<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal year ended December 31, 1995
Commission File Number 0-16526
-------
HUTTON INVESTORS FUTURES FUND L.P. II
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-3406160
- -----------------------------------------------------------------------------
(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)
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act: 30,000 Units
of Limited
Partnership
Interest
----------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this form 10-K / /
<PAGE> 2
PART I
Item 1. Business.
(a) General development of business. Hutton Investors
Futures Fund L.P. II (the "Partnership") is a limited partnership organized on
March 31, 1987, under the Delaware Revised Uniform Limited Partnership Act and
commenced trading on July 24, 1987. The Partnership engages in speculative
trading of commodity futures contracts and other commodity interests, including
futures contracts on United States Treasuries and other financial instruments,
foreign currencies and stock indices. Redemptions of Units of Limited
Partnership Interest in the Partnership ("Units") for the years ended December
31, 1995, 1994 and 1993 are reported in the Statements of Partners' Capital on
page F-5 under "Item 8. Financial Statements and Supplementary Data."
The Partnership trades futures contracts on commodities primarily on
United States commodities exchanges and, to a lesser extent, on some foreign
commodity exchanges through a commodity brokerage account maintained with its
commodity broker, Smith Barney Inc. ("SB").
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. SB is an affiliate of the General
Partner.
Under the Limited Partnership Agreement of the Partnership (the
"Limited Partnership Agreement"), the General Partner has sole responsibility
for the management of the business and affairs of the Partnership, but may
delegate trading discretion to one or more
2
<PAGE> 3
trading advisors.
As of December 31, 1995, the General Partner has entered into advisory
agreements (the "Management Agreements") with TrendLogic Associates Inc. and
with John W. Henry & Co., Inc. (collectively the "Advisors"). Two of the
principals of TrendLogic Associates, Inc., Mr. Paul E. Dean and Mr. Richard
Semels, are employees of SB. The Management Agreements provide that the
Advisors will have sole discretion in determining the investment of the assets
of the Partnership but that the Advisors will have no authority to select the
commodity broker through whom transactions will be executed.
The Management Agreements can be terminated by the General Partner at
any time for any reason whatsoever. The Advisors may terminate the Management
Agreements for any reason upon 30 days' notice to the General Partner. The
Advisors may also terminate the Agreements if the trading policies of the
Partnership are changed in a manner that the Advisor reasonably believes will
adversely affect the performance of its trading strategies.
Pursuant to the terms of the Management Agreements, the Partnership
will pay each Advisor an incentive fee, payable quarterly, equal to 20% of each
Advisor's Trading Profits (as defined in the Limited Partnership Agreement).
Under the terms of a customer agreement between the Partnership and
SB, (the "Customer Agreement") the Partnership is
3
<PAGE> 4
obligated to pay commodity brokerage commissions at $50 per round-turn futures
transaction and $25 per option transaction (inclusive of National Futures
Association ("NFA"), floor brokerage, exchange and clearing fees). In
addition, the General Partner (through SB) invests approximately eighty percent
(80%) of the Partnership's assets in interest bearing U.S. Treasury
obligations (primarily U.S. Treasury Bills).
(b) Financial information about industry segments. The Partnership's
business consists of only one segment, speculative trading of commodity
interests (including, but not limited to, futures contracts, options and
forward contracts on U.S. Treasuries, other financial instruments, foreign
currencies, stock indices and physical commodities). The Partnership does not
engage in sales of goods or services. The Partnership's net income (loss) from
operations for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 are
set forth under "Item 6. Selected Financial Data." The Partnership capital at
December 31, 1995 was $15,624,256.
(c) Narrative description of business.
See Paragraphs (a) and (b) above.
(i) through (x) - Not applicable.
(xi) through (xii) - Not applicable.
(xiii) - The Partnership has no employees.
4
<PAGE> 5
(d) Financial Information About Foreign and Domestic Operations and
Export Sales. The Partnership does not engage in sales of goods or services,
and therefore this item is not applicable.
Item 2. Properties.
The Partnership does not own or lease any properties. The General
Partner operates out of facilities provided by its affiliate, SB.
Item 3. Legal Proceedings.
There are no pending legal proceedings to which the Partnership is a
party or to which any of its assets is subject. No material legal proceedings
affecting the Partnership were terminated during the fiscal year 1995.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to the security holders for a vote
during the year ended December 31, 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters.
(a) Market Information. The Partnership has issued no stock.
There is no established public trading market for the Units of
Limited Partnership Interest.
(b) Holders. The number of holders of Units of Partnership
Interest as of December 31, 1995 was 449.
(c) Distribution. The Partnership did not declare a distribution
in 1995.
5
<PAGE> 6
Item 6. Select Financial Data.
Net realized and unrealized trading gains (losses), interest income,
net income (loss), increase (decrease) in net asset value per Unit for
the years ended December 31, 1995, 1994, 1993, 1992 and 1991 and total
assets as of December 31, 1995, 1994, 1993, 1992 and 1991 were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net realized and unrealized
trading gains (losses) net
of brokerage commissions
and clearing fees of
$473,316, $472,333, $505,394,
$524,371, and $605,073,
respectively $ 4,798,547 $ (653,598) $ 3,828,147 $ (374,971) $ 3,653,598
Interest income $ 640,056 $ 416,641 $ 326,985 $ 359,066 $ 542,479
------------- ------------ ------------ ----------- -----------
$ 5,438,603 $ (236,957) $ 4,155,132 $ (15,905) $ 4,196,077
============ ============ ============ =========== ===========
Net Income (loss) $ 4,824,554 $ (578,344) $ 3,386,679 $ (134,888) $ 3,321,269
============ ============ ============ ============ ===========
Increase (decrease)
in net asset value
per Unit $ 1,082.24 $ (126.76) $ 617.34 $ 26.31 $ 460.65
============ ============ ============ =========== ===========
Total assets $ 16,025,794 $12,055,108 $ 14,156,185 $12,545,574 $15,864,819
============ =========== ============ =========== ===========
</TABLE>
6
<PAGE> 7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(1) Liquidity. The Partnership does not engage in sales of goods or
services. The Partnership's only assets are its equity in its commodity
futures trading account, consisting of cash and cash equivalents, and net
unrealized appreciation (depreciation) on open futures contracts.
Approximately 80% of the Partnership's assets are maintained in interest
bearing U.S. Treasury obligations. Because of the low margin deposits
normally required in commodity futures trading, relatively small price
movements may result in substantial losses to the Partnership. Substantial
losses resulting from such price movements could lead to a material decrease in
liquidity. To minimize this risk, the Partnership follows certain policies
including:
(a) Partnership funds are invested only in commodity interests which
are traded in sufficient volume to permit, in the opinion of the Advisors, ease
of taking and liquidating positions.
(b) The Partnership diversifies its positions among various
commodities. The Partnership does not initiate additional positions in a
commodity if such additional positions would result in a net long or short
position in such commodity requiring as margin more than 15% of the net assets
of the Partnership.
(c) The Partnership does not initiate additional positions in any
commodity if such additional positions would result in aggregate positions for
all commodities requiring as margin more than 66 2/3% of the Partnership's net
assets.
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<PAGE> 8
(d) The Partnership may occasionally accept delivery of a commodity.
Unless such delivery is disposed of promptly by retendering the warehouse
receipt representing the delivery to the appropriate clearing house, the
physical commodity position is fully hedged.
(e) The Partnership does not employ the trading technique commonly
known as "pyramiding", in which the speculator uses unrealized profits on
existing positions as margin for the purchase or sale of additional positions
in the same or related commodities.
(f) The Partnership does not utilize borrowings except short-term
borrowings if the Partnership takes delivery of any cash commodities.
(g) The Advisors may, from time to time, employ trading strategies
such as spreads or straddles on behalf of the Partnership. The term "spread"
or "straddle" describes a commodity futures trading strategy involving the
simultaneous buying and selling of futures contracts on the same commodity but
involving different delivery dates or markets and in which the trader expects
to earn a profit from a widening or narrowing of the difference between the
prices of the two contracts.
8
<PAGE> 9
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, or to purchase or sell other financial
instruments at specified terms at specified future dates. Each of these
instruments is subject to various risks similar to those relating to the
underlying financial instruments including market and credit risk. 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. (See
also Item 8. "Financial Statement and Supplementary Data.," for further
information on financial instrument risk included in the notes to financial
statements.)
Other than the risks inherent in commodity futures trading, the
Partnership knows of no trends, demands, commitments, events or uncertainties
which will result in or which are reasonably likely to result in the
Partnership's liquidity increasing or decreasing in any material way. The
Limited Partnership Agreement requires dissolution of the Partnership under
certain circumstances as defined in the
9
<PAGE> 10
Limited Partnership Agreement including, but not limited to, a decrease in the
net asset value of a Unit to less than $500 as of the close of business on any
business day, or a decrease in the aggregate net assets of the Partnership to
less than $1,000,000, or December 31, 2007.
(2) Capital resources. (a) The Partnership has made no material
commitments for capital expenditures as of the end of the latest fiscal period.
(b) The Partnership's capital consists of the capital contributions
of the Partners as increased or decreased by gains or losses on trading of
commodity interests, expenses, interest income, redemptions of Units and
distributions of profits, if any. Gains or losses on commodity futures trading
cannot be predicted. Market movements in commodities are dependent upon
fundamental and technical factors which the Partnership may or may not be able
to identify. Partnership expenses consist of, among other things, commissions
and incentive fees. The level of these expenses is dependent upon the level of
trading and the ability of the Advisors to identify and take advantage of price
movements in the commodity markets, in addition to the level of net assets
maintained. No forecast can be made as to the level of redemptions in any
given period. For the year ended December 31, 1995, 235 Units were redeemed
for a total of $829,493 which includes the General Partner redemption
representing 31 Unit equivalents totaling $113,858. For the year ended
December 1994, 589 Units were redeemed for a total of $1,591,200 which includes
the General Partner redemption representing 229 Unit equivalents totaling
10
<PAGE> 11
$615,586. For the year ended December 1993, 634 Units were redeemed for a
total of $1,583,233.
(c) Results of Operations. For the year ended
December 31, 1995, the net asset value per Unit increased 41.8% from $2,590.60
to $3,672.84. For the year ended December 31, 1994, the net asset value per
Unit decreased 4.7% from $2,717.36 to $2,590.60. For the year ended December
31, 1993, the net asset value per Unit increased 29.4% from $2,100.02 to
$2,717.36.
The Partnership experienced net trading gains of $5,271,863 before
commissions and expenses for the year ended December 31, 1995. Realized
trading gains of $5,587,098 were primarily attributable to the trading of
commodity futures in currencies, interest rates and agricultural products.
These realized gains were partially offset by realized trading losses incurred
in the trading of precious metals and energy commodity futures.
The Partnership experienced net trading losses of $181,265 before
commissions and expenses for the year ended December 31, 1994. Realized
trading losses of $83,821 were primarily attributable to net losses incurred in
the trading of precious metals, and stock index commodity futures. However,
these realized trading losses were partially offset by realized trading gains
incurred in the trading of financial, energy, agricultural and industrial
commodity futures.
The Partnership experienced net trading gains of $4,333,541 before
commissions and expenses for the year ended December 31, 1993. Realized trading
gains of $3,519,199 were attributable to trading in financial, foods, precious
metals, livestock and stock index commodity futures. However, these gains
were partially offset by realized
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<PAGE> 12
losses incurred in the trading of grains and oils and industrial commodity
futures.
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. These 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. The Advisors' technical trading methods do not generally
take into account such fundamental factors. To the extent that market trends
exist and the Advisors are able to identify them, the Partnership expects to
increase capital through operations.
12
<PAGE> 13
Item 8. Financial Statements and Supplementary Data.
HUTTON INVESTORS FUTURES FUND L.P. II
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Report of Independent Accountant. F-2
Financial Statements:
Statements of Financial Condition at
December 31, 1995 and 1994. F-3
Statements of Income and Expenses for
the years ended December 31, 1995,
1994 and 1993. F-4
Statements of Partners' Capital for the
years ended December 31, 1995, 1994
and 1993. F-5
Notes to Financial Statements. F-6 - F-9
</TABLE>
F-1
CONTINUED
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Hutton Investors Futures Fund L.P. II:
We have audited the accompanying statements of financial condition of HUTTON
INVESTORS FUTURES FUND L.P. II (a Delaware Limited Partnership) as of December
31, 1995 and 1994 and the related statements of income and expenses and
partners' capital for the years ended December 31, 1995, 1994 and 1993. These
financial statements are the responsibility of the management of the General
Partner. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the management of the General Partner, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hutton Investors Futures Fund
L.P. II as of December 31, 1995 and 1994 and the results of its operations for
the years ended December 31, 1995, 1994 and 1993, in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
New York, New York
February 21, 1996
F-2
<PAGE> 15
HUTTON INVESTORS FUTURES FUND L.P. II
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS:
Equity in commodity futures
trading account:
Cash and cash equivalents (Note 3b) $15,190,088 $10,904,167
Net unrealized appreciation on
open futures contracts 835,706 1,150,941
----------- -----------
$16,025,794 $12,055,108
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions on open
futures contracts $54,276 $64,253
Incentive fees 72,172
Other 25,337 37,835
Redemptions payable (Note 5) 249,753 323,825
----------- -----------
401,538 425,913
----------- -----------
Partners' capital (Notes 1, 5 and 6):
General Partner, 44 and 75 Unit
equivalents outstanding in
1995 and 1994, respectively 161,605 194,295
Limited Partners, 4,210 and
4,414 Units of Limited
Partnership Interest
outstanding in 1995 and
1994, respectively 15,462,651 11,434,900
----------- -----------
15,624,256 11,629,195
----------- -----------
$16,025,794 $12,055,108
=========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 16
HUTTON INVESTORS FUTURES FUND L.P. II
STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C> <C>
Income:
Net gains (losses)
on trading of
commodity
interests:
Realized gains
(losses) on
closed positions $5,587,098 $(83,821) $3,519,199
Change in
unrealized
gains/losses
on open positions (315,235) (97,444) 814,342
----------- ---------- ----------
5,271,863 (181,265) 4,333,541
Less, brokerage
commissions and
clearing fees ($16,583,
$16,203 and $17,981,
respectively) (Note 3b) (473,316) (472,333) (505,394)
----------- ---------- ----------
Net realized and
unrealized gains (losses) 4,798,547 (653,598) 3,828,147
Interest income (Note 3b) 640,056 416,641 326,985
----------- ---------- ----------
5,438,603 (236,957) 4,155,132
----------- ---------- ----------
Expenses:
Incentive fees
(Note 3a) 565,765 293,036 712,092
Other expenses 48,284 48,351 56,361
----------- ---------- ----------
614,049 341,387 768,453
----------- ---------- ----------
Net income (loss) $4,824,554 $(578,344) $3,386,679
=========== ========== ==========
Net income (loss) per Unit
of Limited Partnership Interest
and General Partner Unit equivalent
(Notes 1 and 6) $1,082.24 $ (126.76) $617.34
=========== ========== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 17
HUTTON INVESTORS FUTURES FUND L.P. II
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNER TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
Partners' capital at
December 31, 1992 $11,356,887 $638,406 $11,995,293
Net income 3,199,008 187,671 3,386,679
Redemption of 634
Units of Limited
Partnership Interest (1,583,233) (1,583,233)
----------- ---------- -----------
Partners' capital at
December 31, 1993 12,972,662 826,077 13,798,739
Net loss (562,148) (16,196) (578,344)
Redemption of 360 Units
of Limited Partnership
Interest and General
Partner redemption
representing 229
Unit equivalents (975,614) (615,586) (1,591,200)
----------- ---------- -----------
Partners' capital at
December 31, 1994 11,434,900 194,295 11,629,195
Net income 4,743,386 81,168 4,824,554
Redemption of 204
Units of Limited
Partnership Interest
and General Partner
redemption representing
31 Unit equivalents (715,635) (113,858) (829,493)
----------- ---------- -----------
Partners' capital at
December 31, 1995 $15,462,651 $161,605 $15,624,256
=========== ========= ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 18
HUTTON INVESTORS FUTURES FUND L.P. II
NOTES TO FINANCIAL STATEMENTS
1. Partnership Organization:
Hutton Investors Futures Fund L.P. II (the "Partnership") is a limited
partnership which was organized under the Partnership laws of the
State of Delaware on March 31,1987 to engage in the speculative
trading of commodity futures contracts and other commodity interests,
including futures and option contracts on U.S. Treasuries and other
financial instruments, foreign currencies and stock indices. The
commodity interests that are traded by the Partnership are volatile
and involve a high degree of market risk. The Partnership was
authorized to sell 30,000 Units of Limited Partnership Interest
("Units") during the public offering period.
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 (see Note 3b). The General Partner and each limited
partner share in the profits and losses of the Partnership in
proportion to the amount of partnership interest owned by each except
that no limited partner shall be liable for obligations of the
Partnership in excess of his initial capital contribution and profits,
if any, net of distributions.
The Partnership will be liquidated upon the first to occur of the
following: December 31, 2007; the net asset value of a Unit decreases
to less than $500 per unit; the aggregate net assets of the
Partnership decline to less than $1,000,000; or under certain other
circumstances as defined in the Limited Partnership Agreement.
2. Accounting Policies:
a. All commodity interests (including derivative financial
instruments and derivative commodity instruments) are used for
trading purposes. The commodity interests are recorded on
trade date and open contracts are recorded in the statement of
financial condition at market value for those commodity
interests for which market quotations are readily available or
at fair value on the last business day of the year.
Investments in commodity interests denominated in foreign
currency are translated into U.S. dollars at the exchange
rates prevailing on the last business day of the year.
Realized gain (loss) and changes in unrealized values on
commodity interests are recognized in the period in which the
contract is closed or the changes occur and are included in
net gains (losses) on trading of commodity interests.
b. Commission charges to open and close futures contracts are
expensed at the time the positions are opened.
c. Income taxes have not been provided as each partner is
individually liable for the taxes, if any, on his share of the
Partnership's income and expenses.
d. The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the
F-6
<PAGE> 19
HUTTON INVESTORS FUTURES FUND L.P. II
NOTES TO FINANCIAL STATEMENTS
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from these estimates.
3. Agreements:
a. Management Agreements:
The General Partner has Management Agreements with Trendlogic
Associates and John W. Henry & Company Inc. (individually an
"Advisor" or collectively the "Advisors"). Two of the
principals of Trendlogic Associates, Mr. Paul E. Dean and Mr.
Richard Semels, are employees of SB. The Agreements provide
that the Advisors have sole discretion to determine the
investment of the assets of the Partnership, subject to the
Partnership's trading policies set forth in the Partnership's
prospectus. Pursuant to each Management Agreement, each
Advisor is entitled to an incentive fee, payable quarterly,
equal to 20% of the Trading Profits (as defined) on the assets
under such Advisor's management. These Agreements are
effective until June 30, 1996, at which time they may be
renewed by the General Partner. Under certain conditions,
these Agreements may be terminated prior to their scheduled
termination date with respect to any Advisor upon written
notice to such Advisor.
b. Customer Agreement:
The Partnership has entered into a Customer Agreement, which
has been assigned to SB, whereby SB provides services which
include, among other things, the execution of transactions for
the Partnership's account in accordance with orders placed by
the Advisors. The Partnership is obligated to pay brokerage
commissions to SB at $50 per round-turn futures transaction
and $25 per option transaction which includes floor brokerage,
exchange, clearing and NFA fees. All of the Partnership's
assets are deposited in the Partnership's account at SB. The
Partnership's cash is deposited by SB in segregated bank
accounts as required by Commodity Futures Trading Commission
regulations. At December 31, 1995, the amount of cash held for
margin requirements was $2,387,095. The Customer Agreement
provides that approximately 80% of the Partnership's assets be
maintained in interest bearing U.S. Treasury obligations,
including assets to be utilized as margin for commodities
positions.
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.
F-7
<PAGE> 20
HUTTON INVESTORS FUTURES FUND L.P. II
NOTES TO FINANCIAL STATEMENTS
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 December 31, 1995 was $835,706 and the
average fair value during the year then ended, based on monthly
calculation, was $1,178,835.
5. Distributions and Redemptions:
Distributions of profits, if any, will be made at the sole discretion
of the General Partner; however, each limited partner may redeem some
or all of his Units at the net asset value thereof as of the last day
of any calendar quarter on 10 business days' notice to the General
Partner, provided that no redemption may result in the limited partner
holding fewer than three Units after such redemption is effected.
6. Net Asset Value Per Unit:
Changes in the net asset value per Unit during the years ended
December 31, 1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net realized and
unrealized gains
(losses) $1,074.84 $(144.19) $697.67
Interest income 145.31 85.44 60.37
Expenses (137.91) (68.01) (140.70)
--------- --------- ---------
Increase (decrease)
for the year 1,082.24 (126.76) 617.34
Net asset value per
Unit, beginning
of year 2,590.60 2,717.36 2,100.02
--------- --------- ---------
Net asset value per
Unit, end of year $3,672.84 $2,590.60 $2,717.36
========= ========= =========
</TABLE>
7. 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
F-8
<PAGE> 21
HUTTON INVESTORS FUTURES FUND L.P. II
NOTES TO FINANCIAL STATEMENTS
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 SB.
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 December 31, 1995,
the notional or contractual amounts of the Partnership's commitment to
purchase and sell these instruments was approximately $91,936,000 and
$53,386,000, respectively.
F-9
<PAGE> 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
During the last two fiscal years and any subsequent interim
period, no independent accountant who was engaged as the principal accountant
to audit the Partnership's financial statements has resigned or was dismissed.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no officers or directors and its affairs
are managed by its General Partner, Smith Barney Futures Management Inc.
Investment decisions are made by the Advisors.
Item 11. Executive Compensation.
The Partnership has no directors or officers. Its affairs are
managed by the General Partner. See "Item 1. Business." SB is the commodity
broker for the Partnership and receives brokerage commissions for its services
at an amount equal to $50 per round-turn futures transaction and $25 per option
transaction (inclusive of NFA, exchange and clearing fees) as described in
"Item 1. Business." and "Item 8. Financial Statements and Supplementary Data."
For the year ended December 31, 1995, SB earned $473,316 in brokerage
commissions and clearing fees.
The Advisors manage the Partnership's investments and receive a
quarterly incentive fee, as described under "Item 1. Business." For the year
ended December 31, 1995, the Advisors earned $565,765 in incentive fees.
13
<PAGE> 23
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a). Security ownership of certain beneficial owners. The
Partnership knows of no person who beneficially owns more than 5% of the Units
outstanding.
(b). Security ownership of management. Under the terms of the
Limited Partnership Agreement, the Partnership's affairs are managed by the
General Partner. The General Partner owns Units of general partnership
interest equivalent to 44 Units of Limited Partnership Interest (1.0%).
(c). Changes in control. None.
Item 13. Certain Relationships and Related Transactions.
Smith Barney Inc. and Smith Barney Futures Management Inc.
would be considered promoters for purposes of Item 404(d) of Regulation S-K.
The nature and the amount of compensation received by SB and the General
Partner from the Partnership are set forth under "Item 1. Business.", "Item 8.
Financial Statements and Supplementary Data.", Note 3b. and "Item 11. Executive
Compensation."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) (1) Financial Statements:
Statements of Financial Condition at December 31, 1995, and
1994.
14
<PAGE> 24
Statements of Income and Expenses for the years ended December
31, 1995, 1994 and 1993.
Statements of Partner's Capital for the years ended December 31, 1995, 1994
and 1993.
(2) Financial Statement Schedules: None
(3) Exhibits:
a. Agreement of Limited Partnership of Hutton
Investors Futures Fund L.P. II (the
"Partnership") dated as of March 30, 1987, as
amended and restated as of June 1, 1987).
b. Form of Subscription Agreement (incorporated
by reference from Exhibit E to the Prospectus
contained in Amendment No. 1 to the
Registration Statement on Form S-1 (File
No.33-13485) filed by the Partnership on June
5, 1987).
c. Form of Request for Redemption (incorporated
by reference form Exhibit B to the Prospectus
contained in Amendment No.1 to the
Registration Statement on Form S-1 (File No.
33-13485) filed by the Partnership on June 5,
1987).
d. Escrow Agreement dated June 9, 1987, among
the Partnership, Hutton Commodity Management
Inc., E.F. Hutton & Company Inc. and
15
<PAGE> 25
Chemical Bank (previously filed).
e. Brokerage Agreement dated as of July 23,
1987, between the Partnership and E.F. Hutton
& Company Inc. (previously filed).
f. Advisory Agreement dated as of March 31,
1987, among the Partnership, Hutton Commodity
Management Inc., Desai & Company and John W.
Henry & Co., Inc. the Partnership, Hutton
Commodity Management Inc., (previously
filed).
g. Representation Agreement concerning the
Registration Statement and the Prospectus
dated as of June 9, 1987, among the
Partnership, Hutton & Company Inc., Cresta
Commodity Management Inc., Desai & Company
and John W. Henry & Co., Inc. (previously
filed).
h. Net Worth Agreement dated as of June 3, 1987,
between Hutton Commodity Management Inc. and
the E.F. Hutton Group Inc. (previously
filed).
i. Copy of executed Promissory Note dated June
3, 1987, from The E.F. Hutton Group Inc. to
Hutton Commodity Management Inc. (previously
filed).
16
<PAGE> 26
j. Letter amending and extending Management
Agreement dated March 31, 1987 among the
Partnership, Hutton Commodity Management,
Inc., John W. Henry & Co., Inc. and Desai &
Company as of September 26, 1989 (previously
filed).
k. Letter dated August 28, 1990 from Partnership
to John W. Henry & Co., Inc. extending
Management Agreement (filed as Exhibit k to
Form 10-K for the fiscal year ended December
31, 1990 and incorporated herein by
reference).
l. Letter dated August 28, 1990 from Partnership
to Desai & Company extending Management
Agreement (filed as Exhibit 1 to Form 10-K
for the fiscal year ended December 31, 1990
and incorporated herein by reference).
m. Letter dated January 17, 1991 from
Partnership to Desai & Company terminating
Management Agreement (filed as Exhibit m to
Form 10-K for the fiscal year ended December
31, 1990 and incorporated herein by
reference).
n. Advisory Agreement dated January 30, 1991
among the Partnership, the General Partner
17
<PAGE> 27
and TrendLogic Associates, Inc. (filed as
Exhibit n to Form 10-K for the fiscal year
ended December 31, 1990 and incorporated
herein by reference).
o. Letter dated August 30, 1991 from General
Partner to John W. Henry & Co., Inc.
extending Advisory Agreement (filed as
Exhibit o to Form 10-K for the fiscal year
ended December 31, 1991 and incorporated
herein by reference).
p. Letter dated August 30, 1991 from General
Partner to TrendLogic Associates, Inc.
extending Advisory Agreement (filed as
Exhibit p to Form 10-K for the fiscal year
ended December 31, 1991).
q. Letter dated August 31, 1992 from General
Partner to John W. Henry & Co., Inc. (filed
as Exhibit q to Form 10-K for the fiscal year
ended December 31, 1991).
r. Letter dated August 31, 1992 from General
Partner to TrendLogic Associates, Inc.
extending Advisory Agreements (filed as
Exhibit r to Form 10-K for the fiscal year
ended December 31, 1992 and incorporated
herein by reference).
18
<PAGE> 28
s. Letter dated August 31, 1993 from
General Partner to John W. Henry &
Co., Inc. extending Advisory
Agreements (filed as Exhibit s to
Form 10-K for the fiscal year ended
December 31, 1993 and incorporated
herein by reference).
t. Letter dated August 31, 1993 from
General Partner to TrendLogic
Associates, Inc. (filed as Exhibit t
to Form 10-K for the fiscal year
ended December 31, 1993).
u. Letter dated February 16, 1995 from
General Partner to TrendLogic
Associates, Inc. extending Advisory
Agreement (filed as Exhibit u to
Form 10-K for the fiscal year ended
December 31, 1994).
v. Letter dated February 16, 1995 from
General Partner to John W. Henry &
Co., Inc. extending Advisory
Agreement (filed as Exhibit v to
Form 10-K for the fiscal year ended
December 31, 1994).
(b) Report on Form 8-K: None Filed
19
<PAGE> 29
Supplemental Information To Be Furnished With Reports Filed Pursuant
To Section 15(d) Of The Act by Registrants Which Have Not Registered Securities
Pursuant To Section 12 Of the Act.
Annual Report to Limited Partners
20
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
HUTTON INVESTORS FUTURES FUND L.P. II
- -------------------------------------------
(Registrant)
Date: March 29, 1996
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ Alexander J. Sloane, Chief Executive Officer
------------------------------------------------
Alexander J. Sloane, Chief Executive Officer
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 indicated as of March 29, 1996.
/s/ Philip M. Waterman, Jr.
Philip M. Waterman, Jr.
Co-Chairman and Director
/s/ Jack H. Lehman III
Jack H. Lehman III
Co-Chairman and Director
/s/ Alexander J. Sloane
Alexander J. Sloane
President and Director
/s/ Steve J. Keltz
Steve J. Keltz
Director
/s/ David J. Vogel
David J. Vogel
Director
/s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer
and Director
/s/ Daniel R. McAuliffe, Jr.
Daniel R. McAuliffe, Jr.
Director
/s/ Shelley Ullman
Shelley Ullman
Director
/s/ Michael Schaefer
Michael Schaefer
Director
21
<PAGE> 31
EXHIBIT INDEX
a. Agreement of Limited Partnership of Hutton
Investors Futures Fund L.P. II (the
"Partnership") dated as of March 30, 1987, as
amended and restated as of June 1, 1987).
b. Form of Subscription Agreement (incorporated
by reference from Exhibit E to the Prospectus
contained in Amendment No. 1 to the
Registration Statement on Form S-1 (File
No.33-13485) filed by the Partnership on June
5, 1987).
c. Form of Request for Redemption (incorporated
by reference form Exhibit B to the Prospectus
contained in Amendment No.1 to the
Registration Statement on Form S-1 (File No.
33-13485) filed by the Partnership on June 5,
1987).
d. Escrow Agreement dated June 9, 1987, among
the Partnership, Hutton Commodity Management
Inc., E.F. Hutton & Company Inc. and
Chemical Bank (previously filed).
<PAGE> 32
e. Brokerage Agreement dated as of July 23,
1987, between the Partnership and E.F. Hutton
& Company Inc. (previously filed).
f. Advisory Agreement dated as of March 31,
1987, among the Partnership, Hutton Commodity
Management Inc., Desai & Company and John W.
Henry & Co., Inc. the Partnership, Hutton
Commodity Management Inc., (previously
filed).
g. Representation Agreement concerning the
Registration Statement and the Prospectus
dated as of June 9, 1987, among the
Partnership, Hutton & Company Inc., Cresta
Commodity Management Inc., Desai & Company
and John W. Henry & Co., Inc. (previously
filed).
h. Net Worth Agreement dated as of June 3, 1987,
between Hutton Commodity Management Inc. and
the E.F. Hutton Group Inc. (previously
filed).
i. Copy of executed Promissory Note dated June
3, 1987, from The E.F. Hutton Group Inc. to
Hutton Commodity Management Inc. (previously
filed).
<PAGE> 33
j. Letter amending and extending Management
Agreement dated March 31, 1987 among the
Partnership, Hutton Commodity Management,
Inc., John W. Henry & Co., Inc. and Desai &
Company as of September 26, 1989 (previously
filed).
k. Letter dated August 28, 1990 from Partnership
to John W. Henry & Co., Inc. extending
Management Agreement (filed as Exhibit k to
Form 10-K for the fiscal year ended December
31, 1990 and incorporated herein by
reference).
l. Letter dated August 28, 1990 from Partnership
to Desai & Company extending Management
Agreement (filed as Exhibit 1 to Form 10-K
for the fiscal year ended December 31, 1990
and incorporated herein by reference).
m. Letter dated January 17, 1991 from
Partnership to Desai & Company terminating
Management Agreement (filed as Exhibit m to
Form 10-K for the fiscal year ended December
31, 1990 and incorporated herein by
reference).
n. Advisory Agreement dated January 30, 1991
among the Partnership, the General Partner
and TrendLogic Associates, Inc. (filed as
Exhibit n to Form 10-K for the fiscal year
ended December 31, 1990 and incorporated
herein by reference).
<PAGE> 34
o. Letter dated August 30, 1991 from General
Partner to John W. Henry & Co., Inc.
extending Advisory Agreement (filed as
Exhibit o to Form 10-K for the fiscal year
ended December 31, 1991 and incorporated
herein by reference).
p. Letter dated August 30, 1991 from General
Partner to TrendLogic Associates, Inc.
extending Advisory Agreement (filed as
Exhibit p to Form 10-K for the fiscal year
ended December 31, 1991).
q. Letter dated August 31, 1992 from General
Partner to John W. Henry & Co., Inc. (filed
as Exhibit q to Form 10-K for the fiscal year
ended December 31, 1991).
r. Letter dated August 31, 1992 from General
Partner to TrendLogic Associates, Inc.
extending Advisory Agreements (filed as
Exhibit r to Form 10-K for the fiscal year
ended December 31, 1992 and incorporated
herein by reference).
<PAGE> 35
s. Letter dated August 31, 1993 from
General Partner to John W. Henry &
Co., Inc. extending Advisory
Agreements (filed as Exhibit s to
Form 10-K for the fiscal year ended
December 31, 1993 and incorporated
herein by reference).
t. Letter dated August 31, 1993 from
General Partner to TrendLogic
Associates, Inc. (filed as Exhibit t
to Form 10-K for the fiscal year
ended December 31, 1993).
u. Letter dated February 16, 1995 from
General Partner to TrendLogic
Associates, Inc. extending Advisory
Agreement (filed as Exhibit u to
Form 10-K for the fiscal year ended
December 31, 1994).
v. Letter dated February 16, 1995 from
General Partner to John W. Henry &
Co., Inc. extending Advisory
Agreement (filed as Exhibit v to
Form 10-K for the fiscal year ended
December 31, 1994).
27. Financial Data Schedule
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<ARTICLE> 5
<CIK> 0000812818
<NAME> HUTTON INVESTORS FUTURES FUND L.P. II
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 15,190,088
<SECURITIES> 835,706
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,025,794
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,025,794
<CURRENT-LIABILITIES> 401,558
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15,624,256
<TOTAL-LIABILITY-AND-EQUITY> 16,025,794
<SALES> 0
<TOTAL-REVENUES> 5,438,603
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 614,049
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,824,554
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,824,554
<EPS-PRIMARY> 1,082.24
<EPS-DILUTED> 0
</TABLE>
