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, 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)
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>
SHEARSON MID-WEST FUTURES FUND
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
September 30, 1996 and December 31,
1995. 3
Statements of Income and Expenses
and Partners' Capital for the Three
and Nine Months ended September 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
<PAGE>
PART I
Item 1. Financial Statements
Shearson Mid - West Futures Fund
Statements of Financial Condition
September 30, December 31,
1996 1995
Assets
----------- -----------
(Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $49,892,512 $56,437,296
Net unrealized appreciation
on open futures contracts 5,971,227 2,128,034
----------- -----------
55,863,739 58,565,330
Interest receivable 173,250 208,113
=========== ===========
$56,036,989 $58,773,443
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accrued expenses:
Commissions $ 280,185 $ 293,867
Management fees 185,856 194,932
Administrative fees 46,464 48,733
Incentive fees - -
Other fees 34,497 40,415
Redemptions payable 892,107 799,012
----------- -----------
1,439,109 1,376,959
----------- -----------
Partners' Capital:
General Partner, 322.1307 Unit equivalents
outstanding in 1996 and 1995 599,293 587,086
Limited Partners, 29,025.2041 and 31,170.9645
Units of Limited Partnership Interest
outstanding in 1996 and 1995,
respectively 53,998,586 56,809,398
----------- -----------
54,597,879 57,396,484
=========== ===========
$56,036,988 $58,773,443
=========== ===========
See Notes to Financial Statements
3
<PAGE>
SHEARSON MID - WEST FUTURES FUND
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains (losses) on closed positions $ (2,299,375) $ 121,044 $ 527,260 $ 27,057,289
Change in unrealized gains/losses on open
positions 3,329,960 (1,446,829) 3,843,193 (5,799,835)
------------ ------------ ------------ ------------
1,030,585 (1,325,785) 4,370,453 21,257,454
Less, brokerage commissions and
clearing fees ($15,597, $9,235, $39,974
and $42,656, respectively) (872,790) (904,359) (2,676,513) (2,929,707)
------------ ------------ ------------ ------------
Net realized and unrealized gains (losses) 157,795 (2,230,144) 1,693,940 18,327,747
Interest income 551,717 637,781 1,665,465 2,026,195
------------ ------------ ------------ ------------
709,512 (1,592,363) 3,359,405 20,353,942
------------ ------------ ------------ ------------
Expenses:
Management fees 552,736 583,448 1,707,219 1,866,593
Administrative fees 138,184 145,862 426,804 466,647
Incentive fees 0 0 0 1,123,640
Other 19,734 15,330 53,135 45,723
------------ ------------ ------------ ------------
710,654 744,640 2,187,158 3,502,603
------------ ------------ ------------ ------------
Net income (loss) (1,142) (2,337,003) 1,172,247 16,851,339
Redemptions (1,605,301) (1,515,332) (3,970,852) (14,083,822)
------------ ------------ ------------ ------------
Net increase(decrease) in Partners' capital (1,606,443) (3,852,335) (2,798,605) 2,767,517
Partners' capital, beginning of period 56,204,322 60,262,296 57,396,484 53,642,444
------------ ------------ ------------ ------------
Partners' capital, end of period $ 54,597,879 $ 56,409,961 $ 54,597,879 $ 56,409,961
------------ ------------ ------------ ------------
Net asset value per Unit
(29,347.3348 and 32,180.5397
Units outstanding at
September 30, 1996 and1995, respectively) $ 1,860.40 $ 1,752.92 $ 1,860.40 $ 1,752.92
------------ ------------ ------------ ------------
Net Income (Loss) per Unit of Limited Partnership
Interest and General Partnership Unit equivalent $ 0.39 $ (71.69) $ 37.89 $ 415.28
------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Shearson Mid-West Futures Fund
Notes to Financial Statements
September 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 & Company, 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 September 30, 1996 and the results of its operations for the three
and nine months ended September 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
<PAGE>
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 nine months ended
September 30, 1996 and 1995 were as follows:
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
---- ---- ---- ----
Net realized and unrealized
gains (losses) $ 5.69 $ (68.41) $ 54.81 $ 453.21
Interest income 18.40 19.49 54.33 56.03
Expenses (23.70) (22.77) (71.25) (93.96)
--------- --------- --------- ---------
Increase (decrease) for
period .39 (71.69) 37.89 415.28
Net Asset Value per Unit,
beginning of period 1,860.01 1,824.61 1,822.51 1,337.64
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $1,860.40 $1,752.92 $1,860.40 $1,752.92
========= ========= ========= =========
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 September 30, 1996 was $5,971,227 and the average fair value during
the nine months then ended, based on monthly calculation, was $4,007,040.
4. Financial Instrument Risk:
The Partnership is party to financial instruments with off-balance sheet
risk, including derivative financial instruments and
6
<PAGE>
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.
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
7
<PAGE>
of the Partnership's involvement in these instruments. At September 30, 1996,
the notional or contractual amounts of the Partnership's commitment to purchase
and sell these instruments was $842,183,446 and $214,576,140, respectively, as
detailed below. All of these instruments mature within one year of September 30,
1996. However, due to the nature of the Partnership's business, these
instruments may not be held to maturity. At September 30, 1996, the Partnership
had net unrealized trading gains of $5,971,228 as detailed below.
NOTIONAL OR CONTRACTUAL NET
AMOUNT OF COMMITMENTS UNREALIZED
TO PURCHASE TO SELL GAIN/(LOSS)
----------- ------- -----------
Currencies * $ 96,366,366 $107,928,869 $ 532,725
Interest Rates US 0 25,245,906 (631,531)
Interest Rates Non US 739,910,694 4,972,500 4,910,655
Metals 0 76,428,865 1,163,485
Indices 5,906,386 0 (4,107)
------------ ----------- ----------
$842,183,446 $214,576,140 $5,971,227
============ ============ ==========
* 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 and forward 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 nine months ended September 30, 1996, Partnership capital decreased
4.9% from $57,396,484 to $54,597,879. This decrease was attributable to the
redemption of 2,145.7604 limited partnership Units resulting in an outflow of
$3,970,852 which was partially offset by net income from operations of
$1,172,247 for the nine months ended September 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 third quarter of 1996, the net asset value per
Unit increased 0.02% from $1,860.01 to $1,860.40 as compared to the third
quarter of 1995 in which the net asset value per Unit decreased by 3.9%. The
Partnership experienced a net trading gain before commissions and expenses in
the third quarter of 1996 of $1,030,585. Gains were recognized in the trading of
commodity futures in interest rates and metals which were partially offset by
losses recognized in the trading of currencies and indices. The Partnership
experienced a net trading loss before commissions and expenses in the third
quarter of 1995 of $1,325,785. Losses were recognized in the trading of
commodity futures in interest rates, precious metals and indices which were
partially offset by gains recognized in the trading of commodity futures in
currencies.
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
9
<PAGE>
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 Partnership expects to
increase capital through operations.
Interest income on 80% of the Partnership's average daily equity was earned
at the monthly average 13-week U.S. Treasury Bill yield. Interest income for the
three and nine months ended September 30, 1996 decreased by $86,064 and
$360,730, respectively, as compared to the corresponding periods in 1995. The
decrease in interest income is primarily due to a decrease in interest rates in
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
nine months ended September 30, 1996 decreased by $31,569 and $253,194,
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 nine months ended September
30, 1996 decreased by $30,712 and $159,374, 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 nine months ended September 30, 1996 decreased by $7,678 and $39,843,
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
nine months ended September 30, 1996. Trading performance for the nine months
ended September 30, 1995 resulted in incentive fees of $1,123,640.
10
<PAGE>
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: 11/11/96
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: 11/11/96
By: /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 11/11/96
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000924875
<NAME> Shearson Mid-West Futures Fund
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 49,892,512
<SECURITIES> 5,971,227
<RECEIVABLES> 173,250
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,036,989
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 56,036,989
<CURRENT-LIABILITIES> 1,439,109
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 54,597,879
<TOTAL-LIABILITY-AND-EQUITY> 56,036,988
<SALES> 0
<TOTAL-REVENUES> 3,359,405
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,187,158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,172,247
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,172,247
<EPS-PRIMARY> 37.89
<EPS-DILUTED> 0
</TABLE>
