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, 1998
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
<PAGE>
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, 1998 and December 31, 1997 3
Statement of Income and Expenses and
Partners' Capital for the Three Months
ended March 31, 1998 and 1997 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 - 12
2
<PAGE>
PART I
Item 1. Financial Statements
SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- -----------
Unaudited)
ASSETS:
<S> <C> <C>
Equity in commodity futures trading account:
Cash and cash equivalents $3,319,517 $3,143,740
Net unrealized appreciation
on open futures contracts 326,465 462,188
---------- ----------
3,645,982 3,605,928
Interest receivable 12,251 11,501
---------- ----------
$3,658,233 $3,617,429
========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accrued expenses:
Commissions $ 21,205 $ 21,027
Incentive fees 13,983 54,882
Other 22,935 27,954
Redemptions payable 70,775 19,439
Commodity options written, at market value
(premiums received $16,800 in 1997) -- 12,775
---------- ----------
128,898 136,077
Partners' Capital:
General Partner, 8,000.2096 Unit equivalents
outstanding in 1998 and 1997 112,723 108,162
Limited Partners, 242,437.0888 and
249,401.2878 Units of Limited Partnership
Interest outstanding in 1998 and 1997,
respectively 3,416,612 3,373,190
---------- ----------
3,529,335 3,481,352
---------- ----------
$3,658,233 $3,617,429
========== ==========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
STATEMENT OF INCOME AND EXPENSES AND PARTNERS' CAPITAL
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
------------ ------------
<S> <C> <C>
Income:
Net gains on trading of commodity
futures:
Realized gains on closed positions $ 337,067 $ 303,094
Change in unrealized gains/losses on open
positions (139,748) (36,371)
----------- -----------
197,319 266,723
Less, brokerage commissions and clearing fees
($5 and $0, respectively) (63,739) (63,768)
----------- -----------
Net realized and unrealized gains 133,580 202,955
Interest income 35,387 36,196
----------- -----------
168,967 239,151
----------- -----------
Expenses:
Incentive fees 13,983 46,586
Other 9,380 13,358
----------- -----------
23,363 59,944
----------- -----------
Net income 145,604 179,207
Redemptions (97,621) (92,365)
----------- -----------
Net increase in Partners' capital 47,983 86,842
Partners' capital, beginning of period 3,481,352 3,358,976
----------- -----------
Partners' capital, end of period $ 3,529,335 $ 3,445,818
=========== ===========
Net asset value per Unit
(250,437.2984 and 286,749.3628 Units outstanding
at March 31, 1998 and 1997, respectively) $ 14.09 $ 12.02
=========== ===========
Net income per Unit of Limited Partnership
Interest and General Partner Unit equivalent $ 0.57 $ 0.61
=========== ===========
</TABLE>
4
<PAGE>
SMITH BARNEY INTERNATIONAL ADVISORS CURRENCY FUND L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(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, 1998 and the results of its operations for the
three months ended March 31, 1998 and 1997. 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, 1997.
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
<PAGE>
Smith Barney International Advisors Currency Fund L.P.
Notes to Financial Statements
March 31, 1998
(Continued)
2. Net Asset Value Per Unit:
Changes in net asset value per Unit for the three months ended March 31, 1998
and 1997 were as follows:
THREE-MONTHS ENDED
MARCH 31,
-------------------
1998 1997
------------ --------
Net realized and unrealized
gains $ 0.52 $ 0.68
Interest income 0.14 0.12
Expenses (0.09) (0.19)
------- -------
Increase for period 0.57 0.61
Net Asset Value per Unit,
beginning of period 13.52 11.41
------- ------
Net Asset Value per Unit,
end of period $14.09 $12.02
======= ======
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, 1998 and 1997 was $326,465 and $(69,677), respectively,
and the average fair value during the three months then ended, based on monthly
calculation, was $303,018 and $173,308, respectively.
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,
6
<PAGE>
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.
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
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 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
7
<PAGE>
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, 1998, the notional or contractual
amounts of the Partnership's commitment to purchase and sell these instruments
was $11,342,663 and $20,487,404, respectively, as detailed below. All of these
instruments mature within one year of March 31, 1998. However, due to the nature
of the Partnership's business, these instruments may not be held to maturity. At
March 31, 1998, the fair value of the Partnership's derivatives, including
options thereon, was $326,465, as detailed below.
MARCH 31, 1998
NOTIONAL OR CONTRACTUAL
AMOUNT OF COMMITMENTS
TO PURCHASE TO SELL FAIR VALUE
Currencies - OTC Contracts $11,342,663 $20,487,404 $326,465
=========== =========== ========
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, and the fair value of the Partnership's
derivatives, including options thereon, was $(69,677) as detailed below.
MARCH 31, 1997
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 1998.
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, 1998, Partnership capital
increased 1.4% from $3,481,352 to $3,529,335. This increase was attributable to
net income from operations of $145,604 which was partially offset by the
redemption of 6,964.1990 Units totaling $97,621 for the three months ended March
31, 1998. 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 1998, the net asset value per
Unit increased 4.2% from $13.52 to $14.09, as compared to an increase of 5.3% in
the first quarter of 1997. The Partnership experienced a net trading gain before
commissions and expenses in the first quarter of 1998 of $197,319. These gains
were recognized in the trading of Swiss Francs, Greek Drachma, Thai Baht,
Indonesian Rupia and Malaysian Ringgit and were partially offset by losses in
Japanese Yen, New Zealand Dollar and Brazilian Cruzado. 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.
Commodity futures markets are highly volatile. Broad price fluctuations
and rapid inflation increase the risks involved in commodity trading, but also
increase the possibility of profit. The profitability of the Partnership depends
on the existence of major price trends and the ability of the Advisors to
identify correctly those price trends. Price trends are influenced by, among
other things, changing supply and demand relationships, weather,
9
<PAGE>
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, 1998 decreased by $809 as
compared to the corresponding period in 1997. 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, 1998 as compared to 1997.
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, 1998 decreased by $29 as compared to the
corresponding period in 1997.
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, 1998 and 1997 resulted in incentive fees of $13,983 and $46,586,
respectively.
10
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Between May 1994 and the present, Salomon Brothers Inc.
("SBI"), SB and The Robinson Humphrey Company, Inc.("R- H"),
all currently subsidiaries of Salomon Smith Barney Holdings
Inc. ("SSBHI"), along with a number of other broker-dealers,
were named as defendants in approximately 25 federal court
lawsuits and two state court lawsuits, principally alleging
that companies that make markets in securities traded on
NASDAQ violated the federal antitrust laws by conspiring
to maintain a minimum spread of $.25 between the bid and
asked price for certain securities. The federal lawsuits and
one state court case were consolidated for pre-trial
purposes in the Southern District of New York in the fall
of 1994 under the caption In re NASDAQ Market-Makers Anti-
trust Litigation, United States District Court, Southern
District of New York No. 94-CIV-3996 (RWS); M.D.L. No. 1023.
The other state court suit, Lawrence A. Abel v. Merrill Lynch
& Co., Inc. et al.; Superior Court of San Diego, Case No.
677313, has been dismissed without prejudice in conjunction
with a tolling agreement.
In consolidated action, the plaintiffs purport to represent a
class of persons who bought one or more of what they
currently estimate to be approximately 1,650 securities on
NASDAQ between May 1, 1989 and May 27, 1994. They seek
unspecified monetary damages, which would be trebled under
the antitrust laws. The plaintiffs also seek injunctive
relief, as well as attorney's fees and the costs of the
action. (The state cases seek similar relief.) Plaintiffs in
the consolidated action filed an amended consolidated
complaint that defendants answered in December 1995. On
November 26, 1996, the Court certified a class composed of
retail purchasers. A motion to include institutional
investors in the class and to add class representatives was
granted. In December 1997, SBI, SB and R-H, along with
several other broker-dealer defendants, executed a settlement
agreement with the plaintiffs. This agreement has been
preliminarily approved by the U.S. District Court for the
Southern District of New York but is subject to final
approval.
On July 17, 1996, the Antitrust Division of the Department of
Justice filed a complaint against a number of firms that act
as market makers in NASDAQ stocks. The complaint basically
alleged that a common understanding arose among NASDAQ market
makers which worked to keep quote spreads in
11
<PAGE>
NASDAQ stocks artificially wide. Contemporaneous with the
filing of the complaint, SBI, SB and other defendants entered
into a stipulated settlement agreement, pursuant to which the
defendants would agree not to engage in certain practices
relating to the quoting of NASDAQ securities and would
further agree to implement a program to ensure compliance
with federal antitrust laws and with the terms of the
settlement. In entering into the stipulated settlement, SBI
and SB did not admit any liability. There are no fines,
penalties, or other payments of monies in connection with the
settlement. In April 1997, the U.S. District Court for the
Southern District of New York approved the settlement. In May
1997, plaintiffs in the related civil action (who were
permitted to intervene for limited purposes) appealed the
district court's approval of the settlement. The appeal is
pending.
The Securities and Exchange Commission ("SEC") is also
conducting a review of the NASDAQ marketplace, during which
it has subpoenaed documents and taken the testimony of
various individuals including SBI and SB personnel. In July
1996, the SEC reached a settlement with the National
Association of Securities Dealers and issued a report
detailing certain conclusions with respect to the NASD and
the NASDAQ market.
In December 1996, a complaint seeking unspecified monetary
damages was filed by Orange County, California against
numerous brokerage firms, including SB, in the U.S.
Bankruptcy Court for the Central District of California.
Plaintiff alleged, among other things, that the defendants
recommended and sold to plaintiff unsuitable securities.
The case (County of Orange et al. v. Bear Sterns & Co.
Inc. et al.) Has been stayed by agreement of the parties.
Item 2. Changes in Securities and Use of Proceeds - 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
12
<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:
David J. Vogel, President
Date:
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:
David J. Vogel, President
Date:
By
Daniel A. Dantuono
Chief Financial Officer and
Director
Date:
13
<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: 5/15/98
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: 5/15/98
By /s/ Daniel A. Dantuono
Daniel A. Dantuono
Chief Financial Officer and
Director
Date: 5/15/98
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000876716
<NAME> SMITH BARNEY INTERNATIONAL CURRENCY FUND L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,319,517
<SECURITIES> 326,465
<RECEIVABLES> 12,251
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,658,233
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,658,233
<CURRENT-LIABILITIES> 128,898
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,529,335
<TOTAL-LIABILITY-AND-EQUITY> 3,658,233
<SALES> 0
<TOTAL-REVENUES> 168,967
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,363
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,604
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145,604
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0
</TABLE>
