FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 2000
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
388 Greenwich St. - 7th Fl.
New York, New York 10013
(Address and Zip Code of principal executive offices)
(212) 723-5424
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
<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
June 30, 2000 and December 31, 1999
(unaudited). 3
Statement of Income and Expenses
and Partners' Capital for the three
and six months ended June 30, 2000
and 1999 (unaudited). 4
Notes to Financial Statements
(unaudited) 5 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9 - 10
Item 3. Quantitative and Qualitative Disclosures
of Market Risk 11 - 12
PART II - Other Information 13 - 16
2
<PAGE>
PART I
Item 1. Financial Statements
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.II
STATEMENT OF FINANCIAL CONDITION
(Unaudited)
June 30, December 31,
2000 1999
----------- ------------
ASSETS:
Equity in commodity futures trading account:
Cash $ 5,455,855 $ 6,813,826
Net unrealized appreciation
on open futures contracts 34,884 313,668
Zero coupons, $13,726,000 and $15,341,000 principal
amount in 2000 and 1999, respectively,
due November 15, 2003 at market value
(amortized cost $11,117,453 and $12,033,954
in 2000 and 1999, respectively) 11,215,652 12,011,850
----------- -----------
16,706,391 19,139,344
Receivable from SSB on sale of zero coupons 427,980 322,229
Interest receivable 17,905 24,463
----------- -----------
$17,152,276 $19,486,036
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 47,325 $ 62,619
Management fees 20,780 27,821
Other 30,763 42,336
Redemptions payable 629,391 506,158
----------- -----------
728,259 638,934
Partners' Capital:
General Partner, 203 Unit equivalents
outstanding in 2000 and 1999 242,902 249,394
Limited Partners, 13,523 and 15,138 Units of
Limited Partnership Interest outstanding
in 2000 and 1999, respectively 16,181,115 18,597,708
----------- -----------
16,424,017 18,847,102
----------- -----------
$17,152,276 $19,486,036
=========== ===========
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------ ------------- ----------- -------------
2000 1999 2000 1999
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains (losses) on closed positions $ 799,161 $ 860,211 $ (337,790) $ 675,090
Change in unrealized gains (losses) on open
positions (676,278) 908,234 (278,784) 634,771
------------ ------------ ------------ ------------
122,883 1,768,445 (616,574) 1,309,861
Less, brokerage commissions including clearing fees of
of $8,057, $6,808, $16,236 and $13,173, respectively (158,776) (247,640) (349,642) (489,522)
------------ ------------ ------------ ------------
Net realized and unrealized gains (losses) (35,893) 1,520,805 (966,216) 820,339
Gain on sale of zero coupons 1,943 6,384 951 23,631
Unrealized appreciation (depreciation)
on zero coupons 85,388 (368,022) 120,303 (760,739)
Interest income 238,548 276,451 499,873 551,480
------------ ------------ ------------ ------------
289,986 1,435,618 (345,089) 634,711
------------ ------------ ------------ ------------
Expenses:
Management fees 62,061 103,020 138,220 202,060
Other 11,695 14,263 23,851 30,111
Incentive fees -- 20,500 -- 20,500
------------ ------------ ------------ ------------
73,756 137,783 162,071 252,671
------------ ------------ ------------ ------------
Net income (loss) 216,230 1,297,835 (507,160) 382,040
Redemptions (629,391) (497,937) (1,915,925) (1,065,566)
------------ ------------ ------------ ------------
Net increase (decrease) in Partners' capital (413,161) 799,898 (2,423,085) (683,526)
Partners' capital, beginning of period 16,837,178 21,454,730 18,847,102 22,938,154
------------ ------------ ------------ ------------
Partners' capital, end of period $ 16,424,017 $ 22,254,628 $ 16,424,017 $ 22,254,628
------------ ------------ ------------ ------------
Net asset value per Unit
(13,726 and 16,045 Units outstanding
at June 30, 2000 and 1999, respectively) $ 1,196.56 $ 1,387.01 $ 1,196.56 $ 1,387.01
------------ ------------ ------------ ------------
Net gain (loss) per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 15.17 $ 79.11 $ (31.98) $ 24.73
------------ ------------ ------------ ------------
</TABLE>
See Notes To Financial Statements.
4
<PAGE>
Smith Barney Principal Plus Futures Fund L.P. II
Notes to Financial Statements
June 30, 2000
(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 Partnership's commodity broker is
Salomon Smith Barney Inc. ("SSB"). SSB is an affiliate of the General Partner.
The General Partner is wholly owned by Salomon Smith Barney Holdings Inc.
("SSBHI"), which is the sole owner of SSB. SSBHI is a wholly owned subsidiary of
Citigroup Inc. As of June 30, 2000, all trading decisions are made for the
Partnership by John W. Henry & Company, Inc. and Willowbridge Associates Inc.
(collectively, the "Advisors"). Effective July 1, 2000, John W. Henry & Company,
Inc. was terminated as Advisor to the Partnership and Winton Capital Management
Ltd. was added as Advisor on the same date.
The accompanying financial statements are unaudited but, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Partnership's
financial condition at June 30, 2000 and December 31, 1999 and the results of
its operations for the three and six months ended June 30, 2000 and 1999. 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, 1999.
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
June 30, 2000
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and six months ended
June 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
--------- ---------- -------- --------
<S> <C> <C> <C> <C>
Net realized and unrealized
gains (losses) $ (2.52) $ 92.71 $ (63.16) $ 51.11
Realized and unrealized gains
(losses) on Zero Coupons 6.13 (22.05) 8.35 (44.34)
Interest income 16.74 16.85 33.77 33.18
Expenses (5.18) (8.40) (10.94) (15.22)
--------- --------- --------- ---------
Increase(decrease) for period 15.17 79.11 (31.98) 24.73
Net Asset Value per Unit,
beginning of period 1,181.39 1,307.90 1,228.54 1,362.28
--------- --------- --------- ---------
Net Asset Value per Unit
end of period $ 1,196.56 $ 1,387.01 $ 1,196.56 $ 1,387.01
========= ========= ========= =========
</TABLE>
6
<PAGE>
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 average fair value during the periods ended June 30, 2000
and December 31, 1999, based on a monthly calculation, was $663,551 and
$855,578, respectively. The fair value of these commodity interests, including
options thereon, if applicable, at June 30, 2000 and December 31, 1999, was
$34,884 and $313,668, respectively, as detailed below.
Fair Value
June 30, December 31,
2000 1999
---------- ----------
Currency:
- Exchange Traded Contracts $ (6,990) $ 83,435
- OTC (23,664) (72,633)
Energy 80,977 41,632
Grains 7,980 (3,896)
Interest Rates U.S. 46,225 163,531
Interest Rates Non-U.S. (43,297) (42,138)
Livestock (8,180) (4,260)
Metals (60,104) 53,025
Softs 41,937 74,572
Indices -- 20,400
--------- ---------
Total $ 34,884 $ 313,668
========= =========
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, 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.
7
<PAGE>
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.
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. The majority of these instruments mature
within one year of June 30, 2000. However, due to the nature of the
Partnership's business, these instruments may not be held to maturity.
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 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 second
quarter of 2000.
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 six months ended June 30, 2000, Partnership capital decreased
12.9% from $18,847,102 to $16,424,017. This decrease was attributable to the
redemption of 1,615 Units totaling $1,915,925 coupled with a net loss from
operations of $507,160 for the six months ended June 30, 2000. Future
redemptions can impact the amount of funds available for investments in
commodity contract positions in subsequent periods.
Results of Operations
During the Partnership's second quarter of 2000, the net asset value
per unit increased 1.3% from $1,181.39 to $1,196.56 as compared to an increase
of 6.0% in the second quarter of 1999. The Partnership experienced a net trading
gain before brokerage commissions and related fees in the second quarter of 2000
of $122,883. Gains were primarily attributable to the trading of commodity
futures in energy, currencies and softs and were partially offset by losses in
grains, U.S. and non-U.S. interest rates, livestocks, metals and indices. The
Partnership experienced a net trading gain before brokerage commissions and
related fees in the second quarter of 1999 of $1,768,445. These gains were
primarily attributable to the trading of commodity futures in currencies,
energy, U.S. and non-U.S. interest rates, livestock, metals and indices and were
partially offset by losses in grains and softs.
9
<PAGE>
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 for the three and six months ended June 30,
2000 decreased by $37,903 and $51,607, respectively, as compared to the
corresponding periods in 1999. The decrease in interest income is primarily due
to the effect of redemptions on the Partnership's equity maintained in cash
during 2000.
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
six months ended June 30, 2000 decreased by $88,864 and $139,880, respectively,
as compared to the corresponding periods in 1999.
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 $40,959 and $63,840, respectively,
as compared to the corresponding periods in 1999.
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. There were no incentive fees earned for the
three and six months ended June 30, 2000. Trading performance for the three and
six months ended June 30, 1999 resulted in incentive fees of $20,500.
10
<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.
Exchange maintenance margin requirements have been used by the Partnership
as the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. Maintenance margin has been used rather than the more generally
available initial margin, because initial margin includes a credit risk
component, which is not relevant to Value at Risk.
11
<PAGE>
The following table indicates the trading Value at Risk associated with
the Partnership's open positions by market category as of June 30, 2000. All
open position trading risk exposures of the Partnership have been included in
calculating the figures set forth below. As of June 30, 2000, the Partnership's
total capitalization was $16,424,017. 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, 1999.
June 30, 2000
(Unaudited)
Year to Date
% of Total High Low
Market Sector Value at Risk Capitalization Value at Risk
-------------------------------------------------------------------------------
Currencies:
- Exchange Traded Contracts $ 53,445 0.33% $320,883 $ 53,445
- OTC Contracts 38,499 0.23% 292,020 38,499
Energy 210,600 1.28% 790,700 98,000
Grains 6,300 0.04% 209,900 6,300
Interest Rates U.S. 24,000 0.15% 272,600 24,000
Interest Rates Non-U.S. 170,842 1.04% 736,677 170,842
Livestock 9,900 0.06% 37,400 4,500
Metals 18,000 0.11% 216,000 18,000
Softs 21,500 0.13% 138,587 21,500
-------- --------
Total $553,086 3.37%
======== ========
12
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings -
For information concerning a suit filed by Harris Trust Savings Bank (as trustee
for the Ameritech Pension Trust) and others against Salomon Brothers Inc., and
Salomon Brothers Realty Corp., see the description that appears in the second
and third paragraphs under the caption "Legal Proceedings" of the Annual Report
on Form 10-K of the Partnership for the year ended December 31, 1999, which
description is included as Exhibit 99.1 to this Form 10-Q and incorporated by
reference herein, and in the first paragraph under the caption "Legal
Proceedings" of the Quarterly Report on Form 10-Q of the Partnership for the
quarterly period ended March 31, 2000, which description is included as Exhibit
99.2 to this Form 10-Q and incorporated by reference herein. On June 12, 2000,
the U.S. Supreme Court reversed the U.S. Court of Appeals for the Seventh
Circuit's judgment, which had overturned the denial of defendants' motion for
summary judgment and dismissed the sole remaining ERISA claim against Salomon
Smith Barney Holdings, Inc. ("SSBH"), and remanded the matter to the circuit
court for further proceedings.
13
<PAGE>
Exhibit 99.1
Second and third paragraphs under the caption "Legal Proceedings" beginning on
page 11 of the Annual Report on Form 10-K of SSBH for the year ended December
31, 1999 (File No. 1-4346).
In September 1992, Harris Trust and Savings Bank (as trustee for Ameritech
Pension Trust ("APT")), Ameritech Corporation, and an officer of Ameritech filed
suit against Salomon Brothers Inc. ("SBI") and Salomon Brothers Realty
Corporation ("SBRC") in the U.S. District Court for the Northern District of
Illinois (Harris Trust Savings Bank, not individually but solely as trustee for
the Ameritech Pension Trust, Ameritech Corporation and John A. Edwardson v.
Salomon Brothers Inc and Salomon Brothers Realty Corp.). The second amended
complaint alleges that three purchases by APT from defendants of participation
interests in net cash flow or resale proceeds of three portfolios of motels
owned by Motels of America, Inc. ("MOA"), as well as a fourth purchase by APT of
a similar participation interest in a portfolio of motels owned by Best Inns,
Inc. ("Best"), violated the Employee Retirement Income Security Act ("ERISA"),
and that APT's purchase of the participation interests in the third MOA
portfolio and in the Best portfolio violated the Racketeer Influenced and
Corrupt Organization Act ("RICO") and the Illinois Consumer Fraud and Deceptive
Practices Act ("Consumer Fraud Act"), and constituted fraud, negligent
misrepresentation, breach of contract and unjust enrichment. SBI had acquired
the participation interests when it purchased principal mortgage notes issued by
MOA and Best to finance purchases of motel portfolios; 95% of three of those
interests and 100% of the fourth were sold to APT for a total of approximately
$20.9 million. Plaintiffs' second amended complaint seeks judgment (a) on the
ERISA claims for the approximately $20.9 million purchase price, for rescission
and for disgorgement of profits, as well as other relief, and (b) on the RICO
and state law claims in the amount of $12.3 million, with damages trebled to $37
million on the RICO claims and punitive damages in excess of $37 million on
certain of the state law claims as well as other relief. Following motions by
defendants, the court dismissed the RICO, Consumer Fraud Act, fraud, negligent
misrepresentation, breach of contract, and unjust enrichment claims. The court
also found that defendants were not ERISA fiduciaries and dismissed two of the
three claims based on that allegation. Defendants moved for summary judgment on
plaintiffs' only remaining claim, which alleged an ERISA violation. The motion
was denied, and defendants appealed to the U.S. Court of Appeals for the Seventh
Circuit. In July 1999, the U.S. Court of Appeals for the Seventh Circuit
reversed the denial of defendants' motion for summary judgment and dismissed the
sole remaining ERISA claim against SSBH. Plaintiffs filed a petition for
certiorari with the U.S. Supreme Court seeking review of the decision of the
Court of Appeals. The petition was granted in January 2000.
14
<PAGE>
Both the Department of Labor and the Internal Revenue Service have advised SBI
that they were or are reviewing the underlying transactions. With respect to the
Internal Revenue Service, SSBH, SBI and SBRC have consented to extensions of
time for the assessment of excise taxes that may be claimed with respect to the
transactions for the years 1987, 1988 and 1989. In August 1996, the IRS sent
SSBH, SBI and SBRC what appeared to be draft "30-day letters" with respect to
the transactions and SSBH, SBI and SBRC were given an opportunity to comment on
whether the IRS should issue 30-day letters, which would actually commence the
assessment process. In October 1996, SSBH, SBI and SBRC submitted a memorandum
setting forth reasons why the IRS should not issue such 30-day letters. Since
that time, the IRS has not issued such 30-day letters to SSBH, SBI or SBRC.
15
<PAGE>
Exhibit 99.2
First paragraph under the caption "Legal Proceedings" beginning on page 17 of
the Quarterly Report on Form 10-Q of SSBH for the quarterly period ended March
31, 2000 (File No.1-4346).
For information concerning a suit filed by Harris Trust Savings Bank (as trustee
for the Ameritech Pension Trust) and others against Salomon Brothers Inc., and
Salomon Brothers Realty Corp., see the description that appears in the second
and third paragraphs under the caption "Legal Proceedings" of the Annual Report
on Form 10-K of the Partnership for the year ended December 31, 1999, which
description is included as Exhibit 99.1 to this Form 10-Q and incorporated by
reference herein. In April 2000, the U.S. Supreme Court heard oral argument on
plaintiffs' petition to reverse the decision of the U.S. Court of Appeals for
the Seventh Circuit. The U.S. Supreme Court reserved its decision, and has not
yet released its opinion.
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: 8/14/00
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: 8/14/00
By: /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 8/14/00
17
