-----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, IN5ZSR0r/wiSybH5FNefcjEcr3oxYiX/wPN47r7XNt+B0PoqvITB7E8k2qSe9r8Y v9XBNEsmVhori5AZCQ68zw== 0000944697-98-000001.txt : 19980401 0000944697-98-000001.hdr.sgml : 19980401 ACCESSION NUMBER: 0000944697-98-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITH BARNEY PRINCIPAL PLUS FUTURES FUND LP CENTRAL INDEX KEY: 0000944697 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES [6200] IRS NUMBER: 133823300 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-28350 FILM NUMBER: 98581239 BUSINESS ADDRESS: STREET 1: 390 GREENWICH STREET STREET 2: C/O SMITH BARNEY FUTURES MANAGEMENT INC CITY: NEW YORK STATE: NY ZIP: 10013 10-K 1 SMITH BARNEY PRINCIPAL PLUS 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 33-91742 SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. (Exact name of registrant as specified in its charter) New York 13-3823300 (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: 100,000 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 Principal Plus Futures Fund L.P. (the "Partnership") is a limited partnership organized on January 25, 1993 under the Partnership Law of the State of New York and was capitalized on April 12, 1995. No activity occurred between January 25, 1993 and April 12, 1995. The Partnership engages in speculative trading of commodity interests, including forward contracts on foreign currencies, commodity options and commodity futures contracts including futures contracts on United States Treasuries and certain other financial instruments, foreign currencies and stock indices. The commodity interests that are traded by the Partnership are volatile and involve a high degree of market risk. The Partnership maintains a portion of its assets in interest payments stripped from U.S. Treasury Bonds under the Treasury's STRIPS program ("Zero Coupons") which payments will be due February 15, 2003. The Partnership uses the Zero Coupons and its other assets to margin its commodities account. A total of 100,000 Units of Limited Partnership Interest in the Partnership (the "Units") were offered to the public. Between July 12, 1995 and November 16, 1995, 37,131 Units were sold to the public at $1,000 per Unit. Proceeds of the offering along with the General Partner's contribution of $376,000 were held in escrow until November 17, 1995 at which time an aggregate of $37,507,000 were turned over to the Partnership and the Partnership commenced 2 trading operations. 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 on United States and foreign commodity exchanges. It engages in such trading through a commodity brokerage account maintained with SB. Under the Limited Partnership Agreement of the Partnership (the "Limited Partnership Agreement"), the General Partner administers the business and affairs of the Partnership. As of December 31, 1997, all commodity trading decisions are made for the Partnership by John W. Henry & Company, Inc. ("JWH"), Rabar Market Research, Inc. and Abraham Trading Co. (collectively, the "Advisors"). None of the Advisors is affiliated with the General Partner or SB. The Advisors are not responsible for the organization or operation of the Partnership. Pursuant to the terms of the Management Agreements (the "Management Agreements"), the Partnership is obligated to pay each Advisor a monthly management fee equal to 1/6 of 1% (2% per year) of month-end Net Assets (except JWH, which will receive a monthly management fee equal to 1/3 of 1% (4% per year)) of the Partnership 3 allocated to each Advisor. The Partnership will also pay Abraham Trading Co. an incentive fee payable quarterly equal to 20% of New Trading Profits earned by it for the Partnership; John W. Henry & Company, Inc. will receive an incentive fee payable quarterly of 15% of the New Trading Profits (as defined in the Management Agreements); and Rabar Market Research Inc. will receive an annual incentive fee of 22.5% of New Trading Profits of the Partnership. The Customer Agreement provides that the Partnership will pay SB a monthly brokerage fee equal to 7/12 of 1% of month-end Net Assets allocated to the Advisors (7% per year) in lieu of brokerage commissions on a per trade basis. SB will pay 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 will pay for National Futures Association ("NFA") fees, exchange and clearing fees, give-up and user fees and floor brokerage fees. Brokerage fees will be paid for the life of the Partnership, although the rate at which such fees are paid may be changed. The Customer Agreement between the Partnership and SB gives the Partnership the legal right to net unrealized gains and losses. Reference should be made to "Item 8. Financial Statements and Supplementary Data." for further information regarding the brokerage commissions included in the notes to the financial statements. 4 In addition, SB will 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 non-competitive yield on 3-month U.S. Treasury bills maturing in 30 days from the date on which such weekly rate is determined. In the unlikely event that the Partnership is required to meet a margin call in excess of the cash balance in its trading accounts, SSBH will contribute up to an amount equal to the maturity value of the Zero Coupons held by the Partnership at the time of such call to the capital of the Partnership to permit it to meet its margin obligations in excess of its cash balance. The guarantee can only be invoked once. After the guarantee is invoked, trading will cease and the General Partner will either wait until the end of the month in which the Zero Coupons come due (February, 2003), (the "First Payment Date"), or will distribute cash and Zero Coupons to the limited partners. The General Partner will provide a copy of SSBH's annual report as filed with the SEC to any limited partner requesting it. (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. Treasuries, 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 5 operations for the year ended December 31, 1997, 1996 and for the period from November 17, 1995 (commencement of trading operations) to December 31, 1995 is set forth under "Item 6. Select Financial Data." Partnership capital as of December 31, 1997 was $35,596,403. (c) Narrative description of business. See Paragraphs (a) and (b) above. (i) through (x) - Not applicable. (xi) through (xii) - Not applicable. (xiii) - The Partnership has no employees. (d) Financial Information About Foreign and Domestic Operations and Export Sales. The Partnership does not engage in sales of goods or services, and therefore this item is not applicable. Item 2. Properties. The Partnership does not own or lease any properties. The General Partner operates out of facilities provided by its affiliate, SB. Item 3. Legal Proceedings. There are no pending legal proceedings to which the Partnership is a party or to which any of its assets is subject. No material legal proceedings affecting the Partnership were terminated during the fiscal year. 6 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 1,450. (c) Distribution. The Partnership did not declare a distribution in 1997 or 1996. 7 Item 6. Select Financial Data. The Partnership commenced trading operations on November 17, 1995. Realized and unrealized trading gains (losses), realized and unrealized gains (losses) on Zero Coupons, interest income, net income and increase in net asset value per Unit for the years ended December 31, 1997, 1996 and for the period from November 17, 1995 (commencement of trading operations) to December 31, 1995 and total assets at December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995 ------------ ------------ ---------- Realized and unrealized trading gains net of brokerage commissions and clearing fees of $1,462,372, $1,459,014 and $167,420, respectively $ 2,025,344 $ 2,053,372 $ 1,908,271 Realized and unrealized gains (losses) on Zero Coupons 631,119 (1,226,193) 531,953 Interest income 1,916,217 1,935,048 250,172 ------------ ------------ ------------ $ 4,572,680 $ 2,762,227 $ 2,690,396 ============ ============ ============ Net Income $ 3,546,888 $ 2,043,139 $ 2,227,441 ============ ============ ============ Increase in net asset value per unit $ 115.33 $ 58.96 $ 59.38 ============ ============ ============ Total assets $ 36,883,726 $ 40,218,283 $ 40,226,379 ============ ============ ============
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, Zero Coupons, net unrealized 8 appreciation (depreciation) on open futures contracts and interest receivable. Because of the low margin deposits normally required in commodity futures trading, relatively small price movements may result in substantial losses to the Partnership. Such substantial losses could lead to a material decrease in liquidity. To minimize this risk, the Partnership follows certain policies including: (1) Partnership funds are invested only in commodity contracts which are traded in sufficient volume to permit, in the opinion of the Advisors, ease of taking and liquidating positions. (2) No Advisor will initiate 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. (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 borrowings except short-term borrowings if the Partnership takes delivery of any cash commodities. (5) The Advisors may, from time to time, employ trading strategies such as spreads or straddles on behalf of the Partnership. The term "spread" or "straddle" describes a commodity futures trading strategy involving the simultaneous buying and selling of contracts on the same commodity but involving different delivery dates or markets and in which the trader expects to earn 9 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. (7) The Partnership may cease trading and liquidate all open positions prior to its dissolution if its Net Assets (excluding assets maintained in Zero Coupons) decrease to 10% of those assets on the day trading commenced (adjusted for redemptions). The Partnership is party to financial instruments with off- balance sheet risk, including derivative financial instruments and derivative commodity instruments, in the normal course of its business. These financial instruments include forwards, futures and options, whose value is based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash flows, or to purchase or sell other financial instruments at specified terms at specified 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.) 10 Other than the risks inherent in commodity futures trading, the Partnership knows of no trends, demands, commitments, events or uncertainties which will result in or which are reasonably likely to result in the Partnership's liquidity increasing or decreasing in any material way. The Limited Partnership Agreement provides that the General Partner may, at its discretion, cause the Partnership to cease trading operations and liquidate all open positions upon the first to occur of the following: (i) December 31, 2015; (ii) at the end of the month in which the Zero Coupons purchased by the Partnership come due (February 15, 2003), unless the General Partner elects otherwise; (iii) the vote to dissolve the Partnership by limited partners owning more than 50% of the Units; (iv) 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 Partnership Act unless the Partnership is continued as described in the Limited Partnership Agreement; (v) the Partnership is required to register under the Investment Company Act of 1940 and the General Partner determines that dissolution is therefore in the Partnership's best interest; or (vi) 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 will consist of the capital contributions of the partners as increased or decreased by gains or losses 11 on commodity futures trading and Zero Coupon appreciation or depreciation, 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's Advisors 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 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. Furthermore, the Partnership will receive no payment on its Zero Coupons until their due date. However, the Partnership will accrue interest on the Zero Coupons and Limited Partners will be required to report as interest income on their U.S. tax returns in each year their pro-rata share of the accrued interest on the Zero Coupons even though no interest will be paid prior to their due date. In addition, the amount of interest income payable by SB is dependent upon interest rates over which the Partnership has no control. No forecast can be made as to the level of redemptions in any given period. Beginning with the first full quarter ending at least six months after trading commences (June 30, 1996), a Limited Partner may cause all of his Units to be redeemed by the Partnership at the Redemption Net Asset Value thereof as of the last day of a quarter on ten days' written notice to the General 12 Partner. Redemption fees equal to 2% of Redemption Net Asset Value per Unit redeemed will be charged to any Limited Partner who redeems his Units on the first, second or third possible redemption dates and 1% on the fourth and fifth possible redemption dates, respectively. Thereafter, no redemption fee will be charged. During 1997 and 1996, SB received a redemption fees of $33,328 and $59,478, respectively. Redemption Net Asset Value differs from Net Asset Value calculated for financial reporting purposes in that the accrued liability for reimbursement of offering and organization expenses will not be included in the calculation of Redemption Net Asset Value. For the year ended December 31, 1997, 5,459 Units were redeemed totaling $6,204,189. For the year ended December 31, 1996, 2,847 Units were redeemed totaling $2,973,876. Offering and organization expenses relating to the issuance and marketing of Units offered were initially paid by SB. Such expenses were initially estimated to be $550,000 and were charged against the initial capital of the Partnership. During 1996, the Partnership's total offering and organization expense were determined to be $612,847. The Partnership has charged the excess of $62,847 to expense. As of December 31, 1997, the Partnership had reimbursed SB for the offering and organization expense plus interest at the prime rate quoted by the Chase Manhattan Bank totaling $34,494 from interest paid to the Partnership. For each Unit redeemed the Partnership liquidates $1,000 (principal amount) of Zero Coupons and will continue to liquidate $1,000 (principal amount) of Zero Coupons per Unit redeemed. These liquidations will be at market value which will be less than the amount payable on their due date. Moreover, it is possible that the market value of the Zero Coupon could be less than its purchase price plus the original issue discount amortized to date. 13 (c) Results of operations. For the year ended December 31, 1997 the net asset value per Unit increased 10.4% from $1,103.68 to $1,219.01. For the year ended December 31, 1996, the net asset value per Unit increased 5.6% from $1,044.72 to $1,103.68. For the period from November 17, 1995 (commencement of trading operations) to December 31, 1995, the net asset value per Unit increased 6.0% from $985.34 to $1,044.72. The net asset value of $985.34 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 $3,487,716 before commissions and expenses for the year ended December 31, 1997. Gains were recognized in the trading of commodity futures in currencies, softs, grains, indices, metals and interest rates and were partially offset by losses recognized in livestock and energy products. The Partnership experienced a realized loss of $93,506 on Zero Coupons liquidated in conjunction with the redemption of Units during 1997 and unrealized appreciation of $724,625 on Zero Coupons during 1997. The Partnership experienced net trading gains of $3,512,386 before commissions and expenses for the year ended December 31, 1996. Gains were recognized in the trading of commodity futures in currencies, energy products, metals and interest rates and were partially offset by losses recognized in indices and agricultural products. The Partnership experienced a realized loss of $75,906 on Zero Coupons liquidated in conjunction with the redemption of Units during 1996 and unrealized depreciation of $1,150,287 on Zero Coupons during 1996. 14 The Partnership experienced net trading gains of $2,075,691 before commissions and expenses for the period ended December 31, 1995. Gains were attributable to the trading of commodity futures in interest rates, stock indices, energy and agricultural products and were partially offset by losses experienced in the trading of metals and foreign currencies. The Partnership experienced unrealized appreciation of $531,953 on Zero Coupons during 1995. 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 Advisors 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 Advisors are able to identify them, the Partnership expects to increase capital through operations. 15 Item 8. Financial Statements and Supplementary Data. SMITH BARNEY PRINCIPAL PLUS 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 and 1996. F-3 Statement of Income and Expenses for the years ended December 31, 1997 and 1996 and for the period from November 17, 1995 (commencement of trading operations) to December 31, 1995. F-4 Statement of Partners' Capital for the years ended December 31, 1997 and 1996 and for the period from April 12, 1995 (date Partnership was capitalized) to December 31, 1995. F-5 Notes to Financial Statements. F-6 - F-11 F-1 Report of Independent Accountants To the Partners of Smith Barney Principal PLUS Futures Fund L.P.: We have audited the accompanying statement of financial condition of SMITH BARNEY PRINCIPAL PLUS FUTURES FUND L.P. (a New York Limited Partnership) as of December 31, 1997 and 1996, and the related statements of income and expenses for the years ended December 31, 1997 and 1996 and for the period from November 17, 1995 (commencement of trading operations) to December 31, 1995, and of partners' capital for the years ended December 31, 1997, 1996 and for the period from April 12, 1995 (date Partnership was capitalized) to December 31, 1995. These financial statements are the responsibility of the management of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management of the General Partner, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Smith Barney Principal PLUS Futures Fund L.P. as of December 31, 1997 and 1996, and the results of its operations for the years ended December 31, 1997 and 1996 and for the period from April 12, 1995 (date Partnership was capitalized) to December 31, 1995, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. New York, New York March 6, 1998 F-2 Smith Barney Principal PLUS Futures Fund L.P. Statement of Financial Condition December 31, 1997 and 1996 Assets: 1997 1996 Equity in commodity futures trading account: Cash and cash equivalents (Note 3c) $13,346,392 $15,167,522 Net unrealized appreciation on open futures contracts 1,079,612 445,494 Zero Coupons, $29,201,000 and $34,660,000 principal amount in 1997 and 1996, respectively, due February 15, 2003 at market value (amortized cost $21,727,880 and $24,344,837 in 1997 and 1996, respectively) (Notes 1 and 2) 21,834,171 23,726,503 Commodity options owned, at market value (cost $3,505 in 1996) -- 1,987 ----------- ----------- 36,260,175 39,341,506 Receivable from SB on sale of Zero Coupons 575,066 813,930 Interest receivable 48,485 -- Other assets -- 62,847 ----------- ----------- $36,883,726 $40,218,283 ----------- ----------- Liabilities and Partners' Capital: Liabilities: Accrued expenses: Management fees $ 50,926 $ 52,377 Commissions 114,693 119,361 Incentive fees 154,823 372,390 Due to SB (Note 6) -- 62,847 Other 27,024 42,412 Commodity options written, at market value (premiums received $2,400 in 1996) -- 2,916 Redemptions payable 939,857 1,312,276 ----------- ----------- 1,287,323 1,964,579 Partners' Capital (Notes 1, 5, and 7): General Partner, 376 Unit equivalents outstanding in 1997 and 1996 458,348 414,984 Limited Partners, 28,825 and 34,284 Units of Limited Partnership Interest outstanding in 1997 and 1996, respectively 35,138,055 37,838,720 ----------- ----------- 35,596,403 38,253,704 ----------- ----------- $36,883,726 $40,218,283 ----------- ----------- See notes to financial statements. F-3 Smith Barney Principal PLUS Futures Fund L.P. Statement of Income and Expenses for the years ended December 31, 1997 and 1996 and for the period from November 17, 1995 (commencement of trading operations) to December 31, 1995 1997 1996 1995 Income: Net gains on trading of commodity interests: Realized gains on closed positions $ 2,851,564 $ 4,345,757 $ 798,860 Change in unrealized gains/ losses on open positions 636,152 (833,371) 1,276,831 ----------- ----------- ----------- 3,487,716 3,512,386 2,075,691 Less, Brokerage commissions and clearing fees ($37,258, $42,740 and $5,889, respectively) (Note 3c) (1,462,372) (1,459,014) (167,420) ----------- ----------- ----------- Net realized and unrealized gains 2,025,344 2,053,372 1,908,271 Loss on sale of Zero Coupons (93,506) (75,906) -- Unrealized appreciation (depreciation) on Zero Coupons 724,625 (1,150,287) 531,953 Interest income (Notes 3c and 6) 1,916,217 1,935,048 250,172 ----------- ----------- ----------- 4,572,680 2,762,227 2,690,396 ----------- ----------- ----------- Expenses: Management fees (Note 3b) 586,615 560,948 65,244 Incentive fees (Note 3b) 319,273 67,801 361,011 Other expenses (Note 6) 119,904 90,339 36,700 ----------- ----------- ----------- 1,025,792 719,088 462,955 ----------- ----------- ----------- Net income $ 3,546,888 $ 2,043,139 $ 2,227,441 ----------- ----------- ----------- Net income per Unit of Limited Partnership Interest and General Partner Unit equivalent (Notes 1 and 7) $ 115.33 $ 58.96 $ 59.38 ----------- ----------- ----------- See notes to financial statements. F-4 Smith Barney Principal PLUS Futures Fund L.P. Statement of Partners' Capital for the years ended December 31, 1997 and 1996 and for the period from April 12, 1995 (date Partnership was capitalized) to December 31, 1995 Limited General Partners Partner Total Initial capital $ 1,000 $ 1,000 $ 2,000 contributions Proceeds from offering of 37,130 Units of Limited Partnership Interest and General Partner's contribution representing 375 Unit equivalents (Note 1) 37,130,000 375,000 37,505,000 Offering and organization costs (Note 6) (544,486) (5,514) (550,000) ------------ ------------ ------------ Opening Partnership capital for operations 36,586,514 370,486 36,957,000 Net income 2,205,112 22,329 2,227,441 ------------ ------------ ------------ Partners' capital at December 31, 1995 38,791,626 392,815 39,184,441 Net income 2,020,970 22,169 2,043,139 Redemption of 2,847 Units of Limited Partnership Interest (2,973,876) -- (2,973,876) ------------ ------------ ------------ Partners' capital at December 31, 1996 37,838,720 414,984 38,253,704 Net income 3,503,524 43,364 3,546,888 Redemption of 5,459 Units of Limited Partnership Interest (6,204,189) -- (6,204,189) ------------ ------------ ------------ Partners' capital at December 31, 1997 $ 35,138,055 $ 458,348 $ 35,596,403 ------------ ------------ ------------ See notes to financial statements. F-5 Smith Barney Principal PLUS Futures Fund L.P. Notes to Financial Statements 1. Partnership Organization: Smith Barney Principal PLUS Futures Fund L.P. (the "Partnership") is a limited partnership which was initially organized on January 25, 1993 under the partnership laws of the State of New York and was capitalized on April 12, 1995. No activity occurred between January 25, 1993 and April 12, 1995. The Partnership engages 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 will maintain a portion of its assets in interest payments stripped from U.S. Treasury Bonds under the Treasury's STRIPS program which payments are due approximately seven years from the date trading commenced ("Zero Coupons"). Between July 12, 1995 and November 16, 1995, 37,130 Units of Limited Partnership Interest ("Units") were sold at $1,000 per Unit. The proceeds of the offering were held in an escrow account until November 17, 1995, at which time they were turned over to the Partnership for trading. The Partnership was authorized to sell 100,000 Units during the 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, 2015; at the end of the month in which the Zero Coupons purchased come due (February, 2003) ("First Payment Date"), unless the General Partner elects otherwise, or under certain other circumstances as defined in the Limited Partnership Agreement. The General Partner, in its sole discretion, may elect not to terminate the Partnership as of the First Payment Date. In the event that the General Partner elects to continue the Partnership, each limited partner shall have the opportunity to redeem all or some of his Units. 2. Accounting Policies: a. All commodity interests (including derivative financial instruments and derivative commodity instruments) are used for trading purposes. The commodity interests are recorded on trade date and open contracts are recorded in the statement of financial condition at market value for those commodity interests for which market quotations are readily available or at fair value on the last business day of the year. Investments in commodity interests denominated in foreign currency are translated into U.S. dollars at the exchange rates prevailing on the last business day of the year. Realized gain (loss) and changes in unrealized values on commodity interests are recognized in the period in which the contract is closed or the changes occur and are included in net gains (losses) on trading of commodity interests. F-6 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 original issue discount on the Zero Coupons is being amortized over their life using the interest method and is included in interest income. d. Zero Coupons are recorded in the statement of financial condition at market value. Realized gain (loss) on the sale of Zero Coupons is determined on the amortized cost basis of the Zero Coupons at the time of sale. e. 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 Agreements: The General Partner, on behalf of the Partnership, has entered into Management Agreements with John W. Henry & Company, Inc., Abraham Trading Co. and Rabar Market Research Inc. (collectively, the "Advisors"), which provide that the Advisors have sole discretion in determining the investment of the assets of the Partnership allocated to each Advisor by the General Partner. As compensation for services, the Partnership is obligated to pay a monthly management fee of 1/6 of 1% (2% per year) to Abraham Trading Co. and Rabar Market Research Inc., and 1/3 of 1 % (4% per year) to John W. Henry & Company, Inc., of month-end Net Assets allocated to each advisor. The Partnership will also pay Abraham Trading Co. an incentive fee payable quarterly equal to 20% of New Trading Profits earned by it for the Partnership; John W. Henry & Company, Inc. will receive a quarterly incentive fee of 15% of New Trading Profits; and Rabar Market Research Inc. will receive an annual incentive fee of 22.5% of New Trading Profits of the Partnership. F-7 c. Customer Agreement: The Partnership has entered into a Customer Agreeent with SB whereby SB provides services which include, among other things, the execution of transctions for the Partnership's account in accordance with orders placed by the Advisors. The Partnership is obligated to pay a monthly brokerage fee to SB equal to 7/12 of 1 % of month-end Net Assets (7% per year) in lieu of brokerage commissions on a per trade basis. A portion of this fee is paid to employees of SB who have sold Units of the Partnership. This fee does not include exchange, clearing, user, give-up, floor brokerage and NFA fees which will be borne by the Partnership. All of the Partnership's assets are deposited in the Partnership's account at SB. The Partnership maintains a portion of these assets in Zero Coupons and a portion in cash. The Partnership's cash is deposited by SB in segregated bank accounts, as required by Commodity Futures Trading Commission regulations. At December 31, 1997 and 1996, the amount of cash held for margin requirements was $2,930,178 and $2,155,439, respectively. SB will 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 by either party. 4. Trading Activities: The Partnership was formed for the purpose of trading contracts in a variety of commodity interests, including derivative financial instruments and derivative commodity instruments. The results of the Partnership's trading activity are shown in the statement of income and expenses. All of the commodity interests owned by the Partnership are held for trading purposes. The fair value of these commodity interests, including options thereon, at December 31,1997 and 1996 was $1,079,612 and $444,565, respectively and the average fair value during the years then ended, based on monthly calculation, was $1,182,103 and $1,593,103, respectively. 5. Distributions and Redemptions: Distributions of profits, if any, will be made at the sole discretion of the General Partner. On 10 days' notice to the General Partner, a limited partner may require the Partnership to redeem his Units at their Redemption Net Asset Value as of the last day of a quarter. Redemption fees equal to 2% of Redemption Net Asset Value per Unit redeemed will be charged to any limited partner who redeems his Units on the first, second or third possible redemption date, and 1 % on the fourth and fifth possible redemption dates. Thereafter, no redemption fee will be charged. During 1997 and 1996, SB received redemption fees of $33,328 and $59,478, respectively. Redemption Net Asset Value differs from Net Asset Value calculated for financial reporting purposes in that any accrued liability for reimbursement of offering and organization expenses will not be included in the calculation of Redemption Net Asset Value. F-8 6. Offering and Organization Costs: Offering and organization expenses relating to the issuance and marketing of Units during the offering period were initially paid by SB. Such expenses were initially estimated to be $550,000 and were charged against the initial capital of the Partnership. During 1996, the Partnership's total offering and organization expenses were determined to be $612,847. The Partnership has charged the excess of $62,847 to expense. As of December 31, 1997 the Partnership had reimbursed SB for the offering and organization expense plus interest at the prime rate quoted by the Chase Manhattan Bank totaling $34,494 from interest paid to the Partnership. 7. Net Asset Value Per Unit: Changes in the net asset value per Unit for the years ended December 31, 1997 and 1996 and for the period from November 17, 1995 (commencement of trading operations) to December 31, 1995 were as follows: 1997 1996 1995 Net realized and unrealized gains $ 66.66 $ 58.66 $50.88 Interest income 58.85 52.41 6.67 Realized and unrealized gains (losses) on Zero Coupons 21.33 (32.04) 14.18 Expenses (31.51) (20.07) (12.35) --------- --------- --------- Increase for period 115.33 58.96 59.38 Net asset value per Unit, beginning of period 1,103.68 1,044.72 985.34 --------- --------- --------- Net asset value per Unit, end of period $1,219.01 $1,103.68 $1,044.72 -------- --------- --------- Redemption net asset value per Unit, end of period* $1,219.01 $1,103.68 $1,057.53 -------- --------- --------- *For the purpose of a redemption, any accrued liability for reimbursement of offering and organization expenses will not reduce redemption net asset value per Unit. 8. Guarantee: In the unlikely event that the Partnership is required to meet a margin call in excess of the cash balance in its trading accounts, SSBH will contribute up to an amount equal to the maturity value of the Zero Coupons held by the Partnership at the time of such call to the capital of the Partnership to permit it to meet its margin obligations in excess of its cash balance. The guarantee can only be invoked once. After the guarantee is invoked, trading will cease and the General Partner will either wait until the First Payment Date or will distribute cash and Zero Coupons to the limited partners. F-9 9. Financial Instrument Risk: The Partnership is party to financial instruments with off-balance sheet risk, including derivative financial instruments and derivative commodity instruments, in the normal course of its business. These financial instruments include forwards, futures and options, whose value is based upon an underlying asset, index, or reference rate, and generally represent future commitments to exchange currencies or cash flows, to purchase or sell other financial instruments at specific terms at specified future dates, or, in the case of derivative commodity instruments, to have a reasonable possibility to be settled in cash or with another financial instrument. These instruments may be traded on an exchange or over-the-counter ("OTC"). Exchange traded instruments are standardized and include futures and certain option contracts. OTC contracts are negotiated between contracting parties and include forwards and certain options. Each of these instruments is subject to various risks similar to those related to the underlying financial instruments including market and credit risk. In general, the risks associated with OTC contracts are greater than those associated with exchange traded instruments because of the greater risk of default by the counterparty to an OTC contract. Market risk is the potential for changes in the value of the financial instruments traded by the Partnership due to market changes, including interest and foreign exchange rate movements and fluctuations in commodity or security prices. Market risk is directly impacted by the volatility and liquidity in the markets in which the related underlying assets are traded. 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 F-10 transactions and collateral positions. The notional or contractual amounts of these instruments, while not recorded in the financial statements, reflect the extent of the Partnership's involvement in these instruments. At December 31, 1997, the Partnership's commitment to purchase and sell these instruments was $103,740,103 and $104,099,896, respectively. 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 $1,079,612, as detailed below. December 31, 1997 --------------------------------------- Notional or Contractual Amount of Commitments To Purchase To Sell Fair Value Currencies -Exchange Traded Contracts $ 1,852,635 $ 13,543,743 $ 130,111 -OTC Contracts 11,577,189 22,737,095 (43,636) Energy -- 2,330,053 81,274 Grains -- 3,197,466 76,852 Interest Rate Non-U.S 68,669,047 47,748,762 101,593 Interest Rate U.S 16,567,737 -- 99,253 Livestock -- 1,949,300 55,800 Metals 3,314,600 9,844,978 485,359 Softs 1,709,720 1,695,191 11,764 Indices 49,175 1,053,308 81,242 ------------ ------------ ------------ Total $103,740,103 $104,099,896 $ 1,079,612 ------------ ------------ ------------ At December 31, 1996, the notional or contractual amounts of the Partnership's commitment to purchase and sell these instruments was $104,830,699 and $62,734,677, respectively, and the fair value of the Partnership's derivatives, including options thereon, was $444,565 as detailed below. December 31, 1996 --------------------------------------- Notional or Contractual Amount of Commitments To Purchase To Sell Fair Value Currencies -Exchange Traded $ 4,542,090 $ 15,846,787 $ 178,873 Contracts -OTC Contracts 15,639,841 11,662,894 71,193 Energy 1,293,602 0 (40,305) Interest Rate U.S 6,407,319 943,663 (34,538) Interest Rate Non-U.S 70,157,951 16,870,650 (15,784) Grains 951,750 1,816,095 11,554 Metals 3,472,150 13,216,218 200,474 Indices 449,424 1,399,633 66,931 Softs 417,677 976,337 (3,005) Livestock 1,498,895 2,400 9,172 ------------ ------------ ------------ Total $104,830,699 $ 62,734,677 $ 444,565 ------------ ------------ ------------ F-11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. During the last two fiscal years and any subsequent interim period, no independent accountant who was engaged as the principal accountant to audit the Partnership's financial statements has resigned or was dismissed. PART III Item 10. Directors and Executive Officers of the Registrant. The Partnership has no officers or directors and its affairs are managed by its General Partner, Smith Barney Futures Management Inc. Investment decisions are made by the Advisors. 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 $1,462,372 were paid for the year ended December 31, 1997. Management fees and incentive fees of $586,615 and $319,273, respectively, were paid to the Advisors for the year ended December 31, 1997. 16 Item 12. Security Ownership of Certain Beneficial Owners and Management. (a). Security ownership of certain beneficial owners. As of March 1, 1998, two beneficial owners who are neither a director nor executive officer own more than five percent (5%) of the outstanding Units issued by the Registrant as follows: Title Name and Address of Amount and Nature of Percent of of Class Beneficial Owner Beneficial Ownership Class Units of CITIC Industrial Bank 5,000 Units 17.1% Limited No. 6 Xinyuan Nan Lu Partnership Chaoyang District Beijing Interest Units of Naomi R. Wilden 1,500 Units 5.1% Limited 11727 Pendelton Partnership Ycaipa, CA 92399 Interest (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 partnership interest equivalent to 376 (1.3%) Units of Limited Partnership Interest. (c). Changes in control. None. Item 13. Certain Relationships and Related Transactions. Smith Barney Inc. and Smith Barney Futures Management Inc. would be considered promoters for purposes of Item 404(d) of Regulation S-K. The nature and the amounts of compensation each promoter will receive from the Partnership are set forth under "Item 1. Business." and "Item 11. Executive Compensation." 17 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 and 1996. Statement of Income and Expenses for the years ended December 31, 1997 and 1996 and for period from November 17, 1995 (commencement of trading operations) to December 31, 1995. Statement of Partners' Capital for the years ended December 31, 1997 and 1996 and for the period from April 12, 1995 (date Partnership was capitalized) to December 31, 1995. (2) Financial Statement Schedules:Financial data schedule for the year ended December 31, 1997. (3) Exhibits: 3.1 - Limited Partnership Agreement (dated April 3, 1995 and amended as of June 22, 1995), (filed as Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 33-01742) 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 New York (filed as Exhibit 3.2 to the Registration Statement on Form S-1(File No. 33-91742) and incorporated herein by reference). 18 10.1 - Customer Agreement between the Partnership and Smith Barney Shearson Inc. (filed as Exhibit 10.1 to the Registration Statement on Form S-1 (File No. 33-91742) 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. 33- 91742) and incorporated herein by reference). 10.5 - Management Agreement among the Partnership, the General Partner and John W. Henry & Company, Inc. (JWH) (filed as Exhibit 10.5 to the Registration Statement on Form S-1 (File No. 33-91742) and incorporated herein by reference). 10.6 - Management Agreement among the Partnership, the General Partner and Rabar Market Research, Inc. (filed as Exhibit 10.6 to the Registration Statement on Form S-1 (File No. 33-91742) and incorporated herein by reference). 10.7 - Management Agreement among the Partnership, the General Partner and Abraham Trading Co. (filed as Exhibit 10.7 to the Registration Statement on Form S-1 (File No. 33-91742) and incorporated herein by reference). 10.8 - Letters extending Management Agreements with Rabar Market Researsh, Inc., Abraham Trading Co. and John W. Henry & Company Inc. (filed herein). (b) Reports on 8-K: None Filed. 19 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 20 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 PRINCIPAL PLUS 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 21 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000944697 SB PRINCIPAL PLUS FUTURES FUND L.P. 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 13,346,392 22,913,783 623,551 0 0 36,883,726 0 0 36,883,726 1,287,323 0 0 0 0 35,596,403 36,883,726 0 4,572,680 0 0 1,025,792 0 0 3,546,888 0 0 0 0 0 3,546,888 115.33 0
EX-99 3 LETTERS EXTENDING MANAGEMENT AGREEMENTS May 31, 1996 Abraham Trading & Co. "ATC" Moody Building 2nd & Main Canadain, Texas 790144 Attention: Mr. Craig L. Caudle Re: Management Agreement Renewal Smith Barney Principal Plus Futures Fund L.P. Dear Mr. Caudle: We are writing with respect to your management agreement concerning the commodity pool to which reference is made above (the "Management Agreement"). We would like to extend the term of the Management Agreement through June 30, 1997. All other provisions of the Management Agreement will remain unchanged. Please indicate your agreement to and acceptance of this modification by signing one copy of this letter and returning it to the attention of Mr. Daniel Dantuono at the address above. Very truly yours, SMITH BARNEY FUTURES MANAGEMENT INC. By: Chief Financial Officer, Director & Treasurer AGREED AND ACCEPTED ABRAHAM TRADING & CO. "ATC" By: Print Name: DAD/sr May 31, 1996 John W. Henry & Company One Glendinning Place Westport, Ct. 06880 Attn: Ms. Beth Kenton Re: Management Agreement Renewal SB Principal Plus Futures Fund L.P. Dear Ms. Kenton: We are writing with respect to your management agreement concerning the commodity pool to which reference is made above (the "Management Agreement"). We would like to extend the term of the Management Agreement through June 30, 1997. All other provisions of the Management Agreement will remain unchanged. Please indicate your agreement to and acceptance of this modification by signing one copy of this letter and returning it to the attention of Mr. Daniel Dantuono at the address above. Very truly yours, SMITH BARNEY FUTURES MANAGEMENT INC. By: Chief Financial Officer, Director & Treasurer AGREED AND ACCEPTED JOHN W. HENRY & COMPANY By: Print Name: DAD/sr May 31, 1996 Rabar Market Research 10 Bank St. - Suite 830 White Plain, N.Y. 10606 Attention: Mr. John Dreyer & Mr. Paul Rabar Re: Management Agreement Renewal Smith Barney Principal Plus Futures Fund L.P. Dear Mr. Dreyer & Mr. Rabar: We are writing with respect to your management agreement concerning the commodity pool to which reference is made above (the "Management Agreement"). We would like to extend the term of the Management Agreement through June 30, 1997. The incentive fee will now be paid annually instead of quarterly. All other provisions of the Management Agreement will remain unchanged. Please indicate your agreement to and acceptance of this modification by signing one copy of this letter and returning it to the attention of Mr. Daniel Dantuono at the address above. Very truly yours, SMITH BARNEY FUTURES MANAGEMENT INC. By: Chief Financial Officer, Director & Treasurer AGREED AND ACCEPTED RABAR MARKET RESEARCH June 24, 1997 Abraham Trading & Co. "ATC" Moody Building 2nd & Main Canadain, Texas 790144 Attention: Mr. Craig L. Caudle Re: Management Agreement Renewal Smith Barney Principal Plus Futures Fund L.P. Dear Mr. Caudle: We are writing with respect to your management agreement concerning the commodity pool to which reference is made above (the "Management Agreement"). We would like to extend the term of the Management Agreement through June 30, 1998. All other provisions of the Management Agreement will remain unchanged. Please indicate your agreement to and acceptance of this modification by signing one copy of this letter and returning it to the attention of Mr. Daniel Dantuono at the address above. Very truly yours, SMITH BARNEY FUTURES MANAGEMENT INC. By: Chief Financial Officer, Director & Treasurer AGREED AND ACCEPTED ABRAHAM TRADING & CO. "ATC" By: Print Name: DAD/sr rw/1 June 19, 1997 John W. Henry & Company One Glendinning Place Westport, Ct. 06880 Attn: Ms. Beth Kenton Re: Management Agreement Renewal SB Principal Plus Futures Fund L.P. Dear Ms. Kenton: We are writing with respect to your management agreement concerning the commodity pool to which reference is made above (the "Management Agreement"). We would like to extend the term of the Management Agreement through June 30, 1998. All other provisions of the Management Agreement will remain unchanged. Please indicate your agreement to and acceptance of this modification by signing one copy of this letter and returning it to the attention of Mr. Daniel Dantuono at the address above. Very truly yours, SMITH BARNEY FUTURES MANAGEMENT INC. By: Chief Financial Officer, Director & Treasurer AGREED AND ACCEPTED JOHN W. HENRY & COMPANY By: Print Name: DAD/sr June 24, 1997 Rabar Market Research 10 Bank St. - Suite 830 White Plain, N.Y. 10606 Attention: Mr. John Dreyer & Mr. Paul Rabar Re: Management Agreement Renewal Smith Barney Principal Plus Futures Fund L.P. Dear Mr. Dreyer & Mr. Rabar: We are writing with respect to your management agreement concerning the commodity pool to which reference is made above (the "Management Agreement"). We would like to extend the term of the Management Agreement through June 30, 1998. The incentive fee will now be paid annually instead of quarterly. All other provisions of the Management Agreement will remain unchanged. Please indicate your agreement to and acceptance of this modification by signing one copy of this letter and returning it to the attention of Mr. Daniel Dantuono at the address above. Very truly yours, SMITH BARNEY FUTURES MANAGEMENT INC. By: Chief Financial Officer, Director & Treasurer AGREED AND ACCEPTED RABAR MARKET RESEARCH By: Print Name: DAD/sr rw/1 -----END PRIVACY-ENHANCED MESSAGE-----