UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission File Number 0-21588
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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 10,000,000
Units of
Limited
Partnership
Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K [ ]
<PAGE>
PART I
Item 1. Business.
(a) General development of business. Smith Barney International Advisors
Currency Fund L.P., (the "Partnership") is a limited partnership organized on
May 29, 1991 under the limited partnership laws of the State of New York to
engage in 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 operations on March 12, 1992. A total
of 10,000,000 Units of Limited Partnership Interest in the Partnership ("Units")
were offered to the public. A Registration Statement on Form S-1 relating to the
public offering became effective on September 30, 1991. Between September 30,
1991 and February 27, 1992, 1,109,024 Units were sold to the public at $10 per
Unit. Proceeds of the offering were held in an escrow account and were
transferred, along with the General Partner's contribution of $143,760, to the
Partnership's trading account on March 12, 1992 when the Partnership commenced
trading. Sales of additional Units and redemptions of Units for the years ending
December 31, 1996, 1995 and 1994 are reported in the Statement of Partners'
Capital on page F-5 under "Item 8. Financial Statements and Supplementary Data."
2
<PAGE>
The General Partner has agreed to make additional capital contributions,
if necessary, so that its general partnership interest will be equal to the
greater of (i) an amount to entitle it to 1% of each material item of
Partnership income, loss, deduction or credit or (ii) the greater of (a) 1% of
the Partners' contributions to the Partnership or (b) $25,000. The Partnership
will be liquidated on December 31, 2011; if the Net Asset Value per Unit falls
below $4 as of the end of a trading day; or upon the earlier occurrence of
certain other circumstances set forth in the Limited Partnership Agreement.
The Partnership's trading of futures contracts on commodities is done on
United States and foreign commodity exchanges. It engages in such trading
through a commodity brokerage account maintained with its commodity broker,
Smith Barney, Inc. ("SB").
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. SB is an affiliate of the General
Partner.
As of December 31, 1996, the General Partner, on behalf of the
Partnership, has entered into Management Agreements (the "Management
Agreements") with Friedberg Commodity Management Inc. and Trendview Management
Inc., (collectively, the "Advisors") who make all commodity trading decisions
for the Partnership. None of the Advisors is affiliated with the General Partner
or SB. The Advisors are not responsible for the organization or operation of the
Partnership. The General Partner terminated Gill Capital Management and
Commodity Monitors Inc. as Advisors effective
3
<PAGE>
January 2, 1996. Trendview Management Inc. was added as an Advisor on the same
date. Pursuant to the terms of each Management Agreement, the Partnership is
obligated to pay the Advisors an incentive fee payable quarterly of 20% of New
Trading Profits (as defined in the Limited Partnership Agreement) of the
Partnership.
The Customer Agreement (the "Customer Agreement") provides that the
Partnership pays SB a monthly brokerage fee equal to 7/12 of 1% of month-end Net
Assets (7% per year) in lieu of brokerage commissions on a per trade basis. From
its brokerage fee, SB pays each Advisor a monthly management fee equal to 1/6 of
1% (2% per year) of Net Assets allocated to the Advisor as of the end of the
month. SB also pays a portion of its brokerage fees to its financial consultants
who have sold Units and who are registered as associated persons with the
Commodity Futures Trading Commission (the "CFTC"). The Partnership pays for
National Futures Association ("NFA") fees, exchange and clearing fees, give-up
and user fees and floor brokerage fees. The Customer Agreement between the
Partnership and SB gives the Partnership the legal right to net unrealized gains
and losses. Brokerage fees will be paid for the life of the Partnership,
although the rate at which such fees are paid may be changed.
In addition, SB pays the Partnership interest on 85% of the average daily
equity maintained in cash in its account during each month at the rate equal to
the average noncompetitive 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
4
<PAGE>
Partnership's business consists of only one segment, speculative trading of
commodity interests. The Partnership does not engage in sales of goods or
services. The Partnership's net income (loss) from operations for the years
ended December 31, 1996, 1995, 1994 and 1993, and the period from March 12, 1992
(commencement of trading operations) to December 31, 1992 is set forth under
"Item 6. Select Financial Data." The Partnership capital as of December 31, 1996
was $3,358,976.
(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. 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.
5
<PAGE>
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 fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Security
Holder Matters.
(a) Market Information. The Partnership has issued no
stock. There is no established public trading market
for the Units of Limited Partnership Interest.
(b) Holders. The number of holders of Units of Partnership
Interest as of December 31, 1996 was 176.
(c) Distribution. The Partnership did not declare a
distribution in 1996.
6
<PAGE>
Item 6. Select Financial Data. The Partnership commenced trading operations on
March 12, 1992. Realized and unrealized trading gains (losses), interest income,
net income (loss) and increase (decrease) in net asset value per Unit and
distribution per Unit for the years ended December 31, 1996, 1995, 1994 and 1993
and the period from March 12, 1992 (commencement of trading operations) to
December 31, 1992 and total assets at December 31, 1996, 1995, 1994, 1993 and
1992 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ------------ ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Realized and unrealized trading
gains(losses) net of brokerage
commissions and clearing fees
of $263,649, $694,687, $1,226,232,
$1,733,747 and $914,672,
respectively $ 712,497 $ (320,012) $(2,201,591) $ 682,801 $ 3,022,295
Interest income 150,381 459,661 584,880 610,487 372,633
----------- ----------- ------------ ------------ -----------
$ 862,878 $ 139,649 $(1,616,711) $ 1,293,288 $ 3,394,928
=========== =========== ============ ============ ===========
Net Income (loss) $ 715,392 $ (364,410) $(1,930,322) $ 342,398 $ 2,195,383
=========== =========== ============ ============ ===========
Increase (decrease)
in net asset value
per Unit $ 2.11 $(0.49) $(1.14) $ 0.09 $ 1.69
======= ======= ======= ======= ======
Distributions per
Unit $ 0.85
======
Total assets $3,504,725 $6,935,713 $13,532,638 $20,955,934 $21,098,404
=========== =========== ============ ============ ===========
</TABLE>
7
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(a) Liquidity. The Partnership does not engage in sales of goods or
services. Its only assets are its commodity futures trading account, consisting
of cash and cash equivalents, net unrealized appreciation (depreciation) on open
commodity contracts, commodity options, 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) No Advisor initiates additional positions in any commodity if
such additional positions would result in aggregate positions for all
commodities requiring as margin more than 66-2/3% of the Partnership's assets
allocated to the Advisor. For the purpose of this limitation, forward contracts
in currencies are deemed to have the same margin requirements as the same or
similar futures contracts traded on the Chicago Mercantile Exchange.
(3) 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.
8
<PAGE>
(4) The Partnership does not utilize borrowings except short-term
borrowings if the Partnership takes delivery of any cash commodities, provided
that neither the deposit of margin with a commodity broker nor obtaining and
drawing a line of credit with respect to forward contracts shall constitute
borrowing.
(5) 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 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
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 fair value of off-exchange traded forward
currency contracts at December 31, 1996 and 1995 was approximately $(33,000) and
$75,000, respectively.
The Partnership is party to financial instruments with
9
<PAGE>
off-balance sheet risk, including derivative financial instruments and
derivative commodity instruments, in the normal course of its business. These
financial instruments include forwards, futures and options, whose value is
based upon an underlying asset, index, or reference rate, and generally
represent future commitments to exchange currencies or cash flows, or to
purchase or sell other financial instruments at specified terms at specified
future dates. Each of these instruments is subject to various risks similar to
those relating to the underlying financial instruments including market and
credit risk. The General Partner monitors and controls the Partnership's risk
exposure on a daily basis through financial, credit and risk management
monitoring systems and, accordingly believes that it has effective procedures
for evaluating and limiting the credit and market risks to which the Partnership
is subject. (See also "Item 8. Financial Statement and Supplementary Data.," for
further information on financial instrument risk included in the notes to
financial statements.)
Other than the risks inherent in commodity futures trading, the
Partnership knows of no trends, demands, commitments, events or uncertainties
which will result in or which are reasonably likely to result in the
Partnership's liquidity increasing or decreasing in any material way. The
Limited Partnership Agreement provides that the General Partner may, at its
discretion, cause the Partnership to cease trading operations and liquidate all
open positions upon the first to occur of the following: (i) December 31, 2011;
(ii) the vote to dissolve the
10
<PAGE>
Partnership by limited partners owning more than 50% of the Units; (iii)
assignment by the General Partner of all of its interest in the Partnership or
withdrawal, removal, bankruptcy or any other event that causes the General
Partner to cease to be a general partner under the Partnership Act unless the
Partnership is continued as described in the Limited Partnership Agreement; or
(iv) the occurrence of any event which shall make it unlawful for the existing
Partnership to be continued. The General Partner may, in its discretion,
dissolve the Partnership if the net asset value per Unit falls below $4 as of
the end of any business day after trading.
(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
trading and by 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 will consist of, among other things, commissions, 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. In addition, the amount of interest income payable by SB is
dependent upon interest rates over which the Partnership has no control.
11
<PAGE>
No forecast can be made as to the level of redemptions in any given
period. For the year ended December 31, 1996, 167,750.4101 Units were redeemed
totaling $1,654,807. For the year ended December 31, 1995, 751,596.7759 Units
were redeemed totaling $7,223,568 which includes the General Partner's
redemption representing 15,278.8416 Unit equivalents totaling $142,301. For the
year ended December 31, 1994, 723,900.5106 Units were redeemed totaling
$7,311,931.
During the year ended December 31, 1996, the Partnership has ceased
the offering of Units at the Net Asset Value per Unit as of the end of each
month. For the year ended December 31, 1995, there were additional sales of
2,533.6091 Units totaling $24,500. For the year ended December 31, 1994, there
were additional sales of 70,191.9475 Units totaling $720,900.
A Limited Partner may elect automatically to reinvest the amount of
his distribution, if any, in additional Units and fractional Units at their Net
Asset Value as of the ex-dividend date. This election may be made at the time of
subscription and is contingent upon the availability of Units. If a Limited
Partner elects to reinvest and no Units are available as of a distribution date,
the Limited Partner's SB account will be credited with the amount of the
distribution.
(c) Results of Operations.
For the year ended December 31, 1996, the Net Asset Value per
Unit increased 22.7% from $9.30 to $11.41. For the year ended December 31, 1995,
the Net Asset Value per Unit decreased 5.0% from $9.79 to $9.30. For the year
ended December 31, 1994,
12
<PAGE>
the Net Asset Value per Unit decreased 10.4% from $10.93 to $9.79.
The Partnership experienced net trading gains of $976,146 before
commissions and expenses for the year ended December 31, 1996. These gains were
primarily attributable to the trading of major currencies, in particular,
Japanese Yen, British Pound and Deutsche Mark.
The Partnership experienced net trading gains of $374,675 before
commissions and expenses for the year ended December 31, 1995. Realized trading
gains of $777,627 were attributable to the trading of financial commodity
futures. The Partnership experienced net trading losses of $975,359 before
commissions and expenses for the year ended December 31, 1994. Realized trading
losses of $1,515,843 were attributable to the trading of financial 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.
13
<PAGE>
Item 8. Financial Statements and Supplementary Data.
SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
INDEX TO FINANCIAL STATEMENTS
Page
Number
Report of Independent Accountants. F-2
Financial Statements:
Statement of Financial Condition at
December 31, 1996 and 1995. F-3
Statement of Income and Expenses for
the years ended December 31, 1996, 1995
and 1994. F-4
Statement of Partners' Capital for the
years ended December 31, 1996, 1995, and
1994. F-5
Notes to Financial Statements. F-6 - F-11
F-1
Continued
<PAGE>
Report of Independent Accountants
To the Partners of
Smith Barney International Advisors
Currency Fund L.P.:
We have audited the accompanying statement of financial condition of SMITH
BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P. (a New York Limited
Partnership) as of December 31, 1996 and 1995, and the related statements of
income and expenses and of partners' capital for the years ended December 31,
1996, 1995 and 1994. These financial statements are the responsibility of the
management of the General Partner. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management of the General Partner, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Smith Barney International
Advisors Currency Fund L.P. as of December 31, 1996 and 1995, and the results of
its operations for the years ended December 31, 1996, 1995 and 1994, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 28, 1997
F-2
<PAGE>
Smith Barney
International Advisors Currency Fund L.P.
Statement of Financial Condition
December 31, 1996 and 1995
1996 1995
Assets:
Equity in commodity futures
trading account:
Cash and cash equivalents (Note 3c) $ 3,525,670 $ 6,912,939
Net unrealized depreciation
on open futures contracts (33,306) (22,990)
----------- -----------
3,492,364 6,889,949
Interest receivable 12,361 25,911
Other assets 19,853
----------- -----------
$ 3,504,725 $ 6,935,713
=========== ===========
Liabilities and Partners' Capital:
Liabilities:
Accrued expenses:
Commissions $ 20,444 $ 40,342
Other 33,891 44,133
Redemptions payable (Note 5) 48,595 2,513,653
Incentive fees 42,819
Due to SB (Note 7) 39,194
----------- -----------
145,749 2,637,322
----------- -----------
Partners' Capital (Notes 1, 5 and 8):
General Partner, 8,000.2096 Unit
equivalents outstanding in 1996 91,282 74,402
and 1995
Limited Partners, 286,344.8991
and 454,095.3092 Units of Limited
Partnership Interest outstanding
in 1996 and 1995, respectively 3,267,694 4,223,989
----------- -----------
3,358,976 4,298,391
----------- -----------
$ 3,504,725 $ 6,935,713
=========== ===========
See notes to financial statements.
F-3
<PAGE>
Smith Barney
International Advisors Currency Fund L.P.
Statement of Income and Expenses
for the years ended December 31, 1996,
1995 and 1994
1996 1995 1994
Income:
Net gains (losses) on trading
of commodity interests:
Realized gains (losses) on
closed positions $ 986,462 $ 777,627 $(1,515,843)
Change in unrealized gains/
losses on open positions (10,316) (402,952) 540,484
----------- ----------- -----------
976,146 374,675 (975,359)
Less, brokerage commissions
and clearing fees ($934,
$9,754, and $35,326,
respectively) (Note 3c) (263,649) (694,687) (1,226,232)
----------- ----------- -----------
Net realized and unrealized
gains (losses) 712,497 (320,012) (2,201,591)
Interest income (Note 3c) 150,381 459,661 584,880
----------- ----------- -----------
862,878 139,649 (1,616,711)
----------- ----------- -----------
Expenses:
Incentive fees (Note 3b) 83,905 130,186 85,026
Organization expense (Note 7) 19,953 217,890 111,011
Other 43,628 155,983 117,574
----------- ----------- -----------
147,486 504,059 313,611
----------- ----------- -----------
Net income (loss) $ 715,392 $ (364,410) $(1,930,322)
=========== =========== ===========
Net income (loss) per Unit
of Limited Partnership
Interest and General Partner
Unit equivalent (Notes 1 and 8) $ 2.11 $ (0.49) $ (1.14)
=========== =========== ===========
See notes to financial statements.
F-4
<PAGE>
Smith Barney
International Advisors Currency Fund L.P.
Statement of Partners' Capital for the
years ended December 31, 1996, 1995 and 1994
Limited General
Partners Partner Total
Partners' capital at
December 31, 1993 $ 20,128,782 $ 254,440 $ 20,383,222
Net loss (1,903,783) (26,539) (1,930,322)
Sale of 70,191.9475 Units of
Units of Limited Partnership
Interest 720,900 720,900
Redemption of
723,900.5106 Units of
Limited Partnership
Interest (7,311,931) (7,311,931)
------------ ------------ ------------
Partners' capital at
December 31, 1994 11,633,968 227,901 11,861,869
Net loss (353,212) (11,198) (364,410)
Sale of 2,533.6091
Units of Limited
Partnership Interest 24,500 24,500
Redemption of
736,317.9343 Units of
Limited Partnership
Interest and General
Partner redemption
representing 15,278.8416
Unit equivalents (7,081,267) (142,301) (7,223,568)
------------ ------------ ------------
Partners' capital at
December 31, 1995 4,223,989 74,402 4,298,391
Net income 698,512 16,880 715,392
Redemption of
167,750.4101 Units of
Limited Partnership
Interest (1,654,807) (1,654,807)
------------ ------------ ------------
Partners' capital at
December 31, 1996 $ 3,267,694 $ 91,282 $ 3,358,976
============ ============ ============
See notes to financial statements.
F-5
<PAGE>
Smith Barney International Advisors
Currency Fund L.P.
Notes to Financial Statements
1. Partnership Organization:
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 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 10,000,000 Units of Limited
Partnership Interest ("Units").
Smith Barney Futures Management Inc. acts as the general partner (the
"General Partner") of the Partnership. Smith Barney Inc. ("SB"), an affiliate
of the General Partner, acts as commodity broker for the Partnership (see
Note 3c). The General Partner and each limited partner share in the profits
and losses of the Partnership in proportion to the amount of Partnership
interest owned by each, except that no limited partner shall be liable for
obligations of the Partnership in excess of his initial capital contribution
and profits, if any, net of distributions.
The Partnership will be liquidated on December 31, 2011; if the Net Asset
Value per unit falls below $4 as of the end of a trading day; or under
certain other circumstances set forth in the Limited Partnership Agreement.
2. Accounting Policies:
a.All commodity interests (including derivative financial instruments and
derivative commodity instruments) are used for trading purposes. The
commodity interests are recorded on trade date and open contracts are
recorded in the statement of financial condition at market value for those
commodity interests for which market quotations are readily available or at
fair value on the last business day of the year. Investments in commodity
interests denominated in foreign currency are translated into U.S. dollars
at the exchange rates prevailing on the last business day of the year.
Realized gain (loss) and changes in unrealized values on commodity
interests are recognized in the period in which the contract is closed or
the changes occur and are included in net gains (losses) on trading of
commodity interests.
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.
F-6
<PAGE>
Smith Barney International Advisors
Currency Fund L.P.
Notes to Financial Statements
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.Limited Partnership Agreement:
The Limited Partnership Agreement provides that the General Partner shall
manage the business of the Partnership and may make all trading decisions
for the Partnership.
b.Management Agreements:
The General Partner has entered into Management Agreements with Friedberg
Commodity Management Inc., and Trendview Capital Management (collectively,
the "Advisors"), registered commodity trading advisors. The Advisors are
not affiliated with one another, and none are affiliated with the General
Partner or SB and are not responsible for the organization or operation of
the Partnership. As compensation for their services, the Partnership is
obligated to pay each Advisor 20% of the New Trading Profits of the
Partnership earned by each Advisor. The General Partner terminated
Commodity Monitors Inc. and Gill Capital Management as Advisors effective
January 2, 1996. Trendview Capital Management was added as an Advisor on
the same date.
c.Customer Agreement:
The Partnership has entered into a Customer Agreement which was assigned to
SB which provides that the Partnership will pay SB a monthly brokerage fee
equal to 7/12 of 1% of month-end Net Assets (7% per year) in lieu of
brokerage commissions on a per trade basis. From its brokerage fee SB will
pay each Advisor a monthly management fee equal to 1/6 of 1% (2% per year)
of Net Assets allocated to the Advisor as of the end of the month. The
Partnership will pay for National Futures Association ("NFA") fees,
exchange and clearing fees, user, give-up and floor brokerage fees. SB will
pay a portion of its brokerage fees to the financial consultants who have
sold Units. Brokerage fees will be paid for the life of the Partnership,
although the rate at which such fees are paid may be changed. All 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 the Commodity Futures Trading Commission regulations. At
December 31, 1996 and 1995, the amount of cash held for margin requirements
was $95,916 and $255,326, respectively. SB has agreed to pay the
Partnership interest on 85% of the average daily equity maintained in cash
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 may be terminated upon notice by either
party.
F-7
<PAGE>
Smith Barney International Advisors
Currency Fund L.P.
Notes to Financial Statements
4. Trading Activities:
The Partnership was formed for the purpose of trading contracts in a variety
of commodity interests, including derivative financial instruments and
derivative commodity instruments. The results of the Partnership's trading
activity are shown in the statement of income and expenses.
All of the commodity interests owned by the Partnership are held for trading
purposes. The fair value of these commodity interests, including options
thereon, at December 31,1996 and 1995 was $(33,306) and $(22,990),
respectively, and the average fair value during the years then ended, based
on monthly calculation, was $168,437 and $63,916, respectively.
5. Distributions and Redemptions:
Distributions of profits, if any, will be made at the sole discretion of the
General Partner. A limited partner may redeem all or part of his Units at
their Net Asset Value by written or oral request to the General Partner at
least 15 days prior to the redemption date. No redemption may result in the
limited partner holding fewer than 300 Units after such redemption is
effected.
6. Reinvestment
A limited partner may elect automatically to reinvest the amount of his
annual distribution, if any, in additional Units and fractional Units at
their Net Asset Value as of the day on which the distribution is declared.
This election may be made at the time of subscription and is contingent upon
the availability of Units during the Continuous Offering. If a limited
partner elects to reinvest and no Units are available as of a distribution
date, the limited partner's SB account will be credited with the amount of
the distribution.
F-8
<PAGE>
Smith Barney International Advisors
Currency Fund L.P.
Notes to Financial Statements
7. Organization and Offering Costs:
Organization and offering expenses of $400,000 relating to the initial
offering period were paid by SB and SB's predecessor. The Partnership
reimbursed SB and its predecessor for initial offering and organization
expenses during 1993 and 1992. Offering expenses relating to the Continuous
Offering of Partnership Units were $330,064. The Partnership has reimbursed
SB such costs in twenty-four monthly installments (together with interest at
the prime rate quoted by the Chase Manhattan Bank) as of January, 1996. In
addition, interest expense on the reimbursement of these costs in the amounts
of $101, $8,319 and $10,371 for the years ended 1996, 1995 and 1994,
respectively, has been included in organization expense.
8. Net Asset Value Per Unit:
Changes in the net asset value per Unit of Partnership interest for the years
ended December 31,1996, 1995 and 1994 were as follows:
1996 1995 1994
Net realized and
unrealized gains
(losses) $ 2.10 $ (0.44) $ (1.30)
Interest income 0.42 0.46 0.37
Expenses (0.41) (0.51) (0.21)
-------- -------- --------
Increase (decrease)
for year 2.11 (0.49) (1.14)
Net asset value
per Unit, beginning
of year 9.30 9.79 10.93
-------- -------- --------
Net asset value per
Unit, end of year $ 11.41 $ 9.30 $ 9.79
======== ======== ========
9. Financial Instrument Risk:
The Partnership is party to financial instruments with off-balance sheet
risk, including derivative financial instruments and derivative commodity
instruments, in the normal course of its business. These financial
instruments include forwards, futures and options, whose value is based upon
an underlying asset, index, or reference rate, and generally represent future
commitments to exchange currencies or cash flows, to purchase or sell other
financial instruments at specific terms at specified future dates, or, in the
case of derivative commodity instruments, to have a reasonable possibility to
be settled in cash or with another financial instrument. These instruments
may be traded on an exchange or over-the-counter ("OTC"). Exchange traded
instruments are standardized and include futures and certain option
contracts. OTC contracts are negotiated between contracting parties and
include forwards and certain options. Each of these instruments is subject to
various risks similar to those related to the underlying financial
instruments including market and credit risk. In general, the risks
associated with OTC contracts are greater than those associated with exchange
traded instruments because of the greater risk of default by the counterparty
to an OTC contract.
F-9
<PAGE>
Smith Barney International Advisors
Currency Fund L.P.
Notes to Financial Statements
Market risk is the potential for changes in the value of the financial
instruments traded by the Partnership due to market changes, including
interest and foreign exchange rate movements and fluctuations in commodity or
security prices. Market risk is directly impacted by the volatility and
liquidity in the markets in which the related underlying assets are traded.
Credit risk is the possibility that a loss may occur due to the failure of a
counterparty to perform according to the terms of a contract. Credit risk
with respect to exchange traded instruments is reduced to the extent that an
exchange or clearing organization acts as a counterparty to the transactions.
The Partnership's risk of loss in the event of counterparty default is
typically limited to the amounts recognized in the statement of financial
condition and not represented by the contract or notional amounts of the
instruments. The Partnership has concentration risk because the sole
counterparty or broker with respect to the Partnership's assets is SB.
The General Partner monitors and controls the Partnership's risk exposure on
a daily basis through financial, credit and risk management monitoring
systems, and accordingly believes that it has effective procedures for
evaluating and limiting the credit and market risks to which the Partnership
is subject. These monitoring systems allow the General Partner to
statistically analyze actual trading results with risk adjusted performance
indicators and correlation statistics. In addition, on-line monitoring
systems provide account analysis of futures, forwards and options positions
by sector, margin requirements, gain and loss transactions and collateral
positions.
F-10
<PAGE>
Smith Barney International Advisors
Currency Fund L.P.
Notes to Financial Statements
The notional or contractual amounts of these instruments, while not recorded
in the financial statements, reflect the extent of the Partnership's
involvement in these instruments. At December 31, 1996, the notional or
contractual amounts of the Partnership's commitment to purchase and sell
these instruments was $34,179,252 and $35,471,114, respectively. All of these
instruments mature within one year of December 31, 1996. However, due to the
nature of the Partnership's business, these instruments may not be held to
maturity. At December 31, 1996, the fair value of the Partnership's
derivatives, including options thereon, was $(33,306), as detailed below.
Notional or Contractual
Amount of Commitments
To Purchase To Sell Fair Value
Currencies
-OTC Contracts $34,179,252 $35,471,114 $(33,306)
----------- ----------- --------
Totals $34,179,252 $35,471,114 $(33,306)
=========== =========== ========
F-11
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
During the last two fiscal years and any subsequent interim period,
no independent accountant who was engaged as the principal accountant to audit
the Partnership's financial statements has resigned or was dismissed.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no officers or directors and its affairs are
managed by its General Partner, Smith Barney Futures Management Inc. Investment
decisions are made by the Advisors.
Item 11. Executive Compensation.
The Partnership has no directors or officers. Its affairs are
managed by Smith Barney Futures Management Inc., its General Partner, which
receives compensation for its services, as set forth under "Item 1. Business."
SB, an affiliate of the General Partner, is the commodity broker for the
Partnership and receives brokerage commissions for such services, as described
under "Item 1. Business." During the year ended December 31, 1996, SB earned
$263,649 in brokerage commissions and clearing fees. The Advisors earned $83,905
in incentive fees during 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a). Security ownership of certain beneficial owners. As of March 1,
1997, one beneficial owner who is neither a director nor executive officer of
the General Partner beneficially owns more than five percent (5%) of the
outstanding Units issued by the Registrant as follows:
14
<PAGE>
Title Name and Address of Amount and Nature of Percent of
of Class Beneficial Owner Beneficial Ownership Class
Units of Evelyn A. Freed 45,083.6120 Units 15.6%
Limited 1511 Clearview Lane
Partnership Santa Ana, CA 92705-1501
(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 8,000.2096 Units (2.7%) of Limited Partnership Interest as of
December 31, 1996.
(c). Changes in control. None.
Item 13. Certain Relationships 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 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, 1996, and 1995.
Statement of Income and Expenses for the years ended December
31, 1996, 1995 and 1994.
Statement of Partners' Capital for the
years ended December 31, 1996, 1995 and 1994.
(2) Financial Statement Schedules: None
15
<PAGE>
(3) Exhibits:
3.1 - Limited Partnership Agreement (filed as
Exhibit 3.1 to the Registration Statement on
Form S-1 (File No.33-41438) and incorporated
herein by reference).
3.2 - Certificate of Limited Partnership of the
Partnership as filed in the office of the
Secretary of State of New York on May 29,
1991 (filed as Exhibit 3.2 to the
Registration Statement on Form S-1 (File No.
33-41438) and incorporated herein by
reference).
10.1 - Customer Agreement between the Partnership
and Lehman Brothers Capital Management Corp.
(filed as Exhibit 10.1 to the Registration
Statement on Form S-1 (File No. 33-41438)
and incorporated herein by reference).
10.3 - Escrow Instructions relating to escrow of
subscription funds (filed as Exhibit 10.3 to
the Registration Statement on Form S-1 (File
No. 33-41438) and incorporated herein by
reference).
10.5 - Management Agreement among the Partnership,
the General Partner and Friedberg Commodity
Management Inc. (filed as Exhibit 10.5 to
the Registration Statement on Form S-1 (File
16
<PAGE>
No. 33-41438) and incorporated herein by
reference).
10.6 - Management Agreement among the Partnership,
the General Partner and FX Concepts, Inc.
(filed as Exhibit 10.6 to the Registration
Statement on Form S-1 (File No. 33-41438)
and incorporated herein by reference).
10.7- Management Agreement among the Partnership, the
General Partner and the team of Edwin Gill and David
Hunter (filed as Exhibit 10.7 to the Registration
Statement on Form S-1 (File No. 33-41438) and
incorporated herein by reference).
10.8- Management Agreement among the Partnership, the
General Partner and Steiner & Cie (filed as Exhibit
10.8 to the Registration Statement on Form S-1 (File
No.33-41438) and incorporated herein by reference).
10.9- Management Agreement among the Partnership,
the General Partner and Sunrise Commodities
Incorporated (filed as Exhibit 10.9 to the
Registration Statement on Form S-1 (File No.
33-41438) and incorporated herein by
reference).
10.10- Letter dated September 22, 1992 from General Partner
to Steiner & Cie terminating the Management Agreement
effective September 23, 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- Letter dated March 18, 1993 from General Partner to
Friedberg Commodity Management Inc. extending
Management Agreement (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 March 18, 1993 from General Partner to FX
Concepts, Inc. extending Management Agreement (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 March 18, 1993 from General Partner to
Gill Capital Management Ltd. extending Management
Agreement (filed as Exhibit 10.13 to Form 10-K for the
fiscal year ended December 31, 1993 and incorporated
herein by reference).
10.14- Letter dated March 18, 1993 from General Partner to
Sunrise Commodities Incorporated extending Management
Agreement (filed as Exhibit 10.14 to Form 10-K for the
fiscal year ended December 31, 1993 and incorporated
herein by reference).
10.15 Management Agreement among the Partnership, General
Partner and Gandon Fund Management Limited dated
December 31, 1993 (filed as Exhibit 10.15 to Form 10-K
for the fiscal year ended December 31, 1993 and
incorporated herein by reference).
10.16- Letter dated March 22, 1994 from General Partner to
Gandon Securities Limited terminating Management
Agreement effective March 31, 1994 (filed as Exhibit
10.16 to Form 10-K for the fiscal year ended December
31, 1994).
10.17- Letters dated February 16, 1995 from General Partner
to Friedberg Commodity Management Inc. and Gill Asset
Management extending Management Agreements (filed as
Exhibit 10.17 to Form 10-K for the fiscal year ended
December 31, 1994).
10.18- Letter dated January 31, 1995 from General
Partner to Sunrise Commodity Incorporated
terminating Management Agreement (previously
filed).
10.19- Management Agreement among the Partnership,
General Partner and Commodity Monitors Inc.
dated April 20, 1995 (previously filed).
10.20- Letter dated December 31, 1995 from General
Partner to Commodity Monitors Inc,
terminating Management Agreement (filed
herein).
17
<PAGE>
10.21- Letter dated December 27, 1995 from General
Partner to Gill Capital Management Inc.
terminating Management Agreement (filed
herein).
10.22- Management Agreement among the Partnership,
General Partner and Trendview Management Inc.
dated January 2, 1996 (filed herein).
(b) Report on Form 8-K: None Filed
18
<PAGE>
Supplemental Information To Be Furnished With Reports Filed Pursuant To
Section 15(d) Of The Act by Registrants Which Have Not Registered Securities
Pursuant To Section 12 Of the Act.
Annual Report to Limited Partners
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 24th day of March 1997.
SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
By: Smith Barney Futures Management Inc.
(General Partner)
By /s/ David J. Vogel
David J. Vogel, President & Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/s/ David J. Vogel /s/ Jack H. Lehman III
David J. Vogel, Jack H. Lehman III
Director, Principal Executive Chairman and Director
Officer and President
/s/ Michael Schaefer /s/ Daniel A. Dantuono
Michael Schaefer Daniel A. Dantuono
Director Treasurer, Chief Financial
Officer and Director
/s/ Philip M. Waterman, Jr. /s/ Daniel R. McAuliffe, Jr.
Philip M. Waterman, Jr. Daniel R. McAuliffe, Jr.
Director and Vice-Chairman Director
/s/ Steve J. Keltz /s/ Shelley Ullman
Steve J. Keltz Shelley Ullman
Secretary and Director Director
22
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000876716
<NAME> SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,525,670
<SECURITIES> (33,306)
<RECEIVABLES> 12,361
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,504,725
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,504,725
<CURRENT-LIABILITIES> 145,749
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,358,976
<TOTAL-LIABILITY-AND-EQUITY> 3,504,725
<SALES> 0
<TOTAL-REVENUES> 862,878
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 147,486
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 715,392
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 715,392
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 0
</TABLE>
December 31, 1995
Commodity Monitors Inc.
225 Broadway, Suite 2200
San Diego, CA 92101
Attn: Rick Slaughter
RE: SMITH BARNEY INTERNATIONAL CURRENCY FUND L.P.
Dear Rick:
Smith Barney Futures Management Inc. ("SBFM") has decided to reallocate
away the assets being traded by Commodity Monitors, Inc., for the above fund. By
doing so, this will effectively terminate the management agreement between SBFM,
CMI and the Smith Barney International Currency Fund L.P.
Please liquidate your positions in account 258-42030 in an orderly fashion
by Friday December 29, 1995. If you have any questions, please call me at
212-723-5416.
Very truly yours,
Daniel A. Dantuono
Chief Financial Officer
DAD/cs
cc: Richie Collins
Dan McAuliffe
Susan Petrovcik
Alex Sloane
Shelley Ullman
Dave Vogel
file
December 27, 1995
Gill Capital Management Inc.
Leconfield House
7th Floor - Curzon Street
London, England W1Y7FB
Attn: Edwin Gill
RE: SMITH BARNEY INTERNATIONAL CURRENCY FUND L.P.
Dear Edwin:
Smith Barney Futures Management Inc. ("SBFM") has decided to reallocate
away the assets being traded by Gill Capital Management, Inc., for the above
fund. By doing so, this will effectively terminate the management agreement
between SBFM, Gill Capital Management Inc. and the Smith Barney
International Currency Fund L.P.
Please liquidate your positions in account 258-42010 in an orderly fashion
by Friday December 29, 1995. If you have any questions, please call me at
212-723-5416.
Very truly yours,
Daniel A. Dantuono
Chief Financial Officer
DAD/cs
cc: Richie Collins
Dan McAuliffe
Susan Petrovcik
Alex Sloane
Shelley Ullman
Dave Vogel
file
MANAGEMENT AGREEMENT
AGREEMENT made as of the 2nd day of January, 1996 among SMITH BARNEY
FUTURES MANAGEMENT INC., a Delaware corporation ("SBFM"), SMITH BARNEY
INTERNATIONAL ADVISORS CURRENCY FUND L.P., a New York limited partnership (the
"Partnership"), SMITH BARNEY INC., a Delaware corporation, and TRENDVIEW
MANAGEMENT INC., a corporation organized under the laws of California (the
"Advisor").
W I T N E S S E T H :
WHEREAS, SBFM is the general partner (the "General Partner") of SMITH
BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P., a limited partnership
organized for the purpose of engaging in the speculative trading of commodity
interests, including futures contracts, options and forward contracts on foreign
currencies; 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 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) Upon the commencement of trading
operations by the Advisor for the Partnership and for the period and on the
terms and conditions of this Agreement, the Advisor shall have sole authority
and responsibility, as the Partnership's agent and attorney-in-fact, for
directing the investment and reinvestment of the assets and funds of the
Partnership allocated to it by SBFM in commodity interests, including commodity
futures contracts, options, spot commodities and forward contracts on foreign
currencies. All such trading on behalf of the Partnership shall be in accordance
with the trading policies of the Partnership set forth in the prospectus and
disclosure document of the Partnership, as supplemented (the most recent of
which is hereinafter called the "Prospectus"), and 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 World Currency Portfolio to manage the Partnership's
assets allocated to it. Any open positions or other investments at the time of
receipt of such notice 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
change 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.
(a)(b) SBFM acknowledges receipt of the Advisor's Disclosure Document
dated July 28, 1995 (the "Disclosure Document"). All trades for the account of
the Partnership made by the Advisor 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 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 Advisor will trade the Partnership's account pursuant to its
World Currency Portfolio (as described in the Disclosure Document). In the event
the Advisor wishes to use a trading system or methodology other than or in
addition to the system or methodology outlined in the Disclosure Document 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. Further,
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 other 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 is not 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.
(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 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 give prior notice to the Advisor of any reallocations
or liquidations, if possible. The Advisor may refuse to accept any additional
allocations to its management.
(g) The Advisor will not be liable for trading losses in the
Partnership's account including losses caused by errors committed by any
commodity broker/dealer selected by SBFM; provided, however, that 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 will also 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). The Advisor will not be responsible for
losses caused by circumstances outside the Advisor's control.
2. INDEPENDENCE OF THE ADVISOR. For all purposes herein, the Advisor
shall be deemed to be an independent contractor and, unless 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 an incentive fee payable
quarterly equal to 20% of the New Trading Profits (as such term is defined
below) earned by the Advisor for the Partnership. From the brokerage fee it
receives from the Partnership, SB will pay the Advisor a monthly fee for
professional management services equal to 1/6 of 1% of the Net Assets of the
Partnership allocated to the Advisor as of the end of each month (2% per year).
(a)(b) "Net Assets" shall have the meaning set forth in Paragraph
7(d)(1) of the Limited Partnership Agreement dated as of May 29, 1991 and
without regard to 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 account. Ongoing expenses will be attributed to the
Advisor based on the Advisor's proportionate share of Net Assets. Ongoing
expenses will not include expenses of litigation 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 calendar quarter of trading, which fee shall be based on
New Trading Profits earned from the commencement of trading operations by the
Advisor for the Partnership through the end of the first 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 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 month or a fiscal quarter, 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 to the total number of
business days in the month; it being acknowledged that under the Advisor's
trading strategies, there may be periods when no open positions will be
maintained for the Partnership. No incentive fee shall be paid to the Advisor
until the end of the first full calendar quarter of the Advisor's trading for
the Partnership, which incentive fee shall be based on New Trading Profits (if
any) from the commencement of trading for the Partnership by the Advisor through
the end of the first full calendar quarter.
(e) Obligations incurred under this Paragraph 3 prior to termination
of this Agreement 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 principals, officers, directors, employees,
shareholder(s) and affiliates, may render advisory, consulting and management
and brokerage services to other clients and accounts (including other commodity
pools). The Advisor and its principals, officers, directors, employees,
shareholder(s) and affiliates 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 or different information, computer programs
and trading strategies, 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 for
the Partnership of the quality and nature contemplated by this Agreement.
(a)(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, accounts subject to different fee structures and accounts
with other differences, and that such differences may cause divergent trading
results.
(c) It is acknowledged that the Advisor and/or its principals,
officers, employees, directors, shareholder(s) and affiliates presently act, and
it is agreed that they may continue to act, as advisor and broker 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, on a confidential basis, 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 in
writing. 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,
1996. 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 upon 30 days' notice to the Advisor
if (i) the Advisor fails to conform to the trading policies set forth in the
Prospectus or as they may be changed from time to time by the Partnership with
notice to the Advisor, (ii) the Net Asset Value per Unit shall decline as of the
close of business on any day to $[400] or less, (iii) limited partners owning
more than 50% of the outstanding Units shall vote to require SBFM to terminate
this Agreement, (iv) the Advisor fails to comply with the terms of this
Agreement, (v) SBFM, acting in good faith, upon due consideration by its Board
of Directors, 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 futures positions with those of accounts managed or advised by the
Advisor and its principals will materially adversely affect the performance of
the Partnership's investments. At any time during the term of this Agreement,
SBFM may elect to immediately terminate this Agreement if (i) the Advisor merges
or consolidates with another entity, sells a substantial portion of its assets,
or becomes bankrupt or insolvent, except as provided in Section 10 hereof, (ii)
Clark D. Smith dies, becomes incapacitated, leaves the employ of the Advisor,
ceases to control the Advisor or is otherwise not managing 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.
(a)(b) The Advisor may terminate this Agreement by giving not less
than 30 days' notice to SBFM in the event that (i) 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) at any time after the expiration of one year following the end
of the month in which this Agreement takes effect, (iii) SBFM, the Partnership
or Smith Barney Inc. fails to comply with the terms of this Agreement, (iv) SBFM
fails to consent to a change in trading system pursuant to Paragraph 1(c), or
(v) SBFM requires the Advisor to liquidate its positions other than in order
that SBFM may reallocate the Partnership's assets, meet margin calls on the
Partnership's account or fund redemptions and the Advisor believes that such
liquidation would adversely affect its performance. 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 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, 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 the provisions of 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 it
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, the Partnership's or SBFM's activities or claimed activities
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, employees and
affiliates and the term "SBFM" shall include the Partnership jointly and
severally.
(a)(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) Clark D. Smith 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 Clark D. Smith.
(b) 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.
(c) 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.
(d) The provisions of this Paragraph 6 shall survive the termination
of this Agreement.
7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) The Advisor represents and warrants to the
Partnership, SBFM and SB that:
(i) All references to the Advisor and its principals in any
Prospectus will, after review and approval of such references by the Advisor
prior to the use of such Prospectus in connection with the offering of the
Partnership's units, be accurate in all material respects.
(ii) 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.
(iii) The Advisor is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has full
power and authority to enter into this Agreement and to provide the services
required of it hereunder.
(iv) The Advisor will not, by acting as 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.
(v) 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.
(vi) At any time during the term of this Agreement that a prospectus
or supplement 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, the prospectus is accurate.
(b) SBFM represents and warrants for itself and the
Partnership that:
(i) Any Prospectus (as from time to time amended or supplemented,
which amendment or supplement is approved by the Advisor as to descriptions of
itself and its actual performance) will 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, except that the foregoing warranty does not
apply to any statement or omission concerning the Advisor in the Prospectus,
made in reliance upon, and in conformity with, information furnished to SBFM by
or on behalf of the Advisor expressly for use in the Prospectus.
(ii) It is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and has full corporate power and authority
to perform its obligations under this Agreement.
(iii) SBFM and the Partnership have the capacity and authority to
enter into this Agreement on behalf of SBFM and the Partnership.
(iv) 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.
(v) 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.
(vi) 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.
(vii) The Partnership is a limited partnership duly organized and
validly existing under the laws of the State of New York and has full power and
authority to enter into this Agreement and to perform its obligations under this
Agreement.
(viii) _____ SBFM and its affiliates will comply with all laws, rules
and regulations applicable to the offer and sale of Units.
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 fair and
reasonable order entry system, which shall, on an overall basis, 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 in
the account managed by the Advisor daily and to notify the broker, the
Partnership's brokers and SBFM of (i) any error committed by the Advisor or its
principals or employees or (ii) any trade which the Advisor believes was not
executed in accordance with its instructions.
(iv) During the term of this Agreement, the Advisor will maintain a
net worth of at least $200,000.
(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.
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 or the Partnership:
Smith Barney Futures Management Inc.
390 Greenwich Street - 1st floor
New York, New York 10013
Attention: Mr. David J. Vogel
If to the Advisor:
Mr. Clark D. Smith
Trendview Management Inc.
591 Camino de la Reina, Suite 316
San Diego, California 92108-8433
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 laws.
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.
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 ___________________________
Daniel A. Dantuono
Chief Financial Officer
SMITH BARNEY
INTERNATIONAL ADVISORS
CURRENCY FUND L.P.
By: Smith Barney Futures
Management Inc.
General Partner
By ___________________________
Daniel A. Dantuono
Chief Financial Officer
SMITH BARNEY INC.
By ___________________________
TRENDVIEW MANAGEMENT INC.
By ___________________________
Clark D. Smith
President
