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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, 1996
Commission File Number 0-16627
SHEARSON SELECT ADVISORS FUTURES FUND
(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 Inc.
390 Greenwich St. - 1st Fl.
New York, New York 10013
(Address and Zip Code of principal executive offices)
(212) 723-5424
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 50,000 Units
of Limited
Partnership
Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K [ ]
PART I
Item 1. Business.
(a) General development of business. Shearson Select Advisors Futures Fund
(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, 1996, 1995 and 1994, are reported in the Statements of Partners'
Capital on page F-5 under "Item 8. Financial Statements and Supplementary Data."
The Partnership's trading of futures contracts on commodities is done
primarily on United States commodities exchanges and may, to a lesser extent, be
done on some foreign commodity exchanges. It engages in such trading through a
commodity brokerage account maintained with its commodity broker, Smith Barney
Inc. ("SB").
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. SB is an affiliate of the General
Partner.
Under the Limited Partnership Agreement of the Partnership (the "Limited
Partnership Agreement"), the General Partner has sole
2
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 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 Net Trading Profits of the Partnership.
At December 31, 1996, the General Partner had management agreements (the
"Management Agreements") with Sunrise Capital Management and John W. Henry &
Company, Inc. (collectively, the "Advisors"), none of which is affiliated with
the others or with the General Partner. Reference should be made to "Item 8.
Financial Statements and Supplementary Data." for further information regarding
the Advisors included in the notes to the financial statements.
The Management Agreements require the General Partner to pay the Advisors
a monthly management fee of 1/3 of 1% of the Net Assets of the Partnership (of
4% per year) managed by each Advisor and an incentive fee equal to 10% of the
Net Trading Profits earned on the Net Assets managed by each Advisor during each
quarter. The incentive fees paid to the Advisors will be paid out of the General
Partner's own funds to the extent that incentive fees owed to particular
Advisors exceed 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 all the
3
Advisors, not on any individual Advisor's profits.
Pursuant to the terms of the customer agreement entered into with SB (the
"Customer Agreement"), the Partnership is obligated to pay a monthly commodity
brokerage fee. Effective July 1, 1995, the Partnership pays SB a monthly
brokerage fee equal to .667% of month end net assets (8% per year) in lieu of
brokerage commissions on a per trade basis. Brokerage commissions were reduced
as of this date and the Partnership previously paid SB a monthly brokerage fee
equal to .833% of month end net assets (10%) per year. The Partnership will pay
for clearing fees, but not for floor brokerage which will be borne by SB. The
Customer Agreement between the Partnership and SB gives the Partnership the
legal right to net unrealized gains and losses. Reference should be made to
"Item 8. Financial Statements and Supplementary Data." for further information
regarding the brokerage commissions included in the notes to the financial
statements.
In addition, SB 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
4
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, 1996, 1995, 1994, 1993, and 1992 are
set forth under "Item 6. Select Financial Data." Partnership capital as of
December 31, 1996 was $6,139,970.
(c) Narrative description of business.
See Paragraphs (a) and (b) above.
(i) through (x) - Not applicable.
(xi) through (xii) - Not applicable.
(xiii) - The Partnership has no employees.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales. The Partnership does not engage in
sales of goods or services, and therefore this item is not applicable.
Item 2. Properties.
The Partnership does not own or lease any properties. The General
Partner operates out of facilities provided by its affiliate, SB.
Item 3. Legal Proceedings.
There are no pending legal proceedings to which the Partnership is a
party or to which any of its assets is subject. No material legal proceedings
affecting the Partnership were terminated during the fiscal year 1996.
5
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, 1996 was 661.
(c) Distribution. The Partnership did not declare a
distribution in 1996.
6
Item 6. Select 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, 1996, 1995, 1994, 1993, and 1992 and
total assets at December 31, 1996, 1995, 1994, 1993, and 1992 were as
follows:
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------- -------------
Net realized and unrealized
trading gains (losses) net
of brokerage commissions and
clearing fees of $493,435,
$618,168, $828,783, $1,057,289,
and $1,036,415, respectively $1,411,077 $ 1,706,320 $ (988,663) $ 2,188,701 $(1,251,991)
Interest income 202,098 256,528 238,826 215,048 249,629
----------- ------------ ------------ ------------ -----------
$1,613,175 $ 1,962,848 $ (749,837) $ 2,403,749 $(1,002,362)
=========== ============ ============ ============ ============
Net Income (loss) $1,141,619 $ 1,610,495 $(1,128,851) $ 1,862,704 $(1,452,252)
=========== ============ ============ ============ ============
Increase (decrease) in net
asset value per unit $423.08 $416.20 $(250.84) $306.90 $(174.11)
======== ======== ========= ======== =========
Total assets $6,709,794 $ 6,537,230 $ 6,586,035 $10,415,370 $ 9,874,510
=========== ============ ============ ============ ===========
7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(a) Liquidity. The Partnership does not engage in sales of goods or
services. Its only assets are its equity in its commodity futures trading
account, consisting of cash and cash equivalents, net unrealized appreciation
(depreciation) on open futures contracts and 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) The Partnership diversifies its positions among various
commodities. 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.
8
(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 Advisors may, from time to time, employ trading strategies such
as spreads or straddles on behalf of the Partnership. The term "spread" or
"straddle" describes a commodity futures trading strategy involving the
simultaneous buying and selling of 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
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
9
the Partnership's risk exposure on a daily basis through financial, credit and
risk management monitoring systems and, accordingly believes that it has
effective procedures for evaluating and limiting the credit and market risks to
which the Partnership is subject. (See also Item 8. "Financial Statement 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 General Partner may, in its
discretion, cause the Partnership to 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
10
technical factors which the Partnership's Advisors may or may 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 and the ability of the Advisors to identify and take
advantage of price movements in the commodity markets, in addition to the level
of Net Assets maintained. The amount of interest income payable by SB is
dependent upon interest rates over which the Partnership has no control. No
forecast can be made as to the level of redemptions in any given period. In
1996, 502 Units were redeemed for a total of $1,036,793. In 1995, 890 Units were
redeemed for a total of $1,705,059 which includes the General Partner's
redemption representing 38 Unit equivalents totaling $74,532. In 1994, 1,140
Units were redeemed for a total of $1,913,674 which includes the General
Partner's redemption representing 435 Unit equivalents totaling $726,072.
(c) Results of operations. For the year ended December 31, 1996, the net
asset value per Unit increased 21.6%, from $1,961.37 to $2,384.45. For the year
ended December 31, 1995, the net asset value per Unit increased 26.9% from
$1,545.17 to $1,961.37. For the year ended December 31, 1994, the net asset
value per Unit decreased 14.0%, from $1,796.01 to $1,545.17.
The Partnership experienced net trading gains of $1,904,512 before
commissions and expenses in 1996. Gains were recognized in the trading of
currencies, energy products, interest rates and metals, and were partially
offset by losses in indices and
11
agricultural products.
The Partnership experienced net trading gains of $2,324,488 before
commissions and expenses in 1995. Realized trading gains of $2,541,756 were
attributable to gains incurred in the trading of interest rates, currencies,
stock indices and agricultural commodity futures. However, these realized
trading gains were partially offset by realized trading losses experienced in
the trading of commodity futures in energy and precious metals.
The Partnership experienced net trading losses of $159,880 before
commissions and expenses in 1994. Realized trading losses of $33,222 were
attributable to trading in financial, industrial, stock indices and energy
commodity futures. However, these realized trading losses were partially offset
by realized trading gains experienced in the trading of commodity futures in
agricultural and precious metals.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisors to
identify those price trends correctly. Price trends are influenced by, among
other things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. To
the extent that market trends exist and the Advisors are able to identify them,
the Partnership expects to increase capital through operations.
12
Item 8. Financial Statements and Supplementary Data.
SHEARSON SELECT ADVISORS FUTURES FUND
INDEX TO FINANCIAL STATEMENTS
Page
Number
Report of Independent Accountants. F-2
Financial Statements:
Statement of Financial Condition at
December 31, 1996 and 1995. F-3
Statement of Income and Expenses for
the years ended December 31, 1996,
1995 and 1994 F-4
Statement of Partners' Capital for the
years ended December 31, 1996, 1995 and
1994. F-5
Notes to Financial Statements. F-6 - F-11
F-1
Continued
Report of Independent Accountants
To the Partners of
Shearson Select Advisors
Futures Fund:
We have audited the accompanying statement of financial condition of SHEARSON
SELECT ADVISORS FUTURES FUND (formerly Shearson Lehman Select Advisors Futures
Fund L.P.) (a Delaware Limited Partnership) as of December 31, 1996 and 1995,
and the related statements of income and expenses and partners' capital for the
years ended December 31, 1996, 1995 and 1994. These financial statements are the
responsibility of the management of the General Partner. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management of the General Partner, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Shearson Select Advisors
Futures Fund as of December 31, 1996 and 1995, and the results of its operations
for the years ended December 31, 1996, 1995 and 1994, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 28, 1997
F-2
Shearson Select Advisors
Futures Fund
Statement of Financial Condition
December 31, 1996 and 1995
1996 1995
Assets:
Equity in commodity futures
trading account:
Cash and cash equivalents (Note 3b) $6,581,238 $6,220,627
Net unrealized appreciation
on open futures contracts 109,713 296,486
---------- ----------
6,690,951 6,517,113
Interest receivable 18,843 20,117
---------- ----------
$6,709,794 $6,537,230
========== ==========
Liabilities and Partners'
Capital:
Liabilities:
Accrued expenses:
Commissions $ 44,732 $ 43,582
Management fees 22,103 21,568
Other 34,022 23,087
Incentive fees 175,680
Redemptions payable (Note 5) 293,287 413,849
---------- ----------
569,824 502,086
---------- ----------
Partners' capital (Notes 1, 5, and 6):
General Partner, 34 Unit
equivalents outstanding in
1996 and 1995 81,071 66,687
Limited Partners, 2,541 and
3,043 Units of Limited
Partnership Interest
outstanding, in
1996 and 1995, respectively 6,058,899 5,968,457
---------- ----------
6,139,970 6,035,144
---------- ----------
$6,709,794 $6,537,230
========== ==========
See notes to financial statements.
F-3
Shearson Select Advisors
Futures Fund
Statement of Income and Expenses
for the years ended
December 31, 1996, 1995 and 1994
1996 1995 1994
Income:
Net gains (losses) on
trading of commodity
interests:
Realized gains (losses)
on closed positions $ 2,091,285 $ 2,541,756 $ (33,222)
Change in unrealized
gains/losses
on open positions (186,773) (217,268) (126,658)
----------- ----------- -----------
1,904,512 2,324,488 (159,880)
Less, Brokerage commissions
and clearing fees ($6,720,
$7,491 and $10,714,
respectively) (Note 3b) (493,435) (618,168) (828,783)
----------- ----------- -----------
Net realized and
unrealized gains (losses) 1,411,077 1,706,320 (988,663)
Interest income (Note 3b) 202,098 256,528 238,826
----------- ----------- -----------
1,613,175 1,962,848 (749,837)
----------- ----------- -----------
Expenses:
Management fees (Note 3a) 240,634 258,861 314,745
Incentive fees (Note 3a) 175,680 41,244 10,601
Other expenses 55,242 52,248 53,668
----------- ----------- -----------
471,556 352,353 379,014
----------- ----------- -----------
Net income (loss) $ 1,141,619 $ 1,610,495 $(1,128,851)
=========== =========== ===========
Net income (loss) per Unit
of Limited Partnership
Interest and General Partner Unit
equivalent (Notes 1 and 6) $ 423.08 $ 416.20 $ (250.84)
=========== =========== ===========
See notes to financial statements.
F-4
Shearson Select Advisors
Futures Fund
Statement of Partners' Capital for the
years ended December 31, 1996, 1995 and 1994
Limited General
Partners Partner Total
Partners' capital at
December 31, 1993 $ 8,261,656 $ 910,577 $ 9,172,233
Net loss (1,055,598) (73,253) (1,128,851)
Redemption of 705
Units of Limited
Partnership Interest
and General Partner
redemption
representing
435 Unit equivalents (1,187,602) (726,072) (1,913,674)
----------- ----------- -----------
Partners' capital at
December 31, 1994 6,018,456 111,252 6,129,708
Net income 1,580,528 29,967 1,610,495
Redemption of 852
Units of Limited
Partnership Interest
and General Partner
redemption representing
38 Unit equivalents (1,630,527) (74,532) (1,705,059)
----------- ----------- -----------
Partners' capital at
December 31, 1995 5,968,457 66,687 6,035,144
Net income 1,127,235 14,384 1,141,619
Redemption of 502
Units of Limited
Partnership Interest (1,036,793) (1,036,793)
----------- ----------- -----------
Partners' capital at
December 31, 1996 $ 6,058,899 $ 81,071 $ 6,139,970
=========== =========== ===========
See notes to financial statements.
F-5
Shearson Select Advisors
Futures Fund
Notes to Financial Statements
1. Partnership Organization:
Shearson Select Advisors Futures Fund, formerly Shearson Lehman 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 Inc. acts as the general partner (the
"General Partner") of the Partnership. Smith Barney Inc. ("SB"), an
affiliate of the General Partner, acts as commodity broker for the
Partnership (see Note 3b).
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 market value for those
commodity interests for which market quotations are readily available or at
fair value on the last business day of the year. Investments in commodity
interests denominated in foreign currency are translated into U.S. dollars
at the exchange rates prevailing on the last business day of the year.
Realized gain (loss) and changes in unrealized values on commodity
interests are recognized in the period in which the contract is closed or
the changes occur and are included in net gains (losses) on trading of
commodity interests.
F-6
Shearson Select Advisors
Futures Fund
Notes to Financial Statements
b.Income taxes have not been provided as each partner is individually liable
for the taxes, if any, on his share of the Partnership's income and
expenses.
c.The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.
3. Agreements:
a.Management Agreements and Limited Partnership Agreement:
Under the Limited Partnership Agreement of the Partnership, 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 4% per year of the month-end Net Assets of the
Partnership managed by each Advisor, and an incentive fee payable quarterly
equal to 15% of Net Trading Profits of the Partnership.
At December 31, 1996 the General Partner had Management Agreements with the
following Advisors: Sunrise Capital Management and John W. Henry & Company,
Inc. The Management Agreements require the General Partner to pay the
Advisors a management fee payable monthly of 4% per annum of the Net Assets
of the Partnership managed by each Advisor and an incentive fee payable
quarterly equal to 10% of Net Trading Profits earned on the Net Assets
managed by each Advisor.
F-7
Shearson Select Advisors
Futures Fund
Notes to Financial Statements
b.Customer Agreement
The Partnership has entered into a Customer Agreement which was assigned to
SB whereby SB provides services which include, among other things, the
execution of transactions for the Partnership's account in accordance with
orders placed by the Advisors. Effective July 1, 1995, the Partnership pays
SB a monthly brokerage fee equal to .667% of month-end net assets (8% per
year) in lieu of brokerage commissions on a per trade basis. Brokerage
commissions were reduced as of this date and the Partnership previously
paid SB a monthly brokerage fee equal to .833% of month end net assets (10%
per year). The Partnership pays for all clearing fees but not floor
brokerage. All of the Partnership's assets are deposited in the
Partnership's account at SB. The Partnership's funds are deposited by SB in
segregated bank accounts as required by Commodity Futures Trading
Commission regulations. At December 31, 1996 and 1995, the amount of cash
held for margin requirements was $523,907 and $771,150, respectively. SB
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 SB gives the Partnership the legal right to net
unrealized gains and losses. The Customer Agreement may be terminated upon
notice by either party.
4. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a variety
of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's trading
activity are shown in the statement of income and expenses.
All of the commodity interests owned by the Partnership are held for trading
purposes. The fair value of these commodity interests, including options
thereon, at December 31, 1996 and 1995 was $109,713 and $296,486,
respectively, and the average fair value during the years then ended, based
on monthly calculation, was $547,563 and $464,853 respectively.
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.
F-8
Shearson Select Advisors
Futures Fund
Notes to Financial Statements
6. Net Asset Value Per Unit:
Changes in the net asset value per Unit during the years ended December 31,
1996, 1995, and 1994 were as follows:
1996 1995 1994
Net realized and
unrealized gains
(losses) $ 520.78 $ 442.66 $ (222.14)
Interest income 69.77 72.01 50.70
Expenses (167.47) (98.47) (79.40)
--------- --------- ---------
Increase (decrease)
for year 423.08 416.20 (250.84)
Net asset value per
Unit, beginning of year 1,961.37 1,545.17 1,796.01
--------- --------- ---------
Net asset value per
Unit, end of year $2,384.45 $1,961.37 $1,545.17
========= ========= =========
7. Financial Instrument Risk:
The Partnership is party to financial instruments with off-balance sheet
risk, including derivative financial instruments and derivative commodity
instruments, in the normal course of its business. These financial
instruments include forwards, futures and options, whose value is based upon
an underlying asset, index, or reference rate, and generally represent future
commitments to exchange currencies or cash flows, to purchase or sell other
financial instruments at specific terms at specified future dates, or, in the
case of derivative commodity instruments, to have a reasonable possibility to
be settled in cash or with another financial instrument. These instruments
may be traded on an exchange or over-the-counter ("OTC"). Exchange traded
instruments are standardized and include futures and certain option
contracts. OTC contracts are negotiated between contracting parties and
include forwards and certain options. Each of these instruments is subject to
various risks similar to those related to the underlying financial
instruments including market and credit risk. In general, the risks
associated with OTC contracts are greater than those associated with exchange
traded instruments because of the greater risk of default by the counterparty
to an OTC contract.
F-9
Shearson Select Advisors
Futures Fund
Notes to Financial Statements
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including
interest and foreign exchange rate movements and fluctuations in commodity or
security prices. Market risk is directly impacted by the volatility and
liquidity in the markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of a
counterparty to perform according to the terms of a contract. Credit risk
with respect to exchange traded instruments is reduced to the extent that an
exchange or clearing organization acts as a counterparty to the transactions.
The Partnership's risk of loss in the event of counterparty default is
typically limited to the amounts recognized in the statement of financial
condition and not represented by the contract or notional amounts of the
instruments. The Partnership has concentration risk because the sole
counterparty or broker with respect to the Partnership's assets is SB.
The General Partner monitors and controls the Partnership's risk exposure on
a daily basis through financial, credit and risk management monitoring
systems and, accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the Partnership
is subject. These monitoring systems allow the General Partner to
statistically analyze actual trading results with risk adjusted performance
indicators and correlation statistics. In addition, on-line monitoring
systems provide account analysis of futures, forwards and options positions
by sector, margin requirements, gain and loss transactions and collateral
positions
The notional or contractual amounts of these instruments, while not recorded
in the financial statements, reflect the extent of the Partnership's
involvement in these instruments. At December 31, 1996, the notional or
contractual amounts of the Partnership's commitment to purchase and sell
these instruments was $31,027,760 and $19,166,823, respectively. All of these
instruments mature within one year of December 31, 1996. However, due to the
nature of the Partnership's business, these instruments may not be held to
maturity. At December 31, 1996, the fair value of the Partnership's
derivatives, including options thereon, was $109,713, as detailed below.
F-10
Shearson Select Advisors
Futures Fund
Notes to Financial Statements
Notional or Contractual
Amount of Commitments
To Purchase To Sell Fair Value
Currencies
-OTC Contracts $ 8,474,920 $ 6,350,389 $ 38,097
Interest Rate U.S. 1,251,469 0 (12,595)
Interest Rate
Non-U.S. 21,301,371 8,623,530 (11,939)
Metals 0 3,586,870 74,070
Indices 0 606,034 22,080
----------- ----------- -----------
Totals $31,027,760 $19,166,823 $ 109,713
=========== =========== ===========
8. Subsequent event:
Effective January 1, 1997, Sunrise Capital Management was terminated as an
Advisor to the Partnership and the assets previously managed by Sunrise were
allocated to the Partnership's advisor, John W. Henry & Company, Inc.
In addition, also effective January 1, 1997, brokerage commissions have been
reduced to .5% of month-end net assets (6% per year) from .667% of month-end
net assets (8% per year).
F-11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
During the last two fiscal years and any subsequent interim period, no
independent accountant who was engaged as the principal accountant to audit the
Partnership's financial statements has resigned or was dismissed.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no officers or directors and its affairs are
managed by its General Partner, Smith Barney Futures Management Inc. At December
31, 1996 the General Partner has selected two Advisors, neither of which is
affiliated with the General Partner or its parent. The Advisors selected are
Sunrise Commodities Inc. and John W. Henry & Company, Inc.
Item 11. Executive Compensation.
The Partnership has no directors or officers. Its affairs are
managed by Smith Barney Futures Management Inc., its General Partner, which
receives compensation for its services, as set forth under "Item 1. Business."
SB, an affiliate of the General Partner, is the commodity broker for the
Partnership and receives brokerage commissions for such services, as described
under "Item 1. Business." For the year ended December 31, 1996, SB earned
$493,435 in brokerage commissions and clearing fees and $240,634 in management
fees were paid or were payable to the General Partner. The General Partner also
earned $175,680 in incentive fees in 1996. The Advisors are compensated for
management and incentive fees from the General Partner's own funds.
13
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 (1.3%) as of December 31, 1996.
(c). Changes in control. None.
Item 13. Certain Relationships and Related Transactions.
Smith Barney Inc. and Smith Barney Futures Management Inc. would be
considered promoters for purposes of Item 404 (d) of Regulation S-K. The nature
and the amounts of compensation each promoter will receive from the Partnership
are set forth under "Item 1. Business." and "Item 11. Executive Compensation
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, 1996 and 1995.
Statement of Income and Expenses
for the years ended December 31, 1996,
1995 and 1994.
Statement of Partners' Capital
for the years ended December 31, 1996,
1995 and 1994.
14
(2) Financial Statement Schedules: Financial Data
Schedule for the year ended December 31, 1996.
(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).
15
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).
16
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).
17
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).
10.17 - Letter extending Management Agreement with John
W. Henry & Co., Inc. dated July 16, 1991 (filed
18
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).
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
19
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).
(b) Reports on 8-K: None Filed.
20
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
21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 24th day of March 1997.
SHEARSON SELECT ADVISORS FUTURES FUND
By: Smith Barney Futures Management Inc.
(General Partner)
By /s/ David J. Vogel
David J. Vogel, President & Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/s/ David J. Vogel /s/ Jack H. Lehman III
David J. Vogel, Jack H. Lehman III
Director, Principal Executive Chairman and Director
Officer and President
/s/ Michael Schaefer /s/ Daniel A. Dantuono
Michael Schaefer Daniel A. Dantuono
Director Treasurer, Chief Financial
Officer and Director
/s/ Philip M. Waterman, Jr. /s/ Daniel R. McAuliffe, Jr.
Philip M. Waterman, Jr. Daniel R. McAuliffe, Jr.
Director and Vice-Chairman Director
/s/ Steve J. Keltz /s/ Shelley Ullman
Steve J. Keltz Shelley Ullman
Secretary and Director Director
22