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, 2004
Commission File Number 0-24111
SMITH BARNEY WESTPORT FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
New York 13-393993
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Citigroup Managed Futures LLC
399 Park Avenue - 7th Fl.
New York, New York 10022
(Address and Zip Code of principal executive offices)
(212) 559-2011
(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 _____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act).
Yes X No _____
SMITH BARNEY WESTPORT FUTURES FUND L.P.
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
March 31, 2004 and December 31, 2003
(unaudited). 3
Condensed Schedules of Investments at
March 31, 2004 and December 31, 2003
(unaudited). 4 - 5
Statements of Income and Expenses and Partners'
Capital for the three months ended March 31, 2004
and 2003
(unaudited). 6
Statements of Cash Flows for the three
months ended March 31, 2004 and 2003
(unaudited). 7
Notes to Financial Statements
(unaudited). 8 - 12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 13 - 15
Item 3. Quantitative and Qualitative
Disclosures about Market Risk. 16 - 17
Item 4. Controls and Procedures. 18
PART II - Other Information 19
2
PART I
Item 1. Financial Statements
Smith Barney Westport Futures Fund L.P.
Statements of Financial Condition
(Unaudited)
March 31, December 31,
2004 2003
------------- --------------
Assets:
Equity in commodity futures trading account:
Cash (restricted $27,964,231 and $25,326,406 in 2004
and 2003, respectively) $ 131,797,201 $ 105,240,741
Net unrealized appreciation on open futures positions 10,809,737 1,219,527
Unrealized appreciation on open forward contracts 7,894,310 10,688,078
-------------- --------------
150,501,248 117,148,346
Interest receivable 88,240 57,427
-------------- --------------
$ 150,589,488 $ 117,205,773
============== ==============
Liabilities and Partners' Capital:
Liabilities:
Unrealized depreciation on open forward contracts $ 17,550,218 $ 1,402,374
Accrued expenses:
Commissions 619,759 540,945
Management fees 220,539 191,995
Other 96,176 65,577
Redemptions payable 562,599 1,234,782
-------------- --------------
19,049,291 3,435,673
-------------- --------------
Partners' capital:
General Partner, 748.1146 Unit equivalents
outstanding in 2004 and 2003 1,155,792 1,091,641
Limited Partners, 84,394.3481 and 77,219.8438
Redeemable Units of Limited Partnership Interest
outstanding in 2004 and 2003, respectively 130,384,405 112,678,459
-------------- --------------
131,540,197 113,770,100
-------------- --------------
$ 150,589,488 $ 117,205,773
============== ==============
3
See Accompanying Notes to Unaudited Financial Statements
Smith Barney Westport Futures Fund L.P.
Condensed Schedule of Investments
March 31, 2004
(Unaudited)
Sector Number of Contracts Contract Fair Value
- -------------------------------- -------------------- --------------------------------------------------
Currencies
Unrealized appreciation on forward $7,440,610
contracts 5.66%
Unrealized depreciation on forward
contracts (12.88)%
(20,991,275,645) JPY/USD (9.91)%, June 16, 2004 (13,033,804)
Other (2.97)% (3,913,308)
------------
Total Currencies (7.22)% (9,506,502)
-----------
Total Energy 0.98 % Futures contracts purchased 0.98% 1,290,620
-------------
Total Grains 2.18% Futures contracts purchased 2.18% 2,861,819
-------------
Total Interest Rates U.S. 2.00%
Futures contracts purchased 2.00% 2,628,585
-------------
Total Interest Rates Non-U.S. 1.45% Futures contracts purchased 1.45% 1,906,732
-------------
Total Livestock 0.05% Futures contracts purchased 0.05% 72,750
-------------
Metals
Futures contracts purchased 1.34% 1,767,650
Unrealized appreciation on forward
contracts 0.34% 453,700
Unrealized depreciation on forward
contracts (0.46)% (603,106)
-------------
Total forward contracts (0.12)% (149,406)
-------------
Total Metals 1.22% 1,618,244
-------------
Softs
Futures contracts purchased (0.01)% (14,284)
Futures contracts sold 0.27% 349,934
-------------
Total Softs 0.26% 335,650
-------------
Indices
Futures contracts purchased 0.38% 498,227
Futures contracts sold (0.42)% (552,296)
-------------
Total Indices (0.04)% (54,069)
-------------
Total Fair Value 0.88% $ 1,153,829
=============
% of Investments at Fair
Country Composition Investments at Fair Value Value
- -------------------------------- --------------------------- -----------------------------
Australia $ (18,137) (1.57)%
Canada 12,503 1.08
Germany 2,392,392 207.34
Japan (78,343) (6.79)
United Kingdom (206,769) (17.92)
United States (947,817) (82.14)
--------------------------- -----------------------------
$ 1,153,829 100.00%
=========================== =============================
Percentages are based on Partners' capital unless otherwise indicated.
See Accompanying Notes to Unaudited Financial Statements.
4
Smith Barney Westport Futures Fund L.P.
Condensed Schedule of Investments
December 31, 2003
(Unaudited)
Sector Contract Fair Value
- ---------------------- --------- ------------
Currencies
Unrealized appreciation on forward contracts 7.75% $8,820,213
Unrealized depreciation on forward contracts (1.23)% (1,402,374)
----------
Total Currencies 6.52% 7,417,839
---------
Total Energy 0.94% Futures contracts purchased 0.94% 1,069,047
---------
Total Grains 0.22% Futures contracts purchased 0.22% 252,153
---------
Total Interest Rates U.S. 0.02% Futures contracts purchased 0.02% 17,790
---------
Interest Rates Non-U.S.
Futures contracts purchased (0.00)% * (1,411)
Futures contracts sold (0.08)% (96,253)
---------
Total Interest Rates Non-U.S. (0.08)% (97,664)
---------
Livestock
Futures contracts purchased (0.47)% (533,600)
Futures contracts sold 0.02% 22,200
---------
Total Livestock (0.45)% (511,400)
---------
Metals
Futures contracts purchased 1.42% 1,616,858
Unrealized appreciation on forward contracts 1.64% 1,867,865
---------
Total Metals 3.06% 3,484,723
---------
Softs
Futures contracts purchased (0.60)% (677,813)
Futures contracts sold (0.15)% (166,390)
---------
Total Softs (0.75)% (844,203)
---------
Indices
Futures contracts sold 0.61% 696,650
Futures contracts purchased (0.86)% (979,704)
---------
Total Indices (0.25)% (283,054)
---------
Total Fair Value 9.23% $10,505,231
===========
Investments % of Investments
Country Composition at Fair Value at Fair Value
- -------------------- -------------- ---------------
Australia $ (85,578) (0.81)%
Canada 72,199 0.69
Germany 369,577 3.52
Japan (1,072,484) (10.21)
United Kingdom 1,874,382 17.84
United States 9,347,135 88.97
------------ ------
$10,505,231 100.00%
========== ======
Percentages are based on Partners' capital unless otherwise indicated
*Due to rounding
See Accompanying Notes to Unaudited Financial Statements.
5
Smith Barney Westport Futures Fund L.P.
Statements of Income and Expenses and Partners' Capital
(Unaudited)
Three Months Ended
March 31,
--------------------------------
2004 2003
--------------------------------
Income:
Net gains (losses) on trading of commodity interests:
Realized gains on closed positions and foreign currencies $ 17,972,656 $ 28,216,853
Change in unrealized losses on open positions (9,351,402) (12,987,567)
----------- ----------
8,621,254 15,229,286
Interest income 215,138 228,073
----------- ----------
8,836,392 15,457,359
----------- ----------
Expenses:
Brokerage commissions including clearing fees
of $34,908 and $31,742, respectively 1,836,897 1,547,344
Management fees 636,972 545,324
Incentive fees 9,918 959,471
Other expenses 34,859 32,454
----------- ----------
2,518,646 3,084,593
----------- ----------
Net income 6,317,746 12,372,766
Additions 14,214,000 12,258,000
Redemptions (2,761,649) (2,021,918)
----------- ----------
Net increase in Partners' capital 17,770,097 22,608,848
Partners' capital, beginning of period 113,770,100 84,642,954
----------- ----------
Partners' capital, end of period $131,540,197 $ 107,251,802
=========== ===========
Net asset value per Redeemable Unit
(85,142.4627 and 67,134.9044 Redeemable Units
outstanding at March 31, 2004 and 2003, respectively) $ 1,544.94 $ 1,597.56
=========== ============
Net income per Redeemable Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 85.75 $ 199.44
=========== =============
See Accompanying Notes to Unaudited Financial Statements
6
Smith Barney Westport Futures Fund L.P.
Statements of Cash Flows
(Unaudited)
Three months ended
March 31,
------------------------------
2004 2003
------------------------------
Cash flows from operating activities:
Net Income $ 6,317,746 $ 12,372,766
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in operating assets and liabilities:
Net unrealized appreciation (depreciation) on open futures
positions (9,590,210) 5,220,193
Unrealized appreciation on open forward contracts 2,793,768 4,078,143
Increase in interest receivable (30,813) (20,650)
Unrealized depreciation on open forward contracts 16,147,844 3,689,231
Accrued expenses:
Increase in commissions 78,814 111,424
Increase in management fees 28,544 39,516
Increase in incentive fees - 934,871
Increase in other 30,599 32,454
Increase (decrease) in redemptions payable (672,183) 126,225
------------ -----------
Net cash provided by operating activities 15,104,109 26,584,173
------------ -----------
Cash flows from financing activities:
Proceeds from additions 14,214,000 12,258,000
Payments for redemptions (2,761,649) (2,021,918)
------------ -----------
Net cash provided by financing activities 11,452,351 10,236,082
------------ -----------
Net change in cash 26,556,460 36,820,255
Cash, at beginning of period 105,240,741 77,132,693
------------ ------------
Cash, at end of period $ 131,797,201 $ 113,952,948
============ ============
See Accompanying Notes to Unaudited Financial Statements
7
Smith Barney Westport Futures Fund L.P.
Notes to Financial Statements
March 31, 2004
(Unaudited)
1. General:
Smith Barney Westport Futures Fund L.P. (the "Partnership") is a limited
partnership which was organized on March 21, 1997 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.
Citigroup Managed Futures LLC, formerly Smith Barney Futures Management
LLC, acts as the general partner (the "General Partner") of the Partnership. The
Partnership's commodity broker is Citigroup Global Markets Inc. ("CGM"),
formerly Salomon Smith Barney Inc. CGM is an affiliate of the General Partner.
The General Partner is wholly owned by Citigroup Global Markets Holdings Inc.
("CGMHI"), formerly Salomon Smith Barney Holdings Inc., which is the sole owner
of CGM. CGMHI is a wholly owned subsidiary of Citigroup Inc. As of March 31,
2004, all trading decisions for the Partnership are 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, 2004 and December 31, 2003, the results of its operations
and cash flows for the three months ended March 31, 2004 and 2003. These
financial statements present the results of interim periods and do not include
all disclosures normally provided in annual financial statements. You should
read these financial statements together 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, 2003.
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.
8
Smith Barney Westport Futures Fund L.P.
Notes to Financial Statements
March 31, 2004
(Unaudited)
(Continued)
2. Financial Highlights:
Changes in Net Asset Value per Redeemable Unit of Partnership Interest for
the three months ended March 31, 2004 and 2003 were as follows:
Three-Months Ended
March 31,
----------------------
2004 2003
----------------------
Net realized and unrealized gains * $92.21 $221.07
Interest income 2.63 3.48
Expenses ** (9.09) (25.11)
--------- ---------
Increase for the period 85.75 199.44
Net Asset Value per Redeemable Unit,
beginning of period 1,459.19 1,398.12
--------- ---------
Net Asset Value per Redeemable Unit, end of
period $1,544.94 $1,597.56
========= =========
* Includes brokerage commissions.
** Excludes brokerage commissions.
9
Smith Barney Westport Futures Fund L.P.
Notes to Financial Statements
March 31, 2004
(Unaudited)
(Continued)
Financial Highlights (Continued)
Three-Months Ended
March 31,
--------------------
2004 2003
--------------------
Ratios to average net assets: ***
Net investment loss before
incentive fees **** (7.5)% (7.6)%
=== ====
Operating expenses 8.2% 8.5%
Incentive fees 0.0%***** 3.9%
--- ----
Total expenses 8.2% 12.4%
=== ====
Total return:
Total return before incentive fees 5.9% 15.3%
Incentive fees 0.0%***** (1.0)%
--- ----
Total return after incentive fees 5.9% 14.3%
=== ====
*** Annualized (other than incentive fees)
**** Interest income less total expenses (exclusive of incentive fees)
***** Due to rounding
The above ratios may vary for individual investors based on the timing of
capital transactions during the period. Additionally, these ratios are
calculated for the Limited Partner class using the Limited Partners' share of
income, expenses and average net assets.
10
Smith Barney Westport Futures Fund L.P.
Notes to Financial Statements
March 31, 2004
(Unaudited)
(continued)
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
activities are shown in the Statements of Income and Expenses and Partners'
Capital and are discussed in Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The Customer Agreement between the Partnership and CGM gives the
Partnership the legal right to net unrealized gains and losses on open futures
positions.
All of the commodity interests owned by the Partnership are held for
trading purposes. The average fair values of these interests during the three
and twelve months ended March 31, 2004 and December 31, 2003, based on a monthly
calculation, were $12,565,949 and $6,373,728, respectively. The fair values of
these commodity interests, including options thereon, if applicable, at March
31, 2004 and December 31, 2003, were $1,153,829 and $10,505,231, respectively.
Fair values for exchange traded commodity futures and options are based on
quoted market prices for those futures and options. Fair values for all other
financial instruments for which market quotations are not readily available are
based on calculations approved by the General Partner.
4. Financial Instrument Risks:
In the normal course of its business the Partnership is party to financial
instruments with off-balance sheet risk, including derivative financial
instruments and derivative commodity instruments. These financial instruments
may include forwards, futures and options, whose values are 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, through physical delivery 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.
11
Smith Barney Westport Futures Fund L.P.
Notes to Financial Statements
March 31, 2004
(Unaudited)
(Continued)
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 as unrealized appreciation in the statements
of financial condition and not represented by the contract or notional amounts
of the instruments. The Partnership has credit risk and concentration risk
because the sole counterparty or broker with respect to the Partnership's assets
is CGM.
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, forward and option positions by sector, margin
requirements, gain and loss transactions and collateral positions.
The majority of these instruments mature within one year of March 31, 2004.
However, due to the nature of the Partnership's business, these instruments may
not be held to maturity.
12
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, 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 substantial decrease in liquidity, no such losses occurred in the
Partnership's first quarter of 2004.
The Partnership's capital consists of capital contributions, as increased
or decreased by realized and/or unrealized gains or losses on commodity futures
trading and expenses, interest income, redemptions of Redeemable Units and
distributions of profits, if any.
For the three months ended March 31, 2004, Partnership capital increased
15.6% from $113,770,100 to $131,540,197. This increase was attributable to net
income from operations of $6,317,746, coupled with the additional sales of
8,929.5972 Redeemable Units of Limited Partnership Interest totaling $14,214,000
which was partially offset by the redemption of 1,755.0929 Redeemable Units of
Limited Partnership Interest totaling $2,761,649. Future redemptions can impact
the amount of funds available for investment in commodity contract positions in
subsequent periods.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosures of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
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
statements of financial condition at fair value on the last business day of the
period, which represents market value for those commodity interests for which
market quotations are readily available or other measures of fair value deemed
appropriate by management of the General Partner for those commodity interests
and foreign currencies for which market quotations are not readily available.
Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars at the exchange rates prevailing on the last
business day of the period. Realized gains (losses) and changes in unrealized
values on open positions 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.
Foreign currency contracts are those contracts where the Partnership agrees
to receive or deliver a fixed quantity of foreign currency for an agreed-upon
price on an agreed future date. Foreign currency contracts are valued daily, and
13
the Partnership's net equity therein, representing unrealized gain or loss on
the contracts as measured by the difference between the forward foreign exchange
rates at the dates of entry into the contracts and the forward rates at the
reporting date, is included in the statements of financial condition. Realized
gains (losses) and changes in unrealized values on foreign currency contracts
are recognized in the period in which the contract is closed or the changes
occur and are included in the statements of income and expenses and partners'
capital.
Results of Operations
During the Partnership's first quarter of 2004, the Net Asset Value per
Redeemable Unit increased 5.9% from $1,459.19 to $1,544.94 as compared to an
increase of 14.3% in the first quarter of 2003. The Partnership experienced a
net trading gain before brokerage commissions and related fees in the first
quarter of 2004 of $8,621,254. Gains were primarily attributable to the trading
of commodity futures in energy, grains, U.S. and non-U.S. interest rates, metals
and indices and were partially offset by losses in currencies, livestock and
softs. The Partnership experienced a net trading gain before brokerage
commissions and related fees in the first quarter of 2003 of $15,229,286. Gains
were primarily attributable to the trading of commodity futures in currencies,
energy, U.S. and non-U.S. interest rates, softs and indices and were partially
offset by losses in grains, livestock and metals.
The Partnership had a positive first quarter as many of the financial and
commodity trends that had carried performance in 2003 continued into the first
quarter providing profits for the Fund's advisor. The major contributors to
performance were rising commodity prices, particularly for grains, energy and
base metals and lower interest rates both in the U.S. and internationally.
Currency trading which had been a strong provider of profits reversed late in
the quarter and offset profits from earlier in the period.
The commodity markets, particularly grains and related contracts, produced
most of the Fund's profits for the quarter. The demand for foodstocks from
developing countries generated profits for positions in grains, specifically
soybeans, corn and wheat. Increased global demand for the raw materials of
economic development, namely base metals, like copper, nickel and aluminum, also
produced profitable trading. Silver and gold also were profitable for the
quarter. Energy trading was also highly profitable for the quarter as prices of
crude oil moved to the high $30s range and natural gas prices followed their
normal volatile seasonal patterns with mixed trading results for the Advisor.
Additional profits were earned for positions in U.S. and international
interest rate contracts throughout most of the quarter. Lower U.S. interest
rates combined with rising fiscal and trade deficits pushed the U.S. dollar
lower through mid-February producing profits for the Fund's advisor through
mid-February. Mid-month, a sharp reversal began in the U.S. dollar that led to
losses in March as the dollar regained nearly 10% against the euro and other
major currencies. Overall for the quarter, currency trading resulted in losses.
Trading in stock market indices was slightly profitable as the U.S. and global
stock markets were mostly directionless for the first quarter.
Commodity futures markets are highly volatile. The potential for broad and
rapid price fluctuations increases the risks involved in commodity trading, but
also increases the possibility of profit. The profitability of the Partnership
14
depends on the existence of major price trends and the ability of the Advisor to
correctly identify 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 daily average equity maintained
in cash was earned at a 30-day U.S. Treasury bill rate determined weekly by CGM
based on the average non-competitive yield on 3-month U.S. Treasury bills
maturing in 30 days. CGM may continue to maintain the Partnership's assets in
cash and/or place all of the Partnership's assets in 90-day Treasury bills and
pay the Partnership 80% of the interest earned on the Treasury bills purchased.
CGM will retain 20% of any interest earned on Treasury bills. Interest income
for the three months ended March 31, 2004 decreased by $12,935 as compared to
the corresponding period in 2003. The decrease in interest income is primarily
due to a decrease in interest rates during the three months ended March 31, 2004
as compared to 2003.
Brokerage commissions are calculated on the Partnership's adjusted net
asset value on the last day of each month and are affected by trading
performance, additions and redemptions. Accordingly, they must be analyzed in
relation to the fluctuations in the monthly net asset values. Commissions and
fees for the three months ended March 31, 2004 increased by $289,553 as compared
to the corresponding period in 2003. The increase in brokerage commissions and
fees is due to higher average net assets during the three months ended March 31,
2004 as compared to 2003.
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,
additions and redemptions. Management fees for the three months ended March 31,
2004 increased by $91,648 as compared to the corresponding period in 2003. The
increase in management fees is due to higher average net assets during the three
months ended March 31, 2004 as compared to 2003.
Incentive fees are based on the new trading profits generated by the
Advisor at the end of the quarter as defined in the advisory agreements between
the Partnership, the General Partner and the Advisor. Trading performance for
the three months ended March 31, 2004, resulted in incentive fees of $9,918.
Trading performance for the three months ended March 31, 2003, resulted in
incentive fees of $959,471.
15
Item. 3 Quantitative and Qualitative Disclosures about Market Risk
The Partnership is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's main line of business.
Market movements result in frequent changes in the fair market value of the
Partnership's open positions and, consequently, in its earnings and cash flow.
The Partnership's market risk is influenced by a wide variety of factors,
including the level and volatility of interest rates, exchange rates, equity
price levels, the market value of financial instruments and contracts, the
diversification effects among the Partnership's open positions and the liquidity
of the markets in which it trades.
The Partnership rapidly acquires and liquidates both long and short
positions in a wide range of different markets. Consequently, it is not possible
to predict how a particular future market scenario will affect performance, and
the Partnership's past performance is not necessarily indicative of its future
results.
Value at Risk is a measure of the maximum amount which the Partnership
could reasonably be expected to lose in a given market sector. However, the
inherent uncertainty of the Partnership's speculative trading and the recurrence
in the markets traded by the Partnership of market movements far exceeding
expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnership's experience to date (i.e., "risk of
ruin"). In light of the foregoing as well as the risks and uncertainties
intrinsic to all future projections, the inclusion of the quantification in this
section should not be considered to constitute any assurance or representation
that the Partnership's losses in any market sector will be limited to Value at
Risk or by the Partnership's attempts to manage its market risk.
Exchange maintenance margin requirements have been used by the Partnership
as the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
interval. Maintenance margin has been used rather than the more generally
available initial margin, because initial margin includes a credit risk
component, which is not relevant to Value at Risk.
16
The following table indicates the trading Value at Risk associated with the
Partnership's open positions by market category as of March 31, 2004 and the
highest, lowest and average value at any point during the three months ended
March 31, 2004. All open position trading risk exposures of the Partnership have
been included in calculating the figures set forth below. As of March 31, 2004,
the Partnership's total capitalization was $131,540,197. There has been no
material change in the trading Value at Risk information previously disclosed in
the Form 10-K for the year ended December 31, 2003.
March 31, 2004
(Unaudited)
Year to Date
--------------------------------------------------
% of Total High Low Average
Market Sector Value at Risk Capitalization Value at Risk Value at Risk Value at Risk
- -------------- ------------ -------------- -------------------------------------------------
Currencies $ 5,261,047 4.00% $8,335,355 $4,590,307 $6,381,386
- - OTC Contracts
Energy 4,440,120 3.38% 4,532,750 3,269,000 4,297,907
Grains 835,150 0.63% 836,000 478,725 735,950
Interest Rates U.S. 2,000,950 1.52% 2,077,400 1,247,000 2,034,183
Interest Rates Non-U.S. 4,876,496 3.71% 6,813,999 3,338,031 5,968,852
Livestock 114,600 0.09% 178,000 36,000 128,427
Metals:
- - Exchange Traded
Contracts 1,332,000 1.01% 1,342,000 337,500 1,144,833
- - OTC Contracts 969,600 0.74% 1,064,200 750,535 941,717
Softs 1,001,753 0.76% 1,072,563 423,988 871,757
Indices 3,884,298 2.95% 3,889,393 2,482,410 3,382,772
--------- -----
Total $24,716,014 18.79%
=========== ======
17
Item 4. Controls and Procedures
Based on their evaluation of the Partnership's disclosure controls and
procedures as of March 31, 2004, the Chief Executive Officer and Chief Financial
Officer have concluded that such controls and procedures are effective.
There were no significant changes in the Partnership's internal controls or
in other factors that could significantly affect such controls during the first
quarter of 2004.
18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The following information supplements and amends our discussion set forth
under Part I, Item 3 "Legal Proceedings" in the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003.
Regulatory Matters.
Both the Department of Labor and the IRS have advised CGM that they were or
are reviewing transactions in which Ameritech Pension Trust purchased from CGM
and certain affiliates approximately $20.9 million in participations in a
portfolio of motels owned by Motels of America, Inc. and Best Inns, Inc. With
respect to the IRS review, CGM and certain affiliated entities have consented to
extensions of time for the assessment of excise taxes that may be claimed to be
due with respect to the transactions for the years 1987, 1988 and 1989.
ENRON CORP.
In July 2002, Citigroup, CGM and certain officers were named as defendants
in an alleged class action filed in the United States District Court for the
Southern District of New York, brought on behalf of purchasers of Citigroup
common stock between July 24, 1999 and July 23, 2002. The complaint seeks
unspecified compensatory and punitive damages for alleged violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, and for common law
fraud. Fourteen virtually identical complaints have been filed and consolidated.
The complaints allege that Citigroup misstated the extent of its Enron-related
exposure, and that Citigroup's stock price fell once the true extent of the
company's Enron involvements became known. Plaintiffs filed an amended complaint
on March 10, 2003, which incorporated the allegations in the 15 separate actions
and added new material as well. The amended complaint focuses on certain
transaction Citigroup did with Enron and alleged analyst conflicts of interest.
The class period for the consolidated amended complaint is July 24, 1999 to
December 11, 2002. On June 2, 2003, Citigroup filed a motion to dismiss the
consolidated amended complaint. Plaintiffs' response was filed on July 30, and
Citigroup's reply was filed on October 3, 2003. Oral argument before Judge Swain
was held on November 20, 2003.
Mutual Funds.
In 2003, several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The Company has received subpoenas and
other requests for information from various government regulators regarding
market timing, fees, sales practices and other mutual fund issues in connection
with various investigations, including an investigation by the SEC and a United
States Attorney into the arrangements under which CGMH became the transfer agent
for many of the mutual funds in the Smith Barney fund complex. CGMH is
cooperating fully with all such reviews.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
For the three months ended March 31, 2004, there were additional sales
of 8,929.5972 Redeemable Units totaling $14,214,000. For the three
months ended March 31, 2003, there were additional sales of 7,823.2723
Redeemable Units totaling $12,258,000. Proceeds from the sale of
additional Redeemable Units are used in the trading of commodity
interests including futures contracts, options and forwards contracts.
19
The following chart sets forth the purchases of Redeemable Units by
the Partnership.
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Period (a) Total Number of (b) Average Price (c) Total Number of (d) Maximum Number
Shares (or Units) Paid per Share (or Shares (or Units) (or Approximate
Purchased* Unit)** Purchased as Part of Dollar Value) of
Publicly Announced Shares (or Units)
Plans or Programs that May Yet Be
Purchased Under the
Plans or Programs
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
January 1, 2004 - January 31, 511.5583 $1,481.48 N/A N/A
2004
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
February 1, 2004 - February 879.3786 $1,638.87 N/A N/A
29, 2004
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
March 1, 2004 - March 31, 2004 364.1560 $1,544.94 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Total 1,755.0929 $1,555.11 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
* Generally, Limited Partners are permitted to redeem their Redeemable Units as
of the end of each month on 10 days' notice to the General Partner. Under
certain circumstances, the General Partner can compel redemption but to date the
General Partner has not exercised this right. Purchases of Redeemable Units by
the Partnership reflected in the chart above were made in the ordinary course of
the Partnership's business in connection with effecting redemptions for Limited
Partners.
** Redemptions of Redeemable Units are effected as of the last day of each month
at the Net Asset Value per Redeemable Unit as of that day.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
20
Item 6. Exhibits and reports on Form 8-K
(a) The exhibits required to be filed by Item 601 of Regulation S-K
are incorporated herein by reference to the exhibit index of the
Partnership's Annual Report on Form 10-K for the period ended
December 31, 2003.
Exhibit - 31.1 - Rule 13a-14(a)/15d-14(a) Certification
(Certification of President and Director)
Exhibit - 31.2 - Rule 13a-14(a)/15d-14(a) Certification
(Certification of Chief Financial Officer and Director)
Exhibit - 32.1 - Section 1350 Certification (Certification of
President and Director).
Exhibit - 32.2 - Section 1350 Certification (Certification of
Chief Financial Officer and Director).
(b) Reports on Form 8-K - None
21
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 WESTPORT FUTURES FUND L.P.
By: Citigroup Managed Futures LLC
(General Partner)
By: /s/ David J. Vogel
---------------
David J. Vogel, President and Director
Date: 5/10/04
-------------
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: Citigroup Managed Futures LLC
(General Partner)
By: /s/ David J. Vogel
--------------
David J. Vogel
President and Director
Date: 5/10/04
-----------
By: /s/ Daniel R. McAuliffe, Jr.
------------------
Daniel R. McAuliffe
Chief Financial Officer and Director
Date: 5/10/04
-----------
22
Exhibit 31.1
CERTIFICATION
I, David J. Vogel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Smith Barney Westport
Futures Fund L.P. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 10, 2004
/s/ David J. Vogel
---------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
23
Exhibit 31.2
CERTIFICATION
I, Daniel R. McAuliffe, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Smith Barney Westport
Futures Fund L.P. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 10, 2004
/s/ Daniel R. McAuliffe, Jr.
-----------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
24
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Smith Barney Westport Futures
Fund L.P. (the "Partnership") on Form 10-Q for the period ending March 31, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, David J. Vogel, President and Director of Citigroup Managed
Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition, results of operations
and cash flows of the Partnership.
/s/ David J. Vogel
--------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
May 10, 2004
25
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Smith Barney Westport Futures
Fund L.P. (the "Partnership") on Form 10-Q for the period ending March 31, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Daniel R. McAuliffe, Jr., Chief Financial Officer and Director of
Citigroup Managed Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition, results of operations
and cash flows of the Partnership.
/s/ Daniel R. McAuliffe, Jr.
----------------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
May 10, 2004
26