaudited) 12 - 19
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 20 - 21
Item 3. Quantitative and Qualitative
Disclosures of Market Risk 22
PART II - Other Information 23
2
PART I
Item 1. Financial Statements
SMITH BARNEY MID-WEST FUTURES FUND L.P. II
STATEMENT OF FINANCIAL CONDITION
(Unaudited)
March 31, December 31,
2001 2000
------------ -----------
Assets:
Investment in Master Fund $48,132,497 $ --
Cash, in commodity futures trading account 41,293 37,561,240
Net unrealized appreciation
on open positions, in commodity futures trading account -- 7,601,505
----------- -----------
48,173,790 45,162,745
Interest receivable 146,258 160,983
----------- -----------
$48,320,048 $45,323,728
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 241,600 $ 226,619
Management fees 80,055 75,079
Administrative fees 40,027 37,539
Other 45,673 49,840
Redemptions payable 2,294,945 1,153,427
----------- -----------
2,702,300 1,542,504
----------- -----------
Partners' Capital:
General Partner, 608.9156 Unit equivalents
outstanding in 2001 and 2000 950,000 855,825
Limited Partners, 28,630.3398 and 30,541.2490 Units of Limited
Partnership Interest outstanding in 2001 and 2000, respectively 44,667,748 42,925,399
----------- -----------
45,617,748 43,781,224
----------- -----------
$48,320,048 $45,323,728
=========== ===========
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
MARCH 31,
-----------------------------
2001 2000
------------ ------------
Income:
Realized gains on closed positions from Master $ 6,126,063 $ --
Change in unrealized losses on open postions
from Master 5,334,033 --
Net gains (losses) on trading of commodity
interests (See Note 1):
Realized gains (losses) on closed positions 1,517,732 (9,937,432)
Change in unrealized gains (losses) on
open positions (7,601,505) 1,843,531
------------ ------------
5,376,323 (8,093,901)
Less, brokerage commissions including clearing fees
of $11,664 and $17,613, respectively (702,160) (1,017,236)
------------ ------------
Net realized and unrealized gains (losses) 4,674,163 (9,111,137)
Interest income 416,641 697,565
------------ ------------
5,090,804 (8,413,572)
------------ ------------
Expenses:
Management fees 223,686 646,423
Administrative fees 111,842 161,605
Other 16,838 27,001
------------ ------------
352,366 835,029
------------ ------------
Net income (loss) 4,738,438 (9,248,601)
Additions -- 835,000
Redemptions (2,901,914) (8,969,352)
------------ ------------
Net increase (decrease) in Partners' capital 1,836,524 (17,382,953)
Partners' capital, beginning of period 43,781,224 72,707,182
------------ ------------
Partners' capital, end of period $ 45,617,748 $ 55,324,229
============ ============
Net asset value per Unit
(29,239.2554 and 45,085.9107 Units outstanding
at March 31, 2001 and 2000, respectively) $ 1,560.15 $ 1,227.08
============ ============
Net income (loss) per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 154.66 $ (184.43)
============ ============
See Notes to Financial Statements
4
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2001
(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 directly or indirectly in the speculative
trading of a diversified portfolio of commodity interests including futures
contracts, options and forward contracts. The Partnership commenced trading
operations on September 1, 1994. From September 1, 1994 through January 25,
2001, the Partnership engaged directly in the trading of commodity interests.
Effective January 26, 2001, the Partnership transferred all of its assets
to the JWH Strategic Allocation Master Fund LLC, a New York limited liability
company (the "Master"), as a Non-Managing member. The Master was formed in order
to permit commodity pools managed now or in the future by John W. Henry &
Company, Inc. (the "Advisor") using the Strategic Allocation Program to invest
together in one trading vehicle. Smith Barney Futures Management LLC (the
"General Partner") is the Managing Member of the Master. There will be no
material increase in expenses to investors as a result of investment in the
Master and redemption rights are not affected.
As of March 31, 2001, the Partnership owns 44.71% of the Master. It is the
Partnership's intention to invest the majority of its assets in the Master. The
performance of the Partnership is directly affected by the performance of the
Master. The financial statements of the Master are attached to this report and
should be read together with the Partnership's financial statements.
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. As of March 31, 2001, 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 March 31, 2001 and December 31, 2000 and the results of its
5
operations for the three months ended March 31, 2001 and 2000. These financial
statements present the results of interim periods and do not include all
disclosures normally provided in annual financial statements. You should read
these financial statements together 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, 2000.
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.
6
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2001
(Unaudited)
(Continued)
2. Financial Highlights:
Changes in the Partnership's net asset value per Unit for the three months
ended March 31, 2001 and 2000 were as follows:
THREE-MONTHS ENDED
MARCH 31,
------------------------
2001 2000
------------------------
Net realized and unrealized
gains (losses) $ 152.58 4 (181.68)
Interest income 13.46 13.93
Expenses (11.38) (16.68)
--------- ---------
Increase (decrease) for period 154.66 (184.43)
Net Asset Value per Unit,
beginning of period 1,405.49 1,411.51
--------- ---------
Net Asset Value per Unit,
end of period $ 1,560.15 $1,227.08
========= =========
Total return 11.0%
----
Ratio of expenses, including
brokerage commissions, to
average net assets* 9.7%
----
Ratio of net income to average
net assets* 43.4%
-----
* Annualized
7
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2001
(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 Partnership invests the majority of its
assets through a "master fund/feeder fund" structure. The results of the
Partnership's investment in the Master are shown in the statement of income and
expenses and are discussed in Note 3 of the Master's Notes to Financial
Statements.
The Customer Agreement between the Partnership and SSB gives the
Partnership the legal right to net unrealized gains and losses.
As of December 31, 2000, all of the commodity interests owned by the
Partnership are held for trading purposes. The average fair value during the
twelve months ended December 31, 2000, based on a monthly calculation, was
$1,479,528. The fair value of these commodity interests, including options
thereon, if applicable, at December 31, 2000, was $7,601,505, as detailed below.
Fair Value
-------------
December 31,
2000
-------------
Currency:
- Exchange Traded Contracts $ 207,188
- OTC Contracts 2,621,875
Energy 1,274,209
Grains 133,604
Interest Rates U.S. 1,617,516
Interest Rates Non-U.S 1,330,610
Livestock 8,960
Metals:
- Exchange Traded Contracts (7,055)
- OTC Contracts (62,921)
Softs (133,324)
Indices 610,843
-----------
Total $ 7,601,505
===========
8
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2001
(Unaudited)
(Continued)
4. Financial Instrument Risk:
The Partnership is party to financial instruments with off-balance
sheet risk, including derivative financial instruments and derivative commodity
instruments, through its investment in the Master. Financial instrument risk is
discussed in Note 4 of the Master's Notes to Financial Statements.
9
PART I
Item 1. Financial Statements
JWH STRATEGIC ALLOCATION MASTER FUND LLC
STATEMENT OF FINANCIAL CONDITION
(Unaudited)
March 31,
2001
-------------
Assets:
Equity in commodity futures trading account:
Cash $ 98,904,887
Net unrealized depreciation
on open futures positions 8,734,749
------------
$107,639,636
============
PARTNERS' CAPITAL:
Partners' Capital:
Limited Partners $107,639,636
------------
$107,639,636
============
See Notes to Financial Statements.
10
JWH STRATEGIC ALLOCATION MASTER FUND LLC
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
FOR THE
PERIOD FROM
JANUARY 26, 2001 TO
MARCH 31,
--------------
2001
--------------
Income:
Net gains on trading of commodity
interests:
Realized gains on closed positions $ 13,852,863
Change in unrealized losses on open
positions (262,675)
_____________
13,590,188
Less, clearing fees (38,238)
_____________
Net realized and unrealized gains 13,551,950
_____________
Net income 13,551,950
Additions 20,750,000
Redemptions (1,563,540)
_____________
Net increase in Partners' capital 32,738,410
Partners' capital, beginning of period 74,901,226
_____________
Partners' capital, end of period $ 107,639,636
=============
See Notes To Financial Statements
11
JWH Strategic Allocation Master Fund LLC
Notes to Financial Statements
March 31, 2001
(Unaudited)
1. General:
JWH Strategic Allocation Master Fund LLC (the "Master") is a limited
liability company formed under the New York Limited Liability Company Law. The
Master's purpose is to engage in the speculative trading of a diversified
portfolio of commodity interests including futures contracts, options and
forward contracts. The Master commenced trading operations on January 26, 2001.
The Master operates under the "master fund/feeder fund" structure where its
investors consist of Smith Barney Mid-West Futures Fund L.P. II, holding 44.71%,
Shearson Mid-West Futures Fund, holding 33.32%, and The Saugatuck Fund L.P.,
holding 21.97%.
Smith Barney Futures Management LLC acts as the managing member (the
"Managing Member") of the Partnership. The Partnership's commodity broker is
Salomon Smith Barney Inc. ("SSB"). SSB is an affiliate of the Managing Member.
The Managing Member 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. As of March 31, 2001, 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 Master's financial
condition at March 31, 2001 and the results of its operations for the period
from January 26, 2001 to March 31, 2001. These financial statements present the
results of interim periods and do not include all disclosures normally provided
in annual financial statements.
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.
12
JWH Strategic Allocation Master Fund LLC
Notes to Financial Statements
March 31, 2001
(Unaudited)
(Continued)
2.Financial Highlights:
Total return 18.09%
-----
Ratio of expenses, including
brokerage commissions, to
average net assets* 0.18%
----
Ratio of net income to average
net assets* 63.02%
-----
* Annualized
13
JWH Strategic Allocation Master Fund LLC
Notes to Financial Statements
March 31, 2001
(Unaudited)
(Continued)
3. Trading Activities:
The Master 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 Masters's trading activity are shown
in the statement of income and expenses.
The Customer Agreement between the Master and SSB gives the Master the
legal right to net unrealized gains and losses.
All of the commodity interests owned by the Master are held for trading
purposes. The average fair value during the period from January 26, 2001 to
March 31, 2001, based on a monthly calculation, was $9,716,068. The fair value
of these commodity interests, including options thereon, if applicable, at March
31, 2001, was $8,734,749, as detailed below.
Fair Value
-------------
March 31,
2001
----------
Currency:
- Exchange Traded Contracts $ 790,550
- OTC Contracts 4,480,213
Energy 91,782
Grains 450,161
Interest Rates U.S. 185,055
Interest Rates Non-U.S 183,378
Livestock (1,420)
Metals:
- Exchange Traded Contracts 284,712
- OTC Contracts 73,052
Softs 1,140,694
Indices 1,056,572
-----------
Total $ 8,734,749
===========
14
JWH Strategic Allocation Master Fund LLC
Notes to Financial Statements
March 31, 2001
(Unaudited)
(Continued)
4. Financial Instrument Risk:
The Master 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,
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 Master 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
Master'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 Master
has concentration risk because the sole counterparty or broker with respect to
the Master's assets is SSB.
15
JWH Strategic Allocation Master Fund LLC
Notes to Financial Statements
March 31, 2001
(Unaudited)
(Continued)
The Managing Member monitors and controls the Master's and the Master'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 Master is
subject. These monitoring systems allow the Managing Member 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 Master's
involvement in these instruments. The majority of these instruments mature
within one year of March 31, 2001. However, due to the nature of the Master's
business, these instruments may not be held to maturity.
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
-----------------------------------------------------------------------
Liquidity and Capital Resources
The Master does not engage in the sale of goods or services. Its only
assets are its allocated equity in its commodity futures trading account,
allocated 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 Master.
While substantial losses could lead to a decrease in liquidity, no such losses
occurred in the first quarter of 2001.
The Master'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 three months ended March 31, 2001, Master capital increased 43.7%
from $74,901,226 to $107,639,636. This increase was attributable to net income
from operations of $13,551,950 coupled with additions of $20,750,000, which was
partially offset by the redemption of $1,563,540, for the period from January
26, 2001 to March 31, 2001. Future redemption can impact the amount of funds
available for investments in commodity contract positions in subsequent periods.
Results of Operations
The Master experienced a net trading gain before brokerage commissions and
related fees in the first quarter of 2001 of $13,590,188. Gains were primarily
attributable to the trading of commodity futures in currencies, grains, U.S. and
non-U.S. interest rates, livestock, metals, softs and indices and were partially
offset by losses in energy.
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 Master depends on
the existence of major 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 Master expects to increase capital through operations.
17
Item 3. Quantitative and Qualitative Disclosures of Market Risk
The Master 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 Master'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 Master's main line of business.
Market movements result in frequent changes in the fair market value of the
Master's open positions and, consequently, in its earnings and cash flow. The
Master'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 Master's open positions and the liquidity of the markets in which it
trades.
The Master 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
Master's past performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Master could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Master's speculative trading and the recurrence in the
markets traded by the Master of market movements far exceeding expectations
could result in actual trading or non-trading losses far beyond the indicated
Value at Risk or the Master'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
Master's losses in any market sector will be limited to Value at Risk or by the
Master's attempts to manage its market risk.
Exchange maintenance margin requirements have been used by the Master 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.
18
The following table indicates the trading Value at Risk associated with the
Master's open positions by market category as of March 31, 2001. All open
position trading risk exposures of the Master have been included in calculating
the figures set forth below. As of March 31, 2001, the Master's total
capitalization was $107,639,636.
March 31, 2001
(Unaudited)
Year to Date
% of Total High Low
Market Sector Value at Risk Capitalization Value at Risk Value at Risk
- ----------------------------------------------------------------------------------------------
Currencies:
- Exchange Traded Contracts $ 387,750 0.36% $387,750 $ 182,149
- OTC Contracts 4,535,625 4.21% 4,559,050 1,955,574
Energy 1,437,800 1.34% 1,437,800 487,000
Grains 224,800 0.21% 231,800 149,250
Interest Rates U.S. 1,031,600 0.96% 1,300,700 406,740
Interest Rates Non-U.S 3,486,058 3.24% 4,042,034 2,726,405
Livestock 10,200 0.01% 10,800 7,000
Metals:
- Exchange Traded Contracts 450,000 0.42% 450,000 270,000
- OTC Contracts 237,950 0.22% 247,200 77,500
Softs 413,573 0.38% 452,369 195,570
Indices 1,244,072 1.15% 1,629,212 1,000,976
----------- -----
Total $13,459,428 12.50%
=========== =====
19
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2001
(Unaudited)
(Continued)
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 investment in the Master 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 first quarter of 2001.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by its investment in the Master, expenses,
interest income, redemptions of Units and distributions of profits, if any.
For the three months ended March 31, 2001, Partnership capital increased
4.2% from $43,781,224 to $45,617,748. This increase was attributable to net
income from operations of $4,738,438, which was partially offset by the
redemption of 1,910.9092 Units resulting in an outflow of $2,901,914, for the
three months ended March 31, 2001. Future redemptions can impact the amount of
funds available for investment in the Master in subsequent periods.
Results of Operations
During the Partnership's first quarter of 2001, the net asset value per
unit increased 11.0% from $1,405.49 to $1,560.15 as compared to a decrease of
13.1% in the first quarter of 2000. The Partnership experienced a net trading
gain before brokerage commissions and related fees in the first quarter of 2001
of $5,376,323. Gains were primarily attributable to the trading of commodity
futures, by the Master, in currencies, grains, U.S. and non-U.S. interest rates,
livestock, metals, softs and indices and were partially offset by losses in
energy. The Partnership experienced a net trading loss before commissions and
related fees in the first quarter of 2000 of $8,093,901. Losses were primarily
attributable to the trading of commodity futures in currencies, non-U.S.
interest rates, metals and indices and were partially offset by gains in U.S.
interest rates.
20
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
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, allocated
to it by the Master, was earned at the monthly average 30 day U.S. Treasury bill
rate. Interest income for the three months ended March 31, 2001 decreased by
$280,924, as compared to the corresponding period in 2000. The decrease in
interest income is primarily due to a decrease in interest rates and the effect
of redemptions on the Partnership's equity maintained in cash during the three
month period ended March 31, 2001.
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
months ended March 31, 2001 decreased by $315,076, as compared to the
corresponding period in 2000.
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 months ended March 31,
2001 decreased by $422,737, as compared to the corresponding period in 2000
primarily due to a decrease in the management fee rate during the fourth quarter
of 2000.
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 months ended March 31, 2001 decreased by $49,763, as compared
to the corresponding period in 2000.
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 months ended March 31, 2001 or 2000.
21
Item 3. Quantitative and Qualitative Disclosures of Market Risk
All of the Partnership's assets are subject to the risk of trading loss
through its investment in the Master. Quantitative and qualitative disclosures
of market risk are discussed in "Item 3. Quantitative and Qualitative
Disclosures of Market Risk" of the Master's report.
22
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
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. (a) Exhibits - None
(b) Reports on Form 8-K - None
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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: 5/11/01
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: 5/11/01
By: /s/ Daniel R. McAuliffe, Jr.
-----------------------------------
Daniel R. McAuliffe, Jr.
Chief Financial Officer and
Director
Date: 5/11/01
24