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 March 31, 1997
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:
Statement of Financial Condition at
March 31, 1997 and December 31, 1996. 3
Statement of Income and Expenses
and Partners' Capital for the three
months ended March 31, 1997 and 1996. 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
Statement of Financial Condition
March 31, December 31,
1997 1996
----------- -----------
Assets: (Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $62,081,571 $67,722,636
Net unrealized appreciation
on open futures contracts 362,261 1,232,573
----------- -----------
62,443,832 68,955,209
Interest receivable 214,936 220,614
=========== ===========
$62,658,768 $69,175,823
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accrued expenses:
Commissions $ 313,294 $ 345,879
Management fees 207,818 229,433
Administrative fees 51,955 57,358
Incentive fees 0 1,923,668
Other fees 44,970 56,280
Redemptions payable 0 4,487,900
----------- -----------
618,037 7,100,518
----------- -----------
Partners' Capital:
General Partner, 322.1307 Unit equivalents
outstanding in 1997 and 1996 749,573 744,070
Limited Partners, 26,340.0300 and 26,552.1832
Units of Limited Partnership Interest
outstanding in 1997 and 1996,
respectively 61,291,158 61,331,235
----------- -----------
62,040,731 62,075,305
----------- -----------
$62,658,768 $69,175,823
=========== ===========
See Notes to Financial Statements.
3
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SHEARSON MID - WEST FUTURES FUND
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1996
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains (losses) on closed positions $ 2,515,723 $ (31,845)
Change in unrealized gains/losses on open
positions (870,312) 954,328
____________ ____________
1,645,411 922,483
Less, brokerage commissions and clearing fees
($10,254 and $14,478, respectively) (983,945) (919,659)
____________ ____________
Net realized and unrealized gains 661,466 2,824
Interest income 628,329 562,928
____________ ____________
1,289,795 565,752
____________ ____________
Expenses:
Management fees 636,972 585,414
Administrative fees 159,243 146,353
Other 19,159 16,612
____________ ____________
815,374 748,379
____________ ____________
Net income (loss) 474,421 (182,627)
Redemptions (508,995) (1,112,809)
____________ ____________
Net decrease in Partners' capital (34,574) (1,295,436)
Partners' capital, beginning of period 62,075,305 57,396,484
____________ ____________
Partners' capital, end of period $ 62,040,731 $ 56,101,048
------------ ------------
Net asset value per Unit
(26,662.1607 and 30,895.4124 Units outstanding
at March 31, 1997 and 1996, respectively) $ 2,326.92 $ 1,815.84
------------ ------------
Net income (loss) per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 17.08 $ (6.67)
------------ ------------
See Notes to Financial Statements.
4
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Shearson Mid-West Futures Fund
Notes to Financial Statements
March 31, 1997
(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 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.
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 March 31, 1997 and the results of its operations for the three
months ended March 31, 1997, and 1996. 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, 1996.
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 months ended March 31,
1997 and 1996 were as follows:
THREE-MONTHS ENDED
MARCH 31,
1997 1996
Net realized and unrealized
gains (losses) $ 23.96 $ (.84)
Interest income 23.49 17.98
Expenses (30.37) (23.81)
---------- ----------
Increase (decrease) for period 17.08 (6.67)
Net Asset Value per Unit,
beginning of period 2,309.84 1,822.51
---------- ----------
Net Asset Value per Unit,
end of period $2,326.92 $1,815.84
========== ==========
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 March 31, 1997 was $362,261 and the average fair value during the
three months then ended, based on monthly calculation, was $2,388,840.
4. Financial Instrument Risk:
The Partnership is party to financial instruments with off- balance sheet
risk, including derivative financial instruments and
6
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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 March 31, 1997, the
notional or contractual amounts of the Partnership's commitment to purchase and
sell these instruments was $72,101,339 and $404,042,119, respectively, as
detailed below. All of these instruments mature within one year of March 31,
1997. However, due to the nature of the Partnership's business, these
instruments may not be held to maturity. At March 31, 1997, the fair value of
the Partnership's derivatives including options thereon, was $362,261 as
detailed below.
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies * $ 35,497,762 $ 66,798,843 $(465,635)
Interest Rates Non-U.S. 30,464,402 253,375,620 141,571
Interest Rates U.S. 0 83,867,656 781,000
Metals 6,139,175 0 (94,675)
------------ ------------ ----------
Totals $ 72,101,339 $404,042,119 $ 362,261
============ ============ ==========
* 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 first quarter of 1997.
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 three months ended March 31, 1997, Partnership capital decreased
0.1% from $62,075,305 to $62,040,731. This decrease was attributable to the
redemption of 212.1532 limited partnership Units resulting in an outflow of
$508,995 which was partially offset by net income from operations of $474,421
for the three months ended March 31, 1997. 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 first quarter of 1997, the net asset value per
Unit increased 0.7% from $2,309.84 to $2,326.92 as compared to the first quarter
of 1996 in which the net asset value per Unit decreased by 0.4%. The Partnership
experienced a net trading gain before commissions and expenses in the first
quarter of 1997 of $1,645,411. Gains were recognized in the trading of commodity
futures in currencies, metals and indices which were partially offset by losses
recognized in the trading of interest rate products. The Partnership experienced
a net trading gain before commissions and expenses in the first quarter of 1996
of $922,483. Gains were recognized in the trading of commodity futures in
interest rates, currencies and precious metals which were partially offset by
losses recognized in the trading of stock indices.
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. 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. 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 months ended March 31, 1997, increased by $65,401, as compared to
the corresponding period in 1996. The increase in interest income is primarily
due to the positive trading performance and an increase in interest rates for
the three months ended March 31, 1997 as compared to 1996.
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 months ended March 31, 1997 increased by $64,286 as compared to the
corresponding period in 1996.
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 months ended March 31, 1997
increased by $51,558, as compared to the corresponding period in 1996.
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 months ended March 31, 1997 increased by $12,890, as compared to the
corresponding period in 1996.
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
months ended March 31, 1997 or 1996.
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: 5/12/97
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: 5/12/97
By: /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 5/12/97
12
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<ARTICLE> 5
<CIK> 0000924875
<NAME> Shearson Mid-West Futures Fund
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 62,081,571
<SECURITIES> 362,261
<RECEIVABLES> 214,936
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 62,658,768
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 62,658,768
<CURRENT-LIABILITIES> 618,037
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 62,040,731
<TOTAL-LIABILITY-AND-EQUITY> 62,658,768
<SALES> 0
<TOTAL-REVENUES> 1,289,795
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 815,374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 474,421
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 474,421
<EPS-PRIMARY> 17.08
<EPS-DILUTED> 0
</TABLE>
