FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1998
Commission File Number 0-22489
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
(Exact name of registrant as specified in its charter)
New York 13-3862967
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Smith Barney Futures Management Inc.
390 Greenwich St. - 1st Fl.
New York, New York 10013
(Address and Zip Code of principal executive offices)
(212) 723-5424
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
<PAGE>
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statement of Financial Condition at
September 30, 1998 and December 31, 1997. 3
Statement of Income and Expenses and
Partners' Capital for the
three and nine months ended September 30,
1998 and 1997. 4
Notes to Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9 - 11
Item 3. Quantitative and Qualitative Disclosures
of Market Risk 12
PART II - Other Information 13 - 14
2
<PAGE>
PART I
Item 1. Financial Statements
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.II
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, DECEMBER 31,
1998 1997
----------- ------------
ASSETS:
(Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $ 7,330,819 $ 8,500,216
Net unrealized appreciation
on open futures contracts 3,266,554 720,274
Zero Coupons, $17,057,000 and $18,968,000
principal amount in 1998 and 1997, repectively,
due November 15, 2003 at market value
(amortized cost $12,343,611 and $13,081,092
in 1998 and 1997, respectively) 13,662,145 13,577,673
----------- -----------
24,259,518 22,798,163
Receivable from SSB on sale of
Zero Coupons 162,270 419,702
Interest income 26,281 -
=========== ===========
$24,448,069 $23,217,865
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 82,870 $ 74,685
Management fees 37,508 34,365
Incentive fees 167,031 1,244
Due to Smith Barney - 77,269
Other 43,549 30,223
Redemptions payable 283,648 693,875
----------- -----------
614,606 911,661
Partners' Capital:
General Partner, 203 Unit
equivalents outstanding in 1998 and 1997 283,648 238,726
Limited Partners, 16,854 and 18,765
Units of Limited Partnership Interest
outstanding in 1998 and 1997, respectively 23,549,815 22,067,478
----------- -----------
23,833,463 22,306,204
----------- -----------
$24,448,069 $23,217,865
=========== ===========
See Notes to Financial Statements.
3
<PAGE>
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.II
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains (losses) on closed positions $ 968,868 $ (382,602) $ 653,093 $ 39,578
Change in unrealized gains/losses on open
positions 3,241,534 288,368 2,546,280 364,568
____________ ____________ ____________ ____________
4,210,402 (94,234) 3,199,373 404,146
Less, brokerage commissions and clearing fees
($5,150, $4,847, $16,419 and $11,666, respectively) (229,377) (242,201) (670,803) (722,871)
____________ ____________ ____________ ____________
Net realized and unrealized gains (losses) 3,981,025 (336,435) 2,528,570 (318,725)
Gain on sale of Zero Coupons 15,365 3,431 65,474 14
Unrealized appreciation
on Zero Coupons 718,876 317,996 821,953 190,473
Interest income 274,572 301,060 852,632 898,278
____________ ____________ ____________ ____________
4,989,838 286,052 4,268,629 770,040
____________ ____________ ____________ ____________
Expenses:
Management fees 97,092 99,525 281,891 303,910
Incentive fees 167,031 - 167,031 190,380
Other 13,485 13,600 48,406 41,271
____________ ____________ ____________ ____________
277,608 113,125 497,328 535,561
____________ ____________ ____________ ____________
Net income 4,712,230 172,927 3,771,301 234,479
Redemptions (283,648) (288,689) (2,244,042) (616,911)
____________ ____________ ____________ ____________
Net increase (decrease) in Partners' capital 4,428,582 (115,762) 1,527,259 (382,432)
Partners' capital, beginning of period 19,404,881 21,990,891 22,306,204 22,257,561
____________ ____________ ____________ ____________
Partners' capital, end of period $ 23,833,463 $ 21,875,129 $ 23,833,463 $ 21,875,129
------------ ------------ ------------ ------------
Net asset value per Unit
(17,057 and 19,566 Units outstanding
at September 30, 1998 and 1997, respectively) $ 1,397.28 $ 1,118.59 $ 1,397.28 $ 1,118.59
------------ ------------ ------------ ------------
Net income per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 273.01 $ 8.61 $ 221.29 $ 11.25
------------ ------------ ------------ ------------
Redemption Net Asset Value Per Unit $ 1,397.28 $ 1,127.69 $ 1,397.28 $ 1,127.69
------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements 4
<PAGE>
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(UNAUDITED)
1. General
Smith Barney Principal Plus Futures Fund L.P. II (the "Partnership") was
formed under the laws of the State of New York on November 16, 1995. The
Partnership engages in the speculative trading of a diversified portfolio of
commodity interests, including futures contracts, options and forward contracts.
The commodity interests that are traded by the Partnership are volatile and
involve a high degree of market risk. The Partnership maintains a portion of its
assets in interest payments stripped from U.S. Treasury Bonds under the
Treasury's STRIPS program which payments are due approximately seven years from
the date trading commenced ("Zero Coupons").
Between April 3, 1996 (commencement of offering period) and August 8,
1996, 19,896 Units of limited partnership interest were sold at $1,000 per unit.
The proceeds of the offering were held in an escrow account until August 9,
1996, at which time they were turned over to the Partnership for trading.
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. On September 1, 1998, the Partnership's
commodity broker, Smith Barney Inc., merged with Salomon Brothers Inc and
changed its name to Salomon Smith Barney Inc. ("SSB"). SSB is an affiliate of
the General Partner. The General Partner is wholly owned by Salomon Smith Barney
Holdings Inc. ("SSBH"), which is the sole owner of SSB. SSBH is a wholly owned
subsidiary of Travelers Group Inc. All trading decisions are made for the
Partnership by John W. Henry & Company, Inc. and Willowbridge Associates Inc.
(collectively, the "Advisors"). (see Note 5)
The accompanying financial statements are unaudited but, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the Partnership's financial
condition at September 30, 1998 and the results of its operations for the three
and nine months ended September 30, 1998 and 1997. These financial statements
present the results of interim periods and do not include all disclosures
normally provided in annual financial statements. It is suggested that these
financial statements be read in conjunction with the Partnership's annual report
on Form 10-K filed with the Securities and Exchange Commission for the year
ended December 31, 1997.
Due to the nature of commodity trading, the results of operations for the
interim periods presented should not be considered indicative of the results
that may be expected for the entire year.
5
<PAGE>
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
NOTES TO FINANCIAL STATEMENTS
(continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and nine months ended
September 30, 1998 and 1997 were as follows:
THREE-MONTHS ENDE NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
Net realized and unrealized
gains (losses) $ 230.66 $ (16.98) $ 151.30 $ (16.46)
Realized and unrealized
gains on Zero Coupons 42.54 16.22 50.90 9.81
Interest income 15.90 15.20 46.99 45.00
Expenses (16.09) (5.71) (27.90) (26.76)
Other - (0.12) - (0.34)
--------- --------- --------- ---------
Increase for period 273.01 8.61 221.29 11.25
Net Asset Value per Unit,
beginning of period 1,124.27 1,109.98 1,175.99 1,107.34
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $1,397.28 $1,118.59 $1,397.28 $1,118.59
========= ========= ========= =========
Redemption Net Asset
Value per Unit * $1,397.28 $1,127.69 $1,397.28 $1,127.69
========= ========= ========= =========
* For the purpose of a redemption, any accrued liability for reimbursement
of offering and organization expenses will not reduce redemption net
asset value per unit.
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's trading
activity are shown in the statement of income and expenses.
The Customer Agreement between the Partnership and SSB gives the
Partnership the legal right to net unrealized gains and losses.
All of the commodity interests owned by the Partnership are held for
trading purposes. The fair value of these commodity interests, including options
thereon, at September 30, 1998 and December 31, 1997 was $3,266,554 and
$720,274, respectively, and the average fair value during the nine and twelve
months then ended based on monthly calculation, was $981,234 and $814,445,
respectively.
6
<PAGE>
4. Financial Instrument Risk:
The Partnership is party to financial instruments with off- balance
sheet risk, including derivative financial instruments and derivative commodity
instruments, in the normal course of its business. These financial instruments
include forwards, futures and options, whose value is based upon an underlying
asset, index, or reference rate, and generally represent future commitments to
exchange currencies or cash flows, to purchase or sell other financial
instruments at specific terms at specified future dates, or, in the case of
derivative commodity instruments, to have a reasonable possibility to be settled
in cash or with another financial instrument. These instruments may be traded on
an exchange or over-the-counter ("OTC"). Exchange traded instruments are
standardized and include futures and certain option contracts. OTC contracts are
negotiated between contracting parties and include forwards and certain options.
Each of these instruments is subject to various risks similar to those related
to the underlying financial instruments including market and credit risk. In
general, the risks associated with OTC contracts are greater than those
associated with exchange traded instruments because of the greater risk of
default by the counterparty to an OTC contract.
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including interest
and foreign exchange rate movements and fluctuations in commodity or security
prices. Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure
of a counterparty to perform according to the terms of a contract. Credit risk
with respect to exchange traded instruments is reduced to the extent that an
exchange or clearing organization acts as a counterparty to the transactions.
The Partnership's risk of loss in the event of counterparty default is typically
limited to the amounts recognized in the statement of financial condition and
not represented by the contract or notional amounts of the instruments. The
Partnership has concentration risk because the sole counterparty or broker with
respect to the Partnership's assets is SSB.
The General Partner monitors and controls the Partnership's risk
exposure on a daily basis through financial, credit and risk management
monitoring systems and, accordingly believes that it has effective procedures
for evaluating and limiting the credit and market risks to which the Partnership
is subject. These monitoring systems allow the General Partner to statistically
analyze actual trading results with risk adjusted performance indicators and
correlation statistics. In addition, on-line monitoring systems provide account
analysis of futures, forwards and options positions by sector, margin
requirements, gain and loss transactions and collateral positions.
7
<PAGE>
The notional or contractual amounts of these instruments, while not
recorded in the financial statements, reflect the extent of the Partnership's
involvement in these instruments. At September 30, 1998, the notional or
contractual amounts of the Partnership's commitment to purchase and sell these
instruments was $209,541,200 and $7,172,936, respectively, as detailed below.
All of these instruments mature within one year of September 30, 1998. However,
due to the nature of the Partnership's business, these instruments may not be
held to maturity. At September 30, 1998, the fair value of the Partnership's
derivatives, including options thereon, was $3,266,554, as detailed below.
SEPTEMBER 30, 1998
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies
- - Exchange Traded Contracts $ 14,221,938 $ - $ 246,039
- - OTC Contracts 13,638,850 2,990,901 310,741
Energy 2,177,940 - 23,281
Interest Rates U.S. 47,773,609 - 915,891
Interest Rates Non U.S. 130,218,194 181,828 1,491,563
Grains - 646,435 98,593
Softs - 1,132,410 37,264
Metals 1,510,669 514,230 24,161
Indices - 1,707,132 119,021
------------- ------------ --------
Totals $209,541,200 $7,172,936 $3,266,554
============= =========== ==========
At December 31, 1997, the notional or contractual amounts of the
Partnership's commitment to purchase and sell these instruments was $103,162,990
and $65,919,874, respectively, and, the fair value of the Partnership's
derivatives, including options thereon, was $720,274, as detailed below.
DECEMBER 31, 1997
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies
- - Exchange Traded Contracts - $ 4,026,713 $ 62,013
- - OTC Contracts $ 7,813,559 14,869,435 (37,009)
Energy - 2,381,490 165,550
Interest Rates U.S. 27,054,925 - 163,819
Interest Rates Non U.S. 58,496,762 38,054,369 189,136
Grains 2,958,744 679,250 (102,587)
Softs 3,987,204 842,675 (129,803)
Metals 2,851,796 4,180,877 336,934
Indices - 885,065 72,221
------------ ------------ ---------
Totals $103,162,990 $65,919,874 $ 720,274
============= ============ =========
5. Subsequent Event:
On October 8, 1998, Travelers Group Inc. merged with Citicorp
Inc. and changed its name to Citigroup Inc.
8
<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership does not engage in the sale of goods or services. Its only
assets are its equity in its commodity futures trading account, consisting of
cash and cash equivalents, Zero Coupons, net unrealized appreciation
(depreciation) on open futures and forward contracts, commodity options and
interest receivable. Because of the low margin deposit 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
substantial decrease in liquidity no such losses occurred during the third
quarter of 1998.
The Partnership's capital consists of capital contributions, as increased
or decreased by gains or losses on commodity futures trading and Zero Coupons,
expenses, interest income, redemptions of Units and distributions of profits, if
any.
For the nine months ended September 30, 1998, Partnership capital
increased 6.8% from $22,306,204 to $23,833,463. This increase was attributable
to net income from operations of $3,771,301 which was partially offset by the
redemption of 1,911 Units totalling $2,244,042 for the nine months ended
September 30, 1998. Future redemptions can impact the amount of funds available
for investments in commodity contract positions in subsequent periods.
Operational Risk
The General Partner administers the business of the Partnership through
various systems and processes maintained by SSBH. SSBH has analyzed the impact
of the year 2000 on its systems and processes and modifications for compliance
are proceeding according to plan. All modifications necessary for year 2000
compliance are expected to be completed by the first quarter of 1999. In July
1998, SSB participated in successful industry-wide testing coordinated by the
Securities Industry Association and plans to participate in such tests in the
future. The purpose of industry-wide testing is to confirm that exchanges,
clearing organizations, and other securities industry participants are prepared
for the year 2000.
The most likely and most significant risk to the Partnership associated
with the lack of year 2000 readiness is the failure of outside organizations,
including the commodities exchanges, clearing organizations or regulators with
which the Partnership interacts to resolve their year 2000 issues in a timely
manner. This risk could involve the inability to determine the value of the
Partnership at some point in time and would make effecting
9
<PAGE>
purchases or redemptions of Units in the Partnership infeasible
until such valuation was determinable.
In addition, the General Partner is addressing the technological
implications that will result from regulatory and market changes due to Europe's
Economic and Monetary Union ("EMU").
Risks to the Partnership exist in the lack of experience with this new
currency and the potential impact it can have on the Advisors' trading programs.
Risks also exist in the failure of external information technology and
accounting systems to adequately prepare for the conversion. This issue is
particularly acute in the area of the exchanges, clearing houses and
over-the-counter foreign exchange markets where the futures interests are
traded. If the necessary changes are not properly implemented, the Partnership
could suffer failed trade settlements, inability to reconcile trading positions
and funding disruptions. Such events could result in erroneous entries in the
Partnership's accounts, mispriced transactions, and a delay or inability to
provide timely pricing of Units for the purpose of effecting purchases and
redemptions.
SSB has evaluated its internal systems and made the necessary changes to
accommodate EMU transactions on behalf of the Partnership. The General Partner
will continue to monitor and communicate with the Advisors and related
third-party entities to assure preparation for the EMU conversion and advanced
notification of impending issues or problems.
Results of Operations
During the third quarter ending September 30, 1998, the Partnership's net
asset value per Unit increased 24.3% from $1,124.27 to $1,397.28, as compared to
an increase of 0.8% in the third quarter of 1997. The Partnership experienced a
net trading gain before brokerage commissions and related fees in the third
quarter of 1998 of $4,210,402. These gains were primarily attributable to the
trading of commodity futures in currencies, energy products, softs, U.S. and
non-U.S. interest rates and were partially offset by losses in grains, metals
and indices. The Partnership experienced a net trading loss in the third quarter
of 1997 of $94,234. These losses were recognized in the trading of currencies,
energy products, grains, U.S. interest rates, softs and livestock and were
partially offset by gains in metals, non-U.S.
interest rates and indices.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisors to
identify
10
<PAGE>
correctly those price trends. Price trends are influenced by, among other
things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. To
the extent that market trends exist and the Advisors are able to identify them,
the Partnership expects to increase capital through operations.
Interest Income on 80% of the Partnership's daily equity maintained in
cash was earned at the 30-day U.S. Treasury bill rate determined weekly by SSB
based on the average non-competitive yield on 3-month U.S. Treasury bills
maturing in 30 days. Interest income decreased by $26,488 and $45,646
respectively, for the three and nine months ended September 30, 1998 as compared
to the corresponding periods in 1997. The decrease in interest income is
primarily due to the effect of net redemptions on the Partnership's equity
maintained in cash during 1998.
Brokerage commissions are calculated on the adjusted net asset value on
the last day of each month and are affected by trading performance and
redemptions. Accordingly, they must be compared in relation to the fluctuations
in the monthly net asset value. Brokerage commissions and fees for the three and
nine months ended September 30, 1998 decreased by $12,824 and $52,068,
respectively, as compared to the corresponding periods in 1997.
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 decreased by $2,433 and $22,019, respectively,
as compared to the corresponding periods in 1997.
Incentive fees are based on the new trading profits generated by each
Advisor as defined in the advisory agreements between the Partnership, the
General Partner and each Advisor. Trading performance for the three and nine
months ended September 30, 1998 resulted in incentive fees of $167,031. Trading
performance for the three and nine months ended September 30, 1997 resulted in
incentive fees of $0 and $190,380, respectively.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosures of Market Risk
The Partnership is subject to SEC Financial Reporting Release No. 48,
regarding quantitative and qualitative disclosures of market risk and will
comply with the disclosure and reporting requirements in its Form 10-K as of
December 31, 1998.
12
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Between May 1994 and the present, Salomon Brothers Inc. ("SBI"), Smith
Barney Inc. ("SB") and The Robinson Humphrey Company, Inc. ("R-H"), all
currently subsidiaries of Salomon Smith Barney Holdings Inc. ("SSBH"),
along with a number of other broker-dealers, were named as defendants in
approximately 25 federal court lawsuits and two state court lawsuits,
principally alleging that companies that make markets in securities
traded on NASDAQ violated the federal antitrust laws by conspiring to
maintain a minimum spread of $.25 between the bid and asked price for
certain securities. The federal lawsuits and one state court case were
consolidated for pre-trial purposes in the Southern District of New York
in the fall of 1994 under the caption In re NASDAQ Market-Makers
Antitrust Litigation, United States District Court, Southern District of
New York No. 94-CIV-3996 (RWS); M.D.L. No. 1023. The other state court
suit, Lawrence A. Abel v. Merrill Lynch & Co., Inc. et al.; Superior
Court of San Diego, Case No. 677313, has been dismissed without
prejudice in conjunction with a tolling agreement.
In consolidated action, the plaintiffs purport to represent a class of
persons who bought one or more of what they currently estimate to be
approximately 1,650 securities on NASDAQ between May 1, 1989 and May 27,
1994. They seek unspecified monetary damages, which would be trebled
under the antitrust laws. The plaintiffs also seek injunctive relief, as
well as attorney's fees and the costs of the action. (The state cases
seek similar relief.) Plaintiffs in the consolidated action filed an
amended consolidated complaint that defendants answered in December
1995. On November 26, 1996, the Court certified a class composed of
retail purchasers. A motion to include institutional investors in the
class and to add class representatives was granted. In December 1997,
SBI, SB and R-H, along with several other broker-dealer defendants,
executed a settlement agreement with the plaintiffs. This agreement has
been preliminarily approved by the U.S. District Court for the Southern
District of New York but is subject to final approval.
On July 17, 1996, the Antitrust Division of the Department of Justice
filed a complaint against a number of firms that act as market makers in
NASDAQ stocks. The complaint basically alleged that a common
understanding arose among NASDAQ market makers which worked to keep
quote spreads in NASDAQ stocks artificially wide. Contemporaneous with
the filing of the complaint, SBI, SB and other defendants
13
<PAGE>
entered into a stipulated settlement agreement, pursuant to which the
defendants would agree not to engage in certain practices relating to
the quoting of NASDAQ securities and would further agree to implement a
program to ensure compliance with federal antitrust laws and with the
terms of the settlement. In entering into the stipulated settlement, SBI
and SB did not admit any liability. There are no fines, penalties, or
other payments of monies in connection with the settlement. In April
1997, the U.S. District Court for the Southern District of New York
approved the settlement. In May 1997, plaintiffs in the related civil
action (who were permitted to intervene for limited purposes) appealed
the district court's approval of the settlement. The appeal was argued
in March 1998 and was affirmed in August 1998.
The Securities and Exchange Commission ("SEC") is also conducting a
review of the NASDAQ marketplace, during which it has subpoenaed
documents and taken the testimony of various individuals including SBI
and SB personnel. In July 1996, the SEC reached a settlement with the
National Association of Securities Dealers and issued a report detailing
certain conclusions with respect to the NASD and the NASDAQ market.
In December 1996, a complaint seeking unspecified monetary damages was
filed by Orange County, California against numerous brokerage firms,
including SB, in the U.S. Bankruptcy Court for the Central District of
California. Plaintiff alleged, among other things, that the defendants
recommended and sold to plaintiff unsuitable securities. The case
(County of Orange et al. v. Bear Stearns & Co. Inc. et al.) has been
stayed by agreement of the parties.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders -
None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) Reports on Form 8-K - None
14
<PAGE>
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 PRINCIPAL PLUS FUTURES FUND L.P. II
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/12/98
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/12/98
By /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 11/12/98
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001005335
<NAME> SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,330,819
<SECURITIES> 16,928,699
<RECEIVABLES> 188,551
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,448,069
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,448,069
<CURRENT-LIABILITIES> 614,606
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,833,463
<TOTAL-LIABILITY-AND-EQUITY> 24,448,069
<SALES> 0
<TOTAL-REVENUES> 4,268,629
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 497,328
<LOSS-PROVISION> 0
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