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, 1999
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 LLC
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, 1999 and December 31, 1998
(unaudited). 3
Statement of Income and Expenses and Partners' Capital
for the three and nine months ended September 30, 1999
and 1998 (unaudited). 4
Notes to Financial Statements
(unaudited) 5 - 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10 - 13
Item 3. Quantitative and Qualitative Disclosures
of Market Risk 14 - 15
PART II - Other Information 16
2
<PAGE>
PART I
Item 1. Financial Statements
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.II
STATEMENT OF FINANCIAL CONDITION
(Unaudited)
September 30, DECEMBER 31,
1999 1998
------------ ------------
ASSETS:
Equity in commodity futures trading account:
Cash $ 8,389,558 $ 8,835,664
Net unrealized appreciation
on open futures contracts 518,000 903,705
Zero Coupons, $15,753,000 and $16,838,000
principal amount in 1999 and 1998, repectively,
due November 15, 2003 at market value
(amortized cost $12,158,191 and $12,384,517
in 1999 and 1998, respectively) 12,375,714 13,446,490
------------ -----------
21,283,272 23,185,859
Receivable from SSB on sale of
Zero Coupons 228,391 174,309
Interest income 26,869 26,522
----------- -----------
$21,538,532 $23,386,690
============ ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 73,016 $ 77,866
Management fees 32,368 35,086
Other 43,104 37,245
Redemptions payable 389,274 298,339
----------- -----------
537,762 448,536
----------- -----------
Partners' Capital:
General Partner, 203 Unit
equivalents outstanding in 1999 and 1998 270,625 276,543
Limited Partners, 15,550 and 16,635
Units of Limited Partnership Interest
outstanding in 1999 and 1998, respectively 20,730,145 22,661,611
------------ -----------
21,000,770 22,938,154
------------ -----------
$21,538,532 $23,386,690
=========== ===========
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,
---------------------------- ----------------------------
1999 1998 1999 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains on closed positions $ 303,764 $ 968,868 $ 978,854 $ 653,093
Change in unrealized gains/losses on open
positions (1,020,476) 3,241,534 (385,705) 2,546,280
------------ ------------ ------------ ------------
(716,712) 4,210,402 593,149 3,199,373
Less, brokerage commissions including clearing fees of
$6,628, $5,150, $19,441 and $16,419, respectively (242,734) (229,377) (732,256) (670,803)
------------ ------------ ------------ ------------
Net realized and unrealized gains (losses) (959,446) 3,981,025 (139,107) 2,528,570
Gain on sale of Zero Coupons 3,025 15,365 26,656 65,474
Unrealized appreciation (depreciation)
on Zero Coupons (83,711) 718,876 (844,450) 821,953
Interest income 285,400 274,572 836,880 852,632
------------ ------------ ------------ ------------
(754,732) 4,989,838 (120,021) 4,268,629
------------ ------------ ------------ ------------
Expenses:
Management fees 101,119 97,092 303,179 281,891
Incentive fees -- 167,031 20,500 167,031
Other 8,733 13,485 38,844 48,406
------------ ------------ ------------ ------------
109,852 277,608 362,523 497,328
------------ ------------ ------------ ------------
Net income (loss) (864,584) 4,712,230 (482,544) 3,771,301
Redemptions (389,274) (283,648) (1,454,840) (2,244,042)
------------ ------------ ------------ ------------
Net increase (decrease) in Partners' capital (1,253,858) 4,428,582 (1,937,384) 1,527,259
Partners' capital, beginning of period 22,254,628 19,404,881 22,938,154 22,306,204
------------ ------------ ------------ ------------
Partners' capital, end of period $ 21,000,770 $ 23,833,463 $ 21,000,770 $ 23,833,463
------------ ------------ ------------ ------------
Net asset value per Unit
( 15,753 and 17,057 Units outstanding
at September 30, 1999 and 1998, respectively) $ 1,333.13 $ 1,397.28 $ 1,333.13 $ 1,397.28
------------ ------------ ------------ ------------
Net income (loss) per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ (53.88) $ 273.01 $ (29.15) $ 221.29
------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. II
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(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 principal amounts 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 LLC acts as the general partner (the
"General Partner") of the Partnership. The General Partner changed its form of
organization from a corporation to a limited liability company. The Parnership's
commodity broker is Salomon Smith Barney Inc. ("SSB"). SSB is an affiliate of
the General Partner. The General Partner is wholly owned by Salomon Smith Barney
Holdings Inc. ("SSBH"), which is the sole owner of SSB. SSBH is a wholly owned
subsidiary of Citigroup Inc. All trading decisions are made for the Partnership
by John W. Henry & Company, Inc. and Willowbridge Associates Inc. (collectively,
the "Advisors").
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, 1999 and December 31, 1998 (unaudited) and the
results of its operations for the three and nine months ended September 30, 1999
and 1998. 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, 1998.
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>
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and nine months ended
September 30, 1999 and 1998 were as follows:
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER
1999 1998 1999 1998
--------------------- -------------------
Net realized and unrealized
gains (losses) $ (59.80) $ 230.66 $ (8.69) $151.30
Realized and unrealized gains
(losses) on Zero Coupons (5.03) 42.54 (49.37) 50.90
Interest income 17.79 15.90 50.97 46.99
Expenses (6.84) (16.09) (22.06) (27.90)
-------- -------- -------- ---------
Increase (decrease) for
period (53.88) 273.01 (29.15) 221.29
Net Asset Value per Unit,
beginning of period 1,387.01 1,124.27 1,362.28 1,175.99
-------- -------- -------- --------
Net Asset Value per Unit,
end of period $ 1,333.13 $ 1,397.28 $1,333.13 $ 1,397.28
========= ======== ======== =========
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, if applicable, at September 30, 1999 and December 31, 1998 was $518,000
and $903,705, respectively, and the average fair value during the nine and
twelve months then ended based on monthly calculation, was $1,067,426 and
$982,632, respectively.
4. Financial Instrument Risk:
The Partnership is party to financial instruments with off-balance sheet
risk, including derivative financial instruments and derivative commodity
instruments, in the normal course of its business. These financial instruments
may include forwards,
6
<PAGE>
futures and options, whose value is based upon an underlying asset, index, or
reference rate, and generally represent future commitments to exchange
currencies or cash flows, to purchase or sell other financial instruments at
specific terms at specified future dates, or, in the case of derivative
commodity instruments, to have a reasonable possibility to be settled in cash,
through physical delivery or with another financial instrument. These
instruments may be traded on an exchange or over-the-counter (AOTC@). 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.
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.
7
<PAGE>
At September 30, 1999, the notional or contractual amounts of the
Partnership=s commitment to purchase and sell these instruments was $86,391,194
and $83,407,383, respectively, as detailed below. All of these instruments
mature within one year of September 30, 1999. However, due to the nature of the
Partnership=s business, these instruments may not be held to maturity. At
September 30, 1999, the fair value of the Partnership's derivatives, including
options thereon, if applicable, was $518,000, as detailed below.
SEPTEMBER 30, 1999
(Unaudited)
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies
- - Exchange Traded Contracts $ 7,715,262 $ 2,367,337 $ 133,075
- - OTC Contracts 10,932,213 1,626,997 19,887
Energy 5,024,126 -- 286,296
Grains -- -- --
Interest Rates U.S. 21,843,650 3,971,438 (21,275)
Interest Rates Non-U.S 35,428,942 73,345,278 71,521
Livestock 1,133,940 -- (3,440)
Metals 815,376 208,798 1,121
Softs 3,497,685 1,096,550 40,971
Indices -- 790,985 (10,156)
----------- ----------- ---------
Totals $86,391,194 $83,407,383 $ 518,000
=========== =========== =========
8
<PAGE>
At December 31, 1998, the Partnership's commitment to purchase and sell
these instruments was $57,847,242 and $52,605,224, respectively, and, the fair
value of the Partnership's derivatives, including options thereon, if
applicable, was $903,705, as detailed below.
DECEMBER 31, 1998
(Unaudited)
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies
- Exchange Traded Contracts $ 558,900 $ 552,600 $ (6,300)
- OTC Contracts 3,487,638 1,291,020 24,255
Energy -- 812,280 27,010
Grains -- 810,535 27,312
Interest Rates U.S. 7,605,156 8,066,963 (65,138)
Interest Rates Non-U.S 44,897,799 38,932,518 818,733
Metals 379,338 1,396,540 33,623
Softs 918,411 742,768 44,210
----------- ----------- ---------
Total $57,847,242 $52,605,224 $ 903,705
=========== =========== =========
9
<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 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
substantial decrease in liquidity no such losses occurred during the third
quarter of 1999.
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, 1999, Partnership capital
decreased 8.4% from $22,938,154 to $21,000,770. This decrease was attributable
to the redemption of 1,085 Units totalling $1,454,840 coupled with a net loss
from operations of $482,544 for the nine months ended September 30, 1999. Future
redemptions can impact the amount of funds available for investments in
commodity contract positions in subsequent periods.
Risk of Computer System Failure (Year 2000 Issue)
The Year 2000 issue is the result of existing computers in
many businesses using only two digits to identify a year in the date field.
These computers and programs, often referred to as "information technology,"
were designed and developed without considering the impact of the upcoming
change in the century. If not corrected, many computer applications could fail
or create erroneous results at the Year 2000. Such systems and processes are
dependent on correctly identifying dates in the next century.
10
<PAGE>
The General Partner administers the business of the
Partnership through various systems and processes maintained by SSBH and SSB. In
addition, the operation of the Partnership is dependent on the capability of the
Partnership's Advisors, the brokers and exchanges through which the Advisors
trade, and other third parties to prepare adequately for the Year 2000 impact on
their systems and processes. The Partnership itself has no systems or
information technology applications relevant to its operations.
The General Partner, SSB, SSBH and their parent organization
Citigroup Inc. have undertaken a comprehensive, firm-wide evaluation of both
internal and external systems (systems related to third parties) to determine
the specific modifications needed to prepare for the year 2000. The combined
Year 2000 program in SSB is expected to cost approximately $140 million over the
four years from 1996 through 1999, and has involved over 450 people. As of June
30, 1999, SSB has completed all compliance and certification work.
The systems and components supporting the General Partner's
business that require remediation have been brought into Year 2000 compliance.
Final testing and certification was completed as of June 30, 1999.
This expenditure and the General Partner's resources dedicated
to the preparation for Year 2000 do not and will not have a material impact on
the operation or results of the Partnership.
The General Partner has received statements from the Advisors
that they have completed their Year 2000 remediation programs.
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
purchases or redemptions of Units in the Partnership infeasible until such
valuation was determinable.
SSB has successfully participated in industry-wide testing
including: The Streetwide Beta Testing organized by the Securities Industry
Association (SIA), a government securities clearing test with the Federal
Reserve Bank of New York, The Depository Trust Company, and The Bank of New
York, and the Futures Industry Association participants test. The firm also
participated in the streetwide testing that was conducted from March through May
1999.
It is possible that problems may occur that would require some
time to repair. Moreover, it is possible that problems will occur outside SSBH
and the General Partner for which SSBH or the General Partner could experience a
secondary effect. Consequently, SSBH and the General Partner have prepared
comprehensive, written contingency plans so that alternative procedures and a
framework for critical decisions are defined before any potential crisis occurs.
11
<PAGE>
The goal of year 2000 contingency planning is a set of
alternate procedures to be used in the event of a critical system failure by a
supplier or counterparty. Planning work was completed in January 1999, and
testing of alternative procedures will be completed in the third and fourth
quarters of 1999.
Results of Operations
During the Partnership's third quarter of 1999, the net asset value per
unit decreased 3.9% from $1,387.01 to $1,333.13 as compared to an increase of
24.3% in the third quarter of 1998. The Partnership experienced a net trading
loss before brokerage commissions and related fees in the third quarter of 1999
of $716,712. Losses were primarily attributable to the trading of commodity
futures in currencies, grains, U.S. interest rates, softs, metals and indices
and were partially offset by gains in livestock, non - U.S. interest rates and
energy. The Partnership experienced a net trading gain before brokerage
commissions and related fees in the third quarter of 1998 of $4,210,402. Gains
were recognized in the trading of commodity futures in currencies, energy,
softs, U.S. and non-U.S. interest rates and were partially offset by losses in
grains, metals, and indices.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisors to
identify correctly those price trends. Price trends are influenced by, among
other things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. To
the extent that market trends exist and the 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 increased by $10,828 for the three months
ended September 30, 1999 and decreased by $15,752 for the nine months ended
September 30, 1999 as compared to the corresponding periods in 1998. The
decrease in interest income is primarily due to the effect of net redemptions on
the Partnership's equity maintained in cash during 1999.
Brokerage commissions are calculated on the adjusted net asset value on
the last day of each month and are affected by trading performance and
12
<PAGE>
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, 1999 increased by $13,357 and $61,453,
respectively, as compared to the corresponding periods in 1998.
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 increased by $4,027 and $21,288, respectively,
as compared to the corresponding periods in 1998.
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, 1999 resulted in incentive fees of $0 and $20,500,
respectively. Trading performance for the three and nine months ended September
30, 1998 resulted in incentive fees of $167,031.
13
<PAGE>
Item 3.Quantitative and Qualitative Disclosures of Market Risk
The Partnership is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all
or substantially all of the Partnership's assets are subject to the risk of
trading loss. Unlike an operating company, the risk of market sensitive
instruments is integral, not incidental, to the Partnership's main line of
business.
Market movements result in frequent changes in the fair market value
of the Partnership's open positions and, consequently, in its earnings and
cash flow. The Partnership's market risk is influenced by a wide variety of
factors, including the level and volatility of interest rates, exchange rates,
equity price levels, the market value of financial instruments and contracts,
the diversification effects among the Partnership's open positions and the
liquidity of the markets in which it trades.
The Partnership rapidly acquires and liquidates both long and short
positions in a wide range of different markets. Consequently, it is not
possible to predict how a particular future market scenario will affect
performance, and the Partnership's past performance is not necessarily
indicative of its future results.
Value at Risk is a measure of the maximum amount which the
Partnership could reasonably be expected to lose in a given market sector.
However, the inherent uncertainty of the Partnership's speculative trading and
the recurrence in the markets traded by the Partnership of market movements
far exceeding expectations could result in actual trading or non-trading
losses far beyond the indicated Value at Risk or the Partnership's experience
to date (i.e., "risk of ruin"). In light of the foregoing as well as the risks
and uncertainties intrinsic to all future projections, the inclusion of the
quantification included in this section should not be considered to constitute
any assurance or representation that the Partnership's losses in any market
sector will be limited to Value at Risk or by the Partnership's attempts to
manage its market risk.
14
<PAGE>
The following table indicates the trading Value at Risk associated with
the Partnership's open positions by market category as of September 30, 1999.
All open position trading risk exposures of the Partnership have been included
in calculating the figures set forth below. As of September 30, 1999, the
Partnership's total capitalization was $21,000,770. 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, 1998.
September 30, 1999
(Unaudited)
% of Total
Market Sector Value at Risk Capitalization
Currencies
- OTC Contracts $ 203,067 0.97%
- Exchange Traded Contracts 111,744 0.53%
Energy 305,000 1.45%
Interest rates U.S. 116,500 0.56%
Interest rates Non-U.S 632,034 3.01%
Livestock 24,000 0.12%
Metals 250,600 1.19%
Softs 63,938 0.30%
Indices 39,504 0.19%
---------- ----
Total $1,746,387 8.32%
========== ====
15
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
For information concerning the suit filed by Harris Trust and Savings
Bank (as trustee for Ameritech Pension Trust) and others against Salomon
Brothers Inc., and Salomon Brothers Realty Corporation, see the description that
appears in the second and third paragraphs under the caption Item 3. "Legal
Proceedings" on Form 10-K for the year ended December 31, 1998. In October 1999,
plaintiffs filed a petition for certiorari with the U. S. Supreme Court. The
petition seeks review of the U.S. Court of Appeals for the Seventh Circuit's
decision reversing the denial of defendants' motion for summary judgment and
dismissing the sole remaining ERISA claim against the Company.
For information concerning a purported class action in Florida against
numerous broker-dealers including Salomon Smith Barney Inc. ("SSB"), see the
description that appears in the sixth paragraph under the caption Item 3. "Legal
Proceedings" on Form 10-K for the year ending December 31, 1998. In October
1999, plaintiff filed a second amended complaint.
In March 1999, a complaint seeking in excess of $250 million was filed
by a hedge fund and its investment advisor against SSB in the Supreme Court of
the State of New York, County of New York (MKP Master Fund, LDC et al. v.
Salomon Smith Barney Inc.). Plaintiffs allege that, while acting as their prime
broker SSB breached its contracts with plaintiffs, converted plaintiffs' monies,
and engaged in tortious conduct, including breaching its fiduciary duties. In
October 1999, the Court granted in part and denied in part SSB's motion to
dismiss the complaint. The court dismissed plaintiffs' tort claims, including
the breach of fiduciary duty claims, but allowed the breach of contract and
conversion claims to stand. The Company intends to contest this lawsuit
vigorously.
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
16
<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 LLC
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/12/99
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: Smith Barney Futures Management LLC
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/12/99
By /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 11/12/99
17
<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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,389,558
<SECURITIES> 12,893,714
<RECEIVABLES> 255,260
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,538,532
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,538,532
<CURRENT-LIABILITIES> 537,762
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 21,000,770
<TOTAL-LIABILITY-AND-EQUITY> 21,538,532
<SALES> 0
<TOTAL-REVENUES> (120,021)
<CGS> 0
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<OTHER-EXPENSES> 362,523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (482,544)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (482,544)
<EPS-BASIC> (29.15)
<EPS-DILUTED> 0
</TABLE>
