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 June 30, 2003
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 Citigroup Managed Futures LLC
399 Park Avenue - 7th Fl.
New York, New York 10022
- ------------------------------------------------------------------
(Address and Zip Code of principal executive offices)
(212) 559-2011
- ------------------------------------------------------------------
(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 _____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act).
Yes _____ No __X___
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
June 30, 2003 and December 31,
2002 (unaudited). 3
Statements of Income and Expenses
and Partners' Capital for the three
and six months ended June 30, 2003
and 2002 (unaudited). 4
Notes to Financial Statements
including the Financial Statements
of JWH Strategic Allocation Master
Fund LLC (unaudited). 5 - 17
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 18 - 21
Item 3. Quantitative and Qualitative
Disclosures about Market Risk 22 - 23
Item 4. Controls and Procedures 24
PART II - Other Information 25
2
PART I
Item 1. Financial Statements
SMITH BARNEY MID-WEST FUTURES FUND L.P. II
STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
June 30, December 31,
2003 2002
--------------------------
ASSETS:
Investment in Master, at fair value $29,087,654 $28,234,107
Cash 41,854 19,882
----------- -----------
$29,129,508 $28,253,989
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 145,648 $ 141,270
Management fees 48,231 46,812
Administrative fees 24,116 23,406
Other 45,125 25,498
Redemptions payable 419,702 195,333
----------- -----------
682,822 432,319
----------- -----------
Partners' Capital:
General Partner, 401.3070 and 451.3070 Unit equivalents
outstanding in 2002 and 2003, respectively 796,614 809,275
Limited Partners, 13,929.1210 and 15,063.9866 Units of Limited
Partnership Interest outstanding in 2003 and 2002, respectively 27,650,072 27,012,395
----------- -----------
28,446,686 27,821,670
----------- -----------
$29,129,508 $28,253,989
=========== ===========
See Accompanying Notes to Unaudited Financial Statements.
3
SMITH BARNEY MID-WEST FUTURES FUND L.P. II
STATEMENTS OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
2003 2002 2003 2002
----------------------- -----------------------
Income:
Realized gains on closed positions from Master $ 54,322 $ 4,237,324 $ 8,963,439 $ 2,890,288
Change in unrealized gains (losses) on open positions
from Master (392,054) 5,425,319 (4,298,785) 3,754,920
Expenses allocated from Master (15,671) (14,993) (29,947) (29,834)
Interest income received from Master 69,671 92,995 138,249 203,623
------------ ------------ ------------ ------------
(283,732) 9,740,645 4,772,956 6,818,997
------------ ------------ ------------ ------------
Expenses:
Brokerage commissions 482,677 486,725 990,147 999,794
Management fees 155,438 157,212 320,434 322,935
Administrative fees 77,719 78,606 160,217 161,467
Incentive fees -- -- 178,139 --
Other expenses 9,814 8,494 19,626 17,057
------------ ------------ ------------ ------------
725,648 731,037 1,668,563 1,501,253
------------ ------------ ------------ ------------
Net income (loss) (1,009,380) 9,009,608 3,104,393 5,317,744
Redemptions - Limited Partners (952,847) (8,205,917) (2,376,556) (10,342,074)
- General Partners -- -- (102,821) --
------------ ------------ ------------ ------------
Net increase (decrease) in Partners' capital (1,962,227) 803,691 625,016 (5,024,330)
Partners' capital, beginning of period 30,408,913 29,950,949 27,821,670 35,778,970
------------ ------------ ------------ ------------
Partners' capital, end of period $ 28,446,686 $ 30,754,640 $ 28,446,686 $ 30,754,640
------------ ------------ ------------ ------------
Net asset value per Unit
(14,330.4280 and 18,780.8247 Units outstanding
at June 30, 2003 and 2002, respectively) $ 1,985.05 $ 1,637.55 $ 1,985.05 $ 1,637.55
------------ ------------ ------------ ------------
Net income (loss) per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ (71.37) $ 420.73 $ 191.87 $ 275.83
------------ ------------ ------------ ------------
See Accompanying Notes to Unaudited Financial Statements.
4
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(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,
2002, the Partnership engaged directly in the trading of commodity interests.
Effective January 26, 2001, the Partnership transferred substantially all
of its assets as a tax-free transfer to the JWH Strategic Allocation Master Fund
LLC, a New York limited liability company (the "Master"), as a non-managing
member for 42,510.5077 Units of the Master with a fair value of $42,510,508. 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, the Advisor's proprietary trading program, to invest
together in one trading vehicle. The commodity interests that are traded by the
Master are volatile and involve a high degree of market risk. Citigroup Managed
Futures LLC, formerly Smith Barney Futures Management LLC (the "General
Partner"), is the general partner of the Partnership and the managing member of
the Master. The Partnership is a non-managing member of the Master. Expenses to
investors as a result of the investment in the Master are approximately the same
and redemption rights are not affected.
As of June 30, 2003, the Partnership owns approximately 19.8% of the
Master. It is the Partnership's intention to continue to invest substantially
all of its assets in the Master. The performance of the Partnership is directly
affected by the performance of the Master. The Master's Statements of Financial
Condition, Statements of Income and Expenses and Members' Capital and Condensed
Schedules of Investments are included herein.
The Partnership's and the Master's commodity broker is Citigroup Managed
Futures LLC. On April 7, 2003, Smith Barney Futures Management LLC changed its
name to Citigroup Managed Futures LLC. Citigroup Managed Futures LLC acts as the
general partner (the "General Partner") of the Partnership. The Partnership's
commodity broker is Citigroup Global Markets Inc. ("CGM"), formerly Salomon
(Continued)
5
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(Unaudited)
(Continued)
Smith Barney Inc. CGM is an affiliate of the General Partner. The General
Partner is wholly owned by Citigroup Global Markets Holdings Inc. ("CGMHI"),
formerly Salomon Smith Barney Holdings Inc., which is the sole owner of CGM.
CGMHI is a wholly owned subsidiary of Citigroup Inc ("Citigroup"). As of June
30, 2003, all trading decisions for the Partnership are made by 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 June 30, 2003 and December 31, 2002 and the results of its
operations for the three and six months ended June 30, 2003 and 2002. 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, 2002.
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
June 30, 2003
(Unaudited)
(Continued)
The Master's Statements of Financial Condition at June 30, 2003 and
December 31, 2002, Condensed Schedules of Investments at June 30, 2003 and
December 31, 2002, and its Statements of Income and Expenses and Members'
Capital for the three and six months ended June 30, 2003 and 2002 were:
JWH Strategic Allocation Master Fund LLC
Statements of Financial Condition
(Unaudited)
June 30, December 31,
2003 2002
ASSETS:
Equity in commodity futures trading account:
Cash (restricted $23,748,054
and $15,044,312 in 2003 and
2002, respectively) $ 159,392,728 $ 81,112,283
Net unrealized (depreciation)
appreciation on open positions * (12,376,328) 9,394,955
------------- -------------
$ 147,016,400 $ 90,507,238
============= =============
LIABILITIES AND MEMBERS' CAPITAL:
Liabilities:
Accrued expenses:
Professional fees $ 76,423 $ 47,823
------------- -------------
76,423 47,823
------------- -------------
Members' Capital:
Members' capital 84,964.7936 and
60,664.1530 Units outstanding in
2003 and 2002, respectively 146,939,977 90,459,415
------------- -------------
$ 147,016,400 $ 90,507,238
============= =============
* Forward contracts included in this balance are presented gross in the
accompanying Condensed Schedules of Investments.
7
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(Unaudited)
(Continued)
JWH Strategic Allocation
Master Fund LLC
Condensed Schedule of Investments
June 30, 2003
(Unaudited)
Notional
Sector Amount Contract Fair Value
- -------------------------------------------------- ----------------------------------------------------- -----------
Currencies Unrealized depreciation on forward contracts (6.40)%
EUR (61,118,000) EUR/USD (1.04)%, Sept.17, 2003 $(1,540,632)
CHF (91,125,000) CHF/USD (1.44)%, Sept. 17, 2003 (2,118,002)
JPY (9,578,100,000) JPY/USD (1.06)%, Sept. 17, 2003 (1,554,929)
Other (2.86)% (4,200,533)
Unrealized appreciation on forward contracts 2.60% 3,818,536
--------------
Total Currencies (3.80)% (5,595,560)
--------------
Total Energy (0.68)% Futures contracts purchased (0.68)% (992,323)
--------------
Grains
Futures contracts sold 0.23% 339,250
Futures contracts purchased (0.13)% (192,156)
--------------
Total Grains 0.10% 147,094
--------------
Interest Rates Non-U.S.
Futures contracts sold 0.01% 22,360
Futures contracts purchased (1.98)% (2,909,889)
-------------
Total Interest Rates Non - U.S. (1.97)% (2,887,529)
-------------
Total Interest Rates U.S. (0.79)% Futures contracts purchased (0.79)% (1,156,856)
-----------
Total Livestock 0.01% Futures contracts purchased 0.01% 8,360
------------
Metals
Futures contracts sold (0.02)% (26,030)
Futures contracts purchased (0.54)% (796,440)
-----------
(822,470)
Unrealized depreciation on forward contracts (0.86)% (1,261,693)
Unrealized appreciation on forward contracts 0.02% 32,874
-----------
Total forward contracts (0.84)% (1,228,819)
-----------
Total Metals (1.40)% (2,051,289)
-----------
Total Softs (0.25)% Futures contracts sold (0.25)% (372,130)
-----------
Total Indices 0.36% Futures contracts purchased 0.36% 523,905
------------
Total Fair Value (8.42)% $(12,376,328)
================
Investments at % of Investments at
Country Composition Fair Value Fair Value
- --------------------------------- ------------- -----------
Australia $(1,312,180) (10.60)%
Canada (29,894) (0.24)
Germany (951,901) (7.69)
Japan 425,175 3.43
United Kingdom (1,238,847) (10.01)
United States (9,268,681) (74.89)
------------- ----------
(12,376,328) (100.00)%
============= ==========
Percentages are based on Masters' capital unless otherwise indicated
8
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(Unaudited)
JWH Strategic Allocation
Master Fund LLC
Condensed Schedule of Investments
December 31, 2002
(Unaudited)
Notional
Sector Amount Contract Fair Value
Currencies Unrealized appreciation on forward contracts 8.23%
EUR (116,850,000) EUR/USD 3.52%, March 19, 2003 $3,188,260
CHF (60,550,000) CHF/USD 1.82%, March 19, 2003 1,644,000
JPY (9,565,600,000) JPY/USD 1.51%, March 19, 2003 1,364,829
Other 1.38% 1,251,826
Unrealized depreciation on forward contracts (2.61)%(2,364,747)
----------
Total Currencies 5.62% Total forward contracts 5.62% 5,084,168
---------
Total Energy 1.22% Futures contracts purchased 1.22% 1,104,121
---------
Grains Futures contracts purchased (0.01)% (10,640)
Futures contracts sold 0.36% 329,388
---------
Total Grains 0.35% 318,748
---------
Interest Rates U.S. Futures contracts purchased 0.55% 497,228
Futures contracts sold (0.96)% (872,094)
---------
Total Interest Rates U.S. (0.41)% (374,866)
---------
Total Interest Rates Non-U.S. 2.78% Futures contracts purchased 2.78% 2,515,874
---------
Total Livestock 0.03% Futures contracts purchased 0.03% 23,980
---------
Metals Futures contracts purchased 1.01% 916,440
Unrealized appreciation on forward contracts 0.09% 79,435
Unrealized depreciation on forward contracts (0.35)% (313,193)
---------
Total forward contracts (0.26)% (233,758)
---------
Total Metals 0.75% 682,682
---------
Softs Futures contracts purchased 0.27% 246,814
Futures contracts sold (0.00)%* (2,844)
---------
Total Softs 0.27% 243,970
---------
Indices Futures contracts purchased (0.24)% (222,005)
Futures contracts sold 0.02% 18,283
---------
Total Indices (0.22)% (203,722)
---------
Total Fair Value 10.39% $9,394,955
==========
Investments % of Investments
Country Composition at Fair Value at Fair Value
Australia $220,191 2.34%
Canada 51,439 0.55
Germany 879,354 9.36
Japan 771,920 8.22
United Kingdom 195,396 2.08
United States 7,276,655 77.45
-------------------------- ------------------------
$9,394,955 100.00%
========================== ========================
Percentages are based on Members' capital unless otherwise indicated.
* Due to rounding.
9
Smith Barney Mid-West Futures Fund L.P. II
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JWH STRATEGIC ALLOCATION MASTER FUND LLC
STATEMENTS OF INCOME AND EXPENSES AND MEMBERS' CAPITAL
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ----------------------
2003 2002 2003 2002
-------------------- ----------------------
Income:
Net gains (losses) on trading of commodity
interests:
Realized gains on closed positions
and foreign currencies $ 1,863,361 $ 12,697,083 $ 31,202,079 $ 9,189,128
Change in unrealized gains (losses) on open
positions (8,596,738) 15,535,173 (21,771,283) 11,018,984
Interest Income 324,300 290,854 575,839 605,971
------------- ------------- ------------- -------------
(6,409,077) 28,523,110 10,006,635 20,814,083
------------- ------------- ------------- -------------
Expenses:
Clearing fees 109,757 66,160 172,906 127,405
Other expenses 15,000 11,250 30,000 22,500
------------- ------------- ------------- -------------
124,757 77,410 202,906 149,905
------------- ------------- ------------- -------------
Net income (loss) (6,533,834) 28,445,700 9,803,729 20,664,178
Additions 53,282,545 100,000 54,982,545 1,637,008
Redemptions (4,818,603) (8,051,349) (7,729,873) (12,780,224)
Distribution of Interest to Feeder Funds (324,300) (290,854) (575,839) (605,971)
------------- ------------- ------------- -------------
Net increase in Members' capital 41,605,808 20,203,497 56,480,562 8,914,991
Members' capital, beginning of period 105,334,169 82,389,432 90,459,415 93,677,938
------------- ------------- ------------- -------------
Members' capital, end of period $ 146,939,977 $ 102,592,929 $ 146,939,977 $ 102,592,929
------------- ------------- ------------- -------------
Net asset value per Unit
( 84,964.7936 and 78,425.1126 Units outstanding in
June 30, 2003 and 2002, respectively) $ 1,729.41 $ 1,308.16 $ 1,729.41 $ 1,308.16
------------- ------------- ------------- -------------
Net income (loss) per Unit of Member Interest $ (21.42) $ 358.80 $ 246.93 $ 269.50
------------- ------------- ------------- -------------
10
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(Unaudited)
(Continued)
2. Financial Highlights:
Changes in net asset value per Unit for the three and six months ended
June 30, 2003 and 2002 were as follows:
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- --------------------
2003 2002 2003 2002
---------------------- --------------------
Net realized and unrealized
gains(losses) * $ (59.77)$ 427.68 $ 226.99 $ 288.65
Interest income 4.74 4.13 9.18 8.43
Expenses ** (16.34) (11.08) (44.30) (21.24)
--------- --------- --------- -----
Increase(decrease) for period (71.37) 420.73 191.87 275.83
Net Asset Value per Unit,
beginning of period 2,056.42 1,216.82 1,793.18 1,361.72
--------- --------- --------- -----
Net Asset Value per Unit,
end of period $ 1,985.05 $ 1,637.55 $ 1,985.05 $ 1,637.55
========= ========= ========= =========
* Includes brokerage commissions.
** Excludes brokerage commissions.
11
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(Unaudited)
(Continued)
Financial Highlights continued:
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ------------------
2003 2002 2003 2002
---------------------- ------------------
Ratio to average net assets: ***
Net investment loss before
incentive fees **** (8.9)% (9.0)% (9.1)% (8.6)%
==== ==== ==== ===
Operating expenses 9.9% 10.3% 10.0% 9.9%
Incentive fees 0.0% 0.0% 1.2% 0.0%
---- ---- ---- ---
Total expenses 9.9% 10.3% 11.2% 9.9%
==== ==== ==== ====
Total return:
Total return before incentive
fees (3.5)% 34.6% 11.4% 20.3%
Incentive fees 0.0% 0.0% (0.7)% 0.0%
---- ---- ---- ---
Total return after incentive fees (3.5)% 34.6% 10.7% 20.3%
==== ==== ==== ====
*** Annualized
**** Interest income less total expenses (exclusive of incentive fees)
The above ratios may vary for individual investors based on the timing of
capital transactions during the period.
12
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(Unaudited)
(continued)
Financial Highlights of the Master:
Changes in net asset value per Unit for the three and six months ended June
30, 2003 and 2002 were as follows:
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ------------------
2003 2002 2003 2002
---------------------- ------------------
gains(losses) * $ (25.68)$ 355.36 $ 238.76 $ 262.61
Interest income 4.50 3.58 8.66 7.16
Expenses ** (0.24) (0.14) (0.49) (0.27)
--------- --------- --------- ---------
Increase(decrease) for period (21.42) 358.80 246.93 269.50
Distributions (4.50) (3.58) (8.66) (7.16)
Net Asset Value per Unit,
beginning of period 1,755.34 952.94 1,491.15 1,045.82
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $ 1,729.42 $ 1,308.16 $ 1,729.42 $ 1,308.16
========= ========= ========= =========
* Includes brokerage commissions.
** Excludes brokerage commissions.
13
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(Unaudited)
(Continued)
Financial Highlights of the Master:
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
2003 2002 2003 2002
----------------- -----------------
Ratio to average net assets: *
Net investment income 0.6% 0.9% 0.6% 2.0%
Operating expenses ** 0.1% 0.1% 0.1% 0.1%
Total return (1.2)% 37.7% 16.6% 25.8%
* Annualized
** Excludes clearing fees
The above ratios may vary for individual investors based on the timing of
capital transactions during the year.
14
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(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 members' Capital and are discussed in Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations.
The respective Customer Agreements between the Partnership and CGM and the
Master and CGM give the Partnership and the Master, respectively, 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 values during the six months ended June 30, 2003 and
December 31, 2002, based on a monthly calculation, were $6,084,708 and
$9,163,093, respectively. The fair value of these commodity interests, including
options thereon, if applicable, at June 30, 2003 and December 31, 2002, was
$(12,376,328) and $9,394,955, respectively.
4. Financial Instrument Risk:
The Partnership, through the Partnership's investment in 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.
In the normal course of its business the Master is party to financial
instruments with off-balance sheet risk, including derivative financial
instruments and derivative commodity instruments. These financial instruments
may include forwards, futures and options whose values are 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
15
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(Unaudited)
(Continued)
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 as unrealized appreciation in the statement of
financial condition and not represented by the contract or notional amount of
the instruments. The Master has credit risk and concentration risk because the
sole counterparty or broker with respect to the Master's assets is CGM.
The General Partner monitors and controls 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 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.
16
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
June 30, 2003
(Unaudited)
(Continued)
The majority of these instruments mature within one year of June 30, 2003.
However, due to the nature of the Master's business, these instruments may not
be held to maturity.
17
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, cash and interest receivable. The
Master does not engage in the sale of goods or services. Its only assets are its
investments in commodity futures and cash. 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 second
quarter of 2003.
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 six months ended June 30, 2003, Partnership capital increased 2.2%
from $27,821,670 to $28,446,686. This increase was attributable to net income
from operations of $3,104,393 which was partially offset by the redemption of
1,134.8656 Units of Limited Partnership Interest resulting in an outflow of
$2,376,556 and 50.0000 General Partner Unit equivalents totaling $102,821.
Future redemptions can impact the amount of funds available for investment in
the Master in subsequent periods.
The Master's capital consists of the capital contributions of it's members
as increased or decreased by realized and/or unrealized gains or losses on
commodity futures trading, expenses, interest income, redemptions of Units and
distributions of profits, if any.
For the six months ended June 30, 2003 the Master's capital increased 62.4%
from $90,459,415 to $146,939,977. This increase was attributable to net income
from operations of $9,803,729, coupled with additional sales of 28,614.4521
Units totaling $54,982,545, which was partially offset by the redemption of
4,313.8117 Units resulting in an outflow of $7,729,873 and a distribution of
$575,839 paid to the feeders. Future redemptions can impact the amount of funds
available for investments in commodity contract positions in subsequent periods.
Critical Accounting Policies
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, disclosures of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
18
during the reporting period. Actual results could differ from these estimates.
All commodity interests (including derivative financial instruments and
derivative commodity instruments) are used for trading purposes. The commodity
interests are recorded on trade date and open contracts are recorded in the
statement of financial condition at fair value on the last business day of the
period, which represents market value for those commodity interests for which
market quotations are readily available or other measures of fair value deemed
appropriate by management of the General Partner for those commodity interests
and foreign currencies for which market quotations are not readily available.
Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars at the exchange rates prevailing on the last
business day of the period. Realized gains (losses) and changes in unrealized
values on open positions are recognized in the period in which the contract is
closed or the changes occur and are included in net gains (losses) on trading of
commodity interests.
Foreign currency contracts are those contracts where the Partnership agrees
to receive or deliver a fixed quantity of foreign currency for an agreed-upon
price on an agreed future date. Foreign currency contracts are valued daily, and
the Partnership's net equity therein, representing unrealized gain or loss on
the contracts as measured by the difference between the forward foreign exchange
rates at the date of entry into the contracts and the forward rates at the
reporting dates, is included in the statement of financial condition. Realized
gains (losses) and changes in unrealized values on foreign currency contracts
are recognized in the period in which the contract is closed or the changes
occur and are included in the statements of income and expenses and partners'
capital.
Results of Operations
During the Partnership's second quarter of 2003, the net asset value per
unit decreased 3.5% from $2,056.42 to $1,985.05 as compared to an increase of
34.6% in the second quarter of 2002. The Partnership experienced a net trading
loss before brokerage commissions and related fees in the second quarter of 2003
of $283,732. Losses were primarily attributable to the Master's trading of
commodity futures in currencies, energy, grains, non-U.S. interest rates,
livestock, metals and softs and were partially offset by gains in U.S. interest
rates and indices. The Partnership experienced a net trading gain before
brokerage commissions and related fees in the second quarter of 2002 of
$9,740,645. Gains were primarily attributable to the Master's trading of
19
commodity futures in currencies, grains, non-U.S. interest rates, indices and
livestock and were partially offset by losses in energy, U.S. interest rates,
softs and metals.
Commodity futures markets are highly volatile. The potential for broad and
rapid price fluctuations increases the risks involved in commodity trading, but
also increases the possibility of profit. The profitability of the Partnership
(and Master) depends on the existence of major price trends and the ability of
the Advisor to correctly identify 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 (and Master) expect 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. CGM may continue to maintain the Master's assets in cash and/or place all
of the Master's assets in 90-day Treasury bills and pay the Partnership 80% of
the interest earned on the Treasury bills purchased. CGM will retain 20% of any
interest earned on Treasury bills. Interest income for the three and six months
ended June 30, 2003 decreased by $23,324 and $65,374, respectively, as compared
to the corresponding periods in 2002. The decrease in interest income is
primarily due to a decrease in interest rates during the
three and six months ended June 30, 2003 as compared to 2002.
Brokerage commissions are calculated on the Partnership's adjusted net
asset value on the last day of each month and are affected by trading
performance 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 six months ended June 30, 2003 decreased by $4,048 and $9,647,
respectively, as compared to the corresponding periods in 2002. The decrease in
brokerage commissions is due to average lower net assets during the three and
six months ended June 30, 2003 as compared to 2002.
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
and redemptions. Management fees for the three and six months ended June 30,
2003 decreased by $1,774 and $2,501, respectively, as compared to the
corresponding periods in 2002. The decrease in management fees is due to average
lower net assets during the three and six months ended June 30, 2003 as compared
to 2002.
20
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 and redemptions. Administrative fees for the
three and six months ended June 30, 2003 decreased by $887 and $1,250,
respectively, as compared to the corresponding periods in 2002. The decrease in
administrative fees is due to average lower net assets during the three and six
months ended June 30, 2003 as compared to 2002.
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. Trading performance for the six months ended
June 30, 2003 resulted in incentive fees of $178,139. There were no incentive
fees earned for the six months ended June 30, 2002.
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. 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 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
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 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
interval. 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.
22
The following table indicates the trading Value at Risk associated with the
Master's open positions by market category as of June 30, 2003 and the highest
and lowest value at any point during the three and six months ended June 30,
2003. All open position trading risk exposures of the Master have been included
in calculating the figures set forth below. As of June 30, 2003, the Master's
total capitalization was $146,939,977. 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, 2002.
June 30, 2003
(Unaudited)
Three Months Ended Year to Date
--------------------- ----------------------------
% of Total June 30, 2003 High Low
Market Sector Value at Risk Capitalization High Low Value at Risk Value at Risk
- ------------------------------------------------------------------------------------------------------------------------------------
Currencies:
- - OTC Contracts $ 4,803,043 3.27% $ 7,765,844 $ 2,209,573 $ 7,765,844 $ 1,910,405
Energy 5,412,800 3.68% 6,533,500 1,889,600 6,533,500 1,837,000
Grains 584,350 0.40% 759,375 165,600 759,375 152,175
Interest Rates U.S. 1,489,050 1.01% 2,175,150 419,700 2,175,150 419,700
Interest Rates Non-U.S 3,737,161 2.54% 6,106,625 1,529,251 6,106,625 1,228,573
Livestock 54,600 0.04% 54,600 10,200 54,600 9,350
Metals:
-- Exchange Traded
Contracts 776,000 0.53% 1,070,000 198,000 1,070,000 198,000
- OTC Contracts 440,425 0.30% 734,175 175,800 734,175 175,800
Softs 763,277 0.52% 954,065 298,687 954,065 295,046
Indices 2,860,447 1.95% 3,009,489 709,998 3,009,489 709,998
----------- -------
Total $20,921,153 14.24%
=========== ========
23
Item 4. Controls and Procedures
Based on their evaluation of the Partnership's disclosure controls and
procedures as of June 30, 2003, the Chief Executive Officer and Chief Financial
Officer of the General Partner have concluded that such controls and procedures
are effective.
There were no significant changes in the Partnership's internal controls or
in other factors that could significantly affect such controls subsequent to the
date of their evaluation.
24
PART II OTHER INFORMATION
Item 1. Legal Proceedings -
The following information supplements and amends our discussion set forth
under Part I, Item 3 "Legal Proceedings" in the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 2002 and under Part II, Item 1
"Legal Proceedings" in the Partnership's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2003.
Enron
On July 28, 2003, Citigroup entered into a final settlement agreement with the
Securities and Exchange Commission ("SEC") to resolve the SEC's outstanding
investigations into Citigroup transactions with Enron and Dynegy. Pursuant to
the settlement, Citigroup has, among other terms, (1) consented to the entry of
an administrative cease and desist order, which bars Citigroup from committing
or causing violations of provisions of the federal securities laws, and (2)
agreed to pay $120 million ($101.25 million allocable to Enron and $18.75
million allocable to Dynegy). Citigroup entered into this settlement without
admitting or denying any wrongdoing or liability, and the settlement does not
establish wrongdoing or liability for purposes of any other proceeding. On July
28, 2003, Citibank, N.A. entered into an agreement with the Office of the
Comptroller of the Currency ("OCC") and Citigroup entered into an agreement with
the Federal Reserve Bank of New York ("FED") to resolve their inquiries into
certain of Citigroup's transactions with Enron. Pursuant to the agreements,
Citibank and Citigroup have agreed to submit plans to the OCC and FED,
respectively, regarding the handling of complex structured finance transactions.
Also on July 28, 2003, Citigroup entered into a settlement agreement with the
Manhattan District Attorney's Office to resolve its investigation into certain
of Citigroup's transactions with Enron; pursuant to the settlement, Citigroup
has agreed to pay $25.5 million and to abide by its agreements with the SEC, OCC
and FED.
Additional Actions Several additional actions, previously identified, have been
consolidated with the Newby action and are stayed, except with respect to
certain discovery, until after the Court's decision on class certification.
Also, in July 2003, an action was brought by purchasers in the secondary market
of Enron bank debt against Citigroup, Citibank, Citigroup Global Markets Inc.
("CGM"), and others, alleging claims for common law fraud, conspiracy, gross
negligence, negligence and breach of fiduciary duty.
Research
On June 23, 2003, the West Virginia Attorney General filed an action against CGM
and nine other firms that were parties to the April 28, 2003 settlement with the
SEC, the National Association of Securities Dealers ("NASD"), the New York Stock
Exchange ("NYSE") and the New York Attorney General (the "Research Settlement").
The West Virginia Attorney General alleges that the firms violated the West
Virginia Consumer Credit and Protection Act in connection with their research
activities and seeks monetary penalties.
25
In May 2003, the SEC, NYSE and NASD issued a subpoena and letters to CGM
requesting documents and information with respect to their continuing
investigation of individuals in connection with the supervision of the research
and investment banking departments of CGM. Other parties to the Research
Settlement have received similar subpoena and letters.
In April 2003, to effectuate the Research Settlement, the SEC filed a Complaint
and Final Judgment in the United States District Court for the Southern District
of New York. The Final Judgment has not yet been entered by the court, and the
court has asked for certain additional information. Also in April 2003, the NASD
accepted the Letter of Acceptance, Waiver and Consent entered into with CGM in
connection with the Research Settlement; and in May 2003, the NYSE advised CGM
that the Hearing Panel's Decision, in which it accepted the Research Settlement,
had become final. CGM is currently in discussion with various of the states with
respect to completion of the state components of the Research Settlement.
Payment will be made in conformance with the payment provisions of the Final
Judgment.
WorldCom, Inc.
On May 19, 2003, a motion to dismiss an amended complaint in the WorldCom, Inc.
Securities Litigation was denied.
Dynegy Inc.
On June 6, 2003, the complaint in a pre-existing putative class action pending
in the United States District Court for the Southern District of Texas, brought
by purchasers of publicly traded debt and equity securities of Dynegy Inc., was
amended to add Citigroup, Citibank and CGM, as well as other banks, as
defendants. The plaintiffs allege violations of the federal securities laws
against the Citigroup defendants.
26
Adelphia Communications Corporation
- -----------------------------------
On July 6, 2003, an adversary proceeding was filed by the Official Committee of
Unsecured Creditors on behalf of Adelphia against certain lenders and investment
banks, including CGM, Citibank, N.A., Citicorp USA, Inc., and Citigroup
Financial Products, Inc. (together, the Citigroup Parties). The Complaint
alleges that the Citigroup Parties and numerous other defendants committed acts
in violation of the Bank Company Holding Act and the common law. The complaint
seeks equitable relief and an unspecified amount of compensatory and punitive
damages.
In addition, Salomon Smith Barney Inc. (predecessor of Citigroup Global Markets
Inc.) is among the underwriters named in numerous civil actions brought to date
by investors in Adelphia debt securities in connection with Adelphia securities
offerings between September 1997 and October 2001. Three of the complaints also
assert claims against Citigroup and Citibank, N.A. All of the complaints allege
violations of federal securities laws, and certain of the complaints also allege
violations of state securities laws and the common law. The complaints seek
unspecified damages.
Other
MKP Master Fund, LDC et al. v. Salomon Smith Barney Inc.
- --------------------------------------------------------
In July 2003, CGM's motion for summary judgment was granted.
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. The exhibits required to be filed by Item 601 of Regulation S-K are
incorporated herein by reference to the exhibit index of the Partnership's
Report on Form 10-K for the period ended December 31, 2002.
(a) Exhibit - 31.1 - Rule 13a-14(a)/15d-14(a) Certifications
(Certifications of President and Director)
Exhibit - 31.2 - Rule 13a-14(a)/15d-14(a) Certifications
(Certifications of hief financial Officer and Director)
Exhibit - 32.1 - Section 1350 Certifications (Certification of
President and Director).
Exhibit - 32.2 - Section 1350 Certifications (Certification of
Chief Financial Officer and Director).
(b) Reports on Form 8-K - None
27
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: Citigroup Managed Futures LLC
(General Partner)
By: /s/ David J. Vogel_
David J. Vogel, President and Director
Date: 8/14/03
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: Citigroup Managed Futures LLC
(General Partner)
By: /s/ David J. Vogel
David J. Vogel, President and Director
Date: 8/14/03
By: /s/ Daniel R. McAuliffe, Jr.
Daniel R. McAuliffe, Jr.
Chief Financial Officer and
Director
Date: 8/14/03
28
Exhibit 31.1
CERTIFICATIONS
I, David J. Vogel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Smith Barney Mid-West
Futures Fund L.P. II (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition and results of operations of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
29
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: August 14, 2003
/s/ David J. Vogel
-----------------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
30
Exhibit 31.2
CERTIFICATIONS
I, Daniel R. McAuliffe, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Smith Barney Mid-West
Futures Fund L.P. II (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition and results of operations of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
31
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: August 14, 2003
/s/ Daniel R. McAuliffe, Jr.
-----------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
32
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Smith Barney Mid-West Futures
Fund L.P. II (the "Partnership") on Form 10-Q for the period ending June 30,
2003 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, David J. Vogel, President and Director of Citigroup Managed
Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Partnership.
/s/ David J. Vogel
David J. Vogel
Citigroup Managed Futures LLC
President and Director
August 14, 2003
33
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Smith Barney Mid-West Futures Fund
L.P. II (the "Partnership") on Form 10-Q for the period ending June 30, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Daniel R. McAuliffe, Jr., Chief Financial Officer and Director of
Citigroup Managed Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Partnership.
/s/ Daniel R. McAuliffe, Jr.
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
August 14, 2003
34