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 March 31, 1997
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:
Statement of Financial Condition at
March 31, 1997 and December 31, 1996 3
Statement of Income and Expenses and
Partners' Capital for the Three Months
ended March 31, 1997 and 1996 4
Notes to Financial Statements 5 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9 - 10
PART II - Other Information 11
2
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PART I
Item 1. Financial Statements
SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
STATEMENT OF FINANCIAL CONDITION
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
(Unaudited)
ASSETS:
Equity in commodity futures trading account:
Cash and cash equivalents $ 3,639,085 $ 3,525,670
Net unrealized depreciation on open
futures contracts (69,677) (33,306)
----------- -----------
3,569,408 3,492,364
Interest receivable 13,112 12,361
----------- -----------
$ 3,582,520 $ 3,504,725
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 20,898 $ 20,444
Other 33,553 33,891
Incentive fees 46,586 42,819
Redemptions payable 35,665 48,595
----------- -----------
Partners' Capital: 136,702 145,749
----------- -----------
General Partner, 8,000.2096 Unit equivalents
outstanding in 1997 and 1996 96,163 91,282
Limited Partners, 278,749.1532 and
286,344.8991 Units of Limited Partnership
Interest outstanding in 1997 and 1996,
respectively 3,349,655 3,267,694
----------- -----------
3,445,818 3,358,976
----------- -----------
$ 3,582,520 $ 3,504,725
=========== ===========
See Notes to Financial Statements
3
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SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
THREE-MONTHS THREE-MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
----------- -----------
Income:
Net gains on trading of commocity futures:
Realized gains on closed positions $ 303,094 $ 34,302
Change in unrealized gains/losses on
open positions (36,371) 118,493
----------- -----------
266,723 152,795
Less, brokerage commissions and clearing
fees ($0 and $5,555, respectively) (63,768) (74,959)
----------- -----------
Net realized and unrealized gains 202,955 77,836
Interest income 36,196 42,935
----------- -----------
239,151 120,771
----------- -----------
Expenses:
Incentive fees 46,586
Other 13,358 16,219
Organization expense 19,954
----------- -----------
59,944 36,173
----------- -----------
Net income 179,207 84,598
Redemptions (92,365) (685,223)
----------- -----------
Net increase (decrease) in Partners' capital 86,842 (600,625)
Partners' capital, beginning of period 3,358,976 4,298,391
----------- -----------
Partners' capital, end of period $ 3,445,818 $ 3,697,766
=========== ===========
Net asset value per Unit
(286,749.3628 and 389,154.9293 Units
outstanding at March 31, 1997 and
1996, respectively) $ 12.02 $ 9.50
=========== ===========
Net income per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 0.61 $ 0.20
=========== ===========
See Notes to Financial Statements
4
<PAGE>
SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(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 a diversified portfolio of commodity interests, including futures
contracts options and forward contracts. The commodity interests that are traded
by the Partnership are volatile and involve a high degree of market risk. The
Partnership commenced trading operations on 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 Capital Management (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 March 31, 1997 and the results of its operations for the three
months ended March 31, 1997 and 1996. These financial statements present the
results of interim periods and do not include all disclosures normally provided
in annual financial statements. It is suggested that these financial statements
be read in conjunction with the financial statements and notes included in the
Partnership's annual report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1996.
Due to the nature of commodity trading, the results of operations for
the interim periods presented should not be considered indicative of the results
that may be expected for the entire year.
5
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Smith Barney International Advisors Currency Fund L.P.
Notes to Financial Statements
March 31, 1997
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three months ended March 31, 1997
and 1996 were as follows:
THREE-MONTHS ENDED
MARCH 31,
1997 1996
Net realized and unrealized
gains $ 0.68 $ 0.18
Interest income 0.12 0.10
Expenses (0.19) (0.08)
------- -------
Increase for period 0.61 0.20
Net Asset Value per Unit,
beginning of period 11.41 9.30
------- ------
Net Asset Value per Unit,
end of period $12.02 $ 9.50
======= ======
3. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a
variety of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's trading
activity are shown in the statement 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 March 31, 1997 was $(69,677) and the average fair value during the
three months then ended, based on monthly calculation, was $173,308.
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 amounts of
the instruments.
7
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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 March 31, 1997, the notional or contractual
amounts of the Partnership's commitment to purchase and sell these instruments
was $8,643,896 and $10,282,811, respectively, as detailed below. All of these
instruments mature within one year of March 31, 1997. However, due to the nature
of the Partnership's business, these instruments may not be held to maturity. At
March 31, 1997, the fair value of the Partnership's derivatives, including
options thereon, was $(69,677), as detailed below.
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies - OTC Contracts $8,643,896 $10,282,811 $(69,677)
========== =========== =========
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
first quarter of 1997.
The Partnership's capital consists of the capital contributions of the
partners as increased or decreased by gains or losses on commodity futures
trading, expenses, interest income, redemptions and additions of Units and
distributions of profits, if any.
For the three months ended March 31, 1997, Partnership capital increased
2.6% from $3,358,976 to $3,445,818. This increase was attributable to net income
from operations of $179,207 which was partially offset by the redemption of
7,595.7459 Units totaling $92,365 for the three months ended March 31, 1997.
Future redemptions can impact the amount of funds available for investments in
commodity contract positions in subsequent periods.
Results of Operations
During the Partnership's first quarter of 1997, the net asset value per
Unit increased 5.3% from $11.41 to $12.02, as compared to an increase of 2.2% in
the first quarter of 1996. The Partnership experienced a net trading gain before
commissions and expenses in the first quarter of 1997 of $266,723. These gains
were primarily recognized in the trading of Japanese Yen and Italian Lira and
were partially offset by losses in Pound Sterling and Swiss Francs. The
Partnership experienced a net trading gain before commissions and expenses in
the first quarter of 1996 of $152,795. These gains were recognized in the
trading of Japanese Yen, Deutsche Mark, Australian Dollar, New Zealand Dollar
and Swedish Krona and were partially offset by losses in Swiss Francs, Pound
Sterling, Italian Lira and Czech Koruna.
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
9
<PAGE>
things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and
international political and economic events and changes in interest rates. To
the extent that market trends exist and the Advisors are able to identify them,
the Partnership expects to increase capital through operations.
Interest income on 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 months ended March 31, 1997 decreased by $6,739 as
compared to the corresponding period in 1996. This decrease is primarily due to
the effect of redemptions on the Partnership's equity maintained in cash which
was partially offset by an increase in interest rates during the three months
ended March 31, 1997 as compared to 1996.
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 months ended March 31, 1997 decreased by $11,191 as compared to the
corresponding period in 1996.
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 months ended
March 31, 1997 and 1996 resulted in incentive fees of $46,586 and $0,
respectively.
10
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PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) Reports on Form 8-K - None
11
<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 BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 5/12/97
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: Smith Barney Futures Management Inc.
(General Partner)
By: /s/ David J. Vogel, President
David J. Vogel, President
Date: 5/12/97
By /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 5/12/97
12
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<CIK> 0000876716
<NAME> SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,639,085
<SECURITIES> (69,677)
<RECEIVABLES> 13,112
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,582,520
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,582,520
<CURRENT-LIABILITIES> 136,702
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,445,818
<TOTAL-LIABILITY-AND-EQUITY> 3,582,520
<SALES> 0
<TOTAL-REVENUES> 239,151
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 59,944
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 179,207
<INCOME-TAX> 0
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