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 September 30, 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)
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
<PAGE>
SHEARSON SELECT ADVISORS FUTURES FUND
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
September 30, 1996 and December 31, 1995 3
Statements of Income and Expenses and
Partners' Capital for the Three and Nine
Months ended September 30, 1996 and 1995 4
Notes to Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9 - 10
PART II - Other Information 11
2
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PART I
Item 1. Financial Statements
SHEARSON SELECT ADVISORS FUTURES FUND
STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, DECEMBER 31,
ASSETS 1996 1995
-------------- -----------
(Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $ 5,089,349 $ 6,220,627
Net unrealized appreciation
on open futures contracts 521,093 296,486
---------- ----------
5,610,442 6,517,113
Interest receivable 15,499 20,117
---------- ----------
$ 5,625,941 $ 6,537,230
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses:
Commissions $ 37,506 $ 43,582
Management fees 18,552 21,568
Other 22,825 23,087
Redemptions payable 269,920 413,849
---------- ----------
348,803 502,086
---------- ----------
Partners' capital
General Partner, 34 Unit equivalents
outstanding in 1996 and 1995 66,502 66,687
Limited Partners 2,664 and 3,043
Units of Limited Partnership Interest
outstanding in 1996 and 1995,respectively 5,210,636 5,968,457
---------- ----------
5,277,138 6,035,144
---------- ----------
$ 5,625,941 $ 6,537,230
========== ==========
See Notes to Financial Statements.
3
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SHEARSON SELECT ADVISORS FUTURES FUND
STATEMENTS OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- ------------- ----------- -----------
1996 1995 1996 1995
--------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
futures:
Realized gains (losses) on closed positions $ (242,382) $ 124,454 $ 184,240 $ 2,530,285
Change in unrealized gains /losses on
open positions 293,970 (139,556) 224,607 (593,150)
----------- ----------- ----------- -----------
51,588 (15,102) 408,847 1,937,135
Less, brokerage commissions and clearing fees
($1,681, $1,209, $5,004 and $6,188, respectively) (113,410) (133,335) (359,977) (488,618)
----------- ----------- ----------- -----------
Net realized and unrealized gains (losses) (61,822) (148,437) 48,870 1,448,517
Interest income 49,009 62,786 151,890 196,551
----------- ----------- ----------- -----------
(12,813) (85,651) 200,760 1,645,068
----------- ----------- ----------- -----------
Expenses:
Management fees 55,213 65,361 175,504 195,441
Other 13,193 12,890 39,756 38,980
Incentive fees - - - 41,244
----------- ----------- ----------- -----------
68,406 78,251 215,260 275,665
----------- ----------- ----------- -----------
Net income (loss) (81,219) (163,902) (14,500) 1,369,403
Redemptions (269,920) (241,670) (743,506) (1,291,210)
----------- ----------- ----------- -----------
Net increase (decrease) in Partners' capital (351,139) (405,572) (758,006) 78,193
Partners' capital, beginning of period 5,628,277 6,613,473 6,035,144 6,129,708
----------- ----------- ----------- -----------
Partners' capital, end of period $ 5,277,138 $ 6,207,901 $ 5,277,138 $ 6,207,901
=========== =========== =========== ===========
Net Asset Value per Unit
(2,698 and 3,288 Units outstanding at
September 30, 1996 and 1995, respectively) $ 1,955.94 $ 1,888.05 $ 1,955.94 $ 1,888.05
=========== =========== =========== ===========
Net income per Unit of Limited Partnership
Interest and General Partnership Unit equivalent $ (28.64) $ (47.98) $ (5.43) $ 342.88
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
4
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SHEARSON SELECT ADVISORS FUTURES FUND
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
1. General
Shearson Select Advisors Futures Fund, formerly Shearson Lehman Select
Advisors Futures Fund L.P. (the "Partnership") was organized under the laws of
the State of Delaware on February 10, 1987. The Partnership engages in the
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 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 July 1, 1987.
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. All trading
decisions are being made for the Partnership by John W. Henry & Company, Inc.,
and Sunrise Capital Management, Inc. (collectively, the "Advisors").
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 September 30, 1996 and the results of its operations for the three
and nine months ended September 30, 1996 and 1995. These financial statements
present the results of interim periods and do not include all disclosures
normally provided in annual financial statements. It is suggested that these
financial statements be read in conjunction 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, 1995.
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.
5
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SHEARSON SELECT ADVISORS FUTURES FUND
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and nine months ended
September 30, 1996 and 1995 were as follows:
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
Net realized and unrealized
gains (losses) $ (21.80) $ (43.45) $ 15.88 $ 364.24
Interest income 17.28 18.38 51.16 53.78
Expenses (24.12) (22.91) (72.47) (75.14)
--------- --------- --------- ---------
Increase (decrease) for
period (28.64) (47.98) (5.43) 342.88
Net Asset Value per Unit,
beginning of period 1,984.58 1,936.03 1,961.37 1,545.17
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $1,955.94 $1,888.05 $1,955.94 $1,888.05
========= ========= ========= =========
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.
The Customer Agreement between the Partnership and SB 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 fair value of these commodity interests, including options
thereon, at September 30, 1996 was $521,093 and the average fair value during
the nine months then ended, based on monthly calculation, was $371,059.
4. 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
6
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and options, whose value is based upon an underlying asset, index, or reference
rate, and generally represent future commitments to exchange currencies or cash
flows, to purchase or sell other financial instruments at specific terms at
specified future dates, or, in the case of derivative commodity instruments, to
have a reasonable possibility to be settled in cash or with another financial
instrument. These instruments may be traded on an exchange or over-the-counter
("OTC"). Exchange traded instruments are standardized and include futures and
certain option contracts. OTC contracts are negotiated between contracting
parties and include forwards and certain options. Each of these instruments is
subject to various risks similar to those related to the underlying financial
instruments including market and credit risk. In general, the risks associated
with OTC contracts are greater than those associated with exchange traded
instruments because of the greater risk of default by the counterparty to an OTC
contract.
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including interest
and foreign exchange rate movements and fluctuations in commodity or security
prices. Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counterparty to the transactions. The
Partnership's risk of loss in the event of counterparty default is typically
limited to the amounts recognized in the statement of financial condition and
not represented by the contract or notional amounts of the instruments. The
Partnership has concentration risk because the sole counterparty or broker with
respect to the Partnership's assets is SB.
The General Partner monitors and controls the Partnership's risk exposure
on a daily basis through financial, credit and risk management monitoring
systems and, accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the Partnership is
subject. These monitoring systems allow the General Partner to statistically
analyze actual trading results with risk adjusted performance indicators and
correlation statistics. In addition, on-line monitoring systems provide account
analysis of futures, forwards and options positions by sector, margin
requirements, gain and loss 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 September 30, 1996, the notional or
contractual amounts of the
7
<PAGE>
Partnership's commitment to purchase and sell these instruments was $67,455,083
and $19,373,996 respectively, as detailed below. All of these instruments mature
within one year of September 30, 1996. However, due to the nature of the
Partnership's business, these instruments may not be held to maturity. At
September 30, 1996, the Partnership had net unrealized trading gains of $521,093
as detailed below.
NOTIONAL OR CONTRACTUAL NET
AMOUNT OF COMMITMENTS UNREALIZED
TO PURCHASE TO SELL GAIN/(LOSS)
Currencies
- - Exchange Traded contracts $ 584,725 $ 2,686,850 $ 28,750
- - OTC Contracts 7,593,175 8,443,524 42,538
Energy 350,780 0 29,540
Interest Rates-US 0 1,919,250 (46,125)
Interest Rates-Non US 58,442,273 0 371,279
Grains 0 159,852 198
Indices 484,130 0 (337)
Metals 0 6,164,520 95,250
----------- ---------- --------
Totals $67,455,083 $19,373,996 $521,093
=========== =========== ========
8
<PAGE>
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 and cash equivalents, net unrealized appreciation (depreciation) on open
futures and forward 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. While
substantial losses could lead to a decrease in liquidity, no such losses
occurred during the second quarter of 1996.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by gains or losses on commodity futures
trading, expenses, interest income, redemptions of Units and distributions of
profits, if any.
For the nine months ended September 30, 1996, Partnership capital decreased
12.6% from $6,035,144 to $5,277,138. This decrease was attributable to a
redemption of 379 Units resulting in an outflow of $743,506 and a net loss from
operations of $14,500 for the nine months ended September 30, 1996. Future
redemptions can impact the amount of funds available for investments in
commodity contract positions in subsequent periods.
Results of Operations
During the Partnership's third quarter of 1996, the net asset value per
Unit decreased 1.4% from $1,984.58 to $1,955.94, as compared to the third
quarter of 1995 when the Net Asset Value per Unit decreased 2.5%. The
Partnership experienced a net trading gain before commissions and expenses in
the third quarter of 1996 of $51,588. Gains were recognized in the trading of
interest rates, energy products and metals and were partially offset by losses
in currencies, agricultural products and indices. The Partnership experienced a
net trading loss before commissions and expenses in the third quarter of 1995 of
$15,102. Losses were recognized in the trading of metals, indices, agricultural
products and interest rates and were partially offset by gains in currencies.
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 correctly those price trends. Price trends are influenced by,
9
<PAGE>
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.
Interest income on 70% of the Partnership's daily average equity was earned
at the monthly average 13-week U.S. Treasury bill yield. Interest income for the
three and nine months ended September 30, 1996 decreased by $13,777 and $44,661,
respectively, as compared to the corresponding periods in 1995. The decrease in
interest income is primarily attributable to the decrease in interest rates
during the nine months ended September 30, 1996 as compared to the corresponding
period in 1995 as well as the effect of redemptions on the Partnership's equity
maintained in cash.
Brokerage commissions are calculated on the adjusted net asset value on the
last day of each month and, therefore, vary according to trading performance and
redemptions. Accordingly, they must be compared in relation to the fluctuations
in the monthly net asset values. Commissions for the three and nine months ended
September 30, 1996 decreased by $19,925 and $128,641, respectively, as compared
to the corresponding periods in 1995. The primary factor behind the decrease in
commissions for the nine months ended September 30, 1996 is the reduced
commission rate in the first and second quarters of 1996 as compared to 1995.
Effective July 1, 1995 brokerage commissions were reduced to .667% of month-end
net assets (8% per year) from .833% of month-end net assets (10% per year).
All trading decisions for the Partnership are currently being made by the
Advisors. 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 nine months ended
September 30, 1996 decreased by $10,148 and $19,937, respectively, as compared
to the corresponding periods in 1995.
Incentive fees paid by the Partnership are based on the net trading profits
of the Partnership as defined in the Limited Partnership Agreement. Incentive
fees have not been earned during 1996. Trading performance for the Partnership
in 1995 resulted in incentive fees of $41,244 for the nine months ended
September 30, 1995.
10
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
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. (a) Exhibits
(b) Reports on Form 8-K - None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/11/96
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/11/96
By: /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and Director
Date: 11/11/96
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000811078
<NAME> SHEARSON SELECT ADVISORS FUTURES FUND
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,089,349
<SECURITIES> 521,093
<RECEIVABLES> 15,499
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,625,941
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,625,941
<CURRENT-LIABILITIES> 348,803
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,277,138
<TOTAL-LIABILITY-AND-EQUITY> 5,625,941
<SALES> 0
<TOTAL-REVENUES> 200,760
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 215,260
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (14,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,500)
<EPS-PRIMARY> (5.43)
<EPS-DILUTED> 0
</TABLE>
