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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, 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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
----
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 [ ]
PART i
Item 1. Business.
(a) General development of business. Shearson Mid- West
Futures Fund (the "Partnership") is a limited partnership organized on August
21, 1991 under the partnership laws of the State of New York. The Partnership
commenced trading operations on December 2, 1991. The Partnership engages in
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. Between September 26, 1991 and December 2, 1991, 2,000 Units of limited
partnership interest ("Units") were sold at $1,000 per Unit. The proceeds of the
offering were held in an escrow account until December 2, 1991, at which time
they were turned over to the Partnership for trading. Sales and redemptions of
Units and general partner contributions and redemptions for the years ended
December 31, 1996, 1995 and 1994 are reported in the Statements of Partners'
Capital on page F-5 under "Item 8.
Financial Statements and Supplementary Data."
The Partnership will be liquidated upon the first to occur of the
following: December 31, 2011; if the Net Asset Value per Unit falls below $350
as of the end of business on any business day or upon the earlier occurrence of
certain other circumstances set forth in the Limited Partnership Agreement of
the Partnership (the "Limited Partnership Agreement").
The Partnership's trading of futures contracts on commodities
2
is done on United States and foreign commodity exchanges. It engages in such
trading 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, the General Partner has sole
responsibility for the administration of the business and affairs of the
Partnership, but may delegate trading discretion to one or more trading
advisors. The General Partner administers the business and affairs of the
Partnership including selecting one or more advisors to make trading decisions
for the Partnership. The Partnership will pay the General Partner a monthly
administrative fee in return for its services to the Partnership equal to 1/12
of 1% (1% per year) of month-end Net Assets of the Partnership. This fee may be
increased or decreased at the discretion of the General Partner.
The General Partner has entered into a management agreement (the
"Management Agreement") with John W. Henry & Company, Inc. (the "Advisor") who
will make all commodity trading decisions for the Partnership. The Advisor is
not affiliated with the General Partner or SB. The Advisor is not responsible
for the organization or operation of the Partnership.
Pursuant to the terms of the Management Agreement, the Partnership is
obligated to pay the Advisor a monthly management fee equal to 1/3 of 1% (4% per
year) of Net Assets allocated to the
3
Advisor as of the end of the month and an incentive fee payable quarterly of 15%
of New Trading Profits of the Partnership.
The Customer Agreement between the Partnership and SB (the "Customer
Agreement") provides that the Partnership pays SB a monthly brokerage fee equal
to 1/2 of 1% of month-end Net Assets (6% per year), in lieu of brokerage
commissions on a per trade basis. SB pays a portion of its brokerage fees to its
financial consultants who have sold Units. The Partnership pays for National
Futures Association ("NFA") fees, exchange and clearing fees, give-up and user
fees and floor brokerage fees. Brokerage fees will be paid for the life of the
Partnership, although the rate at which such fees are paid may be changed. The
Customer Agreement between the Partnership and SB gives the partnership the
legal right to net unrealized gains and losses. The Customer Agreement may be
terminated by either party.
In addition, SB pays the Partnership interest on 80% of the average daily
equity maintained in cash in its account during each month at the rate equal to
the average noncompetitive yield of 13- week U.S. Treasury Bills as determined
at the weekly auctions thereof during the month.
(b) Financial information about industry segments. The Partnership's
business consists of only one segment, speculative trading of commodity
interests. 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,
1996, 1995, 1994, 1993 and 1992 is set forth under "Item 6. Select Financial
Data."
4
The Partnership capital as of December 31, 1996 was $62,075,305.
(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.
(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.
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 last fiscal year covered by this report.
5
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, 1996 was 723.
(c) Distribution. The Partnership did not declare a
distribution in 1996.
6
Item 6. Select Financial Data. Realized and unrealized trading gains (losses),
interest income, net income (loss) and increase (decrease) in net asset value
per Unit for the years ended December 31, 1996, 1995, 1994, 1993 and 1992 and
total assets at December 31, 1996, 1995, 1994, 1993 and 1992 were as follows:
1996 1995 1994 1993 1992
------------ ------------ ------------ ----------- -----------
Realized and unrealized trading gains
(losses) net of brokerage commissions
and clearing fees of $3,740,843,
$3,830,022, $3,955,870, $2,488,783 and
$157,437, respectively. $17,066,887 $20,679,606 $(3,231,417) $ 9,286,505 $ 115,703
Interest income 2,245,474 2,649,301 2,157,483 953,307 70,405
------------ ------------ ------------ ------------ ----------
$19,312,361 $23,328,907 $(1,073,934) $10,239,812 $ 186,108
============ ============ ============ ============ ==========
Net Income (loss) $14,323,795 $19,082,887 $(5,208,500) $ 7,091,500 $ (32,096)
============ ============ ============ ============ ===========
Increase (decrease) in net
asset value per unit $487.33 $484.87 $(126.73) $417.41 $49.03
======== ======== ========= ======== ======
Total assets $69,175,823 $58,773,443 $55,730,378 $67,360,836 $7,595,910
============ ============ ============ ============ ==========
7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(a) Liquidity. The Partnership does not engage in sales of
goods or services. Its only assets are its commodity futures trading account,
consisting of cash and cash equivalents, 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. Such substantial losses could lead to a material
decrease in liquidity. To minimize this risk, the Partnership follows certain
policies including:
(1) Partnership funds are invested only in commodity contracts which
are traded in sufficient volume to permit, in the opinion of the Advisor, ease
of taking and liquidating positions.
(2) The Partnership diversifies its positions among various
commodities. The Advisor does not initiate additional positions in any commodity
for the Partnership if such additional positions would result in aggregate
positions for all commodities requiring a margin of more than 66-2/3% of net
assets of the Partnership managed by the Advisor.
(3) 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.
8
(4) 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 purchases or sale of additional positions
in the same or related commodities.
(5) The Partnership does not utilize borrowings except short-term
borrowings if the Partnership takes delivery of any cash commodities.
(6) The Advisor 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 contracts.
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 futures 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
9
and controls the Partnership 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 provides that
the General Partner may, at its discretion, cause the Partnership to cease
trading operations and liquidate all open positions under certain circumstances
including a decrease in Net Asset Value per Unit to less than $350 as of the
close of business on any business day.
(b) Capital resources. (i) The Partnership has made no
material commitments for capital expenditures.
(ii) The Partnership's capital consists of the capital contributions
of the partners as increased or decreased by gains or losses on commodity
futures trading and by expenses, interest income, redemptions of Units and
distributions of profits, if any. Gains or losses on commodity futures trading
cannot be predicted. Market moves in commodities are dependent upon fundamental
and technical factors which the Partnership may or may not be able to identify.
Partnership expenses will consist of, among other
10
things, commissions, and incentive fees. The level of these expenses is
dependent upon the level of trading and the ability of the Advisor to identify
and take advantage of price movements in the commodity markets, in addition to
the level of Net Assets maintained. In addition, the amount of interest income
payable by SB is dependent upon interest rates over which the Partnership has no
control.
For the year ended December 31, 1996, 4,618.7813 Units were
redeemed totaling $9,644,974. For the year ended December 31, 1995, 8,609.1486
Units were redeemed totaling $15,328,847 which includes the General Partner
redemption representing 149 Unit equivalents totaling $271,554. For the year
ended December 31, 1994, 5,084.5320 Units were redeemed totaling $7,319,326
which includes the General Partner redemption representing 3.8534 Unit
equivalents totaling $5,000.
Units of Limited Partnership Interest were sold to persons and
entities who are accredited investors as that term is defined in rule 501(a) of
Regulation D as well as to those persons who are not accredited investors but
who have either a net worth (exclusive of home, furnishings and automobile)
either individually or jointly with the investor's spouse of at least three
times his investment in the Partnership (the minimum investment for which is
$50,000) or gross income for the two previous years and projected gross income
for the current fiscal year of not less than three times his investment in the
Partnership for each year.
(c) Results of Operations. For the year ended December
31, 1996 the Net Asset Value Per Unit increased 26.7% from
11
$1,822.51 to $2,309.84. For the year ended December 31, 1995 the Net Asset Value
Per Unit increased 36.2% from $1,337.64 to $1,822.51. For the year ended
December 31, 1994, the Net Asset Value per Unit decreased 8.7% from $1,464.37 to
$1,337.64.
The Partnership experienced net trading gains of $20,807,730
before commissions and expenses for the year ended December 31, 1996. These
gains were recognized in the trading of currency, precious metals and interest
rate futures contracts. These gains were partially offset by losses incurred in
the trading of commodity futures in indices.
The Partnership experienced net trading gains of $24,509,628
before commissions and expenses for the year ended December 31, 1995. Realized
trading gains of $26,698,849 were recognized in the trading of currency, stock
index and interest rate futures contracts. These gains were partially offset by
losses incurred in the trading of commodity futures in precious metals.
The Partnership experienced net trading gains of $724,453 before
commissions and expenses for the period ended December 31, 1994. Realized
trading losses of $878,687 were attributable to losses incurred in the trading
of precious metals and stock index commodity futures. These losses were
partially offset by gains experienced in the trading of financial 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.
12
The profitability of the Partnership depends on the existence of major price
trends and the ability of the Advisor to identify those price trends correctly.
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.
13
Item 8. Financial Statements and Supplementary Data.
SHEARSON MID-WEST FUTURES FUND
INDEX TO FINANCIAL STATEMENTS
Page
Number
Report of Independent Accountants. F-2
Financial Statements:
Statement of Financial Condition at
December 31, 1996 and 1995. F-3
Statement of Income and Expenses for
the years ended December 31, 1996,
1995 and 1994. F-4
Statement of Partners' Capital for the
years ended December 31, 1996, 1995,
and 1994. F-5
Notes to Financial Statements. F-6 - F-11
F-1
Continued
Report of Independent Accountants
To the Partners of
Shearson Mid-West Futures Fund:
We have audited the accompanying statement of financial condition of SHEARSON
MID-WEST FUTURES FUND (formerly, SLB Mid-West Futures Fund L.P.) (a New York
Limited Partnership) as of December 31, 1996 and 1995, and the related
statements of income and expenses for the years ended December 31, 1996, 1995
and 1994, and of partners' capital for the years ended December 31, 1996, 1995
and 1994. 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 Shearson Mid-West Futures Fund
as of December 31, 1996 and 1995, and the results of its operations for the
years ended December 31, 1996, 1995 and 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 28, 1997
F-2
Shearson Mid-West Futures Fund
Statement of Financial Condition
December 31, 1996 and 1995
1996 1995
Assets:
Equity in commodity futures
trading account:
Cash and cash equivalents (Note 3c) $67,722,636 $56,437,296
Net unrealized appreciation
on open futures contracts 1,232,573 2,128,034
----------- -----------
68,955,209 58,565,330
Interest receivable 220,614 208,113
----------- -----------
$69,175,823 $58,773,443
=========== ===========
Liabilities and Partners' Capital:
Liabilities:
Accrued expenses:
Commissions $ 345,879 $ 293,867
Management fees 229,433 194,932
Administrative fees 57,358 48,733
Incentive fees 1,923,668
Other 56,280 40,415
Redemptions payable (Note 5) 4,487,900 799,012
----------- -----------
7,100,518 1,376,959
----------- -----------
Partners' capital (Notes 1, 5, and 6):
General Partner, 322.1307 Unit
equivalents outstanding in 1996 and 1995 744,070 587,086
Limited Partners, 26,552.1832 and
31,170.9645 Units of Limited
Partnership Interest outstanding in 1996
and 1995, respectively 61,331,235 56,809,398
----------- -----------
62,075,305 57,396,484
----------- -----------
$69,175,823 $58,773,443
=========== ===========
See notes to financial statements.
F-3
Shearson Mid-West Futures Fund
Statement of Income and Expenses
for the years ended
December 31, 1996, 1995 and 1994
1996 1995 1994
Income:
Net gains (losses) on trading of
commodity interests:
Realized gains (losses)
on closed positions $ 21,703,191 $ 26,698,849 $ (878,687)
Change in unrealized gains/
losses on open positions (895,461) (2,189,221) 1,603,140
------------ ------------ ------------
20,807,730 24,509,628 724,453
Less, Brokerage commissions and
clearing fees ($56,807, $55,021,
and $41,784,
respectively) (Note 3c) (3,740,843) (3,830,022) (3,955,870)
------------ ------------ ------------
Net realized and unrealized gains
(losses) 17,066,887 20,679,606 (3,231,417)
Interest income (Note 3c) 2,245,474 2,649,301 2,157,483
------------ ------------ ------------
19,312,361 23,328,907 (1,073,934)
------------ ------------ ------------
Expenses:
Management fees (Note 3b) 2,387,610 2,443,591 2,545,849
Incentive fees (Note 3b) 1,923,668 1,123,640 883,413
Administrative fees (Note 3a) 596,902 610,897 636,462
Other expenses 80,386 67,892 68,842
------------ ------------ ------------
4,988,566 4,246,020 4,134,566
------------ ------------ ------------
Net income (loss) $ 14,323,795 $ 19,082,887 $ (5,208,500)
============ ============ ============
Net income (loss) per Unit of
Limited Partnership Interest
and General Partner Unit
equivalent (Notes 1 and 6) $ 487.33 $ 484.87 $ (126.73)
============ ============ ============
See notes to financial statements.
F-4
Shearson Mid-West Futures Fund
Statement of Partners' Capital
for the years ended
December 31, 1996, 1995, and 1994
Limited General
Partners Partner Total
Partners' capital at
December 31, 1993 $ 65,480,359 $ 689,911 $ 66,170,270
Net loss (5,153,792) (54,708) (5,208,500)
Redemption of 5,080.6786 Units
of Limited Partnership Interest
and General Partner redemption
representing 3.8534
Unit equivalents (7,314,326) (5,000) (7,319,326)
------------ ------------ ------------
Partners' capital at
December 31, 1994 53,012,241 630,203 53,642,444
Net Income 18,854,450 228,437 19,082,887
Redemption of 8,460.1486 Units of
Limited Partnership Interest and
General Partner redemption
representing 149 Unit equivalents (15,057,293) (271,554) (15,328,847)
------------ ------------ ------------
Partners' capital at
December 31, 1995 56,809,398 587,086 57,396,484
Net Income 14,166,811 156,984 14,323,795
Redemption of 4,618.7813 Units of
Limited Partnership Interest (9,644,974) (9,644,974)
------------ ------------ ------------
Partners' capital at
December 31, 1996 $ 61,331,235 $ 744,070 $ 62,075,305
============ ============ ============
See notes to financial statements.
F-5
Shearson Mid-West Futures Fund
Notes to Financial Statements
1. Partnership Organization:
Shearson Mid-West Futures Fund (the "Partnership"), formerly SLB Mid-West
Futures Fund L.P., 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 (see
Note 3c). 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 was authorized to
sell up to 40,000 Units of Limited Partnership Interest ("Units") during the
offering period.
The Partnership will be liquidated upon the first to occur of the following:
December 31, 2011; when the net asset value of a Unit decreases to less than
$350 as of the close of business on any business day; 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.
F-6
Shearson Mid-West Futures Fund
Notes to Financial Statements
b.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.
c.The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the 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.Limited Partnership Agreement:
The General Partner administers the business and affairs of the Partnership
including selecting one or more advisors to make trading decisions for the
Partnership. The Partnership will pay the General Partner a monthly
administrative fee in return for its services to the Partnership equal to
1/12 of 1% (1% per year) of month-end Net Assets of the Partnership. This
fee may be increased or decreased at the discretion of the General Partner.
b.Management Agreement:
The Management Agreement that the General Partner, on behalf of the
Partnership, entered into with the Advisor (John W. Henry & Company, Inc.),
provides that the Advisor has sole discretion in determining the investment
of the assets of the Partnership allocated to the Advisor by the General
Partner. As compensation for services, the Partnership is obligated to pay
the Advisor a monthly management fee of 1/3 of 1% (4% per year) of
month-end Net Assets managed by the Advisor and an incentive fee, payable
quarterly, equal to 15% of the New Trading Profits of the Partnership.
F-7
Shearson Mid-West Futures Fund
Notes to Financial Statements
c.Customer Agreement:
The Partnership has entered into a Customer Agreement which was 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 Advisor. The Partnership is obligated to pay a monthly
brokerage fee to SB equal to 1/2 of 1% of month-end Net Assets (6% per
year), in lieu of brokerage commissions on a per trade basis. A portion of
this fee is paid to employees of SB who have sold Units of the Partnership.
This fee does not include exchange, clearing, user, give-up, floor
brokerage and NFA fees which will be borne by the Partnership. 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, 1996 and 1995, the amount of cash held for margin requirements was
$5,420,012 and $7,230,579, respectively. SB will pay the Partnership
interest on 80% of the average daily equity maintained in cash in its
account during each month at the rate of the average non-competitive yield
of 13-week U.S. Treasury Bills as determined at the weekly auctions thereof
during the month. The Customer Agreement between the Partnership and SB
gives the Partnership the legal right to net unrealized gains and losses.
The Customer Agreement may be terminated by either party.
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.
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, 1996 and 1995, was $1,232,573 and $2,128,034,
respectively and the average fair value during the years then ended, based on
monthly calculation, was $6,115,369 and $4,656,647, respectively.
5. Distributions and Redemptions:
Distributions of profits, if any, will be made at the sole discretion of the
General Partner; however, a limited partner may redeem all or some of his
Units (minimum 20 Units) at the Net Asset Value as of the last day of any
month ending at least one month after trading commences on fifteen days
written notice to the General Partner, provided that no redemption may result
in the limited partner holding fewer than twenty Units after such redemption
is effected.
F-8
Shearson Mid-West Futures Fund
Notes to Financial Statements
6. Net Asset Value Per Unit:
Changes in the net asset value per Unit for the years ended December 31,
1996, 1995 and 1994 were as follows:
1996 1995 1994
Net realized and
unrealized
gains (losses) $ 580.24 $ 526.56 $ (81.54)
Interest income 74.28 75.44 50.10
Expenses (167.19) (117.13) (95.29)
--------- --------- ---------
Increase
(decrease) for year 487.33 484.87 (126.73)
Net asset value
per Unit,
beginning of year 1,822.51 1,337.64 1,464.37
--------- --------- ---------
Net asset value
per Unit,
end of year $2,309.84 $1,822.51 $1,337.64
========= ========= =========
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 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.
F-9
Shearson Mid-West Futures Fund
Notes to Financial Statements
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 December 31, 1996, the notional or
contractual amounts of the Partnership's commitment to purchase and sell
these instruments was $330,829,321 and $206,505,668, respectively, as
detailed below. All of these instruments mature within one year of December
31, 1996. However, due to the nature of the Partnership's business, these
instruments may not be held to maturity. At December 31, 1996, the fair value
of the Partnership's derivatives, including options thereon, was $1,232,573
as detailed below.
F-10
Shearson Mid-West Futures Fund
Notes to Financial Statements
Notional or Contractual
Amount of Commitments
To Purchase To Sell Fair Value
Currencies
-OTC Contracts $ 99,141,055 $ 75,992,123 $ 404,909
Interest Rate 219,258,860 87,845,793 (145,247)
Non-U.S
Interest Rate U.S. 12,429,406 0 (153,281)
Metals 0 36,526,210 824,200
Indices 0 6,141,542 301,992
------------ ------------ ------------
$330,829,321 $206,505,668 $ 1,232,573
============ ============ ============
F-11
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 John W. Henry &
Company, Inc. (the "Advisor").
Item 11. Executive Compensation.
The Partnership has no directors or officers. Its affairs are
managed by Smith Barney Futures Management Inc., its General Partner, which
receives compensation for its services, as set forth under "Item 1. Business."
SB, an affiliate of the General Partner, is the commodity broker for the
Partnership and receives brokerage commissions for such services, as described
under "Item 1. Business." During the year ended December 31, 1996, SB earned
$3,740,843 in brokerage commissions and clearing fees. The Advisor earned
$2,387,610 in management fees and $1,923,668 in incentive fees during 1996. The
General Partner earned $596,902 in administrative fees during 1996.
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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 322.1307 (1.2%) Units of limited partnership interest as of
December 31, 1996.
(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 amounts of compensation each promoter will receive from the Partnership
are set forth under "Item 1. Business." and "Item 11. Executive Compensation."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) (1) Financial Statements:
Statement of Financial Condition at December 31,
1996 and 1995.
Statement of Income and Expenses for the years ended December 31,
1996, 1995 and 1994.
Statement of Partners' Capital for the years
ended December 31, 1996, 1995 and 1994.
15
(2) Financial Statement Schedules: None
(3) Exhibits:
3.1 - Certificate of Limited Partnership
(previously filed).
3.2 - Limited Partnership Agreement (previously
filed).
10.1 - Management Agreement among the Partnership,
the General Partner and John W. Henry &
Company, Inc. (previously filed).
10.2 - Customer Agreement between Partnership and
Smith Barney Shearson Inc. (previously
filed).
10.3 - Form of Subscription Agreement (previously
filed).
10.4 - Letter dated February 16, 1995 from General
Partner to John W. Henry & Company, Inc.
extending Management Agreement (previously
filed).
(b) Report on Form 8-K: None Filed
16
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
17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 24th day of March 1997.
SHEARSON MID-WEST FUTURES FUND L.P.
By: Smith Barney Futures Management Inc.
(General Partner)
By /s/ David J. Vogel
David J. Vogel, President & Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/s/ David J. Vogel /s/ Jack H. Lehman III
David J. Vogel, Jack H. Lehman III
Director, Principal Executive Chairman and Director
Officer and President
/s/ Michael Schaefer /s/ Daniel A. Dantuono
Michael Schaefer Daniel A. Dantuono
Director Treasurer, Chief Financial
Officer and Director
/s/ Philip M. Waterman, Jr. /s/ Daniel R. McAuliffe, Jr.
Philip M. Waterman, Jr. Daniel R. McAuliffe, Jr.
Director and Vice-Chairman Director
/s/ Steve J. Keltz /s/ Shelley Ullman
Steve J. Keltz Shelley Ullman
Secretary and Director Director
18