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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, 1997
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, 1997, 1996 and 1995, are reported in the Statement of Partners'
Capital on page F-5 under "Item 8. Financial Statements and Supplementary Data."
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership and is a wholly owned subsidiary of Smith
Barney Inc. ("SB"). SB acts as commodity broker for the Partnership. On November
28, 1997, Smith Barney Holdings Inc. was merged with Salomon Inc to form Salomon
Smith Barney Holdings Inc. ("SSBH"), a wholly owned subsidiary of Travelers
Group Inc. SB is a wholly owned subsidiary of SSBH.
The Partnership's trading of futures contracts on commodities is done
primarily on United States commodities exchanges and may, to a lesser extent, be
done on some foreign commodity exchanges.
2
It engages in such trading through a commodity brokerage account maintained with
SB.
Under the Limited Partnership Agreement of the Partnership (the
"Limited Partnership Agreement"), the General Partner 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.
At December 31, 1997, the General Partner had a management agreement
(the "Management Agreement") with John W. Henry & Company, Inc. ("the
"Advisor"). Sunrise Capital Management was terminated as an advisor to the
Partnership effective January 1, 1997. The Advisor is not affiliated with the
General Partner or SB. 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 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 Managerment Agreement)
earned on the Net Assets managed by the Advisor during each quarter.
3
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 SB
(the "Customer Agreement"), the Partnership is obligated to pay a monthly
commodity brokerage fee. Effective January 1, 1997, the Partnership pays SB 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 SB
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 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
4
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, 1997, 1996, 1995,
1994, and 1993 are set forth under "Item 6. Select Financial Data." Partnership
capital as of December 31, 1997 was $6,229,841.
(c) Narrative description of business.
See Paragraphs (a) and (b) above.
(i) through (x) - Not applicable.
(xi) through (xii) - No applicable.
(xiii) - The Partnership has no employees.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales. The Partnership does not engage in ales of goods or services,
and therefore this item is no applicable.
5
Item 2. Properties.
The Partnership does not own or lease any properties. The General Partner
operates out of facilities provided by its affiliate, SB.
Item 3. Legal Proceedings.
There are no pending legal proceedings to which the Partnership is a
party or to which any of its assets is subject. No material legal proceedings
affecting the Partnership were terminated during the fiscal year 1997. 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, 1997 was 599.
(c) Distribution. The Partnership did not declare a distribution in
1997 or 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, 1997, 1996,
1995, 1994, and 1993 and total assets at December 31, 1997,
1996, 1995, 1994, and 1993 were as follows:
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------- ---------
Net realized and unrealized
trading gains (losses) net
of brokerage commissions
and clearing fees of
$373,144, $493,435,
$618,168, $828,783, and
$1,057,289, respectively $ 895,110 $ 1,411,077 $ 1,706,320 $ (988,663) $ 2,188,701
Interest income 213,272 202,098 256,528 238,826 215,048
----------- ----------- ----------- ----------- -----------
$ 1,108,382 $ 1,613,175 $ 1,962,848 $ (749,837) $ 2,403,749
=========== =========== =========== =========== ===========
Net Income (loss) $ 723,608 $ 1,141,619 $ 1,610,495 $(1,128,851) $ 1,862,704
=========== =========== =========== =========== ===========
Increase (decrease) in net
asset value per unit $ 311.28 $ 423.08 $ 416.20 $ (250.84) $ 306.90
=========== =========== =========== =========== ===========
Total assets $ 6,503,549 $ 6,709,794 $ 6,537,230 $ 6,586,035 $10,415,370
=========== =========== =========== =========== ===========
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 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
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
9
Partner monitors and controls the Partnership's risk exposure on a daily basis
through financial, credit and risk management monitoring systems and,
accordingly believes that it has effective procedures for evaluating and
limiting the credit and market risks to which the Partnership is subject. (See
also Item 8. "Financial Statements and Supplementary Data.," for further
information on financial instrument risk included in the notes to financial
statements).
Other than the risks inherent in commodity futures trading, the
Partnership knows of no trends, demands, commitments, events or uncertainties
which will result in or which are reasonably likely to result in the
Partnership's liquidity increasing or decreasing 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
10
fundamental and 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 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 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
1997, 264 Units were redeemed for a total of $633,737. 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.
(c) Results of operations. For the year ended December 31, 1997, the
net asset value per Unit increased 13.1%, from $2,384.45 to $2,695.73. 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.
The Partnership experienced net trading gains of $1,268,254 before
commissions and expenses in 1997. Gains were recognized in the trading of
currencies, interest rates, metals and indices.
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 agricultural products.
11
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.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisor to
identify those price trends correctly. Price trends are influenced by, among
other things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. To
the extent that market trends exist and the Advisor is able to identify them,
the Partnership expects to increase capital through operations.
12
Item 8. Financial Statements and Supplementary Data.
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, 1997 and 1996. F-3
Statement of Income and Expenses for
the years ended December 31, 1997,
1996 and 1995 F-4
Statement of Partners' Capital for the
years ended December 31, 1997, 1996 and
1995. 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 (a Delaware Limited Partnership) as of December 31,
1997 and 1996, and the related statements of income and expenses and partners'
capital for the years ended December 31, 1997, 1996 and 1995. These financial
statements are the responsibility of the management of the General Partner. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management of the General Partner, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Shearson Select Advisors
Futures Fund as of December 31, 1997 and 1996, and the results of its operations
for the years ended December 31, 1997, 1996 and 1995, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
March 6, 1998
F-2
Shearson Select Advisors
Futures Fund
Statement of Financial Condition
December 31, 1997 and 1996
1997 1996
Assets:
Equity in commodity futures
trading account:
Cash and cash equivalents
(Note 3b) $6,178,150 $6,581,238
Net unrealized appreciation
on open futures contracts 306,078 109,713
---------- ----------
6,484,228 6,690,951
Interest receivable 19,321 18,843
---------- ----------
$6,503,549 $6,709,794
---------- ----------
Liabilities and Partners' Capital:
Liabilities:
Accrued expenses:
Commissions $ 32,518 $ 44,732
Management fees 21,498 22,103
Other 21,583 34,022
Incentive fees 68,714 175,680
Redemptions payable (Note 5) 129,395 293,287
---------- ----------
273,708 569,824
---------- ----------
Partners' capital (Notes 1, 5, and 6):
General Partner, 34 Unit
equivalents outstanding in
1997 and 1996 91,655 81,071
Limited Partners, 2,277 and
2,541 Units of Limited
Partnership Interest
outstanding in
1997 and 1996, respectively 6,138,186 6,058,899
---------- ----------
6,229,841 6,139,970
---------- ----------
$6,503,549 $6,709,794
---------- ----------
See notes to financial statements.
F-3
Shearson Select Advisors
Futures Fund
Statement of Income and Expenses
for the years ended
December 31, 1997, 1996 and 1995
1997 1996 1995
Income:
Net gains on trading
of commodity interests:
Realized gains
on closed positions $ 1,071,889 $ 2,091,285 $ 2,541,756
Change in unrealized
gains/ losses on
open positions 196,365 (186,773) (217,268)
----------- ----------- -----------
1,268,254 1,904,512 2,324,488
Less, Brokerage commissions
and clearing fees ($4,856,
$6,720 and $7,491,
respectively) (Note 3b) (373,144) (493,435) (618,168)
----------- ----------- -----------
Net realized and
unrealized gains 895,110 1,411,077 1,706,320
Interest income (Note 3b) 213,272 202,098 256,528
----------- ----------- -----------
1,108,382 1,613,175 1,962,848
Expenses:
Management fees (Note 3a) 241,865 240,634 258,861
Incentive fees (Note 3a) 101,180 175,680 41,244
Other expenses 41,729 55,242 52,248
----------- ----------- -----------
384,774 471,556 352,353
----------- ----------- -----------
Net income $ 723,608 $ 1,141,619 $ 1,610,495
----------- ----------- -----------
Net income per Unit of
Limited Partnership Interest
and General Partner Unit
equivalent (Notes 1 and 6) $ 311.28 $ 423.08 $ 416.20
----------- ----------- -----------
See notes to financial statements.
F-4
Shearson Select Advisors
Futures Fund
Statement of Partners' Capital for the
years ended December 31, 1997, 1996 and 1995
Limited General
Partners Partner Total
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
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
----------- ----------- -----------
See notes to financial statements.
F-5
Shearson Select Advisors
Futures Fund
Notes to Financial Statements
1. Partnership Organization:
Shearson Select Advisors Futures Fund (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 and is a wholly owned subsidiary of
Smith Barney Inc. ("SB"). SB acts as commodity broker for the Partnership
(see Note 3b). On November 28, 1997, Smith Barney Holdings Inc. was merged
with Salomon Inc to form Salomon Smith Barney Holdings Inc. ("SSBH"), a
wholly owned subsidiary of Travelers Group Inc. SB is a wholly owned
subsidiary of SSBH.
The General Partner and each limited partner share in the profits and losses
of the Partnership in proportion to the amount of Partnership interest owned
by each except that no limited partner shall be liable for obligations of
the Partnership in excess of his initial capital contribution and profits,
if any, net of distributions.
The Partnership will be liquidated upon the first to occur of the following:
December 31, 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
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 Agreement 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 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 of the Partnership.
At December 31, 1997, 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 earned on the Net Assets managed by the Advisor.
Effective January 1, 1997, Sunrise Capital Management was terminated as
an advisor to the Partnership.
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
F-7
with orders placed by the Advisor. Effective January 1, 1997, the
Partnership pays SB 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 SB a monthly
brokerage fee equal to .833% of month end net assets (10% per year) prior
to July 1, 1995. The Partnership pays for all clearing fees but not floor
brokerage. All of the Partnership's cash is deposited in the
Partnership's account at SB. The Partnership's cash is deposited by SB in
segregated bank accounts as required by Commodity Futures Trading
Commission regulations. At December 31, 1997 and 1996, the amount of cash
held for margin requirements was $747,392 and $523,907, 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, 1997 and 1996 was $306,078 and $109,713,
respectively, and the average fair value during the years then ended, based
on monthly calculation, was $331,109 and $547,563, 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
6. Net Asset Value Per Unit:
Changes in the net asset value per Unit during the years ended December 31,
1997, 1996, and 1995 were as follows:
1997 1996 1995
Net realized and
unrealized gains $ 382.44 $ 520.78 $ 442.66
Interest income 86.74 69.77 72.01
Expenses (157.90) (167.47) (98.47)
--------- --------- ---------
Increase for year 311.28 423.08 416.20
Net asset value per
Unit, beginning of year 2,384.45 1,961.37 1,545.17
--------- --------- ---------
Net asset value per
Unit, end of year $2,695.73 $2,384.45 $1,961.37
--------- --------- ---------
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
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, 1997, the notional or
contractual amounts of the Partnership's commitment to purchase and sell
these instruments was $27,377,209 and $42,685,981, respectively. All of
these instruments mature within one year of December 31, 1997. However, due
F-10
to the nature of the Partnership's business, these instruments may not be
held to maturity. At December 31, 1997, the fair value of the Partnership's
derivatives, including options thereon, was $306,078, as detailed below.
December 31, 1997
-------------------------------------
Notional or Contractual
Amount of Commitments
To Purchase To Sell Fair Value
Currencies
- -OTC Contracts $ 6,940,963 $13,511,341 $ (27,629)
Interest Rate
Non-U.S 13,830,230 26,125,122 16,152
Interest Rate U.S. 5,864,656 -- 46,500
Metals 741,360 2,480,550 224,630
Indices - 568,968 46,425
----------- ----------- -----------
Totals $27,377,209 $42,685,981 $ 306,078
----------- ----------- -----------
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, and the fair value of the
Partnership's derivatives, including options thereon, was $109,713 as
detailed below.
December 31, 1996
-------------------------------------
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 - (12,595)
Interest Rate
Non-U.S 21,301,371 8,623,530 (11,939)
Metals - 3,586,870 74,070
Indices - 606,034 22,080
----------- ----------- -----------
Totals $31,027,760 $19,166,823 $ 109,713
----------- ----------- -----------
F-11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
During the last two fiscal years and any subsequent interim
period, no independent accountant who was engaged as the principal accountant
to audit the Partnership's financial statements has resigned or was dismissed.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no officers or directors and its affairs are managed by
its General Partner, Smith Barney Futures Management Inc. Investment decisions
are made by John W. Henry & Company, Inc. (The "Advisor"). Effective January 1,
1997, Sunrise Capital Management was terminated as an advisor to the
Partnership.
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, 1997, SB earned
$373,144 in brokerage commissions and clearing fees. Management fees paid or
payable to the General Partner were $241,865 and the General Partner also earned
$101,180 in incentive fees in 1997. The Advisor was 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 of Limited Partnership Interest (1.5%) as of December 31,
1997.
(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 31,1997 and 1996.
Statement of Income and Expenses for the years ended
December 31, 1997, 1996 and 1995.
Statement of Partners' Capital for the years end December
31, 1997, 1996 and 1995.
14
(2) Financial Statement Schedules: Financial Data
Schedule for the year ended December 31, 1997.
(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).
10.28 - Letter terminating Management Agreement with
Sunrise Capital Management dated December 23,
1996 (filed herein).
10.29 - Letters extending Management Agreement with
John W. Henry & Company, Inc. (file herein).
(b) Reports on 8-K: None Filed.
20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 24th day of March 1998.
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/ Daniel R. McAuliffe, Jr. /s/ Steve J. Keltz
Daniel R. McAuliffe, Jr. Steve J. Keltz
Director Secretary and Director
/s/ Shelley Ullman
Shelley Ullman
Director
21