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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, 1996
Commission File Number 33-91742
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.
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(Exact name of registrant as specified in its charter)
New York 13-3823300
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(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
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(Address and Zip Code of principal executive offices)
(212) 723-5424
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(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 ____
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SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition
at March 31, 1996 and December 31,
1995 3
Statement of Income and Expenses
and Partners' Capital for the Three
Months ended March 31, 1996 4
Notes to Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 7 - 8
PART II - Other Information 9
</TABLE>
2
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PART I
Item 1. Financial Statements
SMITH BARNEY PRINCIPAL FUTURES FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
ASSETS ______________ ______________
(Unaudited)
<S> <C> <C>
Equity in commodity futures trading account:
Cash and cash equivalents $12,520,576 $13,548,113
Net unrealized appreciation
on open futures contracts 811,473 1,276,831
Zero Coupons, $37,507,000
principal amount due February
15, 2003 at market value
(amortized cost $25,224,732 and $24,867,412
respectively) 24,426,434 25,399,365
Commodity options owned, at market value
(cost $2,010 ) 2,070
-------------- --------------
$37,758,483 $40,226,379
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses:
Management fees $46,130 $47,650
Commissions 110,092 115,109
Incentive fees 45,301 361,011
Due to Smith Barney 349,916 480,508
Other 45,885 36,700
Commodity options written, at market
value (premiums received $900) 960
-------------- --------------
597,324 1,041,938
Partners' Capital
General Partner, 376 Unit
equivalents outstanding in 1996 and 1995 372,533 392,815
Limited Partners, 37,131
Units of Limited Partnership
Interest outstanding in 1996 and 1995
36,788,626 38,791,626
-------------- --------------
37,161,159 39,184,441
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$37,758,483 $40,226,379
============== ==============
</TABLE>
See Notes to Financial Statements.
3
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SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTHS
ENDED
MARCH 31,
1996
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<S> <C>
Income:
Net losses on trading of commodity
interests:
Realized losses on closed positions ($503,838)
Change in unrealized gain/losses on
open positions (465,358)
------------
(969,196)
Less, brokerage commissions and clearing
fees ($13,168) (375,592)
------------
Net realized and unrealized losses (1,344,788)
Unrealized depreciation
on Zero Coupons (1,330,251)
Interest income 487,912
------------
(2,187,127)
------------
Expenses:
Management fees 138,723
Incentive fees (315,710)
Other 13,142
------------
(163,845)
------------
Net losses (2,023,282)
------------
Net decrease in Partners' capital (2,023,282)
Partners' capital, beginning of period 39,184,441
------------
Partners' capital, end of period $37,161,159
============
Net Asset Value per Unit
(37,507 Units outstanding at
March 31, 1996 ) $990.78
============
Redemption Net Asset Value per Unit $1,000.11
============
Net loss per Unit of Limited Partnership
Interest and General Partnership
Unit equivalent $ (53.94)
============
</TABLE>
See Notes to Financial Statements.
4
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SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
General
Smith Barney Principal Plus Futures Fund L.P. (the "Partnership") is
a limited partnership which was initially organized on January 25, 1993 under
the partnership laws of the State of New York and was capitalized on April 12,
1995. No activity occurred between January 25, 1993 and April 12, 1995. 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. The Partnership maintains a portion of its
assets in interest payments stripped from U.S. Treasury Bonds under the
Treasury's STRIPS program which payments are due approximately seven years from
the date trading commenced ("Zero Coupons").
Between July 12, 1995 and November 16, 1995, 37,130 Units were sold
at $1,000 per Unit. The proceeds of the offering were held in an escrow
account until November 17, 1995, at which time they were turned over to the
Partnership for trading.
Smith Barney Inc. ("SB") act as the commodity broker for the
Partnership. The General Partner of the Partnership is a wholly-owned
subsidiary of SB. All trading decisions are made for the Partnership by John
W. Henry & Co., Inc., Abraham Trading Co. and Rabar Market Research Inc.
(collectively, the "Advisors"). None of the Advisors is affiliated with the
General Partner or SB.
Offering and organization expenses of $550,000 relating to the
issuance and marketing of Units offered were initially paid by SB. The accrued
liability for reimbursement of offering and organization expenses will not
reduce Net Asset Value per Unit for any purpose (other than financial
reporting), including calculation of advisory and brokerage fees and the
redemption value of Units. Interest earned by the Partnership will be used to
reimburse SB for the offering and organization expenses of the Partnership
until such time as such expenses are fully reimbursed. As of March 31, 1996,
the Partnership has reimbursed SB for $200,084 of offering and organization
expenses.
5
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SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS
(Continued)
The accompanying financial statements are unaudited but, in the
opinion of management, includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Partnership's
financial condition at March 31, 1996 and the result of its operations for the
three months ended March 31, 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 Security
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.
Net Asset Value Per Unit
Changes in net asset value per Unit for the three months ended March
31, 1996 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1996
------------------
<S> <C>
Net realized and unrealized losses $ (35.85)
Realized and unrealized
losses on Zero Coupons (35.57)
Interest income 13.10
Expenses 4.38
----------
Decrease for period (53.94)
Net Asset Value per Unit,
beginning of period 1,044.72
----------
Net Asset Value per Unit,
end of period $ 990.78
==========
Redemption Net Asset
Value per Unit * $1,000.11
==========
</TABLE>
* For the purpose of a redemption, any accrued liability for reimbursement of
offering and organization expenses will not reduce redemption net asset value
per unit.
6
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Partnership does not engage in the sale of goods or services.
Its only assets are its equity in its commodity futures trading account,
consisting of cash and cash equivalents, Zero Coupons, net unrealized
appreciation (depreciation) on open futures contracts, commodity options and
interest receivable. Because of the low margin deposits normally required in
commodity futures trading, relatively small price movements may result in
substantial losses to the Partnership. While substantial losses could lead to
a substantial decrease in liquidity no such losses occurred in the
Partnership's first quarter of 1996.
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.
The Partnership's capital consists of capital contributions, as
increased or decreased by gains or losses on commodity futures trading and Zero
Coupons, expenses, interest income, redemptions of Units and distributions of
profits, if any.
For the three months ended March 31, 1996, Partnership capital
decreased 5.2% from $39,184,441 to $37,161,159. This decrease was attributable
to a net loss from operations of $2,023,282 for the three months ended March
31, 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 first quarter of 1996, the net asset value
per Unit decreased 5.2% from $1,044.72 to $990.78. The Partnership experienced
a net trading loss before commissions and
7
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expenses in the first quarter of 1996 of $969,196. Losses were recognized in
the trading of commodity futures in stock indices, interest rates, energy
products, precious metals and agricultural products and were partially offset
by gains recognized 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 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. To the extent that market trends exist and the Advisors are
able to identify them, the Partnership expects to increase capital through
operations.
Interest income on 80% of the Partnership's daily average equity
maintained in cash was earned on the monthly average non- competitive yield of
30 day U.S. Treasury Bills. Also included in interest income is the
amortization of original issue discount on the Zero Coupons based on the
interest method.
Brokerage commissions are calculated on the adjusted net asset value
on the last day of each month and are affected by trading performance and
redemptions.
All trading decisions for the Partnership are currently being made
by the Advisors. 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.
Incentive fees are based on the new trading profits generated by
each Advisor as defined in the advisory agreements between the Partnership, the
General Partner and each Advisor.
8
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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
9
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.
By: Smith Barney Futures Management Inc.
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(General Partner)
By: /s/ David J. Vogel, President
------------------------------------
David J. Vogel, President
Date: 5/10/96
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: 5/10/96
By /s/ Daniel A. Dantuono
------------------------------------
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 5/10/96
10
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EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000944697
<NAME> SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 12,520,576
<SECURITIES> 25,237,907
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,758,483
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,758,483
<CURRENT-LIABILITIES> 597,324
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 37,161,159
<TOTAL-LIABILITY-AND-EQUITY> 37,758,483
<SALES> 0
<TOTAL-REVENUES> (2,187,127)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (163,845)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,023,282)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,023,282)
<EPS-PRIMARY> (53.94)
<EPS-DILUTED> 0
</TABLE>
