<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1996
FILE NO. 33-86894
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
POST-EFFECTIVE
AMENDMENT NO. 1
TO THE
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
IDS MANAGED FUTURES, L.P.
(Exact name of registrant as specified in Limited Partnership Agreement)
<TABLE>
<S> <C> <C>
DELAWARE 6793 06-1189438
(Jurisdiction of formation) (Primary standard (IRS employer
industrial classification identification
code number) number)
</TABLE>
CIS INVESTMENTS, INC.
233 SOUTH WACKER DRIVE, SUITE 2300
CHICAGO, ILLINOIS 60606
(312) 460-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
L. CARLTON ANDERSON
CIS INVESTMENTS, INC.
233 SOUTH WACKER DRIVE, SUITE 2300
CHICAGO, ILLINOIS 60606
(312) 460-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES OF COMMUNICATIONS TO:
Paul C. Kosin, Esq.
Chapman and Cutler
111 West Monroe Street
Chicago, Illinois 60603
(312) 845-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
PURSUANT TO THE PROVISIONS OF RULE 429 UNDER THE SECURITIES ACT OF 1933,
THIS REGISTRATION STATEMENT RELATES TO REGISTRATION STATEMENT NO. 33-72240 FILED
BY THE REGISTRANT. THE PROSPECTUS FORMING A PART OF THIS REGISTRATION STATEMENT
SHALL SERVE THE PURPOSES SPECIFIED IN RULE 429.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
IDS MANAGED FUTURES, L.P.
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY FORM S-1
PART I
INFORMATION REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. REGISTRATION ITEM HEADING IN PROSPECTUS
- ------------ -------------------------------------------------- -------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Forepart and Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page
3. Summary Information and Risk Factors.............. Summary of the Prospectus; Commodity Futures
Trading Commission Risk Disclosure Statement;
Risk Factors; Conflicts of Interest
4. Use of Proceeds................................... Use of Proceeds; Capitalization
5. Determination of Offering Price................... Cover Page Notes
6. Dilution.......................................... Not Applicable
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution.............................. Plan of Distribution; Cover Page Notes
9. Description of the Securities To Be Registered.... Description of Units; Redemptions; Summary of the
Prospectus; Amended and Restated Limited
Partnership Agreement
10. Interests of Named Experts and Counsel............ Not Applicable
11. Information With Respect to the Registrant........ Summary of the Prospectus; Use of Proceeds;
Description of Commodity Trading; Trading
Policies; The General Partners; Brokerage
Arrangements; Financial Statements; Charges to
the Fund; Conflicts of Interest
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 7, 1996
IDS MANAGED FUTURES, L.P.
$50,000,000 OF UNITS OF LIMITED PARTNERSHIP INTEREST
Minimum Purchase $1,000
IDS Managed Futures, L.P. (the "Fund") is a Delaware limited partnership
organized to engage in speculative trading of futures contracts, forward
contracts, physical commodities, and related options thereon ("commodity
interests"). The Fund began trading on June 16, 1987 with respect to its initial
Units of limited partnership interest (the "Initial Units"). The Fund's initial
capitalization was $7,372,260. The Fund registered an additional $10,000,000 of
Limited Partnership Interests effective March 29, 1993, and an additional
$20,000,000 of Units effective January 31, 1994. As of April 30, 1995,
$20,734,879 of Units had been sold since March 29, 1993 in the continuing
offering, leaving $9,265,121 of Units unsold from the 1994 offering (the "Unsold
Amount"). As of April 30, 1995 the net capital contributions to the Fund were
$22,611,130.14. The Fund registered an additional $50,000,000 worth of Units
effective June 26, 1995. By this offering, the Fund will offer the $50,000,000
worth of Units plus the Unsold Amount (the "Current Offering"). The offering of
Limited Partnership Interests shall continue until June 26, 1997 (or an earlier
date when the amount of Units registered are sold). As of April 30, 1996,
$27,602,580 worth of the Units have been sold of the Current Offering, The Net
Asset Value per Initial Unit at the commencement of trading in 1987 was $225.43.
As of April 30, 1996, the Net Asset Value per Unit was $279.82; the Net Asset
Value per Unit net of interest income was $243.48; the Net Asset Value of the
Fund was $34,435,478. At the close of business on February 28, 1995, each Unit
was divided into three Units (the "3-for-1 split"), each of which had a Net
Asset Value per Unit equal to the previous Net Asset Value per Unit divided by
three. Accordingly, the total number of Units outstanding tripled as of that
date. References in this Prospectus to Net Asset Value per Unit after that date,
therefore, are to a Net Asset Value per Unit of a revalued Unit, approximately
one-third the Net Asset Value per Unit prior to the 3-for-1 split, which was
$690.75. Past performance is not necessarily indicative of future results. See
"The Past Performance of the Fund" for a description of the Fund's performance.
The Fund is administered by CIS Investments, Inc. ("CISI") and IDS Futures
Corporation ("IDS Futures"). CISI and IDS Futures are collectively referred to
herein as the "General Partners." Cargill Investor Services, Inc. (the "Clearing
Broker"), an affiliate of CISI, acts as the Fund's clearing broker. American
Express Financial Advisors Inc. acts as the Fund's introducing broker (the
"Introducing Broker") and as the Fund's selling agent (the "Selling Agent").
American Express Financial Advisors Inc., an affiliate of IDS Futures, was named
IDS Financial Services Inc. until December 31, 1994. See "Conflicts of
Interest." The current trading advisors to the Fund (the "Trading Advisors") are
John W. Henry & Co., Inc. and Sabre Fund Management Limited.
Additional units of limited partnership interest are being solicited until June
26, 1997 (the "Offering Period"). The units of limited partnership interest
offered by this Prospectus are collectively referred to herein as the "Units."
The minimum subscription (including subscriptions of Individual Retirement
Accounts, Keogh Plans and employee benefit pension plans) is $1,000 although
certain states may require a higher minimum subscription (see Exhibit B); any
greater subscription amount must be in increments of $100. Of an initial $1,000
investment, approximately $910 will be available for trading by the Fund,
although this amount may be greater under certain circumstances. Purchasers are
likely to receive fractional Units. Additionally, each subscriber to the Fund
must represent that his or her net worth is at least $150,000 or, in the
alternative, he or she has a minimum annual gross income of at least $45,000
plus a net worth of at least $45,000.
THESE ARE SPECULATIVE SECURITIES AND INVOLVE A HIGH DEGREE OF RISK. THESE
SECURITIES ARE SUITABLE FOR INVESTMENT ONLY BY A PERSON WHO CAN AFFORD TO LOSE
HIS OR HER ENTIRE INVESTMENT. SEE "INTRODUCTORY STATEMENT--WHO SHOULD INVEST"
AND "RISK FACTORS."
An investment in the Fund involves significant risks, including the following:
- - The speculative and volatile nature of trading in commodity interests which
could result in the loss of all or a substantial part of an investment.
- - Substantial charges to the Fund which will require trading profits in 1996 of
approximately 14.176% of average Net Asset Value in order to break even.
- - Reliance on the Trading Advisors to achieve trading profits.
- - Conflicts of interest between the General Partners, Trading Advisors, and the
Fund's brokers and the Fund.
- - Restriction on redemption rights limiting liquidity.
For a detailed description of the foregoing risks and other risk factors
applicable to an investment in the Fund, see "Risk Factors" on page 20.
TRANSFERABILITY OF THE UNITS IS RESTRICTED AND THERE IS AND WILL BE NO PUBLIC
MARKET THEREFOR. UNITS ARE REDEEMABLE, SUBJECT TO CERTAIN CONDITIONS, ONLY ON
THE LAST TRADING DAY OF A MONTH UPON TEN DAYS' WRITTEN NOTICE TO THE GENERAL
PARTNERS. SEE "LIMITED PARTNERSHIP AGREEMENT" AND "REDEMPTIONS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON THE ADEQUACY OR
ACCURACY OF THIS DISCLOSURE DOCUMENT.
<TABLE>
<CAPTION>
Selling Commissions (2) and Proceeds to the
Price to Public (1) Offering Expense Charge (3) Fund (3)(4)
<S> <C> <C> <C>
Per Unit Net Asset Value per Sales Charge and Offering Expense Charge of 9.9%, (3)(4)
Price Unit collectively, of Net Asset Value per Unit [minus
reductions in Sales Charge for certain subscriptions].
Total Maximum $50,000,000 [plus $4,500,000 [plus charges on unsold remainder] $45,500,000 [plus net
unsold remainder from unsold remainder from
1/94 offering] 1/94 offering]
</TABLE>
(Notes begin on the following page)
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
The date of this Prospectus is July , 1996.
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Units are being offered at a price per Unit equal to Net Asset Value per Unit as
of the close of business on the last business day of the month in which the
General Partners accept such subscriptions and admit subscribers as Limited
Partners, plus the amount of the Sales Charge and the Offering Expense Charge on
a per Unit basis. See Notes 2 and 3 below for descriptions of the Sales Charge
and the Offering Expense Charge, respectively, and how they are calculated.
Representatives and employees of American Express Financial Advisors Inc. and
certain of its corporate affiliates ("Affiliated Purchasers") who purchase Units
will not be assessed a Sales Charge.
All subscription documents from a potential investor must be received by the
tenth calendar day of the month if they are to be considered for acceptance by
the Fund in that month. The Selling Agent will promptly send a confirmation of
the investment and a copy of the Fund's most recent monthly account statement to
the potential investor. The investor will then have sixteen days from the date
of the confirmation from the Selling Agent to determine whether he or she wishes
his or her subscription to be retained by the Fund. The potential investor must
notify the Selling Agent by mail or telephone (pursuant to instructions in the
notice from the Selling Agent) of his or her decision not to invest. No further
action is required in response to the notification from the Selling Agent if the
investor elects to subscribe. The investor's negative response must be received
by the Selling Agent within the sixteen day period. Investors electing to
withdraw their subscription pursuant to the above alternative will promptly
receive a return of their subscription funds from the escrow agent. The investor
may withdraw his or her subscription for any reason during this review period.
See the "Free Look Alternative."
All subscriptions are subject to acceptance by the General Partners. In the
event that offers to subscribe are rejected by the General Partners for any
reason, then all or the rejected portion of the tendered consideration for such
subscription shall be promptly returned to the purchaser.
The anticipated remaining duration of the Fund is approximately ten years; the
Fund's operations will cease on December 31, 2006. However, the Fund may
terminate its operations at an earlier date upon the occurrence of special
circumstances detailed in the Amended and Restated Limited Partnership Agreement
attached to this Prospectus as Exhibit A.
The Units are being offered by the Selling Agent on a best-efforts basis. Each
subscriber will have a sixteen day "Free Look" period to determine whether he or
she wishes to have the Fund retain his or her subscription. See "Free Look
Alternative." Proceeds from subscriptions accepted during the Offering Period
will be held in escrow at First Bank National Association, St. Paul, Minnesota
(the "Escrow Agent"), prior to the time that the proceeds of such subscriptions
are applied to the purchase of Units. Subscribers will be paid interest on funds
deposited with the Escrow Agent within 30 days after the date on which they are
admitted to the Fund as Limited Partners, except that if any subscriber's
accrued interest is less than $10, such interest shall be paid to the Fund and
not to the subscriber. Subscription proceeds deposited with the Escrow Agent may
not be withdrawn by subscribers. See "Plan of Distribution."
- --------------------------------------------------------------------------------
NOTES:
(1) Units having an aggregate offering price of $50,000,000 (plus the Unsold
Amount) are offered by this Prospectus. Units will be offered to Affiliated
Purchasers at a price equal to 103.1% of Net Asset Value per Unit as of the
close of business on the last business day of the month in which the General
Partners accept such subscriptions and admit the subscribers as Limited
Partners to the Fund and to non-Affiliated Purchasers at a maximum price
equal to 109.9% of Net Asset Value per Unit as of the close of business on
the last business day of the month in which the General Partners accept such
subscriptions and admit the subscribers as Limited Partners to the Fund. The
price for non-Affiliated Purchasers may be less than maximum stated
depending on amount subscribed. (See "Description of Charges to the
Fund--Sales Charge".) In order to produce the maximum selling commission
equivalent to 6% of the gross per Unit price (the "Sales Charge") and a
charge for other offering expenses equivalent to 3% of the gross per Unit
price (the "Offering Expense Charge"), a maximum Sales Charge and the
Offering Expense Charge (collectively, 9.8901% of the Net Asset Value per
Unit) will be assessed on subscriptions by non-Affiliated Purchasers.
Affiliated Purchasers will purchase Units during the Offering Period, as
described above, at a price equal to the Net Asset Value per Unit, plus the
Offering Expense Charge. The Offering Expense Charge will be assessed on
subscriptions by Affiliated Purchasers in order to defray offering expenses
(not including a selling commission). In no event shall reimbursement for
total offering expenses (including selling commissions) exceed an amount
equal to 9% of the gross proceeds of the offering. Purchasers are likely to
receive fractional Units. Subscriptions for Units which are received after
the tenth calendar day of a month will be held in the escrow account, due to
the length of time required to process subscriptions, and, if not rejected,
the subscriber will be admitted to the Fund at the subsequent admission of
subscribers to the Fund after
ii
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
the end of such month. Additional Limited Partners will be admitted to the
Fund not more frequently than the end of each full calendar month.
Additional Limited Partners will be admitted to the Fund as of the close of
business on the last business day of each full calendar month, provided that
such proceeds were received by the tenth calendar day of that month. The
Units are being offered by the Fund through the Selling Agent on a
best-efforts basis without any firm underwriting commitment. There can be no
assurance that any or all of the Units being offered will be sold. The Fund
and the General Partners will indemnify the Selling Agent and its
controlling persons against certain liabilities. See "Plan of Distribution."
As of the close of business February 28, 1995, the Net Asset Value per Unit
changed to reflect the 3-for-1 split in Units occurring on that date. For
purposes of comparison, purchasers should refer to the $690.75 Net Asset
Value per Unit on that date.
(2) On the day a subscriber is admitted to the Fund, the Selling Agent will
receive the Sales Charge from the proceeds of the offering with respect to
Units sold to investors other than Affiliated Purchasers. See "Plan of
Distribution." The maximum amount of such payments to the Selling Agent will
be $3,000,000 if all Units offered hereby are sold to investors other than
Affiliated Purchasers, and $50,000,000 in capital is raised in this offering
and no one purchaser subscribes for an amount more than $50,000. No Sales
Charge will be assessed with respect to Units purchased by Affiliated
Purchasers. (Units are offered to Affiliated Purchasers at a lower price per
Unit because no Sales Charge will be charged to such purchasers.) In
addition, the Selling Agent, as the Fund's Introducing Broker for trades in
commodity interests, receives a portion of the per trade commodity brokerage
commissions paid by the Fund in return for certain ongoing services to be
rendered to holders of Units, and such compensation could be deemed to be
underwriting compensation (and, therefore, to be additional offering
charges). See "Plan of Distribution" and "Charges to the Fund."
(3) The General Partners have agreed to advance the expenses of the Current
Offering (other than selling commissions), estimated at $1,500,000,
including legal, accounting, auditing, marketing, filing, registration and
recording fees, printing expenses, and escrow charges. Such $1,500,000
estimate is based upon an assumption that $50,000,000 in capital will be
raised in the complete offering which began on June 26, 1995 for purposes of
calculating the variable elements of such expenses. In return for advancing
such offering expenses, the General Partners will receive the Offering
Expense Charge with respect to Units sold to all purchasers. The General
Partners will not be reimbursed for the payment of such offering expenses
from any other source. If the aggregate Units sold during the Offering
Period do not produce sufficient funds for reimbursement of the funds
advanced by the General Partners for such offering expenses, the General
Partners will be responsible for the shortfall. If the aggregate Units sold
during the Offering Period produce funds in excess of those advanced by the
General Partners for such offering expenses, the General Partners will
retain any excess. See "Plan of Distribution." Notwithstanding the
foregoing, in no event will reimbursement for total offering expenses
(including selling commissions) exceed an amount equal to 9% of the gross
proceeds from the sale of Units, nor will any individual Limited Partner pay
more than 9% of the gross amount of his or her subscription toward such
reimbursement. This limitation on reimbursement of offering expenses is well
within the 15% limitation on such expenses under rules adopted by the
National Association of Securities Dealers, Inc.
(4) The additional Units offered by this Prospectus will be offered through June
26, 1997 (the "Offering Period"), unless all of such Units are previously
sold. Proceeds of subscriptions will be deposited with the Fund's Clearing
Broker on the first trading day of the month after the subscriber has been
admitted to the Fund and the subscriber will receive Units in exchange. (See
Note 1, above.) Proceeds from subscriptions accepted during the Offering
Period will be held in escrow by First Bank National Association, St. Paul,
Minnesota. Subscriptions for Units received after the tenth calendar day of
a month will be held in the escrow account, if not rejected, until the
subsequent admission of subscribers to the Fund after the end of such month,
and will earn interest during that time. See "Plan of Distribution."
The Fund will furnish all holders of Units annual and monthly reports complying
with the regulations of the Commodity Futures Trading Commission. The annual
certified reports will contain audited, and the monthly reports unaudited,
financial information.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE MATTERS DESCRIBED
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER BY ANY PERSON WITHIN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER
WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
iii
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO
PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT FUTURES
AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH
TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS
ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE
POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT,
AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE
SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION
OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE
DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 12-14 AND 45-50 AND
A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO
RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 9.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY
TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU
DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS
DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF
THIS INVESTMENT, AT PAGE 20.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR
OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES,
INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO
REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS
PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO
COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN
NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED.
1
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
FREE LOOK ALTERNATIVE
COMMODITY FUTURES TRADING COMMISSION RULE 4.26(b) PROVIDES THAT IN CONNECTION
WITH SOLICITING PROSPECTIVE PARTICIPANTS FOR A COMMODITY POOL, THE COMMODITY
POOL OPERATOR MUST ATTACH TO THE DISCLOSURE DOCUMENT FOR THE POOL COPIES OF THE
POOL'S MOST CURRENT ACCOUNT STATEMENT. THE POOL OPERATORS FOR THIS FUND HAVE
REQUESTED, AND HAVE BEEN GRANTED, AN EXEMPTION FROM THIS RULE BY THE COMMODITY
FUTURES TRADING COMMISSION PURSUANT TO THE FUND'S "FREE LOOK ALTERNATIVE."
UNDER THE FREE LOOK ALTERNATIVE, PROSPECTIVE PARTICIPANTS WILL SIGN AND FORWARD,
ALONG WITH THEIR INVESTMENT CHECK, THE APPROPRIATE SUBSCRIPTION DOCUMENTS
ATTACHED TO THIS DISCLOSURE DOCUMENT TO THE HOME OFFICE OF AMERICAN EXPRESS
FINANCIAL ADVISORS INC. AMERICAN EXPRESS FINANCIAL ADVISORS INC. WILL THEN SEND
A CONFIRMATION OF THE INVESTMENT AND A COPY OF THE FUND'S MOST RECENT ACCOUNT
STATEMENT TO THE PROSPECTIVE PARTICIPANT ON THE NEXT BUSINESS DAY. THE MAILING
OF THE CONFIRMATION AND ACCOUNT STATEMENT BY AMERICAN EXPRESS FINANCIAL ADVISORS
INC. MARKS THE BEGINNING OF THE "FREE LOOK" PERIOD.
THE FREE LOOK PERIOD IS 16 DAYS. DURING THIS TIME, PROSPECTIVE PARTICIPANTS WILL
HAVE THE OPPORTUNITY TO DETERMINE WHETHER THEY WISH THEIR SUBSCRIPTION AMOUNT TO
BE RETAINED BY THE FUND. PROSPECTIVE PARTICIPANTS MAY RESCIND THEIR
SUBSCRIPTIONS DURING THE FREE LOOK PERIOD FOR ANY REASON.
PROSPECTIVE PARTICIPANTS MAY NOTIFY AMERICAN EXPRESS FINANCIAL ADVISORS INC. OF
THEIR DECISION TO WITHDRAW THEIR SUBSCRIPTIONS EITHER BY MAIL OR BY TELEPHONIC
COMMUNICATION PURSUANT TO INSTRUCTIONS RECEIVED FROM AMERICAN EXPRESS FINANCIAL
ADVISORS INC. IN THE CONFIRMATION.
2
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
CERTAIN TERMS AND DEFINITIONS......................................................................... 6
INVESTMENT REQUIREMENTS............................................................................... 6
SUMMARY OF THE PROSPECTUS............................................................................. 7
The Fund............................................................................................ 7
General Partners.................................................................................... 7
Estimate of the Fund's "Breakeven" Point............................................................ 8
BREAKEVEN POINT OF THE FUND........................................................................... 9
Investment Objective................................................................................ 10
Reopening of the Fund............................................................................... 10
The Current Offering................................................................................ 10
Business and Use of Proceeds........................................................................ 11
Management.......................................................................................... 11
Trading Advisors.................................................................................... 11
Charges to the Fund................................................................................. 12
SUMMARY OF CHARGES TO THE FUND........................................................................ 12
Sales Charge and Offering Expense Charge............................................................ 14
Risks and Conflicts of Interest..................................................................... 14
Termination of Partnership.......................................................................... 15
Financial Information............................................................................... 15
Redemption of Units................................................................................. 15
Distributions....................................................................................... 15
Transfers or Assignments of Units................................................................... 16
Income Tax Aspects.................................................................................. 16
THE OFFERING.......................................................................................... 16
The Offering Period................................................................................. 16
Free Look Alternative............................................................................... 17
Potential Advantages................................................................................ 17
Plan of Distribution................................................................................ 18
Use of Proceeds and Interest Payable................................................................ 18
Suitability Standards............................................................................... 18
INTRODUCTORY STATEMENT................................................................................ 18
Who Should Invest................................................................................... 19
RISK FACTORS.......................................................................................... 20
The Commodity Futures Markets....................................................................... 20
Charges............................................................................................. 22
Management and Incentive Fees..................................................................... 22
Brokerage Fees.................................................................................... 22
Administrative Fee................................................................................ 23
Breakeven Point................................................................................... 23
Trading Advisors.................................................................................... 24
Limited Partners and the Fund....................................................................... 28
Conflicts........................................................................................... 30
Taxation............................................................................................ 30
Regulation.......................................................................................... 32
Credit Risks........................................................................................ 32
POTENTIAL ADVANTAGES OF THE FUND...................................................................... 33
CONFLICTS OF INTEREST................................................................................. 34
</TABLE>
3
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
-----
<S> <C>
PURCHASES BY EMPLOYEE BENEFIT PLANS--ERISA CONSIDERATIONS............................................. 37
USE OF PROCEEDS....................................................................................... 39
SELECTED FINANCIAL DATA............................................................................... 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................. 41
CHARGES TO THE FUND................................................................................... 45
Description of Charges to the Fund.................................................................. 45
Certain Definitions................................................................................. 50
CAPITALIZATION........................................................................................ 51
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNERS...................................................... 51
THE GENERAL PARTNERS.................................................................................. 54
CISI................................................................................................ 54
IDS Futures......................................................................................... 55
PAST PERFORMANCE OF THE FUND.......................................................................... 58
BROKERAGE ARRANGEMENTS................................................................................ 64
The Clearing Broker................................................................................. 64
The Introducing Broker.............................................................................. 65
The Foreign Currency Broker......................................................................... 65
GLOSSARY.............................................................................................. 66
DESCRIPTION OF COMMODITY TRADING...................................................................... 69
Commodity Markets................................................................................... 69
Hedgers and Speculators............................................................................. 70
Commodity Prices.................................................................................... 70
Competition......................................................................................... 71
Regulation.......................................................................................... 71
Margins............................................................................................. 75
TRADING POLICIES...................................................................................... 75
THE TRADING ADVISORS.................................................................................. 77
The Advisory Contract............................................................................... 78
Commodity Trading Methods in General................................................................ 80
John W. Henry & Company, Inc........................................................................ 80
The JWH Trading Method.............................................................................. 84
JWH Trading Policies................................................................................ 85
Trading Techniques................................................................................ 85
Program Modifications............................................................................. 85
Leverage.......................................................................................... 86
Additions, Redemptions and Reallocation of Capital for Commodity Pool or Fund Accounts............ 86
Other JWH Programs.................................................................................. 86
Sabre Fund Management Ltd........................................................................... 87
The Sabre Trading Method............................................................................ 88
DESCRIPTION OF UNITS.................................................................................. 89
PLAN OF DISTRIBUTION.................................................................................. 90
The Offering Period................................................................................. 90
Free Look Alternative............................................................................... 91
The Representation Agreement........................................................................ 91
Offering Expense Charge............................................................................. 92
SUBSCRIPTION PROCEDURE................................................................................ 92
REDEMPTIONS........................................................................................... 93
</TABLE>
4
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
-----
<S> <C>
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT.................................................... 94
Nature of the Fund.................................................................................. 94
Management of the Fund.............................................................................. 95
Distributions by the Fund........................................................................... 96
Redemptions......................................................................................... 96
Additional Partners................................................................................. 96
Transfers of Units.................................................................................. 96
Indemnification..................................................................................... 97
Election, Removal and Withdrawal of General Partners................................................ 97
Termination of the Fund............................................................................. 97
Amendments and Meetings............................................................................. 98
Fiscal Year......................................................................................... 98
Reports and Accounting.............................................................................. 98
FEDERAL INCOME TAX CONSIDERATIONS..................................................................... 99
Partnership Status.................................................................................. 99
Partnership Taxation................................................................................ 100
Recognition of Gain on Redemptions and Distributions................................................ 101
Straddles........................................................................................... 102
Fund Tax Audits..................................................................................... 105
Foreign Investors................................................................................... 105
State and Local Taxes............................................................................... 106
LEGAL MATTERS......................................................................................... 106
EXPERTS............................................................................................... 107
ADDITIONAL INFORMATION................................................................................ 107
ADDITIONAL DEFINITIONS................................................................................ 107
FINANCIAL STATEMENTS.................................................................................. 108
</TABLE>
<TABLE>
<C> <S>
Exhibit A -- Amended and Restated Limited Partnership Agreement
Exhibit B -- Subscription Requirements
Exhibit C -- Subscription Agreement and Power of Attorney
Exhibit D -- Request for Redemption
</TABLE>
IDS MANAGED FUTURES, L.P.
c/o CIS Investments, Inc.
233 South Wacker Drive
Suite 2300
Chicago, Illinois 60606
(312) 460-4000
------------------------
GENERAL PARTNERS
<TABLE>
<S> <C>
CIS Investments, Inc. IDS Futures Corporation
233 South Wacker Drive IDS Tower 10
Suite 2300 Minneapolis, Minnesota 55440
Chicago, Illinois 60606 (612) 671-3131
(312) 460-4000
</TABLE>
5
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CERTAIN TERMS AND DEFINITIONS
Knowledge of various terms and concepts relating to the trading and the
regulation of commodities and commodity trading is necessary for a prospective
investor to determine whether to participate in the Fund. Reference is made to
the "Glossary" in this Prospectus. The Glossary is designed to assist the
prospective investor in understanding the terms and concepts used in this
Prospectus.
INVESTMENT REQUIREMENTS
The minimum investment in the Fund is $1,000; any greater subscription amount
must be in increments of $100. In the Subscription Agreement and Power of
Attorney, a copy of which is attached hereto as Exhibit C, each investor must
represent that he or she has had an opportunity to review the Prospectus and is
satisfied that he or she has had an opportunity to ask questions relating to,
but not limited to, the risk of losing his or her entire investment, and that he
or she has (1) a net worth of at least $150,000 (exclusive of home, furnishings
and automobiles) or (2) a net worth of at least $45,000 (exclusive of home,
furnishings and automobiles) and a minimum annual gross income in the most
recent tax year of at least $45,000. The administrators of the securities laws
of certain states have imposed additional suitability requirements and higher
minimum investment amounts for residents of such states. The Subscription
Requirements (Exhibit B) list such additional suitability and investment
requirements. The General Partners may reject any subscription. All
subscriptions are irrevocable. The General Partners and the Selling Agent are
responsible for making every reasonable effort to determine that the purchase of
Units is a suitable and appropriate investment for each investor, based on
information provided by the investor regarding his or her financial situation
and investment objectives.
KEOGH AND SELF-DIRECTED IRA PLANS. The minimum initial investment for Keogh or
H.R. 10 Plans ("Keoghs") and self-directed individual retirement accounts
("IRAs") is $1,000. See Exhibit B--Subscription Requirements.
EMPLOYEE BENEFIT PLANS. A trustee of any trust related to any "employee pension
benefit plan" or "pension plan" as such terms are defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974 ("ERISA") ("Employee Benefit
Plan") must make the representations and warranties summarized above as such
representations and warranties are applied, respectively, to the "employer" or
"employee organization," as such terms are defined in, respectively, Section
3(5) and 3(4) of ERISA, sponsoring any such pension plan. Other representations
are set forth in Exhibit C--Subscription Agreement and Power of Attorney. In
determining whether an investment in the Fund is suitable for a particular plan,
the prospective subscriber should be aware that investment activities of
Employee Benefit Plans are subject to numerous restrictions under the provisions
of the Internal Revenue Code, ERISA, and, possibly, state laws. The minimum
investment for Employee Benefit Plans is $1,000. See "Risk Factors" and
"Purchases by Employee Benefit Plans--ERISA Considerations."
6
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
SUMMARY OF THE PROSPECTUS
This summary is intended to highlight certain information contained in the
body of this Prospectus. This summary is qualified in its entirety by the
information appearing more fully elsewhere in the Prospectus and the
description of any document is qualified in its entirety by the information
appearing elsewhere in the Prospectus and the Amended and Restated Agreement
to Limited Partnership attached hereto as Exhibit A.
<TABLE>
<S> <C>
THE FUND IDS Managed Futures, L.P. is a limited partnership
organized on December 16, 1986 under the Delaware Revised
Uniform Limited Partnership Act. See Amended and Restated
Limited Partnership Agreement, attached as Exhibit A. The
principal offices of the Fund are located at 233 South
Wacker Drive, Suite 2300, Chicago, Illinois 60606 and the
telephone number for the Fund is (312) 460-4000. The
books and records of the Fund will also be kept there.
The date of this Prospectus is July , 1996. The Fund
began trading on June 16, 1987 with respect to its
initial units of limited partnership units (the "Initial
Units"). The Fund's initial capitalization was
$7,372,260. The Net Asset Value per Unit at the
commencement of trading on June 16, 1987, was $225.43. A
registration statement offering $10,000,000 in aggregate
Units became effective on March 29, 1993 and $9,022,985
of Limited Partnership Interests were sold through
January 31, 1994, leaving $977,015 of Units to be sold.
Another registration statement offering $20,000,000 plus
the unsold $977,015 in aggregate Units became effective
on January 31, 1994. As of April 30, 1995, $20,734,879 of
Units had been sold since March 29, 1993, in the
continuous offering, leaving 9,265,121 of Units unsold
from the 1994 offering (the "Unsold Amount"). The Current
Offering began on June 26, 1995, pursuant to which the
Fund will offer an additional $50,000,000 worth of units
plus the Unsold Amount. The Current Offering will
continue until June 26, 1997. The continuous offerings
have resulted in $27,602,580 worth of Limited Partnership
Interests sold as of April 30, 1996. As of April 30,
1996, the Net Asset Value per Unit was was $279.82 and
net capital contributions were $28,559,308. See "Past
Performance of the Fund," on page 58.
GENERAL PARTNERS The General Partners of the Fund are IDS Futures
Corporation ("IDS Futures"), a wholly-owned subsidiary of
IDS Management Corporation, which is itself a wholly-
owned subsidiary of American Express Financial
Corporation, the corporate parent of the Fund's Selling
Agent/Introducing Broker, and CIS Investments, Inc.
("CISI"), a wholly-owned subsidiary of the Fund's
Clearing Broker. They are responsible for administering
the Fund's affairs. The General Partners are registered
under the Commodity Exchange Act, as amended, as
commodity pool operators (and are currently acting as the
Fund's commodity pool operators) and are members of the
National Futures Association ("NFA"). CISI is registered
as a commodity pool operator effective December 13, 1985
and IDS Futures is registered as a commodity pool
operator effective February 4, 1987. The principal
offices of CISI are located at 233 S. Wacker Drive, Suite
2300, Chicago, Illinois 60606. The records of the Fund
are kept at CISI's principal offices in Chicago. The
principal offices of IDS Futures are located at IDS Tower
10, Minneapolis, Minnesota 55440.
THIS PROSPECTUS The General Partners first intend to use the Prospectus
on July ,1996.
</TABLE>
7
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ESTIMATE OF THE During the first twelve months of an investment by a new
FUND'S "BREAKEVEN" Limited Partner who is not an Affiliated Purchaser, the
POINT initial investment will be subject to expenses of
approximately 14.176% taking into account the 6% Sales
Charge and the 3% Offering Expense Charge. Thereafter,
the estimated breakeven calculation for the Fund will be
reduced by the one time 6% Sales Charge and the 3%
Offering Expense Charge to 5.176% per annum. If the Fund
were unable to achieve such profits, its assets are
likely to be depleted by expenses during the year. There
is no assurance that these anticipated percentages of
expenses will in fact be incurred by the Fund. These
estimates should not be interpreted as representations by
the Fund of the actual amounts of operating expenses of
the Fund. In addition, there can be no assurance that the
expenses to be incurred by the Fund will not exceed the
amounts as estimated or that there will not be any other
expense.
</TABLE>
8
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
BREAKEVEN POINT OF THE FUND
IDS MANAGED FUTURES, L.P.
ESTIMATED "BREAKEVEN" CALCULATION
FOR THE FUND'S 1996 YEAR OF OPERATION
<TABLE>
<CAPTION>
DOLLARS PERCENTAGE
--------- -------------
<S> <C> <C>
Minimum Investment Amount(1) $1,000.00
Sales Charge(1) 60.00 6.00%
Offering Expense Charge(1) 30.00 3.00%
Administrative Fees(2) 13.75 1.375%
Advisory Management Fees(3) 30.50 3.05%
Advisory Incentive Fees(4) 11.51 1.151%
Brokerage Commission and Trading Fees(5) 30.00 3.00%
Periodic Operating Expenses(6) 10.00 1.00%
Less Interest Income(7) (44.00) -4.40%
BREAKEVEN POINT:* $ 141.76 14.176%
</TABLE>
-------------------------
* Amount of Trading Income required for the Fund's Net Asset Value per Unit
(Redemption Value) at the end of one year to equal the Selling Price per
Unit/Percentage of Minimum Investment Amount.
(1) Units will be purchased at the Fund's month-end Net Asset Value per Unit.
A 6% Sales Charge and a 3% Offering Expense Charge will be deducted from
the gross investment amount before the net investment units are
calculated.
(2) The Administrative Fees payable to the General Partners will total 1.375%
of the Fund's Net Asset Value on the first day of its fiscal year.
(3) As of April 30, 1996, JWH is managing approximately 60% of the assets of
the Fund at a management fee of 4% per annum. Sabre is managing
approximately 40% of the assets at a current management fee of 1 1/2% per
annum. This weighted average equals a current combined management fee of
3.05% per annum.
(4) In accordance with the Advisory Contract between the Fund and the Trading
Advisors, JWH will receive an incentive fee of 15% of new net trading
profits and Sabre will receive an incentive fee of 18% of new net trading
profits, both exclusive of interest income. The incentive fees of $11.51
shown above are equal to 16.15% (see weighted average assumption in Note
(3) above) of net of total trading income of $141.76 minus $30.00 of
brokerage commissions and trading fees, $30.50 of management fees and
$10.00 of periodic operating expenses.
(5) Brokerage Commissions payable by the Fund with respect to the trading
directed by the Trading Advisors have ranged from approximately 2.46%-6.2%
of the Fund's average annual Net Asset Value over the past eight years of
trading. An estimate of 3.0% of the Net Asset Value, however, is used in
this table to reflect the current brokerage rate in effect that was
reduced by 30% on September 1, 1995. The actual brokerage commissions paid
for calendar year 1995 was 2.46%.
(6) Periodic Operating Expenses are estimated at 1% of the Fund's average
annual Net Asset Value.
(7) The Fund will earn interest income on 90% of its assets deposited at the
Clearing Broker. Based on the assumption that interest rates will be
falling about 1/2 of 1% in 1996, interest income is estimated at 4.4% of
the Net Asset Value. Interest income earnings for the Fund in 1995 were
approximately 4.9% of the Net Asset Value.
9
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund has been developed with the objective of
achieving substantial capital appreciation over the long
term through professionally managed speculative trading
in futures contracts, forward currency contracts,
physical commodities and related options thereon on
exchanges and markets located in the United States and
abroad.
REOPENING OF THE The Fund is seeking to sell additional Units of Limited
FUND Partnership Interest because the Fund has been successful
in achieving substantial capital appreciation for its
investors. The General Partners believe that it is more
efficient to reopen this Fund than to create a new fund.
Further, the Fund has extended the advisory contracts
with its Trading Advisors and is thus assured of their
continued service. A lack of similar investment products
in the marketplace which would allow investors to
diversify their portfolios has resulted in a large demand
for Limited Partnership Interests in the Fund.
Consequently, the General Partners have decided to
increase the offering of Limited Partnership Interests
through the registration of an additional $50,000,000 of
Limited Partnership Interests. See "Introductory
Statement."
THE CURRENT OFFERING The initial closing for the Current Offering was held on
August 31, 1995, and the amounts of subscriptions then
received and accepted by the General Partners were
contributed to the capital of the Fund. At the initial
closing, the Fund sold 4,971.9361 Units for an aggregate
purchase price of $1,403,011. The Selling Agent was paid
$78,012 in commissions in connection with the initial
closing.
On September 29, 1995, the second closing of the Current
Offering of the Fund was held. On that date, 5,239.90322
Units were sold for an aggregate purchase price of
$1,463,490. The Selling Agent received $82,886 in
commissions.
On October 31, 1995, the third closing of the Current
Offering of the Fund was held. On that date, 3,626.91790
Units were sold for an aggregate purchase price of
$1,007,100. The Selling Agent received $54,054 in
commissions.
On November 30, 1995, the fourth closing of the Current
Offering of the Fund was held. On that date, 2,310.75812
Units were sold for an aggregate purchase price of
$658,600. The Selling Agent received $36,566 in
commissions.
On December 29, 1995, the fifth closing of the Current
Offering of the Fund was held. On that date, 2,033.75749
Units were sold for an aggregate purchase price of
$600,900. The Selling Agent received $34,694 in
commissions.
On January 31, 1996, the sixth closing of the Current
Offering of the Fund was held. On that date, 2,574.69436
Units were sold for an aggregate purchase price of
$792,900. The Selling Agent received $46,834 in
commissions.
On February 29, 1996, the seventh closing of the Current
Offering of the Fund was held. On that date, 745.08625
Units were sold for an aggregate purchase price of
$221,700. The Selling Agent received $13,302 in
commissions.
On March 29, 1996, the eighth closing of the Current
Offering of the Fund was held. On that date, 1,342.41333
Units were sold for an aggregate price of $398,800. The
Selling Agent received $23,928 in commissions.
On April 30, 1996, the ninth closing of the Current
Offering of the Fund was held. On that date, 1044.5715
Units were sold for an aggregate price of $321,200. The
Selling Agent received $19,272 in commissions.
</TABLE>
10
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The proceeds received at each of these closings were
deposited in the Fund's trading account maintained by the
Clearing Broker.
BUSINESS AND USE OF The Fund trades speculatively commodity interests,
PROCEEDS including futures contracts, forward contracts, physical
commodities, and related options thereon pursuant to the
trading instructions of independent trading advisors. See
"The Trading Advisors." All assets of the Fund are and
will be deposited in the Fund's accounts with Cargill
Investor Services, Inc., the Fund's clearing broker (the
"Clearing Broker"). The Clearing Broker credits the Fund
at month's end with interest income on 100% of the Fund's
average monthly net assets on deposit at the Clearing
Broker at a rate equal to 90% of the average yield on the
90-day U.S. Treasury bills issued during that month. The
Clearing Broker will benefit from interest earned on such
funds in excess of the amounts paid to the Fund. See
"Charges to the Fund." Approximately 20% to 60% of the
Fund's assets have historically been committed as initial
margin for trading and the General Partners expect that
approximately 20% to 60% of the Fund's assets will
continue to be committed as initial margin for trading.
However, from time to time the percentage of assets
committed as margin may be more or less than such
historical range. See "Use of Proceeds."
MANAGEMENT The Fund's General Partners are responsible for the
management of the Fund, including the hiring of trading
advisors and brokers. See "The General Partners."
American Express Financial Advisors Inc. and Cargill
Investor Services, Inc., affiliates of the General
Partners, act as the introducing and clearing brokers,
respectively, for the Fund. See "Conflicts of Interest"
and "Brokerage Arrangements." Except in extraordinary
circumstances, Limited Partners will have no right to
vote concerning questions of management, and it is not
expected that meetings of Limited Partners will be held.
TRADING ADVISORS John W. Henry & Co., Inc. and Sabre Fund Management
Limited, which are not affiliated with each other, the
Fund's General Partners, the Clearing Broker, the
Introducing Broker or the Selling Agent, have acted as
the Trading Advisors to the Fund since its inception (the
"Trading Advisors"). See "The Trading Advisors." Pursuant
to an advisory contract, the Trading Advisors
independently direct trading for the Fund's assets. Each
Trading Advisor was initially allocated an equal portion
of the Fund's assets to manage. On February 7, 1991 the
Fund's assets were reallocated in order to adjust the
then-current allocation so that each Trading Advisor had
an equal portion of the Fund's assets to manage. As of
April 30, 1996, John W. Henry & Co., Inc. managed
approximately 60% of the Fund's assets and Sabre Fund
Management Limited managed approximately 40% of the
Fund's assets. The General Partners currently intend that
each Trading Advisor will be allocated an equal portion
of the Fund's assets raised in connection with the
Current Offering. The current advisory contract, as
amended, will terminate on December 31, 1996, subject to
the automatic right of the Fund to renew such contract
for three additional one year terms. Subject only to
certain trading policies of the Fund and to the right of
the General Partners to terminate the advisory contract
under certain circumstances, each Trading Advisor will
continue to independently make trading decisions
regarding the Fund's assets allocated to such Trading
Advisor. See "Trading Policies." Accordingly, the General
Partners will not
</TABLE>
11
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
generally be in a position to intervene concerning the
frequency of trades, the percentage of the Fund's assets
committed as margin for futures contracts or the amount
of brokerage commissions.
CHARGES TO THE FUND SUMMARY. The Fund pays substantial management,
administrative, and incentive fees to the General
Partners and Trading Advisors, as well as brokerage
commissions to the Introducing Broker and the Clearing
Broker. The General Partners each receive an annual
administrative fee on the first business day of each
fiscal year of the Fund. These fees and expenses are
summarized below and are described in detail under
"Charges to the Fund."
</TABLE>
SUMMARY OF CHARGES TO THE FUND
The Fund is subject to the following charges, which are described in greater
detail on page 45. These charges disclose the compensation that the General
Partners and their affiliates and the Trading Advisors may receive from the
Fund either directly or indirectly.
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ---------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
John W. Henry & Co., Inc. (One of Quarterly incentive fee, based on 15% of Trading Profits, if any, in
the Trading Advisors) Trading Profits. each quarter attributable to
trading directed by it.
Monthly management fee based on 1/3 of 1% of month-end Net Asset
Net Asset Value of the Fund. Value of Fund assets subject to
its management (a 4% annual rate).
Sabre Fund Management Limited (One Quarterly incentive fee, based on 18% of Trading Profits, if any, in
of the Trading Advisors) Trading Profits. each quarter attributable to
trading directed by it.
Monthly management fee based on 1/8 of 1% of the month-end Net
Net Asset Value of the Fund. Asset Value of Fund assets subject
to its management (a 1.5% annual
rate). For a discussion of the
potential change in the amount of
such compensation, please see
"Charges--Management and Incentive
Fees" on page 22.
American Express Financial Portion of commodity brokerage $20 per round turn trade.
Advisors Inc. (The Selling Agent commissions and currency brokerage
and the Introducing Broker) commissions.
Sales Charge. 6% of the first $50,000
subscribed, 4% of the second
$50,000, 2% of the subsequent
$400,000, and 1% of any amount of
the subscription exceeding
$500,000.
IDS Futures Corporation (One of Annual administrative fee. 1.125% of Net Asset Value on first
the General Partners) day of Fund's fiscal year.
CIS Investments, Inc. (One of the Annual administrative fee. 0.25% of Net Asset Value on first
General Partners) day of Fund's fiscal year.
</TABLE>
12
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ---------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
Cargill Investor Services, Inc. Portion of commodity brokerage $15 per round turn trade of the
(The Clearing Broker) commissions. total $35 per round turn trade
commission.
Reimbursement of delivery, Actual payments to third parties
insurance, storage, NFA, clearing, in connection with the Fund's
and exchange transaction fees, and trading.
any other charges paid to third
parties.
Financial benefit from interest Interest earned on Fund assets in
income. excess of the amount of interest
paid to the Fund. From 1987 to
1995 this amount ranged between
.41% to 1.66% of the Fund's Net
Asset Value. The General Partners
anticipate future percentages to
remain at the lower end of this
range due to a decrease in
interest income retained by the
Clearing Broker from 20% to 10% in
July of 1993.
CIS Financial Services, Inc. (The Portion of currency brokerage A maximum of $15 per round turn
Currency Broker) commissions. trade of the total $35 per round
turn trade commission.
Unrelated entities that are Periodic legal, accounting, Actual expenses incurred,
unaffiliated with the General auditing, printing, recording and estimated at approximately 1% of
Partners filing fees, and postage charges. the Fund's Net Asset Value
annually.
Extraordinary expenses. Not subject to estimate.
The General Partners Offering Expense Charge. 3% of the subscription proceeds to
cover legal, auditing, accounting,
marketing and other offering
expenses. The General Partners
will pay any expenses in excess of
this percentage. If the total
Offering Charge received exceeds
actual expenses, the difference
shall be retained by the General
Partners. The Sales Charge and the
Offering Charge together will not
in any event exceed an amount
equal to 9% of the gross proceeds
from the sale of Units, and no
Limited Partner will pay more than
9% of the gross proceeds of his or
her subscription toward such
reimbursement.
</TABLE>
13
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
THE SUMMATION OF THE ADMINISTRATIVE FEES, PERIODIC OPERATING EXPENSES, ANY
BROKERAGE COMMISSIONS AND TRANSACTION FEES AND COSTS TO BE PAID BY THE FUND,
ANY ADVISORY FEES (EXCLUDING INCENTIVE FEES), AND ANY FINANCIAL BENEFIT FROM
INTEREST INCOME EARNED ON FUND ASSETS IN EXCESS OF THE INTEREST PAID TO THE
FUND SHALL TOTAL NO MORE THAN 12% OF THE FUND'S NET ASSET VALUE AVAILABLE FOR
TRADING ON A FISCAL YEAR BASIS, AND THE NET ASSET VALUE AVAILABLE FOR TRADING
SHALL NOT EXCEED 100% OF THE FUND'S NET ASSET VALUE. THE GENERAL PARTNERS WILL
ANNUALLY REVIEW THE TOTAL OF THESE EXPENSES PAID BY THE FUND TO ENSURE THAT
THEY DO NOT EXCEED 12% OF THE NET ASSET VALUE AVAILABLE FOR TRADING. SHOULD
THESE EXPENSES TOTAL MORE THAN 12% OF THE NET ASSET VALUE AVAILABLE FOR
TRADING, THE GENERAL PARTNERS WILL PAY AND WILL NOT BE REIMBURSED BY THE FUND
FOR SUCH EXCESS.
IN ADDITION, IF THESE SPECIFIED OPERATING CHARGES EXCEED 10.5% OF THE FUND'S
AVERAGE NET ASSET VALUE BASED ON NET ASSET VALUE ON THE FIRST DAY OF EACH
MONTH DURING ANY FISCAL YEAR OF THE FUND, THE GENERAL PARTNERS WILL NOTIFY ALL
LIMITED PARTNERS OF SUCH EVENT IN WRITING. (THIS LIMITATION DOES NOT APPLY TO
THE SALES CHARGE OR OFFERING EXPENSE CHARGE, WHICH ARE PAID DIRECTLY OUT OF
THE PROCEEDS OF THE OFFERING.)
ALSO, ALL LIMITED PARTNERS WILL BE NOTIFIED IN WRITING BY THE GENERAL PARTNERS
PRIOR TO ANY ACTION BY THE GENERAL PARTNERS TO INCREASE ANY FEE RATES, AND ANY
SUCH PROPOSED RATE INCREASES WILL NOT BE IMPLEMENTED UNTIL AFTER LIMITED
PARTNERS HAVE RECEIVED SUCH WRITTEN NOTICE AND HAVE HAD AN OPPORTUNITY TO
REDEEM UNITS.
FOR A DETAILED DESCRIPTION OF THE CHARGES TO THE FUND, SEE "CHARGES TO THE
FUND" ON PAGE 45.
<TABLE>
<S> <C>
SALES CHARGE AND SALES CHARGE. The Selling Agent will receive from the
OFFERING EXPENSE proceeds of the offering the Sales Charge for each Unit
CHARGE sold to an investor other than an Affiliated Purchaser.
The Sales Charge is equivalent to 6% of the gross per
Unit price for the first $50,000 of a subscription, 4%
for the next $50,000, 2% of the next $400,000, and 1% of
any amount of an investor's total subscription that
exceeds $500,000.
REIMBURSEMENT OF OFFERING EXPENSES. The General Partners
will receive from the proceeds of the offering the
Offering Expense Charge for each Unit sold to an
investor. The Offering Expense Charge is 3% of the gross
per Unit price. Offering expenses include legal,
accounting, auditing, marketing, filing, registration and
recording fees, printing expenses and escrow charges. If
the total Offering Expense Charge received by the General
Partners exceeds the actual offering expenses incurred,
the excess shall be retained by the General Partners.
RISKS AND CONFLICTS An investment in the Fund is speculative, involves
OF INTEREST substantial risks and a Limited Partner may lose his or
her entire investment. The risks of an investment in the
Fund include, but are not limited to, the speculative
nature of trading in commodity interests, including
futures contracts traded on both U.S. exchanges and
non-U.S. exchanges and forward contracts, and the
substantial charges which the Fund will pay for
brokerage, administrative and advisory services,
regardless of whether any profits are achieved. Risks
inherent in investing in the Fund are discussed under
"Risk Factors." Reference is also made to conflicts of
interest resulting from the relationships among the
Introducing Broker, the Clearing Broker, and the General
Partners, and certain other relationships. See "Conflicts
of Interest."
</TABLE>
14
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TERMINATION OF Under the Amended and Restated Limited Partnership
PARTNERSHIP Agreement, the Fund will terminate on the first to occur
of the following: (1) December 31, 2006; (2) receipt by
the General Partners of a notice to dissolve the Fund at
a specified time by Limited Partners owning more than 50%
of the outstanding Units of Limited Partnership Interest
(including Units held by Affiliated Purchasers but not
including Units held by the General Partners or their
corporate affiliates), which notice is sent by registered
mail to the General Partners not less than ninety days
prior to the effective date of such dissolution; (3)
withdrawal, removal, insolvency, bankruptcy, legal
disability, or dissolution of the General Partners
(unless the Fund is continued as provided in the Amended
and Restated Limited Partnership Agreement); (4) the
insolvency or bankruptcy of the Fund; or (5) any event
which makes unlawful the continued existence of the Fund.
In addition, if the Net Asset Value per Unit decreases
below $125 at the close of business on any trading day
(after adding back any distributions from the Fund to the
Limited Partners), the Fund will close out all open
positions as expeditiously as possible and suspend
trading. No assurance can be given that the Fund will be
able to close out all open positions without incurring
substantial additional losses. Unless the General
Partners then elect to withdraw, a special redemption
date will be declared. Limited Partners who elect to
redeem their Units on such a special redemption date will
receive from the Fund for each Unit redeemed an amount
equal to the Net Asset Value per Unit determined at the
close of business on the special redemption date. If
after a special redemption date the Fund's Net Asset
Value is at least $500,000, the Fund will resume trading
unless the General Partners then elect to withdraw.
Notwithstanding the foregoing, the Fund will terminate if
its Net Asset Value has declined to below $500,000 as of
the close of business on any trading day. See "Amended
and Restated Limited Partnership Agreement."
FINANCIAL Financial Statements with respect to financial
INFORMATION information concerning the Fund and the General Partners
appear at the end of this Prospectus.
REDEMPTION OF UNITS No redemptions are permitted by a subscriber during the
first six months after an investor has been first
admitted to the Fund. Thereafter, subject to certain
conditions, a Limited Partner may require the Fund to
redeem some or all of his or her Units as of the close of
trading on the last trading day of a month upon ten days
written notice to the Fund, with redemption at the Net
Asset Value thereof as of such close of trading. The
right of redemption may be temporarily suspended upon the
occurrence of certain events. Under certain
circumstances, a Limited Partner might be required to
repay to the Fund for a period of three years after
redemption of Units the amount of the redemption if the
Limited Partner knowingly received such distribution in
violation of applicable law. See "Redemptions." In the
event of any suspension, Units will thereafter be
redeemed at the Net Asset Value thereof as of the close
of trading of the trading day on which they are redeemed.
A special redemption date shall be declared by the
General Partners in the event of a decrease in the Net
Asset Value per Unit below $125 (after adding back any
distributions) at the close of business on any trading
day, unless the General Partners elect to withdraw.
DISTRIBUTIONS Distributions of profits, if any, will be made at the
discretion of the General Partners. There is no assurance
that such distributions will be made, and tax liabilities
incurred by a Limited Partner as a result of profitable
trading by the
</TABLE>
15
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Fund may exceed any distributions which he or she
receives from the Fund. The General Partners have not
made any distributions and do not currently intend to
make regular distributions. See "Risk Factors."
TRANSFERS OR The Amended and Restated Limited Partnership Agreement
ASSIGNMENTS OF UNITS provides for the limited transfer or assignment of Units.
No transfer or other assignment of Units may be made
without written notice to the General Partners and no
assignee of a Limited Partner may become a substituted
Limited Partner except with the consent of the General
Partners. A substituted Limited Partner will be subject
to all of the restrictions and liabilities of his or her
predecessor in interest. See "Amended and Restated
Limited Partnership Agreement" and Exhibit A--Amended and
Restated Limited Partnership Agreement.
INCOME TAX ASPECTS A Limited Partner's share of the Fund's income and loss
will be derived primarily from the Fund's trading
activities and interest income. It is expected that a
substantial portion of this income or loss will be
derived from trading "Section 1256 Contracts" (e.g.,
futures contracts traded on a domestic exchange, on a
world exchange or certain foreign currency contracts).
Limited Partners are expected to be allocated a
substantial portion of the Fund's interest income
attributable to Units for federal income tax purposes.
Such interest income will be taxed as ordinary income.
See "Federal Income Tax Considerations."
THE OFFERING
THE OFFERING PERIOD A registration statement and prospectus became effective
on June 26, 1995 for the offer and sale of $50,000,000
worth of Units. This Prospectus updates certain financial
and other information disclosed in the prospectus dated
June 26, 1995 and will be used to continue to solicit
registered Units. The offering period for Units (the
"Offering Period") will extend to June 26, 1997, or such
earlier date when the total amount of Units registered
are sold.
Units are being offered hereby during the Offering Period
through the Selling Agent on a best-efforts basis without
any firm underwriting commitment. Units are offered to
Affiliated Purchasers at a price per Unit equal to the
Net Asset Value per Unit as of the close of business on
the last business day of the month in which the General
Partners accept such subscriptions and admit subscribers
as Limited Partners, plus the amount of the Offering
Expense Charge on a per Unit basis, and to non-Affiliated
Purchasers at a price per Unit equal to the Net Asset
Value per Unit as of the last business day of the month
in which the General Partners accept such subscriptions,
plus the amount of the Sales Charge and the Offering
Expense Charge on a per Unit basis. Limited Partners are
likely to receive fractional Units. Due to a 3-for-1
split in Units that occurred at the close of business on
February 28, 1995, the Net Asset Value per Unit
thereafter was altered to one-third of the Net Asset
Value per Unit prior to that date. Subscriptions for
Units which are received after the tenth calendar day of
a month will be held in the escrow account, due to the
length of time required to process subscriptions, and, if
not rejected, the subscriber will be admitted to the Fund
at the subsequent admission of subscribers to the Fund
after the end of such month. If the subscription is
rejected, in whole or in part for any reason (which is in
the sole discretion of the General Partners), the
subscription funds or the rejected portion thereof will
be promptly returned to the subscriber without interest.
Additional Limited Partners will be admitted to the
</TABLE>
16
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Fund not more frequently than the end of each full
calendar month. Additional Limited Partners will be
admitted to the Fund as of the close of business on the
last business day of each full calendar month, provided
that such proceeds were received by the tenth calendar
day of that month. See "Free Look Alternative."
The minimum subscription (including the minimum
subscription for Individual Retirement Accounts, Keogh
Plans and Employee Benefit Plans) is $1,000; any greater
subscription amount must be in increments of $100. Checks
should be made out to First Bank National Association,
St. Paul, Minnesota as escrow agent for the Fund (the
"Escrow Agent"). All money or other consideration
received or accepted in connection with this offering
will be promptly forwarded through American Express
Financial Advisors Inc. to the Escrow Agent.
Subscriptions for Units received after the tenth calendar
day of a month will be held in the escrow account at the
Escrow Agent, if not rejected, until the subsequent
admission of subscribers to the Fund after the end of
such month, and will earn interest during that time. The
interest earned will be paid to subscribers within 30
days after the date on which they are admitted as Limited
Partners, except that if any subscriber's accrued
interest is less than $10, such interest shall be paid to
the Fund and not to the subscriber. All subscriptions for
Units are irrevocable by subscribers, and subscriptions
may be rejected in the sole discretion of the General
Partners. The Fund shall pay to the Selling Agent from
the proceeds of the offering a selling commission in an
amount equal to the Sales Charge for each Unit sold to an
investor other than an Affiliated Purchaser. In return
for advancing offering expenses (other than selling
commissions) the General Partners will receive the
Offering Expense Charge for each Unit sold to an
investor. See "Plan of Distribution."
FREE LOOK All subscription documents from a potential investor must
ALTERNATIVE be received by the Selling Agent by the tenth calendar
day of the month if they are to be considered for
acceptance by the Fund in that month. The Selling Agent
will promptly send a confirmation of the investment and a
copy of the Fund's most recent monthly account statement
to the potential investor. The investor will then have
sixteen days from the date of the confirmation from the
Selling Agent to determine whether he or she wishes his
or her subscription to be retained by the Fund. The
potential investor must notify the Selling Agent by mail
or telephone (pursuant to instructions in the notice from
the Selling Agent) of his or her decision NOT to invest.
No further action is required in response to the
notification from the Selling Agent if the investor
elects to subscribe. The investor's negative response
must be received by the Selling Agent not later than
sixteen days from the date of the confirmation from the
Selling Agent. Investors electing to withdraw their
subscription pursuant to the above alternative will
promptly receive a return of their subscription funds
from the escrow agent. The investor may withdraw his or
her subscription for any reason during this review
period. All subscriptions are subject to acceptance by
the General Partner. See "Plan of Distribution--Free Look
Alternative."
POTENTIAL ADVANTAGES The Fund, utilizing the combined purchasing power of its
Limited Partners' funds, provides investors with the
opportunity to obtain certain advantages which might
otherwise be unavailable to them if they were to engage
individually in trading commodity interests. Such
potential advantages include diversification, limited
liability, professional trading management,
administrative convenience, interest income and reduction
in brokerage commissions. See "Introductory Statement--
Potential Advantages of the Fund."
</TABLE>
17
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PLAN OF DISTRIBUTION The Units are being offered through the Selling Agent on
a best-efforts basis without any firm underwriting
commitment. All subscriptions received during the
Offering Period will be held in escrow by the Escrow
Agent, if not rejected, until the subsequent admission of
subscribers to the Fund, and will earn interest during
that time. Any subscription may be rejected in whole or
in part by the General Partners in their discretion, but
no subscription may be revoked by the subscriber. Other
than the Units of General Partnership Interest and one
Unit of Limited Partnership Interest purchased by a
principal of IDS Futures to permit organization of the
Fund as a Delaware limited partnership, none of the
General Partners, the Trading Advisors, the Introducing
Broker, the Clearing Broker or their principals have any
beneficial interest in the Fund, although any of such
persons or entities may subscribe for Units for
investment purposes. See "Plan of Distribution" and
"Subscription Procedure."
USE OF PROCEEDS AND The proceeds of the offering will be deposited in the
INTEREST PAYABLE Fund's commodity trading accounts with the Clearing
Broker and will be used to trade speculatively commodity
futures contracts, forward contracts and other commodity
interests (including options thereon), pursuant to the
independent direction of each of the Trading Advisors
with respect to that portion of the Fund's assets
allocated to it. The Fund receives in each month interest
earned on 100% of its average monthly net assets on
deposit at the Clearing Broker at 90% of the average
90-day Treasury bill rate for Treasury bills issued
during that month. Approximately 20% to 60% of the assets
of the Fund have historically been committed as initial
margin or premiums for trading in commodity interests.
The General Partners believe that approximately 20% to
60% of the assets of the Fund will continue to be
committed as initial margin or premiums for trading in
commodity interests, but from time to time the percentage
of assets committed as margin may be more or less than
that historical range. See "Use of Proceeds."
SUITABILITY Each investor must represent in the Subscription
STANDARDS Agreement and Power of Attorney attached hereto as
Exhibit C that he or she is able to assume the risk
inherent in an investment in the Fund and that his or her
net worth or net worth and minimum annual gross income in
combination satisfy certain requirements. See "Investment
Requirements."
</TABLE>
INTRODUCTORY STATEMENT
IDS Managed Futures, L.P. was organized on December 16, 1986, as a limited
partnership under the laws of the State of Delaware and will terminate not later
than December 31, 2006. It is administered by its General Partners, IDS Futures
Corporation ("IDS Futures"), a Minnesota corporation, and CIS Investments, Inc.
("CISI"), a Delaware corporation. The Fund engages in speculative trading of
futures contracts, forward contracts, physical commodities and related options
thereon ("commodity interests"). Its Amended and Restated Limited Partnership
Agreement is appended to this Prospectus as Exhibit A.
The Fund is seeking to sell additional units of limited partnership interest
("Units") because the Fund has been successful in achieving substantial capital
appreciation for its investors and because the General Partners believe that it
is more efficient to reopen this existing Fund than to create a new fund. It is
more efficient to reopen this Fund because the contractual structure of the Fund
has been previously negotiated and established and the Trading Advisors have a
proven track record. The Fund has extended the advisory contract with the two
Trading Advisors and can offer the continuation of their advisory services.
Further, at this time, the General Partners believe that there is a lack of
similar investment products for investors in the market place. Lastly, a larger
fund has benefits to current and prospective investors because it permits
greater diversification of positions, and therefore, potentially less
volatility.
18
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
In 1993, the General Partners chose a 12-month reopening period because they
believed this length of time would be sufficient to allow new investors into the
Fund and for the Selling Agent's representatives to market the Fund. When the
demand for this offering was greater than expected, the General Partners
increased the amount of the offering and extended the offering period in 1994
for another 12-month period. As demand has continued, the General Partners have
increased and extended the offering for another 24 month period. The General
Partners believe that the extended offering period will allow potential and
existing investors to make investments at more than one time.
The General Partners reopened the Fund on March 29, 1993 when a registration
statement filed with the Securities and Exchange Commission (File No. 33-45375)
for the sale of $10,000,000 of Units of Limited Partnership Interest was
declared effective by the SEC. This offering continued until January 31, 1994.
The Fund registered an additional $20,000,000 of Units effective January 31,
1994 (File No. 33-72240). The Fund registered an additional $50,000,000 of Units
effective June 26, 1995 (File No. 33-86894). As of April 30, 1996, the three
offerings have sold $27,602,580 worth of Units, leaving $52,397,420 available
for sale. As of April 30, 1996 the total net capital contributions to the Fund
were $28,559,308. This offering of Limited Partnership Interests shall continue
until June 26, 1997 (or such earlier date when the amount of Units registered
has been sold).
Trades are executed and cleared through Cargill Investor Services, Inc., an
affiliate of CISI, one of the Fund's General Partners. The Fund's introducing
broker is American Express Financial Advisors Inc., an affiliate of IDS Futures,
one of the Fund's General Partners. John W. Henry & Co., Inc. and Sabre Fund
Management Limited are the Fund's Trading Advisors (the "Trading Advisors"). The
Trading Advisors have been acting in such capacity since June 16, 1987 and have
a contract which was amended in March, 1992, and again in April, 1996, and will
continue until December 31, 1996, with an automatic renewal provision for three
additional one-year periods (subject to earlier termination under certain
circumstances). The Fund pays to each Trading Advisor a quarterly incentive fee
based on Trading Profits attributable to trading directed by such Trading
Advisor and a monthly management fee based on that portion of the Fund's Net
Asset Value subject to such Trading Advisor's management at month's end. See
"Charges to the Fund."
WHO SHOULD INVEST
PURCHASE OF THE UNITS OFFERED HEREBY SHOULD BE MADE ONLY BY THOSE PERSONS WHO
CAN AFFORD TO BEAR THE RISK OF A TOTAL LOSS OF THEIR INVESTMENT. THE GENERAL
PARTNERS RESERVE THE RIGHT TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART. THE
FUND WILL INCUR SIGNIFICANT EXPENSES, SUCH AS BROKERAGE COMMISSIONS AND
ADMINISTRATIVE AND MANAGEMENT FEES AND EXPENSES, WHICH MUST BE RECOUPED BEFORE
ANY PROFIT CAN BE GENERATED FOR THE FUND AND ITS LIMITED PARTNERS.
Each subscriber will be required to make certain representations as to his or
her net worth and income. See "Investment Requirements" and the Subscription
Agreement and Power of Attorney attached as Exhibit C. The Units are subject to
restrictive redemption provisions; Units may not be redeemed during the first
six months after purchase by an investor. See "Redemptions." THE GENERAL
PARTNERS BELIEVE THAT PROSPECTIVE INVESTORS SHOULD CONSIDER THE UNITS AS A
LONG-TERM INVESTMENT IN ORDER TO PERMIT THE TRADING TECHNIQUES OF THE TRADING
ADVISORS TO FUNCTION OVER A SIGNIFICANT TIME PERIOD. There is no public market
for these units and none is likely to develop.
Prospective investors should not enter this program with expectations of
sheltering income or receiving cash distributions. See "Risk Factors--Limited
Partners Will Be Taxed On Income and Profits Whether or Not Distributed." If
losses accrue to the Fund, a Limited Partner's distributive share will likely be
treated as a capital loss and may be available for offsetting capital gains from
other sources. However, to the extent the Limited Partner has no net capital
gains from other sources, such loss may be used only to a limited extent, under
current United States tax law, as a deduction from ordinary income. Due to such
limitations, the Fund is not a "tax shelter" in that Fund losses will not
materially reduce a Limited Partner's federal income tax arising from his or her
ordinary income. See "Federal Income Tax Considerations." POTENTIAL INVESTORS
ARE URGED TO CONSULT THEIR PERSONAL TAX ADVISORS ON ALL MATTERS INVOLVING THEIR
PERSONAL INCOME TAX SITUATIONS.
19
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
RISK FACTORS
Prospective investors should carefully read the entire Prospectus (including the
Commodity Futures Trading Commission Risk Disclosure Statement on page 1) and
carefully consider the following risks before subscribing for Units. Since the
commodity markets involve substantial risks, an investment in the Units should
be made only after consulting with independent qualified sources of investment
and tax advice. Among the risks involved are the following:
THE COMMODITY FUTURES MARKETS
(1) COMMODITY INTEREST TRADING IS VOLATILE. A principal risk in commodity
futures trading is the volatility (price fluctuation) in the market prices of
commodities. The prices of commodities fluctuate rapidly and over wide ranges.
The profitability of the Fund will depend on identifying trends in fluctuations
in market prices. Prices of commodity futures contracts are affected by a wide
variety of complex and hard to predict factors, such as supply and demand of a
particular commodity, weather and climate conditions, governmental activities
and regulations, political and economic events and prevailing psychological
characteristics of the marketplace. See "Description of Commodity
Trading--Commodity Prices" and "The Trading Advisors."
(2) COMMODITY FUTURES TRADING IS HIGHLY LEVERAGED. Commodity futures contracts
are traded on margins which typically range from 1% to 20% of the value of the
contract. The average margin is less than 10% of the value of the contract. The
low margin deposits normally required in commodity futures trading permit an
extremely high degree of leverage. A relatively small price movement in a
commodity futures contract may result in immediate and substantial loss to the
investor. Like other leveraged investments, a commodity futures transaction may
result in losses in excess of the amount invested. If the Fund invests a
substantial amount of its assets in a losing commodity futures trade, a
substantial reduction in the value of a Unit would result. Although the Fund may
lose more than its initial margin on a trade, the Fund, and not the Limited
Partners personally, will be subject to margin calls. See "Description of
Commodity Trading--Margins."
(3) COMMODITY FUTURES MARKETS MAY BE ILLIQUID. It is not always possible to
execute a buy or sell order at the desired price, or to close out an open
position, due to market conditions, limits on open positions and/or daily price
fluctuation limits (see "Glossary") imposed by both U.S. and non-U.S. exchanges
and approved by the Commodity Futures Trading Commission ("CFTC"). Daily price
fluctuation limits establish the maximum amount the price of a futures contract
may vary either up or down from the previous day's settlement price at the end
of the trading session. Once the market price of a commodity futures contract
reaches its daily price fluctuation limit, positions in the commodity can be
neither taken nor liquidated unless traders are willing to effect trades at or
within the limit. Because these limits only govern price movements for a
particular trading day, they do not limit losses. In certain commodities, the
daily price fluctuation limits may apply throughout the life of a contract, so
that the holder of a contract who cannot liquidate his or her position by the
end of trading on the last trading day for that contract may be required to make
or take delivery of the commodity.
Another instance of difficult or impossible execution occurs in markets which
lack sufficient trading liquidity. It is also possible for an exchange or the
CFTC to suspend trading in a particular contract, order immediate settlement of
a particular contract, or direct that trading in a particular contract be
conducted for liquidation only. For example, during periods in October 1987
trading in certain stock index futures was too illiquid for markets to function
properly and was at one point suspended. Although the Fund's Trading Advisors
intend to purchase and sell actively traded commodities, no assurance can be
given that such markets will be or remain liquid, or that Fund orders will be
executed at or near the desired prices. See "Trading Policies."
(4) PERIODS OF UNPROFITABLE TRADING. Losses were posted to the Fund in 1994
(-6.93%) and 1992 (-3.47%). Total return for the three calendar years 1993, 1994
and 1995 was 58.84% and total return for the years 1991 through 1995 was 93.07%.
A hypothetical $1,000 Net Asset Value per Unit of the Fund, available at the
beginning of each of those three years would have lost $34.30 in 1992, gained
$383.20 in 1993, lost $69.30 in 1994 and gained $230.30 in 1995.
20
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(5) SPECIFIC RISKS OF TRADING IN OPTIONS ON COMMODITY FUTURES. The Fund engages
in trading options on commodity futures. No specific limitation on the
percentage or amount of such contracts, if any, engaged in by the Fund has been
imposed. The Trading Advisors have significantly less experience in trading
options on futures than they have in trading futures contracts. See "The Trading
Advisors." Although successful trading in options on futures contracts requires
many of the same skills required for successful futures trading, the risks
involved are somewhat different. Options trading may be restricted in the event
that trading in the underlying futures contract becomes restricted, and options
trading may itself be illiquid at times, irrespective of the condition of the
market in the underlying futures contract, making it difficult to offset option
positions. As of the date of this Prospectus trading in foreign options is
subject to approval of foreign options by the CFTC on a case-by-case basis. The
Fund will trade only in options, including foreign options, to purchase or sell
commodity futures contracts or physical commodities, if such options have been
approved for trading on a designated contract market by the CFTC.
(6) FORWARD CONTRACTS ON FOREIGN CURRENCIES ARE NOT TRADED ON EXCHANGES AND LACK
REGULATORY PROTECTIONS OF EXCHANGES. The Fund may engage in the trading of
forward contracts on foreign currencies pursuant to the direction of the Trading
Advisors for customer accounts. No specific limitation on the percentage or
amount of such contracts, if any, engaged in by the Fund has been imposed. See
"Description of Commodity Trading--Commodity Markets." A forward contract is a
contractual obligation to purchase or sell a specified quantity of a commodity
at a specified date in the future at a specified price and, therefore, is
similar to a futures contract. However, forward contracts are not traded on
exchanges and, as a consequence, investors in forward contracts are not afforded
the regulatory protections of such exchanges or the CFTC; rather banks and
dealers act as principals in such markets. Neither the CFTC nor banking
authorities regulate trading in forward contracts on currencies, and foreign
banks may not be regulated by any United States governmental agency. There are
no limitations on daily price moves in forward contracts. In addition,
speculative position limits are not applicable to forward contract trading,
although the principals with which the Fund may deal in the forward markets may
limit the positions available to the Fund as a consequence of credit
considerations. The principals who deal in the forward contract markets are not
required to continue to make markets in the forward contracts they trade. There
have been periods during which certain participants in forward markets have
refused to quote prices for forward contracts or have quoted prices with an
unusually wide spread between the price at which they are prepared to buy and
that at which they are prepared to sell. In addition, the imposition of exchange
and credit controls or the fixing of currency exchange rates by governmental
authorities might limit forward trading to less than that which a Trading
Advisor would otherwise direct for the Fund. Not only are the forward markets
substantially unregulated, but it is also possible that the CFTC or certain
other governmental agencies may in the future attempt to prevent the Fund from
trading in the forward markets.
CIS Financial Services, Inc. ("CISFS"), will act as the forward contract broker
for the Fund and will arrange for the Fund to contract with one or more banks as
a direct counterparty of the Fund in order to make or take future delivery of a
specified lot of a particular currency. CISFS will guarantee the obligations of
the Fund for which it acts as Broker through lines of credit it has established
with the counterparty bank(s). The Fund initially expects to engage in
transactions in foreign exchange contracts with only one bank. However, more
banks may be added as counterparties in the future. Forward contracts will be
transacted only with banks having in excess of $100,000,000 of capitalization.
Since the Fund's inception, the Fund has not yet engaged in trading forward
contracts on foreign currencies. See "Trading Policies," "Risk Factors--Failure
of Brokerage Firms," "Charges to the Fund," and "Brokerage Arrangements."
Because performance of forward contracts on currencies and other commodities are
not guaranteed by any exchange or clearinghouse, the Fund will be subject to the
risk of the inability or refusal on the part of the bank to perform with respect
to such contracts on the part of the principals or agents with or through which
the Fund trades. Any such failure or refusal, whether due to insolvency,
bankruptcy or other causes, could subject the Fund to substantial losses. The
Fund will not be excused from the performance of any forward contracts into
which it has entered due to the default of third parties or CISFS in respect of
other forward trades which in a Trading Advisor's trading strategy were to have
substantially offset such contracts. However, the Fund will only transact
foreign exchange contracts with well-capitalized banks as discussed above.
21
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
It is not possible to predict at this time whether the Fund's activities in the
forward markets may be affected as a result of such actions. See "Trading
Policies." Certain cases may be interpreted to suggest that entities such as the
Fund may not trade in the currency forward markets. Were the Fund to become
unable to trade in the forward markets, the prospect of achieving its investment
objectives would be materially adversely affected.
(7) CONTRACTS OFFERED ON FOREIGN EXCHANGES SUBJECT TO DIFFERENT REGULATIONS AND
TRADING PRACTICES. The Fund engages in the trading of contracts on foreign
exchanges. Futures exchanges are being established in many countries,
particularly throughout Europe and Asia, and trading on those markets
constitutes a steadily increasing share of total worldwide volume in futures
trading. In some cases, the types of contracts traded on these exchanges
resemble those traded on U.S. futures exchanges, but in many other instances
there are no comparable U.S. contracts. Foreign exchanges are not regulated by
the CFTC or any other United States governmental agency. Therefore, options and
futures trading on any such exchange may be subject to more risks than trading
options and futures contracts on exchanges in the United States. For example,
some foreign markets, in contrast to United States exchanges, are "principals'
markets" similar to the forward markets in which performance is the
responsibility only of the individual member with whom the trader has entered
into a contract and not of any exchange or clearing corporation. Due to the
absence of a clearing house system on certain foreign markets, such markets are
significantly more susceptible to disruptions than are United States exchanges.
Moreover, the Fund is subject to whatever regulatory provisions are applicable
to transactions effected outside the United States, whether on foreign exchanges
or otherwise. Trading on foreign exchanges involves the additional risks of
expropriation, burdensome or confiscatory taxation, moratoriums, exchange and
investment controls or political or diplomatic events which might adversely
affect the Fund's trading activities. In trading on these exchanges, the Fund
will also be subject to the risk of changes in the exchange rates between the
U.S. Dollar and the currencies in which foreign contracts are margined and
settled.
Although the CFTC is prohibited by statute from promulgating rules which govern
in any respect any rule, contract term or action of any foreign commodity
exchange, the CFTC has adopted rules to regulate the sale of foreign futures
contracts and foreign options within the United States. These regulations may
restrict the Fund's access to foreign markets by limiting the activities of
certain participants in such markets with whom the Fund could otherwise have
traded. See "CFTC Risk Disclosure Statement."
CHARGES
(8) THE FUND PAYS SUBSTANTIAL FEES, COMMISSIONS AND EXPENSES WHICH COULD DEPLETE
ITS ASSETS. See "Conflicts of Interest--Relationship of the General Partners,
the Introducing Broker, the Clearing Broker, and the Foreign Currency Broker."
MANAGEMENT AND INCENTIVE FEES. John W. Henry & Co., Inc. receives a quarterly
incentive fee of 15% of the Fund's Trading Profits attributable to trading
directed by it. Sabre Fund Management Limited receives a quarterly incentive fee
of 18% of the Fund's Trading Profits attributable to trading directed by it. In
addition, John W. Henry & Co., Inc. receives a monthly management fee of 1/3 of
1% of the Fund's Net Asset Value subject to its management at month's end. Sabre
Fund Management Limited receives a monthly management fee equal to 1/8 of 1% of
the Fund's Net Asset Value subject to its management at month's end. This fee
will be increased to 1/4 of 1% of the Fund's Net Asset Value at such time that
the cumulative trading performance of Sabre reaches a certain level specified by
the General Partners and agreed upon by Sabre.
BROKERAGE FEES. As of September 1, 1995, the Fund pays brokerage commissions of
$35 per round turn trade (plus NFA, exchange and clearing fees to the Clearing
Broker), of which $15 is kept by the Clearing Broker and $20 is paid to the
Fund's Introducing Broker. Prior to that time, the Fund paid commissions of $50
per round turn trade, plus the fees mentioned above. There is no method to
predict accurately the amount of brokerage commissions which the Fund may pay
because those commissions will be entirely dependent on the volume of trading by
the Fund and the commission rates charged to the Fund from time to time. The
Fund has paid brokerage commissions, on an annual basis, of approximately
2.5%-6.2% of the Fund's Net Asset Value. Based on
22
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
currently anticipated commission rates, the General Partners estimate that
brokerage commissions, on an annual basis, will approximate an amount in the
lower end of the historical range. Actual charges may differ substantially from
the historical range and this estimate, and will be determined by trading
opportunities perceived by the Trading Advisors.
ADMINISTRATIVE FEE. Each of the General Partners receives from the Fund an
annual administrative fee based on the Fund's Net Asset Value on the first
business day of each fiscal year of the Fund. The annual administrative fee
payable to IDS Futures is 1.125% of Fund's beginning Net Asset Value for each
fiscal year, and the annual administrative fee payable to CISI is 0.25% of the
Fund's beginning Net Asset Value for each fiscal year.
BREAKEVEN POINT. THE FUND IS OBLIGATED TO PAY BROKERAGE COMMISSIONS AND CERTAIN
CHARGES INCIDENTAL TO TRADING, AS WELL AS THE GENERAL PARTNERS' ADMINISTRATIVE
FEES, THE TRADING ADVISORS' MANAGEMENT FEES, AND LEGAL, ACCOUNTING, AUDITING,
PRINTING, RECORDING AND FILING FEES, POSTAGE CHARGES, AND ANY EXTRAORDINARY
EXPENSES REGARDLESS OF WHETHER THE FUND REALIZES PROFITS. THESE PAYMENTS MAY
CAUSE THE FUND TO TERMINATE. THE FUND WILL BE REQUIRED TO MAKE TRADING PROFITS
OF A VERY SUBSTANTIAL MAGNITUDE TO AVOID DEPLETION OR EXHAUSTION OF ITS ASSETS
FROM THE AGGREGATE OF THESE CHARGES. SEE "SUMMARY OF THE PROSPECTUS--ESTIMATE OF
THE FUND'S BREAKEVEN POINT ON PAGE 9." For example, if the Fund's Net Asset
Value (as defined under "Charges to the Fund--Certain Definitions") declines to
less than $500,000 as of the close of business on any trading day, the Fund will
terminate. See "Amended and Restated Limited Partnership Agreement--Termination
of Fund" and Exhibit A attached hereto. Quarterly incentive fees payable to the
Trading Advisors are based upon, among other things, unrealized appreciation on
open commodity positions, and any such fees paid to the Trading Advisors will be
retained by them even if the Fund subsequently experiences losses. Such
appreciation may never be realized by the Fund. In addition, because the
incentive fee is determined on a quarterly rather than an annual basis, the Fund
may pay substantial incentive fees to the Trading Advisors during portions of
the Fund's fiscal year even though subsequent losses result in a yearly net loss
for the Fund. Moreover, because incentive fees payable to each Trading Advisor
are calculated separately, it is possible that one Trading Advisor may receive
incentive fees in respect of Trading Profits achieved on the assets managed by
it during a quarter in which the other Trading Advisor experiences losses on the
assets that it manages which are greater than the profits earned by the funds
under management by the Trading Advisor receiving fees. Thus, it is possible
that incentive fees could be payable during a quarter in which the Net Asset
Value per Unit actually has declined. The Clearing Broker receives a significant
benefit from a portion of the interest generated by the Fund's assets. See "Use
of Proceeds."
(9) INCENTIVE FEE PAYMENTS PER UNIT WILL NOT MATCH PERFORMANCE PER UNIT EXACTLY.
The incentive fees payable to the Trading Advisors accrue monthly and are
payable quarterly, based on the increase in Net Asset Value of the funds under
management of each Trading Advisor, subject to certain adjustments related to
interest realized on those funds, distributions or redemptions, and allocations
or reallocations. See "Charges to the Fund--Description of Charges to the Fund"
and "Charges to the Fund--Certain Definitions." Whenever an incentive fee is
payable to one or more of the Trading Advisors, each outstanding Unit owned by a
Limited Partner will pay a proportionate amount of such incentive fee. This
method of calculating and paying incentive fees, while requiring each
outstanding Unit to contribute equally to payment of such fees, nonetheless
creates a distortion in that not every outstanding Unit is likely to have
participated equally in the gains which give rise to an incentive fee payment to
a Trading Advisor. This is because Units will be sold to Limited Partners at
prices per Unit which are likely to vary depending upon the time when particular
Limited Partners purchase their Units and are admitted to the Fund and the
trading experience of the Fund. See the Notes to the cover page of this
Prospectus. The Fund as a whole may be required to pay incentive fees to one or
more Trading Advisors even though the value of particular Units has remained the
same or even declined since they were purchased. On the other hand, a Limited
Partner could purchase Units which experience an increase in value although the
Fund as a whole has not experienced any Trading Profits during that period of
time and consequently pays no incentive fee. The extent of such distortions will
depend on a variety of factors including, but not limited to, the time at which
particular Limited Partners are admitted to the Fund, the prices at which Units
are sold at such times, the timing of the Fund's trading profits and losses, and
the magnitude of such admissions, profits and losses and the profitability of
trading directed by each
23
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Trading Advisor. Therefore, the amounts paid in incentive fees attributable to
certain Units may, from time to time, vary from the specific trading performance
(participation in profit or loss) experienced by those Units. If an alternative
method of calculating incentive fees were to be employed by the Fund that
matched the trading experience of Units to the incentive fee contribution of
Units, the amounts payable by Limited Partners in incentive fees with respect to
their Units would vary from those payable under the method that the Fund will
employ. In addition, if Units are purchased at a Net Asset Value per Unit which
reflects an accrued but unpaid incentive fee on unrealized Trading Profits
recognized as of such date, and such accrual is subsequently reversed in whole
or in part due to trading losses by the end of the current calendar quarter, the
reversal of the accrued incentive fee will be credited to all Units equally,
including the Units purchased at a Net Asset Value per Unit which already fully
reflected such accrual. This will result in the Net Asset Value per Unit of
previously outstanding Units being lower than it would have been had no new
Units been purchased at a price reflecting an accrued incentive fee, because the
"unaccrual" of the incentive fee resulting from the losses subsequent to the
date of such purchase would otherwise have accrued to the exclusive benefit of
the previously outstanding Units, not such Units plus the Units more recently
purchased.
TRADING ADVISORS
(10) RELIANCE ON TRADING ADVISORS FOR PROFITABLE PERFORMANCE.
TRADING METHODS. The Fund has an advisory contract ("Advisory Contract") with
the Trading Advisors which will continue until December 31, 1996 and is subject
to extension by the Fund for three additional one-year terms. Each Trading
Advisor will direct trading for the Fund completely independently of the other
Trading Advisor, and will have no knowledge of trading decisions being made by
the other Trading Advisor. No assurance can be given that the trading techniques
and strategies of either Trading Advisor will be profitable in the future, or
that the services of any Trading Advisor will continue to be available to the
Fund. The specific details of the Trading Advisors' respective trading methods
are proprietary; consequently, the Limited Partners will not be able to
determine the full details of those methods or whether those methods as
described herein (see "The Trading Advisors"). Subject to the Fund's trading
policies, each Trading Advisor may alter its trading methods if it determines
that such a change is in the best interest of the Fund. Each Trading Advisor has
agreed to notify the General Partners of any such changes which it considers to
be material. See "The Trading Advisors." If the General Partners are so notified
of a material change in an advisor's trading methods, they will so notify the
Limited Partners in the monthly report to the Limited Partners.
CONFLICTS OF INTEREST. From time to time, the Trading Advisors (or their
affiliates) will manage additional accounts, and these accounts (see "Conflicts
of Interest--Other Commodity Pools and Accounts"), together with that of the
Fund, will increase the level of competition for the same trades desired by the
Fund, including the priorities of order entry. There is no specific limit
imposed by the Advisory Contract between the Fund and the Trading Advisors as to
the number of accounts they (or their affiliates) may manage. In addition, the
positions of all of the accounts owned or controlled by each of the Trading
Advisors or their affiliates are aggregated for the purposes of applying
speculative position limits (see "Glossary" and "Risk Factors--Effects of
Speculative Position Limits"), and such aggregation might limit the number of
contracts which can be traded or held by the Fund pursuant to the direction of a
Trading Advisor whose trading approaches such limits. In fulfilling their
responsibilities to the Fund, the General Partners have required that the
Advisory Contract provide for notice to the General Partners by a Trading
Advisor when the Fund's positions are first included in an aggregate amount
which equals ninety percent (90%) of the applicable speculative limit and will
promptly respond thereafter to requests from the General Partners with respect
to the percentage of the applicable speculative limit reflected by the aggregate
positions owned or controlled by any Trading Advisor or any of its principals,
employees or agents. The Advisory Contract also provides for the right of the
General Partners to inspect each of the Trading Advisor's trading records for
the purpose of confirming that the Fund is being treated equitably by that
Trading Advisor with respect to modifications of trading strategy resulting from
such limits, as well as with respect to the assignment of priorities of order
entry to that Trading Advisor's accounts. Each Trading Advisor may, in directing
trading for
24
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
other accounts, employ trading programs different from those employed in
connection with the Fund's trading. The performance of such other trading
programs may be more successful than the performance of programs employed in
connection with the Fund's trading. See also "Risk Factors--Multiple Trading
Advisors."
LIMITATION OF LIABILITY AND INDEMNIFICATION FOR TRADING ADVISORS. The Trading
Advisors, their principals and employees will not be liable to the Fund, the
Limited Partners, any of their successors or assigns or the General Partners
except by reason of acts or omissions in contravention of the express terms of
the Advisory Contract or due to misconduct or negligence or for not having acted
in good faith in the reasonable belief that its actions were taken in, or not
opposed to, the best interests of the Fund.
The Fund will indemnify each Trading Advisor, its principals and employees to
the full extent permitted by law for any liability incurred in connection with
any acts or omissions related to the Trading Advisor's management of Fund
assets, provided that there has been no judicial determination that such
liability was the result of negligence, misconduct or breach of the Advisory
Contract nor any judicial determination that the conduct which was the basis for
such liability was not done in a good faith belief that it was in, or not
opposed to, the best interests of the Fund. Any such indemnification involving a
material amount, unless ordered or expressly permitted by a court, will be made
by the Fund only upon the opinion of mutually acceptable independent legal
counsel that the Trading Advisor has met the applicable standard of conduct
described above.
CHANGE IN PRINCIPALS AND ADVISORS. Each Trading Advisor is dependent on the
services of its respective principals. If the services of such principals were
not available to a Trading Advisor, or were interrupted, the continued ability
of that Trading Advisor to render services to clients would be subject to
substantial uncertainty, and such services of the Trading Advisor could be
terminated completely.
If the Advisory Contract is terminated with respect to one or more Trading
Advisors, the General Partner would be required to make other arrangements for
providing advisory services if the Fund intends to continue trading. No
assurance can be given that the Trading Advisors' services will be available to
the Fund following the expiration of the current Advisory Contract or that the
Trading Advisors' services may not be earlier terminated. See "The Trading
Advisors--The Advisory Contract." Upon termination of a Trading Advisor, the
General Partners may direct liquidation of all positions established by the
terminated Trading Advisor prior to commencement of trading directed by another
trading advisor with respect to those assets. If any new trading advisors were
to be retained by the Fund, fee arrangements which differ substantially from
those established with the Trading Advisors may be implemented.
(11) TRADING DECISIONS BASED ON TECHNICAL ANALYSIS DO NOT CONSIDER FUNDAMENTAL
TYPES OF DATA AND REQUIRE PRICE TRENDS TO BE PROFITABLE. In general, the Trading
Advisors use, and any additional advisors which the Fund may select in the
future may use, trend-following systems based on mathematical analysis of
certain technical data regarding past market performance. See "The Trading
Advisors." These trend-following systems do not generally take into account
fundamental external factors, except insofar as such factors may influence the
technical data constituting input information for the trading system.
Fundamental factors include, among others, factors that affect the supply and
demand of the underlying commodity, interest rates, government intervention,
exchange controls and political stability. Technical systems may be unable to
respond to fundamental causative events until after their impact has ceased to
influence the market. Causative factors include, among others, the daily, weekly
and monthly price fluctuations, volume variations and changes in open interest.
The profitability of any diversified technical trading system depends upon major
price moves or trends in some commodities which can be interpreted by the system
as price trends sufficient to dictate an entry or exit decision. In the past
there have been periods when no commodity has experienced any major price
movements or when price movements have been erratic or ill-defined, and such
periods are likely to recur in the future. The best technical trading system
will not be profitable if there are no trends of the kind it seeks to follow.
Any factor which would make it more difficult to execute trades at a system's
signal prices, such as a significant lessening of liquidity in a particular
market, would also be detrimental to profitability. Trend-following technical
systems may produce profitable results for a period of time, after which further
application of such systems to the technical input data
25
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
fails to detect correctly any future price movements. For this reason, commodity
trading advisors utilizing such systems may modify and alter their systems on a
periodic basis. Such systems (including the Trading Advisors') may also be
modified and altered for application to accounts of different sizes.
Furthermore, government control of or intervention in the markets traded may
lessen the prospect of sustained price moves. A number of markets traded by the
Fund may be targets for governmental intervention.
The use of technical trading systems by professional advisors has been
increasing as a proportion of overall volume of the markets as a whole, and for
certain commodities in particular. This could result in several advisors
attempting simultaneously (because of the availability of the same current
market information) to initiate or liquidate substantial positions in any market
at or about the same time as either or both of the Trading Advisors, or
otherwise cause an alteration of historical trading patterns or affect the
execution of trades to the significant detriment of the Fund.
(12) LEVERAGE ADJUSTMENTS TO SABRE FUND MANAGEMENT LIMITED'S TRADING METHODS
AFFECTS PERFORMANCE VOLATILITY. In September 1992, in an effort to increase the
rates of return historically achieved by Sabre Fund Management Limited
("Sabre"), the General Partners agreed with the recommendation of Sabre that it
increase the leverage used in its trading by 50%. By increasing the leverage at
which Sabre trades for the Fund, the General Partner intended to provide Sabre
the potential to achieve rates of return more comparable to those ordinarily
expected from a speculative trading approach, although there can be, of course,
no assurance that increasing the leverage at which Sabre trades will have such a
result. Increasing the leverage at which Sabre will trade can, however, be
expected to increase volatility of the performance of Sabre by increasing both
trading profits and losses. There can be no assurance as to the effect which
such leverage adjustments may have on the performance of Sabre or of the Fund.
This leverage increase is still in effect as of the date of this Prospectus.
(13) PERIODS WITHOUT DISCERNIBLE PRICE TRENDS MAKE PROFITABLE TRADING DIFFICULT.
There can be no assurance that any trading strategies will produce profitable
results. The past performance of an advisor's trading strategies is not
necessarily indicative of future profitability, and the best trading strategies,
whether based on technical or fundamental analysis, will not be profitable if
there are no trends of the kind they seek to follow. The profitability of any
technical or fundamental trading strategy depends upon significant price moves
or trends in at least some commodities. In the past there have been periods
without discernible trends and presumably similar periods will occur in the
future. Any factor which reduces the occurrence of major trends may reduce the
prospect that any trading strategy will be profitable. For this reason,
commodity trading advisors may modify or alter their trading methods on a
periodic basis. Subject to the trading limitations described under "Trading
Policies," a Trading Advisor may alter its trading methods, upon written notice
to the General Partners of any material change in such trading methods, if a
Trading Advisor determines that such change is in the best interests of the
Fund. Changes in commodity interests traded shall not be deemed material changes
in trading methods. The trading methods to be utilized by the Trading Advisors
are generally proprietary and confidential, and Limited Partners will not be
notified of changes in commodity interests traded or modifications, additions or
deletions to the Trading Advisors' trading methods. See "The Trading Advisors."
(14) OTHER CLIENTS OF THE TRADING ADVISORS MAY COMPETE FOR SAME TRADES AND
POSITIONS. Each Trading Advisor may manage other accounts, including other
publicly offered pools and accounts in which the Trading Advisor or its
principals may have an interest, which could increase the level of competition
for the same trades the Fund might otherwise make, including order execution and
availability of speculative position limits. Each Trading Advisor has
represented that it will not knowingly or deliberately employ a trading strategy
on behalf of the Fund which is inferior to any strategy which it employs for
other accounts, or otherwise favor on an overall basis any other account managed
by them over the Fund. Each Trading Advisor and its principals, however, may
employ trading methods, policies and strategies which differ from those employed
on behalf of the Fund in circumstances which differ from those under which the
Fund operates. Further, each Trading Advisor may be restricted in the positions
it can take on behalf of the Fund due to positions taken for such Trading
Advisor's own account or its customer. Therefore, the results of the Fund's
trading may differ from those of the other accounts concurrently managed by the
Trading Advisors. See "The Trading Advisors."
26
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(15) MULTIPLE TRADING ADVISORS MAY NOT INCREASE PROTECTION AGAINST LOSSES OR
PRODUCE MORE PROFITABLE TRADING. The Fund has retained two independent Trading
Advisors to attempt to achieve substantial protection against major losses
without sacrificing the ability to capitalize on profitable trends through
diversification. In addition, the Fund may in the future retain the services of
one or more additional Trading Advisors. In fact, the diversification of trading
approaches among the Trading Advisors may have the opposite result. There is no
assurance that the use of multiple trading approaches will not effectively
result in losses by one Trading Advisor which offset or exceed any profits
achieved by the other Trading Advisor. Accordingly, there is no assurance that
the use of two Trading Advisors will be any more successful than the retention
of one Trading Advisor. Because the Trading Advisors will trade independently of
each other, the Fund could hold opposite positions pursuant to the directions of
each Trading Advisor, and could simultaneously buy and sell the same futures
contract, thereby incurring commission and transaction fee costs with no net
change in its holdings. Conversely, the Trading Advisors may at times enter
identical orders and therefore compete for the same positions. This competition
could prevent the orders from being executed at the desired price or prevent
execution altogether. The past performance of the Trading Advisors does not
reflect the impact these factors may have on the Fund's overall performance. In
addition, although margin requirements applicable to trading directed by each
Trading Advisor will ordinarily be met from the Fund assets allocated to it, a
Trading Advisor could incur losses that would make it unable to meet margin
calls from those assets. In this event, the General Partners may require
contributions and liquidations from the assets allocated to the other Trading
Advisor. This could adversely affect the trading strategy of that other Trading
Advisor.
Moreover, because incentive fees payable to each Trading Advisor are calculated
separately, it is possible that one Trading Advisor may receive incentive fees
in respect of Trading Profits achieved on the assets managed by it during a
quarter in which the other Trading Advisor experiences losses on the assets that
it manages which are greater than the profits earned by the funds under
management by the Trading Advisor receiving fees. Thus, it is possible that
incentive fees could be payable during a quarter in which the Net Asset Value
per Unit actually has declined. The effect might be to deplete the Fund assets
by the amount of incentive fees paid during periods when the loss incurred by
one Trading Advisor outweighs the profits recognized by the other Trading
Advisor.
(16) SPECULATIVE POSITION LIMITS MAY LIMIT POSITIONS TAKEN BY FUND. The CFTC and
domestic exchanges have established speculative position limits ("position
limits") on the maximum net long or short futures position which any person, or
group of persons acting in concert, may hold or control in particular futures
contracts or options on futures traded on U.S. commodity exchanges. The CFTC has
adopted a rule which requires commodity exchanges to impose speculative position
limits on all commodities traded on the exchange (with the exception of certain
commodities subject to speculative position limits established by the CFTC). All
commodity accounts owned or controlled by each Trading Advisor and its
affiliates are combined for position limit purposes. With respect to futures
trading in commodities subject to such limits, a Trading Advisor may thus be
required to reduce the size of the futures positions which would otherwise be
taken for the Fund in such commodities and not trade futures in certain of such
commodities in order to avoid exceeding such limits. Such modification of trades
of the Fund, if required, could adversely affect the operations and
profitability of the Fund. See "Description of Commodity Trading--Regulation."
If such limits are exceeded, a Trading Advisor will be compelled to liquidate
positions in each of its clients' trading accounts, including the Fund's, on a
pro rata basis in accordance with the amount of equity in each such account.
While each Trading Advisor believes that the speculative position limits will
not adversely affect the trading directed by it, it is possible that from time
to time the trading approach or instructions of an advisor may have to be
modified and that positions held by the Fund may have to be liquidated to avoid
exceeding such limits. Such modification or liquidation, if required, could
adversely affect the operations and profitability of the Fund. In addition, the
speculative position limits will apply on an aggregate basis to all positions
held by the Fund.
(17) NEW ADVISORS MAY BE RETAINED WITHOUT NOTICE TO, OR APPROVAL BY, LIMITED
PARTNERS. Upon termination of a Trading Advisor, the General Partners may direct
liquidation of all positions established by such Trading Advisor prior to
commencement of trading directed by another trading advisor with respect to
those assets. Any additional and replacement trading advisors would be selected
by the General Partners without prior notice to, or approval
27
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
from, Limited Partners who would not have the opportunity to review their
performance records and the terms of their agreements with the Fund prior to
their selection. Pursuant to the Amended and Restated Limited Partnership
Agreement, the General Partners are authorized to enter into advisory contracts
with new advisors on terms and conditions as they, in their sole discretion,
deem to be in the best interests of the Fund. If an advisor were to be
designated following a decline in the Fund's assets, that advisor might
(depending upon the compensation arrangements negotiated with the General
Partners) receive an incentive fee based on any subsequent trading profits
despite the fact that those trading profits do not exceed trading losses
incurred by previous or existing advisors or by the Fund as a whole.
(18) EXCHANGE FOR PHYSICALS MAY NOT ALWAYS BE PERMITTED. The Trading Advisors
may engage in exchange for physicals for the Fund's accounts. See "Glossary." If
the Trading Advisors were to be prevented from making use of this trading
technique for the Fund, due to changes in applicable regulations, the trading
performance of the Fund could be adversely affected.
(19) INCREASING THE ASSETS TRADED BY THE TRADING ADVISORS MAY HAVE POSSIBLE
ADVERSE EFFECTS. Commodity trading advisors are limited in the amount of assets
that they can successfully manage, both by the difficulty of executing
substantially larger trades made necessary by the larger amount of equity under
management and by the restrictive effect of speculative position limits.
Increased equity generally results in a larger demand for the same commodity
interest contract positions among the accounts managed by a commodity trading
advisor. Furthermore, a number of analysts believe that a trading advisor's rate
of return tends to decrease as the amount of equity under management increases.
The Trading Advisors have not agreed to limit the amount of additional equity
that they may manage, and the assets under management of certain Trading
Advisors have increased substantially since the beginning of the Fund's trading
and may increase further. There can be no assurance that the Trading Advisors'
respective trading systems will not be adversely affected by additional equity,
including any additional assets of the Fund.
LIMITED PARTNERS AND THE FUND
(20) FUND OPERATING HISTORY NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.
The Fund began trading on June 16, 1987. The Fund's initial capitalization was
$7,372,260. The Net Asset Value per Unit at the commencement of trading on June
16, 1987 was $225.43 and the Net Asset Value per Unit as of April 30, 1996 was
$279.82 (which would have been equivalent to $839.46 before the February 28,
1995 3-for-1 split). The average annual rate of return from an investment in the
Fund through April 30, 1996 is 14.8%, based on the initial Net Asset Value. Due
to the uncertainty of the commodity markets, the past performance of the Fund
specifically cannot be regarded as an indicator of the Fund's future
performance. See "Past Performance of the Fund."
(21) GENERAL PARTNERS LIMITED EXPERIENCE AS POOL OPERATORS. CISI and IDS Futures
have limited prior experience in operating commodity pools. In addition to
operating the Fund since June 16, 1987, CISI currently operates another public
commodity pool jointly with IDS Futures. See "Past Performance of the Fund" and
"The General Partners."
(22) AUTOMATIC TERMINATION FEATURES COULD TERMINATE FUND. The Units are designed
for investors who desire longer term investments. The Fund will terminate on
December 31, 2006, and will terminate automatically if the Fund's Net Asset
Value decreases below $500,000 at the close of business on any trading day. In
addition, the Fund will suspend trading and may terminate if the Net Asset Value
per Unit (after adding back any previous distributions from the Fund to the
Limited Partners) decreases below $125, after the 3-for-1 split. See "Trading
Policies" and "Amended and Restated Limited Partnership Agreement--Termination
of Fund" and "Amended and Restated Limited Partnership Agreement--Redemption."
However, no assurance can be given that the investor will receive $125 per Unit,
or any other specified amount since the impossibility of executing trades under
certain conditions, together with the expenses of liquidation, may deplete the
Fund's assets below this amount. See "Commodity Futures Markets May Be Illiquid"
above.
28
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(23) INVESTORS HAVE LIMITED MANAGEMENT RIGHTS. Purchasers of the Units will
become Limited Partners in the Fund and, as such, they will be unable to
exercise any management functions with respect to its operations. The rights and
obligations of the Limited Partners are governed by the provisions of the
Delaware Revised Uniform Limited Partnership Act and by the Amended and Restated
Limited Partnership Agreement, which provides, in part, that amendments thereto
may be proposed by the General Partners or by Limited Partners owning at least
10% of the outstanding Units and will be adopted if approved by the holders of a
majority of such Units (not including any Units held by the General Partners or
their corporate affiliates, but including any Units held by representatives and
employees of the Selling Agent and of its corporate affiliates). See "Amended
and Restated Limited Partnership Agreement--Management of the Fund" and the
Amended and Restated Limited Partnership Agreement attached as Exhibit A.
(24) RISK OF SUBSTANTIAL LOSSES AFTER ADMISSION OF NEW LIMITED PARTNERS. The
Fund could incur substantial losses shortly after the admission of new Limited
Partners. The General Partners could subsequently decide to deleverage trading,
alter allocations of assets among the Trading Advisors, or terminate a Trading
Advisor, any of which may impair the potential for profit for those Limited
Partners. The fixed rate charges to the Fund, paid irrespective of the Fund's
profitability, could further exacerbate such losses.
(25) LIMITED ABILITY TO LIQUIDATE INVESTMENT IN UNITS. Although a Limited
Partner may transfer his or her Units, no market exists for the Units and none
is likely to develop. In addition, a transferee of a Unit can only become a
substituted Limited Partner with the General Partners' consent. See "Amended and
Restated Limited Partnership Agreement--Transfers of Units." Restrictive
redemption privileges are provided in the Amended and Restated Limited
Partnership Agreement. See "Redemptions." No redemptions are permitted by a
subscriber during the first six months after he or she has been first admitted
to the Fund. Thereafter, under certain conditions, a Limited Partner may require
the Fund to redeem any or all of his or her Units (with the redemption amount
designated either in terms of Units or dollars) based on the Net Asset Value per
Unit as of the last day of any month on ten (10) days' written notice to the
General Partners. Accordingly, the Net Asset Value per Unit on the date such
notice is given may vary considerably from that on the redemption date. The
minimum redemption amount, whether requested in terms of dollars or Units, is
the lesser of $500 or the Net Asset Value of two Units, unless the Limited
Partner is redeeming his or her entire interest in the Fund. The Units are
generally noncallable by the General Partners, but the General Partners have
authority under the Fund's Amended and Restated Limited Partnership Agreement to
require Limited Partners that are employee benefit plans to withdraw from the
Fund under certain conditions. See "Purchases by Employee Benefit Plans--ERISA
Considerations."
(26) SUBSTANTIAL REDEMPTIONS COULD AFFECT FUND'S TRADING. Substantial
redemptions of Units by the Limited Partners within a limited period of time
could require the Fund to liquidate positions more rapidly than would otherwise
be desirable, which could adversely affect the value of both the Units being
redeemed and the outstanding Units. In addition, regardless of the period of
time in which redemptions occur, the resulting reduction in the Fund's Net Asset
Value could make it more difficult for the Fund to generate Trading Profits or
recoup losses due to a reduced equity base.
(27) CLAIMS AGAINST LIMITED PARTNERS COULD BE MADE BY FUND. Under certain
circumstances, (see "Amended and Restated Limited Partnership Agreement--Nature
of The Partnership" and Exhibit A--Amended and Restated Limited Partnership
Agreement), a Limited Partner might be required to repay to the Fund a
distribution for a period of three years after the distribution was received
with the knowledge that the distribution violated Delaware partnership law.
(28) EXPIRATION OF THE FUND'S CONTRACTS WITH THE CLEARING BROKER AND TRADING
ADVISORS COULD LEAD TO CHANGES IN FUND'S OPERATIONS. The Advisory Contract, as
amended, between the Fund and the Trading Advisors will continue until December
31, 1996, and is subject to extension by the Fund for three additional one-year
terms. Furthermore, the Advisory Contract is terminable by the Fund or such
Trading Advisors upon the occurrence of certain other events. Upon termination
of the contract with the Trading Advisors, the General Partners will be required
to re-negotiate such contracts or make other arrangements for providing such
services if the Fund intends to continue trading. No assurance can be given that
upon expiration of the Advisory Contract the General Partners will be
29
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
able to retain the existing trading advisors or new trading advisors on the same
terms or fee structure as the current Advisory Contract. In addition, no
assurance can be given that the services of the Introducing Broker and Clearing
Broker will be available after the expiration or termination of the Clearing
Brokerage Agreement. If the Fund were to employ new brokers, the brokerage
commissions charged might be higher or lower than those currently paid by the
Fund. See "The Trading Advisors--The Advisory Contract" and "Brokerage
Arrangements."
(29) LIMITED NET WORTH OF GENERAL PARTNERS. The General Partners will maintain a
minimum net worth as described under the caption "The General Partners--Minimum
Investment and Net Worth" and Exhibit A--Amended and Restated Limited
Partnership Agreement for as long as they continue as general partners of the
Fund. However, investors should recognize that affiliates of the General
Partners, including Cargill Investor Services, Inc. and American Express
Financial Advisors Inc., have no similar obligations to maintain a minimum net
worth in connection with the Fund's operation and that the assets of such
affiliates will not be available to discharge obligations of the Fund.
(30) POTENTIAL INDEMNIFICATION OBLIGATIONS OF FUND COULD REDUCE ITS NET ASSET
VALUE. Under certain circumstances, the Fund might be subject to indemnification
obligations with respect to the General Partners, the Trading Advisors, the
Clearing Broker, the Selling Agent, the Escrow Agent and related parties. The
Fund will not carry any insurance to cover any obligations and none of the
foregoing parties will be insured for losses for which the Fund has agreed to
indemnify them. Any indemnification paid by the Fund would reduce the Fund's Net
Asset Value.
(31) MONTHLY ACCOUNT STATEMENT PROVIDED AFTER SUBSCRIPTION. CFTC Regulation
4.26(b) requires that a copy of the Fund's latest monthly account statement be
attached to this disclosure document when used to solicit prospective investors.
However, due to the unnecessary administrative burden that exact compliance with
Regulation 4.26(b) would create, the Fund has proposed, and the CFTC has
accepted, an alternative solution. Prospective investors will be furnished the
Fund's latest monthly account statement immediately following receipt of their
subscriptions by the Selling Agent. In addition to receiving the latest monthly
account statement, each prospective investor will be provided with an address
and phone number to contact within 16 days from the date of the mailing of the
account statement and confirmation by the Selling Agent if the investor wishes
to rescind his/her subscription.
CONFLICTS
(32) CONFLICTS OF INTEREST EXIST FROM RELATIONSHIPS AMONG FUND'S SERVICE
PROVIDERS. There exist inherent and potential conflicts of interest in the
operation of the Fund's business. See "Conflicts of Interest." These include (i)
the conflict between the duty of the General Partners to monitor the Trading
Advisors' trading volume and the financial advantage to the Introducing Broker,
an affiliate of IDS Futures, and to the Clearing Broker, an affiliate of CISI,
in the event of substantial trading by the Trading Advisors and (ii) the
competition with the Fund by affiliates of the General Partners and the Fund's
Introducing Broker and Clearing Broker, by the Trading Advisors, and by
customers (including other commodity pools) of the foregoing entities in
connection with the execution of similar commodity transactions.
(33) LACK OF INDEPENDENT INVESTIGATION OF FUND'S STRUCTURE BY SELLING AGENT.
American Express Financial Advisors Inc., the Selling Agent for the Fund, is an
affiliate of IDS Futures, one of the Fund's General Partners. Accordingly, no
independent investigation of the Fund's structure and operations has been
undertaken by the Selling Agent. In addition, the Fund, the Selling Agent, the
General Partners, and one of the Fund's Trading Advisors are represented by the
same counsel.
TAXATION
(34) TAX LAWS SUBJECT TO CHANGE. It is possible that the current federal income
tax treatment accorded an investment in the Fund will be modified by
legislative, administrative or judicial action in the future. The nature of
future changes in federal income tax law, if any, cannot be determined prior to
enactment of any new tax legislation. However, such legislation could
significantly alter the tax consequences and decrease the after-tax rate
30
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
of return of an investment in the Fund. In addition, regulations are expected to
be promulgated which will implement or clarify provisions of recent tax law
changes. Any such change may or may not be retroactive. Potential limited
partners should seek, and must rely on, the advice of their own tax advisors
with respect to the possible impact on their investments of federal and state
tax law and any future proposed tax legislation or administrative or judicial
action. See "Federal Income Tax Considerations."
(35) DEDUCTIBILITY OF PARTNERSHIP EXPENSES MAY BE LIMITED. The Tax Reform Act of
1986 imposes limitations on the deductibility of certain miscellaneous itemized
deductions. Such deductions, including, for example, investment advisory fees,
are only deductible to the extent they exceed two (2) percent of the taxpayer's
adjusted gross income. This limitation would not apply to the Fund or to a
partner's share of Fund expenses if the Fund were determined to be engaged in
the trade or business of trading commodities and its expenses were directly
related to its trade or business activities. If, however, the Fund is not
engaged in the trade or business of trading commodities or its expenses are not
related to its trade or business activities, then such expenses would instead
"flow through" to Fund partners and each partner would only be able to deduct
his or her share of these expenses to the extent they, together with other
miscellaneous itemized deductions of the partner, exceed the two (2) percent
floor. See "Federal Income Tax Considerations."
(36) POSSIBILITY OF TAXATION AS A CORPORATION WOULD PREVENT PASS-THROUGH OF
PROFIT OR LOSS TO INVESTORS. The General Partners have been advised by their
counsel, Chapman and Cutler, that, in its opinion, under current federal income
tax law and regulations, the Fund will be classified as a partnership and not as
an association taxable as a corporation. This status has not been confirmed by a
ruling from, and such opinion is not binding upon, the Internal Revenue Service
(the "Service"). No such ruling has been or will be requested. The facts and
authorities relied upon by counsel in its opinion may change in the future. If
the Fund should be taxed as a corporation for federal income tax purposes in any
taxable year, income or loss of the Fund would not be passed through to the
partners, and the Fund would be subject to tax on its income at the tax rate
applicable to corporations. In addition, all or a portion of distributions made
to partners could be taxable to the partners as dividend income, and the amount
of such distributions would not be deductible by the Fund in computing its
taxable income. See "Federal Income Tax Considerations--Partnership Taxation."
(37) LIMITED PARTNERS WILL BE TAXED ON INCOME AND PROFITS WHETHER OR NOT
DISTRIBUTED. If the Fund has taxable income for a fiscal year, such income will
be taxable to the Limited Partners in accordance with their distributive shares
of the Fund's income, whether or not such income is distributed to the limited
partners. The Amended and Restated Limited Partnership Agreement provides that
the General Partners will determine whether and in what amount the Fund will
distribute its profits or capital. It is possible that no distributions will be
made in some years in which profits are achieved. Accordingly, if there are
profits (including unrealized profits), the limited partners will incur tax
liabilities, but the limited partners may not receive distributions of cash
adequate to pay taxes with respect to such profits. Prospective investors should
note further that the Fund might sustain losses after the end of the fiscal year
offsetting such realized or unrealized profits, so a limited partner might never
receive the profits on which he or she is taxed. However, Limited Partners may,
subject to the conditions described under "Redemptions," redeem Units to provide
funds for the payment of taxes.
(38) BROKERAGE COMMISSIONS TO AMERICAN EXPRESS FINANCIAL ADVISORS INC. MIGHT BE
CHARACTERIZED AS NON-DEDUCTIBLE EXPENSE. A portion of the commodity brokerage
commissions payable by the Fund to American Express Financial Advisors Inc. as
Introducing Broker might be characterized by the Internal Revenue Service as a
syndication expense. If so the Fund (and indirectly the Limited Partners) would
be required to treat that portion of the commodity brokerage commissions as a
non-deductible syndication expense. Over a period of years this amount could be
substantial.
(39) TAX CONSEQUENCES OF COMMODITY FUTURES AND OPTIONS TRADING DIFFER FROM THOSE
FOR OTHER INVESTMENTS. The federal income tax treatment of trading in commodity
interests varies significantly from the federal income tax treatment accorded
other types of investments. Additionally, the tax consequences of certain
transactions that the
31
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Fund may enter into are not addressed in the Code or regulations and are
uncertain at this time. There is no assurance that the Service will agree with
the Fund's tax treatment of such transactions. See "Federal Income Tax
Considerations."
(40) PARTNERSHIP ALLOCATIONS COULD BE CHALLENGED BY IRS. There can be no
assurance that the partnership allocations contained in the Amended and Restated
Limited Partnership Agreement will not be challenged by the Service. While it is
intended that such allocation provisions comply with applicable U.S. Treasury
regulations, the liability of the limited partners could be substantially
increased if the allocations were successfully challenged. See "Federal Income
Tax Considerations--Allocations of Fund Profits and Losses."
REGULATION
(41) ABSENCE OF REGULATION APPLICABLE TO SECURITIES MUTUAL FUNDS AND THEIR
ADVISORS. The Fund has not registered as a securities investment company, or
"Mutual Fund," subject to the extensive regulation by the Securities and
Exchange Commission (the "SEC") imposed upon such entities under the Investment
Company Act of 1940. In addition, the Trading Advisors are not registered under
the Investment Advisers Act of 1940 (or any similar state law). Investors are,
therefore, not afforded the protections provided by those Acts. However, under
the Commodity Exchange Act, as amended, the Trading Advisors are each registered
as a commodity trading advisor, the General Partners are each registered as a
commodity pool operator, the Clearing Broker is registered as a futures
commission merchant, the Introducing Broker is registered as an introducing
broker, and the Fund is subject to regulation by the CFTC and the NFA. See
"Description of Commodity Trading--Regulation."
(42) FUTURE REGULATORY CHANGES COULD OCCUR. The futures market, particularly the
stock index futures and options markets, could be subject to significant
additional regulations as a result of regulatory and Congressional responses to
market turbulence in recent years. It is unknown to what extent statutory
modifications and/or administrative regulations will be promulgated. In
addition, the various exchanges and regulatory bodies are also considering
implementing changes in self-imposed regulations.
The regulation of commodities and securities transactions in the United States
is a rapidly changing area of law and the various regulatory procedures
described herein are subject to modification by government action. The effect of
any future regulatory change on the Fund is impossible to predict, but could be
substantial and adverse. See "Description of Commodity Trading--Regulation."
Considerable regulatory attention has recently been focused on publicly
distributed partnerships, and, in particular, "commodity pools" such as the
Fund. For example, proposals have been made to consider and evaluate the
disruptive effects of pools of speculative capital trading in the currency
markets on central banks' attempts to influence exchange rates, and perhaps to
restrict such trading as a result of such evaluation. In the current
environment, perhaps more than in prior periods, prospective investors must
recognize the possibility of future regulatory change altering, perhaps to a
material extent, the nature of an investment in the Fund.
CREDIT RISKS
(43) FAILURE OF BROKERAGE FIRMS MIGHT JEOPARDIZE FUND'S ASSETS. The Commodity
Exchange Act requires a clearing broker to segregate all funds received from
such broker's customers in respect of regulated futures (but not forward)
transactions from such broker's proprietary funds. If the Clearing Broker were
not to do so to the full extent required by law, the assets of the Fund might
not be fully protected in the event of the bankruptcy of the Clearing Broker.
Furthermore, in the event of the Clearing Broker's bankruptcy, the Fund would be
limited to recovering only a pro rata share of all available funds segregated on
behalf of the Clearing Broker's combined customer accounts, even though certain
property specifically traceable to the Fund was held by the Clearing Broker.
Commodity brokers other than the Clearing Broker, including commodity brokers
located outside the U.S., may hold assets of the Fund. There may be less
protection to the Fund's assets if such a foreign broker were to become
insolvent. The bankruptcy or inability to perform of the parties with which the
Fund trades in the forward markets
32
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
could also result in substantial losses both due to defaulted contracts (which
on United States exchanges would effectively be guaranteed by the clearing house
system) and to such parties generally not being obligated to segregate customer
funds as are CFTC regulated futures commission merchants.
CISFS is not subjected to regulation under any U.S. regulatory framework or to
supervision by any regulatory agency. Further, there are no minimum capital
requirements that apply to its operations, and, unlike the Clearing Broker,
CISFS is not required to segregate customer funds held by it. While CISFS does
not trade directly for its own account, it does enter into forward contract
transactions as a counterparty on behalf of its customers with other
participants in the interbank market. Since the interbank market does not
operate through a clearing house, CISFS (like the Fund, as described above) is
directly exposed to the risk of insolvency on the part of one of its
counterparties. In the event of CISFS's insolvency or termination of the lines
of credit made available to the Fund through CISFS, the Fund might be unable to
consummate its forward contract transactions with its counterparties, and
therefore incur substantial losses. Since the Fund may enter forward contract
transactions directly with counterparty banks, the insolvency of CISFS will not
excuse it from performing any of those contracts.
THE FOREGOING LIST OF RISK FACTORS DOES NOT PURPORT TO BE A COMPLETE EXPLANATION
OF RISKS INVOLVED IN THIS OFFERING. POTENTIAL INVESTORS SHOULD READ THE ENTIRE
PROSPECTUS BEFORE DECIDING TO INVEST IN THE FUND.
POTENTIAL ADVANTAGES OF THE FUND
Investment in the Units is speculative and involves a high degree of risk. See
"Risk Factors." However, an investment in the Fund offers the following
potential advantages which might otherwise be unavailable to a Limited Partner
if he or she were to engage individually in commodity futures transactions:
INVESTMENT DIVERSIFICATION. An investor who is not prepared to spend substantial
time trading commodity interests may nevertheless participate in these markets
through the Fund, thereby obtaining diversification from other investments such
as stocks, bonds and real estate. The General Partners believe that the
profitability of trading in commodity interests, and, therefore, the profit
potential of the Fund, does not depend upon favorable general economic
conditions and that it may be as profitable during periods of declining stock,
bond and real estate markets as at any other time. Conversely, the Fund may be
unprofitable (as well as profitable) during periods of generally favorable
economic conditions.
The possibility of significant fluctuations in the value of the U.S. Dollar and
the cost of energy, of wide swings in domestic and foreign stock markets and
interest rates, and of fragility in world banking and credit mechanisms (among
other factors) may make a diversification into an investment vehicle such as the
Fund particularly timely. The Fund's flexibility to take either long or short
positions--whereas traditional portfolios are typically heavily weighted towards
the former--can be an important advantage in times of economic uncertainty.
COMMODITY DIVERSIFICATION. The Trading Advisors may trade over 50 commodity
interests, but the actual number of commodity interests traded will vary from
time to time. Positions in all of the commodities that the Trading Advisors
trade probably would not be held by the Fund at any given time. In order to
limit the risk involved in adverse market activity in any one commodity, the
trading policies of the Fund restrict the amount of Fund assets which may be
invested in any one commodity. The Fund will not allow any commodity trading
advisor to acquire, on behalf of the Fund, additional positions in a commodity
if such additional positions, when added to the existing open positions
initiated by the commodity trading advisor, would result in a net long or short
position for any commodity requiring as margin or premiums more than 15% of the
Fund's Net Asset Value allocated to that commodity trading advisor's management
at the time. See "Trading Policies." Each Limited Partner will thus obtain
greater diversification in commodities traded than would be possible trading
individually unless substantially more than the $1,000 minimum investment in the
Fund were committed to the commodity markets.
LIMITED LIABILITY. Unlike an individual who trades directly in commodity futures
contracts, an investor in the Fund cannot be individually subjected to margin
calls and cannot lose more than the amount of his or her original
33
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
investment and any profits earned thereon (including distributions, payments
upon redemption of Units and interest thereon). See "Description of Commodity
Trading--Margins" and "Amended and Restated Limited Partnership
Agreement--Nature of the Partnership."
PROFESSIONAL TRADING MANAGEMENT. Subject to certain extension and termination
rights, all commodity transaction decisions until December 31, 1999, will be
made by the Trading Advisors, whose advisory and management services are not
generally available to small investors.
ADMINISTRATIVE CONVENIENCE. The Fund provides the Limited Partners with many
services designed to reduce the administrative details involved in engaging in
commodity transactions. The General Partners, the Trading Advisors and the
Fund's commodity brokers perform services for the Fund, including entering
orders for commodity transactions, segregating the Fund's assets in a separate
account or accounts, keeping books and records, distributing monthly account
statements to the Limited Partners, and responding to inquiries from Limited
Partners.
INTEREST INCOME. The Fund receives monthly interest income on 100% of the Fund's
average monthly net assets on deposit at the Clearing Broker at a rate equal to
90% of the average yield on the 90-day U.S. Treasury bills issued during that
month. An individual trader often would not receive any interest on the funds in
his or her commodity account unless he or she committed substantially more than
the amount of the minimum investment in the Fund.
REDUCTION IN BROKERAGE COMMISSIONS. The Fund pays brokerage commissions at rates
equal to $35 per round turn trade, plus NFA, exchange and clearing fees. The
brokerage commission rate payable by the Fund was reduced from $50 to $35 per
round turn trade effective September 1, 1995. Thus, the proceeds from all
investments made pursuant to this offering will benefit from the lower rate from
the date such proceeds are committed to trading. The Clearing Broker and the
Introducing Broker will not receive any amounts in excess of $15 and $20,
respectively, for each round turn trade. The Fund may be required to pay a
brokerage commission in excess of $35 for each round turn trade on certain
non-U.S. exchanges. Any such excess amounts paid by the Fund will be direct
costs associated with the execution of trades on such exchanges. See "Charges to
the Fund." To the extent an investor would be charged higher commissions were he
or she to trade directly, he or she will be benefited by such lower rates.
Reference is made to "Charges to the Fund," "Conflicts of Interest," and
"Brokerage Arrangements" concerning the nature and amount of brokerage
commissions and for a discussion of the fact that the Fund is not charged the
lowest available brokerage rates.
CAPITAL RESERVE. Because it is unlikely that all of the Fund's trading capital
will be committed to trading at any given time, the Fund expects to maintain a
reserve that may provide greater ability to continue trading operations in
adverse markets than that available to traders who trade with the equivalent of
the minimum investment in the Fund.
CONFLICTS OF INTEREST
The following inherent or potential conflicts of interest should be considered
by prospective investors before subscribing for Units:
1. RELATIONSHIP OF THE GENERAL PARTNERS, THE INTRODUCING BROKER, THE CLEARING
BROKER, AND THE FOREIGN CURRENCY BROKER. CISI, one of the General Partners, is
an affiliate of Cargill Investor Services, Inc., the Clearing Broker. IDS
Futures, the Fund's other General Partner, is an affiliate of American Express
Financial Advisors Inc., the Introducing Broker. The responsibilities of the
General Partners include selecting brokers to act on behalf of the Fund,
obtaining appropriate commission rates for the Fund, and ensuring that the
Trading Advisors do not engage in excessive trading. Cargill Investor Services,
Inc. is currently acting as the clearing broker for the Fund and American
Express Financial Advisors Inc. is currently acting as the introducing broker
for the Fund. In such capacities, they receive brokerage commissions for
commodity transactions effected by the Fund. Although the Fund will trade only
at the direction of independent commodity trading advisors, CISI and IDS Futures
have a conflict of interest between their duty to the Limited Partners to limit
or reduce the cost of brokerage commissions and their interest in the generation
of brokerage commissions which would benefit Cargill Investor Services, Inc.,
34
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
an affiliate of CISI, and American Express Financial Advisors Inc., an affiliate
of IDS Futures. The General Partners do not intend to negotiate with any other
brokerage firms for brokerage services for the Fund so long as the brokerage
agreements with Cargill Investor Services, Inc. and American Express Financial
Advisors Inc. are in effect.
Because decisions determining the volume and frequency of trading by the Fund
will be made by independent commodity trading advisors, the General Partners
believe that the effects of this conflict of interest will be mitigated. The
General Partners do not have authority to influence the trading decisions of the
Trading Advisors regarding the volume or frequency of trades, except that the
General Partners are required to monitor compliance with the Fund's trading
policies, and may from time to time direct the Trading Advisors to liquidate
positions held by the Fund in order to meet redemption requests. The Clearing
Broker and Introducing Broker may charge other customers, including other
commodity pool accounts, brokerage commissions at rates which are higher or
lower than those to be paid by the Fund. Taking into consideration the services
to be provided to the Fund by the Clearing Broker and Introducing Broker, and
the reduction of the brokerage commission rate from $50 to $35 per round turn
rate, the General Partners believe that the brokerage commission arrangements
are fair to the Fund. Accordingly, the General Partners do not intend to seek
lower commission rates for the Fund. The General Partners will seek to assure
that brokerage charges for the Fund are within the range of those generally
charged to public commodity funds of comparable size and structure in view of
the nature and quality of the brokerage services to be rendered.
The General Partners each receive an annual administrative fee based on the
Fund's Net Asset Value on the first business day of each fiscal year of the
Fund. The annual administrative fee payable to IDS Futures is 1.125% of the
Fund's beginning Net Asset Value for each fiscal year, and the annual
administrative fee payable to CISI is 0.25% of the Fund's beginning Net Asset
Value for each fiscal year. The amounts of these fees were determined by the
General Partners without any negotiation between them and the Fund.
The Clearing Broker and the Introducing Broker may receive more brokerage
commission revenue from the Fund's trading if no distributions are made to the
Limited Partners. The General Partners' annual administrative fees will also be
larger if no distributions are made to Limited Partners, since those fees are
based on the Fund's Net Asset Value. All decisions as to distributions will be
made by the General Partners; the General Partners have not made and have no
current intentions to declare distributions to Limited Partners. The General
Partners may therefore have a conflict of interest between their interest in
making decisions about distributions in the best interests of the Fund and its
Limited Partners and their interest in maximizing the assets of the Fund which
are available for trading and for the generation of brokerage commissions, and
as the basis for the annual administrative fees payable to them.
The Fund receives interest on 100% of its average monthly net assets on deposit
at the Clearing Broker at a rate of interest equal to 90% of the average 90-day
Treasury bill rate for Treasury bills issued during that month. The Clearing
Broker receives and retains any increments of interest earned on the assets of
the Fund in excess of the interest paid to the Fund. Since the Clearing Broker
is affiliated with CISI, CISI's conflict of interest (described immediately
above) between making decisions related to distributions in the best interests
of the Fund and its Limited Partners, while also having an interest of its own
in maximizing the assets of the Fund, extends to its interest in maintaining the
Fund's assets at higher levels and minimizing the amounts of distributions in
order also to maximize the amount of interest income generated by assets of the
Fund and payable to the Clearing Broker.
Effective September 1, 1995, the Fund pays brokerage commissions of $35 per
round turn trade to the Clearing Broker, plus NFA, exchange and clearing fees,
of which $15 per round turn trade is retained by the Clearing Broker. The
remaining $20 per round turn trade is paid to the Introducing Broker.
CISI is also affiliated with CIS Financial Services, Inc. ("CISFS"). CISFS acts
as the agent for the Fund with respect to forward contract transactions in
foreign currencies and contracts on behalf of the Fund with large banks
(capitalization in excess of $100,000,000) in order to make or take future
delivery of specified lots of foreign currencies for the Fund. In such capacity,
CISFS will receive brokerage commissions for the foreign currency
35
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
forward contracts it effects for the Fund's account. Although the Fund will
trade only at the discretion of independent commodity trading advisors, CISI has
a conflict of interest between its duty to the Limited Partners to limit or
reduce the cost of brokerage commissions and its interest in the generation of
such commissions for CISFS. The General Partners do not intend to negotiate with
any other firms to provide forward contract brokerage services as long as the
agreement with CISFS is in effect. The General Partners believe that the
consequences of this conflict of interest will be mitigated by the fact that all
trading decisions will be made by independent commodity trading advisors. The
brokerage commissions payable to CISFS of $15 per transaction are comparable, on
a comparable currency unit basis, to those charged to the Fund by the Clearing
Broker. The conflicts of interest described above related to distributions to
the Limited Partners and the generation of brokerage commissions, and a conflict
of interest related to the inclination of CISI to favor the retention of CISFS
as the Fund's forward contract broker even when circumstances may indicate the
desirability of replacing CISFS in that capacity, also apply to the selection of
CISFS as the Fund's forward contract broker.
2. OTHER COMMODITY POOLS AND ACCOUNTS. The Clearing Broker currently acts as
commodity broker for commodity pools other than the Fund, including one other
public commodity pool of which the General Partners are CISI and IDS Futures,
and may act as commodity broker for other commodity pools of which CISI or IDS
Futures will be the general partner. The General Partners may in the future
establish and operate additional commodity pools, which may vary in structure
and in compensation arrangements from the Fund. The parent of the Introducing
Broker/ Selling Agent is registered as a commodity trading advisor and in that
capacity renders hedging advice to mutual funds advised by it as an investment
adviser. The Clearing Broker offers to its customers a Managed Account Program
("MAP") through which customers may select an independent commodity trading
advisor to direct trading for their individual accounts. The Clearing Broker,
the Introducing Broker, and the General Partners will not knowingly or
deliberately favor any such commodity pool or account over the Fund with respect
to the execution of commodity trades. In addition, the Trading Advisors or their
affiliates operate commodity pools and will manage accounts other than the
Fund's, including commodity pools and proprietary accounts. The Trading Advisors
have represented to the Fund that they will treat the Fund equitably and will
not deliberately favor on an overall basis any other client over the Fund with
respect to advice relating to commodity interest transactions.
3. COMMODITY TRANSACTIONS OF AFFILIATES AND CUSTOMERS OF THE CLEARING BROKER AND
THE INTRODUCING BROKER. Corporate affiliates of the Clearing Broker and the
Introducing Broker, including Cargill, Inc., the parent company of the Clearing
Broker, and their affiliates, trade in commodity interests from time to time for
their own accounts. In addition, the Clearing Broker is a substantial futures
commission merchant handling transactions in commodities and commodity futures
contracts for a large number of customers, including commodity pools, other than
the Fund. The Clearing Broker may effect transactions for the accounts of the
Fund in which other parties to the transaction may be affiliates of or other
commodity pools operated by affiliates of the Clearing Broker or Introducing
Broker. In addition, it is likely that the volume of trading by such other
parties will result in the Fund competing with such other parties from time to
time in bidding on similar purchases or sales of commodities and commodity
futures contracts. Transactions for such other parties might be effected when
similar trades for the Fund are not executed or are executed at less favorable
prices. The operating policies of the Clearing Broker require that orders be
transmitted to the trading floors of the commodity exchanges in the sequence
received, regardless of customer size or identity. Limited Partners will not be
permitted to inspect the trading records of the Clearing Broker or Introducing
Broker in light of the proprietary and confidential nature of such trading
records.
4. OTHER ACTIVITIES OF THE CLEARING BROKER, INTRODUCING BROKER, GENERAL PARTNERS
AND TRADING ADVISORS, AND THEIR OFFICERS AND EMPLOYEES. As part of their
commodity brokerage services, certain account executives of the Clearing Broker
offer and service discretionary and non-discretionary commodity account programs
for customers meeting certain investment requirements. The selection of
commodity trades for such accounts is made by the particular account executive
handling the accounts or by a commodity trading advisor engaged for such
purpose. In addition, the Clearing Broker provides, on a daily basis, both
fundamental and technical information available to its account executives and
certain customers. It should be noted, however, that the Clearing Broker, its
employees and its affiliates will perform no advisory services for the Fund.
Since the Fund will be advised by the Trading Advisors which are not affiliated
with the Clearing Broker, the Fund may take positions similar to or opposite to
those taken
36
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
by managed account programs offered by the Clearing Broker's account executives
or by the commodity research of the Clearing Broker. Certain of the officers and
employees of the Clearing Broker may be members of various exchanges and may
from time to time serve on the governing bodies and standing committees of such
exchanges and their clearing houses. In addition, certain of the officers and
employees of the Trading Advisors, the Clearing Broker, the Introducing Broker
and the General Partners may also be members of committees of the NFA. In such
capacities these individuals have a fiduciary duty to the exchanges or
organizations on which they serve and they are required to act in the best
interests of such exchanges or organizations, even if such actions were to be
adverse to the interest of the Fund. In addition, principals of such firms may
devote portions of their time to other business activities unrelated to the
business of those firms.
5. COMPENSATION TO THE GENERAL PARTNERS, THE CLEARING BROKER AND THE INTRODUCING
BROKER. Receipt by the General Partners, the Clearing Broker, and the
Introducing Broker of compensation on an ongoing basis in the form of
administrative fees and brokerage commissions paid by the Fund creates a
conflict of interest between their duty to perform certain services for the
Limited Partners in the Fund in the best interests of such Limited Partners and
their interest in continuing to receive ongoing compensation related to
administrative fees and brokerage commissions paid by the Fund, which is
dependent on continued participation by such Limited Partners in the Fund. See
"The General Partners" and "Brokerage Arrangements."
PURCHASES BY EMPLOYEE BENEFIT PLANS--ERISA CONSIDERATIONS
Subject to the following discussion, the purchase of the Units might be a
suitable investment for an employee benefit plan. The term "employee benefit
plans" refers to plans and accounts of various types (including their related
trusts) which provide for the accumulation of a portion of an individual's
earnings or compensation, as well as investment income earned thereon, free from
federal income tax until such time as funds are distributed from the plan. Such
plans include corporate pension and profit-sharing plans, "simplified employee
pension plans," so-called "Keogh" plans for self-employed individuals, including
partners, and Individual Retirement Accounts for persons (including employees
and self-employed persons) who receive compensation income. Before proceeding
with such a purchase, the person with investment discretion on behalf of an
employee benefit plan must determine whether the purchase of Units is (a)
permitted under the governing instruments of the employee benefit plan, and (b)
appropriate for that particular plan in view of its overall investment policy
and the composition and diversification of its portfolio. AMONG OTHER FACTORS,
SUCH A DETERMINATION IS LIKELY TO REQUIRE CONSIDERATION OF (I) WHETHER THE
INVESTMENT IS PRUDENT, CONSIDERING THE NATURE OF THE FUND, (II) WHETHER THE
INVESTMENT SATISFIES THE DIVERSIFICATION REQUIREMENTS OF SECTION 404 OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 ("ERISA"), (III) THE DEFINITION
OF "PLAN ASSETS" UNDER ERISA AND REGULATIONS ISSUED BY THE DEPARTMENT OF LABOR
REGARDING THE DEFINITION OF PLAN ASSETS, (IV) WHETHER SUCH INVESTMENT MAY RESULT
IN THE CREATION OF UNRELATED BUSINESS TAXABLE INCOME, WHICH IS NOT EXEMPT FROM
TAXATION UNDER THE INTERNAL REVENUE CODE, AND (V) THAT, ALTHOUGH UNITS WILL BE
PERIODICALLY REDEEMED BY THE FUND, THERE MAY BE NO MARKET IN WHICH SUCH
FIDUCIARY CAN SELL OR OTHERWISE DISPOSE OF THE UNITS. WITH RESPECT TO
SELF-DIRECTED IRAS, THE INDIVIDUAL ESTABLISHING SUCH ACCOUNT SHOULD CONSIDER,
AMONG OTHER THINGS, (IV) AND (V) ABOVE.
A minimum purchase requirement of $1,000 has been set for Individual Retirement
Accounts, Keogh Plans and Employee Benefit Plans. See "Investment Requirements."
Greater minimum purchases may be mandated by the securities laws and regulations
of certain states, and each investor should consult the Subscription
Requirements (Exhibit B) to determine the applicable investment requirements.
The form of Subscription Agreement and Power of Attorney (Exhibit C) for
individuals and joint owners, corporations, partnerships, and trusts may be used
in conjunction with the purchase of Units on behalf of Employee Benefit Plans.
Those considering the purchase of Units on behalf of Individual Retirement
Accounts or employee benefit plans should be aware that, if the assets of an
investing plan were to be treated for purposes of the Employee Retirement Income
Security Act of 1974 ("ERISA") and the Internal Revenue Code of 1986, (the
"Code"), as including the underlying assets of the Fund, such treatment would
make the units an inappropriate investment for individual
37
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
retirement accounts or employee benefit plans. If Fund assets were deemed to be
plan assets, the fiduciary standards of Title I of ERISA, which generally apply
to trustees and other fiduciaries of employee benefit plans, would also extend
to the General Partners and the Trading Advisors, and such standards could limit
the transactions the Fund could enter. In addition, treatment of Fund assets as
plan assets might give rise to "prohibited" transactions under ERISA and the
Code.
PLAN ASSETS. On November 13, 1986, the Department of Labor issued a final
regulation Section2510.3-101 (the "Regulation") under ERISA, effective March 13,
1987, which provides certain conditions under which the assets of a limited
partnership will not be "plan assets" of an employee benefit plan which
purchases an equity security of such entity. One way for the assets of a limited
partnership to not be deemed "plan assets" is if less than twenty-five (25)
percent (by value) of the interests in the partnership are "benefit plan
investors." For this purpose, the term "benefit plan investors" includes both
plans covered by ERISA and other investors with similar investment objectives,
such as governmental pension plans, individual retirement accounts and welfare
benefit plans. No assurance can be offered by the General Partners as to the
value of the participation in the Fund which may be held by benefit plan
investors.
Another way for the assets of a limited partnership to not be deemed "plan
assets" is if Units are "publicly offered securities" as defined in the
Regulation. For purposes of the Regulation, a publicly offered security is a
security that is "freely transferable," part of a class of securities that is
"widely held" and which is either (a) part of a class of securities that is
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
or (b) sold to the plan investor as part of an offering pursuant to an effective
registration statement under the Securities Act of 1933, if the class of such
securities is registered under the Securities Exchange Act of 1934 within 120
days after the end of the issuer's fiscal year during which the offering of the
securities occurred. The Regulation provides that a class of securities is
"widely held" if owned by 100 or more persons who are independent of the issuer
and of each other. The determination of whether a security is "freely
transferable" depends on the facts and circumstances of the particular case. It
is expected that the Units in the Fund will continue to meet the criteria of the
publicly offered securities test contained in the Regulation.
ERISA AND IRS RULES. The fiduciary who makes the investment decision for a plan
should carefully consider the restrictions on plan investments imposed by
Section 404 and Section 406 of ERISA, and by Internal Revenue Code Section 4975.
In general, Section 404 of ERISA imposes a duty on trustees or other fiduciaries
responsible for plan investments to exercise prudence in the selection of
investments, and to diversify such investments to minimize the risk of losses to
the plan. An investment in the Fund constitutes a highly speculative and
relatively illiquid investment and, although ERISA does not prohibit plans from
engaging in such investments per se, each plan fiduciary must carefully consider
whether, in light of the plan's overall investment portfolio, the risks inherent
in an investment in the Fund are consistent with the standards of Section 404 of
ERISA. THE FUND HAS NO RESPONSIBILITY FOR DETERMINING WHETHER A PURCHASE OF
UNITS IS A PRUDENT INVESTMENT FOR ANY PLAN. EACH PLAN FIDUCIARY CONSIDERING
ACQUIRING UNITS MUST CONSULT WITH ITS OWN LEGAL AND TAX ADVISERS BEFORE DOING
SO.
The General Partners expect that the Fund will not acquire or possess stock in
trade or other property of a kind which would properly be included in inventory
if on hand at the close of the taxable year, or property held primarily for sale
to customers in the ordinary course of a trade or business. On this basis and
assuming (i) the Fund will only engage in the activities described herein and
(ii) no money has been borrowed to invest in the Fund, income of the Fund should
not be "unrelated trade or business income" under Section 512 of the Code to any
employee benefit plan or individual retirement account. Although the General
Partners do not expect that the Fund will borrow money, if it were to do so (see
"Trading Policies") a portion of the tax exempt partner's share of Fund income
may be UBTI. The person with investment discretion on behalf of an employee
benefit plan should consult his or her attorney or other tax adviser with regard
to whether the purchase of Units might give rise to UBTI. If a tax-exempt
investor's share of Fund income is UBTI, the tax-exempt investor will generally
be subject to the same provisions as taxable investors, such as the requirements
to file tax returns to report the income and to pay tax
38
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(including estimated tax) on the income. Each tax-exempt investor is entitled to
a $1,000 exemption to offset UBTI, but if the tax-exempt investor has UBTI from
other sources, only a portion of the exemption would be available to offset UBTI
of the Fund, if any.
Units may not be purchased with the assets of an employee benefit plan if a
General Partner, the Selling Agent, a Trading Advisor or any of their affiliates
either: (a) has investment discretion with respect to the investment of such
plan assets; or (b) has authority or responsibility to regularly give investment
advice with respect to such plan, for a fee, and pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such plan assets and that such advice will be based on
the particular investment needs of the plan; (c) has discretionary authority or
discretionary responsibility for administration of a plan; or (d) are employers
maintaining or contributing to such plan. Each fiduciary who authorizes a
purchase of Units by a plan must determine for himself whether such purchase
would constitute a prohibited transaction and should consult with his or her or
its advisor on tax and ERISA issues concerning these matters.
Subscribing for Units in the Fund does not create an IRA or other employee
benefit plan. Those considering the purchase of Units on behalf of an IRA or
other Employee Benefit Plan must first assure themselves that the plan has been
properly established and funded. Then after the considerations discussed above
have been taken into account, the trustee or custodian of a Plan who decides or
who is instructed to do so may subscribe for Units in the Fund, subject to the
applicable minimum subscription.
THE FUND'S AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT PROVIDES THAT IF
AT ANY TIME THE GENERAL PARTNERS, IN THEIR SOLE DISCRETION, DETERMINE THAT THE
CONTINUED PARTICIPATION BY AN EMPLOYEE BENEFIT PLAN IN THE FUND WOULD CAUSE ANY
TRANSACTION BY THE FUND TO BE A VIOLATION OF ANY OF THE PROVISIONS OF SECTION
406 OF ERISA OR SECTION 4975 OF THE CODE, THE GENERAL PARTNERS MAY REQUIRE SUCH
A PLAN TO WITHDRAW IN WHOLE OR PART FROM THE FUND TO SATISFY CODE REQUIREMENTS.
ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF IRAS OR OTHER EMPLOYEE BENEFIT PLANS IS
IN NO RESPECT A REPRESENTATION BY THE GENERAL PARTNERS OR THE INTRODUCING BROKER
THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO
INVESTMENTS BY ANY PARTICULAR PLAN. THE GENERAL PARTNERS RESERVE THE RIGHT TO
REJECT THE SUBSCRIPTIONS OF ANY EMPLOYEE BENEFIT PLAN, IN THEIR DISCRETION, IF
THEY BELIEVE THAT THE ACCEPTANCE OF ADDITIONAL EMPLOYEE BENEFIT PLAN
SUBSCRIPTIONS MAY JEOPARDIZE THE STANDING OF THE FUND UNDER APPLICABLE LAW AS A
PERMISSIBLE INVESTMENT BY EMPLOYEE BENEFIT PLANS. THE PERSON WITH INVESTMENT
DISCRETION SHOULD CONSULT WITH HIS ATTORNEY AND FINANCIAL ADVISERS AS TO THE
PROPRIETY OF AN INVESTMENT IN THE PARTNERSHIP IN LIGHT OF THE CIRCUMSTANCES OF
THE PARTICULAR PLAN AND CURRENT TAX LAW.
The fiduciary provisions of ERISA are highly complex, and the foregoing is
merely a brief summary of some of its provisions. Each employee benefit plan
should consult with its own counsel as to the applicability of ERISA prior to
investing in the Fund.
USE OF PROCEEDS
The net proceeds to the Fund of this offering will be credited to the Fund's
commodity accounts with the Clearing Broker. Such proceeds will be used by the
Fund to engage in speculative trading in commodity futures contracts and options
on futures contracts and other futures related interests and in the cash foreign
exchange market, pursuant to the Trading Advisors' instructions as described
under "The Trading Advisors." In the past, approximately 20% to 60% of the
Fund's assets have been committed as initial margin for commodity futures
contracts. The General Partners believe that approximately 20% to 60% of the
Fund's assets will continue to normally be committed as initial margin for
commodity futures contracts, but from time to time the percentage of assets
committed as margin may be more or less than such historical range. Currently,
and since the inception of trading, the Fund has not engaged in trading of
forward contracts on foreign currencies, and therefore has not
39
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
committed assets as margin or otherwise with CISFS, its foreign currency broker.
At such time as the General Partners deem it is appropriate for the Fund to
engage in trading forward contracts, the requisite assets will be transferred
from the Fund's commodity accounts with the Clearing Broker to CISFS. Such
assets will earn the same interest as if deposited with the Clearing Broker. See
"Risk Factors--Forward Contracts on Foreign Currencies are Not Traded on
Exchanges and Lack Regulatory Protections of Exchanges." The Clearing Broker may
increase margins applicable to the Fund at any time. See "Description of
Commodity Trading--Margins." The Fund will not acquire additional positions in
commodity interests, including commodity futures contracts, options on commodity
interests, and forward contracts, if such additional positions would result in
aggregate net long or net short positions for all commodities requiring as
margin or premium more than two-thirds of the Fund's assets. The balance of the
Fund's assets will be retained to apply, if needed, as additional margin. See
"Trading Policies."
Pursuant to current regulations promulgated under the Commodity Exchange Act, as
amended, the Fund's accounts will be classified as customer accounts of the
Clearing Broker so long as the Clearing Broker, CISI, and certain related
persons of the foregoing own less than a 10% interest in the Fund. Interest
earned on the Fund's assets held by the Clearing Broker will be generated and
applied as described in the following paragraphs. Margin applicable to the
Fund's trading will be met from Fund assets held by the Clearing Broker.
The General Partners will be reimbursed by the Fund for organization and
offering expenses of the Fund initially paid by them. The General Partners have
agreed to pay all expenses of the offering regardless of total cost. The
Offering Expense Charge will be 3% of the gross per Unit price, and is intended
to reimburse the General Partners for offering costs. However, the General
Partners bear the risk that the Offering Expense Charge, when applied to the
total capital raised in connection with this offering, will not be sufficient to
fully reimburse the General Partners for the organization and offering expenses.
The General Partners will absorb any costs exceeding 3%. If, at the end of the
offering, the total Offering Expense Charge exceeds the actual offering expenses
incurred, the General Partners will retain any excess. As used in this
Prospectus, organization and offering expenses include legal, accounting,
auditing, marketing, filing, registration and recording fees, printing expenses,
and escrow charges. See "Charges to the Fund." However, such reimbursement (the
"Offering Expense Charge"), when added to the Sales Charge, shall not exceed 9%
of the gross proceeds of the offering.
The Fund will receive in each month interest earned on 100% of its average
monthly net assets on deposit at the Clearing Broker at 90% of the average
90-day Treasury bill rate for Treasury bills issued during that month. The
Clearing Broker benefits from interest earned on Fund assets in excess of the
amount paid to the Fund. Assets of the Fund will be deposited as margin with the
Clearing Broker in accordance with provisions of the Commodity Exchange Act, as
amended, and the rules and regulations promulgated thereunder.
SELECTED FINANCIAL DATA
IDS MANAGED FUTURES, L.P.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $ 3,341,500 $ 2,242,504 $ 258,208 $ 3,443,879 $ 2,278,901
INCOME (LOSS) FROM CONTINUING OPERATIONS 2,607,723 1,411,872 (284,307) 2,361,949 (1,530,228)
INCOME (LOSS) PER UNIT* 52.70 36.60 (6.04) 65.22 (16.30)
TOTAL ASSETS 6,066,077 7,183,050 5,980,134 15,134,816 24,184,896
LONG TERM OBLIGATIONS 0 0 0 0 0
CASH DIVIDEND PER UNIT 0 0 0 0 0
<CAPTION>
1995
<S> <C>
OPERATING REVENUES $ 8,419,239
INCOME (LOSS) FROM CONTINUING OPERATIONS 5,755,268
INCOME (LOSS) PER UNIT* 50.46
TOTAL ASSETS 33,275,874
LONG TERM OBLIGATIONS 0
CASH DIVIDEND PER UNIT 0
</TABLE>
* Figures adjusted for 3-for-1 split for comparative purposes.
40
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Most United States commodity exchanges limit the amount of fluctuation in
commodity futures contract prices during a single trading day by regulations.
These regulations specify what are referred to as "daily price fluctuation
limits" or "daily limits." The daily limits establish the maximum amount the
price of a futures contract may vary either up or down from the previous day's
settlement price at the end of a trading session. Once the daily limit has been
reached in a particular commodity, no trades may be made at a price beyond the
limit. Positions in the commodity could then be taken or liquidated only if
traders are willing to effect trades at or within the limit during the period
for trading on such day. Because the "daily limit" rule only governs price
movement for a particular trading day, it does not limit losses. In the past,
futures prices have moved the daily limit for numerous consecutive trading days
and thereby prevented prompt liquidation of futures positions on one side of the
market, subjecting commodity futures traders holding such positions to
substantial losses for those days.
It is also possible for an exchange or the CFTC to suspend trading in a
particular contract, order immediate settlement of a particular contract, or
direct that trading in a particular contract be for liquidation only.
The Fund's net assets are held in a brokerage account with the Clearing Broker,
and as long as Cargill Investor Services, Inc. acts as the Fund's clearing
broker, the Fund will earn interest on 100% of the Fund's average monthly cash
balance at a rate equal to 90% of the average yield on the 90-day U.S. Treasury
Bills issued during that month. For the quarter ended March 31, 1996, the
Clearing Broker had paid or accrued to pay interest of $359,594 to the Fund. For
the calendar year ended December 31, 1995, the Clearing Broker had paid or
accrued to pay interest of $1,389,521 to the Fund. For the calendar year ended
December 31, 1994, the Clearing Broker had paid or accrued to pay interest of
$760,250 to the Fund. For the calendar year ended December 31, 1993, the
Clearing Broker paid or accrued to pay interest of $218,411 to the Fund.
The number of both limited and general partnership units increased in the first
quarter of 1995 due largely to the 3-for-1 unit split on February 28, 1995. The
3-for-1 unit split created an additional 72,932.75 limited partnership units and
an additional 1,289.40 general partnership units. For the quarter ended March
31, 1996, investors redeemed a total of 2,733.64 Units for $753,552. For the
calendar year ended December 31, 1995, investors redeemed a total of 9,012.50
Units for $2,332,058. For the calendar year ended December 31, 1994, investors
redeemed a total of 1,940.13 Units for $445,141. For the calendar year ended
December 31, 1993, investors redeemed a total of 874.14 Units for $188,989. For
the calendar year ended December 31, 1995, investors purchased a total of
21,105.44 Units for $5,834,503. These Units were purchased pursuant to a
prospectus date June 26, 1995. For the calendar year ended December 31, 1994,
investors purchased a total of 47,745.45 Units (including the General Partners'
purchase of 434.88 Units) for $12,461,922. These Units were purchased pursuant
to a prospectus dated January 31, 1994. For calendar year 1993, investors
purchased a total of 28,968.12 Units (including General Partners' purchases) for
$7,571,735. These Units were purchased pursuant to a prospectus dated March 29,
1993.
On December 31, 1995, the Fund had unrealized profits of 1,705,569. The total
balance of the Fund's accounts at the Clearing Broker was $33,145,765. These
positions required margin deposits at the Clearing Broker of $3,655,729. These
figures compare to unrealized profits of $1,340,020, margin deposits at the
Clearing Broker of $2,923,318, and a total balance of the Fund's account at the
Clearing Broker of $23,381,950 at December 31, 1994. These figures compare to
unrealized profits of $648,483, margin deposits at the Clearing Broker of
$1,194,246, and total balance of the Fund's accounts of $13,635,344 at December
31, 1993.
RESULTS OF OPERATIONS
Trading for 1993 was very profitable. The net return for this period was a
positive 38% as compared to a modest loss of 3.43% in 1992. These results were
achieved primarily through trading of world financial markets-- capitalizing on
strong trends in global bonds and stock indices. Long positions in European,
United States and
41
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Pacific Rim bond markets were generally very profitable as global economic
sluggishness continued to plague many of the world's industrialized nations.
Currency markets for the most part stayed within narrow trading ranges for this
period. The one exception to this was the major movement of the Japanese Yen.
Grains had a brief flurry of activity during the summer as severe flooding
hampered crop development in the Midwest coupled with drought conditions in the
southeastern United States. As a result of this trading, the Fund realized a
gain for the year of $2,361,949.
The year 1994 was a challenging year for the Fund, which posted a loss of 6.9%
as compared to a gain of 38% in 1993. Economic and political instability
worldwide created disruptions in the financial markets. The U.S. Administration
was under fire, there was major trade tension between the U.S. and Japan,
instability in Russia, an assassination in Mexico and conflict in Korea, all
resulting in a sharp decline in global stock and bond prices. The Yen/U.S.
Dollar relationship fluctuated sharply due to the concerns of trade barriers or
a potential trade war with Japan. The U.S. Dollar declined relative to the
European currencies and even reached the lowest post World War II levels versus
the Japanese Yen. Physical commodities offered a few opportunities. Coffee had a
major rally after a severe freeze devastated the growing area in Brazil, sugar
prices rose to a three year high in October and there were modest gains in
precious metals. The Fund ended the year with a loss of $1,530,228.
In 1995 the Trading Advisors were well-positioned to capitalize on many trading
opportunities, especially in the financial sector, which produced a net gain of
23.03% for the year, as compared to a loss of 6.9% in 1994. The first quarter of
the year was the most profitable for the Fund. The February collapse of Barings
PLC created opportunities, expecially in the Far Eastern markets. The Barings
demise had a global effect, sending stock prices falling around the world and
driving investors toward the safety of German marks and U.S. Treasury bonds. The
German mark benefited substantially from the uncertain state of many world
economies and gained steadily versus the U.S. and other European currencies.
Long positions in foreign exchange generated sizable gains, with positions in
the Japanese yen, yen bond and the Nikkei 225 being the most favorable. The
balance of the year was much quieter in terms of market opportunities, trends
and profits. The Fund ended the year with a profit of $5,755,268.
To enhance the foregoing comparison of results of operations from year to year,
one can examine, line to line, the Statements of Financial Condition and
Operations. Due to sales of the Fund during 1994 and 1995, as well as the
profits earned during 1995, the Cash on deposit with the Clearing Broker was
significantly greater in 1995 (at a balance of $31,440,196) than at the end of
1994 or 1993 (balances of $22,041,930 and $12,986,861, respectively). Interest
receivable at the end of the year also increased over the three years from
$32,807 in 1993 to $103,566 in 1994 and $130,109 in 1995 as a result of this
increase in assets while interest income for the year of 1995 was $1,389,521 as
compared to $760,250 in 1994 and $218,411 in 1993. One additional balance sheet
item impacted by this increase in assets is the accrued management fee which
increased from $40,470 in 1993 to $36,060 in 1994 and to $97,719 in 1995.
Management fees, administrative fees and commissions also saw fluctuations as a
result of these increased investments in the fund, increasing from a total of
$754,792 in 1993 to $1,562,081 in 1994 and $2,074,335 in 1995.
Although the number of positions held at the end of the year decreased from 1994
to 1995 (after an increase from 1993), the positions held at the end of the
periods were successively more profitable going from $648,483 in 1993 to
$1,340,020 in 1994 and $1,705,569 in 1995. This increase in profits also
contributed to the Fund owing the traders incentive fees of $33,129 in 1995 as
compared to no accrual in 1994 and $39,295 in 1993. The overall profitable
trading for the year 1993 versus the loss in 1994 and another gain in 1995,
caused the Accrued operating expenses to fluctuate from $65,314 in 1993 to
$54,700 in 1994 and $141,246 in 1995, with comparable fluctuations in the yearly
expense. This fluctuation was caused by the Illinois State Property Replacement
Tax that the fund must pay on its profits.
The increased number of investors in the Fund caused there to be more
transactions in the Fund and also caused the redemptions payable at the end of
each year to increase over the periods going from $11,298 in 1993 to $99,551 in
1994 and $370,419 in 1995.
42
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Profitable trading in 1993 and 1995, as compared to losses in 1994, were
reflected in the trading gains of $3,223,567 in 1993 and $6,840,213 in 1995
versus a loss of $608,708 in 1994. As mentioned above, the decline in the value
of the US Dollar versus the world currencies caused the fund to realize gains of
$189,505 in 1995 and $127,359 in 1994 versus a gain of only $1,901 in 1993.
For the first quarter of 1994, the Fund recorded a loss of $271,106 or $16.26
per Unit ($5.42 per Unit after the 3-for-1 unit split in February, 1995.)
Trading in the financial sector, particularly in global interest rates which had
contributed to much of last year's substantial returns, began the year on a
negative note. The Japanese financial markets were unsettled due to the initial
failure of the government to generate support for its economic revival package.
Trading in foreign currency exchange was also negative as the US. dollar
seesawed against the German mark and Japanese yen throughout the month.
Therefore, the Fund posted a loss of $661,502.74 or $31.64 per Unit in January.
Considerable uncertainty and resulting volatility continued in the financial
markets in February. The Federal Reserve raised its short term Fed Fund rate
potentially signaling higher rates in the months ahead. Global interest rate
markets reacted sharply as prices fell around the world. In addition, the
speculation of a trade war between the U.S. and Japan caused price fluctuations
in the yen/dollar relationship. Overall, profits in global interest rates were
offset by losses in the foreign exchange markets. The Fund recorded a loss of
$506,529.42 or $22.22 per Unit in February. March was a profitable month for
both of the Trading Advisors of the Fund. Accelerating world wide economic and
political turmoil created sharp declines in global stock and bond prices.
Political unrest, including trade tensions between the U.S. and Japan, an
assassination in Mexico, instability in Russia and a potential conflict in Korea
weighed heavily on the financial markets. Collapsing markets provided definite
trend following opportunities in which both Trading Advisors were able to
profit. Trading in currencies, most notably the Japanese yen, German mark and
Swiss franc also contributed to gains. Increased investor demand for silver
caused a profitable uptrend for the traders. The Fund posted a gain of
$896,925.61 or $37.60 per Unit in March.
During the first quarter of 1994, additional Units sold consisted of 2966.45
Limited Partner Units (or 8,899.35 Limited Partner Units after the 3-for-1 Unit
split in February, 1995.) Investors redeemed a total of 47.86 Units during the
quarter. At the end of the quarter there were 23,827.77 Units outstanding
(including the 559.98 Units owned by the General Partners.) Additional Units
sold during the quarter represent a total of $2,241,690, before the reduction of
selling commissions and organizational costs of $264,513.60.
For the first quarter of 1995 the Fund recorded a profit of $3,279,154 or $29.36
per Unit. As a result of the 3-for-1 unit split on February 28, 1995, the income
(loss) per unit of partnership interest for January and February which follows
was calculated by dividing the income (loss) for each month by the Units
outstanding for each month times three in order to compare performance to the
March income (loss) per Unit. In January the financial markets were impacted by
speculation regarding a possible Federal Reserve monetary tightening as a
further effort to moderate domestic economic growth and inflation. The continued
uncertainty regarding the financial crisis in Mexico and possible ramifications
of the earthquake in Kobe, Japan also weighed on the financial markets.
Therefore, the Fund recorded a loss of $725,716 or $6.68 per Unit (or $20.06 per
Unit prior to the 3-for-1 split) in January. During the month of February,
global political and financial events, including the sudden demise of the
British merchant bank, Barings PLC, sent stock prices falling around the world
and investors rushing to safety in German marks and U.S. bonds. The German mark
benefited substantially from the uncertain state of many world economies and
gained steadily versus the U.S. and other European currencies. There was a
global lack of support for the U.S. dollar as it declined against many European
currencies and sank to new postwar lows versus Japanese yen. Long positions in
foreign exchange and favorable positions in the Japanese markets generated
substantial gains for the Fund. As a result, the Fund recorded a profit of
$1,987,901 or $17.85 per Unit (or $53.57 per Unit prior to the 3-for-1 split) in
February. The decline in value of the U.S. dollar gained momentum and
accelerated in March. Market participants ignored efforts by central bankers to
support the dollar, including an unanticipated move by the German Bundesbank to
lower short term rates late in March. By month end, the dollar reached yet
another postwar low. Positive performance during the month was dominated by
strong trends in foreign exchange. Gains in currency positions, global interest
rates and stock indexes resulted in the Fund recording a profit of $2,016,969 or
$18.19 per Unit in March.
43
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
During the first quarter of 1995, additional Units sold consist of 969.53
Limited Partner Units and 4.52 General Partner units. Additional Units sold
during the quarter represent a total of $701,402, before the reduction of
selling commissions and organizational costs of $80,754. Investors redeemed a
total of 645.37 Units during the quarter. At the end of the quarter there were
110,728.43 Units outstanding (including 1,934.10 Units owned by the General
Partners).
For the first quarter of 1996 the Fund recorded a gain of $84,570 or $0.80 per
Unit. In January, the primary influence on markets was the U.S. dollar, which
rose against most currencies and hit its highest level in two years against the
Japanese yen. Trading in foreign exchange generated the majority of profits.
Trading in stock indexes was slightly profitable. The Fund recorded a profit of
$1,324,808 or $10.98 per Unit in January. In February, the U.S. dollar lost
ground against the Japanese yen, British pound, Swiss franc and German mark,
resulting in the Fund giving back some of the profits earned in January. The
largest decline occurred in Japanese yen positions. In the metals markets,
subsiding inflation fears and weakening demand pushed gold prices beneath the
$400 threshold reached only a month before. Trading in interest rates and stock
indexes was also unprofitable. The Fund recorded a loss of $1,188,721 or $9.76
per Unit in February. In March, trading was volatile, reflecting investors'
confusion over the direction of the U.S. economy. In addition, political
tensions between China and Taiwan and "Mad Cow" disease in Britain further added
to economic uncertainties. Elections in Australia, which put an end to 13 years
of Labor Party rule, boosted the Australian dollar to levels not seen in over 10
months. Trading in stock indices and metals was unprofitable. As a result, the
Fund recorded a loss of $51,517 or $.42 per Unit in March.
On March 29, 1996, Janis E. Miller resigned as President and a Director of IDS
Futures, one of the General Partners of the Fund. As of the date of the filing
of this Post-Effective Amendment No. 1 Mr. Wendell Halvorson is in the process
of being appointed as President of IDS Futures pending approval by the NFA. See
"The General Partners."
During the first quarter of 1996, additional Units sold consisted of 4,662.19
Limited Partner Units; there were no General Partner units sold. Additional
Units sold during the quarter represented a total of $1,413,400 before the
reduction of selling commissions and organizational costs of $126,466. At the
end of the quarter there were 122,554.27 Units outstanding (including 2,315.34
Units owned by the General Partners).
To enhance the foregoing comparison of results of operations from period to
period, one can examine, line to line, the Statements of Financial Condition and
Operations. Due to sales of the Fund during the years, as well as the profits
earned during 1995 and 1996, the Cash on deposit with the Clearing Broker was
significantly greater at the end of the first quarter of 1996 (at a balance of
$31,717,582) than at 1995 or 1994 (balances of $24,418,852 and $15,371,586
respectively). Interest receivable at the end of the period also increased
during 1994 to 1995, going from $42,340 in 1994 to $124,202 in 1995 as a result
of this increase in assets, although lower interest rates caused the interest
receivable at the end of 1996 to decrease to $122,901. Interest income for the
first quarter of 1996 was $359,594 as compared to $315,305 in 1995 and $104,671
in 1994, resulting from the increase in capital. Two additional balance sheet
items impacted by this increase in assets are the Prepaid GP fee and the Accrued
Management Fees which increased from a total of $ 202,007 in 1994 to $ 329,703
in 1995 and to $ 418,471 (after a decrease in the percentage of management fee
paid to Sabre) in 1995. Management Fees, administrative fees and commissions
also saw fluctuations as a result of these increased investments in the fund,
increasing from a total of $213,834 in 1994 to $ 334,623 in 1995 and $ 308,748
(after the decrease in management fees) in 1996.
The number of positions held at the end of the period decreased from 1995 to
1996 (after an increase from 1994), and the profitability of the positions
followed the same pattern, going from $1,084,350 in 1994 to $3,353,759 in 1995
and $1,373,326 in 1996. The large profits enjoyed in 1995 also contributed to
the Fund owing the Trading Advisors incentive fees of $302,369 in 1995 as
compared to no accrual in 1996 and $65,253 in 1994. The overall profitable
trading for the year 1995 versus the loss in 1994 and the small gain in 1995,
caused the Accrued operating expenses to fluctuate from $23,725 in 1994 to
$99,398 in 1995 and $51,186 in 1996, with comparable fluctuations in the
quarterly expense. This fluctuation was caused by the Illinois State Property
Replacement Tax that the Fund must pay on its profits.
44
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
The increased number of investors in the Fund caused there to be more
transactions in the Fund and also caused the redemptions payable at the end of
each year to increase over the periods going from $19,317 in 1994 to $40,299 in
1995 and $167,359 in 1996.
At the end of the first quarter of 1994 and 1995, there were no Selling
Commissions due to the Selling Agent as there were no investors at that time.
However, there were some investors purchasing at the end of the first quarter of
1996 requiring an accrual of $35,892.
Profitable trading in 1996 and 1995, as compared to a trading loss in 1994, were
reflected in the trading gains of $3,691,670 in 1995 and $294,188 in 1996 versus
a loss of $5,746 in 1994. As mentioned above, the decline in the value of the US
Dollar versus the world currencies caused the Fund to realize gains of $204,487
in 1995 and $43,522 in 1994 versus a loss of $46,403 in 1996 when the dollar
gained strength.
During the fiscal quarters ended March 31, 1994, March 31, 1995 and March 31,
1996, the Fund had no credit exposure to a counterparty which is a foreign
commodities exchange which was material.
The Fund currently only trades on recognized global futures exchanges. In the
event the Fund begins trading over the counter contracts, any credit exposure to
a counterparty which exceeds 10% of the Fund's total assets will be disclosed.
See Footnote 5 of the Financial Statements of IDS Managed Futures, L.P. on page
116 for procedures established by the General Partners to monitor and minimize
market and credit risks for the Fund. In addition to the procedures set out in
Footnote 5, the General Partners review on a daily basis reports of the Fund's
performance, including monitoring of the daily net asset value of the Fund. The
General Partners also review the financial situation of the Fund's Clearing
Broker on a monthly basis. The General Partners rely on the policies of the
Clearing Broker to monitor specific credit risks. The Clearing Broker does not
engage in proprietary trading and thus has no direct market exposure which
provides the General Partners assurance that the Fund will not suffer trading
losses through the Clearing Broker.
INFLATION
Inflation does have an effect on commodity prices and the volatility of
commodity markets; however, continued inflation is not expected to have a
material adverse affect on the Fund's operations or assets.
CHARGES TO THE FUND
The charges to the Fund are summarized in tabular form beginning on page 14 of
this Prospectus. Investors should review the following narrative, which provides
more information about the fees and expenses payable by the Fund, in conjunction
with that summary.
The estimate of the Fund's "Breakeven" Point is shown on page 9 of this
Prospectus.
The General Partners will furnish each Limited Partner with a monthly account
statement describing the performance of the Fund and setting forth aggregate
management and advisory fees, brokerage commissions, and other expenses incurred
or accrued by the Fund, as well as such other information as is required by CFTC
regulations to be reported to Limited Partners. See "Amended and Restated
Limited Partnership Agreement-- Reports and Accounting."
DESCRIPTION OF CHARGES TO THE FUND
ADVISORY FEES. John W. Henry & Co., Inc. receives a monthly management fee of
1/3 of 1% of the Fund's Net Asset Value subject to its management at month-end.
Sabre Fund Management Limited receives a monthly management fee equal to 1/8 of
1% of the Fund's Net Asset Value subject to its management at month's end. This
fee will be increased to 1/4 of 1% of the Fund's Net Asset Value at such time
that the cumulative trading performance of Sabre reaches a certain level
specified by the General Partners and agreed upon by Sabre. John W. Henry & Co.,
Inc.
45
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
receives a quarterly incentive fee equal to 15% of Trading Profits, if any,
attributable to trading directed by it. Sabre Fund Management Limited receives
an incentive fee of 18% of Trading Profits, if any, attributable to trading
directed by it. Incentive fee payments, if any, accrue monthly and are paid
quarterly. See "Risk Factors--Distortions Produced by Incentive Fee
Arrangement." Management fees are paid monthly and deducted prior to the
calculation of the quarterly incentive fees. "Trading Profits" (for purposes of
calculating a Trading Advisor's incentive fee only) is defined as the excess (if
any) of (A) the Net Asset Value of the Fund's assets under management of a
Trading Advisor as of the last day of any calendar quarter (before deduction of
incentive fees payable for such quarter) over (B) the highest Net Asset Value of
the Fund's assets under the management of such Trading Advisor as of the last
day of the most recent calendar quarter for which an incentive fee was due and
owing. In computing Trading Profits, the difference between (A) and (B) above
shall be (i) decreased by all interest realized on the Trading Advisor's
allocable share of Fund assets subject to such Trading Advisor's management
between the dates referred to in (A) and (B), and (ii) increased by the Trading
Advisor's allocable share of any distributions or redemptions paid or payable by
the Fund as of, or subsequent to, the date in (B) through the date in (A), and
(iii) adjusted (either increased or decreased, as the case may be) to reflect
the Trading Advisor's allocable share of any additional allocations or negative
reallocations of Fund assets from the date in (B) to the last day of the
calendar quarter as of which the current incentive fee calculation is made. See
"Risk Factors--Distortions Produced by Incentive Fee Arrangement." Incentive
fees and management fees paid or payable by the Fund to a Trading Advisor shall
only be charged against the assets managed by the Trading Advisor receiving or
to receive such fees. Similarly, brokerage commissions shall be allocated
against the assets under the management of the Trading Advisor whose trading
decisions generated those brokerage commissions.
Incentive fees shall be paid within 10 business days after the end of the
quarter for which they are earned. For purposes of determining whether an
incentive fee is payable by Units which are redeemed other than at quarter end,
the dates of such redemptions shall be considered as if they were the last day
of the quarter.
If an incentive fee shall have been paid by the Fund to a Trading Advisor in
respect of any calendar quarter and the Trading Advisor shall incur subsequent
losses on the Fund's assets subject to its management, such Trading Advisor
shall nevertheless be entitled to retain amounts previously paid to it in
respect of Trading Profits. Management fees shall be payable regardless of
trading performance.
Incentive fees shall not be payable on interest earned on Fund assets. The
incentive fees payable to the Trading Advisors are based upon Trading Profits,
if any, as of the end of each quarter, including any unrealized gains or losses
in open positions in commodity interests. Unrealized gains attributable to
appreciation in open positions may never be realized by the Fund when those
positions are closed. Upon the expiration or termination of the Advisory
Contract, the Fund will be charged an incentive fee as though such expiration or
termination date were the end of a quarter.
SAMPLE ADVISORY FEE CALCULATION. Assume, for example, that a Trading Advisor was
allocated one million dollars at the beginning of the quarter and that the
advisor makes profits of $500,000 during the first quarter. Using the incentive
fee percentage of 15%, as will be paid to John W. Henry & Co., Inc., the fees
paid would be $75,000 (15% of $500,000). The new value of the fund would be
$1,425,000, after deducting the incentive fee paid. This would be the "new
trading high" that would have to be exceeded prior to the advisor receiving
another incentive fee. If in the following quarter, the account realizes a loss
of $250,000 pursuant to trading directed by that advisor, no incentive fee would
be paid. The value of the account would be $1,175,000 and the level to be
exceeded before the next incentive
46
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
fee payment would be required would be $1,425,000. If in the following quarter,
the advisor earns profits of $400,000, it would be paid fees of $22,500,
((1,175,000+400,000 - 1,425,000)X.15). The value and the new high value to
exceed before any further incentive fees are earned would then be $1,552,500.
<TABLE>
<CAPTION>
TO RECAP: ACCOUNT VALUE PRIOR HIGH FEES PAID
<S> <C> <C> <C>
Inception $1,000,000 $1,000,000
Quarter 1 profit 500,000 500,000 $75,000
Incentive fees (75,000) (75,000)
--------------- ---------------
End Quarter 1 $1,425,000 $1,425,000
Quarter 2 loss (250,000)
Incentive fees 0 0
--------------- ---------------
End Quarter 2 $1,175,000 $1,425,000
Quarter 3 profit 400,000 150,000 22,500
Incentive fees (22,500) (22,500)
--------------- ---------------
End Quarter 3 $1,552,500 $1,552,500 $97,500
</TABLE>
BROKERAGE EXPENSES. Cargill Investors Services, Inc. acts as the Fund's Clearing
Broker. Effective September 1, 1995, the Fund pays a brokerage commission of $35
(plus NFA, exchange and clearing fees) per round turn trade (and any permitted
future increase in such rate). From its inception until September 1, 1995, the
Fund paid brokerage commissions at a rate of $50 per round turn trade. With
respect to any trading conducted by the Fund on a foreign exchange, the Fund
pays the equivalent in foreign funds to $35 per trade plus any differential
associated with execution costs on non-U.S. exchanges. The Fund may be required
to pay brokerage commissions in excess of $35 for each round turn trade on
certain non-U.S. exchanges, and any such additional amounts would be direct
costs associated with the execution of trades on such non-U.S. exchanges. The
Fund is required to pay, in addition to the brokerage charge described above,
the NFA per trade transaction fee (which is currently assessed at a rate of
14 CENTS per round turn futures transaction and 7 CENTS per options trade) and
exchange and clearing fees. Exchange fees range from $0 and $2 per trade plus
any differential for non-U.S. exchanges, if applicable, depending on the
exchange where a trade is executed; clearing fees range from $0 to $1.70 per
trade plus any differential for non-U.S. exchanges, if applicable, also
depending on the exchange where a trade is executed.
In addition to the brokerage commission described in the preceding paragraph,
the Clearing Broker receives and retains as part of its compensation for
providing brokerage services to the Fund a portion of the interest earned on the
assets of the Fund on deposit with the Clearing Broker. As described below under
"Charges to the Fund-- Interest Allocation," the Clearing Broker will credit the
Fund with interest on 100% of the Fund's average monthly net assets on deposit
at the Clearing Broker at a rate equal to 90% of the average 90-day Treasury
bill rate for Treasury bills issued during that month. The Clearing Broker
receives and retains any increment of interest earned on the assets of the Fund
in excess of the amount it credits to the Fund under this arrangement.
Historically, since the inception of trading by the Fund, the incremental
interest retained by the Clearing Broker has annually ranged between 0.4% and
1.7% of the Fund's average Net Asset Value.
The Fund also reimburses the Clearing Broker for all delivery, insurance,
storage, service and other charges that it incurs and pays to third parties in
connection with the Fund's trading.
47
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
The Fund pays $35 commission per round turn trade to the Clearing Broker, which
in turn pays $20 per round turn trade to American Express Financial Advisors
Inc. in its capacity as Introducing Broker for the Fund. American Express
Financial Advisors Inc. receives its portion of such commissions for its ongoing
services to the Fund and the Limited Partners. Such services include:
1. Responding to inquiries from Limited Partners from time to time as to the
Net Asset Value of the Fund's Units;
2. Providing information to the Limited Partners concerning the futures markets
and the Fund's activities;
3. Responding to inquiries of Limited Partners related to the Fund's monthly
account statements, annual reports, financial statements, and annual tax
information provided periodically to the Limited Partners;
4. Providing information to Limited Partners regarding redemptions of Units;
5. Assisting Limited Partners in redeeming Units; and
6. Providing other services requested from time to time by Limited Partners.
The allocation of the total per trade rate of brokerage commissions ($35) to be
paid by the Fund between the Clearing Broker ($15) and the Introducing Broker
($20) was determined by the General Partners after their evaluation of the
respective services of the Clearing Broker and the Introducing Broker to the
Fund. This allocation could change in the future if the General Partners
determine that a change in the allocation formula is warranted by a change in
the respective services provided by the Clearing Broker and the Introducing
Broker. Prospective investors should be aware that because American Express
Financial Advisors Inc. receives a portion of the commodity brokerage
commissions generated by the Fund and allocable to outstanding Units, American
Express Financial Advisors Inc. has a conflict of interest in performing certain
services for the Limited Partners as to whether or not they should redeem Units.
See "Conflicts of Interest."
COMPETITIVENESS OF BROKERAGE EXPENSES. Because the Clearing Broker for the Fund
is affiliated with one of the Fund's General Partners, Guidelines promulgated by
the North American Securities Administration Association, Inc. ("NASAA") and
various states require that the brokerage transactions executed for the Fund by
the Clearing Broker be effected at competitive rates. In evaluating the
reasonableness of the brokerage expenses of the Fund and the competitiveness of
such expenses with those paid by other public commodity funds, the General
Partners believe an investor should focus, among other factors, on the brokerage
commission charged by the Clearing Broker, the portion of interest earned on the
Fund's assets that is retained by the Clearing Broker, the ratio of total
brokerage expenses to the Fund's Net Asset Value and the nature and quality of
the brokerage services rendered by the Clearing Broker and the Introducing
Broker.
Guidelines promulgated by NASAA provide that brokerage commission charges will
be presumptively reasonable if they satisfy either of the following maximum
rates:
1. 80% of the Clearing Broker's published retail rate plus pit brokerage fees,
or
2. 14% annually of the Fund's average net assets excluding assets not directly
related to trading activity.
The NASAA guidelines also provide that any interest income earned on the Fund's
assets which is retained by the Clearing Broker must be included with the
amounts of brokerage commissions the Clearing Broker receives in determining
whether such maximum rate limitations are satisfied.
The rate of $35 per round turn trade (plus NFA, exchange and clearing fees) is
approximately two-thirds of the Clearing Broker's regular retail rate per round
turn trade. The Fund's commission rate is not the lowest rate which the Clearing
Broker charges to any account, including commodity pools, nor is it as low as
the rate which might be charged by other commodity brokerage firms for similar
trades. Further since the Clearing Broker is affiliated with one of the General
Partners and the Introducing Broker is affiliated with the other General
Partner, there has been no arm's-length negotiation of brokerage commissions
applicable to the Fund's trades, and a conflict of interest exists between the
General Partners' duty to the Fund to limit or reduce the cost of brokerage
commissions and the
48
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
interest of the General Partners in the generation of brokerage commissions
which would benefit the Clearing Broker and the Introducing Broker as the Fund's
commodity brokers. See "Conflicts of Interest" and "Fiduciary Responsibility of
the General Partners." The General Partners do not intend to negotiate with any
other brokerage firms for brokerage services for the Fund so long as the
brokerage agreement with the Clearing Broker and Introducing Broker is in
effect.
Although the $35 round turn trade commission rate charged to the Fund by the
Clearing Broker is not the lowest rate charged by the Clearing Broker to any
account, including commodity pools, nor is it as low as rates which might be
charged by other commodity brokerage firms for similar trades, the General
Partners believe that the overall brokerage expenses of the Fund, (which
includes the $35 per round turn commission rate and the portion of interest
earned on Fund assets which is retained by the Clearing Broker), are very
competitive with the brokerage expenses charged to public commodity funds of
comparable size and structure in view of the nature and quality of the services
rendered by the Clearing Broker, the Introducing Broker and their affiliates and
the frequency of trades made by the Trading Advisors. Historically, since the
inception of trading by the Fund, the annual brokerage expenses (including the
previous round turn commission rate of $50 and interest income retained by the
Clearing Broker) of the Fund have ranged between 2.5% and 6.2% of the Fund's
average daily Net Asset Value, well below the 14% limit on presumptively
reasonable brokerage expenses as outlined in the NASAA Guidelines.
The General Partners will annually review the brokerage commission charges paid
by the Fund in combination with administrative fees, periodic operating
expenses, transaction fees and costs, the Trading Advisors' management fees, and
any financial benefit from interest earned on Fund assets in excess of the
interest paid to the Fund to assure that the Fund does not pay such charges in
excess of 12% of the Fund's average Net Asset Value (based on Net Asset Value on
the first day of each month) on a fiscal year basis--a level 2% below the limits
specified in the NASAA Guidelines for brokerage commission charges and to assure
that the brokerage charges for the Fund are within the range of those generally
charged to public commodity funds of comparable size and structure in view of
the nature and quality of the brokerage services being rendered. In determining
annually whether such charges paid by the Fund are within the NASAA Guidelines
as described above, the General Partners will include within the calculation of
such charges all interest income earned on the Fund's assets which is retained
by the Clearing Broker.
Historically the Fund's annual brokerage expenses have ranged from approximately
2.5% to 6.2% of the Fund's Net Asset Value. Based on currently anticipated
commission rates and information provided by the Trading Advisors as to the
frequency of their past trades, the General Partners estimate that, at the
reduced $35 per round turn rate charged to the Fund, annual brokerage expenses
payable by the Fund will be toward the lower end of the historical range. Actual
future charges may differ substantially from this historical range since the
actual amounts paid by the Fund will depend on the volume and frequency of
trading directed by the Trading Advisors and the brokerage commission rates
applicable to the Fund's trading.
From the $35 per round turn commission for foreign exchange transactions, the
Fund pays a brokerage commission of $35 per round turn trade to CISFS. CISFS
acts as the Fund's forward contract broker for transactions effected by the
Trading Advisors for the future delivery of a specified lot of a particular
currency. CISFS reallocates $20 to American Express Financial Advisors in its
capacity as Introducing Broker.
ADMINISTRATIVE FEES. Each of the General Partners receives an annual
administrative fee based on the Fund's Net Asset Value (as defined in "Certain
Definitions," below) on the first business day of each fiscal year of the Fund.
The annual administrative fee payable to IDS Futures is 1.125% of the Fund's
beginning Net Asset Value for each fiscal year, and the annual administrative
fee payable to CISI is 0.25% of the Fund's beginning Net Asset Value for each
fiscal year.
INTEREST ALLOCATION. The Fund receives interest from the Clearing Broker on 100%
of its average monthly net assets on deposit at the Clearing Broker at a rate of
interest equal to 90% of the average 90-day Treasury bill rate for Treasury
bills issued during that month. The Clearing Broker receives and retains any
increment of interest earned on the assets of the Fund in excess of the amount
paid to the Fund. The amount of interest income which
49
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
will be retained by the Clearing Broker under this arrangement will vary over
time, depending on applicable interest rates and the Net Asset Value of the
Fund. From 1987 to 1995 this amount ranged from $37,083 to $154,391, or between
.41% and 1.66% of the Fund's Net Asset Value. The General Partners anticipate
future percentages to remain at the lower end of this range due to a decrease in
interest income retained by the Clearing Broker from 20% to 10% in July of 1993.
OFFERING EXPENSE. The General Partners have agreed to advance the expenses of
this offering, which include legal, auditing, accounting, marketing, filing,
registration and recording fees plus printing expenses and escrow charges. The
General Partners will receive the Offering Expense charge to defray the amounts
of offering expenses that they have advanced. If the total Offering Expense
Charge received by the General Partners exceeds the actual offering expenses
incurred by them, the excess shall be retained by the General Partners. If
actual offering expenses exceed the total Offering Expense Charge, the General
partners shall pay, without reimbursement from the Fund, such excess.
SALES CHARGE. The Selling Agent will receive the Sales Charge from the proceeds
of the offering with respect to Units sold to investors other than Affiliated
Purchasers. This Sales Charge will consist of 6% of the first $50,000
subscribed, 4% of the second $50,000, 2% of the subsequent $400,000, and 1% of
any amount of the subscription exceeding $500,000. The maximum amount of such
payments to the Selling Agent will be $3,000,000 if all of the Units offered
hereby are sold to non-Affiliated Purchasers and $50,000,000 in new capital is
raised in this offering and no single purchaser subscribes for more than
$50,000.
OTHER PERIODIC EXPENSES. The Fund pays periodic legal, accounting, auditing,
printing, recording and filing fees, and postage charges, all of which are
currently estimated at approximately 1% of the Fund's Net Asset Value annually,
and extraordinary expenses, which could include expenses such as the cost of
litigation to which the Fund might become a party. All periodic expenses shall
be billed directly to the Fund.
CERTAIN DEFINITIONS
(1) NET ASSET VALUE. Net Asset Value means the Fund's total assets less total
liabilities, including any liability for organization and offering expenses
to be determined on the basis of generally accepted accounting principles,
consistently applied, except as set forth below. For purposes of this
calculation:
(a) Net Asset Value shall include any unrealized profit or loss on
securities and open commodity positions and any other credit or debit
accruing to the Fund but unpaid or not received by the Fund.
(b) All securities and open commodity positions shall be valued at their
then market value which means, with respect to open commodity positions,
the settlement price as determined by the exchange on which the
transaction is effected or the most recent appropriate quotation as
supplied by the Clearing Broker or banks through which the transaction
is effected. If there are no trades on the date of the calculation due
to operation of the daily price fluctuation limits (see "Glossary") or
due to a closing of the exchange on which the transaction is executed,
the contract will be valued at fair value as determined by the General
Partners. Interest, if any, shall accrue monthly.
(c) Brokerage commissions on open positions shall be accrued in full upon
the initiation of such open positions as a liability of the Fund.
Management fees shall be paid monthly and deducted prior to the
calculation of the quarterly incentive fee.
(2) NET ASSET VALUE PER UNIT. Net Asset Value per Unit means the Net Asset
Value divided by the number of Units outstanding on the date of
calculation.
(3) TRADING PROFITS. Trading Profits (for purposes of calculating each Trading
Advisor's incentive fees only) is defined as the excess (if any) of (A) the
Net Asset Value of the Fund's assets under management of a Trading Advisor
as of the last day of any calendar quarter (before deduction of incentive
fees payable for such quarter) over (B) the highest Net Asset Value of the
Fund's assets under the management of such Trading Advisor as of the last
day of the most recent calendar quarter for which an incentive fee was due
and owing.
50
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
In computing Trading Profits, the difference between (A) and (B) above
shall be (i) decreased by all interest realized on the Advisor's allocable
share of Fund assets subject to such Trading Advisor's management between
the dates referred to in (A) and (B), and (ii) increased by the Trading
Advisor's allocable share of any distributions or redemptions paid or
payable by the Fund as of, or subsequent to, the date in (B) through the
date in (A), and (iii) adjusted (either increased or decreased, as the case
may be) to reflect the Trading Advisor's allocable share of any additional
allocations or negative reallocations of Fund assets from the date in (B)
to the last day of the calendar quarter as of which the current incentive
fee calculation is made. The incentive fee shall not be payable on interest
earned on Fund assets. For purposes of calculating Trading Profits
attributable to the assets under the management of each Trading Advisor
only, the definition of Net Asset Value shall be modified, insofar as it
takes into consideration the amount of incentive and management fees
payable by and brokerage commissions accrued by the Fund, to provide for
the allocation of such incentive and management fees and brokerage
commissions specifically to the assets under the management of the Trading
Advisor which is entitled to such fees or whose trading decisions generated
those brokerage commissions.
CAPITALIZATION
The table below shows the capitalization of the Fund as of April 30, 1996.
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS OUTSTANDING
- ------------------------------------------------------------------------------------------ ----------------
<S> <C>
Units of General Partnership Interest (3)................................................. 2,315.33
Units of Limited Partnership Interest..................................................... 120,748.12
Total Partners' Contributions (including General Partners' capital contributions)......... $28,559,308
<FN>
(1) As of April 30, 1996, 120,748.12 Units of Limited Partnership Interest and
2,315.33 Units of General Partnership Interest have been issued and are
outstanding under the Delaware Revised Uniform Limited Partnership Act.
The Units of General Partnership Interest shown as outstanding represent
capital contributions to the Fund by the General Partners. The General
Partners have agreed to make such additional capital contributions on an
equal basis as are necessary to maintain an investment in an amount equal
to the lesser of 3% of the aggregate capital contributions of all Partners
or $100,000, but in no event less than 1% of such contributions. As of
April 30, 1996, the Unsold Amount of $9,265,121 remained available for
sale pursuant to the Fund's registration statement declared effective
January 31, 1994, and with an additional $50,000,000 in aggregate Units
now registered for offering to the public, Units having an aggregate
offering price of $59,265,121 are now offered.
(2) Because the price of the Units cannot be determined in advance, the table
cannot present the possible number of Units sold or the amounts of capital
contributions that may be received for Units.
(3) No Sales Charge will be charged to the General Partners for any Units they
purchase in connection with this offering; therefore, such interest will
be purchased at a price of Net Asset Value per Unit plus the Offering
Expense Charge per Unit.
</TABLE>
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNERS
In evaluating the conflicts of interest described under "Conflicts of Interest,"
an investor should be aware that the General Partners have a fiduciary
responsibility to the Limited Partners to exercise good faith and fairness in
all dealings affecting the Fund. Their fiduciary duties extend to the
responsibility for safekeeping and use of all funds and assets of the Fund,
although by law the Fund's assets will not be in their actual custody. Except as
provided herein, the General Partners shall not employ or permit others to
employ such funds and assets in any manner except for the exclusive benefit of
the Fund. Other duties and obligations of the General Partners are set forth in
the Amended and Restated Limited Partnership Agreement. See "Amended and
Restated Limited Partnership
51
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Agreement" and Exhibit A. In this regard, it should be noted that, although the
General Partners may terminate the Advisory Contract with the Trading Advisors
under certain circumstances, the General Partners may not direct any part of the
Fund's trading and that they have employed the Trading Advisors to perform that
function until December 31, 1996, subject to automatic renewal for three
additional one year periods. Thereafter, the General Partners either will
continue to retain the Trading Advisors or will retain new or additional
commodity trading advisor(s) to direct trading. See "Conflicts of Interest."
Cases have been decided under the common law or statutory law of partnerships in
certain jurisdictions to the effect that a limited partner may institute legal
action on behalf of himself/herself and all other similarly situated limited
partners (a "class action") to recover damages from the General Partners for
violations of fiduciary duties, or on behalf of a partnership (a partnership
"derivative action") to recover damages from a third party where the General
Partners have failed or refused to institute proceedings to recover such
damages. In addition, limited partners may have the right, subject to applicable
procedural and jurisdictional requirements, to bring partnership class actions
in federal court to enforce their rights under federal securities laws and the
rules and regulations promulgated thereunder by the SEC. Limited partners who
have suffered losses in connection with the purchase or sale of their interest
in a limited partnership may be able to recover such losses from the general
partner where the losses result from a violation by the general partner of the
anti-fraud provisions of the federal securities laws.
Under certain circumstances, limited partners also have the right to institute a
reparations proceeding before the CFTC against the General Partners (registered
commodity pool operators), Cargill Investor Services, Inc. (a registered futures
commission merchant), American Express Financial Advisors Inc. (a registered
introducing broker), and the Trading Advisors (registered commodity trading
advisors), as well as those of their respective employees who are required to be
registered, under the Commodity Exchange Act, as amended, and the rules and
regulations promulgated thereunder. In addition, arbitration proceedings may be
brought before the NFA against persons who are members of that organization. The
General Partners, the Clearing Broker, the Introducing Broker, and the Trading
Advisors are members of the NFA. The Futures Trading Act of 1982 created a
private right of action under the Commodity Exchange Act, as amended. Investors
in commodities and in commodity pools may, therefore, invoke the protections
provided by such legislation. See "Description of Commodity Trading--
Regulation."
LIMITED PARTNERS SHOULD, HOWEVER, BE AWARE THAT IN ENDEAVORING TO RECOVER
DAMAGES IN SUCH ACTIONS, IT WOULD GENERALLY BE DIFFICULT TO ESTABLISH AS A BASIS
FOR LIABILITY THAT COMMODITY TRADING HAS BEEN EXCESSIVE. THIS IS DUE TO THE
BROAD DISCRETION GIVEN TO THE TRADING ADVISORS BY THE ADVISORY CONTRACT, THE
EXCULPATORY PROVISIONS CONTAINED IN SUCH CONTRACT AND THE AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT (SEE "THE TRADING ADVISORS--THE ADVISORY
CONTRACT") AND THE VAGUENESS OF STANDARDS DEFINING EXCESSIVE TRADING.
The foregoing summary describing in general terms the remedies available to
limited partners under federal law is based on statutes, rules and decisions as
of the date of this Prospectus. This is a rapidly developing and changing area
of the law. Therefore, Limited Partners who believe that the General Partners
may have violated the law should consult their own counsel as to their
evaluation of the status of the applicable law at such time.
The Amended and Restated Limited Partnership Agreement provides that the General
Partners shall not be liable to the Fund or to the Limited Partners for any loss
suffered by the Fund that arises out of any action or inaction of the General
Partners, if such action or inaction did not constitute negligence or misconduct
of the General Partners and if the General Partners, in good faith, determined
that their action or inaction was in the best interest of the Fund. In addition,
the Fund may indemnify the General Partners against expenses, including
attorneys' fees, judgments and amounts paid in settlement, actually and
reasonably incurred by the General Partners in connection with the Fund,
provided that the expenses for which indemnification is sought were not the
result of negligence or misconduct by the General Partners. Under certain
circumstances, as described in the Fund's Amended and Restated Limited
Partnership Agreement, affiliates of the General Partners may also be granted
exculpation or indemnification.
52
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
The Fund has also agreed to indemnify the Trading Advisors and their affiliates
under certain conditions. (See "Risk Factors--Trading Advisors--Limitation of
Liability and Indemnification for Trading Advisors" and "The Trading
Advisors--The Advisory Contract.") Under certain circumstances, the Fund may
also be subject to indemnification obligations with respect to the Selling
Agent, the Clearing Broker, the Escrow Agent and related parties.
The CFTC has issued a statement of policy relating to indemnification of
officers and directors of a futures commission merchant (such as Cargill
Investor Services, Inc.) and its controlling persons under which it has taken
the position that whether such indemnification is consistent with the policies
expressed in the Commodity Exchange Act, as amended, will be determined by the
CFTC on a case-by-case basis.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the General Partners, their principals, or persons
controlling the Fund pursuant to the foregoing provisions, the Fund has been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in that Act and is therefore unenforceable.
The Amended and Restated Limited Partnership Agreement prohibits the Fund from
making any loans to the General Partners or to anyone else.
53
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
THE GENERAL PARTNERS
The General Partners of the Fund are IDS Futures Corporation ("IDS Futures"), a
wholly-owned subsidiary of IDS Management Corporation, which is itself a
wholly-owned subsidiary of American Express Financial Corporation, the corporate
parent of the Fund's Selling Agent/Introducing Broker, and CIS Investments, Inc.
("CISI"), a wholly-owned subsidiary of the Fund's Clearing Broker. They are
responsible for administering the Fund's affairs. The General Partners are
registered under the Commodity Exchange Act, as amended, as commodity pool
operators (and are currently acting as the Fund's commodity pool operators) and
are members of the NFA. The principal offices of CISI are located at 233 South
Wacker Drive, Suite 2300, Chicago, Illinois 60606. The records of the Fund are
kept at CISI's principal offices in Chicago. The principal offices of IDS
Futures are located at IDS Tower 10, Minneapolis, Minnesota 55440. The principal
offices of the Fund are located at 233 South Wacker Drive, Suite 2300, Chicago,
Illinois 60606, and its telephone number is (312) 460-4000. CISI and IDS Futures
have limited prior experience in operating commodity pools. In addition to
operating the Fund since June 16, 1987, CISI operated one private commodity pool
and currently jointly operates another public commodity pool with IDS Futures.
None of the principals of CISI has any beneficial ownership in the Fund. None of
the principals of IDS Futures has any beneficial ownership in the Fund, except
for Lori J. Larson who as of April 30, 1996, owned 19.06 Units in the Fund. The
performance history of the General Partners with respect to the Fund is
presented on page 58. See "Past Performance of the Fund."
CISI. CISI was incorporated in Delaware in 1983. CISI is a wholly-owned
subsidiary of Cargill Investor Services, Inc. CISI is registered under the
Commodity Exchange Act, as amended, as a commodity pool operator and is a member
of NFA. The officers and directors of CISI do not receive any compensation
directly from CISI.
The directors and officers of CISI are as follows:
HAL T. HANSEN (BORN IN NOVEMBER, 1936), PRESIDENT AND DIRECTOR. Mr. Hansen has
been President of Cargill Investor Services, Inc. since November, 1978. He
serves on the Executive Committees of the Board of Directors of NFA and the
Futures Industry Association ("FIA") and is the Chairman of the NFA. Mr. Hansen
graduated from the University of Kansas in 1958. He started work at Cargill,
Incorporated in 1958, and was employed by Cargill S.A.C.I. in Argentina from
1965 to 1969. Mr. Hansen has been employed by Cargill Investor Services, Inc.
since 1974.
L. CARLTON ANDERSON (BORN IN AUGUST, 1937), VICE PRESIDENT AND DIRECTOR. Mr.
Anderson is a graduate of Northwestern University, Evanston, Illinois. He
started work at Cargill, Incorporated in 1959, in the Commodity Marketing
Division. He served as President of Stevens Industries Inc., Cargill's peanut
shelling subsidiary from 1979 to 1981. He has been employed by Cargill Investor
Services, Inc. since 1981, and is currently the Director in charge of the
Portfolio Diversification Group. Mr. Anderson currently serves on the Board of
Directors of the Managed Futures Association.
RICHARD A. DRIVER (BORN IN SEPTEMBER, 1947), VICE PRESIDENT AND DIRECTOR OF
CISI. Mr. Driver became a Vice President and Director of CISI on June 29, 1993.
Mr. Driver graduated from the University of North Carolina in 1969 and he
received a Masters Degree from the American Graduate School of International
Management in 1973. Mr. Driver began working for Cargill, Incorporated in 1973
and joined Cargill Investor Services, Inc. in 1977 as Vice President of
Operations.
CHRISTOPHER MALO (BORN IN AUGUST, 1956), VICE PRESIDENT. Mr. Malo graduated from
Indiana University in 1976. He started work at Cargill, Incorporated in June,
1978 as an internal auditor. He transferred to Cargill Investor Services, Inc.
in August, 1979, and served as Secretary/Treasurer from November, 1983 until
July, 1991. He was elected Vice President and Secretary in July, 1991. He is a
member of the FIA Operations Division and serves as Chairman of the FIA Finance
Committee.
BARBARA A. PFENDLER (BORN IN MAY, 1953), VICE PRESIDENT. Ms. Pfendler is a
graduate of the University of Colorado, Boulder. She started work at Cargill,
Incorporated in 1975 as a meal merchant and regional sales manager for the Flax
and Sunflower Department in Minneapolis. In 1979, she was named senior merchant
for the Domestic
54
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Soybean Processing Division ("DSP") in Cedar Rapids, Iowa and later was an
account manager for DSP facilities in Savage, Minnesota and Sidney, Ohio. She
joined CIS in 1986 as the Sales Manager for the Portfolio Diversification Group
in Chicago.
DONALD ZYCK (BORN IN OCTOBER, 1961), SECRETARY AND TREASURER. Mr. Zyck graduated
from Northern Illinois University, DeKalb, Illinois in 1983. He began working at
Cargill Investor Services, Inc. in April, 1985 as a Staff Accountant. From
January 1988 to October 1994 he was Manager of Treasury Operations at CIS. He
was elected Controller, Secretary and Treasurer of CIS in October, 1994.
BRUCE H. BARNETT (BORN IN JUNE, 1947), ASSISTANT SECRETARY. Mr. Barnett
graduated in 1968 from Southern Connecticut State College. New York University
Law School awarded Mr. Barnett a J.D. in 1971 and an LL.M. in 1973. He started
work at Cargill, Incorporated in 1990 as Vice President, Taxes. From 1987 to
1990, Mr. Barnett was employed in various positions held at Unilever, a European
based multi-national corporation.
HENRY W. GJERSDAL, JR. (BORN IN MAY, 1954), ASSISTANT SECRETARY EFFECTIVE JUNE
25, 1996. Mr. Gjersdal received a bachelor of arts degree from Gustavus Adolphus
College in 1976 and a J.D. degree from the University of Michigan in 1979. He is
a member of the American Bar Association and the Tax Executives Institute. He
joined the Law Department of Cargill, Incorporated in April, 1981. He had
previously been an associate with Doherty, Rumble and Butler, Minneapolis,
Minnesota. In June, 1985 he was named European Tax Manager for Cargill
International, Geneva, and in 1987 was named Senior Tax Attorney for the Law
Department. He became Assistant Tax Director in the Tax Department in December,
1990. Mr. Gjersdal was named Assistant Vice President of Cargill, Incorporated's
Administrative Division in April, 1994 with responsibility for the audit and
international groups in Cargill's Tax Department.
PATRICE H. HALBACH (BORN IN AUGUST, 1953), ASSISTANT SECRETARY EFFECTIVE JUNE
25, 1996. Ms. Halbach graduated phi beta kappa from the University of Minnesota
with a bachelor of arts degree in history. In 1980 she received a J.D. degree
cum laude. She is a member of the Tax Executives Institute, the American Bar
Association and the Minnesota Bar Association. Ms. Halbach joined the Law
Department of Cargill, Incorporated in February, 1983. She had previously been
an attorney with Fredrikson & Byron, Minneapolis, Minnesota. In December, 1990
she was named Senior Tax Manager for Cargill, Incorporated's Tax Department and
became Assistant Tax Director in March, 1993. She was named Assistant Vice
President of Cargill, Incorporated's Administrative Division in April, 1994. In
her current position as Assistant Tax Director, Ms. Halbach oversees federal
audits and international compliance for Cargill and its affiliates.
IDS FUTURES
IDS Futures was established in 1986 to act as a general partner and commodity
pool operator in connection with commodity pool offerings. It is registered as a
commodity pool operator under the Commodity Exchange Act, as amended, and is a
member of NFA. The directors and officers of IDS Futures do not receive any
compensation directly from IDS Futures.
The directors and officers of IDS Futures are as follows:
LORI J. LARSON (BORN IN AUGUST, 1958), VICE PRESIDENT AND DIRECTOR. Ms. Larson
has been employed by American Express Financial Corporation since 1981 and
currently holds the title of Vice President. Since August 1988, she has been
responsible for day-to-day management of vendor relationships, due diligence
review, and operational aspects for the limited partnerships distributed by
American Express Financial Advisors Inc. In addition, she has responsibility for
the product development of the publicly offered mutual funds in the IDS Mutual
Fund Group. Ms. Larson has held a variety of management positions with American
Express Financial Corporation throughout her career. She is a graduate of, and
has an M.B.A. from, the University of Minnesota.
MICHAEL L. WEINER (BORN IN JULY, 1946), VICE PRESIDENT, SECRETARY AND TREASURER.
Mr. Weiner is the Vice President-- Corporate Tax Operations of American Express
Financial Corporation. He has been employed by American Express Financial
Corporation since 1975. His responsibilities include research, planning and
compliance for the American
55
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Express Financial Corporation corporate tax group. Mr. Weiner graduated from the
University of Minnesota Law School in 1974 and completed the Masters of Business
Administration program at St. Thomas College of Minnesota in 1979. Mr. Weiner is
also an officer of American Express Financial Advisors Inc.
JOHN M. KNIGHT (BORN IN FEBRUARY, 1952), VICE PRESIDENT. Mr. Knight has been
employed by American Express Financial Corporation since July, 1975. He is
currently Controller--Variable Assets, thus charged with overall finance
responsibilities for Mutual Funds, Limited Partnerships, Variable Annuities and
Wealth Management Services. From 1981 to March, 1984, he held a number of
positions in the IDS Certificate Company, including Controller of that
organization. Mr. Knight is a graduate of the University of Wisconsin--Eau
Claire and a FLMI.
MR. MORRIS GOODWIN, JR. (BORN IN AUGUST, 1951), DIRECTOR. Mr. Goodwin has served
as Vice President and Corporate Treasurer of American Express Financial
Corporation since July, 1989. He is responsible for corporate cash management,
treasury operations, short term portfolio investment, capital allocation,
liquidity management and financing and corporate-wide asset acquisition and
management. Mr. Goodwin served as Chief Financial Officer of IDS Bank & Trust
from 1988 to 1990. From 1980 until 1987, Mr. Goodwin held various positions with
Morgan Stanley & Co., Inc. He is a graduate of Williams College and holds an
M.B.A. from Stanford Graduate School of Business.
PETER J. ANDERSON (BORN IN MARCH, 1942), DIRECTOR. Mr. Anderson is Chairman and
Chief Investment Officer of IDS Advisory Group Inc., as well as Senior Vice
President--Investments, and a member of the board of directors, American Express
Financial Advisors Inc. Mr. Anderson joined IDS Advisory Group, Inc. in April,
1982 as Senior Vice President--IDS Equity Advisors, a division of IDS Advisory
Group Inc. He became President of IDS Advisory Group in January, 1985. In July,
1987, Mr. Anderson was named Senior Vice President of American Express Financial
Advisors Inc. and at that point assumed responsibility for common stock mutual
funds. In January, 1993, Mr. Anderson assumed responsibility for the portfolio
management, research and economic functions of American Express Financial
Advisors Inc. Mr. Anderson has a B.A. from Yale University and an M.B.A. with a
major in finance from Wharton Graduate School.
WENDELL L. HALVORSON (BORN IN AUGUST, 1936). Mr. Halvorson will be the new
President of IDS Futures effective upon NFA approval, currently pending. Mr.
Halvorson has held the position of Director--Limited Partnership Operations with
American Express Financial Corporation since August, 1983. He has been employed
with American Express Financial Corporation since November, 1968. Since August
of 1983, he has been responsible for day-to-day management of vendor
relationships, due diligence review and investor services for limited
partnerships distributed by American Express Financial Advisors Inc. Mr.
Halvorson has held a variety of management positions within American Express
Financial Corporation throughout his career, including Director--Brokerage
Sales, Director-- Plan Services Business Products and Vice President--Group
Insurance. He is a graduate of the University of Minnesota.
MINIMUM INVESTMENT AND NET WORTH. The Amended and Restated Limited Partnership
Agreement of the Fund provides that the General Partners will contribute to the
Fund in an amount equal to the lesser of 3% of the aggregate capital
contributions to the Fund or $100,000, but in no event less than 1% of such
contributions. In return, the General Partners will receive Units of General
Partnership Interest. As of April 30, 1996 the General Partners had contributed
$360,110 in satisfaction of the foregoing capital requirements and held 2,315.36
Units of General Partnership Interest. It is the intention of the General
Partners to contribute capital in equal amounts to satisfy the foregoing minimum
investment requirement.
The General Partners will participate in profits and losses with the Limited
Partners pro-rata to the extent of their respective investments. The General
Partners may not redeem or transfer their minimum interest so long as they are
the Fund's general partners. Any Units purchased by the General Partners and
their affiliates will be purchased to satisfy the minimum investment requirement
described above, or for investment purposes, and not for resale. The General
Partners will receive the administrative fees described under "Charges to the
Fund."
The Amended and Restated Limited Partnership Agreement also provides that the
General Partners shall, for as long as they continue as General Partners of the
Partnership, maintain together a net worth of not less than (i) the
56
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
lesser of $250,000 or 15% of the aggregate capital contributions to each
partnership for which they act as General Partners capitalized at $2.5 million
or less; and (ii) 10% of the aggregate capital contributions to each partnership
for which they act as General Partners capitalized at greater than $2.5 million.
The General Partners have agreed that they will together satisfy the net worth
applicable to them as General Partners. For these purposes, "net worth" shall
reflect the carrying of all assets at fair market value and shall exclude
capital contributions of the General Partners to the Fund or to any other
limited partnership of which they may be general partners. Net worth will be
calculated in accordance with generally accepted accounting principles provided
that all current assets shall be based on then current market value, and may
include any notes receivable or stock subscriptions from an adequately
capitalized affiliate of the General Partners or a letter of credit. The General
Partners satisfy the net worth requirement applicable to them as the result of
their acting as the Fund's General Partners in the case of IDS Futures, by means
of a demand note payable to it from IDS Financial Corporation (now named
American Express Financial Corporation), and in the case of CISI, a subscription
agreement from Cargill Investor Services, Inc.
OTHER MATTERS. There have been no material administrative, civil or criminal
actions against the General Partners or their individual principals pending,
concluded or on appeal within the five years preceding the date of this
Prospectus. Neither the General Partners nor their individual principals trade
or intend to trade commodity interests for their own accounts.
Under the Amended and Restated Limited Partnership Agreement, the General
Partners may not (except in certain limited, and essentially emergency,
situations) direct the Fund's futures trading, but must select an advisor to
direct that trading. Various principals of the General Partners are responsible
for the selection of trading advisors for the Fund. The General Partners have
chosen, and have caused the Fund to enter into an advisory contract with, the
Trading Advisors.
The General Partners are responsible for the preparation of monthly and annual
reports to the Limited Partners; the filing of reports required by the CFTC, the
SEC and any other federal or state agencies requiring reports; and the
calculation of Net Asset Value and advisory fees. The General Partners will
provide suitable facilities and procedures for handling redemptions, transfers,
distributions of profits (if any) and orderly liquidation of the Fund. The
General Partners are also responsible for engaging a futures commission merchant
to execute the Fund's futures trades. The General Partners have chosen the
Clearing Broker to act in this capacity. The General Partners have selected the
Introducing Broker to introduce trades for the Fund's account. The General
Partners will be reimbursed for the portion of offering expenses they have
incurred in connection with this offering by the Fund, through an Offering
Expense Charge of 3% of the gross per Unit price, as described under "Charges to
the Fund." If the total charge received by the General Partners exceeds actual
offering costs incurred, the excess will be retained by the General Partners.
DUTIES. The duties of the General Partners include retaining or replacing any
commodity trading advisor to the Fund, determining the amounts and timing of
capital contributions to the Fund by the General Partners, making all
expenditures for or on behalf of the Fund, selling or disposing of Fund
property, if any, retaining or replacing any futures commission merchant or
introducing broker (commodity broker) for the Fund, appointing persons to act
for the Fund in the distribution of Units, retaining attorneys and accountants
to assist in the organization and operation of the Fund, settling any claims
made against the Fund, determining the amounts and frequency of distributions by
the Fund and administering and maintaining records for the Fund. These actions
and decisions are not an exclusive or comprehensive statement of the powers of
the General Partners which extend to all actions which they believe to be in the
best interests of the Fund and in furtherance of the purposes for which the Fund
was formed. See "Amended and Restated Limited Partnership Agreement" and Exhibit
A.
57
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
PAST PERFORMANCE OF THE FUND
The following table presents the performance history of the Fund for the most
recent five years and year to date. Beginning on page 60, supplemental past
performance is presented which shows the entire performance history of the Fund
since its inception. The information in the following tables has not been
audited. In the opinion of the General Partners the information therein presents
fairly the performance of the Fund.
58
<PAGE>
IDS MANAGED FUTURES, L.P.
PAST PERFORMANCE
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
<TABLE>
<CAPTION>
RATE OF RETURN (1)
-----------------------------------------------------------------
MONTH 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January 4.07% (3.05%) (4.48%) 1.19% (13.95%) (1.55%)
February (3.48%) 8.41% (3.29%) 10.80% (9.43%) 1.76%
March (0.16%) 7.90% 5.76% (0.82%) 0.69% 0.59%
April 3.50% 4.71% (0.67%) 6.54% (6.30%) (1.85%)
May 1.86% 3.98% 1.34% (1.74%) (2.03%)
June (2.84%) 2.72% 1.44% 15.58% 3.60%
July 0.27% (2.87%) 8.35% 18.09% (11.27%)
August (0.05%) (2.15%) 3.09% 7.92% 4.12%
September (1.14%) (0.45%) (0.29%) (3.29%) 13.37%
October (0.26%) 0.03% (0.04%) (3.60%) (3.94%)
November 2.43% (3.51%) (0.03%) (2.02%) 3.51%
December 3.42% (1.68%) 2.03% (0.64%) 20.71%
Year 3.81% 23.03% (6.93%) 38.32% (3.43%) 26.22%
Name of Pool: IDS Managed Futures, L.P.
Type of Pool: Publicly offered
Inception of Trading: June 16, 1987
Aggregate Subscriptions: $34,974,840
Current Net Asset Value: $34,435,478
Worst Monthly Percentage Draw-down: January 1992 - 13.95%(2)
Worst Peak to Valley Draw-down: January 1992 through May 1992 - 27.75%
</TABLE>
(1) Refer to the footnotes to the Supplemental Past Performance of IDS Managed
Futures, L.P. beginning on page 63, for a detailed analysis of the
calculation of past performance and particularly footnote 13 for an
explanation of how Rate of Return is calculated.
(2) Draw-down means losses experienced by the Fund over a specified period.
59
<PAGE>
IDS MANAGED FUTURES, L.P.
PERFORMANCE RECORD
<TABLE>
<CAPTION>
GROSS NET CHANGE IN
REALIZED REALIZED UNREALIZED
BEGINNING PROFIT/ BROKERAGE PROFIT/ PROFIT/ INTEREST
EQUITY ADDITIONS WITHDRAWALS (LOSS) COMMISSIONS (LOSS) (LOSS) INCOME
MONTH (1) (2) (3) (4) (5) (6) (7) (8)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1987
June $ 0 $7,372,260 $ 0 $ 7,153 $18,736 $ (11,583) $ 11,965 $ 12,667
July 6,727,952 0 0 (150,999) 28,463 (179,462) 258,084 26,285
August 6,784,137 0 0 (208,132) 26,979 (235,111) 222,925 27,525
September 6,790,470 0 0 (99,469) 31,549 (131,017) (19,285) 28,439
October 6,630,971 0 0 763,056 31,218 731,838 449,234 30,848
November 7,658,858 0 0 221,973 21,061 200,913 570,280 30,268
December 8,312,270 0 52,544 676,065 24,480 651,585 (190,284) 33,352
1988
January 8,618,111 0 83,585 (254,695) 26,664 (281,358) (70,372) 32,149
February 8,158,762 0 119,444 997,014 20,149 976,865 (868,290) 29,358
March 8,143,557 0 156,346 (574,273) 36,048 (610,321) (52,149) 30,136
April 7,341,253 0 50,328 (310,888) 16,846 (327,734) 94,712 27,793
May 7,050,166 0 86,840 (204,734) 27,283 (232,016) 223,965 29,844
June 6,939,362 0 132,297 (199,143) 27,267 (226,411) 1,082,477 30,129
July 7,612,813 0 149,296 331,753 16,705 315,048 (1,028,276) 32,377
August 6,747,516 0 168,311 (279,662) 22,625 (302,287) 193,940 31,811
September 6,460,395 0 79,394 450,564 12,310 438,254 (200,312) 30,904
October 6,617,181 0 188,976 (381,605) 29,037 (410,642) 410,958 32,596
November 6,441,442 0 157,884 475,668 27,761 447,908 (469,262) 32,491
December 6,275,595 0 154,612 (344,080) 34,860 (378,940) 143,665 35,774
1989
January 5,870,391 0 153,600 140,199 43,805 96,394 108,821 31,472
February 5,913,639 0 143,891 (78,517) 16,525 (95,042) (216,077) 30,626
March 5,470,620 0 169,127 280,283 25,043 255,241 (84,791) 35,271
April 5,464,295 0 101,234 (310,171) 18,597 (328,768) 115,565 27,895
May 5,153,663 0 231,536 (61,447) 18,916 (80,364) 1,113,533 32,570
June 5,913,914 0 221,825 1,167,026 37,132 1,129,894 (1,449,641) 33,541
July 5,384,539 0 122,312 (639,001) 17,883 (656,885) 940,812 26,547
August 5,585,550 0 119,353 109,469 21,861 87,608 (484,820) 28,151
September 5,037,914 0 118,846 (263,300) 37,258 (300,558) (89,357) 25,528
October 4,588,880 0 89,556 20,206 26,402 (6,196) (260,457) 22,030
November 4,225,289 0 72,257 361,114 25,969 335,145 181,198 23,198
December 4,684,303 0 155,383 253,520 31,133 222,386 (320,573) 24,846
<CAPTION>
MANAGEMENT
AND VALUE OF A
INCENTIVE OTHER NET ENDING RATE OF UNIT NUMBER OF
FEES EXPENSES PERFORMANCE EQUITY RETURN INVESTMENT UNITS
MONTH (9) (10) (11) (12) (13) (14) (15)
- ---------------
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1987
June $ 6,456 $650,901 $ (644,308) 6,727,952 (8.740%) 225.26 29,868.00
July 36,052 12,671 56,185 6,784,137 0.84% 227.14 29,868.00
August 2,856 6,151 6,333 6,790,470 0.09% 227.35 29,868.00
September 25,106 12,530 (159,498) 6,630,971 (2.35%) 222.01 29,868.00
October 181,918 2,116 1,027,886 7,658,858 15.50% 256.42 29,868.00
November 158,370 (10,321) 653,413 8,312,270 8.53% 278.30 29,868.00
December 94,008 42,260 358,386 8,618,111 4.31% 290.30 29,687.00
Gross Rate of Return 28.78%
Rate of Return Net of Interest Income 25.95%
Value of a Unit Investment Net of Interest
Income 283.92
1988
January 20,658 35,526 (375,764) 8,158,762 (4.36%) 277.64 29,385.94
February 20,709 12,985 104,238 8,143,557 1.28% 281.19 28,961.16
March 18,791 (5,167) (645,958) 7,341,253 (7.93%) 258.88 28,357.23
April 17,796 17,734 (240,758) 7,050,166 (3.28%) 250.39 28,156.23
May 17,610 28,147 (23,964) 6,939,362 (0.34%) 249.54 27,808.23
June 22,303 58,144 805,748 7,612,813 11.61% 278.52 27,333.23
July 19,441 15,708 (716,001) 6,747,516 (9.41%) 252.32 26,741.54
August 14,462 27,813 (118,811) 6,460,395 (1.76%) 247.88 26,062.54
September 19,450 13,216 236,180 6,617,181 3.66% 256.94 25,753.54
October 30,986 (11,311) 13,238 6,441,442 0.20% 257.46 25,019.54
November 12,874 6,226 (7,964) 6,275,595 (0.12%) 257.14 24,405.54
December 28,038 23,051 (250,591) 5,870,391 (3.99%) 246.87 23,779.24
Gross Rate of Return (14.96%)
Rate of Return Net of Interest Income (21.41%)
Value of a Unit Investment Net of Interest
Income 223.12
1989
January 15,206 24,634 196,848 5,913,639 3.35% 255.15 23,177.24
February 14,071 4,564 (299,128) 5,470,620 (5.06%) 242.24 22,583.24
March 14,119 28,800 162,802 5,464,295 2.98% 249.45 21,905.24
April 13,170 10,920 (209,399) 5,153,663 (3.83%) 239.89 21,483.24
May 15,402 58,550 991,787 5,913,914 19.24% 286.06 20,673.85
June 14,051 7,294 (307,550) 5,384,539 (5.20%) 271.18 19,855.85
July 14,305 (27,155) 323,324 5,585,550 6.00% 287.46 19,430.37
August 12,925 46,297 (428,284) 5,037,914 (7.67%) 265.42 18,980.69
September 11,799 (45,998) (330,188) 4,588,880 (6.55%) 248.03 18,501.53
October 10,093 19,318 (274,034) 4,225,289 (5.97%) 233.22 18,117.53
November 10,703 (2,432) 531,271 4,684,303 12.57% 262.54 17,842.31
December 10,461 (51,126) (32,675) 4,496,244 (0.70%) 260.71 17,246.31
Gross Rate of Return 5.61%
Rate of Return Net of Interest Income (6.71%)
Value of a Unit Investment Net of Interest
Income 208.15
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
60
<PAGE>
IDS MANAGED FUTURES, L.P.
PERFORMANCE RECORD
<TABLE>
<CAPTION>
GROSS NET CHANGE IN
REALIZED REALIZED UNREALIZED
BEGINNING PROFIT/ BROKERAGE PROFIT/ PROFIT/
EQUITY ADDITIONS WITHDRAWALS (LOSS) COMMISSIONS (LOSS) (LOSS)
MONTH (1) (2) (3) (4) (5) (6) (7)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1990
January 4,496,244 0 129,859 (168,008) 14,557 (182,565) 1,288,029
February 5,483,114 0 230,344 1,222,532 17,076 1,205,456 (384,079)
March 5,945,905 0 197,035 588,666 18,803 569,863 (292,185)
April 5,963,388 0 119,344 (85,298) 19,864 (105,162) 494,973
May 6,189,544 0 50,389 174,898 20,567 154,330 (1,248,208)
June 5,098,710 0 43,252 1,736 15,776 (14,040) 108,417
July 5,192,457 0 34,032 (31,542) 14,428 (45,971) 487,023
August 5,623,014 0 57,950 685,605 16,928 668,677 (87,112)
September 6,121,562 0 19,972 714,535 13,560 700,975 (341,602)
October 6,446,804 0 167,614 (185,502) 13,983 (199,485) 9,779
November 6,123,072 0 61,126 64,260 13,186 51,074 (26,662)
December 6,091,988 0 89,675 4,932 6,385 (1,452) (99,777)
1991
January 5,903,376 0 86,179 (55,836) 10,291 (66,127) (30,747)
February 5,725,883 0 37,836 66,629 12,018 54,612 71,943
March 5,788,827 0 48,960 103,021 10,831 92,190 (2,678)
April 5,773,955 0 41,731 (75,919) 12,391 (88,309) (16,753)
May 5,625,587 0 30,163 (219,809) 18,548 (238,358) 112,901
June 5,481,114 0 64,413 328,317 42,652 285,665 (79,849)
July 5,614,098 0 32,833 (462,492) 20,967 (483,459) (171,200)
August 4,948,695 0 42,345 (134,205) 31,857 (166,062) 375,859
September 5,110,441 0 24,224 39,656 16,195 23,461 628,041
October 5,769,542 0 54,156 (56,540) 10,972 (67,513) (168,168)
November 5,488,231 0 23,211 577,462 48,463 528,999 (320,009)
December 5,657,620 0 124,757 650,811 10,034 640,777 757,205
<CAPTION>
MANAGEMENT
AND VALUE OF A
INTEREST INCENTIVE OTHER NET ENDING RATE OF UNIT NUMBER OF
INCOME FEES EXPENSES PERFORMANCE EQUITY RETURN INVESTMENT UNITS
MONTH (8) (9) (10) (11) (12) (13) (14) (15)
- ---------------
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990
January 26,048 13,809 973 1,116,729 5,483,114 24.84% 325.46 16,847.31
February 29,016 110,319 46,940 693,134 5,945,905 12.64% 366.60 16,218.99
March 34,644 59,680 38,123 214,519 5,963,388 3.61% 379.83 15,700.24
April 29,772 62,757 11,326 345,500 6,189,544 5.79% 401.83 15,403.24
May 29,163 (33,091) 8,821 (1,040,445) 5,098,710 (16.81%) 334.29 15,252.51
June 27,294 13,122 (28,449) 136,999 5,192,457 2.69% 343.27 15,126.51
July 26,820 14,178 (10,894) 464,589 5,623,014 8.95% 373.98 15,035.51
August 33,701 56,144 2,625 556,498 6,121,562 9.90% 410.99 14,894.51
September 27,912 66,364 (24,292) 345,213 6,446,804 5.64% 434.17 14,848.51
October 31,054 15,766 (18,302) (156,117) 6,123,072 (2.42%) 423.66 14,452.87
November 31,003 17,056 8,316 30,043 6,091,988 0.49% 425.74 14,309.29
December 27,363 13,415 11,657 (98,938) 5,903,376 (1.62%) 418.82 14,095.18
Gross Rate of Return 60.65%
Rate of Return Net of Interest Income 58.26%
Value of a Unit Investment Net of Interest
Income 329.42
1991
January 23,906 14,567 3,779 (91,314) 5,725,883 (1.55%) 412.34 13,886.18
February 21,367 14,603 32,539 100,779 5,788,827 1.76% 419.60 13,796.01
March 23,280 23,796 54,908 34,088 5,773,955 0.59% 422.07 13,680.01
April 20,929 14,204 8,299 (106,637) 5,625,587 (1.85%) 414.28 13,579.28
May 21,800 13,813 (3,160) (114,310) 5,481,114 (2.03%) 405.86 13,504.96
June 19,153 14,232 13,340 197,397 5,614,098 3.60% 420.48 13,351.77
July 19,985 12,485 (14,590) (632,570) 4,948,695 (11.27%) 373.10 13,263.77
August 19,567 12,914 12,358 204,091 5,110,441 4.12% 388.49 13,154.77
September 17,604 41,603 (55,821) 683,324 5,769,542 13.37% 440.43 13,099.77
October 19,371 13,891 (3,045) (227,155) 5,488,231 (3.94%) 423.09 12,971.77
November 17,964 28,634 5,718 192,601 5,657,620 3.51% 437.94 12,918.77
December 17,820 259,654 (15,430) 1,171,577 6,704,441 20.71% 528.63 12,682.77
Gross Rate of Return 26.22%
Rate of Return Net of Interest Income 24.50%
Value of a Unit Investment Net of Interest
Income 410.12
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
61
<PAGE>
IDS MANAGED FUTURES, L.P.
PERFORMANCE RECORD
<TABLE>
<CAPTION>
GROSS NET CHANGE IN
REALIZED REALIZED UNREALIZED
BEGINNING PROFIT/ BROKERAGE PROFIT/ PROFIT/
EQUITY ADDITIONS WITHDRAWALS (LOSS) COMMISSIONS (LOSS) (LOSS)
MONTH (1) (2) (3) (4) (5) (6) (7)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992
January 6,704,441 0 59,133 (282,279) 12,616 (294,894) (585,841)
February 5,709,834 0 29,600 385,072 22,448 362,624 (875,039)
March 5,141,991 0 56,758 2,540 19,265 (16,725) 61,769
April 5,120,703 0 17,879 (459,518) 17,769 (477,287) 162,659
May 4,780,055 0 76,766 (266,497) 18,312 (284,809) 186,705
June 4,620,080 0 35,313 392,168 26,785 365,382 343,118
July 5,304,490 0 97,635 (21,412) 16,383 (37,795) 1,011,461
August 6,166,230 0 28,126 819,593 13,419 806,174 (283,343)
September 6,626,216 0 76,532 852,784 19,686 833,098 (1,039,969)
October 6,331,987 0 17,098 (183,338) 12,600 (195,938) 15,112
November 6,068,777 0 21,580 103,287 29,920 73,367 (190,902)
December 5,941,995 0 10,210 (35,280) 29,388 (64,668) 47,658
1993
January 5,893,506 0 7,232 (155,688) 30,971 (186,659) 270,731
February 5,956,270 0 4,579 702,629 32,677 669,952 13,009
March 6,594,957 0 0 205,702 29,520 176,182 (240,727)
April 6,541,136 0 43,242 (46,669) 19,894 (66,563) 553,215
May 6,925,981 0 12,452 293,082 31,293 261,789 (137,327)
June 7,006,469 0 4,974 443,457 45,979 397,478 (240,990)
July 7,102,642 598,214 41,365 53,619 30,098 23,521 662,433
August 8,252,806 1,430,318 0 570,558 27,655 542,903 (236,072)
September 9,938,302 1,230,783 58,310 675,473 25,130 650,343 (669,795)
October 11,081,528 1,156,055 0 (133,638) 12,807 (146,445) 173,358
November 12,233,520 988,074 5,537 53,234 40,673 12,561 25,093
December 13,212,536 1,295,090 11,298 150,041 50,022 100,019 238,839
1994
January 14,765,001 1,280,394 7,327 (268,193) 43,967 (312,160) (327,405)
February 15,376,565 696,782 5,871 (407,918) 77,970 (485,888) (1,613)
March 15,560,947 0 19,317 234,499 41,142 193,357 764,885
April 16,438,555 1,678,846 19,122 (177,335) 28,857 (206,192) 118,099
May 17,987,950 1,673,130 32,856 828,216 42,202 786,013 (4,511)
June 20,344,467 860,448 44,647 464,404 45,606 418,798 202,034
July 21,713,376 1,035,371 11,490 (15,068) 21,877 (36,954) (584,599)
August 22,113,907 578,468 27,176 990 49,592 (48,602) (403,790)
September 22,190,564 938,788 39,662 159,498 82,581 76,917 (197,738)
October 22,990,574 822,271 127,874 (760,513) 68,953 (829,466) 814,000
Nov 23,691,780 807,434 10,250 (706,579) 111,416 (817,995) 36,284
Dec 23,657,531 615,634 99,551 (652,247) 40,732 (692,978) 275,892
<CAPTION>
MANAGEMENT
AND VALUE OF A
INTEREST INCENTIVE OTHER NET ENDING RATE OF UNIT NUMBER OF
INCOME FEES EXPENSES PERFORMANCE EQUITY RETURN INVESTMENT UNITS
MONTH (8) (9) (10) (11) (12) (13) (14) (15)
- ---------------
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1992
January 16,872 11,394 60,217 (935,474) 5,709,834 (13.95%) 454.87 12,552.77
February 12,241 10,069 28,000 (538,243) 5,141,991 (9.43%) 411.99 12,480.93
March 14,299 10,145 13,727 35,469 5,120,703 0.69% 414.83 12,344.11
April 11,884 9,248 10,776 (322,768) 4,780,055 (6.30%) 388.68 12,298.11
May 11,282 9,011 (12,623) (83,210) 4,620,080 (1.74%) 381.92 12,097.11
June 11,686 10,548 (10,084) 719,722 5,304,490 15.58% 441.41 12,017.11
July 13,630 16,129 11,790 959,375 6,166,230 18.09% 521.25 11,829.80
August 12,660 69,920 (22,540) 488,111 6,626,216 7.92% 562.51 11,779.80
September 12,413 (24,435) 47,674 (217,696) 6,331,987 (3.29%) 544.03 11,639.12
October 12,432 15,522 44,196 (228,113) 6,086,776 (3.60%) 524.43 11606.52
November 11,956 15,263 2,360 (123,202) 5,941,995 (2.02%) 513.81 11564.52
December 14,068 15,023 20,314 (38,279) 5,893,506 (0.64%) 510.50 11544.52
Gross Rate of Return (3.43%)
Rate of Return Net of Interest Income (9.74%)
Value of a Unit Investment Net of Interest
Income 370.18
1993
January 11,039 15,348 9,767 69,996 5,956,270 1.19% 516.57 11530.52
February 11,183 69,042 (18,164) 643,266 6,594,957 10.80% 572.35 11522.52
March 13,340 13,237 (10,621) (53,821) 6,541,136 (0.82%) 567.68 11522.52
April 13,855 81,686 (9,266) 428,087 6,925,981 6.54% 604.83 11451.03
May 13,147 41,962 2,707 92,940 7,006,469 1.34% 612.95 11430.71
June 13,971 12,658 56,654 101,147 7,102,642 1.44% 621.80 11422.71
July 15,736 96,027 12,348 593,315 8,252,806 8.35% 673.74 12249.22
August 16,146 49,715 18,084 255,178 9,938,302 3.09% 694.57 14308.50
September 18,854 22,227 6,422 (29,247) 11,081,528 (0.29%) 692.53 16001.53
October 29,899 40,419 20,456 (4,063) 12,233,520 (0.04%) 692.28 17671.45
November 27,851 44,128 24,898 (3,521) 13,212,536 (0.03%) 692.08 19091.14
December 33,391 65,255 38,321 268,673 14,765,001 2.03% 706.15 20909.16
Gross Rate of Return 38.32%
Rate of Return Net of Interest Income 67.01%
Value of a Unit Investment Net of Interest
Income 618.23
1994
January 29,813 42,248 9,503 (661,503) 15,376,565 (4.48%) 674.51 22796.56
February 32,368 44,665 6,731 (506,529) 15,560,947 (3.29%) 652.29 23855.77
March 42,489 114,996 (11,190) 896,925 16,438,555 5.76% 689.89 23827.77
April 44,456 61,080 5,612 (110,329) 17,987,950 (0.67%) 685.26 26249.80
May 54,149 74,627 44,780 716,244 20,344,468 3.98% 712.55 28551.78
June 61,089 154,511 (25,696) 553,106 21,713,374 2.72% 731.92 29666.38
July 69,880 62,890 8,788 (623,351) 22,113,906 (2.87%) 710.91 31106.63
August 73,967 64,331 31,878 (474,634) 22,190,565 (2.15%) 695.65 31899.11
September 80,140 65,887 (7,453) (99,115) 22,990,575 (0.45%) 692.54 33197.41
October 79,567 68,710 (11,417) 6,809 23,691,780 0.03% 692.75 34199.79
Nov 88,654 68,129 70,248 (831,433) 23,657,531 (3.51%) 668.44 35,392.36
Dec 103,677 69,060 13,946 (396,416) 23,777,198 (1.68%) 657.24 36,177.59
Gross Rate of Return (6.93%)
Rate of Return Net of Interest Income (5.31%)
Value of a Unit Investment Net of Interest
Income 585.41
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
62
<PAGE>
IDS MANAGED FUTURES, L.P.
PERFORMANCE RECORD
<TABLE>
<CAPTION>
GROSS NET CHANGE IN
REALIZED REALIZED UNREALIZED
BEGINNING PROFIT/ BROKERAGE PROFIT/ PROFIT/
EQUITY ADDITIONS WITHDRAWALS (LOSS) COMMISSIONS (LOSS) (LOSS)
MONTH (1) (2) (3) (4) (5) (6) (7)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
Jan 23,777,198 620,648 25,852 (197,438) 70,420 (267,858) (460,486)
Feb 23,646,279 0 101,905 1,810,348 73,078 1,737,271 247,943
Mar 25,532,275 0 40,299 65,020 109,391 (44,371) 2,226,282
Apr 27,508,945 0 135,467 2,799,714 29,525 2,770,188 (1,323,604)
May 28,669,853 0 487,128 1,450,172 45,042 1,405,131 (824,022)
June 28,715,673 0 181,463 494,982 51,497 443,484 (1,345,291)
July 27,719,054 0 69,531 (280,227) 46,115 (326,342) 375,934
August 27,723,992 1,282,909 113,582 (832,677) 72,668 (905,345) 960,475
September 28,880,699 1,336,699 330,711 770,986 42,970 728,016 (1,095,327)
October 29,558,043 922,833 179,178 (776,322) 38,900 (815,222) 736,752
Nov 30,225,752 602,276 296,524 394,773 83,806 310,967 473,957
Dec 31,267,489 548,179 370,419 775,332 56,626 718,706 392,936
1996
Jan 32,513,952 722,279 391,797 741,794 58,766 683,028 917,354
Feb 34,169,242 201,747 194,396 674,826 66,855 607,970 (2,068,943)
Mar 32,987,871 362,908 167,359 (790,189) 71,361 (861,550) 819,346
Apr 33,131,903 292,292 149,813 145,646 68,573 77,073 1,159,669
NOTES TO IDS MANAGED FUTURES, L.P.
<CAPTION>
MANAGEMENT
AND VALUE OF A
INTEREST INCENTIVE OTHER NET ENDING RATE OF UNIT NUMBER OF
INCOME FEES EXPENSES PERFORMANCE EQUITY RETURN INVESTMENT UNITS
MONTH (8) (9) (10) (11) (12) (13) (14) (15)
- ---------------
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
Jan 96,401 68,414 25,358 (725,716) 23,646,279 (3.05%) 637.18 37,111.07
Feb 94,367 76,794 14,887 1,987,901 25,532,275 8.41% 230.25 110,890.64
Mar 124,537 386,870 (97,390) 2,016,969 27,508,945 7.90% 248.44 110,728.43
Apr 113,091 222,380 40,920 1,296,375 28,669,853 4.71% 260.14 110,207.69
May 127,257 121,353 54,065 532,948 28,715,673 1.86% 264.98 108,369.33
June 124,032 32,548 4,834 (815,156) 27,719,054 (2.84%) 257.46 107,664.51
July 107,402 84,177 (1,652) 74,469 27,723,992 0.27% 258.15 107,395.17
August 116,573 84,199 100,124 (12,620) 28,880,699 (0.05%) 258.03 111,926.92
September 119,108 86,537 (6,095) (328,644) 29,558,043 (1.14%) 255.10 115,870.42
October 115,797 89,345 23,928 (75,946) 30,225,752 (0.26%) 254.44 118,793.13
Nov 120,771 93,737 75,973 735,985 31,267,489 2.43% 260.64 119,966.22
Dec 130,183 130,848 42,274 1,068,703 32,513,952 3.42% 269.54 120,625.71
Gross Rate of Return 23.03%
Rate of Return Net of Interest Income 21.19%
Value of a Unit Investment Net of Interest
Income 236.48
1996
Jan 122,757 266,619 131,712 1,324,808 34,169,242 4.07% 280.53 121,803.77
Feb 113,888 (94,633) (63,730) (1,188,721) 32,987,871 (3.48%) 270.77 121,830.92
Mar 122,950 83,171 49,092 (51,517) 33,131,903 (0.16%) 270.34 122,554.27
Apr 124,516 120,136 80,027 1,161,096 34,435,478 3.50% 279.82 123,063.45
Gross Rate of Return 3.81%
Rate of Return Net of Interest Income 2.96%
Value of a Unit Investment Net of Interest
Income 243.48
NOTES TO IDS MA
</TABLE>
1. Beginning Equity is the capital committed to trading as of the beginning of
the period.
2. Additions represents all capital additions made after the close of business
on the last day of the month. Commencing July 1993, additions are net of
selling commissions and organization and offering expenses.
3. Withdrawals represents all partial or complete withdrawals and redemptions
made after the close of business on the last day of the month. As of April
30, 1996, IDS Managed Futures, LP has not made any distributions of capital
to its limited partners.
4. Gross Realized Profit (Loss) represents gross realized profit or loss on all
trades closed out during the period.
5. Brokerage Commissions represents the total amount of all brokerage
commissions and clearing fees paid on all trades liquidated during the
period or accrued on open positions at the end of the period.
6. Net Realized Profit (Loss) equals the sum of Gross Realized Profit (Loss)
minus Brokerage Commissions.
7. Changes in Unrealized Profit (Loss) represents the change in unrealized
profits or losses on the quoted market value of unliquidated positions at
the end of each period. A negative number signifies either a decrease in
unrealized profits or an increase in unrealized losses; a positive number
signifies either an increase in unrealized profits or a decrease in
unrealized losses.
8. Interest Income represents interest received and accrued during the month.
9. Management Fees represents a charge of 1/4 of 1% of the net asset value per
month for management services. The Management Fees are paid regardless of
performance. Incentive Fees represents a charge of 18% of the trading
profits as of the end of each quarter. If trading profits for a quarter are
negative it constitutes a carryforward loss for the beginning of the next
fiscal quarter. No Incentive Fees are payable until future trading profits
for the ensuing quarter exceed carryforward loss. Effective January 1, 1992,
the management fee paid to Sabre Fund Management Limited was reduced to 1/8
of 1% per month. It stayed at this level until such time as cumulative
trading performance reached a level as specified in the Advisory Contract.
Effective July 1, 1993, the management fee paid to Sabre was increased back
to the original 1/4 of 1%. Once again, the Sabre management fee was reduced
to 1/8 of 1% on January 1, 1996 until such time as cumulative trading
performance reaches a predetermined performance level. Effective July 1,
1992, the management fee due to John W. Henry was changed to 1/3 of 1% of
the assets allocated to it, and the incentive fee was changed to 15%. The
General Partners, acting on the recommendation of Sabre, increased the
leverage on the assets managed by Sabre by 50%. This change was effective
September 14, 1992 and was done in an effort to enhance their performance.
This increase in leverage, however, did not cause a comparable increase in
their management fees.
10. Other Expenses represents Operating Expenses other than Management Fees and
Incentive Fees. Included in the Other Expenses for March 1988 are selling
commissions and organization and offering expenses of $639,102.
11. Net Performance equals Net Realized Profit (Loss) plus change in Unrealized
Profit (Loss) plus Interest Income, minus Management Fees, Incentive Fees
and Other Expenses.
12. Ending Equity represents Beginning Equity plus Additions minus Withdrawls
plus or minus Net Performance.
13. Rate of Return is calculated by dividing Net Performance by Beginning
Equity, except for the first period where Net Performance is divided by
Additions.
14. The Value of a Unit Investment is calculated by dividing the Ending Equity
by the number of Units outstanding at the end of the month. At the end of
each month the amount shown in this column is equal to the net asset value
per unit at month end. The first amount shown in this column includes
reductions for selling commissions and organization and offering expenses as
well as an adjustment for trading results in that month.
15. This represents the number of units outstanding at the end of each month. On
February 28, 1995, the Fund had a 3-for-1 unit split.
16. Gross Rate of Return is calculated by taking the difference in Net Asset
Value per unit for the year and dividing by the beginning of the year Net
Asset Value per unit.
17. Rate of Return Net of Interest Income is calculated in the same manner as
Gross Rate of Return, except the calculation is based on the Net Asset Value
per Unit Net of Interest Income in a carry forward calculation, assuming the
fund earns no interest income.
18. Net Asset Value per Unit Net of Interest Income is calculated in the same
manner as this table, except it is assumed that the fund has no interest
income for the entire life of the fund in a carry forward calculation.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
63
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
BROKERAGE ARRANGEMENTS
THE CLEARING BROKER
The Clearing Broker, Cargill Investor Services, Inc., executes and clears the
Fund's futures transactions and provides other brokerage-related services. The
Clearing Broker is a Delaware corporation. Its principal office is located at
233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606. It has offices and
affiliated offices at numerous other locations in the United States as well as
in England, France, Switzerland, Australia and the Far East. The clients of the
Clearing Broker include commercial and financial institutions that use the
futures markets for risk management purposes as well as private investors. The
Clearing Broker has more than 600 employees. The Clearing Broker is a
wholly-owned, but separately managed, subsidiary of Cargill, Incorporated, a
privately-owned international merchant, warehouser, processor and transporter of
agricultural and other bulk commodities that was founded in 1865.
The Clearing Broker is a clearing member of all of the principal futures
exchanges in the United States and is a clearing broker or has clearing
relationships on all major world futures exchanges. It is registered with the
CFTC as a futures commission merchant and is a member of NFA. Certain employees
of the Clearing Broker are members of U.S. futures exchanges and may serve on
the governing bodies and standing committees of those exchanges and their
clearing houses. In that capacity, these employees have a fiduciary duty to the
exchanges and would be required to act in the best interests of such exchanges,
even if that action might be adverse to the interests of the Fund.
Cargill, Incorporated owns and operates grain elevators and soybean processing
plants that are designated as regular warehouses for delivery of certain
physical commodities in satisfaction of futures contracts under the rules of the
Chicago Board of Trade and similar rules of other U.S. futures exchanges. If the
Fund makes or accepts delivery of grain or soybean products pursuant to a
futures contract, it is possible that, under exchange rules governing settlement
of the contract, the Fund may tender or receive negotiable warehouse receipts
issued by Cargill, Incorporated.
Cargill, Incorporated and its affiliates are substantial users of virtually all
futures contracts for hedging purposes. Such hedging transactions are generally
implemented by employees of Cargill, Incorporated and the Clearing Broker
generally executes or clears those transactions. The volume of trading by
Cargill, Incorporated and its affiliates is likely to result in their competing
with the Fund for futures market positions. Thus, in certain instances, the
Clearing Broker may have orders for trades from the Fund and from Cargill,
Incorporated or its affiliates, and the Clearing Broker might be deemed to have
a conflict of interest between the sequence in which such orders will be
transmitted to the trading floors of futures exchanges. In order to assure
impartial treatment for such orders, the Clearing Broker has an operating policy
of transmitting orders to the trading floors in the sequence received regardless
of which entity has placed the order. The Fund might enter into trades in which
the other party is Cargill, Incorporated or one of its affiliates. It is
possible that the hedging and cash operations of Cargill, Incorporated or
trading by its affiliates may adversely affect the Fund. Records of such trading
will not be made available to Limited Partners. It is possible that these
entities may take positions either similar or opposite to positions taken by the
Fund and that the Fund and these entities may compete for similar positions in
the futures markets. No officers, directors or employees of the Clearing Broker
or its affiliates will trade futures speculatively for their own accounts.
In the ordinary course of its business, the Clearing Broker is engaged in civil
litigation and subject to administrative proceedings which, in the aggregate,
are not expected to have a material effect upon its condition, financial or
otherwise, or the services it will render to the Fund. Neither the Clearing
Broker nor any of its principals have been the subject of any material
administrative, civil or criminal action within the five years preceding the
date of this Prospectus.
The Fund and the Clearing Broker have entered into a Commodity Brokerage
Agreement that provides that, for as long as the Fund maintains an account with
the Clearing Broker, the Clearing Broker will execute trades for the
64
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Fund upon instructions of the Trading Advisors and, effective the first business
day of the month beginning after the initial closing of this offering, will
receive a brokerage commission rate equal to $35 (plus NFA, exchange and
clearing fees and any differential for non-U.S. exchanges, if applicable) per
round turn trade. The Clearing Broker will reallow $20 of each round turn trade
commission to American Express Financial Advisors Inc. in its capacity as
Introducing Broker for the Fund, as described below under the heading "The
Introducing Broker." If in the future the Fund pays less than $35 for each round
trade, the Clearing Broker and the Introducing Broker may receive amounts in
proportions that differ from the current allocation. The Commodity Brokerage
Agreement is terminable on 60 days notice by either party. Should the Fund
choose not to renew this agreement with the Clearing Broker, no assurance may be
given that the Fund will be able to retain the brokerage services of another
clearing broker at the same commission rate. Further, no assurance is given that
the Clearing Broker or the Fund will continue the agreement at the same
commission rate. In addition, under the Amended and Restated Limited Partnership
Agreement, Limited Partners owning more than 50% of the outstanding Units may
cause the Fund to terminate the Commodity Brokerage Agreement. The Clearing
Broker is responsible for transaction execution and clearance of futures
contracts (and options, if traded) as well as for certain administrative duties
such as recordkeeping, transmittal of confirmation statements and calculating
equity balance and margin requirements for the Fund's account. That agreement
provides that the Clearing Broker will not be liable to the Fund except for bad
faith or negligence.
The Fund's assets are and will continue to be deposited with Cargill Investor
Services, Inc. in its capacity as the Fund's Clearing Broker. The Clearing
Broker pays monthly to the Fund interest on 100% of its average monthly net
assets on deposit at the Clearing Broker at a rate equal to 90% of the average
90 day Treasury bill rate for Treasury bills issued during that month. The
Clearing Broker receives and retains any increment of interest earned on the
assets of the Fund in excess of the amount paid to the Fund.
THE INTRODUCING BROKER
A summary of the operations of American Express Financial Advisors Inc. is set
forth under the caption "Plan of Distribution." American Express Financial
Advisors Inc. is compensated, in its capacity as Introducing Broker, at a rate
of $20 per round turn, which amount it receives from the Clearing Broker as a
reallowance of a portion of brokerage commissions which are paid by the Fund to
the Clearing Broker for executing trades for the Fund. See "The Clearing
Broker." American Express Financial Advisors Inc. receives such commissions for
its ongoing services to the Fund and to the Limited Partners. Such services
include (1) responding to inquiries from Limited Partners from time to time as
to the Net Asset Value of the Fund's Units; (2) providing information to the
Limited Partners concerning the futures markets and the Fund's activities; (3)
responding to inquiries of Limited Partners related to the Fund's monthly
account statements, annual reports, financial statements, and annual tax
information provided periodically to the Limited Partners; (4) providing
information to Limited Partners regarding redemptions of Units; (5) assisting
Limited Partners in redeeming Units; and (6) providing other services requested
from time to time by Limited Partners. Prospective investors should be aware
that, in receiving a portion of the commodity brokerage commissions generated by
the Fund and allocable to outstanding Units, American Express Financial Advisors
Inc. has a conflict in performing certain services to the Limited Partners,
particularly as to whether or not they should redeem Units. See "Conflicts of
Interest." A description of proceedings involving the Introducing Broker and its
principals appears under "Plan of Distribution."
THE FOREIGN CURRENCY BROKER
CIS Financial Services, Inc. ("CISFS") will act as the Fund's forward contract
broker and in that capacity will arrange for the Fund to contract directly for
forward transactions in foreign currencies. CISFS is a Delaware corporation that
is a wholly-owned subsidiary of CIS Holdings, Inc. CISFS is a direct participant
in the interbank market for foreign currencies. In that capacity it buys and
sells foreign currencies for its customers through direct counterparty
transactions with other participants in the interbank market. CISFS has
established substantial lines of credit with banks participating in the
interbank market, and CISFS will make those lines of credit available to the
Fund for its own currency transactions. In these transactions, the Fund will act
as a principal in each
65
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
transaction entered into with a bank, and CISFS will act only as the Fund's
agent in brokering these transactions. To date, the Fund has not yet engaged in
forward currency transactions. In the event that the Fund begins to trade
forward contracts, sufficient cash will be transferred from the Fund's Commodity
account with the Clearing Broker to CISFS. As of the date of this Prospectus the
Fund had no assets on deposit with CISFS.
GLOSSARY
The following glossary may assist the prospective investor in understanding the
terms used in this Prospectus. It should be noted preliminarily that commodity
futures contracts are made on or through a commodity exchange, and provide for
future delivery of agricultural and industrial commodities, foreign currencies
and financial instruments as well as for cash settlement for certain contracts.
Such contracts are uniform for each commodity and vary only with respect to
price and delivery time. A commodity futures contract to accept delivery (buy)
is referred to as a "long" contract; conversely, a contract to make delivery
(sell) is referred to as a "short" contract. A long contract may generally be
satisfied either by taking delivery of the commodity and paying the entire
purchase price therefor or by offsetting the contractual obligation prior to
delivery through the acquisition of a corresponding short contract on the same
exchange. Likewise, a short contract may generally be satisfied either by making
delivery of the commodity (usually by tendering warehouse receipts, shipping
certificates or similar documents of title) or by acquiring a corresponding long
contract on the same exchange. However, certain contracts must be settled in
cash by holders of both long and short contracts if they are not closed out by
acquisition of an offsetting contract prior to expiration of the contract.
Contracts based on stock indexes, for example, are settled in cash rather than
by delivery. Commodity exchanges provide a clearing mechanism to facilitate the
matching of offsetting trades. Until a commodity futures contract is satisfied
by delivery or offset it is said to be an "open" position.
Commodity futures contracts are but one category of commodity trading as it
currently exists in the United States. Two other categories of commodity
transactions are "spot" contracts and "forward" contracts. Both of these are
varieties of cash commodity transactions, as opposed to futures transactions, in
that they relate to the purchase and sale of specified actual physical
commodities. Whereas futures contracts are generally uniform except for price
and delivery time, cash commodity contracts may differ from each other with
respect to such terms as quantity, grade, mode of shipment, terms of payment,
penalties, risk of loss and the like. Spot contracts are generally cash
commodity contracts for the purchase and sale of a specific physical commodity
for immediate delivery. Forward contracts are cash commodity contracts for the
purchase and sale of a specific physical commodity for delivery at some future
time under terms and conditions specifically negotiated by the parties. Cash
commodity transactions may arise in conjunction with commodity futures
transactions. For example, if the holder of a long contract satisfies it by
taking delivery of the commodity, such holder is said to have a cash commodity
position. This cash position, if it is not to be used or processed by the
holder, may be sold through spot or forward contracts, or delivered in
satisfaction of a commodity futures contract. Other terms used herein include
the following:
AFFILIATED PURCHASER. A representative or employee of the Selling Agent or
certain of its corporate affiliates who purchase Units.
AFFILIATE. A person that directly or indirectly controls, or is controlled by,
or is under common control with another person; a person that directly or
indirectly owns, controls or holds power to vote 10% or more of the outstanding
voting securities of another person; a person 10% or more of whose outstanding
voting securities are directly or indirectly owned, controlled or held by
another person; any officer, director or partner of another person; or if a
person is an officer, director or partner, any second person for which the first
person acts in such capacity. The affiliates of the General Partners include
American Express Financial Advisors Inc., the Fund's Selling Agent and
Introducing Broker, and Cargill Investor Services, Inc., the Fund's Clearing
Broker, as well as their respective directors and officers.
CAPITAL CONTRIBUTION. The payment by a Limited Partner of the purchase price for
Units of Limited Partnership Interest or the payment by the General Partners for
Units of General Partnership Interest.
66
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CLEARING BROKER. A member of various organized commodity exchanges and of
related clearing houses of such exchanges. Services performed by a clearing
broker include the clearance and settlement of transactions, ordering executions
on the floor and various back-office type functions. Cargill Investor Services,
Inc. will act as the clearing broker for the Fund on exchanges of which it is a
member and, on exchanges of which it is not a member, will cause the Fund's
commodity transactions to be executed and cleared by clearing brokers of such
exchanges.
COMMISSION. The fee charged by a broker for executing and clearing a trade for a
customer. Effective the first business day of the month beginning after the
initial closing of this offering, the Fund pays a $35 commission (plus NFA,
exchange, and clearing fees) for each transaction executed for the Fund.
Commissions are charged to the Fund on a "round turn" basis, i.e., only upon the
closing of an open position. The Clearing Broker receives $15 (44%), and the
Introducing Broker $20 (56%), of each $35 round turn commission paid by the
Fund. For purposes of calculating the Fund's Net Asset Value, the full "round
turn" commission will be recognized at the time an open position is established.
COMMODITY. The term commodity refers to goods, wares, merchandise, produce and
in general everything that is bought and sold in commerce. Out of this large
class, certain commodities, because of their wide distribution, universal
acceptance and marketability in commercial channels, have become the subjects of
trading on various national and international exchanges located in principal
marketing and commercial areas. Traded commodities include grains such as wheat
and corn; soybeans and soybean products (meal and oil); foods such as livestock
and meat, frozen concentrated orange juice, sugar, cocoa and coffee; fibers such
as cotton and lumber; metals such as copper, silver, gold, and platinum;
financial instruments such as Eurodollars, United States Treasury bills and
corporate commercial paper; stock index contracts; foreign currencies such as
British pounds, Canadian dollars, Deutsche marks, Japanese yen, and Swiss
francs; and energy supplies such as petroleum and petroleum products (heating
oil).
COMMODITY FUTURES TRADING COMMISSION ("CFTC"). An independent regulatory agency
of the United States Government empowered to regulate accounts, agreements and
transactions relating to commodity futures contracts and other commodity
interests under the Commodity Exchange Act, as amended.
COMMODITY POOL OPERATOR. The sponsor or promoter of a commodity pool such as the
Fund. The General Partners are commodity pool operators registered under the
Commodity Exchange Act, as amended.
COMMODITY TRADING ADVISOR. One who for compensation analyzes or makes
recommendations with respect to commodities and commodity trading, or manages
commodity trading for others. The Trading Advisors are commodity trading
advisors registered under the Commodity Exchange Act, as amended.
DAILY PRICE FLUCTUATION LIMIT. The maximum permitted fluctuation (imposed by an
exchange and approved by the CFTC) in the price of a commodity futures contract
for a given commodity that can occur on a commodity exchange on a given day in
relation to the previous day's settlement price, which maximum permitted
fluctuation is subject to change from time to time by the exchange.
DELIVERY. The process of satisfying a commodity futures contract by transferring
ownership of a specified quantity and grade of a cash commodity to the purchaser
thereof or, in the case of futures contracts on stock indices, by cash payment.
EXCHANGE FOR PHYSICAL. An exchange for physical ("EFP") is a transaction
permitted under the rules of many futures exchanges in which two parties holding
futures positions may close out their positions without making an open,
competitive trade on the exchange. Generally, the holder of a short futures
position buys the physical commodity, while the holder of a long futures
position sells the physical commodity. The prices at which such transactions are
executed are negotiated between the parties.
FORWARD CONTRACT. See "Description of Commodity Trading--Commodity Markets."
FUTURES CONTRACT. See "Description of Commodity Trading--Commodity Markets."
HEDGING. See "Description of Commodity Trading--Hedgers and Speculators."
67
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
LIMIT ORDER. A trading order which sets a limit on either price or time of
execution or both. Limit orders (as contrasted with stop orders) do not become
market orders.
MARKET ORDER. A trading order to execute a trade at the most favorable available
price as soon as possible.
MARGIN. Good faith deposits with a broker to assure fulfillment of a purchase or
sale of a commodity futures contract. See "Description of Commodity
Trading--Margins."
MARGIN CALL. A demand for additional funds after the initial good faith deposit
required to maintain a customer's account in compliance with the requirements of
a particular commodity exchange or of a commodity broker.
NATIONAL FUTURES ASSOCIATION ("NFA"). The self-regulatory body of the futures
industry, established pursuant to the Commodity Exchange Act, as amended. The
NFA's functions include registration of futures industry professionals, rule
making, arbitration of certain types of disputes and membership audits. The
Clearing Broker, the Introducing Broker, the Trading Advisors and the General
Partners are members of the NFA. See "Description of Commodity Trading
Regulation."
NET ASSET VALUE. See "Charges to the Fund--Certain Definitions."
OPEN POSITION. A contractual commitment arising under a long contract or short
contract that has not been extinguished by an offsetting trade or delivery.
OFFERING EXPENSE CHARGE. Reimbursement for offering expenses (not including
selling commissions) paid to the General Partners out of the proceeds of the
offering.
POSITION LIMIT. The maximum number of commodity futures contracts in one
commodity (or one contract month of a commodity) that can be held or controlled
on a contract market at one time by one person or a group of persons acting
together. Position limits are imposed by the CFTC or the various commodity
exchanges.
PYRAMIDING. As commonly used in the commodity futures industry, the use of
unrealized profits in an existing position to provide margin for the acquisition
of additional commodity futures contracts in the same or a related commodity.
The Fund will not employ pyramiding as a trading technique. See "Trading
Policies."
ROUND TURN OR ROUND TURN TRADE. A term used in expressing brokerage commission
rates and indicating that a particular quoted rate applies to the sale and
offsetting purchase of a futures contract, or to the purchase and offsetting
sale of a futures contract.
SALES CHARGE. Selling fee paid to American Express Financial Advisors Inc., the
Selling Agent, for the sale of Units out of the proceeds of the offering.
SETTLEMENT PRICE. The price for commodity futures contracts in a particular
commodity established by a clearing house or exchange after the close of each
day's trading.
SPREAD. See Paragraph 9 under "Trading Policies."
STOP ORDER. An order given to a broker to execute a trade in a commodity futures
contract when the market price for the contract reaches the specified stop order
price. Stop orders are utilized in an attempt to protect gains or limit losses
on open positions. Stop orders become market orders when the stop order price is
reached.
UNITS OF GENERAL PARTNERSHIP INTEREST. Units representing the capital
contribution, or a portion thereof, of the General Partners to the Fund.
UNITS OF LIMITED PARTNERSHIP INTEREST. Units representing the interest of a
Limited Partner in the Fund. The General Partners, the Trading Advisors, the
Clearing Broker, the Selling Agent and Introducing Broker and their directors,
officers, shareholders and employees may purchase such Units.
UNREALIZED PROFIT OR LOSS. The profit or loss which would be realized on an open
position if it were closed out at the current settlement price.
68
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMODITY TRADING
(TO BE READ IN CONJUNCTION WITH "GLOSSARY," ABOVE)
The following general description of commodity trading does not purport to be a
complete explanation of the commodity markets or commodity regulation. Because
commodity trading is a rapidly developing economic activity, a potential
investor should consult with independent qualified sources of investment advice
before determining to invest in the Units.
COMMODITY MARKETS
Commodity futures contracts are but one category of commodity trading as it
currently exists in the United States. It is important to note that trading in
commodity futures contracts involves trading in standardized contracts for
future delivery of commodities and not the buying and selling of particular lots
of commodities. Futures contracts should be distinguished from two other
categories of commodity transactions: "spot" contracts and "forward" contracts.
Both of these are varieties of cash commodity transactions, as opposed to
futures transactions, in that they relate to the purchase and sale of specific
actual physical commodities. Whereas futures contracts are generally uniform
except for price and delivery time, cash commodity contracts may differ from
each other with respect to such terms as quantity, grade, mode of shipment,
terms of payment, penalties, risk of loss and the like. Spot contracts are
generally cash commodity contracts for the purchase and sale of a specific
physical commodity for immediately delivery. Forward contracts are cash
commodity contracts for the purchase and sale of a specific physical commodity
for delivery at some future time under the terms and conditions specifically
negotiated by the parties. For example, forward contracts on foreign currencies
may be purchased or sold for future delivery through banks. In such instances,
the bank generally acts as a principal in the transaction and includes its
anticipated profit and costs of the transaction in the price it quotes for such
forward contracts on foreign currencies.
Cash commodity transactions may arise in conjunction with commodity futures
transactions. For example, if the holder of a long contract satisfies it by
taking delivery of the commodity, such holder is said to have a cash commodity
position. This cash position, if it is not to be used or processed by the
holder, may be sold through spot or forward contracts, or delivered in
satisfaction of a commodity futures contract.
In addition, options on futures contracts are traded on commodity exchanges. An
option on a futures contract gives the purchaser of the option the right (but
not the obligation) to take a position at a specified price (the "striking,"
"strike" or "exercise" price) in the underlying futures contract. A "call"
option gives the purchaser the right to take a long position in the underlying
futures contract, and the purchaser of a "put" option acquires the right to take
a short position in the underlying contract. The purchase price of an option is
referred to as its "premium." The seller (or "writer") of an option is obligated
to take a futures position at a specified price if the option is exercised. In
the case of a call option, the seller must stand ready to take a short position
in the underlying futures contract at the striking price if the option is
exercised. A seller of a put option, on the other hand, stands ready to take a
long position in the underlying futures contract at the striking price if the
option is exercised.
A call option on a futures contract is said to be "in-the-money" if the striking
price is below current market levels and "out-of-the-money" if such price is
above current market levels. Similarly, a put option on a futures contract is
said to be "in-the-money" if the striking price is above current market levels
and to be "out-of-the-money" if the striking price is below current market
levels.
Options have limited life spans, usually tied to the delivery or settlement date
of the underlying futures contract. Some options, however, expire significantly
in advance of such date. An option that is "out-of-the-money" and not offset by
the time it expires becomes worthless. On certain exchanges, "in-the-money"
options are automatically exercised on their expiration date, but on others
unexercised options simply become worthless after their expiration date. Options
usually trade at a premium above their intrinsic value (the difference between
the market price for the underlying futures contract and the striking price). As
an option nears its expiration date, the market and intrinsic value typically
move into parity. The difference between an option's intrinsic and its market
value is referred to as the "time value" of the option.
69
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
The use of interrelated options and futures positions can provide an additional
means of risk management and permit a trader to retain a futures position in the
hope of additional appreciation in that position, while at the same time
allowing the trader to limit the possible adverse effects of a decline in the
position's value through purchasing an option permitting the offsetting of such
position at a pre-established price.
HEDGERS AND SPECULATORS
Two broad classifications of persons who trade in commodity futures contracts
are "hedgers" and "speculators." Hedgers use the futures markets for protection
against certain risks of price variation and include commercial interests who
market or process commodities as well as entities who manage other risks, such
as risks relating to interest rate fluctuation. For example, a seller or
processor is subject to the risk of market price fluctuations between the time
it contracts to sell or process a commodity and the time it must perform on the
contract. In such cases, at the time of the contract, it may simultaneously buy
futures contracts for the necessary equivalent quantity of the commodity it
needs or sell a futures contract for the equivalent commodity it intends to
market at some later date. For example, a cattle feeder may buy a corn contract
for delivery as much as several months ahead and simultaneously sell a cattle
contract that could be satisfied by the delivery of its herd, with the objective
of relieving itself of exposure to price variations in either its raw material
or ultimate market product. Similarly, a farmer may hedge against price
fluctuations between the day the crop is planted and the day it is ready for
delivery. If the futures price quoted for its anticipated date of delivery is
sufficient to cover its costs and leave a profit deemed adequate, the farmer can
sell the futures contract, and deliver the crop in the local market and close
out the futures position by purchasing a futures contract. In these examples,
the hedger may either make or take delivery in satisfaction of its futures
contract, or else close the position prior to delivery and buy or sell the
necessary equivalent amount of the physical commodity. (Certain futures
contracts, such as stock index futures contracts, are settled in cash rather
than by actual physical delivery of any underlying commodity). In either case,
the price of the commodity is established at the time the hedger initiates his
futures position. Thus, the commodity futures markets enable the hedger to shift
certain risks of price fluctuations to the speculator. The usual objective of
the hedger is to protect the profit which it expects to earn from its farming,
merchandising or processing operations, rather than to profit from its futures
trading.
The speculator, unlike the hedger, generally expects neither to deliver nor
receive the physical commodity. Instead the speculator risks its capital with
the hope of making profits from price fluctuations in commodity futures
contracts. The speculator is, in effect, the risk bearer and assumes the risks
which the hedger seeks to avoid. Speculators rarely take delivery of the
physical commodity but close out their futures positions by entering into
offsetting purchases or sales of futures contracts. Because the speculator may
take either a long or short position in the commodity futures market, it is
possible for it to make profits or incur losses regardless of the direction of
price trends. Futures trades made by the Fund will be speculative, rather than
for hedging purposes. Prospective investors should note that there are always
two parties to a commodity futures contract. If one party to such contract
experiences a gain on the contract, the other party to such contract experiences
an equal amount of loss. Thus, at most, only fifty percent of open futures
contracts can experience gain at any one time, without reference to the
commissions and other costs of trading which may reduce or eliminate such a
gain.
COMMODITY PRICES
The prices of commodities fluctuate rapidly and over wide ranges, and are listed
in major daily newspapers and financial journals. Except for the effect of
government policies and programs, commodity prices are generally determined by
the interaction of supply and demand. The market is subject to the many
psychological factors working on each buyer and seller, as well as to crop
conditions, deflation or inflation, strikes (especially in the transportation
and commodity storage industries), world conditions, war or threats of war,
interest rates and other factors. Any prediction of commodity prices is
necessarily subject to all of these and other factors, any one of which can
change at any time. Notwithstanding that current and correct information as to
substantially all factors is known, prices still may not react as predicted.
Some of the other factors which affect commodity prices include a country's
balance of payments (surplus or deficit), political stability, treaties,
government policies, international
70
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
monetary agreements and exchange controls. Under past federal economic
stabilization programs, maximum prices at which commodities could be traded were
imposed. Although no such regulations are currently in effect, no assurance can
be given that price restrictions will not be imposed again.
COMPETITION
Both the rules of the various exchanges and those of the CFTC are designed to
promote free competition and to restrict manipulative and distortive pricing
practices in the purchase and sale of commodities for future delivery. Countless
hedgers and speculators, many of whom have assets greatly in excess of the
assets of the Fund should the maximum amount of this offering be subscribed,
offer and bid for the available supply of traded commodities. Since the Trading
Advisors manage accounts other than the Fund's, those accounts will compete with
the Fund for the same contracts. See "Risk Factors--Reliance on Trading
Advisors." Thus, were market volume or liquidity to remain static or be reduced,
the Fund may experience greater difficulty in executing trades at a favorable
price or in executing all the contracts called for in an order. See "Conflicts
of Interest."
REGULATION
Commodity exchanges provide centralized market facilities for trading in futures
contracts relating to specified commodities. Among the principal exchanges in
the United States are the Chicago Board of Trade and the Chicago Mercantile
Exchange (including the International Monetary Market Division). Among the
principal foreign commodity exchanges are the London Metal Exchange and the
London International Financial Futures Exchange. In the trading of forward
contracts on foreign currencies with banks, the banks act as principals and may
cover their net long or short positions by trading with other banks in the
interbank market.
Congress has enacted legislation regulating commodity trading, commodity
exchanges, individual brokers who are members of such exchanges, and market
professionals and commodity brokerage houses engaged in commodity trading. The
controlling legislation, known as the Commodity Exchange Act, as amended
("Act"), is generally designed to promote the orderly and systematic marketing
of commodities and commodity futures contracts and to prevent fraud, speculative
excess and price manipulation. The Commodity Futures Trading Commission Act of
1974 amended the Act by making numerous changes in the law relating to commodity
futures contract trading and increasing the scope of governmental regulation
thereof. Under the 1974 amendments to the Act, the CFTC is the governmental
agency having responsibility for implementing the objectives of the Act and for
regulating commodity exchanges and commodity futures trading thereon.
The NFA is a non-governmental, self-regulatory body for the futures industry.
The objective of the NFA is to implement a comprehensive regulatory program for
the commodities industry, with special attention devoted to the uniform
regulation of the retail activities of its members. The NFA is generally
responsible for the registration of futures commission merchants, floor brokers,
introducing brokers, associated persons, commodity trading advisors and
commodity pool operators. Pursuant to a provision of the Commodity Exchange Act
permitting a registered futures association to require membership of CFTC
registrants in one such association, the by-laws of the NFA prohibit certain
members of the NFA from accepting futures orders from another person required to
be registered with the CFTC (except a direct customer) unless such other person
belongs to either the NFA or another registered futures association. The
Clearing Broker, the Introducing Broker, the General Partners and the Trading
Advisors are members of the NFA.
Under the Act, futures trading in all commodities traded on United States
exchanges is regulated. The Act provides that domestic commodity futures
exchanges must be designated as "contract markets" by the CFTC. Transactions in
spot or forward contracts or on foreign exchanges may not be within the
jurisdiction of the CFTC and to the extent the Fund engages in such transactions
it may be dealing in "unregulated" commodities. Forward contracts on foreign
currencies are traded through banks, which are regulated in various ways by
federal banking agencies, such as the Federal Reserve Board and the Comptroller
of the Currency, and state banking authorities.
71
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
The Act is implemented by rules and regulations promulgated by the CFTC and NFA
providing for, among other things: (i) the designation of contract markets; (ii)
the monitoring of commodity exchange rules; (iii) speculative position limits
(see "Glossary"); (iv) segregation of customers' funds; (v) minimum financial
requirements; (vi) recordkeeping and reporting requirements; and (vii)
registration and periodic audits of commodity market professionals, including
floor brokers, brokerage houses ("futures commission merchants"), introducing
brokers, commodity trading advisors, commodity pool operators and their
associated persons. In addition, the CFTC has administrative authority to: (i)
hear and adjudicate customer complaints against all individuals and firms
registered or subject to registration under the Act in "reparations
proceedings;" (ii) seek injunctions and restraining orders; (iii) issue orders
to cease and desist; (iv) initiate disciplinary proceedings; (v) revoke or
suspend registrations; (vi) levy fines; and (vii) require exchange action in the
event of market emergencies.
The Act makes unlawful any device, scheme or artifice to defraud any current or
prospective client or participant in a commodity pool and prohibits any
transaction, practice or course of business which operates as a fraud or deceit
upon any current or prospective client or pool participant. The CFTC and NFA
have extensive jurisdiction to regulate commodity trading advisors and commodity
pool operators, and have adopted a comprehensive scheme for the regulation of
their activities. In accordance with the Act, the Trading Advisors are
registered as commodity trading advisors and the General Partners are registered
as commodity pool operators. SUCH REGISTRATIONS IN NO WAY IMPLY THAT THE CFTC OR
NFA HAS APPROVED THE QUALIFICATIONS OF SUCH ENTITIES TO ACT AS DESCRIBED IN THIS
PROSPECTUS OR THE BUSINESS ACTIVITIES ENGAGED IN BY SUCH ENTITIES. The CFTC
requires registered commodity trading advisors and commodity pool operators to
make filings with the CFTC setting forth their form of organization and the
identity of their management and controlling persons. The Act authorizes the
CFTC and NFA to require and review books, records and documents prepared by
commodity trading advisors and commodity pool operators. The CFTC requires a
commodity pool operator to keep accurate, current and orderly records with
respect to each pool it operates. The Act authorizes the NFA to deny, suspend or
revoke the registration of a commodity trading advisor or a commodity pool
operator if it finds that such person's trading practices tend to disrupt
orderly market conditions, that such person or any controlling person thereof
has been subject to certain sanctions or is subject to an order denying such
person trading privileges on any exchange and in certain other circumstances. If
the registration of both General Partners were to be suspended or terminated,
the Fund would no longer be able to trade until a substitute general partner or
partners could be duly elected and registered as a commodity pool operator(s).
If the registration of a Trading Advisor were similarly suspended or terminated,
that Trading Advisor would no longer be permitted by the General Partners to
advise the Fund.
Under currently effective CFTC rules, the General Partners are obligated to make
specific disclosures to prospective investors, including disclosures concerning
the risks involved in investing in the Fund and concerning the past trading
performance of the Fund; to segregate the Fund's monies and assets in a separate
account or accounts; to maintain certain books and records; and to render
monthly account statements and an annual report to the Limited Partners. Upon
request by the CFTC, the names and addresses of the Limited Partners in the Fund
would be required to be furnished to the CFTC, along with copies of all
transactions with, and reports and other communications to, the Limited
Partners.
Cargill Investor Services, Inc., the Fund's commodity broker, is subject to
regulation by and registration with the CFTC as a "futures commission merchant."
The CFTC requires all futures commission merchants to meet and maintain
specified fitness and financial requirements, comply with certain trading
requirements, account separately for all customers' funds and positions and
maintain specified books and records on customer transactions open to inspection
by the representatives of the CFTC. Should the registration of Cargill Investor
Services, Inc. as a futures commission merchant be suspended or terminated, the
Fund would no longer be able to maintain its account with Cargill Investor
Services, Inc. and a new clearing broker would be retained by the General
Partners.
Limited Partners are afforded certain rights to institute reparations
proceedings under the Act. The CFTC has adopted rules implementing the
reparation provisions of the Act which provide that any person may file a
reparation claim with the CFTC for violation of the Act, or rules, regulations
and orders promulgated thereunder,
72
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
against a floor broker, a futures commission merchant and its associated
persons, a commodity trading advisor or a commodity pool operator. Limited
Partners are also afforded certain rights under the rules of the NFA concerning
arbitration of complaints or grievances against NFA members.
Commodity exchanges have promulgated rules and regulations to control and
regulate their members and clearing houses as well as the trading conducted on
their floors. Examples of exchange regulations include establishment of initial
and maintenance margins, speculative position limits, limits on daily price
fluctuations and contract specifications. Such rules and regulations relating to
terms and conditions of contracts of sale or to other trading requirements,
other than the setting of margins, must be approved by the CFTC and, under
certain circumstances, may be required by the CFTC to be amended or modified.
Most United States commodity exchanges (but currently not certain non-U.S.
exchanges, or banks in the case of forward contracts on foreign currencies)
limit the amount of fluctuation in commodity futures contract prices during a
single trading day by regulations. These regulations specify what are referred
to as "daily price fluctuation limits" or "daily limits." The daily limits
establish the maximum amount the price of a futures contract may vary either up
or down from the previous day's settlement price at the end of the trading
session. Once the daily limit has been reached in a particular commodity, no
trades may be made at a price beyond the limit. Positions in the commodity could
then be taken or liquidated only if traders are willing to effect trades at or
within the limit during the period for trading on such day. Because the "daily
limit" rule only governs price movement for a particular trading day, it does
not limit losses. In the past, futures prices have moved the daily limit for
numerous consecutive trading days and thereby prevented prompt liquidation of
futures positions on one side of the market, subjecting commodity futures
traders holding such positions to substantial losses for those days. See "Risk
Factors-- Commodity Futures Markets May Be Illiquid."
The CFTC and domestic exchanges have established speculative position limits,
often referred to as "position limits," on the maximum net long or net short
position which any person, or group of persons acting in concert, may hold or
control in commodity futures contracts. See "Glossary." Speculative position
limits are designed to prevent excessive speculation and attempted manipulation
of a market. If the CFTC determines that a market emergency exists, it is
authorized, among other things, to set retroactively speculation position limits
that apply to a position acquired prior to the date of that action. These limits
are subject to certain exemptions, such as bona fide hedging transactions. The
position limits currently established by the CFTC include those applicable to
grains, soybeans, and cotton. In addition, domestic exchanges have established
position limits with respect to other commodities traded on those exchanges.
Certain New York exchanges set limits on the total net position that may be held
by a clearing broker. Under the Act, the CFTC has jurisdiction to establish
position limits with respect to all commodities traded on commodity futures
exchanges located in the United States. The CFTC adopted a rule which requires
commodity exchanges to impose position limits on all commodities traded on the
exchange (other than commodities subject to federally established speculative
limits). All commodity accounts, including that of the Fund, controlled by a
Trading Advisor and its affiliates are combined for speculative position limit
purposes. It is possible that the Fund's account might be aggregated with other
accounts that might hereafter be managed by the General Partners or their
officers, directors, affiliates or shareholders for purposes of determining
speculative position limits. If required or effected, such aggregation of
commodity futures positions could adversely affect the operations and
profitability of the Fund. See "Risk Factors--Effects of Speculative Position
Limits."
Although the CFTC is prohibited by statute from regulating trading on foreign
commodity markets, the CFTC has adopted rules with respect to the regulation of
persons outside the U.S. engaging in foreign futures and options transactions
(i.e., transactions in futures and options on non-U.S. exchanges) with persons
in the United States and has also published a statement concerning its
jurisdiction in the foreign currency forward market. Previously, the marketing
of foreign futures in the United States was substantially unregulated while the
sale of foreign options was prohibited. These relatively new rules permit, for
the first time since 1978, foreign options to be offered and sold in the United
States, subject to prior CFTC approval. Notwithstanding the foregoing, the CFTC
does not regulate the activities of foreign exchanges or the cash forward
market. See "Risk Factors" for the risks associated with the foregoing
transactions.
73
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
The regulation of commodities transactions in the United States is a rapidly
changing area of law and the various regulatory procedures described herein are
subject to modification by United States Congressional action, changes in CFTC
rules and amendments to exchange regulations and NFA regulations. For example,
given the growing proliferation of stock index products, there is a tendency for
stock index trading to affect the stock market itself. As a result, it has been
suggested that various commodities and securities exchanges amend their
contracts to try and cut down on stock index-related price movements,
particularly when various stock index contracts expire simultaneously. Exchanges
also may be required to lower their speculative positions limits during the
trading days immediately prior to contract expirations, and also may be required
to alter their price settlement procedures. It is also possible that additional
regulatory controls will be imposed in the future by the CFTC and/or the SEC.
The Act also gives the various states powers to enforce its provisions and the
regulations of the CFTC.
The CFTC by law must be reauthorized periodically by Congress or lapse. On April
21, 1995, a new appropriations bill was enacted which reauthroized the CFTC
through fiscal year 2000.
The CFTC does not regulate futures trading on exchanges outside of the United
States (see "Commodity Futures Trading Commission Foreign Futures and Foreign
Options Risk Disclosure Statement"), forward contracts with banks or
transactions in physical commodities generally. No regulatory scheme currently
exists in relation to the foreign currency forward market, except for regulation
of general banking activities and exchange controls in the various jurisdictions
where trading occurs or in which the currency originates. Moreover, neither
foreign commodity exchanges nor foreign banks currently are subject to
regulation by the CFTC or any other United States governmental agency, and may
not be subject to any regulation. Foreign commodity exchanges differ in certain
respects from their United States counterparts. In contrast to the United States
exchanges on which the exchange or an affiliated clearing corporation assumes
the opposite side of each transaction, certain foreign exchanges are "principal"
markets where trades remain the liability only of the traders involved.
Some foreign exchanges also have no position limits, with each dealer
establishing the size of the positions it will permit traders to hold. To the
extent that the Fund will engage in transactions on foreign exchanges, it will
be subject to the risk of fluctuations in the exchange rate between the native
currencies of any foreign exchange on which it trades and the United States
dollar (which risks may be hedged by the Fund) and the possibility that exchange
controls could be imposed in the future. For example, trading in stock index
contracts on the Hong Kong Exchange was suspended for a considerable period as a
result of the market turbulence of October 1987 (considerably longer than the
suspensions experienced in the United States stock index trading). There is no
limitation on daily price moves on forward contracts in foreign currencies
traded through banks, brokers or dealers. While margin calls are not required by
foreign exchanges, the Fund may be subject to daily margin calls in foreign
markets. The Fund may in the future engage in option transactions on foreign
exchanges.
The Fund, under current law, is not subject to registration as an investment
company with the SEC under the Investment Company Act of 1940. See "RISK
FACTORS--ABSENCE OF REGULATION APPLICABLE TO SECURITIES MUTUAL FUNDS AND THEIR
ADVISORS." Generally, that law and the regulations promulgated pursuant to it
apply to "MUTUAL FUNDS" and comparable investment vehicles which trade and
invest in securities, e.g., stocks and bonds. Because the trading activities of
the Fund will be restricted, pursuant to its trading policies, to commodity
interests, it is not subject to regulation as an investment company. See
"Trading Policies." However, the Fund is subject to regulation under the
Securities Exchange Act of 1934, and regulations promulgated thereunder, which
are administered by the SEC. The Fund is subject to certain continuing
disclosure and periodic reporting requirements that provide for the preparation
of quarterly and annual reports, as well as reports dealing with any material
modifications in or development related to the Fund's organization or
activities. All of these reports required to be filed with the SEC are publicly
available and may be inspected without charge at the public reference facilities
maintained by the SEC in Washington, D.C., and copies thereof may be obtained
from the SEC at its office in Washington, D.C. upon payment of the prescribed
fees.
74
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
MARGINS
Margins are good faith deposits which must be deposited with a broker in order
to initiate or maintain an open position in a commodity futures contract. When
commodity futures contracts are traded, both buyer and seller are required to
post margins with the brokers handling their trades as security for the
performance of their buying and selling undertakings and to offset losses in
their trades due to daily fluctuations in the markets. Minimum margins are set
by commodity exchanges and generally range from less than 1% to 20% of the value
of the commodity underlying the contract. Because of these low margins, price
fluctuations occurring in commodity futures markets may create profits and
losses which are greater than are customary in other forms of investment or
speculation.
Margins with respect to transactions on certain foreign exchanges generally are
established by member firms rather than by the exchanges themselves. However, in
the case of International Commodity Clearing House Limited ("ICCH") cleared
transactions, ICCH (as the independent clearing house) requires margins and
deposits from its members and such members generally require their clients to
put up amounts at least equal to the ICCH charges.
Brokerage firms, including the Clearing Broker, carrying accounts for traders in
commodity futures contracts may increase the amount of margin required as a
matter of policy in order to accord further protection for themselves. Margin
requirements may be altered from time to time by the Clearing Broker and can be
made to apply retroactively at the discretion of the Clearing Broker. In
addition, applicable margin requirements are modified from time to time by
commodity exchanges.
If the Fund trades forward contracts on foreign currencies through banks, the
Foreign Currency Broker will require margin from the Fund with respect to such
trading. The margin (or collateral) levels established by CISFS are higher than
those required for foreign currency futures contracts on the International
Monetary Market of the Chicago Mercantile Exchange. This is because the risk is
different for forward contracts.
Unlike futures trading, there are no clearing houses which guarantee the
performance of each trade. There is a one to one counterparty risk between the
contracting parties. Further, the market risk in an unregulated market is
different from that in a regulated, standard contract market.
TRADING POLICIES
The objective of the Fund is to achieve substantial appreciation of its assets
through speculative trading in commodity interests, including futures contracts,
forward contracts, physical commodities and related options thereon on major
United States and certain foreign commodity exchanges and in the interbank
forward markets. Commodity interests may include any instruments and items which
are now, or may hereafter be, the subject of futures trading, such as physical
commodities, Treasury bills, mortgage-backed securities, foreign currencies,
options and indexes on securities. The Fund will attempt to accomplish its
objective by following the Trading Policies set forth below:
(i) Fund assets will be invested only in futures contracts which are traded in
sufficient volume to permit, in the independent opinions of the Trading
Advisors, ease of taking and liquidating positions. The Trading Advisors may at
any time independently determine to expand or reduce the number of commodity
interests traded by that portion of the Fund's assets under their control.
(ii) No Trading Advisor will acquire on behalf of the Fund additional positions
in any commodity if such additional positions, when added to the existing open
positions initiated by the Trading Advisor, would result in a net long or short
position for that commodity requiring as margin or premiums more than 15% of the
Fund's assets allocated to that Trading Advisor's management. For purposes of
implementing this policy, soybeans will be treated as one commodity and soybean
oil and soybean meal will be treated together as one commodity.
(iii) The Fund will not normally be as highly leveraged as permitted in the case
of an investment by an individual. On the basis of information supplied by the
Trading Advisors, the General Partners estimate that between 20% and 60% of the
Fund's assets will normally be committed as initial margin (although the
percentage may be more or
75
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
less than such range from time to time). This requirement may be changed and, to
reduce the Clearing Broker's risk, additional restrictions on the leverage of
the Fund may be imposed by the Clearing Broker without notice at any time.
(iv) No Trading Advisor will acquire on behalf of the Fund additional positions
in any commodity interest if such additional positions, when added to the
existing open positions initiated by the Trading Advisor, would result in
aggregate net long or short positions (including any forward contracts) for all
commodities requiring as margin or premiums more than 66 2/3% of the Fund's
assets allocated to that Trading Advisor's management.
(v) The Fund will not generally enter into an open position for a particular
commodity during a delivery month for that commodity. However, the Fund may
occasionally make or accept delivery of a commodity. This may occur because a
Trading Advisor's trading strategies may, from time to time, identify certain
trends which occur in delivery months which can be taken advantage of by the
Fund. The Fund may take delivery of a commodity and take a corresponding short
position in the commodity by selling futures contracts for the commodity. The
Fund will not engage in cash commodity transactions, except as indicated above,
unless the cash position is hedged.
(vi) The Fund will 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 a related commodity. However, a Trading Advisor may take into account the
Fund's open trade equity in assets of the Fund in determining whether to acquire
additional commodity futures contracts on behalf of the Fund.
(vii) The Fund will not purchase, sell or trade in securities or write,
purchase, sell or trade in options to purchase or sell securities, commodity
futures contracts or physical commodities unless such options have been approved
for trading on a designated contract market by the CFTC. The Fund may trade in
foreign options if permitted under the Commodity Exchange Act, as amended, and
CFTC regulations, but only when and to the extent authorized in writing by the
General Partners to the Trading Advisors. The Fund may trade in futures
contracts on securities.
(viii) The Fund will not generally utilize borrowings, except for short-term
borrowings where the Fund takes delivery of any cash commodity or to the extent
that the Fund's Clearing Broker obtains lines of credit for the trading of
forward contracts with banks. The Fund will not make any loans.
(ix) A Trading Advisor may, from time to time, employ trading techniques such as
spreads or straddles on behalf of the Fund. The term "spread" or "straddle"
describes a transaction involving the simultaneous buying and selling of
commodity interests dealing with the same or a different commodity interest but
involving different delivery dates or markets, and in which the trader expects
to earn profits from a widening or narrowing movement of the two prices of the
commodity interests. See "Federal Income Tax Considerations--Partnership
Taxation: Allocation of Fund Profits and Losses" for a discussion of the tax
effects of such trading.
(x) The Fund may trade in futures contracts on foreign currencies through
foreign and domestic commodity exchanges, including the International Monetary
Market Division of the Chicago Mercantile Exchange. The Fund may also establish
positions in foreign currencies through banks or in the interbank market.
Forward contracts on foreign currencies will be transacted only with banks
having in excess of $100,000,000 in combined capital and surplus. No specific
limitation on the percentage or amount of forward contracts, if any, engaged in
by the Fund has been imposed.
(xi) The Fund's assets will not be commingled with the assets of any other
person; funds used to satisfy margin requirements will not be considered
commingled for this purpose.
(xii) No Trading Advisor to the Fund will be permitted to engage in churning the
Fund's assets (i.e., direct excessive trading for the purpose of generating
brokerage commissions without regard for the best interests of the Fund).
76
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(xiii) No rebates or give ups may be paid to or received by the General
Partners, nor may the General Partners participate in any reciprocal business
arrangements which could circumvent this prohibition, but retention of Cargill
Investor Services, Inc. to act as the Fund's clearing broker and the retention
of American Express Financial Advisors Inc. to act as the Fund's introducing
broker shall not be deemed to violate this prohibition.
If Net Asset Value per Unit (as defined under "Charges to the Fund-Certain
Definitions") declines to less than $125 (after adding back any distributions
made previously by the Fund to the Limited Partners), at the close of business
on any trading day, the Fund will attempt to close out all open positions as
expeditiously as possible and suspend trading. No assurance can be or is given
that the Fund would be able to close out all open positions without incurring
substantial additional losses.
Within ten business days after the date of suspension of trading due to a
decrease in Net Asset Value per Unit below $125 (after adding back any
distributions), the General Partners must either give notice to the Limited
Partners of their intention to withdraw from the Fund, or declare a business day
within 30 business days from the date of suspension of trading to be a special
redemption date. Notice of a special redemption date must be sent to each
Limited Partner at least ten business days before such date. Any Limited Partner
who elects to have his or her Units redeemed on a special redemption date will
receive from the Fund for each Unit redeemed an amount equal to the Net Asset
Value per Unit determined as of the close of business on the special redemption
date. See "Redemptions." If after the special redemption date the Fund's Net
Asset Value is at least $500,000, it will resume trading, unless the General
Partners elect to withdraw from the Fund. Notwithstanding the foregoing, the
Fund will terminate in the event of a decline of the Fund's Net Asset Value to
less than $500,000 as of the close of business on any trading day. In addition,
each Limited Partner will be notified within seven business days from the date
of any decline in the Net Asset Value per Unit to less than 50% of the Net Asset
Value per Unit as of the last preceding business day on which the Fund's Net
Asset Value was calculated, and shall at that time be provided with a
description of Limited Partners' voting rights.
Material changes in the Trading Policies described above must be approved by a
vote of a majority of the outstanding Units (including Units held by
representatives and employees of the Selling Agent and of its corporate
affiliates but not including Units held by the General Partners or their
corporate affiliates). A change in commodities traded, however, will not be
deemed to be a material change in the Trading Policies. In the event the General
Partners shall, in their sole discretion, using their prudent business judgment,
determine that any trading instructions issued by a Trading Advisor violate the
Trading Policies of the Fund, then the General Partners may negate such trading
instructions.
The Fund will conform in all respects to the rules, regulations and guidelines
of the commodity exchanges on which its trades are executed. Neither the Chicago
Board of Trade nor any other commodity exchange will endorse or approve any
program, practice or offering of the Fund, or of any other commodity pool.
Trading may take place on any United States commodity exchange which has
received designation as a contract market by the CFTC. It is currently
anticipated that a substantial portion of the Fund's trading will take place on
the Chicago Board of Trade, the Chicago Mercantile Exchange, Commodity Exchange,
Inc., the New York Mercantile Exchange, the New York Coffee, Sugar & Cocoa
Exchange, Inc., New York Futures Exchange and the New York Cotton Exchange. In
addition, trading may take place on foreign commodity exchanges which have not
received designation as contract markets by the CFTC.
THE TRADING ADVISORS
Two firms have acted as the Fund's commodity trading advisors since the Fund
began trading: John W. Henry & Co., Inc. ("JWH") and Sabre Fund Management
Limited ("Sabre"). Collectively, the two advisors are sometimes referred to as
the "Trading Advisors." The Trading Advisors were selected by the General
Partners on the basis of their review of the past performance of each of the
Trading Advisors and their respective trading methods. Each Trading Advisor was
initially allocated one half of the Fund's assets to manage. On February 7,
1991, the Fund's assets were reallocated in order to adjust the then-current
allocation so that each Trading Advisor had an equal portion of the Fund's
assets to manage. As of the date of this Prospectus John W. Henry & Co., Inc.
managed
77
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
approximately 60% of the Fund's assets and Sabre Fund Management Limited managed
approximately 40% of the Fund's assets. The General Partners currently intend
that each Trading Advisor be allocated an equal portion of the Fund's assets
raised in connection with this offering. The Trading Advisors are independent
commodity trading advisors and are not affiliated with each other, either
General Partner, the Clearing Broker, the Introducing Broker or the Fund. Each
Trading Advisor will direct trading for the Fund completely independently of the
other Trading Advisor, and will have no knowledge of trading decisions being
made by the other Trading Advisor. Each Trading Advisor is registered under the
Commodity Exchange Act, as amended, as a commodity trading advisor, and is a
member in good standing of the NFA. Although a Trading Advisor or its principals
may purchase Units in the Fund, there are no arrangements or commitments for any
of them to purchase Units.
There have been no material civil, administrative or criminal proceedings
against either of the Trading Advisors or their respective principals pending,
completed or on appeal during the five years preceding the date of this
Prospectus.
Each of the Trading Advisors is described in the following sections of the
Prospectus. Following the description of each Trading Advisor is a summary of
the trading methods employed by it. Those summaries have been developed by the
Trading Advisors, and accordingly represent only those aspects of each trading
method deemed by the respective Trading Advisors to be worthy of emphasis. In
addition, a summary of a Trading Advisor may include information about certain
aspects of the operation or implementation of its trading program which may in
practice be similar to the trading program of the other Trading Advisor but are
not mentioned or emphasized in that Trading Advisor's summary. The Trading
Advisors' respective trading methods are proprietary and confidential, and
therefore the summaries presented hereafter are general and do not include
specific details about them. In addition, the Trading Advisors engage in ongoing
research concerning the commodity interests markets and may modify and refine
their trading methods from time to time. As a result of such modifications, the
trading methods that might be used by the Trading Advisors in the future in
directing trading for the Fund might differ from those presently used by them.
Investors in the Fund will not be advised of such changes in trading methods.
Trading methods require the exercise of judgment by each Trading Advisor.
Judgment is required in the evaluation of the trading methods used by each
Trading Advisor, in the evaluation and consideration of modifications of the
trading methods from time to time, and in the implementation of the trading
methods. The decision not to trade certain commodity interests or not to make
certain trades may at times result in missing price moves and, therefore,
profits of great magnitude, which other trading managers who are willing to
trade those commodity interests may be able to capture. There can be no
assurance that the trading methods employed by either Trading Advisor will
result in profitable trading for the Fund.
THE ADVISORY CONTRACT
The Fund has entered into an Advisory Contract with the Trading Advisors. The
contract provides that the Trading Advisors will have sole responsibility for
determining transactions in commodity interests with respect to Fund assets. The
General Partners currently intend that each Trading Advisor will be allocated an
equal portion of the Fund's assets raised in connection with this offering, but
at any time thereafter the General Partners, in their sole discretion, may
reallocate assets among the Trading Advisors or among other trading advisors
which may be appointed by them. The Advisory Contract was entered into on March
27, 1987 and has been renewed each year since then. On January 23, 1992, and
again on April 30, 1996, the Advisory Contract was amended to provide for the
continuation of the Trading Advisors' services to the Fund. The current Advisory
Contract, as amended, extends to December 31, 1996, with automatic renewal for
three additional one-year terms. The Advisory Contract may also be terminated by
the General Partners upon notice for cause. A Trading Advisor may terminate the
Advisory Contract if certain specified events occur, or on 60 days' written
notice to the General Partners during any renewal term. John W. Henry & Co.,
Inc. may terminate the Advisory Contract at any time upon 60 days written notice
to the General Partners. The Advisory Contract will terminate automatically if
the Fund is terminated.
No assurance is given that, after the expiration or termination of the Advisory
Contract, the Fund will be able to retain the advisory services of the same
Trading Advisors or that if such services are available they will be on the
78
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
same terms as those of the initial Advisory Contract. The General Partners may,
in their sole discretion, employ additional trading advisors or replace existing
trading advisors. Upon termination or expiration of the Advisory Contract, the
Fund may retain other advisors whose compensation may be determined without
regard to the previous performance of the Fund, or it may renew its Advisory
Contract with the Trading Advisors on the same or different terms. The
compensation payable by the Fund to each Trading Advisor for its services under
the Advisory Contract is described under the caption "Charges to the Fund."
A Trading Advisor, its principals and employees will not be liable to the Fund,
its partners, any of its successors or assigns or the General Partners except by
reason of acts or omissions due to bad faith, misconduct, negligence or for not
having acted in good faith in the reasonable belief that its actions were taken
in, or not opposed to, the best interests of the Fund. The Fund will indemnify a
Trading Advisor, its principals and employees to the full extent permitted by
law for any liability incurred in connection with any acts or omissions related
to such Trading Advisor's management of its allocable share of Fund assets,
provided that there has been no judicial determination that such liability was
the result of negligence, misconduct or bad faith nor any judicial determination
that the conduct which was the basis for such liability was not done in a good
faith belief that it was in, or not opposed to, the best interests of the Fund.
Any such indemnification involving a material amount, unless ordered or
expressly permitted by a court, will be made by the Fund only upon the opinion
of mutually acceptable independent legal counsel that the Trading Advisor has
met the applicable standard of conduct described above. A Trading Advisor could
be liable to the Fund for any excessive trading directed by it for the Fund if
one of the above standards for liability were violated. However, it may be
difficult to establish as a basis for liability that trading has been excessive
due to the vagueness of the standards defining excessive trading; most cases
that have addressed the issue of excessive trading have dealt with cases in
which the party with discretionary trading authority over an account also was
compensated (at least in part) for such service by receipt of a portion of
commodity brokerage commissions payable by that account, so that the trader had
a direct financial incentive to engage in heavy trading. In contrast, the
Trading Advisors are not affiliated with the Clearing Broker and will not
receive any compensation based on or related to the brokerage commissions
payable by the Fund. In addition, it may also be difficult to establish that
trading directed for the Fund has been excessive due to the broad trading
discretion granted to the Trading Advisors in the Advisory Contract.
The Advisory Contract prohibits a Trading Advisor from receiving any commission,
compensation, remuneration or payment whatever from any broker with whom the
Fund carries any account by reason of the Fund's transactions. The Fund will pay
each Trading Advisor a quarterly incentive fee and a monthly management fee as
described under "Charges to the Fund."
Each Trading Advisor and its principals, affiliates and employees shall be free
to trade for their own accounts and to manage other commodity accounts during
the term of the Advisory Contract and to use the same information and trading
strategy which the Trading Advisor obtains, produces or utilizes in the
performance of services for the Fund. See "Risk Factors--Reliance on Trading
Advisors" and "Conflicts of Interest--Other Commodity Pools and Accounts."
Limited Partners will not be allowed to inspect the records of such accounts in
light of the confidential nature of such records. However, the Advisory Contract
provides that the General Partners may inspect all the records of a Trading
Advisor related to commodity trading to determine whether the Fund has been
treated equitably with other accounts of the Trading Advisor. The General
Partners shall have the right to receive from a Trading Advisor pertinent
information on the overall performance of all of the Trading Advisor's accounts
for the purpose of confirming that the Fund has been treated equitably in light
of the Trading Advisor's trading for other accounts during the term of the
Advisory Contract, including information as to priorities of order entry
assigned by the Trading Advisor to all its accounts and any modifications which
might have to be made to the Trading Advisor's trading decisions as a result of
the application of speculative position limits to its accounts. See "Risk
Factors--Reliance on Trading Advisors" and "Description of Commodity
Trading--Regulation."
79
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
COMMODITY TRADING METHODS IN GENERAL
This section contains a general description of commodity trading methods to
assist the reader in understanding the subsequent discussions of the trading
methods used by each Trading Advisor. Because of the general nature of this
section, it should not be inferred that any element of a trading system
described here will necessarily be followed by either of the Trading Advisors.
Commodity futures traders basically rely on one of two types of
analysis--"technical" or "fundamental"--for their trading decisions. Technical
analysis is based on the theory that a study of the markets themselves will
provide a means of anticipating the external factors that affect the supply and
demand of a particular commodity in order to predict future prices. On the other
hand, fundamental analysis relies on a study of those external factors. As an
example with respect to an agricultural commodity, some of the fundamental
factors that affect the supply of soybeans include the acreage planted, crop
conditions (drought, flood, disease, etc.), labor disputes affecting planting,
harvesting, and distribution, and the previous year's crop carryover. The demand
for soybeans consists of domestic usage and exports, which are affected by
general world economic conditions and the cost of soybeans in relation to the
cost of competing food products. As an example with respect to currency, some of
the fundamental factors that affect the demand for a currency, e.g., British
pounds, include the inflation and interest rates of the currency's domestic
market, exchange controls, and that country's balance of trade, business, and
political stability. The supply of a currency can be determined by, among other
things, government spending, credit controls, domestic money supply and prior
years' trade balances.
Technical analysis of the markets generally includes a study of, among other
things, the actual daily, weekly and monthly price fluctuations, volume
variations, or changes in open interest, utilizing charts, computers, or a
combination of the two for analysis of these items. Such approaches to the
commodity futures markets may use a series of mathematical measurements and
calculations designed to monitor market activity for the particular strategies
used. Trading recommendations are based on signals generated by charts, manual
calculations or computers. As an example with respect to a financial commodity,
one set of procedures might evaluate the following factors, among others, on a
daily basis: (1) the price trends of a financial commodity and the levels at
which to initiate new positions and terminate old positions; (2) the volatility
that the particular financial commodity has displayed in the past; (3) the
condition of the market of the financial commodity being traded in terms of
whether it is a trending market or an erratic and non-trending market; and (4)
the state of the financial commodity markets in terms of determining the proper
points for initiating new positions and allowing increases in existing
commitments.
At the end of each trading day, a trader using a technical trading system
generally obtains settlement and other price information for each commodity
which its system follows. This price information is used to generate a series of
trading signals. If a trading system is maintained on a computer, the prices
will be entered into the computer and a program, which consists of a series of
mathematical calculations. If the trading system does not operate on a computer,
the trader will manually apply such information to a series of rules or
equations which constitute its trading system. Certain trading systems signal
the trend in each commodity followed and indicate any changes in such trend,
thus permitting the trader to adjust his or her positions accordingly. In other
types of trading systems, the trading system will indicate an exact price at
which to open and close positions for each commodity followed and the trader
will attempt to enter or exit positions in accordance with such prices.
JOHN W. HENRY & CO., INC.
John W. Henry & Co., Inc. ("JWH"), a California corporation, is a United States
based global management firm. JWH is recognized as a leader in managing capital
in futures, interest rate, and foreign exchange markets for international banks,
brokerage firms, pension funds, institutions, and high-net-worth individuals.
JWH trades numerous contracts on a 24-hour basis in the U.S., Europe and Asia,
and has grown to be one of the largest advisors in the industry, managing over
$1.3 billion in client capital.
80
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
John W. Henry & Company began managing assets in 1981 as a sole proprietorship
and was incorporated as John W. Henry & Co., Inc., a California corporation, in
1982 to conduct business as a commodity trading advisor. JWH's registration as a
commodity trading advisor became effective in February 1982 and its registration
as a commodity pool operator became effective in July 1989. JWH is a member of
the NFA in these capacities. The sole shareholder of JWH is The John W. Henry
Trust dated July 27, 1990. The offices of JWH are located in Boca Raton, Florida
and Westport, Connecticut. Various individuals who are both principals and
non-principals play a part in making trading decisions for JWH.
Mr. John W. Henry is Chairman of the JWH Board of Directors and is trustee and
sole beneficiary of the John W. Henry Trust dated July 27, 1990. He currently
concentrates his activities at JWH on portfolio management, business issues and
frequent dialogue with trading supervisors. Mr. Henry is the exclusive owner of
certain trading systems licensed to Elysian Licensing Corporation, a corporation
wholly owned by Mr. Henry and sublicensed by Elysian Licensing Corporation to
JWH and utilized by JWH in managing client accounts. Over the last ten years,
Mr. Henry has developed many innovative investment programs which have enabled
JWH to become one of the most successful money managers in the foreign exchange,
futures and fixed income markets.
Mr. Henry has served on the Board of Directors of the National Association of
Futures Trading Advisors, the Nominating Committee of the National Futures
Association and on the Board of Directors of the Managed Futures Trade
Association and currently serves on the Board of Directors of the Futures
Industry Association. He is currently Chairman of the FIA Task Force on
Derivatives for Investment. Mr. Henry also currently serves on a panel created
by the Chicago Mercantile Exchange and the Chicago Board of Trade to study
cooperative efforts related to electronic trading, common clearing and the
issues regarding a merger. In 1989, Mr. Henry established residency in Florida,
and since that time has performed services from that location as well as from
the offices of JWH in Westport, Connecticut. Mr. Henry is a principal of
Westport Capital Management Corporation, Global Capital Management Limited, JWH
Investments, Inc., and JWH Risk Management, Inc., all of which are affiliates of
JWH. Since the beginning of 1987, Mr. Henry has devoted, and will continue to
devote, considerable time to business activities unrelated to JWH and its
affiliates.
Mr. Mark H. Mitchell is Vice Chairman and a member of the JWH Board of
Directors. He is also Vice Chairman and a Director of JWH Risk Management, Inc.
Prior to joining JWH in January 1994, Mr. Mitchell was a partner of Chapman and
Cutler, a Chicago law firm, where he headed its futures law practice since
August 1983. From August 1980 to March 1991, he served as General Counsel of the
National Association of Futures Trading Advisors and, from March 1991 to
December 1993, he served as General Counsel of the Managed Futures Association.
Mr. Mitchell is currently a member of the Commodity Pool Operator/Commodity
Trading Advisory Committee and the Special Committee for the Review of a
Multi-tiered Regulatory Approach to NFA Rules, both of the NFA, and the
Executive Committee of the Law and Compliance Division of the Futures Industry
Association. In 1985, he received the Richard P. Donchian Award for Outstanding
Contributions to the Field of Commodity Money Management. He has been an editor
of FUTURES INTERNATIONAL LAW LETTER and its predecessor publication, COMMODITIES
LAW LETTER. He received an A.B. with honors from Dartmouth College and a J.D.
from the University of California at Los Angeles, where he was named to the
Order of the Coif, the national legal honorary society.
Mr. David R. Bailin is an Executive Vice President and is a member of the
Operating Committee of JWH. He is responsible for the development,
implementation and management of JWH's sales and marketing infrastructure. He
currently serves on the Board of Directors of the Futures Industry Institute.
Prior to joining JWH in December 1995, Mr. Bailin was Managing
Director--Development since April 1994 for Global Asset Management ("GAM"), a
Bermuda-based management firm with over $7 billion in managed assets. He was
responsible for overseeing the international distribution of GAM's funds as well
as for establishing new distribution relationships and channels. Prior to his
employment with GAM, Mr. Bailin headed the real estate asset management division
of Geometry Asset Management beginning in July 1992. Prior to that time,
beginning in 1988, he was President of Warner Financial, an investment advisory
business in Boston, Massachusetts. Mr. Bailin received a B.A. from Amherst
College and an M.B.A. from Harvard Business School.
81
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Mr. Peter F. Karpen is a Managing Director and a member of the Operating
Committee of JWH, President of JWH Investments, Inc. and President and Chairman
of the Board of Directors of Global Capital Management Limited. Mr. Karpen is
also President and Director of Westport Capital Management Corporation. Mr.
Karpen announced his resignation from JWH on March 18, 1996, but will continue
in his present capacity for 6 months from that date. He will resign from JWH's
affiliates on June 30, 1996. Mr. Karpen joined JWH in June 1995 from CS First
Boston where he was Director of Futures and Options since 1988 and Vice
President since 1981. Mr. Karpen has been a member of the board of the Futures
Industry Association since 1984 and a member of its Executive Committee since
1988. Mr. Karpen was Chairman of the FIA from 1994-1995. In addition, he is a
Public Director of the New York Cotton Exchange and serves on the CFTC's
Financial Products Advisory Committee. He has been a Trustee of the Futures
Industry Institute and a member of the CFTC's Regulatory Coordination Advisory
Committee and a member of several commodities and securities exchanges in the
United States. He received his BA from Boston University and MBA from Boston
College.
Mr. James E. Johnson, Jr. is Chief Financial Officer and Chief Administrative
Officer for JWH. He also serves as a member of the company's Operating
Committee. Mr. Johnson is also Treasurer of JWH Investments, Inc., Chief
Financial Officer of JWH Risk Management, Inc., and Treasurer of Westport
Capital Management Corporation. Mr. Johnson joined JWH in May of 1995 from
Bankers Trust Company where he was Managing Director and Chief Financial Officer
for their Institutional Asset Management Division since January 1983. His areas
of responsibility included finance, operations and technology for the $160
billion global asset advisor. Prior to joining Bankers Trust, Mr. Johnson was a
Product Manager at American Express Company responsible for research and market
strategies for the Gold Card. He received a BA with honors from Columbia
University and an MBA in Finance and Marketing from New York University.
Ms. Elizabeth A.M. Kenton is a Senior Vice President, Director of Compliance,
and a member of the Operating Committee of JWH. Since joining JWH in March 1989,
Ms. Kenton has held positions of increasing responsibility in Research and
Development, Administration and Regulatory Compliance. Ms. Kenton is also a
Director and Treasurer of Westport Capital Management Corporation, the Executive
Vice President of JWH Investment Advisory Services, Inc., a Senior Vice
President of JWH Risk Management, Inc., and a Director of Global Capital
Management Limited. Prior to her employment at JWH, Ms. Kenton was Associate
Manager of Financial and Trading Operations at Krieger Investments, a currency
and commodity trading firm. From July 1987 to September 1988, Ms. Kenton worked
for Bankers Trust Company as a Product Specialist for foreign exchange and
treasury options trading. She received a B.S. in Finance from Ithaca College.
Ms. Mary Beth Hardy is a Senior Vice President, Manager of Trading
Administration, and a member of the Operating Committee of JWH. Since joining
JWH in September 1990, Ms. Hardy has held positions of increasing responsibility
in Research and Development and Trading. Prior to her employment at JWH, Ms.
Hardy held the position of Associate Editor at Waters Information Services, a
publishing company, where she wrote weekly articles covering technological
advances in the securities and futures markets. Prior to joining Waters in 1989,
Ms. Hardy was at Shearson Lehman Brothers Inc. ("Shearson"), where she held the
position of Assistant Director of the Managed Futures Trading Department. Prior
to that, Ms. Hardy was an institutional salesperson for Shearson, in a group
specializing in financial futures and options. Previously, Ms. Hardy was an
institutional salesperson for Donaldson, Lufkin and Jenrette with a group which
also specialized in financial futures and options. Ms. Hardy is a member of the
Managed Futures Association's Trading and Markets committee. She received a
B.B.A. in Finance from Pace University.
Mr. David M. Kozak is Counsel to JWH and a Vice President of JWH. He is also
Secretary of JWH Risk Management, Inc. Prior to joining JWH in September 1995,
Mr. Kozak was employed at Chapman and Cutler, where he was an associate from
September 1983 and a partner from 1989. Mr. Kozak has concentrated in commodity
futures law since 1981, with emphasis in the area of commodity money management.
During the time he was employed by Chapman and Cutler, he served as outside
counsel to the NAFTA and the MFA. Mr. Kozak is
82
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
currently a member of the NFA Special Committee on CPO/CTA Disclosure Issues and
the Visiting Committee of The University of Chicago Library. He received a B.A.
from Lake Forest College, an M.A. from The University of Chicago, and a J.D.
from Loyola University of Chicago.
Mr. Kevin S. Koshi is a Senior Vice President and Chief Trader of JWH,
responsible for the supervision and administration of all aspects of order
execution strategies and implementation of trading policies and procedures. Mr.
Koshi joined JWH in August 1988 as a professional in the Finance department, and
since 1990 he has held positions of increasing responsibility in the Trading
department. He received a B.S. in Finance from California State University at
Long Beach in 1988.
Mr. Barry S. Fox is the Director of Research and is responsible for the design
and testing of existing and new programs. He also supports and maintains the
proprietary algorithms used to generate JWH trades. Mr. Fox joined JWH in 1991
and since that time has held positions of increasing responsibility in the
Research and Development department. Prior to his employment at JWH, Mr. Fox
provided sales and financial analysis support for Spreadsheet Solutions, a
financial software development company. Prior to joining Spreadsheet Solutions
in October 1990, Mr. Fox operated a trading company where he traded his own
proprietary capital. Before that, he was employed with Bankers Trust as a
product specialist for foreign exchange and treasury options trading. He
received a B.S. in Business Administration from the University of Buffalo.
Ms. Glenda G. Twist is a Director of JWH and has held that position since August
1993. Ms. Twist joined JWH in September, 1991 with responsibilities for
corporate liaison and she continues her duties in that area. Her
responsibilities include assistance in the day-to-day administration of the
Florida office, and review and compilation of financial information for JWH. Ms.
Twist was President of J.W. Henry Enterprises Corp., for which she performed
financial, consulting and administrative services from January, 1991 to August,
1991. From 1988 to 1990, Ms. Twist was Executive Director of Cities in Schools,
a program in Arkansas designed to prevent students from leaving school before
completing their high school education. She received her B.S. in Education from
Arkansas State University.
Mr. Michael D. Gould is Director of Investor Services at JWH. He is responsible
for general business development and oversees the investor services function. He
joined JWH in April, 1994 from Smith Barney Inc., where he served as Senior
Sales Manager and Vice President--Futures for the Managed Futures Department. He
held the identical position with the predecessor firms of Shearson Lehman Bros.
and Lehman Bros. Prior to that time, he was engaged in a proprietary trader
development program at Tricon USA from September, 1990 to October, 1991. He was
a registered financial consultant with Merrill Lynch from 1985 through August,
1990. His professional career began in 1982 as an owner-operator of a
non-ferrous metals trading and export business which he ran until September,
1985.
Mr. Jack M. Ryng, C.P.A., joined JWH as the Controller in November, 1991. He is
also Secretary and Chief Financial Officer of JWH Investments, Inc. Prior to
that time, he was a Senior Manager with Deloitte & Touche, where he held
positions of increasing responsibility since September of 1985 of commodities
and securities industry clients. His clients included the largest Commodity Pool
Operator in the United States along with other broker/dealers, futures
commission merchants, investment banks, and foreign exchange operations in the
areas of accounting regulatory compliance and consulting. Prior to his
employment by the Financial Services Center of Touche Ross & Co. (the
predecessor firm of Deloitte & Touche), he worked for Leonard Rosen & Co. as a
senior accountant. Mr. Ryng is a member of AICPA and the New York C.P.A.
Society, and is a member of the board of the New York operations of the FIA. He
received a B.S. in Business Administration from Duquesne University.
Mr. Michael J. Scoyni is a Managing Director of JWH and a principal of Westport
Capital Management Corporation. Mr. Scoyni has been associated with Mr. Henry
since 1974 and with JWH since 1982. He was engaged in research and development
for John W. Henry & Company (the predecessor of JWH) from November, 1981 to
December, 1982. Mr. Scoyni has been employed by JWH since 1982 in positions of
increasing responsibility. He received a B.A. in Anthropology from California
State University in 1974.
83
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Mr. Christopher E. Deakins is a Vice President of JWH. He is responsible for
general business development and investor services support. Prior to joining JWH
in August, 1995, he was a vice president, national sales, and a member of the
Management Team for RXR Capital Management, Inc. His responsibilities consisted
of business development, institutional sales, and broker dealer support. Prior
to joining RXR in August, 1986, he was engaged as an account executive for
Prudential-Bache Securities starting in February, 1985. Prior to that, Mr.
Deakins was an account executive for Merrill Lynch. He received a B.A. in
Economics from Hartwick College.
Chris J. Lautenslager is a Vice President of JWH. He is responsible for general
business development and Investor Services support. Prior to joining JWH in
April, 1996, he was the Vice President of Institutional Sales for I/B/E/S
International Inc., a distributor of corporate earnings estimate information.
His responsibilities consisted of business development and support of global
money managers and investment bankers. Prior to his employment with I/B/E/S, Mr.
Lautenslager devoted time to personal activities from April, 1994 to March,
1995, following the closing of the Stamford, Connecticut office of Gruntal &
Co., where he had worked as a proprietary equity trader since November, 1993.
Before that, he held the same position at S.A.C. Capital Management starting in
February, 1993. From October 1987 to December, 1993, Mr. Lautenslager was a
partner and managing director of Limitless Option Partners, a registered Chicago
Mercantile Exchange trading and brokerage organization, where he traded currency
futures and options. He received a B.S. in Accounting from the University of
Colorado and a Masters in Management from Northwestern University.
Mr. Edwin B. Twist is a Director of JWH and has held that position since August,
1993. Mr. Twist joined JWH as Internal Projects Manager in September, 1991. Mr.
Twist's responsibilities include assistance in the day-to-day administration of
JWH's Florida office and internal projects. Mr. Twist was Secretary and
Treasurer of J.W. Henry Enterprises Corp., a Florida corporation engaged in
administrative and financial consulting services, for which he performed
financial, consulting and administrative services from January, 1991 to August,
1991. Prior to his employment with JWH, Mr. Twist was an owner and manager for
16 years of a 2,500-acre commercial farm in eastern Arkansas.
Ms. Nancy O. Fox, C.P.A., is a Vice President and the manager of investment
support of JWH. She is responsible for the day-to-day activities of the
Investment Support Department, including all aspects of operations and
performance reporting. Prior to joining JWH in January, 1992, Ms. Fox was a
senior accountant at Deloitte & Touche, where she served commodities and
securities industry clients and held positions of increasing responsibility
since July, 1987. Ms. Fox is a member of the AICPA and the New Jersey Society of
C.P.A.s. She received a B.S. in Accounting and Finance from Fairfield
University.
JWH and Mr. Henry may engage in discretionary trading for their own accounts,
and may trade for the purpose of testing new investment programs and concepts,
as long as such trading does not amount to a breach of fiduciary duty. In the
course of such trading, JWH and Mr. Henry may take positions in their own
accounts which are the same or opposite from client positions, and on occasion
orders may be filled better for their accounts than for client accounts due to
testing a new quantitative model or program, a neutral allocation system, and/or
trading pursuant to individual discretionary methods. Records for these accounts
will not be made available to clients. Employees and principals of JWH (other
than Mr. Henry) are not permitted to trade on a discretionary basis in futures,
options on futures or forward contracts. However, such principals and employees
may invest in investment vehicles that trade futures, options on futures, or
forward contracts, when an independent trader manages trading in that vehicle,
and in The JWH Employee Fund, L.P., which is managed by JWH. The records of
these accounts also will not be made available to clients.
THE JWH TRADING METHOD
JWH employs several trading methods in directing trading for clients' accounts.
All of these methods are technical in nature, and generally operate in the
manner described for technical trading methods under "Commodity Trading Methods
in General," above.
84
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
All of the trading methods employed by JWH are operated as completely separate
and independent systems. In directing trading for the Fund, JWH will employ, and
has employed, the Financial and Metals Portfolio.
Researched throughout 1983, the Financial and Metals Portfolio began trading
client capital in October 1984. The Financial and Metals Portfolio, which uses
intermediate term and long term trend analysis models, participates in four
major market sectors--interest rates, world currencies, stock indices and
precious metals--and initiates trades according to trend emergence and
computerized determination of relative risk. This is the program which JWH has
implemented for the Fund since October, 1989.
The Financial and Metals Portfolio may take along, short or neutral positions in
up to 39 markets within the four market sectors traded, may use stop orders and
generally commits 10% and 30% of equity to margin on open positions. Because
assets are concentrated in financial futures and metals only, volatility can be
higher than in a more diversified portfolio.
JWH TRADING POLICIES
TRADING TECHNIQUES
The technical trading methods of JWH are guided by a proprietary set of
mathematical formulas that provide signals for investment decisions integrated
within a strict money-management framework.
JWH investment techniques focus on long-term trends rather than day-to-day price
fluctuations. Positions held for two to four months are not unusual, and
positions have been held for more than one year. Historically, only 30-40
percent of all trades have been profitable. Large profits on a few trades in
positions that typically exist for several months have produced favorable
overall results. Generally, the majority of losing trades have been liquidated
within weeks. The maximum equity retracement JWH has experienced in any single
program was nearly 60 percent. Clients should understand that similar or greater
drawdowns are possible in the future.
JWH in its sole discretion may override computer-generated signals, and may at
times use discretion in the application of its trading systems which may affect
performance positively or negatively. Subjective aspects of JWH's trading
methods also include the determination of program leverage, commencement of
trading in an account, contracts traded, contract month selection, margin
utilization, markets traded, and effective trade execution.
PROGRAM MODIFICATIONS
In an effort to maintain and improve performance, JWH has engaged, and continues
to engage in an extensive program of research. While the basic parameters
underlying the firm's trading approach have remained intact throughout its
history, the potential benefits of employing more than one trading parameter
alternatively, or in varying combinations, is a subject of continual testing,
review and evaluation. Extensive research and analysis may suggest substitution
of alternative parameters with respect to particular contracts in light of
relative differences in historical performance achieved through testing
different parameters. In addition, risk management research and analysis may
suggest modifications regarding the relative weighting among various contracts,
the addition or deletion of particular contracts for a program or a change in
the degree of leverage employed.
As capital in each JWH program increases, additional emphasis and weighting may
be placed on certain markets which have historically demonstrated the greatest
liquidity and profitability. Furthermore, the weighting of capital committed to
various markets in the trading programs is dynamic, and JWH may vary the
weighting at its discretion as market conditions, liquidity, position limit
considerations and other factors warrant. Limited Partners will not be informed
of such changes.
JWH may from time to time trade in physical or cash commodities for immediate or
deferred delivery, including specifically gold bullion, as well as futures,
options, and forward contracts when it believes that cash markets offer
comparable or superior market liquidity or ability to execute transactions at a
single price. Cash transactions, as opposed to futures transactions, relate to
the purchase and sale of specific physical commodities. Whereas futures
85
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
contracts are generally uniform except for price and delivery time, cash
contracts may differ from each other with respect to such terms as quantity,
grade, mode of shipment, terms of payment, penalties, risk of loss and the like.
There is no limitation on daily price movements of cash or forward contracts
transacted through banks, brokerage firms, or government dealers, and those
entities are not required to continue to make markets in any commodity. In
addition, the CFTC does not comprehensively regulate cash transactions, which
are subject to the risk of these entities' failure or inability or refusal to
perform with respect to such contracts.
LEVERAGE
Leverage adjustments have been and continue to be an integral part of JWH's
investment strategy. At its discretion, JWH may adjust leverage in certain
markets or entire trading programs. Leverage adjustments may be made at certain
times for some trading programs but not for others. Factors which may affect the
decision to adjust leverage include: ongoing research, program volatility,
current market volatility, risk exposure, and subjective judgment and evaluation
of these and other general market conditions. Such decisions to change leverage
may positively or negatively affect performance, and will alter risk exposure
for an account. Leverage adjustments may lead to greater profits or losses, more
frequent or larger margin calls, and greater brokerage expense. No assurance is
given that such actions will be to the financial advantage of JWH clients. JWH
reserves the right, in its sole discretion, to adjust its leverage policy
without notification to investors.
As a result of the factors mentioned above, on several occasions, JWH has
decreased leverage over the last five years, in certain markets and entire
trading programs. These actions have reduced the volatility of certain trading
programs when compared to the volatility prior to the decreases in leverage.
While historical returns represent actual performance achieved, investors should
be aware that the degree of leverage currently utilized may be significantly
different from that used during previous time periods.
ADDITIONS, REDEMPTIONS AND REALLOCATION OF CAPITAL FOR COMMODITY POOL OR FUND
ACCOUNTS
JWH has developed procedures for trading pool accounts, such as the Fund, that
provide for the addition, redemption and/or reallocation of capital. Investors
who purchase or redeem units in a fund are most frequently permitted to do so at
a price equal to the net asset value per unit on the close of business on the
last business day of the month or quarter. Further, funds may reallocate capital
among advisors at the close of business on the last business day of the month.
In order to provide market exposure commensurate with equity in the account on
the date of these transactions JWH's general practice is to adjust positions as
near to the close of business on the last trading date of the month as possible.
The intention is to provide for additions, redemptions and reallocations at a
net asset value per unit that will be the same for each of these transactions
and to eliminate possible variation in net asset value per unit that could occur
as a result of inter-day price changes when additions are calculated on the
first day of the subsequent month. Therefore, JWH may, in its sole discretion,
adjust its trading of the assets associated with the addition, redemption and
reallocation of capital as near as possible to the close of business on the last
trading day of the month to reflect the amount then available for trading. Based
on JWH's determination of liquidity or other market conditions, JWH may decide
to commence trading earlier in the day on, or before, the last business day of
the month. In the case of an addition to a fund account, JWH may also, in its
sole discretion, delay the actual start of trading for those new assets. No
assurance is given that JWH will be able to achieve the objectives described
above in connection with funding level changes.
OTHER JWH PROGRAMS
In addition to the Financial and Metals Portfolio, JWH currently operates nine
other programs for U.S. and foreign investors, none of which will be utilized by
the Fund.
86
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
SABRE FUND MANAGEMENT LTD.
BACKGROUND
Sabre Fund Management Limited ("Sabre"), a company established under the laws of
England in 1982, has been registered with the CFTC as a commodity trading
advisor and as a commodity pool operator and a member of the NFA since
September, 1984. Sabre has also been a member of the Association of Futures
Brokers and Dealers (the "AFBD") and was regulated by the AFBD until the merger
of that organization in April, 1991 with another self-regulatory organization to
form the Securities and Futures Authority which now regulates Sabre's UK
business.
Sabre is one of the longest operating, of any active UK-based trading advisor.
As of April 30, 1996, Sabre had approximately $29 million in client assets under
management, of which approximately $19.3 million was being traded pursuant to
the Pattern Recognition System (the "System" or the "PRS System"). Of this $19.3
million, $.3 million was being traded in Financial Accounts and $19 million in
Diversified Accounts.
Sabre specializes in institutional and substantial individual client accounts.
It maintains its office at 55 St. James' Street, London, SW1A 1LA, England, UK
(telephone number 011-44-71-361-2800, telefax number 011-44-71-361-0180).
Inquiries regarding Sabre may be directed to that office.
Sabre is a wholly-owned subsidiary of Sabre Limited, a UK holding company.
Effective May 16, 1996, an agreement was entered into between the shareholders
of Sabre Limited to transfer 100% of the outstanding shares of Sabre Limited to
Robin Edwards. The effective date of such transfer will occur within 60 days of
May 16, 1996, when Robin Edwards will own 100% of the issued share capital of
Sabre Limited.
PRINCIPALS AND DIRECTORS
ROBIN WARWICK EDWARDS, born in 1947, Executive Director. Mr. Edwards is
responsible for directing Sabre's trading activities. He qualified as a
Chartered Accountant in 1970. In 1971, he joined Arthur Andersen & Co.,
Chartered Accountants, in London. During 1975 and 1976, Mr. Edwards managed his
own capital in the futures and currency markets while living in Australia, and
in 1976 he moved to Luxembourg. Mr. Edwards spent three years in Luxembourg
developing the fund management approach now used by Sabre, returning to London
in 1979 to promote his fund management activities to institutions and private
clients. Mr. Edwards and Mr. Swete met in the summer of 1981, and in 1982 Mr.
Edwards joined G.N.I. Ltd. as a manager of the futures trading accounts. At the
end of 1982, he left to form Sabre with Mr. Swete.
PETER GERALD SWETE, born in 1943, Non-Executive Director. Mr. Swete qualified as
a Chartered Accountant with Touche Ross & Co., Chartered Accountants, in 1970.
After gaining further experience with a computer services company and in
financial management, he spent five years as financial director of the
international commodities and currency research group, Commodities Research Unit
Ltd. In January 1981, he joined G.N.I. Ltd., a UK futures commission merchant,
to promote futures management to institutions, leaving at the end of 1982 to
form Sabre.
MICHAEL J. GRIMME, born in 1956, Non-Executive Director. Mr. Grimme graduated
from the University of Delaware with a Bachelor of Science Degree in Mechanical
and Aerospace Engineering in 1978. Mr. Grimme then joined Sun Refining and
Marketing Company in Philadelphia, Pennsylvania and remained with them through
the end of 1986, working in numerous capacities (engineering, economics and
trading). While at Sun, Mr. Grimme received a Masters in Business Administration
with a Concentration in Finance from Widener in Chester, Pa. In 1987, he joined
Phibro Energy, one of the largest and most successful trading companies in the
world, in Greenwich, Connecticut. After an initial two year period in Greenwich
as a crude oil trader, in 1989, Mr. Grimme transferred to Zug, Switzerland and
eventually moved the office to London, England as the central headquarters for
all of Philbro Energy trading services in Europe, Africa and the Middle East.
The rules of the CFTC require that any material civil, criminal or
administrative proceedings brought within the past five years against Sabre or
any of its principals be described in this Disclosure Document. Neither Sabre
nor any of its principals has ever been the subject of any material
administrative, civil or criminal action--pending, settled, or on appeal.
87
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
THE SABRE TRADING METHOD
The Sabre PRS System is a technical, trend-following system, trading in a wide
range of derivative instruments including agricultural commodities, equity,
bond, interest-rate and currency-related futures and options contracts primarily
in the United States, Europe and Japan. As of April 30, 1996, Sabre Diversified
accounts ranged in size from $.2 million to $13.5 million with an average
account size of $3.8 million. Management fees ranged from 0% to 3% and quarterly
performance fees ranged from 15% to 25%.
The PRS System relies on technical analysis (based primarily on chart analysis)
and statistical evaluation of a proprietary database. The System seeks to take
positions in markets in which a major change in prices is perceived to be
imminent.
Unlike many technical trading systems, the Sabre trading method employed does
not rely exclusively on computer trading models but combines the extensive
trading skills of principals with the disciplines of the computerized
statistical database.
Sabre generally does not attempt to generate income by realizing small profits
on a large number of trades, but rather attempts to capitalize on more
infrequent, but significant, price movements in order to recognize less numerous
but more substantial profits. Sabre's trading has been and will continue to be
based primarily on technical strategies, using its pattern recognition
technology and experience. The buy and sell signals generated by Sabre's pattern
recognition strategies are not derived from analysis of fundamental factors
affecting commodity prices (for example, weather conditions or the likelihood of
central bank intervention), but rather from evaluation of factors that are
intrinsic to the market itself, such as historical price fluctuations, volume
variations and the past duration of price trends. Such strategies are, in
virtually all instances, the basis on which specific trades (as opposed to more
general decisions relating to position size and the commodity groups to be
traded) are determined.
The computerized analytical model developed by Sabre generates stop-loss levels
and profit objectives from Sabre's database once patterns have been identified
manually. Beginning in December 1991, Sabre began using a computer database of
historic market price movements and patterns which it had compiled over the past
few years. This information was previously prepared manually. This database has
been subjected to detailed statistical analysis using Sabre's in-house computer
programs, and the results of this work are now used extensively as part of the
PRS System. These developments to the System were implemented in December 1991.
For some time (since April 1989), Sabre has been trading accounts which
emphasized the financial markets. Clients in the past have and will continue to
be able to select the extent to which their accounts will emphasize different
markets.
The PRS System involves ongoing analysis of periodic price movements in
approximately 60 different futures and forward contracts which are continuously
updated by Sabre using a chart graphics system which it developed for such
purposes. In addition, Sabre maintains an extensive pattern library of both
failed and successful trading patterns, which it refers to in formulating its
strategies. The patterns in this library are maintained in the computerized
database developed by Sabre to allow detailed and systematic research and
analysis into individual markets. Despite the increasing systematization of
certain aspects of the System, the judgmental analysis of the Sabre principals,
based on their years of experience in the markets traded by the System, remains
an integral part of both the risk control and the long-term profit potential of
the PRS Accounts.
Sabre currently offers a variety of portfolios to clients who can select the
relative emphasis between financial and non-financial commodities to be used for
their PRS Accounts. There are two basic PRS Account types:
1. Diversified accounts which invest in a wide range of markets including
financials and agricultural commodities-- "Diversified Accounts."
2. Financial accounts which do not invest in agricultural commodities but
instead concentrate on the financial markets including (at the discretion of
investors) the energy and metals markets--"Financial Accounts."
In directing trading for the Fund, Sabre will treat the Fund's account as a
Diversified Account.
88
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
The General Partners agreed with the recommendation of Sabre to trade the Fund's
account at 50% greater leverage than the leverage historically utilized for
accounts managed by Sabre, in an attempt to increase the rate of return
generated by its trading method. In managing its accounts, Sabre alters its
utilization of leverage from time to time depending on its view of the overall
market conditions. Sabre's method is conceived of by its principals as more
conservative than most commodity advisory methods and is generally directed
towards achieving rates of return somewhat lower than those which speculative
commodity pools typically seek to achieve. Increasing the leverage at which
Sabre trades is an attempt to give the Fund the potential to achieve rates of
return more comparable to those ordinarily expected from a speculative trading
approach, although there can, of course, be no assurance that increasing the
leverage at which Sabre trades will have such a result. Increasing its trading
leverage can, however, be expected to increase the volatility of its performance
by increasing both trading profits and losses.
In addition to the PRS System, Sabre also offers several other trading systems
which will not be used by the Fund.
Sabre and its principals trade futures, options and forward markets for their
own accounts and expect to continue to do so in the future. The records of such
trading will be made available for inspection by the General Partners.
Generally, positions taken by Sabre for its clients' accounts are also taken for
Sabre's own trading account. Such trading could result in competition with
client accounts (including that of the Fund) for execution of similar trades. It
is possible, however, that Sabre or its principals could take positions in
commodity interests opposite to positions taken for clients. Trading conducted
by Sabre for its own account could involve positions opposite to those taken for
the Fund at Sabre's direction only as a consequence of straddles assumed in
Sabre's trading account or from testing of a new trading system.
DESCRIPTION OF UNITS
A purchaser of Units of the Fund will be a Limited Partner of the Fund. Units
will be fully paid and nonassessable when purchased and paid for pursuant to
this offering. Capital contributions of Limited Partners are subject to the
risks of the Fund's business. See "Risk Factors." However, a Limited Partner
will not be personally liable for any debts, losses or obligations of the Fund
beyond the amount of his or her capital contribution and profits attributable to
it, if any. Under applicable law, the Fund may not make a distribution to the
Limited Partners to the extent that at the time of distribution, after giving
effect to the distribution, all liabilities of the Fund exceed the fair value of
the assets of the Fund. A Limited Partner who receives a distribution in
violation of this law and who knew at the time of the distribution that the
distribution violated the law will be liable to the Fund for three years for the
amount of the distribution. A Limited Partner who receives a distribution and
who did not know at the time of the distribution that the distribution violated
applicable law will not be liable for the amount of the distribution. Limited
Partners will not participate in the management of the Fund as a consequence of
its organization in the form of a limited partnership and the desirability of
maintaining limited liability for the Limited Partners. Limited Partners may
have the opportunity to vote on certain significant matters affecting the
organization, operation or continuation of the Fund (see Exhibit A--Amended and
Restated Limited Partnership Agreement). Limited Partners will be provided with
periodic reports and statements by the Fund, as required by applicable CFTC
regulations.
The General Partners determined that it was in the best interests of the Fund
that outstanding Units be split on a 3-for-1 basis as of the close of business
on February 28, 1995, and that the Net Asset Value per Unit be adjusted
accordingly. The Fund's records, and subsequent communications with Limited
Partners, reflect the fact that Limited Partners holding Units before that date
thereafter hold three Units for each previously outstanding Unit continuing to
be held by Limited Partners. Such Limited Partners' allocations and voting
participation were not altered on a pro rata basis.
Because of the significant appreciation that has occurred in the Net Asset Value
of Units since their initial issuance, the General Partners believe that the 3:1
split of Units will also enable Limited Partners to adjust the amounts of any
redemptions they wish to make more accurately in relation to the level of Net
Asset Value per Unit.
89
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
PLAN OF DISTRIBUTION
The offering of Units will be made by the Fund through American Express
Financial Advisors Inc. on a best efforts basis without any firm underwriting
commitment. The offering of Units will be made pursuant to a Selling Agreement
(the "Selling Agreement") among the Fund, the Selling Agent and the General
Partners. The Fund will pay the Selling Agent the Sales Charge for each Unit
sold to an investor other than an Affiliated Purchaser. Purchasers of Units who
are Affiliated Purchasers will pay no Sales Charge in connection with their
purchase. The General Partners will receive from the proceeds of the offering
the Offering Expense Charge for each Unit sold to an investor.
American Express Financial Advisors Inc., a Delaware corporation organized in
1894, is a wholly-owned subsidiary of American Express Financial Corporation.
American Express Financial Corporation is a wholly-owned subsidiary of American
Express Company. American Express Financial Advisors Inc. is registered as a
broker-dealer and investment adviser with the SEC, and is a member of the
National Association of Securities Dealers, Inc. American Express Financial
Advisors Inc. does business as a broker-dealer in 51 jurisdictions. As of March
31, 1996, American Express Financial Advisors Inc. had 7,216 employees and in
addition maintained a nationwide financial planning force of 7,954 persons.
American Express Financial Advisors Inc. was named and did business as IDS
Financial Services Inc. until January 1, 1995. IDS Futures Corporation, a
Minnesota corporation organized in December of 1986, is a wholly-owned
subsidiary of IDS Management Corporation, a Minnesota corporation organized in
December, 1986. IDS Management Corporation is a wholly-owned subsidiary of
American Express Financial Corporation, which was named IDS Financial
Corporation until January 1, 1995. Other subsidiaries of IDS Management
Corporation are engaged in the organization and management of limited
partnerships investing in assets other than commodity interests. American
Express Financial Advisors Inc. and its affiliates are engaged in providing a
variety of financial products and services to individuals, businesses and
institutions. These products and services include life insurance and annuities,
face amount certificates, mutual funds, client paid financial planning services,
investment advisory services, limited partnership interests and brokerage
services. During the ordinary course of its business, American Express Financial
Advisors Inc. is engaged in civil litigation and subject to administrative
proceedings, which, in the aggregate, are not expected to have a material effect
upon its condition, financial or otherwise, or the services it will render to
the Fund. Neither American Express Financial Advisors Inc. nor any of its
principals have been the subject of any material administrative, civil or
criminal action pending, completed or on appeal within the five years preceding
the date of this Prospectus.
During the Offering Period, the minimum subscription (including subscriptions
for certain retirement plans) is $1,000; any greater subscription amount must be
in increments of $100. Purchasers must subscribe for at least the minimum
purchase amount. Subscription checks must be made out to First Bank National
Association, St. Paul, Minnesota, as Escrow Agent for IDS Managed Futures, L.P.
All subscription checks will be forwarded by the Selling Agent to the Escrow
Agent by noon of the next business day after receipt of such subscriptions.
The Units are being sold by the Fund when, and if, subscriptions therefor are
accepted by the General Partners, subject to the satisfaction of certain
conditions set forth in the Selling Agreement. In the Selling Agreement, the
Fund and the General Partners have agreed to indemnify the Selling Agent against
certain liabilities incurred in connection with the issuance and sale of the
Units. Under the Securities Act of 1933, as amended, such indemnification may be
contrary to public policy and, therefore, unenforceable.
THE OFFERING PERIOD
The Units will be offered until June 26, 1997 or such earlier date when all
Units registered are sold. Units will continue to be offered to Affiliated
Purchasers at a price per Unit equal to Net Asset Value per Unit as of the close
of business on the last business day of the month in which the General Partners
accept such subscriptions and admit subscribers as Limited Partners, plus the
amount of the Offering Expense Charge on a per Unit basis. Units will be offered
to non-Affiliated Purchasers at a price per Unit equal to the Net Asset Value
per Unit as of the close of business on the last business day of the month in
which the General Partners accept such subscriptions and admit subscribers as
Limited Partners, plus the amounts of the Sales Charge and the Offering Expense
Charge on a
90
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
per Unit basis. Purchasers are likely to receive fractional Units. Subscriptions
for Units which are received after the tenth calendar day of a calendar month
will be held in the escrow account, due to the length of time required to
process subscriptions, and, if not rejected, the subscribers will be admitted to
the Fund at the subsequent admission of subscribers to the Fund after the end of
such month. See "Free Look Alternative." Additional Limited Partners will be
admitted to the Fund on the last business day of each full calendar month during
the Offering Period, if such proceeds were received by the tenth calendar day of
that month. All subscription funds will be held in escrow in interest-bearing
instruments by First Bank National Association, St. Paul, Minnesota, as Escrow
Agent, until such subscriptions have been accepted by the General Partners. All
Funds held in the escrow account will earn interest during that time.
Subscribers will receive interest on funds deposited with the Escrow Agent
within 30 days after the date on which they are admitted to the Fund, except
that if any subscriber's accrued interest is less than $10, such interest shall
be paid to the Fund and not the subscriber. The Selling Agent shall receive from
the proceeds of the offering the Sales Charge for each Unit sold to investors
other than Affiliated Purchasers. The General Partners shall receive from the
proceeds of the offering the Offering Expense Charge for each Unit sold to
investors.
FREE LOOK ALTERNATIVE
CFTC Rule 4.26(b) requires that, in connection with soliciting investors for the
Fund, the General Partners must attach to this Disclosure Document copies of the
Fund's most recent Account Statement. However, the General Partners requested,
and were granted, an exemption from this rule by the CFTC in return for
providing investors with a "Free-Look Alternative."
Under the Free-Look Alternative, prospective investors will sign the appropriate
subscription documents and will forward these documents along with their
subscription check to the home office of the Selling Agent. The Selling Agent
will then send by mail a confirmation of the subscription and a copy of the
Fund's most recent Account Statement to the prospective investor on the next
business day. The mailing of the confirmation and the Account Statement by the
Selling Agent marks the beginning of the "Free-Look" period.
The Free-Look period is 16 days. During this time, prospective investors will
have the opportunity to review the Fund's most recent Account Statement and to
determine whether they wish their subscription to be retained by the Fund.
Prospective investors may rescind their subscriptions during the Free-Look
period for any reason.
Prospective investors may notify the Selling Agent of their decision to withdraw
their subscriptions from the Fund either by mail or by telephone pursuant to
instructions received from the Selling Agent in the confirmation.
The Selling Agent must receive the subscription by the tenth calendar day of the
month in order for the General Partner to accept the subscription as of the
close of business on the last day of the month. Subscriptions received after the
tenth calendar day of the month will be eligible for acceptance by the General
Partner on the last business day of the following month.
THE REPRESENTATION AGREEMENT
The Fund, the Selling Agent, the General Partners, the Clearing Broker and the
Trading Advisors have entered into a Representation Agreement concerning the
Registration Statement and Prospectus. In this Agreement, the various parties
set forth their various duties and obligations to one another with respect to
the Fund's Registration Statement filed with the SEC and the Prospectus. The
Representation Agreement consists generally of representations between and among
the parties related to the accuracy and completeness of statements contained in
the Registration Statement and Prospectus concerning them, the parties'
respective authority to enter into the Representation Agreement and to perform
their obligations under that agreement and any other agreements concerning the
Fund to which they are parties, their legal organization, and their possession
of necessary licenses or registrations. The Representation Agreement also
establishes the ongoing obligations of the parties with respect to any necessary
modification of the Registration Statement and the Prospectus during the course
of the offering of Units. In addition, the Representation Agreement specifies
the obligations of the parties to deliver and exchange
91
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
certain opinions and certificates at the initial closing of the offering. In the
Representation Agreement, there are also certain indemnification provisions.
Each Trading Advisor agrees to indemnify and hold harmless the other parties and
their controlling persons and employees against losses or damages incurred by
any of them due to (i) a misrepresentation, alleged misrepresentation, breach of
warranty, covenant or agreement (or alleged breach thereof) of the Trading
Advisor in the Representation Agreement, or (ii) an untrue statement or alleged
untrue statement of a material fact in the Registration Statement or Prospectus
or an omission or alleged omission of a material fact required to be included in
the Registration Statement or the Prospectus or necessary to make the statements
therein not misleading, to the extent that such an untrue statement, alleged
untrue statement, omission or alleged omission was made in reliance upon and in
conformity with information furnished by the Trading Advisor related to the
Trading Advisor. In a similar manner, each General Partner agrees to indemnify
and hold harmless the Trading Advisors and the Clearing Broker and their
controlling persons and employees against losses or damages incurred by any of
them due to (i) a misrepresentation, alleged misrepresentation, breach of
warranty, covenant or agreement (or alleged breach thereof) of the Fund or that
General Partner in the Representation Agreement, or (ii) an untrue statement or
alleged untrue statement of a material fact in the Registration Statement or
Prospectus or an omission or alleged omission of a material fact required to be
included in the Registration Statement or the Prospectus or necessary to make
the statements therein not misleading except to the extent that such statement
or omission was made in reliance upon and in conformity with information
furnished by the Clearing Broker or the Trading Advisors. Unlike other
agreements to which the Fund is a party and which provide the specific terms
upon which the Fund will receive brokerage, advisory or selling agent services,
the Representation Agreement does not establish the terms upon which a service
is to be rendered. Instead, in it all of the parties to the offering exchange
representations and/or covenants concerning the Registration Statement and the
Prospectus to the extent that such representations and/or covenants are not
otherwise provided for in the specific service-related agreements concerning the
Fund or the offering.
OFFERING EXPENSE CHARGE
The General Partners have agreed to advance the expenses of the offering which
include legal, auditing, accounting, marketing, filing, registration and
recording fees plus printing expenses and escrow charges. All Limited Partners
investing in the Fund will be charged the Offering Expense Charge of 3% of the
gross per Unit price, and the General Partners shall be responsible for any
expenses in excess of the Offering Expense Charge. However, if this charge
exceeds the actual expenses incurred, the excess shall be retained by the
General Partners.
SUBSCRIPTION PROCEDURE
In order to purchase Units, an investor must (a) receive the Fund's current
monthly and annual reports, (b) complete and execute a copy of the Subscription
Agreement and Power of Attorney attached hereto as Exhibit C and (c) deliver or
mail the Subscription Agreement and Power of Attorney and a check for the full
purchase price of the Units subscribed for to American Express Financial
Advisors Inc. Additional copies of the Subscription Agreement and Power of
Attorney will be furnished upon request to the Selling Agent.
Checks should be made out to First Bank National Association, as escrow agent
for IDS Managed Futures, L.P. The documents and checks will be promptly
forwarded through American Express Financial Advisors Inc. to the Escrow Agent
by noon of the next business day after receipt of such subscriptions, with
copies to the General Partners for determination of whether to accept the
subscription. If the subscription is rejected, in whole or in part for any
reason (which is in the sole discretion of the General Partners), the
subscription funds or the rejected portion thereof will be promptly returned to
the subscriber without interest. The minimum subscription (including
subscriptions for Keogh, self-directed IRA plans and Employee Benefit Plans) is
$1,000; any greater subscription amount to be in increments of $100. Purchasers
must subscribe for at least the minimum purchase amount. Each subscriber must
represent and warrant in the Subscription Agreement that, among other things, he
or she can afford the risks of an investment in the Fund, including the risk of
losing his or her entire investment, and that he has (a) a net worth of at least
$150,000 (exclusive of home, furnishings and automobiles) or (b) a net worth of
at least $45,000 (exclusive of home, furnishings and automobiles) and a minimum
annual gross income in the most
92
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
recent tax year of at least $45,000 (see Subscription Requirements, attached as
Exhibit B; certain states have higher suitability requirements). Subscriptions
will be held in escrow by First Bank National Association, St. Paul, Minnesota
until the funds so deposited are returned to prospective subscribers or are
deposited with the Fund's Clearing Broker. Assets attributable to such accepted
subscriptions will be deposited with the Clearing Broker on the first trading
day of the month after the subscribers are admitted to the Fund. See "Plan of
Distribution." Any interest earned by a subscriber on subscriptions from the
time of deposit with the Escrow Agent to the time the funds are released by the
Escrow Agent will be distributed to the subscriber within 30 days after the date
on which the subscriber is admitted to the Fund as a Limited Partner, except
that if any subscriber's accrued interest is less than $10, such interest shall
be paid to the Fund and not the subscriber.
A Limited Partner of the Fund may contribute additional capital to the Fund. The
minimum subscription requirement for such investment is $100. In order to
subscribe for additional Units an investor must complete the Subscription
Agreement and Power of Attorney (Exhibit C) and deliver or mail it with a check
for the full purchase price of additional Units to the Selling Agent. Checks
should be made payable to First Bank National Association, as escrow agent for
IDS Managed Futures, L.P.
UNITS MAY NOT BE PURCHASED BY ERISA-COVERED PLANS IF THE GENERAL PARTNERS,
SELLING AGENT OR THEIR AFFILIATES (A) HAVE INVESTMENT DISCRETION WITH RESPECT TO
THAT PORTION OF THE ASSETS OF THE PLAN TO BE INVESTED IN UNITS OR (B) REGULARLY
GIVE INDIVIDUALIZED INVESTMENT ADVICE WHICH SERVES AS A PRIMARY BASIS FOR THE
INVESTMENT DECISIONS MADE WITH RESPECT TO SUCH ASSETS. THIS PROHIBITION IS
DESIGNED TO PREVENT POTENTIAL VIOLATIONS OF CERTAIN PROVISIONS OF ERISA.
All subscription documents from a potential investor must be received by
American Express Financial Advisors, Inc. by the tenth calendar day of the month
if they are to be considered for acceptance by the Fund in that month. American
Express Financial Advisors, Inc. will promptly send a confirmation of the
investment and a copy of the Fund's most recent monthly account statement to the
potential investor. The investor will then have sixteen days from the date of
the confirmation from American Express Financial Advisors, Inc. to determine and
confirm to American Express Financial Advisors, Inc. whether he or she wishes
his or her subscription to be retained by the Fund. The potential investor must
notify American Express Financial Advisors, Inc. by mail or telephone (pursuant
to instructions in the notice from American Express Financial Advisors, Inc.) of
his or her decision not to invest. No further action is required in response to
the notification from American Express Financial Advisors, Inc. if the investor
elects to subscribe. The investor's negative response must be received by
American Express Financial Advisors, Inc. not later than sixteen days from the
date of the confirmation from American Express Financial Advisors, Inc.
Investors electing to withdraw their subscription pursuant to the above
alternative will receive a return of their subscription funds from the escrow
agent. The investor may withdraw his or her subscription for any reason during
this review period. All subscriptions are subject to acceptance by the General
Partner. See "Plan of Distribution--Free Look Alternative."
REDEMPTIONS
No redemptions are permitted by a subscriber during the first six months after
he or she has been admitted to the Fund. Thereafter, a Limited Partner may cause
any or all of his or her Units to be redeemed by the Fund effective as of the
last trading day of any month of the Fund based on the Net Asset Value per Unit
(as defined under "Charges to the Fund--Certain Definitions") on ten days
written notice to the General Partners. Requests for redemption (Exhibit D)
should be sent to American Express Financial Advisors Inc., c/o Unit 580, P.O.
Box 534, Minneapolis, Minnesota 55440. The General Partners may declare
additional redemption dates upon notice to the Limited Partners.
All requests for redemption in proper form will be honored and payment will be
made within 10 business days of the effective date of redemption, except as
described below. The profits and losses of the Fund shall be allocated to the
partners in proportion to their respective Units and to their respective dates
of redemption. The Fund's commodity positions will be liquidated to the extent
necessary to effect redemptions. The right to obtain
93
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
redemption is contingent on receipt by the General Partners of a Request for
Redemption in the form attached hereto as Exhibit D (or any other form approved
by the General Partners) ten days prior to the last trading day of the month in
which redemption is requested. It is also contingent upon the Fund having
property sufficient to discharge its liabilities (contingent or otherwise) on
the effective date of redemption. The request for redemption must specify either
the number of Units to be redeemed or the dollar amount of the requested
redemption. The minimum redemption amount, whether requested in terms of dollars
or Units, is the lesser of $500 or the Net Asset Value of two Units, unless the
Limited Partner is redeeming his or her entire interest in the Fund. Under
special circumstances, including but not limited to inability to liquidate
commodity positions or default or delay in payments due to the Fund from banks
or other persons, the Fund may in turn delay payment to partners requesting
redemption of Units of the proportionate part of net assets represented by the
sums which are the subject of such default or delay. See "Risk Factors--Limited
Ability to Liquidate Investment in Units."
Under applicable law, the Fund may not make a distribution to the Limited
Partners to the extent that at the time of the distribution, after giving effect
to the distribution, all liabilities of the Fund exceed the fair value of the
assets of the Fund. A Limited Partner who receives a distribution in violation
of this law and who knew at the time of the distribution that the distribution
violated the law will be liable to the Fund for three years for the amount of
the distribution. A Limited Partner who receives such a distribution and who did
not know at the time of the distribution that the distribution violated
applicable law will not be liable for the amount of the distribution.
If the Net Asset Value per Unit decreases, after the 3-for-1 split, below $125
at the close of business on any trading day (after adding back any distributions
from the Fund to the Limited Partners), the Fund will attempt to close out all
open positions as expeditiously as possible and suspend trading. No assurance
can be or is given that the Fund will be able to close out all open positions
without incurring substantial additional losses. Unless the General Partners
then elect to withdraw, a special redemption date will be declared. The rights
of a Limited Partner to redeem Units held by him on a special redemption date
are described in detail under "Trading Policies" and in the Fund's Amended and
Restated Limited Partnership Agreement. In general, Limited Partners who elect
to redeem Units on such a special redemption date will receive from the Fund for
each Unit redeemed an amount equal to the Net Asset Value per Unit determined as
of the close of business on such special redemption date. If after a special
redemption date the Fund's Net Asset Value is at least $500,000 the Fund will
resume trading unless the General Partners then elect to withdraw.
The federal income tax aspects of redemptions are described under "Federal
Income Tax Considerations-- Recognition of Gain on Redemptions, Distributions
and Sale of Units."
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
The rights and duties of the General Partners and the Limited Partners are
governed by the provisions of the Delaware Revised Uniform Limited Partnership
Act and by the Amended and Restated Limited Partnership Agreement (the
"Agreement") which is attached hereto as Exhibit A. Certain features of this
Agreement are explained below, but reference should be made to the Agreement for
complete details of its terms and conditions.
NATURE OF THE FUND
The Fund was organized on December 16, 1986, pursuant to the Revised Uniform
Limited Partnership Act of the State of Delaware. Interests in the Fund, other
than the general partnership interests of the General Partners, are Units of
Limited Partnership Interest, which when purchased and paid for pursuant to this
offering will be fully paid and nonassessable. A Limited Partner's capital
contribution is subject to the risks of the Fund's business. However, a Limited
Partner will not be personally liable for any debts or losses of the Fund beyond
the amount of his or her capital contribution and profits attributable thereto
(if any). Under applicable law, the Fund may not make a distribution to the
Limited Partners to the extent that at the time of the distribution, after
giving effect to the distribution, all liabilities of the Fund exceed the fair
value of the assets of the Fund. The General Partners will be liable for all
obligations of the Fund to the extent that assets of the Fund and amounts which
may be claimed
94
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
against Limited Partners, as described above, are insufficient to discharge such
obligations. After the commencement of commodity trading, no interest will be
paid by the Fund on any capital contribution. The Agreement provides that the
death of a Limited Partner will not terminate or dissolve the Fund and that the
legal representatives of such Limited Partner have no right to withdraw or
demand an accounting of the value of his or her interest except by redemption of
Units. In addition, each Limited Partner waives on behalf of himself and his or
her estate the filing of any inventory, audit, accounting or appraisal of the
Fund's assets.
MANAGEMENT OF THE FUND
Under the Agreement, the General Partners shall have the exclusive management
and control of all aspects of the business of the Fund. Management
responsibility must be vested solely in the General Partners in order to limit
the liability of the Limited Partners. If by the exercise of the voting rights
under the Agreement (see "Amendments and Meetings" below) Limited Partners
participate in the management of the Fund's affairs, such Limited Partners may
lose their limited liability for the obligations of the Fund. In the course of
their management the General Partners may, in their discretion, retain such
persons, including affiliates of the General Partners, as they deem necessary
for the efficient operation of the Fund, except that no affiliate of the General
Partners may act as a commodity trading advisor to the Fund. The Fund shall not
enter into any contract with the General Partners, any of their affiliates or
any commodity trading advisor which has a term of more than one year and which
does not provide that it may be cancelled by the Fund without penalty upon 60
days notice. Limited Partners holding more than 50% of the then outstanding
Units (including Units held by representatives and employees of the Selling
Agent and of its corporate affiliates, but not including Units held by the
General Partners or their corporate affiliates), however, (i) may terminate any
agreement with an affiliate of either General Partner on 60 days notice without
penalty, (ii) may remove the General Partners and elect successors and (iii) may
terminate the Fund. For a description of the obligations imposed upon the
General Partners with respect to maintaining a minimum net worth and a minimum
investment in the Fund, see "The General Partners."
The Agreement requires the General Partners to retain commodity trading advisors
not affiliated with the General Partners and delegate the management of the
Fund's commodity accounts to such advisors. Pursuant to the Agreement, John W.
Henry & Co., Inc. and Sabre Fund Management Limited have had responsibility to
manage the Fund's commodity accounts. The Agreement prohibits any person who
shares or participates in commodity brokerage commissions paid by the Fund from
receiving, directly or indirectly, any management or incentive fees for trading
advice or trading management. The Agreement also prohibits any broker retained
by the Fund from paying, directly or indirectly, rebates or give-ups to any
commodity trading advisor of the Fund or the General Partners. In the event the
General Partners shall, in their sole discretion, determine that any trading
instructions issued by a Trading Advisor violate the Fund's established trading
policies (see "Trading Policies"), then the General Partners may negate such
trading instructions. The General Partners have the right to terminate the
contract with a Trading Advisor for cause or upon a determination that such
termination is necessary for the protection of the Fund upon written notice to
the Trading Advisor. See "The Trading Advisors--The Advisory Contract."
The responsibilities of the General Partners include, but are not limited to,
the following: determining whether the Fund will make distributions of profits
to partners; administering transfers and redemptions of Units; preparing monthly
and annual reports to the Limited Partners; filing reports required by the CFTC,
the SEC and any other federal or state agencies; calculating the Net Asset Value
and applicable management and incentive fees; executing various documents on
behalf of the Fund and the Limited Partners pursuant to powers of attorney; and
supervising the liquidation of the Fund if an event causing termination of the
Fund occurs. The General Partners will also keep all records of the Fund's
activities; the General Partners will keep copies of all subscription agreements
(including suitability records) signed by Limited Partners in connection with
public offerings of Units for a period of six years. To facilitate the execution
of various documents by the General Partners on behalf of the Fund and the
Limited Partners, the Limited Partners will appoint the General Partners their
attorneys-in-fact with power of substitution by executing a copy of the
Subscription Agreement and Power of Attorney which is attached hereto as Exhibit
C. Such documents include, without limitation, amendments to the Agreement, the
Certificate of Limited Partnership
95
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
of the Fund and customer agreements with commodity brokers. All operating and
administrative expenses attributable to the Fund will be paid by the Fund, and
include brokerage commissions, the General Partners' administrative fees, the
Trading Advisors' management and incentive fees, and other charges incidental to
trading, advisory fees, legal, accounting, auditing, printing, recording and
filing fees, and extraordinary expenses. See "Charges to the Fund." For a
discussion of the General Partners' legal duties and obligations as fiduciaries
of the Fund, see "Fiduciary Responsibility of the General Partners."
DISTRIBUTIONS BY THE FUND
The Agreement does not provide for regular or periodic cash distributions, but
gives the General Partners sole discretion in determining what distributions, if
any, the Fund will make to its partners. The General Partners do not currently
intend to declare such distributions, and it is possible that no distributions
will be made in some years in which profits are achieved. However, a Limited
Partner has the right to redeem a portion or all of his or her Units in
accordance with the redemption procedures set forth under "Redemptions." Any
distribution shall become a liability of the Fund for purposes of calculating
Net Asset Value as of the date of its declaration. The allocation of the Fund's
net profit or loss for federal income tax purposes is discussed under "Federal
Income Tax Considerations--Taxation of Limited Partners." Upon liquidation of
the Fund, the assets of the Fund will be distributed to each partner in the
ratio that his or her capital account bears to the accounts of all partners. To
date, the Fund has not made any distributions.
REDEMPTIONS
The Agreement sets forth certain restrictive redemption provisions. No
redemptions are permitted by a subscriber during the first six months after such
subscriber has been admitted to the Fund. A special redemption date shall be
declared by the General Partners in the event of a decline in the Net Asset
Value per Unit below $125 (after adding back any distributions) at the close of
business on any trading day. See "Redemptions."
ADDITIONAL PARTNERS
The General Partners have the sole discretion to admit additional limited
partners. Subsequent to this offering the Fund may offer and sell additional
Units, and there is no limitation on the total number of Units which may be
outstanding. Net proceeds per Unit to the Fund from any Units subsequently
offered must equal at least the Fund's then current Net Asset Value per Unit.
TRANSFERS OF UNITS
Subject to compliance with suitability requirements of the Fund, federal and
state securities laws and rules of other governmental authorities, a Limited
Partner may assign his or her Units upon notice to the General Partners as
described in the Agreement. No assignment of Units will be effective against the
Fund or the General Partners until the General Partners receive such notice. No
assignee, except with the consent of the General Partners (which consent may be
withheld at their sole and absolute discretion), may become a substituted
limited partner. An assignee who becomes a substituted limited partner will be
subject to all of the rights and liabilities of the assigning limited partner.
An assignee who does not become a substituted limited partner will have none of
the rights of a limited partner except the right to receive distributions and to
redeem Units to the extent to which the assigning limited partner would have
otherwise been entitled. Under the Delaware Revised Uniform Limited Partnership
Act, an assigning limited partner remains liable to the Fund for any amounts for
which he or she may be liable under such Act regardless of whether any assignee
to whom he or she has assigned Units becomes a substituted limited partner.
There is not now a public market for the Units and it is unlikely that one will
develop in the future. The General Partners may not permit a transfer of Units
if, in their judgment, such assignment may cause the Fund to be taxable as a
corporation or as an association, rather than as a partnership under the
Internal Revenue Code.
96
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
INDEMNIFICATION
The Agreement provides that the General Partners and their affiliates shall not
be liable to the Fund or to the Limited Partners for any loss suffered by the
Fund that arises out of any action or inaction of the General Partners, if such
action or inaction did not constitute negligence or misconduct of the General
Partners or their affiliates and if the General Partners or their affiliates, in
good faith, determined that their action or inaction was in the best interest of
the Fund and within the scope of their authority. In addition, the Fund may
indemnify a General Partner against expenses, including attorneys' fees,
judgments and amounts paid in settlement, actually and reasonably incurred by a
General Partner in connection with the Fund, provided that the expense for which
indemnification is sought was not the result of negligence or misconduct by the
General Partner. Notwithstanding the above, the General Partner shall not be
indemnified for any losses, liabilities or expenses arising from or out of an
alleged violation of federal or state securities laws unless (1) there has been
a successful adjudication on the merits of each count involving alleged
securities violations as to the particular indemnitee, or (2) such claims have
been dismissed with prejudice on the merits by a court of competent jurisdiction
as to the particular indemnitee, or (3) a court of competent jurisdiction
approves a settlement of the claims against a particular indemnitee. Under
certain circumstances, as described in the Fund's Amended and Restated Limited
Partnership Agreement, affiliates of the General Partners may also be granted
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the General Partners, their principals or persons
controlling the Fund pursuant to the foregoing provisions, the Fund has been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
The Fund has also agreed to indemnify the Trading Advisors and their affiliates
under certain conditions. See "The Trading Advisors--The Advisory Contract."
ELECTION, REMOVAL AND WITHDRAWAL OF GENERAL PARTNERS
The General Partners may be removed, and additional or successor general
partners may be elected, by a vote of a majority of the outstanding Units (not
including Units held by the General Partners or their corporate affiliates). The
General Partners may not transfer or withdraw their required minimum investment
in the Fund for so long as they act as General Partners of the Fund; however, a
General Partner may withdraw as General Partner of the Fund upon 120 days'
notice to the Limited Partners. If the Limited Partners or the remaining General
Partner elect to continue the Partnership, the withdrawing General Partner shall
pay all expenses incurred as a result of its withdrawal.
TERMINATION OF THE FUND
The affairs of the Fund will be wound up, its liabilities discharged, its
remaining assets distributed pro rata to the Unit holders and the Fund
liquidated as soon as practicable upon the first to occur of the following: (i)
December 31, 2006; (ii) receipt by the General Partners of a notice to dissolve
the Fund at a specified time by Limited Partners owning more than 50% of the
Units (including Units held by representatives and employees of the Selling
Agent and of its corporate affiliates, but not including any Units held by the
General Partners or their corporate affiliates), which notice is sent by
registered mail to the General Partners not less than 90 days prior to the
effective date of such dissolution; (iii) withdrawal, removal, insolvency,
bankruptcy, dissolution or legal disability of the General Partners unless a new
General Partner has been substituted; (iv) the insolvency or bankruptcy of the
Fund; (v) a decrease in the Fund's Net Asset Value below $500,000 as of the
close of business on any trading day; or (vi) the occurrence of any event which
shall make it unlawful for the existence of the Fund to be continued or
requiring termination of the Fund. To the extent the Fund has open commodity
positions at such time, it will use its best efforts to close such positions,
although no assurance can be given that market conditions might not delay
liquidation and that further substantial losses might not be incurred. See "Risk
Factors--Commodity Futures
97
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Markets May Be Illiquid." Further, if the Net Asset Value per Unit decreases
below $125 at the close of business on any trading day (after adding back any
distributions), after the 3-for-1 split, the Fund will close out all open
positions, suspend trading and declare a special redemption date.
AMENDMENTS AND MEETINGS
The Agreement may be amended in any respect, except to change the Fund to a
general partnership, to change the liability or reduce the capital account of
the General Partners or the Limited Partners, to extend the duration of the Fund
or to modify the percentage of profits, losses or distributions to which the
General Partners or the Limited Partners are entitled. Any amendment must be
approved by a vote of the holders of a majority of the outstanding Units
(including Units held by representatives and employees of the Selling Agent and
of its corporate affiliates, but not including Units held by the General
Partners or their corporate affiliates), either pursuant to a written vote or at
a duly called meeting of the Limited Partners. Any Limited Partner upon written
request addressed to the General Partners may obtain, upon payment of the costs
of reproduction and mailing, a list of the names and addresses of record of all
Limited Partners and the number of Units held by each; provided, however, that
any Limited Partner requesting such list shall give written assurances that the
list will not in any event be used for commercial purposes. In addition, such
list will be made available at the Fund's principal office for the review of any
Limited Partner or his representative at reasonable times. An amendment may be
proposed or a meeting may be called by the General Partners or by the holders of
at least 10% of the outstanding Units. It is not expected that the General
Partners will call any annual meetings of the Limited Partners.
FISCAL YEAR
The fiscal year of the Fund generally shall begin on January 1 of each year and
end on December 31 of that year. The first fiscal year of the Fund commenced on
the date the Fund's Certificate of Limited Partnership was filed, and ended on
December 31, 1986.
REPORTS AND ACCOUNTING
Books and records of the Fund required by the CFTC will be maintained at the
principal offices of the Fund. Limited Partners have the right at all times
during normal business hours to inspect and copy (upon payment of reasonable
reproduction costs) such books and records, in person or by their authorized
representative. Upon request, copies of such books and records shall be sent to
any Limited Partner by mail after reasonable reproduction and distribution costs
are paid by such Limited Partner. The Net Asset Value per Unit is available
daily from the General Partners upon request of any Limited Partner.
The Fund will keep its books on an accrual basis. The books of the Fund shall be
audited at least annually at Fund expense by an independent public accountant to
be designated by the General Partners. Each Limited Partner shall be furnished
with an annual report containing audited financial statements examined by an
independent public accountant and such other information as the CFTC requires.
The CFTC currently requires that an annual report be provided to the Limited
Partners within 90 days after the close of each fiscal year, setting forth,
among other matters:
(a) the Net Asset Value of the Fund and the Net Asset Value per Unit at the end
of the fiscal year or the total value of a partner's interest in the Fund;
(b) the total amount of (i) management, administrative and advisory fees, (ii)
brokerage commissions and fees for commodity and other investment transactions
during the fiscal year and (iii) all other expenses incurred or accrued by the
Fund during the fiscal year;
(c) any change in the Fund's commodity trading advisors or any material change
in the management of the Fund's commodity trading advisors;
98
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(d) any other material business dealings between the Fund, the General
Partners, its commodity trading advisors, its commodity brokers or any
principal of any of the foregoing;
(e) the actual performance of the Fund during prescribed time periods;
(f) a statement of financial condition as of the close of the fiscal year and
preceding fiscal year;
(g) cash flow statements for the fiscal year and the previous fiscal year; and
(h) appropriate footnote disclosures and such further material information as
may be necessary to make the financial statements not misleading.
In addition to the annual report, CFTC rules currently require that the General
Partners furnish each Limited Partner within 30 days of the end of the month
with an account statement (unaudited) covering such month, which statement shall
contain generally the same type of information set forth in items (a) - (e)
above.
Limited Partners will also be furnished with such additional information as the
General Partners, in their discretion, deem appropriate, as well as any
information required to be provided by any governmental authority having
jurisdiction over the Fund.
The General Partners will also furnish each Limited Partner with tax information
not later than March 15 of each year in a form which may be utilized in the
preparation of income tax returns.
FEDERAL INCOME TAX CONSIDERATIONS
The discussion below is necessarily general and is intended to describe the
federal income tax consequences of an investment in the Fund by individuals who
are citizens or residents of the U.S. The applicability or effect of matters
discussed below may vary depending upon a limited partner's individual
circumstances. Therefore, each prospective limited partner and any foreign,
tax-exempt or corporate prospective investor must consult his own tax advisor to
satisfy himself as to the federal, state, local and foreign tax consequences of
an investment in the Fund.
The following discussion of the federal income tax consequences of an investment
in the Fund is based upon the existing provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), the rules and regulations promulgated
thereunder, and existing court decisions. Any future legislative or regulatory
changes could be retroactive with respect to transactions prior to the date of
such changes and could significantly modify the statements herein.
PARTNERSHIP STATUS
The federal income tax consequences to the Fund and its limited partners will
depend upon whether the Fund is classified as a partnership or as an association
taxable as a corporation for federal income tax purposes.
Chapman and Cutler has rendered its opinion to the Fund that, if the Fund is
organized and operated in accordance with the provisions of the Agreement and of
state law, and assuming the factual matters and representations in this
Prospectus and the corresponding representations by the General Partners are
true and correct, under present law and regulations and judicial interpretations
thereof (all of which are subject to change) the Fund will be classified and
treated as a partnership for federal income tax purposes as opposed to an
association taxable as a corporation. Specifically, the General Partners have
represented that together they will satisfy the net worth requirements
applicable to a sole corporate general partner of a limited partnership, and
that they will not act at the direction or under the control of the limited
partners, but rather pursue their own economic self-interests. An opinion of
counsel has no binding effect, and in the absence of a ruling, there can be no
assurance that the Service will not contend that the Fund should be treated as
an association taxable as a corporation. No opinion from the Service with
respect to the status of the Fund as a partnership has been, or will be, sought.
Code Section7704 provides that except for certain partnerships with passive-type
income, publicly traded partnerships will be treated as corporations. Code
Section7704 generally provides that a publicly traded partnership will not be
treated as a
99
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
corporation if 90% or more of the gross income of the partnership consists of
certain types of income, including interest and income and gains from
commodities or futures and options with respect to commodities. The General
Partners expect that more than 90% of the Funds gross income will be derived
from these sources so that the Fund should not be treated as a corporation even
if it is a publicly traded partnership within the meaning of the provisions.
If the Fund were to be classified in any given taxable year as an association
taxable as a corporation, the limited partners would be treated for Federal
income tax purposes as shareholders of a corporation. The Fund would recognize
and be taxed upon its income, gain, losses, deductions, and credits at corporate
tax rates, and such items would not flow through to the limited partners. If the
Fund is classified as an association taxable as a corporation, Fund
distributions would be taxable to the limited partners (at ordinary income tax
rates to the extent of the Fund's current or accumulated earnings and profits)
in the same manner that corporate dividends are generally taxed to shareholders.
Accordingly, treatment of the Fund as an association taxable as a corporation
would probably result in a material reduction on a limited partner's cash flow
and after tax return.
For purposes of the remainder of this discussion of federal income tax
consequences, it has been assumed that the Fund will be classified as a
partnership for federal income tax purposes.
PARTNERSHIP TAXATION
PARTNERS, RATHER THAN FUND, SUBJECT TO FEDERAL INCOME TAX. The Fund itself will
not pay any federal income tax. Instead, the Fund will report to each partner
his or her distributive share of the Fund's income, gains, losses, deductions
and credits. Each limited partner then reports on his federal income tax return
such limited partner's share of the items of partnership income or loss for the
Fund's taxable year that ends with or within the limited partner's taxable year.
The characterization of an item of profit or loss will usually be determined at
the Fund level. With certain exceptions, income tax is not imposed on or
measured by cash distributions (or constructive distributions) by the Fund, but
on the Fund's "taxable income." Conversely, the absence of cash or constructive
distributions does not, of itself, necessarily limit or affect the recognition
of taxable income by the limited partners. See "Recognition of Gain on
Redemptions, Distributions and Sale of Units: Cash Distributions" below.
FEES AND EXPENSES. Under prior law, individual taxpayers could deduct expenses
of producing income. Now, non-trade or business expenses of producing income,
including investment advisory fees and other investment expenses, are to be
aggregated with employee business expenses (collectively, the "Investment
Expenses"), and the aggregate amount of such expenses are deductible only to the
extent such amounts exceed two percent of a taxpayer's adjusted gross income and
satisfy any general limitations on deductibility.
The General Partners intend to treat incentive fees, management fees and other
expenses of the Fund as fully deductible expenses, which are not subject to the
two percent limitation. Whether this characterization is correct involves legal
and factual questions upon which counsel is unable to opine. Generally, relevant
authorities provide that a determination of whether a taxpayer is in the trade
or business of trading commodities involves an analysis of trading strategies
and the frequency and volume of the taxpayer's trading activity. However, these
authorities do not provide any clear guidelines for determining when activities
rise to the level of a trade or business. Further, this determination may depend
to some extent on factors, such as future trading activity and experience, which
are not known at this time. See "Risk Factors--(35) Deductibility of Partnership
Expenses." The Service may assert that expenses of the Fund, such as incentive
fees and management fees are subject to the two percent floor.
There can be no assurance that the Service will not attempt to reallocate Fund
expenses in a manner which adversely affects the interests of the limited
partners or recharacterize a portion or all of expenses as Investment Expenses
that are subject to the two percent floor discussed above. If the Service is
successful in such an attempt, limited partners may not be able to deduct a
substantial amount of the expenses of the Fund.
100
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
ALLOCATIONS OF FUND PROFITS AND LOSSES. For federal income tax purposes, a
limited partner's distributive share of items of Fund income, gain, loss,
deduction or credit will be determined by the terms of the Fund's Amended and
Restated Limited Partnership Agreement (see Exhibit A), unless an allocation
under that Agreement does not have "substantial economic effect" or is not in
accordance with the limited partner's interest in the Fund. If such an
allocation were determined to lack "substantial economic effect," a limited
partner's share of the Fund's profits and losses would be determined in
accordance with his or her interest in the Fund, taking into consideration all
relevant facts and circumstances.
The Fund establishes an account to keep track of tax allocations to each partner
as well as a capital account to keep track of each partner's interest in the Net
Asset Value of the Fund. Generally, increases and decreases in the Net Asset
Value of the Fund are allocated monthly to Units based on beginning of the month
capital account balances, such that at the end of each month each Partner's
capital account balance equals the Partner's interest in the entire Net Asset
Value of the Fund. Taxable income or loss is allocated to the Partners to
eliminate tax capital and book capital account differences. Special allocations
are made to redeemed Units so that tax capital account balances equal both book
capital account balances and amounts paid on redemption. Thus, the allocation
provisions in the Fund's Amended and Restated Limited Partnership Agreement are
designed to reconcile tax allocations with economic allocations. The General
Partners expect that such allocations will be recognized for tax purposes.
However, if the allocations provided by the Amended and Restated Limited
Partnership Agreement are not recognized for federal income tax purposes, the
amount of gain or loss allocated to limited partners for such tax purposes might
be increased or decreased.
RECOGNITION OF GAIN ON REDEMPTIONS AND DISTRIBUTIONS
In general, the Code provides that a partner's tax basis in his or her
partnership interest is equal to his or her contribution, increased by the
amount of taxable income and gain allocated to the partner and reduced by
allocations of taxable loss and distributions to the partner. Tax basis is
significant because it is the measure by which gain, income and loss are
determined on distributions to partners and redemptions of interests.
CASH DISTRIBUTIONS AND PARTIAL REDEMPTIONS. Cash received as a distribution or
in redemption of less than all of the partner's interest is applied first to
reduce the tax basis of a limited partner's Units, and any cash received in
excess of such tax basis will generally be taxable as a gain from the sale of
Units; e.g., capital gain. To the extent cash distributions do not exceed a
limited partner's basis in his or her Units as adjusted for the Fund's
operations for the year, the cash distributed will be treated as a return of
capital resulting in no tax liability.
COMPLETE REDEMPTIONS. A limited partner may realize gain or loss upon redemption
for cash of all of the partner's interest in the Fund. Gain or loss will be
recognized to the extent the proceeds of a complete redemption differ from such
Units' basis (after allocation of income, loss and special allocations, if any,
of the Fund through the month of redemption and the corresponding adjustment to
basis of the redeeming partner's Units).
GAINS, LOSSES AND DEDUCTIONS.
AT RISK RULES. A limited partner in the Fund can only deduct losses to the
extent of the lesser of the limited partner's tax basis or the amount "at risk"
with respect to his or her Units as of the end of the Fund's taxable year in
which such loss occurs. See also "Capital Gain and Loss" below.
In general, a limited partner will be considered to be "at risk" only with
respect to the amount of the purchase price of his or her Units. A taxpayer's
amount at risk is increased by any income derived from the activity, and
decreased by any losses derived from the activity and any distributions from the
activity. "Loss" from an activity is defined as being the excess of allowable
deductions for a taxable year from that activity over the amount of income
actually received or accrued by the taxpayer during such year from that
activity. The amount of such loss that is disallowed in any taxable year may be
carried over to the first succeeding taxable year, but may only be deducted in
that year (or in years following) to the extent that the taxpayer's amount "at
risk" increases in the subsequent year(s).
101
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
FUND INCOME AND LOSSES AND THE PASSIVE LOSS RULES. The passive loss rules
generally provide that certain taxpayers, including individuals, may only deduct
losses from interests in passive activities to the extent of passive gains and
income. In effect, passive losses may not be deducted against active income,
which include salaries, or portfolio income, which generally includes interest,
dividends and capital gains or losses on the sale of property that generates
portfolio income.
An activity of trading personal property, such as commodities and related
securities, or other property of the type that is actively traded for the
account of owners of interests in the activity is not a passive activity. Thus,
a Limited Partner's share of income or loss of the Fund will not constitute
passive income or loss.
SYNDICATION EXPENSES. The Code provides that no deduction is allowed to a
partnership or to a partner for expenses incurred to promote the sale of an
interest in a partnership ("syndication expenses"). Thus, to the extent the Fund
pays the general partners Offering Expenses Charges, this expense will not be
deductible or amortizable, even though the payments of this expense will reduce
Net Asset Value of the Fund. Further, the Internal Revenue Service could take
the position that brokerage commissions paid by the Fund should be characterized
as non-deductible syndication expenses. If it successfully takes this position,
the amount of non-deductible syndication expense could increase substantially.
GAINS AND LOSSES ON SECTION 1256 CONTRACTS. The Code provides different tax
treatment for Section 1256 Contracts from the tax treatment accorded other
interests in property ("NON-SECTION 1256 CONTRACTS"). Section 1256 Contracts
include regulated futures contracts, foreign currency contracts, nonequity
options, and dealer equity options. However, not all of the forward contracts in
foreign currencies traded by the Fund will necessarily be Section 1256
Contracts. See "Other Options and Foreign Currency Contracts," below.
Section 1256 Contracts held by the Fund at its fiscal year-end will be treated
as sold for their fair market value on the last business day of such taxable
year, i.e., marked to market. Generally, this will result in all realized and
unrealized gains and losses on Section 1256 Contracts being recognized for
federal income tax purposes. As a consequence, the limited partners may have tax
liability for unrealized Fund profits in open positions at year-end. All gains
and losses from Section 1256 Contracts will be treated as 60% long-term and 40%
short-term capital gain or loss, regardless of the actual holding period of the
individual contract and regardless of whether the trade constituted a "long" or
"short" position. See "Taxation of Limited Partners: Capital Gain and Loss,"
below. Each limited partner's distributive share of such gain or loss for a
taxable year will be combined with his or her other items of capital gain or
loss for such year in computing his or her federal income tax liability.
Appropriate adjustment will be made to the gain or loss realized upon the Fund's
ultimate disposition of Section 1256 Contracts which were previously marked to
market in order to reflect the fact that unrealized gain or loss was previously
reported.
GAINS AND LOSSES ON NON-SECTION 1256 CONTRACTS. Generally, gains or losses with
respect to Non-Section 1256 Contracts will be taken into account for tax
purposes only when realized. Generally, such gain or loss will be short-term
capital gain or loss if such contracts are held for one year or less and
long-term capital gain or loss if held for more than one year.
STRADDLES
GENERALLY. The Code contains special provisions regarding taxation of straddles.
Two or more positions are treated as offsetting and therefore as a straddle if
there is a substantial diminution in risk of loss from holding any position in
personal property by reason of holding one or more other positions in personal
property. Code Section1092(c)(3) provides a rebuttable presumption that two or
more positions are offsetting in certain situations such as where the positions
are marketed as offsetting positions or are in the same personal property. Any
position held by the Fund could result in a limited partner's individually-held
position (if he or she engages in trading individually) being classified as an
offsetting position; in certain situations, adverse tax consequences (such as
the capitalization of interest under Section 263(g) of the Code) may result to
such limited partner. Generally, losses with respect to straddles including
Non-Section 1256 Contracts will be allowed only to the extent such losses exceed
the
102
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
unrecognized gains on the offsetting position at the close of the tax year. The
disallowed losses are deferred until the subsequent tax year when such gains are
recognized or there is no unrecognized gain. The rules governing gains and
losses on straddles are technical and highly complex. Limited Partners should
consult their tax advisors to determine how these rules affect them.
MIXED STRADDLES. Temporary regulations apply the wash sale and short sale rules
of the Code to straddles which cause substantially all gains and losses from
Non-Section 1256 Contracts which are part of a straddle to be treated as
short-term capital gains and losses (except as described below). Where the
positions of a straddle are comprised of both Section 1256 Contracts and
Non-Section 1256 Contracts, the Fund will be subject to the "mixed straddle"
rules. The appropriate tax treatment of any gains or losses from trading in
mixed straddles will depend on elections which may be made from time to time by
the General Partners.
First, the Fund may elect to treat the Section 1256 Contract as a Non-Section
1256 Contract, and the mixed straddle would be subject to the rules governing
straddles comprised solely of Non-Section 1256 Contracts. Second, the Fund may
identify the positions of a particular straddle as an "identified mixed
straddle" under Section 1092(b)(2) of the Code and, thereby, net the gain or
loss attributable to the offsetting positions. Third, the Fund may place the
positions in a "mixed straddle account" which is marked to market daily. Under
this alternative, gain or loss for positions in the "mixed straddle account"
will be recognized daily. Fourth, if the Fund does not make any of the
aforementioned elections, the loss on all such positions will be treated as 60%
long-term and 40% short-term, while any gain would be treated as 60% long-term
and 40% short-term or all short-term depending upon whether the net gain was
attributable to Section 1256 Contracts or Non-Section 1256 Contracts,
respectively.
IDENTIFIED STRADDLES. Any loss incurred by the Fund with respect to an
"identified straddle" involving Non-Section 1256 Contracts is treated as
sustained not earlier than the day on which the Fund disposes of all positions
comprising the identified straddle. Such loss is not deferred even though the
Fund continues to hold other positions that offset the loss portion of the
identified straddle. An "identified straddle" (for these purposes, as opposed to
those described in the subparagraph concerning mixed straddles, immediately
above) is one which was clearly identified as such on the Fund's records on the
day on which the straddle was acquired, which is not part of a larger straddle
and in which all of the original positions were acquired on the same day and
were either disposed of on the same day during the taxable year or remained
intact as of the close of the taxable year.
OTHER OPTIONS AND FOREIGN CURRENCY CONTRACTS. Generally, foreign currency gain
or loss realized on certain transactions denominated in foreign currencies,
including transactions involving debt instruments and forwards, futures, options
and similar instruments ("SECTION 988 TRANSACTIONS") is treated as ordinary
income or loss for federal income tax purposes. Special rules apply to a
"qualified fund," which is a partnership that has properly elected to be treated
as a qualified fund and that satisfies certain ownership, activity and income
requirements. The General Partners filed an election for the Fund to be treated
as a qualified fund for 1992 and thereafter, and they believe the Fund will
satisfy the other requirements for being a qualified fund. All gain or loss on
positions held by a qualified fund which would be marked to market under Section
1256 if held at year end is capital gain or loss. See "Capital Gain or Loss"
below. Bank forward contracts, foreign currency futures contracts traded on a
foreign exchange, or to the extent provided in regulations any similar
instruments, which are not otherwise Section 1256 Contracts must be treated by
qualified funds and their partners as Section 1256 Contracts. Also, a qualified
fund must mark to market such currency contracts and treat gain or loss on such
currency contracts as short-term capital gain or loss.
In addition, foreign currency gain or loss realized with respect to certain
foreign currency "hedging" transactions will be treated as ordinary income or
loss, regardless of whether they would otherwise be marked to market, to the
extent provided in the Treasury Regulations.
Each partner should discuss Code Section988 with his or her tax advisor and
decide what elections, if any, should be made by the partner based on his or her
individual facts and circumstances.
103
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CAPITAL GAIN AND LOSS. Under current law, gain or loss recognized in connection
with a cash distribution or sale or redemption of Units generally will be
treated as capital gain or loss if the holder of such Units is not a dealer in
Units. If such Units are held for more than one year, gain or loss recognized
will generally be long-term capital gain or loss. Otherwise, such gain or loss
will generally be short-term gain or loss. Long-term capital gains are currently
taxed at a maximum rate of 28% for individuals and 34% for corporations.
The excess of capital losses over capital gains is deductible by an individual
against ordinary income on a 1-for-1 basis, subject to an annual limitation of
$3,000. Excess capital losses which are not used to reduce ordinary income in a
particular taxable year may be carried forward and treated as capital losses
incurred in future years. Because of the limitations imposed upon the
deductibility of capital losses, a limited partner's share of the Fund's net
capital losses, including short-term capital losses, if any, will not materially
reduce the federal income tax on his or her ordinary income.
CONVERSION TRANSACTIONS. The Code includes provisions that are intended to
prevent the conversion into capital gain of income from a transaction in which
substantially all of the taxpayer's expected return is attributable to the time
value of the taxpayer's net investment in the transaction (a "conversion
transaction"). Gain on a conversion transaction is recharacterized as ordinary
income to the extent the gain is equal to the amount of interest that would have
accrued on the taxpayer's net investment in the conversion transaction,
calculated at a rate equal to 120% of the applicable federal rate. The classes
of transactions subject to these provisions includes certain straddles, certain
hedging type transactions and any other transactions specified in regulations
prescribed by the Treasury. Legislative history to the conversion provisions
indicates that Congress intended to cover transactions where "the taxpayer is in
the economic position of a lender--he has an expectation of a return from the
transaction which in substance is in the nature of interest and he undertakes no
significant risks other than those typical of a lender." The general partners do
not expect that the risks assumed by the Fund will be of the kind targeted by
the conversion transaction provisions, but because of the broad authority of the
Treasury to issue regulations, certain transactions entered into by the Fund may
be conversion transactions, in which event a portion of any gain realized in
such transactions may be recharacterized as ordinary income.
INTEREST INCOME. The Fund will realize interest income that is taxable as
ordinary income. As noted above, capital losses may only be used to offset a
limited amount of ordinary income. Thus, if the Fund realizes net trading
losses, a limited partner may still be liable for tax with respect to the
partner's share of the Fund's interest income and other ordinary income because
he or she may only be able to reduce his or her ordinary income by a limited
amount of such capital losses.
The net loss from Section 1256 Contracts will be treated as 60% long-term
capital loss and 40% short-term capital loss. Any net losses from Section 1256
Contracts can be carried back by an individual taxpayer for three years, if he
or she so elects, and applied against gains from Section 1256 Contracts in those
years, but not against other income. To the extent that such losses are not
depleted by a carryback, they can be carried forward under existing capital loss
carryforward rules, but they will retain their character as 60% long-term
capital loss and 40% short-term capital loss. See "Other Options and Foreign
Currency Contracts," above.
INTEREST DEDUCTION LIMITATION. Restrictions on the deductibility of "investment
interest" may result in the disallowance in whole or in part of a limited
partner's share of the Fund's deduction for interest on its obligations, or
deductions for interest on any obligations incurred by the limited partner to
finance the purchase price of his or her Unit. These restrictions are applied on
a partner-by-partner basis, and each investor is advised to consult with his or
her tax advisor to determine whether or not his or her becoming a limited
partner will cause the disallowance of any portion of his or her investment
interest deduction. If a partner borrows money to acquire units, interest
payable on such borrowing will be investment interest subject to the investment
interest limitation to the extent that it is attributable to the Fund's
portfolio income (within the meaning of the passive loss rules). Income of a
Limited Partner from the Fund should constitute investment income for this
purpose.
104
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
OTHER INFORMATION
ALTERNATIVE MINIMUM TAX. The alternative minimum tax is based on the excess (if
any) of the "alternative minimum taxable income" over an exemption amount
($22,500 for married taxpayers filing separate returns and estates and trusts,
$33,750 for single taxpayers and $45,000 for taxpayers filing joint or surviving
spouse returns and corporations), with the first $175,000 of any such excess
taxed at 26% and any remaining excess taxed at 28%. Alternative minimum taxable
income is generally computed by adding the amount of tax preference items to
adjusted gross income and then subtracting allowable deductions. Potential
investors are urged to consult their personal tax advisors regarding the effect
of the alternative minimum tax on their investment in the Fund.
TAX RETURNS AND INFORMATION. The Fund will file its information return using the
accrual method of accounting. By March 15 of each year, the Fund will furnish
each limited partner (and any assignee of a Unit of any limited partner) copies
of (i) the Fund's Schedule K-1 indicating the limited partner's distributive
share of tax items, and (ii) such additional information as is reasonably
necessary to permit the limited partners to prepare their own federal and state
tax returns. The Fund's tax returns will be prepared by independent certified
public accountants selected by the General Partners.
FUND TAX ACCOUNTING. The Fund's taxable year will be the calendar year.
FUND TAX AUDITS
Any tax audit of the Fund likely will take place under the unified audit
("TEFRA") rules. All partnerships except certain small partnerships with ten or
fewer partners are subject to the TEFRA rules. The TEFRA rules require in
general that the IRS must make adjustments to any partnership item by means of
an audit of the partnership. If adjustments are made to partnership items as a
result of an audit at the partnership level, the partners usually must take the
adjustments into account on their individual returns.
The statute of limitations for assessment with respect to partnership items (or
affected items) for any partnership taxable year expires three years from the
date of filing the partnership federal income tax return. The period may be
extended by agreement with any partner with respect to such partner or, for all
partners, by agreement with the Fund's "tax matters partner." CISI will be the
Fund's tax matters partner. CISI has the authority, as tax matters partner, to
enter into a settlement with the Service on behalf of, and binding upon, limited
partners provided that such limited partners do not file a statement with the
Service declaring that the tax matters partner does not have authority to settle
a tax controversy on the limited partner's behalf.
There can be no assurance that the Fund's tax returns will not be audited by the
Service, or that no adjustments to such will be required as a result of such an
audit. If the Fund's tax return were audited by the Service and any items of
income or loss were adjusted as a result of such audit, such adjustments might
require that each limited partner file an amended federal (and possibly state
and/or local) income tax return. In the course of such audit, all items on such
limited partner's returns, and not merely items of Fund income or loss, would be
subject to adjustment.
If the Fund's tax return were audited, the Fund would probably incur legal and
accounting expenses in seeking to sustain the Fund's position. In addition, the
limited partners might incur personal legal and accounting expenses in
connection with any amendment or audit of their returns.
FOREIGN INVESTORS
The federal income tax consequences to a nonresident alien individual investor
will depend upon whether the Fund is engaged in a U.S. trade or business for
federal income tax purposes. The Fund intends to qualify for an exemption from
trade or business characterization which applies to partnerships trading only
commodities of a kind customarily dealt in on an organized commodity exchange in
transactions of a kind customarily consummated at such places. Certain reporting
requirements apply to foreign investors, and there can be no assurance that the
105
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Treasury will not impose additional reporting requirements on such limited
partners in the future. Each prospective limited partner who is a nonresident
alien is advised to consult with his or her personal tax advisor regarding the
impact for federal income tax purposes of an investment in the Fund.
STATE AND LOCAL TAXES
In addition to the federal income tax consequences described herein, the Fund
and Limited Partners may be subject to state and local taxes. The Fund will be
subject to the Illinois Personal Property Replacement Tax to the extent net
income of the Fund is attributable to Illinois. Fund income which is subject to
this tax will be taxed at a rate of 1.5%. To the extent income of the Fund is
derived from trade or business activities (this income may include interest
received by the Fund from the Clearing Broker) and is attributable to Illinois,
each Limited Partner, whether or not a resident of Illinois, is required
annually to file an Illinois income tax return and pay Illinois income tax at
the rate of 3.0% of his or her share of such income. To date the General
Partners have treated all income of the Fund as being attributable to, and
taxable by, Illinois, however, the General Partners can not determine at this
time what portion, if any, of future Fund income will be attributable to
Illinois because this determination is dependent upon factual issues which
cannot be predicted with any level of certainty. A Limited Partner who is not an
Illinois resident may be required to include his or her share of Fund income in
determining his or her taxable income in the jurisdiction in which he or she is
a resident. Additionally, other states or jurisdictions in which the Fund
conducts business may require a Limited Partner to file tax returns and may
impose a tax on his or her share of Fund income derived from activities in such
other states or localities. Taxable income for state and local purposes may
differ from federal taxable income, and a Limited Partner may be liable for
state or local tax even though he or she has no federal income tax liability
attributable to his or her investment in the Fund. To the extent a nonresident
Limited Partner pays tax to Illinois or another jurisdiction due to the Fund's
conduct of business there, he or she may be entitled to a deduction or credit
against taxes owed to his state of residence with respect to the same income.
Since Limited Partners may be affected in different ways by state and local law,
each prospective Limited Partner is advised to consult his or her personal tax
advisor regarding the state and local taxes payable in connection with an
investment in the Fund.
THIS ANALYSIS IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING,
PARTICULARLY SINCE CERTAIN OF THE INCOME TAX CONSEQUENCES OF INVESTMENT IN THE
FUND MAY NOT BE IDENTICAL FOR ALL PURCHASERS. THIS ANALYSIS PRIMARILY REVIEWS
THE FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE FUND FOR INDIVIDUALS
WHO ARE U.S. CITIZENS AND WHO HOLD UNITS AS A CAPITAL ASSET. EACH PROSPECTIVE
PURCHASER OF UNITS IS ENCOURAGED TO CONSULT WITH HIS OR HER PERSONAL TAX ADVISOR
WITH SPECIFIC REFERENCE TO HIS OR HER OWN TAX SITUATION UNDER FEDERAL, STATE AND
LOCAL LAWS.
It is emphasized that no assurance can be given that legislative, administrative
or judicial changes will not occur which would modify the foregoing statements,
which are based upon the existing provisions of the Code and the existing
administrative and judicial interpretations thereof and the current information
available.
LEGAL MATTERS
Legal matters in connection with the securities being offered hereby have been
passed upon for the Fund and the General Partners by Chapman and Cutler,
Chicago, Illinois. Chapman and Cutler has also acted as counsel for John W.
Henry & Co., Inc. in connection with this offering. Chapman and Cutler may
continue to represent such entities after completion of this offering, and such
representation may include advice with respect to the responsibilities of such
entities to the Fund. Chapman and Cutler has rendered its opinion to the General
Partners to the effect that the Fund should be classified as a partnership for
federal income tax purposes and not as an association taxable as a corporation.
In addition, Chapman and Cutler may represent affiliates of the General
Partners, including American Express Financial Advisors Inc. and Cargill
Investor Services, Inc., on matters unconnected with the Fund.
106
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
EXPERTS
The financial statements of IDS Managed Futures, L.P. as of December 31, 1995
and December 31, 1994 and for each of the years in the three-year period ended
December 31, 1995 included in this Prospectus have been examined by KPMG Peat
Marwick LLP, certified public accountants, as set forth in their report
appearing elsewhere herein. Such financial statements are included herein in
reliance upon such report and upon the authority of such firm as experts in
auditing and accounting.
The balance sheet of IDS Futures Corporation at March 31, 1996, appearing in
this Prospectus and Registration Statement has been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, which is based in part on the audited reports of IDS Managed
Futures, L.P. and IDS Managed Futures II, L.P., and is included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of CISI as of May 31, 1995 and May 31, 1994 have been
examined by KPMG Peat Marwick LLP. Such financial statements are set forth in
their respective reports appearing elsewhere herein. Such financial statements
are included herein in reliance upon such reports and of such firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
This Prospectus constitutes part of the Registration Statement on Form S-1 filed
by the Fund with the Securities and Exchange Commission in Washington, D.C.
Copies of the Registration Statement have also been provided to the Commodity
Futures Trading Commission. This Prospectus does not contain all the information
set forth in such Registration Statement and the exhibits thereto, certain
portions of which have been omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Such Registration Statement and exhibits may
be inspected without charge at the public reference facilities maintained by the
Securities and Exchange Commission in Washington, D.C., and copies of all or
part thereof may be obtained from the Commission at its office in Washington,
D.C. upon payment of the prescribed fees.
ADDITIONAL DEFINITIONS
The following definitions have been added to this Prospectus at the request of
various state securities administrators.
ADVISOR. Any person who for any consideration engages in the business of
advising others, either directly or indirectly, as to the value, purchase, or
sale of Commodity Contracts or commodity options.
COMMODITY CONTRACT. A contract or option thereon providing for the delivery or
receipt at a future date of a specified amount and grade of a traded commodity
at a specified price and delivery point.
NET ASSETS. The total assets, less total liabilities, of the Fund determined on
the basis of generally accepted accounting principles. Net Assets shall include
any unrealized profits or losses on open positions, and any fee or expense
including Net Asset fees accruing to the Fund.
NET WORTH. The excess of total assets over total liabilities as determined by
generally accepted accounting principles. Net Worth shall be determined
exclusive of home, home furnishings and automobiles.
NEW TRADING PROFITS. The excess, if any, of Net Assets at the end of the period
over Net Assets at the end of the highest previous period or Net Assets 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, or capital distributions, if any, made during the period decreased
by interest or other income, not directly related to trading activity, earned on
Fund assets during the period, whether the assets are held separately or in a
margin account.
ORGANIZATIONAL AND OFFERING EXPENSES. All expenses incurred by the Fund in
connection with and in preparing a Fund for registration and subsequently
offering and distributing it to the public, including, but not limited to, total
107
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
underwriting and brokerage discounts and commissions (including fees of the
underwriter's attorneys), expenses for printing, engraving, mailing, salaries of
employees while engaged in sales activity, charges of transfer agents,
registrars, trustees, escrow holders, depositories, experts, expenses of
qualification of the sale of its limited partnership interests under federal and
state law, including taxes and fees, accountants' and attorneys' fees.
PIT BROKERAGE FEE. This includes the floor brokerage, clearing fees, National
Futures Association fees, and exchange fees.
SPONSOR. Any person directly or indirectly instrumental in organizing a fund or
any person who will manage or participate in the management of a fund, including
a fund who pays any portion of the organizational expenses of the fund, and the
general partner(s) and any other person who regularly performs or selects the
persons who perform services for the fund. "Sponsor" does not include wholly
independent third parties such as attorneys, accountants, and underwriters whose
only compensation is for professional services rendered in connection with the
offering of the units. The term "Sponsor" shall be deemed to include its
affiliates.
VALUATION DATE. The date as of which the Net Assets of the Fund are determined.
VALUATION PERIOD. A regular period time between valuation dates.
FINANCIAL STATEMENTS
The following financial statements are presented for the Fund and both General
Partners. Investors should note that they are purchasing an interest in the Fund
and not the General Partners.
108
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Partners
IDS Managed Futures, L.P.:
We have audited the accompanying statements of financial condition of IDS
Managed Futures, L.P. as of December 31, 1995 and 1994, and the related
statements of operations, partners' capital, and cash flows for each of the
years in the three-year period ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. 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
management, 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 IDS Managed Futures, L.P. as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
January 25, 1996
109
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Statements of Financial Condition
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Assets:
Cash $ -- 699,380
Equity in commodity futures trading accounts:
Cash on deposit with Clearing Broker 31,440,196 22,041,930
Unrealized gain on open futures contracts 1,705,569 1,340,020
----------- -----------
33,145,765 24,081,330
Interest receivable 130,109 103,566
----------- -----------
Total assets $33,275,874 24,184,896
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued commissions on open futures contracts due to AXP Advisors
and CIS 64,903 98,322
Accrued exchange, clearing, and NFA fees 1,785 2,318
Accrued management fees 97,719 69,060
Accrued incentive fees 33,129 --
Accrued operating expenses 141,246 54,700
Accrued selling commissions and organization and offering expenses 52,721 83,746
Redemptions payable 370,419 99,551
----------- -----------
Total liabilities 761,922 407,697
----------- -----------
Partners' capital:
Limited partners (118,310.37 and 106,612.23 units outstanding at
December 31, 1995 and 1994, respectively) (see Note 1) 31,889,868 23,356,449
General partners (2,315.34 and 1,920.54 units outstanding at
December 31, 1995 and 1994, respectively) (see Note 1) 624,084 420,750
----------- -----------
Total partners' capital 32,513,952 23,777,199
----------- -----------
Total liabilities and partners' capital $33,275,874 24,184,896
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
110
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Statements of Operations
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- ----------
<S> <C> <C> <C>
Revenues:
Gain on trading of commodity futures contracts:
Realized gain (loss) on closed positions $6,474,664 (1,300,245) 2,811,801
Increase in unrealized gain on open futures contracts 365,549 691,537 411,766
Interest income 1,389,521 760,250 218,411
Foreign currency transaction gain 189,505 127,359 1,901
---------- ----------- ----------
Total revenues 8,419,239 278,901 3,443,879
---------- ----------- ----------
Expenses:
Commission paid to AXP Advisors and CIS 701,468 639,227 367,379
Exchange, clearing, and NFA fees 18,571 15,677 9,339
Management fees 1,027,360 704,158 297,038
Incentive fees 449,841 186,976 254,665
General partner fee to IDSFC and CISI 326,936 203,019 81,036
Operating expenses 139,795 60,072 72,473
---------- ----------- ----------
Total expenses 2,663,971 1,809,129 1,081,930
---------- ----------- ----------
Net profit (loss) $5,755,268 (1,530,228) 2,361,949
---------- ----------- ----------
---------- ----------- ----------
Profit (loss) per unit of limited partnership interest
(see Note 1) $ 50.46 (16.30) 65.22
Profit (loss) per unit of general partnership interest
(see Note 1) 50.46 (16.30) 65.22
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
111
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Statements of Partners' Capital
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Total
Total Limited General Partners'
Units* Partners Partners Capital
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 33,355.56 $ 5,676,032 217,474 5,893,506
Sale of partnership interests 28,760.40 7,519,735 52,000 7,571,735
Selling commissions and organization and
offering costs -- (870,081) (3,120) (873,201)
----------- ----------- ----------- -----------
Net sales of partnership interests 28,760.40 6,649,654 48,880 6,698,534
Net profit -- 2,278,603 83,346 2,361,949
Redemptions (874.14) (188,989) -- (188,989)
----------- ----------- ----------- -----------
Balance at December 31, 1993 61,241.82 14,415,300 349,700 14,765,000
Sale of partnership interests 47,310.54 12,353,922 108,000 12,461,922
Selling commissions and organization and
offering costs -- (1,464,994) (9,360) (1,474,354)
----------- ----------- ----------- -----------
Net sales of partnership interests 47,310.54 10,888,928 98,640 10,987,568
Net loss -- (1,502,638) (27,590) (1,530,228)
Redemptions (1,940.13) (445,141) -- (445,141)
----------- ----------- ----------- -----------
Balance at December 31, 1994 106,612.23 $23,356,449 420,750 23,777,199
Sale of partnership interests 20,710.64 5,731,623 102,880 5,834,503
Selling commissions and organization
offering costs -- (517,959) (3,000) (520,959)
----------- ----------- ----------- -----------
Net sales of partnership interests 20,710.64 5,213,664 99,880 5,313,544
Net profit -- 5,651,813 103,454 5,755,267
Redemptions (9,012.50) (2,332,058) -- (2,332,058)
----------- ----------- ----------- -----------
Balance at December 31, 1995 118,310.37 31,889,868 624,084 32,513,952
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net asset value per unit at December 31,
1995 (see Note 1) $ 269.54 269.54
----------- -----------
----------- -----------
Net asset value per unit at December 31,
1994 (see Note 1) $ 219.08 219.08
----------- -----------
----------- -----------
Net asset value per unit at December 31,
1993 (see Note 1) $ 235.38 235.38
----------- -----------
----------- -----------
*UNITS OF LIMITED PARTNERSHIP INTEREST;
ALL UNIT AMOUNTS REFLECT THE 3-FOR-1
SPLIT AS DESCRIBED IN NOTE 1.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
112
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Statements of Cash Flows
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net profit (loss) $ 5,755,268 (1,530,228) 2,361,949
Adjustments to reconcile net profit (loss) to net
cash provided by (used in) operating activities:
Change in assets and liabilities:
Decrease (increase) in unrealized gain on open
futures contracts (365,549) (691,537) (411,766)
Decrease (increase) in interest receivable (26,543) (70,759) (18,739)
Increase (decrease) in accrued liabilities 83,357 (50,372) 282,100
----------- ----------- ----------
Net cash provided by (used in) operating activities 5,446,533 (2,342,896) 2,213,544
----------- ----------- ----------
Cash flows from financing activities:
Net proceeds from sale of units 5,313,544 10,987,568 6,698,534
Partner redemptions (2,061,191) (356,888) (187,901)
----------- ----------- ----------
Net cash provided by financing activities 3,252,353 10,630,680 6,510,633
----------- ----------- ----------
Net increase in cash 8,698,886 8,287,784 8,724,177
Cash at beginning of year 22,741,310 14,453,526 5,729,349
----------- ----------- ----------
Cash at end of year $31,440,196 22,741,310 14,453,526
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
113
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
December 31, 1995, 1994, and 1993
1. GENERAL INFORMATION AND SUMMARY
IDS Managed Futures, L.P. (the Partnership), a limited partnership organized
on December 16, 1986 under the Delaware Revised Uniform Limited Partnership
Act, was formed to engage in the speculative trading of commodity interests
including futures contracts, forward contracts, physical commodities, and
related options thereon pursuant to the trading instructions of independent
trading advisors. The general partners are IDS Futures Corporation (IDSFC) and
CIS Investments, Inc. (CISI). The clearing broker is Cargill Investor
Services, Inc. (Clearing Broker or CIS), the parent company of CISI.
Each unit of limited partnership interest was divided into three units
("3-for-1 split") at the close of business on February 28, 1995, each unit
having a net asset value per unit equal to the previous net asset value per
unit divided by three. Accordingly, the total number of units outstanding
tripled as of that date. For comparative purposes, the respective prior years'
unit amounts and net asset value per unit amounts have been restated for the
3-for-1 split.
Units of limited partnership interest were offered by IDS Financial Services
Inc. (IDS) (an affiliate of IDSFC) commencing March 27, 1987. The total amount
of the offering was $7,500,000. There is no definite number of units
authorized for the Partnership because investors affiliated with the Selling
Agent of the Partnership were not required to pay selling commissions. By June
16, 1987, a total of 88,326 units representing a total investment of
$7,372,260 of limited partnership interest had been sold. Selling commissions
of $353,280 were paid to IDS. Each of the general partners purchased 639
units. The Partnership began trading on June 16, 1987.
Units of the limited partnership representing an additional investment of
$10,000,000 were offered by IDS commencing March 29, 1993. An additional
investment of $20,000,000 was offered by IDS commencing January 31, 1994.
Commencing June 26, 1995, American Express Financial Advisors Inc. (AXP
Advisors) (effective January 1, 1995 IDS Financial Services Inc. changed its
name to American Express Financial Advisors Inc.) offered an additional
investment of $50,000,000. By December 31, 1995, a total of 96,782 units
representing a total investment of $25,605,280 of limited partnership interest
had been sold in the combined offerings. During the offerings, the general
partners purchased a total of 1,037 additional units representing a total
investment of $262,880. Selling commissions of $1,470,434 were paid to AXP
Advisors by the new limited partners. All new investors paid organization and
offering expenses totaling $1,398,080.
No redemptions are permitted by a subscriber during the first six months after
he or she has been admitted to the Partnership. Thereafter, a Limited Partner
may cause any or all of his or her units to be redeemed by the Partnership
effective as of the last trading day of any month of the Partnership based on
the Net Asset Value per unit on ten days written notice to the General
Partners. Payment will be made within ten business days of the effective date
of the redemption. The Partnership's Limited Partnership Agreement contains a
full description of redemption and distribution procedures.
The Partnership shall be terminated on December 31, 2006 if none of the
following occur prior to that date: (1) investors holding more than 50% of the
outstanding units notify the general partners to dissolve the Partnership as
of a specific date; (2) disassociation of the general partners with the
Partnership; (3) bankruptcy of the
114
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
Partnership; (4) decrease in the net asset value to less than $500,000; (5)
the Partnership is declared unlawful; or (6) the net asset value per unit
declines to less than $125 per unit and the Partners elect to terminate the
Partnership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Partnership conform to generally
accepted accounting principles and to general practices within the commodities
industry. The following is a description of the more significant of those
policies which the Partnership follows in preparing its financial statements.
FINANCIAL ACCOUNTING STANDARDS BOARD ("FASB") INTERPRETATION NO. 39 REPORTING
Reporting in accordance with FASB Interpretation No. 39 ("FIN 39") is not
applicable to the Partnership and the provisions of FIN 39 do not have any
effect on the Partnership's financial statements.
REVENUE RECOGNITION
Commodity futures contracts, forward contracts, physical commodities, and
related options are recorded on the trade date. All such transactions are
reported on an identified cost basis. Realized gains and losses are determined
by comparing the purchase price to the sales price when the trades are offset.
Unrealized gains and losses reflected in the statements of financial condition
represent the difference between original contract amount and market value (as
determined by exchange settlement prices for futures contracts and related
options and cash dealer prices at a pre-determined time for forward contracts,
physical commodities, and their related options) as of the last business day
of the year or as of the last date of the financial statements.
Prior to August 1, 1993, the Partnership earned interest on 100% of the
Partnership's average monthly cash balance on deposit with the clearing broker
at a rate equal to 80% of the average 90-day treasury bill rate for treasury
bills issued during that month. Effective August 1, 1993 the rate was changed
to 90% of the average 90-day treasury bill rate for treasury bills issued
during that month.
COMMISSIONS
Brokerage commissions and National Futures Association (NFA), clearing and
exchange fees are accrued on a round-turn basis on open commodity futures
contracts. Prior to June 26, 1995 the Partnership paid CIS commissions on
trades executed on its behalf at a rate of $50.00 per round-turn contract.
With the June 26, 1995 offering, the rate was changed to $35.00 per round-turn
contract. The first subscribers to the offering came into the fund at the end
of August. Therefore, the new rate became applicable in September 1995. The
Partnership pays this commission directly to CIS and CIS then reallocates the
appropriate portion to AXP Advisors.
FOREIGN CURRENCY TRANSACTIONS
Trading accounts in foreign currency denominations are susceptible to both
movements in the underlying contract markets as well as fluctuation in
currency rates. Translation of foreign currencies into U.S. dollars for closed
positions are translated at an average exchange rate for the year, while
year-end balances are translated at the year-end currency rates. The impact of
the translation is reflected in the statements of operations.
115
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, cash includes cash on deposit
with Clearing Broker in commodity futures trading accounts.
USE OF ESTIMATES
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
3. FEES
Management fees are accrued and paid monthly, incentive fees are accrued
monthly and paid quarterly, and general partners' administrative fees are paid
annually and amortized monthly. Trading decisions for the period of these
financial statements were made by the following Commodity Trading Advisors
(CTAs): John W. Henry & Company, Inc. (Henry) and Sabre Fund Management
Limited (Sabre).
Under signed agreement, Sabre will receive a monthly management fee of 1/4 of
1% of the month-end new asset value of the Partnership under their management
and 18% of the Partnership's net trading profits, if any, in each quarter
attributable to their trading. Effective December 1, 1991 to June 30, 1993,
the agreement with Sabre was changed to reduce the management fees paid to
them to 1/8th of 1% of the month-end net assets.
Under signed agreement, Henry will receive a monthly management fee of 1/3 of
1% of the month-end new asset value of the Partnership under their management
and 15% of the Partnership's net trading profits, if any, attributable to
their management.
The Partnership pays an annual administrative fee of 1.125% and .25% of the
beginning of the year net asset value of the Partnership to IDSFC and CISI,
respectively.
4. INCOME TAXES
No provision for Federal income taxes has been made in the accompanying
financial statements as each partner is responsible for reporting income
(loss) based on the pro rata share of the profits or losses of the
Partnership. The Partnership is responsible for the Illinois State Partnership
Information and Replacement Tax based on the operating results of the
Partnership. Such tax amounted to $21,393 and $86,546 for the years ended
December 31, 1993 and 1995, respectively, and is included in operating
expenses in the statement of operations. No such tax was incurred for the
years ended December 31, 1994 as the Partnership sustained net losses.
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Partnership was formed to speculatively trade commodity interests. The
Partnership's commodity interest transactions and its related cash balance are
on deposit with the Clearing Broker at all times. In the event that volatility
of trading of other customers of the Clearing Broker impaired the ability of
the Clearing Broker to satisfy its obligations to the Partnership, the
Partnership would be exposed to off-balance sheet risk. Such risk is defined
in Statement of Financial Accounting Standards No. 105 (SFAS 105) as a credit
risk. To mitigate this
116
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
risk, the Clearing Broker, pursuant to the mandates of the Commodity Exchange
Act, is required to maintain funds deposited by customers relating to futures
contracts in regulated commodities in separate bank accounts which are
designated as segregated customers' accounts. In addition, the Clearing Broker
has set aside funds deposited by customers relating to foreign futures and
options in separate bank accounts which are designated as customer secured
accounts. Lastly, the Clearing Broker is subject to the Securities and
Exchange Commission's Uniform Net Capital Rule which requires the maintenance
of minimum net capital at least equal to 4% of the funds required to be
segregated pursuant to the Commodity Exchange Act. The Clearing Broker has
controls in place to make certain that all customers maintain adequate margin
deposits for the positions which they maintain at the Clearing Broker. Such
procedures should protect the Partnership from the off-balance sheet risk as
mentioned earlier. The Clearing Broker does not engage in proprietary trading
and thus has no direct market exposure.
The contractual amounts of commitments to purchase and sell exchange traded
futures contracts was $284,240,048 and $225,727,635, respectively, on December
31, 1995, and $367,657,629 and $283,946,414, respectively, on December 31,
1994. The contractual amounts of these instruments reflect the extent of the
Partnership's involvement in the related futures contracts and do not reflect
the risk of loss due to counterparty performance. Such risk is defined by SFAS
105 as credit risk. The counterparty of the Partnership for futures contracts
traded in the United States and most non-U.S. exchanges on which the fund
trades is the Clearing House associated with the exchange. In general,
Clearing Houses are backed by the membership and will act in the event of
non-performance by one of its members or one of the members' customers and as
such should significantly reduce this credit risk. In the cases where the
Partnership trades on exchanges on which the Clearing House is not backed by
the membership, the sole recourse of the Partnership for nonperformance will
be the Clearing House.
The average fair value of commodity interests was $1,168,519 and $859,000
during 1995 and 1994, respectively. Fair value as of December 31, 1995 and
1994 was $1,705,569 and $1,340,020, respectively. The net gains or losses
arising from the trading of commodity interests are presented in the statement
of operations.
The Partnership holds futures and futures options positions on the various
exchanges throughout the world. The Partnership does not trade over the
counter contracts. As defined by SFAS 105, futures positions are classified as
financial instruments. SFAS 105 requires that the Partnership disclose the
market risk of loss from all of its financial instruments. Market risk is
defined as the possibility that future changes in market prices may make a
financial instrument less valuable or more onerous. If the markets should move
against all of the futures positions held by the Partnership at the same time,
and if the markets moved such that the CTAs were unable to offset the futures
positions of the Partnership, the Partnership could lose all of its assets and
the partners would realize a 100% loss. The Partnership has contracts with two
CTAs who make the trading decisions. One of the CTAs trades a program
diversified among all commodity groups, while the other is diversified among
the various futures contracts in the financial and metals group. Both CTAs
trade on U.S. and non-U.S. exchanges. Such diversification should greatly
reduce this market risk.
At December 31, 1995, the cash requirement of the commodity interests of the
Partnership was $3,655,729. This cash requirement is met by $30,204,044 held
in segregated funds and $2,941,721 held in secured funds. At December 31,
1994, the cash requirement of the commodity interests of the Partnership of
$2,923,318 was met by $21,069,467 being held in segregated funds and
$2,312,483 being held in secured funds. At December 31, 1995 and 1994, cash
was on deposit with the Clearing Broker which exceeded the cash requirement
amount.
117
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
The following chart discloses the dollar amount of the unrealized gain or loss
on open contracts related to exchange traded contracts for the Partnership at
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
COMMODITY GROUP 1995 1994
<S> <C> <C>
Agricultural $ 212,081 $ 542,558
Currency 51,557 (193,887)
Stock Indices 220,579 --
Energies 425,780 30,118
Metals (49,905) 107,205
Interest 845,477 854,026
---------- -----------
Total $1,705,569 $ 1,340,020
</TABLE>
The range of maturity dates of these exchange traded open contracts is January
1996 to December 1996.
ACKNOWLEDGEMENT
December 31, 1995, 1994, and 1993
To the best of my knowledge and belief, the information contained herein is
accurate and complete.
/S/ DONALD J. ZYCK
--------------------------------------------
Donald J. Zyck
Treasurer, CIS Investments, Inc.,
one of the General Partners and Commodity Pool Operators of
IDS Managed Futures, L.P.
118
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Statements of Financial Condition
Unaudited
<TABLE>
<CAPTION>
ASSETS MAR 31, 1996 DEC 31, 1995
- --------------------------------------------------------------- -------------- -------------
<S> <C> <C>
Cash at Escrow Agent $ 0 $ 0
Equity in commodity futures trading accounts:
Account balance 31,717,582 31,440,196
Unrealized gain on open futures contracts 1,373,326 1,705,569
-------------- -------------
33,090,908 33,145,765
Interest receivable 122,901 130,109
Prepaid G.P. fee 335,300 0
-------------- -------------
Total assets $ 33,549,109 $33,275,874
-------------- -------------
-------------- -------------
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------------------------------------
<S> <C> <C>
Liabilities:
Accrued commissions on open futures contracts
due to AXP Advisors and CIS $ 79,697 $ 66,688
Accrued management fee 83,171 97,719
Accrued incentive fee 0 33,129
Accrued operating expenses 51,086 141,246
Redemptions payable 167,359 370,419
Selling and Offering Expenses Payable 35,892 52,721
-------------- -------------
Total liabilities 417,205 761,922
Partners' Capital:
Limited partners (120,238.93 units
outstanding at 3/31/96, 118,310.37 units
outstanding at 12/31/95) (see Note 1) 32,505,965 31,889,868
General partners (2,315.34 units outstanding
3/31/96 and 2,315.34 at 12/31/95) (see Note 1) 625,939 624,084
-------------- -------------
Total partners' capital 33,131,904 32,513,952
-------------- -------------
Total liabilities and partners' capital $ 33,549,109 $33,275,874
-------------- -------------
-------------- -------------
</TABLE>
IN THE OPINION OF MANAGEMENT, THESE STATEMENTS REFLECT ALL ADJUSTMENTS
NECESSARY
TO FAIRLY STATE THE FINANCIAL CONDITION OF IDS MANAGED FUTURES, L.P. (SEE
NOTE 6)
119
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Statements of Operations
Unaudited
<TABLE>
<CAPTION>
JAN 1, 1996 JAN 1, 1995
THROUGH THROUGH
MAR 31, 1996 MAR 31, 1995
--------------- --------------
<S> <C> <C>
Revenues
Gains on trading of commodity futures and forwards contracts,
physical commodities and related options:
Realized gain (loss) on closed positions $ 626,430 $1,677,931
Change in unrealized gain (loss) on open positions (332,242) 2,013,739
Interest income 359,594 315,305
Foreign currency transaction gain (loss) (46,403) 204,487
--------------- --------------
Total revenues 607,379 4,211,462
Expenses
Commissions paid to AXP Advisors and CIS 191,135 247,888
Exchange fees 5,846 5,001
Management fees 253,074 229,709
Incentive fees 2,083 302,369
General Partner fee to AXP Advisors and CIS 111,767 81,734
Operating expenses (41,096) 65,607
--------------- --------------
Total expenses 522,809 932,308
--------------- --------------
Net profit (loss) $ 84,570 $3,279,154
--------------- --------------
--------------- --------------
Profit (Loss) per unit of partnership interest $ 0.80 $ 29.36
--------------- --------------
--------------- --------------
(see Note 1) (see Note 1 )
</TABLE>
THIS STATEMENT OF OPERATIONS, IN THE OPINION OF MANAGEMENT, REFLECTS ALL
ADJUSTMENTS
NECESSARY TO FAIRLY STATE THE FINANCIAL CONDITION OF IDS MANAGED FUTURES,
L. P. (SEE NOTE 6)
120
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Statements of Changes in Partners' Capital
For the period January 1, 1996 through March 31, 1996
Unaudited
<TABLE>
<CAPTION>
Limited General
Units* Partners Partners Total
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Partners' capital at January 1, 1996 118,310.37 $31,889,868 $ 624,084 $32,513,952
Net profit (loss) 82,715 1,855 84,570
Additional Units Sold (see Note 1) 4,662.19 1,413,400 0 1,413,400
Less Selling and Organizational Costs (126,466) 0 (126,466)
Redemptions (see Note 1) (2,733.64) (753,552) (753,552)
----------- ----------- --------- -----------
Partners' capital at March 31, 1996 120,238.93 $32,505,965 $ 625,939 $33,131,903
----------- ----------- --------- -----------
----------- ----------- --------- -----------
Net asset value per unit January 1, 1996
(see Note 1) 219.08 219.08
Net profit (loss) per unit (see Note 1) 51.26 51.26
----------- ---------
Net asset value per unit March 31, 1996 $ 270.34 $ 270.34
</TABLE>
*UNITS OF LIMITED PARTNERSHIP INTEREST.
THIS STATEMENT OF CHANGES IN PARTNERS' CAPITAL, IN THE OPINION OF
MANAGEMENT, REFLECTS ALL ADJUSTMENTS NECESSARY TO FAIRLY STATE THE
FINANCIAL CONDITION OF IDS MANAGED FUTURES, L. P. (SEE NOTE 6)
121
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
JAN 1, 1996 JAN 1, 1995
THROUGH MAR THROUGH MAR
31, 1996 31, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss)............................................ $ 84,570 $ 3,279,154
Adjustments to reconcile net profit (loss) to net cash
provided by (used in) operating activities:
Change in assets and liabilities:
Unrealized gain (loss) on open futures contracts......... 332,243 (2,013,739)
Interest receivable...................................... 7,208 (20,971)
Prepaid general partner fee.............................. (335,300) (245,202)
Accrued liabilities...................................... (124,828) 368,706
Redemptions payable...................................... (203,060) (59,252)
Selling and Offering Expenses Payable.................... (16,829) (83,746)
-------------- --------------
Net cash provided by (used in) operating activities............ (255,996) 1,224,950
Cash flows from financing activities:
Additional Units Sold........................................ 1,413,400 701,402
Selling and Offering Expenses................................ (126,466) (80,754)
Partner redemptions.......................................... (753,552) (168,056)
-------------- --------------
Net cash provided by (used in) financing activities............ 533,382 452,592
-------------- --------------
Net increase (decrease) in cash................................ 277,386 1,677,542
Cash at beginning of period.................................... 31,440,196 22,741,310
-------------- --------------
Cash at end of period.......................................... $ 31,717,582 $ 24,418,852
-------------- --------------
-------------- --------------
</TABLE>
THIS STATEMENT OF CASH FLOWS, IN THE OPINION OF MANAGEMENT, REFLECTS ALL
ADJUSTMENTS NECESSARY TO FAIRLY STATE THE FINANCIAL CONDITION OF IDS
MANAGED FUTURES, L. P. (SEE NOTE 6)
122
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
March 31, 1996
(1) GENERAL INFORMATION AND SUMMARY
IDS Managed Futures, L.P. (the "Partnership") is a limited partnership
organized on December 16, 1986 under the Delaware Revised Uniform Limited
Partnership Act. The Partnership was formed to speculatively trade commodity
interests, including futures contracts, forward contracts, physical
commodities, and related options thereon pursuant to the trading instructions
of independent trading advisors. The General Partners of the Partnership are
CIS Investments, Inc. ("CISI") and IDS Futures Corporation ("IDS Futures")
(collectively, the "General Partners"). The General Partners are registered
commodity pool operators under the Commodity Exchange Act, as amended (the "CE
Act") and are responsible for administering the business and affairs of the
Partnership exclusive of trading decisions. CISI is an affiliate of Cargill
Investor Services, Inc. ("CIS"), the clearing broker for the Partnership. IDS
Futures is an affiliate of American Express Financial Advisors Inc. ("AXP
Advisors"), formerly IDS Financial Services Inc., which acts as the
Partnership's introducing broker and selling agent. Effective January 1, 1995,
IDS Financial Corporation, the parent company of IDS Financial Services Inc.,
changed its name to American Express Financial Corporation and IDS Financial
Services Inc. changed its name to American Express Financial Advisors Inc.
These were solely name changes; the management and structure of each company
did not change. Trading decisions for the Partnership are made by two
independent commodity trading advisors, John W. Henry & Co., Inc. and Sabre
Fund Management Limited.
Units of limited partnership interest ("Units") were offered initially by AXP
Advisors commencing March 27, 1987 and concluding June 16, 1987. Subsequent
offerings commenced March 29, 1993, January 31, 1994 and June 26, 1995. The
total amount of the initial offering was $7,500,000 and the total amount of
the combined reopenings was $80,000,000. Investors purchase Units at the then
current net asset value per Unit; investors affiliated with the selling agent
of the Partnership are not required to pay selling commissions, and the
current offering has varied selling commission rates depending on the total
dollar amount of the investment. Therefore, the total number of Units
authorized for the Partnership is not determinable and therefore is not
disclosed in the financial statements.
The initial offering of Units was made pursuant to a registration statement on
Form S-18 and Prospectus declared effective with the Securities and Exchange
Commission ("SEC") on March 27, 1987. The maximum sales allowed in the
offering was $7,500,000. By the end of the offering period, subscriptions for
29,442 Units (excluding the Units purchased by the initial Limited Partner)
had been accepted by the Partnership, representing a total investment of
$7,372,260. The minimum subscription size was $5,000 or 20 Units for investors
not affiliated with AXP Advisors and $4,700 or 20 Units for affiliated
investors (affiliated investors did not have to pay selling commissions of $15
per unit). In the case of Individual Retirement Accounts and Keogh Plans the
minimum subscription size was $1,000 in most jurisdictions and $940 for
affiliated investors. In June 1987, $353,280 was paid to AXP Advisors for
selling commissions and $285,822 was reimbursed to the General Partners for
organization and offering expenses which had been incurred on behalf of the
Partnership. The trading advisors commenced trading on June 16, 1987 with
$6,733,158.
The Partnership was reopened to additional investment pursuant to a
registration statement on Form S-1 that was declared effective with the SEC on
March 29, 1993. The maximum sales allowed in this additional offering was
$10,000,000. The minimum subscription size for the reopening was $1,000 for
investors not affiliated with
123
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
AXP Advisors. On January 31, 1994, a registration statement on Form S-1 was
declared effective with the SEC for purposes of offering $20,000,000 of Units
in the Partnership in addition to the unsold portion of the $10,000,000 of
Units offered pursuant to the Prospectus dated March 29, 1993.
By December 31, 1994, a total of 25,571.16 Units representing a total
investment of $20,033,657 of limited partnership interest had been sold in the
combined offerings. Selling commissions of $1,145,552 were paid to AXP
Advisors by the new limited partners. All new investors paid organization and
offering expenses totaling $1,202,003. During the period from December 10,
1994 through December 31, 1994, subscriptions for 974.05 Units representing a
total investment of $701,402 of limited partnership interest were received
from investors which were accepted into the Partnership as of January 31,
1995. These were the final subscriptions received from investors before the
close of the offering. Selling commissions of $38,670 were paid to AXP
Advisors by the new limited partners and all new investors paid organization
and offering expenses totaling $42,084.
Commencing with the January 31, 1994 offering, the General Partners modified
the method in which they were reimbursed for offering expenses that they
advanced. All offering expenses incurred in offering Units since March 29,
1993 were treated as a single reimbursable amount. At the end of the offering
(December 31, 1994), any excess of the aggregate Offering Expense charge
received by the General Partners over the actual offering expenses advanced by
them was rebated to those investors who purchased Units during the entire
offering since March 29, 1993. Rebates were made pro rata based on the number
of Units purchased by each investor and were paid in cash. The payout to
investors equaled $671,399.88 and was paid to investors on approximately April
1, 1995. Any rebate of less than $15 per investor, however, was retained by
the General Partners.
At the close of business on February 28, 1995 each Unit was divided into three
Units (a "3 for 1 split"), each of which has a Net Asset Value per Unit equal
to the previous Net Asset Value per Unit divided by three. Accordingly, the
total number of Units outstanding tripled as of that date.
On June 26, 1995, a new registration statement on Form S-1 was declared
effective with the SEC to register $50,000,000 of Units in addition to the
unsold portion of the $20,000,000 offered pursuant to the Prospectus dated
January 31, 1994. The minimum subscription size for the new offering is $1,000
for investors not affiliated with AXP Advisors. By March 31, 1996, a total of
22,845.46 Units representing a total investment of $6,546,501 of limited
partnership interest had been sold in the new offering. Selling commissions of
$370,276 were paid to AXP Advisors by the new limited partners. All new
investors paid organization and offering expenses totaling $196,395.
The Offering Expense charged pursuant to the registration statement effective
June 26, 1995 was reduced to 3% from the 6% which had been charged in the
previous two offerings. No rebate similar to that described above will be made
for this current offering.
No redemptions are permitted by a subscriber during the first six months after
he or she has been admitted to the Partnership. Thereafter, a Limited Partner
may cause any or all of his or her Units to be redeemed by the Partnership
effective as of the last trading day of any month of the Partnership based on
the Net Asset Value per Unit on ten days written notice to the General
Partners. There are no additional charges to the investors at redemption. The
General Partners may declare additional redemption dates upon notice to the
Limited Partners. Payment will be made within ten business days of the
effective date of the redemption. The Partnership's Restated and Amended
Limited Partnership Agreement contains a full description of redemption and
distribution procedures.
124
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
The Partnership shall be terminated on Dec. 31, 2006 if none of the following
occur prior to that date: (1) investors holding more than 50 percent of the
outstanding Units notify the General Partners to dissolve the Partnership as
of a specific date; (2) withdrawal, removal, insolvency, bankruptcy, legal
disability or dissolution of the General Partners of the Partnership; (3)
bankruptcy or insolvency of the Partnership; (4) decrease in the net asset
value to less than $500,000; (5) the Partnership is declared unlawful; or (6)
the net asset value per Unit declines to less than $125 per Unit and the
General Partners elect to withdraw from the Partnership.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Partnership conform to generally
accepted accounting principles and to general practices within the commodities
industry. The following is a description of the more significant of those
policies which the Partnership follows in preparing its financial statements.
FINANCIAL ACCOUNTING STANDARDS BOARD ("FASB") INTERPRETATION NO. 39 REPORTING
Reporting in accordance with FASB Interpretation No. 39 ("FIN 39") is not
applicable to the Partnership and the provisions of FIN 39 do not have any
effect on the Partnership's financial statements.
REVENUE RECOGNITION
Commodity futures contracts, forward contracts, physical commodities and
related options are recorded on the trade date. All such transactions are
reported on an identified cost basis. Realized gains and losses are determined
by comparing the purchase price to the sales price when the trades are offset.
Unrealized gains and losses reflected in the statements of financial condition
represent the difference between original contract amount and market value (as
determined by exchange settlement prices for futures contracts and related
options and cash dealer prices at a predetermined time for forward contracts,
physical commodities and their related options) as of the last business day of
the quarter end.
The Partnership earns interest on 100 percent of the Partnership's average
monthly cash balance on deposit with the Clearing Broker at a rate equal to 90
percent of the average 90-day Treasury bill rate for U.S. Treasury bills
issued during that month.
COMMISSIONS
Brokerage commissions, National Futures Association fees, and clearing and
exchange fees are accrued on a round-turn basis on open commodity futures
contracts. The Partnership pays commissions on trades executed on its behalf
at a rate of $35 per round turn contract to CIS which in turn reallocates $20
per round turn contract to AXP Advisors, an affiliate of IDS Futures.
FOREIGN CURRENCY TRANSACTIONS
Trading accounts on foreign currency denominations are susceptible to both
movements on underlying contract markets as well as fluctuation in currency
rates. Foreign currencies are translated into U.S. dollars for closed
positions at an average exchange rate for the quarter while quarter-end
balances are translated at the quarter-end currency rates. The impact of the
translation is reflected in the statement of operations.
125
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, cash represents cash on deposit
with the Clearing Broker in commodity futures trading accounts.
(3) FEES
Management fees are accrued and paid monthly, incentive fees are accrued
monthly and paid quarterly and General Partners' administrative fees are paid
annually and amortized monthly. Trading decisions for the period of these
financial statements were made by John W. Henry & Co., Inc. ("JWH") and Sabre
Fund Management Limited ("Sabre"), the Partnership's Commodity Trading
Advisors ("CTAs"). Under agreements signed with these CTAs, Sabre receives a
monthly management fee of 1/8 of 1% of the month-end net asset value of the
Partnership under its management and JWH receives 1/3 of 1% of the month-end
net asset value under its management. The Partnership pays JWH a quarterly
incentive fee of 15% and pays Sabre a quarterly incentive fee of 18% of
trading profits achieved on the NAV of the Partnership allocated by the
General Partners to such Advisor's management.
The Partnership pays an annual administrative fee of 1.125% and 0.25% of the
beginning of the year net asset value of the Partnership to IDS Futures and
CISI, respectively.
(4) INCOME TAXES
No provision for Federal Income Taxes has been made in the accompanying
financial statements as each partner is responsible for reporting income
(loss) based on the pro rata share of the profits or losses of the
Partnership. The Partnership is responsible for the Illinois Personal Property
and Income Tax based on the operating results of the Partnership. Such tax
amounted to $1,261 and $49,573 for the periods ended March 31, 1996 and March
31, 1995, respectively, and is included in operating expenses in the Statement
of Operations.
(5) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Partnership was formed to speculatively trade Commodity Interests. It has
commodity transactions and all of its cash on deposit at its Clearing Broker
at all times. In the event that volatility of trading of other customers of
the Clearing Broker impaired the ability of the Clearing Broker to satisfy its
obligations to the Partnership, the Partnership would be exposed to
off-balance sheet risk. Such risk is defined in Statement of Financial
Accounting Standards No. 105 ("SFAS 105") as a credit risk. To mitigate this
risk, the Clearing Broker, pursuant to the mandates of the Commodity Exchange
Act, is required to maintain funds deposited by customers relating to futures
contracts in regulated commodities in separate bank accounts which are
designated as segregated customers' accounts. In addition, the Clearing Broker
has set aside funds deposited by customers relating to foreign futures and
options in separate bank accounts which are designated as customer secured
accounts. Lastly, the Clearing Broker is subject to the Securities and
Exchange Commission's Uniform Net Capital Rule which requires the maintenance
of minimum net capital of at least 4% of the funds required to be segregated
pursuant to the Commodity Exchange Act. The Clearing Broker has controls in
place to make certain that all customers maintain adequate margin deposits for
the positions which they maintain at the Clearing Broker. Such procedures
should protect the Partnership from the off-balance sheet risk as mentioned
earlier. The Clearing Broker does not engage in proprietary trading and thus
has no direct market exposure.
126
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
The counterparty of the Partnership for futures contracts traded in the United
States and most non-U.S. exchanges on which the Partnership trades is the
Clearing House associated with the exchange. In general, Clearing Houses are
backed by the membership and will act in the event of non-performance by one
of its members or one of the members' customers and as such should
significantly reduce this credit risk. In the cases where the Partnership
trades on exchanges on which the Clearing House is not backed by the
membership, the sole recourse of the Partnership for nonperformance will be
the Clearing House.
The Partnership holds futures and futures options positions on the various
exchanges throughout the world. The Partnership does not trade over the
counter contracts. As defined by SFAS 105, futures positions are classified as
financial instruments. SFAS 105 requires that the Partnership disclose the
market risk of loss from all of its financial instruments. Market risk is
defined as the possibility that future changes in market prices may make a
financial instrument less valuable or more onerous. If the markets should move
against all of the futures positions held by the Partnership at the same time,
and if the markets moved such that the Trading Advisors were unable to offset
the futures positions of the Partnership, the Partnership could lose all of
its assets and the partners would realize a 100% loss. The Partnership has
contracts with two CTAs who make the trading decisions. One of the CTAs trades
a program diversified among all commodity groups, while the other is
diversified among the various futures contracts in the financials and metals
group. Both CTAs trade on U.S. and non-U.S. exchanges. Such diversification
should greatly reduce this market risk. Cash was on deposit with the Clearing
Broker in each time period of the financial statements which exceeded the cash
requirements of the Commodity Interests of the Partnership.
The following chart discloses the dollar amount of the unrealized gain or loss
on open contracts related to exchange traded contracts for the Partnership as
of March 31, 1996:
<TABLE>
<CAPTION>
COMMODITY GROUP: UNREALIZED GAIN/(LOSS):
- -------------------------------------------------------------- -------------------------------
<S> <C>
AGRICULTURAL COMMODITIES 177,823
FOREIGN CURRENCIES 97,882
STOCK INDICES (5,672)
ENERGIES 38,790
METALS (34,933)
INTEREST RATE INSTRUMENTS 1,099,436
----------
TOTAL 1,373,326
----------
----------
</TABLE>
The range of maturity dates of these exchange traded open contracts is April
of 1996 to March of 1997. The average open trade equity for period of January
1, 1996 to March 31, 1996 was $1,563,949.
The margin requirement at March 31, 1996 was $3,477,234. To meet this
requirement, the Partnership had on deposit with the Clearing Broker
$30,647,945 in segregated funds and $2,442,963 in secured funds.
127
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
(6) FINANCIAL STATEMENT PREPARATION
The interim financial statements are unaudited but reflect all adjustments
that are, in the opinion of management, necessary to a fair statement of the
results for the interim periods presented. These adjustments consist primarily
of normal recurring accruals.
The results of operations for interim periods will not necessarily be
indicative of the operating results for the fiscal year.
Statements of Financial Condition
Unaudited
<TABLE>
<CAPTION>
ASSETS APR 30, 1996 DEC 31, 1995
- ---------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Cash at Escrow Agent $ 0 $ 0
Equity in commodity futures trading accounts:
Account balance 31,905,141 31,440,196
Unrealized gain on open futures contracts 2,532,995 1,705,569
------------- -------------
34,438,136 33,145,765
Interest receivable 124,464 130,109
Prepaid G.P. fee 298,044 0
------------- -------------
Total assets $34,860,644 $33,275,874
------------- -------------
------------- -------------
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
- ----------------------------------------------------------------
<S> <C> <C>
Liabilities:
Accrued commissions on open futures contracts due to AXP
Advisors and CIS $ 89,387 $ 66,688
Accrued management fee 86,027 97,719
Accrued incentive fee 34,108 33,129
Accrued operating expenses 36,922 141,246
Redemptions payable 149,813 370,419
Selling and Offering Expenses Payable 28,909 52,721
------------- -------------
Total liabilities 425,166 761,922
Partners' Capital:
Limited partners (120,748.12 units outstanding at 4/30/96,
118,310.37 units outstanding at 12/31/95) (see Note 1) 33,787,603 31,889,868
General partners (2,315.34 units outstanding at 4/30/96 and
2,315.34 at 12/31/95) (see Note 1) 647,875 624,084
------------- -------------
Total partners' capital 34,435,478 32,513,952
------------- -------------
Total liabilities and partners' capital $34,860,644 $33,275,874
------------- -------------
------------- -------------
</TABLE>
IN THE OPINION OF MANAGEMENT, THESE STATEMENTS REFLECT ALL ADJUSTMENTS
NECESSARY TO FAIRLY STATE THE FINANCIAL CONDITION OF IDS MANAGED FUTURES,
L.P. (SEE NOTE 6 ABOVE)
128
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CIS Investments, Inc.:
We have audited the accompanying balance sheets of CIS Investments, Inc. (a
wholly owned subsidiary of Cargill Investor Services, Inc.) as of May 31, 1995
and 1994, and the related statements of earnings, stockholder's equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. 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
management, 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 CIS Investments, Inc. as of May
31, 1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick
July 14, 1995
129
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CIS INVESTMENTS, INC.
BALANCE SHEETS
MAY 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Accounts receivable from limited partnerships $ -- $ 177,484
Investments in limited partnerships 409,876 336,788
----------- -----------
409,876 514,272
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Unearned management fees 34,925 21,782
Due to Parent 57,791 238,817
Accrued taxes payable 10,802 7,717
----------- -----------
Total liabilities 103,518 268,316
Stockholder's equity:
Common stock, $100 par value. Authorized 30,000 shares; issued 10 shares 1,000 1,000
Common stock subscribed, 17,437 shares in 1995 and 12,437 shares in 1994 1,743,700 1,243,700
Paid-in capital 250,000 250,000
Accumulated earnings (deficit) 55,358 (5,044)
----------- -----------
2,050,058 1,489,656
Less subscriptions receivable (note 4) (1,743,700) (1,243,700)
----------- -----------
Total stockholder's equity 306,358 245,956
----------- -----------
$ 409,876 $ 514,272
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
(PLEASE NOTE THAT THE PURCHASER OF UNITS IS NOT PURCHASING AN INTEREST IN THE
COMPANY WHOSE BALANCE SHEET APPEARS ABOVE.)
130
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CIS INVESTMENTS, INC.
STATEMENT OF EARNINGS
YEARS ENDED MAY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Revenues:
Management fees $ 50,148 $ 43,686
Unrealized gain on investments in limited partnerships 44,887 37,065
Other income -- 38,206
--------- ---------
Total revenues 95,035 118,957
Expenses:
Interest -- 14,262
Operating 2,533 3,959
--------- ---------
Total expenses 2,533 18,221
--------- ---------
Income before income taxes 95,502 100,736
Income tax expense 32,100 25,222
--------- ---------
Net income $ 60,402 $ 75,514
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to financial statements.
(PLEASE NOTE THAT THE PURCHASER OF UNITS IS NOT PURCHASING AN INTEREST IN THE
COMPANY WHOSE BALANCE SHEET APPEARS ABOVE.)
131
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CIS INVESTMENTS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEARS ENDED MAY 31, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON PAID-IN COMMON STOCK ACCUMULATED SUBSCRIPTIONS
STOCK CAPITAL SUBSCRIBED DEFICIT RECEIVABLE TOTAL
----------- ----------- ------------ -------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1993 $ 1,000 250,000 1,243,700 (80,558) (1,243,700) 170,442
Net income -- -- -- 75,514 -- 75,514
----------- ----------- ------------ -------------- --------------- ---------
Balance at May 31, 1994 1,000 250,000 1,243,700 (5,044) (1,243,700) 245,956
Common stock subscription -- -- 500,000 -- (500,000) --
Net income -- -- -- 60,402 -- 60,402
----------- ----------- ------------ -------------- --------------- ---------
Balance at May 31, 1995 $ 1,000 250,000 1,743,700 55,358 (1,743,700) 306,358
----------- ----------- ------------ -------------- --------------- ---------
----------- ----------- ------------ -------------- --------------- ---------
</TABLE>
See accompanying notes to financial statements.
(PLEASE NOTE THAT THE PURCHASER OF UNITS IS NOT PURCHASING AN INTEREST IN THE
COMPANY WHOSE BALANCE SHEET APPEARS ABOVE.)
132
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CIS INVESTMENTS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 60,402 75,514
Adjustments to reconcile net income to net cash provided by operating activities:
Unrealized gain on investments in limited partnerships (44,887) (37,065)
Decrease in assets:
Accounts receivable from limited partnerships 177,484 565,301
Accrued management fees -- 388
Increase (decrease) in liabilities:
Unearned management fees 13,143 13,187
Due to parent (181,026) (570,361)
Accrued taxes payable 3,085 36
--------- ---------
Net cash provided by operating activities 28,201 47,000
--------- ---------
Net cash used in investing activities --
Purchase of limited partnership units (28,201) (47,000)
--------- ---------
Net change in cash -- --
Cash at beginning of year -- --
--------- ---------
Cash at end of year $ -- --
--------- ---------
--------- ---------
Supplemental disclosures of cash flow information --
Cash paid during the year for:
Income taxes $ 29,015 25,186
Interest expense -- 14,262
--------- ---------
--------- ---------
Noncash transaction -- The Parent subscribed to an additional 5,000 shares.
The shares are valued at $100 per share.
</TABLE>
See accompanying notes to financial statements.
(PLEASE NOTE THAT THE PURCHASER OF UNITS IS NOT PURCHASING AN INTEREST IN THE
COMPANY WHOSE BALANCE SHEET APPEARS ABOVE.)
133
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CIS INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995 AND 1994
(1) General Information and Summary of Significant Accounting Policies
General
CIS Investments, Inc. (the Company), a wholly owned subsidiary of Cargill
Investor Services, Inc., (the Parent) is the general partner in various
limited partnerships organized for the purpose of engaging in the speculative
trading of commodity interests, including futures contracts, physical
commodities, and related options.
Management Fees
Unearned management fees are amortized over one year using the straight-line
method.
Investments in Limited Partnerships
Investments in limited partnerships are recorded at a value which
approximates the Company's proportionate share of the limited partnership's
net asset value.
Income Taxes
The Company is included in the consolidated Federal income tax return of the
Parent.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 (Statement 109), Accounting for
Income Taxes. Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability
method of accounting for income taxes. Under the asset and liability method
of Statement 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
Expenses
General and administrative overhead costs of the Company are expensed and
paid by the Parent. As such, they are not reflected in these financial
statements. During fiscal year 1995 the Parent stopped charging interest on
amounts due to Parent.
(2) Investments in Limited Partnerships
Investments in limited partnerships at May 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
Units Amount Units Amount
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
IDS Managed Futures, L.P. 960 $ 254,451 280 $ 199,205
IDS Managed Futures II, L.P. 322 155,425 322 137,583
--------- ---------
$ 409,876 $ 336,788
--------- ---------
--------- ---------
</TABLE>
All investments are in general partnership units.
134
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CIS INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995 AND 1994
(3) Net Worth Requirements
The Company is required to maintain net worth, as defined, of not less than
(i) the lesser of $250,000 or 15% of the aggregate capital contributions of
any limited partnership for which it shall act as a general partner if such
contributions are less than $2,500,000 and (ii) 10% of the aggregate capital
contributions of any limited partnership for which it shall act as a general
partner if such contributions are equal to or exceed $2,500,000. At May 31,
1995 the Company is in compliance with its net worth requirements.
(4) Common Stock Subscriptions
The Company and its Parent entered into stock subscription agreements whereby
the Parent subscribed to purchase up to 17,437 shares of the Company's stock
at $100 per share in order to ensure the Company's continued compliance with
its net worth requirements. No subscribed stock was issued, nor is it known
when and if any will be issued in the future. As such, the subscribed stock
receivable amount is shown as a deduction from stockholder's equity.
(5) Income Taxes
The Company adopted Statement 109 as of June 1, 1993. There were no
significant temporary differences that gave rise to deferred tax assets
and/or deferred tax liabilities, therefore the implementation of Statement
109 had no effect on the financial statements of the Company.
135
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
CIS INVESTMENTS, INC.
UNAUDITED BALANCE SHEET
AS OF APRIL 30, 1996
ASSETS
<TABLE>
<S> <C>
Accounts Receivable $ 0
Investment in IDS Managed Futures, L.P. 321,913
Investment in IDS Managed Futures II, L.P. 161,963
Investment in Everest Futures Fund 100,000
Accrued Income 388
----------
Total Assets $ 584,264
----------
----------
LIABILITIES AND EQUITY
Unearned Management Fees $ 54,440
Intercompany Payable 135,007
Income Taxes Payable 34,260
----------
Total Accounts Payable 223,707
Common Stock $100 par value, 20,000 Authorized, 10 issued 1,000
Subscribed Stock 27,437 shares 2,743,700
Paid-in-Capital 250,000
Retained Earnings 109,557
----------
Total Stockholders Equity 3,104,257
Less--subscriptions receivable (2,743,700)
----------
Total Liabilities and Equity $ 584,264
----------
----------
Unaudited
</TABLE>
This Balance Sheet, in the opinion of management, reflects all adjustments
necessary to fairly state the financial condition of CIS Investments, Inc. at
April 30, 1996.
136
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
IDS Futures Corporation
We have audited the accompanying balance sheet of IDS Futures Corporation as of
March 31, 1996. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
based on our audit. The financial statements of IDS Managed Futures, L.P. and
IDS Managed Future II, L.P. (corporations in which the Company has a 1.0% and
1.5% interest, respectively) have been audited by other auditors whose reports
have been furnished to us; insofar as our opinion on the balance sheet relates
to data included for IDS Managed Futures, L.P. and IDS Managed Futures II, L.P.,
it is based solely on the reports of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit of the balance sheet and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of other auditors, the
balance sheet referred to above presents fairly, in all material respects, the
balance sheet of IDS Futures Corporation at March 31, 1996, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
May 9, 1996
137
<PAGE>
IDS FUTURES CORPORATION
BALANCE SHEET
MARCH 31, 1996
<TABLE>
<S> <C>
ASSETS
Cash............................................................................................ $ 478
Interest-bearing deposits with affiliate........................................................ 829,217
Accounts receivable............................................................................. 3,704
Due from limited partners (Note 6).............................................................. 60,278
Investment in Limited Partnerships (fair value -- $468,570)..................................... 254,500
Deferred income taxes (Note 4).................................................................. 171,940
----------
Total assets.................................................................................... $1,320,117
----------
----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Due to affiliate (Note 5)..................................................................... $ 218,034
Unearned income............................................................................... 274,334
----------
Total liabilities............................................................................... 492,368
Stockholder's equity:
Common Stock, $1 par value:
Authorized and issued shares -- 100......................................................... 100
Additional paid-in capital.................................................................... 1,974,900
Retained earnings............................................................................. 477,749
----------
2,452,749
Less notes receivable from affiliate (Note 3)................................................. (1,625,000)
----------
Net stockholder's equity........................................................................ 827,749
----------
Total liabilities and stockholder's equity...................................................... $1,320,117
----------
----------
</TABLE>
Commitments (Note 2)
SEE ACCOMPANYING NOTES.
(PLEASE NOTE THAT THE PURCHASER OF UNITS IS NOT PURCHASING AN
INTEREST IN THE COMPANY WHOSE BALANCE SHEET APPEARS ABOVE.)
138
<PAGE>
IDS FUTURES CORPORATION
NOTES TO BALANCE SHEET
MARCH 31, 1996
1. ORGANIZATION, PURPOSE AND ACCOUNTING POLICIES
IDS Futures Corporation (the Company) is a wholly-owned subsidiary of IDS
Management Corporation, which is a wholly-owned subsidiary of American Express
Financial Corporation (AEFC), formerly known as IDS Financial Corporation
(IDS), which is a wholly-owned subsidiary of American Express Company. The
Company was organized on December 12, 1986 and is registered under the
Commodity Exchange Act. The Company acts as a general partner in limited
partnerships.
The preparation of the balance sheet requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies. Actual results could differ from those estimates.
The investments in Limited Partnerships, which consist of interests in IDS
Managed Futures, L.P. and IDS Managed Futures II, L.P., are accounted for at
the lower of cost or fair value. Fair value has been estimated by management
as the Company's proportionate share of the limited partnership's net asset
value as set forth in the audited financial statements of the Limited
Partnerships.
The Company's interest-bearing deposit with affiliate represents short-term
funds deposited with AEFC. These funds earn interest based upon short-term
published indices. Fair value of this deposit approximates the carrying value.
Unearned income consists of management fees received at the beginning of 1996
which are recognized over the course of the year for book purposes.
2. PARTNERSHIP PARTICIPATION
The Company has entered into Agreements of Limited Partnership whereby the
general partners have agreed that they will contribute to the capital of each
Managed Futures Partnership (Partnership) an amount which will make its total
contributions to each Partnership equal to the grater of (i) 3% of the
aggregate capital contributions of the Partnerships or $100,000, whichever is
less, or (ii) 1% of the aggregate capital contributions of the Partnership.
Each partner of the Partnership will share in profits and losses of the
Partnership in proportion to the amount of the interest in the partnership
owned by each. The Agreements of Limited Partnership also require that, at all
times after the admission of limited partners to the Partnership, they
maintain together net worth at least equal to (i) the lesser of $250,000 or
15% of the aggregate capital contributions of any limited partnerships for
which they shall act as general partners and which are capitalized at less
than or equal to $2,500,000, and (ii) 10% of the aggregate capital
contributions of any limited partnerships for which they shall act as general
partners and which are capitalized at greater $2,500,000. For this purpose,
net worth shall reflect the carrying of all assets at fair market value and
shall exclude capital contributions by it to any limited partnership of which
it may be a general partner. The Company meets its net worth requirement
through promissory notes from AEFC.
3. NOTES RECEIVABLE
On April 7, 1987, IDS issued a $375,000 demand note, with interest accruing on
funds outstanding at the prime rate of Norwest Bank, Minneapolis, as a capital
contribution to IDS Futures Corporation.
(PLEASE NOTE THAT THE PURCHASER OF UNITS IS NOT PURCHASING AN
INTEREST IN THE COMPANY WHOSE BALANCE SHEET APPEARS ABOVE.)
139
<PAGE>
IDS FUTURES CORPORATION
NOTES TO BALANCE SHEET (CONTINUED)
On February 22, 1988, IDS issued an additional $750,000 demand note, with
interest accruing on funds outstanding at the prime rate of Norwest Bank,
Minneapolis, as a capital contribution to IDS Futures Corporation.
On June 23, 1988, IDS issued an additional $500,000 demand note, with interest
accruing on funds outstanding at the prime rate of Norwest Bank, Minneapolis,
as a capital contribution to IDS Futures Corporation.
These notes have been treated as a reduction in capital. All accrued interest
on the above notes has been waived by the parties to the notes.
4. TAX POLICY
The Company is included in a consolidated tax return with AEFC and its
subsidiaries. AEFC's policy is to reimburse a subsidiary for any tax return
benefit on losses incurred by the subsidiary and the subsidiary will pay AEFC
if it has a separate company tax return liability.
The deferred tax asset at March 31, 1996 represents temporary differences
(primarily unearned management fees received and recorded for tax purposes but
deferred for book purposes) that have passed through to the Company from its
investment in limited partnerships.
5. AFFILIATE TRANSACTIONS
The Company is allocated various expenses from AEFC, such as programming, data
processing, legal, taxes and other administrative costs. The payable balance
at March 31, 1996 represents adjustments to those allocations that are due to
AEFC.
6. DUE FROM LIMITED PARTNERS
This account represents an excess of unreimbursed offering expenses. According
to the January 31, 1994 Prospectus, "The General Partners will receive from
the proceeds of the offering, the Offering Expense Charge (OEC) for each unit
sold to an investor. The OEC includes fees for legal, accounting, auditing,
marketing, filing, registration and recording fees, printing expenses and
escrow charges. If the total IEC received by the General Partners exceeds the
actual offering expense incurred, the excess shall be rebated to the Limited
Partners."
(PLEASE NOTE THAT THE PURCHASER OF UNITS IS NOT PURCHASING AN
INTEREST IN THE COMPANY WHOSE BALANCE SHEET APPEARS ABOVE.)
140
<PAGE>
IDS Futures Corporation
Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
FOR THE
QUARTER ENDED
4/30/96
-------------
<S> <C>
ASSETS:
1. Cash.............................................................................................................. $ 735
2. Interest Bearing Deposits with Affiliate.......................................................................... 819,937
3. Investment in Limited Partnerships................................................................................ 254,499
4. Accounts Receivable............................................................................................... 5,078
5. Deferred Income Taxes............................................................................................. 161,271
6. Due from Limited Partners......................................................................................... 48,652
-------------
TOTAL ASSETS......................................................................................................... $ 1,290,171
-------------
-------------
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
7. Due to Affiliate.................................................................................................. 195,544
8. Unearned Income................................................................................................... 243,852
-------------
TOTAL LIABILITIES.................................................................................................... 439,396
Stockholder's equity:
9. Common Stock, $1 par value:
Authorized and issued shares -- 100................................................................................ 100
10. Additional Paid-in Capital....................................................................................... 1,974,900
11. Retained Earnings................................................................................................ 500,775
-------------
TOTAL STOCKHOLDER'S EQUITY........................................................................................... 2,475,775
12. Less Notes Receivable............................................................................................ (1,625,000)
-------------
NET STOCKHOLDER'S EQUITY............................................................................................. 850,775
-------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY........................................................................... $ 1,290,171
-------------
-------------
</TABLE>
141
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
EXHIBIT A
IDS MANAGED FUTURES, L.P.
AMENDED AND
RESTATED LIMITED PARTNERSHIP AGREEMENT
CIS Investments, Inc. and IDS Futures Corporation (hereinafter referred to
collectively as the "General Partners" and individually referred to as a
"General Partner") in their capacities as general partners and as
attorneys-in-fact for those who hereafter execute this agreement, as amended or
by separate instrument, and for the limited partners of IDS Managed Futures,
L.P. (the "Partnership") hereby agree to and adopt this Amended and Restated
Limited Partnership Agreement (the "Agreement") as of this day, September 30,
1994, and hereby amend and revise that certain Limited Partnership Agreement of
the Partnership dated June 16, 1987 and amended on January 28, 1992, March 29,
1993, January 25, 1994, and September 30, 1994.
STRUCTURE OF THE PARTNERSHIP
1. FORMATION AND NAME.
The parties hereto do hereby form a limited partnership under the Delaware
Revised Uniform Limited Partnership Act, as amended and in effect on June 16,
1987 (the "Act"). The name of the limited partnership is IDS Managed Futures,
L.P. (the "Partnership"). The General Partners shall execute and file a
Certificate of Limited Partnership in accordance with the provisions of the Act
and execute, file, record and publish as appropriate such amendments, assumed
name certificates and other documents as are or become necessary or advisable as
determined by the General Partners. Each Limited Partner hereby undertakes to
furnish to the General Partners a power of attorney which may be filed with the
Certificate of Limited Partnership and any amendments thereto and such
additional information as is required from him to complete such documents and to
execute and cooperate in the filing, recording or publishing of such documents
at the request of the General Partners.
2. PRINCIPAL OFFICES.
The principal offices of the Partnership shall be at the offices of CIS
Investments, Inc. or such other places as the General Partners may designate
from time to time.
3. BUSINESS.
The Partnership business and purpose is to trade, buy, sell, spread or otherwise
acquire, hold or dispose of commodity interests including futures contracts,
forward contracts, physical commodities, and related options thereon. The
objective of the Partnership business is appreciation of its assets through
speculative trading in such commodity interests.
4. TERM, DISSOLUTION AND FISCAL YEAR.
(a) TERM. The term of the Partnership shall commence on the day on which the
Certificate of Limited Partnership is filed in the Office of the Secretary of
State of Delaware pursuant to the provisions of the Act and shall end upon the
first to occur of the following: (1) December 31, 2006; (2) receipt by the
General Partners of a notice to dissolve the Partnership at a specified time by
Limited Partners owning more than 50% of the outstanding Units of Limited
Partnership Interest ("Units"), including Units held by representatives and
employees of the Partnership's Selling Agent and of its corporate affiliates,
but not including any Units held by the General Partners or their corporate
affiliates, which notice is sent by registered mail to the General Partners not
less than ninety days prior to the effective date of such dissolution; (3)
withdrawal, removal, insolvency, bankruptcy, legal disability or dissolution of
the General Partners unless the Partnership is continued pursuant to paragraph
22 below; (4) the insolvency or
A-1
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
bankruptcy of the Partnership; (5) a decrease in the Net Asset Value of the
Partnership to less than $500,000 as of the close of business on any trading
day; or (6) the occurrence of any event which shall make it unlawful for the
existence of the Partnership to be continued or requiring termination of the
Partnership.
(b) DISSOLUTION. Upon the occurrence of an event causing the termination of the
Partnership, the Partnership shall terminate and be dissolved. Dissolution,
payment of creditors and distribution of the Partnership assets shall be
effected as soon as practicable in accordance with the Act, and the General
Partners and Limited Partners (and any assignees) shall share in the assets of
the Partnership, if any, pro rata in accordance with their respective capital
accounts, less any amount owing by such Partners (or assignees) to the
Partnership.
(c) FISCAL YEAR. The fiscal year of the Partnership shall begin on January 1 of
each year and end on December 31; provided, however, that the first fiscal year
of the Partnership shall commence on the date its Certificate of Limited
Partnership is filed.
(d) CERTAIN DEFINITIONS.
"Advisor" means any person who for any consideration engages in the business of
advising others, either directly or indirectly, as to the value, purchase, or
sale of Commodity Contracts or commodity options.
"Commodity Contract" means a contract or option thereon providing for the
delivery or receipt at a future date of a specified amount and grade of a traded
commodity at a specified price and delivery point.
"Net Asset Value" of the Partnership means the total assets less total
liabilities, including any liability for organization and offering expenses of
the Partnership, to be determined on the basis of generally accepted accounting
principles, consistently applied, unless otherwise specified below. As of the
close of business on February 28, 1995, regardless of whether Units are then
being offered, each Unit shall be divided into three Units, each of which shall
have Net Asset Value per Unit equal to one-third the Net Asset Value per Unit on
that date prior to such division. The resulting Net Asset Value per Unit will
constitute the Net Asset Value per Unit thereafter.
"Net Asset Value per Unit" means the Net Asset Value divided by the number of
Units outstanding on the date of calculation. For purposes of these
calculations:
(a) Net Asset Value shall include any unrealized profit or loss on securities
and open commodity positions and any other credit or debit accruing to the
Partnership but unpaid or not received by the Partnership.
(b) All securities and open commodity positions shall be valued at their then
market value which means, with respect to open commodity positions, the
settlement price as determined by the exchange on which the transaction is
effected or the most recent appropriate quotation as supplied by the clearing
broker or banks through which the transaction is effected. If there are no
trades on the date of the calculation due to the operation of the daily price
fluctuation limits or due to a closing of the exchange on which the
transaction is executed, the contract will be valued at fair market value as
determined by the General Partners. Interest, if any, shall accrue monthly.
(c) Brokerage commissions on open commodity positions shall be accrued in full
upon the initiation of such open positions as a liability of the Partnership.
Management fees shall be paid monthly and deducted prior to the calculation of
the quarterly incentive fee.
"Net Worth" means the excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
"Trading Profits" means Trading Profits (for purposes of calculating each
Advisor's incentive fees only) is defined as the excess (if any) of (A) the Net
Asset Value of the Partnership's assets under management of an Advisor as of the
last day of any calendar quarter (before deduction of incentive fees payable for
such quarter) over (B) the highest Net Asset Value of the Partnership's assets
under the management of such Advisor as of the last day of the most recent
calendar quarter for which an incentive fee was due and owing. In computing
Trading Profits, the
A-2
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
difference between (A) and (B) above shall be (i) decreased by all interest
realized on the Advisor's allocable share of Partnership assets subject to such
Advisor's management between the dates referred to in (A) and (B), and (ii)
increased by the Advisor's allocable share of any distributions or redemptions
paid or payable by the Partnership as of, or subsequent to, the date in (B)
through the date in (A), and (iii) adjusted (either increased or decreased, as
the case may be) to reflect the Advisor's allocable share of any additional
allocations or negative reallocations of Partnership assets from the date in (B)
to the last day of the calendar quarter as of which the current incentive fee
calculation is made. The incentive fee shall not be payable on interest earned
on Partnership assets. For purposes of calculating Trading Profits attributable
to the assets under the management of each Advisor only, the definition of Net
Asset Value shall be modified, insofar as it takes into consideration the amount
of incentive and management fees payable by and brokerage commissions accrued by
the Partnership, to provide for the allocation of such incentive and management
fees and brokerage commissions specifically to the assets under the management
of the Advisor which is entitled to such fees or whose trading decisions
generated those brokerage commissions.
"Organizational and Offering Expenses" means all expenses incurred by the
Partnership in connection with and in preparing for registration and
subsequently offering and distributing units to the public, including, but not
limited to, total underwriting and brokerage discounts and commissions
(including fees of the underwriter's attorneys), expenses for printing,
engraving, mailing, salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow holders, depositories,
experts, expenses of qualification of the sale of its limited partnership
interests under federal and state law, including taxes and fees, accountants'
and attorneys' fees.
"Pit Brokerage Fee" means the floor brokerage, clearing fees, National Futures
Association fees, and exchange fees.
"Sponsor" means any person directly or indirectly instrumental in organizing the
Partnership or any person who will manage or participate in the management of
the Partnership, including a person who pays any portion of the organizational
expenses of the Partnership, and the general partner(s) and any other person who
regularly performs or selects the persons who perform services for the
Partnership. "Sponsor" does not include wholly independent third parties such as
attorneys, accountants, and underwriters whose only compensation is for
professional services rendered in connection with the offering of the units. The
term "Sponsor" shall be deemed to include its affiliates.
"Valuation Date" means the date as of which the Net Asset Value of the
Partnership is determined.
"Valuation Period" means a regular period time between valuation dates.
5. MANAGEMENT OF THE PARTNERSHIP.
Subject to the limitations of this Agreement, the General Partners shall have
exclusive management and complete control of the management of all aspects of
the Partnership's business for the purposes herein stated. The General Partners
shall make all decisions affecting Partnership affairs (except that the General
Partners shall not select the purchases and sales of any commodity interests for
the Partnership, but shall employ non-affiliated commodity trading advisors to
provide such services), and shall have the exclusive right to act for the
Partnership including, inter alia, the power to enter into contracts with third
parties for trading advisory services and brokerage services, which brokerage
services may be performed by entities affiliated with the General Partners at
rates that may exceed the lowest rates which might otherwise be available to the
Partnership, with respect to the following matters:
(a) Retaining or replacing any commodity trading advisor to the Partnership;
(b) Retaining any futures commission merchant or introducing broker to act as
the Partnership's broker, or materially revising the terms or conditions upon
which any futures commission merchant, or introducing broker, shall be
retained;
A-3
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(c) Appointing any person, including any person affiliated with the General
Partners, to act as a selling agent, clearing broker, introducing broker,
underwriter, or otherwise to act on behalf of the Partnership to sell or
solicit the purchase of Units in the Partnership;
(d) Determining to offer additional Units in the Partnership pursuant to its
prospectus;
(e) Settling claims against the Partnership; and
(f) Retaining attorneys and accountants to assist in the organization and
operation of the Partnership.
The General Partners shall exercise good faith in carrying out their duties and
exercising their powers in regard to, or on behalf of, the Partnership, and
shall devote sufficient efforts to the furtherance of the business of the
Partnership as reasonably necessary and appropriate. The General Partners shall
retain commodity trading advisors not affiliated with either General Partner and
will delegate the management of the Partnership's commodity accounts to such
advisors.
No Limited Partner shall take part in the management of the business or transact
any business for the Partnership, and no Limited Partner shall have power to
sign for or bind the Partnership. No Limited Partner shall be entitled to any
salary, draw or other compensation from the Partnership on account of his
investment in the Partnership. The General Partners shall have sole discretion
in determining what distributions of profits and income, if any, shall be made
to the Partners. Any distributions shall become a liability of the Partnership
for purposes of calculating Net Asset Value as of the dates of their
declaration.
The General Partners may engage and compensate on behalf of the Partnership from
funds of the Partnership, such persons, firms or corporations, including (except
as described in this Agreement) the General Partners and any affiliated person
or entity, as the General Partners in their sole judgment shall deem advisable
for the conduct and operation of the business of the Partnership.
The General Partners are hereby authorized on behalf of the Partnership to enter
into the advisory contract between the Partnership and John W. Henry & Co., Inc.
and Sabre Fund Management Limited described in the Prospectus, pursuant to which
such entities will have responsibility with respect to the determination of the
Partnership's commodity trading decisions. In the event the General Partners
shall, in their sole discretion, using their prudent business judgment,
determine that any trading instructions issued by such entities or any other
commodity trading advisor to the Partnership, violate established trading
policies of the Partnership (as described in paragraph 12 below), then the
General Partners may negate such trading instructions. The General Partners may,
in their sole discretion, select additional commodity trading advisors to direct
trading for the Partnership. The General Partners are further authorized, on
behalf of the Partnership, (i) to enter into the brokerage agreement and related
customer agreements with their affiliates, Cargill Investor Services, Inc. and
American Express Financial Advisors Inc., described in the Prospectus, pursuant
to which those firms will render brokerage services to the Partnership, (ii) to
cause the Partnership to pay brokerage commissions at the rates provided for in
the brokerage agreement, and National Futures Association, exchange, clearing,
delivery, insurance, storage, service and other fees and charges incidental to
the Partnership's trading and (iii) to receive an annual administrative fee
equal, in the case of IDS Futures Corporation, to 1.125% of the Partnership's
Net Asset Value on the first business day of each fiscal year and, in the case
of CIS Investments, Inc., to 0.25% of the Partnership's Net Asset Value on the
first business day of each fiscal year. The Partnership shall not pay brokerage
commissions to Cargill Investor Services, Inc. and American Express Financial
Advisors Inc. (exclusive of National Futures Association, exchange, clearing,
delivery, insurance, storage, service and other fees and charges incidental to
the Partnership's trading and outside the control of Cargill Investor Services,
Inc. and American Express Financial Advisors Inc.) or annual administrative fees
to the General Partners at rates higher than those established in the
Partnership's initial Prospectus for a period of 60 months from the date the
Partnership commences trading.
The Partnership shall not enter into any contract with the General Partners, any
of their affiliates, or any commodity trading advisor which has a term of more
than one year and which does not provide that it may be canceled by the
Partnership without penalty upon 60 days notice. No such contract between the
Partnership and
A-4
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
the General Partners or any of their affiliates shall be canceled by the General
Partners or such affiliates without 60 days prior written notice to the Limited
Partners. The Partnership shall make no loans. No person who shares or
participates in commodity brokerage commissions may receive, directly or
indirectly, any management or incentive fees for trading advice or trading
management (provided, however, that this prohibition shall not apply to the
administrative fees payable to the General Partners); no broker of the
Partnership may pay, directly or indirectly, rebates or give-ups to any
commodity trading advisor of the Partnership or the General Partners.
The General Partners may take such actions on behalf of the Partnership as they
deem necessary or desirable to manage the business of the Partnership including,
but not limited to, the following: opening bank accounts; determining the
amounts and frequency of distributions to the Partners; calculating and paying,
or authorizing the payment of, distributions to the Partners and expenses of the
Partnership such as organization and offering expenses (including selling
commissions), management, administrative and incentive fees, brokerage
commissions, legal, auditing and accounting fees, printing fees, filing and
recording fees, and extraordinary expenses (which expenses shall be billed
directly to the Partnership); administering transfers and redemptions of Units;
filing reports required by any federal or state agency; executing various
documents on behalf of the Partnership and the Limited Partners pursuant to
powers of attorney; supervising the liquidation of the Partnership if an event
causing termination of the Partnership occurs; and investing or directing the
investment of the Partnership's funds not involving the purchase or sale of
commodity futures contracts or other commodity interests. The General Partners
may keep the Partnership's assets on deposit with Cargill Investor Services,
Inc. The Partnership will be credited by Cargill Investor Services, Inc., with
interest earned on 100% of the Partnership's average monthly Net Asset Value at
a rate equal to 90% of the average yield on 90-day U.S. Treasury bills issued
during that month. Cargill Investor Services, Inc. may retain for its own
account any incremental interest earned on the Partnership's assets in excess of
the amounts so credited to the Partnership. The General Partners shall have
fiduciary responsibility to the Partnership with respect to the safekeeping and
use of all funds and assets of the Partnership, whether or not in their
immediate possession or control, and they shall not employ or permit others to
employ such funds and assets except as specifically provided herein in any
manner other than for the exclusive benefit of the Partnership. The General
Partners shall keep and retain, at the principal office of the Partnership, such
books and records relating to the business of the Partnership as are required by
state securities administrators and by the Commodity Exchange Act, as amended,
and the rules and regulations promulgated thereunder.
The General Partners may engage in other business activities and, subject to
this paragraph 5, shall not be required to refrain from any other activity nor
forego any profits from any such activity, including any activity as a commodity
broker, a commodity pool operator, or a commodity trading advisor of additional
commodity pools organized to trade in commodity interests.
The General Partners shall give notice to each Limited Partner within seven
business days from the effective date of: (i) any material change in contracts
with commodity trading advisors, including any change in advisors or any
modification in connection with the method of calculating the incentive fee;
(ii) any other material change affecting the compensation of any party.
Additionally, no decision shall be made by the General Partners to materially
adversely change the brokerage commission to Net Asset Value ratio until notice
is given to the Limited Partners and the Limited Partners are provided the
opportunity to redeem their Units in the Partnership. The General Partners shall
include with each such notification a description of the Limited Partners
redemption rights and voting rights, and a description of any material effect
such changes may have on the interests of the Limited Partners.
In reviewing the Partnership's brokerage arrangements, the General Partners
shall insure that the brokerage commissions represent the best price and
services available, taking into consideration, in particular, when the commodity
broker is an "affiliate" of a General Partner: (i) the size of the Partnership;
(ii) the commodity interest trading activity; (iii) the services provided by the
commodity broker, the General Partner or any affiliate thereof to the
Partnership; (iv) the cost incurred by the commodity broker, the General Partner
or any affiliate thereof in organizing and operating the Partnership and
offering Units; and (v) the overall costs to the Partnership.
A-5
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
No person dealing with the General Partners shall be required to determine their
authority to make any undertaking on behalf of the Partnership, nor to determine
any fact or circumstance bearing upon the existence of their authority.
CAPITAL STRUCTURE AND PARTNERSHIP FINANCES
6. NET WORTH OF GENERAL PARTNERS.
The General Partners agree that at all times after the admission of Limited
Partners to the Partnership pursuant to the public offering of the Partnership's
Units of Limited Partnership Interest described in paragraph 17 hereof, so long
as they remain General Partners of the Partnership, they will maintain together
Net Worth (as defined below) at least equal to (i) the lesser of $250,000 or 15%
of the aggregate capital contributions of any limited partnerships (including
the Partnership, if applicable) for which they shall act as general partners and
which are capitalized at less than $2,500,000, and (ii) 10% of the aggregate
capital contributions of any limited partnerships (including the Partnership, if
applicable) for which they shall act as general partners and which are
capitalized at greater than $2,500,000. For the purposes of this paragraph 6,
Net Worth shall be calculated in accordance with generally accepted accounting
principles, consistently applied, with all current assets valued at then current
fair market values, and may include promissory notes or stock subscriptions
issued to the General Partners by their respective parent corporations and shall
exclude any interest held by the General Partners in the Partnership or any
other limited partnership.
The requirements of the preceding paragraph may be modified in accordance with
the voting procedures set forth in paragraph 22, provided the General Partners
obtain an opinion of counsel for the Partnership that a proposed modification
will not adversely affect the classification of the Partnership as a partnership
for federal income tax purposes or result in a violation of the securities laws
of any states in which Units of Limited Partnership Interest are sold.
7. CAPITAL CONTRIBUTIONS AND PARTNERSHIP UNITS.
The General Partners shall purchase for their own account Units of General
Partnership Interest amounting to the greater of (i) 3% of the aggregate capital
contributions of the Partnership or $100,000, whichever is less, or (ii) 1% of
the aggregate capital contributions of the Partnership. Capital contributions by
the General Partners shall be credited to their capital accounts, when and as
paid. The General Partners and their affiliates may purchase Units of Limited
Partnership Interest and shall share in all Partnership income, gains, losses,
deductions and credits to the extent of their interest in the Partnership. The
Units of General Partnership Interest representing the minimum capital
contribution of the General Partners may not be transferred or redeemed so long
as they act as General Partners.
Interests in the Partnership other than the general partnership interests of the
General Partners shall be Units of Limited Partnership Interest ("Units" or,
individually, a "Unit"). The initial Limited Partner, Wendell Halvorson, has
contributed $235 in cash to the capital of the Partnership in consideration for
one Unit. In accordance with the latest Prospectus of the Partnership from time
to time filed with the Securities and Exchange Commission pursuant to Rule 424
(the "Prospectus"), the Partnership may issue and sell Units to other persons.
The General Partners and their affiliates, including their directors, officers,
shareholders and employees (including representatives of American Express
Financial Advisors Inc., the Partnership's selling agent), and the Trading
Advisors, may purchase Units and such Units shall be included in determining
whether the initial $1,000,000 subscription requirement, as set forth in
paragraph 17 below, is met. The initial purchase price of each Units shall be
$250 to members of the public, and $235 for representatives and employees of
American Express Financial Advisors Inc. and certain of its corporate affiliates
during the offering of Units as specified in the initial Prospectus. Net
proceeds per Unit to the Partnership from any Units subsequently offered must
equal at least the Partnership's then current Net Asset Value per Unit (as
defined in paragraph 4(d) above). The Units need not be evidenced by
certificates.
A-6
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
8. MAINTENANCE OF CAPITAL ACCOUNTS; ALLOCATION OF PROFITS AND LOSSES.
(a) CAPITAL ACCOUNTS. A capital account shall be established for each Partner
and shall be maintained and adjusted in accordance with Treasury Regulation
Section 1.704(b)(2)(iv). The initial balance of each Partner's capital
account shall be the Partner's initial capital contribution to the
Partnership.
(b) MONTHLY ALLOCATIONS. The following determinations and allocations shall be
made:
(1)
The Net Asset Value shall be determined.
(2)
Any increase or decrease in Net Asset Value as of the end of the month
shall then be credited or charged to the Partners' capital accounts in the
ratio that the balance of each capital account bears to the balance of all
capital accounts.
(3)
The amount of any distribution to a Partner, the amount of any accrued but
unpaid incentive fees attributable to redeemed Units and the amount paid
to a Partner on redemption of Units shall be charged to that Partner's
capital account.
(c) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES. As of the end
of each fiscal year, Partnership profit or loss ("Profit and/or "Loss")
shall be allocated for federal income tax purposes among the Partners
pursuant to the following paragraphs. Allocations of Profit and Loss shall
be pro rata from net capital gain or loss and net ordinary income or loss
realized by the Partnership unless allocations of items of gain or income or
loss or expense are necessary to satisfy the requirements in paragraphs (bb)
and (dd) that sufficient Profit and Loss be allocated to allocation accounts
such that allocation accounts attributable to redeemed Units equal
distributions in redemption of such Units. Notwithstanding the foregoing
requirement that annual allocations of Profit and Loss be pro rata from
capital and ordinary income, gain, loss and expense, adjustments to such
allocations shall be made to reflect the extent to which income or expense
is otherwise determined and periodically allocated to the Partners, and such
periodic allocations and adjustments shall be determined in a manner that in
the judgment of the General Partners is consistent with the intent of this
Paragraph 8(c).
(1)
Partnership Profit and Loss shall be allocated as follows:
(aa) For the purpose of allocating Profit or Loss among the Partners,
there shall be established an allocation account with respect to each
Partner. The initial balance of each allocation account shall be the
amount paid to the Partnership for such Partner's Units. Allocation
accounts shall be adjusted as of the end of each fiscal year and as of
the date a Partner redeems any Units as follows:
(i) Each allocation account shall be increased by the amount of
Profit allocated to the Partner pursuant to paragraph (cc) below.
(ii) Each allocation account shall be decreased by the amount of
Loss allocated to the Partner pursuant to paragraph (ee) below and
by the amount of any distributions the Partner has received with
respect to his Units.
(bb) Profit shall be allocated first to each Partner who has redeemed
any Units during the fiscal year up to the excess, if any, of the
amount received upon redemption of the basis over the allocation
account attributable on a pro rata basis to the redeemed Units.
(cc) Profit remaining after the allocation thereof pursuant to paragraph
(bb) shall be allocated next among all Partners whose capital accounts
are in excess of their allocation accounts (after the adjustments in
paragraph (bb)) in the ratio that each such Partner's excess bears to
all such Partners' excesses. In the event that gain to be allocated
pursuant to this paragraph (cc) is greater than the excess of all such
Partners' capital accounts over all such allocation accounts, the
excess will be allocated among all Partners in the ratio that each
Partner's capital account bears to all Partners' capital accounts.
A-7
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(dd) Loss shall be allocated first to each Partner who has redeemed any
Units during the fiscal year up to the excess, if any, of the
allocation account attributable on a pro rata basis to the redeemed
Units over the amount received upon redemption of the Units.
(ee) Loss remaining after the allocation thereof pursuant to paragraph
(dd) shall be allocated next among all Partners whose allocation
accounts are in excess of their capital accounts (after the adjustments
in paragraph (dd)) in the ratio that each such Partner's excess bears
to all such Partners' excesses. In the event that loss to be allocated
pursuant to this paragraph (ee) is greater than the excess of all such
allocation accounts over all such Partners' capital accounts, the
excess loss will be allocated among all Partners in the ratio that each
Partner's capital accounts bears to all Partners' capital accounts.
(2)
In the event that a Unit has been assigned, the allocations prescribed by
this Paragraph (c) shall be made with respect to such Unit without regard
to the assignment, except that in the year of assignment the allocations
prescribed by this Paragraph (e) shall, to the extent permitted for
federal income tax purposes, be allocated between the assignor and
assignee using the interim closing of the books method.
(3)
The allocation for federal income tax purposes of Profit and Loss, as set
forth herein, is intended to allocate taxable profit and loss among
Partners generally in the ratio and to the extent that net profit and net
loss are allocated to such Partners under paragraph (b) hereof so as to
eliminate, to the extent possible, any disparity between a Partner's
capital account and his allocation account with respect to each Unit then
outstanding, consistent with the principles set forth in Section 704(c) of
the Internal Revenue Code of 1986, as amended (the "Code").
(d) DEFICIT BALANCES. Notwithstanding anything herein to the contrary, in the
event that at the end of any Partnership taxable year any Partner's capital
account is adjusted for, or such Partner is allocated, or there is distributed
to such Partner any item described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) in an amount not reasonably expected at the
end of such year, and such treatment creates a deficit balance in such Partner's
capital account, then such Partner shall be allocated all items of income and
gain of the Partnership for such year and for all subsequent taxable years of
the Partnership until such deficit balance has been eliminated. In the event
that any such unexpected adjustments, allocations or distributions create a
deficit balance in the capital accounts of more than one Partner in any
Partnership taxable year, all items of income and gain of the Partnership for
such taxable year and all subsequent taxable years shall be allocated among all
such Partners in proportion to their respective deficit balances until such
deficit balances have been eliminated. Upon the dissolution and termination of
the Partnership, each General Partner must contribute an amount equal to any
deficit balance in his capital account.
(e) REDEMPTIONS AND DISTRIBUTIONS. No Limited Partner shall have priority over
any other Limited Partner either as to return of cash contributions or as to
profits, losses or distributions.
(f) JUDGMENT OF GENERAL PARTNERS. Except with respect to matters as to which the
General Partners are granted discretion hereunder, the opinion of the
independent public accountants retained by the Partnership from time to time
shall be final and binding with respect to all computations and determinations
required to be made hereunder, provided, however, that if, in the event that any
computation or determination involves a choice of different alternatives, the
accountants making such computations and determinations shall be permitted to
rely upon the judgment of the General Partners. Notwithstanding any provision
herein to the contrary, if in the judgment of the General Partners, the
allocations for federal income tax purposes (i) shall not satisfy the
requirements of Section 704(b) of the Code or Regulations promulgated
thereunder, (ii) shall violate any other provision of the Code or Regulations or
(iii) shall not properly take into account any expenditure by, or receipt of,
the Partnership, the General Partners shall adjust the allocations accordingly.
No adjustment made by the General Partners pursuant to this paragraph 8(f) shall
materially and adversely affect the amount of cash which would otherwise be
credited to a Limited Partner, without his consent.
A-8
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
9. EXPENSES AND LIMITATION THEREOF.
IDS Financial Services Inc. (the "Selling Agent") was paid $15 for each Unit
sold by it to members of the public in the initial offering of Units, but no
selling commission shall be charged in connection with any sales of Units to
representatives and employees of IDS Financial Services Inc. and certain of its
corporate affiliates. The General Partners initially advanced all other
organization and offering expenses of the Partnership, including legal,
accounting, auditing, filing, registration and recording fees, printing expenses
and escrow charges. The General Partners were subsequently reimbursed by the
Partnership for advancing the Partnership's organization and offering expenses
prior to the commencement of trading by the Partnership. However, the General
Partners were entitled to any of the payments called for by this paragraph 9
only if subscriptions for at least $1,000,000 were received and accepted by the
General Partners, subject to a maximum reimbursement of such expenses, when
added to the selling commissions, equal to 15% of the value of the Units sold
prior to any reduction for selling commissions. The terms and provisions of this
Section 9 that pertain to the Partnership's original offering to the public
shall be superseded by the terms and provisions of the prospectus given to
investors in connection with any subsequent offering.
The Partnership's assets will be deposited in the Partnership's account with
Cargill Investor Services, Inc., the Partnership's clearing broker. Cargill
Investor Services, Inc. will credit the Partnership at month-end with interest
income on 100% of the Partnership's average monthly Net Asset Value at a rate
equal to 90% of the average yield on the 90 day U.S. Treasury Bills issued
during that month.
The General Partners shall each receive as compensation for acting as General
Partners an annual administrative fee equal, in the case of IDS Futures
Corporation, to 1.45% of the Partnership's Net Asset Value on the first business
day of each Partnership fiscal year and, in the case of CIS Investments, Inc.,
to 0.3% of the Partnership's Net Asset Value on the first business day of each
Partnership fiscal year.
After December 31, 1992, the annual administrative fee payable to IDS Futures
Corporation will be 1.125% of the Partnership's beginning Net Asset Value on the
first business day of each Partnership fiscal year, and the annual
administrative fee payable to CIS Investments, Inc. will be 0.25% of the
Partnership's Net Asset Value on the first business day of each Partnership
fiscal year.
Each General Partner shall share in all Partnership income, gain, losses,
deductions and credits to the extent of its interest in the Partnership. The
Partnership will pay its periodic operating expenses relating to legal,
accounting, auditing, printing, filing and recording fees; management and
incentive fees; brokerage commissions and any incidental trading charges
(including all delivery, insurance, storage, service or other charges paid to
third parties in connection with the Partnership's trading); extraordinary
expenses, and any items for which payment may be made by the Partnership as set
forth in paragraph 21. All of such expenses shall be billed directly to the
Partnership. The aggregate annual expenses of every character paid or incurred
by the Partnership, including management and advisory fees based on the
Partnership's Net Asset Value but excluding commodity brokerage commissions,
incentive fees, legal, audit and extraordinary expenses calculated at least
quarterly on a basis consistently applied, shall be reasonable but in no event
shall exceed 1/2 of 1% of Net Asset Value per month. Appropriate reserves may be
created, accrued and charged against the Partnership's assets for contingent
liabilities, if any, as of the date any such contingent liability becomes known
to the General Partners.
Additionally, the summation of the Administrative Fees and Administrative
Expenses, Brokerage Commissions and transaction fees and costs to be paid by the
Partnership, any Management Fee, any Advisory Fee, and any financial benefit
from interest income earned on Partnership assets in excess of the interest paid
to the Partnership shall total no more than 14% of the Partnership's Net Asset
Value available for trading and the Net Asset Value available for trading shall
not exceed 100% of the Partnership's Net Asset Value. The General Partners will
annually review the total of these expenses paid by the Partnership to ensure
that they do not exceed 14% of the Net Asset Value available for trading. Should
these expenses total more than 14% of the Net Asset Value available for trading,
the General Partners will pay and will not be reimbursed by the Partnership for
such excess.
A-9
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
10. LIMITED LIABILITY OF LIMITED PARTNERS.
Each Unit, when purchased in accordance with this Agreement, shall be fully paid
and nonassessable. Any provisions of this Agreement to the contrary
notwithstanding, no Limited Partner shall be liable for the Partnership
obligations in excess of the capital contributed by him and profits attributable
thereto, if any, and such other amounts as he may be liable for pursuant to the
Act. If the Partnership were unable otherwise to meet its obligations, the
Limited Partners might be required to repay to the Partnership for a period of
one year after the return of a Limited Partner's capital contribution or any
part thereof such returned capital contribution, including profits, if any, any
distributions and amounts received upon redemption, and interest thereon, but
only to the extent necessary to discharge the Partnership's liabilities to
creditors who extended credit to the Partnership during the period such capital
contribution was held by the Partnership.
11. RETURN OF LIMITED PARTNER'S CAPITAL CONTRIBUTION.
Except to the extent that a Limited Partner shall have the right to withdraw
capital in accordance with paragraph 16 below, no Limited Partner shall have any
right to demand the return of his capital contribution or any profits added
thereto, except upon termination and dissolution of the Partnership. In no event
shall a Limited Partner be entitled to demand or receive property other than
cash.
The General Partners shall not be personally liable for the return or repayment
of all or any portion of the capital or profits of any Partner (or assignee), it
being expressly agreed that any such return of capital or profits made pursuant
to this Agreement shall be made solely from the assets (which shall not include
any right of contribution from the General Partners) of the Partnership.
CONDUCT OF THE PARTNERSHIP'S BUSINESS
12. TRADING POLICIES.
The Partnership shall adhere to the following trading policies:
(a) Funds will be invested only in futures contracts which are traded in
sufficient volume to permit, in the opinion of the Advisors to the Partnership,
ease of taking and liquidating positions. The Advisors may at any time determine
to expand or reduce the number of commodity interests traded by that portion of
assets under their respective control.
(b) No Advisor will acquire on behalf of the Partnership additional positions in
any commodity interest if such additional positions, when added to the existing
open positions initiated by the Advisor, would result in a net long or short
position for that commodity interest requiring as margin or premiums more than
15% of the Partnership assets allocated to that Advisor's management. For
purposes of implementing this policy, soybeans will be treated as one commodity
interest and soybean oil and soybean meal will be treated together as one
commodity interest.
(c) The Partnership will not normally be as highly leveraged as permitted in the
case of an investment by an individual. On the basis of information supplied by
the Advisors, the General Partners estimate that between 20% and 60% of the
Partnership's assets will normally be committed as initial margin (although the
percentage may be more or less than such range from time to time). To reduce the
Clearing Broker's risk, additional restrictions on the leverage of the
Partnership may be imposed by the Clearing Broker without notice at any time.
(d) No Advisor will acquire on behalf of the Partnership additional positions in
any commodity interest if such additional positions, when added to the existing
open positions initiated by the Advisor, would result in aggregate net long or
short positions (including any forward contracts) for all commodity interests
requiring as margin or premiums more than 66 2/3% of the Partnership's assets
allocated to that Advisor's management.
(e) The Partnership will not generally enter into an open position for a
particular commodity during a delivery month for that commodity. However, the
Partnership may occasionally make or accept delivery of a commodity. This may
occur because an Advisor's trading strategy may, from time to time, identify
certain trends which occur in
A-10
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
delivery months which can be taken advantage of by the Partnership. The
Partnership may take delivery of a commodity and take a corresponding short
position in the commodity by selling futures contracts for the commodity. The
Partnership will not engage in cash commodity transactions, except as indicated
above, unless the cash position is hedged.
(f) The Partnership will 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 a related commodity interest. However, the Advisors may take into account the
Partnership's open trade equity in assets of the Partnership in determining
whether to acquire additional commodity futures contracts on behalf of the
Partnership.
(g) The Partnership will not purchase, sell or trade in securities or write,
purchase, sell or trade in options to purchase or sell securities, commodity
futures contracts or physical commodities unless such options have been approved
for trading on a designated contract market by the CFTC. The Partnership may
trade in foreign options if permitted under the Commodity Exchange Act, as
amended, and CFTC regulations, but only when and to the extent authorized in
writing by the General Partners to the Advisors. The Partnership may trade in
futures contracts on securities.
(h) The Partnership will not generally utilize borrowings, except for short-term
borrowings where the Partnership takes delivery of any cash commodity or to the
extent that Cargill Investor Services, Inc., as the Partnership's clearing
broker, obtains lines of credit for the trading of forward contracts with banks.
The Partnership will not make any loans.
(i) The Advisors may, from time to time, employ trading techniques such as
spreads or straddles on behalf of the Partnership. The term "spread" or
"straddle" describes a transaction involving the simultaneous buying and selling
of commodity interests dealing with the same or different commodity interests
but involving different delivery dates or markets, and in which the trader
expects to earn profits from a widening or narrowing movement of the two prices
of the commodity interests.
(j) The Partnership may trade in futures contracts on foreign currencies through
foreign and domestic commodity exchanges, including the International Monetary
Market Division of the Chicago Mercantile Exchange. The Partnership may also
establish positions in foreign currencies through banks or in the interbank
market. Forward contracts on foreign currencies will be transacted only with
banks having in excess of $100,000,000 in combined capital and surplus. No
specific limitation on the percentage or amount of forward contracts, if any,
engaged in by the Partnership has been imposed.
(k) The Partnership's assets will not be commingled with the assets of any other
person; funds used to satisfy margin requirements will not be considered
commingled.
(l) No Advisor to the Partnership will be permitted to engage in churning the
assets of the Partnership.
(m) No rebates or give ups may be paid to or received by the General Partners,
nor may the General Partners participate in any reciprocal business arrangements
which could circumvent this prohibition, but retention of Cargill Investor
Services, Inc. to act as the Partnership's clearing broker and retention of
American Express Financial Advisors Inc. to act as the Partnership's introducing
broker shall not be deemed to violate this prohibition. The General Partners and
their affiliates shall not establish or participate in any reciprocal business
arrangements which would circumvent the restrictions against dealing with
affiliates or other interested parties, but this prohibition shall not be deemed
to prevent the Partnership from using the services of Cargill Investor Services,
Inc. as clearing broker or American Express Financial Advisors Inc. as
introducing broker.
Material changes in the trading policies described above must be approved by a
vote of a majority of the outstanding Units (not including Units held by the
General Partners or their corporate affiliates). A change in commodity interests
traded shall not be deemed to be a material change in the trading policies. If
the General
A-11
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Partners determine, in their sole discretion, using prudent business judgment,
that any trading instructions issued by the Partnership's Advisors violate one
of the Partnership's trading policies, the General Partners may negate such
trading instructions.
13. REPORTS AND STATEMENTS.
The General Partners, in their sole discretion, may cause the Partnership to
make, refrain from making or, once having made, revoke, the election referred to
in Section 754 of the Internal Revenue Code of 1986, as amended, and any similar
election provided by state or local law or any similar provision enacted in lieu
thereof. Each Limited Partner shall be furnished as of the end of each month and
as of the end of each fiscal year with (i) such reports (in such detail) as are
required to be given to Limited Partners by the rules of the Commodity Futures
Trading Commission, (ii) any other reports (in such detail) as are required by
any other governmental authority which has jurisdiction over the activities of
the Partnership; and (iii) any other reports or information which the General
Partners, in their discretion, determine to be necessary or appropriate. Each
Limited Partner shall be furnished an annual report containing audited financial
statements examined by an independent public accountant within 90 days after the
close of each fiscal year, setting forth, among other matters:
(a) The Net Asset Value of the Partnership and the Net Asset Value per Unit at
the end of the fiscal year or the total value of a Partner's interest in the
Partnership;
(b) the total amount of (i) management, administrative, and advisory fees, (ii)
brokerage commissions and fees for commodity and other investment transactions
during the fiscal year and (iii) all other expenses incurred or accrued by the
Partnership during the fiscal year;
(c) any change in the Partnership's commodity trading advisors or any material
change in the management of the Partnership's commodity trading advisors;
(d) any other material business dealings between the Partnership, the General
Partners, the commodity trading advisors, its commodity broker or any principal
of any of the foregoing;
(e) the actual performance of the Partnership during prescribed time periods;
(f) a statement of financial condition as of the close of the fiscal year and
preceding fiscal year;
(g) statements of income (loss), changes in financial position and changes in
partners' equity during the fiscal year and the previous fiscal year; and
(h) appropriate footnote disclosures and such further material information as
may be necessary to make the financial statements not misleading.
In addition to the annual report, the General Partners will furnish each Limited
Partner, within 30 days of the end of each month, with an account statement
(unaudited) covering such month, which statement shall contain generally the
same type of information set forth in the items (a)-(e) above. Each Limited
Partner shall also be notified within seven business days from the date of any
decline in the Net Asset Value per Unit to less than 50% of the Net Asset Value
per Unit since the last business day on which the Partnership's Net Asset Value
was calculated, and shall at that time be provided with a description of Limited
Partners' voting rights hereunder. The General Partners will also furnish each
Limited Partner with tax information not later than March 15 of each year in a
form which may be utilized in the preparation of income tax returns.
14. PARTNERSHIP RECORDS.
Proper books of account and records relating to the Partnership's business shall
be made and kept by the General Partners as required by the Commodity Exchange
Act, as amended, and the rules and regulations promulgated thereunder. Such
books and records shall be kept on an accrual basis. Limited Partners or their
duly authorized representatives may inspect and copy (upon payment of reasonable
reproduction costs) such books and records during normal business hours at the
Partnership's principal office. Upon request, copies of such books and records
A-12
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
will be sent to any Limited Partner if reasonable reproduction and distribution
costs are paid by such Limited Partner, or as otherwise required by the
Commodity Exchange Act, as amended, and the rules and regulations promulgated
thereunder.
ADMISSION AND WITHDRAWAL OF PARTNERS
15. TRANSFERS OF UNITS.
Subject to compliance with the suitability standards of the Partnership, federal
and state securities laws and the rules of any other applicable governmental
authority, Units may be assigned, transferred or disposed of at the election of
a Limited Partner upon written notice to the General Partners. No consent of the
General Partners is necessary. No assignment, transfer or disposition shall be
effective against the Partnership or the General Partners until the General
Partners receive the written notice described below. The assignee shall become a
substituted Limited Partner in the Partnership only upon the consent of the
General Partners (which consent may be granted or withheld at their sole
discretion). An assignee who becomes a substituted limited partner will be
subject to all of the rights and liabilities of the assigning limited partner.
An assignment of Units will not be permitted if, in the judgment of the General
Partners, such assignment may cause the partnership to be taxable under the
Internal Revenue Code as a corporation or an association rather than as a
partnership.
The written notice of assignment shall specify the name and address of the
assignee, the date of assignment, shall include a statement by the assignee that
he agrees to give written notice to the General Partners upon any subsequent
assignment and shall be signed by the assignor (or his duly authorized
representative) and assignee. The General Partners may, in their sole
discretion, waive receipt of the above-described notice or waive any defect
therein. If an assignment, transfer or disposition occurs by reason of the death
of a Limited Partner or assignee, written notice of such assignment may be given
by the duly authorized representative of the estate of the Limited Partner or
assignee and shall be supported by such proof of legal authority and valid
assignment as may be reasonably requested by the General Partners. Neither the
estate nor any beneficiary of a deceased Limited Partner or assignee will have
any right to withdraw any capital or profits from the Partnership except by
redemption of Units. A substituted Limited Partner shall have all rights and
powers and shall be subject to all the restrictions and liabilities of his
assignor; provided, however, that a substituted Limited Partner shall not be
subject to those liabilities of which he was ignorant at the time he became a
substituted Limited Partner and which could not be ascertained from the
Certificate of Limited Partnership. Each Limited Partner agrees that with the
consent of the General Partners any assignee may become a substituted Limited
Partner without the further act or consent of any Limited Partner. Each Limited
Partner agrees that he has no right to consent to and will not consent to any
person or entity becoming a substituted Limited Partner, except as set forth in
the preceding sentence. If the General Partners withhold consent, an assignee
shall not become a substituted Limited Partner and shall not have any of the
rights of a Limited Partner, except that the assignee shall be entitled to
receive that share of capital or profits and shall have that right of redemption
to which his assignor would otherwise have been entitled. An assigning Limited
Partner shall remain liable to the Partnership as provided in the Act,
regardless of whether his assignee becomes a substituted Limited Partner.
16. REDEMPTION OF UNITS.
No redemptions are permitted during the first six months after an investor has
been first admitted to the Partnership. Thereafter, a Limited Partner (or any
assignee of Units whom the General Partners have received written notice as
described in paragraph 15 above) may withdraw from the Partnership all or any
part of his capital contributions and undistributed profits, if any, effective
as of the last trading day of any month. Redemption amounts may be designated
either in terms of a number of Units or an amount in dollars. The minimum
redemption amount, whether requested in terms of dollars or Units, is the lesser
of $500 or the Net Asset Value of two Units, unless the Limited Partner is
redeeming his entire interest in the Partnership. Redemptions may be obtained by
a Limited Partner by requiring the Partnership to redeem any or all of his Units
based on Net Asset Value per Unit, calculated as of the close of business (as
determined by the General Partners) on the effective date
A-13
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
of redemption; provided, that (1) there remains property of the Partnership
sufficient to pay all liabilities, contingent or otherwise, of the Partnership
(except any liability to Partners on account of their capital contributions) and
(2) the General Partners shall have timely received a Request for Redemption as
hereinafter defined. As used herein, Request for Redemption shall mean a letter
in the form specified by the General Partners sent by a Limited Partner (or any
assignee of whom the General Partners have received written notice as described
in paragraph 15 above) and received by the General Partners ten days prior to
the end of the month of the requested redemption. A form of Request for
Redemption may be obtained by written request to the General Partners. The
General Partners may declare additional redemption dates upon notice to the
Limited Partners. Upon redemption, a Partner (or any assignee of whom the
General Partners have received written notice as described above) shall receive
from the Partnership for each Unit redeemed an amount based on the Net Asset
Value per Unit, less any amount owing by such Partner (and assignees, if any) to
the Partnership. If redemption is requested by an assignee, all amounts owed by
the Partner to whom such Units was sold by the Partnership as well as all
amounts owed by all assignees who owned such Unit shall be deducted from the
amount paid to such assignee upon redemption of his Units. An assignee shall not
be entitled to redemption until the General Partners have received written
notice (as described in Paragraph 15 above) of the assignment, transfer or
disposition under which the assignee claims an interest in the Units to be
redeemed and shall have no claim against the Partnership or the General Partners
with respect to distributions or amounts paid on redemption of Units prior to
the receipt by the General Partners or such notice. Profits and losses shall be
allocated to Partners in proportion to their respective units and to their
respective dates of redemption in accordance with Section 8(b) hereof. The
Partnership's commodity positions will be liquidated to the extent necessary to
effect redemptions. Redemptions are contingent upon the Partnership having
property sufficient to discharge its liabilities (contingent or otherwise) on
the effective date of redemption. If the General Partners determine that
permitting the number of redemptions sought would be detrimental to the tax
status of the Partnership, they may restrict the number of redemptions to be
permitted, and shall select by lot so many redemptions as will not, in their
judgment, impair the Partnership's tax status.
After the 3-for-1 split of Units (as described in paragraph 17 hereof) occurs,
if the Net Asset Value per Unit (as defined in paragraph 4(a) hereof) decreases
below $125 (after adding back any distributions from the Partnership to the
Limited Partners), at the close of business on any trading day, the Partnership
will attempt to liquidate all open positions as expeditiously as possible and
suspend trading. Within ten business days after the date of any such suspension
of trading, the General Partners shall either give notice to the Limited
Partners of their intention to withdraw from the Partnership or shall declare a
special redemption date. Such special redemption date, if declared, shall be a
business day within 30 business days from the date of suspension of trading by
the Partnership, and the General Partners shall mail notice of such date to each
Limited Partner (and assignee of Units of whom they have notice pursuant to
paragraph 15 above) by first class mail, postage prepaid, not later than ten
business days prior to such special redemption date together with instructions
as to the procedure such Partner or assignee must follow to have his Units
redeemed on such date. Upon redemption pursuant to a special redemption date, a
Partner (or any assignee of whom the General Partners have received written
notice as described in paragraph 15 above) shall receive from the Partnership
for each Unit redeemed an amount equal to the Net Asset Value per Unit
determined as of the close of business on such special redemption date less any
amount owing by such Partner (and assignees, if any) to the Partnership. If
redemption is requested by an assignee, all amounts owed by the Partner to whom
such Unit was sold by the Partnership as well as all amounts owed by all
assignees who owned such Unit shall be deducted from the amount paid to such
assignee upon redemption of his Unit. An assignee shall not be entitled to
redemption until the General Partners have received written notice (as described
in paragraph 15 above) of the assignment, transfer or disposition under which
the assignee claims an interest in the Units to be redeemed. If, after such
special redemption date, the Partnership's Net Asset value is at least $500,000,
the Partnership will resume trading, unless the General Partners elect to
withdraw from the Partnership.
Payment will be made within ten business days after the effective date of
redemption or special date of redemption, except that under special
circumstances, including but not limited to inability to liquidate commodity
positions as of the effective date of redemption (including any special
redemption date) or default or delay in payments due the
A-14
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Partnership from commodity brokers, banks or other persons, the Partnership may
in turn delay payment to Partners requesting redemption of Units of the
proportionate part of the Net Asset Value of the Units represented by the sums
which are the subject of such default or delay.
The General Partners may require any subscriber which is an employee benefit
plan subject to Title I of the Employee Retirement Income Security Act of 1974
to withdraw in whole or in part from the Partnership through redemption of its
Units if such withdrawal, in the General Partners' sole good faith judgment, is
necessary to avoid violation by the Partnership and/or Limited Partners which
are employee benefit plans of applicable provisions of such statute.
17. OFFERING OF UNITS OF LIMITED PARTNERSHIP INTEREST.
The General Partners on behalf of the Partnership shall (i) cause to be filed a
registration statement or registration statements, and such amendments thereto
as the General Partners deem advisable, with the Securities and Exchange
Commission for the registration and public offering of Units, (ii) qualify Units
for sale under the securities laws of such States of the United States or other
jurisdictions as the General Partners shall deem advisable and (iii) take such
action with respect to the matters described in (i) and (ii) as it shall deem
advisable or necessary. The expenses of the Partnership in connection with such
filings, qualifications and offerings, other than selling commissions, shall be
advanced by the General Partners, but the Partnership will subsequently
reimburse the General Partners for such expenses out of the proceeds of the
offering. The terms and provisions of this Section 17 that pertain to the
Partnership's original offering to the public shall be superseded by the terms
and provisions of the prospectus given to investors in connection with any
subsequent offering.
The General Partners are authorized to take such action and make such
arrangements for the sale of the Units as they deem appropriate, including
without limitation (i) the execution on behalf of the Partnership of a selling
agreement appointing American Express Financial Advisors Inc. as agent of the
Partnership for the offer and sale of the Units during the offering period as
contemplated in a prospectus and appointing American Express Financial Advisors
Inc. as the Fund's introducing broker, and (ii) the indemnification of American
Express Financial Advisors Inc. and John W. Henry & Co., Inc. and Sabre Fund
Management Limited (the Partnership's initial Advisors) and each person
controlling them against certain liabilities incurred in connection with the
issuance and sale of the Units. The General Partners will keep copies of all
subscription agreements (including suitability records) signed by Limited
Partners in connection with public offerings of Units for a period of six years.
If the Partnership shall not have obtained during the period of its initial
public offering of the Units subscriptions representing an aggregate offering
price of $1,000,000 this Agreement shall terminate, and all capital contributed
to the Partnership shall be promptly returned to the contributors thereof. In
addition, any interest which shall have accrued (from the time of deposit of
each subscription to the time such funds are released by the Escrow Agent
referred to below) shall be promptly distributed to such contributors. The
General Partners and officers, directors, shareholders and employees of Cargill
Investor Services, Inc. and American Express Financial Advisors Inc., may
subscribe for Units and any such subscriptions shall be included in determining
whether the minimum subscription requirement is met. All initial subscriptions
will be held in escrow by the Marquette Bank Minneapolis, N.A. (the "Escrow
Agent"). The Partnership shall not commence trading operations unless and until
the General Partners have accepted subscriptions for Units representing an
aggregate offering price of $1,000,000 pursuant to the Partnership's initial
public offering of Units. The allocable portion of any interest earned on each
subscription shall be distributed to each subscriber. The General Partners may
terminate any offering of Units at any time. The aggregate of all capital
contributions shall be available to the Partnership to carry on its business,
and no interest shall be paid by the Partnership on any such contributions after
such contributions are released by the Escrow Agent.
All Units subscribed for upon receipt of a check or draft of the subscriber are
issued subject to the collection of the funds represented by such check or
draft. In the event a check or draft of a subscriber for Units representing
payment for Units is returned unpaid, the Partnership shall cancel the Units
issued to such subscriber represented by such returned check or draft and the
General Partners shall file an amendment, if required, to the Partnership's
A-15
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Certificate of Limited Partnership reflecting such cancellation. Any losses or
profits sustained by the Partnership in connection with the Partnership's
commodity trading allocable to such canceled Units shall be deemed an increase
or decrease in Net Asset Value and allocated among the remaining partners as
described in paragraph 8 above. Each subscriber agrees to reimburse the
Partnership for any expenses or losses incurred in connection with any such
cancellation of Units issued to him.
As of the close of business on February 28, 1995, regardless of whether Units
are then being offered, each Unit shall be divided into three Units, each of
which shall have Net Asset Value per Unit equal to one-third the Net Asset Value
per Unit on that date prior to such division. The resulting Net Asset Value per
Unit will constitute the Net Asset Value per Unit thereafter.
18. ADMISSION OF ADDITIONAL PARTNERS.
At any time the General Partners may, in their sole discretion and subject to
applicable law, admit additional Limited Partners, each of which newly admitted
Limited Partner shall contribute cash to the capital of the Partnership for each
Unit of Limited Partnership Interest to be acquired in at least the minimum
amount specified in paragraph 7. Pursuant to paragraph 15, the General Partners
may consent to and admit any assignee of Units as a substituted Limited Partner.
There is no limit on the total number of Units which may be outstanding.
19. POWER OF ATTORNEY.
Each Limited Partner, by the execution of this Agreement, whether by counterpart
or separate instrument, does irrevocably constitute and appoint the General
Partners his true and lawful attorneys and agents, with full power of
substitution and with full power and authority in his name, place and stead, to
admit additional Limited Partners, to file, prosecute, defend, settle or
compromise any and all actions at law or suits in equity for or on behalf of the
Partnership with respect to any claim, demand or liability asserted or
threatened by or against the Partnership, and to execute, acknowledge, swear to,
deliver, file and record in the appropriate public offices and publish (i) all
certificates and other instruments (including counterparts of this Agreement)
which the General Partners deem appropriate to qualify or continue the
Partnership as a limited partnership in the jurisdictions in which the
Partnership may conduct business or which may be required to be filed by the
Partnership under the laws of any jurisdiction; (ii) all instruments which the
General Partners deem appropriate to reflect a change or modification of the
Partnership in accordance with the terms of this Agreement relating to the
Partnership or any amendment thereto; (iii) all conveyances and other
instruments which the General Partners deem appropriate to reflect the
dissolution and termination of the Partnership; and (iv) certificates of assumed
name. The Power of Attorney granted herein shall be irrevocable and deemed to be
a power coupled with an interest and shall survive the incapacity or death of a
Limited Partner. Each Limited Partner hereby agrees to be bound by any
representation made by the General Partners and by any successor thereto, acting
in good faith pursuant to such Power of Attorney. Each Limited Partner agrees to
execute a special Power of Attorney on a document separate from this Agreement.
In the event of any conflict between this Agreement and any instruments filed by
the General Partners pursuant to the Power of Attorney granted in this paragraph
19, this Agreement shall control.
20. WITHDRAWAL OF A PARTNER.
The Partnership shall terminate and be dissolved upon the withdrawal of the
General Partners. A General Partner may withdraw from the Partnership at any
time on 120 days' written notice by first class mail, postage prepaid to each
Limited Partner. If the Limited Partners or the remaining General Partner elect
to continue the Partnership, the withdrawing General Partner shall pay all
expenses incurred as a result of its withdrawal. The withdrawing General Partner
shall cease to be a General Partner as of the day of such withdrawal, and shall
then receive a return of its capital plus any portion of compensation as a
General Partner accrued and owing to it at such time.
A-16
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
If any of the events specified below occurs in regard to a General Partner, the
General Partner shall be considered to have submitted a notice of withdrawal
from the Partnership as of the date of the occurrence of such event:
(a) any levy or attachment by a creditor on or by any person claiming a lien on
any material interest of the General Partner if such levy or attachment is not
cured within 10 days;
(b) any assignment by the General Partner of any interest for the benefit of
creditors;
(c) any voluntary filing by the General Partner, or filing by another against
the General Partner, of any petition for adjudication of such General Partner as
insolvent or bankrupt;
(d) any use of any insolvency or similar act by the General Partner;
(e) any filing by the General Partner of a petition for reorganization or
arrangement under any provision of state or federal bankruptcy laws then in
force and effect;
(f) any appointment in any insolvency proceeding of any receiver or trustee for
the General Partner or any material portion of the General Partner's property;
(g) any adjudgment of bankruptcy or insolvency, or entry of an order for relief
in any bankruptcy or insolvency proceeding; and
(h) the filing of any petition for, or consent to, any of the foregoing by the
General Partner or the filing of an answer or other pleading admitting or
failing to contest material allegations contained in a petition filed against it
in any proceeding of such nature.
Unless written consent from all Limited Partners is obtained permitting a
General Partner to continue to act in that capacity, a General Partner shall be
considered to have submitted a notice of withdrawal if 120 days after the
commencement of any proceeding against it seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
statute, law or regulation such proceeding has not been dismissed, or if within
90 days after the appointment without its consent or acquiescence of a trustee,
receiver or liquidator of the General Partner or all or any substantial part of
its properties, the appointment is not vacated or stayed, or within 90 days
after the expiration of any such stay, the appointment is not vacated.
A Limited Partner will cease to be a Partner upon redemption or assignment of
all of his Units. The death, legal disability, withdrawal, insolvency or
dissolution of a Limited Partner shall not terminate or dissolve the Partnership
and such Limited Partner, his estate, custodian or personal representative shall
have no right to withdraw or value such Limited Partner's interest in the
Partnership except as provided in paragraph 16 above. Each Limited Partner (and
any assignee of a Limited Partner's interest) expressly agrees that, in the
event of his death, he waives on behalf of himself and his estate and any person
interested therein to waive, the furnishing of any inventory, accounting or
appraisal of the assets of the Partnership and any right to an audit of the
Partnership other than those expressly granted or established in paragraph 13.
INDEMNIFICATION
21. INDEMNIFICATION.
(a) A General Partner and its Affiliates, shall bear no liability to the
Partnership or to any Limited Partner for any loss suffered by the Partnership
which arises out of any action or inaction of the General Partner or its
Affiliates if such action or inaction did not constitute negligence or
misconduct of the General Partner or its Affiliate and if the General Partner or
its Affiliate, in good faith, determined that its course of conduct for which
exculpation is sought was in the best interest of the Partnership, and if the
General Partner or its Affiliate was acting on behalf of or performing services
for the Partnership and wholly within the scope of authority of the General
Partner.
(b) A General Partner and its Affiliates, may be indemnified by the Partnership,
but only out of the assets of the Partnership and not from the assets of the
Limited Partners, against expenses, including attorney's fees, judgments and
amounts paid in settlement, actually and reasonably incurred by the General
Partner or such Affiliates in
A-17
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
connection with the Partnership provided that such expense were not the result
of negligence or misconduct on the part of the General Partner or its Affiliate,
the General Partner or its Affiliate determined in good faith that its course of
conduct was in the best interests of the Partnership, and the General Partner or
its Affiliate was acting on behalf of or performing services for the Partnership
and wholly within the scope of authority of the General Partner. The Partnership
shall not advance Partnership funds to a General Partner or any of its
Affiliates for legal expenses and other costs incurred as a result of any legal
action brought against the General Partner or its Affiliate.
(c) Notwithstanding subparagraph (a) and subparagraph (b) of this paragraph 21,
the General Partner and its Affiliates and any person acting as a broker-dealer
shall not be indemnified for any losses, liabilities or expenses arising from or
out of an alleged violation of federal or state securities laws unless (1) there
has been a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee, or (2) such claims
have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee, or (3) a court of competent
jurisdiction approves a settlement of the claims against a particular indemnitee
and finds that indemnification of the settlement and related costs should be
made.
(d) In any claim for indemnification for federal or state securities law
violations, the party seeking indemnification shall place before the court the
positions of the Securities and Exchange Commission and the Massachusetts
Securities Division, and the position of any state regulatory authority where
partnership interests were offered or sold with respect to the issue of
indemnification for securities law violations.
(e) For purposes of this Paragraph 21 an Affiliate is: any person owning or
controlling, directly or indirectly, either General Partner or who is under
common control with a General Partner, and any officer or director of either
General Partner, and each affiliate may be entitled to exculpation or
indemnification under this Paragraph 21 in circumstances in which such Affiliate
is being sued for an act of such General Partner solely because of its
relationship to the General Partner, or in circumstances in which such person is
actually performing the duties of the General Partner in regard to the
Partnership.
(f) The Partnership shall not incur the cost of that portion of any liability
insurance which may insure either General Partner and its Affiliates who are
performing services on behalf of the Partnership for any liability as to which
such person is prohibited from being indemnified hereunder.
GOVERNANCE OF THE PARTNERSHIP
22. AMENDMENTS AND MEETINGS.
(a) AMENDMENTS PROPOSED BY THE GENERAL PARTNERS. If at any time during the term
of the Partnership the General Partners shall deem it necessary or desirable to
amend this Agreement, such amendment shall be effective only if embodied in an
instrument signed by the General Partners and by Limited Partners owning more
than fifty percent (50%) of the Units then owned by the Limited Partners (not
including any Units held by the General Partners or their corporate affiliates)
and if made in accordance with and to the extent permissible under the Act. For
purposes of obtaining a written vote, the General Partners may require response
within a specified time with respect to amendments proposed by them. Any such
supplemental or amendatory agreement shall be adhered to and have the same
effect from and after its effective date as if the same had originally been
embodied in and formed a part of this Agreement; provided, however, that no such
supplemental or amendatory agreement shall change or alter this paragraph 22,
extend the term of the Partnership, change the Partnership to a general
partnership, change the liability or reduce the capital account of any Partner
or modify the percentage or profits, losses or distributions to which any
Partner is entitled. In addition, reduction of the capital account of any
assignee or modification of the percentage of profits, losses or distributions
to which an assignee is entitled hereunder shall not be effected by amendment or
supplement to this Agreement without such assignee's consent.
The General Partners may amend this Agreement without the consent of the Limited
Partners in order: (i) to clarify any inaccuracy, ambiguity or reconcile any
inconsistency; (ii) to add to the representations, duties or obligations of the
General Partners or surrender any right or power of the General Partners for the
benefit of the
A-18
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Limited Partners; (iii) to delete or add any provision of this Agreement
required to be deleted or added by the staff of the Securities and Exchange
Commission or other federal agency or any state securities official or similar
official or in order to opt to be governed by any amendment or successor statute
to the Act; (iv) change the name of the Partnership or the location of the
principal place of business of the Partnership; (v) change this Agreement in any
manner that is appropriate or necessary to qualify or maintain the qualification
of the Partnership as a limited partnership or a partnership in which the
Limited Partners have limited liability under the laws of any state or that is
appropriate or necessary to ensure that the Partnership will not be treated as
an association taxable as a corporation for federal income tax purposes; (vi)
change this Agreement in any manner that does not adversely affect the Limited
Partners in any material respect or that is required or contemplated by other
provisions of this Agreement; (vii) make any amendment that is appropriate or
necessary, in the opinion of the General Partners, to prevent the Partnership or
the General Partners or their directors or officers from in any manner being
subjected to the provisions of the Investment Company Act of 1940, as amended,
the Investment Advisers Act of 1940, as amended, or "plan asset" regulations
adopted under ERISA, regardless of whether substantially similar to plan asset
regulations currently applied or proposed by the United States Department of
Labor; or (viii) make any other amendment similar to the foregoing; provided,
that no such amendment will be adverse to the interests of the Limited Partners.
(b) MEETINGS; AMENDMENTS PROPOSED BY THE LIMITED PARTNERS. Upon payment of the
costs of reproduction and mailing, any Limited Partner upon written request
addressed to the General Partners shall be entitled to obtain from the General
Partners a list of the names and addresses of record of all Limited Partners and
the number of Units held by each; provided, however, that any Limited Partner
requesting such list shall give written assurance that the list will not in any
event be used for commercial purposes. In addition, such list will be made
available at the Partnership's principal office for the review of any Limited
Partner or his representative at reasonable times. Upon receipt of a written
request, signed by Limited Partners owning at least 10% of the Units then owned
by Limited Partners, that a meeting of the Partnership be called to vote upon
any matter which the Limited Partners may vote upon pursuant to this Agreement,
the General Partners shall, by written notice to each Limited Partner of record
delivered in person or by certified mail, within fifteen days after such
receipt, call a meeting of the Partnership. Such meeting shall be held at least
thirty but not more than fifty days after the mailing of such notice, and such
notice shall specify the date, a reasonable place and time, and the purpose of
such meeting. Partners may vote in person or by proxy at any such meeting. At
any meeting called pursuant to this subparagraph 22(b), upon affirmative vote
(which may be in person or by proxy) of Limited Partners owning more than 50% of
the Units then owned by the Limited Partners (not including any Units held by
the General Partners or their corporate affiliates), the following actions may
be taken: (i) this Amended and Restated Limited Partnership Agreement may be
amended in accordance with and only to the extent permissible under the Act;
provided, however, that no amendment shall alter this paragraph 22, extend the
term of the Partnership, change the Partnership to a general partnership, change
the liability or reduce the capital account of any Partner or modify the
percentage of profits, losses or distributions to which any Partner is entitled
(in addition, reduction of the capital account of any assignee or modification
of the percentage of profits, losses or distributions to which an assignee is
entitled hereunder shall not be effected by amendment or supplement to this
Agreement without such assignee's consent); (ii) the Partnership may be
dissolved; (iii) the General Partners may be removed; (iv) a successor (or
successors) general partner may be elected as long as the Partnership continues
to have one General Partner, provided that the election of a general partner at
a time when there is no remaining General Partner, after an event of withdrawal
or removal of the last remaining General Partner, may only be conducted in
accordance with the Act; (v) a new general partner or general partners may be
elected if the General Partners elect to withdraw from the Partnership,
provided, that the appointment of the new general partner(s) is effective as of
the date of any such withdrawal; (vi) any contracts with the General Partners or
any of their affiliates may be terminated on sixty days notice without penalty;
and (vii) the sale of all the assets of the Partnership may be approved.
(c) PROXY RULES. In the event the Partnership is required to comply with
Regulation 14A under the Securities Exchange Act of 1934 (the "proxy rules") or
any successor regulation, the foregoing time periods specified in this paragraph
22 may be altered by the General Partners so as not to conflict therewith.
A-19
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
23. GOVERNING LAWS.
The validity and construction of this Agreement shall be governed by and
construed by the laws of the State of Delaware without regard to principles of
conflicts of law; provided, that the foregoing choice of law shall not restrict
the application of any state's securities laws to the sale of Units to its
residents or within such state.
24. MISCELLANEOUS
(a) NOTICES. All notices or other communications required or permitted to be
given pursuant to this Agreement shall be in writing and shall be considered as
properly given or made if mailed postage prepaid, or if telegraphed, by prepaid
telegram, and addressed, if to IDS Managed Futures, L.P. c/o CIS Investments,
Inc., and IDS Futures Corporation, 233 South Wacker Drive, Suite 2300, Chicago,
Illinois 60606, and if to a Limited Partner, to the address set forth above such
Limited Partner's signature on the signature page annexed hereto. Any Limited
Partner may change his address by giving notice in writing to the General
Partners stating his new address, and the General Partners may change their
address by giving such notice to all Partners. Commencing on the tenth day after
the giving of such notice by any Limited Partner or the General Partners, such
newly designated address shall be such Partner's address for the purpose of all
notices or other communications required or permitted to be given pursuant to
this Agreement.
(b) BINDING EFFECT. This Agreement shall inure to and be binding upon all of the
parties, their successors and assigns, custodians, estates, heirs and personal
representatives. For purposes of determining the rights of any Partner or
assignee hereunder, the Partnership and the General Partners may rely upon the
Partnership records as to who are Partners and assignees and all Partners and
assignees agree that their rights shall be determined and that they shall be
bound thereby.
(c) HEADINGS. Paragraph headings in no way define, extend or describe the scope
of this Agreement or the effect of any of its provisions.
(d) COUNTERPARTS. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original but all of which shall constitute one
instrument.
CIS INVESTMENTS, INC.
General Partner
By /s/ Hal T. Hansen
President
IDS FUTURES CORPORATION
General Partner
By /s/ Janis E. Miller
President
FOR THE LIMITED PARTNERS:
CIS INVESTMENTS, INC.
As Attorney-in-Fact
By /s/ Hal T. Hansen
President
IDS FUTURES CORPORATION
As Attorney-in-Fact
By /s/ Janis E. Miller
President
A-20
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
EXHIBIT B
IDS MANAGED FUTURES, L.P.
SUBSCRIPTION REQUIREMENTS
The purchase of Units of Limited Partnership Interest in IDS Managed Futures,
L.P. may be made only by persons who have (i) a net worth of at least $150,000
(exclusive of home, furnishings and automobiles) or (ii) a net worth (similarly
calculated) of at least $45,000 and a minimum annual gross income of at least
$45,000. Residents of certain states in which Units may be qualified for sale
may be subject to greater net worth (similarly calculated), annual income and
other financial requirements. See "Suitability Requirements," below.
Purchaser represents (for Purchaser, and if Purchaser is an entity, on behalf of
and with respect to each of Purchaser's shareholders, partners or beneficiaries)
by executing and delivering the Partnership's Subscription Agreement and Power
of Attorney, that he/she meets the financial requirements applicable to his/her
state of residence and that he/she is of legal age to execute this Agreement. If
Purchaser no longer meets such financial requirements, or if any other
information provided in connection with this subscription becomes inaccurate,
prior to his/her admission to the Partnership as a limited partner, he/she will
immediately notify the General Partners. Purchaser is urged to review carefully
the responses, representations and warranties he/she is making herein and in the
Subscription Agreement and Power of Attorney. Purchaser agrees that this
subscription may be accepted or rejected in whole or in part by CIS Investments,
Inc. and IDS Futures Corporation (the "General Partners") in their sole and
absolute discretion. Purchaser certifies that he/she has received a Prospectus
of the Partnership dated . Purchaser acknowledges that the
representations and warranties herein are made through the Partnership's
Subscription Agreement and Power of Attorney to, and may be relied upon by, the
Partnership, the General Partners, and the Selling Agent.
Purchaser should read the following notices: (a) he/she can lose his/her entire
investment in the Partnership; (b) there is no assurance that the Partnership
will have results similar to the past performance of the Partnership (see the
caption "Past Performance of the Fund" in the Prospectus); (c) CIS Investments,
Inc., a General Partner, is a wholly-owned subsidiary of Cargill Investor
Services, Inc., the Partnership's clearing broker, and IDS Futures Corporation,
a General Partner, is an affiliate of American Express Financial Advisors, Inc.,
the Partnership's selling agent and introducing broker, and conflicts of
interest therefore exist (see the captions "Conflicts of Interest," and
"Fiduciary Responsibility of the General Partners" in the Prospectus); (d)
Cargill Investor Services, Inc., the Partnership's clearing broker, and American
Express Financial Advisors Inc., the Partnership's introducing broker, will
receive, pursuant to the brokerage agreement described in the Prospectus,
substantial brokerage commissions from the Partnership which will exceed the
lowest such rates which are otherwise available (see the caption "Conflicts of
Interest" in the Prospectus); (e) the redemption of Units is restricted (see the
caption "Redemptions" in the Prospectus), he/she will have no right to demand
distributions from the Partnership and the transferability of Units is also
restricted; (f) investment in the Partnership and trading in commodity interests
have certain special federal income tax aspects and that he/she should seek such
advice from qualified sources (e.g., attorneys or accountants) as he/she deems
necessary; (g) the data in the tables under "Past Performance of the Fund" in
the Prospectus should be read only in conjunction with the Notes accompanying
such tables, and that such data should not be interpreted to mean that the
Partnership will have performance results similar to those reported in the
future or that it will realize any profits; and (h) the Partnership has entered
into an advisory agreement with John W. Henry & Co., Inc. and Sabre Fund
Management Limited as the Partnership's commodity trading advisors and with
American Express Financial Advisors Inc. and Cargill Investor Services, Inc. as
the Partnership's introducing and clearing brokers, respectively.
Purchaser also agrees by delivering the Partnership's Subscription Agreement and
Power of Attorney that he/she shall become a limited partner, and he/she hereby
agrees to each and every term of the Limited Partnership Agreement as if his/her
signature were subscribed thereto. The General Partners, as the Purchaser's
Attorneys-in-Fact, may subscribe his/her name to the Certificate of Limited
Partnership and the Limited Partnership Agreement.
B-1
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
SPECIAL REQUIREMENTS FOR EMPLOYEE PENSION PLANS OR INDIVIDUAL RETIREMENT
ACCOUNTS.
In addition to all of the foregoing representations, acknowledgments, and
agreements, any subscriber to the Partnership which is a trust or other entity
established to fund an employee benefit plan subject to the fiduciary provisions
of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA") or
of Section 4975 of the Internal Revenue Code ("Code") also makes through the
Partnership's Subscription Agreement and Power of Attorney the representations
and agreements enumerated below.
Plans subject to ERISA generally include all funded retirement or deferred
compensation plans, whether or not qualified for tax purposes (including Keogh
plans and IRAs), and certain types of funded fringe benefit plans (such as
VEBAs). All employee benefit plans will be assumed to be subject to ERISA unless
the plan demonstrates to the satisfaction of CIS Investments, Inc. and IDS
Futures Corporation, the General Partners, that it is exempt.
For all such entities, the Subscription Agreement and Power of Attorney must be
executed by a "named fiduciary" of the plan (as defined by Section 402(a)(2) of
ERISA), who has the authority under the terms of the plan to authorize an
investment in IDS Managed Futures, L.P. Generally, the named fiduciary must be a
trustee of the trust, unless authority to direct trust investments has been
delegated to another named fiduciary or to an investment manager pursuant to
Section 403(a) of ERISA. Execution of the Subscription Agreement and Power of
Attorney by the employer maintaining the plan is not sufficient unless such
employer is also a named fiduciary.
The person executing the Fund's Subscription Agreement and Power of Attorney on
behalf of a subscribing plan (the "Plan"), in consideration of the Plan being
permitted to acquire interests in IDS Managed Futures, L.P., a Delaware limited
partnership, agrees by executing its Subscription Agreement and Power of
Attorney to the following terms and conditions, which terms and conditions shall
be treated as though incorporated in the Subscription Agreement and Power of
Attorney of the Plan of such date herewith, and shall be in addition to and
shall not supersede the terms and conditions set forth therein.
(1) The undersigned hereby represents and warrants as follows:
(a) The undersigned is either a named fiduciary of the Plan (as defined in
Section 402(a)(2) of ERISA) or an investment manager of the Plan (as defined
in Section 3(38) of ERISA) with full authority under the terms of the Plan and
full authority from all Plan beneficiaries, if required, to cause the Plan to
invest in the Partnership, to execute the Subscription Agreement and Power of
Attorney in favor of CIS Investments, Inc. and IDS Futures Corporation, as
general partners of IDS Managed Futures, L.P. Such investment has been duly
approved by all other named fiduciaries whose approval is required, if any,
and is not prohibited or restricted by any provisions of the Plan or of any
related instrument.
(b) As a named fiduciary or investment manager, the undersigned has
independently determined that the investment by the Plan in the Partnership
satisfies all requirements of Section 404(a)(1) of ERISA, specifically
including the "prudent man" standard of Section 404(a)(1)(B) and the
"diversification" standard of Section 404(a)(1)(C), and will not be prohibited
under any of the provisions of Section 406 of ERISA or of Section 4975(c)(1)
of the Code. The undersigned has requested and received all information from
the General Partners which it, after due inquiry, considered relevant to such
determinations. In determining that the requirements of Section 404(a)(1) are
satisfied, the undersigned has taken into account the fact that the
Partnership was not specifically designed as an investment vehicle for
employee benefit plans, and will not be administered with the requirements of
such plans in mind. Specifically, the undersigned has taken into account the
facts that (i) there is a substantial risk of a complete loss of the Plan's
investment; and (ii) an investment in the Partnership will be illiquid, except
for certain redemption rights, and funds so invested will not be readily
available for the payment of employee benefits. Taking these factors, and all
other factors relating to the Partnership into account, the undersigned has
concluded that investment in the Partnership constitutes an appropriate part
of the Plan's overall investment program.
(2) The undersigned hereby agrees that he/she or it will notify the General
Partners, in writing, of (a) any termination, substantial contraction, merger or
consolidation of the Plan, or transfer of its assets to any other plan,
B-2
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(b) any amendment to the Plan or any related instrument which materially affects
the investments of the Plan or the authority of any named fiduciary or
investment manager to authorize Plan investments; and (c) any alteration in the
identity of any named fiduciary or investment manager, including itself, who has
the authority to approve Plan investments.
(3) It is the understanding of the Plan and the undersigned that the General
Partners will not, as a result of the Plan's investment in the Partnership, be
considered fiduciaries of the Plan as defined in Section 3(21) of ERISA. If,
however, a General Partner or any officer, employee, or agent of the General
Partners is ever held to be a fiduciary, it is agreed that, in accordance with
the provisions of Sections 402(c)(1), 405(b)(1), 405(c)(2), and 405(d) of ERISA,
that the fiduciary responsibilities of such person shall be limited to his or
its duties in administering the business of the Partnership, and he, she or it
shall not be responsible for any other duties with respect to the Plan
(specifically including evaluating the initial or continued appropriateness of
the Plan's investment in the Partnership under Section 404(a)(1) of ERISA). The
undersigned hereby further agrees that he, she or it will indemnify and hold
harmless any such person against any liability asserted against such person
under Section 409 of ERISA or any tax assessed against such person under Section
4975 of the Code, including costs and attorneys' fees reasonably incurred in
defending against such liability, and any additional tax imposed on such person
by reason of payments made pursuant to such indemnity.
(4) It is further understood by the Plan and the undersigned that, anything else
contained in the Limited Partnership Agreement to the contrary notwithstanding,
if at any time the General Partners, in their sole discretion, determine that
the continued participation by the Plan in the Partnership would cause a
violation of any of the provisions of Section 406 of ERISA or Section 4975 of
the Code, the General Partners may require the Plan to withdraw in whole or part
from the Partnership in accordance with the provisions of Section 16 of the
Fund's Limited Partnership Agreement. Nothing herein shall be construed to
impose any responsibility on the General Partners to determine whether an
investment in the Partnership satisfies the requirements of Section 404(a)(1) of
ERISA, or to relieve the undersigned or any other fiduciary of responsibility
for preventing the Plan from violating the provisions of Section 406 of ERISA or
Section 4975 of the Code.
(5) CIS Investments, Inc., IDS Futures Corporation, Cargill Investor Services,
Inc., American Express Financial Advisors Inc., John W. Henry & Co., Inc., Sabre
Fund Management Limited and their respective affiliates do not render any
investment advice on a regular basis pursuant to a mutual understanding,
arrangement, or agreement, written or otherwise, between the Plan and any of
such parties who will act in regard to the Partnership and none of such parties
renders any investment advice to the Plan which furnishes the primary basis for
investment decisions with respect to assets of the Plan.
SUITABILITY REQUIREMENTS
The states listed below require that residents of those states must meet higher
minimum suitability requirements and/or higher minimum investments than those
established by the Fund of a net worth of at least $45,000 (exclusive of home,
furnishings and automobiles) plus a minimum annual gross income of at least
$45,000 or, in the alternative, a net worth of $150,000 (exclusive of home,
furnishings and automobiles) and a minimum investment of $1,000.
Massachusetts, Minnesota, Missouri and North Carolina require that residents of
those states must meet minimum suitability requirements of a net worth
(excluding home, furnishings and automobiles) of at least $60,000 plus a gross
annual income of at least $60,000 or, in the alternative, a net worth of at
least $225,000 (exclusive of home, furnishings and automobiles).
California: Net worth of at least $100,000 (exclusive of home, furnishings and
automobile) plus an annual gross income of at least $65,000 or, in the
alternative, a net worth of at least $250,000.
Iowa: Net worth of at least $100,000 (exclusive of home, furnishings and
automobile) plus an annual taxable income of at least $75,000 or, in the
alternative, a net worth of at least $350,000.
B-3
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
Michigan: Net worth of at least $60,000 (exclusive of home, furnishings,
automobiles and investment in the Fund) plus a gross annual income of at least
$60,000 or, in the alternative, a net worth (as defined above) of at least
$225,000.
Pennsylvania: Net worth of at least $275,000 (exclusive of home, furnishings and
automobiles). Additionally, if subscriber's net worth, as described above, is
less than $1,000,000, then subscriber's investment in the Fund may not exceed
10% of his/her net worth.
Tennessee: A gross income of at least $65,000 in the most recent past tax year
and in the current tax year and a net worth of $65,000 (exclusive of home,
furnishings and automobile) or, in the alternative, a net worth (exclusive of
home, furnishings and automobile) of at least $250,000.
Oregon and Texas: Net worth of at least $60,000 (exclusive of home, home
furnishings and automobiles) plus an annual taxable income of at least $60,000
or, in the alternative, a net worth of at least $225,000.
Washington: Net worth (exclusive of home, furnishings and automobiles) or joint
net worth with spouse in excess of $1,000,000 or an income in excess of $200,000
or joint income with spouse in excess of $300,000 in each of the last two tax
years and reasonably expects to achieve the same level of income in the current
year.
MINIMUM INVESTMENT CRITERIA
Although the General Partners of the Fund believe that a minimum investment of
$1,000 is appropriate for the Fund, the states listed below require that
residents of those states must make a larger initial minimum investment in the
Fund.
<TABLE>
<S> <C>
Iowa: $3,000
Minnesota: $2,500
Nebraska: $5,000
North Carolina: $5,000
Texas: $5,000
</TABLE>
ATTENTION CALIFORNIA RESIDENTS:
The General Partners, pursuant to Section 260.141.11 of the California Code of
Regulations, are required to deliver to each California investor a copy of the
rules regarding the restriction on transferring your limited partnership units.
RULE 260.141.11. RESTRICTION ON TRANSFER
(a) The issuer of any security upon which a restriction on transfer has been
imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a
copy of this section to be delivered to each issuee or transferee of such
security at the time the certificate evidencing the security is delivered to
the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale or
transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the Code
or Section 260.105.14 of these rules;
B-4
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
(4) to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's
ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting as
such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign
state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal transaction,
or as an underwriter or member of an underwriting syndicate or selling
group;
(9) if the interest sold or transferred is a pledge or other lien given by
the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or 25121
of the Code, of the securities to be transferred, provided that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113 of
the Code, provided that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who are
neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to
the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state, if, in
either such case, such person (i) discloses to potential purchasers at
the sale that transfer of the securities is restricted under this rule,
(ii) delivers to each purchaser a copy of this rule, and (iii) advises
the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not involve
a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102; provided that any such transfer is on
the condition that any certificate evidencing the security issued to such
transferee shall contain the legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as
follows:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OR THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
B-5
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
SUBSCRIPTION INSTRUCTIONS
Subscribers for Units of Limited Partnership Interest in IDS Managed Futures,
L.P. must deliver an executed copy of the Subscription Agreement and Power of
Attorney (Exhibit C) with a check for the amount of such subscription payable to
First Bank National Association. The minimum subscription (including
subscriptions of Individual Retirement Accounts, Keogh Plans and Employee
Benefit Plans) is $1,000 (certain states have higher minimum amounts); any
greater subscription amount must be in increments of $100. Each subscriber
should review carefully the Subscription Requirements (Exhibit B) before
completing and executing the Subscription Agreement and Power of Attorney
(Exhibit C).
The subscriber should return the completed Subscription Agreement and Power of
Attorney and the check to: American Express Financial Advisors Inc., Geographic
Service Team, P.O. Box 74, Minneapolis, Minnesota 55440. Subscription checks
must be made payable to First Bank National Association, St. Paul, Minnesota as
Escrow Agent for IDS Managed Futures, L.P.
B-6
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES, L.P. SUBSCRIPTION AGREEMENT
(Complete after reading reverse side of agreement.)
COMPLETE IF NONQUALIFIED INVESTMENT
Name in which Units are to be registered (unless form on the right is
applicable)
-----------------------------------------------------------------
Name of Subscribing Individual or Entity
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Taxpayer Number (for IRS Reporting) Tax Year End*
*If other than December 31
COMPLETE IF QUALIFIED INVESTMENT
Name in which IRA, Keogh or Qualified Plan Units are to be registered
AMERICAN EXPRESS TRUST COMPANY
-----------------------------------------------------------------
Name of Custodian (Trustee)
--------------------------------------------------------------------------
FBO
51-6041053
-----------------------------------------------------------------
Custodian Tax ID (for IRS Reporting) Tax Year End*
<TABLE>
<S> <C> <C>
Investor's ---------------------------------------------------------------------------
Mailing Address Street or P.O. Box
--------------------------------------------------------------------------------
City State Zip
( )
Distribution Address --------------------------------------------------------------------------------
if Different From Phone
Investor's Address --------------------------------------------------------------------------------
MAKE CHECK PAYABLE Street or P.O. Box
TO: --------------------------------------------------------------------------------
FIRST BANK NATIONAL City State Zip
ASSOCIATION --------------------------------------------------------------------------------
Account Number for Distributions
Investment Amount
</TABLE>
<TABLE>
<S> <C> <C>
$
</TABLE>
Please circle ownership type:
Individual Owner IRA Keogh JTRS Community
Property Tenants-in-Common Trust Corporation Partnership
UGMA State:
Other (specify)
If this investment is for a qualified employee benefit plan, an individual
retirement account or other tax-exempt investor, in making this investment on
behalf of such entity, I (we) acknowledge specifically that the Prospectus
contains pertinent tax sections with respect to benefit plans entitled "Tax
Information--Tax-Exempt Investors" and "Purchases by Employee Benefit
Plans--ERISA Considerations," and in particular the inclusion therein relating
to unrelated business taxable income, and I (we) have satisfied myself
(ourselves) as to the potential tax consequences of such provisions on this
investment.
Signature
-----------------------------------------------------------------
Signature (if joint owner)
---------------------------------------------------
______________________________________ ______________________________________
Date City and State
--------------------------------------------------------------------------
Name of Subscribing Individual or Entity--Printed
--------------------------------------------------------------------------
Signature of Authorized Fiduciary, Trustee, Partner or Corporate Officer
(Specify Title)
--------------------------------------------------------------------------
Name of Authorized Fiduciary, Trustee, Partner or Corporate Officer
(if applicable)--Printed
The trustee, corporate officer or partner whose signature appears above
certifies that he/she has full power and authority from all beneficiaries,
shareholders or partners of the entity named above to execute this
Subscription Agreement on behalf of the entity and to make the representations
and warranties made herein on their behalf and that investment in the
Partnership has been affirmatively authorized by the governing board or body
of such entity and is not prohibited by law or the governing documents of the
entity.
ACKNOWLEDGEMENTS
Subscriber acknowledges the following by initialing separately each of the
following:
---------- I/(We) meet the minimum income and net worth standards estab-
---------- lished for the Partnership;
---------- I/(We) am (are) purchasing interests in the Partnership for my
(our)
---------- own account;
---------- I/(We) have received a copy of the Prospectus and the Annual
---------- Report for the Partnership.
-------------------------------------------------------------------------------
For Use By American Express Financial Advisor
I have reasonable grounds to believe, based on information obtained from the
investor concerning his/her investment objectives, other investments,
financial situation and needs and any other information known by me, that an
investment in the Partnership is suitable for such investor in light of
his/her financial position, net worth and other suitability characteristics. I
have also informed the investor of the unlikelihood of a public trading market
developing for the Units during the term of the Partnership and of the
restrictions on the redemption of Units.
The financial advisor MUST sign below in order to substantiate compliance with
Appendix F to Articles 3 and 4, Section 34 of the NASD's Rules of Fair
Practice.
--------------------------------------------------------------------------
Financial Advisor Date
12035-7 G(3/96)
Send all three parts to your Geographic Service Team
C-1
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
EXHIBIT C
IDS MANAGED FUTURES, L.P.
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
(1) SUBSCRIPTIONS. The undersigned ("Subscriber") hereby subscribes for Units of
Limited Partnership Interest ("Units") in IDS Managed Futures, L.P. (the
"Partnership") at a price per Unit, if an Affiliated Purchaser, equal to the Net
Asset Value per Unit as of the close of business on the last business day of the
month in which the General Partners accept such subscriptions and admit the
subscribers as Limited Partners, plus the amount of the Offering Expense Charge
on a per Unit basis, and if a non-Affiliated Purchaser, at a price per Unit
equal to the Net Asset Value per Unit as of the last business day of the month
in which the General Partners accept such subscriptions and admit the
subscribers as Limited Partners, plus the amount of the Sales Charge and the
Offering Expense Charge on a per Unit basis (minimum initial subscription:
$1,000 including subscriptions for Individual Retirement Accounts and Keogh
Plans). Concurrently with or prior to delivery of this Subscription Agreement
and Power of Attorney, the Subscriber is delivering a check payable to First
Bank National Association, as escrow agent for IDS Managed Futures, L.P. for the
amount of his/her subscription to American Express Financial Advisors Inc.,
Geographic Service Team, P.O. Box 74, Minneapolis, Minnesota 55440. The General
Partners may, in their sole and absolute discretion, accept or reject this
subscription, and this subscription cannot be revoked, cancelled, or terminated
by subscriber except as provided below. If this subscription is accepted,
subscriber agrees to contribute the amount of the subscription to the
Partnership and to be bound by the terms of its Amended and Restated Limited
Partnership Agreement.
All subscription documents from a potential investor must be received by
American Express Financial Advisors by the tenth calendar day of the month if
they are to be considered for acceptance by the Fund in that month. American
Express Financial Advisors will promptly send a confirmation of the investment
and a copy of the Fund's most recent monthly account statement to the potential
investor. The mailing of the confirmation and the account statement marks the
beginning of the "Free Look" period. The Free Look period is 16 days. During
this time the prospective investor will have the opportunity to determine
whether he or she wishes his or her subscription to be retained by the Fund. The
potential investor must notify American Express Financial Advisors by mail or
telephone (pursuant to instructions in the notice from American Express
Financial Advisors) of his or her decision not to invest. No further action is
required in response to the notification from American Express Financial
Advisors if the investor elects to subscribe. The investor's negative response
must be received by American Express Financial Advisors during the Free Look
period. Investors electing to withdraw their subscription pursuant to the above
alternative will promptly receive a return of their subscription funds from the
escrow agent. The investor may withdraw his or her subscription for any reason
during the Free Look period. All subscriptions are subject to acceptance by the
General Partners.
(2) REPRESENTATIONS AND WARRANTIES. In addition to the representations to be
acknowledged in the box on the facing page, Subscriber represents that he/she
has had an opportunity to ask questions relating to the Subscription
Requirements or to the Prospectus.
(3) POWER OF ATTORNEY. In connection with the interest in IDS Managed Futures,
L.P. acquired or to be acquired pursuant to this subscription, Subscriber hereby
irrevocably constitutes and appoints CIS Investments, Inc. and IDS Futures
Corporation (the General Partners of the Partnership), with full power of
substitution, his/her true and lawful attorneys-in-fact, with full power and
authority in his/her name, place, and stead, to admit additional limited
partners to the Partnership, to file, prosecute, defend, settle or compromise
any and all actions at law or suits in equity for or on behalf of the
Partnership with respect to any claim, demand or liability asserted or
threatened by or against the Partnership, and to execute, acknowledge, swear to,
deliver, file and record on his/her behalf in the appropriate public offices and
publish (i) all certificates and other instruments (including but not limited to
a Certificate of Limited Partnership and a certificate of doing business under
an assumed name) which the General Partners deem appropriate to qualify or
continue the Partnership as a limited partnership in the jurisdictions in which
the Partnership may conduct business or which may be required to be filed by the
Partnership or the Partners under the laws of any jurisdiction; (ii) all
instruments which the General Partners deem appropriate to reflect a change or
modification of the Partnership in accordance with the terms of the Limited
Partnership Agreement relating to the Partnership or any amendment thereto; and
(iii) all conveyances and other instruments which the General Partners deem
appropriate to reflect the dissolution and termination of the Partnership. The
foregoing grant of authority is a special power of attorney coupled with an
interest, is irrevocable, and shall survive Subscriber's death or incapacity.
Subscriber hereby agrees to be bound by any representation made by the General
Partners and by any successor thereto, acting in good faith pursuant hereto.
C-2
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
LIMITED PARTNERSHIP PURCHASE PLAN AGREEMENT
Please complete this form for each limited partnership sponsored by companies in
the American Express Financial Corporation Group of Companies when making
purchases without a sales commission. Mail or route this form, the American
Express Financial Advisors new business application, the partnership
subscription agreement and a check to:
American Express Financial Advisors Inc.
Geographic Service Team
P.O. Box 74
Minneapolis, MN 55440
The following individuals are eligible to purchase limited partnership interests
without paying a sales commission:
Advisors, managers and employees of companies in the American Express Financial
Corporation Group of Companies.
Eligible persons may purchase limited partnership interests in partnerships
sponsored by the American Express Financial Group of Companies without paying
the sales charge which is the base selling commission payable to American
Express Financial Corporation, not including any dealer/manager fee or other
similar charge.
I UNDERSTAND THAT THE TOTAL DISCOUNT I RECEIVE WILL BE REPORTED ON MY FORM W-2
OR 1099 AS TAXABLE INCOME TO ME. (100% TO INDEPENDENT CONTRACTORS; 80% FOR
EMPLOYEES). I REPRESENT THAT I HAVE PURCHASED THESE LIMITED PARTNERSHIP
INTERESTS AS AN INVESTMENT AND NOT WITH A VIEW TOWARD THEIR RESALE.
PLEASE CHECK THE APPROPRIATE BOX AND FILL OUT YOUR EMPLOYEE OR ADVISOR NUMBER
BELOW. ADVISOR NUMBERS MUST INCLUDE THE CHECK DIGIT.
I am an
1. ____ Independent Contractor (veteran advisor, district manager)
2. ____ American Express Employee (first year advisors, division V.P.,
region V.P., associate manager, training and recruiting manager,
division staff, home office staff)
Advisor/Employee Number ________________________________________________________
Unit/DO Number _____________________ Advisor/Employee Name ____________________
Partnership Name _________________ Partnership Account Number _________________
(Entered by New Business)
Investment Amount $ ____________________________________________________________
Signature ________________________________ Date _______________________________
C-3
<PAGE>
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
IDS MANAGED FUTURES EXHIBIT D
REQUEST FOR REDEMPTION ______________ , 19__
IDS Managed Futures, L.P.
American Express Financial Advisors Inc.
c/o Unit 580
P.O. Box 534
Minneapolis, Minnesota 55440
Dear Sirs:
The undersigned hereby requests redemption of $__________ or __________ Units
(please designate redemption amount in terms of dollars or Units) of the
partnership identified below, less any amount the undersigned owes to such
Partnership. The undersigned hereby represents and warrants that he, she, or it
is the true and lawful owner of the Unit or Units to which this request relates
with full power and authority to request redemption of such Unit(s). The
undersigned acknowledges that no redemptions are permitted during the first six
months after he/she has been first admitted to the Partnership. Further, the
undersigned acknowledges that if he/she redeems any of his/her Units, he/she
will not be permitted to purchase any Units offered by the Partnership for six
months following the date of any such redemption. In addition, the undersigned
acknowledges that if he/she purchases any Units of the Partnership in connection
with a public offering of Units, he/she will not be permitted to redeem such
Units or any previously purchased Units of the same partnership for a period of
six months from the date of the most recent purchase. Such Unit(s) are not
subject to any pledge or otherwise encumbered in any fashion. Redemption shall
be effective as of the last trading day of the month in which the General
Partners receive this Request, PROVIDED that the General Partners receive notice
ten days in advance of such date, and shall be in an amount based on Net Asset
Value per Unit on such date. The minimum redemption amount, whether requested in
terms of dollars or Units, is the lesser of $500 or the Net Asset Value of two
Units, unless the undersigned is redeeming his/her entire interest in the
Partnership.
SIGNATURES MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS OF
LIMITED PARTNERSHIP INTEREST ARE REGISTERED
<TABLE>
<S> <C>
PLEASE FORWARD SUCH FUNDS BY MAIL TO THE UNDERSIGNED AT:
- ----------------------------------------------------------------------------------------------------------------------------------
Name Street, City, State and Zip Code
PLEASE FORWARD SUCH FUNDS TO THE FOLLOWING IDS ACCOUNT:
- ------------------------------------------------------------ --------------------------------------------------------------------
Product Name Account Number
- ------------------------------------------------------------
Subscriber Tax ID Number
</TABLE>
<TABLE>
<S> <C>
ENTITY LIMITED PARTNER: INDIVIDUAL LIMITED PARTNER:
(or Assignee) (or Assignee)
- ------------------------------------------------------------ --------------------------------------------------------------------
(Name of entity)
By ------------------------------------------------ ---------------------------------------------------
(Authorized trustee, partner or corporate officer)
- ------------------------------------------------------------ --------------------------------------------------------------------
(Print title of authorized trustee, partner or corporate (Signature of all partners or assignees)
officer)
- ------------------------------------------------------------ --------------------------------------------------------------------
Customer Account Number Name of Partnership
</TABLE>
D-1
<PAGE>
American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, Minnesota 55440
- -C- 1995 American Express Financial Corporation
All rights reserved. 12035-8D (6/95)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below are estimates of the approximate amounts of fees and
expenses payable by the Registrant in connection with the issuance and sale of
Units of Limited Partnership Interest (such fees and expenses will be paid
jointly by the General Partners, and in return, the General Partners will
receive the Offering Expense Charge as described in the Prospectus):
<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT
--------------
<S> <C>
Securities and Exchange Commission Registration Fee*......................................................... $ 17,240.00
National Association of Securities Dealers, Inc. Filing Fee*................................................. 5,500.00
Printing Expenses............................................................................................ 85,000.00
Accounting Fees and Expenses................................................................................. 25,000.00
Seminars..................................................................................................... 100,000.00
Blue Sky Fees and Expenses (including Legal Fees)............................................................ 40,000.00
Legal Fees and Expenses...................................................................................... 75,000.00
Escrow Fees.................................................................................................. 26,700.00
Marketing Expenses........................................................................................... 85,000.00
Miscellaneous Expenses....................................................................................... 50,000.00
--------------
Total.................................................................................................... $ 509,440.00
--------------
--------------
<FN>
- ------------------------
*Fees marked with an asterisk are exact rather than estimated and approximate.
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 21 of the Limited Partnership Agreement included herein as Exhibit
3.1, provides for indemnification of the General Partners, their officers,
directors and persons owning or controlling the General Partners, under the
circumstances described therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
One Unit of Limited Partnership Interest was sold for $235 to Wendell
Halvorson, the initial Limited Partner, in order to permit establishment of IDS
Managed Futures, L.P. as a Delaware limited partnership on December 16, 1986.
The sale of such Unit was exempt from registration under the Securities Act of
1933 pursuant to Section 4(2) thereof. No discounts or commissions were paid in
connection therewith; no purchaser other than Mr. Halvorson was solicited.
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(1) EXHIBITS
The following documents are filed herewith and made a part of this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ------------------------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Selling Agreement among Registrant, American Express Financial Advisors Inc., IDS Futures Corporation and
CIS Investments, Inc.
3.1 Amended and Restated Limited Partnership Agreement (attached to Prospectus as Exhibit A).
3.2 Subscription Requirements (attached to Prospectus as Exhibit B).
3.3 Subscription Agreement and Power of Attorney (attached to Prospectus as Exhibit C).
3.4 Request for Redemption (attached to Prospectus as Exhibit D).
5.1* Securities Opinion and Consent of Chapman and Cutler to the Registrant.
8.1* Tax Opinion and Consent of Chapman and Cutler to the Registrant.
10.1.1* Advisory Contract between Registrant and John W. Henry & Co., Inc. and Sabre Fund Management Limited.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- ------------------------------------------------------------------------------------------------------------------
<S> <C>
10.1.2* Amendment to Advisory Contract between Registrant and John W. Henry & Co., Inc.
10.1.3* Amendment to Advisory Contract between Registrant and Sabre Fund Management Limited.
10.1.4 Amendment to Advisory Contract between Registrant, John W. Henry & Co., Inc., and Sabre Fund Management Limited
dated April 30, 1996.
10.2* Escrow Agreement between Registrant and FirsTier Bank, N.A. now known as First Bank National Association.
10.3* Brokerage Agreement between Registrant, Cargill Investor Services, Inc., and American Express Financial Advisors
Inc..
10.4* Form of Net Worth Agreement between Cargill Investor Services, Inc. and CIS Investments, Inc. and between IDS
Financial Corporation and IDS Futures Corporation.
10.5* Form of Representation Agreement between IDS Managed Futures, L.P., American Express Financial Advisors Inc., CIS
Investments, Inc., Cargill Investor Services, Inc., IDS Futures Corporation, John W. Henry & Co., Inc. and Sabre
Fund Management Limited.
10.6* Foreign Exchange Account Agreement between CIS Financial Services, Inc. and Registrant.
23.1 The consent of KPMG Peat Marwick LLP.
23.2 The consent of Ernst & Young LLP.
23.3 The consent of Chapman and Cutler.
<FN>
- ------------------------
*Documents so indicated are not included in this Post-Effective Amendment No. 1
and are not hereby amended but were previously filed as exhibits to the
Registration Statement.
</TABLE>
(2) FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and schedules are filed herewith:
Included in the Prospectus:
(a) Financial Statements of IDS Managed Futures, L.P., at December 31,
1995, and Report of Certified Public Accountants dated January 25, 1996,
unaudited Financial Statements dated March 31, 1996, and an unaudited update
of the Statement of Financial Condition dated April 30, 1996.
(b) Balance Sheet of CIS Investments, Inc., as of May 31, 1995 and
Report of Certified Public Accountants dated July 14, 1995, plus an
unaudited Balance Sheet dated April 30, 1996.
(c) Balance Sheet of IDS Futures Corporation as of March 31, 1996, and
Report of Certified Public Accountants dated May 9, 1996, plus an unaudited
update of the Balance Sheet dated April 30, 1996.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses, incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis and State of
Minnesota on June 6, 1996.
IDS MANAGED FUTURES, L.P.
By: /s/ MICHAEL L. WEINER
---------------------------------------
Michael L. Weiner
VICE PRESIDENT, SECRETARY AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------------- --------------------------------------------------------------
<C> <S>
/s/ MICHAEL L. WEINER
---------------------------------------- Vice President, Secretary and Treasurer of IDS Futures
Michael L. Weiner Corporation
/s/ LORI J. LARSON
---------------------------------------- Vice President and Director IDS Futures Corporation
Lori J. Larson
/s/ JOHN M. KNIGHT
---------------------------------------- Vice President IDS Futures Corporation
John M. Knight
/s/ MORRIS GOODWIN, JR.
---------------------------------------- Director IDS Futures Corporation
Morris Goodwin, Jr.
/s/ PETER J. ANDERSON
---------------------------------------- Director IDS Futures Corporation
Peter J. Anderson
<CAPTION>
SIGNATURE DATE
- --------------------------------------------------- -----------------
<C> <C>
/s/ MICHAEL L. WEINER
---------------------------------------- June 6, 1996
Michael L. Weiner
/s/ LORI J. LARSON
---------------------------------------- June 6, 1996
Lori J. Larson
/s/ JOHN M. KNIGHT
---------------------------------------- June 6, 1996
John M. Knight
/s/ MORRIS GOODWIN, JR.
---------------------------------------- June 6, 1996
Morris Goodwin, Jr.
/s/ PETER J. ANDERSON
---------------------------------------- June 6, 1996
Peter J. Anderson
</TABLE>
(Being the principal executive officer, the principal financial and accounting
officer and all of the directors of IDS Futures Corporation)
II-4
<PAGE>
IDS FUTURES CORPORATION
General Partner of
Registrant
By: /s/ MICHAEL L. WEINER
-----------------------------------
Michael L. Weiner
VICE PRESIDENT, SECRETARY AND
TREASURER
IDS MANAGED FUTURES, L.P.
By CIS Investments, Inc.
(GENERAL PARTNER)
By /s/ HAL T. HANSEN
---------------------------------------
Hal T. Hansen
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------------- --------------------------------------------------------------
<C> <S>
/s/ HAL T. HANSEN
---------------------------------------- President and Director of CIS Investments, Inc.
Hal T. Hansen
/s/ L. CARLTON ANDERSON
---------------------------------------- Vice President and Director of CIS Investments, Inc.
L. Carlton Anderson
/s/ CHRISTOPHER MALO
---------------------------------------- Vice President of CIS Investments, Inc.
Christopher Malo
/s/ RICHARD A. DRIVER
---------------------------------------- Vice President and Director of CIS Investments, Inc.
Richard A. Driver
/s/ BARBARA A. PFENDLER
---------------------------------------- Vice President of CIS Investments, Inc.
Barbara A. Pfendler
/s/ DONALD ZYCK
---------------------------------------- Treasurer and Secretary of CIS Investments, Inc.
Donald Zyck
/s/ BRUCE H. BARNETT
---------------------------------------- Assistant Secretary of CIS Investments, Inc.
Bruce H. Barnett
<CAPTION>
SIGNATURE DATE
- --------------------------------------------------- -----------------
<C> <C>
/s/ HAL T. HANSEN
---------------------------------------- June 6, 1996
Hal T. Hansen
/s/ L. CARLTON ANDERSON
---------------------------------------- June 6, 1996
L. Carlton Anderson
/s/ CHRISTOPHER MALO
---------------------------------------- June 6, 1996
Christopher Malo
/s/ RICHARD A. DRIVER
---------------------------------------- June 6, 1996
Richard A. Driver
/s/ BARBARA A. PFENDLER
---------------------------------------- June 6, 1996
Barbara A. Pfendler
/s/ DONALD ZYCK
---------------------------------------- June 6, 1996
Donald Zyck
/s/ BRUCE H. BARNETT
---------------------------------------- June 6, 1996
Bruce H. Barnett
</TABLE>
II-5
<PAGE>
(Being the principal executive officer, the principal financial and accounting
officer and all of the directors of CIS Investments, Inc.)
CIS INVESTMENTS, INC.
General Partner of Registrant
By /s/ HAL T. HANSEN
- ---------------------------------------
Hal T. Hansen
PRESIDENT
II-6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
POST-EFFECTIVE
AMENDMENT NO. 1
TO THE
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EXHIBITS
------------------------
IDS MANAGED FUTURES, L.P.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ----------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Selling Agreement among Registrant, IDS Financial Services Inc., IDS Futures Corporation and
CIS Investments, Inc.
3.1 Amended and Restated Limited Partnership Agreement (attached to Prospectus as Exhibit A).
3.2 Subscription Requirements (attached to Prospectus as Exhibit B).
3.3 Subscription Agreement and Power of Attorney (attached to Prospectus as Exhibit C).
3.4 Request for Redemption (attached to Prospectus as Exhibit D).
5.1* Securities Opinion and Consent of Chapman and Cutler to the Registrant.
8.1* Tax Opinion and Consent of Chapman and Cutler to the Registrant.
10.1.1* Advisory Contract between Registrant and John W. Henry & Co., Inc. and Sabre Fund Management
Limited.
10.1.2* Amendment to Advisory Contract between Registrant and John W. Henry & Co., Inc.
10.1.3* Amendment to Advisory Contract between Registrant and Sabre Fund Management Limited.
10.1.4 Amendment to Advisory Contract between Registrant, John W. Henry & Co., Inc., and Sabre Fund
Management Limited dated April 30, 1996.
10.2* Escrow Agreement between Registrant and FirsTier Bank, N.A. now known as First Bank National
Association.
10.3* Brokerage Agreement between Registrant, Cargill Investor Services, Inc., and American Express
Financial Advisors Inc.
10.4* Form of Net Worth Agreement between Cargill Investor Services, Inc. and CIS Investments, Inc. and
between IDS Financial Corporation and IDS Futures Corporation.
10.5* Form of Representation Agreement between IDS Managed Futures, L.P., American Express Financial
Advisors Inc., CIS Investments, Inc., Cargill Investor Services, Inc., IDS Futures Corporation,
John W. Henry & Co., Inc. and Sabre Fund Management Limited.
10.6* Foreign Exchange Account Agreement between CIS Financial Services, Inc. and Registrant.
23.1 The consent of KPMG Peat Marwick LLP.
23.2 The consent of Ernst & Young LLP.
23.3 The consent of Chapman and Cutler.
</TABLE>
- ------------------------
*Documents so indicated are not included in this Post-Effective Amendment No. 1
and are not hereby amended but were previously filed as exhibits to the
Registration Statement.
<PAGE>
EXHIBIT 10.1.4
AMENDMENT TO THE IDS MANAGED FUTURES, L.P.
ADVISORY CONTRACT DATED MARCH 27, 1987
John W. Henry & Co., Inc., a California corporation ("JWH"), IDS Managed
Futures, L.P., a Delaware limited partnership (the "Partnership"), Sabre Fund
Management Ltd., a limited liability company organized under the laws of England
("Sabre"), IDS Futures Corporation, a Minnesota corporation ("IDS Futures"), and
CIS Investments, Inc., a Delaware corporation ("CISI"), hereby agree to the
following amendments (collectively, the "Amendment") to that certain Advisory
Contract dated March 27, 1987, by and among the parties hereto (the "Advisory
Contract"), as amended by that certain Amendment to the IDS Managed Futures,
L.P. Advisory Contract dated as of January 23, 1992, by and among JWH, the
Partnership, IDS Futures and CISI and that certain Amendment to the IDS Managed
Futures Advisory Contract dated as of January 23, 1992, by and among Sabre, the
Partnership, IDS Futures and CISI (the Advisory Contract and the aforesaid
amendments thereto are hereinafter referred to collectively as the "Agreement").
All terms and conditions of the Agreement shall remain in full force and effect
after adoption of this Amendment unless expressly and specifically amended
hereby, and all references to the Agreement shall be deemed references to the
Agreement as amended hereby. The purpose of this Amendment is to extend the term
of the Agreement. Any capitalized terms used herein and not specifically defined
herein shall have the meanings ascribed to such terms in the Agreement.
1. Under Section 6, Terms and Termination, the first paragraph shall be
deleted and a new first paragraph shall be inserted to replace the deleted
paragraph and shall read as follows:
The term of the Agreement as hereby amended shall be deemed to have
commenced on the date that the Agreement would have expired had this
Amendment not been executed, and unless sooner terminated, shall continue in
effect until December 31, 1996. This Agreement shall automatically renew
with respect to each Advisor on the same terms as set forth herein for three
additional twelve-month terms beginning January 1 and ending December 31
unless the Partnership shall give to an Advisor written notice that it does
not elect to renew the Agreement with respect to such Advisor at least 45
days prior to the termination of the then current twelve-month period. This
renewal right shall be applicable irrespective of any change in Advisors or
any reallocation of Partnership assets among Advisors or to other trading
advisors by the Partnership.
2. Under Section 1, Duties of the Advisors, fourth paragraph, the third
sentence shall read in its entirety as follows:
Each Advisor agrees that in the event such Advisor determines to trade
speculatively or is now trading another commodity account pursuant to a Trading
Approach materially different from that utilized by such Advisor in its trading
on behalf of the Partnership, such Advisor will notify the General Partners and
disclose such Trading Approach to the General Partners upon reasonable request,
subject to reasonable assurances of confidentiality.
3. Under Section 11, The Advisor's Representations and Warranties, Section
11(e) shall be deleted in its entirety.
4. This Amendment may be signed in multiple counterparts, all of which,
when taken together shall constitute one document.
5. The parties restate and confirm the accuracy as of the date hereof of
the representations made by each of them in Section 11 and Section 12 of the
Agreement.
6. This Amendment and the applicable provisions of the Agreement not
expressly and specifically amended hereby together constitute the entire
agreement among the parties with respect to the matters referred to herein and
therein, and no other agreement, verbal or otherwise, shall be binding upon the
parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
30th day of April, 1996.
<TABLE>
<S> <C>
IDS MANAGED FUTURES, L.P. SABRE FUND MANAGEMENT, LTD.
By: CIS Investments, Inc.
General Partner
By: /s/ L. CARLTON ANDERSON By: /s/ ROBIN W. EDWARDS
--------------------------------------------- ---------------------------------------------
Its: Vice President Its: Managing Director
By: IDS Futures Corporation JOHN W. HENRY & CO., INC.
General Partner
By: /s/ MICHAEL L. WEINER By: /s/ ELIZABETH A.M. KENTON
--------------------------------------------- ---------------------------------------------
Its: Vice President, Treasurer and Secretary Its: Senior Vice President
CIS INVESTMENTS, INC. IDS FUTURES CORPORATION
By: /s/ L. CARLTON ANDERSON By: /s/ MICHAEL L. WEINER
--------------------------------------------- ---------------------------------------------
Its: Vice President Its: Vice President, Treasurer and Secretary
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "EXPERTS" and to
the use of our report dated January 25, 1996 with respect to the financial
statements of IDS Managed Futures, L.P. as of December 31, 1994 and 1995 and for
each of the years in the three-year period then ended, and to the use of our
report dated July 14, 1995 with respect to the financial statements of CIS
Investments, Inc. as of May 31, 1995 and 1994 included in Post-Effective
Amendment No. 1 to the Registration Statement and related Prospectus of IDS
Managed Futures, L.P. for the registration of $50,000,000 of limited partnership
interests.
KPMG Peat Marwick LLP
June 7, 1996
Chicago, Illinois
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "EXPERTS" and to
the use of our report dated May 9, 1996 with respect to the balance sheet of IDS
Futures Corporation included in Post-Effective Amendment No. 1 to the
Registration Statement and related Prospectus of IDS Managed Futures, L.P. for
the registration of $50,000,000 of limited partnership interests.
Ernst & Young LLP
June 6, 1996
Minneapolis, Minnesota
<PAGE>
EXHIBIT 23.3
CONSENT OF ATTORNEYS
We consent to the references to our firm under the heading "LEGAL MATTERS"
in the Prospectus, and to the reference to our opinion in the Post-Effective
Amendment No. 1 to the Registration Statement and related Prospectus of IDS
Managed Futures, L.P. (the "Partnership") for the registration of $50,000,000 of
limited partnership interests. We also consent to the inclusion in the
Post-Effective Amendment No. 1 to the Registration Statement of our opinion as
to the tax consequences of an investment in the Partnership (filed as Exhibit
8.1) and also to the inclusion of our opinion as to the legality of the
Partnership's securities (filed as Exhibit 5.1).
CHAPMAN AND CUTLER
June 6, 1996
Chicago, Illinois
