SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File No. 0-16515
December 31, 1999
IDS MANAGED FUTURES, L.P.
(Exact name of registrant as specified in its charter)
Delaware 06-1189438
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification #)
233 South Wacker Drive, Suite 2300, Chicago, IL 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 460-4000
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Units of Limited Partnership Interest
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K: [X]
The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant as of February 29, 2000: $41,026,238
<PAGE>
Index to exhibits on page 29
Documents Incorporated by Reference
Incorporated by Reference in Part IV, Item 14 is Post-Effective Amendment
No. 1 to Registration Statement No. 33-86894 of the Partnership on Form S-1
under the Securities Act of 1933, filed on June 7, 1996.
Incorporated by Reference in Part IV, Item 14 is Post-Effective Amendment
No. 3 to Registration Statement No. 33-86894 of the Partnership on Form S-1
under the Securities Act of 1933, filed on July 31, 1997.
Incorporated by Reference in Part IV, Item 14 is Post-Effective Amendment
No. 4 to Registration Statement No. 33-86894 of the Partnership on Form S-1
under the Securities Act of 1933, filed on April 21, 1998.
Incorporated by Reference in Part IV, Item 14 is Post-Effective Amendment
No. 5 to Registration Statement No. 33-86894 of the Partnership on Form S-1
under the Securities Act of 1933, filed on March 24, 1999.
Incorporated by Reference in Part IV, Item 14 is Post-Effective Amendment
No. 6 to Registration Statement No. 33-86894 of the Partnership on Form S-1
under the Securities Act of 1933, filed on March 2, 2000.
<PAGE>
Part I
Item 1. Business
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" or the "Clearing
Broker"), 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. Trading decisions for the Partnership for the fiscal year ended
December 31, 1999 were made by two independent commodity trading advisors, John
W. Henry & Company, Inc. and Welton Investment Corporation.
CIS is a "Futures Commission Merchant", the General Partners are "Commodity Pool
Operators", AXP Advisors is an "Introducing Broker" and the trading advisors to
the Partnership are "Commodity Trading Advisors" as those terms are used in the
CE Act. As such, they are registered with and subject to regulation by the
Commodity Futures Trading Commission ("CFTC") and the National Futures
Association ("NFA"). AXP Advisors and CIS are also registered as broker-dealers
with the National Association of Securities Dealers, Inc. ("NASD") and the
Securities and Exchange Commission (the "SEC").
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, June 26, 1995 and August
26, 1997. Units are currently offered pursuant to a Prospectus dated March 31,
1999 and a Supplement to the Prospectus dated February 1, 2000. The total
amount of the initial offering was $7,500,000 and the total amount of the
multiple reopenings was $80,000,000. After the initial purchase price of $250
per Unit, investors purchase Units at the then current net asset value per Unit
on the last business day of the month; 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.
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.
Should the Partnership engage in forward transactions in foreign currencies, CIS
Financial Services, Inc. ("CISFS") will act as the Partnership's forward
contract broker and in that capacity will arrange for the Partnership to
contract directly for forward transactions in foreign currencies. CISFS is a
direct participant in the interbank market for foreign currencies. The
Partnership will act as a principal in each transaction entered into with a
bank, and CISFS will act only as the Partnership's agent in brokering these
transactions.
Under the terms of the Limited Partnership Agreement, the General Partners
may not select Partnership transactions involving the purchase or sale of any
commodity interests, but must select one or more advisors to direct the
Partnership's trading with respect thereto. Initially, the General Partners
chose and caused the Partnership to enter into Advisory Contracts with each of
John W. Henry & Company, Inc. ("JWH") and Sabre Fund Management Limited
("Sabre"). Commencing on June 16, 1987, after the conclusion of the offering
period with respect to the Partnership's Limited Partnership Units, JWH and
Welton began to provide commodity trading instructions to CIS on behalf of the
Partnership. The General Partners felt it appropriate to make a change in
trading advisor programs; 70 percent of the assets formerly managed by JWH
pursuant to its Original Investment Program were allocated to another program
operated by JWH, the Financial and Metals Portfolio, as of February 28, 1989.
The remaining assets in the JWH Original Investment Program were closed due to
disappointing performance as of October 13, 1989. This money was reallocated to
Sabre in early 1990. In February 1991, the General Partners felt it prudent to
realign the assets of the Partnership so that JWH and Sabre were each allocated
50% of the trading assets. On July 2, 1997 the General Partners entered into an
agreement to add Welton Investment Corporation ("Welton") as an additional
independent commodity trading advisor for the Partnership and effective July 8,
1997 the assets of the Partnership were reallocated among the three independent
commodity trading advisors. In accordance with the terms of the Advisory
Contract between the Partnership and Sabre, the General Partners elected not to
renew the Advisory Contract for Sabre and it expired on December 31, 1997.
Effective January 1, 1998, all of the assets of the Partnership are managed by
JWH and Welton. Collectively, JWH and Welton are herein referred to as the
"Advisors".
The General Partners are responsible for preparing monthly and annual
reports to the Limited Partners; filing reports required by the CFTC, the NFA,
the SEC and any other Federal or State agencies having jurisdiction over the
Partnership's operations; calculating the Net Asset Value (meaning the total
assets less total liabilities of the Partnership) and directing payment of the
management and incentive fees payable to the Advisors under the Advisory
Contracts.
The General Partners provide suitable facilities and procedures for handling
redemptions, transfers, distributions of profits (if any) and orderly
liquidation of the Partnership. Although CIS, an affiliate of CISI (one of the
General Partners) acts as the Partnership's clearing broker, the General
Partners are responsible for selecting another clearing broker in the event CIS
is unable or unwilling to continue in that capacity. The General Partners are
further authorized, on behalf of the Partnership (i) to enter into a brokerage
clearing agreement and related customer agreements with their affiliates, CIS
and AXP Advisors, pursuant to which those firms render clearing and introducing
brokerage services to the Partnership; (ii) to cause the Partnership to pay
brokerage commissions at the rates provided for in the brokerage agreement
(until August 31, 1995 this rate was $50 per round turn trade to CIS which in
turn reallocated $30 per round turn trade to AXP Advisors; effective September
1, 1995, which was the first business day of themonth following the initial
closing of the new offering, the round turn brokerage commission rate was
decreased from $50 to $35 per round turn trade to CIS which in turn reallocates
$20 per round turn trade to AXP Advisors) and NFA, exchange, clearing, delivery,
insurance, storage, service and other fees and charges including surcharges on
foreign exchanges with higher incremental costs incidental to the Partnership's
trading; and (iii) to receive an annual administrative fee equal, in the case of
IDS Futures, to 1.45% of the Partnership's Net Asset Value ("NAV") on the first
business day of each fiscal year and, in the case of CISI, to 0.3% of the
Partnership's NAV on the first business day of each fiscal year until December
31, 1992. Commencing January 1, 1993, the annual administrative fee payable to
IDS Futures was reduced to 1.125% and the annual administrative fee payable to
CISI was reduced to 0.25%. Although no increase to brokerage commissions or
administrative fees is anticipated, such fees as allowed in the Prospectus may
be increased at rates equivalent to increases in the Consumer Price Index or
other comparable measure of inflation.
The Advisory Contracts between the Partnership and the Advisors provide that the
Advisors shall each have sole discretion in and responsibility for the selection
of the Partnership's commodity transactions with respect to that portion of the
Partnership's assets allocated to it. The Advisory Contract with JWH was amended
on April 30, 1996 (but made effective back to the date of January 31, 1996) to
extend the term of the Advisory Contract through December 31, 1996 with the
automatic renewal for three additional twelve-month terms (beginning January 1
and ending December 31 of each year) through December 1999, unless earlier
terminated in accordance with the termination provisions contained therein. On
December 31, 1999, the Advisory Contract was further amended to extend the
agreement between the parties until December 31, 2002 unless earlier terminated
in accordance with the termination provisions contained therein. The Advisory
Contract with Welton commenced on July 2, 1997 and continued until December 31,
1998, with automatic renewal for three additional twelve-month terms (beginning
January 1 and ending December 31 of each year) through December 2001, unless
earlier terminated in accordance with the termination provisions contained
therein. The renewal right is applicable irrespective of any change in trading
advisors of the Partnership or any reallocation of Partnership assets among the
trading advisors or to other trading advisors.
The Advisory Contracts shall terminate automatically in the event that the
Partnership is terminated in accordance with the Amended and Restated Limited
Partnership Agreement. The Advisory Contracts may be terminated by the
Partnership with respect to any Advisor individually upon written notice to the
Advisor in the event that (i) the Partnership assets allocated to the Advisor
has trading losses in excess of 30% of the assets originally allocated to the
Advisor; (ii) the Advisor is unable, to any material extent, to use its agreed
upon trading approach; (iii) the Advisor's registration is revoked or not
renewed; (iv) there is unauthorized assignment of the Advisory Contract by the
Advisor (v) the Advisor dissolves, merges, consolidates with another entity,
sells a substantial portion of its assets, changes control, become bankrupt or
insolvent or has a change in executive officer; or (vi) the General Partners
determine in good faith that such termination is necessary for the protection of
the Partnership.
An Advisor may terminate the Advisory Contract at any time upon written notice
to the Partnership in the event (i) that its continued trading on behalf of the
Partnership would require the Advisor to become registered as an investment
advisor under the Investment Advisors Act of 1940; (ii) that assets in excess of
50% of the initially allocated assets are reallocated from the Advisor; (iii)
that the registration of either General Partner is revoked, suspended,
terminated or not renewed; (iv) that the General Partners elect to have the
Advisor use a trading approach which is different from that initially used; (v)
that the General Partners override a trading instruction or impose additional
trading limitations; (vi) that there is an unauthorized assignment of the
Advisory Contract by the General Partners; or (vii) other good cause is shown to
which the written consent of the General Partners is also obtained. An Advisor
may also terminate the Advisory Contract on 60 days written notice to the
General Partners during any renewal term.
The Advisors will continue to advise other futures trading accounts. The
Advisors and their officers, directors and employees also will be free to trade
commodity interests for their own accounts provided such trading is consistent
with the Advisors' obligations and responsibilities to the Partnership. To the
extent that the Advisors recommend similar or identical trades to the
Partnership and other accounts which they manage, the Partnership may compete
with those accounts for the execution of the same or similar trades.
The Partnership initially paid JWH a monthly management fee of 1/4 of 1% of
the Partnership's NAV under management as of the end of the month, whether or
not the Partnership was profitable, and a quarterly incentive fee of 18% of
trading profits achieved on the NAV of the Partnership allocated to such
Advisor's management until June 30, 1992. Effective July 1, 1992, the
Partnership began paying JWH 1/3 of 1% of the month end NAV of the Partnership
and a quarterly incentive fee of 15% of the Partnership's net trading profits,
if any, attributable to its management. Pursuant to an agreement between the
Partnership and Welton, the Partnership pays Welton a monthly management fee of
1/4 of 1% of the month-end NAV of the Partnership under its management and a
quarterly incentive fee of 18% of trading profits achieved on the NAV of the
Partnership allocated to such Advisor's management. See pages 6-8 of Exhibit
10.1 incorporated by reference herein for a description of NAV and trading
profits. The incentive fee is paid to an Advisor only when the cumulative
trading profits for assets allocated to that Advisor at the end of a quarter
exceed the highest previous cumulative trading profits at the end of a quarter
for which an incentive fee was paid to the Advisor. The calculation and payment
of incentive fees is not affected by the performance of the other Advisors.
The Limited Partnership Agreement provides that (i) funds will be invested only
in futures contracts which are traded in sufficient volume to permit, in the
opinion of each Advisor, ease of taking and liquidating positions; (ii) no
Advisor will establish futures positions in a commodity interest such that the
margin required for those positions, when added to that required for existing
positions for the same commodity interest, would exceed 15% of the Partnership
assets allocated to the Advisor; (iii) it is expected that 20% to 60% of the Net
Assets of the Partnership will normally be committed to initial margin, however,
no Advisor may commit more than 66 2/3% of the assets under its management to
initial margins; (iv) the Partnership will not generally enter into an open
position for a particular commodity interest during a delivery month; (v) the
Partnership may not trade in securities or options on 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 CE Act and CFTC
regulations; the Partnership may trade in futures contracts, futures contracts
on foreign currencies through foreign and domestic commodity exchanges and
forward contracts on foreign currencies; (vi) the Partnership may not engage in
pyramiding, but may employ spreads or straddles; (vii) the Partnership's assets
will not be commingled with the assets of any other person; (viii) no Advisor
will be permitted to engage in churning the assets of the Partnership; and (ix)
no rebates or give-ups may be paid to or received by the General Partners. The
Partnership will not generally utilize borrowing except for short-term borrowing
when the Partnership takes delivery of a physical commodity. Material changes in
these trading policies must be approved by a vote of a majority of the
outstanding Limited Partnership Units.
The Partnership's Net Assets are deposited in the Partnership's account with
CIS, the Partnership's clearing broker. 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.
The Partnership currently has no salaried employees and all administrative
services performed for the Partnership are performed by the General Partners.
The General Partners have no employees other than their officers and directors,
all of whom are employees of the affiliated companies of the General Partners.
For these administrative services, the General Partners received an annual fee,
as described above, equal to 1.75% of the NAV on the first day of the
Partnership's fiscal year (paid on a pro rata basis for the first year of the
Partnership's trading) until December 31, 1992. Commencing January 1, 1993 the
annual administrative fee for the General Partners was reduced to 1.375% of the
NAV on the first day of the Partnership's fiscal year.
The Partnership's business constitutes only one segment for financial reporting
purposes; it is a limited partnership whose 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 Partnership does not engage in the production or sale of any goods
or services. The objective of the Partnership business is appreciation of its
assets through speculative trading in such commodity interests. Financial
information about the Partnership's business, as of December 31, 1999, is set
forth under Items 6 and 7 herein.
Competition
Each Advisor and its principals, affiliates and employees are 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
Advisor obtains, produces or utilizes in the performance of services for the
Partnership. To the extent that the Advisor recommends similar or identical
trades to the Partnership and other accounts which it manages, the Partnership
may compete with those accounts for the execution of the same or similar trades.
Other trading advisors who are not affiliated with the Partnership may utilize
trading methods which are similar in some respects to those methods used by the
Partnership's Advisors. These other trading advisors could also be competing
with the Partnership for the same or similar trades as requested by the
Partnership's Advisors.
Item 2. Properties
The Partnership does not utilize any physical properties in the conduct of its
business. The General Partners use the offices of CIS and AXP Advisors, at no
additional charge to the Partnership, to perform their administrative functions,
and the Partnership uses the offices of CIS, again at no additional charge to
the Partnership, as its principal administrative offices.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Part II
Item 5. Market for the Registrant's Units and Related Security Holder Matters
(a) There is no established public market for the Units and none is
expected to develop.
(b) As of December 31, 1999, there were 145,413.46 Units held
by Limited Partners and 2,883.58 Units held by the General
Partners. A total of 22,518.55 Units had been redeemed by
Limited Partners during the period from January 1, 1999 to
December 31, 1999 (89,408.15 Units were redeemed prior to
calendar year 1999). The Partnership's Amended and Restated
Limited Partnership Agreement (Exhibit 3.1 hereto) contains a
full description of redemption and distribution procedures.
(c) To date no distributions have been made to partners in
the Partnership.
The Limited Partnership Agreement does not provide for regular or periodic cash
distributions, but gives the General Partners sole discretion in determining
what distributions, if any, the Partnership will make to its partners. The
General Partners have not declared any such distributions to date, and do not
currently intend to declare such distributions.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
Year ended December 31,
1995 1996 1997 1998 1999
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. Operating Revenues(000) $8,419 $10,190 $7,619 $9,513 (5,873)
2. Income (Loss) From
Continuing Operations(000) 5,755 6,701 3,778 4,578 (10,406)
3. Income (Loss) Per Unit 50.46 54.14 28.09 30.08 (69.61)
4. Total Assets(000) 33,276 41,669 50,592 58,570 47,833
5. Long Term Obligations 0 0 0 0 0
6. Cash Dividend Per Unit 0 0 0 0 0
<FN>
Note: All references to Units reflect the 3-for-1 Unit split effective
February 28, 1995.
</FN>
</TABLE>
Item 7. 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 reached 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 Partnership's Net Assets are held in a brokerage account with CIS. The
Partnership initially earned interest on 100% of the Partnership's average
monthly cash balance at a rate equal to 80% of the average yield on the 90-day
U.S. Treasury bills issued during that month until July 31, 1993. Commencing
August 1, 1993, the Partnership began to earn interest at a rate of 90% of the
average yield on the 90-day U.S. Treasury Bills issued during that month. For
the calendar year ended December 31, 1999 CIS had paid or accrued to pay
interest of $2,173,010 to the Partnership. Similarly, for the calendar year
ended December 31, 1998 CIS had paid or accrued to pay interest of $2,148,711 to
the Partnership.
For the fiscal year ended December 31, 1999, investors redeemed a total of
22,518.55 Units for $7,771,619. For the fiscal year ended December 31, 1998
investors redeemed a total of 14,354.27 Units for $4,951,407.
During 1999, Limited Partners purchased 19,596.40 Units for $6,738,511. The
General Partners did not purchase any Units in 1999.
On December 31, 1999, the Partnership had unrealized profits of $2,294,971
and cash on deposit of $45,354,529. These positions required margin deposits at
CIS of $5,397,536. The total balance of the Partnership's account at CIS was
$47,649,500. These figures compare to unrealized profits of $5,740,766 and cash
on deposit of $52,649,782, margin requirements of $6,224,367 and total balance
of the Partnership's account of $58,390,548 as of December 31, 1998. On December
31, 1997, the Partnership had unrealized profits of $2,454,648 and cash on
deposit at CIS of $47,936,067. These positions required margin deposits at CIS
of $4,973,284. The total balance of the Partnership's account was $50,390,715.
During the fiscal year ended December 31, 1999, the Partnership had no credit
exposure to a counterparty which is a foreign commodities exchange which was
material.
The Partnership currently only trades on recognized global futures exchanges. In
the event the Partnership begins trading over the counter contracts, any credit
exposure to a counterparty which exceeds 10% of the Partnership's total assets
will be disclosed.
See Footnote 5 of the Financial Statements for procedures established by the
General Partners to monitor and minimize market and credit risks for the
Partnership. In addition to the procedures set out in Footnote 5, the General
Partners review on a daily basis reports of the Partnership's performance,
including monitoring of the daily net asset value of the Partnership. The
General Partners also review the financial situation of the Partnership'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.
Results of Operations
The Partnership posted a loss for 1999 and posted positive returns for 1998
and 1997.
1999
The IDS Managed Futures, L.P. experienced a disappointing year in 1999.
Both John W. Henry & Company, Inc (JWH) and Welton Investment Company (Welton),
the trading advisors to the Fund, experienced the most difficult performance
year in their history. A lack of sustained price movements coupled with abrupt
trend reversals in many market sectors resulted in a very difficult trading
environment. The forces that supported strong returns in the equity markets such
as strong consumer confidence and the perception of economic equilibrium caused
volatile, sideways price patterns in the futures markets. This type of price
movement is extremely difficult for long-term trend followers such as JWH and
Welton.
The first quarter was marked by the advent of the newly formed Euro
currency. In March, the conflict in Kosovo led to the U.S. dollar gaining
dramatically on the Euro and Swiss franc. As the conflict in Kosovo escalated,
the crisis-related selling of these two currencies continued, resulting in
profits for the Fund. Short crude oil positions in January and February gave way
to long crude oil positions that were sustained throughout the year. Crude oil
began its sharp ascent from just under $12/barrel to $25.60/barrel at year-end.
This sustained trend proved profitable for the Fund. However, erratic markets in
interest rates in Europe and the Far East along with agricultural markets
created losses.
The second quarter was the most profitable for the Fund. Highlights
included the rising Nikkei and S&P 500 stock indices and the continued rise of
the dollar relative to the Euro and Swiss franc. During May, the U.K. rendered
its decision to sell over 50% of its gold reserves. This drove gold prices lower
and the Fund's short positions accrued profits. Short U.S. and European interest
rate positions performed well as the Federal Reserve increased the discount rate
a 1/4 point in June.
The third quarter was the most difficult quarter for the Fund. As the
crisis in Kosovo began to abate, the Fund's currency positions in the Euro and
Swiss franc quickly reversed and open trade profits were reduced dramatically.
Despite another 1/4 point interest rate increase in August, short positions in
the U.S. interest rate sector suffered. In the final week of September, 15
European Central Banks announced that they had decided to stop selling gold for
the next five years. Subsequently, gold prices rose a staggering $50/ounce and
handed gold sellers such as the Partnership a significant loss.
After the final interest rate increase in October, yields on the U.S. 30
year bond moved from 6.4% to 6.1% and up to 6.5% in the fourth quarter further
emphasizing the difficult trading year. Similar trading patterns occurred in
offshore interest rates which in turn led to negative performance. The Japanese
yen and crude oil helped offset these losses as their positive trends continued.
The Partnership ended the year with a loss of $10,406,083.
1998
The year 1998 was marked by declining global interest rates and commodity prices
and extremely volatile currency fluctuations. The Partnership produced a net
gain of 8.55% for the calendar year. One of the key markets that consistently
reported profits during the year was the energy sector, primarily crude oil.
Short crude oil prices throughout the year were beneficial to the Partnership.
Additionally, coffee prices fell 28% during the year and the Partnership
benefited from its short positions in coffee prices.
The first quarter was marked by a flight to quality in the bond market, namely
German bunds and U.S. bonds amidst turbulence in the Asian markets. The U.S.
dollar remained volatile for the first two months of the year and strengthened
during March, primarily versus the German mark and Swiss franc. The volatility
in both these sectors produced overall losses for the Partnership. Warren
Buffett was rumored and then confirmed to be holding significant silver
positions anticipating a rise in silver prices. Long silver prices were
beneficial to the Partnership.
In the second quarter, the U.S. dollar strengthened against the Japanese
yen until the U.S. Government intervened to support the Japanese yen,
essentially selling the U.S. dollar and depressing the value of the U.S. dollar
relative to most major world currencies. By July, the U.S. dollar was back at
all-time highs against the Japanese yen. Overall, the Partnership gained as a
result of the fluctuation of the U.S. dollar. However, the ripple effect created
volatility for the U.S. dollar versus the European currencies and the
Partnership lost on its positions in these currencies. Precious metals, namely
silver, reversed as prices slumped. Gold prices seesawed up and down never
settling on direction. The volatility in these markets was unprofitable to the
Partnership.
The third quarter was highlighted by a devaluation of the Russian ruble which
sent shock waves through the world equity markets as traders liquidated equities
in favor of sovereign debt. Even prior to the Russian crisis, the Partnership
was well positioned to take advantage of rising bonds. The Partnership was long
the U.S., German and Japan bond markets. Interest rates on the U.S. 30-year long
bond fell below 5%, the lowest level in over 30 years. In addition, the
Partnership was short the Nikkei and FTSE equity indices. Gold and silver prices
fell to 1998 lows, as short positions in these precious metals were profitable.
The fourth quarter saw extremes in the currency sector as the U.S. dollar again
gyrated for the last three months of the year. The long Japanese yen position
that provided the only profit for the Partnership in October was the largest
losing position in November, yet by December, long Japanese yen positions were
providing profits. The Fed eased interest rates one quarter point three times in
seven weeks. However, long U.S. bond positions reaped few rewards as these rate
cuts had already been factored in the market. Global stock indices rebounded
beginning in October and long positions in the S&P and German DAX proved
rewarding. The Partnership ended the year with a profit of $4,578,497.
1997
In 1997 the global futures markets showed a great deal of volatility and the
Advisors were well positioned to profit from several of these moves. The
Partnership produced a net gain of 8.68% for the calendar year. The year 1997
was marked by declining gold prices and interest rates around the globe and a
rising U.S. dollar relative to the German mark and Japanese yen. The strength of
these market moves proved beneficial to the Partnership. The price of gold
declined to the lowest level in over a decade reflecting its declining value as
an alternative monetary asset as central banks increased their willingness to
sell or lease the precious metal. Solid gains were generated in the global
interest rate markets, particularly in the Japanese Government bond where yields
plummeted to historic lows as the nation sank relentlessly into a recession.
Strong gains were also recorded in Australian 10-year bonds and 3-year notes and
in German and Italian bonds. Gains were realized in positions in the German
mark, which weakened in world markets as hopes for European monetary union rose.
The U.S. dollar dominated the world currencies reflecting sound economic
fundamentals in the U.S. The Partnership benefited from the upward price
movement in natural gas during the summer and fall. However, energy markets were
disappointing as ample world inventories and mild weather kept supply and demand
in balance. In addition, losses were incurred in agricultural markets, despite
strong performance by coffee futures earlier in the year. The Partnership ended
the year with a profit of $3,778,125.
<PAGE>
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 effect on the Partnership's operations or assets.
Item 7(A). Quantitative and Qualitative Disclosures About Market Risk
Introduction
Past Results Are Not Necessarily Indicative of Future Performance
The Partnership is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's main line of business.
Market movements result in frequent changes in the fair market value of the
Partnership's open positions and, consequently, in its earnings and cash flow.
The Partnership's market risk is influenced by a wide variety of factors,
including the level and volatility of interest rates, exchange rates, equity
price levels, the market value of financial instruments and commodity contracts,
the diversification effects among the Partnership's open positions and the
liquidity of the markets in which it trades.
The Partnership can acquire and/or liquidate both long and short positions in a
wide range of different markets. Consequently, it is not possible to predict how
a particular future market scenario will affect performance, and the
Partnership's past performance is not necessarily indicative of its future
results.
Value at Risk is a measure of the maximum amount which the Partnership could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Partnership's speculative trading and the recurrence in the
markets traded by the Partnership of market movements far exceeding expectations
could result in actual trading or non-trading losses far beyond the indicated
Value at Risk or the Partnership's experience to date (i.e., "risk of ruin"). In
light of the foregoing as well as the risks and uncertainties intrinsic to all
future projections, the inclusion of the quantification included in this section
should not be considered to constitute any assurance or representation that the
Partnership's losses in any market sector will be limited to Value at Risk or by
the Partnership's attempts to manage its market risk.
Standard of Materiality
Materiality as used in this section, "Quantitative and Qualitative Disclosures
About Market Risk," is based on an assessment of reasonably possible market
movements and the potential losses caused by such movements, taking into account
the leverage, optionality and multiplier features of the Partnership's market
sensitive instruments.
Quantifying the Partnership's Trading Value at Risk
Quantitative Forward-Looking Statements
The following quantitative disclosures regarding the Partnership's market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934). All
quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of historical
fact.
The Partnership's risk exposure in the various market sectors traded by the
Trading Advisor is quantified below in terms of Value at Risk. Due to the
Partnership's mark-to-market accounting, any loss in the fair value of the
Partnership's open positions is directly reflected in the Partnership's earnings
(realized or unrealized) and cash flow (at least in the case of exchange-traded
contracts in which profits and losses on open positions are settled daily
through variation margin).
Exchange maintenance margin requirements have been used by the Partnership as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current
market volatility (including the implied volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic estimate
of the maximum expected near-term one-day price fluctuation. Maintenance margin
has been used rather than the more generally available initial margin, because
initial margin includes a credit risk component which is not relevant to Value
at Risk.
In the case of market sensitive instruments which are not exchange traded (which
will be forward currencies should the Partnership begin trading them), the
margin requirements for the equivalent futures positions have been used as Value
at Risk. In those rare cases in which a futures-equivalent margin is not
available, dealers' margins have been used.
The fair value of the Partnership's futures and forward positions does not have
any optionality component. However, Welton also trades commodity options on
behalf of the Partnership. The Value at Risk associated with options is
reflected in the following table as the margin requirement attributable to the
instrument underlying each option. Where this instrument is a futures contract,
the futures margin, and where this instrument is a physical commodity, the
futures-equivalent maintenance margin has been used. This calculation is
conservative in that it assumes that the fair value of an option will decline by
the same amount as the fair value of the underlying instrument, whereas, in
fact, the fair values of the options traded by the Partnership in all cases
fluctuate to a lesser extent than those of the underlying instruments.
In quantifying the Partnership's Value at Risk, 100% positive correlation in the
different positions held in each market risk category has been assumed.
Consequently, the margin requirements applicable to the open contracts have
simply been aggregated to determine each trading category's aggregate Value at
Risk. The diversification effects resulting from the fact that the Partnership's
positions are rarely, if ever, 100% positively correlated have not been
reflected.
The Partnership's Trading Value at Risk in Different Market Sectors
The following table indicates the average, highest and lowest amounts of
trading Value at Risk associated with the Fund's open positions by market
category for fiscal year 1999 and the actual trading Value at Risk as of
December 31, 1998. All open position trading risk exposures of the Fund have
been included in calculating the figures set forth below. During fiscal year
1999, the Fund's average total capitalization was approximately $51.4 million.
As of December 31, 1998, the Fund's total capitalization was approximately $57.7
million.
<TABLE>
Fiscal Year 1999
- ----------------------------------------------------------------
<CAPTION>
Highest Lowest Average % of
Market Value Value Value Average
Sector at Risk* at Risk* at Risk* Capitalization**
<S> <C> <C> <C> <C>
Interest Rates $4.1 $2.4 $2.8 5.6%
Currencies $1.8 $1.4 $1.7 3.2%
Stock Indices $2.5 $0.8 $1.7 3.2%
Precious Metals $0.7 $1.0 $0.8 1.6%
Commodities $0.6 $0.7 $0.6 1.0%
Energy $0.1 $0.0 $0.1 0.3%
Total $9.8 $6.3 $7.7 14.9%
<FN>
* Average, highest and lowest Value at Risk amounts relate to the
quarter-end amounts for each calendar quarter-end during the fiscal year. All
amounts represent millions of dollars.
** Average Capitalization is the average of the Fund's capitali-zation at
the end of each fiscal quarter for fiscal year 1999.
</FN>
</TABLE>
<TABLE>
December 31, 1998
- ----------------------------------------------------------------
<CAPTION>
% of Total
Market Sector Value at Risk Capitalization
<S> <C> <C>
Interest Rates $ 3.9 million 6.8%
Currencies $ 0.7 million 1.3%
Stock Indices $ 0.6 million 1.0%
Precious Metals $ 0.5 million 0.8%
Commodities $ 0.1 million 0.2%
Energy $ 0.1 million 0.2%
Total $ 5.9 million 10.3%
</TABLE>
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership is
typically many times the applicable maintenance margin requirement (maintenance
margin requirements generally ranging between approximately 1% and 10% of
contract face value) as well as many times the capitalization of the
Partnership. The magnitude of the Partnership's open positions creates a "risk
of ruin" not typically found in most other investment vehicles. Because of the
size of its positions, certain market conditions - unusual, but historically
recurring from time to time - could cause the Partnership to incur severe losses
over a short period of time. The foregoing Value at Risk table as well as the
past performance of the Partnership - give no indication of this "risk of ruin."
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash balances
not needed for margin. However, these balances (as well as any market risk they
represent) are immaterial. The Partnership holds substantially all of its assets
in cash on deposit with CIS and CISFS. The Partnership has cash flow risk on
these cash deposits because if interest rates decline, so will the interest paid
out by CIS and CISFS at the 90% of the 90-day Treasury bill rate. As of December
31, 1999, the Partnership had approximately $45.3 million in cash on deposit
with CIS and CISFS.
<PAGE>
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's market risk
exposures except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Partnership and the Trading Advisor
manage the Partnership's primary market risk exposures constitute forward-
looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act. The Partnership's primary market
risk exposures as well as the strategies used and to be used by the Trading
Advisor for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual results of the
Partnership's risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expropriations, illiquid
markets, the emergence of dominant fundamental factors, political upheavals,
changes in historical price relationships, an influx of new market participants,
increased regulation and many other factors could result in material losses as
well as in material changes to the risk exposures and the risk management
strategies of the Partnership. There can be no assurance that the Partnership's
current market exposure and/or risk management strategies will not change
materially or that any such strategies will be effective in either the short or
long-term. Investors must be prepared to lose all or substantially all of their
investment in the Partnership.
The following were the primary trading risk exposures of the Partnership as of
December 31,1999, by market sector.
Interest Rates. Interest rate risk is a major market exposure of the
Partnership. Interest rate movements directly affect the price of the sovereign
bond positions held by the Partnership and indirectly the value of its stock
index and currency positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially impact the
Partnership's profitability. The Partnership's primary interest rate exposure is
to interest rate fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes positions in the government debt of smaller
nations e.g., Australia and New Zealand. The General Partners anticipate that
G-7 interest rates will remain the primary market exposure of the Partnership
for the foreseeable future. The changes in interest rates which have the most
effect on the Partnership are changes in long-term, as opposed to short-term,
rates. Most of the speculative positions held by the Partnership are in medium-
to long-term instruments. Consequently, even a material change in short-term
rates would have little effect on the Partnership were the medium to long-term
rates to remain steady.
Currencies. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates i.e., positions between two currencies other
than the U.S. dollar. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/Euro, dollar/Swiss franc and dollar/ pound
positions. The General Partners do not anticipate that the risk profile of the
Partnership's currency sector will change significantly in the future. The
currency trading Value at Risk figure includes foreign margin amounts converted
into U.S. dollars with an incremental adjustment to reflect the exchange rate
risk inherent to the dollar-based Partnership in expressing Value at Risk in a
functional currency other than dollars.
Stock Indices. The Partnership's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Partnership are
by law limited to futures on broadly based indices. As of December 31, 1999, the
Partnership's primary exposures were in the S&P and NASDAQ(US), Nikkei (Japan)
and the IBX35 (Spain) stock indices. The General Partners anticipate little
trading in non-G-7 stock indices. The Partnership is primarily exposed to the
risk of adverse price trends or static markets in the major U.S., European and
Japanese indices. (Static markets would not cause major market changes but would
make it difficult for the Partnership to avoid being "whipsawed" into numerous
small losses.)
Metals. The Partnership's metals market exposure is to fluctuations in the price
of gold and silver as well as various of the industrial metals. The Trading
Advisors have from time to time taken substantial positions as they have
perceived market opportunities to develop. The General Partners anticipate that
trading will continue across most of the available metals contracts.
Commodities. The Partnership's primary commodities exposure is to agricultural
price movements which are often directly affected by severe or unexpected
weather conditions. Coffee, cotton, hogs and wheat accounted for the substantial
bulk of the Partnership's commodities exposure as of December 31, 1999. In the
past, the Partnership also has had material market exposure to grains, sugar,
soy oil, rubber, hogs and cocoa and may do so again in the future. Welton and
the Partnership will continue to trade a wide variety of commodity contracts.
Energy. The Partnership's primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle East.
Although the Advisors trade natural gas to a limited extent, oil and oil
products are by far the dominant energy market exposure of the Partnership. Oil
prices can be volatile and substantial profits and losses have been and are
expected to continue to be experienced in this market. Qualitative Disclosures
Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Partnership as of
December 31, 1999.
Foreign Currency Balances. The Partnership's primary foreign currency balances
are in Japanese yen, Euros, British pounds and Australian dollars. The
Partnership controls the non-trading risk of these balances by regularly
converting these balances back into dollars (no less frequently than twice a
month).
Cash Position. The Partnership holds substantially all its assets in cash at CIS
and CISFS, earning interest at 90% of the average 90-day Treasury bill rate for
Treasury bills issued during each month.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The General Partners monitor the Partnership's performance and the
concentration of its open positions, and consult with the Advisors concerning
the Partnership's overall risk profile. If the General Partners felt it
necessary to do so, the General Partners could require the Advisors to close out
individual positions as well as entire programs traded on behalf of the
Partnership. However, any such intervention would be a highly unusual event. The
General Partners primarily rely on the Advisors own risk control policies while
maintaining a general supervisory overview of the Partnership's market risk
exposures.
Risk Management
JWH attempts to control risk in all aspects of the investment process from
confirmation of a trend to determining the optimal exposure in a given market,
and to money management issues such as the startup or upgrade of investor
accounts. JWH double checks the accuracy of market data, and will not trade a
market without multiple price sources for analytical input. In constructing a
portfolio, JWH seeks to control overall risk as well as the risk of any one
position, and JWH trades only markets that have been identified as having
positive performance characteristics. Trading discipline requires plans for the
exit of a market as well as for entry. JWH factors the point of exit into the
decision to enter (stop loss). The size of JWH's positions in a particular
market is not a matter of how large a return can be generated, but of how much
risk it is willing to take relative to that expected return.
To attempt to reduce the risk of volatility while maintaining the potential for
excellent performance, proprietary research is conducted on an ongoing basis to
refine the JWH investment strategies. Research may suggest substitution of
alternative investment methodologies with respect to particular contracts; this
may occur, for example, when the testing of a new methodology has indicated that
its use might have resulted in different historical performance. In addition,
risk management research and analysis may suggest modifications regarding the
relative weighting among various contracts, the addition or deletion of
particular contracts from a program, or a change in position size in relation to
account equity. The weighting of capital committed to various markets in the
investment programs is dynamic, and JWH may vary the weighting at its discretion
as market conditions, liquidity, position limit considerations and other factors
warrant.
JWH may determine that risks arise when markets are illiquid or erratic, such as
may occur cyclically during holiday seasons, or on the basis of irregularly
occurring market events. In such cases, JWH at its sole discretion may override
computer-generated signals and may at times use discretion in the application of
its quantitative models, which may affect performance positively or negatively.
Adjustments in position size in relation to account equity have been and
continue to be an integral part of JWH's investment strategy. At its discretion,
JWH may adjust the size of a position in relation to equity in certain markets
or entire programs. Such adjustments may be made at certain times for some
programs but not for others. Factors which may affect the decision to adjust the
size of a position in relation to account equity include ongoing research,
program volatility, assessments of current market volatility and risk exposure,
subjective judgment, and evaluation of these and other general market
conditions.
Welton's portfolios are subject to an on-going process of monitoring and review.
Risk is managed at all levels in the investment process. In advance of entering
a position, the risk of each trade is determined in relationship to the
potential exposure and volatility impact of that open position in an account
proportionate to its size. Multiple indicators of risk exposure are calculated
including initial risk, volatility, intra-period volatility, open equity risk,
and margin exposure. Various risk measures for each trade are determined before
trade entry and monitored throughout the life span of the trade.
The factors used to assess risk exposure and performance risks more generally
include (i) initial risk per trade (by model and market); (ii) volatility
(standard deviation of returns) per trade throughout the holding period; (iii)
open equity risk (by market, market group and portfolio); (iv) margin to equity
ratio (by market and portfolio); (v) judgment of extraordinary event or report
risk; (vi) portfolio level volatility (standard deviation and negative
semi-variant standard deviation); (vii) slippage (model efficiency and market
liquidity) monitoring overtime; and (viii) value-at-risk measures by market,
sector, macro-economic views, and portfolio. Multiple other factors would need
to be included for business risks, implementation quality assessments, and the
like. Furthermore, Welton retains the right to exercise discretion.
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements and the notes thereto appearing in
this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
The Partnership is managed by its General Partners, IDS Futures Corporation and
CIS Investments, Inc. The officers and directors of the General Partners as of
December 31, 1999 were as follows:
IDS Futures Corporation
John C. Boeder (born December 1941) is President and a director of IDS Futures
Corporation. Mr. Boeder was elected as a director and President of IDS Futures
in December 1999. Mr. Boeder has been employed by American Express Financial
Corporation since 1964. Since January 1999, he has held the title Vice President
and General Manager of the Non-Proprietary Products Group for American Express
Financial Corporation. He has overall responsibility for the non-proprietary
products offered through American Express Financial Advisors' distribution
channels. In addition, he oversees American Express Financial Advisors' direct
investment and limited partnership business. From 1994 to 1999, he was Vice
President and General Manager of Segment Marketing. From 1989 to 1994, he was
President of IDS Life Insurance Company of New York. He has held numerous
marketing positions in the insurance, annuity, and mutual fund departments of
American Express Financial Corporation. He graduated from the University of
Minnesota with a B.A. degree in business.
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 Express Financial Corporation corporate
tax group. Mr. Weiner is also an officer of AXP Advisors. 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.
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 of 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.
Patty L. Moren (born in June 1960) is Vice President of IDS Futures. Since
June 1999, Ms. Moren has been Vice President Controller of Variable Assets &
Services for American Express Financial Corporation. In this role, she is
charged with the overall finance responsibilities for mutual funds, wealth
management services, variable annuities, limited partnerships and brokered
mutual funds at American Express Financial Corporation, an indirect parent
company of IDS Futures. From 1995 to 1999, she was Director of Field
Compensation for American Express Financial Corporation where she led the
development of product compensation schedules and incentive programs for the
independent contractor sales force. From 1990 to 1995, Ms. Moren was Manager of
Sales Compensation for American Express Financial Corporation. Ms. Moren started
at American Express Financial Corporation in 1985 as Audit Manager. Prior to
joining American Express Financial Corporation, she was a senior financial
auditor for Cargill, Inc. She has a B.A. in Accounting from the University of
St. Thomas and a M.B.A. in Finance from Carlson School of Management.
CIS Investments, Inc.
Bernard W. Dan (born in December 1960), President and Director. Mr. Dan has
served as President and Director of CISI since June 1, 1998. He received a B.S.
degree in accounting from St. John's University, Collegeville, Minnesota. He
joined Cargill Investor Services, Inc. in 1985 and held various operational
positions. In 1986 Mr. Dan was assigned to Cargill Investor Services, Ltd. in
London as Administrative Manager for all operational activities. In 1989 Mr. Dan
was assigned to the CIS New York Regional Office as the Administrative Manager.
Mr. Dan was named Director of Cargill Investor Services (Singapore) Pte Ltd. at
the formation of the company in November 1994 and continued in that position
until April 1997. Mr. Dan was named President of Cargill Investor Services, Inc.
on June 1, 1998. Mr. Dan actively serves within the futures industry on exchange
committees and industry user groups.
Shaun D. O'Brien (born November 1964) is Vice President -
Controller/Treasurer and a director. Mr. O'Brien became a Vice President and a
director of CISI on July 1, 1999. Mr. O'Brien graduated from Northeastern
University in 1987 and he received a master's degree from the University of
Minnesota's Carlson School of Management in 1999. Mr. O'Brien began working for
Cargill, Incorporated in 1988 and joined CIS in 1999.
Barbara A. Pfendler (born in May 1953), Vice President and Director. Ms.
Pfendler was appointed Vice President of CISI in May 1990 and Director of CISI
in June 1998. Ms. Pfendler graduated from the University of Colorado in 1975.
She began her career with Cargill, Incorporated in 1975, holding various
merchandising and management positions within Cargill Incorporated's Oilseed
Processing Division before transferring to Cargill Investor Services, Inc. in
1986. She is currently the manager responsible for all activities of the Fund
Services Group at Cargill Investor Services, Inc. She was appointed Vice
President of Cargill Investor Services, Inc. in June 1996 and Director of
Cargill Investor Services, Inc. in June 1998.
Jan R. Waye (born in June 1948), Vice President. Mr. Waye was appointed
Vice President of CISI in June 1997. Mr. Waye graduated from Concordia College,
Moorhead, MN, with a B.A. degree in Communications and Economics in 1970. Mr.
Waye assumed the position of Senior Vice President of Cargill Investor Services,
Inc. in September 1996, after returning from London where he held various
management positions for Cargill Investor Services, Ltd. including most recently
Managing Director for CIS Europe. Mr. Waye joined Cargill, Incorporated in 1970
and served in various commodity trading and management positions in Chesapeake,
VA; Winnipeg, Manitoba; and Vancouver, BC. In 1978 he moved to New York and
shortly thereafter Minneapolis as head of Foreign Exchange for Cargill's metals
trading business. Mr. Waye served in various management positions in the
Financial Markets Group until 1988 when he assisted in the management and sale
of Cargill's life insurance business in Akron, Ohio. He moved to London in late
1988. Mr. Waye has served as a member of the Board of LIFFE, the London
International Financial Futures and Options Exchange, and as Vice Chairman of
its Membership and Rules Committee. He also served on the Board of the London
Commodity Exchange up to its merger with LIFFE.
Christopher Malo (born in August 1956), Vice President. Mr. Malo graduated
from Indiana University in 1976 with a B.S. in Accounting and further completed
the University of Minnesota Executive Program in 1993. He started working 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
and Controller from November 1983 until July 1991. He was elected Vice
President, Administration and Operations in July 1991. Mr. Malo was Managing
Director in Europe from 1996 until January 1999, responsible for CIS activities
and operations in Europe, the Middle East and Russia. He was an active member of
the FIA-UK Chapter and LIFFE Membership and Rules committee. He currently serves
on the Board of the FIA in Chicago.
Ronald L.Davis (born in September 1953), Vice President. Mr.Davis was
elected Vice President of CISI in June 1998. Mr. Davis graduated from Illinois
Institute of Technology, Chicago, Illinois with a B.S. in 1975 and with an M.B.A
in 1977. He began his career in the futures industry with A.G. Becker,
Incorporated in 1980 and joined Cargill Investor Services, Inc. in 1987 as the
Administrative Manager of the Fund Services Group. He is responsible for all
administrative, accounting and reporting functions of all CISI funds. In June
1998 Mr. Davis became Business Development Manager of the Fund Services Group.
Rebecca S. Steindel (born in April 1965), Secretary. Ms. Steindel was
elected Secretary of CISI in September 1997. Ms. Steindel graduated from the
University of Illinois in 1987. She began working at Cargill Investor Services,
Inc. in August 1987. She has held various financial and risk management
positions at Cargill Investor Services, Inc. and was elected Risk and Compliance
Officer and Secretary of Cargill Investor Services, Inc. in August 1997. She
currently serves on the Board of Directors and Executive Committee of the FIA
Financial Management Division.
Barbara A. Walenga (born in February 1960) is an Assistant Secretary. Ms.
Walenga graduated from Fayetteville Technical Institute in 1981. She began
working at CIS in August 1981. She has held various compliance management
positions at CIS and is currently the Legal Compliance Manager. She is currently
a member of the FIA Law and Compliance Division and the SIA Compliance and Legal
Division.
Patrice H. Halbach (born in August 1953), Assistant Secretary. Ms. Halbach
became Assistant Secretary of CISI in June 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 from the University of
Minnesota. 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
January 1999 she was named Vice President, Tax, of Cargill, Incorporated. In her
current position as Vice President, Tax, Ms. Halbach oversees Cargill,
Incorporated's global tax function.
Additional CISI officers include James Clemens as Assistant Secretary and
Lillian Lundeen as Assistant Secretary.
Each officer and director holds such office until the election and qualification
of his or her successor or until his or her earlier death, resignation or
removal.
Item 11. Executive Compensation
The Partnership has no officers or directors. The General Partners, IDS Futures
and CISI, administer the business and affairs of the Partnership (exclusive of
Partnership trading decisions which are made by independent commodity trading
advisors). The officers and directors of the General Partners receive no
compensation from the Partnership for acting in their respective capacities with
the General Partners.
All operating and administrative expenses attributable to the Partnership are
paid by the General Partners except for brokerage commissions, NFA, clearing and
exchange fees, advisory fees, legal, accounting, auditing, printing, recording
and filing fees and postage charges which are paid directly by the Partnership.
All expenses other than brokerage commissions incurred by the Partnership and
administrative fees are paid to persons not affiliated with the Partnership. For
the services performed through December 31, 1992 on behalf of the Partnership,
the General Partners received an annual administrative fee totaling 1.75% of the
Partnership's net assets. On January 1, 1993 this fee was reduced to 1.375%. The
General Partners received a total of $793,969 in 1999, $680,117 in 1998, and
$554,056 in 1997 for this fee.
CIS, an affiliate of CISI, is the Partnership's clearing broker. During the year
ended December 31, 1999, the Partnership accrued and paid $1,626,723 in
brokerage commissions to CIS, as compared to $1,354,116 in 1998 and $1,142,101
in 1997. Of these commissions, $20 per round turn trade is paid to AXP Advisors
as the Partnership's introducing broker and $15 is retained by CIS as clearing
broker (based on a commission rate of $35 per round turn trade). Prior to
September 1, 1995, $30 per round turn trade was paid to AXP Advisors and $20 was
retained by CIS (based on a commission rate of $50 per round turn trade). The
Partnership did not transact any business through CISFS during the year ended
December 31, 1999 and therefore paid no commissions to CISFS.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) As of December 31, 1999, no person was known to the Partnership to own
beneficially more than 5% of the outstanding Units.
(b) As of December 31, 1999, the General Partners beneficially owned
2,883.58 Units or approximately 1.94% of the Units outstanding as of
that date.
(c) As of December 31, 1999, no arrangements were known to the registrant,
including any pledges by any person of Units of the Partnership or
shares of its General Partners or the parents of the General Partners,
such that a change in control of the Partnership may occur at a
subsequent date.
Item 13. Certain Relationships and Related Transactions.
(a) None other than the compensation arrangements described herein.
(b) None.
(c) None.
(d) Not Applicable.
Part IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) The following documents are included herein:
(1) Financial Statements:
a. Report of Independent Public Accountants.
b. Statements of Financial Condition as of December 31, 1999 and 1998.
c. Statements of Operations, Statements of Changes in Partners' Capital &
Statements of Cash Flows for the years ended December 31, 1999, 1998,
and 1997
d. Notes to Financial Statements.
(2) All financial statement schedules have been omitted either because the
information required by the schedules is not applicable, or because
the information required is contained in the financial statements
included herein or the notes hereto.
(3) Exhibits:
See the Index to Exhibits annexed hereto.
(b) Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 28, 2000 IDS Managed Futures, L.P.
By: IDS Futures Corporation By: CIS Investments, Inc.
(General Partner) (General Partner)
By: /s/ John C. Boeder By: /s/ Bernard W.Dan
John C. Boeder Bernard W.Dan
President President
By: /s/ Michael L. Weiner By: /s/ Shaun D. O'Brien
Michael L. Weiner Shaun D. O'Brien
Vice President, Secretary Vice President
and Treasurer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Date: March 28, 2000
/s/ John C. Boeder /s/ Bernard W.Dan
John C. Boeder Bernard W.Dan
Director and President Director and
President
/s/ Peter J. Anderson /s/ Barbara A. Pfendler
Peter J. Anderson Barbara A. Pfendler
Director Director and Vice
President
/s/ Michael L. Weiner /s/ Shaun D. O'Brien
Michael L. Weiner Shaun D. O'Brien
Vice President, Secretary and Vice President and
Treasurer Treasurer
<PAGE>
Index to Exhibits
Number Exhibit
3.1 Amended and Restated Limited Partnership Agreement.
10.1 Advisory Contract dated as of March 27, 1987 between CIS
Investments, Inc., IDS Futures Corporation, IDS Managed
Futures, L.P., John W. Henry & Company, Inc. and Sabre
Fund Management Limited.
10.2 Amended Advisory Contracts dated January 23, 1992 between
CIS Investments, Inc., IDS Futures Corporation, IDS Managed
Futures, L.P. and each of John W. Henry & Company, Inc. and
Sabre Fund Management Limited.
10.3 Amended Advisory Contract dated April 30, 1996 between CIS
Investments, Inc., IDS Futures Corporation, IDS Managed
Futures, L.P., John W. Henry & Company,Inc. and Sabre Fund
Management Limited.
10.4 Advisory Contract dated as of July 2, 1997 between CIS
Investments, Inc., IDS Futures Corporation, IDS Managed
Futures, L.P. and Welton Investment Corporation (Incorporated
by reference to Post-Effective Amendment No.3 to the
Registration Statement as filed by the Partnership on July
31, 1997).
10.5 Amended Advisory Contract dated December 31, 1999
between CIS Investments, Inc., IDS Futures Corporation, IDS
Managed Futures, L.P. and John W. Henry & Company.
10.6 Guarantee dated March 21, 2000 between IDS Managed Futures,
L.P. and Cargill Incorporated.
Note: Exhibits 3.1, 10.1, 10.2 and 10.3 are incorporated
by reference to Post-Effective Amendment No. 1 to the
Registration Statement as filed by the Partnership on
June 7, 1996. Exhibit 10.5 is incorporated by reference to
Post-Effective Amendment No. 6 to the Registration Statement
as filed by the Partnership on March 2, 2000.
<PAGE>
IDS MANAGED FUTURES, L.P.
Table of Contents
Independent Auditors' Report
Financial Statements:
Statements of Financial Condition, December 31, 1999 and 1998
Statements of Operations,Years ended December 31, 1999, 1998 and 1997
Statements of Changes in Partners' Capital, Years ended December 31, 1999,
1998 and 1997
Statements of Cash Flows, Years ended December 31, 1999, 1998 and 1997
Notes to Financial Statements
Acknowledgment
<PAGE>
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. (the Partnership) as of December 31, 1999 and 1998, and
the related statements of operations, changes in partners' capital, and cash
flows for each of the years in the three-year period ended December 31, 1999.
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, 1999 and 1998, and the
results of operations, changes in partners' capital, and cash flows for each of
the years in the three-year period ended December 31, 1999, in conformity with
generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
January 21, 2000
<PAGE>
<TABLE>
IDS MANAGED FUTURES,L.P.
Statements of Financial Condition
December 31, 1999 and 1998
<CAPTION>
Assets 1999 1998
---------- ----------
<S> <C> <C>
Assets:
Equity in commodity futures trading accounts:
Cash on deposit with Clearing Broker ................ $45,354,529 52,649,782
Unrealized gain on open contracts ................... 2,294,971 5,740,766
---------- -----------
47,649,500 58,390,548
Interest receivable ................................... 183,939 179,775
=========== ==========
$47,833,439 58,570,323
Liabilities and Partners' Capital
Liabilities:
Accrued commissions on open contracts
due to AXP Advisors and CIS ......................... $ 39,204 129,531
Accrued exchange, clearing and NFA fees ............... 1,642 2,100
Accrued management fees ............................... 143,998 173,726
Accrued operating expenses ............................ 38,000 125,906
Accrued selling commissions and organization
and offering expenses ............................... 18,912 87,188
Redemptions payable ................................... 1,287,696 308,694
---------- ----------
Total liabilities ............................. 1,529,452 827,145
---------- ----------
Partners' capital:
Limited partners (145,413.46 and 148,335.61
units outstanding at December 31, 1999
and 1998, respectively) ............................. 45,403,623 56,642,072
General partners (2,883.58 units outstanding
at December 31, 1999 and 1998) ..................... 900,364 1,101,106
---------- ----------
Total partners' capital ....................... 46,303,987 57,743,178
---------- ----------
$47,833,439 58,570,323
=========== ==========
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
IDS MANAGED FUTURES, L.P.
Statements of Operations
Years ended December 31, 1999, 1998 and 1997
<CAPTION>
1999 1998 1997
------------- ----------- ----------
<S> <C> <C> <C>
Revenues (expenses):
Gain (loss) on trading of commodity contracts:
Realized gain (loss) on closed positions ......... $ (4,572,598) 4,255,156 4,545,484
Increase (decrease) in unrealized gain
on open contracts .............................. (3,445,795) 3,286,118 1,586,579
Interest income .................................... 2,173,010 2,148,711 2,032,524
Foreign currency transaction loss .................. (27,862) (177,410) (546,087)
----------- ---------- ----------
Total revenues (expenses) ................. (5,873,245) 9,512,575 7,618,500
=========== ========== ==========
Expenses:
Commission paid to AXP Advisors and CIS ............ 1,626,723 1,354,116 1,142,101
Exchange, clearing and NFA fees .................... 71,199 64,522 41,957
Management fees .................................... 1,919,833 1,852,486 1,609,144
Incentive fees ..................................... 107,651 876,259 396,625
General partner fee to IDSFC and CISI .............. 793,969 680,117 554,056
Operating expenses ................................. 13,463 106,578 96,492
---------- ---------- ----------
Total Expenses 4,532,838 4,934,078 3,840,375
Net profit (loss) ......................... $(10,406,083) 4,578,497 3,778,125
Profit (loss) per unit of limited partnership interest $ (69.61) 30.08 28.09
Profit (loss) per unit of general partnership interest (69.61) 30.08 28.09
<FN>
============ ========= ==========
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
IDS MANAGED FUTURES, L.P.
Statements of Changes in Partners Capital
Years ended December 31, 1999, 1998 and 1997
<CAPTION>
Total
Limited General partners
Units* partners partners capital
<S> <C> <C> <C> <C>
Balance at December 31, 1996 122,175.79 $ 39,545,527 749,421 40,294,948
Sale of partnership interests 26,213.79 9,652,700 100,000 9,752,700
Selling commissions and organization
offering costs - (844,169) (3,000) (847,169)
---------- ------------ ---------- -------------
Net sales of partnership interests 26,213.79 8,808,531 97,000 8,905,531
Net profit - 3,703,214 74,911 3,778,125
Redemptions (10,395.53) (3,515,603) - (3,515,603)
----------- ----------- --------- -------------
Balance at December 31, 1997 137,994.05 48,541,669 921,332 49,463,001
Sale of partnership interests 24,695.83 9,378,300 100,000 9,478,300
Selling commissions and organization
and offering costs - (822,213) (3,000) (825,213)
----------- ----------- ---------- -------------
Net sales of partnership interests 24,695.83 8,556,087 97,000 8,653,087
Net profit - 4,495,723 82,774 4,578,497
Redemptions (14,354.27) (4,951,407) - (4,951,407)
----------- ----------- ----------- ------------
Balance at December 31, 1998 148,335.61 56,642,072 1,101,106 57,743,178
Sale of partnership interests 19,596.40 7,369,700 - 7,369,700
Selling commissions and organization
and offering costs - (631,189) - (631,189)
----------- ----------- ----------- -------------
Net sales of partnership interests 19,596.40 6,738,511 - 6,738,511
Net loss - (10,205,341) (200,742) (10,406,083
Redemptions (22,518.55) (7,771,619) - (7,771,619)
----------- ----------- ----------- -------------
Balance at December 31, 1999 145,413.46 $ 45,403,623 900,364 46,303,987
========== ========== =========== =============
Net asset value per unit at December 31, 1999 $ 312.24 312.24
========== ===========
Net asset value per unit at December 31, 1998 $ 381.85 381.85
========== ===========
Net asset value per unit at December 31, 1997 $ 351.77 351.77
========== ===========
*Units of limited partners
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
IDS MANAGED FUTURES, L.P.
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
<CAPTION>
1999 1998 1997
------ ------- ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net profit (loss) $ (10,406,083) 4,578,497 3,778,125
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 contracts 3,445,795 (3,286,118) (1,586,579
Decrease (increase) in interest (4,164) 21,942 (49,359)
Decrease in accrued liabilities (276,695) (120,593) (632,835)
------------- ----------- -----------
Net cash provided by (used in) operating activities (7,241,147) 1,193,728 1,509,352
------------- ----------- -----------
Cash flows from financing activities:
Net proceeds from sale of units 6,738,511 8,653,456 9,585,141
Partner redemptions (6,792,617) (5,133,469) (3,157,208
------------- ----------- -----------
Net cash provided by (used in) financing activities (54,106) 3,519,987 6,427,933
------------- ----------- -----------
Net increase (decrease) in cash (7,295,253) 4,713,715 7,937,285
Cash at beginning of year 52,649,782 47,936,067 39,998,782
------------- ------------ -----------
Cash at end of year $ 45,354,529 52,649,782 47,936,067
============= ============ ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
December 31, 1999, 1998, and 1997
(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 Partnership began trading on June 16, 1987. 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.
Units of the Partnership representing an additional investment of
$10,000,000 were offered by American Express Financial Advisors, Inc. (AXP
Advisors), formerly IDS Financial Services Inc., commencing March 29, 1993. An
additional investment of $20,000,000 was offered by AXP Advisors commencing
January 31, 1994. Commencing June 26, 1995, AXP Advisors offered an additional
investment of $50,000,000. By December 31, 1999, a total of 185,099 units
representing a total investment of $56,826,819 of limited partnership interest
had been sold in the combined offerings. During the offerings, the General
Partners purchased a total of 1,606 additional units representing a total
investment of $459,880. Selling commissions of $3,297,164 were paid to AXP
Advisors by the new limited partners. All new investors paid organization and
offering expenses totaling $2,363,141. See the IDS Managed Futures, L.P.
prospectus dated August 26, 1997 for further details concerning the offerings.
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 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.
Revenue Recognition Commodity futures contracts, forward contracts,
physical commodities, and related options are recorded on the trade date. All
such transactions are recorded on the identified cost basis and marked to market
daily. Unrealized gains and losses on open contracts 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 year or as of the last date of the financial
statements.
<PAGE>
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
December 31, 1999, 1998, and 1997
The Partnership earns interest on 100% of the Partnership's average monthly
cash balance on deposit with the Clearing Broker at a rate equal to 90% of the
average 91-day Treasury bill rate for Treasury bills issued during that month.
Redemptions 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 10 days' written notice to the General
Partners. Payment will be made within 10 business days of the effective date of
the redemption. The Partnership's Limited Partnership Agreement contains a full
description of redemption and distribution procedures.
Commissions Effective January 18, 1999, brokerage commissions and National
Futures Association (NFA) clearing and exchange fees are accrued on a half-turn
basis on open commodity futures contracts, as opposed to a round-turn basis
prior to this date. 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 that offering came into the fund at the end
of August 1995. Therefore, the new rate became applicable in September 1995.
Effective January 18, 1999, the rate changed to $17.50 per half-turn contract.
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 both to movements in the underlying contract
markets as well as to 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.
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.
<PAGE>
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
December 31, 1999, 1998, and 1997
(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. (JWH); Welton Investment Corporation
(Welton); and Sabre Fund Management Limited (Sabre).
Under signed agreement for the periods presented prior to January 1, 1996,
Sabre received a monthly management fee of 1/4 of 1% of the month-end net 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 January 1, 1996, 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.
Effective February 1, 1997 the agreement with Sabre was changed to increase the
management fees paid to them to 1/4 of 1% of the month-end net assets. The
agreement with Sabre, which expired on December 31, 1997, was not renewed.
Under signed agreement, JWH will receive a monthly management fee of 1/3 of
1% of the month-end net asset value of the Partnership under its management and
15% of the Partnership's net trading profits, if any, attributable to its
management.
Under signed agreement, Welton will receive a monthly management fee of 1/4
of 1% of the month-end net asset value of the Partnership under its management
and 18% of the Partnership's net trading profits, if any, attributable to its
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 $0, $71,906, and $56,820 for the years ended
December 31, 1999, 1998 and 1997, 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. 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 risk,
the Clearing Broker, pursuant to the mandates of the Commodity Exchange Act, is
required to maintain funds deposited by customers relating to futures
<PAGE>
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
December 31, 1999, 1998, and 1997
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 were $91,125,485 and $158,096,821, respectively, on December
31, 1999 and $869,511,990 and $820,115,419, respectively, on December 31, 1998.
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 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 nonperformance
by one of their 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 $2,782,169, $3,929,112
and $2,545,273 during 1999, 1998 and 1997, respectively. Fair value as of
December 31, 1999 and 1998 was $2,294,971 and $5,740,766, 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. As of December 31, 1999, 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, 1999, the cash requirement of the commodity interests of the
Partnership was $5,397,536. This cash requirement was met by $42,146,603 held in
segregated funds and $5,502,897 held in secured funds. At December 31, 1998, the
cash requirement of the commodity interests of the Partnership of $6,224,367 was
met by $51,092,138 being held in segregated funds and $7,298,410 being held in
secured funds. At December 31, 1999 and 1998, cash was on deposit with the
Clearing Broker which exceeded the cash requirement amount.
<PAGE>
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
December 31, 1999, 1998, and 1997
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, 1999 and 1998:
<TABLE>
Commodity Group 1999 1998
<CAPTION>
--------------- ----------------
<S> <C> <C>
Agricultural $ 71,690 91,344
Currency 454,130 339,704
Stock Indices 1,012,382 511,912
Energies 17,459 133,111
Metals 129,159 (2,413)
Interest 610,151 4,667,108
--------------- ----------------
Total $ 2,294,971 5,740,766
=============== ================
</TABLE>
The range of expiration dates of these exchange traded open contracts is
January 2000 to December 2000.
<PAGE>
IDS MANAGED FUTURES, L.P.
Acknowledgement
December 31, 1999, 1998, and 1997
Acknowledgment
To the best of my knowledge and belief, the information contained herein is
accurate and complete.
/s/ Shaun O'Brien
Shaun O'Brien
Treasurer, CIS Investments, Inc.,
One of the General Partners and Commodity Pool Operators of IDS Managed Futures,
L.P.
AMENDMENT TO THE IDS MANAGED FUTURES. L.P.
ADVISORY CONTRACT DATED MARCH 27, 1987
John W. Henry & Company, Inc., a Florida corporation ("JWH"), IDS
Managed Futures, L.P, a Delaware limited partnership ("the Partnership"), 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 (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, 2002. This Agreement shall
automatically renew with respect to JWH 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 JWH written
notice that it does not elect to renew the Agreement with respect to
JWH 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. This Amendment may be signed in multiple counterparts, all of
which, when taken together shall constitute one document.
3. 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.
4. 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 31st day of December, 1999.
IDS MANAGED FUTURES, L.P. JOHN W. HENRY & COMPANY, INC.
CIS INVESTMENTS, INC.
General Partner By:/s/ Verne O. Sedlacek
By:/s/ Barbara A. Pfendler Its:President
Its: Vice President
IDS FUTURES CORPORATION
General Partner
By: /s/John M. Knight
Its:Vice President
CIS INVESTMENTS, INC.
By: /s/ Barbara A. Pfendler
Its: Vice President
IDS FUTURES CORPORATION
By: /s/ John M. Knight
Its: Vice President
B-2889
March 21, 2000
IDS Managed Futures, L.P.
c/o CIS Investments, Inc.
233 South Wacker Drive
Suite 2300
Chicago, IL 60606
Attn: Barbara A. Pflender
1. In consideration of your carrying accounts with, and
entering into foreign exchange transactions with and/or through, our subsidiary,
CIS Financial Services, Inc. (the "Subsidiary") for other good and valuable
consideration, the receipt of which is hereby acknowledged, effective as of the
date of this guarantee, Cargill, Incorporated (the "Guarantor"), does hereby
unconditionally guarantee that it will make to you (the "Counterparty") any due
but unpaid payments within ten (10) New York business days after receipt of the
Counterparty's written demand upon the Subsidiary and the Guarantor, unless the
Counterparty shall otherwise agree in writing. All reference herein to "you" or
the "Counterparty" are references to you and your successors and permitted
assigns. However, in no event shall the Guarantor's liability under this
guarantee exceed the maximum aggregate amount of U.S. $3,000,000 (Three Million
United States Dollars), plus accrued interest and the reasonable costs of
enforcing the obligations of the Guarantor hereunder, including reasonable
attorneys' fees.
2. If any obligation of the Subsidiary for which the Guarantor
shall become responsible pursuant to this guarantee shall be payable in a
currency other than U.S. Dollars, and in a place other than the United States of
America, the Guarantor shall have the right to discharge such obligation by
payment to the Counterparty of U.S. Dollars. Such payment shall be in an amount
converted into U.S. Dollars at the spot rate of exchange quoted by The Chase
Manhattan Bank, New York in the New York interbank market at 11:00 a.m. New York
time on the day of payment for the sale by the Guarantor of U.S. Dollars against
a purchase by the Guarantor of the currency of the obligation.
3. The Guarantor further agrees that all payments made by the
Subsidiary to the Counterparty on any obligation hereby guaranteed will, when
made, be final and agrees that if any such payment is recovered from, or repaid
by, the Counterparty in whole or in part as a result of any final court order in
any bankruptcy, insolvency, or similar proceeding instituted by or against the
Subsidiary, or if any such payment is rescinded or otherwise required to be
restored by any final court order, this guarantee shall continue to be fully
applicable to such obligation to the same extent as though the payment so
recovered or repaid had never been originally made on such obligation. However,
after taking into account any such recovery from or repayment by the
Counterparty, or any such rescission or restoration, in no event shall the
guarantee be interpreted to allow the Counterparty to recover more from the
Guarantor, the Subsidiary, through any combination of the payments from either
or both such parties, than the Subsidiary's total outstanding obligations hereby
guaranteed, plus accrued interest and the reasonable costs of enforcement as
provided in paragraph 1 hereinabove.
4. All sums payable by the Guarantor hereunder shall be made
in freely transferable, cleared, and immediately available funds without any
set-off, deduction, or withholding (unless such set-off, deduction, or
withholding is required by an applicable law, judicial, or administration
decision, or practice of any relevant governmental authority, or by any
combination thereof) to such account as the Counterparty shall indicate in
writing to the Guarantor. If the Guarantor is so required to set-off, deduct, or
withhold, then the Guarantor shall pay to the Counterparty, in addition to the
payment to which the Counterparty is otherwise entitled, such additional amount
as is necessary to ensure that the net amount actually received by the
Counterparty (free and clear of any set-off, deduction, or withholding) will
equal the full amount which the Counterparty would have received had no such
set-off, deduction, or withholding been required.
5. The Guarantor hereby waives (i) promptness, diligence,
presentment, demand of payment (except as specified herein), protest, or order
and (ii) any requirements that the Counterparty exhaust any right or take any
action against the Subsidiary (except as specified herein) or any other person
or entity before proceeding to exercise any right or remedy against the
Guarantor.
6. The Guarantor hereby agrees that its obligations under this
guarantee shall be unconditional, irrespective of the validity, regularity, or
enforceability of the obligations with respect to the Subsidiary, the absence of
any action to enforce the Subsidiary's obligations , any waiver or consent by
the Counterparty with respect to any provisions thereof, or any other
circumstances which might otherwise constitute a legal or equitable discharge or
defense of the Guarantor, except payment. This guarantee is a guarantee of
payment and not a guarantee of collection.
7. No amendment or waiver of any provision of this guarantee
nor consent to any departure by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by the Counterparty,
and then such amendment, waiver or departure shall be effective only in the
specific instance and for the specific purpose for which given.
8. No failure on the Counterparty's part to exercise, and no
delay in exercising any right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
9. This guarantee constitutes a direct, unsecured, and
unsubordinated obligation of the Guarantor, ranking equally with all other
unsecured and unsubordinated obligations of the Guarantor.
10. The Guarantor shall be subrogated to all the
Counterparty's rights against the Subsidiary with respect to any amounts paid by
the Guarantor pursuant to the provisions of this guarantee; provided, however,
that the Guarantor shall not be entitled to enforce or to receive any payments
arising out of, or based upon, such right of subrogation until all amounts due
and payable by the Subsidiary shall have been paid in full.
11. The Guarantor hereby represents and warrants that (i) this
guarantee constitutes the legally valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws or equitable principles relating to or
limiting creditor's rights generally; and (ii) the execution, delivery, and
performance of this guarantee will not violate any provision of any existing law
or regulation binding on the Guarantor, the violation of which would have a
material adverse effect on the business, operations, assets, or financial
condition of the Guarantor.
12. This guarantee shall expire on March 21, 2000 or may be
terminated by the Guarantor at any time by the Guarantor sending the
Counterparty a written notice of such termination by courier or facsimile, such
written notice to be effective three (3) New York business days after receipt by
the Counterparty; however, this guarantee and the Guarantor's liability
hereunder shall survive and continue in full force and effect with respect to
any obligation of the Subsidiary arising in connection with any transaction
entered into, or committed to, between the Counterparty and the Subsidiary prior
to the effective date of such expiration or termination, whether or not such
transaction has a settlement date beyond the effective date of such expiration
or termination.
13. All notices and communications to the Counterparty
respective of this guarantee, including notices of revocation, shall be sent by
facsimile or couriered to the Counterparty at:
Counterparty Address: CIS Investments, Inc. IDS Futures Corporation
Co-General Partner Co-General Partner
233 South Wacker Drive 200 AXP Financial Center
Suite 2300 Minneapolis, MN 55424
Chicago, IL 60606
Contact Name: Barbara A. Pflender Marilyn Saxton T22/570
Phone Number: 312/460-4926 612/671-8821
Fax Number: 312/460-4939 612/671-7801
Counterparty may, at any time, modify the contact information
in this paragraph 13 by providing the Guarantor with advance written notice of
such modification.
14. All notices and communications to the Guarantor
respective of this guarantee shall be sent by facsimile or couriered to the
Guarantor at:
Cargill, Incorporated
15407 McGinty Road West
Wayzata, MN 55391-2399
Contact Name: Carol A. Haydter, Corporate Treasury #3
Phone Number: 952/742-2309
Fax Number: 952/742-4027
Guarantor may, at any time, modify the contact information in
this paragraph 14 by providing the Counterparty with advance written notice of
such modification.
15. Any notice or communication shall be deemed received, if
by facsimile, upon receipt of relevant transmission, as confirmed by sender's
transmission report and a follow-up phone call to the addressee confirming
receipt of the facsimile. If by courier, such notice shall be deemed received
upon receipt of signed confirmation by courier company.
16. This guarantee shall be governed by and construed in
accordance with the laws of the State of New York, United States of America. The
Guarantor and Counterparty hereby agree that any United States Federal court
sitting in the City of New York, Borough of Manhattan shall have jurisdiction to
settle any disputes which may arise in connection with this guarantee. The
Guarantor and Counterparty hereby agree to waive any right to trial by jury in
any cause of action arising in connection with, or relating to, this guarantee.
17. The Counterparty shall not assign its rights under the
guarantee, unless it shall first have given the Guarantor five (5) days prior
written notice of such assignment, such notice to be effective upon receipt. Any
additional costs, including without limitation taxes and fees, associated or
incurred in connection with such assignment shall be borne by the Counterparty.
The Guarantor shall not assign its obligations under this guarantee, unless it
shall first have obtained the Counterparty's prior written consent to such
assignment. Any additional costs, including without limitation taxes and fees,
associated or incurred in connection with such assignment shall be borne by the
Guarantor.
CARGILL, INCORPORATED
By: /s/ William W. Veazey By: /s/ Daryl L. Wikstrom
--------------------- ---------------------
William W. Veazey Daryl L. Wikstrom
Corporate Vice President Assistant Treasurer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000809061
<NAME> IDS MANAGED FUTURES, L.P.
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 47649500
<SECURITIES> 0
<RECEIVABLES> 183939
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47833439
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<TOTAL-ASSETS> 47833439
<CURRENT-LIABILITIES> 1529452
<BONDS> 0
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 47833439
<SALES> 0
<TOTAL-REVENUES> (5873245)
<CGS> 0
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<INCOME-PRETAX> (10406083)
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