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, 2000
Commission File Number 0-16627
SHEARSON SELECT ADVISORS FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3405705
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Smith Barney Futures Management LLC
388 Greenwich St. - 7th 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>
16
SHEARSON SELECT ADVISORS FUTURES FUND L.P.
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statement of Financial Condition at
September 30, 2000 and December 31,
1999 (unaudited). 3
Statement of Income and Expenses
and Partners' Capital for the three
and nine months ended September 30,
2000 and 1999 (unaudited). 4
Notes to Financial Statements
(unaudited) 5 - 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10 - 11
Item 3. Quantitative and Qualitative Disclosures
of Market Risk 12 - 13
PART II - Other Information 14
2
<PAGE>
PART I
Item 1. Financial Statement
SHEARSON SELECT ADVISORS FUTURES FUND L.P.
STATEMENT OF FINANCIAL CONDITION
(Unaudited)
September 30, December 31,
2000 1999
-------------- --------------
ASSETS:
Equity in commodity futures
trading account:
Cash $ 2,610,888 $ 4,010,166
Net unrealized depreciation
on open contracts (202,053) (2,058)
-------------- --------------
2,408,835 4,008,108
Interest receivable 8,728 12,413
-------------- --------------
$ 2,417,563 $ 4,020,521
============== ==============
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 12,088 $ 20,103
Management fees 7,917 13,209
Other 30,311 37,729
Redemptions payable 75,400 93,085
-------------- --------------
125,716 164,126
-------------- --------------
Partners' capital :
General Partner, 34 Unit
equivalents outstanding
in 2000 and 1999 53,408 75,355
Limited Partners, 1,425 and
1,706 Units of Limited
Partnership Interest
outstanding in 2000 and
1999, respectively 2,238,439 3,781,040
-------------- --------------
2,291,847 3,856,395
-------------- --------------
$ 2,417,563 $ 4,020,521
============== ==============
See Notes to Financial Statements.
3
<PAGE>
SHEARSON SELECT ADVISORS FUTURES FUND
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of commodity
interests:
Realized gains (losses) on closed positions $ 32,535) $ 1,763 $ (690,051) $ 482,613
Change in unrealized losses on open position (171,140) (622,291) (199,995) (693,469)
----------- ----------- ----------- -----------
(203,675) (620,528) (890,046) (210,856)
Less, brokerage commissions including clearing fees
of $575, $1,429, $2,229 and $3,592, respectively (39,500) (76,227) (143,187) (237,022)
----------- ----------- ----------- -----------
Net realized and unrealized losses (243,175) (696,755) (1,033,233) (447,878)
Interest income 27,305 42,354 92,874 120,361
----------- ----------- ----------- -----------
(215,870) (654,401) (940,359) (327,517)
----------- ----------- ----------- -----------
Expenses:
Management fees 24,911 49,513 90,504 153,950
Other 9,202 11,677 30,969 35,715
----------- ----------- ----------- -----------
34,113 61,190 121,473 189,665
----------- ----------- ----------- -----------
Net loss (249,983) (715,591) (1,061,832) (517,182)
Redemptions (75,400) (113,868) (502,716) (519,333)
----------- ----------- ----------- -----------
Net decrease in Partners' capital (325,383) (829,459) (1,564,548) (1,036,515)
Partners' capital, beginning of period 2,617,230 5,338,609 3,856,395 5,545,665
----------- ----------- ----------- -----------
Partners' capital, end of period $ 2,291,847 $ 4,509,150 $ 2,291,847 $ 4,509,150
----------- ----------- ----------- -----------
Net asset value per Unit
(1,459 and 1,782 Units outstanding
at September 30, 2000 and 1999, respectively) $ 1,570.83 $ 2,530.39 $ 1,570.83 $ 2,530.39
----------- ----------- ----------- -----------
Net loss per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ (165.89) $ (391.67) $ (645.49) $ (276.12)
----------- ----------- ----------- -----------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
Shearson Select Advisors Futures Fund L.P.
Notes to Financial Statements
September 30, 2000
(Unaudited)
1. General
Shearson Select Advisors Futures Fund L.P., (the "Partnership") is a
limited partnership which was organized under the laws of the State of Delaware
on February 10, 1987. The Partnership is engaged in the speculative trading of a
diversified portfolio of commodity interests including futures contracts,
options and forward contracts. The commodity interests that are traded by the
Partnership are volatile and involve a high degree of market risk. The
Partnership commenced trading on July 1, 1987.
Smith Barney Futures Management LLC acts as the general partner (the
"General Partner") of the Partnership. The Partnership's commodity broker is
Salomon Smith Barney Inc. ("SSB"). SSB is an affiliate of the General
Partner. The General Partner is wholly owned by Salomon Smith Barney
Holdings Inc. ("SSBHI"), which is the sole owner of SSB. SSBHI is a wholly
owned subsidiary of Citigroup Inc. All trading decisions are made by John W.
Henry & Company ("the Advisor").
The accompanying financial statements are unaudited but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the Partnership's financial
condition at September 30, 2000 and December 31, 1999 and the results of its
operations for the three and nine months ended September 30, 2000 and 1999.
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, 1999.
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 L.P.
Notes to Financial Statements
September 30, 2000
(Unaudited)
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and nine months ended
September 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------ ----------- ------------ ---------
<S> <C> <C> <C> <C>
Net realized and unrealized
losses $ (161.36) $ (381.36) $ (628.00) $ (239.70)
Interest income 18.11 23.18 57.10 63.55
Expenses (22.64) (33.49) (74.59) (99.97)
---------- --------- -------- ---------
Decrease for period (165.89) (391.67) (645.49) (276.12)
Net Asset Value per Unit,
beginning of period 1,736.72 2,922.06 2,216.32 2,806.51
---------- ---------- ---------- ---------
Net Asset Value per Unit,
end of period $1,570.83 $2,530.39 $1,570.83 $2,530.39
========== ========== ========== =========
</TABLE>
6
<PAGE>
Shearson Select Advisors Futures Fund L.P.
Notes to Financial Statements
September 30, 2000
(Unaudited)
(Continued)
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's trading
activity are shown in the statement of income and expenses.
The Customer Agreement between the Partnership and SSB gives the
Partnership the legal right to net unrealized gains and losses.
All of the commodity interests owned by the Partnership are held for
trading purposes. The average fair value during the periods ended September 30,
2000 and December 31, 1999, based on a monthly calculation, was $41,330 and
$212,790, respectively. The fair value of these commodity interests, including
options thereon, if applicable, at September 30, 2000 and December 31, 1999, was
$(202,053) and $(2,058), respectively, as detailed below.
Fair Value
September 30, December 31,
2000 1999
Currency:
- OTC $(199,255) $(59,672)
Interest Rates U.S. 15,369 47,375
Interest Rates Non-U.S. (11,332) 19,287
Metals (6,497) (22,030)
Indices (338) 12,982
--------- -------
Total $(202,053) $ (2,058)
========== =========
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
may include forwards, futures and options, whose value is based upon an
underlying asset, index, or reference rate, and generally represent future
commitments to exchange currencies or cash flows, to purchase or sell other
financial instruments at specific terms at specified future dates, or, in the
case of derivative commodity instruments,
7
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Shearson Select Advisors Futures Fund L.P.
Notes to Financial Statements
September 30, 2000
(Unaudited)
(Continued)
to have a reasonable possibility to be settled in cash, through physical
delivery or with another financial instrument. These instruments may be traded
on an exchange or over-the-counter ("OTC"). Exchange traded instruments are
standardized and include futures and certain option contracts. OTC contracts are
negotiated between contracting parties and include forwards and certain options.
Each of these instruments is subject to various risks similar to those related
to the underlying financial instruments including market and credit risk. In
general, the risks associated with OTC contracts are greater than those
associated with exchange traded instruments because of the greater risk of
default by the counterparty to an OTC contract.
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including interest
and foreign exchange rate movements and fluctuations in commodity or security
prices. Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counterparty to the transactions. The
Partnership's risk of loss in the event of counterparty default is typically
limited to the amounts recognized in the statement of financial condition and
not represented by the contract or notional amounts of the instruments. The
Partnership has concentration risk because the sole counterparty or broker with
respect to the Partnership's assets is SSB.
The General Partner monitors and controls the Partnership's risk exposure
on a daily basis through financial, credit and risk management monitoring
systems and accordingly believes that it has effective procedures for evaluating
and limiting the credit and market risks to which the Partnership is subject.
These monitoring systems allow the General Partner to statistically analyze
actual trading results with risk adjusted performance indicators and correlation
statistics. In addition, on-line monitoring systems provide account analysis of
futures, forwards and options positions by sector, margin requirements, gain and
loss transactions and collateral positions.
8
<PAGE>
Shearson Select Advisors Futures Fund L.P.
Notes to Financial Statements
September 30, 2000
(Unaudited)
(Continued)
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. The majority of these instruments mature
within one year of September 30, 2000. However, due to the nature of the
Partnership's business, these instruments may not be held to maturity.
9
<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, commodity options and interest receivable.
Because of the low margin deposits normally required in commodity futures
trading, relatively small price movements may result in substantial losses to
the Partnership. While substantial losses could lead to a decrease in liquidity,
no such losses occurred during the third quarter of 2000.
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, 2000, Partnership capital
decreased 40.6% from $3,856,395 to $2,291,847. This decrease was attributable to
the redemption of 281 Units resulting in an outflow of $502,716 coupled with a
net loss from operations of $1,061,832 for the nine months ended September 30,
2000. 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 2000, the net asset value per
unit decreased 9.6% from $1,736.72 to $1,570.83 as compared to a decrease of
13.4% in the third quarter of 1999. The Partnership experienced a net trading
loss before brokerage commissions and related fees in the third quarter of 2000
of $203,675. Losses were primarily attributable to the trading of commodity
contracts in non U.S. interest rates, metals and indices and were partially
offset by gains in currencies and U.S. interest rates. The Partnership
experienced a net trading loss before commissions and related fees in the third
quarter of 1999 of $620,528. Losses were primarily attributable to the trading
of commodity contracts in currencies, U.S. and non U.S. interest rates, metals
and indices.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisor to
10
<PAGE>
identify correctly those price trends. Price trends are influenced by, among
other things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. To
the extent that market trends exist and the 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 on the monthly average 13-week U.S. Treasury Bill yield. Interest income
for the three and nine months ended September 30, 2000 decreased by $15,049 and
$27,487, respectively, as compared to the corresponding periods in 1999. The
decrease in interest income is primarily due to the effect of redemptions and
losses 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 and fees for the three
and nine months ended September 30, 2000 decreased by $36,727 and $93,835,
respectively, as compared to the corresponding periods in 1999.
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, 2000 decreased by $24,602 and $63,446, respectively, as compared to the
corresponding periods in 1999.
Incentive fees paid by the Partnership are based on the net trading
profits of the Partnership as defined in the Limited Partnership Agreement.
There were no incentive fees earned for the three and nine months ended
September 30, 2000 or 1999.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosures of Market Risk
The Partnership is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's main line of business.
Market movements result in frequent changes in the fair market value of
the Partnership's open positions and, consequently, in its earnings and cash
flow. The Partnership's market risk is influenced by a wide variety of factors,
including the level and volatility of interest rates, exchange rates, equity
price levels, the market value of financial instruments and contracts, the
diversification effects among the Partnership's open positions and the liquidity
of the markets in which it trades.
The Partnership rapidly acquires and liquidates both long and short
positions in a wide range of different markets. Consequently, it is not possible
to predict how a particular future market scenario will affect performance, and
the Partnership's past performance is not necessarily indicative of its future
results.
Value at Risk is a measure of the maximum amount which the Partnership
could reasonably be expected to lose in a given market sector. However, the
inherent uncertainty of the Partnership's speculative trading and the recurrence
in the markets traded by the Partnership of market movements far exceeding
expectations could result in actual trading or non-trading losses far beyond the
indicated Value at Risk or the Partnership's experience to date (i.e., "risk of
ruin"). In light of the foregoing as well as the risks and uncertainties
intrinsic to all future projections, the inclusion of the quantification
included in this section should not be considered to constitute any assurance or
representation that the Partnership's losses in any market sector will be
limited to Value at Risk or by the Partnership's attempts to manage its market
risk.
Exchange maintenance margin requirements have been used by the Partnership
as the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. Maintenance margin has been used rather than the more generally
available initial margin, because initial margin includes a credit risk
component, which is not relevant to Value at Risk.
12
<PAGE>
The following table indicates the trading Value at Risk associated with
the Partnership's open positions by market category as of September 30, 2000.
All open position trading risk exposures of the Partnership have been included
in calculating the figures set forth below. As of September 30, 2000, the
Partnership's total capitalization was approximately $2,291,847. There has been
no material change in the trading Value at Risk information previously disclosed
in the Form 10-K for the year ended December 31, 1999.
<TABLE>
<CAPTION>
September 30, 2000
(Unaudited)
Year to Date
% of Total High Low
Market Sector Value at Risk Capitalization Value at Risk Value at Risk
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Currencies:
- OTC Contracts $138,234 6.03% $236,832 $27,070
Interest Rates 19,200 0.84% 51,500 19,200
Interest Rates Non-U.S. 68,861 3.00% 288,058 40,403
Metals 31,350 1.37% 93,250 3,000
Indices 38,118 1.66% 79,883 8,082
--------- ------
Total $295,763 12.90%
========= ======
</TABLE>
13
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings -
For information concerning the matter entitled MKP Master Fund, LDC et al. v.
Salomon Smith Barney Inc., see the description that appears in the ninth
paragraph under the caption "Legal Proceedings" of the Annual Report on Form
10-K of the Partnership for the year ended December 31, 1999. In September 2000,
the court denied plaintiffs' motion to dismiss SSB's counterclaims based on
indemnification and contribution.
Item 2. Changes in Securities and Use of Proceeds - 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 - None
(b) Reports on Form 8-K - None
14
<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 L.P.
By: Smith Barney Futures Management LLC
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/14/00
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 LLC
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/14/00
By: /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and Director
Date: 11/14/00
15
