FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE Act of 1934
For the Quarter ended June 30, 2004
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 Citigroup Managed Futures LLC
399 Park Avenue - 7th Fl.
New York, New York 10022
- --------------------------------------------------------------------------------
(Address and Zip Code of principal executive offices)
(212) 559-2011
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act).
Yes ___ No X
SHEARSON SELECT ADVISORS FUTURES FUND L.P.
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
June 30, 2004 and December 31,
2003 (unaudited). 3
Condensed Schedules of Investments at
June 30, 2004 and December 31, 2003
(unaudited). 4 - 5
Statements of Income and Expenses
and Partners' Capital for the three
and six months ended June 30, 2004 and
2003 (unaudited). 6
Statements of Cash Flows for the three
and six months ended June 30, 2004 and
2003 (unaudited). 7
Notes to Financial Statements
(unaudited). 8 - 11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations. 12 - 14
Item 3. Quantitative and Qualitative Disclosures
about Market Risk. 15 - 16
Item 4. Controls and Procedures. 17
PART II - Other Information 18
2
Part I
Item 1. Financial Statements
Shearson Select Advisors Futures Fund L.P.
Statements of Financial Condition
(Unaudited)
June 30, December 31,
2004 2003
------------------------
Assets:
Equity in commodity futures trading account:
Cash (restricted $470,043 and $536,151 in
2004 and 2003, respectively) $3,643,531 $4,256,795
Net unrealized appreciation on open futures positions -- 603
Unrealized appreciation on open forward contracts 9,431 314,690
---------- ----------
3,562,962 4,572,088
Interest receivable 2,830 2,092
---------- ----------
$3,655,792 $4,574,180
========== ==========
Liabilities and Partners' Capital:
Liabilities:
Net unrealized depreciation on open futures positions $ 55,243 $ --
Unrealized depreciation on open forward contracts 109,449 18,001
Accrued expenses:
Commissions 17,456 22,781
Management fees 11,496 15,054
Other 24,872 17,242
Redemptions payable 82,348 7,869
---------- ----------
300,864 80,947
---------- ----------
Partners' Capital :
General Partner, 34 Unit equivalents
outstanding in 2004 and 2003 103,698 133,774
Limited Partners, 1,066 and 1,108 Redeemable Units
of Limited Partnership Interest
outstanding in 2004 and 2003, respectively 3,251,230 4,359,459
---------- ----------
3,354,928 4,493,233
---------- ----------
$3,655,792 $4,574,180
========== ==========
See Accompanying Notes to Unaudited Financial Statements.
3
Shearson Select Advisors Futures Fund L.P.
Condensed Schedule of Investments
June 30, 2004
(Unaudited)
Sector Contract Fair Value
- -------- --------- -----------
Currencies
Unrealized appreciation on forward contracts 0.21% $ 7,148
Unrealized depreciation on forward contracts (2.38)% (79,899)
----------
Total Currencies (2.17)% (72,751)
----------
Interest Rates U.S.
Futures contracts purchased (0.14)% (4,615)
Futures contracts sold (1.13)% (38,015)
----------
Total Interest Rates U.S. (1.27)% (42,630)
----------
Interest Rates Non-U.S.
Futures contracts purchased (0.02)% (687)
Futures contracts sold (0.28)% (9,463)
----------
Total Interest Rates Non-U.S. (0.30)% (10,150)
----------
Metals
Futures contracts sold (0.10)% (3,300)
Unrealized appreciation on forward contracts 0.07% 2,283
Unrealized depreciation on forward contracts (0.88)% (29,550)
----------
Total forward contracts (0.81)% (27,267)
----------
Total Metals (0.91)% (30,567)
---------
Total Indices 0.02% Futures contracts purchased 0.02% 837
----------
Total Fair Value (4.63)% $ (155,261)
==========
Investments at % of Investments at
Country Composition Fair Value Fair Value
- -------------------- ------------ ----------
Australia $ (4,615) (2.97)%
Germany (7,471) (4.81)
Japan (11,491) (7.40)
United Kingdom (48,133) (31.00)
United States (83,551) (53.82)
----------- --------
$ (155,261) (100.00)%
=========== ========
Percentages are based on Partners' capital unless otherwise indicated.
See Accompanying Notes to Unaudited Financial Statements.
4
Shearson Select Advisors Futures Fund L.P.
Condensed Schedule of Investments
December 31, 2003
(Unaudited)
Sector Contract Fair Value
- -------------------------------------- ------------------------------------------------------ -----------------
Currencies
Unrealized depreciation on forward contracts (0.40)% $(18,001)
Unrealized appreciation on forward contracts 5.76% 258,796
---------
Total Currencies 5.36% 240,795
---------
Total Interest Rates U.S. (0.31)% Futures contracts sold (0.31)% (14,069)
---------
Total Interest Rates Non-U.S. 0.12% Futures contracts purchased 0.12% 5,474
---------
Metals
Futures contracts purchased 0.48% 21,480
Unrealized appreciation on forward contracts 1.24% 55,894
---------
Total Metals 1.72% 77,374
---------
Indices
Futures contracts sold (0.89)% (39,843)
Futures contracts purchased 0.61% 27,561
---------
Total Indices (0.28)% (12,282)
---------
Total Fair Value 6.61% $297,292
=========
Investments % of Investments
Country Composition at Fair Value at Fair Value
- -------------------- ------------ ------------
Germany $ 19,439 6.54%
Japan (39,843) (13.40)
United Kingdom 64,665 21.75
United States 253,031 85.11
-------- ------
$297,292 100.00%
======== ======
Percentages are based on Partners' capital unless otherwise indicated.
See Accompanying Notes to Unaudited Financial Statements.
5
SHEARSON SELECT ADVISORS FUTURES FUND L.P.
STATEMENTS OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2004 2003 2004 2003
------------------------ ------------------------
Income:
Net gains (losses) on trading of commodity interests:
Realized (losses) gains on closed positions $ (779,132) $ 451,400 $ (333,544) $ 1,569,127
Change in unrealized losses on open positions (99,254) (84,062) (452,553) (553,827)
----------- ----------- ----------- -----------
Net realized and unrealized gains (losses) (878,386) 367,338 (786,097) 1,015,300
Interest income 7,643 8,812 14,560 17,251
----------- ----------- ----------- -----------
(870,743) 376,150 (771,537) 1,032,551
----------- ----------- ----------- -----------
Expenses:
Brokerage commissions including clearing fees
of $692, $1,193, $1,187 and $1,862, respectively 57,383 74,605 130,420 146,703
Management fees 36,862 47,569 82,924 94,236
Incentive fees -- 36,775 -- 66,775
Other expenses 6,995 8,816 12,390 16,718
----------- ----------- ----------- -----------
101,240 167,765 225,734 324,432
----------- ----------- ----------- -----------
Net income (loss) (971,983) 208,385 (997,271) 708,119
Redemptions (82,348) (94,653) (141,034) (192,618)
----------- ----------- ----------- -----------
Net increase (decrease) in Partners' capital (1,054,331) 113,732 (1,138,305) 515,501
Partners' capital, beginning of period 4,409,259 4,461,182 4,493,233 4,059,413
----------- ----------- ----------- -----------
Partners' capital, end of period $ 3,354,928 $ 4,574,914 $ 3,354,928 $ 4,574,914
========== =========== =========== ===========
Net asset value per Redeemable Unit
(1,100 and 1,160 Redeemable Units outstanding
at June 30, 2004 and 2003, respectively) $ 3,049.93 $ 3,943.89 $ 3,049.93 $ 3,943.89
=========== =========== =========== ===========
Net income (loss) per Redeemable Unit of Limited Partnership
Interest and General Partner Unit equivalent $ (862.46) $ 176.00 $ (884.60) $ 589.00
=========== =========== =========== ===========
See Accompanying Notes to Unaudited Financial Statements.
6
Shearson Select Advisors Futures Fund L.P.
Statements of Cash Flows
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ------------------------
2004 2003 2004 2003
---------------------- ------------------------
Cash flows from operating activities:
Net Income (loss) $ (971,983) $ 208,385 $ (997,271) $ 708,119
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Net unrealized appreciation (depreciation) on open futures
positions 210,322 85,459 55,846 299,714
Unrealized appreciation on open forward contracts 264,106 3,670 305,259 134,834
(Increase) decrease in interest receivable (309) 248 (738) 6
Unrealized depreciation on open forward contracts (375,174) (5,067) 91,448 119,279
Accrued expenses:
Increase (decrease) in commissions (5,177) 635 (5,325) 3,075
Increase (decrease) in management fees (3,447) 392 (3,558) 1,984
Increase in incentive fees -- 6,775 -- 36,775
Increase in other 3,735 8,816 7,630 16,718
Increase (decrease) in redemptions payable 23,662 (3,312) 74,479 40,975
--------- --------- --------- ---------
Net cash provided by (used in) operating activities (854,265) 306,001 (472,230) 1,361,479
--------- --------- --------- ---------
Cash flows from financing activities:
Payments for redemptions (82,348) (94,653) (141,034) (192,618)
-------- --------- --------- ---------
Net change in cash (936,613) 211,348 (613,264) 1,168,861
Cash, at beginning of period 4,580,144 4,764,248 4,256,795 3,806,735
----------- --------- --------- ---------
Cash, at end of period $ 3,643,531 $ 4,975,596 $ 3,643,531 $ 4,975,596
=========== =========== =========== ===========
See Accompanying Notes to Unaudited Financial Statements.
7
Shearson Select Advisors Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
1. General
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 commenced trading on July 1, 1987.
Citigroup Managed Futures LLC, formerly Smith Barney Futures Management
LLC, acts as the general partner (the "General Partner") of the Partnership. The
Partnership's commodity broker is Citigroup Global Markets Inc. ("CGM"),
formerly Salomon Smith Barney Inc. CGM is an affiliate of the General Partner.
The General Partner is wholly owned by Citigroup Global Markets Holdings Inc.
("CGMHI"), formerly Salomon Smith Barney Holdings Inc., which is the sole owner
of CGM. CGMHI is a wholly owned subsidiary of Citigroup Inc. As of June 30,
2004, all trading decisions are made by John W. Henry & Company (the "Advisor").
The accompanying financial statements are unaudited but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the Partnership's financial
condition at June 30, 2004 and December 31, 2003 and the results of its
operations and cash flows for the three and six months ended June 30, 2004 and
2003. These financial statements present the results of interim periods and do
not include all disclosures normally provided in annual financial statements.
You should read these financial statements together with the financial
statements and notes included in the Partnership's Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the year ended December
31, 2003.
Due to the nature of commodity trading, the results of operations for the
interim periods presented should not be considered indicative of the results
that may be expected for the entire year.
8
Shearson Select Advisors Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
2. Financial Highlights:
Changes in Net Asset Value per Redeemable Unit of Limited Partnership
Interest for the three and six months ended June 30, 2004 and 2003 were as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ------------------------
2004 2003 2004 2003
-------------- --------- ---------- --------
Net realized and unrealized gains (losses)* $ (830.32) $ 247.25 $ (813.47) $ 723.17
Interest income 6.78 7.44 12.83 14.42
Expenses** (38.92) (78.69) (83.96) (148.59)
--------- --------- --------- ---------
Increase (decrease) for the period (862.46) 176.00 (884.60) 589.00
Net Asset Value per Redeemable Unit, beginning
of period 3,912.39 3,767.89 3,934.53 3,354.89
--------- --------- --------- ---------
Net Asset Value per Redeemable Unit, end of
period $ 3,049.93 $ 3,943.89 $ 3,049.93 $ 3,943.89
========= ========= ========= =========
* Includes brokerage commissions
** Excludes brokerage commissions
Ratio to average net assets: ***
Net investment loss before incentive fees**** (9.8)% (10.6)% (10.2)% (10.7)%
========= ========= ========= =========
Operating expenses 10.6% 11.4% 10.9% 11.4%
Incentive fees 0.0% 3.2% 0.0% 3.0%
--------- --------- --------- ---------
Total expenses 10.6% 14.6% 10.9% 14.4%
========= ========= ========= =========
Total return:
Total return before incentive fees (22.0)% 5.5% (22.5)% 19.3%
Incentive fees 0.0% (0.8)% 0.0% (1.7)%
--------- --------- --------- ---------
Total return after incentive fees (22.0)% 4.7% (22.5)% 17.6%
========= ========= ========= =========
*** Annualized (other than incentive fee)
**** Interest income less total expenses (exclusive of incentive fees)
The above ratios may vary for individual investors based on the timing of
capital transactions during the period. Additionally, these ratios are
calculated for the Limited Partner class using the Limited Partners' share of
income expenses and average net assets.
9
Shearson Select Advisors Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's trading
activities are shown in the Statements of Income and Expenses and Partners'
Capital and are discussed in Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The Customer Agreement between the Partnership and CGM gives the
Partnership the legal right to net unrealized gains and losses.
All of the commodity interests owned by the Partnership are held for
trading purposes. The average fair values of these interests during the six and
twelve months ended June 30, 2004 and December 31, 2003, based on a monthly
calculation, were $50,622 and $295,425, respectively. The fair value of these
commodity interests, including options thereon, if applicable, at June 30, 2004
and December 31, 2003, were $(155,261) and $297,292, respectively. Fair values
for exchange traded commodity futures and options are based on quoted market
prices for those futures and options. Fair values for all other financial
instruments for which market quotations are not readily available are based on
calculations approved by the General Partner.
4. Financial Instrument Risk:
In the normal course of its business the Partnership is party to financial
instruments with off-balance sheet risk, including derivative financial
instruments and derivative commodity instruments. These financial instruments
may include forwards, futures and options, whose values are based upon an
underlying asset, index, or reference rate, and generally represent future
commitments to exchange currencies or cash flows, to purchase or sell other
financial instruments at specific terms at specified future dates, or, in the
case of derivative commodity instruments, to have a reasonable possibility to be
settled in cash, through physical delivery or with another financial instrument.
These instruments may be traded on an exchange or over-the-counter ("OTC").
Exchange traded instruments are standardized and include futures and certain
option contracts. OTC contracts are negotiated between contracting parties and
include forwards and certain options. 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.
10
Shearson Select Advisors Futures Fund L.P.
Notes to Financial Statements
June 30, 2004
(Unaudited)
(Continued)
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counterparty to the transactions. The
Partnership's risk of loss in the event of counterparty default is typically
limited to the amounts recognized as unrealized appreciation in the statements
of financial condition and not represented by the contract or notional amounts
of the instruments. The Partnership has credit risk and concentration risk
because the sole counterparty or broker with respect to the Partnership's assets
is CGM.
The General Partner monitors and controls the Partnership's risk exposure
on a daily basis through financial, credit and risk management monitoring
systems and, accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the Partnership is
subject. These monitoring systems allow the General Partner to statistically
analyze actual trading results with risk-adjusted performance indicators and
correlation statistics. In addition, on-line monitoring systems provide account
analysis of futures, forwards and options positions by sector, margin
requirements, gain and loss transactions and collateral positions.
The majority of these instruments mature within one year of June 30, 2004.
However, due to the nature of the Partnership's business, these instruments may
not be held to maturity.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
The Partnership does not engage in the sale of goods or services. Its only
assets are its equity in its commodity futures trading account, consisting of
cash, net unrealized appreciation (depreciation) on open futures and forward
contracts, commodity options and interest receivable. Because of the low margin
deposits normally required in commodity futures trading, relatively small price
movements may result in substantial losses to the Partnership. While substantial
losses could lead to a decrease in liquidity, no such losses occurred during the
second quarter of 2004.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by realized and/or unrealized gains or losses
on commodity futures trading, expenses, interest income, redemptions of
Redeemable Units and distributions of profits, if any.
For the six months ended June 30, 2004, Partnership capital decreased 25.3%
from $4,493,233 to $3,354,928. This decrease was attributable to net loss from
operations of $997,271 coupled with the redemption of 42 Redeemable Units
resulting in an outflow of $141,034. Future redemptions can impact the amount of
funds available for investment in commodity contract positions in subsequent
periods.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosures of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
All commodity interests (including derivative financial instruments and
derivative commodity instruments) are used for trading purposes. The commodity
interests are recorded on trade date and open contracts are recorded in the
statements of financial condition at fair value on the last business day of the
period, which represents market value for those commodity interests for which
market quotations are readily available or other measures of fair value deemed
appropriate by management of the General Partner for those commodity interests
and foreign currencies for which market quotations are not readily available.
Investments in commodity interests denominated in foreign currencies are
translated into U.S. dollars at the exchange rates prevailing on the last
business day of the period. Realized gains (losses) and changes in unrealized
gains (losses) on open positions are recognized in the period in which the
contract is closed or the changes occur and are included in net gains (losses)
on trading of commodity interests.
Foreign currency contracts are those contracts where the Partnership agrees
to receive or deliver a fixed quantity of foreign currency for an agreed-upon
price on an agreed future date. Foreign currency contracts are valued daily, and
the Partnership's net equity therein, representing unrealized gain or loss on
the contracts as measured by the difference between the forward foreign exchange
rates at the date of entry into the contracts and the forward rates at the
reporting date, is included in the statements of financial condition. Realized
gains (losses) and changes in unrealized gains (losses) on open positions are
recognized in the period in which the contract is closed or the changes occur
and are included in the statements of income and expenses and partners' capital.
12
Results of Operations
During the Partnership's second quarter of 2004, the net asset value per
Redeemable Unit decreased 22.0% from $3,912.39 to $3,049.93 as compared to an
increase of 4.7% in the second quarter of 2003. The Partnership experienced a
net trading loss before brokerage commissions and related fees in the second
quarter of 2004 of $878,386. Losses were primarily attributable to the trading
of commodity contracts in currencies, U.S. and non-U.S. interest rates, metals
and indices. The Partnership experienced a net trading gain before brokerage
commissions and related fees in the second quarter of 2003 of $367,338. Gains
were primarily attributable to the trading of commodity contracts in currencies,
U.S. and non-U.S. interest rates and indices and were partially offset by losses
in metals.
During the Partnership's six months ended June 30, 2004, the net asset
value per Redeemable Unit decreased 22.5% from $3,934.53 to $3,049.93 as
compared to an increase of 17.6% during the six months ended June 30, 2003. The
Partnership experienced a net trading loss before brokerage commissions and
related fees during the six months ended June 30, 2004 of $786,097. Losses were
primarily attributable to the trading of commodity contracts in currencies,
non-U.S. interest rates, metals and indices and were partially offset by gains
in U.S interest rates. The Partnership experienced a net trading gain before
brokerage commissions and related fees during the six months ended June 30, 2003
of $1,015,300. Gains were primarily attributable to the trading of commodity
contracts in currencies, U.S. and non-U.S. interest rates and indices and were
partially offset by losses in metals.
The lack of persistent trends resulted in a difficult environment for the
Advisor, which began precisely as the second quarter of 2004 got underway.
Trends in both financial and commodity futures markets had been clear for the
previous three quarters. In the second quarter of 2004 however, substantially
opposing fundamental considerations along with benign short-term volatility
greatly reduced the opportunities for the Advisor and fostered a particularly
difficult trading environment.
The directionless behavior of so many markets can be explained in terms of
a perception that a significant change may be underway in the global economic
cycle. Some of the primary drivers of these conditions have been: softer than
expected U.S. economic data creating confusion with regard to forecasting the
pace of Fed tightening; U.S. and international bonds, equity and currency
markets coping with indications of rising inflation, but at the same time, an
apparent pause in growth; and a fragile Eurozone recovery keeping European
Central Bank monetary intervention on hold.
Trading in all market sectors was unprofitable for the Partnership. Losses
primarily occurred in Asian and European currencies, gold and longer-term
interest rate positions. Gains in European interest rates and base metals were
not sufficient to offset the accumulated losses.
Commodity futures markets are highly volatile. The potential for broad and
rapid price fluctuations increases the risks involved in commodity trading, but
also increases the possibility of profit. The profitability of the Partnership
depends on the existence of major price trends and the ability of the Advisor to
correctly identify those price trends. 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.
13
Interest income on 70% of the Partnership's daily average equity maintained
in cash was earned at the monthly average 13-week U.S. Treasury Bill yield. CGM
may continue to maintain the Partnership assets in cash and/or place all of the
Partnership assets in 90-day Treasury bills and pay the Partnership 70% of the
interest earned on the Treasury bills purchased. CGM will retain 30% of any
interest earned on Treasury bills. Interest income for the three and six months
ended June 30, 2004 decreased by $1,169 and $2,691, respectively, as compared to
the corresponding period in 2003. The decrease in interest income is primarily
due to a decrease in interest rates and net assets for the three and six months
ended June 30, 2004 as compared to the corresponding periods in 2003.
Brokerage commissions are calculated on the Partnership's adjusted net
asset value on the last day of each month and are affected by trading
performance and redemptions. Accordingly, they must be compared in relation to
the fluctuations in the monthly net asset values. Commissions and fees for the
three and six months ended June 30, 2004 decreased by $17,222 and $16,283,
respectively, as compared to the corresponding periods in 2003. The decrease in
brokerage commissions and fees for the three and six months ended June 30, 2004
is due to a decrease in average net assets during the period.
Management fees are calculated as a percentage of the Partnership's net
asset value as of the end of each month and are affected by trading performance
and redemptions. Management fees for the three and six months ended June 30,
2004 decreased by $10,707 and $11,312, respectively, as compared to the
corresponding period in 2003. The decrease in management fees for the three and
six months ended June 30, 2004 is due to a decrease in average net assets during
the period.
Incentive fees paid by the Partnership are based on the new trading profits
of the Partnership as defined in the Limited Partnership Agreement. Trading
performance for the three months and six ended June 30, 2004 resulted in
incentive fees of $0. Trading performance for the three and six months ended
June 30, 2003 resulted in incentive fees of $36,775 and $66,775, respectively.
14
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's main line of business.
Market movements result in frequent changes in the fair value of the
Partnership's open positions and, consequently, in its earnings and cash flow.
The Partnership's market risk is influenced by a wide variety of factors,
including the level and volatility of interest rates, exchange rates, equity
price levels, the value of financial instruments and contracts, the
diversification effects 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 in this
section should not be considered to constitute any assurance or representation
that the Partnership's losses in any market sector will be limited to Value at
Risk or by the Partnership's attempts to manage its market risk.
Exchange maintenance margin requirements have been used by the Partnership
as the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
interval. Maintenance margin has been used rather than the more generally
available initial margin, because initial margin includes a credit risk
component, which is not relevant to Value at Risk.
15
The following table indicates the trading Value at Risk associated with the
Partnership's open positions by market category as of June 30, 2004 and the
highest, lowest and average value during the three months ended June 30, 2004.
All open position trading risk exposures of the Partnership have been included
in calculating the figures set forth below. As of June 30, 2004, the
Partnership's total capitalization was $3,354,928. There has been no material
change in the trading Value at Risk information previously disclosed in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 2003.
June 30, 2004
(Unaudited)
Three Months Ended June 30, 2004
-------------------------------------------------------
% of Total High Low Average
Market Sector Value at Risk Capitalization Value at Risk Value at Risk Value at Risk
--------------------------------------------------------------------------------------------
Currencies
- OTC Contracts $ 78,933 2.35% $ 1,057,118 $ 76,832 $ 113,123
Interest rates U.S. 39,700 1.18% 65,900 13,200 42,367
Interest rates Non-U.S. 150,720 4.49% 289,801 83,677 149,187
Metals
- Exchange Contracts 18,000 0.54% 19,500 16,500 18,000
- OTC Contracts 10,125 0.30% 32,100 3,300 9,108
Indices 135,158 4.03% 152,659 8,655 59,400
------------------- -------------
Totals $ 432,636 12.89%
=================== =============
16
Item 4. Controls and Procedures
Based on their evaluation of the Partnership's disclosure controls and
procedures as of June 30, 2004, the Chief Executive Officer and Chief Financial
Officer have concluded that such controls and procedures are effective.
During the Partnership's last fiscal quarter, no changes occurred in the
Partnership's internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Partnership's
internal control over financial reporting.
17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The following information supplements and amends our discussion set forth
under Part I, Item 3 "Legal Proceedings" in the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003 and under Part II, Item 1
"Legal Proceedings" in the Partnership's Quarterly Report of Form 10-Q for the
fiscal quarter ended March 31, 2004.
WorldCom, Inc.
On May 10, 2004, Citigroup announced that it had agreed to pay $2.65
billion to settle the WorldCom class action suits.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
The following chart sets forth the purchases of Redeemable Units by the
Partnership.
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Period (a) Total Number of (b) Average Price (c) Total Number of (d) Maximum Number
Shares (or Units) Paid per Share Shares (or (or Approximate
Purchased* (or Unit)** Units) Purchased Dollar Value) of
as Part of Shares (or
Publicly Units) that May
Announced Plans Yet Be Purchased
or Programs Under the Plans
or Programs
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
April 1, 2004 - April 30, 2004 0 N/A N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
May 1, 2004 - May 31, 2004 0 N/A N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
June 1, 2004 - June 30, 2004 27 $3,049.93 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
Total 27 $3,049.93 N/A N/A
- ------------------------------- ----------------------- ----------------------- ---------------------- -----------------------
* Generally, Limited Partners are permitted to redeem their Redeemable Units as
of the end of each month on 10 days' notice to the General Partner. Under
certain circumstances, the General Partner can compel redemption but to date the
General Partner has not exercised this right. Purchases of Redeemable Units by
the Partnership reflected in the chart above were made in the ordinary course of
the Partnership's business in connection with effecting redemptions for Limited
Partners.
** Redemptions of Redeemable Units are effected as of the last day of each month
at the Net Asset Value per Redeemable Unit as of that day.
18
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed by Item 601 of Regulation S-K are
incorporated herein by reference to the exhibit index of the
Partnership's Annual Report on Form 10-K for the year ended December
31, 2003.
Exhibit - 31.1 - Rule 13a-14(a)/15d-14(a) Certification (Certification
of President and Director)
Exhibit - 31.2 - Rule 13a-14(a)/15d-14(a) Certification (Certification
of Chief Financial Officer and Director)
Exhibit - 32.1 - Section 1350 Certification (Certification of
President and Director).
Exhibit - 32.2 - Section 1350 Certification (Certification of Chief
Financial Officer and Director).
(b) Reports on Form 8-K - None
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SHEARSON SELECT ADVISORS FUTURES FUND L.P.
By: Citigroup Managed Futures LLC
(General Partner)
By: /s/ David J. Vogel
-------------------
David J. Vogel
President and Director
Date: 8/12/04
By: /s/ Daniel R. McAuliffe, Jr.
-------------------------------------
Daniel R. McAuliffe, Jr.
Chief Financial Officer and Director
Date: 8/12/04
20
Exhibit 31.1
CERTIFICATIONS
I, David J. Vogel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Shearson Select
Advisors Futures Fund L.P. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition and results of operations of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 12, 2004
/s/ David J. Vogel
-----------------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
21
Exhibit 31.2
CERTIFICATIONS
I, Daniel R. McAuliffe, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Shearson Select
Advisors Futures Fund L.P. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition and results of operations of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 12, 2004
/s/ Daniel R. McAuliffe, Jr.
-----------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
22
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Shearson Select Advisors Futures Fund
L.P. (the "Partnership") on Form 10-Q for the period ending June 30, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, David J. Vogel, President and Director of Citigroup Managed
Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/ David J. Vogel
- --------------------------
David J. Vogel
Citigroup Managed Futures LLC
President and Director
Date: August 12, 2004
23
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Shearson Select Advisors Futures Fund
L.P. (the "Partnership") on Form 10-Q for the period ending June 30, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Daniel R. McAuliffe, Jr., Chief Financial Officer and Director of
Citigroup Managed Futures LLC, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/ Daniel R. McAuliffe, Jr.
- --------------------------
Daniel R. McAuliffe, Jr.
Citigroup Managed Futures LLC
Chief Financial Officer and Director
Date: August 12, 2004
24