<PAGE>
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, 1996
Commission File Number 0-24280
SHEARSON MID-WEST FUTURES FUND
(Exact name of registrant as specified in its charter)
New York 13-3634370
(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)
SLB MID-WEST FUTURES FUND L.P.
(Former name, if changed since previous report)
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
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SHEARSON MID-WEST FUTURES FUND
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
June 30, 1996 and December 31, 1995. 3
Statements of Income and Expenses
and Partners' Capital for the Three
and Six Months ended June 30, 1996
and 1995. 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 11
2
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PART I
Item 1. Financial Statements
SHEARSON MID - WEST FUTURES FUND
STATEMENTS OF FINANCIAL CONDITION
JUNE 30, DECEMBER 31,
1996 1995
ASSETS
----------- ------------
(Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $54,478,877 $56,437,296
Net unrealized appreciation
on open futures contracts 2,641,267 2,128,034
----------- -----------
57,120,144 58,565,330
Interest receivable 183,773 208,113
----------- -----------
$57,303,917 $58,773,443
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses:
Commissions $ 286,520 $ 293,867
Management fees 190,058 194,932
Administrative fees 47,514 48,733
Other fees 28,323 40,415
Redemptions payable 547,180 799,012
----------- -----------
1,099,595 1,376,959
----------- -----------
Partners' Capital:
General Partner, 322.1307 Unit equivalents 599,166 587,086
outstanding in 1996 and 1995
Limited Partners, 29,895.0901 and 31,170.9645
Units of Limited Partnership Interest
outstanding in 1996 and 1995, respectively 55,605,156 56,809,398
----------- -----------
56,204,322 57,396,484
----------- -----------
$57,303,917 $58,773,443
=========== ===========
See Notes to Financial Statements
3
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SHEARSON MID - WEST FUTURES FUND
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains on closed positions $ 2,858,480 $ 19,565,817 $ 2,826,635 $ 26,936,245
Change in unrealized gains/losses on open
positions (441,095) (14,162,817) 513,233 (4,353,006)
------------ ------------ ------------ ------------
2,417,385 5,403,000 3,339,868 22,583,239
Less, brokerage commissions and
clearing fees ($9,899, $12,090, $24,377
and $33,421, respectively ) (884,064) (1,064,726) (1,803,723) (2,025,348)
------------ ------------ ------------ ------------
Net realized and unrealized gains 1,533,321 4,338,274 1,536,145 20,557,891
Interest income 550,820 745,353 1,113,748 1,388,414
------------ ------------ ------------ ------------
2,084,141 5,083,627 2,649,893 21,946,305
------------ ------------ ------------ ------------
Expenses:
Management fees 569,069 684,773 1,154,483 1,283,145
Administrative fees 142,267 171,193 288,620 320,785
Incentive fees 0 520,088 0 1,123,640
Other 16,789 15,050 33,401 30,393
------------ ------------ ------------ ------------
728,125 1,391,104 1,476,504 2,757,963
------------ ------------ ------------ ------------
Net income 1,356,016 3,692,523 1,173,389 19,188,342
Redemptions (1,252,742) (10,126,642) (2,365,551) (12,568,490)
------------ ------------ ------------ ------------
Net increase(decrease) in Partners' capital 103,274 (6,434,119) (1,192,162) 6,619,852
Partners' capital, beginning of period 56,101,048 66,696,415 57,396,484 53,642,444
------------ ------------ ------------ ------------
Partners' capital, end of period $ 56,204,322 $ 60,262,296 $ 56,204,322 $ 60,262,296
------------ ------------ ------------ ------------
Net asset value per Unit
(30,217.2208 and 33,027.4571
Units outstanding at
June 30, 1996 and 1995, respectively) $ 1,860.01 $ 1,824.61 $ 1,860.01 $ 1,824.61
------------ ------------ ------------ ------------
Net Income per Unit of Limited Partnership
Interest and General Partnership Unit equivalent $ 44.17 $ 91.85 $ 37.50 $ 486.97
------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
4
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Shearson Mid-West Futures Fund
Notes to Financial Statements
June 30, 1996
(Unaudited)
1. General:
Shearson Mid-West Futures Fund (the "Partnership") is a limited partnership
which was organized on August 21, 1991 under the partnership laws of the State
of New York with the name SLB Mid-West Futures Fund L.P. The Partnership engages
in the speculative trading of commodity interests, including forward contracts
on foreign currencies, commodity options and commodity futures contracts
including futures contracts on U.S. Treasuries and certain 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.
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 for the Partnership are being made by John W. Henry & Co., Inc. (the
"Advisor").
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, 1996 and the results of its operations for the three and
six months ended June 30, 1996 and 1995. 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 financial statements and notes included in the
Partnership's annual report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1995.
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
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Shearson Mid-West Futures Fund
Notes to Financial Statements
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and six months ended June
30, 1996 and 1995 were as follows:
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
--------- --------- --------- ---------
Net realized and unrealized
gains $ 49.95 $ 107.99 $ 49.12 $ 521.62
Interest income 17.94 20.27 35.92 36.53
Expenses (23.72) (36.41) (47.54) (71.18)
--------- --------- --------- ---------
Increase for period 44.17 91.85 37.50 486.97
Net Asset Value per Unit,
beginning of period 1,815.84 1,732.76 1,822.51 1,337.64
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $1,860.01 $1,824.61 $1,860.01 $1,824.61
========= ========= ========= =========
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 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 June 30, 1996 was $2,641,267 and the average fair value during the
six months then ended, based on monthly calculation, was $3,597,842.
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
6
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business. These financial instruments include forwards, futures and options,
whose value is based upon an underlying asset, index, or reference rate, and
generally represent future commitments to exchange currencies or cash flows, to
purchase or sell other financial instruments at specific terms at specified
future dates, or, in the case of derivative commodity instruments, to have a
reasonable possibility to be settled in cash or with another financial
instrument. These instruments may be traded on an exchange or over-the-counter
("OTC"). Exchange traded instruments are standardized and include futures and
certain option contracts. OTC contracts are negotiated between contracting
parties and include forwards and certain options. Each of these instruments is
subject to various risks similar to those related to the underlying financial
instruments including market and credit risk. In general, the risks associated
with OTC contracts are greater than those associated with exchange traded
instruments because of the greater risk of default by the counterparty to an OTC
contract.
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including interest
and foreign exchange rate movements and fluctuations in commodity or security
prices. Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counterparty to the transactions. The
Partnership's risk of loss in the event of counterparty default is typically
limited to the amounts recognized in the statement of financial condition and
not represented by the contract or notional amounts of the instruments. The
Partnership has concentration risk because the sole counterparty or broker with
respect to the Partnership's assets is 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 June 30,
7
<PAGE>
1996, the notional or contractual amounts of the Partnership's commitment to
purchase and sell these instruments was $322,221,345 and $222,305,128,
respectively, as detailed below. All of these instruments mature within one year
of June 30, 1996. However, due to the nature of the Partnership's business,
these instruments may not be held to maturity. At June 30, 1996, the Partnership
had net unrealized trading gains of $2,641,267 as detailed below.
NOTIONAL OR CONTRACTUAL NET
AMOUNT OF COMMITMENTS UNREALIZED
TO PURCHASE TO SELL GAIN/(LOSS)
----------- ------------- -----------
Currencies * $ 67,764,445 $112,633,129 $1,087,100
Interest Rates US 0 50,145,000 (230,625)
Interest Rates Non US 237,742,217 0 580,568
Metals 0 43,400,525 1,234,515
Indices 16,714,683 16,126,474 (30,291)
------------ ----------- -----------
$322,221,345 $222,305,128 $2,641,267
============ ============ ==========
* The notional or contractual commitment amounts and the net unrealized gain
amount listed for the currency sector represent OTC contracts. All other sectors
listed represent exchange traded contracts.
8
<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, net unrealized
appreciation (depreciation) on open futures contracts 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 decrease in liquidity,
no such losses occurred in the second quarter of 1996.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by gains or losses on commodity futures
trading, expenses, interest income, redemptions of Units and distributions of
profits, if any.
For the six months ended June 30, 1996, Partnership capital decreased 2.1%
from $57,396,484 to $56,204,322. This decrease was attributable to the
redemption of 1,275.8744 limited partnership Units resulting in an outflow of
$2,365,551 which was partially offset by net income from operations of
$1,173,389 for the six months ended June 30, 1996. 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 1996, the net asset value per
Unit increased 2.4% from $1,815.84 to $1,860.01 as compared to the second
quarter of 1995 in which the net asset value per Unit increased by 5.3%. The
Partnership experienced a net trading gain before commissions and expenses in
the second quarter of 1996 of $2,417,385. Gains were recognized in the trading
of commodity futures in currencies and metals which were partially offset by
losses recognized in the trading of interest rates and indices. The Partnership
experienced a net trading gain before commissions and expenses in the second
quarter of 1995 of $5,403,000. Gains were recognized in the trading of commodity
futures in interest rates and indices which were partially offset by losses
recognized in currencies and metals.
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. These price trends are influenced by,
among other things, changing supply and demand relationships, weather,
9
<PAGE>
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 Partnership expects to increase capital through operations.
Interest income on 80% of the Partnership's average daily equity was earned
on the monthly average 13-week U.S. Treasury Bill yield. Interest income for the
three and six months ended June 30, 1996 decreased by $194,533 and $274,666,
respectively, as compared to the corresponding periods in 1995. The decrease in
interest income is primarily due to a decrease in interest rates in the first
and second quarters of 1996 as compared to 1995 in addition to the effect of
redemptions on the Partnership's equity maintained in cash.
Brokerage commissions are calculated on the adjusted net asset value on the
last day of each month and, therefore, vary according to trading performance and
redemptions. Accordingly, they must be compared in relation to the fluctuations
in the monthly net asset values. Commissions and clearing fees for the three and
six months ended June 30, 1996 decreased by $180,662 and $221,625, respectively,
as compared to the corresponding periods in 1995.
All trading decisions for the Partnership are currently being made by the
Advisor. 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 for the three and six months ended June 30,
1996 decreased by $115,704 and $128,662, respectively, as compared to the
corresponding periods in 1995.
Administrative fees are paid to the General Partner for administering the
business and affairs of the Partnership. These 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. Administrative fees for the
three and six months ended June 30, 1996 decreased by $28,926 and $32,165,
respectively, as compared to the corresponding periods in 1995.
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. No incentive fees were earned for the three and
six months ended June 30, 1996. Trading performance for the three and six months
ended June 30, 1995 resulted in incentive fees of $520,088 and $1,123,640,
respectively.
10
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PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - 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
11
<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.
SHEARSON MID-WEST FUTURES FUND
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
-------------------------------------
David J. Vogel, President
Date: 8/14/96
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: 8/14/96
By: /s/ Daniel A. Dantuono
-------------------------------------
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 8/14/96
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000924875
<NAME> Shearson Midwest Futures Fund
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 54,478,877
<SECURITIES> 2,641,267
<RECEIVABLES> 183,773
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,303,917
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 57,303,917
<CURRENT-LIABILITIES> 1,099,595
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 56,204,322
<TOTAL-LIABILITY-AND-EQUITY> 57,303,917
<SALES> 0
<TOTAL-REVENUES> 2,649,893
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,476,504
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,173,389
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,173,389
<EPS-PRIMARY> 37.50
<EPS-DILUTED> 0
</TABLE>
