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, 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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 60,000 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 [ ]
<PAGE>
PART I
Item 1. Business.
(a) General development of business. Shearson Hutton Performance Partners
(the "Partnership") is a limited partnership organized on October 3, 1988 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 other financial instruments,
foreign currencies and stock indices. The Partnership commenced trading on June
6, 1989. A total of 60,000 Units of Limited Partnership Interest in the
Partnership (the "Units") were offered to the public. A Registration Statement
on Form S-1 relating to the public offering of 60,000 Units became effective on
December 29, 1988. Redemptions for the years ended December 31, 1996, 1995 and
1994 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. Smith Barney Inc. ("SB"), an affiliate of
the General Partner acts as commodity broker for the Partnership.
Under the Limited Partnership Agreement, the General Partner administers
the business and affairs of the Partnership. At December 31, 1996, the General
Partner, on behalf of the Partnership, had entered into a Management Agreement
(the
2
<PAGE>
"Management Agreement") with SJO, Inc. (the "Advisor") who makes all commodity
trading decisions for the Partnership. The Advisor is not affiliated with the
General Partner or SB and is not responsible for the organization or operation
of the Partnership. Hyman Beck & Company Inc. was terminated as an Advisor
effective October 1, 1996.
Pursuant to the terms of the Management Agreement, the Partnership is
obligated to pay the Advisor a monthly management fee equal to 2.5% per annum of
the Partnership's Net Assets and an incentive fee, payable quarterly, equal to
20% of the Partnership's Trading Profits. Trading Profits do not include
interest paid to the Partnership by SB under the terms of the Customer Agreement
(the "Customer Agreement").
Under the terms of the Customer Agreement entered into with SB, the
Partnership is obligated to pay SB a monthly brokerage fee equal to .625% of
month-end Trading Assets (7-1/2% per year) in lieu of brokerage commissions on a
per trade basis. SB pays a portion of such brokerage fees to certain of its
financial consultants, who are employees that sold Units in the initial
offering. Such financial consultants will receive a portion of the brokerage
fees deemed to be attributable to the Units sold by them. Brokerage fees will be
paid for the life of the Partnership, although the rate at which such fees will
be paid may be changed. The Partnership will pay, or reimburse, SB for National
Futures Association, exchange, clearing and floor brokerage fees. These fees
depend on the number of trades entered into by the Advisor.
3
<PAGE>
The Customer Agreement between the Partnership and SB gives the Partnership the
legal right to net unrealized gains and losses.
In addition, SB pays the Partnership interest on 80% of the average daily
equity maintained in cash in its account during each month at a 30-day U.S.
Treasury bill rate determined weekly by SB based on the average non-competitive
yield on 3-month U.S. Treasury bills maturing in 30 days from the date on which
such weekly rate is determined.
(b) Financial information about industry segments. The Partnership's
business consists of only one segment, speculative trading of commodity futures
contracts. 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,
1996, 1995, 1994, 1993 and 1992 is set forth under "Item 6. Select Financial
Data." The Partnership's capital as of December 31, 1996 was $2,372,374.
(c) Narrative description of business.
See Paragraphs (a) and (b) above.
(i) through (x) - Not applicable.
(xi) through (xii) - Not applicable.
(xiii) The Partnership has no employees.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales. The Partnership does not engage in sales of
goods or services, and therefore this item is not applicable.
4
<PAGE>
Item 2. Description of 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.
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 Limited
Partnership Interest as of December 31, 1996 was 265.
(c) Distribution. The Partnership did not declare a
distribution in 1996.
5
<PAGE>
Item 6. Select Financial Data.
Realized and unrealized trading gains (losses), realized and unrealized gains
(losses) on investment in commodity fund, interest income, net income (loss) and
increase (decrease) in net asset value per Unit for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 and total assets at December 31, 1996, 1995,
1994, 1993, and 1992 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Realized and unrealized
trading gains (losses)
net of brokerage commissions
and clearing fees of $229,376,
$298,137, $401,015, $549,846
and $650,877, respectively $ 12,275 $ 709,968 $ (330,325) $ 414,381 $ (491,523)
Net realized and unrealized
gains on investments in
commodity fund 739,157
Interest Income 109,523 156,521 150,334 149,634 163,872
----------- ----------- ----------- ----------- ----------
$ 121,798 $ 866,489 $ (179,991) $ 564,015 $ 411,506
============ =========== =========== =========== ==========
Net Income (loss) $ (9,306)* $ 605,734 $ (434,321) $ 282,283 $ 87,779
============ =========== =========== =========== ==========
Increase (decrease) in net
asset value per unit $33.29 $211.84 $(139.00) $ 54.86 $ 15.31
======== ======== ========= ======== =======
Total assets $2,604,771 $3,348,723 $3,707,481 $5,838,014 $7,451,302
============ =========== =========== =========== ==========
</TABLE>
* The amount shown per Unit in 1996 does not accord with the net loss
as shown in the Statement of Income and Expenses for the year ended
December 31, 1996 because of the timing of redemptions of the
Partnership's Units in relation to the fluctuating values of the
Partnership's commodity interests.
6
<PAGE>
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 commodity futures trading accounts, 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.
(3) The Partnership does not initiate additional positions in any
commodity if such additional positions would result in aggregate positions for
all commodities requiring as margin more that 66-2/3% of the Partnership's net
assets.
(4) The Partnership may occasionally accept delivery of a commodity.
Unless such delivery is disposed of promptly by retendering the warehouse
receipts representing the delivery to the appropriate clearing house, the
physical commodity position is fully hedged.
7
<PAGE>
(5) 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.
(6) The Partnership does not utilize borrowings except short-term
borrowings if the Partnership takes delivery of any cash commodities.
(7) The Advisors 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 two 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
Partner monitors and controls
8
<PAGE>
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 Statement 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, at its
discretion, cause the Partnership to cease trading operations and liquidate all
open positions upon the first to occur of the following: (i) December 31, 2008;
(ii) a vote to dissolve the Partnership by limited partners owning more than 50%
of the Units; (iii) assignment by the General Partner of all of its interest in
the Partnership or withdrawal, removal, bankruptcy or any other event that
causes the General Partner to cease to be a general partner under the Delaware
Revised Uniform Limited Partnership Act unless the Partnership is continued as
described in the Limited Partnership Agreement; (iv) a decline in the Net Asset
Value of a Unit as of the close of business on any business day to less than
$500; (v) a decline in the aggregate Net Assets of the Partnership to less than
$1,000,000; and (vi) the occurrence of any event which shall make
9
<PAGE>
it unlawful for the existence of the Partnership to be continued.
(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, 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 fundamental
and technical factors which the Partnership 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 Advisors to identify and take advantage of
price movements in the commodity markets, in addition to the level of Net Assets
maintained. Furthermore, interest income 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. For the year ended December 31, 1996, 622 Units
were redeemed for a total of $796,854. For the year ended December 31, 1995, 624
Units were redeemed for a total of $846,690 and the General Partner redeemed 26
Unit equivalents totaling $36,025. For the year ended December 31, 1994, 1,014
Limited Partnership Units were redeemed for a total of $1,315,546 and the
General Partner redeemed 117 Unit equivalents totaling $144,086.
10
<PAGE>
(c) Results of operations. For the year ended December 31, 1996, the net
asset value per Unit increased 2.4% from $1,385.59 to $1,418.88. For the year
ended December 31, 1995, the net asset value per unit increased 18.0% from
$1,173.75 to $1,385.59. For the year ended December 31, 1994, the net asset
value per Unit decreased 10.6%, from $1,312.75 to $1,173.75.
The Partnership experienced net trading gains of $241,651 before
commissions and expenses for the year ended December 31, 1996. Gains were
attributable to gains incurred in the trading of commodity futures in interest
rates. These gains were partially offset by losses in metals, indices, foreign
currencies and agricultural commodity futures.
The Partnership experienced net trading gains of $1,008,105 before
commissions and expenses for the year ended December 31, 1995. Realized trading
gains of $852,203 were attributable to gains incurred in the trading of
commodity futures in interest rates, stock indices and currencies. These
realized gains were partially offset by realized losses in precious metals and
agricultural commodity futures.
The Partnership experienced net trading gains of $70,690 before
commissions and expenses for the year ended December 31, 1994. Realized trading
gains of $470,880 were attributable to gains incurred in financial, precious
metals, grains and oils and stock index commodity futures. These realized gains
were partially offset by realized losses experienced in the trading of foods,
agricultural and energy commodity futures.
11
<PAGE>
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 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 Advisors are able to identify them,
the Partnership expects to increase capital through operations.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data.
SHEARSON HUTTON PERFORMANCE PARTNERS
INDEX TO FINANCIAL STATEMENTS
Page
Number
Report of Independent Accountants. F-2
Financial Statements:
Statement of Financial Condition at
December 31, 1996 and 1995. F-3
Statement of Income and Expenses for
the years ended December 31, 1996,
1995 and 1994. F-4
Statement of Partners' Capital for the
years ended December 31, 1996, 1995 and
1994. F-5
Notes to Financial Statements. F-6 - F-11
F-1
Continued
<PAGE>
Report of Independent Accountants
To the Partners of
Shearson Hutton Performance Partners:
We have audited the accompanying statement of financial condition of SHEARSON
HUTTON PERFORMANCE PARTNERS (formerly, SLH Performance Partners Futures Fund
L.P.) (a Delaware Limited Partnership) as of December 31, 1996 and 1995, and the
related statements of income and expenses and of partners' capital for the years
ended December 31, 1996, 1995 and 1994. 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 Hutton Performance
Partners as of December 31, 1996 and 1995, and the results of its operations for
the years ended December 31, 1996, 1995 and 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 28, 1997
F-2
<PAGE>
Shearson Hutton Performance Partners
Statement of Financial Condition
December 31, 1996 and 1995
1996 1995
Assets:
Equity in commodity futures
trading account:
Cash and cash equivalents (Note 3b) $2,570,817 $3,219,888
Net unrealized appreciation
on open futures
contracts 25,099 116,804
---------- ----------
2,595,916 3,336,692
Interest receivable 8,855 12,031
---------- ----------
$2,604,771 $3,348,723
========== ==========
Liabilities and Partners' Capital:
Liabilities:
Accrued expenses:
Commissions $ 16,280 $ 20,929
Management fees 5,393 6,217
Incentive fees 27,557 1,896
Professional fees 22,649
Other 3,022 21,986
Redemptions payable (Note 5) 157,496 119,161
---------- ----------
232,397 170,189
---------- ----------
Partners' capital (Notes 1, 5, and 6):
General Partner, 24 Unit
equivalents outstanding in 1996 34,053 33,254
and 1995
Limited Partners, 1,648 and 2,270
Units of Limited Partnership
Interest
outstanding in 1996 and 1995,
respectively 2,338,321 3,145,280
---------- ----------
2,372,374 3,178,534
---------- ----------
$2,604,771 $3,348,723
========== ==========
See notes to financial statements.
F-3
<PAGE>
Shearson Hutton Performance Partners
Statement of Income and Expenses
for the years ended
December 31, 1996, 1995 and 1994
1996 1995 1994
Income:
Net gains (losses) on trading of
commodity interests:
Realized gains on
closed positions $ 333,356 $ 852,203 $ 470,880
Change in unrealized
gains/losses
on open positions (91,705) 155,902 (400,190)
----------- ----------- -----------
241,651 1,008,105 70,690
Less, Brokerage commissions and
clearing fees ($5,970, $5,365,
and $14,935,
respectively) (Note 3b) (229,376) (298,137) (401,015)
----------- ----------- -----------
Net realized and unrealized
gains (losses) 12,275 709,968 (330,025)
Interest income (Note 3b) 109,523 156,521 150,334
----------- ----------- -----------
121,798 866,489 (179,991)
----------- ----------- -----------
Expenses:
Management fees (Note 3a) 63,161 75,214 107,797
Incentive fees (Note 3a) 27,557 141,581 99,189
Other expenses 40,386 43,960 47,344
----------- ----------- -----------
131,104 260,755 254,330
----------- ----------- -----------
Net income (loss) $ (9,306) $ 605,734 $ (434,321)
=========== =========== ===========
Net income (loss) per Unit of
Limited Partnership Interest
and General Partner Unit
equivalent (Notes 1 and 6) $ 33.29* $ 211.84 $ (139.00)
=========== =========== ===========
* The amount shown per Unit in 1996 does not accord with the net loss as shown
in the Statement of Income and Expenses for the year ended December 31, 1996
because of the timing of redemptions of the Partnership's Units in relation
to the fluctuating values of the Partnership's commodity interests.
See notes to financial statements.
F-4
<PAGE>
Shearson Hutton Performance Partners
Statement of Partners' Capital for the years ended
December 31, 1996, 1995, and 1994
Limited General
Partners Partner Total
Partners' capital at
December 31, 1993 $ 5,130,238 $ 219,230 $ 5,349,468
Net loss (417,865) (16,456) (434,321)
Redemption of 1,014
Units of Limited
Partnership Interest
and General Partner
redemption representing
117 Unit equivalents (1,315,546) (144,086) (1,459,632)
----------- ----------- -----------
Partners' capital at
December 31, 1994 3,396,827 58,688 3,455,515
Net Income 595,143 10,591 605,734
Redemption of 624
Units of Limited
Partnership Interest
and General Partner
redemption representing
26 Unit equivalents (846,690) (36,025) (882,715)
----------- ----------- -----------
Partners' capital at
December 31, 1995 $ 3,145,280 $ 33,254 $ 3,178,534
Net income (loss) (Note 6) (10,105) 799 (9,306)
Redemption of 622
Units of Limited
Partnership Interest (796,854) -- (796,854)
----------- ----------- -----------
Partners' capital at
December 31, 1996 $ 2,338,321 $ 34,053 $ 2,372,374
=========== =========== ===========
See notes to financial statements.
F-5
<PAGE>
Shearson Hutton Performance Partners
Notes to Financial Statements
1. Partnership Organization:
Shearson Hutton Performance Partners (formerly SLH Performance Partners
Futures Fund L.P.) (the "Partnership") is a limited partnership which
was organized on October 3, 1988 under the partnership laws of the
State of Delaware and commenced trading operations on June 6, 1989. 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 60,000 Units of Limited Partnership Interest ("Units")
during the public offering period.
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 (see
Note 3b). 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, 2008; the net asset value per Unit decreases to less than $500
as of the close of business on any business day; 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
<PAGE>
Shearson Hutton Performance Partners
Notes to Financial Statements
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:
The General Partner, on behalf of the Partnership, has entered into a
Management Agreement with SJO, Inc. (the "Advisor") which provides that the
Advisor has sole discretion in determining the investment of the assets of
the Partnership allocated to the Advisor by the General Partner. As
compensation for services, the Partnership is obligated to pay the Advisor
a management fee payable monthly equal to 2.5% per annum of the Net Assets
managed by the Advisor and an incentive fee payable quarterly equal to 20%
of Trading Profits. Hyman Beck & Company, Inc. was terminated as an Advisor
effective October 1, 1996.
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 with
orders placed by the Advisor. The Partnership is obligated to pay brokerage
commissions to SB at .625% of month end Trading Assets per month (7.5% per
year) in lieu of brokerage commissions on a per trade basis. A portion of
this fee is paid to employees of SB who have sold Units of the Partnership.
This fee does not include exchange, clearing, user, giveup, floor brokerage
and NFA fees which will be borne by the Partnership. All of the
Partnership's assets are 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, 1996 and 1995, the amount of cash held for margin requirements was
$425,859 and $505,136, respectively. SB will pay the Partnership interest
on 80% of the average daily equity in its account during each month at the
rate of the average non-competitive 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 by either party.
F-7
<PAGE>
Shearson Hutton Performance Partners
Notes to Financial Statements
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 31,1996 and 1995 was $25,099 and $116,804, respectively,
and the average fair value during the years then ended, based on monthly
calculation, was $118,151 and $125,387, respectively.
5. Distributions and Redemptions:
Distributions of profits, if any, will be made at the sole discretion of the
General Partner; however, a limited partner may redeem all or some of his
Units at the Net Asset Value thereof as of the last day of any calendar
quarter on fifteen days written notice to the General Partner, provided that
no redemption may result in the limited partner holding fewer than three
Units after redemption is effected.
F-8
<PAGE>
Shearson Hutton Performance Partners
Notes to Financial Statements
6. Net Asset Value Per Unit:
Changes in the net asset value per Unit for the years ended December 31,1996,
1995 and 1994 were as follows:
1996 1995 1994
Net realized and
unrealized
gains (losses) $45.70 $248.21 $(110.57)
Interest income 53.19 59.74 43.35
Expenses (65.60) (96.11) (71.78)
-------- -------- --------
Increase (decrease)
for year 33.29* 211.84 (139.00)
Net asset value
per Unit, beginning
of year 1,385.59 1,173.75 1,312.75
--------- --------- ---------
Net asset value
per Unit, end
of year $1,418.88 $1,385.59 $1,173.75
========= ========= =========
* The amount shown per Unit in 1996 does not accord with the net loss as shown
in the Statement of Income and Expenses for the year ended December 31, 1996
because of the timing of redemptions of the Partnership's Units in relation
to the fluctuating values of the Partnership's commodity interests.
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
<PAGE>
Shearson Hutton Performance Partners
Notes to Financial Statements
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.
F-10
<PAGE>
Shearson Hutton Performance Partners
Notes to Financial Statements
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, 1996, the notional or
contractual amounts of the Partnership's commitment to purchase and sell
these instruments was $47,001,136 and $8,603,362, respectively, as detailed
below. All of these instruments mature within one year of December 31, 1996
and are exchange traded contracts. However, due to the nature of the
Partnership's business, these instruments may not be held to maturity. At
December 31, 1996, the fair value of the Partnership's derivatives, including
options thereon, was $25,099, as detailed below.
Notional or Contractual
Amount of Commitments
To Purchase To Sell Fair Value
Interest Rate
Non-U.S. $47,001,136 $8,603,362 $25,099
F-11
<PAGE>
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 the Advisors.
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, 1996, SB earned $229,376 in
brokerage commissions and clearing fees.
The Advisors manage the Partnership's assets and receive a monthly
management fee and a quarterly incentive fee, as described under "Item 1.
Business." and "Item 8. Financial Statements and Supplementary Data.", Note 3a.
For the year ended December 31, 1996, the Advisors earned $63,161 in management
fees and $27,557 in incentive fees.
13
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a). Security ownership of certain beneficial owners. As of
March 1, 1997, one beneficial owner who is neither a director nor
executive officer owns more than five percent (5%) of the
outstanding Units issued by the Registrant as follows:
Title Name and Address of Amount and Nature of Percent of
of Class Beneficial Owner Beneficial Ownership Class
Units Renisa SA 100 Units 5.98%
Limited 1780 Avenida Del Mundo
Partnership Apt. 707
Interest Coronado, CA 92118-3058
(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 24 Units (1.4%) of Limited Partnership Interest as of December 31,
1996.
(c). Changes in control. None.
Item 13. Certain Relationship 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 8. Financial Statements and
Supplementary Data.", Notes 3a and 3b and "Item 11. Executive Compensation."
14
<PAGE>
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, 1996, and 1995.
Statement of Income and Expenses for the years ended December
31, 1996, 1995 and 1994.
Statement of Partners' Capital for the years ended December 31,
1996, 1995 and 1994.
(2) Financial Statement Schedules: None.
(3) Exhibits:
3.1 - Limited Partnership Agreement (filed as Exhibit 3.1 to the
Registration Statement No.33-25255 and incorporated herein by
reference).
3.2 - Certificate of Limited Partnership of the Partnership as
filed on October 3, 1988 (filed as Exhibit 3.2 to the
Registration Statement No. 33-25255 and incorporated herein
by reference).
10.1- Customer Agreement between the Partnership and Shearson
Lehman Hutton Inc. dated as of December 28, 1988 (previously
filed).
10.2- Escrow Agreement between the Partnership and European American
Bank (previously filed).
15
<PAGE>
10.3- Management Agreement among the Partnership, Hayden
Commodities Corp. and Advisors dated as of December 28, 1988
(previously filed).
10.4- Letter dated May 31, 1990 from General Partner to Advisors
extending Management Agreements (filed as Exhibit 10.4 to Form
10-K for the fiscal year ended December 31, 1990 and incorporated
herein by reference).
10.5- Letter dated May 24, 1991 from General Partner to Advisors
extending Management Agreement (filed as Exhibit 10.5 to Form 10-K
for the fiscal year ended December 31, 1991 and incorporated
herein by reference).
10.6- Subscription Agreement dated July 31, 1991 among the Partnership
and the Moore Currency Fund, Ltd. (filed as Exhibit 10.6 to Form
10-K for the fiscal year ended December 31, 1991 and incorporated
herein by reference).
10.7- Letter dated November 20, 1992 from General Partner to MCMI
terminating the Management Agreement effective as of November 30,
1992 (filed as Exhibit 10.7 to Form 10-K for the fiscal year ended
December 31, 1992 and incorporated herein by reference).
10.8- Letter dated November 20, 1992 from General Partner to Bacon
Investment Corp. revising the compensation structure effective as
of December 1, 1992 (filed as Exhibit 10.8 to Form 10-K for the
fiscal year ended December 31, 1992 and incorporated herein by
reference).
16
<PAGE>
10.9- Request for Redemption from the Moore Currency Fund, Ltd. dated
December 14, 1992 (filed as Exhibit 10.9 to Form 10-K for the
fiscal year ended December 31, 1992 and incorporated herein by
reference).
10.10- Management Agreement among the Partnership, the General Partner
and SJO, Inc. dated December 1, 1992 (filed as Exhibit 10.10 to
Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference).
10.11- Management Agreement among the Partnership, the General Partner
and Hyman Beck & Company, Inc. dated January 19, 1993 (filed as
Exhibit 10.11 to Form 10-K for the fiscal year ended December
31, 1993 and incorporated herein by reference).
10.12- Letter dated February 3, 1993 from the Moore Currency Fund, Ltd.
confirming the Partnership's Request for Redemption as of
December 31, 1992 (filed as Exhibit 10.12 to Form 10-K for the
fiscal year ended December 31, 1993 and incorporated herein by
reference).
10.13- Letter dated June 23, 1994 terminating Bacon Investment Corp. as
a trading advisor effective June 30, 1994 (filed as Exhibit
10.13 to Form 10-K for the fiscal year ended December 31, 1994
and incorporated herein by reference).
17
<PAGE>
10.14- Letter dated February 16, 1995 from General Partner to SJO,
Inc. and Hyman Beck and Company, Inc. extending Management
Agreements to June 30, 1995 (filed as Exhibit 10.14 to Form
10-K for the fiscal year ended December 31, 1995 and
incorporated herein by reference).
10.15- Letter dated September 26, 1996 from General Partner to Hyman
Beck and Company, Inc. terminating the Management Agreement
effective as of October 1, 1996 (filed herein).
(b) Reports on 8-K: None Filed.
18
<PAGE>
Supplemental Information To Be Furnished With Reports Filed Pursuant
To Section 15(d) Of The Act by Registrants Which Have Not Registered
Securities Pursuant To Section 12 Of the Act.
Annual Report to Limited Partners
19
<PAGE>
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 1997.
SHEARSON HUTTON PERFORMANCE PARTNERS
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/ Philip M. Waterman, Jr. /s/ Daniel R. McAuliffe, Jr.
Philip M. Waterman, Jr. Daniel R. McAuliffe, Jr.
Director and Vice-Chairman Director
/s/ Steve J. Keltz /s/ Shelley Ullman
Steve J. Keltz Shelley Ullman
Secretary and Director Director
20
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000841941
<NAME> Shearson Hutton Performance Partners
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,570,817
<SECURITIES> 25,099
<RECEIVABLES> 8,855
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,604,771
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,604,771
<CURRENT-LIABILITIES> 232,397
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,372,374
<TOTAL-LIABILITY-AND-EQUITY> 2,604,771
<SALES> 0
<TOTAL-REVENUES> 121,798
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 131,104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,306)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,306)
<EPS-PRIMARY> 33.29
<EPS-DILUTED> 0
</TABLE>
October 1, 1996
Hyman Beck & Co. Inc.
6 Campus Drive - 2nd Fl.
Parsippany, New Jersey 07054
Attention: Mr. David Fuller
Dear Mr. Fuller:
Effective immediately, all assets have been reallocated away from your
trading account in the Shearson Hutton Performance Partners, L.P. This
effectively terminates your management agreement with the Fund. Please liquidate
your positions in an orderly fashion by Tuesday, October 1, 1996.
If you have any questions, please call me at 212-723-5416.
Very truly yours,
SMITH BARNEY FUTURES MANAGEMENT INC.
Daniel A. Dantuono
Chief Financial Officer & Director
DD/cs
