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, 1997
Commission File Number 333-24923
SMITH BARNEY WESTPORT FUTURES FUND L.P.
(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 WESTPORT FUTURES FUND L.P.
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statement of Financial Condition at
September 30, 1997. 3
Statement of Income and Expenses and
Partners' Capital for the period from
August 1, 1997 (commencement of trading
operations) to September 30, 1997. 4
Notes to Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9 - 10
PART II - Other Information 12
2
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PART I
Item 1. Financial Statements
Smith Barney Westport Futures Fund L.P.
STATEMENT OF FINANCIAL CONDITION
September 30,
1997
ASSETS:
---------------
(Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $ 59,960,055
Net unrealized appreciation
on open futures contracts 1,899,298
---------------
$ 61,859,353
===============
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 335,071
Management fees 205,020
Due to Smith Barney 383,319
Other 18,340
---------------
941,750
---------------
Partners' Capital:
General Partner, 652.4940 Unit
equivalents outstanding 609,950
Limited Partners, 64,514.0880
Units of Limited Partnership
Interest outstanding 60,307,653
---------------
60,917,603
---------------
$ 61,859,353
===============
See Notes to Financial Statements.
3
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SMITH BARNEY WESTPORT FUTURES FUND L.P.
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
PERIOD FROM
AUGUST 1,1997
(COMMENCEMENT OF
TRADING OPERATIONS)
TO SEPTEMBER 30,
1997
------------------------
Income:
Net gains (losses) on trading of commodity
futures:
Realized losses on closed positions $ (3,985,542)
Change in unrealized gains on open
positions 1,899,298
------------------------
(2,086,244)
Less, brokerage commissions and
clearing fees ( $8,285) (576,861)
------------------------
Net realized and unrealized gains (2,663,105)
Interest income 326,681
------------------------
(2,336,424)
------------------------
Expenses:
Management fees 335,633
Other 18,340
------------------------
353,973
------------------------
Net income (loss) (2,690,397)
------------------------
Net decrease in Partners' capital (2,690,397)
Proceeds from offering - Limited Partners 40,036,000
General Partner 405,000
Offering and organization expense (710,000)
Additions - Limited Partners 23,638,000
General Partner 239,000
------------------------
Partners' capital, end of period $ 60,917,603
========================
Net asset value per Unit
( 65,166.5820 Units outstanding
at September 30, 1997) $ 934.80
========================
Net income (loss) per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ (47.64)
========================
Redemption Net asset value per Unit $ 940.68
========================
See Notes to Financial Statements.
4
4
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SMITH BARNEY WESTPORT FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
1. General:
Smith Barney Westport Futures Fund L.P. (The "Partnership") was formed
under the laws of the State of New York, on March 21, 1997, to engage 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.
Between May 30, 1997 (commencement of offering period) and July 31, 1997,
40,035 Units of limited partnership interest and 404 Unit equivalents
representing the general partner's contribution were sold at $1,000 per unit.
The proceeds of the offering were held in an escrow account until August 1,
1997, 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. Smith Barney Inc. ("SB"), an affiliate of
the General Partner, acts as commodity broker for the Partnership. All trading
decisions be made for the Partnership by John W. Henry & Company, Inc. (the
"Advisor"). The Advisor is not affiliated with the General Partner or SB.
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, 1997 and the results of its operations for the period
from August 1, 1997 (commencement of trading operations) to September 30, 1997.
These financial statements present the results of an interim period 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
financial statement included in the Registration Statement.
Due to the nature of commodity trading, the results of operations for the
interim period presented should not be considered indicative of the results that
may be expected for the entire year.
5
<PAGE>
SMITH BARNEY WESTPORT FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. Net Asset Value Per Unit:
Change in net asset value per Unit for the period from August 1, 1997,
(commencement of trading operations) to September 30, 1997 was as follows:
PERIOD FROM
AUGUST 1, 1997
(COMMENCEMENT OF
TRADING OPERATIONS)
TO
SEPTEMBER 30, 1997
Net realized and unrealized
losses $(52.57)
Interest income 6.26
Expenses (6.74)
Other 5.41
-------
Decrease for period (47.64)
Net Asset Value per Unit,
beginning of period 982.44
-------
Net Asset Value per Unit,
end of period $934.80
=======
Redemption Net Asset
Value per Unit * $940.68
=======
* 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. Offering and Organization Costs:
Offering and organization expenses of approximately $710,000 relating to
the issuance and marketing of Units offered were initially paid by SB and were
charged against the initial capital of the Partnership. The accrued liability
for reimbursement of offering and organization expenses will not reduce Net
Asset Value per Unit for any purpose (other than financial reporting), including
calculation of advisory and brokerage fees and the redemption value of Units.
Interest earned by the Partnership will be used to reimburse SB for the offering
and organization expenses of the Partnership until such time as such expenses
are fully reimbursed. As of September 30, 1997, the Partnership has
6
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reimbursed SB for $326,681 of offering and organization expenses in addition to
interest at the prime rate quoted by the Chase Manhattan Bank totaling $4,302.
4. 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 SB 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, 1997 was $1,899,298 and the average fair value during
the period from August 1, 1997 (commencement of trading operations) to September
30, 1997, based on monthly calculation, was $819,156.
5. 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.
7
<PAGE>
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 SB.
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. At September 30, 1997, the notional or
contractual amounts of the Partnership's commitment to purchase and sell these
instruments was $655,906,205 and $160,297,617, respectively, as detailed below.
All of these instruments mature within one year of September 30, 1997. However,
due to the nature of the Partnership's business, these instruments may not be
held to maturity. At September 30, 1997, the Partnership had net unrealized
trading gains of $1,899,298, as detailed below.
NOTIONAL OR CONTRACTUAL NET
AMOUNT OF COMMITMENTS UNREALIZED
TO PURCHASE TO SELL GAIN/(LOSS)
Currencies * $ 80,349,887 $120,453,969 $ (394,720)
Energy 9,739,270 12,948,790 (473,940)
Interest Rates US 113,455,594 0 (93,563)
Interest Rates Non US 418,397,141 0 2,762,372
Grains 6,080,423 0 (86,527)
Softs 10,951,153 6,832,045 (359,806)
Metals 10,232,255 6,916,044 238,859
Indices 6,700,482 13,146,769 306,623
------------- ------------- ----------
Total $655,906,205 $160,297,617 $1,899,298
============= ============= ==========
8
<PAGE>
* The notional or contractual commitment amounts and the fair value amount
listed for the currency sector represent OTC contracts. All other sectors listed
represent exchange traded contracts.
6. Pending Merger:
On September 24, 1997, Travelers Group Inc. ("Travelers") and Salomon Inc
("Salomon") announced an agreement and plan of merger pursuant to which Salomon
will become a wholly owned subsidiary of Travelers and Smith Barney Holdings
Inc., the parent company of Smith Barney Inc. and Smith Barney Futures
Management Inc., will be merged into Salomon forming Salomon Smith Barney
Holdings Inc. The transaction is expected to be completed by year-end 1997.
9
<PAGE>
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, 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 in the period ended September 30, 1997.
The Partnership's capital consists of capital contributions, as increased
or decreased by gains or losses on commodity futures trading, expenses, interest
income, additions, redemptions of Units and distributions of profits, if any.
For the period ended September 30, 1997, Partnership capital increased
53.3% from $39,731,000 to $60,917,603. This increase was attributable to the
addition of 24,725.5820 Units totaling $23,877,000 which was partially offset by
net loss from operations of $2,690,397 for the period ended September 30, 1997.
Results of Operations
During the period from August 1, 1997 (commencement of trading
operations) to September 30, 1997, Partnership's net asset value per Unit
decreased 4.8% from $982.44 to $934.80. The Partnership experienced a net
trading loss before commissions and expenses in the period ended September 30,
1997 of $2,086,244. Losses were recognized in the trading of commodity futures
in energy products, U.S. interest rates, currencies, grains, softs, indices and
metals and were partially offset by gains recognized in non-U.S. interest rates.
The Partnership commenced trading operations on August 1, 1997, and, as a
result, comparative information is not available.
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 Advisor 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 Advisor is able to identify them,
the
10
<PAGE>
Partnership expects to increase capital through operations.
Interest income on 80% of the Partnership's average daily equity
maintained in cash was earned at the 30 day U.S. Treasury bill rate determined
weekly by SB based on the average noncompetitive yield on 3-month U.S. Treasury
bills maturing in 30 days.
Brokerage commissions are calculated on the adjusted net asset value on
the last day of each month and are affected by trading performance, additions
and redemptions.
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,
additions and redemptions.
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.
11
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds -
The Partnership commenced trading operations on August 1, 1997 with
40,036 Units of limited partnership interest totaling $40,036,000
and 405 Unit equivalents representing the General Partner's
contribution of $405,000. The Partnership continues to offer Units
at the net asset value per Unit as of the end of each month. For
the period from August 1, 1997 (commencement of trading operations)
to September 30, 1997, there were additional sales of 24,478.0880
Units totaling $23,638,000 and contributions by the General Partner
representing 247.4940 Unit equivalents totaling $239,000.
Proceeds from the sale of additional Units are used in the trading
of commodity interests including futures contracts, options and
forward contracts.
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
12
<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 WESTPORT FUTURES FUND L.P.
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/12/97
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: 11/12/97
By /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 11/12/97
13
<PAGE>
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<ARTICLE> 5
<CIK> 0001037189
<NAME> SB Westport Futures Fund L.P.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 59,960,055
<SECURITIES> 1,899,298
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61,859,353
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 61,859,353
<CURRENT-LIABILITIES> 941,750
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 60,917,603
<TOTAL-LIABILITY-AND-EQUITY> 61,859,353
<SALES> 0
<TOTAL-REVENUES> (2,336,424)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 353,973
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,690,397)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,690,397)
<EPS-PRIMARY> (47.64)
<EPS-DILUTED> 0
</TABLE>
