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, 2004
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 13-4224248
- --------------------------------------------------------------------------------
(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 X No
SMITH BARNEY MID-WEST FUTURES FUND L.P. II
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
March 31, 2004 and December 31,
2003 (unaudited). 3
Statements of Income and Expenses
and Partners' Capital for the three
months ended March 31, 2004
and 2003 (unaudited). 4
Statements of Cash Flows for the three
months ended March 31, 2004 and 2003
(unaudited). 5
Notes to Financial Statements
including the Financial Statements
of JWH Strategic Allocation Master
Fund LLC (unaudited). 6 - 16
Item 2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations 17 - 19
Item 3 Quantitative and Qualitative
Disclosures about Market Risk 20 - 21
Item 4 Controls and Procedures 22
PART II - Other Information 23
2
PART I
Item 1. Financial Statements
Smith Barney Mid-West Futures Fund L.P. II
Statements of Financial Condition
(Unaudited)
March 31, December 31,
2004 2003
----------------- -----------------
ASSETS:
Investment in Master, at fair value $27,204,696 $ 26,278,490
Cash 29,109 18,291
----------------- -----------------
$27,233,805 $ 26,296,781
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued expenses:
Commissions $ 136,169 $ 131,484
Management fees 45,108 43,570
Administrative fees 22,554 21,785
Other 32,924 23,126
Redemptions payable 136,977 222,481
----------------- -----------------
373,732 442,446
----------------- -----------------
Partners' capital:
General Partner, 401.3070 Unit equivalents outstanding
in 2004 and 2003 780,919 740,829
Limited Partners, 13,401.8218 and
13,603.9978 Redeemable Units of Limited
Partnership Interest outstanding in 2004 and
2003, respectively 26,079,154 25,113,506
----------------- -----------------
26,860,073 25,854,335
----------------- -----------------
$27,233,805 $26,296,781
================= =================
See Accompanying Notes to Unaudited 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,
--------------------------------
2004 2003
-------------- -------------
Income:
Realized gains on closed positions
from Master $ 3,692,789 $ 8,909,117
Change in unrealized gains/losses on open
positions from Master (1,688,137) (3,906,731)
Expenses allocated from Master (21,785) (14,285)
Interest income allocated from Master 46,278 68,578
------------ ------------
2,029,145 5,056,679
------------ ------------
Expenses:
Brokerage commissions 414,424 507,461
Management fees 137,304 164,996
Administrative fees 68,652 82,498
Incentive fees -- 178,139
Other expenses 11,198 9,812
------------ ------------
631,578 942,906
------------ ------------
Net income 1,397,567 4,113,773
Redemptions - Limited Partners (391,829) (1,423,709)
General Partner -- (102,821)
------------ ------------
Net increase in Partners' capital 1,005,738 2,587,243
Partners' capital, beginning of period 25,854,335 27,821,670
------------ ------------
Partners' capital, end of period $ 26,860,073 $ 30,408,913
============ ============
Net asset value per Redeemable
Unit (13,803.1288 and 14,837.3419
Redeemable Units outstanding at
March 31, 2004 and 2003, respectively) $ 1,945.94 $ 2,056.42
============ ============
Net income per Redeemable Unit of Limited
Partnership Interest and General Partner Unit
equivalent $ 99.90 $ 263.24
============ ============
See Accompanying Notes to Unaudited Financial Statements
4
Smith Barney Mid-West Futures Fund L.P. II
Statements of Cash Flows
March 31 2004
(Unaudited)
Three months ended
March 31,
-------------------------
2004 2003
--------- ----------
Cash flows from operating activities:
Net Income $ 1,397,567 $ 4,113,773
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in operating assets and liabilities:
Investment in Master, at Fair Value (926,206) (3,607,165)
Accrued expenses:
Increase in commissions 4,685 18,097
Increase in management fees 1,538 5,986
Increase in administrative fees 769 2,993
Increase in incentive fees -- 178,139
Increase in other 9,798 9,813
Increase (decrease) in redemptions payable (85,504) 817,052
----------- -----------
Net cash provided by operating activities 402,647 1,538,688
----------- -----------
Cash flows from financing activities
Payments for redemptions (391,829) (1,526,530)
----------- -----------
Net cash used in financing activities (391,829) (1,526,530)
----------- -----------
Net change in cash 10,818 12,158
Cash, at beginning of period 18,291 19,882
----------- -----------
Cash, at end of period $ 29,109 $ 32,040
=========== ===========
See Accompanying Notes to Unaudited Financial Statements
5
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2004
(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 allocated substantially all of
its capital to the JWH Strategic Allocation Master Fund LLC, a New York limited
liability company (the "Master"). With this cash, the Partnership purchased
42,510.5077 Redeemable 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, JWH's proprietary trading program, to invest together in one
trading vehicle. Citigroup Managed Futures LLC, formerly Smith Barney Futures
Management LLC, acts as the general partner (the "General Partner") of the
Partnership. The General Partner is managing member of the Master. Individual
and pooled accounts currently managed by JWH, including the Partnership
(collectively, the "Feeder Funds"), are permitted to be a non-managing member of
the Master. The General Partner and JWH believe that trading through this
master/feeder structure should promote efficiency and economy in the trading
process. Expenses to investors as a result of the investment in the Master are
approximately the same and redemption rights are not affected.
As of March 31, 2004, the Partnership owns approximately 16.0% 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, Statements of
Cash Flows and Condensed Schedules of Investments are included herein.
The Partnership's and Master's commodity broker is Citigroup Global Markets
Inc. ("CGM"), formerly Salomon 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.
As of March 31, 2004, all trading decisions for the Partnership are made by
the Advisor.
6
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2004
(Unaudited)
(Continued)
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, 2004 and December 31, 2003 and the results of its
operations and cash flows for the three months ended March 31, 2004 and 2003.
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, 2003.
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.
Certain prior period amounts have been reclassified to conform to current
period presentation.
7
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2004
(Unaudited)
(Continued)
The Master's Statements of Financial Condition as of March 31, 2004 and
December 31, 2003, Condensed Schedules of Investments at March 31, 2004 and
December 31, 2003, its Statements of Income and Expenses and Members' Capital
for the three months ended March 31, 2004 and 2003 and its Statements of Cash
Flows for the three months ended March 31, 2004 and 2003 were:
JWH Strategic Allocation Master Fund LLC
Statements of Financial Condition
(Unaudited)
March 31, December 31,
2004 2003
----------------- -----------------
Assets:
Equity in commodity futures trading account:
Cash (restricted $37,160,523 and $31,852,745 in
2004 and 2003, respectively) $168,131,075 $131,979,502
Net unrealized appreciation on open futures positions 14,304,573 1,477,101
Unrealized appreciation on open forward contracts 10,233,413 13,496,013
Interest receivable 123,389 80,717
----------------- -----------------
$192,792,450 $147,033,333
================= =================
Liabilities and Member's Capital:
Liabilities:
Unrealized depreciation on open forward contracts $22,774,157 $1,799,594
Accrued expenses:
Professional fees 73,461 76,405
Distribution payable 123,389 80,717
----------------- -----------------
22,971,007 1,956,716
----------------- -----------------
Members' capital:
Members' capital 93,962.1391 and 86,435.1829 Units
outstanding in 2004 and 2003, respectively 169,821,443 145,076,617
----------------- -----------------
$192,792,450 $147,033,333
================= =================
8
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2004
(Unaudited)
(continued)
JWH Strategic Allocation
Master Fund LLC
Condensed Schedule of Investments
March 31, 2004
(Unaudited)
Number of
Sector Contracts Contract Fair Value
- -----------------------------------------------------------------------------------------------------------------------
Currencies
Unrealized depreciation on
forward contracts (12.94)%
JPY (27,208,156,617) JPY/USD - (9.96)% June 16, 2004 $ (16,906,807)
Other - (2.98)% (5,073,248)
--------------
(21,980,055)
Unrealized appreciation on forward
contracts 5.68% 9,638,675
--------------
Total Currencies (7.26)% (12,341,380)
--------------
Total Energy 1.03% Futures contracts sold 1.03% 1,747,388
--------------
Total Grains 2.26% Futures contracts purchased 2.26% 3,839,807
--------------
Total Interest Rates Non - U.S. 1.45% Futures contracts purchased 1.45% 2,461,567
--------------
Total Interest Rates 2.03% Futures contracts purchased 2.03% 3,451,804
--------------
Total Livestock 0.06% Futures contracts purchased 0.06% 96,510
-------------
Metals
Futures contracts purchased 1.38% 2,342,255
Unrealized depreciation on forward
contracts (0.47)% (794,102)
Unrealized appreciation on forward
contracts 0.35% 594,738
--------------
Total forward contracts (0.12)% (199,364)
--------------
Total Metals 1.26% 2,142,891
--------------
Softs Futures contracts sold 0.26% 448,789
Futures contracts purchased (0.01)% (18,774)
--------------
Total Softs 0.25% 430,015
--------------
Indices
Futures contracts sold (0.43)% (722,612)
Futures contracts purchased 0.39% 657,839
--------------
Total Indices (0.04)% (64,773)
--------------
Total Fair Value 1.04% $ 1,763,829
==============
% of Investments at Fair
Country Composition Investments at Fair Value Value
- ------------------------------------ ------------------------------- ------------------------------
Australia $ (25,220) (1.43)%
Canada 14,793 0.84
Germany 3,130,948 177.51
Japan (125,637) (7.12)
United Kingdom (259,821) (14.73)
United States (971,234) (55.07)
------------------------------- --------------------
$ 1,763,829 100.00%
=============================== ====================
Percentages are based on Members' capital unless otherwise indicated.
9
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2004
(Unaudited)
(continued)
JWH Strategic Allocation
Master Fund LLC
Condensed Schedule of Investments
December 31, 2003
(Unaudited)
Sector Contract Fair Value
- ----------------------------------------------------------------------------------- -----------------
Currencies Unrealized appreciation on forward contracts 7.66% $11,113,632
Unrealized depreciation on forward contracts (1.22)% (1,771,985)
------------------
Total Currencies 6.44% 9,341,647
------------------
Total Energy 0.90% Futures contracts sold 0.90% 1,299,873
------------------
Total Grains 0.22% Futures contracts purchased 0.22% 318,552
------------------
Interest Rates Non-U.S.
Futures contracts sold (0.08)% (121,386)
Futures contracts purchased (0.01)% (8,299)
------------------
Total Interest Rates Non-U.S. (0.09)% (129,685)
------------------
Total Interest Rates 0.01% Futures contracts purchased 0.01% 19,950
------------------
Livestock
Futures contracts sold 0.02% 27,750
Futures contracts purchased (0.46)% (671,770)
------------------
Total Livestock (0.44)% (644,020)
------------------
Metals
Futures contracts purchased 1.40% 2,028,135
Unrealized depreciation on forward contracts (0.02)% (27,609)
Unrealized appreciation on forward contracts 1.64% 2,382,381
------------------
Total forward contracts 1.62% 2,354,772
------------------
Total Metals 3.02% 4,382,907
------------------
Softs
Futures contracts sold (0.15)% (212,200)
Futures contracts purchased (0.59)% (854,280)
------------------
Total Softs (0.74)% (1,066,480)
------------------
Indices
Futures contracts sold (0.85)% (1,230,359)
Futures contracts purchased 0.61% 881,135
------------------
Total Indices (0.24)% (349,224)
------------------
Total Fair Value 9.08% $13,173,520
==================
Investments % of Investments
Country Composition at Fair Value at Fair Value
- --------------------------------- -------------------------- -------------------------
Australia $(106,707) (0.81)%
Canada 90,406 0.69
Germany 468,304 3.55
Japan (1,350,542) (10.25)
United Kingdom 2,351,597 17.85
United States 11,720,462 88.97
-------------------------- -------------------------
$13,173,520 100.00%
========================== =========================
Percentages are based on Members' capital unless otherwise indicated.
10
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
(Unaudited)
(continued)
JWH Strategic Allocation Master Fund LLC
Statements of Income and Expenses and Members' Capital
(Unaudited)
Three months ended
March 31,
--------------------------
2004 2003
--------------------------
Income:
Net gains (losses) on trading of commodity
interests:
Realized gains on closed positions
and foreign currencies $ 22,880,670 $ 29,338,717
Change in unrealized losses on open
positions (11,409,691) (13,174,544)
Interest Income 317,375 251,539
------------- -------------
11,788,354 16,415,712
------------- -------------
Expenses:
Clearing fees 116,700 63,149
Other expenses 15,000 15,000
------------- -------------
131,700 78,149
------------- -------------
Net income 11,656,654 16,337,563
Additions 16,896,500 1,700,000
Redemptions (3,490,953) (2,911,270)
Distribution of interest to feeder funds (317,375) (251,539)
------------- -------------
Net increase in Members' capital 24,744,826 14,874,754
Members' capital, beginning of period 145,076,617 90,459,415
------------- -------------
Members' capital, end of period $ 169,821,443 $ 105,334,169
============= =============
Net asset value per Unit
(93,962.1391 and 60,007.7063 Units
outstanding in March 31, 2004 and 2003,
respectively) $ 1,807.34 $ 1,755.34
------------- -------------
Net income per Unit of Member Interest $ 132.36 $ 268.35
------------- -------------
11
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
(Unaudited)
(Continued)
JWH Strategic Allocation Master Fund LLC.
Statements of Cash Flows
March 31, 2004
(Unaudited)
Three months ended
March 31,
--------------------------
2004 2003
--------------------------
Cash flows from operating activities:
Net Income $ 11,656,654 $ 16,337,563
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in operating assets and liabilities:
Net unrealized appreciation (depreciation) on open futures
positions (12,827,472) 5,280,517
Unrealized appreciation on open forward contracts 3,262,600 4,549,759
Increase in interest receivable (42,672) (15,135)
Unrealized depreciation on open forward contracts 20,974,563 3,344,268
Accrued expenses:
Increase (decrease) in professional fees (2,944) 15,000
Increase in distribution payable 42,672 15,135
------------- -------------
Net cash provided by operating activities 23,063,401 29,527,107
------------- -------------
Cash flows from financing activities:
Proceeds from additions 16,896,500 1,700,000
Payments for redemptions (3,490,953) (2,911,270)
Distribution of interest to feeder funds (317,375) (251,539)
------------- -------------
Net cash provided by (used in) financing activities 13,088,172 (1,462,809)
------------- -------------
Net change in cash 36,151,573 28,064,298
Cash, at beginning of period 131,979,502 81,112,283
------------- -------------
Cash, at end of period $ 168,131,075 $ 109,176,581
============= =============
12
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2004
(Unaudited)
(Continued)
2. Financial Highlights:
Changes in Net Asset Value per Redeemable Units of Partnership Interest for
the three months ended March 31, 2004 and 2003 were as follows:
Three Months Ended
March 31,
-------------------------
2004 2003
-------------------------
Net realized and unrealized gains* $ 112.34 $ 286.76
Interest income 3.32 4.44
Expenses** (15.76) (27.96)
--------- ---------
Increase for the period 99.90 263.24
Net Asset Value per Redeemable Unit, beginning of period 1,846.04 1,793.18
--------- ---------
Net Asset Value per Redeemable Unit, end of period $ 1,945.94 $ 2,056.42
========= =========
Ratio to average net assets: ***
Net investment loss before incentive fees**** (9.1)% (9.3)%
========= =========
Operating expenses 9.8% 10.2%
Incentive fees -- 2.3%
--------- ---------
Total expenses 9.8% 12.5%
========= =========
Total return:
Total return before incentive fees 5.4% 15.3%
Incentive fees -- (0.6)%
--------- ---------
Total return after incentive fees 5.4% 14.7%
========= =========
The above ratios may vary for individual investors based on the timing of
capital transactions during the period. Additionally, there ratios are
calculated for the Limited Partner class using the Limited Partners' share of
income, expenses and average net assets.
* Includes brokerage commissions and expenses allocated from Master.
** Excludes brokerage commissions and expenses allocated from Master.
*** Annualized (other than incentive fees)
**** Interest income less total expenses (exclusive of incentive fees)
13
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2004
(Unaudited)
(continued)
Financial Highlights of the Master:
Changes in Net Asset Value per Unit of Member Interest for the three months
ended March 31, 2004 and 2003 were as follows:
Three Months Ended
March 31,
------------------------
2004 2003
-------------------------
Net realized and unrealized gains * $ 129.06 $ 264.44
Interest income 3.46 4.16
Expenses ** (0.16) (0.25)
--------- ---------
Increase for the period 132.36 268.35
Distributions (3.46) (4.16)
Net Asset Value per Unit, beginning of period 1,678.44 1,491.15
--------- ---------
Net Asset Value per Unit, end of period $ 1,807.34 $ 1,755.34
========= =========
Ratio to average net assets: ***
Net investment income**** 0.5% 0.7%
Operating expenses 0.3% 0.3%
Total return 7.7% 18.0%
========= =========
The above ratios may vary for individual investors based on the timing of
capital transactions during the period.
* Includes clearing fees
** Excludes clearing fees
*** Annualized
**** Interest income less total expenses
14
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2004
(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 statements 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 on open futures positions.
All of the commodity interests owned by the Master are held for trading
purposes. The average fair values during the three and twelve months ended March
31, 2004 and December 31, 2003, based on a monthly calculation, were $16,289,739
and $7,057,885, respectively. The fair value of these commodity interests,
including options thereon, if applicable, at March 31, 2004 and December 31,
2003, were $1,763,829 and $13,173,520, respectively. . Fair values for exchange
traded commodity futures and options are based on quoted market prices for those
futures and options. Fair values for all other financial instruments for which
market quotations are not readily available are based on calculations approved
by the General Partner.
4. Financial Instrument Risk:
In the normal course of its business, 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. 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 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.
15
Smith Barney Mid-West Futures Fund L.P. II
Notes to Financial Statements
March 31, 2004
(Unaudited)
(Continued)
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
Partnership's/Master's risk of loss in the event of counterparty default is
typically limited to the amounts recognized as unrealized appreciation in the
statements of financial condition and not represented by the contract or
notional amount of the instruments. The Partnership, through the Partnership's
investment in the Master, has concentration risk because the sole counterparty
or broker with respect to the Master's assets is CGM.
The General Partner monitors and controls the Partnership's/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
Partnership/Master are subject. These monitoring systems allow the General
Partner to statistically analyze actual trading results with risk-adjusted
performance indicators and correlation statistics. In addition, on-line
monitoring systems provide account analysis of futures, forwards and options
positions by sector, margin requirements, gain and loss transactions and
collateral positions.
The majority of these instruments mature within one year of March 31, 2004.
However, due to the nature of the Partnership's/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 Partnership does not engage in the sale of goods or services. Its only
assets are its investment in the Master and cash. 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 Master. While substantial losses could lead to a
decrease in liquidity, no such losses occurred in the first quarter of 2004.
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 Redeemable Units and distributions of profits,
if any.
For the three months ended March 31, 2004, Partnership capital increased
3.9% from $25,854,335 to $26,860,073. This increase was attributable to net
income from operations of $1,397,567, which was partially offset by the
redemption of 202.1760 Redeemable Units of Limited Partnership Interest
resulting in an outflow of $391,829. 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 Redeemable
Units and distributions of profits, if any.
For the three months ended March 31, 2004 the Master's capital increased
17.1% from $145,076,617 to $169,821,443. This increase was attributable to net
income from operations of $11,656,654, coupled with additional sales of
9,530.6470 Redeemable Units totaling $16,896,500, which was partially offset by
the redemption of 2,003.6908 Redeemable Units resulting in an outflow of
$3,490,953 and a distribution of interest of $317,375 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, revenues and expenses, and related disclosures of
contingent assets and liabilities at the date of the financial statements and
accompanying notes. 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
statements 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
17
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 first quarter of 2004, the Net Asset Value per
Redeemable Unit increased 5.4% from $1,846.04 to $1,945.94 as compared to an
increase of 14.7% in the first quarter of 2003. The Partnership experienced a
net trading gain before brokerage commissions and related fees in the first
quarter of 2004 of $2,004,652. Gains were primarily attributable to the Master's
trading of commodity futures in energy, grains, U.S. and non-U.S. interest
rates, metals and indices and were partially offset by losses in currencies,
livestock and softs. The Partnership experienced a net trading gain before
brokerage commissions and related fees in the first quarter of 2003 of
$5,002,386. Gains were primarily attributable to the Master's trading of
commodity futures in currencies, energy, U.S. and non-U.S. interest rates,
indices and softs and were partially offset by losses in grains, livestock and
metals.
The Partnership had a positive first quarter as many of the financial and
commodity trends that had carried performance in 2003 continued into the first
quarter providing profits for the Partnership's Advisor. The major contributors
to performance were rising commodity prices, particularly for grains, energy and
base metals and lower interest rates both in the U.S. and internationally.
The commodity markets, particularly grains and related contracts, produced
most of the Partnership's profits for the quarter. The demand for foodstocks
from developing countries generated profits for positions in grains,
specifically soybeans, corn and wheat. Increased global demand for the raw
materials of economic development, namely base metals, like copper, nickel and
aluminum, also produced profitable trading. Silver and gold also were profitable
for the quarter. Energy trading was also highly profitable for the quarter as
prices of crude oil moved to the high $30s range and natural gas prices followed
their normal volatile seasonal patterns with mixed trading results for the
Advisor.
Additional profits were earned for positions in U.S. and international
interest rate contracts throughout most of the quarter. Lower U.S. interest
rates combined with rising fiscal and trade deficits pushed the U.S. dollar
lower through mid-February producing profits for the Fund's advisor through
mid-February. Mid-month, a sharp reversal began in the U.S. dollar that led to
18
losses in March as the dollar regained nearly 10% against the euro and other
major currencies. Overall for the quarter, currency trading resulted in losses.
Trading in stock market indices was slightly profitable as the U.S. and global
stock markets were mostly directionless for the first quarter.
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 months ended
March 31, 2004 decreased by $22,300 as compared to the corresponding period in
2003. The decrease in interest income is primarily due to a decrease in interest
rates during the three months ended March 31, 2004 as compared to 2003.
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 months ended March 31, 2004 decreased by $93,037 as compared to the
corresponding period in 2003. The decrease in brokerage commissions is due to
average lower net assets during the three months ended March 31, 2004 as
compared to 2003.
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 months ended March 31, 2004
decreased by $27,692 as compared to the corresponding period in 2003. The
decrease in management fees is due to average lower net assets during the three
months ended March 31, 2004 as compared to 2003.
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 months ended March 31, 2004 decreased by $13,846 as compared to the
corresponding period in 2003. The decrease in administrative fees is due to
average lower net assets during the three months ended March 31, 2004 as
compared to 2003.
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 three months ended
March 31, 2004 and 2003 resulted in incentive fees of $ 0, and $178,139,
respectively.
19
Item 3. Quantitative and Qualitative Disclosures about 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.
The risk to the limited partners that have purchased interests in the
Partnership is limited to the amount of their capital contributions to the
Partnership and their share of the Partnership assets and undistributed profits.
This limited liability is a consequence of the organization of the Partnership
as a limited partnership under applicable law.
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.
20
The following table indicates the trading Value at Risk associated with the
Master's open positions by market category as of March 31, 2004 and the highest
and lowest value at any point during the three months ended March 31, 2004. All
open position trading risk exposures of the Master have been included in
calculating the figures set forth below. As of March 31, 2004, the Master's
total capitalization was $169,821,443. There has been no material changes in the
trading Value at Risk information previously disclosed in the Form 10-K for the
year ended December 31, 2003.
March 31, 2004
(Unaudited)
Year to Date
-------------------------------------------------
% of Total High Low
Market Sector Value at Risk Capitalization Value at Risk Value at Risk Average
- ------------------------------------------------------------------- -------------------------------------------------
Currencies:
-OTC Contracts $6,964,128 4.10% $10,928,609 $6,021,749 $8,364,425
Energy 5,877,270 3.46% 5,930,250 4,281,150 5,621,490
Grains 1,121,300 0.66% 1,121,300 638,300 977,442
Interest Rates U.S. 2,657,600 1.56% 2,728,400 1,641,350 2,668,533
Interest Rates Non-U.S. 6,483,768 3.82% 8,840,369 4,314,458 7,796,875
Livestock 152,800 0.09% 234,000 46,000 169,313
Metals
-Exchange Traded Contracts 1,768,500 1.04% 1,768,500 445,500 1,506,667
-OTC Contracts 1,299,575 0.77% 1,391,375 995,290 1,245,192
Softs 1,330,474 0.78% 1,421,730 560,686 1,152,934
Indices 5,192,704 3.06% 5,192,704 3,311,279 4,464,783
----------------------------------
Total $32,848,119 19.34%
==================================
21
Item 4. Controls and Procedures
Based on their evaluation of the Partnership's disclosure controls and
procedures as of March 31, 2004 the Chief Executive Officer and Chief Financial
Officer 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 during the first
quarter of 2004.
22
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, 2003.
REGULATORY MATTERS.
Both the Department of Labor and the IRS have advised CGM that they were or
are reviewing transactions in which Ameritech Pension Trust purchased from CGM
and certain affiliates approximately $20.9 million in participations in a
portfolio of motels owned by Motels of America, Inc. and Best Inns, Inc. With
respect to the IRS review, CGM and certain affiliated entities have consented to
extensions of time for the assessment of excise taxes that may be claimed to be
due with respect to the transactions for the years 1987, 1988 and 1989.
ENRON CORP.
In July 2002, Citigroup, CGM and certain officers were named as defendants
in an alleged class action filed in the United States District Court for the
Southern District of New York, brought on behalf of purchasers of Citigroup
common stock between July 24, 1999 and July 23, 2002. The complaint seeks
unspecified compensatory and punitive damages for alleged violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, and for common law
fraud. Fourteen virtually identical complaints have been filed and consolidated.
The complaints allege that Citigroup misstated the extent of its Enron-related
exposure, and that Citigroup's stock price fell once the true extent of the
company's Enron involvements became known. Plaintiffs filed an amended complaint
on March 10, 2003, which incorporated the allegations in the 15 separate actions
and added new material as well. The amended complaint focuses on certain
transaction Citigroup did with Enron and alleged analyst conflicts of interest.
The class period for the consolidated amended complaint is July 24, 1999 to
December 11, 2002. On June 2, 2003, Citigroup filed a motion to dismiss the
consolidated amended complaint. Plaintiffs' response was filed on July 30, and
Citigroup's reply was filed on October 3, 2003. Oral argument before Judge Swain
was held on November 20, 2003.
MUTUAL FUNDS
In 2003, several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The Company has received subpoenas and
other requests for information from various government regulators regarding
market timing, fees, sales practices and other mutual fund issues in connection
with various investigations, including an investigation by the SEC and a United
States Attorney into the arrangements under which CGMH became the transfer agent
for many of the mutual funds in the Smith Barney fund complex. CGMH is
cooperating fully with all such reviews.
23
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities - None
The following chart sets forth the purchases of Redeemable Units by the
Partnership.
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Period (a) Total Number of (b) Average Price (c) Total Number of (d) Maximum Number
Shares (or Units) Paid per Share (or Shares (or Units) (or Approximate
Purchased* Unit)** Purchased as Part of Dollar Value) of
Publicly Announced Shares (or Units)
Plans or Programs that May Yet Be
Purchased Under the
Plans or Programs
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
January 1, 2004 - January 31, 92.4088 $1,872.10 N/A N/A
2004
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
February 1, 2004 - February 39.3761 $2,078.76 N/A N/A
29, 2004
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
March 1, 2004 - March 31, 2004 70.3911 $1,945.94 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Total 202.1760 $1,965.60 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
* Generally, Limited Partners are permitted to redeem their Redeemable Units as
of the end of each month on 10 days' notice to the General Partner. Under
certain circumstances, the General Partner can compel redemption but to date the
General Partner has not exercised this right. Purchases of Redeemable Units by
the Partnership reflected in the chart above were made in the ordinary course of
the Partnership's business in connection with effecting redemptions for Limited
Partners.
** Redemptions of Redeemable Units are effected as of the last day of each month
at the Net Asset Value per Redeemable Unit as of that day.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
24
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) 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 Annual Report on Form 10-K for the period ended December
31, 2003.
Exhibit - 31.1 - Rule 13a-14(a)/15d-14(a) Certification
(Certification of President and Director)
Exhibit - 31.2 - Rule 13a-14(a)/15d-14(a) Certification
(Certification of Chief Financial Officer and Director)
Exhibit - 32.1 - Section 1350 Certifications (Certification of
President and Director).
Exhibit - 32.2 - Section 1350 Certification (Certification of Chief
Financial Officer and Director).
(b) Reports on Form 8-K - None
25
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: May 10, 2004
------------
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: May 10, 2004
------------
By: /s/ Daniel R. McAuliffe, Jr.
----------------------------
Daniel R. McAuliffe, Jr.
Chief Financial Officer and
Director
Date: May 10, 2004
------------
26
Exhibit 31.1
CERTIFICATION
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, results of operations and cash flows 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 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 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 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):
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: May 10, 2004
-------------- /s/ David J. Vogel
------------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
27
Exhibit 31.2
CERTIFICATION
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, results of operations and cash flows 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 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 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 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):
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: May 10, 2004
-------------
/s/ Daniel R. McAuliffe Jr.
-------------------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
28
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 March 31, 2004 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, results of operations and
cash flows of the Partnership.
/s/ David J. Vogel
------------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
Date: May 10, 2004
-------------
29
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 March 31, 2004 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, results of operations and
cash flows of the Partnership.
/s/ Daniel R. McAuliffe, Jr.
---------------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
Date: May 10, 2004
-------------
30