FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1996
Commission File Number 0-21588
SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
(Exact name of registrant as specified in its charter)
New York 13-3616914
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Smith Barney Futures Management Inc.
390 Greenwich St. - 1st. Fl.
New York, New York 10013
(Address and Zip Code of principal executive offices)
(212) 723-5424
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
FORM 10-Q
INDEX
Page
Number
PART I - Financial Information:
Item 1. Financial Statements:
Statements of Financial Condition at
September 30, 1996 and December 31, 1995 3
Statements of Income and Expenses and
Partners' Capital for the Three and Nine
Months ended September 30, 1996 and 1995 4
Notes to Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9 - 10
PART II - Other Information 11
2
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PART I
Item 1. Financial Statements
SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, DECEMBER 31,
1996 1995
----------- -----------
(Unaudited)
ASSETS
Equity in commodity futures trading account:
Cash and cash equivalents $ 3,264,852 $ 6,912,939
Net unrealized appreciation (depreciation)
on open futures contracts 164,975 (22,990)
----------- -----------
3,429,827 6,889,949
Interest receivable 11,495 25,911
Other assets 19,853
----------- -----------
$ 3,441,322 $ 6,935,713
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued expenses:
Commissions $ 20,074 $ 40,342
Other 42,675 44,133
Redemptions payable 103,047 2,513,653
Incentive fee 38,286 -
Due to Smith Barney 39,194
----------- -----------
204,082 2,637,322
----------- -----------
Partners' Capital
General Partner, 8,000.2096 Unit equivalents
outstanding in 1996 and 1995 84,882 74,402
Limited Partners, 297,151.1546 and
454,095.3092 Units of Limited Partnership
Interest outstanding in 1996 and 1995,
respectively 3,152,358 4,223,989
----------- -----------
3,237,240 4,298,391
----------- -----------
$ 3,441,322 $ 6,935,713
=========== ===========
See Notes to Financial Statements.
3
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SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
STATEMENTS OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------ ------------ ------------ ------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Net gains (losses) on trading of
commodity futures:
Realized gains on closed positions $ 246,259 $ 744,619 $ 474,137 $ 1,257,352
Change in unrealized gains /losses on
open positions (13,775) (405,121) 187,965 (501,180)
------------ ------------ ------------ ------------
232,484 339,498 662,102 756,172
Less, brokerage commissions and clearing
fees ($48, $1,228, $934, and $8,748,
respectively) (60,272) (165,187) (200,382) (560,510)
------------ ------------ ------------ ------------
Net realized and unrealized gains 172,212 174,311 461,720 195,662
Interest income 35,404 107,338 115,587 373,073
------------ ------------ ------------ ------------
207,616 281,649 577,307 568,735
------------ ------------ ------------ ------------
Expenses:
Incentive fees 38,286 68,346 41,086 130,186
Other 16,467 28,172 48,213 122,071
Organization expense and filing fees - 56,868 19,954 160,158
------------ ------------ ------------ ------------
54,753 153,386 109,253 412,415
------------ ------------ ------------ ------------
Net income 152,863 128,263 468,054 156,320
Redemptions (332,541) (1,079,628) (1,529,205) (3,695,096)
Additions - - - 24,500
------------ ------------ ------------ ------------
Net decrease in Partners' capital (179,678) (951,365) (1,061,151) (3,514,276)
Partners' capital, beginning of period 3,416,918 9,298,958 4,298,391 11,861,869
------------ ------------ ------------ ------------
Partners' capital, end of period $ 3,237,240 $ 8,347,593 $ 3,237,240 $ 8,347,593
============ ============ ============ ============
Net Asset Value per Unit
(305,151.3642 and 839,353.1199 Units
outstanding at September 30, 1996 and 1995,
respectively) $ 10.61 $ 9.94 $ 10.61 $ 9.94
============ ============ ============ ============
Net income per Unit of Limited Partnership
Interest and General Partnership Unit equivalent $ 0.48 $ 0.13 $ 1.31 $ 0.15
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
4
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SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
1. General:
Smith Barney International Advisors Currency Fund L.P., (the "Partnership")
is a limited partnership which was organized on May 29, 1991 under the
partnership laws of the State of New York to engage in the speculative trading
of commodity interests, including forward contracts, commodity options and
commodity futures contracts on foreign currencies. The commodity interests that
are traded by the Partnership are volatile and involve a high degree of market
risk. The Partnership commenced trading on March 12, 1992.
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate of
the General Partner, acts as commodity broker for the Partnership. All trading
decisions for the Partnership are made by Friedberg Commodity Management Inc.
and Trendview Management Inc. (collectively, the "Advisors").
The accompanying financial statements are unaudited but, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Partnership's financial
condition at September 30, 1996 and the results of its operations for the three
and nine months ended September 30, 1996 and 1995. These financial statements
present the results of interim periods and do not include all disclosures
normally provided in annual financial statements. It is suggested that these
financial statements be read in conjunction with the financial statements and
notes included in the Partnership's annual report on Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 1995.
Due to the nature of commodity trading, the results of operations for the
interim periods presented should not be considered indicative of the results
that may be expected for the entire year.
5
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Smith Barney International Advisors Currency Fund L.P.
Notes to Financial Statements
September 30, 1996
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three and nine months ended
September 30, 1996 and 1995 were as follows:
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
Net realized and unrealized
gains $ 0.54 $ 0.19 $ 1.29 $ 0.20
Interest income 0.11 0.12 0.31 0.35
Expenses (0.17) (0.18) (0.29) (0.40)
------ ------ ------ ------
Increase for period 0.48 0.13 1.31 0.15
Net Asset Value per Unit,
beginning of period 10.13 9.81 9.30 9.79
------ ------ ------ ------
Net Asset Value per Unit,
end of period $10.61 $ 9.94 $10.61 $ 9.94
====== ====== ====== ======
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's trading
activities are shown in the statements of income and expenses.
The Customer Agreement between the Partnership and SB gives the
Partnership the legal right to net unrealized gains and losses.
All of the commodity interests owned by the Partnership are held for
trading purposes. The fair value of these commodity interests, including options
thereon, at September 30, 1996 was $164,975 and the average fair value during
the nine months then ended, based on monthly calculation, was $143,599.
6
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4. Financial Instrument Risk:
The Partnership is party to financial instruments with off-balance sheet
risk, including derivative financial instruments and derivative commodity
instruments, in the normal course of its business. These financial instruments
include forwards, futures and options, whose value is based upon an underlying
asset, index, or reference rate, and generally represent future commitments to
exchange currencies or cash flows, to purchase or sell other financial
instruments at specific terms at specified future dates, or, in the case of
derivative commodity instruments, to have a reasonable possibility to be settled
in cash or with another financial instrument. These instruments may be traded on
an exchange or over-the-counter ("OTC"). Exchange traded instruments are
standardized and include futures and certain option contracts. OTC contracts are
negotiated between contracting parties and include forwards and certain options.
Each of these instruments is subject to various risks similar to those related
to the underlying financial instruments including market and credit risk. In
general, the risks associated with OTC contracts are greater than those
associated with exchange traded instruments because of the greater risk of
default by the counter party to an OTC contract.
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including interest
and foreign exchange rate movements and fluctuations in commodity or security
prices. Market risk is directly impacted by the volatility and liquidity in the
markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of
a counterparty to perform according to the terms of a contract. Credit risk with
respect to exchange traded instruments is reduced to the extent that an exchange
or clearing organization acts as a counterparty to the transactions. The
Partnership's risk of loss in the event of counterparty default is typically
limited to the amounts recognized in the statement of financial condition and
not represented by the contract or notional amounts of the instruments. The
Partnership has concentration risk because the sole counterparty or broker with
respect to the Partnership's assets is SB.
The Partnership engages in the trading of forward contracts in foreign
currencies. In this connection, the Partnership contracts with SB as the
counterparty to take future delivery of a particular foreign currency. In a
forward transaction, cash settlement does not occur until the agreed upon value
date of the transaction. The Partnership's credit risk in the event of counter
party default is typically limited to the amounts recognized in the statement of
financial condition and not represented by the contract or notional
7
<PAGE>
amounts of the instruments. At September 30, 1996 the net unrealized
appreciation for off-exchange traded forward currency contracts was $164,975.
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.
The notional or contractual amounts of these instruments, while not
recorded in the financial statements, reflect the extent of the Partnership's
involvement in these instruments. At September 30, 1996, the notional or
contractual amounts of the Partnership's commitment to purchase and sell these
instruments was $25,267,103 and $27,312,962, respectively, as detailed below.
All of these instruments mature within one year of September 30, 1996. However,
due to the nature of the Partnership's business, these instruments may not be
held to maturity. At September 30, 1996, the Partnership had net unrealized
trading gains of $164,975, as detailed below.
NOTIONAL OR CONTRACTUAL NET
AMOUNT OF COMMITMENTS UNREALIZED
TO PURCHASE TO SELL GAIN
Currencies - OTC Contracts $25,267,103 $27,312,962 $164,975
----------- ----------- --------
$25,267,103 $27,312,962 $164,975
=========== =========== ========
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Partnership does not engage in the sale of goods or services. Its only
assets are its equity in its commodity futures trading account, consisting of
cash and cash equivalents, net unrealized appreciation (depreciation) on open
futures and forward contracts and interest receivable. Because of the low margin
deposits normally required in commodity futures trading, relatively small price
movements may result in substantial losses to the Partnership. While substantial
losses could lead to a decrease in liquidity, no such losses occurred in the
third quarter of 1996.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by gains or losses on commodity futures
trading, expenses, interest income, redemptions and additions of Units and
distributions of profits, if any.
For the nine months ended September 30, 1996, Partnership capital
decreased 24.7% from $4,298,391 to $3,237,240. This decrease was attributable to
the redemption of 156,944.1546 Units totaling $1,529,205 which was partially
offset by net income from operations of $468,054 for the nine months ended
September 30, 1996. Future redemptions can impact the amount of funds available
for investments in commodity contract positions in subsequent periods.
Results of Operations
During the Partnership's third quarter of 1996, the net asset value per
Unit increased 4.7% from $10.13 to $10.61, as compared to an increase of 1.3% in
the third quarter of 1995. The Partnership experienced a net trading gain before
commissions and expenses in the third quarter of 1996 of $232,484 recognized in
the trading of major, minor and exotic forward currency contracts. The
Partnership experienced a net trading gain before commissions and expenses in
the third quarter of 1995 of $339,498. Gains were recognized in the trading of
major and exotic currencies and were partially offset by losses in minor
currencies.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisors to
identify correctly those price trends. Price trends are influenced by, among
other things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
international political and economic events
9
<PAGE>
and changes in interest rates. To the extent that market trends exist and the
Advisors are able to identify them, the Partnership expects to increase capital
through operations.
Interest income on 85% of the Partnership's daily equity maintained in
cash was earned at the monthly average 13-week U.S. Treasury bill yield.
Interest income for the three and nine months ended September 30, 1996 decreased
by $71,934 and $257,486, respectively, as compared to the corresponding periods
in 1995. These decreases are primarily due to the effect of redemptions on the
Partnership's equity maintained in cash as well as a decrease in interest rates
in 1996 as compared to 1995.
Brokerage commissions are calculated on the adjusted net asset value on
the last day of each month and, therefore, vary according to trading performance
and redemptions. Accordingly, they must be compared in relation to the
fluctuations in the monthly net asset values. Commissions and clearing fees for
the three and nine months ended September 30, 1996 decreased by $104,915 and
$360,128, respectively, as compared to the corresponding periods in 1995.
Incentive fees are based on the new trading profits generated by each
Advisor as defined in the advisory agreements between the Partnership, the
General Partner and each Advisor. Trading performance for the three and nine
months ended September 30, 1996 resulted in a decrease in incentive fees of
$30,060 and $89,100, respectively, as compared to the corresponding periods in
1995.
10
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) Reports on Form 8-K - None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SMITH BARNEYINTERNATIONAL ADVISORS CURRENCY FUND L.P.
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/11/96
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 11/11/96
By: /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and Treasurer
Date: 11/11/96
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000876716
<NAME> SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,264,852
<SECURITIES> 164,975
<RECEIVABLES> 11,495
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,441,322
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,441,322
<CURRENT-LIABILITIES> 204,082
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,237,240
<TOTAL-LIABILITY-AND-EQUITY> 3,441,322
<SALES> 0
<TOTAL-REVENUES> 577,307
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 109,253
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 468,054
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 468,054
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 0
</TABLE>
