<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1996
Commission File Number 0-18467
SHEARSON HUTTON PERFORMANCE PARTNERS
(Exact name of registrant as specified in its charter)
Delaware 13-3486116
(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)
SLH PERFORMANCE PARTNERS FUTURES FUND L.P.
(Former name, if changed since previous report)
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
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SHEARSON HUTTON PERFORMANCE PARTNERS
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition
at June 30, 1996 and December 31,
1995. 3
Statements of Income and Expenses
and Partners' Capital for the Three
and Six Months ended June 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 HUTTON PERFORMANCE PARTNERS
STATEMENTS OF FINANCIAL CONDITION
JUNE 30, DECEMBER 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
Equity in commodity futures trading account:
Cash and cash equivalents $2,665,276 $3,219,888
Net unrealized appreciation
on open futures contracts 53,841 116,804
---------- ----------
2,719,117 3,336,692
Interest receivable 9,058 12,031
---------- ----------
$2,728,175 $3,348,723
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses:
Commissions 17,051 20,929
Management fees 5,047 6,217
Incentive fees -- 1,896
Other 22,963 21,986
Redemptions payable 301,215 119,161
---------- ----------
346,276 170,189
---------- ----------
Partners' Capital
General Partner, 24 Unit
equivalents outstanding in 1996
and 1995, respectively 29,033 33,254
Limited Partners, 1,945 and 2,270
Units of Limited Partnership Interest
outstanding in 1996 and 1995,
respectively 2,352,866 3,145,280
---------- ----------
2,381,899 3,178,534
---------- ----------
$2,728,175 $3,348,723
========== ==========
See Notes to Financial Statements.
3
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SHEARSON HUTTON PERFORMANCE PARTNERS
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED SIX-MONTHS ENDED
JUNE 30, JUNE 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 $ (103,883) $1,106,868 $ (216,311) $ 987,235
Change in unrealized gains/
losses on open positions 19,006 (540,412) (62,963) 33,984
--------------- -------------- -------------- --------------
(84,877) 566,456 (279,274) 1,021,219
Less, brokerage commissions and
clearing fees ($1,009, $2,038,
$2,557 and $3,522, respectively) (56,333) (87,089) (122,098) (162,744)
--------------- -------------- -------------- --------------
Net realized and unrealized
gains (losses) (141,210) 479,367 (401,372) 858,475
Interest income 27,696 43,958 58,721 82,779
--------------- -------------- -------------- --------------
(113,514) 523,325 (342,651) 941,254
--------------- -------------- -------------- --------------
Expenses:
Management fees 15,410 22,088 32,828 37,623
Incentive fees - 67,533 - 139,685
Other 11,595 11,100 23,189 21,189
--------------- -------------- -------------- --------------
27,005 100,721 56,017 198,497
--------------- -------------- -------------- --------------
Net income (loss) (140,519) 422,604 (398,668) 742,757
Redemptions (301,215) (297,913) (397,967) (614,690)
--------------- -------------- -------------- --------------
Net increase (decrease) in
Partners' capital (441,734) 124,691 (796,635) 128,067
Partners' capital, beginning
of period 2,823,633 3,458,891 3,178,534 3,455,515
--------------- -------------- -------------- --------------
Partners' capital, end
of period $ 2,381,899 $3,583,582 $2,381,899 $3,583,582
=============== ============== ============== ==============
Net Asset Value per Unit
(1,969 and 2,490
Units outstanding at
June 30, 1996 and 1995, respectively) $ 1,209.70 $ 1,439.19 $ 1,209.70 $ 1,439.19
=============== ============== ============== ==============
Net income (loss) per Unit of Limited
Partnership Interest and General
Partnership Unit equivalent $ (63.35) $ 156.68 $ (175.89) $ 265.43
=============== ============== ============== ==============
</TABLE>
See Notes to Financial Statements.
4
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SHEARSON HUTTON PERFORMANCE PARTNERS
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
1. General:
Shearson Hutton Performance Partners (the "Partnership") was organized
under the laws of the State of Delaware on October 3, 1988 with the name SLH
Performance Partners Futures Fund L.P. The Partnership engages in the
speculative trading of commodity interests including forward contracts on
foreign currencies, commodity options and commodity 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 operations on
June 6, 1989.
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 for the Partnership are being made by SJO, Inc. and Hyman Beck &
Company, Inc. (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 as of June 30, 1996 and the results of its operations for the three
and six months ended June 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 HUTTON PERFORMANCE PARTNERS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and six months ended June
30, 1996 and 1995 were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
Net realized and unrealized
gains (losses) $ (63.67) $ 177.74 $ (177.08) $ 306.50
Interest income 12.49 16.29 26.01 29.47
Expenses (12.17) (37.35) (24.82) (70.54)
--------- --------- --------- ---------
Increase (decrease)
for period (63.35) 156.68 (175.89) 265.43
Net Asset Value per Unit,
beginning of period 1,273.05 1,282.50 1,385.59 1,173.75
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $1,209.70 $1,439.18 $1,209.70 $1,439.18
========= ========= ========= =========
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 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 June 30, 1996 was $53,841 and the average fair value during the six
months then ended, based on monthly calculation was $69,510.
6
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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 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, gains and loss transactions, and collateral positions.
7
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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 June 30, 1996, the notional or contractual
amounts of the Partnership's commitment to purchase and sell these instruments
was $13,898,843 and $15,562,128, respectively, as detailed below. All of these
instruments mature within one year of June 30, 1996. However, due to the nature
of the Partnership's business, these instruments may not be held to maturity. At
June 30, 1996, the Partnership had net unrealized trading gains of $53,841, as
detailed below.
NOTIONAL OR CONTRACTUAL NET
AMOUNT OF COMMITMENTS UNREALIZED
TO PURCHASE TO SELL GAIN/(LOSS)
----------- ------------ -----------
Currencies* $ 4,070,619 $ 4,057,074 $ 16,782
Interest Rates Non US 8,406,435 9,025,454 6,657
Metals 783,074 1,816,011 16,621
Softs 149,061 234,775 15,486
Indices 489,654 428,814 (1,705)
----------- ----------- ---------
Totals $13,898,843 $15,562,128 $ 53,841
=========== =========== ========
*The notional or contractual commitment amounts and the net unrealized gain
amount listed for the currency sector represent OTC contracts. All other sectors
listed represent exchange traded contracts.
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, 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. While substantial losses could lead to a decrease in liquidity,
no such losses occurred in 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 six months ended June 30, 1996, Partnership capital decreased 25.1%
from $3,178,534 to $2,381,899. This decrease was attributable to the redemption
of 325 limited partnership Units resulting in an outflow of $397,967 and by a
net loss from operations of $398,668 for the six months ended June 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 second quarter of 1996, the net asset value per
Unit decreased 5.0% from $1,273.05 to $1,209.70 as compared to the second
quarter of 1995 in which the net asset value per Unit increased 12.2%. The
Partnership experienced a net trading loss before commissions and expenses in
the second quarter of 1996 of $84,877. Losses were recognized in the trading of
commodity futures in interest rates and agricultural products and were partially
offset by gains recognized in metals, indices and currencies. The Partnership
experienced a net trading gain before commissions and expenses in the second
quarter of 1995 of $566,456. Gains were recognized in the trading of commodity
futures in agricultural products, indices, currencies and interest rates, and
were partially offset by losses recognized in 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 correctly those price trends. These 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
9
<PAGE>
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 80% 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 six months ended June 30, 1996 decreased by $16,262 and $24,058,
respectively, as compared to the corresponding periods in 1995. This decrease
was attributable to a decrease in interest rates in the first and second
quarters of 1996 as compared to the corresponding periods of 1995 coupled with
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 and clearing fees for the three and
six months ended June 30, 1996 decreased by $30,756 and $40,646, as compared to
the corresponding periods in 1995.
Management fees are calculated as a percentage of the Partnership's net
asset value as of the end of each month and are affected by trading performance
and redemptions. Management fees for the three and six months ended June 30,
1996 decreased by $6,678 and $4,795 respectively, as compared to the
corresponding periods in 1995.
Incentive fees are based on the new appreciation generated by each Advisor
as defined in the advisory agreements between the Partnership, the General
Partner and each Advisor. No incentive fees were earned during the three and six
months ended June 30, 1996. Trading performance for the three and six months
ended June 30, 1995 resulted in incentive fees of $67,533 and $139,685,
respectively.
10
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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 - None
(b) Reports on Form 8-K - None
11
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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 HUTTON PERFORMANCE PARTNERS
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J.Vogel, President
----------------------------------
David J. Vogel, President
Date: 8/14/96
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: 8/14/96
By: /s/ Daniel A. Dantuono
----------------------------------
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 8/14/96
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000841941
<NAME> Shearson Hutton Performance Partners
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,665,276
<SECURITIES> 53,841
<RECEIVABLES> 9,058
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,728,175
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,728,175
<CURRENT-LIABILITIES> 346,276
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,381,899
<TOTAL-LIABILITY-AND-EQUITY> 2,728,175
<SALES> 0
<TOTAL-REVENUES> (342,651)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 56,017
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (398,668)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (398,668)
<EPS-PRIMARY> (175.89)
<EPS-DILUTED> 0
</TABLE>
