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, 1997
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)
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 HUTTON PERFORMANCE PARTNERS
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statement of Financial Condition
at September 30, 1997 and December 31,
1996. 3
Statement of Income and Expenses
and Partners' Capital for the Three
and Nine Months ended September 30, 1997
and 1996. 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
<PAGE>
PART I
Item 1. Financial Statements
SHEARSON HUTTON PERFORMANCE PARTNERS
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------- -----------
ASSETS: (Unaudited)
Equity in commodity futures trading account:
Cash and cash equivalents $1,832,704 $2,570,817
Net unrealized appreciation
on open futures contracts 136,747 25,099
---------- ----------
1,969,451 2,595,916
Interest receivable 6,224 8,855
__________ __________
$1,975,675 $2,604,771
========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 12,348 $ 16,280
Management fees 3,700 5,393
Incentive fees 0 27,557
Professional fees 17,256 22,649
Other 638 3,022
Redemptions payable 115,886 157,496
__________ __________
149,828 232,397
---------- ----------
Partners' Capital:
General Partner, 24 Unit
equivalents outstanding in 1997
and 1996, respectively 30,903 34,053
Limited Partners, 1,394 and 1,648
Units of Limited Partnership Interest
outstanding in 1997 and 1996,
respectively 1,794,944 2,338,321
---------- ----------
1,825,847 2,372,374
---------- ----------
$1,975,675 $2,604,771
========== ==========
See Notes to Financial Statements.
3
<PAGE>
SHEARSON HUTTON PERFORMANCE PARTNERS
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- ---------------------------------
1997 1996 1997 1996
------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading
of commodity futures:
Realized gains (losses) on
closed positions $ 86,309 $ 5,671 $ (193,890) $ (210,640)
Change in unrealized gains /
losses on open positions 33,950 219,681 111,648 156,718
___________ ___________ ___________ ___________
120,259 225,352 (82,242) (53,922)
Less, brokerage commissions and
clearing fees ($2,196, $1,236,
$6,131 and $3,793, respectively) (43,343) (51,131) (136,829) (173,229)
___________ ___________ ___________ ___________
Net realized and unrealized
gains (losses) 76,916 174,221 (219,071) (227,151)
Interest income 19,749 24,810 62,139 83,531
___________ ___________ ___________ ___________
96,665 199,031 (156,932) (143,620)
___________ ___________ ___________ ___________
Expenses:
Management fees 11,237 13,838 35,902 46,666
Other 11,482 11,719 31,120 34,908
___________ ___________ ___________ ___________
22,719 25,557 67,022 81,574
___________ ___________ ___________ ___________
Net income (loss) 73,946 173,474 (223,954) (225,194)
Redemptions (115,886) (241,391) (322,573) (639,358)
___________ ___________ ___________ ___________
Net decrease in Partners' capital (41,940) (67,917) (546,527) (864,552)
Partners' capital, beginning
of period 1,867,787 2,381,899 2,372,374 3,178,534
___________ ___________ ___________ ___________
Partners' capital, end
of period $ 1,825,847 $ 2,313,982 $ 1,825,847 $ 2,313,982
=========== =========== =========== ===========
Net Asset Value per Unit
(1,418 and 1,783 Units
outstanding at September 30,
1997 and 1996, respectively) $ 1,287.62 $ 1,297.80 $ 1,287.62 $ 1,297.80
=========== =========== =========== ===========
Net income (loss) per Unit of Limited
Partnership Interest and General
Partnership Unit equivalent $ 49.03 $ 88.10 $ (131.26) $ (87.79)
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
SHEARSON HUTTON PERFORMANCE PARTNERS
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
1. General:
Shearson Hutton Performance Partners (the "Partnership") was organized
under the laws of the State of Delaware on October 3, 1988 to engage 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 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 TrendLogic
Associates, 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 September 30, 1997 and the results of its operations for the
three and nine months ended September 30, 1997 and 1996. 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, 1996.
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
<PAGE>
SHEARSON HUTTON PERFORMANCE PARTNERS
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and nine months ended
September 30, 1997 and 1996 were as follows:
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
Net realized and unrealized
gains (losses) $ 51.00 $ 88.48 $ (128.11) $ (88.60)
Interest income 13.10 12.60 39.39 38.61
Expenses (15.07) (12.98) (42.54) (37.80)
--------- --------- --------- ---------
Increase (decrease) for
period 49.03 88.10 (131.26) (87.79)
Net Asset Value per Unit,
beginning of period 1,238.59 1,209.70 1,418.88 1,385.59
--------- --------- --------- ---------
Net Asset Value per Unit,
end of period $1,287.62 $1,297.80 $1,287.62 $1,297.80
========= ========= ========= =========
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 September 30, 1997 was $136,747 and the average fair value during
the nine months then ended, based on monthly calculation was $82,596.
6
<PAGE>
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, gain and loss transactions, and collateral positions.
7
<PAGE>
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, 1997, the notional or
contractual amounts of the Partnership's commitment to purchase and sell these
instruments was $19,337,989 and $3,737,427, respectively, as detailed below. All
of these instruments mature within one year of September 30, 1997. However, due
to the nature of the Partnership's business, these instruments may not be held
to maturity. At September 30, 1997, the fair value of the Partnership's
derivatives was $136,747, as detailed below.
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies
- - Exchange Traded Contracts $ 568,033 $ 195,520 $ (1,933)
- - OTC Contracts 1,608,735 1,485,590 (6,933)
Energy 235,932 0 10,302
Interest Rates U.S. 1,033,834 0 4,259
Interest Rates Non-U.S. 15,682,238 1,221,290 125,123
Grains 56,700 62,350 (3,362)
Livestock 0 76,950 840
Softs 70,992 187,603 7,666
Metals 81,525 286,125 375
Indices 0 221,999 410
------------ ----------- --------
Totals $19,337,989 $3,737,427 $136,747
============ =========== ========
5. Pending Merger:
On September 24, 1997, Travelers Group Inc. ("Travelers") and Salomon Inc
("Salomon") announced an agreement and plan of merger pursuant to which Salomon
will become a wholly owned subsidiary of Travelers and Smith Barney Holdings
Inc., the parent company of Smith Barney Inc. and Smith Barney Futures
Management Inc., will be merged into Salomon forming Salomon Smith Barney
Holdings Inc. The transaction is expected to be completed by year-end 1997.
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 third quarter of 1997.
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, 1997, Partnership capital
decreased 23% from $2,372,374 to $1,825,847. This decrease was attributable to a
net loss from operations of $223,954 coupled with the redemption of 254 Units
resulting in an outflow of $322,573 for the nine months ended September 30,
1997. 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 1997, the net asset value per
Unit increased 4.0% from $1,238.59 to $1,287.62 as compared to the third quarter
of 1996 in which the net asset value per Unit increased 7.3%. The Partnership
experienced a net trading gain before commissions and expenses in the third
quarter of 1997 of $120,259. This gain was attributable to the trading of
commodity futures in currencies, energy products, U.S. and non U.S. interest
rates and metals and was partially offset by losses in grains, softs, livestock
and indices. The Partnership experienced a net trading gain before commissions
and expenses in the third quarter of 1996 of $225,352. Gains were recognized in
the trading of commodity futures in interest rates and were partially offset by
losses recognized in agricultural products, currencies, indices and 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. 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 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 nine months ended September 30, 1997 decreased by $5,061 and
$21,392, respectively, as compared to the corresponding periods in 1996. This
decrease was attributable to 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 nine months ended September 30, 1997 decreased by $7,788 and
$36,400, respectively, as compared to the corresponding periods in 1996.
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, 1997 decreased by $2,601 and $10,764, respectively, as compared to the
corresponding periods in 1996.
Incentive fees are based on the new trading profits generated by the
Advisors as defined in the advisory agreement between the Partnership, the
General Partner and each Advisor. No incentive fees were earned during the three
and nine months ended September 30, 1997 or 1996.
10
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
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
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 HUTTON PERFORMANCE PARTNERS
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/12/97
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: 11/12/97
By: /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 11/12/97
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000841941
<NAME> Shearson Hutton Performance Partners
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,832,704
<SECURITIES> 136,747
<RECEIVABLES> 6,224
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,975,675
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,975,675
<CURRENT-LIABILITIES> 149,828
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,825,847
<TOTAL-LIABILITY-AND-EQUITY> 1,975,675
<SALES> 0
<TOTAL-REVENUES> (156,932)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 67,022
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (223,954)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (223,954)
<EPS-PRIMARY> (131.26)
<EPS-DILUTED> 0
</TABLE>
