-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G7gO38GQiT/aOTJu2Bp3juYdw+fpKFXbNF89IghyOm//B/qVneBD81Pn3xS4H2uG Xsc9UnzbnBRC+QpKkFeeJA== 0000841941-98-000001.txt : 19980330 0000841941-98-000001.hdr.sgml : 19980330 ACCESSION NUMBER: 0000841941-98-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SLH PERFORMANCE PARTNERS FUTURES FUND LP CENTRAL INDEX KEY: 0000841941 STANDARD INDUSTRIAL CLASSIFICATION: [6221] IRS NUMBER: 133486116 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18467 FILM NUMBER: 98576636 BUSINESS ADDRESS: STREET 1: 390 GREENWICH ST 1ST FLR STREET 2: C/O SMITH BARNEY FUTURES MGMT INC CITY: NEW YORK STATE: NY ZIP: 10013 BUSINESS PHONE: 2127235424 MAIL ADDRESS: STREET 1: C/O SMITH BARNEY FUTURES MANAGEMENT INC STREET 2: 390 GREENWICH ST 1ST FLOOR CITY: NEW YORK STATE: NY ZIP: 10013 10-K 1 SHEARSON HUTTON PERFORMANCE PARTNERS 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, 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) 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 [ ] 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, 1997, 1996 and 1995 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 and is a wholly owned subsidiary of Smith Barney Inc. ("SB"). SB acts as commodity broker for the Partnership. On November 28, 1997, Smith Barney Holdings Inc. was merged with Salomon Inc to form Salomon Smith Barney Holdings Inc. ("SSBH"), a wholly owned subsidiary of Travelers Group Inc. SB is a wholly owned subsidiary of SSBH. 2 The Partnership ceased trading during December 1997. The General Partner withdrew effective December 31, 1997, and the Partnership terminated operations as of that date. Distribution of the Partnership's capital was made subsequent to that date. Under the Limited Partnership Agreement, the General Partner administers the business and affairs of the Partnership. At December 31, 1997, the General Partner, on behalf of the Partnership, had entered into Management Agreements (the "Management Agreement") with SJO, Inc. and TrendLogic Associates Inc. (the "Advisors") who make all commodity trading decisions for the Partnership. Two of the principals of TrendLogic Associates, Mr. Paul E. Dean and Mr. Richard Semels, are employees of SB. TrendLogic Associates was added as an Advisor to the Partnership effective April 3, 1997. Pursuant to the terms of the Management Agreement, the Partnership is obligated to pay SJO, Inc. and TrendLogic Associates Inc. a monthly management fee equal to 2.5% and 2% per annum of the Partnership's Net Assets, respectively, 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 3 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. 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 the rate equal to the average non competitive yield of 13- week U.S. Treasury Bills as determined at the weekly auctions thereof during the month. (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, 1997, 1996, 1995, 1994 and 1993 is set forth under "Item 6. Select Financial Data." The Partnership's capital as of December 31, 1997 was $1,225,424. 4 (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. 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. 5 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, 1997 was 160. (c) Distribution. The Partnership did not declare a distribution in 1997 or 1996. 6 Item 6. Select Financial Data. Realized and unrealized trading gains (losses), interest income, net income (loss) and increase (decrease) in net asset value per Unit for the years ended December 31, 1997, 1996, 1995, 1994 and 1993 and total assets at December 31, 1997, 1996, 1995, 1994, and 1993 were as follows:
1997 1996 1995 1994 1993 ----------- ------------ ----------- ------------ -------- Realized and unrealized trading gains (losses) net of brokerage commissions and clearing fees of $171,941, $229,376, $298,137, $401,015 and $549,846, respectively $ (253,676) $ 12,275 $ 709,968 $ (330,325) $ 414,381 Interest Income 77,643 109,523 156,521 150,334 149,634 ------------ ------------ ----------- ----------- ---------- $ (176,033) $ 121,798 $ 866,489 $ (179,991) $ 564,015 =========== ============ =========== =========== ========= Net Income (loss) $ (269,399) $ (9,306) $ 605,734 $ (434,321) $ 282,283 =========== ============ =========== =========== ========== Increase (decrease) in net asset value per unit $(143.72) $ 33.29 * $211.84 $(139.00) $ 54.86 ========= ========= ======== ========= ======= Total assets $1,268,821 $2,604,771 $3,348,723 $3,707,481 $5,838,014 =========== ============ =========== =========== ========== * 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 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. (a) Liquidity. The Partnership ceased trading during December 1997. The General Partner withdrew effective December 31, 1997, and the Partnership terminated operations as of that date. Distribution of the Partnership's capital was made subsequent to that date. 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 8 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. (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 9 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 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 Statements and Supplementary Data.," for further information on financial instrument risk included in the notes to financial statements.) (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 10 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, 1997, 711 Limited Partnership Units were redeemed for a total of $877,551. 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. (c) Results of operations. For the year ended December 31, 1997, the net asset value per Unit decreased 10.1%, from $1,418.88 to $1,275.16. 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. The Partnership experienced net trading losses of $81,735 before commissions and expenses for the year ended December 31, 1997. Losses were attributable to losses incurred in grains, non U.S. interest rates, livestock, metals, softs and indices and were partially offset by gains in U.S. interest rates, energy products and currencies. 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. 11 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. 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 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, 1997 (termination of operations) and 1996. F-3 Statement of Income and Expenses for the years ended December 31, 1997, (termination of operations), 1996 and 1995. F-4 Statement of Partners' Capital for the years ended December 31, 1997 (termination of operations), 1996 and 1995. F-5 Notes to Financial Statements. F-6 - F-11 F-1 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 (a Delaware Limited Partnership) as of December 31, 1997 (termination of operations) and 1996, and the related statements of income and expenses and of partners' capital for the years ended December 31, 1997, 1996 and 1995. 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, 1997 (termination of operations) and 1996, and the results of its operations for the years ended December 31, 1997, 1996 and 1995, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. New York, New York March 6, 1998 F-2 Shearson Hutton Performance Partners Statement of Financial Condition December 31, 1997 (termination of operations) and 1996 1997 1996 Assets: Equity in commodity futures trading account: Cash and cash equivalents (Note 3b) $1,264,449 $2,570,817 Net unrealized appreciation on open futures contracts -- 25,099 ---------- ---------- 1,264,449 2,595,916 Interest receivable 4,372 8,855 ---------- ---------- $1,268,821 $2,604,771 ---------- ---------- Liabilities and Partners' Capital: Liabilities: Accrued expenses: Commissions $ 9,917 $ 16,280 Management fees 2,372 5,393 Incentive fees -- 27,557 Professional fees 27,849 22,649 Other 3,259 3,022 Redemptions payable (Note 5) -- 157,496 ---------- ---------- 43,397 232,397 Partners' capital (Notes 1, 5, and 6): General Partner, 24 Unit equivalents outstanding in 30,604 34,053 1997 and 1996 Limited Partners, 937 and 1,648 Units of Limited Partnership Interest 1,194,820 2,338,321 outstanding in 1997 and 1996, respectively 1,225,424 2,372,374 ---------- ---------- $1,268,821 $2,604,771 ---------- ---------- See notes to financial statements. F-3 Shearson Hutton Performance Partners Statement of Income and Expenses for the years ended December 31, 1997 (termination of operations), 1996 and 1995 1997 1996 1995 Income: Net gains (losses) on trading of commodity interests: Realized gains (losses) on closed positions $ (56,636) $ 333,356 $ 852,203 Change in unrealized gains/ losses on open positions (25,099) (91,705) 155,902 ----------- ----------- ----------- (81,735) 241,651 1,008,105 Less, Brokerage commissions and clearing fees ($7,723, $5,970, and $5,365, respectively) (Note 3b) (171,941) (229,376) (298,137) ----------- ----------- ----------- Net realized and unrealized gains (253,676) 12,275 709,968 (losses) Interest income 77,643 109,523 156,521 ----------- ----------- ----------- (Note 3b) (176,033) 121,798 866,489 ----------- ----------- ----------- Expenses: Management fees 44,418 63,161 75,214 (Note 3a) Incentive fees (Note 3a) -- 27,557 141,581 Other expenses 48,948 40,386 43,960 ----------- ----------- ----------- 93,366 131,104 260,755 ----------- ----------- ----------- Net income (loss) $ (269,399) $ (9,306) $ 605,734 ----------- ----------- ----------- Net income (loss) per Unit of Limited Partnership Interest and General Partner Unit equivalent (Notes 1 and 6) $ (143.72) $ 33.29* $ 211.84 ----------- ----------- ----------- * 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 Shearson Hutton Performance Partners Statement of Partners' Capital for the years ended December 31, 1997 (termination of operations), 1996, and 1995 Limited General Partners Partner Total 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 loss (Note 6) (10,105) 799 (9,306) Redemption of 622 Units of Limited (796,854) -- (796,854) ----------- ----------- ----------- Partnership Interest Partners' capital at December 31, 1996 2,338,321 34,053 2,372,374 Net loss (265,950) (3,449) (269,399) Redemption of 711 Units of Limited (877,551) -- (877,551) ----------- ----------- ----------- Partnership Interest Partners' capital at December 31, 1997 $ 1,194,820 $ 30,604 $ 1,225,424 ----------- ----------- ----------- See notes to financial statements. F-5 Shearson Hutton Performance Partners Notes to Financial Statements 1. Partnership Organization: Shearson Hutton Performance Partners (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 and is a wholly owned subsidiary of Smith Barney Inc. ("SB"). SB acts as commodity broker for the Partnership (see Note 3b). On November 28, 1997, Smith Barney Holdings Inc. was merged with Salomon Inc to form Salomon Smith Barney Holdings Inc. ("SSBH"), a wholly owned subsidiary of Travelers Group Inc. SB is a wholly owned subsidiary of SSBH. 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 ceased trading during December 1997. The General Partner withdrew effective December 31, 1997, and the Partnership terminated operations as of that date. Distribution of the Partnership's capital was made subsequent to that date. (See Note 8.) 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 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 Management Agreements with SJO, Inc. and Trendlogic Associates Inc. (collectively the "Advisors"). Two of the principals of Trendlogic Associates, Mr. Paul E. Dean and Mr. Richard Semels, are employees of SB. The agreements provide that the Advisors have sole discretion in determining the investment of the assets of the Partnership allocated to the Advisors by the General Partner. As compensation for services, the Partnership is obligated to pay SJO, Inc. and Trendlogic Associates Inc a management fee payable monthly equal to 2.5% per annum and 2.0% per annum respectively, of the Net Assets managed by the Advisors and an incentive fee payable quarterly equal to 20% of Trading Profits. Trendlogic Associates Inc was added as an Advisor to the Partnership effective April 3, 1997. The Management Agreements were effective until December 31, 1997, the date the Partnership terminated operations. F-7 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 Advisors. 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, give-up, 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, 1997 and 1996, the amount of cash held for margin requirements was $0 and $425,859, 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 noncompetitive 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 was effective until December 31, 1997, the date the Partnership terminated operations. 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, 1997 and 1996 was $0 and $25,099, respectively, and the average fair value during the years then ended, based on monthly calculation, was $74,970 and $118,151, 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 6. Net Asset Value Per Unit: Changes in the net asset value per Unit for the years ended December 31, 1997 (termination of operations), 1996 and 1995 were as follows: 1997 1996 1995 Net realized and unrealized gains (losses) $ (130.17) $ 45.70 $ 248.21 Interest income 52.29 53.19 59.74 Expenses (65.84) (65.60) (96.11) --------- --------- --------- Increase (decrease) for year (143.72) 33.29* 211.84 Net asset value per Unit, beginning of 1,418.88 1,385.59 1,173.75 --------- --------- --------- year Net asset value per Unit, end of year $1,275.16 $1,418.88 $1,385.59 --------- --------- --------- * 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 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 At December 31, 1997 (termination of operations), the Partnership held no open positions and as a result had no commitment to purchase or sell any 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, and the fair value of the Partnership's derivatives, including options thereon, was $25,099 as detailed below. December 31, 1996 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 ----------- ----------- ----------- 8. Liquidation of the Partnership: The General Partner withdrew from the Partnership effective December 31, 1997 (termination of operations) after having given the required 90 days written notice to each Limited Partner. Distribution of the Partnership's capital was made subsequent to that date. F-11 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, 1997, SB earned $171,941 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, 1997, the Advisors earned $44,418 in management fees. No incentive fees were earned for the year ended December 31, 1997. 13 Item 12. Security Ownership of Certain Beneficial Owners and Management (a). Security ownership of certain beneficial owners. The Partnership knows of no person who beneficially owns more than 5% of the Units outstanding. (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 (2.5%) of Limited Partnership Interest as of December 31, 1997. (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." 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, 1997 and 1996. Statement of Income and Expenses for the years ended December 31, 1997, 1996 and 1995. Statement of Partners' Capital for the years ended December 31, 1997, 1996 and 1995. (2) Financial Statement Schedules: Financial Data Schedule for the year ended December 31, 1997. (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). 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). 14 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). 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). 15 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). 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). 16 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 (previously filed). 10.16- Management Agreement among the Partnership, the General Partner and TrendLogic Associates Inc. (filed herein). 10.17- Letter extending Mangement Agreement with SJO, Inc. (filed herein). (b) Reports on 8-K: None Filed. 17 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 18 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 1998. 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/ Daniel R. McAuliffe, Jr. /s/ Steve J. Keltz Daniel R. McAuliffe, Jr. Steve J. Keltz Director Secretary and Director /s/ Shelley Ullman Shelley Ullman Director 20 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000841941 Shearson Hutton Performance Partners 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 1,264,449 0 4,372 0 0 1,268,821 0 0 1,268,821 43,397 0 0 0 0 1,225,424 1,268,821 0 (176,033) 0 0 93,366 0 0 (269,399) 0 0 0 0 0 (269,399) (143.72) 0
EX-99 3 EXTENSION LETTER May 31, 1996 SJO INC. 10 W. State Street Suite 201 Geneva, Illinois 60134 Attention: Mr. Zafar Fakroddin & Mr. Irwin Berger Re: Management Agreement Renewal Shearson Hutton Performance Partners Dear Mr. Fakroddin & Mr. Berger: We are writing with respect to your management agreement concerning the commodity pool to which reference is made above (the "Management Agreement"). We would like to extend the term of the Management Agreement through June 30, 1997. All other provisions of the Management Agreement will remain unchanged. Please indicate your agreement to and acceptance of this modification by signing one copy of this letter and returning it to the attention of Mr. Daniel Dantuono at the address above. Very truly yours, SMITH BARNEY FUTURES MANAGEMENT INC. By: Chief Financial Officer, Director & Treasurer AGREED AND ACCEPTED SJO INC. By: Print Name: DAD/sr June 24, 1997 SJO INC. 10 W. State Street Suite 201 Geneva, Illinois 60134 Attention: Mr. Zafar Fakroddin & Mr. Irwin Berger Re: Management Agreement Renewal Shearson Hutton Performance Partners Dear Mr. Fakroddin & Mr. Berger: We are writing with respect to your management agreement concerning the commodity pool to which reference is made above (the "Management Agreement"). We would like to extend the term of the Management Agreement through June 30, 1998. All other provisions of the Management Agreement will remain unchanged. Please indicate your agreement to and acceptance of this modification by signing one copy of this letter and returning it to the attention of Mr. Daniel Dantuono at the address above. Very truly yours, SMITH BARNEY FUTURES MANAGEMENT INC. By: Chief Financial Officer, Director & Treasurer AGREED AND ACCEPTED SJO INC. By: Print Name: DAD/sr EX-99 4 MANAGEMENT AGREEMENT MANAGEMENT AGREEMENT AGREEMENT made as of the 1st day of April, 1997 among SMITH BARNEY FUTURES MANAGEMENT INC., a Delaware corporation ("SBFM"), SLH PERFORMANCE PARTNERS FUTURES FUND L.P., a Delaware limited partnership doing business as SHEARSON HUTTON PERFORMANCE PARTNERS FUTURES FUND (the "Partnership") and TRENDLOGIC ASSOCIATES, INC., a Delaware corporation (the "Advisor"). W I T N E S S E T H : WHEREAS, SBFM is the general partner of SHEARSON HUTTON PERFORMANCE PARTNERS FUTURES FUND, a limited partnership organized for the purpose of speculative trading of commodity interests, including futures contracts, options and forward contracts on U.S. and non-U.S. markets with the objective of achieving substantial capital appreciation; and WHEREAS, the Limited Partnership Agreement establishing the Partnership (the "Limited Partnership Agreement") permits SBFM to delegate to one or more commodity trading advisors SBFM's authority to make trading decisions for the Partnership; and WHEREAS, the Advisor is registered as a commodity trading advisor with the Commodity Futures Trading Commission ("CFTC") and is a member of the National Futures Association ("NFA"); and WHEREAS, SBFM is registered as a commodity pool operator with the CFTC and is a member of the NFA; and WHEREAS, SBFM, the Partnership and the Advisor wish to enter into this Agreement in order to set forth the terms and conditions upon which the Advisor will render and implement advisory services in connection with the conduct by the Partnership of its commodity trading activities during the term of this Agreement; NOW, THEREFORE, the parties agree as follows: 1. DUTIES OF THE ADVISOR. (a) The Advisor shall have sole authority and responsibility, as one of the Partnership's agents and attorneys-in-fact, for directing the trading of the assets and funds of the Partnership allocated to it from time to time by the General Partner in commodity interests, including commodity futures contracts, options and forward contracts. All such trading on behalf of the Partnership shall be in accordance with the trading policies set forth in the Prospectus dated December 29, 1988 as such trading policies may be changed from time to time upon receipt by the Advisor of prior written notice of such change and pursuant to the trading strategy selected by SBFM to be utilized by the Advisor in managing the Partnership's assets. SBFM has initially selected the Advisor's Diversified Program as the trading strategy which the Advisor shall utilize to manage the Partnership's assets allocated to it. Any open positions or other investments at the time of receipt of such notice of a change in trading policy shall not be deemed to violate the changed policy and shall be closed or sold in the ordinary course of trading. The Advisor may not deviate from the trading policies set forth in the Prospectus without the prior written consent of the Partnership given by SBFM. The Advisor makes no representation or warranty that the trading to be directed by it for the Partnership will be profitable or will not incur losses. (b) SBFM acknowledges receipt of the Advisor's Disclosure Document dated _____________ as filed with the CFTC. All trades made by the Advisor for the account of the Partnership shall be made through such commodity broker or brokers as SBFM shall direct, and the Advisor shall have no authority or responsibility for selecting or supervising any such broker in connection with the execution, clearance or confirmation of transactions for the Partnership or for the negotiation of brokerage rates charged therefor. However, the Advisor, with the prior written permission (by either original or fax copy) of SBFM, may direct any and all trades in commodity futures and options to a futures commission merchant or independent floor broker it chooses for execution with instructions to give-up the trades to the broker designated by SBFM, provided that the futures commission merchant or independent floor broker and any give-up or floor brokerage fees are approved in advance by SBFM. All give-up or similar fees relating to the foregoing shall be paid by the Partnership after all parties have executed the relevant give-up agreements (by either original or fax copy). (c) The initial allocation of the Partnership's assets to the Advisor will be made to the Advisor's Diversified Program. In the event the Advisor wishes to use a trading system or methodology other than or in addition to the Diversified Program in connection with its trading for the Partnership, either in whole or in part, it may not do so unless the Advisor gives SBFM prior written notice of its intention to utilize such different trading system or methodology and SBFM consents thereto in writing. In addition, the Advisor will provide five days' prior written notice to SBFM of any change in the trading system or methodology to be utilized for the Partnership which the Advisor deems material. If the Advisor deems such change in system or methodology or in markets traded to be material, the changed system or methodology or markets traded will not be utilized for the Partnership without the prior written consent of SBFM. Non-material changes in the trading system or methodology utilized for the Partnership may be instituted by the Advisor without such prior written consent. The Advisor will provide the Partnership with a current list of all commodity interests to be traded for the Partnership's account and will not trade any additional commodity interests for such account without providing notice thereof to SBFM and receiving SBFM's written approval. The Advisor also agrees to provide SBFM, on a monthly basis, with a written report of the assets under the Advisor's management together with all other matters deemed by the Advisor to be material changes to its business not previously reported to SBFM. (d) The Advisor agrees to make all material disclosures to the Partnership regarding itself and its principals as defined in Part 4 of the CFTC's regulations ("principals"), shareholders, directors, officers and employees, their trading performance and general trading methods, its customer accounts (but not the identities of or identifying information with respect to its customers) and otherwise as are required in the reasonable judgment of SBFM to be made in any filings required by Federal or state law or NFA rule or order. Notwithstanding Sections 1(d) and 4(d) of this Agreement, the Advisor shall not be required to disclose the actual trading results of proprietary accounts of the Advisor or its principals unless SBFM reasonably determines that such disclosure is required in order to fulfill its fiduciary obligations to the Partnership or the reporting, filing or other obligations imposed on it by Federal or state law or NFA rule or order. The Partnership and SBFM acknowledge that the trading advice to be provided by the Advisor is a property right belonging to the Advisor and that they will keep all such advice confidential. Further, SBFM agrees to treat as confidential any results of proprietary accounts and/or proprietary information with respect to trading systems obtained from the Advisor. Nothing contained in this Agreement shall be deemed or construed to require the Advisor to disclose any confidential or proprietary details of the Advisor's trading strategies and methodologies. (e) The Advisor understands and agrees that SBFM may designate other trading advisors for the Partnership and apportion or reapportion to such other trading advisors the management of an amount of Net Assets (as defined in Section 3(b) hereof) as it shall determine in its absolute discretion. The designation of other trading advisors and the apportionment or reapportionment of Net Assets to any such trading advisors pursuant to this Section 1 shall neither terminate this Agreement nor modify in any regard the respective rights and obligations of the parties hereunder. (f) SBFM may, from time to time, in its absolute discretion, select additional trading advisors and reapportion funds among the trading advisors for the Partnership as it deems appropriate. SBFM shall use its best efforts to make reapportionments, if any, as of the first day of a calendar month. The Advisor agrees that it may be called upon at any time promptly to liquidate positions in SBFM's sole discretion so that SBFM may reallocate the Partnership's assets, meet margin calls on the Partnership's account, fund redemptions, or for any other reason, except that SBFM will not require the liquidation of specific positions by the Advisor. SBFM will use its best efforts to give two days' prior notice to the Advisor of any reallocations or liquidations. (g) The Advisor will not be liable for trading losses in the Partnership's account including losses caused by errors; provided, however, that (i) the Advisor will be liable to the Partnership with respect to losses incurred due to errors committed or caused by it or any of its principals or employees in communicating improper trading instructions or orders to any broker on behalf of the Partnership and (ii) the Advisor will be liable to the Partnership with respect to losses incurred due to errors committed or caused by any executing broker (other than any SBFM affiliate) selected by the Advisor, (it also being understood that SBFM, with the assistance of the Advisor, will first attempt to recover such losses from the executing broker). 2. INDEPENDENCE OF THE ADVISOR. For all purposes herein, the Advisor shall be deemed to be an independent contractor and, except as otherwise expressly provided or authorized, shall have no authority to act for or represent the Partnership in any way and shall not be deemed an agent, promoter or sponsor of the Partnership, SBFM, or any other trading advisor. The Advisor shall not be responsible to the Partnership, the General Partner, any trading advisor or any limited partners for any acts or omissions of any other trading advisor no longer acting as an advisor to the Partnership. 3. COMPENSATION. (a) In consideration of and as compensation for all of the services to be rendered by the Advisor to the Partnership under this Agreement, the Partnership shall pay the Advisor (i) an incentive fee payable quarterly equal to 20% of New Trading Profits (as such term is defined below) earned by the Advisor for the Partnership and (ii) a monthly fee for professional management services equal to 1/6 of 1% (2% per year) of the month-end Net Assets of the Partnership allocated to the Advisor. (b) "Net Assets" shall have the meaning set forth in Paragraph 7(d)(1) of the Limited Partnership Agreement dated as of October 3, 1988 and amended as of December 29, 1988, and without regard to further amendments thereto, provided that in determining the Net Assets of the Partnership on any date, no adjustment shall be made to reflect any distributions, redemptions or incentive fees payable as of the date of such determination. (c) "New Trading Profits" shall mean the excess, if any, of Net Assets managed by the Advisor at the end of the fiscal period over Net Assets managed by the Advisor at the end of the highest previous fiscal period or Net Assets allocated to the Advisor at the date trading commences, whichever is higher, and as further adjusted to eliminate the effect on Net Assets resulting from new capital contributions, redemptions, reallocations or capital distributions, if any, made during the fiscal period, decreased by interest or other income, not directly related to trading activity, earned on the Partnership's assets during the fiscal period, whether the assets are held separately or in margin accounts. Ongoing expenses will be attributed to the Advisor based on the Advisor's proportionate share of Net Assets. Ongoing expenses will not include expenses incurred in connection with litigation or administrative proceedings not involving the activities of the Advisor on behalf of the Partnership. Ongoing expenses include offering and organizational expenses of the Partnership. No incentive fee shall be paid until the end of the first full calendar quarter of trading by the Advisor, which fee shall be based on New Trading Profits earned from the commencement of trading by the Advisor on behalf of the Partnership through the end of the first full calendar quarter. Interest income earned, if any, will not be taken into account in computing New Trading Profits earned by the Advisor. If Net Assets allocated to the Advisor are reduced due to redemptions, distributions or reallocations (net of additions), there will be a corresponding proportional reduction in the related loss carryforward amount that must be recouped before the Advisor is eligible to receive another incentive fee. (d) Quarterly incentive fees and monthly management fees shall be paid within twenty (20) business days following the end of the period, as the case may be, for which such fee is payable. In the event of the termination of this Agreement as of any date which shall not be the end of a fiscal quarter or a calendar month, as the case may be, the quarterly incentive fee shall be computed as if the effective date of termination were the last day of the then current quarter and the monthly management fee shall be prorated to the effective date of termination. If, during any month, the Partnership does not conduct business operations or the Advisor is unable to provide the services contemplated herein for more than two successive business days, the monthly management fee shall be prorated by the ratio which the number of business days during which SBFM conducted the Partnership's business operations or utilized the Advisor's services bears in the month to the total number of business days in such month. (e) The provisions of this Paragraph 3 shall survive the termination of this Agreement. 4. RIGHT TO ENGAGE IN OTHER ACTIVITIES. (a) The services provided by the Advisor hereunder are not to be deemed exclusive. SBFM on its own behalf and on behalf of the Partnership acknowledges that, subject to the terms of this Agreement, the Advisor and its officers, directors, employees and shareholder(s), may render advisory, consulting and management services to other clients and accounts. The Advisor and its officers, directors, employees and shareholder(s) shall be free to trade for their own accounts and to advise other investors and manage other commodity accounts during the term of this Agreement and to use the same information, computer programs and trading strategies, systems, methodologies, programs or formulas which they obtain, produce or utilize in the performance of services to SBFM for the Partnership. However, the Advisor represents, warrants and agrees that it believes the rendering of such consulting, advisory and management services to other accounts and entities will not require any material change in the Advisor's basic trading strategies and will not affect the capacity of the Advisor to continue to render services to SBFM for the Partnership as contemplated by this Agreement. (b) If, at any time during the term of this Agreement, the Advisor is required to aggregate the Partnership's commodity positions with the positions of any other person for purposes of applying CFTC- or exchange-imposed speculative position limits, the Advisor agrees that it will promptly notify SBFM if the Partnership's positions are included in an aggregate amount which exceeds the applicable speculative position limit. The Advisor agrees that, if its trading recommendations are altered because of the application of any speculative position limits, it will not modify the trading instructions with respect to the Partnership's account in such manner as to affect the Partnership substantially disproportionately as compared with the Advisor's other accounts. The Advisor further represents, warrants and agrees that under no circumstances will it knowingly or deliberately use trading strategies or methods for the Partnership that are inferior to strategies or methods employed for any other client or account and that it will not knowingly or deliberately favor any client or account managed by it over any other client or account in any manner, it being acknowledged, however, that different trading strategies or methods may be utilized for differing sizes of accounts, accounts with different trading policies, accounts experiencing differing inflows or outflows of equity, accounts which commence trading at different times, accounts which have different portfolios or different fiscal years, accounts utilizing different executing brokers and accounts with other differences, and that such differences may cause divergent trading results. (c) It is acknowledged that the Advisor and/or its officers, employees, directors and shareholder(s) presently act, and it is agreed that they may continue to act, as advisor for other accounts managed by them, and may continue to receive compensation with respect to services for such accounts in amounts which may be more or less than the amounts received from the Partnership. (d) The Advisor agrees that it shall make such information available to SBFM respecting the performance of the Partnership's account as compared to the performance of other accounts managed by the Advisor or its principals as shall be reasonably requested by SBFM. The Advisor presently believes and represents that existing speculative position limits will not materially adversely affect its ability to manage the Partnership's account given the potential size of the Partnership's account and the Advisor's and its principals' current accounts and all proposed accounts for which they have contracted to act as trading manager. 5. TERM. (a) This Agreement shall continue in effect until June 30, 1998. SBFM may, in its sole discretion, renew this Agreement for additional one-year periods upon notice to the Advisor not less than 30 days prior to the expiration of the previous period. At any time during the term of this Agreement, SBFM may terminate this Agreement at any month-end upon 30 days' notice to the Advisor. At any time during the term of this Agreement, SBFM may elect to immediately terminate this Agreement upon 30 days' notice to the Advisor if (i) the Net Asset Value per Unit shall decline as of the close of business on any day to $500 or less; (ii) the Net Assets allocated to the Advisor (adjusted for redemptions, distributions, withdrawals or reallocations, if any) decline by 50% or more as of the end of a trading day from such Net Assets' previous highest value; (iii) limited partners owning at least 50% of the outstanding Units shall vote to require SBFM to terminate this Agreement; (iv) the Advisor fails to materially comply with the terms of this Agreement; (v) SBFM, in good faith, reasonably determines that the performance of the Advisor has been such that SBFM's fiduciary duties to the Partnership require SBFM to terminate this Agreement; or (vi) SBFM reasonably believes that the application of speculative position limits resulting from the aggregation of the Partnership's commodity positions with the positions of any other accounts managed or advised by the Advisor or its principals will substantially affect the performance of the Partnership. At any time during the term of this Agreement, SBFM may elect immediately to terminate this Agreement if (i) the Advisor merges, consolidates with another entity, sells a substantial portion of its assets, or becomes bankrupt or insolvent, except as provided in Section 10 hereof, (ii) J. Richard Semels dies, becomes incapacitated, leaves the employ of the Advisor or ceases to be a controlling principal of the Advisor or is otherwise not actively participating in the management of the trading programs or systems of the Advisor, or (iii) the Advisor's registration as a commodity trading advisor with the CFTC or its membership in the NFA or any other regulatory authority, is terminated or suspended. This Agreement will immediately terminate upon dissolution of the Partnership or upon cessation of trading prior to dissolution. (b) The Advisor may terminate this Agreement by giving not less than 30 days' notice to SBFM (i) in the event that the trading policies of the Partnership as set forth in the Prospectus are changed in such manner that the Advisor reasonably believes will adversely affect the performance of its trading strategies; (ii) after June 30, 1998; (iii) in the event that the General Partner or Partnership fails to comply with the terms of this Agreement; or (iv) SBFM fails to consent to a change in the trading strategy pursuant to Section 1(c) of this Agreement. The Advisor may immediately terminate this Agreement if SBFM's registration as a commodity pool operator or its membership in the NFA is terminated or suspended. (c) Except as otherwise provided in this Agreement, any termination of this Agreement in accordance with this Paragraph 5 or Paragraph 1(e) shall be without penalty or liability to any party, except for any fees due to the Advisor pursuant to Section 3 hereof. 6. INDEMNIFICATION. (a)(i) In any threatened, pending or completed action, suit, or proceeding to which the Advisor was or is a party or is threatened to be made a party arising out of or in connection with this Agreement or the management of the Partnership's assets by the Advisor or the offering and sale of units in the Partnership, SBFM shall, subject to subparagraph (a)(iii) of this Paragraph 6, indemnify and hold harmless the Advisor against any loss, liability, damage, cost, expense (including, without limitation, attorneys' and accountants' fees), judgments and amounts paid in settlement actually and reasonably incurred by it in connection with such action, suit, or proceeding if the Advisor acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Partnership, and provided that its conduct did not constitute negligence, intentional misconduct, or a breach of its fiduciary obligations to the Partnership as a commodity trading advisor, unless and only to the extent that the court or administrative forum in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, the Advisor is fairly and reasonably entitled to indemnity for such expenses which such court or administrative forum shall deem proper; and further provided that no indemnification shall be available from the Partnership if such indemnification is prohibited by Section 16 of the Limited Partnership Agreement. The termination of any action, suit or proceeding by judgment, order or settlement shall not, of itself, create a presumption that the Advisor did not act in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Partnership. (ii) Without limiting sub-paragraph (i) above, to the extent that the Advisor has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subparagraph (i) above, or in defense of any claim, issue or matter therein, SBFM shall indemnify the Advisor against the expenses (including, without limitation, attorneys' and accountants' fees) actually and reasonably incurred by it in connection therewith. (iii) Any indemnification under subparagraph (i) above, unless ordered by a court or administrative forum, shall be made by SBFM only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that such indemnification is proper in the circumstances because the Advisor has met the applicable standard of conduct set forth in subparagraph (i) above. Such independent legal counsel shall be selected by SBFM in a timely manner, subject to the Advisor's approval, which approval shall not be unreasonably withheld. The Advisor will be deemed to have approved SBFM's selection unless the Advisor notifies SBFM in writing, received by SBFM within five days of SBFM's telecopying to the Advisor of the notice of SBFM's selection, that the Advisor does not approve the selection. (iv) In the event the Advisor is made a party to any claim, dispute or litigation or otherwise incurs any loss or expense as a result of, or in connection with, any activities or claimed activities of the Partnership, SBFM or another commodity trading advisor to the Partnership unrelated to the Advisor, SBFM shall indemnify, defend and hold harmless the Advisor against any loss, liability, damage, cost or expense (including, without limitation, attorneys' and accountants' fees) incurred in connection therewith. (v) As used in this Paragraph 6(a), the terms "Advisor" shall include the Advisor, its principals, officers, directors, stockholders and employees and the term "SBFM" shall include the Partnership. (b)(i) The Advisor agrees to indemnify, defend and hold harmless SBFM, the Partnership and their affiliates against any loss, liability, damage, cost or expense (including, without limitation, attorneys' and accountants' fees), judgments and amounts paid in settlement actually and reasonably incurred by them (A) as a result of the material breach of any material representations and warranties made by the Advisor in this Agreement, or (B) as a result of any act or omission of the Advisor relating to the Partnership if there has been a final judicial or regulatory determination or, in the event of a settlement of any action or proceeding with the prior written consent of the Advisor, a written opinion of an arbitrator pursuant to Paragraph 14 hereof, to the effect that such acts or omissions violated the terms of this Agreement in any material respect or involved negligence, bad faith, recklessness or intentional misconduct on the part of the Advisor (except as otherwise provided in Section 1(g)). (ii) In the event SBFM, the Partnership or any of their affiliates is made a party to any claim, dispute or litigation or otherwise incurs any loss or expense as a result of, or in connection with, the activities or claimed activities of the Advisor or its principals, officers, directors, shareholder(s) or employees unrelated to SBFM's or the Partnership's business, the Advisor shall indemnify, defend and hold harmless SBFM, the Partnership or any of their affiliates against any loss, liability, damage, cost or expense (including, without limitation, attorneys' and accountants' fees) incurred in connection therewith. (iii) J. Richard Semels shall have no liability to the Partnership or SBFM or any of their respective officers, directors, employees, partners or affiliates under this Agreement or in connection with the transactions contemplated by this Agreement except in the case of fraud or willful misconduct by J. Richard Semels. (c) In the event that a person entitled to indemnification under this Paragraph 6 is made a party to an action, suit or proceeding alleging both matters for which indemnification can be made hereunder and matters for which indemnification may not be made hereunder, such person shall be indemnified only for that portion of the loss, liability, damage, cost or expense incurred in such action, suit or proceeding which relates to the matters for which indemnification can be made. (d) None of the indemnifications contained in this Paragraph 6 shall be applicable with respect to default judgments, confessions of judgment or settlements entered into by the party claiming indemnification without the prior written consent, which shall not be unreasonably withheld, of the party obligated to indemnify such party. (e) The provisions of this Paragraph 6 shall survive the termination of this Agreement. 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. (a) The Advisor represents and warrants that: (i) The Advisor's Disclosure Document referred to in Paragraph 1(b) above is in full compliance with the Commodity Exchange Act and the rules and regulations promulgated thereunder; and (ii) is accurate in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact which is necessary to make the statements therein not misleading. (ii) The information with respect to the Advisor set forth in the actual performance tables in the Advisor's Disclosure Document is based on all of the customer commodity interest accounts managed on a discretionary basis by the Advisor's principals and/or the Advisor during the period covered by such tables and required to be disclosed therein. (iii) The Advisor will be acting as a commodity trading advisor with respect to the Partnership and not as a securities investment adviser and is duly registered with the CFTC as a commodity trading advisor, is a member of the NFA, and is in compliance with such other registration and licensing requirements as shall be necessary to enable it to perform its obligations hereunder, and agrees to maintain and renew such registrations and licenses during the term of this Agreement. (iv) The Advisor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power and authority to enter into this Agreement and to provide the services required of it hereunder. (v) The Advisor will not, by acting as a commodity trading advisor to the Partnership, breach or cause to be breached any undertaking, agreement, contract, statute, rule or regulation to which it is a party or by which it is bound. (vi) This Agreement has been duly and validly authorized, executed and delivered by the Advisor and is a valid and binding agreement enforceable in accordance with its terms. (vii) At any time during the term of this Agreement that a prospectus relating to the Units is required to be delivered in connection with the offer and sale thereof, the Advisor agrees upon the request of SBFM to provide the Partnership with such information as shall be necessary so that, as to the Advisor and its principals, such prospectus is accurate. (b) SBFM represents and warrants for itself and the Partnership that: (i) It is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to perform its obligations under this Agreement. (ii) SBFM and the Partnership have the capacity and authority to enter into this Agreement on behalf of the Partnership. (iii) This Agreement has been duly and validly authorized, executed and delivered on SBFM's and the Partnership's behalf and is a valid and binding agreement of SBFM and the Partnership enforceable in accordance with its terms. (iv) SBFM will not, by acting as General Partner to the Partnership, and the Partnership will not, breach or cause to be breached any undertaking, agreement, contract, statute, rule or regulation to which it is a party or by which it is bound which would materially limit or affect the performance of its duties under this Agreement. (v) It is registered as a commodity pool operator and is a member of the NFA, and it will maintain and renew such registration and membership during the term of this Agreement. (vi) The Partnership is a limited partnership duly organized and validly existing under the laws of the State of Delaware and has full power and authority to enter into this Agreement and to perform its obligations under this Agreement. 8. COVENANTS OF THE ADVISOR, SBFM AND THE PARTNERSHIP. (a) The Advisor agrees as follows: (i) In connection with its activities on behalf of the Partnership, the Advisor will comply with all applicable rules and regulations of the CFTC and/or the commodity exchange on which any particular transaction is executed. (ii) The Advisor will promptly notify SBFM of the commencement of any material suit, action or proceeding involving it, whether or not any such suit, action or proceeding also involves SBFM. (iii) In the placement of orders for the Partnership's account and for the accounts of any other client, the Advisor will utilize a pre-determined, systematic, fair and reasonable order entry system, which shall, on an overall basis, taking into consideration that the Advisor utilizes other programs for trading other accounts, be no less favorable to the Partnership than to any other account managed by the Advisor. The Advisor acknowledges its obligation to review the Partnership's positions, prices and equity in the account managed by the Advisor daily and within two business days to notify, in writing, the broker and SBFM and the Partnership's brokers of (i) any error committed by the Advisor or its principals or employees; (ii) any trade which the Advisor believes was not executed in accordance with its instructions; and (iii) any discrepancy with a value of $10,000 or more (due to differences in the positions, prices or equity in the account) between its records and the information reported on the account's daily and monthly broker statements. (iv) The Advisor will demonstrate to SBFM's satisfaction its ability to bear its responsibilities arising under this Agreement, by presentation of supporting documentation (such as financial statements together with a certification of accuracy or, in certain cases, the individual obligation of the controlling principal of the Advisor for the Advisor's responsibilities hereunder) as SBFM may reasonably request. In this connection, Advisor agrees that it shall cause the Promissory Note attached hereto as Rider A to be executed. (b) SBFM agrees for itself and the Partnership that: (i) SBFM and the Partnership will comply with all applicable rules and regulations of the CFTC and/or the commodity exchange on which any particular transaction is executed. (ii) SBFM will promptly notify the Advisor of the commencement of any material suit, action or proceeding involving it or the Partnership, whether or not such suit, action or proceeding also involves the Advisor. 9. COMPLETE AGREEMENT. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof. 10. ASSIGNMENT. This Agreement may not be assigned by any party without the express written consent of the other parties, except that the Advisor may incorporate or transfer all of its assets, trading programs or goodwill to, or merge or consolidate with, any corporation, partnership or sole proprietorship controlled by J. Richard Semels, and may assign this Agreement to any such corporation, partnership or sole proprietorship; provided, that said corporation, partnership or sole proprietorship assumes all rights and obligations of the Advisor under this Agreement and is entitled to and agrees to use the trading methods and systems of the Advisor for the benefit of the Partnership. 11. AMENDMENT. This Agreement may not be amended except by the written consent of the parties. 12. NOTICES. All notices, demands or requests required to be made or delivered under this Agreement shall be in writing and delivered personally or by registered or certified mail or expedited courier, return receipt requested, postage prepaid, to the addresses below or to such other addresses as may be designated by the party entitled to receive the same by notice similarly given: If to SBFM: Smith Barney Futures Management Inc. 390 Greenwich Street 1st Floor New York, New York 10013 Attention: David J. Vogel If to the Advisor: TRENDLOGIC ASSOCIATES, INC. One Fawcett Place Greenwich, Connecticut 06830 Attention: Mr. J. Richard Semels with a copy to: Perez C. Ehrich, Esq. Dorsey & Whitney LLP 250 Park Avenue New York, New York 10177 13. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of law. 14. ARBITRATION. The parties agree that any dispute or controversy arising out of or relating to this Agreement or the interpretation thereof, shall be settled by arbitration in accordance with the rules, then in effect, of the National Futures Association or, if the National Futures Association shall refuse jurisdiction, then in accordance with the rules, then in effect, of the American Arbitration Association; provided, however, that the power of the arbitrator shall be limited to interpreting this Agreement as written and the arbitrator shall state in writing his reasons for his award. Judgment upon any award made by the arbitrator may be entered in any court of competent jurisdiction. 15. NO THIRD PARTY BENEFICIARIES. There are no third party beneficiaries to this Agreement. 16. FEE ACKNOWLEDGMENT. SBFM acknowledges for itself and the Partnership that (i) the incentive fee payable to the Advisor under Section 3 of this Agreement is compensation for advice provided by the Advisor which relates to the trading of commodity interests, (ii) such fee is not based on the capital gains or capital appreciation of securities of any type, and (iii) notwithstanding the Advisor's registration as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), such fee is not computed in accordance with requirements under the Advisers Act applicable to performance fees. IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the undersigned as of the day and year first above written. SMITH BARNEY FUTURES MANAGEMENT INC. By: /s/ David J. Vogel David J. Vogel President and Director SHEARSON HUTTON PERFORMANCE PARTNERS FUTURES FUND By: Smith Barney Futures Management Inc. (General Partner) By: /s/ David J. Vogel David J. Vogel President and Director TRENDLOGIC ASSOCIATES, INC. By: /s/ J. Richard Semels ____ J. Richard Semels Chairman and Chief Executive Officer RIDER A PROMISSORY NOTE Greenwich, Connecticut Date: April 1, 1997 FOR VALUE RECEIVED, the undersigned, J. Richard Semels, promises to pay on demand, to the order of SHEARSON HUTTON PERFORMANCE PARTNERS FUTURES FUND (the "Fund") or Smith Barney Futures Management Inc. ("SBFM") as the Fund or SBFM shall elect, the sum of One Hundred Thousand Dollars ($100,000). This note shall be callable by the Fund or SBFM only if and to the extent that TrendLogic Associates, Inc. ("TrendLogic"), a Delaware corporation, does not have sufficient assets to fulfill TrendLogic's obligations associated with the Management Agreement dated April 1, 1997 among SBFM, the Fund and TrendLogic. /s/ J. Richard Semels ____ J. Richard Semels -----END PRIVACY-ENHANCED MESSAGE-----