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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission File Number 0-16627
SHEARSON SELECT ADVISORS FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3405705
State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
c/o Smith Barney Futures Management LLC
390 Greenwich St. - 1st Fl.
New York, New York 10013
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(Address and Zip Code of principal executive offices)
(212) 723-5424
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(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: 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 toItem 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 [X]
As of February 29, 2000 Limited Partnership Units with an aggregate value
of $3,465,678 were outstanding and held by non-affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
PART 1
Item 1. Business.
(a) General development of business. Shearson Select Advisors Futures
Fund L.P. (the "Partnership") is a limited partnership organized on February 10,
1987 under the Partnership Laws of the State of Delaware. 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 and foreign currencies. The commodity interests that
are traded by the Partnership are volatile and involve a high degree of market
risk. The Partnership commenced trading on July 1, 1987. Redemptions for the
years ended December 31, 1999, 1998 and 1997, are reported in the Statement of
Partners' Capital on page F-6 under "Item 8. Financial Statements and
Supplementary Data."
Smith Barney Futures Management LLC acts as the general partner (the
"General Partner") of the Partnership. The General Partner changed its form of
organization from a corporation to a limited liability company on October 1,
1999. The Partnership's commodity broker is Salomon Smith Barney Inc. ("SSB").
SSB is an affiliate of the General Partner. The General Partner is wholly owned
by Salomon Smith Barney Holdings Inc. ("SSBHI"), which is the sole owner of SSB.
SSBHI is a wholly owned subsidiary of Citigroup Inc.
The Partnership's trading of futures contracts on commodities is done
primarily on United States commodities exchanges and may, to a lesser extent, be
2
done on some foreign commodity exchanges. It engages in such trading through a
commodity brokerage account maintained with SSB.
Under the Limited Partnership Agreement of the Partnership (the
"Limited Partnership Agreement"), the General Partner has sole responsibility
for the administration of the business and affairs of the Partnership, but may
delegate trading discretion to one or more trading advisors.
The Partnership is obligated to pay the General Partner a monthly
management fee of 1/3 of 1% (4% per year) of the month end Net Assets of the
Partnership, as defined, managed by each advisor and an incentive fee payable
quarterly equal to 15% of New Trading Profits of the Partnership.
The General Partner has entered into a management agreement (the
"Management Agreement") with John W. Henry & Company, Inc. ("the Advisor"). The
Advisor is not affiliated with the General Partner or SSB. Reference should be
made to "Item 8. Financial Statements and Supplementary Data." for further
information regarding the Advisor included in the notes to the financial
statements.
3
The Management Agreement requires the General Partner to pay the
Advisor a monthly management fee of 1/3 of 1% of the Net Assets of the
Partnership (of 4% per year) managed by the Advisor and an incentive fee equal
to 10% of the New Trading Profits (as defined in the Management Agreement)
earned on the Net Assets managed by the Advisor during each quarter. The
incentive fee paid to the Advisor will be paid out of the General Partner's own
funds to the extent that the incentive fee owed to the Advisor exceeds the
incentive fee paid by the Partnership to the General Partner. Thus, the
Partnership will pay an incentive fee based on aggregate profits earned by the
Advisor.
Pursuant to the terms of the customer agreement entered into with SSB
(the "Customer Agreement"), the Partnership is obligated to pay a monthly
commodity brokerage fee. Effective January 1, 1997, the Partnership pays SSB a
monthly brokerage fee equal to .5% of month end net assets (6% per year) in lieu
of brokerage commissions on a per trade basis. From July 1, 1995 through January
1, 1997, the Partnership paid Smith Barney a monthly brokerage fee equal to
.667% of month end net assets (8% per year). The Partnership previously paid SSB
a monthly brokerage fee equal to .833% of month end net assets (10% per year)
prior to July 1, 1995. The Partnership will pay for clearing fees, but not for
floor brokerage which will be borne by SSB. The Customer Agreement between the
Partnership and SSB gives the Partnership the legal right to net unrealized
gains and losses. Reference should be made to "Item 8. Financial Statements and
4
Supplementary Data." for further information regarding the brokerage commissions
included in the notes to the financial statements.
In addition, SSB will pay the Partnership interest on 70% of the
average daily equity maintained in cash in its accounts during each month at the
rate of the average non-competitive yield of the 13-week U.S. Treasury Bills as
determined at the weekly auctions thereof during the month. The Customer
Agreement may be terminated upon notice by either party.
(b) Financial information about industry segments. The Partnership's
business consists of only one segment, speculative trading of commodity
interests, including forward contracts on foreign currencies, commodity options
and commodity futures contracts (including futures contracts on U.S. Treasuries
and other financial instruments, foreign currencies and stock indices). The
Partnership does not engage in sales of goods or services. The Partnership's net
income (loss) from operations for the years ended December 31, 1999, 1998, 1997,
1996, and 1995 are set forth under "Item 6. Selected Financial Data."
Partnership capital as of December 31, 1999 was $3,856,395.
(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 Geographic Areas. The Partnership does
not engage in sales of goods or services or own any long lived assets,
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, SSB.
Item 3. Legal Proceedings.
There have been no material administrative, civil or criminal
actions within the past five years against SSB or any of its individual
principals and no such actions are currently pending, except as follows.
In September 1992, Harris Trust and Savings Bank (as trustee for
Ameritech Pension Trust), Ameritech Corporation, and an officer of Ameritech
sued Salomon Brothers Inc ("SBI") and Salomon Brothers Realty Corporation
("SBRC") in the U.S. District Court for the Northern District of Illinois
(Harris Trust Savings Bank, not individually but solely as trustee for the
Ameritech Pension Trust, Ameritech Corporation and John A. Edwardson v. Salomon
Brothers Inc and Salomon Brothers Realty Corp.). The complaint alleged that
purchases by Ameritech Pension Trust from the Salomon entities of approximately
$20.9 million in participations in a portfolio of motels owned by Motels of
America, Inc. and Best Inns, Inc. violated the Employee Retirement Income
Security Act ("ERISA"), the Racketeer Influenced and Corrupt Organization Act
("RICO") and state law. SBI had acquired the participations issued by Motels of
America and Best Inns to finance purchases of motel portfolios and sold 95% of
three such issues and 100% of one such issue to Ameritech Pension Trust.
6
Ameritech Pension Trust's complaint sought (1) approximately $20.9 million on
the ERISA claim, and (2) in excess of $70 million on the RICO and state law
claims as well as other relief. In various decisions between August 1993 and
July 1999, the courts hearing the case have dismissed all of the allegations in
the complaint against the Salomon entities. In October 1999, Ameritech appealed
to the U.S. Supreme Court and in January 2000, the Supreme Court agreed to hear
the case and oral argument will be heard on April 17, 2000. The appeal seeks
review of the decision of the U.S. Court of Appeals for the Seventh Circuit that
dismissed the sole remaining ERISA claim against the Salomon entities.
Both the Department of Labor and the Internal Revenue Service ("IRS")
have advised SBI that they were or are reviewing the transactions in which
Ameritech Pension Trust acquired such participations. With respect to the IRS
review, SSBHI, SBI and SBRC have consented to extensions of time for the
assessment of excise taxes that may be claimed to be due with respect to the
transactions for the years 1987, 1988 and 1989. As of the date of this report,
the IRS has not issued such 30-day letters to SSBHI, SBI or SBRC.
In December 1996, a complaint seeking unspecified monetary damages was
filed by Orange County, California against numerous brokerage firms, including
SSB, in the U.S. Bankruptcy Court for the Central District of California.
(County of Orange et al. v. Bear Stearns & Co.Inc.et al.) The complaint alleged,
among other things, that the brokerage firms recommended and sold unsuitable
securities to Orange County. SSB and the remaining brokerage firms settled with
Orange County in mid 1999.
7
In June 1998, complaints were filed in the U.S. District Court
for the Eastern District of Louisiana in two actions (Board of Liquidations,City
Debt of the City of New Orleans v. Smith Barney Inc. et ano. and The City
of New Orleans v. Smith Barney Inc. et ano.), in which the City of New
Orleans seeks a determination that Smith Barney Inc. and another
underwriter will be responsible for any damages that the City may incur in
the event the IRS denies tax exempt status to the City's General Obligation
Refunding Bonds Series 1991. The complaint were subsequently amended. SSB
has asked the court to dismiss the amended complaints. In May 1999, the
Court denied SSB's motion to dismiss, but stayed the litigation because the
matter was not ripe. In March 2000, the city filed a notice of discontinuance
dismissing the complaint.
In November 1998, a class action complaint was filed in the United
States District Court for the Middle District of Florida (Dwight Brock as Clerk
for Collier County v. Merrill Lynch, et al.). The complaint alleged that,
pursuant to a nationwide conspiracy, 17 broker-dealer defendants, including SSB,
charged excessive mark-ups in connection with advanced refunding transactions.
Among other relief, plaintiffs sought compensatory and punitive damages,
restitution and/or rescission of the transactions and disgorgement of alleged
excessive profits. In October 1999, the plaintiff filed a second amended
complaint. SSB has asked the court to dismiss the amended complaint.
In connection with the Louisiana and Florida matters, the IRS and SEC
have been conducting an industry-wide investigation into the pricing of Treasury
securities in advanced refunding transactions.
8
In December 1998, SSB was one of twenty-eight market making firms that
reached a settlement with the SEC in the matter titled In the Matter of Certain
Market Making Activities on NASDAQ. As part of the settlement of that matter,
SSB, without admitting or denying the factual allegations, agreed to an order
that required that it: (i) cease and desist from committing or causing any
violations of Sections 15(c)(1) and (2) of the Securities Exchange Act of 1934
and Rules 15c1-2, 15c2-7 and 17a-3 thereunder, (ii) pay penalties totaling
approximately $760,000, and (iii) submit certain policies and procedures to an
independent consultant for review.
In March 1999, a complaint seeking in excess of $250 million was filed
by a hedge fund and its investment advisor against SSB in the Supreme Court of
the State of New York, County of New York (MKP Master Fund, LDC et al. v.
Salomon Smith Barney Inc.). The complaint included allegations that, while
acting as prime broker for the hedge fund, SSB breached its contracts with
plaintiffs, misused their monies, and engaged in tortious (wrongful) conduct,
including breaching its fiduciary duties. SSB asked the court to dismiss the
complaint in full. In October 1999, the court dismissed the tort claims,
including the breach of fiduciary duty claims. The court allowed the breach of
contract and misuse of money claims to stand. In December 1999, SSB filed an
answer and asserted counterclaims against the investment advisor. In response to
plaintiff's motion to strike the counterclaims, in January 2000, SSB amended its
counterclaims against the investment advisor to seek indemnification and
contribution. Plaintiffs moved to strike SSB's amended counterclaims in February
2000. SSB will continue to contest this lawsuit vigorously.
9
In the course of its business, SSB, as a major futures commission
merchant and broker-dealer is a party to various claims and routine regulatory
investigations and proceedings that the general partner believes do not have a
material effect on the business of SSB. 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
established public trading market for the Units of Limited Partnership
Interest.
(b) Holders. The number of holders of Units of Partnership Interest as
of December 31, 1999 was 454.
(c) Distribution. The Partnership did not declare a distribution in 1999
or 1998.
(d) Use of Proceeds. There were no additional sales in the years ended
December 31, 1999, 1998 and 1997.
10
Item 6. Selected Financial Data.
Net realized and unrealized trading gains (losses), interest income, net income
(loss) and increase (decrease) in net asset value per Unit for the years ended
December 31, 1999, 1998, 1997, 1996, and 1995 and total assets at December 31,
1999, 1998, 1997, 1996, and 1995 were as follows:
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
Net realized and unrealized
trading gains (losses) net
of brokerage commissions
and clearing fees of $300,092,
$331,645, $373,144, $493,435
and $618,168, respectively $ (991,124) $ 300,001 $ 895,110 $ 1,411,077 $ 1,706,320
Interest income 157,603 180,533 213,272 202,098 256,528
----------- ----------- ----------- ----------- -----------
$ (833,521) $ 480,534 $ 1,108,382 $ 1,613,175 $ 1,962,848
=========== =========== =========== =========== ===========
Net income (loss) $(1,076,852) $ 158,830 $ 723,608 $ 1,141,619 $ 1,610,495
=========== =========== =========== =========== ===========
Increase (decrease) in net
asset value per unit $ (590.19) $ 110.78 $ 311.28 $ 423.08 $ 416.20
=========== =========== =========== =========== ===========
Total assets $ 4,020,521 $ 5,755,721 $ 6,503,549 $ 6,709,794 $ 6,537,230
=========== =========== =========== =========== ===========
11
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, net unrealized 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 initiates additional positions in any commodity for
the Partnership if such additional positions would result in aggregate positions
for all commodities requiring a margin of more than 66-2/3% of net assets of the
Partnership managed by the Advisor.
(3) The Partnership may occasionally accept delivery of a
commodity. Unless such delivery is disposed of promptly by retendering the
warehouse receipt representing the delivery to the appropriate clearing house,
the physical commodity position is fully hedged.
12
(4) The Partnership does 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.
(5) The Partnership does not utilize borrowings except short-term
borrowings if the Partnership takes delivery of any cash commodities.
(6) The Advisor 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 futures contracts on the same commodity but
involving different delivery dates or markets and in which the trader expects to
earn a profit from a widening or narrowing of the difference between the prices
of the contracts.
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
may 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
13
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 in any material way. The
Limited Partnership Agreement provides that the Partnership will cease trading
operations and liquidate all open positions under certain circumstances
including a decrease in net asset value per Unit to less than $350 as of the
close of business on any business day or a decline in net assets to less than
$1,000,000.
(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 futures 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's Advisors may or may
14
not be able to identify. Partnership expenses consist of, among other things,
commissions, management fees and incentive fees. The level of these expenses is
dependent upon the level of trading gains or losses and the ability of the
Advisor to identify and take advantage of price movements in the commodity
markets, in addition to the level of Net Assets maintained. The amount of
interest income payable by SSB 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. In 1999, 236 Units were redeemed for a total of
$612,418. In 1998, 335 units were redeemed for a total of $843,006. In 1997, 264
Units were redeemed for a total of $633,737
(c) Results of operations. For the year ended December 31, 1999, the
net asset value per Unit decreased 21.0%, from $2,806.51 to $2,216.32. For the
year ended December 31, 1998 the net asset value per unit increased 4.1 % from
$2,695.73 to 2,806.51. For the year ended December 31, 1997, the net asset value
per Unit increased 13.1%, from $2,384.45 to $2,695.73
The Partnership experienced a net trading loss before
brokerage commissions and related fees in 1999 of $691,032. Losses were
primarily attributable to the trading of commodity futures in U.S. and non-U.S.
interest rates, metals and indices and were partially offset by gains in
currencies.
The Partnership experienced net trading gains of $631,646
before commissions and expenses in 1998. Gains were primarily attributable to
15
in the trading of U.S. and non-U.S. interest rates and were partially offset by
losses in currencies, metals and indices.
The Partnership experienced net trading gains of $1,268,254
before commissions and expenses in 1997. Gains were primarily attributable to
the trading of currencies, U.S. and non-U.S. interest rates, metals and indices.
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.
(d) Operational Risk
The Partnership is directly exposed to market risk and credit
risk, which arise in the normal course of its business activities. Slightly less
direct, but of critical importance, are risks pertaining to operational and back
office support. This is particularly the case in a rapidly changing and
increasingly global environment with increasing transaction volumes and an
expansion in the number and complexity of products in the marketplace.
Such risks include:
Operational/Settlement Risk - the risk of financial and opportunity loss
and legal liability attributable to operational problems, such as inaccurate
pricing of transactions, untimely trade execution, clearance and/or settlement,
or the inability to process large volumes of transactions. The Partnership is
subject to increased risks with respect to its trading activities in emerging
market securities, where clearance, settlement, and custodial risks are
often greater than in more established markets.
16
Technological Risk - the risk of loss attributable to technological limitations
or hardware failure that constrain the Partnership's ability to gather, process,
and communicate information efficiently and securely, without interruption, to
customers, among units within the Partnership, and in the markets where the
Partnership participates.
Legal/Documentation Risk - the risk of loss attributable to deficiencies
in the documentation of transactions (such as trade confirmations) and customer
relationships (such as master netting agreements) or errors that result in
noncompliance with applicable legal and regulatory requirements.
Financial Control Risk - the risk of loss attributable to limitations
in financial systems and controls. Strong financial systems and controls
ensure that assets are safeguarded, that transactions are executed in accordance
with management's authorization, and that financial information utilized by
management and communicated to external parties, including the Partnership's
unitholders, creditors, and regulators, is free of material errors.
Risk of Computer System Failure (Year 2000 Issue)
SSBHI's computer systems and business processes successfully
handled the date change from December 31, 1999 to January 1, 2000. SSBHI is not
aware of any significant year 2000 problems encountered internally or with the
third parties with which it interfaces, including customers and counterparties,
the global financial market infrastructure, and the utility infrastructure on
which all corporations rely.
Based on operations since January 1, 2000, SSBHI does not
expect any significant impact to its ongoing business as a result of the year
2000 issue. However, it is possible that the full impact of year 2000 issues has
not been fully recognized and no assurances can be given that year 2000 problems
will not emerge.
The pretax costs associated with required system modifications
and conversions totaled approximately $130 million. These costs were funded
through operating cash flow and expensed in the period in which they were
incurred.
The expenditures and the General Partner's resources
dedicated to the preparation for Year 2000 did not have a material impact on the
operation or results of the Partnership.
The most likely and most significant risk to the Partnership
associated with the lack of Year 2000 readiness is the failure of outside
organizations, including the commodities exchanges, clearing organizations, or
17
regulators with which the Partnership interacts to resolve their Year 2000
issues in a timely manner. This risk could involve the inability to determine
the value of the Partnership at some point in time and would make effecting
purchases or redemptions of Units in the Partnership infeasible until such
valuation was determinable.
(e) New Accounting Pronouncements
The Partnership adopted Statement on Financial Accounting Standards No. 133
("SFAS 133"), Accounting For Derivative Financial Instruments and Hedging
Activities, on January 1, 1999. SFAS 133 requires that an entity recognize all
derivative instruments in the statement of financial condition and measure those
financial instruments at fair value. SFAS 133 has no impact on Partners' Capital
and operating results as all derivative instruments are recorded at fair value,
with changes therein reported in the statement of income and expenses.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
Introduction
The Partnership is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's main line of business.
Market movements result in frequent changes in the fair market
18
value of the Partnership's open positions and, consequently, in its earnings and
cash flow. The Partnership's market risk is influenced by a wide variety of
factors, including the level and volatility of interest rates, exchange rates,
equity price levels, the market value of financial instruments and contracts,
the diversification results among the Partnership's open positions and the
liquidity of the markets in which it trades.
The Partnership rapidly acquires and liquidates both long and
short positions in a wide range of different markets. Consequently, it is not
possible to predict how a particular future market scenario will affect
performance, and the Partnership's past performance is not necessarily
indicative of its future results.
Value at Risk is a measure of the maximum amount which the
Partnership could reasonably be expected to lose in a given market sector.
However, the inherent uncertainty of the Partnership's speculative trading and
the recurrence in the markets traded by the Partnership of market movements far
exceeding expectations could result in actual trading or non-trading losses far
beyond the indicated Value at Risk or the Partnership's experience to date
(i.e., "risk of ruin"). In light of the foregoing as well as the risks and
uncertainties intrinsic to all future projections, the inclusion of the
quantification included in this section should not be considered to constitute
any assurance or representation that the Partnership's losses in any market
sector will be limited to Value at Risk or by the Partnership's attempts to
19
manage its market risk.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking statements" within
the meaning of the safe harbor from civil liability provided for such statements
by the Private Securities Litigation Reform Act of 1995 (set forth in Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934). All quantitative disclosures in this section are deemed to be
forward-looking statements for purposes of the safe harbor except for statements
of historical fact (such as the terms of particular contracts and the number of
market risk sensitive instruments held during or at the end of the reporting
period).
The Partnership's risk exposure in the various market sectors traded by
the Advisor is quantified below in terms of Value at Risk. Due to the
Partnership's mark-to-market accounting, any loss in the fair value of the
Partnership's open positions is directly reflected in the Partnership's earnings
(realized and unrealized).
Exchange maintenance margin requirements have been used by the
Partnership as the measure of its Value at Risk. Maintenance margin requirements
are set by exchanges to equal or exceed the maximum losses reasonably expected
to be incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current
20
market volatility (including the implied volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic estimate
of the maximum expected near-term one-day price fluctuation. Maintenance margin
has been used rather than the more generally available initial margin, because
initial margin includes a credit risk component which is not relevant to Value
at Risk.
In the case of market sensitive instruments which are not exchange
traded (almost exclusively currencies in the case of the Partnership), the
margin requirements for the equivalent futures positions have been used as Value
at Risk. In those rare cases in which a futures-equivalent margin is not
available, dealers' margins have been used.
In quantifying the Partnership's Value at Risk, 100% positive
correlation in the different positions held in each market risk category has
been assumed. Consequently, the margin requirements applicable to the open
contracts have simply been added to determine each trading category's aggregate
Value at Risk. The diversification effects resulting from the fact that the
Partnership's positions are rarely, if ever, 100% positively correlated have not
been reflected.
21
The Partnership's Trading Value at Risk in Different Market Sectors
The following table indicates the trading Value at Risk associated with
the Partnership's open positions by market category as of December 31, 1999. All
open position trading risk exposures of the Partnership have been included in
calculating the figures set forth below. As of December 31, 1999, the
Partnership's total capitalization was $3,856,395.
December 31, 1999
Year to Date
High Low
Market Sector Value at % of Total Value Value
Risk Capitalization at Risk at Risk
- --------------------------------------------------------------------------------
Currencies
- - OTC Contracts $179,054 4.64% $237,128 $136,764
Interest rates U.S. 60,500 1.57% 100,000 55,928
Interest rates Non-U.S 83,511 2.17% 390,546 124,694
Metals 78,000 2.02% 134,400 68,800
Indices 68,327 1.77% 157,388 157,388
-------- --------
Total $469,392 12.17%
======== ========
22
As of December 31, 1998, the Partnership's total capitalization was
$5,545,665.
December 31, 1998
% of Total
Market Sector Value at Risk Capitalization
Currencies
- - OTC Contracts $ 63,180 1.14%
Interest rates U.S. 82,600 1.49%
Interest rates Non-U.S. 355,460 6.41%
Metals $ 12,800 0.23%
--------- ------
Total $ 514,040 9.27%
========= ======
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership
is typically many times the applicable maintenance margin requirement (margin
requirements generally range between 2% and 15% of contract face value) as well
as, many times, the capitalization of the Partnership. The magnitude of the
Partnership's open positions creates a "risk of ruin" not typically found in
most other investment vehicles. Because of the size of its positions, certain
market conditions -- unusual, but historically recurring from time to time --
could cause the Partnership to incur severe losses over a short period of time.
The foregoing Value at Risk table -- as well as the past performance of the
Partnership -- give no indication of this "risk of ruin."
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. However, these balances (as well as any market
risk they represent) are immaterial.
23
Materiality as used in this section, "Qualitative and Quantitative
Disclosures About Market Risk," is based on an assessment of reasonably possible
market movements and the potential losses caused by such movements, taking into
account the leverage, optionality and multiplier features of the Partnership's
market sensitive instruments. Qualitative Disclosures Regarding Primary Trading
Risk Exposures
The following qualitative disclosures regarding the
Partnership's market risk exposures - except for (i) those disclosures that are
statements of historical fact and (ii) the descriptions of how the Partnership
manages its primary market risk exposures - constitute forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by the General Partner
and the Advisors for managing such exposures are subject to numerous
uncertainties, contingencies and risks, any one of which could cause the actual
results of the Partnership's risk controls to differ materially from the
objectives of such strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant fundamental factors,
political upheavals, changes in historical price relationships, an influx of new
market participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
24
management strategies of the Partnership. There can be no assurance that the
Partnership's current market exposure and/or risk management strategies will not
change materially or that any such strategies will be effective in either the
short- or long- term. Investors must be prepared to lose all or substantially
all of their investment in the Partnership.
The following were the primary trading risk exposures of the Partnership
as of December 31, 1999, by market sector.
Interest Rates. Interest rate movements directly affect the price of the
futures positions held by the Partnership and indirectly the value of its stock
index and currency positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially impact the
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions on the government debt of
smaller nations -- e.g., Australia. The General Partner anticipates that G-7
interest rates will be one of the primary market exposures of the Partnership
for the foreseeable future. The changes in interest rates which have the most
effect on the Partnership are changes in long-term, as opposed to short-term,
rates. Consequently, even a material change in short-term rates would have
little effect on the Partnership were the medium- to long-term rates to remain
steady.
Currencies. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
25
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound positions. The General
Partner does not anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future. The currency trading Value at
Risk figure includes foreign margin amounts converted into U.S. dollars with an
incremental adjustment to reflect the exchange rate risk inherent to the
dollar-based Partnership in expressing Value at Risk in a functional currency
other than dollars.
Stock Indices. The Partnership's primary equity exposure is to equity
price risk in the G-7 countries. The stock index futures traded by the
Partnership are by law limited to futures on broadly based indices. As of
December 31, 1999, the Partnership's primary exposures were in the Financial
Times (England), Nikkei (Japan) and SFE (Australian) stock indices. The General
Partner anticipates little, if any, trading in non-G-7 stock indices. The
Partnership is primarily exposed to the risk of adverse price trends or static
markets in the major U.S., European and Japanese indices. (Static markets would
not cause major market changes but would make it difficult for the Partnership
to avoid being "whipsawed" into numerous small losses.)
Metals. The Partnership's primary metal market exposure is to
fluctuations in the price of gold and silver. Although the Advisor will from
26
time to time trade base metals such as aluminum, copper and tin, the principal
market exposures of the Partnership have consistently been in the precious
metals, gold and silver. The Advisor's gold trading has been increasingly
limited due to the long-lasting and mainly non-volatile decline in the price of
gold over the last 10-15 years. However, silver prices have remained volatile
over this period, and the Advisor has from time to time taken substantial
positions as they have perceived market opportunities to develop. The General
Partner anticipates that gold and silver will remain the primary metals market
exposure for the Partnership. Qualitative Disclosures Regarding Non-Trading Risk
Exposure
The following were the only non-trading risk exposures of the
Partnership as of December 31, 1999.
Foreign Currency Balances. The Partnership's primary foreign currency
balances are in Japanese yen, German marks, British pounds and French francs.
The Advisor regularly converts foreign currency balances to dollars in an
attempt to control the Partnership's non-trading risk.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
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.
27
The General Partner monitors the Partnership's performance and the
concentration of its open positions, and consults with the Advisor concerning
the Partnership's overall risk profile. If the General Partner felt it necessary
to do so, the General Partner could require the Advisor to close out individual
positions as well as enter certain positions traded on behalf of the
Partnership. However, any such intervention would be a highly unusual event. The
General Partner primarily relies on the Advisor's own risk control policies
while maintaining a general supervisory overview of the Partnership's market
risk exposures.
The Advisor applies its own risk management policies to its trading.
The Advisor often follows diversification guidelines, margin limits and stop
loss points to exit a position. The Advisor's research of risk management often
suggests ongoing modifications to its trading programs.
As part of the General Partner's risk management, the General Partner
periodically meets with the Advisor to discuss its risk management and to look
for any material changes to the Advisor's portfolio balance and trading
techniques. The Advisor is required to notify the General Partner of any
material changes to its programs.
28
Item 8. Financial Statements and Supplementary Data.
SHEARSON SELECT ADVISORS FUTURES FUND
INDEX TO FINANCIAL STATEMENTS
Page
Number
Oath or Affirmation F-2
Report of Independent Accountants. F-3
Financial Statements:
Statement of Financial Condition at
December 31, 1999 and 1998. F-4
Statement of Income and Expenses for
the years ended December 31, 1999,
1998 and 1997 F-5
Statement of Partners' Capital for the
years ended December 31, 1999, 1998 and
1997. F-6
Notes to Financial Statements. F-7 -F-11
To The Limited Partners of
Shearson Select Advisors Futures Fund L.P.
To the best of the knowledge and belief of the undersigned, the information
contained herein is accurate and complete.
By: Daniel A. Dantuono, Chief Financial Officer
Smith Barney Futures Management LLC
General Partner, Shearson Select
Advisors Futures Fund L.P.
Smith Barney Futures Management LLC
390 Greenwich Street
1st Floor
New York, N.Y. 10013
212-723-5424
F-2
Report of Independent Accountants
To the Partners of
Shearson Select Advisors Futures Fund L.P.:
In our opinion, the accompanying statement of financial condition and the
related statements of income and expenses and of partners' capital present
fairly, in all material respects, the financial position of Shearson Select
Advisors Futures Fund L.P. at December 31, 1999 and 1998, and the results of its
operations for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
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 of these financial
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by the management of
the General Partner, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 25, 2000
F-3
Shearson Select Advisors Futures Fund L.P.
Statement of Financial Condition
December 31, 1999 and 1998
1999 1998
Assets:
Equity in commodity futures trading account:
Cash (Note 3b) $ 4,010,166 $ 5,145,243
Net unrealized appreciation (depreciation)
on open futures contracts (2,058) 596,728
----------- -----------
4,008,108 5,741,971
Interest receivable 12,413 13,750
----------- -----------
$ 4,020,521 $ 5,755,721
----------- -----------
Liabilities and Partners' Capital:
Liabilities:
Accrued expenses:
Commissions $ 20,103 $ 28,779
Management fees 13,209 18,998
Professional fees 35,111 24,644
Other 2,618 2,923
Redemptions payable (Note 5) 93,085 134,712
----------- -----------
164,126 210,056
----------- -----------
Partners' capital (Notes 1, 5, and 6):
General Partner, 34 Unit equivalents outstanding in
1999 and 1998 75,355 95,421
Limited Partners, 1,706 and 1,942 Units of Limited Partnership
Interest outstanding in 1999 and 1998, respectively 3,781,040 5,450,244
----------- -----------
3,856,395 5,545,665
----------- -----------
$ 4,020,521 $ 5,755,721
----------- -----------
See notes to financial statements.
F-4
Shearson Select Advisors Futures Fund L.P.
Statement of Income and Expenses
for the years ended
December 31, 1999, 1998 and 1997
1999 1998 1997
Income:
Net gains (losses) on trading of commodity interests:
Realized gains (losses) on closed
positions $ (92,246) $ 340,996 $ 1,071,889
Change in unrealized gains (losses)
on open positions (598,786) 290,650 196,365
----------- ----------- -----------
(691,032) 631,646 1,268,254
Less, Brokerage commissions including
clearing fees of $4,471, $4,463 and
$4,856, respectively (Note 3b) (300,092) (331,645) (373,144)
----------- ----------- -----------
Net realized and unrealized gains
(losses) (991,124) 300,001 895,110
Interest income (Note 3b) 157,603 180,533 213,272
----------- ----------- -----------
(833,521) 480,534 1,108,382
----------- ----------- -----------
Expenses:
Management fees (Note 3a) 194,847 215,929 241,865
Incentive fees (Note 3a) -- 58,423 101,180
Professional fees 44,794 40,803 33,386
Other expenses 3,690 6,549 8,343
----------- ----------- -----------
243,331 321,704 384,774
----------- ----------- -----------
Net income (loss) $(1,076,852) $ 158,830 $ 723,608
----------- ----------- -----------
Net income (loss) per Unit of Limited
Partnership Interest and General
Partner Unit equivalent (Notes 1 and 6) $ (590.19) $ 110.78 $ 311.28
----------- ----------- -----------
See notes to financial statements.
F-5
Shearson Select Advisors Futures Fund L.P.
Statement of Partners' Capital for the
years ended December 31, 1999, 1998 and 1997
Limited General
Partners Partner Total
Partners' capital at December 31, 1996 $ 6,058,899 $ 81,071 $ 6,139,970
Net income 713,024 10,584 723,608
Redemption of 264 Units of
Limited Partnership Interest (633,737) -- (633,737)
----------- ----------- -----------
Partners' capital at December 31, 1997 6,138,186 91,655 6,229,841
Net income 155,064 3,766 158,830
Redemption of 335 Units of
Limited Partnership Interest (843,006) -- (843,006)
----------- ----------- -----------
Partners' capital at December 31, 1998 5,450,244 95,421 5,545,665
Net loss (1,056,786) (20,066) (1,076,852)
Redemption of 236 Units of
Limited Partnership Interest (612,418) -- (612,418)
----------- ----------- -----------
Partners' capital at December 31, 1999 $ 3,781,040 $ 75,355 $ 3,856,395
----------- ----------- -----------
See notes to financial statements.
F-6
Shearson Select Advisors
Futures Fund L.P.
Notes to Financial Statements
1. Partnership Organization:
Shearson Select Advisors Futures Fund L.P. (the "Partnership") is a limited
partnership which was organized under the laws of the State of Delaware on
February 10, 1987. The Partnership is engaged 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 was authorized to sell 50,000 Units of Limited Partnership
Interest ("Units") during its public offering. Smith Barney Futures
Management LLC acts as the general partner (the "General Partner") of the
Partnership. The General Partner changed its form of organization from a
corporation to a limited liability company on October 1, 1999. The
Partnership's commodity broker is Salomon Smith Barney Inc. ("SSB"). SSB is
an affiliate of the General Partner. The General Partner is wholly owned by
Salomon Smith Barney Holdings Inc. ("SSBHI"), which is the sole owner of
SSB. SSBHI is a wholly owned subsidiary of Citigroup Inc.
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, 2007; a decline in net asset value per Unit on any business day
after trading to less than $350; a decline in net assets after trading
commences to less than $1,000,000; or under certain other circumstances as
defined in the Limited Partnership Agreement.
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 fair value on the
last business day of the year, which represents market value for those
commodity interests for which market quotations are readily available.
Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars at the exchange rates prevailing on the last
business day of the year. Realized gains (losses) 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.
F-7
3. Agreements:
a. Management Agreement and Limited Partnership Agreement:
Under the Partnership's Limited Partnership Agreement, the General
Partner is permitted to delegate its authority to trade the Partnership's
assets to one or more trading advisors and to compensate those advisors
from the General Partner's own funds. The General Partner receives a
monthly management fee of 1/3 of 1% (4% per year) of the month-end Net
Assets of the Partnership managed by the advisor, and an incentive fee
payable quarterly equal to 15% of Net Trading Profits, as defined in the
Limited Partnership Agreement, of the Partnership.
At December 31, 1999, the General Partner had a Management Agreement with
John W. Henry & Company, Inc. (the "Advisor"). The Management Agreement
requires the General Partner to pay the Advisor a management fee payable
monthly of 4% per annum of the Net Assets of the Partnership managed by
the Advisor and an incentive fee payable quarterly equal to 10% of Net
Trading Profits, as defined in the Management Agreement, earned on the
Net Assets managed by the Advisor.
b. Customer Agreement
The Partnership has entered into a Customer Agreement, which was assigned
to SSB from a predecessor company, whereby SSB provides services which
include, among other things, the execution of transactions for the
Partnership's account in accordance with orders placed by the Advisor.
Effective January 1, 1997, the Partnership pays SSB a monthly brokerage
fee equal to .5% of month end net assets (6% per year) in lieu of
brokerage commissions on a per trade basis. The Partnership pays for all
clearing fees but not floor brokerage charges. All of the Partnership's
cash is deposited in the Partnership's account at SSB. The Partnership's
cash is deposited by SSB in segregated bank accounts to the extent
required by Commodity Futures Trading Commission regulations. At December
31, 1999 and 1998, the amount of cash held for margin requirements was
$517,865 and $547,430, respectively. SSB has agreed to pay the
Partnership interest on 70% of the average daily equity in its accounts
during each month at the rate of the average noncompetitive yield of
13-week U.S. Treasury Bills as determined at the weekly auctions thereof
during the month. The Customer Agreement between the Partnership and SSB
gives the Partnership the legal right to net unrealized gains and losses.
The Customer Agreement may be terminated upon notice by either party.
F-8
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 average fair value during the years ended December 31, 1999
and 1998, based on a monthly calculation, was $212,790 and $352,056,
respectively. The fair value of these commodity interests, including options
thereon, if applicable, at December 31, 1999 and 1998 was $(2,058) and
$596,728, respectively, as detailed below.
Fair Value
December 31, December 31,
1999 1998
Currencies:
-OTC Contracts $ (59,672) $ 28,455
Interest Rates U.S. 47,375 (41,469)
Interest Rates Non-U.S 19,287 610,002
Metals (22,030) (260)
Indices 12,982 --
--------- ---------
Total $ (2,058) $ 596,728
--------- ---------
5. Distributions and Redemptions:
Distributions of profits, if any, will be made at the sole discretion of the
General Partner; however, each limited partner may redeem some or all of his
Units at the net asset value thereof as of the last day of any calendar
quarter on 15 days' notice to the General Partner, provided that no
redemption may result in the limited partner holding fewer than three Units
after such redemption is effected.
6. Net Asset Value Per Unit:
Changes in the net asset value per Unit of Partnership interest during the
years ended December 31, 1999, 1998, and 1997 were as follows:
1999 1998 1997
Net realized and unrealized gains (losses) $ (544.55) $ 177.52 $ 382.44
Interest income 84.45 83.33 86.74
Expenses (130.09) (150.07) (157.90)
--------- --------- ---------
Increase (decrease) for year (590.19) 110.78 311.28
Net asset value per Unit, beginning of year 2,806.51 2,695.73 2,384.45
--------- --------- ---------
Net asset value per Unit, end of year $ 2,216.32 $ 2,806.51 $ 2,695.73
--------- --------- ---------
F-9
7. Financial Instrument Risks:
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 may 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, through physical delivery or with another
financial instrument. These instruments may be traded on an exchange or
over-the-counter ("OTC"). Exchange traded instruments are standardized and
include futures and certain option contracts. OTC contracts are negotiated
between contracting parties and include forwards and certain options. 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
(see table in Note 4). 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 SSB.
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. The majority of these
instruments mature within one year of December 31, 1999. However, due to the
nature of the Partnership's business, these instruments may not be held to
maturity.
F-10
8. New Accounting Pronouncements:
The Partnership adopted Statement on Financial Accounting Standards No. 133
("SFAS 133"), Accounting for Derivative Financial Instruments and Hedging
Activities, on January 1, 1999. SFAS 133 requires that an entity recognize
all derivative instruments in the statement of financial condition and
measure those financial instruments at fair value. SFAS 133 has no impact on
Partners' Capital and operating results as all derivative instruments are
recorded at fair value, with changes therein reported in the statement of
income and expenses.
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 LLC.
Investment decisions are made by John W. Henry & Company, Inc. (the "Advisor").
Item 11. Executive Compensation.
The Partnership has no directors or officers. Its affairs are
managed by Smith Barney Futures Management LLC, its General Partner. SSB, 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." For the year ended December 31, 1999, SSB earned $300,092 in
brokerage commissions and clearing fees. Management fees paid or payable to the
General Partner were $194,847. The Advisor was compensated for management fees
from the General Partners own funds.
29
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a). Security ownership of certain beneficial owners.
--------------------------------------------------
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 34 Units of Limited Partnership Interest (1.9%) as of December 31,
1999.
(c). Changes in control. None.
Item 13. Certain Relationships and Related Transactions.
Salomon Smith Barney Inc. and Smith Barney Futures Management
LLC 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.","Item 11.Executive
Compensation" and "Item 8. Financial Statements and Supplementary Data."
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, 1999
and 1998.
Statement of Income and Expenses for the years ended
30
December 31, 1999, 1998 and 1997. Statement of
Partners' Capital for the years ended December 31,
1999, 1998 and 1997.
(2) Financial Statement Schedules:Financial Data Schedule
for the year ended December 31, 1999.
(3) Exhibits:
3.1 - Limited Partnership Agreement dated as of
February 10, 1987 and amended as of April 6,
1987 (filed as Exhibit 3.1 to the Registration
Statement No.33-12241 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 Delaware on
February 10, 1987 (filed as Exhibit 3.2 to the
Registration Statement No.
33-12241 and incorporated herein by reference)
10.1 - Customer Agreement between Shearson Lehman
Select Advisors Futures Fund L.P. and Smith
Barney Shearson Inc. (previously filed).
10.1(a)- Amendment to Customer Agreement dated as of September 30,
1988 (previously filed).
10.4(a)- Management Agreement between Hayden Commodities Corp. and
Dunn Commodities, Inc. (previously filed).
10.4(b)- Management Agreement between Hayden Commodities Corp. and
Investment Timing Services (previously filed).
31
10.4(c)- Management Agreement between Hayden Commodities Corp. and
Cresta Commodity Management Inc. (previously filed).
10.4(d)- Management Agreement between Hayden Commodities Corp. and
Computerized Advisory (previously filed).
10.6(e)- Management Agreement between Hayden Commodities Corp. and
Donald J. Guy (previously filed).
10.4(f)- Management Agreement between Hayden Commodities Corp. and
I.C.S.C., Inc. (previously filed).
10.4(g)- Management Agreement between Hayden Commodities Corp. and
Orion Inc. (previously filed).
10.4(h)- Management Agreement between Hayden Commodities Corp. and
Bacon Investment Corporation (previously filed).
10.4(I)- Management Agreement between Hayden Commodities Corp. and
PRAGMA, Inc. (previously filed).
10.4(j)- Management Agreement between Hayden Commodities Corp. and
Mint Investment Management Company (previously filed).
10.4(k)- Management Agreement between Hayden Commodities Corp. and
John W. Henry & Company (previously filed).
10.4(l)- Management Agreement between Hayden Commodities Corp. and
Charles M. Wilson & Company (previously filed).
32
10.4(m)- Management Agreement between Hayden Commodities Corp. and
Sunrise Commodities, Inc. (previously filed).
10.5 - Letter extending Management Agreement with Sunrise
Commodities Inc. dated as of June 30, 1989 (previously
filed).
10.6 - Letter extending Management Agreement with Charles
M. Wilson & Company dated as of June 30, 1989 (previously
filed).
10.7 - Letter extending Management Agreement with PRAGMA, Inc.
dated June 30, 1989 (previously filed).
10.8 - Letter extending Management Agreement with John W.
Henry & Co., Inc. dated as of June 30, 1989 (previously
filed).
10.9 - Letter extending Management Agreement with Bacon
Investment Corporation dated June 30, 1989 (previously
filed).
10.10 - Assignment by Bacon Investment Corporation to Zack
Hampton Bacon, III dated as of September 15, 1989
(previously filed).
10.11 - Letter extending Management Agreement with Sunrise
Commodities Inc. dated June 26, 1990 (filed as Exhibit
10.11 to Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference).
33
10.12 - Letter extending Management Agreement with PRAGMA, Inc.
dated June 26, 1990 (filed as Exhibit 10.12 to Form 10-K
for the fiscal year ended December 31, 1991 and
incorporated herein by reference).
10.13 - Letter extending Management Agreement with John W. Henry
& Co., Inc. dated June 26, 1990 (filed as Exhibit 10.
13 to Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference).
10.14- Letter extending Management Agreement with Zack Hampton
Bacon, III dated June 25, 1990 (filed as Exhibit 10.14
to Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference).
10.15 - Letter extending Management Agreement with Sunrise
Commodities, Inc. dated July 16, 1991 (filed as Exhibit
10.15 to Form 10-K for the fiscal year ended December
31, 1991 and incorporated herein by reference).
10.16 - Letter extending Management Agreement with PRAGMA, Inc.
dated July 16, 1991 (filed as Exhibit 10.16 to Form 10-K
for the fiscal year ended December 31, 1991 and
incorporated herein by reference).
34
10.17 - Letter extending Management Agreement with John W. Henry
& Co., Inc. dated July 16, 1991 (filed as Exhibit 10.
17 to Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference).
10.18 - Letter extending Management Agreement with Zack Hampton
Bacon, III dated July 16, 1991 and (filed as Exhibit 10.
18 to Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference).
10.19 - Letter extending Management Agreement with Sunrise
Commodities Inc. dated June 30, 1992 (filed as Exhibit 10.
19 to Form 10-K for the fiscal year ended December 31,
1992).
10.20 - Letter extending Management Agreement with PRAGMA, Inc.
dated June 30, 1992 ( filed as Exhibit 10.20 to Form
10-K for the fiscal year ended December 31, 1992).
10.21 - Letter extending Management Agreement with John W. Henry
& Co., Inc. dated June 30, 1992 (filed as Exhibit 10.21 to
Form 10-K for the fiscal year ended December 31, 1992).
10.22 - Letter extending Management Agreement with Zack Hampton
Bacon, III dated June 30, 1992 (filed as Exhibit 10.22 to
Form 10-K for the fiscal year ended December 31, 1992).
35
10.23 - Letter terminating Management Agreement with Zack
Hampton Bacon, III dated March 31, 1993 (filed as Exhibit
10.23 to Form 10-K for the fiscal year ended December 31,
1993).
10.24 - Letter terminating Management Agreement with PRAGMA,
Inc. dated July 29, 1994 (filed as Exhibit 10.24 to Form
10-K for the fiscal year ended December 31, 1994).
10.25 - Management Agreement dated September 1, 1994 the
Partnership, the General Partner and Gill Capital
Management(filed as Exhibit 10.25 to Form 10-K for the
fiscal year ended December 31, 1994).
10.26 - Letters extending Management Agreements with John W.
Henry & Co., Sunrise Capital Management, Inc. and Gill
Capital Management dated February 16, 1995 (filed as
Exhibit 10.26 to Form 10-K for the fiscal year ended
December 31, 1994).
10.27 - Letter terminating Management Agreement with Gill
Capital Management dated June 27, 1995 (filed as Exhibit
10.27 to Form 10-K for the fiscal year ended December 31,
1995).
10.28 - Letter terminating Management Agreement with Sunrise
Capital Management dated December 23, 1996 (previously
filed).
10.29 - Letters extending Managements Agreements with John W.
Henry & Company, Inc. for 1996 and 1997 (Filed as
Exhibit 10.29 to Form 10-K for fiscal year ended December
31, 1997).
10.30 - Letter extending Management Agreement with John W. Henry
and Company, Inc. for 1998 (previously filed).
10.31 - Letter extending Management Agreement with John W. Henry
and Company, Inc. for 1999 (filed herein).
(b) Reports on 8-K: None Filed.
36
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
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report on Form
10-K 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 30th day of March 2000.
SHEARSON SELECT ADVISORS FUTURES FUND L.P.
By: Smith Barney Futures Management LLC
(General Partner)
By /s/ David J. Vogel
David J. Vogel, President & Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this annual report on Form 10-K 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 R. Schaefer /s/ Daniel A. Dantuono
Michael R. 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
38