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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 year ended December 31, 1997
Commission File Number 333-24923
SMITH BARNEY WESTPORT FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
New York 13-3939393
(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:120,000 Units
of Limited
Partnership
Interest
(Title of Class)
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. Smith Barney Westport Futures Fund
L.P. ("Partnership") is a limited partnership organized on March 21, 1997 under
the Partnership laws of the State of New York. The Partnership commenced trading
operations on August 1, 1997. The Partnership engages in speculative trading of
commodity interests, including futures contracts, options and forward contracts.
A Registration Statement on Form S-1 relating to the public offering
became effective on May 30, 1997. Beginning May 30, 1997, 120,000 Units of
Limited Partnership Interest ("Units") were publicly offered at $1,000 per Unit
for a period of ninety days, subject to increase for up to an additional sixty
days at the sole discretion of the General Partner. Between May 30, 1997
(commencement of the offering period) and July 31, 1997, 40,035 Units were sold
at $1,000 per Unit. Proceeds of the offering were held in an escrow account and
were transferred, along with the General Partner's contribution of $404,000 to
the Partnership's trading account on August 1, 1997 when the Partnership
commenced trading. Sales of additional Units and additional General Partner's
contributions and redemptions of Units for the period ended December 31, 1997
are reported in the Statement of Partners' Capital on page F-5 under "Item 8.
Financial Statements and Supplementary Data."
The General Partner has agreed to make capital contributions,
2
if necessary, so that its general partnership interest will be equal to the
greater of (i) an amount to entitle it to 1% of each material item of
Partnership income, loss, deduction or credit and (ii) the greater of (a) 1% of
the partners' contributions to the Partnership or (b) $25,000. The Partnership
will be liquidated upon the first of the following to occur: December 31, 2017;
the net asset value of a Unit decreases to less than $400 as of the close of any
business day; or under certain circumstances as defined in the Limited
Partnership Agreement of the Partnership (the "Limited Partnership Agreement").
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership and is a wholly owned subsidiary of Smith
Barney Inc. ("SB"). SB acts as commodity broker for the Partnership. On November
28, 1997, Smith Barney Holdings Inc. was merged with Salomon Inc to form Salomon
Smith Barney Holdings Inc. ("SSBH"), a wholly owned subsidiary of Travelers
Group Inc. SB is a wholly owned subsidiary of SSBH.
The Partnership's trading of futures contracts on commodities is done
primarily on United States and foreign commodity exchanges. It engages in such
trading through a commodity brokerage account maintained with SB.
As of December 31, 1997, all commodity trading decisions are made for the
Partnership by John W. Henry & Company, Inc. ("JWH"), (the "Advisor"). The
Advisor is not affiliated with the General Partner or SB. The Advisor is not
responsible for the organization or operation of the Partnership.
3
Pursuant to the terms of the Management Agreement (the "Management
Agreement"), the Partnership is obligated to pay the Advisor: (i) a monthly
management fee equal to 1/3 of 1% (4% per year) of month-end Net Assets of the
Partnership allocated to the Advisor as of the end of each month and (ii) an
incentive fee payable quarterly, equal to 15% of the New Trading Profits (as
defined in the Management Agreement) of the Partnership. For purposes of
calculating JWH's incentive fee, Net Asset Value shall equal the assets of the
Partnership reduced only by expenses equal to 5.25% (at an annual rate) of the
Partnership's month-end assets.
The Partnership has entered into a Customer Agreement with SB (the
"Customer Agreement") which provides that the Partnership will pay SB a monthly
brokerage fee equal to 13/24 of 1% of month-end Net Assets allocated to the
Advisors (6.5% per year) in lieu of brokerage commissions on a per trade basis.
SB also pays a portion of its brokerage fees to its financial consultants who
have sold Units and who are registered as associated persons with the Commodity
Futures Trading Commission (the "CFTC"). The Partnership pays for National
Futures Association ("NFA") fees, exchange and clearing fees, give-up and user
fees and floor brokerage fees. The Customer Agreement between the Partnership
and SB gives the Partnership the legal right to net unrealized gains and losses.
In addition, SB pays the Partnership interest on 80% of the average daily
equity maintained in cash in its account during each month at a 30-day U.S.
Treasury bill rate determined weekly by SB based on the average non-competitive
yield on 3-month U.S. Treasury
4
bills maturing in 30 days from the date on which such weekly rate is determined.
However, SB began paying interest to the Partnership only after the amount of
interest accrued equaled the total amount of offering and organizational
expenses paid by SB in connection with the Partnership's offering plus interest
at the prime rate quoted by the Chase Manhattan Bank.
(b) Financial information about industry segments. The Partnership's
business consists of only one segment, speculative trading of commodity
interests (including, but not limited to, futures contracts, options and forward
contracts on U.S. Treasury Bills, other financial instruments, foreign
currencies, stock indices and physical commodities). The Partnership does not
engage in sales of goods or services. The Partnership's net income from
operations for the period from August 1, 1997 (commencement of trading
operations) to December 31, 1997 is set forth under "Item 6. Select Financial
Data." The Partnership capital as of December 31, 1997 was $101,255,607.
(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.
5
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.
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 public market for the Units of
Limited Partnership Interest.
(b) Holders. The number of holders of Units of Limited
Partnership Interest as of December 31, 1997 was
4,154.
(c) Distribution. The Partnership did not declare a distribution in
1997.
6
Item 6. Select Financial Data. The Partnership commenced trading operations on
August 1, 1997. Realized and unrealized trading gains, interest income, net
income and increase in net asset value per Unit for the period from August 1,
1997 (commencement of trading operations) to December 31, 1997 and total assets
at December 31, 1997 were as follows:
1997
Realized and unrealized trading
gains net of brokerage commissions
and clearing fees of $2,127,374 $ 5,051,247
Interest Income 1,161,609
$ 6,212,856
Net Income $ 4,152,296
============
Increase in net asset
value per unit $ 29.05
=======
Total assets $103,029,348
============
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 equity in its commodity futures trading
account, consisting of cash and cash equivalents, net unrealized appreciation
(depreciation) on open futures contracts and receivables. 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
7
will follow certain policies including:
(1) Partnership funds are invested only in futures contracts which are
traded in sufficient volume to permit, in the opinion of the Advisor, ease of
taking and liquidating positions.
(2) No Advisor initiates additional positions in any commodity if such
additional positions would result in aggregate positions for all commodities
requiring as margin more than 66-2/3% of the Partnership's assets allocated to
the Advisor. For the purpose of this limitation, forward contracts in currencies
will be deemed to have the same margin requirements as the same or similar
futures contracts traded on the Chicago Mercantile Exchange.
(3) The Partnership will not employ the trading technique commonly known
as "pyramiding", in which the speculator uses unrealized profits on existing
positions as margin for the purchase or sale of additional positions in the same
or related commodities.
(4) The Partnership will not utilize borrowing except short-term
borrowing if the Partnership takes delivery of any cash commodities, provided
that neither the deposit of margin with a commodity broker nor obtaining and
drawing on a line of credit with respect to forward contracts shall constitute
borrowing.
(5) The Advisor may, from time to time, employ trading strategies such
as spread 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
8
to earn a profit from a widening or narrowing of the difference
between the prices of the two contracts.
(6) The Partnership will not permit the churning of its commodity
trading accounts.
The Partnership is party to financial instruments with offbalance 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. (See
also Item 8. Financial Statements 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
9
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 upon the first to occur of the
following: (i) December 31, 2017; (ii) the vote dissolve the Partnership by
limited partners owning more than 50% of the Units; (iii) assignment by the
General Partner of all of its interest in the Partnership or withdrawal,
removal, bankruptcy or any other event that causes the General Partner to cease
to be a general partner under the New York Revised Limited Partnership Act
unless the Partnership is continued as described in the Limited Partnership
Agreement; (iv) Net Asset Value per Unit falls to less than $400 as of the end
of any trading day; or (v) the occurrence of any event which shall make it
unlawful for the existence of the Partnership to be continued.
(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
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 things, commissions,
management fees and incentive fees. The level of these expenses is dependent
upon the level of trading and
10
the ability of the Advisors 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.
Distributions of profits, if any, will be made at the sole discretion of
the General Partner and at such times as the General Partner may decide.
Beginning at the end of six full months after the commencement of trading, a
limited partner may require the Partnership to redeem his Units at their Net
Asset Value as of the last day of a month on 10 days' notice to the General
Partner. For the purpose of a redemption, any accrued liability for
reimbursement of offering and organization expenses for the Initial Offering
Period will not reduce Net Asset Value per Unit. There is no fee charged to
limited partners in connection with redemptions. For the period ended December
31, 1997, 10 Units were redeemed totaling $9,689.
The Partnership continues to offer Units at the Net Asset Value per Unit
as of the end of each month. For the period ended December 31, 1997, there were
additional sales of 59,076.5475 Units totaling $56,807,000 and contributions by
the General Partner representing 597.9801 Unit equivalents totaling $575,000.
(c) Results of Operations.
For the period from August 1, 1997 (commencement of trading operations)
to December 31, 1997, the net asset value per Unit increased 3.0% from $982.44
to $1,011.49. There were no operations
11
in 1996 and 1995. The net asset value of $982.44 at commencement of trading
operations is reflective of charging offering and organizational expenses
against the initial capital of the Partnership for financial reporting purposes.
The Partnership experienced net trading gains of $7,178,621 before
commissions and expenses in 1997. These gains were attributable to gains
incurred in the trading of U.S. and non U.S. interest rates, metals and
currencies and were partially offset by losses experienced in the trading of
energy products, grains, indices and softs.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisor to
identify 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.
12
Item 8. Financial Statements and Supplementary Data.
SMITH BARNEY WESTORT FUTURES FUND L.P.
INDEX TO FINANCIAL STATEMENTS
Page
Number
Report of Independent Accountants. F-2
Financial Statements:
Statement of Financial Condition at
December 31, 1997. F-3
Statement of Income and Expenses for
the period from August 1, 1997
(commencement of trading operations)
to December 31, 1997. F-4
Statement of Partners' Capital for
the period from March 21, 1997 (date
Partnership was organized) to
December 31, 1997. F-5
Notes to Financial Statements. F-6 - F-11
F-1
Continued
Report of Independent Accountants
To the Partners of
Smith Barney Westport Futures Fund L.P
We have audited the accompanying statement of financial condition of SMITH
BARNEY WESTPORT FUTURES FUND L.P. (a New York Limited Partnership) as of
December 31, 1997, and the related statements of income and expenses for the
period from August 1, 1997 (commencement of trading operations) to December 31,
1997, and of partners' capital for the period from March 21, 1997 (date
Partnership was organized) to December 31, 1997. 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 audit.
We conducted our audit 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 audit provides 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 Smith Barney Westport Futures
Fund L.P. as of December 31, 1997, and the results of its operations for the
period from March 21, 1997 (date Partnership was organized) to December 31,
1997, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
March 6, 1998
F-2
Smith Barney Westport Futures Fund L.P.
Statement of Financial Condition
December 31, 1997
Assets: 1997
Equity in commodity futures
trading account:
Cash and cash equivalents
(Note 3c) $ 94,452,401
Net unrealized appreciation
on open futures contracts 8,075,897
------------
102,528,298
Interest receivable 339,134
Due from SB 161,916
------------
$103,029,348
------------
Liabilities and Partners'
Capital:
Liabilities:
Accrued expenses:
Commissions $ 558,075
Management fees 341,439
Incentive fees 834,386
Other 39,841
------------
1,773,741
------------
Partners' capital (Notes 1 and 7):
General Partner, 1,002.9801
Unit equivalents outstanding
in 1997 1,014,504
Limited Partners, 99,102.5475
Units of Limited Partnership
Interest outstanding in 1997 100,241,103
------------
101,255,607
------------
$103,029,348
------------
See notes to financial statements.
F-3
Smith Barney Westport Futures Fund L.P.
Statement of Income and Expenses
for the period from August 1, 1997
(commencement of trading operations) to December 31,
1997
1997
Income:
Net gains on trading
of commodity
interests:
Realized losses on
closed positions $ (897,276)
Change in unrealized
gains on open positions 8,075,897
-----------
7,178,621
Less, Brokerage
commissions and clearing fees
($30,840) (Note 3c) 2,127,374
Net realized and
unrealized gains 5,051,247
Interest income
(Notes 3c and 6) 1,161,609
-----------
6,212,856
-----------
Expenses:
Management fees (Note 3b) 1,229,565
Incentive fees (Note 3b) 834,386
Organization expense (Note 6) (49,441)
Other expenses 46,050
-----------
2,060,560
-----------
Net income $ 4,152,296
-----------
Net income per Unit of
Limited Partnership Interest
and General Partner Unit
equivalent (Notes 1 and 7) $ 29.05
-----------
See notes to financial statements.
F-4
Smith Barney Westport
Futures Fund L.P.
Statement of Partners' Capital
for the period from March 21, 1997 (date Partnership
was organized) to December 31, 1997
Limited General
Partners Partner Total
Initial capital $ 1,000 $ 1,000 $ 2,000
contributions
Proceeds from offering
of 40,035 Units of Limited
Partnership Interest
and General Partner's
contribution representing
404 Unit equivalents
(Note 1) 40,035,000 404,000 40,439,000
Offering and
organization costs (Note 6) (702,890) (7,110) (710,000)
------------- ------------- -------------
Opening Partnership
capital for operations 39,333,110 397,890 39,731,000
Net Income 4,110,682 41,614 4,152,296
Sale of 59,076.5475
Units of Limited
Partnership Interest
and General Partner's
contribution representing
597.9801 Unit equivalents 56,807,000 575,000 57,382,000
Redemption of 10
Units of Limited
Partnership Interest (9,689) -- (9,689)
------------- ------------- -------------
Partners' capital at
December 31, 1997 $ 100,241,103 $ 1,014,504 $ 101,255,607
------------- ------------- -------------
See notes to financial statements.
F-5
Smith Barney Westport
Futures Fund L.P.
Notes to Financial Statements
1. Partnership Organization:
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.
Between May 30, 1997 (commencement of the offering period) and July 31,
1997, 40,035 Units of Limited Partnership Interest ("Units") were sold at
$1,000 per Unit. The proceeds of the initial offering were held in an escrow
account until August 1, 1997, at which time they were turned over to the
Partnership for trading. The Partnership continues to offer Units during the
continuous offering period. The Partnership is authorized to sell 120,000
Units during the public offering period of the Partnership.
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership and is a wholly owned subsidiary of
Smith Barney Inc. ("SB"). SB acts as commodity broker for the Partnership
(see Note 3c). On November 28, 1997, Smith Barney Holdings Inc. was merged
with Salomon Inc to form Salomon Smith Barney Holdings Inc. ("SSBH"), a
wholly owned subsidiary of Travelers Group Inc. SB is a wholly owned
subsidiary of SSBH.
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 will be liquidated upon the first to occur of the following:
December 31, 2017; the net asset value of a Unit decreases to less than $400
as of a close of any business day; or under certain other circumstances as
defined in the Limited Partnership Agreement.
F-6
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.
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.
b. Management Agreement:
The General Partner, on behalf of the Partnership, has entered into a
Management Agreement with John W. Henry & Company, Inc. ("JWH") (the
"Advisor"), registered commodity trading advisor. The Advisor is not
affiliated with the General Partner or SB and is not responsible for the
organization or operation of the Partnership. The Partnership will pay
the Advisor a monthly management fee equal to 1/3 of 1% (4% per year) of
month-end Net Assets allocated to the Advisor. In addition, the
Partnership is obligated to pay the Advisor an incentive fee payable
quarterly equal to 15% of the New Trading Profits, as defined, earned by
the Advisor for the Partnership. For purposes of calculating JWH's
incentive fee, Net Assets used in the calculation of New Trading Profits,
shall equal the assets of the Partnership reduced only by expenses equal
to 5.25% (at an annual rate) of the Partnership's month-end assets.
F-7
c. Customer Agreement:
The Partnership has entered into a Customer Agreement which provides that
the Partnership will pay SB a monthly brokerage fee equal to 13/24 of 1%
(6.5% per year) of month-end Net Assets, as defined, in lieu of brokerage
commissions on a per trade basis. The Partnership will pay for National
Futures Association ("NFA") fees, exchange, clearing, user, give-up and
floor brokerage fees. SB will pay a portion of brokerage fees to its
financial consultants who have sold Units in this 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, 1997, the amount of cash held for margin requirements was
$16,993,115. SB has agreed to pay the Partnership interest on 80% of the
average daily equity maintained in cash in its account during each month
at a 30-day U.S. Treasury bill rate determined weekly by SB based on the
average noncompetitive yield on 3-month U.S. Treasury bills maturing in
30 days from the date on which such weekly rate is determined. 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 upon notice 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 interests. The results of the Partnership's trading
activity are shown in the statement of income and expense.
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, 1997, was $8,075,897 and the average fair
value during the period then ended, based on monthly calculation was
$5,627,034.
F-8
5. Distributions and Redemptions:
Distributions of profits, if any, will be made at the sole discretion of the
General Partner and at such times as the General Partner may decide.
Beginning at the end of six full months after the commencement of trading, a
limited partner may require the Partnership to redeem his Units at their Net
Asset Value as of the last day of a month on 10 days' notice to the General
Partner. For the purpose of a redemption, any accrued liability for
reimbursement of offering and organization expenses for the Initial Offering
Period will not reduce Net Asset Value per Unit. There is no fee charged to
limited partners in connection with redemptions.
6. Offering and Organization Costs:
Offering and organization expenses estimated at $710,000 relating to the
issuance and marketing of Units during the initial offering period were
initially paid by SB and were charged against the initial capital of the
Partnership. Actual offering and organization expenses totaled $653,455. 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 plus interest at the prime rate quoted by the Chase Manhattan
Bank until such time as such expenses are fully reimbursed.
As of December 31, 1997, the Partnership had reimbursed SB for $653,455 of
offering and organization expenses and $7,104 of interest and the difference
between these amounts and the original estimate which was charged to
Partners' capital is reflected in the statement of income and expenses.
F-9
7. Net Asset Value Per Unit:
Changes in the net asset value per Unit for the period from August 1, 1997
(commencement of trading operations) to December 31, 1997 were as follows:
1997
Net realized and
unrealized gains $ 31.94
Interest income 14.20
Expenses (17.09)
---------
Increase for period 29.05
Net asset value per Unit,
beginning of period 982.44
---------
Net asset value per Unit,
end of period $1,011.49
---------
8. 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, or 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-10
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
appropriately not recorded in the financial statements, reflect the extent
of the Partnership's involvement in these instruments. At December 31, 1997,
the Partnership's commitment to purchase and sell these instruments was
$513,151,141 and $482,486,909, respectively, as detailed below. All of these
instruments mature within one year of December 31, 1997. However, due to the
nature of the Partnership's business, these instruments may not be held to
maturity. At December 31, 1997, the fair value of the Partnership's
derivatives, including options thereon, was $8,075,897, as detailed below.
December 31, 1997
-------------------------------------------
Notional or Contractual
Amount of Commitments
To Purchase To Sell Fair Value
Currencies:
-OTC $ 79,702,539 $171,012,164 $ 1,553,893
Energy -- 26,340,080 1,632,990
Grains 1,480,470 7,170,325 89,273
Interest Rate
U.S 146,479,725 -- 763,150
Interest Rate
Non-U.S 261,861,726 222,578,459 901,690
Metals 10,746,480 29,465,693 2,571,779
Softs 12,880,201 9,320,777 146,373
Indices -- 16,599,411 416,749
------------ ------------ ------------
Total $513,151,141 $482,486,909 $ 8,075,897
------------ ------------ ------------
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 will be made by John W. Henry & Company, Inc.
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." Brokerage commissions and clearing fees of $2,127,374
were paid for the period ended December 31, 1997. Management fees and incentive
fees of $1,229,565 and $834,386, respectively, were paid to the Advisor for the
period ended December 31, 1997.
13
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a). Security ownership of certain beneficial owners.
As of March 1, 1998, 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 1,002.9801 Units (1.0%) of Limited Partnership Interest as of
December 31, 1997.
(c). Changes in control. None.
Item 13. Certain Relationship 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."
14
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, 1997.
Statement of Income and Expenses for the period from August 1,
1997 (commencement of trading operations) to December 31,
1997. Statement of Partners' Capital for the period from March
21, 1997 (date Partnership was organized) to December 31,
1997.
(2) Financial Statement Schedules: Financial Data Schedule
for the period ended December 31, 1997.
(3) Exhibits:
3.1 - Limited Partnership Agreement (filed as Exhibit 3.1 to the
Registration Statement on Form S-1 (File No. 333-24923 and
incorporated herein by reference).
3.2 - Certificate of Limited Partnership of the
Partnership as filed in the office of the Secretary
of State of the State of New York (filed as Exhibit
3.2 to the Registration Statement on Form S-1 (Filed
No. 333-24923) and incorporated herein by
reference).
10.1- Customer Agreement between the Partnership and Smith
Barney (filed as Exhibit 10.1 to the Registration
15
Statement on Form S-1 (File No. 333-24923) and
incorporated herein by reference).
10.2- Subscription Agreement (filed as Exhibit 10.2 to the
Registration Statement on Form S-1 (File No. 333-
24923) and incorporated herein by reference).
10.3- Escrow Instructions relating to escrow of
subscription funds (filed as Exhibit 10.3 to the
Registration Statement on Form S-1 (File No. 333-
24923) and incorporated herein by reference).
10.4- Management Agreement among the Partnership, the
General Partner and John W. Henry & Company Inc.
(filed as Exhibit 10.5 to the Registration Statement
on Form S-1 (File No. 333-24923) and incorporated
herein by reference).
(b) Reports on 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 1998.
SMITH BARNEY WESTPORT 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/ Daniel R. McAuliffe, Jr. /s/ Steve J. Keltz
Daniel R. McAuliffe, Jr. Steve J. Keltz
Director Secretary and Director
/s/ Shelley Ullman
Shelley Ullman
Director
18