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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2004
Commission File Number 000-30455
SALOMON SMITH BARNEY GLOBAL DIVERSIFIED FUTURES FUND L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-4015586
- --------------------------------------------------------------------------------
(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 No X
SALOMON SMITH BARNEY GLOBAL DIVERSIFIED 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 - 11
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. 12 - 14
Item 3. Quantitative and Qualitative
Disclosures about Market Risk. 15 - 16
Item 4. Controls and Procedures. 17
PART II - Other Information 18
2
SALOMON SMITH BARNEY GLOBAL DIVERSIFIED FUTURES FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
March 31, December 31,
2004 2003
----------- -----------
ASSETS:
Equity in commodity futures trading account:
Cash (restricted $6,474,769 and $6,640,283
in 2004 and 2003, respectively) $56,373,018 $52,664,213
Net unrealized appreciation on open
futures positions 3,136,856 1,254,503
Unrealized appreciation on open forward contracts 1,956,260 3,866,171
----------- -----------
61,466,134 57,784,887
Interest receivable 37,388 30,142
----------- -----------
$61,503,522 $57,815,029
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Unrealized depreciation on open forward contracts $ 1,655,391 $ 1,573,552
Accrued expenses:
Commissions 273,897 257,940
Management fees 86,987 80,143
Incentive fees 1,248,673 1,953,719
Other 61,942 52,169
Redemptions payable 146,568 190,508
----------- -----------
3,473,458 4,108,031
=========== ===========
Partners' capital:
General Partner, 619.7983 Unit equivalents
outstanding in 2004 and 2003 939,571 857,956
Limited Partners, 37,660.3936 and 38,178.7765
Redeemable Units of Limited Partnership Interest
outstanding in 2004 and 2003, respectively 57,090,493 52,849,042
----------- -----------
58,030,064 53,706,998
----------- -----------
$61,503,522 $57,815,029
=========== ===========
See Accompanying Notes to Unaudited Financial Statements.
3
Salomon Smith Barney Global Diversified Futures Fund L.P.
Condensed Schedule of Investments
March 31, 2004
(Unaudited)
Sector Contract Fair Value
- ------------------------------------------------------------------------------------------------ ---------------
Currencies Unrealized depreciation on forward contracts (1.86)% $ (1,079,355)
Unrealized appreciation on forward contracts 1.65% 955,930
------------
Total forward contracts (0.21)% (123,425)
Futures contracts sold (0.02)% (13,041)
Futures contracts purchased 0.02% 14,852
------------
Total futures contracts (0.00)%* 1,811
------------
Total Currencies (0.21)% (121,614)
------------
Energy Futures contracts sold (0.07)% (38,548)
Futures contracts purchased 0.45% 262,233
------------
Total Energy 0.38% 223,685
------------
Grains Futures contracts sold 0.00%* 1,340
Futures contracts purchased 1.48% 859,821
------------
Total Grains 1.48% 861,161
------------
Interest Rates Non - U.S. Futures contracts sold 0.10% 58,720
Futures contracts purchased 1.25% 723,783
------------
Total Interest Rates Non - U.S. 1.35% 782,503
------------
Interest Rates U.S. Futures contracts sold (0.00)%* (325)
Futures contracts purchased 0.40% 232,436
------------
Total Interest Rates 0.40% 232,111
------------
Total Livestock 0.30% Futures contracts purchased 0.30% 172,477
------------
Total Lumber 0.04% Futures contracts purchased 0.04% 27,236
------------
Metals Futures contracts purchased 1.10% 635,607
Unrealized depreciation on forward contracts (0.99)% (576,036)
Unrealized appreciation on forward contracts 1.72% 1,000,330
------------
Total forward contracts 0.73% 424,294
------------
Total Metals 1.83% 1,059,901
------------
Softs Futures contracts sold 0.18% 104,187
Futures contracts purchased (0.04)% (23,344)
------------
Total Softs 0.14% 80,843
------------
Indices Futures contracts sold (0.04)% (25,957)
Futures contracts purchased 0.25% 145,379
------------
Total Indices 0.21% 119,422
------------
Total Fair Value 5.92% $ 3,437,725
=============
Country Composition Investments at Fair Value % of Investments at Fair Value
.............................................................................................................................
Australia $ (66,996) (1.95)
Canada 113,750 3.31
France 41,621 1.21
Germany 481,111 14.00
Hong Kong 2,028 0.06
Italy (1,401) (0.04)
Japan 668,304 19.44
Spain 18,655 0.54
Sweden 5,234 0.15
United Kingdom 700,135 20.37
United States 1,475,284 42.91
..................................... ......................................
$ 3,437,725 100.00%
===================================== ======================================
Percentages are based on Partners' capital unless otherwise indicated
* Due to Rounding
See Accompanying Notes to Unaudited Financial Statements.
4
Salomon Smith Barney
Global Diversified Futures Fund L.P.
Condensed Schedule of Investments
December 31, 2003
(Unaudited)
Sector Contract Fair Value
- ------------------------------------------------------------------------------------------- ---------------
Currencies
Unrealized appreciation on forward contracts 4.38% $2,352,507
Unrealized depreciation on forward contracts (2.11)% (1,134,174)
----------
Total forward contracts 2.27% 1,218,333
----------
Futures contracts sold (0.00)%* (2,424)
----------
Total Currencies 2.27% 1,215,909
----------
Total Energy 0.25% Futures contracts purchased 0.25% 135,757
----------
Grains
Futures contracts purchased (0.01)% (3,869)
Futures contracts sold (0.02)% (10,468)
----------
Total Grains (0.03)% (14,337)
----------
Total Interest Rates U.S. 0.00%* Futures contracts purchased 0.00%* 1,994
----------
Interest Rates Non-U.S.
Futures contracts purchased 0.30% 159,039
Futures contracts sold (0.08)% (41,544)
----------
Total Interest Rates Non-U.S. 0.22% 117,495
----------
Metals
Futures contracts purchased 0.67% 359,915
Unrealized appreciation on forward contracts 2.82% 1,513,664
Unrealized depreciation on forward contracts (0.82)% (439,378)
----------
Total forward contracts 2.00% 1,074,286
----------
Total Metals 2.67% 1,434,201
----------
Softs
Futures contracts purchased (0.03)% (14,000)
Futures contracts sold 0.01% 2,471
----------
Total Softs (0.02)% (11,529)
----------
Total Indices 1.24% Futures contracts purchased 1.24% 667,632
----------
Total Fair Value 6.60% $3,547,122
==========
Investments at Fair % of Investments
Country Composition Value at Fair Value
- ---------------------- ----------------------- ------------------
Australia $12,842 0.36%
Canada 154,681 4.36
France 2,653 0.07
Germany 152,267 4.29
Hong Kong 11,883 0.34
Italy (11,804) (0.33)
Japan 27,876 0.79
Spain 40,912 1.15
Sweden 9,240 0.26
United Kingdom 1,228,716 34.64
United States 1,917,856 54.07
----------------------- ------------------
$3,547,122 100.00%
======================= ==================
Percentages are based on Partners' capital unless otherwise indicated
* Due to rounding
See Accompanying Notes to Unaudited Financial Statements.
5
SALOMON SMITH BARNEY GLOBAL DIVERSIFIED 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 $ 7,435,065 $ 8,259,378
Change in unrealized losses on open
positions (109,397) (3,186,501)
------------ ------------
7,325,668 5,072,877
Interest income 92,967 116,918
------------ ------------
7,418,635 5,189,795
------------ ------------
Expenses:
Brokerage commissions including clearing fees
of $27,385 and $34,591, respectively 822,229 781,978
Management fees 239,038 228,844
Incentive fees 1,248,673 808,962
Other expenses 19,849 18,423
------------ ------------
2,329,789 1,838,207
------------ ------------
Net income 5,088,846 3,351,588
Redemptions (765,780) (1,240,223)
------------ ------------
Net increase in Partners' capital 4,323,066 2,111,365
Partners' capital, beginning of period 53,706,998 49,391,625
------------ ------------
Partners' capital, end of period $ 58,030,064 $ 51,502,990
============ ============
Net asset value per Redeemable Unit
(38,280.1919 and 40,842.9868 Redeemable Units
outstanding at March 31, 2004 and 2003, respectively) $ 1,515.93 $ 1,261.00
============ ============
Net income per Redeemable Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 131.68 $ 80.05
============ ============
See Accompanying Notes to Unaudited Financial Statements
6
Salomon Smith Barney Global Diversified Futures Fund L.P.
Statements of Cash Flows
March 31, 2004
(Unaudited)
Three months ended
March 31,
------------------------
2004 2003
------------------------
Cash flows from operating activities:
Net Income $ 5,088,846 $ 3,351,588
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 (1,882,353) 2,562,447
Unrealized appreciation on open forward contracts 1,909,911 1,067,925
Increase in interest receivable (7,246) (1,823)
Unrealized depreciation on open forward contracts 81,839 (443,871)
Accrued expenses:
Increase in commissions 15,957 4,235
Increase in management fees 6,844 1,085
Decrease in incentive fees (705,046) (484,508)
Increase in other 9,773 18,423
Decrease in redemptions payable (43,940) (727,167)
------------ ------------
Net cash provided by operating activities 4,474,585 5,348,334
------------ ------------
Cash flows from financing activities:
Payments for redemptions (765,780) (1,240,223)
------------ ------------
Net cash used in financing activities (765,780) (1,240,223)
------------ ------------
Net change in cash 3,708,805 4,108,111
Cash, at beginning of period 52,664,213 48,802,978
------------ ------------
Cash, at end of period $ 56,373,018 $ 52,911,089
============ ============
See Accompanying Notes to Unaudited Financial Statements.
7
Salomon Smith Barney Global Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2004
(Unaudited)
1. General:
Salomon Smith Barney Global Diversified Futures Fund L.P. (the
"Partnership") is a limited partnership organized under the laws of the State of
New York on June 15, 1998 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. The Partnership commenced
trading operations on February 2, 1999.
Between November 25, 1998 (commencement of the offering period) and
February 1, 1999, 33,379 Redeemable Units of limited partnership interest and
337 Redeemable Unit equivalents representing the general partner's contribution
were sold at $1,000 per Redeemable Unit. The proceeds of the offering were held
in an escrow account until February 2, 1999, at which time they were turned over
to the Partnership for trading. The public offering of Redeemable Units
terminated on November 25, 2000.
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. ("Citigroup"). As
of March 31, 2004, all trading decisions are made for the Partnership by Aspect
Capital Management Ltd. ("Aspect"), Campbell & Company, Inc., ("Campbell") and
Altis Partners LTD ("Altis") (each an "Advisor" and collectively, the
"Advisors").
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
Salomon Smith Barney Global Diversified 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* $ 168.27 $ 102.50
Interest income 2.41 2.82
Expenses** (39.00) (25.27)
--------- ---------
Increase for the period 131.68 80.05
Net Asset Value per Redeemable Unit, beginning of period 1,384.25 1,180.95
--------- ---------
Net Asset Value per Redeemable Unit, end of period $ 1,515.93 $ 1,261.00
========= =========
Ratio to average net assets: ***
Net investment loss before incentive fees**** (7.1)% (7.2)%
========= =========
Operating expenses 7.8% 8.2%
Incentive fees 2.3% 6.4%
--------- ---------
Total expenses 10.1% 14.6%
========= =========
Total return:
Total return before incentive fees 11.9% 8.4%
Incentive fees (2.4)% (1.6)%
--------- ---------
Total return after incentive fees 9.5% 6.8%
========= =========
* Includes brokerage commissions
** Excludes brokerage commissions
*** Annualized (other than incentive fees)
**** Interest income less total expenses (exclusive of incentive fees)
The above ratios may vary for individual investors based on the timing of
capital transaction 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.
9
Salomon Smith Barney Global Diversified 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 $4,377,648 and $2,199,191, respectively. The fair values of
these commodity interests, including options thereon, if applicable, at March
31, 2004 and December 31, 2003, were $3,437,725 and $3,547,122, respectively.
Fair values for exchange traded commodity futures and options are based on
quoted market prices for those futures and options.
4. Financial Instrument Risk:
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.
10
Salomon Smith Barney Global Diversified 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, forwards and options 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.
11
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, commodity options, if applicable, and interest receivable. Because of
the low margin deposits normally required in commodity futures trading,
relatively small price movements may result in substantial losses to the
Partnership. While substantial losses could lead to a decrease in liquidity, no
such losses occurred during the first quarter of 2004.
The Partnership's capital consists of the capital contributions of the
partners, as increased or decreased by realized and/or unrealized gains or
losses on commodity futures trading, expenses, interest income, additions and
redemptions of Redeemable Units and distributions of profits, if any.
For the three months ended March 31, 2004, Partnership capital increased
8.0% from $53,706,998 to $58,030,064. This increase was attributable to net
income from operations of $5,088,846, which was partially offset by the
redemption of 518.3829 Redeemable Units of Limited Partnership Interest
resulting in an outflow of $765,780. 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 estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities at the date of the
financial statements and accompanying notes. 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
12
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 date of entry into the contracts and the forward rates at the
reporting dates, is included in the statement 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 9.5% from $1,384.25 to $1,515.93 as compared to an
increase of 6.8% 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 $7,325,668. Gains were primarily attributable to the trading of
commodity futures in currencies, energy, grains, U.S. and non-U.S. interest
rates, livestock and metals were partially offset by losses in softs and
indices. The Partnership experienced a net trading gain before brokerage
commissions and related fees in the first quarter of 2003 of $5,072,877. Gains
were primarily attributable to the trading of commodity futures in currencies,
energy, U.S. and non-U.S. interest rates, metals and softs and were partially
offset by losses in grains and indices.
The Partnership had a strong first quarter as the financial and commodity
trends that had carried performance in 2003 continued into the first quarter
providing profits across nearly all market sectors. The major contributors to
performance were lower interest rates both in the U.S. and internationally,
weakness in the U.S. dollar for much of the quarter and continued pressure on
commodity prices, particularly in base metals, energy, and grains.
Lower interest rate trends provided substantial profits for positions in
U.S. and international interest rate contracts in January and February. 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 Partnership's
advisors but then began a sharp correction that led to losses in March as the
dollar regained nearly 10% against the euro and other major currencies. Trading
in stock market indices was as mixed as the directionless stock markets were for
the first quarter.
In the commodity markets, increased global demand for the raw materials of
economic development, namely base metals, like copper, nickel and aluminum
produced profitable trading. Bullish price trends in gold, silver and palladium
were also profitable for the advisors. Concurrently, the demand for foodstocks
in developing countries generated profits for positions in grains, specifically
soybeans, corn and wheat. Each of these sectors produced profits for the
quarter. Energy trading was also slightly 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 Advisors.
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
depends on the existence of major price trends and the ability of the Advisors
to correctly identify those price trends. Price trends are influenced by, among
other things, changing supply and demand relationships, weather, governmental,
13
agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. To
the extent that market trends exist and the advisors are able to identify them,
the Partnership expects to increase capital through operations.
Interest income on 80% of the Partnership's daily equity maintained in cash
was earned at the monthly average 30-day U.S. Treasury bill yield. CGM may
continue to maintain the Partnership assets in cash and/or place all of the
Partnership 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 $23,951, as compared to the corresponding period in
2003. The decrease in interest income is primarily due to the 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 and redemptions. Accordingly, they must be compared in relation to
the fluctuations in the monthly net asset values. Commissions and fees for the
three months ended March 31, 2004 increased by $40,251, as compared to the
corresponding period in 2003. The increase in brokerage commissions for the
three months ended March 31, 2004 is due to an increase in average net assets
during the period.
Management fees are calculated as a percentage of the Partnership's net
asset value as of the end of each month and are affected by trading performance
and redemptions. Management fees for the three months ended March 31, 2004
increased by $10,194, as compared to the corresponding period in 2003. The
increase in management fees for the three months ended March 31, 2004 is due to
an increase in average net assets during the period.
Incentive fees paid annually by the Partnership are based on the new
trading profits of the Partnership as defined in the Limited Partnership
Agreement. Trading performance for the three months ended March 31, 2004 and
2003 resulted in an incentive fee accrual of $1,248,673 and $808,962,
respectively.
14
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.
The risk to the limited partners that have purchased interests in the
Partnership is limited to the amount of their capital contributions to the
Partnership and their share of the Partnership assets and undistributed profits.
This limited liability is a consequence of the organization of the Partnership
as a limited partnership under applicable law.
Market movements result in frequent changes in the fair 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 value of financial instruments and contracts, the
diversification effects of the Partnership's open positions and the liquidity of
the market 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.
15
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 and lowest 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 $58,030,064. 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
- -Exchange Traded Contracts $ 167,110 0.29% $ 317,695 $ 157,616 $ 247,135
- - OTC Contracts 825,902 1.42% 1,353,727 620,582 1,063,501
Energy 642,530 1.11% 879,574 401,350 652,761
Grains 416,187 0.72% 416,187 76,491 334,558
Interest rate U.S. 519,750 0.89% 957,450 325,413 642,883
Interest rate Non-U.S. 1,120,694 1.93% 2,428,075 994,949 1,714,818
Livestock 80,600 0.14% 101,100 3,200 51,633
Metals
- -Exchange Traded Contracts 311,900 0.54% 311,900 161,100 242,367
- - OTC Contracts 396,149 0.68% 615,967 300,245 462,928
Softs 351,945 0.61% 368,736 57,000 279,356
Indices 806,646 1.41% 3,060,289 806,646 2,020,139
Wood 18,700 0.03% 25,950 5,250 12,540
---------------------------------------
Totals $ 5,669,013 9.77%
=======================================
16
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.
17
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.
18
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities - None
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, 193.7258 $1,390.80 N/A N/A
2004
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
February 1, 2004 - February 227.9722 $1,534.30 N/A N/A
29, 2004
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
March 1, 2004 - March 31, 2004 96.6849 $1,515.93 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Total 518.3829 $1,480.34 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.
19
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports of 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 year 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
20
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.
SALOMON SMITH BARNEY GLOBAL DIVERSIFIED 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, Jr.
Chief Financial Officer and Director
Date: 5/10/04
-----------------------
21
Exhibit 31.1
CERTIFICATION
I, David J. Vogel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salomon Smith Barney
Global Diversified 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 Vogel
-----------------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
22
Exhibit 31.2
CERTIFICATION
I, Daniel R. McAuliffe, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salomon Smith Barney
Global Diversified 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
23
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 Salomon Smith Barney Global
Diversified 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 Vogel
- --------------------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
May 10, 2004
24
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 Salomon Smith Barney Global
Diversified 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
25