-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K1X0b4vgrS+IAxn4AqSE/r075sYiq9jAebCyDCw1U243+r2j/mMX+P6IhGVBPLt0 d23lbqhaHb6hPKUMAhsxzg== 0001037189-98-000012.txt : 19980330 0001037189-98-000012.hdr.sgml : 19980330 ACCESSION NUMBER: 0001037189-98-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITH BARNEY WESTPORT FUTURES FUND LP CENTRAL INDEX KEY: 0001037189 STANDARD INDUSTRIAL CLASSIFICATION: [6221] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-24923 FILM NUMBER: 98576749 BUSINESS ADDRESS: STREET 1: C/O SMITH BARNEY FUTURES MANAGEMENT INC STREET 2: 390 GREENWICH ST CITY: NEW YORK STATE: NY ZIP: 10013 BUSINESS PHONE: 2127235424 MAIL ADDRESS: STREET 1: C/O SMITH BARNEY FUTURES MANAGEMENT INC STREET 2: 390 GREENWICH ST CITY: NEW YORK STATE: NY ZIP: 10013 10-K 1 SMITH BARNEY WESTPORT FUTURES FUND L.P. 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 0001037189 Smith Barney Westport Futures Fund L.P. 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 94,452,401 8,075,897 501,050 0 0 103,029,348 0 0 103,029,348 1,773,741 0 0 0 0 101,255,607 103,029,348 0 6,212,856 0 0 2,060,560 0 0 4,152,296 0 0 0 0 0 4,152,296 29.05 0
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