<PAGE>
As filed with the Securities and Exchange Commission on March 2, 2000
Registration No. 33-86894
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
POST-EFFECTIVE AMENDMENT NO. 6 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
IDS MANAGED FUTURES, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 6793 06-1189438
(State of Organization) (Primary Standard Industrial (IRS Employer
Classification Code Number) Identification Number)
C/O CIS INVESTMENTS, INC.
233 SOUTH WACKER DRIVE
SUITE 2300
CHICAGO, ILLINOIS 60606
(312) 460-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BARBARA A. PFENDLER
C/O CIS INVESTMENTS, INC.
233 SOUTH WACKER DRIVE
SUITE 2300
CHICAGO, ILLINOIS 60606
(312) 460-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
Joseph H. Harrison, Jr.
Scott M. Montpas
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (the "Securities Act") check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
------------------------------
<PAGE>
PART ONE
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IDS MANAGED FUTURES, L.P.
$22,500,000
LIMITED PARTNERSHIP INTERESTS
THE FUND
The Fund trades in the U.S. and international futures and forward markets in
currencies, interest rates, energy and agricultural products, metals and stock
indices.
The primary objective of the Fund is substantial capital appreciation over time.
An investment in the Fund offers a potentially valuable means of diversifying a
traditional portfolio of stocks and bonds and has the potential to be profitable
in both rising and falling markets.
THE TRADING ADVISORS
John W. Henry & Company, Inc. is one of the largest professional managed futures
advisors in terms of assets under management in the managed futures industry.
Welton Investment Corporation has been managing institutional, corporate and
individual investments in the futures and foreign exchange markets for over ten
years.
GENERAL PARTNERS
CIS Investments, Inc. and IDS Futures Corporation are the general partners of
the Fund.
CIS Investments, Inc. is an affiliate of Cargill, Incorporated, one of the
largest private companies in the United States. IDS Futures Corporation is an
affiliate of American Express Financial Corporation.
THE UNITS
The Units are available for subscription on the last day of each month at
approximately 109.9% of the then current Net Asset Value. Units will be offered
until December 31, 2001 unless all the Units are sold before that date. The
General Partners may decide to register additional Units and/or extend the
offering.
As of January 31, 2000, the Net Asset Value per Unit, after adjusting for a
3-for-1 split on February 28, 1995, was $295.90.
Subscription funds will be deposited in escrow at U.S. Bank National
Association, St. Paul, Minnesota until invested in the Units as of the last day
of the month. Interest earned on an investor's subscription will be paid to the
investor within thirty days after the investor becomes a limited partner, unless
the interest is less than $10, in which case it will be paid to the Fund.
American Express Financial Advisors Inc., the Fund's Selling Agent, will use its
best efforts to sell the Units. There is no minimum number of Units which must
be sold as of the beginning of any particular month. If the total amount of this
offering, $22.5 million, is sold to unaffiliated investors, the General Partners
will retain $0.68 million as an Offering Expense Charge and the Selling Agent
will retain as much as $1.35 million in selling commissions.
THE RISKS
Before you decide whether to invest, read this entire Prospectus carefully and
consider "The Risks You Face" beginning on page 8.
- - You could lose all or substantially all of your investment in the Fund.
- - The Fund is speculative and it takes positions with total values that are
bigger than the total amount of the Fund's assets. The face value of the
Fund's positions typically range from 7 to 30 times its aggregate Net Asset
Value.
- - Performance has been volatile. The Net Asset Value per Unit has fluctuated
almost 25% in a single month.
- - Substantial expenses, totaling almost 4.875% per annum, must be offset by
trading profits.
- - There is no market for the Units. You may not redeem Units until you have
been a Limited Partner in the Fund for six months. Thereafter, Units may be
redeemed only as of the end of a calendar month.
- - A significant portion of the Fund's trading is on non-U.S. markets which
are not subject to the same degree of regulation as U.S. markets.
- - You will be required to make representations and warranties in connection
with your investment.
MINIMUM INVESTMENT: $1,000
This Prospectus is in two parts: a disclosure document and a statement of
additional information. These parts are bound together and both contain
important information. Subscribers are encouraged to discuss their investment
decision with their financial, tax and legal advisers.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE
MERITS OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED
ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
----------------------------------
CIS INVESTMENTS, INC. / IDS FUTURES CORPORATION
CO-GENERAL PARTNERS
APRIL __, 2000
<PAGE>
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS
YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS
ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE
POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS
THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID
DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A
COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGES 44 TO 48
AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAKEVEN, THAT IS, TO
RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 7.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT, AT PAGES 8 TO 11.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN
FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE
SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE
POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE
UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR
MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY
BE EFFECTED.
------------------------
FREE LOOK ALTERNATIVE
Commodity Futures Trading Commission Rule 4.26(b) provides that in
connection with soliciting prospective participants for a commodity pool, the
commodity pool operator must attach to the disclosure document for the pool
copies of the pool's most current account statement. The pool operators for this
Fund have requested, and have been granted, an exemption from this rule by the
Commodity Futures Trading Commission pursuant to the Fund's "Free Look
Alternative."
Under the Free Look Alternative, prospective participants will sign and
forward, along with their investment check, the appropriate subscription
documents attached to this disclosure document to the home office of American
Express Financial Advisors Inc. American Express Financial Advisors Inc. will
then send a confirmation of the investment and a copy of the Fund's most recent
account statement to the prospective participant on the next business day. The
mailing of the confirmation and account statement by American Express Financial
Advisors Inc. marks the beginning of the "Free Look" period.
The Free Look period is 16 days. During this time, prospective
participants will have the opportunity to determine whether they wish their
subscription amount to be retained by the Fund. Prospective participants may
rescind their subscriptions during the Free Look period for any reason.
Prospective participants may notify American Express Financial Advisors
Inc. of their decision to withdraw their subscriptions either by mail or by
telephonic communication pursuant to instructions received from American Express
Financial Advisors Inc. in the confirmation.
------------------------
THIS PROSPECTUS DOES NOT INCLUDE ALL OF THE INFORMATION OR EXHIBITS IN
THE FUND'S REGISTRATION STATEMENT. YOU CAN READ AND COPY THE ENTIRE REGISTRATION
STATEMENT AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SEC IN
WASHINGTON, D.C.
THE FUND FILES QUARTERLY AND ANNUAL REPORTS WITH THE SEC. YOU CAN READ
AND COPY THESE REPORTS AT THE SEC PUBLIC REFERENCE FACILITIES IN CHICAGO, NEW
YORK OR WASHINGTON, D.C. PLEASE CALL THE SEC AT 1-800-SEC-0300 FOR FURTHER
INFORMATION.
THE FUND'S FILINGS ARE POSTED AT THE SEC WEBSITE AT HTTP://WWW.SEC.GOV.
------------------------
CIS INVESTMENTS, INC. IDS FUTURES CORPORATION
233 SOUTH WACKER DRIVE 200 AXP FINANCIAL CENTER
SUITE 2300 MINNEAPOLIS, MINNESOTA 55474
CHICAGO, ILLINOIS 60606 (612) 671-3131
(312) 460-4000
-1-
<PAGE>
IDS MANAGED FUTURES, L.P.
ORGANIZATIONAL CHART
[GRAPHIC]
CISI is a subsidiary of the Clearing Broker and IDS Futures is an
affiliate of the Selling Agent, who is also the Fund's Introducing Broker. See
"Conflicts of Interest" beginning at page 51 and "Transactions Between the
General Partners and the Fund" at page 54.
-2-
<PAGE>
IDS MANAGED FUTURES, L.P.
CONTENTS
PART ONE
DISCLOSURE DOCUMENT
Summary.........................................................3
The Risks You Face..............................................8
Investment Factors.............................................11
How the Fund Works.............................................12
Performance of the Fund........................................15
Selected Financial Information.................................16
Management's Analysis of Operations............................17
Quantitative and Qualitative Disclosures
About the Fund's Market Risk.................................20
The General Partners...........................................24
The Trading Advisors...........................................27
John W. Henry & Company, Inc...................................28
JWH Principals.................................................31
Performance of the JWH Financial
and Metals Portfolio........................................35
Welton Investment Corporation..................................38
Welton Principals..............................................40
Performance of the Welton Diversified
Portfolio...................................................41
Interest Income................................................43
Charges........................................................44
Brokerage Arrangements.........................................48
Redemptions; Net Asset Value...................................50
Conflicts of Interest..........................................51
Transactions Between the General Partners
and the Fund................................................54
The Limited Partnership Agreement..............................54
Tax Consequences...............................................56
Plan of Distribution...........................................59
Lawyers; Accountants...........................................60
Financial Statements...........................................61
PART TWO
STATEMENT OF ADDITIONAL
INFORMATION
Supplemental Performance of the Fund............................1
Investment Diversification......................................4
Futures Markets and Trading Methods.............................6
Blue Sky Glossary...............................................7
- ---------------
Exhibit A -- Amended and Restated Limited
Partnership Agreement.........................A-1
Exhibit B -- Subscription Requirements........................B-1
Exhibit C -- Subscription Agreement and
Power of Attorney..............................C-1
Exhibit D -- Request for Redemption...........................D-1
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SUMMARY
GENERAL
IDS Managed Futures, L.P. is a Delaware limited partnership which
trades a wide range of U.S. and international futures and forward contracts and
related options. CIS Investments, Inc. ("CISI") and IDS Futures Corporation
("IDS Futures") are the Fund's general partners. John W. Henry & Company, Inc.
("JWH(R)") and Welton Investment Corporation ("Welton") are its current Trading
Advisors.
The Fund began trading on June 16, 1987 with an initial capitalization
of $7,372,260 and a Net Asset Value per Unit of $225.43. The beginning Net Asset
Value per Unit was $75.14 after adjusting for a 3-for-1 split on February 28,
1995. As of January 31, 2000, the Fund's Net Asset Value per Unit was $295.90.
THE FUND AND ITS OBJECTIVES
The Fund's primary objective is to achieve substantial capital
appreciation over time through professionally managed speculative trading in
futures contracts, forward currency contracts, physical commodities and related
options on exchanges and markets located in the United States and abroad. The
Fund offers investors an opportunity to participate in markets not typically
represented in an individual's portfolio, as well as the potential to profit
from rising as well as falling prices. The success of the Fund is not dependent
on favorable economic conditions, national or international. In fact, periods of
economic uncertainty can augment the profit potential of the Fund by increasing
the likelihood of significant movements in commodity prices, the exchange rates
between various countries, world stock prices and interest rates.
Currently, JWH manages approximately 65% of the Fund's assets pursuant
to its Financial and Metals Portfolio and Welton manages approximately 35%
pursuant to its Diversified Portfolio. The General Partners will allocate 65% of
the proceeds of this offering to JWH and 35% to Welton.
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-3-
<PAGE>
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THE TRADING ADVISORS AND THEIR PROGRAMS
JWH
JWH has been a Trading Advisor for the Fund since its inception. JWH
manages capital in commodities, financial futures and foreign exchange markets
for international banks, brokerage firms, pension funds, institutions and high
net worth individuals. JWH trades on a 24-hour basis in a wide range of futures
and forward contracts -- over sixty markets as of the date of this Prospectus --
in the United States, Europe and Asia. JWH is one of the largest managed futures
advisors in terms of assets under management, trading approximately $1.8 billion
in client capital as of January 31, 2000.
JWH'S PROGRAM USED FOR THE FUND
JWH currently uses its Financial and Metals Portfolio for the Fund. The
Financial and Metals Portfolio has been trading client capital since October
1984 and has a compounded annualized rate of return of 31.6% from inception
through January 31, 2000. The Financial and Metals Portfolio, which has the most
assets under management of any JWH program, seeks to identify and capitalize on
intermediate and long-term price movements in four worldwide market sectors:
interest rates, currencies, non-U.S. stock indices and metals. This program
takes a market position when trends are identified, but may take a neutral
stance or liquidate open positions in non-trending markets. As of January 31,
2000, JWH had approximately $667 million under management pursuant to the
Financial and Metals Portfolio.
WELTON
Welton became a Trading Advisor to the Fund in July 1997. Welton
manages capital on behalf of individual, institutional and corporate clients in
a wide range of markets. As of January 31, 2000, Welton was managing
approximately $101 million of client capital pursuant to its Diversified
Portfolio.
WELTON'S PROGRAM USED FOR THE FUND
The Fund currently uses Welton's Diversified Portfolio, Welton's most
diversified trading program in terms of markets traded and trading strategies
employed.
Welton's Diversified Portfolio started trading in April 1992 and has a
compounded annualized net rate of return of 12.63% through January 31, 2000. Of
all the Welton trading programs, the Diversified Portfolio trades in the widest
spectrum of markets and seeks exposure to all major market sectors including
interest rates, currencies, stock indices, metals, energy and agricultural
commodities. The Diversified Portfolio uses multiple trading strategies in an
attempt to earn profits in a variety of market conditions.
---------------
THE TRADING PROGRAMS USED BY THE FUND ARE TECHNICAL, TREND-FOLLOWING
COMPUTERIZED TRADING SYSTEMS.
The mathematical models used by the Trading Advisors' trading programs
are technical systems, generating trading signals on the basis of statistical
research into past market prices. The Trading Advisors do not attempt to analyze
underlying economic factors, identify mispricings in the market or predict
future prices.
The Trading Advisors are trend-following traders. A trend-following
trader's primary trading objective is to participate in major price trends --
sustained price movements either up or down. Such price trends may be relatively
infrequent. Trend-following traders anticipate that over half of their positions
will be unprofitable. Their strategy is based on making sufficiently large
profits from the trends which they identify and follow to generate overall
profits despite the more numerous but, hopefully, smaller losses incurred on the
majority of their positions.
See "The Risks You Face" beginning at page 8.
MARKETS TRADED
The trading programs currently used by the Fund emphasize trading
currencies and financial instruments, but participate in most major sectors of
the global economy, which include:
-4-
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<PAGE>
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CURRENCIES
- ------------------------------------------------------------------
Australian Dollar Malaysian Ringgit
British Pound Mexican Peso
Canadian Dollar New Zealand Dollar
Euro South African Rand
Hong Kong Dollar Swedish Krona
Japanese Yen Swiss Franc
FINANCIAL INSTRUMENTS
- ------------------------------------------------------------------
Australian Euro BOBL
Bank Bills (90-day) (5-year)
Australian Treasury Euro Notional Bond
Bonds (3-year and Eurodollar
10-year) Euroswiss
Canadian Bankers' Euroyen
Acceptance (3-month) Japanese Government
Canadian Government Bond (10 year)
Bond (10-year) New Zealand Government
Euribor Bill (3-month)
Euro Bonds (5-year New Zealand Government
and 30-year) Bond (10-year)
Euro Bono (10-year) U.K. Long "Gilts"
Euro BTP U.K. Short Sterling
Euro Bund U.S. Treasury Note
(10-year)
U.S. Bond (30-year)
INDICES
- ------------------------------------------------------------------
Australian All Hang Seng Index (Hong
Ordinaries Index Kong)
CAC 40 Index IBEX 35 (Spain)
(France) MSCI Hong Kong Index
DAX Index (German) MSCI Taiwan Index
Dow Jones Industrial MIB 30 (Italy)
Average Nasdaq (100 Index)
FTSE 100 Index (UK) New York Composite
Goldman Sachs Nikkei 225 Index
Commodity Index (Japan)
OMX Index (UK)
S&P 500 Stock Index
METALS
- ------------------------------------------------------------------
Aluminum Palladium
Copper Platinum
Gold Silver
Lead Tin
Nickel Zinc
AGRICULTURAL PRODUCTS
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Azuki (Red Beans) Lumber
Cocoa Orange Juice
Coffee Rubber
Corn Soybeans
Cotton Soybean Meal
Fresh Pork Bellies Soybean Oil
Live Cattle Sugar
Lean Hogs Wheat
ENERGY
- ------------------------------------------------------------------
Crude Oil No. 2 Heating Oil
Natural Gas Unleaded Gasoline
London Gasoil
THE FUND MAY TRADE IN ALL OR ONLY SOME OF THESE MARKETS AT ANY GIVEN
TIME. THERE IS NO WAY TO PREDICT WHICH MARKETS THE FUND WILL TRADE OR WHAT ITS
RELATIVE COMMITMENTS TO THE DIFFERENT MARKETS WILL BE.
As of January 31, 2000, the Fund had the following approximate market
sector commitments.
[PIE CHART TO COME]
Interest Rates 41.7%
Currencies 21.2%
Stock Indices 21.0%
Metals 9.3%
Commodities 3.9%
Energies 2.9%
THE GENERAL PARTNERS
CISI and IDS Futures are the General Partners and Commodity Pool
Operators of the Fund. CISI was incorporated in Delaware in 1983 and is an
affiliate of Cargill Investor Services, Inc., the Fund's Clearing Broker. In
addition to the Fund, CISI is the commodity pool operator of two other public
commodity pools -- one jointly with IDS Futures -- and one private commodity
pool. As of January 31, 2000, the aggregate capitalization of these funds was
$138 million.
IDS Futures was incorporated in Minnesota in 1986 and is an affiliate
of American Express Financial Advisors Inc., the Fund's Selling Agent and
-5-
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<PAGE>
Introducing Broker. The General Partners perform all administrative functions on
behalf of the Fund.
MAJOR RISKS OF THE FUND
The Fund is a speculative investment. It is not possible to predict how
the Fund will perform over either the long or short term.
Investors must be prepared to lose all or substantially all of their
investment in the Units.
There can be no assurance that the past performance of either the Fund
or the Trading Advisors indicates how they will perform in the future.
To date, the performance of the Fund has been volatile (one commonly
accepted measure of risk). The Net Asset Value per Unit has varied almost 25% in
a single month.
The Fund could incur large losses over short periods.
The Fund typically takes positions with a face amount of 7 to 30 times
of its total Net Assets.
Positive correlation between the trading programs (because they trade
in some of the same markets and are technical, trend-following programs) reduces
diversification and increases the risk of loss.
The performance of the Trading Advisors' trading programs is dependent
upon market trends of the type that their models are designed to identify.
Trendless periods are frequent, and during such periods the Fund is unlikely to
be profitable.
Trading on foreign contract markets involves additional risks,
including the risks of inadequate or lack of regulation, exchange-rate
fluctuations, expropriation, credit and investment controls and counterparty
insolvency.
There can be no assurance of the continued availability of the Trading
Advisors or their key principals.
Because its performance is entirely unpredictable, there is no way of
telling when is a good time to invest in the Fund. Investors have no means of
knowing whether they are buying Units at a time when profitable periods are
ending, beginning or not in progress.
No market exists for the Units, and Units may be redeemed only once a
month beginning with the seventh month after an investor has been admitted to
the Fund as a Limited Partner. Because investors must submit irrevocable
subscriptions by the tenth calendar day of the month of investment as well as
redemption notices by the tenth calendar day prior to the end of the month of
redemption, they cannot know the Net Asset Value at which they will acquire or
redeem Units. Investors cannot control the maximum losses on their Units because
they cannot be sure of the redemption value of their Units.
As Unitholders, investors have no voice in the operation of the Fund;
they are entirely dependent on the General Partners and Trading Advisors for the
success of their investment.
FREE LOOK ALTERNATIVE
Investors must submit their subscription documents to the General
Partners by the tenth calendar day of the month to be considered for acceptance
in that month. The Selling Agent will send investors a confirmation of receipt
and the most recent month-end account statement the day after the investor's
subscription documents are received. Investors then have sixteen days to decide
whether they want to invest.
FEES AND EXPENSES
At the time you invest in the Fund, your investment will be subject to
a 6% Sales Charge and a 3% Offering Expense Charge. In addition, the Fund is
subject to substantial ongoing fees and expenses including the Trading Advisors'
management and incentive fees, administrative fees, brokerage commissions and
trading fees and periodic operating expenses.
During the first twelve months of an investment by a new Limited
Partner, the initial investment will be subject to expenses of approximately
13.875% taking into account the one-time Sales Charge and the Offering Expense
Charge. Thereafter, the estimated break-even calculation for
-6-
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
the Fund will be reduced to approximately 4.875% per annum. If the Fund is
unable to earn profits and interest sufficient to offset its expenses, its
assets will be reduced by expenses during the year. The General Partners have
estimated certain Fund expenses for purposes of the following breakeven table.
There can be no assurance that the expenses to be incurred by the Fund will not
exceed the estimated amounts.
<TABLE>
<CAPTION>
BREAKEVEN TABLE
TWELVE-MONTH
DOLLAR
TWELVE-MONTH BREAKDOWN
PERCENTAGE ($1,000 INITIAL
EXPENSES BREAKEVEN INVESTMENT)++
- -------- --------- -------------
<S> <C> <C>
One Time Sales Charge* 6.00% $60.00
One Time Offering Expense
Charge 3.00% $30.00
Administrative Fee 1.375% $13.75
Brokerage Fees 2.75% $27.50
Advisory Management Fees** 3.65% $36.50
Advisory Incentive Fees** 1.20% $12.00
Periodic Operating Expenses 0.50% $5.00
LESS Interest Income** (4.60)% ($46.00)
RETURN ON $1,000 INITIAL 13.875% $138.75
INVESTMENT REQUIRED FOR
"BREAK-EVEN" IF UNITS HELD AT
LEAST TWELVE MONTHS
- -------------------------------
</TABLE>
* Limited Partners who are representatives or employees of American Express
Financial Advisors Inc. or certain corporate affiliates will not pay a Sales
Charge.
** Estimated. JWH's management fee is 4% per annum of the assets it manages and
Welton's management fee is 3% per annum of the assets it manages. JWH receives a
quarterly incentive fee of 15% of the Trading Profits it generates and Welton
receives a quarterly incentive fee of 18% of the Trading Profits it generates.
Consequently, an incentive fee could be due in a breakeven or losing year.
++ Assumes a constant $1,000 Net Asset Value.
SEE "CHARGES" AT PAGE 44.
PRINCIPAL TAX ASPECTS OF OWNING UNITS
Investors are taxed each year on any gains recognized by the Fund
whether or not they redeem any Units or receive any distributions from the Fund.
40% of any trading profits on U.S. exchange-traded contracts are taxed
as short-term capital gains at the applicable ordinary income rate for
individuals (39.6% maximum), while 60% of such gains are taxed as long-term
capital gain at a maximum rate for individuals of 20%. The Fund's trading gains
from other contracts will be primarily short-term capital gain. This tax
treatment applies regardless of how long an investor holds Units. If, on the
other hand, an individual investor held a stock or bond for twelve months, all
the gain realized on its sale would generally be taxed at a maximum rate of 20%.
Losses on the Units may be deducted against capital gains. Any losses
in excess of capital gains may be deducted only against ordinary income to the
extent of $3,000 per year. Consequently, investors could pay tax on the Fund's
interest income even though they have lost money on their Units. See "Tax
Consequences" beginning at page 56.
AN INVESTMENT IN THE UNITS SHOULD BE CONSIDERED AS A LONG-TERM COMMITMENT
The market conditions in which the Fund is likely to recognize
significant profits occur infrequently. An investor should plan to hold Units
for long enough to have a realistic opportunity for a number of such trends to
develop.
The General Partners believe that investors should consider the Units
at least a three to five year commitment.
IS THE FUND A SUITABLE INVESTMENT FOR YOU?
You should consider investing in the Fund if you are interested in its
potential to produce enhanced returns over the long term that are generally
unrelated to the returns of the traditional debt and equity markets and you are
prepared to risk significant losses. The General Partners believe that the Fund
should be viewed as a diversification opportunity for an investor's entire
investment portfolio, not as a complete investment program. No one should invest
more than 10% of his or her readily marketable assets in the Fund.
-7-
- --------------------------------------------------------------------------------
<PAGE>
THE RISKS YOU FACE
POSSIBLE TOTAL LOSS OF AN INVESTMENT IN THE FUND
You could lose all or substantially all of your investment in the Fund.
INVESTING IN THE UNITS MIGHT NOT DIVERSIFY AN OVERALL PORTFOLIO
One of the objectives of the Fund is to add an element of
diversification to a traditional securities portfolio. While the Fund may
perform in a manner largely independent from the general stock and bond markets,
there is no assurance it will do so. An investment in the Fund could increase
rather than reduce overall portfolio losses during periods when the Fund as well
as stocks and bonds decline in value. Investors must not rely on the Fund as any
form of hedge against losses in their core securities portfolios.
Prospective investors should consider whether diversification in itself
is worthwhile even if the Fund is unprofitable.
INVESTORS MUST NOT RELY ON THE PAST PERFORMANCE OF EITHER THE FUND OR THE
TRADING ADVISORS IN DECIDING WHETHER TO BUY UNITS
The performance of the Fund is entirely unpredictable, and the past
performance of the Fund as well as that of the Trading Advisors is not
necessarily indicative of their future results.
The price data which technical trading advisors research in developing
their programs may not reflect the changing dynamics of future markets. If not,
the trading programs would have little chance of being profitable. An influx of
new market participants, changes in market regulation, international political
developments, demographic changes and numerous other factors can contribute to
once-successful strategies becoming outdated.
VOLATILE TRADING HISTORY
The Fund's performance has been volatile. Since the inception of
trading, the largest "peak-to-valley" drawdown was nearly 28% and the largest
monthly loss was nearly 17%. Even if the Fund is successful, it is likely to
experience significant losses from time to time.
OVERLAP OF THE MARKETS TRADED BY THE TRADING ADVISORS REDUCES DIVERSIFICATION,
INCREASING THE RISK OF LOSS
The trading programs used by the Fund trade in overlapping markets.
ITS SUBSTANTIAL EXPENSES WILL CAUSE LOSSES FOR THE FUND UNLESS OFFSET BY PROFITS
The Fund pays fixed annual expenses in excess of the interest income it
receives of approximately 3.675% of its average month-end assets. In addition to
this annual expense level, the Fund is subject to quarterly incentive fees on
any Trading Profits. Because these incentive fees are calculated quarterly, they
could represent a substantial expense to the Fund even in a breakeven or losing
year.
The Fund's expenses could, over time, result in significant losses.
Except for the incentive fees, these expenses are not contingent and are payable
whether or not the Fund is profitable.
THE TRADING ADVISORS ANALYZE ONLY TECHNICAL MARKET DATA, NOT ANY ECONOMIC
FACTORS EXTERNAL TO MARKET PRICES
The Trading Advisors' trading programs focus exclusively on technical
analysis of market prices. Consequently, any factor external to the market
itself which dominates prices is likely to cause major losses. For example, a
significant political or economic event may be very likely to cause a major
price movement, but the Trading Advisors' programs would continue to maintain
positions that would incur major losses as a result of such movement if the
programs indicated that they should do so.
The likelihood of the Units being profitable could be materially
diminished during periods when events external to the markets themselves have an
important impact on prices. During such periods, the Trading Advisors'
historical price analysis could establish positions on the wrong side of the
price movements caused by such events.
-8-
<PAGE>
LACK OF PRICE TRENDS OR THE TYPES OF PRICE TRENDS WHICH THE TRADING PROGRAMS CAN
IDENTIFY WILL CAUSE MAJOR LOSSES
The Fund cannot trade profitably unless major price trends occur in at
least certain markets that it trades. Many markets are trendless most of the
time, and in static markets the trading programs are likely to incur losses. In
fact, each Trading Advisor expects a significant percentage of its trades to be
unprofitable; each depends on significant gains from a few major trends to
offset these losses.
THE DANGER TO THE FUND OF "WHIPSAW" MARKETS
Often, the most unprofitable market conditions for the Fund are those
in which prices "whipsaw," moving quickly upward, then reversing, then moving
upward again, then reversing again. In such conditions, the trading programs may
establish losing positions based on incorrectly identifying both the brief
upward or downward price movements as trends.
THE LARGE SIZE OF THE FUND'S TRADING POSITIONS INCREASES THE RISK OF SUDDEN,
MAJOR LOSSES
At times the Fund takes positions with face values up to approximately
thirty times its total equity. Consequently, even small price movements can
cause major losses.
UNIT VALUES ARE UNPREDICTABLE AND VARY SIGNIFICANTLY MONTH-TO-MONTH
The Net Asset Value per Unit can vary significantly month-to-month. In
January 1990, there was almost a 25% change in the value of a Unit. Investors
cannot know at the time they submit a subscription or a redemption request what
the subscription price or redemption value of their Units will be. In addition,
investors are unable to know whether they are subscribing for Units after a
significant upswing in the Net Asset Value per Unit -- often a time when the
Fund has an increased probability of entering into a losing period.
The only way to take money out of the Fund is to redeem Units. However,
you may not redeem Units during the first six months following your admission to
the Fund as a Limited Partner. Thereafter, you can redeem Units only at
month-end on ten calendar days' advance notice. Transfers of Units are subject
to limitations as well. The restrictions imposed on redemptions limit your
ability to protect yourself against major losses by redeeming Units.
ALTERATION OF TRADING SYSTEMS AND CONTRACTS AND MARKETS TRADED
The Trading Advisors may, in their discretion, change and adjust their
trading programs, as well as the contracts and markets which they trade. These
adjustments may result in foregoing profits which the trading programs would
otherwise have captured, as well as incurring losses which they would otherwise
have avoided. Neither the General Partners nor the Limited Partners are likely
to be informed of any non-material changes in the trading programs.
INCREASED COMPETITION FROM OTHER TREND-FOLLOWING TRADERS COULD REDUCE THE FUND'S
PROFITABILITY
There has been a dramatic increase over the past twenty years in the
amount of assets managed by trend-following trading systems like the Trading
Advisors' programs. The increased money under management of trend-following
traders has resulted in increased competition for the same positions. Increased
competition makes positions more costly and harder to acquire.
THE TRADING ADVISORS' HIGH LEVEL OF EQUITY UNDER MANAGEMENT COULD LEAD TO
DIMINISHED RETURNS
The Trading Advisors have a significant amount of assets under
management. As of January 31, 2000, JWH had approximately $1.8 billion under
management and, as of January 31, 2000, Welton had approximately $112 million
under management. The more money a Trading Advisor manages, the more difficult
it may be for the Trading Advisor to trade profitably. Larger trades result in
more price slippage than do smaller orders.
ILLIQUID MARKETS COULD MAKE IT IMPOSSIBLE FOR THE FUND TO REALIZE PROFITS OR
LIMIT LOSSES
In illiquid markets, the Trading Advisors could be unable to capitalize
on the opportunities identified
-9-
<PAGE>
by their programs or to close out positions against which the market is moving.
The Trading Advisors attempt to limit their trading to highly liquid markets,
but there can be no assurance that a market which has been highly liquid in the
past will not experience periods of unexpected illiquidity resulting in losses
for the Fund.
THE TRADING ADVISORS TRADE EXTENSIVELY IN FOREIGN MARKETS; THESE MARKETS ARE
LESS REGULATED THAN U.S. MARKETS AND ARE SUBJECT TO EXCHANGE RATE, MARKET
PRACTICES AND POLITICAL RISKS
The trading programs used for the Fund trade a great deal outside the
U.S. From time to time, as much as 75% of the Fund's overall market exposure
could involve positions taken on foreign markets. Foreign trading involves risks
- -- including exchange-rate exposure, possible governmental intervention and lack
of regulation -- which U.S. trading does not. In addition, the Fund may not have
the same access to certain positions on foreign exchanges as do local traders,
and the historical market data on which the Trading Advisors base their
strategies may not be as reliable or accessible as it is in the United States.
Certain foreign exchanges may also be in a more or less developmental stage so
that prior price histories may not be indicative of current price dynamics. The
rights of clients in the event of the insolvency or bankruptcy of a non-U.S.
market or broker are also likely to be more limited than in the case of U.S.
markets or brokers.
UNREGULATED MARKETS LACK THE REGULATORY PROTECTIONS OF EXCHANGES
The Fund may trade spot and forward contracts in currencies in
unregulated markets. It is impossible to determine fair pricing, prevent abuses
such as "front-running" or impose other effective forms of control over such
markets. The absence of regulation could expose the Fund in certain
circumstances to significant losses which it might otherwise have avoided.
REGULATORY CHANGES COULD RESTRICT THE FUND'S OPERATIONS
The Fund implements a speculative, highly leveraged strategy. From time
to time there is governmental scrutiny of these types of strategies and
political pressure to regulate their activities. For example, the Malaysian
government recently blamed the collapse of its currency on speculative funds and
called for international restrictions on their operations.
Regulatory changes could adversely affect the Fund by restricting its
markets, limiting its trading and/or increasing the taxes to which Limited
Partners are subject. The General Partners are not aware of any pending or
threatened regulatory developments which might adversely affect the Fund.
However, adverse regulatory initiatives could develop suddenly and without
notice.
THE FUND COULD LOSE ASSETS AND HAVE ITS TRADING DISRUPTED DUE TO THE BANKRUPTCY
OF THE CLEARING BROKER OR OTHERS
The Fund is subject to the risk of CIS, exchange or clearinghouse
insolvency. Fund assets could be lost or impounded in such an insolvency during
lengthy bankruptcy proceedings. Were a substantial portion of the Fund's capital
tied up in a bankruptcy, the General Partners might suspend or limit trading,
perhaps causing the Fund to miss significant profit opportunities. No fund
managed by the General Partners has ever lost any assets due to the bankruptcy
or default of a broker, exchange or clearinghouse, but there can be no assurance
that this will not happen in the future.
POSSIBILITY OF TERMINATION OF THE FUND BEFORE EXPIRATION OF ITS STATED TERM
CISI and/or IDS Futures may withdraw as a general partner of the Fund
upon 120 days' notice. If both General Partners were to withdraw, the Fund would
terminate unless a substitute general partner was obtained. Other events, such
as a long-term substantial loss suffered by the Fund, could also cause the Fund
to terminate before the expiration of its stated term. This could cause you to
liquidate your investment and upset the overall maturity and timing of your
investment portfolio. If the registrations with the CFTC or memberships in the
National Futures Association of the Trading Advisors, the General Partners, CIS
or American Express Financial Advisors Inc. were revoked or suspended, such
entity would no longer be able to provide services to the Fund.
-10-
<PAGE>
INVESTORS ARE TAXED EVERY YEAR ON THEIR SHARE OF THE FUND'S PROFITS -- NOT ONLY
WHEN THEY REDEEM AS WOULD BE THE CASE IF THEY HELD STOCKS OR BONDS
Investors are taxed each year on their investment in the Fund,
irrespective of whether they redeem any Units.
All performance information included in this Prospectus is presented on
a pre-tax basis; the investors who experienced such performance had to pay the
related taxes from other sources.
Over time, the compounding effects of the annual taxation of the Fund's
income are material to the economic consequences of investing in the Fund. For
example, a 10% compound annual rate of return over five years would result in an
initial $10,000 investment compounding to $16,105. However, if one factors in a
30% tax rate each year, the result would be $14,025.
THE FUND'S TRADING GAINS ARE TAXED AT SHORT- AND LONG-TERM CAPITAL GAINS RATES
Investors are taxed on their share of any trading profits of the Fund
at both short- and long-term capital gain rates depending on the mix of U.S.
exchange-traded contracts and non-U.S. contracts traded. These tax rates are
determined irrespective of how long an investor holds Units. Consequently, the
tax rate on the Fund's trading gains may be higher than those applicable to
other investments held by an investor for a comparable period.
TAX COULD BE DUE FROM INVESTORS ON THEIR SHARE OF THE FUND'S INTEREST INCOME
DESPITE OVERALL LOSSES
Investors may be required to pay tax on their allocable share of the
Fund's interest income, even though the Fund incurs overall losses. Trading
losses can be used to offset trading gains and up to $3,000 of ordinary income
each year. Consequently, if an investor were allocated $5,000 of interest
income and $10,000 of net trading losses, the investor would owe tax on $2,000
of interest income even though the investor would have a $5,000 loss for the
year. The $7,000 capital loss would carry forward, but subject to the same
limitation on its deductibility against ordinary income.
INVESTMENT FACTORS
AN INVESTMENT IN THE FUND OFFERS THE POTENTIAL TO ACHIEVE SUBSTANTIAL
CAPITAL APPRECIATION OVER TIME TO INVESTORS WHO CAN ACCEPT SIGNIFICANT RISK AND
EXPECTED VOLATILITY IN PERFORMANCE. IF SUBSTANTIAL LOSSES CAN BE AVOIDED, THE
GENERAL PARTNERS BELIEVE THAT THE FUND HAS A REASONABLE OPPORTUNITY TO GENERATE
SIGNIFICANT PROFITS OVER TIME, DESPITE EXHIBITING CONSIDERABLE INTRA-PERIOD
VOLATILITY, BY CAPITALIZING ON MAJOR PRICE MOVEMENTS WHEN THEY DO OCCUR. IF
SUCCESSFUL, THE FUND OFFERS INVESTORS THE FOLLOWING POTENTIAL ADVANTAGES.
ACCESS TO THE TRADING ADVISORS AND THEIR TRADING PROGRAMS
By investing in the Fund, subscribers have the opportunity to place
assets with experienced active managed futures advisors whose advisory and
management services are generally unavailable to small investors. For example,
JWH is one of the largest advisors in the managed futures industry in terms of
assets under management. JWH typically requires a substantial amount of money --
$5,000,000 or more -- to open a managed account. Investors in the Fund are able
to gain access to JWH, as well as Welton, for a small fraction of the Trading
Advisors' normal minimum account size.
INVESTMENT DIVERSIFICATION
The globalization of the world's economy offers potentially valuable
trading opportunities, as major political and economic events continue to
influence world markets, at times dramatically. Volatility in interest rates,
the possibility of significant fluctuations in the value of commodities and
currencies, the consolidation of European currencies, fragility in world banking
and credit mechanisms and the growing interdependence among national economies
create high risks but also substantial opportunities for profit. These
developments may make an investment into an investment vehicle such as the Fund
timely.
-11-
<PAGE>
Unlike a traditional diversified portfolio of stocks, bonds and real
estate, the profit potential of the Fund does not depend upon favorable general
economic conditions. The Fund is as likely to be profitable (or unprofitable)
during periods of declining stock markets as at any other time. In addition to
the expected non-correlation in its performance with the performance of the
general equity and debt markets, the Fund's flexibility to take either long or
short positions, as opposed to traditional portfolios which are typically
heavily weighted towards the former, can be an important advantage in times of
economic uncertainty.
An investor who is not prepared to spend substantial time trading in
the futures and forward markets may nevertheless participate in the commodities
and financial markets through investing in the Fund, thereby obtaining
diversification from traditional investments such as a diversified portfolio of
stocks, bonds and real estate. By allocating a portion of the risk segment of a
traditional diversified portfolio to the Fund, an investor has the potential, if
the Fund is successful, to enhance the prospects for superior performance of the
overall portfolio as well as to reduce the volatility of the portfolio over time
and the dependence of such portfolio on any single country's economy.
SEE GRAPH ON PAGE 4 OF PART II OF THIS PROSPECTUS FOR AN ILLUSTRATION
OF THE LACK OF CORRELATION BETWEEN THE FUND'S RETURNS AND THOSE OF THE S&P 500
STOCK INDEX.
OPPORTUNITY TO PROFIT IN DECLINING AS WELL AS IN RISING MARKETS
The futures markets offer the ability to trade either side of the
market. Unlike short selling in the securities markets, taking short positions
in the futures market (or buying a put option or selling a call option) in
anticipation of a drop in price can be accomplished without additional
restrictions or special margin requirements. Selling short is no more difficult
than establishing a long position.
The profit and loss potential of futures trading is not dependent upon
economic prosperity or interest rate or currency stability. Positive and
negative returns may be realized in both rising and declining markets. It is
potentially advantageous for investors to own assets which can appreciate during
a period of generally declining prices, financial disruption or economic
instability.
INTEREST ON FUND ASSETS
Each month, the Clearing Broker pays the Fund interest on 100% of the
Fund's average monthly net assets on deposit at the Clearing Broker at a rate
equal to 90% of the average yield on the 90-day U.S. Treasury bills issued
during that month. The interest earned on the Fund's assets can offset a
substantial portion of its routine costs. The Fund's interest income represents
a source of revenue entirely independent of the success or failure of its
speculative futures and forward trading.
LIMITED LIABILITY
An investor who opens an individual futures account is generally liable
for all losses incurred in such account. Investors may lose substantially more
than they commit to an account particularly in light of the large positions in
relation to capital used in futures and forward trading. However, a Limited
Partner cannot lose more than his or her investment in the Fund plus
undistributed profits. In fact, in the event the Net Asset Value of a Unit
decreases to less than $125 as of the close of business on any day, the General
Partners are required to cause the Fund to liquidate all open positions, suspend
trading and declare a Special Redemption Date in accordance with the provisions
in the Fund's Limited Partnership Agreement. Without limited liability, it could
be imprudent for an investor to participate in strategies like those applied by
the Trading Advisors where positions may be large in relation to account equity.
ADMINISTRATIVE CONVENIENCE
The Fund is structured so as to substantially eliminate the
administrative burden which otherwise would be involved if Limited Partners
engaged directly in futures and forward trading. Limited Partners receive
monthly unaudited and annual certified financial reports as well as all tax
information relating to the Fund necessary for Limited Partners to complete
their federal income tax returns. The approximate daily Net Asset Value per Unit
is available by calling your financial advisor or CISI at
-12-
<PAGE>
(312) 460-4000.
HOW THE FUND WORKS
BUYING UNITS
You buy Units as of the last business day of any month at Net Asset
Value plus the Sales Charge and the Offering Expense Charge. Your subscription
must be submitted by the tenth calendar day of the month to be considered for
acceptance as a Limited Partner that month. Late subscriptions will be applied
to Unit sales as of the end of the second month after receipt, unless revoked.
All subscription funds will be held in an interest bearing escrow account until
your subscription is accepted or rejected.
The Selling Agent will promptly send you a confirmation of your
investment and a copy of the Fund's most recent monthly account statement. You
will then have sixteen days from the date of the confirmation to decide whether
or not you wish your subscription to be retained by the Fund. If you wish to
invest in the Fund, no further action is necessary. If, during the sixteen day
period, you decided that you do not wish to invest, you must notify the Selling
Agent by mail or telephone of your decision; the escrow agent will promptly
return your subscription funds. Notification instructions will be included with
the confirmation and monthly account statement.
Investors need to submit a Subscription Agreement with each purchase of
Units.
The minimum purchase for first-time investors is $1,000. Additional
investments may be made in $100 increments.
USE OF PROCEEDS
One hundred percent of the net subscription proceeds are credited to
the Fund's commodity accounts with the Clearing Broker. The Fund uses the
proceeds to engage in speculative trading in commodity futures contracts,
forward contracts and other commodity interests, including options thereon. 65%
of the net proceeds are allocated to JWH to trade in accordance with the
Financial and Metals Portfolio trading program and 35% of the net proceeds are
allocated to Welton to trade in accordance with its Diversified Portfolio
trading program.
Historically, the Fund has used approximately 20% to 60% of its assets
as initial margin for futures trading. The General Partners believe that
approximately the same percentage of assets will be used for margin, although
the percentage may be more or less than the historical range.
The General Partners have agreed to pay all ongoing offering expenses
regardless of total cost. The Offering Expense Charge is 3% of the gross per
Unit price and is intended to reimburse the General Partners for offering costs.
The General Partners will absorb any costs exceeding 3%. If, at the end of the
offering, the total Offering Expense Charge exceeds the actual offering expenses
incurred, the General Partners will retain any excess.
The Fund receives interest on 100% of its average monthly net assets on
deposit at the Clearing Broker at 90% of the average 90-day Treasury bill rate
for Treasury bills issued during each month. The Clearing Broker retains all
interest earned on Fund assets in excess of the amount paid to the Fund.
REDEEMING UNITS
You can redeem Units monthly beginning the seventh month following your
admission to the Fund as a Limited Partner. Redemption requests must be received
by the General Partners no later than the tenth calendar day prior to the end of
the month during which you want to redeem. A Request for Redemption is attached
to Part II of this Prospectus as Exhibit D. Unless you are redeeming all of your
Units, the minimum redemption amount is the lesser of two Units or $500 and your
remaining interest in the Fund must equal the lesser of $500 or the Net Asset
Value of two Units.
UNCERTAIN SUBSCRIPTION AND REDEMPTION VALUE OF UNITS
The Fund sells and redeems Units at subscription or redemption date Net
Asset Value, not at the Net Asset Value as of the date that subscriptions or
redemption requests are submitted. Investors must submit subscriptions no later
than the tenth day of the month prior to investment and redemption requests no
-13-
<PAGE>
later than the tenth calendar day prior to the end of the month. Because of the
volatility of Unit values, these delays mean that investors cannot know the
value at which they will purchase or redeem their Units.
Material adverse changes in the Fund's financial position could occur
between the time an investor commits to acquire or redeem Units and the time the
purchase or redemption is made.
NO DISTRIBUTIONS INTENDED
The Fund does not anticipate making any distributions to investors. No
distributions have been made to date.
-14-
<PAGE>
PERFORMANCE OF THE FUND
IDS MANAGED FUTURES, L.P.
PAST PERFORMANCE SINCE INCEPTION
NAME OF POOL: IDS Managed Futures, L.P.
TYPE OF POOL: Publicly offered
INCEPTION OF TRADING: June 16, 1987
AGGREGATE SUBSCRIPTIONS: $59,400,000
CURRENT NET ASSET VALUE: $42,997,956 (January 31, 2000)
WORST MONTHLY DECLINE: (7.57)% (10/99)
WORST PEAK TO VALLEY DECLINE: (21.90)% (7/99-1/00)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MONTHLY
PERFORMANCE 2000 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January (5.23)% (4.20)% (2.88)% 3.68% 4.07% (3.05)%
- ----------------------------------------------------------------------------------------------------------------------
February (0.65)% (0.36)% 0.08% (3.48)% 8.41%
- ----------------------------------------------------------------------------------------------------------------------
March (4.62)% 0.94% (0.18)% (0.16)% 7.90%
- ----------------------------------------------------------------------------------------------------------------------
April 1.42% (6.22)% (2.00)% 3.50% 4.71%
- ----------------------------------------------------------------------------------------------------------------------
May 2.57% 2.49% (5.51)% (2.44)% 1.86%
- ----------------------------------------------------------------------------------------------------------------------
June 5.08% (3.54)% 2.74% 0.51% (2.84)%
- ----------------------------------------------------------------------------------------------------------------------
July (2.91)% (0.97)% 11.05% (1.09)% 0.27%
- ----------------------------------------------------------------------------------------------------------------------
August (3.01)% 12.72% (4.38)% 0.47% (0.05)%
- ----------------------------------------------------------------------------------------------------------------------
September (5.60)% 9.70% 1.73% 3.34% (1.14)%
- ----------------------------------------------------------------------------------------------------------------------
October (7.57)% (2.96)% (1.17)% 9.26% (0.26)%
- ----------------------------------------------------------------------------------------------------------------------
November (0.39)% (5.24)% 1.67% 6.71% 2.43%
- ----------------------------------------------------------------------------------------------------------------------
December 0.69% 6.46% 1.61% (1.48)% 3.42%
- ----------------------------------------------------------------------------------------------------------------------
Compound Annual (5.23)%
Rate of Return (1 month) (18.20)% 8.55% 8.68% 20.08% 23.03%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Prior to July 1997, Fund assets were allocated equally between JWH and
Sabre Fund Management Limited. In July 1997, the Fund's assets were reallocated
65% to JWH, 30% to Welton and 5% to Sabre. Sabre's advisory contract terminated
December 31, 1997 and its allocation of Fund assets was moved to Welton.
Monthly rates of return are calculated by dividing net performance for
the month by beginning equity.
Worst peak-to-valley decline means the greatest cumulative percentage
decline in month-end net asset value during any period in which the initial
month-end net asset value for the period is not equaled or exceeded by a
subsequent month-end net asset value. Worst peak-to-valley decline is calculated
by comparing the initial month-end net asset value to each subsequent month-end
net asset value. A new trading "peak" is established each time the month-end net
asset value exceeds all prior month-end net asset values.
The performance record shown above depicts the CFTC required
performance for the past five years and year to date. The performance record of
the Fund from inception through December 1994 is set forth on page 1 of the
Statement of Additional Information.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
-15-
<PAGE>
SELECTED FINANCIAL INFORMATION
THE FOLLOWING SELECTED FINANCIAL INFORMATION FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998, 1997, 1996 AND 1995 IS DERIVED FROM THE FINANCIAL
STATEMENTS OF THE FUND, WHICH HAVE BEEN AUDITED BY KPMG LLP.
-------------------------
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Revenues............ $(5,873,245) $9,512,575 $7,618,500 $10,189,635 $8,419,239
Income (loss) from continuing
operations.................... $(10,406,083) $4,578,497 $3,778,125 $6,701,475 $5,755,268
Income (loss) per unit*....... $(69.61) $30.08 $28.09 $54.14 $50.46
Total assets.................. $47,833,439 $58,570,323 $50,592,432 $41,669,309 $33,275,874
Long term obligations......... 0 0 0 0 0
Cash dividend obligations..... 0 0 0 0 0
</TABLE>
* FIGURES HAVE BEEN ADJUSTED FOR A 3-FOR-1 SPLIT ON FEBRUARY 28, 1995 FOR
COMPARATIVE PURPOSES.
----------------------------------
-16-
<PAGE>
MANAGEMENT'S ANALYSIS
OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
The Trading Advisors' programs do not predict price movements. No
fundamental economic supply or demand analysis is used in attempting to identify
mispricings in the market, and no macroeconomic assessments of the relative
strengths of different national economies or economic sectors is made. Instead,
the programs apply proprietary computer models to analyze past market data, and
from this data alone attempt to determine whether market prices are trending.
Technical traders such as the Trading Advisors base their strategies on the
theory that market prices reflect the collective judgment of numerous different
traders and are, accordingly, the best and most efficient indication of market
movements. However, there are frequent periods during which fundamental factors
external to the market dominate prices.
If the Trading Advisors' models identify trends, they signal positions
which follow the trends. When these models identify trends as having ended or
reversed, the positions are either closed out or reversed. Due to their
trend-following character, the Trading Advisors' programs do not predict either
the commencement or the end of a price movement. Rather, their objective is to
identify trends early enough to profit from them and to detect their end or
reversal in time to close out the Fund's positions while retaining most of the
profits made from following the trends.
In analyzing the performance of the Trading Advisors' trend-following
programs, economic conditions, political events, weather factors, etc., are not
directly relevant because only market data has any input into their trading
results. There is no direct connection between particular market conditions and
price trends. There are so many influences on the markets that the same general
type of economic event may lead to a price trend in some cases but not in
others. The analysis is further complicated by the fact that the programs are
designed to recognize only certain types of trends and to apply only certain
criteria to determine when a trend has begun. Consequently, even though
significant price trends may occur, if these trends are not comprised of the
type of intra-period price movements which the programs are designed to
identify, the Fund may miss the trend altogether.
The Fund's success depends on the Trading Advisors' ability to
recognize and capitalize on major price movements and other profit opportunities
in different sectors of the world economy. Because of the speculative nature of
its trading, operational or economic trends have little relevance to the Fund's
results, and its past performance is not necessarily indicative of its future
results. The General Partners believe, however, that there are certain market
conditions -- for example, markets with major price movements -- in which the
Fund has a better opportunity of being profitable than in others.
The following performance summary outlines certain major price trends
which at least one of the Trading Advisors' programs identified for the Fund.
The fact that certain trends were captured does not imply that others, perhaps
larger and potentially more profitable trends, were not missed or that the
Trading Advisors will be able to capture similar trends in the future. Moreover,
the fact that the programs were profitable in certain market sectors in the past
does not mean that they will be so in the future.
The performance summary is an outline description of how the Fund
performed in the past, not necessarily any indication of how it will perform in
the future. Furthermore, the general causes to which certain trends are
attributed may or may not in fact have caused such trends, as opposed to simply
having occurred at about the same time.
While there can be no assurance that the Trading Advisors will trade
profitably even in trending markets, markets in which substantial and sustained
price movements occur offer the best profit potential for the Fund.
PERFORMANCE SUMMARY
FROM INCEPTION UNTIL JULY 1997, JWH AND SABRE FUND MANAGEMENT LIMITED
WERE THE FUND'S ONLY TRADING ADVISORS AND FUND ASSETS WERE ALLOCATED EQUALLY TO
EACH TRADING ADVISOR. WELTON BECAME A
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<PAGE>
TRADING ADVISOR IN JULY 1997 AND FUND ASSETS WERE REALLOCATED 65% TO JWH, 30% TO
WELTON AND 5% TO SABRE. SABRE'S ADVISORY CONTRACT TERMINATED AT THE END OF 1997
AND SABRE'S ALLOCATION OF FUND ASSETS WAS MOVED TO WELTON. CONSEQUENTLY, THE
PERFORMANCE SUMMARY FOR THE YEAR 1997 REFLECTS THE TRADING OF SABRE AND
REFERENCES TO TRADING ADVISORS IN THAT YEAR INCLUDE SABRE.
1999
The Fund experienced a disappointing year in 1999. Both Trading
Advisors experienced the most difficult performance years 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 British
government decided 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 0.25% 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 0.25% 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 per ounce and handed
gold sellers such as the Fund 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 back up to 6.5% in the fourth quarter
further emphasizing the difficult trading year. Similar trading patterns
occurred in non-U.S. 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 Fund 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 Fund 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
Fund. Additionally, coffee prices fell 28% during the year and the Fund
benefitted 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 Fund. 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 Fund.
In the second quarter, the U.S. dollar strengthened against the
Japanese yen until the U.S. Government intervened to support the Japanese yen,
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<PAGE>
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 Fund 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. 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
for the Fund.
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 Fund
was well positioned to take advantage of rising bonds. The Fund 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 Fund was
short the Nikkei and FTSE equity indices. Gold and silver prices fell to 1998
lows, and 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. A long Japanese yen
position provided the only profit for the Fund in October but was the largest
losing position in November. Yet, by December, long Japanese yen positions were
again 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 into the market. Global stock indices
rebounded beginning in October and long positions in the S&P and German DAX
proved rewarding. The Fund 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 Trading Advisors were well positioned to profit from several of these
moves. The Fund 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 Fund. 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 Fund 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 Fund ended the
year with a profit of $3,778,125.
LIQUIDITY AND CAPITAL RESOURCES
The amount of assets invested in the Fund generally does not affect its
performance, as typically this amount is not a limiting factor on the positions
acquired by the Trading Advisors, and the Fund's expenses are primarily charged
as a fixed percentage of or are proportional to its asset base, however large.
The Fund sells no securities other than the Units. The Fund borrows
only to a limited extent and only on a strictly short-term basis in order to
finance losses on non-U.S. dollar denominated trading positions pending the
conversion of the Fund's dollar deposits. These borrowings are at a prevailing
short-term rate in the relevant currency. They have been immaterial to the
Fund's operation to date and are expected to continue to be so.
The Net Asset Value of the Fund's assets is not materially affected by
inflation. Changes in interest rates, which are often associated with inflation,
will affect the interest rate applied to the Fund's cash deposits. More
importantly, however, changes in interest rates could cause periods of strong up
or down price trends, during which the Fund's
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<PAGE>
profit potential generally increases. Inflation or deflation in commodity prices
could also generate price movements which the programs might successfully
follow.
The Fund's assets are held in cash. This should permit the Trading
Advisors to limit losses as well as reduce market exposure on short notice
should their programs indicate reducing market exposure. In addition, because
there is a readily available market value for the Fund's positions, the Fund's
monthly Net Asset Value calculations are precise.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT THE FUND'S MARKET RISK
INTRODUCTION
PAST RESULTS ARE NOT NECESSARILY
INDICATIVE OF FUTURE PERFORMANCE
The Fund 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 Fund'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 Fund's main line of business.
Market movements result in frequent changes in the fair market value of
the Fund's open positions and, consequently, in its earnings and cash flow. The
Fund'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 Fund's open positions and the liquidity of the
markets in which it trades.
The Fund 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 Fund's past
performance is not necessarily indicative of its future results.
Value at Risk is a measure of the maximum amount which the Fund could
reasonably be expected to lose in a given market sector. However, the inherent
uncertainty of the Fund's speculative trading and the recurrence in the markets
traded by the Fund of market movements far exceeding expectations could result
in actual trading or non-trading losses far beyond the indicated Value at Risk
or the Fund'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 Fund's
losses in any market sector will be limited to Value at Risk or by the Fund's
attempts to manage its market risk.
STANDARD OF MATERIALITY
Materiality as used in this section, "Quantitative and Qualitative
Disclosures About the Fund's 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 Fund's market sensitive instruments.
QUANTIFYING THE FUND'S TRADING VALUE AT RISK
QUANTITATIVE FORWARD-LOOKING STATEMENTS
THE FOLLOWING QUANTITATIVE DISCLOSURES REGARDING THE FUND'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 OF 1933 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 Fund's risk exposure in the various market sectors traded by the
Trading Advisors is quantified below in terms of Value at Risk. Due to the
Fund's mark-to-market accounting, any loss in the fair value of the Fund's open
positions is directly reflected in the Fund'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).
-20-
<PAGE>
Exchange maintenance margin requirements have been used by the Fund 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.
The market sensitive instruments traded by the Fund are exchange traded.
The fair value of the Fund's futures and forward positions does not have
any optionality component. However, Welton also trades commodity options on
behalf of the Fund. 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 Fund in all cases fluctuate
to a lesser extent than those of the underlying instruments.
In quantifying the Fund'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 Fund's
positions are rarely, if ever, 100% positively correlated have not been
reflected.
THE FUND'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>
<CAPTION>
FISCAL YEAR 1999
----------------------------------------------------------------
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%
==== ==== ==== =====
</TABLE>
* 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 capitalization at
the end of each fiscal quarter for fiscal year 1999.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------------
% 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 Fund is
typically many times the applicable maintenance margin requirement
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<PAGE>
(maintenance margin requirements generally ranging between approximately 1%
and 10% of contract face value) as well as many times the capitalization of
the Fund. The magnitude of the Fund'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 Fund to incur severe losses
over a short period of time. The foregoing Value at Risk tables -- as well as
the past performance of the Fund -- give no indication of this "risk of
ruin."
NON-TRADING RISK
The Fund 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 Fund holds substantially all of its assets in cash on deposit with
CIS and CISFS. The Fund 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 90-day Treasury bill rate. As of December 31, 1999 and 1998, the Fund had
approximately $45.4 million and $53.0 million, respectively, in cash on deposit
with CIS and CISFS.
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES
THE FOLLOWING QUALITATIVE DISCLOSURES REGARDING THE FUND'S MARKET RISK
EXPOSURES -- EXCEPT FOR (i) THOSE DISCLOSURES THAT ARE STATEMENTS OF HISTORICAL
FACT AND (ii) THE DESCRIPTIONS OF HOW THE FUND AND THE TRADING ADVISORS MANAGE
THE FUND'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 FUND'S PRIMARY MARKET RISK EXPOSURES AS
WELL AS THE STRATEGIES USED AND TO BE USED BY THE TRADING ADVISORS FOR MANAGING
SUCH EXPOSURES ARE SUBJECT TO NUMEROUS UNCERTAINTIES, CONTINGENCIES AND RISKS,
ANY ONE OF WHICH COULD CAUSE THE ACTUAL RESULTS OF THE FUND'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 FUND.
THERE CAN BE NO ASSURANCE THAT THE FUND'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 FUND.
The following were the primary trading risk exposures of the Fund as of
December 31, 1999, by market sector.
INTEREST RATES. Interest rate risk is the principal market exposure of
the Fund. Interest rate movements directly affect the price of the sovereign
bond positions held by the Fund 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 Fund's
profitability. The Fund's primary interest rate exposure is to interest rate
fluctuations in the United States and the other G-7 countries. However, the Fund
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 Fund for the foreseeable
future. The changes in interest rates which have the most effect on the Fund are
changes in long-term, as opposed to short-term, rates. Most of the speculative
positions held by the Fund are in medium- to long-term instruments.
Consequently, even a material change in short-term rates would have little
effect on the Fund were the medium- to long-term rates to remain steady.
CURRENCIES. The Fund'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 Fund trades in a large number of currencies,
including cross-rates -- I.E., positions between two currencies other than the
U.S. dollar. However, the Fund's major exposures have typically been in the
dollar/yen, dollar/euro, dollar/Swiss franc and dollar/pound positions. The
General Partners do
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<PAGE>
not anticipate that the risk profile of the Fund'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 Fund
in expressing Value at Risk in a functional currency other than dollars.
STOCK INDICES. The Fund's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Fund are by law
limited to futures on broadly based indices. As of December 31, 1999, the Fund's
primary exposures were in the S&P and NASDAQ (U.S.), FTSE (England) and Nikkei
(Japan) stock indices. The General Partners anticipate little trading in non-G-7
stock indices. The Fund 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
Fund to avoid being "whipsawed" into numerous small losses.)
METALS. The Fund'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 Fund's primary commodities exposure is to agricultural
price movements which are often directly affected by severe or unexpected
weather conditions. Hogs, coffee and rubber accounted for the substantial bulk
of the Fund's commodities exposure as of December 31, 1999. In the past, the
Fund also has had material market exposure to grains, sugar and cocoa and may do
so again in the future. Welton will continue to trade a wide variety of
commodity contracts.
ENERGY. The Fund's primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle East.
Although the Trading Advisors trade natural gas to a limited extent, oil and oil
products are by far the dominant energy market exposure of the Fund. Oil prices
can be volatile as evidenced by their dramatic rise in 1999 after ending 1998
depressed. 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 Fund as
of December 31, 1999.
FOREIGN CURRENCY BALANCES. The Fund's primary foreign currency balances
are in Japanese yen, Euros, British pounds and Australian dollars. The Fund
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 Fund 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 Fund's performance and the
concentration of its open positions, and they consult with the Trading Advisors
concerning the Fund's overall risk profile. If the General Partners felt it
necessary to do so, the General Partners could require the Trading Advisors to
close out individual positions as well as entire programs traded on behalf of
the Fund. However, any such intervention would be a highly unusual event. The
General Partners primarily rely on the Trading Advisors own risk control
policies while maintaining a general supervisory overview of the Fund's market
risk exposures.
RISK MANAGEMENT
JWH. 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
-23-
<PAGE>
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. 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 an 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. The initial risk is the difference between the
entry price and the initial intended exit point. It is fundamental to
calculating position quantity and is directly related to market volatility. The
risk of each trade is determined before trade entry and monitored throughout the
life span of the trade.
The following factors are used to assess risk exposure and performance
risks more generally: (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 over time; and (viii) weighted mean correlation of
open positions. 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.
THE GENERAL PARTNERS
The General Partners of the Fund are CISI and IDS Futures. CISI is a
wholly-owned subsidiary of the Fund's Clearing Broker. IDS Futures is a
wholly-owned subsidiary of IDS Management Corporation, which is itself a
wholly-owned subsidiary of American Express Financial Corporation. American
Express Financial Corporation is also the parent of the Fund's Selling
Agent/Introducing Broker. Together, CISI and IDS Futures are responsible for
administering the Fund's affairs. Both General Partners are registered under the
Commodity Exchange Act, as amended, as commodity pool operators (and are
currently acting as the Fund's
-24-
<PAGE>
Commodity Pool Operators) and are members of NFA.
The General Partners maintain an aggregate 1% interest in the Fund. As
of January 31, 2000, principals of the General Partners owned a total of
2,883.58 Units. Neither the General Partners nor their individual principals
trade or intend to trade commodity interests for their own accounts.
CISI
CISI was incorporated in Delaware in 1983. It has been registered with
the CFTC under the Commodity Exchange Act as a commodity pool operator since
December 13, 1985 and is a member of NFA in such capacity. CISI maintains its
principal office at 233 South Wacker Drive, Suite 2300, Chicago, Illinois 60606;
telephone (312) 460-4000. The records of the Fund are kept at CISI's principal
office. The officers and directors of CISI do not receive any compensation
directly from CISI.
In addition to the Fund, CISI currently operates two public commodity
pools, one of which is also jointly operated with IDS Futures, and one private
commodity pool.
The directors and officers of CISI are as follows:
BERNARD W. DAN (born in December 1960) is President and a director. Mr.
Dan has been President of CIS since June 1, 1998. He joined CIS 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 actively serves within
the futures industry on exchange committees and industry user groups. He
received a B.S. degree in accounting from St. John's University, Collegeville,
Minnesota.
BARBARA A. PFENDLER (born in May 1953) is Vice President and a
director. Ms. Pfendler is a graduate of the University of Colorado, Boulder. She
began her career with Cargill, Incorporated in 1975. She held various
merchandising and management positions within the organization's Oilseed
Processing Division before transferring to CIS in 1986 where she is responsible
for the Fund Services Group. She was appointed Vice President of CISI in May
1990 and Vice President of CIS in June 1996.
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.
JAN R. WAYE (born in June 1948) is Vice President. Mr. Waye assumed the
position of Senior Vice President of CIS in mid-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. He was
appointed Vice President of CISI on June 24, 1997. Mr. Waye joined Cargill in
1970 and served in various commodity trading and management positions in
Chesapeake, Virginia; Winnipeg, Manitoba; and Vancouver, British Columbia. 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. Mr. Waye graduated
from Concordia College, Moorhead, Minnesota, with a B.A. degree in
Communications and Economics in 1970.
CHRISTOPHER MALO (born in August 1956) is Vice President. Mr. Malo
graduated from Indiana University in 1978 with a B.S. in Accounting and further
completed the University of Minnesota
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Executive Program in 1993. He started work at Cargill, Incorporated in June
1978. He joined CIS in 1979, and served as Secretary/Treasurer and Controller
from 1983 until 1991. He was elected Vice President, Administration and
Operations in July 1991. He 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) is Vice President. Mr. Davis
graduated from Illinois Institute of Technology, Chicago, Illinois in 1975 with
a B.S. and an M.B.A. in 1977. He began his career in the futures industry with
A. G. Becker, Incorporated in 1980 and joined CIS 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) is Secretary. Ms. Steindel
graduated from the University of Illinois in 1987. She began working at CIS in
August 1987. She has held various financial and risk management positions at CIS
and was elected Risk and Compliance Officer and Secretary in August 1997. She
currently serves on the Board of Directors and Executive Committee of the FIA
Financial Management Division.
PATRICE H. HALBACH (born in August 1953) is an Assistant Secretary. Ms.
Halbach graduated Phi Beta Kappa from the University of Minnesota with a B.A.
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.
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.
The following are new officers of CISI: JAMES CLEMENS, Assistant
Secretary; LILLIAN LUNDEEN, Assistant Secretary.
IDS FUTURES
IDS Futures was incorporated in 1986 to act as a general partner and
commodity pool operator in connection with commodity pool offerings. It is
registered as a commodity pool operator and is a member of NFA in such capacity.
As of the date of this Prospectus, the principal office of IDS Futures is at IDS
Tower 10, Minneapolis, Minnesota 55440. Effective April 17, 2000, the principal
office of IDS Futures will be 200 AXP Financial Center, Minneapolis, Minnesota
55474. The directors and officers of IDS Futures do not receive any compensation
directly from IDS Futures.
The directors and officers of IDS Futures are as follows:
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
Inc.'s distribution channels. In addition, he oversees American Express
Financial Advisors Inc.'s direct investment and limited partnership business.
From 1994 to 1999, he was Vice President and General Manager of Segment
Marketing. From 1989 to 1994,
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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) is Vice President, Secretary and
Treasurer. Mr. Weiner is the Vice President -- Tax Research and Audit 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 graduated from the University of Minnesota Law School in
1974 and completed the Masters of Business Administration program at St. Thomas
College of Minnesota in 1979. Mr. Weiner is also an officer of American Express
Financial Advisors Inc.
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 the University of Minnesota's Carlson
School of Management.
PETER J. ANDERSON (born in March 1942), is a director. Mr. Anderson is
Chairman and Chief Investment Officer of American Express Asset Management Group
Inc. (formerly IDS Advisory Group Inc.), as well as Senior Vice President --
Investments, and a member of the board of directors of American Express
Financial Corporation. Mr. Anderson joined American Express Asset Management
Group Inc. in April 1982 as Senior Vice President -- IDS Equity Advisors, a
division of American Express Asset Management Group Inc. He became President of
American Express Asset Management Group Inc. 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.
THE TRADING ADVISORS
Each Trading Advisor is an independent commodity trading advisor and is
not affiliated with either General Partner, the Clearing Broker, the Selling
Agent/Introducing Broker or the Fund. Each Trading Advisor directs trading for
the Fund completely independently of the other, and will have no knowledge of
trading decisions being made by the other.
The Trading Advisors are described in the following sections of this
Prospectus. The descriptions of JWH and Welton have been developed by JWH and
Welton, and accordingly represent only those aspects of the JWH and Welton
trading methodologies deemed by JWH and Welton to be worthy of emphasis. The
trading methods of the Trading Advisors are proprietary and confidential, and
therefore the summaries presented hereafter are general and do not include
specific details about them. In addition, the Trading Advisors engage in ongoing
research concerning the commodity interests markets and may modify and refine
their trading methods from time to time. As a result of such modifications, the
trading methods that might be used by the Trading Advisors in the future in
directing trading for the Fund might differ from those presently used by them.
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Investors in the Fund will not be advised of such changes in trading methods.
THE ADVISORY CONTRACTS
The General Partners, in their sole discretion, may reallocate assets
between the Trading Advisors or among other trading advisors which may be
appointed by them. The JWH advisory contract extends to December 31, 2002 and
may be renewed by the Fund for three additional one-year terms. The advisory
contract with Welton extends to December 31, 2000, and may be renewed by the
Fund for one additional one-year term. The Advisory Contracts may also be
terminated by the General Partners upon notice for cause in certain
circumstances or if specified events occur. Each Trading Advisor may terminate
the advisory contract with respect to itself if certain specified events occur.
In addition, JWH may terminate its advisory contract at any time upon 60 days'
written notice to the General Partners. Both Advisory Contracts will terminate
automatically if the Fund is terminated.
There is no assurance that, after the expiration or termination of the
Advisory Contracts, the Fund will be able to retain the advisory services of JWH
or Welton, or that if such services are available they will be on the same terms
as those of the initial Advisory Contracts.
The Fund will indemnify a Trading Advisor, its principals and employees
to the fullest extent permitted by law for any liability incurred in connection
with any acts or omissions related to such Trading Advisor's management of its
allocable share of Fund assets, PROVIDED that there has been no judicial
determination that such liability was the result of negligence, misconduct or
bad faith nor any judicial determination that the conduct which was the basis
for such liability was not done in a good faith belief that it was in, or not
opposed to, the best interests of the Fund. A Trading Advisor, its affiliates
and its related parties will not be liable to the Fund or the Limited Partners
unless its conduct violates the standards for indemnification by the Fund.
JOHN W. HENRY & COMPANY, INC.
BACKGROUND
John W. Henry & Company began managing assets in 1981 as a sole
proprietorship and was later incorporated in the State of California as John W.
Henry & Co., Inc. to conduct business as a commodity trading advisor ("CTA"; a
person which directs the trading of futures accounts for clients, including
commodity pools). JWH reincorporated in Florida in 1997. JWH's offices are at
One Glendinning Place, Westport, Connecticut 06880 and 301 Yamato Road, Suite
2200, Boca Raton, Florida 33431-4931. JWH's registration as a CTA became
effective in November 1980. JWH is a member of NFA in this capacity. "JWH" is
the registered trademark of John W. Henry & Company, Inc.
For a description of the principals of JWH, see "JWH Principals"
beginning at page 28.
TRADING STRATEGY
THE FOLLOWING DESCRIPTION OF JWH'S TRADING STRATEGY RELATES TO JWH
GENERALLY AND NOT TO THE FUND ITSELF.
GENERAL
JWH specializes in managing institutional and individual capital in the
global futures, interest rate and foreign exchange markets. Since 1981, JWH has
developed and implemented proprietary methods to identify short- to long-term
trends. As of the date of this Prospectus, JWH operates twelve trading programs.
INVESTMENT PHILOSOPHY AND METHODOLOGY
JWH's investment philosophy is based on the premise that market prices,
rather than market fundamentals, are the key aggregator of information necessary
to make investment decisions. JWH believes that changes in market prices
initially reflect human reactions to new or emerging information or events that
will cause trends, but that prices eventually reflect all relevant information.
The price adjustment process takes time, however, since reactions of market
participants to changing market dynamics initially may be inefficient. For
example, investors may not
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react immediately to information because of differing abilities to process and
evaluate data, differing levels of risk tolerance or uncertainty. Gradual price
adjustments manifest themselves in long-terms trends, which themselves can
influence the course of events and from which profit opportunities can arise.
JWH believes that such market inefficiencies can be exploited through a
combination of trend detection and risk management.
There is strong economic and statistical evidence to suggest that
trends do exist in most markets although they may be difficult to identify.
Since it was founded, JWH has employed analytical methods to identify short- to
long-term trends. Comprehensive research undertaken by the firm's founder, John
W. Henry, led to the development of disciplined systematic quantitative models.
JWH's computer models examine market data for systematic price behavior or
relationships which will characterize a trend. When price trends are identified,
the JWH trading system generates buy and sell signals for implementing trades.
The strict application of these signals is one of the most important aspects of
JWH's investment process.
JWH attempts to control risk throughout the investment process. This
includes the confirmation of a trend, determining the optimal exposure in a
given market and money management issues such as the startup or upgrade of an
account. JWH's research on these and other issues has resulted in investment
program modifications from time to time that have decreased from previous levels
the overall volatility of its investment programs while maintaining the
potential for generating attractive performance returns.
DURATION OF POSITIONS HELD
JWH's historical performance demonstrates that, because trends often
last longer than most market participants expect, significant returns can be
generated from positions held over a long period of time. Therefore, market
exposure to profitable positions is not changed based on the time horizon of a
trade. Positions held for two to four months are not unusual and positions have
been held for more than one year. Losing positions are generally pared
relatively quickly, with most closing within a few days or weeks. However, if
the JWH system detects a profitable underlying trend, a position trading at a
loss may be retained in order to capture the potential benefits of participating
in that trend. Throughout the investment process, risk controls designed to
reduce the possibility of extraordinary loss in any one market are maintained.
EQUITY DRAWDOWNS
Historically, only 30% to 40% of all trades made pursuant to JWH's
programs have been profitable. Large profits on a few trades in positions that
typically exist for several months have produced favorable results overall. The
greatest cumulative percentage decline in daily net asset value which JWH has
experienced since inception in any single program was nearly 60% on a composite
basis. Prospective investors in the Fund should understand that similar or
greater drawdowns are possible in the future.
To reduce exposure to volatility in any particular market, most JWH
programs participate in several markets at one time. In total, JWH participates
in more than sixty markets, encompassing interest rates, currencies and
commodities such as agricultural products, energy and precious and base metals.
Most investment programs maintain a consistent portfolio composition to allow
opportunities in as many major market trends as possible.
OVERSIGHT OF TRADING POLICIES
The Investment Policy Committee ("IPC") is a senior-level advisory
group, broadly responsible for evaluating and overseeing trading policies. The
IPC provides a forum for shared responsibility, meeting periodically to discuss
issues relating to implementation of JWH's investment process and its
application to markets, including research on new markets and strategies in
relation to JWH trading models. Typical issues analyzed by the IPC include
liquidity, position size, capacity, performance cycles, and new product and
market strategies. The IPC also makes the discretionary decisions concerning
investment program selection, asset allocation and position sizes in relation to
account equity for the Strategic Allocation Program, a multi-program asset
allocation methodology. Composition of the IPC, and participation in its
discussions and decisions by non-members, may vary over time. All
recommendations
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of the IPC are subject to final approval by the chairman. The IPC does not make
day-to-day trading decisions.
DISCRETIONARY ASPECTS
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. This could occur, for example,
when JWH determines that markets are illiquid or erratic, such as may occur
cyclically during holiday seasons or on the basis of irregularly occurring
market events. Subjective aspects of JWH's quantitative models also include the
determination of position size in relation to account equity, when an account
should commence trading, the investment of assets associated with additions,
redemptions and reallocations, contracts and contract months traded and
effective trade execution.
PROGRAM MODIFICATIONS
Proprietary research is conducted on an ongoing basis to refine the JWH
investment strategies. While the basic philosophy underlying the firm's
investment methodology has remained intact throughout its history, the potential
benefits of employing more than one investment methodology, or in varying
combinations, is a subject of continual testing, review and evaluation.
Extensive research may suggest substitution of alternative investment
methodologies with respect to particular contracts. This may occur, for example,
when testing of a different methodology has indicated that it 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 for a
program or a change in position size in relation to account equity. However,
most investment programs maintain a consistent portfolio composition to allow
opportunities in as many major market trends as possible.
All cash in a JWH investment program is available to be used to trade
in a JWH program. The amounts committed to margin will vary from time to time.
As capital in each JWH trading program increases, additional emphasis and
weighting may be placed on certain markets which have historically demonstrated
the greatest liquidity and profitability. Furthermore, the weighting of capital
committed to various markets in the trading programs is dynamic, and JWH may
vary the weighting at its discretion as market conditions, liquidity, position
limit considerations and other factors warrant. The Fund generally will not be
informed of any such changes.
ADJUSTING THE SIZE OF THE TRADING POSITIONS TAKEN
Adjustments to 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 account equity
in certain markets or entire programs. Such adjustments may be made at certain
times for some investment 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; current market volatility; risk
exposure; and subjective judgment and evaluation of these and other general
market conditions. Such decisions to change the size of a position in relation
to account equity may positively or negatively affect performance and will alter
risk exposure for an account. Such adjustments may lead to greater profits or
losses, more frequent and larger margin calls and greater brokerage expense. No
assurance is or can be given that such adjustments will result in profits for
investors in the Fund. JWH reserves the right to alter, at its sole discretion
and without notification to the Fund, its policies regarding the size of
positions taken in relation to account equity.
ADDITION, REDEMPTION AND REALLOCATION OF CAPITAL FOR COMMODITY POOL ACCOUNTS
Investors purchase or redeem Units at Net Asset Value on the close of
business on the last business day of the month. In order to provide market
exposure commensurate with the Fund's equity on the date of these transactions,
JWH's general practice is to adjust positions as near as possible to the close
of business on the last trading date of the month. The intention is to provide
for additions and redemptions at a Net Asset Value that will be the same for
each of these transactions, and to eliminate possible variations in Net Asset
Values that could occur as a result of inter-day price changes if, for example,
additions were
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calculated on the first day of the subsequent month. Therefore, JWH may, at its
sole discretion, adjust its investment of the assets associated with the
addition or redemption as near as possible to the close of business on the last
business day of the month to reflect the amount then available for trading.
Based on JWH's determination of liquidity or other market conditions, JWH may
decide to commence trading earlier in the day on, or before, the last business
day of the month, or at its sole discretion, delay adjustments to trading for an
account to a date or time after the close of business on the last day of the
month. No assurance is given that JWH will be able to achieve the objectives
described above in connection with Fund equity level changes. The use of
discretion by JWH in the application of this procedure may affect performance
positively or negatively.
PHYSICAL AND CASH COMMODITIES
JWH may from time to time trade in physical or cash commodities for
immediate or deferred delivery, including specifically gold bullion, as well as
futures and forward contracts when JWH believes that cash markets offer
comparable or superior market liquidity or the ability to execute transactions
at a single price. The CFTC does not regulate cash transactions, which are
subject to the risk of counterparty failure, inability or refusal to perform
with respect to such contracts.
LEGAL CONCERNS
There neither now exists nor has there previously ever been any
material administrative, civil or criminal action against JWH or its principals.
Principals of JWH serve on the boards of directors and committees of
various organizations, both in and outside the managed futures industry. In such
capacity, these individuals have a fiduciary duty to the other organizations
they serve, and they are required to act in the best interests of those
organizations, even if those actions were to be adverse to the interest of JWH
and its clients.
FINANCIAL AND METALS PORTFOLIO
JWH currently uses its Financial and Metals Portfolio for the Fund. The
Financial and Metals Portfolio, which has the most assets under management of
any JWH program, seeks to identify and capitalize on intermediate and long-term
price movements in four worldwide market sectors: interest rates, currencies,
non-U.S. stock indices and metals. If a trend is identified, the program takes a
position; in non-trending markets, the program may remain neutral or liquidate
open positions.
JWH PRINCIPALS
The following are the principals of JWH:
The sole shareholder of JWH is the John W. Henry Trust dated July 27,
1990. MR. JOHN W. HENRY is chairman of the JWH Board of Directors and is trustee
and sole beneficiary of the John W. Henry Trust. Mr. Henry is also a member of
the JWH Investment Policy Committee. He currently concentrates his activities at
JWH on portfolio management, research and new system development, day-to-day
decisions involving the strategic direction and business of the firm and
frequent dialogue with trading supervisors. Mr. Henry is the exclusive owner of
certain trading systems licensed to Elysian Licensing Corporation, a corporation
wholly-owned by Mr. Henry and sublicensed by Elysian Licensing Corporation to
JWH and utilized by JWH in managing investor accounts.
Mr. Henry has served on the Board of Directors of the Futures Industry
Association ("FIA"), the National Association of Futures Trading Advisors
("NAFTA") and the Managed Futures Trade Association, and has served on the
Nominating Committee of NFA. He has also served on a panel created by the
Chicago Mercantile Exchange and the Chicago Board of Trade to study cooperative
efforts related to electronic trading, common clearing and issues regarding a
potential merger. In 1989, Mr. Henry established residency in Florida, and since
that time has performed services from that location as well as from the offices
of JWH in Westport, Connecticut. Mr. Henry is a principal of Westport Capital
Management Corporation, Global Capital Management Limited and JWH Financial
Products, Inc., all of which are affiliates of JWH. Since the beginning of 1987,
Mr. Henry has devoted, and will continue to devote, considerable time to
activities in
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businesses other than JWH and its affiliates including acting as Chairman of the
Florida Marlins Baseball Club LLC, which continues to be operated by a
professional baseball staff.
MR. MARK H. MITCHELL is vice chairman, counsel to the firm and a member
of the JWH Board of Directors. His duties include the coordination and
allocation of responsibilities among JWH and its affiliates. He is also vice
chairman and a director of JWH Financial Products, Inc. Prior to joining JWH in
January 1994, Mr. Mitchell was a partner at Chapman and Cutler, in Chicago,
where he headed the law firm's futures law practice from August 1983 to December
1993. He also served as General Counsel of the Managed Funds Association ("MFA")
and General Counsel of NAFTA. Mr. Mitchell is currently a member of the NFA
CPO/CTA Advisory Committee. In addition, he has served as a member of the NFA
Special Committee for the Review of Multi-tiered Regulatory Approach to NFA
Rules, the MFA Government Relations Committee and the Executive Committee of the
Law and Compliance Division of the FIA. In 1985, he received the Richard P.
Donchian Award for Outstanding Contributions to the Field of Commodity Money
Management. He received an A.B. with honors from Dartmouth College and a J.D.
from the University of California at Los Angeles, where he was named to the
Order of the Coif, the national legal honorary society.
MR. VERNE O. SEDLACEK is the president, chief operating officer and a
member of the JWH Investment Policy Committee. Mr. Sedlacek is responsible for
the day-to-day management of the firm. He is also president and a director of
Westport Capital Management Corporation and Global Capital Management Limited,
and vice president of JWH Financial Products, Inc. Prior to joining JWH in July
1998, Mr. Sedlacek was the executive vice president and chief financial officer
of Harvard Management Company, Inc., a wholly-owned subsidiary of Harvard
University, which at the time of his departure managed approximately $14 billion
of University-related funds. He joined Harvard Management Company in March 1983
and was responsible for managing the areas of personnel, budgets, systems,
performance analysis, contracts, credit, compliance, custody, operations, cash
management, securities lending and market risk evaluation. Mr. Sedlacek
currently serves on the Board of Directors of the NFA, FIA and the Chicago
Mercantile Exchange, and he is a member of the Global Markets Advisory Committee
of the CFTC. He is also a member of the NFA/FIA Best Practices Study End User
Expert Panel. Mr. Sedlacek received his A.B. in Economics from Princeton
University, M.B.A. in Accounting from New York University and was certified as a
C.P.A. in the State of New York in 1978.
DR. MARK S. RZEPCZYNSKI is a senior vice president, research and
trading, and a member of the JWH Investment Policy Committee. He is also a vice
president of JWH Financial Products, Inc. Dr. Rzepczynski joined JWH in May
1998. From May 1995 to April 1998, Dr. Rzepczynski was vice president and
director of taxable credit and quantitative research in the fixed-income
division of Fidelity Management and Research where he oversaw credit and
quantitative research recommendations for all Fidelity taxable fixed-income
funds. From April 1993 to April 1995, Dr. Rzepczynski was a portfolio manager
and director of research for CSI Asset Management, Inc., a fixed-income money
management subsidiary of Prudential Insurance. Dr. Rzepczynski has a B.A. CUM
LAUDE in Economics from Loyola University of Chicago, and an A.M. and Ph.D. in
Economics from Brown University.
MR. E. LYNDON TEFFT is a senior vice president and the chief financial
officer. He is also the treasurer of Westport Capital Management Corporation,
vice president of JWH Financial Products, Inc. and a director, secretary and
treasurer of JWH Securities, Inc. Prior to joining JWH in October 1998, Mr.
Tefft was the Director of MIS and a vice president at Harvard Management
Company, Inc. where he was responsible for directing the design, development,
and operation of global equity, bond and derivative trading, accounting and
settlement systems beginning in May 1994. Mr. Tefft received a B.S. in
Industrial Management from Purdue University and an M.B.A. from Wharton School
of Business at the University of Pennsylvania.
MS. ELIZABETH A. M. KENTON is a senior vice president, compliance. She
is responsible for the day-to-day management of compliance, as well as overall
issues pertaining to administration and human resources. Since joining JWH in
March 1989, Ms. Kenton has held positions of increasing responsibility
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in research and development, administration and regulatory compliance. Ms.
Kenton is also a director of Westport Capital Management Corporation and Global
Capital Management Limited, and she is a vice president of JWH Financial
Products, Inc. She received a B.S. in Finance from Ithaca College.
MR. DAVID M. KOZAK is a senior vice president, general counsel, and
secretary to the corporation. He is also secretary of JWH Financial Products,
Inc. and a director and secretary of Westport Capital Management Corporation.
Prior to joining JWH in September 1995, Mr. Kozak had been a partner at the law
firm of Chapman and Cutler from 1989. In his practice there he concentrated in
commodity futures law, with an emphasis on commodity money management. Mr. Kozak
is currently the secretary and a director of the MFA, and is a member of that
organization's Executive and Government Relations Committees. He is also a
member of the Special Committee on CPO/CTA Disclosure Issues and the Special
Committee for the Review of Multi-Tiered Regulatory Approach to NFA Rules, both
of NFA. He is chairman of the subcommittee on CTA and CPO issues of the
Committee on Futures Regulation of the Association of the Bar of the City of New
York. Mr. Kozak received a B.A. from Lake Forest College, an M.A. from the
University of Chicago, and a J.D. from Loyola University of Chicago.
MR. DAVID I. GINSBERG is a member of the JWH Board of Directors and
special advisor to the chairman. Mr. Ginsberg joined JWH in October 1999. He
served as the managing director of the Multi-Manager Group at Global Asset
Management ("GAM") from its inception in September 1989 until July 1995. This
GAM group was, and continues to be, one of the largest multi-advisor groups
specializing in hedge funds. Since leaving GAM, Mr. Ginsberg has been a private
investor. Mr. Ginsberg received a M.B.A. with a concentration in finance from
Boston University and a B.A. from Kenyon College. Mr. Ginsberg is a member of
the board of directors of GAM Diversity, Inc., a global multi-advisor hedge fund
with assets in excess of $1 billion that specializes in hedge funds, and a
director of Adelphi Europe Fund, a hedge fund specializing in European equities.
He is also vice chairman of the Florida Marlins Baseball Club LLC.
MR. JOHN A. WING is a member of the JWH Board of Directors. He is also
a professor of Law and Finance at the Illinois Institute of Technology (IIT) and
director of its Center for the Study of Law and Financial Markets. Mr. Wing
joined JWH in February 2000 and IIT in July 1998. Prior to July 1998, he was
chairman of the board and chief executive officer of ABN-AMRO Incorporated,
formerly The Chicago Corporation. Mr. Wing joined The Chicago Corporation as its
chief executive officer in 1981 and continued to lead the firm following its
merger with ABN-AMRO in January 1997 until his retirement in July 1998.
Mr. Wing is currently chairman of the board for the Risk Management
Committee of the Commercial Club and of Market Liquidity Holding, LLC. He is
also a director of AmerUs Life Holdings. In addition, he has served as a
director of the Midwest Stock Exchange, The Chicago Board Options Exchange,
Securities Industry Association, Futures Industry Association, National Futures
Association and Chicago Capital Fund. Mr. Wing has also been a governor of the
National Association of Securities Dealers, a member of the New York Stock
Exchange Regional Firms Committee, and a member of the Chicago Mercantile
Exchange's special panel to review trading rules and practices. Mr. Wing has
also served as a trustee of IIT and chairman of the Board of Overseers of its
Stuart School of Business. He received a B.A. in Economics from Union College
and a LLB from George Washington University.
MR. KEVIN S. KOSHI is a senior vice president, proprietary trading and
a member of the JWH Investment Policy Committee. He is responsible for the
implementation and oversight of the firm's proprietary strategies and
investments. Mr. Koshi joined JWH in August 1988 as a professional in the
Finance Department, and since 1990 has held positions of increasing
responsibility in the trading department. He received a B.S. in Finance from
California State University at Long Beach.
MR. MATTHEW J. DRISCOLL is vice president, trading and chief trader. He
is also a member of the JWH Investment Policy Committee. He is responsible for
the supervision and administration of all aspects of order execution strategies
and implementation of trading policies and procedures. Mr. Driscoll joined
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JWH in March 1991 as a member of its trading department. Since joining the firm,
he has held positions of increasing responsibility as they relate to the
development and implementation of JWH's trading strategies and procedures. He
has played a major role in the development of JWH's 24-hour trading operation.
Mr. Driscoll attended Pace University.
MR. EDWIN B. TWIST is a member of the JWH Board of Directors. Mr. Twist
is also a director of JWH Financial Products, Inc. Mr. Twist joined JWH as
internal projects manager in September 1991 and has been a director of JWH since
August 1993. Mr. Twist's responsibilities include assisting with the day-to-day
administration and internal projects of JWH's Florida office.
MR. JULIUS A. STANIEWICZ is a vice president, senior strategist, and a
member of the JWH Investment Policy Committee. He is also president of JWH
Financial Products, Inc. and a vice president of Westport Capital Management
Corporation. He joined JWH in March of 1992. Mr. Staniewicz received a B.A. in
Economics from Cornell University.
The additional principals of JWH have the following titles: Mr.
Christopher E. Deakins, vice president, investor services; Ms. Nancy O. Fox,
C.P.A. vice president, investment support; Mr. Andrew D. Willard, vice
president, information technology; Mr. Paul D. Braica, vice president,
analytics; Ms. Florence Y. Sofer, vice president, marketing; Ms. Wendy G.
Goodyear, vice president, investor services and Mr. Robert B. Lendrim, vice
president, investor services.
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PERFORMANCE OF THE JWH FINANCIAL AND METALS PORTFOLIO
PROGRAM COMPOSITION
Interest Rates Currencies
Non U.S. Stock Indices Precious and Base Metals
INCEPTION OF CLIENT ACCOUNT TRADING: OCTOBER 1982
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: OCTOBER 1984
ASSETS MANAGED (EXCLUDING NOTIONAL FUNDS) ON JANUARY 31, 2000: $1.8 BILLION
ASSETS MANAGED PURSUANT TO THE PROGRAM (EXCLUDING NOTIONAL FUNDS) ON JANUARY
31, 2000: $667 MILLION
NUMBER OF OPEN ACCOUNTS: 26
WORST MONTHLY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (10.1)% (2/96)
WORST PEAK-TO-VALLEY DECLINE ON AN INDIVIDUAL ACCOUNT BASIS: (30.5)%
(6/94-1/95)
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN FROM JANUARY 1995 THROUGH JANUARY
2000: 11.5%
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN FROM INCEPTION THROUGH JANUARY
2000: 31.6%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
MONTHLY 2000 1999 1998 1997 1996 1995
PERFORMANCE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January (3.6)% (4.8)% (3.5)% 4.4% 6.0% (3.8)%
- ---------------------------------------------------------------------------------------------
February 0.9% (4.0)% (2.2)% (5.5)% 15.7%
- ---------------------------------------------------------------------------------------------
March (2.6)% (1.6)% (0.7)% 0.7% 15.3%
- ---------------------------------------------------------------------------------------------
April 1.6% (7.9)% (2.9)% 2.3% 6.1%
- ---------------------------------------------------------------------------------------------
May 5.9% 3.2% (8.3)% (1.7)% 1.2%
- ---------------------------------------------------------------------------------------------
June 6.1% (4.8)% 4.1% 2.2% (1.7)%
- ---------------------------------------------------------------------------------------------
July (2.3)% (0.9)% 15.8% (1.1)% (2.3)%
- ---------------------------------------------------------------------------------------------
August (3.1)% 17.5% (3.7)% (0.8)% 2.1%
- ---------------------------------------------------------------------------------------------
September (7.0)% 15.3% 2.2% 3.2% (2.1)%
- ---------------------------------------------------------------------------------------------
October (8.1)% (3.8)% 2.0% 14.3% 0.3%
- ---------------------------------------------------------------------------------------------
November (3.2)% (7.5)% 2.5% 10.9% 2.6%
- ---------------------------------------------------------------------------------------------
December (2.8)% 8.9% 2.9% (2.6)% 1.7%
- ---------------------------------------------------------------------------------------------
Compound Annual (3.6)% (18.7)% 7.2% 15.2% 29.7% 38.5%
Rate of Return (1 month)
- ---------------------------------------------------------------------------------------------
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
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<PAGE>
NOTES ON PERFORMANCE RECORDS
FROM THE INCEPTION OF TRADING OF THE JWH PROGRAMS, THE GREATEST CUMULATIVE
PERCENTAGE DECLINE IN DAILY NET ASSET VALUE EXPERIENCED IN ANY SINGLE PROGRAM
WAS NEARLY 60% ON A COMPOSITE BASIS, AND CERTAIN INDIVIDUAL ACCOUNTS INCLUDED IN
SUCH PROGRAM EXPERIENCED EVEN GREATER DECLINES. (THE PERFORMANCE INFORMATION FOR
THE FINANCIAL AND METALS PORTFOLIO PRIOR TO JANUARY 1995 IS NOT PRESENTED, IN
ACCORDANCE WITH CFTC POLICY). CERTAIN JWH ACCOUNTS HAVE LOST 10% OR MORE IN A
SINGLE TRADING DAY. PROSPECTIVE INVESTORS SHOULD UNDERSTAND THAT SIMILAR OR
GREATER DRAWDOWNS ARE POSSIBLE IN THE FUTURE. THERE CAN BE NO ASSURANCE THAT JWH
WILL TRADE PROFITABLY FOR THE FUND OR AVOID SUDDEN AND SEVERE LOSSES.
An investor should note that the composite capsule performance
presentations include individual accounts which, even though traded according to
the same investment program, have materially different rates of return. The
reasons for this are numerous material differences among accounts: (a)
procedures governing timing for the commencement of trading and means of moving
toward full portfolio commitment of new accounts; (b) the period during which
accounts are active; (c) client trading restrictions, including futures versus
forward contracts and contract months; (d) trading size to equity ratio
resulting from procedures for the commencement of trading and full portfolio
commitment of new accounts and new capital; (e) the size of the account, which
can influence the size of positions taken and restrict the account from
participating in all markets available to an investment program; (f) the amount
of interest income earned by an account, which will depend on the rates paid by
futures commission merchants on equity deposits and/or on the portion of an
account invested in interest-bearing obligations such as Treasury bills; (g) the
amount of management and incentive fees paid to JWH and the amount of brokerage
commissions paid, which will vary and will depend on the commissions negotiated
by the client with the broker; (h) the timing of orders to open or close
positions; (i) the market conditions, which in part determine the quality of
trade executions; (j) variations in fill prices; and (k) timing of additions and
withdrawals. Notwithstanding these material differences among accounts, the
composite remains a valid representation of the accounts included therein.
Composite performance presentation is only allowed for accounts which are
not materially different. To decide if there are material differences among
accounts traded pursuant to the same trading program, the gross trading
performance of each JWH investment program and each individual JWH account
within the relevant program is reviewed against the following parameters
established by interpretations of the Division of Trading and Markets of the
CFTC to determine if the differences are material: (i) if the arithmetic average
of two percentages is greater than ten percentage points and the difference
between the two is less than 10% of their average; (ii) if the arithmetic
average of the two percentages is greater than five percentage points but less
than ten percentage points and the difference between the two is 1.5 percentage
points or less; and (iii) if the arithmetic average of the two percentages is
less than five percentage points and the difference between the two is one
percentage point or less. If one of the parameters (i) - (iii) is satisfied in
the review, then the results within the designated range are deemed "materially
the same" or "not materially different." The parameters (i) - (iii) determine if
differences between accounts are material. The gross trading performance of each
JWH investment program and each individual JWH account within the relevant
program not satisfying the above parameters is then reviewed to determine
whether any material differences that are detected could produce misleading
composite performance results. With the exception of accounts that were
established at levels below JWH's current minimum account size, JWH's policy is
to provide separate performance capsules when an account is consistently
performing differently on a gross trading basis from the other JWH accounts
traded pursuant to the same trading program and the continued inclusion of that
account in the composite would create a distortion in the composite rate of
return.
The composite rates of return indicated should not be taken as
representative of any rate of return actually achieved by any single account
represented in the records. Investors are further cautioned that the data set
forth in the performance capsule records are not indicative of any results which
may be attained by JWH in the future since past performance is not necessarily
indicative of future results. During the periods covered by the capsule
performance records, and particularly since 1989, JWH has increased and
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<PAGE>
decreased position size in relation to account equity in certain markets and
entire programs, and also altered the composition of the markets and contracts
for certain programs. In general since 1992, JWH began implementing certain
position size adjustments that were of a more permanent nature. While historical
returns represent actual performance achieved, investors should be aware that
the position size relative to account equity utilized currently or in the future
may be significantly different from that used during previous time periods.
Investors should be aware that commencing in August 1992, JWH decreased the
position size in relation to account equity by 50% for the Financial and Metals
Portfolio.
Prior to December 1991, capsule performance records are presented on a
cash basis except as otherwise stated in the notes to the records. The recording
of items on a cash basis should not, for most months, be materially different
from presenting such rates of return on an accrual basis. Any differences in the
monthly rates of return between the two methods are immaterial to the overall
performance presented. With the change to the accrual basis of accounting for
incentive fees in December 1991 for JWH, the net effect on monthly net
performance and the rate of return in the capsule performance records of
continuing to record interest income, management fees, commissions and other
expenses on a cash basis is materially equivalent to the full accrual basis. In
August 1998, JWH made an adjustment to the accounting method employed for the
Financial and Metals Portfolio. This adjustment moved the Financial and Metals
Portfolio to the full accrual basis on September 1, 1998.
The calculation of management and incentive fees is subject to variation
due to agreed-upon definitions contained in each account's advisory agreement.
Management fees vary from 0% to 6% of assets under management; incentive fees
vary from 0% to 25% of profits. Such variations in advisory fees may have a
material impact on the performance of an account from time to time.
NOTES TO CAPSULE PERFORMANCE SUMMARY
Assets Managed Pursuant to the Program is the aggregate amount of total
equity, excluding "notional" equity, under management of JWH in the Financial
and Metals Portfolio as of December 31, 1999.
Number of Open Accounts is the number of accounts directed by JWH pursuant
to the Financial and Metals Portfolio as of December 31, 1999.
Worst Monthly Decline on an Individual Account Basis within the past five
years is the largest monthly loss experienced by any single account in the
Financial and Metals Portfolio in any calendar month covered by the capsule.
"Loss" for these purposes is calculated on the basis of the loss experienced by
the individual account, expressed as a percentage of total equity (including
"notional" equity) in the account. Worst monthly decline information includes
the month and year of such decline.
Worst Peak-to-Valley Decline on an Individual Account Basis is the largest
percentage decline by any single account in the Financial and Metals Portfolio
(after eliminating the effect of additions and withdrawals) during the period
covered by the capsule from any month-end net asset value, without such
month-end net asset value being equalled or exceeded as of a subsequent
month-end by the individual account, expressed as a percentage of the total
equity (including "notional" equity) in the account.
Compound Annual Rate of Return is calculated by compounding the monthly
rates of return over the number of periods in a given year. For example, each
monthly rate of return in hundredths is added to one (1) and the result is
multiplied by the previous month's compounded monthly rate of return similarly
expressed. One (1) is then subtracted from the product. For periods less than
one year, the results are year to date. Average Compounded Annualized Rate of
Return is similarly calculated, except that before subtracting one (1) from the
product, the product is exponentially changed by the factor of one (1) divided
by the number of years in the program's performance record, then one (1) is
subtracted.
Monthly Rates of Return are daily compounded monthly rates of return.
The daily compounded monthly rate of return is calculated by compounding the
daily rates of return over the number of days in the month. For example, each of
the daily rates of return in hundredths is added to one (1) and the result is
multiplied by the previous day's daily rate of return similarly expressed. One
(1) is then subtracted from the product. The daily rates of return are
calculated by dividing the day's net performance
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<PAGE>
by the sum of the beginning equity, plus additions minus withdrawals for the
day. Prior to September 1998, Monthly Rates of Return were calculated by
dividing net performance by the sum of the beginning equity, plus additions
minus withdrawals in the investment program for the month. For such purposes all
additions and withdrawals were treated as if they had been made on the first day
of the month, even if, in fact, they occurred later. From December 1991 through
August 1998, if additions and withdrawals were material to the Financial and
Metals Portfolio's performance, they were time weighted. If time weighting was
materially misleading, then the only accounts traded method was utilized. As of
September 1998, time weighting is no longer relevant as the monthly rates of
return are daily compounded monthly rates of return.
Proprietary capital is included in the rates of return for the Financial
and Metals Portfolio, but does not have a material impact on the rates of
return.
WELTON INVESTMENT CORPORATION
Welton Investment Corporation is a Delaware corporation merged in May
1997 from a California corporation originally formed in November 1988. Its
business is providing professional management services specializing in futures
and foreign exchange markets worldwide. Welton was formed to offer proprietary
investment and portfolio management techniques to qualified individual,
institutional, and corporate investors. Welton is registered beginning January
4, 1989, as a commodity trading advisor and commodity pool operator with the
CFTC, is a commodity trading advisor and commodity pool operator member of NFA
and is also a member of the Managed Funds Association.
WELTON INVESTMENT PHILOSOPHY AND RISK MANAGEMENT PROCESS
Welton is committed to achieving attractive rates of return while
successfully managing risk. This is pursued through the consistent application
of the firm's primary trading principles:
- Market diversification
- Style diversification
- Portfolio allocation and management
- Trade execution analysis
- Formal monitoring and review systems
These principles provide the basis for pursuing strong rates of return with
controlled volatility and with low correlation to traditional fixed income and
equity investments as well as other managed futures programs and alternative
investment strategies.
Welton's investment process employs a variety of trading styles to
diversify the basis of profitability by adding diverse sources of return with
differing market dependencies, timing risks, and therefore low to moderate
correlation to traditional directional trading models of many managed futures
trading advisors. This may provide the potential benefits of (1) increasing the
actual level of portfolio diversification by increasing the number of methods
pursuing different market conditions, (2) effectively moderating negative
characteristics of other implemented models through diversification, (3)
requiring each method to be an effective, profitable and efficient user of
capital resources, (4) applying each method objectively across all applicable
markets, and (5) providing diversification to the market impact of order types
and market conditions during execution. Specifically, Welton organizes its
trading approaches into two fundamentally diverse investment style return
drivers as follows: Non/Limited Price Directional (relative value and volatility
arbitrage) and Price Directional (trend following).
Welton considers its portfolios and program to be in a constant cycle
of review and improvement centered on a stable process for improving their long
term success. This paradigm for performance improvement encompasses all
divisions of the firm. The continuous process involves regular review and
analysis of the following:
- All actual trading activity
- New and existing global markets with the goal of increasing
market diversification
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<PAGE>
- Potential strategic approaches to various market conditions
with the goal of increasing diversification
- Trading costs and execution methods
- Portfolio management models and techniques to best integrate
all of the above
This process implicitly recognizes that adaptation is essential in
approaching the global markets and that adaptation is best implemented at even
the most primary model levels.
To implement these models, Welton has developed an advanced decision
support platform capable of analyzing markets and combinations of markets around
the world in real-time. This tool allows the implementation of Welton's trading
strategies independently or in complementary combinations across diverse global
markets. Ongoing research and development continues to be Welton's largest
single commitment of resources with the objective of improving the level,
consistency and quality of performance in its offered portfolios and programs.
Although the trading of Welton portfolios is guided by the consistent
application of proprietary mathematical systems, there will always remain
investment decisions requiring the discretion and judgment of Welton. These
include but are not limited to contract month selection, analysis of portfolio
balance and capital requirements.
In addition, Welton may at its sole discretion choose not to implement
certain trades if they are judged to carry unusual risk to an account. Welton
will reinvest trading profits unless withdrawn by the client. Welton may also
stop trading certain markets should they become, in Welton's judgment, too
illiquid or volatile to trade or their movement too correlated with other
portfolio elements.
Assets committed to meet minimum exchange margin for all positions is
expected to remain between 5% and 20% of the trading size of the account. These
levels may from time to time be greater or lesser than this range. Actual margin
requirements may also differ between client accounts based on the method upon
which margin is being calculated and other terms negotiated between clients and
their brokers. All investments, including Welton managed portfolios and
programs, involve the risk of loss.
WELTON INVESTMENT PORTFOLIOS AND PROGRAM
Welton offers two distinct categories of investment products to
institutional, fund, corporate and qualified individual clients. One category
contains two classes of absolute return managed investment portfolios. The first
class provides three portfolio choices each of which utilize diversified trading
styles and quantitative investment models across the global futures, options and
currency markets. They are designed to achieve attractive absolute rates of
return with low correlation to the returns of traditional asset classes as well
as skill-based alternative investment strategies.
The second class provides a single portfolio choice that utilizes a
narrower group of trading styles on a much more limited group of highly liquid
global futures, options, and currency markets. The focus of this portfolio is
upon trading styles with substantially lower dependency on correct directional
positioning and timing of those positions than Welton's more diversified
absolute return portfolios. The main goal of the portfolio is to provide a
source of significant, durable diversification to other skill-based alternative
asset investments and traditional managed futures allocations.
In addition to absolute return portfolios, Welton offers a category
with a relative return investment program. This is an inherently customized
investment program designed to improve returns relative to a client-directed
global investment performance benchmark such as a fixed income index or note. In
directing trading for the Fund, Welton will employ its Diversified Portfolio,
which is an absolute return investment portfolio.
DIVERSIFIED PORTFOLIO
The Diversified Portfolio manages client assets through exposure to the
widest spectrum of futures markets spanning all major market sectors including
interest rates, currencies, stock indices, precious and industrial metals,
energy, meats, grains and soft commodities. Multiple trading strategies are
employed in an attempt to profitably participate in a variety of market
conditions. This emphasis on
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<PAGE>
market and style diversification exemplifies Welton's core principles in
advising on investor assets in the global marketplace.
WELTON PRINCIPALS
PATRICK L. WELTON is the Chief Executive Officer and Chairman of Welton
Investment Corporation. Dr. Welton developed the mathematical analysis
techniques and systems software employed by Welton in its trading and portfolio
management. Dr. Welton earned bachelor's degrees from the University of
Wisconsin, completing a portion of his undergraduate studies at Harvard
University. He then attended the UCLA School of Medicine where he completed
graduate biophysics and medical studies and earned an M.D. degree. Subsequently,
he was a postgraduate physician and a chief resident at the Stanford University
Medical Center. In addition to his full-time management of Welton, Dr. Welton is
a Principal to Welton Global Funds Management Corporation, a Director of Axios
Data Analysis Systems Corporation and a volunteer Clinical Professor of Medicine
at Stanford University School of Medicine. He has engaged in futures and
equities market research since 1981. During the past five years, Dr. Welton has
spoken at domestic and international conferences, authored articles,
participated in panel presentations on numerous trading and risk management
issues, and served on committees for the Managed Funds Association and NFA. He
is currently serving on the Board of Directors of NFA. He is registered as an
Associated Person with NFA.
ANNETTE L. WELTON is a co-founder of Welton Investment Corporation, a
Director, Chief Operational and Chief Financial Officer. Ms. Welton participated
in the early development of the systems software employed by Welton in its
trading and portfolio management methods. Since 1988, Ms. Welton has continued
to participate in the research committee, the review process and the monitoring
of trading for the company's clients. She also serves as a principal to Welton
Global Funds Management Corporation, a commodity pool operator affiliate. Ms.
Welton earned a Bachelor of Science degree in 1984 from the University of
California at Los Angeles. Since 1992, Ms. Welton has participated in the
Managed Funds Association's Public Relations and Trading and Markets Committees.
She has served on NFA's Nominating Committee in the Commodity Trading Advisory
category and has authored and co-authored several articles published in various
alternative investment trade publications. She is registered as an Associated
Person with NFA.
JERRY M. HARRIS is the Senior Vice President of Welton. He received a
Bachelor of Science degree in aerospace engineering at the University of
Virginia. He then earned a master's degree in information systems from the
University of Southern California. Subsequently, he was Vice President and Chief
Operating Officer of Cresta Commodity Management, Inc. in San Diego, California.
Beginning 1989 through 1990, he was Vice President of Marketing at Commodities
Corporation in Princeton, New Jersey. From November 1988 through March 1998, he
was a pilot with Delta Airlines. Mr. Harris is responsible for business
development efforts and industry representation, as well as participating in
strategic planning for Welton. Mr. Harris is a member of the Alternative
Investments Management Association and serves on its International Development
Committee as well as the Institutional Money Management Advisory Committee of
the New York Mercantile Exchange. He frequently is a featured speaker to
institutional and private investor groups on the topic of integrating
skill-based alternative investment strategies to diversify investment
portfolios. He has been associated with Welton Investment Corporation since 1993
and is registered as an Associated Person with NFA.
DAVID S. NOWLIN is the Vice President of Administrative Operations. His
responsibilities include oversight of the performance accounting and compliance
functions within the firm. Mr. Nowlin received a Bachelor of Arts degree in 1983
in Business Administration from Westmont College located in Santa Barbara,
California. He earned a Masters of Business Administration in 1992 from Santa
Clara University. Mr. Nowlin has been with Welton since 1993 and is registered
as an Associated Person with NFA. Prior to 1993, he held positions with Price
Waterhouse and Dean Witter Reynolds.
BRENT M. HANKINS is the Vice President of Trading Operations and
Portfolio Manager of Welton. His responsibilities include all aspects of trading
operations and portfolio management for the firm.
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<PAGE>
This includes management of brokerage relationships as well as the preparation,
transmission, checking and reconciliation of orders, monitoring of open
positions and risk, as well as tracking the liquidity of markets traded. Mr.
Hankins earned a Bachelor of Arts degree in Agricultural Business from
California Polytechnic State University, San Luis Obispo in 1992. He has been
associated with Welton since 1993 and is registered as an Associated Person with
NFA.
OTHER WELTON PROGRAMS
In addition to the Diversified Portfolio, Welton currently operates
three other portfolios and a trading program, none of which will be utilized by
the Fund.
PERFORMANCE OF THE WELTON DIVERSIFIED PORTFOLIO
The results set forth in the following table for accounts managed
pursuant to Welton's Diversified Portfolio are not indicative of the results
which may be achieved by the Fund in the future. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS. NO REPRESENTATION IS MADE THAT THE FUND WILL OR IS
LIKELY TO ACHIEVE PROFITS OR INCUR LOSSES COMPARABLE TO THOSE SHOWN.
The following performance results are presented on a composite basis
rather than for each account managed by Welton pursuant to its Diversified
Portfolio. The experience of individual accounts, including the Fund, have and
will differ from the composite results shown. Since Welton has modified and will
continue to modify its trading methods from time to time, the results shown in
the table do not necessarily reflect the precise trading methods to be used by
Welton on behalf of the Fund. In addition, the markets in which performance
records were achieved have been and are changing. A trading method that was
successful in a particular set of market conditions might not be successful in
other market conditions. The performance of particular accounts managed by
Welton may vary from the performance of other accounts managed by Welton due to
such factors as account size, brokerage commissions and advisory fees payable by
an account, degree of diversification, the particular commodity interests traded
and the times when accounts began trading, as well as the period during which
accounts are active, leverage is employed, the amount of interest income earned
by an account, the timing of orders to open or close positions and trading
instructions and/or restrictions of the client.
INVESTORS SHOULD NOTE THAT THE FOLLOWING PERFORMANCE TABLE IS A
COMPOSITE OF INDIVIDUAL ACCOUNTS WHICH VARY ACCORDING TO ACCOUNT SIZE, TRADING
LEVERAGE, FEES AND TRADING OBJECTIVES. THESE ACCOUNTS ARE NEGOTIATED ON A CLIENT
BY CLIENT BASIS AND THE TRADING FEES AND LEVERAGE AS WELL AS THE ACCOUNT SIZE
FOR EACH INDIVIDUAL ACCOUNT MAY BE MORE OR LESS THAN THE FUND. CONSEQUENTLY, THE
FOLLOWING PERFORMANCE TABLES MAY NOT PRESENT AS MEANINGFUL INFORMATION TO
INVESTORS AS THE ACTUAL PERFORMANCE OF THE FUND, WHICH IS PRESENTED ON PAGE 15.
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<PAGE>
PERFORMANCE OF THE WELTON DIVERSIFIED PORTFOLIO
INCEPTION OF CLIENT ACCOUNT TRADING: FEBRUARY 1989
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: APRIL 1992
ASSETS MANAGED (EXCLUDING NOTIONAL FUNDS) ON JANUARY 31, 2000: $112,000,000
ASSETS MANAGED PURSUANT TO THE PROGRAM (EXCLUDING NOTIONAL FUNDS) ON JANUARY
31, 2000: $101,000,000
NUMBER OF OPEN ACCOUNTS: 32
WORST MONTHLY DECLINE: (15.94)% (2/96)
WORST PEAK-TO-VALLEY DECLINE: (25.96)% (2/96-8/96)
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN FROM JANUARY 1995 THROUGH JANUARY
2000: 11.66%
AVERAGE COMPOUNDED ANNUALIZED RATE OF RETURN FROM INCEPTION THROUGH JANUARY
2000: 12.63%
<TABLE>
<CAPTION>
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
MONTHLY 2000 1999 1998 1997 1996 1995
PERFORMANCE
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
January (5.90)% (2.26)% (1.71)% 2.42% 5.94% (3.94)%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
February (2.54)% 6.81% 6.21% (15.94)% 8.90%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
March (7.90)% 6.18% (1.57)% (1.86)% 10.11%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
April 1.12% (3.50)% 0.28% 4.66% 3.57%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
May (3.34)% 2.30% 3.78% (7.71)% 11.71%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
June 3.43% (0.84)% 5.96% (1.72)% (1.38)%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
July (3.82)% (0.25)% 12.83% (2.83)% (2.57)%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
August (2.33)% 5.63% (6.16)% (2.70)% (1.25)%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
September (1.61)% 2.35% 1.25% 7.48% 1.55%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
October (7.10)% (4.66)% (6.14)% 13.16% (7.39)%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
November 6.79% 2.65% 2.79% 9.97% 4.77%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
December 7.81% 2.04% 1.23% 2.15% 9.44%
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
Compound Annual (5.90)% (12.32)% 17.52% 23.62% 7.17% 36.35%
Rate of Return (1 month)
- --------------------------- ------------- -------------- ------------- ------------- -------------- -------------
</TABLE>
Monthly rates of return are calculated by dividing net performance for
the month by beginning equity.
Worst peak-to-valley decline means the greatest cumulative percentage
decline in month-end net asset value during any period in which the initial
month-end net asset value for the period is not equaled or exceeded by a
subsequent month-end net asset value. Worst peak-to-valley decline is calculated
by comparing the initial month-end net asset value to each subsequent month-end
net asset value. A new trading "peak" is established each time the month-end net
asset value exceeds all prior month-end net asset values.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
-42-
<PAGE>
INTEREST INCOME
The Fund's assets are generally deposited with CIS and CISFS.
On the fifth business day of each month, CIS and CISFS credit the Fund
with interest on 100% of the Fund's net assets on deposit with CIS or CISFS, as
the case may be, in the previous month at a rate equal to 90% of the average
90-day Treasury bill rate for Treasury bills issued during that month.
CIS retains any interest earned on the Fund's assets in excess of the
amounts paid to the Fund.
Although the Fund has not yet traded in the spot and forward currency
markets, it will be required to deposit margin with CISFS when it does
participate in these markets. CIS will satisfy such margin requirements by
transferring Fund assets from the Fund's account at CIS to CISFS. Amounts
transferred to CISFS as margin on spot and forward currency and precious metals
positions will not be held by CISFS as customer segregated funds under the CEA
and the rules of the CFTC but will be included in determining the interest to be
credited to the Fund as described above.
The Fund's assets are used either as margin to secure the Fund's
obligations under the open positions which it holds in the markets or as a
reserve to support further trading in the event of market losses. The assets
deposited as margin with and held by the Clearing Broker are held in "customer
segregated funds accounts" or "foreign futures and foreign options secured
amount accounts" (in the case of futures and options traded on non-U.S.
exchanges), as prescribed by the CEA and applicable CFTC regulations. If assets
are deposited as margin with and held by CISFS they will be held in unregulated
accounts. In general, approximately 80% to 94% of the Fund's assets are held in
customer segregated funds accounts, with the remainder in foreign futures and
options secured accounts. The Fund's assets are held in cash.
-43-
<PAGE>
CHARGES
CHARGES PAID BY THE FUND
------------------------
The Fund is subject to the following charges and fees.
<TABLE>
<CAPTION>
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
- --------- ----------------- -----------------
<S> <C> <C>
JWH Incentive Fee 15% of Trading Profits, if
any, in each quarter
attributable to trading directed
by it.
JWH Management Fee 1/3 of 1% (a 4% annual rate) of
month-end Net Asset Value of
Fund assets subject to its
management.
Welton Incentive Fee 18% of Trading Profits, if any,
in each quarter attributable to
trading directed by it.
Welton Management Fee 1/4 of 1% (a 3% annual rate) of
month-end Net Asset Value of
Fund assets subject to its
management.
American Express Sales Charge 6% of the first $50,000
Financial Advisors subscribed, 4% of the second
Inc. $50,000, 2% of the subsequent
$400,000, and 1% of any amount
of the subscription exceeding
$500,000.
American Express Brokerage Commissions $20 per round turn trade of the
Financial Advisors total $35 per round turn trade
Inc. commission.
IDS Futures Annual Administrative Fee 1.125% of Net Asset Value on the
first day of the Fund's fiscal
year.
CISI Annual Administrative Fee 0.25% of Net Asset Value on the
first day of the Fund's fiscal
year.
CIS Brokerage Commissions $15 per round turn trade of the
total $35 per round turn trade
commission.
CIS Reimbursement of delivery, insurance, Actual payments to third parties
storage, NFA, clearing, give-up, in connection with the Fund's
electronic trading, EFP and exchange trading.
transaction fees, and any other charges
paid to third parties
-44-
<PAGE>
RECIPIENT NATURE OF PAYMENT AMOUNT OF PAYMENT
- --------- ----------------- -----------------
CIS Financial benefit from interest income Interest earned on Fund assets
in excess of the amount of
interest paid to the Fund. From
1994 to 1999 this amount ranged
between 0.41% to 0.54% of the
Fund's Net Asset Value. The
General Partners anticipate
future percentages to remain at
the lower end of this range due
to an increase in the interest
rate credited to the Fund by the
Clearing Broker in July of 1993.
CISFS Brokerage Commissions A maximum of $15 per round turn
trade of the total $35 per round
turn trade commission.
Third Parties Periodic legal, accounting, Actual expenses incurred,
auditing, printing, recording and filing estimated at approximately 0.50%
fees, and postage charges of the Fund's Net Asset Value
annually.
Third Parties Extraordinary Expenses Not subject to estimate.
The General Partners Offering Expense Charge 3% of the subscription proceeds
to cover legal, auditing,
accounting, marketing and other
offering expenses. The General
Partners will pay any expenses
in excess of this percentage. If
the total Offering Expense
Charge received exceeds actual
expenses, the difference shall
be retained by the General
Partners. The Sales Charge and
the Offering Expense Charge
together will not in any event
exceed an amount equal to 9% of
the gross proceeds from the sale
of Units, and no Limited Partner
will pay more than 9% of the
gross proceeds of his or her
subscription toward such
reimbursement.
</TABLE>
------------------------
DESCRIPTION OF CHARGES TO THE FUND
ADVISORY FEES
JWH receives a monthly management fee of 1/3 of 1% (a 4% annual rate)
and Welton receives a monthly management fee of 1/4 of 1% (a 3% annual rate). In
each case, the management fee is calculated only on the assets of the Fund under
the management of the Trading Advisor. Management fees are paid monthly and
deducted prior to the calculation of the quarterly incentive fees.
INCENTIVE FEES
JWH receives a quarterly incentive fee equal to 15% of Trading Profits,
if any, attributable to trading directed by it and Welton receives a quarterly
incentive fee equal to 18% of Trading Profits, if any, attributable to trading
directed by it. Trading Profits is the excess of (A) the Net Asset Value of the
Fund's
-45-
<PAGE>
assets managed by the Trading Advisor as of the last day of any calendar quarter
(before deduction of incentive fees payable for such quarter) over (B) the
highest Net Asset Value of the Fund's assets managed by the Trading Advisor as
of the last day of the most recent calendar quarter for which an incentive fee
was due and owing. In computing Trading Profits, interest realized on Fund
assets managed by the Trading Advisor is excluded. Also, allocations of Fund
assets to a Trading Advisor and reallocations of Fund assets away from a Trading
Advisor increase or decrease, respectively, the highest Net Asset Value referred
to in (B) above.
Units redeemed on a date other than at quarter-end shall be treated as
if redeemed at the end of the quarter for purposes of calculating incentive fees
and incentive fees, if any, shall be paid to the Trading Advisors at that time.
Subsequent losses do not reduce incentive fees once they are earned.
The incentive fees payable to a Trading Advisor are based upon Trading
Profits, if any, as of the end of each quarter, including any unrealized gains
or losses in open positions in commodity interests. Unrealized gains
attributable to appreciation in open positions may never be realized by the Fund
when those positions are closed. Upon the expiration or termination of a Trading
Advisor's Advisory Contract, the Fund will be charged an incentive fee as though
such expiration or termination date were the end of a quarter.
SAMPLE ADVISORY FEE CALCULATION
Assume, for example, that JWH was allocated $1,000,000 at the beginning
of the quarter and that it makes profits of $500,000 during the first quarter.
The fees paid to JWH would be $75,000 (15% of $500,000) and the new value of the
Fund assets allocated to JWH would be $1,425,000 after deducting the incentive
fee paid. This would be the "new trading high" that would have to be exceeded
prior to JWH receiving another incentive fee. If in the following quarter, the
account realizes a loss of $250,000 pursuant to trading directed by JWH, no
incentive fee would be paid. The value of the account would be $1,175,000 and
the level to be exceeded before the next incentive fee payment would be required
would be $1,425,000. If in the following quarter, JWH earns profits of $400,000,
it would be paid fees of $22,500 ([$1,175,000 + $400,000 - $1,425,000] X .15).
The value and the new high value to exceed before any further incentive fees are
earned would then be $1,552,500.
BROKERAGE EXPENSES
Cargill Investors Services, Inc. acts as the Fund's Clearing Broker.
The Fund pays a brokerage commission of $35 (plus NFA, exchange and clearing
fees and give-up, electronic trading and EFP fees, if applicable) per round turn
trade (and any permitted future increase in such rate). Prior to September 1,
1995, the Fund paid brokerage commissions at a rate of $50 per round turn trade.
With respect to any trading conducted by the Fund on a foreign exchange, the
Fund pays the equivalent of $35 per trade plus any differential associated with
execution costs on non-U.S. exchanges. The Fund is required to pay, in addition
to the brokerage charge described above, the NFA per trade transaction fee
(which is currently assessed at a rate of 18 CENTS per round turn futures
transaction and 9 CENTS per options trade) and exchange and clearing fees and
give-up, electronic trading and EFP fees, if applicable. Exchange fees range
from $0 to $2 per trade plus any differential for non-U.S. exchanges, if
applicable, depending on the exchange where a trade is executed; clearing fees
range from $0 to $1.70 per trade plus any differential for non-U.S. exchanges,
if applicable, also depending on the exchange where a trade is executed; give-up
and electronic trading fees range from $2 to $4 per trade, if applicable,
depending on the exchange where a trade is executed.
The Fund also reimburses the Clearing Broker for all delivery,
insurance, storage, service and other charges that it incurs and pays to third
parties in connection with the Fund's trading.
The Fund pays a $35 commission per round turn trade to the Clearing
Broker or CISFS, as the case may be, which in turn pays $20 per round turn trade
to American Express Financial Advisors Inc. in its capacity as Introducing
Broker for the Fund. American Express Financial Advisors Inc. receives its
portion of such commissions for its ongoing services to the Fund and the Limited
Partners. Such services include:
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<PAGE>
1. Responding to inquiries from Limited Partners from time to time as to
the Net Asset Value of the Fund's Units;
2. Providing information to the Limited Partners concerning the futures
markets and the Fund's activities;
3. Responding to inquiries of Limited Partners related to the Fund's
monthly account statements, annual reports, financial statements, and annual tax
information provided to the Limited Partners;
4. Providing information to Limited Partners regarding redemptions of
Units;
5. Assisting Limited Partners in redeeming Units; and
6. Providing other services requested from time to time by Limited
Partners.
The General Partners annually review the brokerage commissions,
administrative fees, periodic operating expenses, transaction fees and costs,
the Trading Advisors' management fees, and any financial benefit from interest
earned on Fund assets in excess of the interest paid to the Fund to assure that
such charges do not exceed 12% of the Fund's average monthly Net Asset Value.
The General Partners also annually review the Fund's brokerage charges to assure
that they are within the range of those generally charged to public commodity
funds of comparable size and structure in view of the nature and quality of the
brokerage services being rendered.
Historically the Fund's annual brokerage expenses have ranged from
approximately 2.5% to 6.1% of the Fund's Net Asset Value. Actual future charges
may differ substantially from this historical range since the actual amounts
paid by the Fund will depend on the volume and frequency of trading directed by
the Trading Advisors and the brokerage commission rates applicable to the Fund's
trading.
ADMINISTRATIVE FEES
Each of the General Partners receives an annual administrative fee
based on the Fund's Net Asset Value on the first business day of each fiscal
year. The annual administrative fee payable to IDS Futures and CISI is 1.125%
and 0.25%, respectively, of the Fund's beginning Net Asset Value for each fiscal
year.
INTEREST ALLOCATION
The Fund receives interest from the Clearing Broker on 100% of its
average monthly net assets on deposit at the Clearing Broker at a rate of
interest equal to 90% of the average 90-day Treasury bill rate for Treasury
bills issued during that month. The Clearing Broker receives and retains any
increment of interest earned on the assets of the Fund in excess of the amount
paid to the Fund. The amount of interest income which the Clearing Broker
retains under this arrangement will vary over time, depending on applicable
interest rates and the Net Asset Value of the Fund. From 1994 to 1999 this
amount ranged from between 0.41% and 0.54% of the Fund's Net Asset Value. The
General Partners anticipate future percentages to remain at the lower end of
this range due to an increase in the rate of interest credited by the Clearing
Broker from 80% to 90% of such average 90-day Treasury bill rate in July of
1993.
OFFERING EXPENSE
The General Partners have agreed to pay all of the expenses of this
offering, which include legal, auditing, accounting, marketing, filing,
registration and recording fees plus printing expenses and escrow charges. The
General Partners will receive the Offering Expense Charge to reimburse them for
the offering expenses. If the total Offering Expense Charge received by the
General Partners exceeds the actual offering expenses they incurred, they shall
retain the excess. If actual offering expenses exceed the total Offering Expense
Charge, the General Partners shall pay, without reimbursement from the Fund,
such excess.
SALES CHARGE
The Selling Agent will receive the Sales Charge from the proceeds of
the offering. This Sales Charge will consist of 6% of the first $50,000
subscribed, 4% of the second $50,000, 2% of the subsequent $400,000 and 1% of
any amount of the subscription exceeding $500,000. Subscribers who are
representatives or employees of the Selling Agent
-47-
<PAGE>
or certain of its corporate affiliates ("Affiliated Purchasers") will not pay a
Sales Charge. The maximum amount of such payments to the Selling Agent will be
$1.35 million if all of the Units offered hereby are sold to non-Affiliated
Purchasers and $22.5 million in new capital is raised in this offering and no
single purchaser subscribes for more than $50,000.
OTHER PERIODIC EXPENSES
The Fund pays periodic legal, accounting, auditing, printing, recording
and filing fees, and postage charges, all of which are currently estimated at
approximately 0.50% of the Fund's Net Asset Value annually, and extraordinary
expenses, which could include expenses such as the cost of litigation to which
the Fund might become a party. All periodic expenses shall be billed directly to
the Fund.
EXTRAORDINARY EXPENSES
The Fund will be required to pay any extraordinary expenses, such as
taxes, incurred in its operation. To date, the Fund has not incurred any
extraordinary expenses and, in the General Partner's experience with other
managed futures funds, such expenses have been negligible. Extraordinary
expenses, if any, would not reduce Trading Profits for purposes of calculating
the Trading Advisors' incentive fees.
BROKERAGE ARRANGEMENTS
THE CLEARING BROKER
CIS executes and clears the Fund's futures transactions and provides
other brokerage-related services. The Clearing Broker is a Delaware corporation.
Its principal office is located at 233 South Wacker Drive, Suite 2300, Chicago,
Illinois 60606. It has offices and affiliated offices in Chicago, New York,
Kansas City and Minnesota as well as in England, France, Switzerland and
Singapore. The clients of the Clearing Broker include commercial and financial
institutions that use the futures markets for risk management purposes as well
as private investors. The Clearing Broker has more than 550 employees. The
Clearing Broker is a wholly-owned, but separately managed, subsidiary of
Cargill, Incorporated, a privately-owned international merchant, warehouser,
processor and transporter of agricultural and other bulk commodities that was
founded in 1865.
The Clearing Broker is a clearing member of all of the principal
futures exchanges in the United States and is a clearing broker or has clearing
relationships on all major world futures exchanges. It is registered with the
CFTC as a futures commission merchant and is a member of NFA. Certain employees
of the Clearing Broker are members of U.S. futures exchanges and may serve on
the governing bodies and standing committees of those exchanges and their
clearing houses. In that capacity, these employees have a fiduciary duty to the
exchanges and would be required to act in the best interests of such exchanges,
even if that action might be adverse to the interests of the Fund.
Cargill, Incorporated owns and operates grain elevators and soybean
processing plants that are designated as regular warehouses for delivery of
certain physical commodities in satisfaction of futures contracts under the
rules of the Chicago Board of Trade and similar rules of other U.S. futures
exchanges.
Cargill, Incorporated and its affiliates are substantial users of
virtually all futures contracts for hedging purposes. Such hedging transactions
are generally implemented by employees of Cargill, Incorporated and the Clearing
Broker generally executes or clears those transactions. The volume of trading by
Cargill, Incorporated and its affiliates is likely to result in their competing
with the Fund for futures market positions. Thus, in certain instances, the
Clearing Broker may have orders for trades from the Fund and from Cargill,
Incorporated or its affiliates, and the Clearing Broker might be deemed to have
a conflict of interest between the sequence in which such orders will be
transmitted to the trading floors of futures exchanges. In order to assure
impartial treatment for such orders, the Clearing Broker has an operating policy
of transmitting orders to the trading floors in the sequence received regardless
of which entity has placed the order. The Fund might enter into trades in which
the other party is Cargill, Incorporated or one of its affiliates. It is
possible that the hedging and cash operations of Cargill, Incorporated or
trading by its affiliates may adversely affect the Fund. Records of such trading
-48-
<PAGE>
will not be made available to Limited Partners. It is possible that these
entities may take positions either similar or opposite to positions taken by
the Fund and that the Fund and these entities may compete for similar
positions in the futures markets.
NO OFFICERS, DIRECTORS OR EMPLOYEES OF THE CLEARING BROKER OR ITS
AFFILIATES ARE PERMITTED TO TRADE FUTURES SPECULATIVELY FOR THEIR OWN ACCOUNTS.
In the ordinary course of its business, the Clearing Broker is engaged
in civil litigation and subject to administrative proceedings which, in the
aggregate, are not expected to have a material effect upon its condition,
financial or otherwise, or the services it will render to the Fund. Neither the
Clearing Broker nor any of its principals have been the subject of any material
administrative, civil or criminal action within the five years preceding the
date of this Prospectus.
The Fund and the Clearing Broker have entered into a Commodity
Brokerage Agreement that provides that, for as long as the Fund maintains an
account with the Clearing Broker, the Clearing Broker will execute trades for
the Fund upon instructions of the Trading Advisors and will receive a brokerage
commission rate equal to $35 (plus NFA, exchange and clearing fees and give-up,
electronic trading and EFP fees, if applicable, and any differential for
non-U.S. exchanges, if applicable) per round turn trade. If in the future the
Fund pays less than $35 for each roundturn trade, the Clearing Broker and the
Introducing Broker may receive amounts in proportions that differ from the
current allocation. Either party may terminate the Commodity Brokerage Agreement
on 60 days notice. Should the Fund choose not to renew this agreement with the
Clearing Broker, no assurance may be given that the Fund will be able to retain
the brokerage services of another clearing broker at the same commission rate.
In addition, under the Amended and Restated Limited Partnership Agreement,
Limited Partners owning more than 50% of the outstanding Units may cause the
Fund to terminate any contracts with the General Partners or their affiliates.
The Clearing Broker is responsible for transaction execution and clearance of
futures contracts (and options, if traded) as well as for certain administrative
duties such as recordkeeping, transmittal of confirmation statements and
calculating equity balance and margin requirements for the Fund's account. The
Commodity Brokerage Agreement provides that the Clearing Broker will not be
liable to the Fund except for bad faith or negligence.
The Fund's assets are and will continue to be deposited with CIS in its
capacity as the Fund's Clearing Broker. The Clearing Broker pays monthly to the
Fund interest on 100% of its average monthly net assets on deposit at the
Clearing Broker at a rate equal to 90% of the average 90 day Treasury bill rate
for Treasury bills issued during that month. The Clearing Broker receives and
retains any increment of interest earned on the assets of the Fund in excess of
the amount paid to the Fund.
THE INTRODUCING BROKER
American Express Financial Advisors Inc., a Delaware corporation
organized in 1984, is a wholly-owned subsidiary of American Express Financial
Corporation. American Express Financial Corporation is a wholly-owned subsidiary
of American Express Company. American Express Financial Advisors Inc. is
registered as a broker-dealer and investment adviser with the SEC, and is a
member of the National Association of Securities Dealers, Inc. American Express
Financial Advisors Inc. does business as a broker-dealer in 51 jurisdictions.
American Express Financial Advisors Inc. maintains a nationwide financial
planning force of more than 9,500 persons. American Express Financial Advisors
Inc. was named and did business as IDS Financial Services Inc. until January 1,
1995. IDS Futures Corporation, a Minnesota corporation organized in December of
1986, is a wholly-owned subsidiary of IDS Management Corporation, a Minnesota
corporation organized in December 1986. IDS Management Corporation is a
wholly-owned subsidiary of American Express Financial Corporation, which was
named IDS Financial Corporation until January 1, 1995. Other subsidiaries of IDS
Management Corporation are engaged in the organization and management of limited
partnerships investing in assets other than commodity interests.
-49-
<PAGE>
American Express Financial Advisors Inc. and its affiliates are engaged
in providing a variety of financial products and services to individuals,
businesses and institutions. These products and services include life insurance
and annuities, face amount certificates, mutual funds, client paid financial
planning services, investment advisory services, limited partnership interests
and brokerage services.
During the ordinary course of its business, American Express Financial
Advisors Inc. is engaged in civil litigation and subject to administrative
proceedings, which, in the aggregate, are not expected to have a material effect
upon its condition, financial or otherwise, or the services it will render to
the Fund. Neither American Express Financial Advisors Inc. nor any of its
principals have been the subject of any material administrative, civil or
criminal action pending, completed or on appeal within the five years preceding
the date of this Prospectus.
The Clearing Broker will reallocate $20 of each round turn trade
commission to American Express Financial Advisors Inc. in its capacity as
Introducing Broker for the Fund. American Express Financial Advisors Inc.
receives such commissions for its ongoing services to the Fund and to the
Limited Partners. Prospective investors should be aware that, in receiving a
portion of the commodity brokerage commissions generated by the Fund and
allocable to outstanding Units, American Express Financial Advisors Inc. has a
conflict in performing certain services to the Limited Partners, particularly as
to whether or not they should redeem Units.
THE FOREIGN CURRENCY BROKER
CISFS will act as the Fund's forward contract broker and in that
capacity will arrange for the Fund to contract directly for forward transactions
in foreign currencies. CISFS is a Delaware corporation that is a wholly-owned
subsidiary of CIS Holdings, Inc. CISFS is a direct participant in the interbank
market for foreign currencies. In that capacity it buys and sells foreign
currencies for its customers through direct counterparty transactions with other
participants in the interbank market. CISFS has established substantial lines of
credit with banks participating in the interbank market, and CISFS will make
those lines of credit available to the Fund for its own currency transactions.
In these transactions, the Fund will act as a principal in each transaction
entered into with a bank, and CISFS will act only as the Fund's agent in
brokering these transactions.
To date, the Fund has not engaged in forward currency transactions. In
the very near future, the fund expects this to begin. When the Fund begins
TRADING forward contracts, sufficient cash will be transferred from the Fund's
commodity account with the Clearing Broker to CISFS and CARGILL, Incorporated
will guarantee CISFS' obligations to the FUND up to $3 million. As of the date
of this Prospectus, the Fund had no assets on deposit with CISFS.
REDEMPTIONS;
NET ASSET VALUE
REDEMPTIONS
THE FUND IS INTENDED AS A MEDIUM- TO LONG-TERM, "BUY AND HOLD"
INVESTMENT. THE FUND'S OBJECTIVES ARE TO ACHIEVE SUBSTANTIAL CAPITAL
APPRECIATION OVER TIME. THE FUND IS NOT INTENDED TO ACHIEVE, NOR TO ATTEMPT TO
ACHIEVE, SIGNIFICANT APPRECIATION OVER THE SHORT TERM.
No redemptions are permitted by a subscriber during the first six
months after he or she has been admitted to the Fund. Thereafter, a Limited
Partner may redeem any or all of his or her Units effective as of the last
trading day of any month at the Net Asset Value per Unit. Requests for
Redemption (Exhibit D) should be sent to American Express Financial Advisors
Inc., c/o Unit 580, P.O. Box 534, Minneapolis, Minnesota 55440 at least 10
calendar days prior to the last trading day of the month in order for the
effective date of redemption to be the last trading day of the month in which a
Request for Redemption is made. In the event that a Request for Redemption is
received later than 10 calendar days prior to the last trading day of a month,
the redemption requests will have an effective date of redemption of the last
trading day of the subsequent month.
The Request for Redemption must specify either the number of Units to
be redeemed or the
-50-
<PAGE>
dollar amount of the requested redemption. The minimum redemption amount,
whether requested in terms of dollars or Units, is the lesser of $500 or the Net
Asset Value of two Units, unless the Limited Partner is redeeming his or her
entire interest in the Fund. If a Limited Partner redeems less than his or her
entire interest in the Fund, his or her remaining interest must equal the lesser
of $500 or the Net Asset Value of two Units.
Redemption payments will generally be made within 10 business days of
the effective date of redemption, except as described below. The profits and
losses of the Fund shall be allocated to the partners in proportion to their
respective Units and to their respective dates of redemption. The right to
obtain redemption is contingent upon the Fund having property sufficient to
discharge its liabilities (contingent or otherwise) on the effective date of
redemption. Under special circumstances, including but not limited to inability
to liquidate commodity positions or default or delay in payments due to the Fund
from banks or other persons, the Fund may in turn delay payment to partners
requesting redemption of Units of the proportionate part of net assets
represented by the sums which are the subject of such default or delay.
If the Net Asset Value per Unit decreases below $125 at the close of
business on any trading day (after adding back any distributions from the Fund
to the Limited Partners), the Fund will attempt to close out all open positions
as expeditiously as possible and suspend trading. No assurance can be or is
given that the Fund will be able to close out all open positions without
incurring substantial additional losses. Unless the General Partners then elect
to withdraw, a special redemption date will be declared. Limited Partners who
elect to redeem Units on such a special redemption date will receive from the
Fund for each Unit redeemed an amount equal to the Net Asset Value per Unit
determined as of the close of business on such special redemption date. If after
a special redemption date the Fund's Net Asset Value is at least $500,000 the
Fund will resume trading unless the General Partners then elect to withdraw.
NET ASSET VALUE
The Net Asset Value of the Fund is its assets less its liabilities
determined in accordance with generally accepted accounting principles. The Net
Asset Value per Unit is the Net Asset Value of the Fund divided by the number of
Units outstanding.
When calculating Net Asset Value, futures or option contracts traded on
a United States commodity exchange are valued at the settlement price on the
date of valuation. If an open position cannot be liquidated on the day with
respect to which Net Asset Value is being determined, the settlement price on
the first subsequent day on which the position can be liquidated shall be the
basis for determining the liquidating value of such position for such day, or
such other value as the General Partners may deem fair and reasonable. The
liquidating value of a commodity futures or option contract not traded on a
United States commodity exchange shall mean its liquidating value as determined
by the General Partners on a basis consistently applied for each different
variety of contract. Accrued incentive fee liabilities reduce Net Asset Value
(subject, however, to possible whole or partial reversal if the Fund incurs
subsequent losses) even if such accrued incentive fees may never, in fact, be
finally paid to the Trading Advisors.
CONFLICTS OF INTEREST
THE GENERAL PARTNERS
CISI and IDS Futures are general partners of the Fund and affiliates of
the Fund's Clearing Broker, Introducing Broker/Selling Agent and Foreign
Currency Broker. The General Partners have both a duty to act in the best
interests of the Limited Partners and the Fund and an interest in benefitting
their affiliates. Accordingly, the General Partners are subject to the following
conflicts of interest.
BROKERAGE COMMISSIONS
The General Partners have a duty to reduce the brokerage commissions
and an interest in generating additional brokerage commission through either
higher round turn rates or more trading to benefit their affiliates. However,
the Trading Advisors determine the volume and frequency of trading and they are
unaffiliated with the General Partners. Additionally, the Clearing Broker and
Introducing Broker may charge other accounts higher fees. As a result, the
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General Partners believe that the brokerage arrangements are fair to the Fund.
ANNUAL ADMINISTRATIVE FEES
The General Partners receive an annual administrative fee based upon
the beginning Net Asset Value of the Fund. These fees were determined by the
General Partners without any negotiation between them and the Fund.
Distributions are made at the discretion of the General Partners.
Because distributions reduce the Fund's Net Asset Value, the General Partners
have a conflict of interest between making distributions in the best interests
of the Fund and increasing the Fund's Net Asset Value to increase their annual
administrative fees.
INTEREST
CIS pays the Fund interest on 100% of the average monthly net assets on
deposit with it at a rate equal to 90% of the average 90-day U.S. Treasury bill
rate for Treasury bills issued during the month. CIS retains the excess interest
earned on the Fund's deposits. CISI has a conflict of interest between making
distributions in the best interests of the Fund and increasing the amount of
Fund assets on deposit with its affiliate.
OTHER POOLS AND ACCOUNTS
The Clearing Broker acts as commodity broker for commodity pools other
than the Fund. The General Partners have established and operate additional
commodity pools, which may vary in structure and in compensation arrangements
from the Fund. The parent of the Introducing Broker/Selling Agent is registered
as a commodity trading advisor and in that capacity renders hedging advice to
mutual funds it advises. The Clearing Broker, the Introducing Broker and the
General Partners will not knowingly or deliberately favor any other commodity
pool or account over the Fund with respect to the execution of commodity trades.
The Trading Advisors or their affiliates may operate commodity pools
and will manage accounts other than the Fund's account, including commodity
pools and proprietary accounts. The Trading Advisors have represented to the
Fund that they will treat the Fund equitably and will not deliberately favor on
an overall basis any other client over the Fund with respect to advice relating
to commodity interest transactions.
OTHER ACTIVITIES OF THE CLEARING BROKER, INTRODUCING BROKER, GENERAL PARTNERS
AND TRADING ADVISORS, AND THEIR OFFICERS AND
EMPLOYEES
The General Partners allocate their resources among a number of
different investment funds. They may have financial incentives to favor certain
investment funds over the Fund.
Certain of the officers and employees of the Clearing Broker may be
members of various exchanges and may from time to time serve on the governing
bodies and standing committees of such exchanges and their clearing houses. In
addition, certain of the officers and employees of the Trading Advisors, the
Clearing Broker, the Introducing Broker and the General Partners may also be
members of committees of NFA. In such capacities these individuals have a
fiduciary duty to the exchanges or organizations on which they serve and they
are required to act in the best interests of such exchanges or organizations,
even if such actions were to be adverse to the interests of the Fund. In
addition, principals of such firms may devote portions of their time to other
business activities unrelated to the business of those firms.
COMPENSATION TO THE GENERAL PARTNERS, THE CLEARING BROKER AND THE INTRODUCING
BROKER
Receipt by the General Partners, the Clearing Broker and the
Introducing Broker of compensation on an ongoing basis in the form of
administrative fees and brokerage commissions paid by the Fund creates a
conflict of interest between their duty to perform certain services in the best
interests of the Limited Partners and their interest in continuing to receive
ongoing compensation related to administrative fees and brokerage commissions,
which is dependent on the Limited Partners continuing to participate in the
Fund.
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CIS; CISFS
CIS executes trades for different clients in the same markets at the
same time. Consequently, other clients may receive better prices on the same
trades than the Fund, causing the Fund to pay higher prices for its positions.
CIS and CISFS must allocate their resources among many different
clients. They could have financial incentives to favor certain accounts over the
Fund. Because of the competitive nature of the markets in which they trade, to
the extent that either CIS or CISFS prefers other clients over the Fund, the
Fund is likely to be negatively impacted.
THE TRADING ADVISORS
GENERAL
The Trading Advisors manage many accounts other than the Fund.
Consequently, the Trading Advisors may devote less resources to the Fund's
trading to the detriment of the Fund.
Some of the Trading Advisors' principals devote a substantial portion
of their business time to ventures other than managing the Fund, including
ventures unrelated to futures trading. The Fund may be at a competitive
disadvantage to other accounts which are managed by trading advisors whose
principals devote their entire attention to futures trading.
FINANCIAL INCENTIVES TO DISFAVOR THE FUND
If the Fund has losses, the Trading Advisors may have an incentive to
prefer other clients because they could begin to receive incentive compensation
from such clients without having to earn back any losses.
THE SELLING AGENT
The Selling Agent receives the Sales Charge for every Unit sold to a
non-Affiliated Purchaser. Consequently, the Selling Agent has a conflict of
interest in advising their clients whether to invest in the Units.
The Selling Agent receives ongoing compensation based on the trading
activity of the Fund. Consequently, in advising clients whether to redeem their
Units the Selling Agent will have a conflict of interest between its interest in
maximizing the compensation which it will receive from the Fund and giving its
clients the financial advice which the Selling Agent believes to be in such
clients' best interests.
PROPRIETARY TRADING
JWH and Mr. Henry may engage in discretionary trading for their own
accounts, and may trade for the purpose of testing new investment programs and
concepts, as long as such trading does not amount to a breach of fiduciary duty.
In the course of such trading, JWH and Mr. Henry may take positions in their own
accounts which are the same as or opposite to the Fund's positions, due to
testing a new quantitative model or program, a neutral allocation system, and/or
trading pursuant to individual discretionary methods. In addition, Mr. Ginsberg
may engage in discretionary trading for his own account pursuant to his own
personal trading approach as long as such trading does not amount to a breach of
fidiciary duty. Mr. Ginsberg's trades may be the same as or opposite to
positions that JWH takes for the Fund. Trades for the accounts of JWH, Mr. Henry
or MR. Ginsberg may on occasion receive better fills than the Fund's account.
Records for these accounts will not be made available to the Fund.
Employees and principals of JWH (other than Messrs. Henry and Ginsberg)
are not permitted to trade in futures, options on futures or forward contracts.
However, such principals and employees may invest in investment vehicles that
trade futures, options on futures or forward contracts when an independent
trader manages trading in that vehicle, and in the JWH Employee Fund, L.P., for
which JWH is the trading advisor. Records of these accounts will not be made
available to the Fund.
Mr. Wing is chairman of the board of Market Liquidity Holding, LLC
(MLHL). MLHL acts as the general partner of partnerships or sponsors entities
that will trade futures, options on futures and equity options for hedging and
risk management purposes in connection with the equity trading of these
entities. Mr. Wing is not involved in directing or overseeing such trading.
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Records of MLHL's accounts will not be made available to the Fund.
Welton and its principals trade futures, options and securities for
their own accounts and provide management services to other clients. Investments
made on behalf of Welton, its principals and its clients as well as any policies
related thereto will remain confidential. In the course of such trading, Welton
or its principals may take positions in their own accounts which are in the same
market and in the same direction as positions advocated for clients. In the case
that Welton or its principals place the same trade orders for their accounts as
they do for their clients in a single block order with the brokerage firm, the
brokerage firm shall allocate the trade fill prices assigned to each account in
a manner consistent with that firm's policy. This equalizes the likelihood of
Welton or its principals receiving a superior or inferior price compared to any
of their clients or in the case of a partial fill of a block order, equalizes
the likelihood of Welton or its principals receiving a trade that some customers
will not receive or vice versa.
Records of proprietary trading will not be available for inspection by
Limited Partners.
Proprietary trading by JWH, Mr. Henry, Mr. Ginsberg or Welton and its
principals could, if substantial in size and conducted in the same markets
traded by the Fund, cause losses for the Fund by increasing the cost at which it
must acquire and liquidate positions. Over time, the losses resulting from such
increased prices could make it difficult for the Fund to earn profits even if
its trading were otherwise successful.
TRANSACTIONS BETWEEN THE GENERAL PARTNERS AND THE FUND
Each of the service providers to the Fund, other than the Trading
Advisors, are affiliated with one of the General Partners. The General Partners
negotiated with the Trading Advisors over the level of their management and
incentive fees. However, none of the fees the Fund pays to the General Partners
or their affiliates were negotiated, and they may be higher than would have been
obtained in arm's-length bargaining.
The Fund pays CIS substantial brokerage commissions a portion of which
is paid to American Express Financial Advisors Inc. The Fund also pays CIS
interest on short-term loans extended by CIS to cover losses on foreign currency
positions and permits CIS to retain a portion of the interest earned on the
Fund's assets.
No loans have been, are or will be outstanding between the General
Partners or any of their principals and the Fund.
Descriptions of the dealings between the Fund, the General Partners and
their affiliates are set forth under "Selected Financial Data," "Interest
Income," "Charges" and "Brokerage Arrangements."
THE LIMITED PARTNERSHIP AGREEMENT
The rights and duties of the General Partners and the Limited Partners
are governed by the provisions of the Delaware Revised Uniform Limited
Partnership Act and by the Amended and Restated Limited Partnership Agreement.
Certain features of the Partnership Agreement are explained below.
NATURE OF THE FUND
A Limited Partner will not be personally liable for any debts or losses
of the Fund beyond the amount of his or her capital contribution and profits
attributable thereto.
MANAGEMENT OF THE FUND
Under the Partnership Agreement, the General Partners shall have the
exclusive management and control of all aspects of the business of the Fund.
Limited Partners holding more than 50% of the outstanding Units may require the
Fund to terminate any agreement with an affiliate of either General Partner on
60 days notice without penalty.
The Fund will operate and pay all of its administrative expenses,
including brokerage commissions, the General Partners' administrative fees, the
Trading Advisors' management and incentive fees, and other charges incidental to
trading,
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advisory fees, legal, accounting, auditing, printing, recording and filing fees,
and extraordinary expenses.
MINIMUM INVESTMENT; NET WORTH REQUIREMENT
The General Partners are required to maintain together a 1% investment
in the Fund. In addition, the General Partners are required to maintain together
a net worth no less than 10% of the aggregate capital contributions to each
partnership for which they act as General Partner. The General Partners satisfy
the net worth requirement applicable to them by means of a demand note payable
to it from IDS Financial Corporation (now named American Express Financial
Corporation), in the case of IDS Futures, and a subscription agreement from
Cargill Investor Services, Inc., as well as a demand note payable to it from
Cargill, Incorporated, in the case of CISI.
DISTRIBUTIONS BY THE FUND
The General Partners, in their sole discretion, decide whether the Fund
will make any distributions to its partners. To date, the Fund has not made any
distributions.
REDEMPTIONS
Limited Partners may not redeem their Units during the first six months
after being admitted to the Fund as a Limited Partner. Thereafter, Units may be
redeemed as of the last trading day of any month at Net Asset Value per Unit
upon ten calendar days prior written notice. In the event the Net Asset Value
per Unit declines below $125 (after adding back any distributions) at the close
of business on any trading day, the General Partners shall close out all
positions, suspend trading and declare a special redemption date.
ADDITIONAL PARTNERS
The General Partners have the sole discretion to admit additional
limited partners. Subsequent to this offering the Fund may offer and sell
additional Units, and there is no limitation on the total number of Units which
may be outstanding.
TRANSFERS OF UNITS
A Limited Partner may assign his or her Units upon prior notice to the
General Partners. No assignee, without the consent of the General Partners may
become a substituted limited partner. If the General Partners withhold consent,
an assignee will only have the right to share in the profits of the Fund and to
redeem Units to the extent to which the assigning Limited Partner would have
otherwise been entitled.
INDEMNIFICATION
The General Partners and their affiliates shall not be liable to the
Fund or to the Limited Partners other than for acts or omissions constituting
negligence or misconduct or which were not taken in good faith or were not
within the scope of their authority. In addition, the Fund may indemnify a
General Partner against expenses, including attorneys' fees, judgments and
amounts paid in settlement, actually and reasonably incurred by a General
Partner in connection with the Fund, PROVIDED that the expense for which
indemnification is sought was not the result of negligence or misconduct by the
General Partner.
ELECTION, REMOVAL AND WITHDRAWAL OF GENERAL PARTNERS
The General Partners may be removed, and additional or successor
general partners may be elected, by a vote of a majority of the outstanding
Units (not including Units held by the General Partners or their corporate
affiliates). A General Partner may withdraw completely upon 120 days' notice to
the Limited Partners. If the Limited Partners or the remaining General Partner
elect to continue the partnership, the withdrawing General Partner shall pay all
expenses incurred as a result of its withdrawal.
TERMINATION OF THE FUND
The Fund will terminate upon the first to occur of the following: (i)
December 31, 2006; (ii) Limited Partners owning more than 50% of the Units
(excluding any Units held by the General Partners or their corporate
affiliates), electing to dissolve the Fund; (iii) withdrawal, removal,
insolvency, bankruptcy, dissolution or legal disability of the General Partners
unless a new General Partner has been substituted; (iv) the insolvency or
bankruptcy of the Fund; (v) a decrease in the Fund's Net Asset Value below
$500,000 as of the close of business on any trading day; or (vi) the occurrence
of any event
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which shall make it unlawful for the existence of the Fund to be continued or
requiring termination of the Fund.
AMENDMENTS; MEETINGS
The Partnership Agreement may be amended in any respect by holders of a
majority of the outstanding Units, except to change the Fund to a general
partnership, to change the liability or reduce the capital account of the
General Partners or the Limited Partners, to extend the duration of the Fund or
to modify the percentage of profits, losses or distributions to which the
General Partners or the Limited Partners are entitled.
An amendment may be proposed or approved at a meeting of the partners.
The General Partners or the holders of at least 10% of the outstanding Units may
call a meeting. No annual meetings have been or are expected to be held.
FISCAL YEAR
The fiscal year of the Fund ends on December 31.
REPORTS AND ACCOUNTING
The Fund uses the accrual method of accounting and its books are
audited annually by the Fund's independent public accountant. Each Limited
Partner receives an annual report containing audited financial statements and
monthly statements.
The General Partners will also furnish each Limited Partner with tax
information in a form which may be utilized in the preparation of income tax
returns.
TRADING POLICIES
The Fund has established certain trading policies which are set forth
in Section 12 of the Partnership Agreement.
TAX CONSEQUENCES
THE FOLLOWING CONSTITUTES THE OPINION OF SIDLEY & AUSTIN AND SUMMARIZES
THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES TO UNITED STATES TAXPAYERS WHO ARE
INDIVIDUALS.
THE FUND'S TAX STATUS
In the opinion of Sidley & Austin, the Fund will be classified as a
partnership for federal income tax purposes. Consequently, the Limited Partners
individually, not the Fund itself, are subject to tax.
The General Partners believe that all of the income expected to be
generated by the Fund will constitute "qualifying income" and have so advised
Sidley & Austin. As a result, in the opinion of Sidley & Austin, the Fund will
not be subject to tax as a corporation under the provisions applicable to
"publicly-traded partnerships."
TAXATION OF UNITHOLDERS ON PROFITS OR LOSSES OF THE FUND
Each Unitholder must pay tax on his or her share of the Fund's income
and gains. Such share must be included each year in a Unitholder's taxable
income whether or not such Unitholder has redeemed Units. In addition, a
Unitholder may be subject to paying taxes on the Fund's interest income even
though the Net Asset Value per Unit has decreased due to trading losses. See "--
Tax on Capital Gains and Losses; Interest Income," below.
The Fund provides each Unitholder with an annual schedule of his or her
share of the Fund's tax items. The Fund generally allocates these items equally
to each Unit. However, when a Unitholder redeems Units, the Fund allocates
capital gains or losses so as to reduce or eliminate any difference between the
redemption proceeds and the tax accounts of such Units.
LIMITED DEDUCTIBILITY OF FUND LOSSES AND DEDUCTIONS
A Unitholder may not deduct Fund losses or deductions in excess of his
or her tax basis in his or her Units as of year-end. Generally, a Unitholder's
tax basis in his or her Units is the amount paid for such Units reduced (but not
below zero) by his or her share of any Fund distributions, losses and deductions
and increased by his or her share of the Fund's income and gains.
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LIMITED DEDUCTIBILITY FOR CERTAIN EXPENSES
Individual taxpayers are subject to material limitations on their
ability to deduct investment advisory expenses and other expenses of producing
income. Based upon the Fund's trading activities to date, in the opinion of
Sidley & Austin, the amount, if any, of the Fund's expenses which might be
subject to this limitation should be DE MINIMIS. However, the IRS could take a
different position. The IRS could contend that the management and incentive fees
and other fund expenses should be characterized as "investment advisory
expenses" because the Fund is not engaged in a "trade or business."
Individuals cannot deduct investment advisory expenses in calculating
their alternative minimum tax.
YEAR-END MARK-TO-MARKET OF OPEN POSITIONS
Section 1256 Contracts are futures, futures options traded on U.S.
exchanges, certain foreign currency contracts and stock index options. Certain
of the Fund's open positions are Section 1256 Contracts. Section 1256 Contracts
that remain open at the end of each year are treated for tax purposes as if such
positions had been sold and any gain or loss recognized. The gain or loss on
Section 1256 Contracts is characterized as 40% short-term capital gain or loss
and 60% long-term capital gain or loss regardless of how long any given position
has been held. Non-U.S. exchange-traded futures and forwards are generally
non-Section 1256 Contracts. Gain or loss on non-Section 1256 Contracts will be
recognized when sold by the Fund and will be primarily short-term gain or loss.
TAXATION OF FOREIGN CURRENCY TRANSACTIONS
Certain forward contracts, futures contracts or similar instruments
entered into or acquired by the Fund will be Section 988 transactions if the
amount paid or received is denominated in terms of or determined by reference to
the value of a currency other than the U.S. dollar. In general, foreign currency
gain or loss on Section 988 transactions is characterized as ordinary income or
loss, except that gain or loss on regulated futures contracts or non-equity
options on foreign currencies that are Section 1256 Contracts is characterized
as capital gain or loss. See "Year-End Mark-to-Market of Open Positions," above.
The Fund has elected to be treated as a qualified fund, causing all gain or loss
from trading of forward contracts and foreign-currency futures contracts (other
than Section 1256 Contracts) to be characterized as short-term capital gain or
loss. In addition, all such contracts will be subject to the "mark-to-market"
rules. Adverse tax consequences might result, however, if the Fund failed to
meet the requirements of electing qualified fund status in a taxable year.
TAX ON CAPITAL GAINS AND LOSSES; INTEREST INCOME
As described under "-- Year-End Mark-to-Market of Open Positions," the
Fund's trading generates 60% long-term capital gains or losses and 40%
short-term capital gains or losses from its Section 1256 Contracts and primarily
short-term capital gain or loss from its non-Section 1256 Contracts. Individuals
pay tax on long-term capital gains at a maximum rate of 20%. Short-term capital
gains are subject to tax at the same rates as ordinary income, with a maximum
rate of 39.6% for individuals.
Individual taxpayers may deduct capital losses only to the extent of
their capital gains plus $3,000. Accordingly, the Fund could incur significant
losses, but a Unitholder could be required to pay taxes on his or her share of
the Fund's interest income.
If an individual taxpayer incurs a net capital loss for a year, he may
elect to carryback (up to three years) the portion of such loss which consists
of a net loss on Section 1256 Contracts. A taxpayer may deduct such losses only
against net capital gain for a carryback year to the extent that such gain
includes gains on Section 1256 Contracts. To the extent that a taxpayer could
not use such losses to offset gains on Section 1256 Contracts in a carryback
year, the taxpayer may carryforward such losses indefinitely as losses on
Section 1256 Contracts.
SYNDICATION EXPENSES
The costs associated with the ongoing offering of the Units under this
Prospectus and any subsequent ongoing offering expenses incurred by the Fund
will be non-deductible syndication expenses. The IRS could also contend that a
portion of the brokerage fees
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paid to the Clearing Broker or the Introducing Broker constitute non-deductible
syndication expenses.
TAXATION OF FOREIGN INVESTORS
A Limited Partner who is a non-resident alien individual, foreign
corporation, foreign partnership, foreign trust or foreign estate (a "Foreign
Limited Partner") generally is not subject to taxation by the United States on
capital gains from commodity or derivatives trading, provided that such Foreign
Limited Partner (in the case of an individual) does not spend more than 182 days
in the United States during his or her taxable year, and provided further, that
such Foreign Limited Partner is not engaged in a trade or business within the
United States during a taxable year to which income, gain, or loss is treated as
"effectively connected." An investment in the Fund should not, by itself, cause
a Foreign Limited Partner to be engaged in a trade or business within the United
States for the foregoing purposes, assuming that the trading activities of the
Fund will be conducted as described in this Prospectus. Pursuant to a "safe
harbor" in the Code, an investment fund whose U.S. business activities consist
solely of trading commodities and derivatives for its own account should not be
treated as engaged in a trade or business within the United States provided that
such investment fund is not a dealer in commodities or derivatives and does not
regularly offer to enter into, assume, assign or otherwise terminate positions
in derivatives with customers, and provided further that the commodities traded
are of a kind customarily dealt in on an organized commodity exchange in
transactions of a kind customarily consummated at such place. Based on a review
of the contracts the Fund trades as of the date of this Prospectus, the Fund has
been advised by its counsel, Sidley & Austin, that such contracts should satisfy
the safe harbor. If the contracts traded by the Fund in the future were not
covered by the safe harbor, there is a risk that the Fund would be treated as
engaged in a trade or business within the United States. In the event that the
Fund were found to be engaged in a United States trade or business, a Foreign
Limited Partner would be required to file a United States federal income tax
return for such year and pay tax at full United States rates. In the case of a
Foreign Limited Partner which is a foreign corporation, an additional 30%
"branch profits" tax might be imposed. Furthermore, in such event the Fund would
be required to withhold taxes from the income or gain allocable to such a
Limited Partner under Section 1446 of the Code.
A Foreign Limited Partner is not subject to United States tax on
certain interest income, including income attributable to (i) original issue
discount on Treasury bills having a maturity of 183 days or less or (ii)
commercial bank deposits, provided, in either case, that such Foreign Limited
Partner is not engaged in a trade or business within the United States during a
taxable year. Additionally, a Foreign Limited Partner, not engaged in a trade or
business within the United States, is not subject to United States tax on
interest income (other than certain so-called "contingent interest")
attributable to obligations issued after July 18, 1984 that are in registered
form if the Foreign Limited Partner provides the Fund with a Form W-8BEN or
other applicable form .
UNRELATED BUSINESS TAXABLE INCOME
Tax-exempt Limited Partners will not be required to pay tax on their
share of income or gains of the Fund, provided that such Limited Partners do not
purchase Units with borrowed funds.
IRS AUDITS OF THE FUND AND ITS LIMITED PARTNERS
The IRS is required to audit Fund-related items at the Fund rather than
the partner level. CISI is the Fund's "tax matters partner" with general
authority to determine the Fund's responses to a tax audit. If an audit of the
Fund results in an adjustment, all partners may be required to pay additional
taxes plus interest as well as penalties.
STATE AND OTHER TAXES
In addition to the federal income tax consequences described above, the Fund and
the partners may be subject to various state and other taxes. For example, the
Fund may be subject to a 1.5% Personal Property Replacement Tax in Illinois.
Such tax is imposed on the net income of the Fund allocable to Illinois.
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PROSPECTIVE INVESTORS ARE
URGED TO CONSULT THEIR TAX
ADVISERS BEFORE DECIDING
WHETHER TO INVEST.
PLAN OF DISTRIBUTION
THE SUBSCRIPTION PROCEDURE
Units are offered at the Net Asset Value per Unit as of the close of
business on the last business day of the month during which the General Partners
are accepting subscriptions. The minimum initial investment is $1,000 and the
incremental subscription amount is $100, plus the amounts of the Sales Charge
and the Offering Expense Charge. Affiliated Purchasers do not pay the Sales
Charge. Units will be offered until December 31, 2001, unless all of the Units
are sold prior to that date or the General Partners decide to extend the
offering beyond such date.
In order to purchase Units, investors must complete, execute and
deliver to the Selling Agent an original of the Subscription Agreement and Power
of Attorney which accompanies this Prospectus, together with a check for the
amount of his or her subscription. Pending investments will be held in escrow in
interest-bearing instruments by U.S. Bank National Association, St. Paul,
Minnesota, as Escrow Agent, until such subscriptions have been accepted by the
General Partners. Subscription checks must be made out to U.S. Bank National
Association, St. Paul, Minnesota, as Escrow Agent for IDS Managed Futures, L.P.
All funds held in the escrow account will earn interest during that
time. Subscribers will receive interest on funds deposited with the Escrow Agent
within 30 days after the date on which they are admitted to the Fund, except
that if any subscriber's accrued interest is less than $10, such interest shall
be paid to the Fund and not the subscriber.
The offering of Units will be made by the Fund through the Selling
Agent on a best efforts basis without any firm underwriting commitment.
FREE LOOK ALTERNATIVE
After prospective investors have delivered their subscription documents
along with their subscription checks to the Selling Agent, the Selling Agent
will mail a confirmation along with a copy of the Fund's most recent account
statement to the prospective investor on the next business day. During the next
sixteen days, prospective investors have the opportunity to review the Fund's
most recent account statement to determine whether they wish to rescind their
subscription. Prospective investors may rescind their subscriptions for any
reason during the Free-Look period. Prospective investors may notify the Selling
Agent of their decision to withdraw their subscriptions from the Fund either by
mail or by telephone pursuant to instructions received from the Selling Agent in
the confirmation.
SUBSCRIBERS' REPRESENTATIONS AND WARRANTIES
By executing a Subscription Agreement and Power of Attorney Signature
Page, such subscriber is representing and warranting, among other things, that:
(i) the subscriber is of legal age to execute and deliver the Subscription
Agreement and Power of Attorney and has full power and authority to do so; (ii)
the subscriber has read and understands "Exhibit B -- Subscription Requirements"
of Part II of this Prospectus and meets or exceeds the applicable suitability
criteria of net worth and annual income set forth therein; and (iii) the
subscriber has received a copy of this Prospectus. These representations and
warranties might be used by the General Partners or others against a subscriber
in the event that the subscriber were to take a position inconsistent therewith.
While the foregoing representations and warranties will be binding on
subscribers, the General Partners believe that to a large extent such
representations and warranties would be implied from the fact that an investor
has subscribed for Units. NONETHELESS, NO PROSPECTIVE SUBSCRIBER WHO IS NOT
PREPARED TO MAKE SUCH REPRESENTATIONS AND WARRANTIES, AND TO BE BOUND BY THEM,
SHOULD CONSIDER INVESTING IN THE UNITS.
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THE SELLING AGENT
The Selling Agent shall receive from the proceeds of the offering the
Sales Charge for each Unit sold to investors other than Affiliated Purchasers.
The Sales Charge equals 6% of the first $50,000 subscribed, 4% of the second
$50,000, 2% of the subsequent $400,000 and 1% of any subscriptions in excess of
$500,000.
In addition to the Sales Charge, the Selling Agent receives from CIS a
portion of the round turn commissions in its capacity as Introducing Broker.
LAWYERS; ACCOUNTANTS
Sidley & Austin, Chicago, Illinois has advised the General Partners on
the offering of the Units. Sidley & Austin drafted "Tax Consequences." Sidley &
Austin does not represent the Fund or the Limited Partners in matters relating
to the Fund.
The financial statements of IDS Managed Futures, L.P. as of December
31, 1999, 1998 and 1997 included herein have been audited by KPMG LLP.
The balance sheet of IDS Futures Corporation as of December 31, 1999
included herein has been audited by Ernst & Young LLP.
The financial statements of CISI as of May 31, 1999 and 1998 included
herein have been audited by by KPMG LLP.
-60-
<PAGE>
FINANCIAL STATEMENTS
SCHEDULES ARE OMITTED FOR THE REASON THAT THEY ARE NOT REQUIRED OR ARE
NOT APPLICABLE OR THAT EQUIVALENT INFORMATION HAS BEEN INCLUDED IN THE FINANCIAL
STATEMENTS OR NOTES THERETO.
---------------
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IDS MANAGED FUTURES, L.P.
Independent Auditors' Report ............................................................62
Statements of Financial Condition as of December 31, 1999 and 1998 ......................63
Statements of Operations for the years ended December 31, 1999, 1998 and 1997 ...........64
Statements of Changes in Partners' Capital for the years ended December 31,
1999, 1998 and 1997 .................................................................65
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 ...........66
Notes to Financial Statements ...........................................................67
IDS FUTURES CORPORATION
Report of Independent Auditors ..........................................................72
Balance Sheet as of December 31, 1999 ...................................................73
Notes to Balance Sheet ..................................................................74
CIS INVESTMENTS, INC.
Unaudited Statement of Financial Condition as of December 31, 1999 ......................77
Independent Auditors' Report ............................................................78
Statements of Financial Condition as of May 31, 1999 and 1998 ...........................79
Statements of Income for the years ended May 31, 1999 and 1998 ..........................80
Statements of Changes in Stockholder's Equity for the years ended
May 31, 1999 and 1998 ...............................................................81
Statements of Cash Flows for the years ended May 31, 1999 and 1998 ......................82
Notes to Financial Statements ...........................................................83
</TABLE>
-61-
<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
January 21, 2000
-62-
<PAGE>
IDS MANAGED FUTURES, L.P.
Statements of Financial Condition
December 31, 1999 and 1998
<TABLE>
<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
=============== ==============
</TABLE>
See accompanying notes to financial statements.
-63-
<PAGE>
IDS MANAGED FUTURES, L.P.
Statements of Operations
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<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:
Commissions 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
================================ ==============
</TABLE>
See accompanying notes to financial statements.
-64-
<PAGE>
IDS MANAGED FUTURES, L.P.
Statements of Changes in Partners' Capital
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<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
================ ============
</TABLE>
*Units of limited partners.
See accompanying notes to financial statements.
-65-
<PAGE>
IDS MANAGED FUTURES, L.P.
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<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 receivable (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
=============== ============== ===============
</TABLE>
See accompanying notes to financial statements.
-66-
<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.
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.
-67-
<PAGE>
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
December 31, 1999, 1998 and 1997
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.
-68-
<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 its management and
18% of the Partnership's net trading profits, if any, in each quarter
attributable to its trading. Effective January 1, 1996, the agreement
with Sabre was changed to reduce the management fees paid to it, 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
it 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 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%
-69-
<PAGE>
IDS MANAGED FUTURES, L.P.
Notes to Financial Statements
December 31, 1999, 1998 and 1997
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.
-70-
<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>
<CAPTION>
COMMODITY GROUP 1999 1998
---------------
--------------- ----------------
<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.
-71-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
IDS Futures Corporation
We have audited the accompanying balance sheet of IDS Futures Corporation
(wholly owned indirectly by American Express Company) as of December 31, 1999.
This balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of IDS Futures Corporation at December
31, 1999, in conformity with accounting principles generally accepted in the
United States.
/s/ Ernst & Young LLP
February 15, 2000
-72-
<PAGE>
IDS FUTURES CORPORATION
Balance Sheet
December 31, 1999
<TABLE>
<S> <C>
ASSETS
Cash $ 3,347
Interest-bearing deposits with affiliate 2,718,128
Accounts receivable 2,535
Investment in Limited Partnerships (fair value - $639,914) 354,500
Deferred income taxes 152,554
------------------
Total assets $ 3,231,064
==================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Due to affiliate (NOTE 4) $ 791,265
Other liabilities 248,482
------------------
Total liabilities 1,039,747
Stockholder's equity:
Common Stock, $1 par value:
Authorized and issued shares - 100 100
Additional paid-in capital 1,974,900
Retained earnings 1,841,317
------------------
3,816,317
Less notes receivable from affiliate (NOTE 3) (1,625,000)
------------------
Net stockholder's equity 2,191,317
------------------
Total liabilities and stockholder's equity $ 3,231,064
==================
</TABLE>
Commitments (NOTE 2)
SEE ACCOMPANYING NOTES.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-73-
<PAGE>
IDS FUTURES CORPORATION
Notes to Balance Sheet
December 31, 1999
1. ORGANIZATION, PURPOSE AND ACCOUNTING POLICIES
IDS Futures Corporation (the Company) is a wholly-owned subsidiary of IDS
Management Corporation, which is a wholly-owned subsidiary of American Express
Financial Corporation (AEFC), which is a wholly-owned subsidiary of American
Express Company. The Company was organized on December 12, 1986 and is
registered under the Commodity Exchange Act. The Company acts as a general
partner in limited partnerships.
The preparation of the balance sheet requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies. Actual results could differ from those estimates.
INTEREST-BEARING DEPOSITS WITH AFFILIATE
The Company's interest-bearing deposit with affiliate represents short-term
funds deposited with AEFC. These funds earn interest based upon published
short-term indices. The carrying value of this deposit approximates fair value.
INVESTMENTS IN LIMITED PARTNERSHIPS
The investments in limited partnerships, which consist of interests in IDS
Managed Futures, L.P. and IDS Managed Futures II, L.P., are accounted for at the
lower of cost or fair value. Fair value has been estimated by management as the
Company's proportionate share of the limited partnerships' net asset value, as
set forth in the audited financial statements of the Limited Partnerships.
INCOME TAXES
The Company's taxable income is included in the consolidated federal tax return
of the Company's parent. Each eligible subsidiary of the Company's parent
provides for income taxes on a separate return basis. Under an agreement with
its parent, the Company receives income tax benefits for net operating losses
and future tax deductions that are recognizable on the parent's consolidated
federal tax return.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The temporary differences
are comprised primarily of the difference in the tax basis and financial
reporting basis of the investments in limited partnerships.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-74-
<PAGE>
2. PARTNERSHIP PARTICIPATION
The Company, as a General Partner, has entered into Amended and Restated Limited
Partnership Agreements whereby the general partners have agreed that they will
contribute to the capital of each Managed Futures Partnership (Partnership) an
amount which will make its total contributions to each Partnership equal to the
greater of (i) 3% of the aggregate capital contributions of the Partnerships or
$100,000, whichever is less, or (ii) 1% of the aggregate capital contributions
of the Partnership. Each partner of the Partnership will share in profits and
losses of the Partnership in proportion to the amount of the interest in the
partnership owned by each. The Agreements of Limited Partnership also require
that, at all times after the admission of limited partners to the Partnership,
the general partners together maintain net worth at least equal to (i) the
lesser of $250,000 or 15% of the aggregate capital contributions of any limited
partnerships for which they shall act as general partners and which are
capitalized at less than or equal to $2,500,000, and (ii) 10% of the aggregate
capital contributions of any limited partnerships for which they shall act as
general partners and which are capitalized at greater than $2,500,000. For this
purpose, net worth shall reflect the carrying of all assets at fair market value
and shall exclude capital contributions by it to any limited partnership of
which it may be a general partner. The Company meets its net worth requirement
through promissory notes from AEFC.
3. NOTES RECEIVABLE FROM AFFILIATE
On April 7, 1987, AEFC issued a $375,000 demand note, with interest accruing on
funds outstanding at the prime rate of Norwest Bank, Minneapolis, as a capital
contribution to IDS Futures Corporation.
On February 22, 1988, AEFC issued an additional $750,000 demand note, with
interest accruing on funds outstanding at the prime rate of Norwest Bank,
Minneapolis, as a capital contribution to IDS Futures Corporation.
On June 23, 1988, AEFC issued an additional $500,000 demand note, with interest
accruing on funds outstanding at the prime rate of Norwest Bank, Minneapolis, as
a capital contribution to IDS Futures Corporation.
These notes have been reported as a reduction in capital. All accrued interest
on the above notes has been waived by the parties to the notes.
4. AFFILIATE TRANSACTIONS
The Company is allocated various expenses from AEFC, such as programming, data
processing, legal, taxes and other administrative costs. The payable balance at
December 31, 1999 represents allocations that are due to AEFC.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-75-
<PAGE>
5. CONTINGENCIES
According to the Prospectus of IDS Managed Futures, L.P., the General Partners
will receive from the proceeds of the offering, the Offering Expense Charge
(OEC) for each unit sold to an investor. The OEC includes fees for legal,
accounting, auditing, marketing, filing, registration and recording fees,
printing expenses and escrow charges. The General Partners will pay all offering
expenses and are liable for any expenses in excess of the Offering Expense
Charge.
6. YEAR 2000 (UNAUDITED)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the Company. All of the
systems used by the Company are maintained by AEFC and are utilized by multiple
subsidiaries and affiliates of AEFC. The Company's business is heavily dependent
upon AEFC's computer systems and have significant interactions with systems of
third parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to the Company, was conducted to identify the major
systems that could be affected by the Year 2000 issue. Steps were taken to
resolve potential problems including modification to existing software and the
purchase of new software. As of December 31, 1999, AEFC had completed its
program of corrective measures on its internal systems and applications,
including Year 2000 compliance testing. As of December 31, 1999, AEFC had also
completed an evaluation of the Year 2000 readiness of other third parties whose
system failures could have an impact on the Company's operations.
Business continuation plans, which address business continuation in the event of
a system disruption, are in place for all key business units. At December 31,
1999, these plans had been amended to include specific Year 2000 considerations.
In assessing its Year 2000 initiatives and the results of actual production
since January 1, 2000, management believes no material adverse consequences were
experienced, and there was no material effect on the Company's business, results
of operations or financial condition as a result of the Year 2000 issue.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-76-
<PAGE>
CIS INVESTMENTS, INC.
Unaudited Statement of Financial Condition
December 31, 1999
ASSETS
<TABLE>
<CAPTION>
1999
-------------------
<S> <C>
Assets:
Receivable from JWH Global Trust $ 889,971
Investments in registered commodity pools 1,977,812
-------------------
Total Assets $ 2,867,783
===================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Deferred Offering Costs $ 159,615
Income Taxes Payable 170,567
-------------------
Total liabilities 330,182
-------------------
Stockholder's equity:
Common stock, $100 par value. Authorized 1,000
30,000 shares; issued 10 shares
Common stock subscribed, 29,990 shares 2,999,000
at the years ended 1999 and 1998, respectively
Less subscriptions receivable (2,999,000)
Paid-in capital 18,250,000
Less demand note receivable (18,000,000)
Retained earnings 2,286,601
-------------------
Total stockholder's equity 2,537,601
-------------------
$ 2,867,783
===================
</TABLE>
THIS UNAUDITED STATEMENT OF FINANCIAL CONDITION, IN THE OPINION OF
MANAGEMENT, REFLECTS ALL ADJUSTMENTS NECESSARY TO FAIRLY STATE THE FINANCIAL
CONDITION OF CIS INVESTMENTS, INC. AT DECEMBER 31, 1999. ALL ADJUSTMENTS WERE OF
A NORMAL AND RECURRING NATURE.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-77-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CIS Investments, Inc.:
We have audited the accompanying statements of financial condition of CIS
Investments, Inc. (a wholly owned subsidiary of Cargill Investor Services, Inc.)
(the Company) as of May 31, 1999 and 1998, and the related statements of income,
changes in stockholder's equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CIS Investments, Inc. as of May
31, 1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
KPMG LLP
July 23, 1999
-78-
<PAGE>
CIS INVESTMENTS, INC.
Statements of Financial Condition
May 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
---------------- ---------------
<S> <C> <C>
Assets:
Receivable from JWH Global Trust $ 219,991 337,513
Accrued taxes receivable 44,223 45,321
Investments in registered commodity pools 2,259,643 1,914,443
---------------- ---------------
Total assets $ 2,523,857 2,297,277
================ ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable $ 387 3,899
Deferred management fees 84,209 72,133
Due to Cargill Inc. 417,943 1,192,827
---------------- ---------------
Total liabilities 502,539 1,268,859
---------------- ---------------
Stockholder's equity:
Common stock, $100 par value. Authorized
30,000 shares; issued 10 shares 1,000 1,000
Common stock subscribed, 29,990 shares
at the years ended 1999 and 1998, respectively 2,999,000 2,999,000
Less subscriptions receivable (2,999,000) (2,999,000)
Paid-in capital 18,250,000 18,250,000
Less demand note receivable (18,000,000) (18,000,000)
Retained earnings 1,770,318 777,418
---------------- ---------------
Total stockholder's equity 2,021,318 1,028,418
---------------- ---------------
$ 2,523,857 2,297,277
================ ===============
</TABLE>
See accompanying notes to financial statements.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-79-
<PAGE>
CIS INVESTMENTS, INC.
Statements of Income
Years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ --------------
<S> <C> <C>
Revenues:
Management fees $ 201,405 162,315
Other professional services income 1,256,260 670,912
Realized and unrealized gain on investments 303,696 32,558
------------ --------------
Total revenues 1,761,361 865,785
Expenses - operating 172,976 47,249
------------ --------------
Income before income taxes 1,588,385 818,536
Income tax expense 595,485 288,484
------------ --------------
Net income $ 992,900 530,052
============ ==============
</TABLE>
See accompanying notes to financial statements.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-80-
<PAGE>
CIS INVESTMENTS, INC.
Statements of Changes in Stockholder's Equity
Years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
COMMON DEMAND
COMMON STOCK SUBSCRIPTIONS PAID-IN NOTE RETAINED
STOCK SUBSCRIBED RECEIVABLE CAPITAL RECEIVABLE EARNINGS TOTAL
------------ ---------------- ---------------- ------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
May 31, 1997 $ 1,000 2,999,000 (2,999,000) 250,000 -- 247,366 498,366
Contribution of
capital from Cargill -- -- -- 18,000,000 (18,000,000) -- --
Net income -- -- -- -- -- 530,052 530,052
------------ ---------------- ---------------- ------------- --------------- -------------- -------------
Balance at
May 31, 1998 1,000 2,999,000 (2,999,000) 18,250,000 (18,000,000) 777,418 1,028,418
Net income -- -- -- -- -- 992,900 992,900
------------ ---------------- ---------------- ------------- --------------- -------------- -------------
Balance at
May 31, 1999 $ 1,000 2,999,000 (2,999,000) 18,250,000 (18,000,000) 1,770,318 2,021,318
============ ================ ================ ============= =============== ============== =============
</TABLE>
See accompanying notes to financial statements.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-81-
<PAGE>
CIS INVESTMENTS, INC.
Statements of Cash Flows
Years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 992,900 $ 530,052
Adjustments to reconcile net income to net cash
provided by operating activities:
Realized and unrealized gain on investments (303,696) (32,558)
Decrease (increase) in assets:
Accrued taxes receivable 1,098 33,309
Increase (decrease) in liabilities:
Deferred management fees 12,076 13,370
Accounts payable (3,512) (396,134)
--------------------- ------------------
Net cash provided by operating activities 698,866 148,039
--------------------- ------------------
Cash flows from investing activities:
Organizational and offering costs of JWH Global Trust 117,522 177,993
Purchase of investments, net (41,504) (900,847)
--------------------- ------------------
Net cash (used in) provided by investing activities 76,018 (722,854)
--------------------- ------------------
Cash flow from financing activity - amount advanced
from (paid to) Cargill Inc. (774,884) 574,815
--------------------- ------------------
Net cash (used in) provided by financing activity (774,884) 574,815
--------------------- ------------------
Net change in cash -- --
Cash at beginning of year -- --
--------------------- ------------------
Cash at end of year $ -- $ --
===================== ==================
Supplemental disclosures of cash flow information -
cash paid during the year for income taxes $ 594,387 $ 255,142
===================== ==================
</TABLE>
See accompanying notes to financial statements.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-82-
<PAGE>
CIS INVESTMENTS, INC.
Notes to Financial Statements
May 31, 1999 and 1998
(1) GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies which have been
followed in preparing the accompanying financial statements is set
forth below.
NATURE OF BUSINESS
CIS Investments, Inc. (the Company), a wholly owned subsidiary
of Cargill Investor Services, Inc. (the Parent), is a
registered commodity pool operator with the Commodity Futures
Trading Commission. The Company is the general partner or
managing owner in various limited partnerships or trusts
(Funds) organized for the purpose of engaging in the
speculative trading of commodity interests, including futures
contracts, physical commodities, and related options.
MANAGEMENT FEES
Unearned management fees are amortized over one year, the life
of the contract, using the straight-line method.
INVESTMENTS
Investments in Funds are recorded at a value which
approximates the Company's proportionate share of each Fund's
net asset value.
INCOME TAXES
The Company is included in the consolidated Federal income tax
return of the Parent. Income tax expense is calculated as if
the Company would file a separate return. Accrued taxes
represents the remaining balance due from the Parent for the
current year taxes including the impact of deferred taxes.
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period
that includes the enactment date.
EXPENSES
Certain immaterial administrative overhead costs are expensed
and paid by the Parent.
USE OF ESTIMATES
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles
(GAAP). The preparation of financial statements in conformity
with GAAP requires management to make estimates and
assumptions that affect
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-83-
<PAGE>
the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the date
of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual
amounts could differ from such estimates.
(2) INVESTMENTS IN FUNDS
Investment in IDS Managed Futures, L.P. is approximately 1% of the
total interest. Investment in IDS Managed Futures II, L.P. is
approximately 2% of the total interest. Investment in Everest Futures
Fund II, L.P. and JWH Global Trust is approximately 1.0% of the total
interest. Investments in the Funds at May 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- ------------------------------
UNITS AMOUNT UNITS AMOUNT
--------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
IDS Managed Futures, L.P. 1,423 $ 513,151 1,299 $ 428,833
IDS Managed Futures II, L.P. 322 212,795 322 194,618
Everest Futures Fund II, L.P. 370 554,674 370 457,647
JWH Global Trust 8,598 979,023 8,007 833,345
=============== ============= ============== ==============
$ 2,259,643 $ 1,914,443
</TABLE>
The following represents condensed combined financial information of
the Funds as of May 31, 1999 and 1998 (in thousands).
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
<S> <C> <C>
Assets $ 221,779 185,018
--------------- ----------------
Liabilities 5,013 1,473
Capital 216,766 183,545
--------------- ----------------
Total liabilities and capital $ 221,779 185,018
=============== ================
</TABLE>
(3) NET WORTH REQUIREMENTS
The Company is required to maintain an amount of net worth as stated in
each Fund's agreement. For the purpose of compliance, net worth is
defined as the total of common stock issued and subscribed, paid in
capital and retained earnings. At May 31, 1999, the Company believes it
is in compliance with its net worth requirements.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-84-
<PAGE>
CIS INVESTMENTS, INC.
Notes to Financial Statements
May 31, 1999 and 1998
(4) COMMON STOCK SUBSCRIPTIONS
The Company and its Parent entered into stock subscription agreements
whereby the Parent subscribed to purchase up to 29,990 shares of the
Company's stock at $100 per share in order to ensure the Company's
continued compliance with its net worth requirements. No subscribed
stock was issued, nor is it known when and if any will be issued in the
future. As such, the subscribed stock receivable amount is shown as a
deduction from stockholder's equity.
(5) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Funds hold futures contracts and options. A futures contract is
defined as an agreement to buy or sell a specific amount of a commodity
or financial instrument at a particular price on a stipulated future
date. If the markets should move against all of the futures positions
held by the Funds at the same time, and if the Funds are unable to
offset the futures positions of the Funds, the Funds could lose all of
their assets and the investors, including the Company, would realize a
100% loss on their investment.
(6) RECEIVABLE FROM JWH GLOBAL TRUST
The Company has advanced JWH Global Trust (the Trust) its initial
organizational and offering costs. These costs are being reimbursed
currently by the Trust at a rate of 1/2 of 1% of the net assets of the
Trust per year.
(7) DEMAND NOTE RECEIVABLE
The company received a capital contribution of $18,000,000 from its
Parent and entered into a related non interest bearing demand note for
$18,000,000. No cash was transferred, nor is it known when and if any
will be transferred in the future. As such, the demand note is shown as
a deduction from stockholder's equity.
PURCHASER OF UNITS WILL NOT RECEIVE AN INTEREST IN THIS ENTITY.
-85-
<PAGE>
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
IDS MANAGED FUTURES, L.P.
$22,500,000
UNITS OF BENEFICIAL INTEREST
-------------------------
THIS IS A SPECULATIVE, LEVERAGED INVESTMENT WHICH
INVOLVES THE RISK OF LOSS. PAST PERFORMANCE IS
NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
SEE "THE RISKS YOU FACE" BEGINNING AT PAGE 8 IN PART ONE.
- --------------------------------------------------------------------------------
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE
DOCUMENT AND A STATEMENT OF ADDITIONAL
INFORMATION. THESE PARTS ARE BOUND
TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION.
- --------------------------------------------------------------------------------
CIS INVESTMENTS, INC.
AMERICAN EXPRESS FINANCIAL ADVISORS INC. IDS FUTURES CORPORATION
SELLING AGENT CO-GENERAL PARTNERS
-------------------------
<PAGE>
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Supplemental Performance of the Fund..............................................................................1
Investment Diversifiction.........................................................................................4
Futures Markets and Trading Methods...............................................................................6
"Blue Sky" Glossary...............................................................................................7
-------------------
EXHIBITS
Exhibit A: Amended and Restated Limited Partnership Agreement..................................................A-1
Exhibit B: Subscription Requirements...........................................................................B-1
Exhibit C: Subscription Instructions...........................................................................C-1
Exhibit D: Request for Redemption..............................................................................D-1
</TABLE>
-i-
<PAGE>
SUPPLEMENTAL PERFORMANCE OF THE FUND
The Performance of the Fund during the most recent five calendar years
and year to date is presented on Page 15 in Part I of this two part Prospectus.
The following performance of the Fund from inception through December 1994, the
Growth in Value of $10,000 graph and the Comparative Performance of the Trading
Advisors graph are deemed supplemental information according to CFTC rules and
are therefore presented separately in this Statement of Additional Information
IDS MANAGED FUTURES, L.P.
FROM INCEPTION TO DECEMBER 1994
NAME OF POOL: IDS Managed Futures, L.P.
TYPE OF POOL: Publicly offered
INCEPTION OF TRADING: June 16, 1987
AGGREGATE SUBSCRIPTIONS: $59,400,000 (through January 31, 2000)
CURRENT NET ASSET VALUE: $42,997,956 (January 31, 2000)
WORST MONTHLY DECLINE FROM INCEPTION THROUGH DECEMBER 1994: (16.81)% (5/90)
WORST PEAK TO VALLEY DECLINE FROM INCEPTION THROUGH DECEMBER 1994: (27.75)%
(1/92-5/92)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MONTHLY
PERFORMANCE 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
January (4.48)% 1.19% (13.95)% (1.55)% 24.84% 3.35% (4.36)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
February (3.29)% 10.80% (9.43)% 1.76% 12.64% (5.06)% 1.28%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
March 5.76% (0.82)% 0.69% 0.59% 3.61% 2.98% (7.93)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
April (0.67)% 6.54% (6.30)% (1.85)% 5.79% (3.83)% (3.28)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
May 3.98% 1.34% (1.74)% (2.03)% (16.81)% 19.24% (0.34)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
June 2.72% 1.44% 15.58% 3.60% 2.69% (5.20)% 11.61% (8.74)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
July (2.87)% 8.35% 18.09% (11.27)% 8.95% 6.00% (9.41)% 0.84%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
August (2.15)% 3.09% 7.92% 4.12% 9.90% (7.67)% (1.76)% 0.09%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
September (0.45)% (0.29)% (3.29)% 13.37% 5.64% (6.55)% 3.66% (2.35)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
October 0.03% (0.04)% (3.60)% (3.94)% (2.42)% (5.97)% 0.20% 15.50%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
November (3.51)% (0.03)% (2.02)% 3.51% 0.49% 12.57% (0.12)% 8.53%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
December (1.68)% 2.03% (0.64)% 20.71% (1.62)% (0.70)% (3.99)% 4.31%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Compound Annual
Rate of Return
(6.93)% 38.32% (3.43)% 26.22% 60.65% 5.61% (14.96)% 28.78%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The monthly rates of return reflect the performance of the Fund when
its assets were allocated equally between JWH and Sabre Fund Management Limited.
In July 1997, the Fund's assets were reallocated 65% to JWH, 30% to Welton and
5% to Sabre. Sabre's advisory contract terminated December 31, 1997 and its
allocation of Fund assets was moved to Welton. As a result of, the supplemental
performance of the Fund presented above may be materially different from the
current performance of the Fund.
Monthly rates of return are calculated by dividing net performance for
the month by beginning equity.
Worst peak-to-valley decline, which is presented for the most recent
five calendar years and year to date, means the greatest cumulative percentage
decline in month-end net asset value during any period in which the initial
month-end net asset value for the period is not equaled or exceeded by a
subsequent month-end net asset value. Worst peak-to-valley decline is calculated
by comparing the initial month-end net asset value to each subsequent month-end
net asset value. A new trading "peak" is established each time the month-end net
asset value exceeds all prior month-end net asset values.
-1-
<PAGE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
-2-
<PAGE>
COMPARATIVE PERFORMANCE OF THE TRADING ADVISORS
JOHN W. HENRY & COMPANY, INC. WELTON INVESTMENT CORPORATION
JAN. 1, 1995 THROUGH JAN. 31, 2000 JAN. 1, 1995 THROUGH JAN. 31, 2000
FINANCIAL AND METALS PORTFOLIO THE DIVERSIFIED PORTFOLIO
HISTORICAL PERFORMANCE BASED ON $10,000 INVESTMENT
COMPARATIVE PERFORMANCE OF THE TRADING ADVISORS
<TABLE>
<CAPTION>
JWH Welton
<S> <C> <C>
12/31/1993 $ 10,000 $ 10,000
1/31/1994 $ 9,710 $ 9,526
2/28/1994 $ 9,652 $ 8,891
3/31/1994 $ 10,347 $ 8,952
4/30/1994 $ 10,440 $ 8,476
5/31/1994 $ 10,576 $ 8,965
6/30/1994 $ 11,051 $ 9,478
7/31/1994 $ 10,377 $ 9,095
8/31/1994 $ 9,952 $ 8,513
9/30/1994 $ 10,101 $ 8,783
10/31/1994 $ 10,273 $ 8,825
11/30/1994 $ 9,821 $ 11,460
12/31/1994 $ 9,477 $ 11,601
1/31/1995 $ 9,117 $ 11,144
2/28/1995 $ 10,548 $ 12,136
3/31/1995 $ 12,162 $ 13,363
4/30/1995 $ 12,904 $ 13,840
5/31/1995 $ 13,059 $ 15,460
6/30/1995 $ 12,837 $ 15,247
7/31/1995 $ 12,542 $ 14,855
8/31/1995 $ 12,805 $ 14,669
9/30/1995 $ 12,536 $ 14,897
10/31/1995 $ 12,574 $ 13,796
11/30/1995 $ 12,901 $ 14,454
12/31/1995 $ 13,120 $ 15,818
1/31/1996 $ 13,907 $ 16,758
2/29/1996 $ 13,142 $ 14,087
3/31/1996 $ 13,234 $ 13,825
4/30/1996 $ 13,539 $ 14,469
5/31/1996 $ 13,309 $ 13,353
6/30/1996 $ 13,601 $ 13,124
7/31/1996 $ 13,452 $ 12,752
8/31/1996 $ 13,344 $ 12,408
9/30/1996 $ 13,771 $ 13,336
10/31/1996 $ 15,740 $ 15,091
11/30/1996 $ 17,456 $ 16,596
12/31/1996 $ 17,002 $ 16,953
1/31/1997 $ 17,750 $ 17,363
2/28/1997 $ 17,360 $ 18,441
3/31/1997 $ 17,238 $ 18,152
4/30/1997 $ 16,738 $ 18,202
5/31/1997 $ 15,349 $ 18,890
6/30/1997 $ 15,978 $ 20,016
7/31/1997 $ 18,503 $ 22,584
8/31/1997 $ 17,818 $ 21,193
9/30/1997 $ 18,210 $ 21,458
10/31/1997 $ 18,575 $ 20,141
11/30/1997 $ 19,039 $ 20,703
12/31/1997 $ 19,591 $ 20,957
1/31/1998 $ 18,905 $ 20,599
2/28/1998 $ 18,149 $ 22,002
3/31/1998 $ 17,859 $ 23,361
4/30/1998 $ 16,448 $ 22,544
5/31/1998 $ 16,974 $ 23,062
6/30/1998 $ 16,159 $ 22,868
7/31/1998 $ 16,014 $ 22,811
8/31/1998 $ 18,817 $ 24,096
9/30/1998 $ 21,695 $ 24,662
10/31/1998 $ 20,871 $ 23,513
11/30/1998 $ 19,306 $ 24,136
12/31/1998 $ 21,024 $ 24,628
1/31/1999 $ 20,015 $ 24,071
2/28/1999 $ 20,195 $ 23,460
3/31/1999 $ 19,670 $ 21,607
4/30/1999 $ 19,985 $ 21,849
5/31/1999 $ 21,164 $ 21,119
6/30/1999 $ 22,455 $ 21,843
7/31/1999 $ 21,938 $ 21,009
8/31/1999 $ 21,258 $ 20,519
9/30/1999 $ 19,770 $ 20,189
10/31/1999 $ 18,169 $ 18,756
11/30/1998 $ 17,587 $ 20,029
12/31/1999 $ 17,095 $ 21,593
1/1/2000 $ 17,095 $ 20,319
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Other
trading advisors may be used, and have been used in the past, to manage assets
of the Fund from time to time.
Potential investors should note that the graphs shown above represent
past performance results of the Trading Advisors and not that of the Fund. These
past performance results are the composite performance of the accounts traded
pursuant to the respective trading program of each Trading Advisor currently
used for the Fund, not the results of any one account.
-3-
<PAGE>
THE FOLLOWING GRAPH SHOWS ACTUAL PERFORMANCE OF THE FUND VERSUS CERTAIN
INDICES. ALL PERFORMANCE RETURNS ARE BASED UPON AN INITIAL $10,000 INVESTMENT IN
JUNE 1987.
GROWTH IN VALUE OF $10,000
JUNE 1987 THROUGH JANUARY 2000
Actual performance of IDS Managed Futures, L.P.
GROWTH IN VALUE OF $10,000
<TABLE>
<CAPTION>
IDS Managed CPI SP500 Lehman Bond
Futures
<S> <C> <C> <C> <C>
5/31/1987 $ 10,000 $ 10,000 $ 10,000 $ 10,000
6/30/1987 $ 9,992 $ 10,035 $ 10,505 $ 10,138
7/31/1987 $ 10,075 $ 10,061 $ 11,037 $ 10,130
8/31/1987 $ 10,084 $ 10,114 $ 11,449 $ 10,075
9/30/1987 $ 9,847 $ 10,167 $ 11,198 $ 9,861
10/31/1987 $ 11,354 $ 10,193 $ 8,786 $ 10,212
11/30/1987 $ 12,322 $ 10,203 $ 8,062 $ 10,293
12/31/1987 $ 12,853 $ 10,203 $ 8,675 $ 10,433
1/31/1988 $ 12,293 $ 10,229 $ 9,040 $ 10,801
2/29/1988 $ 12,450 $ 10,256 $ 9,459 $ 10,929
3/31/1988 $ 11,463 $ 10,300 $ 9,168 $ 10,826
4/30/1988 $ 11,087 $ 10,352 $ 9,269 $ 10,768
5/31/1988 $ 11,049 $ 10,388 $ 9,348 $ 10,696
6/30/1988 $ 12,332 $ 10,432 $ 9,777 $ 10,954
7/31/1988 $ 11,172 $ 10,476 $ 9,739 $ 10,897
8/31/1988 $ 10,975 $ 10,520 $ 9,409 $ 10,925
9/30/1988 $ 11,375 $ 10,591 $ 9,810 $ 11,172
10/31/1988 $ 11,398 $ 10,625 $ 10,083 $ 11,382
11/30/1988 $ 11,385 $ 10,634 $ 9,939 $ 11,244
12/31/1988 $ 10,930 $ 10,652 $ 10,112 $ 11,256
1/31/1989 $ 11,296 $ 10,705 $ 10,850 $ 11,419
2/28/1989 $ 10,725 $ 10,749 $ 10,581 $ 11,336
3/31/1989 $ 11,044 $ 10,812 $ 10,827 $ 11,385
4/30/1989 $ 10,621 $ 10,882 $ 11,389 $ 11,623
5/31/1989 $ 12,666 $ 10,944 $ 11,848 $ 11,929
6/30/1989 $ 12,007 $ 10,970 $ 11,781 $ 12,291
7/31/1989 $ 12,728 $ 10,996 $ 12,844 $ 12,553
8/31/1989 $ 11,752 $ 11,014 $ 13,094 $ 12,367
9/30/1989 $ 10,982 $ 11,049 $ 13,041 $ 12,430
10/31/1989 $ 10,326 $ 11,102 $ 12,738 $ 12,736
11/30/1989 $ 11,624 $ 11,129 $ 12,997 $ 12,857
12/31/1989 $ 11,543 $ 11,147 $ 13,309 $ 12,892
1/31/1990 $ 14,410 $ 11,262 $ 12,416 $ 12,739
2/28/1990 $ 16,232 $ 11,315 $ 12,577 $ 12,779
3/31/1990 $ 16,818 $ 11,377 $ 12,910 $ 12,788
4/30/1990 $ 17,791 $ 11,395 $ 12,588 $ 12,671
5/31/1990 $ 14,801 $ 11,421 $ 13,813 $ 13,046
6/30/1990 $ 15,199 $ 11,483 $ 13,720 $ 13,254
7/31/1990 $ 16,559 $ 11,526 $ 13,676 $ 13,437
8/31/1990 $ 18,198 $ 11,633 $ 12,441 $ 13,257
9/30/1990 $ 19,225 $ 11,730 $ 11,837 $ 13,367
10/31/1990 $ 18,760 $ 11,801 $ 11,787 $ 13,537
11/30/1990 $ 18,852 $ 11,827 $ 12,547 $ 13,828
12/31/1990 $ 18,544 $ 11,827 $ 12,896 $ 14,044
1/31/1991 $ 18,257 $ 11,898 $ 13,457 $ 14,218
2/28/1991 $ 18,578 $ 11,915 $ 14,418 $ 14,339
3/31/1991 $ 18,688 $ 11,933 $ 14,767 $ 14,438
4/30/1991 $ 18,342 $ 11,951 $ 14,801 $ 14,594
5/31/1991 $ 17,970 $ 11,987 $ 15,438 $ 14,678
6/30/1991 $ 18,617 $ 12,023 $ 14,731 $ 14,671
7/31/1991 $ 16,519 $ 12,041 $ 15,417 $ 14,875
8/31/1991 $ 17,199 $ 12,076 $ 15,781 $ 15,196
9/30/1991 $ 19,499 $ 12,129 $ 15,517 $ 15,505
10/31/1991 $ 18,730 $ 12,147 $ 15,725 $ 15,677
11/30/1991 $ 19,388 $ 12,182 $ 15,094 $ 15,821
12/31/1991 $ 23,403 $ 12,191 $ 16,817 $ 16,291
1/31/1992 $ 20,138 $ 12,208 $ 16,504 $ 16,069
2/29/1992 $ 18,239 $ 12,252 $ 16,717 $ 16,174
3/31/1992 $ 18,365 $ 12,315 $ 16,393 $ 16,083
4/30/1992 $ 17,208 $ 12,332 $ 16,873 $ 16,199
5/31/1992 $ 16,909 $ 12,349 $ 16,956 $ 16,505
6/30/1992 $ 19,543 $ 12,393 $ 16,704 $ 16,733
7/31/1992 $ 23,078 $ 12,419 $ 17,386 $ 17,074
8/31/1992 $ 24,906 $ 12,454 $ 17,030 $ 17,247
9/30/1992 $ 24,087 $ 12,489 $ 17,231 $ 17,452
10/31/1992 $ 23,220 $ 12,533 $ 17,290 $ 17,220
11/30/1992 $ 22,748 $ 12,550 $ 17,877 $ 17,223
12/31/1992 $ 22,603 $ 12,542 $ 18,096 $ 17,497
1/31/1993 $ 22,872 $ 12,603 $ 18,247 $ 17,833
2/28/1993 $ 25,342 $ 12,647 $ 18,496 $ 18,145
3/31/1993 $ 25,134 $ 12,691 $ 18,886 $ 18,221
4/30/1993 $ 26,778 $ 12,727 $ 18,430 $ 18,349
5/31/1993 $ 27,137 $ 12,745 $ 18,921 $ 18,373
6/30/1993 $ 27,527 $ 12,763 $ 18,976 $ 18,705
7/31/1993 $ 29,826 $ 12,763 $ 18,900 $ 18,812
8/31/1993 $ 30,747 $ 12,798 $ 19,616 $ 19,141
9/30/1993 $ 30,658 $ 12,825 $ 19,461 $ 19,193
10/31/1993 $ 30,646 $ 12,878 $ 19,863 $ 19,264
11/30/1993 $ 30,637 $ 12,887 $ 19,675 $ 19,100
12/31/1993 $ 31,259 $ 12,887 $ 19,913 $ 19,203
1/31/1994 $ 29,858 $ 12,922 $ 20,589 $ 19,462
2/28/1994 $ 28,876 $ 12,966 $ 20,031 $ 19,124
3/31/1994 $ 30,539 $ 13,010 $ 19,158 $ 18,651
4/30/1994 $ 30,335 $ 13,028 $ 19,404 $ 18,502
5/31/1994 $ 31,542 $ 13,037 $ 19,722 $ 18,500
6/30/1994 $ 32,400 $ 13,081 $ 19,239 $ 18,460
7/31/1994 $ 31,470 $ 13,117 $ 19,870 $ 18,827
8/31/1994 $ 30,793 $ 13,169 $ 20,683 $ 18,850
9/30/1994 $ 30,655 $ 13,205 $ 20,178 $ 18,573
10/31/1994 $ 30,664 $ 13,214 $ 20,630 $ 18,556
11/30/1994 $ 29,588 $ 13,231 $ 19,880 $ 18,515
12/31/1994 $ 29,091 $ 13,231 $ 20,174 $ 18,643
1/31/1995 $ 28,203 $ 13,284 $ 20,697 $ 19,012
2/28/1995 $ 30,575 $ 13,337 $ 21,503 $ 19,464
3/31/1995 $ 32,991 $ 13,381 $ 22,136 $ 19,583
4/30/1995 $ 34,545 $ 13,425 $ 22,787 $ 19,857
5/31/1995 $ 35,187 $ 13,452 $ 23,696 $ 20,626
6/30/1995 $ 34,188 $ 13,479 $ 24,246 $ 20,776
7/31/1995 $ 34,280 $ 13,479 $ 25,050 $ 20,731
8/31/1995 $ 34,263 $ 13,514 $ 25,113 $ 20,981
9/30/1995 $ 33,872 $ 13,541 $ 26,172 $ 21,185
10/31/1995 $ 33,784 $ 13,586 $ 26,078 $ 21,460
11/30/1995 $ 34,605 $ 13,576 $ 27,222 $ 21,782
12/31/1995 $ 35,789 $ 13,567 $ 27,747 $ 22,087
1/31/1996 $ 37,245 $ 13,647 $ 28,690 $ 22,233
2/29/1996 $ 35,949 $ 13,691 $ 28,956 $ 21,846
3/31/1996 $ 35,892 $ 13,762 $ 29,235 $ 21,693
4/30/1996 $ 37,148 $ 13,815 $ 29,666 $ 21,572
5/31/1996 $ 36,242 $ 13,842 $ 30,430 $ 21,529
6/30/1996 $ 36,426 $ 13,850 $ 30,546 $ 21,817
7/31/1996 $ 36,029 $ 13,876 $ 29,197 $ 21,876
8/31/1996 $ 36,199 $ 13,903 $ 29,814 $ 21,839
9/30/1996 $ 37,408 $ 13,947 $ 31,490 $ 22,219
10/31/1996 $ 40,872 $ 13,992 $ 32,358 $ 22,712
11/30/1996 $ 43,614 $ 14,018 $ 34,802 $ 23,100
12/31/1996 $ 42,969 $ 14,018 $ 34,113 $ 22,886
1/31/1997 $ 44,550 $ 14,063 $ 36,243 $ 22,957
2/28/1997 $ 44,586 $ 14,107 $ 36,527 $ 23,014
3/31/1997 $ 44,505 $ 14,142 $ 35,029 $ 22,759
4/30/1997 $ 43,615 $ 14,159 $ 37,119 $ 23,100
5/31/1997 $ 41,212 $ 14,151 $ 39,377 $ 23,319
6/30/1997 $ 42,341 $ 14,168 $ 41,140 $ 23,597
7/31/1997 $ 47,020 $ 14,185 $ 44,413 $ 24,234
8/31/1997 $ 44,961 $ 14,211 $ 41,926 $ 24,028
9/30/1997 $ 45,738 $ 14,247 $ 44,221 $ 24,384
10/31/1997 $ 45,203 $ 14,283 $ 42,746 $ 24,737
11/30/1997 $ 45,958 $ 14,274 $ 44,723 $ 24,851
12/31/1997 $ 46,698 $ 14,257 $ 45,491 $ 25,102
1/31/1998 $ 45,353 $ 14,284 $ 45,993 $ 25,423
2/28/1998 $ 45,190 $ 14,311 $ 49,309 $ 25,403
3/31/1998 $ 45,615 $ 14,338 $ 51,832 $ 25,489
4/30/1998 $ 42,777 $ 14,364 $ 52,353 $ 25,622
5/31/1998 $ 43,843 $ 14,390 $ 51,454 $ 25,865
6/30/1998 $ 42,291 $ 14,407 $ 53,542 $ 26,085
7/31/1998 $ 41,880 $ 14,425 $ 52,974 $ 26,140
8/31/1998 $ 47,207 $ 14,442 $ 45,324 $ 26,566
9/30/1998 $ 51,787 $ 14,459 $ 48,228 $ 27,188
10/31/1998 $ 50,254 $ 14,494 $ 52,148 $ 27,043
11/30/1998 $ 47,620 $ 14,494 $ 55,307 $ 27,198
12/31/1998 $ 50,697 $ 14,485 $ 58,492 $ 27,279
1/31/1999 $ 48,567 $ 14,520 $ 60,937 $ 27,473
2/28/1999 $ 48,252 $ 14,520 $ 59,044 $ 26,992
3/31/1999 $ 46,027 $ 14,476 $ 61,405 $ 27,141
4/30/1999 $ 46,681 $ 14,371 $ 63,782 $ 27,227
5/31/1999 $ 47,881 $ 14,371 $ 62,276 $ 26,988
6/30/1999 $ 50,313 $ 14,371 $ 65,739 $ 26,901
7/31/1999 $ 48,829 $ 14,328 $ 63,687 $ 26,788
8/31/1999 $ 47,325 $ 14,293 $ 63,371 $ 26,775
9/30/1999 $ 44,712 $ 14,225 $ 61,634 $ 27,086
10/31/1999 $ 41,323 $ 14,199 $ 65,535 $ 27,186
11/30/1998 $ 41,162 $ 14,190 $ 66,867 $ 27,183
12/31/1999 $ 41,446 $ 14,173 $ 70,805 $ 27,053
1/1/2000 $ 39,279 $ 14,173 $ 67,251 $ 26,963
</TABLE>
Sources:
S&P 500:
Standard & Poor's Corp./S&P 500 Total Return Index (includes reinvestment of
dividends). The S&P 500 is a market capitalization weighted price index
composed of 500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and Over-The-Counter market. This index is
unmanaged and reflects the inherent volatility and liquidity of the equity
markets.
Bond Index:
Lehman Aggregate Bond Index. This index is unmanaged, consists of
representative government and corporate bonds as well as asset-backed and
mortgage-backed securities and reflects the liquidity of the bond markets.
Bond investments are fixed income investments and have been generally less
volatile than equities or commodities but are sensitive to interest-rate
movement.
Consumer Price Index. U.S. Department of Labor, Bureau of Statistics/CPI
Index.
IDS Managed Futures, L.P., historical performance of IDS Managed Futures,
L.P., a managed fund. Actual performance has reflected the more speculative
and volatile nature of trading in commodity interests. Investors may
liquidate their Units on a monthly basis after six months.
-4-
<PAGE>
INVESTMENT DIVERSIFICATION
Unlike a traditional diversified portfolio of stocks, bonds and real
estate, the profit potential of the Fund does not depend upon favorable general
economic conditions. As demonstrated by the graph below, the Fund is as likely
to be profitable (or unprofitable) during periods of declining stock markets as
at any other time. In addition to the expected non-correlation in its
performance with the performance of the general equity and debt markets, the
Fund's flexibility to take either long or short positions, as opposed to
traditional portfolios which are typically heavily weighted towards the former,
can be an important advantage in times of economic uncertainty.
An investor who is not prepared to spend substantial time trading in
the futures and forward markets may nevertheless participate in the commodities
and financial markets through investing in the Fund, thereby obtaining
diversification from traditional investments such as a diversified portfolio of
stocks, bonds and real estate. By allocating a portion of the risk segment of a
traditional diversified portfolio to the Fund, an investor has the potential, if
the Fund is successful, to enhance the prospects for superior performance of the
overall portfolio as well as to reduce the volatility of the portfolio over time
and the dependence of such portfolio on any single country's economy.
-4-
<PAGE>
PORTFOLIO DIVERSIFICATION ILLUSTRATION
(QUARTERLY PERCENTAGE CHANGE IN VALUE)
JUNE 1987 THROUGH DECEMBER 1999
This graph demonstrates the low correlation of the Fund's past
performance with the Standard & Poor's 500 Index
<TABLE>
<CAPTION>
PORTFOLIO DIVERSIFICATION ILLUSTRATION
IDS Managed
Futures SP500
<S> <C> <C>
9/30/1987 -1.45% 6.59%
12/31/1987 30.53% -22.51%
3/31/1988 -10.82% 5.70%
6/30/1988 7.58% 6.58%
9/30/1988 -7.76% 0.32%
12/31/1988 -3.91% 3.06%
3/31/1989 1.04% 7.11%
6/30/1989 8.72% 8.76%
9/30/1989 -8.54% 10.69%
12/31/1989 5.11% 2.05%
3/31/1990 45.70% -2.97%
6/30/1990 -9.63% 6.22%
9/30/1990 26.49% -13.72%
12/31/1990 -3.54% 8.94%
3/31/1991 0.77% 14.60%
6/30/1991 -0.38% -0.29%
9/30/1991 4.74% 5.32%
12/31/1991 20.02% 8.37%
3/31/1992 -21.53% -2.50%
6/30/1992 6.41% 1.85%
9/30/1992 23.25% 3.13%
12/31/1992 -6.16% 5.06%
3/31/1993 11.20% 4.40%
6/30/1993 9.52% 0.45%
9/30/1993 11.37% 2.57%
12/31/1993 1.96% 2.33%
3/31/1994 -2.30% -3.78%
6/30/1994 6.09% 0.38%
9/30/1994 -5.39% 4.87%
12/31/1994 -5.10% -0.03%
3/31/1995 13.41% 9.72%
6/30/1995 3.63% 9.53%
9/30/1995 -0.92% 7.94%
12/31/1995 5.66% 6.01%
3/31/1996 0.29% 5.36%
6/30/1996 1.49% 4.48%
9/30/1996 2.69% 3.09%
12/31/1996 14.87% 8.34%
3/31/1997 3.58% 2.68%
6/30/1997 -4.86% 17.47%
9/30/1997 8.02% 7.48%
12/31/1997 2.10% 2.87%
3/31/1998 -2.32% 13.94%
6/30/1998 -7.29% 3.32%
9/30/1998 22.45% -9.92%
12/31/1998 -2.10% 21.29%
3/31/1999 -9.21% 4.98%
6/30/1999 9.31% 7.06%
9/30/1999 -11.13% -6.25%
12/31/1999 -7.31% 14.88%
</TABLE>
-5-
<PAGE>
FUTURES MARKETS AND TRADING METHODS
THE FUTURES AND FORWARD MARKETS
FUTURES AND FORWARD CONTRACTS
Futures contracts in the United States can only be traded on approved
exchanges and call for the future delivery of various commodities. These
contractual obligations may be satisfied either by taking or making physical
delivery or by making an offsetting sale or purchase of a futures contract on
the same exchange.
Forward currency contracts are traded off-exchange through banks or
dealers. In such instances, the bank or dealer generally acts as principal in
the transaction and charges "bid-ask" spreads.
Futures and forward trading is a "zero-sum," risk transfer economic
activity. For every gain there is an equal and offsetting loss.
EXCHANGE OF FUTURES FOR PHYSICALS ("EFP") TRANSACTIONS
Although futures contracts are normally entered into through
competitive bidding and offering on an exchange floor (or its electronic
equivalent), most U.S. exchanges allow futures contracts also to be established
in a transaction known as an exchange of futures for physicals ("EFP"). In an
EFP transaction where two parties engage in a cash sale of a commodity
underlying a futures contract, those same two parties are permitted to establish
futures positions of an equivalent quantity opposite to their cash transaction.
For example, a seller of a cash commodity would be permitted to establish a long
futures position of an equivalent quantity and the buyer of the cash commodity
would be permitted to establish a short futures position of the equivalent
commodity. In some futures markets, the cash transaction upon which the EFP is
based can be the reversal of a previously entered into but unsettled cash
transaction. In those markets, because the cash transaction is essentially
"transitory," EFPs can serve as a means for parties to enter into futures
contracts at negotiated prices and at other than during normal trading hours.
HEDGERS AND SPECULATORS
The two broad classifications of persons who trade futures are
"hedgers" and "speculators." Hedging is designed to minimize the losses that may
occur because of price changes, for example, between the time a merchandiser
contracts to sell a commodity and the time of delivery. The futures and forward
markets enable the hedger to shift the risk of price changes to the speculator.
The speculator risks capital with the hope of making profits from such changes.
Speculators, such as the Fund, rarely take delivery of the physical commodity
but rather close out their futures positions through offsetting futures
contracts.
EXCHANGES; POSITION AND DAILY LIMITS; MARGINS
Each of the commodity exchanges in the United States has an associated
"clearinghouse." Once trades made between members of an exchange have been
cleared, each clearing broker looks only to the clearinghouse for all payments
in respect of such broker's open positions. The clearinghouse "guarantee" of
performance on open positions does not run to customers. If a member firm goes
bankrupt, customers could lose money.
The Trading Advisors trade for the Fund on a number of foreign
commodity exchanges. Foreign commodity exchanges differ in certain respects from
their United States counterparts and are not regulated by any United States
agency.
The CFTC and the United States exchanges have established "speculative
position limits" on the maximum positions that the Trading Advisors may hold or
control in futures contracts on certain commodities.
Most United States exchanges limit the maximum change in futures prices
during any single trading day. Once the "daily limit" has been reached, it
becomes very difficult to execute trades. Because these limits apply on a
day-to-day basis, they do not limit ultimate losses, but may reduce or eliminate
liquidity.
When a position is established, "initial margin" is deposited. On most
exchanges, at the close of each trading day "variation margin," representing the
unrealized gain or loss on the open positions, is either credited to or debited
from a trader's account.
-6-
<PAGE>
If "variation margin" payments cause a trader's "initial margin" to fall below
"maintenance margin" levels, a "margin call" is made, requiring the trader to
deposit additional margin or have his position closed out.
TRADING METHODS
Managed futures strategies are generally classified as either (i)
systematic or discretionary; and (ii) technical or fundamental.
SYSTEMATIC AND DISCRETIONARY TRADING APPROACHES
A systematic trader relies on trading programs or models to generate
trading signals. Discretionary traders make trading decisions on the basis of
their own judgment.
Each approach involves inherent risks. For example, systematic traders
may incur substantial losses when fundamental or unexpected forces dominate the
markets, while discretionary traders may overlook price trends which would have
been signaled by a system.
TECHNICAL AND FUNDAMENTAL ANALYSIS
Technical analysis operates on the theory that market prices, momentum
and patterns at any given point in time reflect all known factors affecting the
supply and demand for a particular commodity. Consequently, technical analysis
focuses on market data as the most effective means of attempting to predict
future prices.
Fundamental analysis, in contrast, focuses on the study of factors
external to the markets, for example: weather, the economy of a particular
country, government policies, domestic and foreign political and economic
events, and changing trade prospects. Fundamental analysis assumes that markets
are imperfect and that market mispricings can be identified.
TREND-FOLLOWING
Trend-following advisors try to take advantage of major price
movements, in contrast with traders who focus on making many small profits on
short-term trades or through relative value positions. Trend-following traders
assume that most of their trades will be unprofitable. They look for a few large
profits from big trends. During periods with no major price movements, a
trend-following trading advisor is likely to have big losses.
RISK CONTROL TECHNIQUES
Trading advisors often adopt risk management principles. Such
principles typically restrict the size of positions taken as well as
establishing stop-loss points at which losing positions must be liquidated.
However, no risk control technique can assure that big losses will be avoided.
THE TRADING ADVISORS' PROGRAMS ARE SYSTEMATIC, TECHNICAL AND
TREND-FOLLOWING.
"BLUE SKY" GLOSSARY
THE FOLLOWING DEFINITIONS ARE INCLUDED IN THIS PART TWO IN COMPLIANCE
WITH THE REQUIREMENTS OF VARIOUS STATE SECURITIES ADMINISTRATORS WHO REVIEW
PUBLIC FUTURES FUND OFFERINGS FOR COMPLIANCE WITH THE "GUIDELINES FOR THE
REGISTRATION OF COMMODITY POOL PROGRAMS" STATEMENT OF POLICY PROMULGATED BY THE
NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION, INC. THE FOLLOWING
DEFINITIONS ARE REPRINTED VERBATIM FROM SUCH GUIDELINES AND MAY, ACCORDINGLY,
NOT IN ALL CASES BE RELEVANT TO AN INVESTMENT IN THE FUND.
DEFINITIONS -- As used in the Guidelines, the following terms have the
following meanings:
ADMINISTRATOR -- The official or agency administering the security laws
of a state.
ADVISOR -- Any Person who for any consideration engages in the business
of advising others, either directly or indirectly, as to the value, purchase, or
sale of commodity contracts or commodity options.
AFFILIATE -- An Affiliate of a Person means: (a) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of the
outstanding voting securities of such Person; (b) any Person 10% or more of
whose outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote, by such Person; (c) any Person, directly or
indirectly,
-7-
<PAGE>
controlling, controlled by, or under common control of such Person; (d) any
officer, director or partner of such Person; or (e) if such Person is an
officer, director or partner, any Person for which such Person acts in any such
capacity.
CAPITAL CONTRIBUTIONS -- The total investment in a Program by a
Participant or by all Participants, as the case may be.
COMMODITY BROKER -- Any Person who engages in the business of effecting
transactions in commodity contracts for the account of others or for his or her
own account.
COMMODITY CONTRACT -- A contract or option thereon providing for the
delivery or receipt at a future date of a specified amount and grade of a traded
commodity at a specified price and delivery point.
CROSS REFERENCE SHEET -- A compilation of the Guideline sections,
referenced to the page of the prospectus, Program agreement, or other exhibits,
and justification of any deviation from the Guidelines.
NET ASSETS -- The total assets, less total liabilities, of the Program
determined on the basis of generally accepted accounting principles. Net Assets
shall include any unrealized profits or losses on open positions, and any fee or
expense including Net Asset fees accruing to the Program.
NET ASSET VALUE PER PROGRAM INTEREST -- The Net Assets of the Fund
divided by the number of Units outstanding.
NET WORTH -- The excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
NEW TRADING PROFITS -- The excess, if any, of Net Assets at the end of
the period over Net Assets at the end of the highest previous period or Net
Assets at the date trading commences, whichever is higher, and as further
adjusted to eliminate the effect on Net Assets resulting from new Capital
Contributions, redemptions, or capital distributions, if any, made during the
period decreased by interest or other income, not directly related to trading
activity, earned on Program assets during the period, whether the assets are
held separately or in a margin account.
ORGANIZATIONAL AND OFFERING EXPENSES -- All expenses incurred by the
Program in connection with and in preparing a Program for registration and
subsequently offering and distributing it to the public, including, but not
limited to, total underwriting and brokerage discounts and commissions
(including fees of the underwriter's attorneys), expenses for printing,
engraving, mailing, salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow holders, depositories,
experts, expenses of qualification of the sale of its Program Interests under
federal and state law, including taxes and fees, and accountants' and attorneys'
fees.
PARTICIPANT -- The holder of a Program Interest.
PERSON -- Any natural Person, partnership, corporation, association or
other legal entity.
PIT BROKERAGE FEE -- Pit Brokerage Fee shall include floor brokerage,
clearing fees, National Futures Association fees, and exchange fees.
PROGRAM -- A limited partnership, joint venture, corporation, trust or
other entity formed and operated for the purpose of investing in Commodity
Contracts.
PROGRAM BROKER -- A Commodity Broker that effects trades in Commodity
Contracts for the account of a Program.
PROGRAM INTEREST -- A limited partnership interest or other security
representing ownership in a Program.
PYRAMIDING -- A method of using all or a part of an unrealized profit
in a Commodity Contract position to provide margin for any additional Commodity
Contracts of the same or related commodities.
SPONSOR -- Any Person directly or indirectly instrumental in organizing
a Program or any Person who will manage or participate in the management of a
Program, including a Commodity Broker who pays any portion of the Organizational
Expenses of the Program, and the general partner(s) and any other Person who
regularly performs or selects the Persons who perform services for the Program.
Sponsor does
-8-
<PAGE>
not include wholly independent third parties such as attorneys, accountants, and
underwriters whose only compensation is for professional services rendered in
connection with the offering of the units. The term "Sponsor" shall be deemed to
include its Affiliates.
VALUATION DATE -- The date as of which the Net Assets of the Program
are determined.
VALUATION PERIOD -- A regular period of time between Valuation Dates.
-9-
<PAGE>
EXHIBIT A
IDS MANAGED FUTURES, L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
DATED AS OF SEPTEMBER 30, 1994
<PAGE>
IDS MANAGED FUTURES, L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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STRUCTURE OF PARTNERSHIP
<S> <C> <C>
1. Formation and Name.................................................................................. A-1
2. Principal Offices................................................................................... A-1
3. Business............................................................................................ A-1
4. Term, Dissolution and Fiscal Year................................................................... A-1
(a) Term........................................................................................... A-1
(b) Dissolution.................................................................................... A-1
(c) Fiscal Year.................................................................................... A-1
(d) Certain Definitions............................................................................ A-1
5. Management of the Partnership...................................................................... A-3
CAPITAL STRUCTURE AND PARTNERSHIP FINANCES
6. Net Worth of General Partners ...................................................................... A-4
7. Capital Contributions and Partnership Units......................................................... A-5
8. Maintenance of Capital Accounts; Allocation of Profits and Losses.....................................A-5
(a) Capital Accounts............................................................................... A-5
(b) Monthly Allocations............................................................................ A-5
(c) Allocation of Profit and Loss for Federal Income Tax Purposes.................................. A-5
(d) Deficit Balances............................................................................... A-6
(e) Redemptions and Distributions.................................................................. A-7
(f) Judgment of General Partners................................................................... A-7
9. Expenses and Limitation Thereof..................................................................... A-7
10. Limited Liability of Limited Partners .............................................................. A-8
11. Return of Limited Partner's Capital Contribution.................................................... A-8
CONDUCT OF THE PARTNERSHIP'S BUSINESS
12. Trading Policies.................................................................................. A-8
13. Reports and Statements............................................................................ A-9
14. Partnership Records............................................................................... A-10
ADMISSION AND WITHDRAWAL OF PARTNERS
15. Transfer of Units................................................................................. A-10
16. Redemption of Units............................................................................... A-10
17. Offering of Units of Limited Partnership Interest................................................. A-12
18. Admission of Additional Partners.................................................................. A-12
19. Power of Attorney................................................................................. A-13
20. Withdrawal of a Partner........................................................................... A-13
INDEMNIFICATION
21. Indemnification................................................................................... A-14
A-i
<PAGE>
GOVERNANCE OF THE PARTNERSHIP
Page
----
22. Amendments and Meetings........................................................................... A-14
(a) Amendments Proposed by the General Partners.................................................. A-14
(b) Meetings; Amendments Proposed by the Limited Partners........................................ A-15
(c) Proxy Rules.................................................................................. A-15
23. Governing Laws.................................................................................... A-15
24. Miscellaneous..................................................................................... A-15
(a) Notices..................................................................................... A-15
(b) Binding Effect............................................................................... A-16
(c) Headings..................................................................................... A-16
(d) Counterparts................................................................................. A-16
Testimonium
Signatures
</TABLE>
A-ii
<PAGE>
IDS MANAGED FUTURES, L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
CIS INVESTMENTS, INC. and IDS FUTURES CORPORATION (hereinafter referred
to collectively as the "General Partners" and individually referred to as a
"General Partner") in their capacities as general partners and as
attorneys-in-fact for those who hereafter execute this agreement, as amended or
by separate instrument, and for the limited partners of IDS MANAGED FUTURES,
L.P. (the "Partnership") hereby agree to and adopt this Amended and Restated
Limited Partnership Agreement (the "Agreement") as of this day, September 30,
1994, and hereby amend and revise that certain Limited Partnership Agreement of
the Partnership dated June 16, 1987 and amended on January 28, 1992, March 29,
1993, January 25, 1994, and September 30, 1994.
STRUCTURE OF THE PARTNERSHIP
1. FORMATION AND NAME.
The parties hereto do hereby form a limited partnership under the
Delaware Revised Uniform Limited Partnership Act, as amended and in effect on
June 16, 1987 (the "Act"). The name of the limited partnership is IDS Managed
Futures, L.P. (the "Partnership"). The General Partners shall execute and file a
Certificate of Limited Partnership in accordance with the provisions of the Act
and execute, file, record and publish as appropriate such amendments, assumed
name certificates and other documents as are or become necessary or advisable as
determined by the General Partners. Each Limited Partner hereby undertakes to
furnish to the General Partners a power of attorney which may be filed with the
Certificate of Limited Partnership and any amendments thereto and such
additional information as is required from him to complete such documents and to
execute and cooperate in the filing, recording or publishing of such documents
at the request of the General Partners.
2. PRINCIPAL OFFICES.
The principal offices of the Partnership shall be at the offices of CIS
Investments, Inc. or such other places as the General Partners may designate
from time to time.
3. BUSINESS.
The Partnership business and purpose is to trade, buy, sell, spread or
otherwise acquire, hold or dispose of commodity interests including futures
contracts, forward contracts, physical commodities, and related options thereon.
The objective of the Partnership business is appreciation of its assets through
speculative trading in such commodity interests.
4. TERM, DISSOLUTION AND FISCAL YEAR.
(a) TERM. The term of the Partnership shall commence on the day on
which the Certificate of Limited Partnership is filed in the Office of the
Secretary of State of Delaware pursuant to the provisions of the Act and shall
end upon the first to occur of the following: (1) December 31, 2006; (2) receipt
by the General Partners of a notice to dissolve the Partnership at a specified
time by Limited Partners owning more than 50% of the outstanding Units of
Limited Partnership Interest ("Units"), including Units held by representatives
and employees of the Partnership's Selling Agent and of its corporate
affiliates, but not including any Units held by the General Partners or their
corporate affiliates, which notice is sent by registered mail to the General
Partners not less than ninety days prior to the effective date of such
dissolution; (3) withdrawal, removal, insolvency, bankruptcy, legal disability
or dissolution of the General Partners unless the Partnership is continued
pursuant to paragraph 22 below; (4) the insolvency or bankruptcy of the
Partnership; (5) a decrease in the Net Asset Value of the Partnership to less
than $500,000 as of the close of business on any trading day; or (6) the
occurrence of any event which shall make it unlawful for the existence of the
Partnership to be continued or requiring termination of the Partnership.
(b) DISSOLUTION. Upon the occurrence of an event causing the
termination of the Partnership, the Partnership shall terminate and be
dissolved. Dissolution, payment of creditors and distribution of the Partnership
assets shall be effected as soon as practicable in accordance with the Act, and
the General Partners and Limited Partners (and any assignees) shall share in the
assets of the Partnership, if any, PRO RATA in accordance with their respective
capital accounts, less any amount owing by such Partners (or assignees) to the
Partnership.
(c) FISCAL YEAR. The fiscal year of the Partnership shall begin on
January 1 of each year and end on December 31; PROVIDED, HOWEVER, that the first
fiscal year of the Partnership shall commence on the date its Certificate of
Limited Partnership is filed.
(d) CERTAIN DEFINITIONS.
"ADVISOR" means any person who for any consideration engages in the
business of advising others, either directly or indirectly, as to the value,
purchase, or sale of Commodity Contracts or commodity options.
"COMMODITY CONTRACT" means a contract or option thereon providing for
the delivery or receipt at a future date of a specified amount and grade of a
traded commodity at a specified price and delivery point.
"NET ASSET VALUE" of the Partnership means the total assets less total
liabilities, including any liability for organization
A-1
<PAGE>
and offering expenses of the Partnership, to be determined on the basis of
generally accepted accounting principles, consistently applied, unless otherwise
specified below. As of the close of business on February 28, 1995, regardless of
whether Units are then being offered, each Unit shall be divided into three
Units, each of which shall have Net Asset Value per Unit equal to one-third the
Net Asset Value per Unit on that date prior to such division. The resulting Net
Asset Value per Unit will constitute the Net Asset Value per Unit thereafter.
"NET ASSET VALUE PER UNIT" means the Net Asset Value divided by the
number of Units outstanding on the date of calculation. For purposes of these
calculations:
(a) Net Asset Value shall include any unrealized profit or loss on
securities and open commodity positions and any other credit or debit accruing
to the Partnership but unpaid or not received by the Partnership.
(b) All securities and open commodity positions shall be valued at
their then market value which means, with respect to open commodity positions,
the settlement price as determined by the exchange on which the transaction is
effected or the most recent appropriate quotation as supplied by the clearing
broker or banks through which the transaction is effected. If there are no
trades on the date of the calculation due to the operation of the daily price
fluctuation limits or due to a closing of the exchange on which the transaction
is executed, the contract will be valued at fair market value as determined by
the General Partners. Interest, if any, shall accrue monthly.
(c) Brokerage commissions on open commodity positions shall be
accrued in full upon the initiation of such open positions as a liability of the
Partnership. Management fees shall be paid monthly and deducted prior to the
calculation of the quarterly incentive fee.
"NET WORTH" means the excess of total assets over total liabilities as
determined by generally accepted accounting principles. Net Worth shall be
determined exclusive of home, home furnishings and automobiles.
"TRADING PROFITS" means Trading Profits (for purposes of calculating
each Advisor's incentive fees only) is defined as the excess (if any) of (A) the
Net Asset Value of the Partnership's assets under management of an Advisor as of
the last day of any calendar quarter (before deduction of incentive fees payable
for such quarter) over (B) the highest Net Asset Value of the Partnership's
assets under the management of such Advisor as of the last day of the most
recent calendar quarter for which an incentive fee was due and owing. In
computing Trading Profits, the difference between (A) and (B) above shall be (i)
decreased by all interest realized on the Advisor's allocable share of
Partnership assets subject to such Advisor's management between the dates
referred to in (A) and (B), and (ii) increased by the Advisor's allocable share
of any distributions or redemptions paid or payable by the Partnership as of, or
subsequent to, the date in (B) through the date in (A), and (iii) adjusted
(either increased or decreased, as the case may be) to reflect the Advisor's
allocable share of any additional allocations or negative reallocations of
Partnership assets from the date in (B) to the last day of the calendar quarter
as of which the current incentive fee calculation is made. The incentive fee
shall not be payable on interest earned on Partnership assets. For purposes of
calculating Trading Profits attributable to the assets under the management of
each Advisor only, the definition of Net Asset Value shall be modified, insofar
as it takes into consideration the amount of incentive and management fees
payable by and brokerage commissions accrued by the Partnership, to provide for
the allocation of such incentive and management fees and brokerage commissions
specifically to the assets under the management of the Advisor which is entitled
to such fees or whose trading decisions generated those brokerage commissions.
"ORGANIZATIONAL AND OFFERING EXPENSES" means all expenses incurred by
the Partnership in connection with and in preparing for registration and
subsequently offering and distributing units to the public, including, but not
limited to, total underwriting and brokerage discounts and commissions
(including fees of the underwriter's attorneys), expenses for printing,
engraving, mailing, salaries of employees while engaged in sales activity,
charges of transfer agents, registrars, trustees, escrow holders, depositories,
experts, expenses of qualification of the sale of its limited partnership
interests under federal and state law, including taxes and fees, accountants'
and attorneys' fees.
"PIT BROKERAGE FEE" means the floor brokerage, clearing fees, National
Futures Association fees, and exchange fees.
"SPONSOR" means any person directly or indirectly instrumental in
organizing the Partnership or any person who will manage or participate in the
management of the Partnership, including a person who pays any portion of the
organizational expenses of the Partnership, and the general partner(s) and any
other person who regularly performs or selects the persons who perform services
for the Partnership. "Sponsor" does not include wholly independent third parties
such as attorneys, accountants, and underwriters whose only compensation is for
professional services rendered in connection with the offering of the units. The
term "Sponsor" shall be deemed to include its affiliates.
"VALUATION DATE" means the date as of which the Net Asset Value of the
Partnership is determined.
"VALUATION PERIOD" means a regular period time between valuation dates.
A-2
<PAGE>
5. MANAGEMENT OF THE PARTNERSHIP.
Subject to the limitations of this Agreement, the General Partners
shall have exclusive management and complete control of the management of all
aspects of the Partnership's business for the purposes herein stated. The
General Partners shall make all decisions affecting Partnership affairs (except
that the General Partners shall not select the purchases and sales of any
commodity interests for the Partnership, but shall employ non-affiliated
commodity trading advisors to provide such services), and shall have the
exclusive right to act for the Partnership including, inter alia, the power to
enter into contracts with third parties for trading advisory services and
brokerage services, which brokerage services may be performed by entities
affiliated with the General Partners at rates that may exceed the lowest rates
which might otherwise be available to the Partnership, with respect to the
following matters:
(a) Retaining or replacing any commodity trading advisor to the
Partnership;
(b) Retaining any futures commission merchant or introducing
broker to act as the Partnership's broker, or materially revising the terms or
conditions upon which any futures commission merchant, or introducing broker,
shall be retained;
(c) Appointing any person, including any person affiliated with
the General Partners, to act as a selling agent, clearing broker, introducing
broker, underwriter, or otherwise to act on behalf of the Partnership to sell or
solicit the purchase of Units in the Partnership;
(d) Determining to offer additional Units in the Partnership
pursuant to its prospectus;
(e) Settling claims against the Partnership; and
(f) Retaining attorneys and accountants to assist in the
organization and operation of the Partnership.
The General Partners shall exercise good faith in carrying out their
duties and exercising their powers in regard to, or on behalf of, the
Partnership, and shall devote sufficient efforts to the furtherance of the
business of the Partnership as reasonably necessary and appropriate. The General
Partners shall retain commodity trading advisors not affiliated with either
General Partner and will delegate the management of the Partnership's commodity
accounts to such advisors.
No Limited Partner shall take part in the management of the business or
transact any business for the Partnership, and no Limited Partner shall have
power to sign for or bind the Partnership. No Limited Partner shall be entitled
to any salary, draw or other compensation from the Partnership on account of his
investment in the Partnership. The General Partners shall have sole discretion
in determining what distributions of profits and income, if any, shall be made
to the Partners. Any distributions shall become a liability of the Partnership
for purposes of calculating Net Asset Value as of the dates of their
declaration.
The General Partners may engage and compensate on behalf of the
Partnership from funds of the Partnership, such persons, firms or corporations,
including (except as described in this Agreement) the General Partners and any
affiliated person or entity, as the General Partners in their sole judgment
shall deem advisable for the conduct and operation of the business of the
Partnership.
The General Partners are hereby authorized on behalf of the Partnership
to enter into the advisory contract between the Partnership and John W. Henry &
Company, Inc. and Sabre Fund Management Limited described in the Prospectus,
pursuant to which such entities will have responsibility with respect to the
determination of the Partnership's commodity trading decisions. In the event the
General Partners shall, in their sole discretion, using their prudent business
judgment, determine that any trading instructions issued by such entities or any
other commodity trading advisor to the Partnership, violate established trading
policies of the Partnership (as described in paragraph 12 below), then the
General Partners may negate such trading instructions. The General Partners may,
in their sole discretion, select additional commodity trading advisors to direct
trading for the Partnership. The General Partners are further authorized, on
behalf of the Partnership, (i) to enter into the brokerage agreement and related
customer agreements with their affiliates, Cargill Investor Services, Inc. and
American Express Financial Advisors Inc., described in the Prospectus, pursuant
to which those firms will render brokerage services to the Partnership, (ii) to
cause the Partnership to pay brokerage commissions at the rates provided for in
the brokerage agreement, and National Futures Association, exchange, clearing,
delivery, insurance, storage, service and other fees and charges incidental to
the Partnership's trading and (iii) to receive an annual administrative fee
equal, in the case of IDS Futures Corporation, to 1.125% of the Partnership's
Net Asset Value on the first business day of each fiscal year and, in the case
of CIS Investments, Inc., to 0.25% of the Partnership's Net Asset Value on the
first business day of each fiscal year. The Partnership shall not pay brokerage
commissions to Cargill Investor Services, Inc. and American Express Financial
Advisors Inc. (exclusive of National Futures Association, exchange, clearing,
delivery, insurance, storage, service and other fees and charges incidental to
the Partnership's trading and outside the control of Cargill Investor Services,
Inc. and American Express Financial Advisors Inc.) or annual administrative fees
to the General Partners at rates higher than those established in the
Partnership's initial Prospectus for a period of 60 months from the date the
Partnership commences trading.
A-3
<PAGE>
The Partnership shall not enter into any contract with the General
Partners, any of their affiliates, or any commodity trading advisor which has a
term of more than one year and which does not provide that it may be canceled by
the Partnership without penalty upon 60 days notice. No such contract between
the Partnership and the General Partners or any of their affiliates shall be
canceled by the General Partners or such affiliates without 60 days prior
written notice to the Limited Partners. The Partnership shall make no loans. No
person who shares or participates in commodity brokerage commissions may
receive, directly or indirectly, any management or incentive fees for trading
advice or trading management (PROVIDED, HOWEVER, that this prohibition shall not
apply to the administrative fees payable to the General Partners); no broker of
the Partnership may pay, directly or indirectly, rebates or give-ups to any
commodity trading advisor of the Partnership or the General Partners.
The General Partners may take such actions on behalf of the Partnership
as they deem necessary or desirable to manage the business of the Partnership
including, but not limited to, the following: opening bank accounts; determining
the amounts and frequency of distributions to the Partners; calculating and
paying, or authorizing the payment of, distributions to the Partners and
expenses of the Partnership such as organization and offering expenses
(including selling commissions), management, administrative and incentive fees,
brokerage commissions, legal, auditing and accounting fees, printing fees,
filing and recording fees, and extraordinary expenses (which expenses shall be
billed directly to the Partnership); administering transfers and redemptions of
Units; filing reports required by any federal or state agency; executing various
documents on behalf of the Partnership and the Limited Partners pursuant to
powers of attorney; supervising the liquidation of the Partnership if an event
causing termination of the Partnership occurs; and investing or directing the
investment of the Partnership's funds not involving the purchase or sale of
commodity futures contracts or other commodity interests. The General Partners
may keep the Partnership's assets on deposit with Cargill Investor Services,
Inc. The Partnership will be credited by Cargill Investor Services, Inc., with
interest earned on 100% of the Partnership's average monthly Net Asset Value at
a rate equal to 90% of the average yield on 90-day U.S. Treasury bills issued
during that month. Cargill Investor Services, Inc. may retain for its own
account any incremental interest earned on the Partnership's assets in excess of
the amounts so credited to the Partnership. The General Partners shall have
fiduciary responsibility to the Partnership with respect to the safekeeping and
use of all funds and assets of the Partnership, whether or not in their
immediate possession or control, and they shall not employ or permit others to
employ such funds and assets except as specifically provided herein in any
manner other than for the exclusive benefit of the Partnership. The General
Partners shall keep and retain, at the principal office of the Partnership, such
books and records relating to the business of the Partnership as are required by
state securities administrators and by the Commodity Exchange Act, as amended,
and the rules and regulations promulgated thereunder.
The General Partners may engage in other business activities and,
subject to this paragraph 5, shall not be required to refrain from any other
activity nor forego any profits from any such activity, including any activity
as a commodity broker, a commodity pool operator, or a commodity trading advisor
of additional commodity pools organized to trade in commodity interests.
The General Partners shall give notice to each Limited Partner within
seven business days from the effective date of: (i) any material change in
contracts with commodity trading advisors, including any change in advisors or
any modification in connection with the method of calculating the incentive fee;
(ii) any other material change affecting the compensation of any party.
Additionally, no decision shall be made by the General Partners to materially
adversely change the brokerage commission to Net Asset Value ratio until notice
is given to the Limited Partners and the Limited Partners are provided the
opportunity to redeem their Units in the Partnership. The General Partners shall
include with each such notification a description of the Limited Partners
redemption rights and voting rights, and a description of any material effect
such changes may have on the interests of the Limited Partners.
In reviewing the Partnership's brokerage arrangements, the General
Partners shall insure that the brokerage commissions represent the best price
and services available, taking into consideration, in particular, when the
commodity broker is an "affiliate" of a General Partner: (i) the size of the
Partnership; (ii) the commodity interest trading activity; (iii) the services
provided by the commodity broker, the General Partner or any affiliate thereof
to the Partnership; (iv) the cost incurred by the commodity broker, the General
Partner or any affiliate thereof in organizing and operating the Partnership and
offering Units; and (v) the overall costs to the Partnership.
No person dealing with the General Partners shall be required to
determine their authority to make any undertaking on behalf of the Partnership,
nor to determine any fact or circumstance bearing upon the existence of their
authority.
CAPITAL STRUCTURE AND
PARTNERSHIP FINANCES
6. NET WORTH OF GENERAL PARTNERS.
The General Partners agree that at all times after the admission of
Limited Partners to the Partnership pursuant to the public offering of the
Partnership's Units of Limited Partnership Interest described in paragraph 17
hereof, so long as they remain General Partners of the Partnership, they will
maintain together Net Worth (as defined below) at least equal to (i) the lesser
of $250,000 or 15% of the aggregate capital contributions of any limited
partnerships (including the Partnership, if applicable) for
A-4
<PAGE>
which they shall act as general partners and which are capitalized at less than
$2,500,000, and (ii) 10% of the aggregate capital contributions of any limited
partnerships (including the Partnership, if applicable) for which they shall act
as general partners and which are capitalized at greater than $2,500,000. For
the purposes of this paragraph 6, Net Worth shall be calculated in accordance
with generally accepted accounting principles, consistently applied, with all
current assets valued at then current fair market values, and may include
promissory notes or stock subscriptions issued to the General Partners by their
respective parent corporations and shall exclude any interest held by the
General Partners in the Partnership or any other limited partnership.
The requirements of the preceding paragraph may be modified in
accordance with the voting procedures set forth in paragraph 22, PROVIDED the
General Partners obtain an opinion of counsel for the Partnership that a
proposed modification will not adversely affect the classification of the
Partnership as a partnership for federal income tax purposes or result in a
violation of the securities laws of any states in which Units of Limited
Partnership Interest are sold.
7. CAPITAL CONTRIBUTIONS AND PARTNERSHIP UNITS.
The General Partners shall purchase for their own account Units of
General Partnership Interest amounting to the greater of (i) 3% of the aggregate
capital contributions of the Partnership or $100,000, whichever is less, or (ii)
1% of the aggregate capital contributions of the Partnership. Capital
contributions by the General Partners shall be credited to their capital
accounts, when and as paid. The General Partners and their affiliates may
purchase Units of Limited Partnership Interest and shall share in all
Partnership income, gains, losses, deductions and credits to the extent of their
interest in the Partnership. The Units of General Partnership Interest
representing the minimum capital contribution of the General Partners may not be
transferred or redeemed so long as they act as General Partners.
Interests in the Partnership other than the general partnership
interests of the General Partners shall be Units of Limited Partnership Interest
("UNITS" or, individually, a "UNIT"). The initial Limited Partner, Wendell
Halvorson, has contributed $235 in cash to the capital of the Partnership in
consideration for one Unit. In accordance with the latest Prospectus of the
Partnership from time to time filed with the Securities and Exchange Commission
pursuant to Rule 424 (the "PROSPECTUS"), the Partnership may issue and sell
Units to other persons. The General Partners and their affiliates, including
their directors, officers, shareholders and employees (including representatives
of American Express Financial Advisors Inc., the Partnership's selling agent),
and the Trading Advisors, may purchase Units and such Units shall be included in
determining whether the initial $1,000,000 subscription requirement, as set
forth in paragraph 17 below, is met. The initial purchase price of each Units
shall be $250 to members of the public, and $235 for representatives and
employees of American Express Financial Advisors Inc. and certain of its
corporate affiliates during the offering of Units as specified in the initial
Prospectus. Net proceeds per Unit to the Partnership from any Units subsequently
offered must equal at least the Partnership's then current Net Asset Value per
Unit (as defined in paragraph 4(d) above). The Units need not be evidenced by
certificates.
8. MAINTENANCE OF CAPITAL ACCOUNTS;
ALLOCATION OF PROFITS AND LOSSES.
(a) CAPITAL ACCOUNTS. A capital account shall be established for each
Partner and shall be maintained and adjusted in accordance with Treasury
Regulation Section 1.704-1(b)(2)(iv). The initial balance of each Partner's
capital account shall be the Partner's initial capital contribution to the
Partnership.
(b) MONTHLY ALLOCATIONS. The following determinations and allocations
shall be made:
(1) The Net Asset Value shall be determined.
(2) Any increase or decrease in Net Asset Value as of the end of
the month shall then be credited or charged to the Partners' capital
accounts in the ratio that the balance of each capital account bears
to the balance of all capital accounts.
(3) The amount of any distribution to a Partner, the amount of any
accrued but unpaid incentive fees attributable to redeemed Units and
the amount paid to a Partner on redemption of Units shall be charged
to that Partner's capital account.
(c) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES. As
of the end of each fiscal year, Partnership profit or loss ("PROFIT" and/or
"LOSS") shall be allocated for federal income tax purposes among the Partners
pursuant to the following paragraphs. Allocations of Profit and Loss shall be
PRO RATA from net capital gain or loss and net ordinary income or loss realized
by the Partnership unless allocations of items of gain or income or loss or
expense are necessary to satisfy the requirements in paragraphs (bb) and (dd)
that sufficient Profit and Loss be allocated to allocation accounts such that
allocation accounts attributable to redeemed Units equal distributions in
redemption of such Units. Notwithstanding the foregoing requirement that annual
allocations of Profit and Loss be PRO RATA from capital and ordinary income,
gain, loss and expense, adjustments to such allocations shall be made to reflect
the extent to which income or expense is otherwise determined and periodically
allocated to the Partners, and such periodic allocations and adjustments shall
be determined in a manner that in the judgment of the General Partners is
consistent with the intent of this Paragraph 8(c).
A-5
<PAGE>
(1) Partnership Profit and Loss shall be allocated as follows:
(aa) For the purpose of allocating Profit or Loss among the
Partners, there shall be established an allocation account with
respect to each Partner. The initial balance of each allocation
account shall be the amount paid to the Partnership for such Partner's
Units. Allocation accounts shall be adjusted as of the end of each
fiscal year and as of the date a Partner redeems any Units as follows:
(i) Each allocation account shall be increased by the amount
of Profit allocated to the Partner pursuant to paragraph (cc) below.
(ii) Each allocation account shall be decreased by the amount
of Loss allocated to the Partner pursuant to paragraph (ee) below and
by the amount of any distributions the Partner has received with
respect to his Units.
(bb) Profit shall be allocated first to each Partner who has
redeemed any Units during the fiscal year up to the excess, if any, of
the amount received upon redemption of the basis over the allocation
account attributable on a PRO RATA basis to the redeemed Units.
(cc) Profit remaining after the allocation thereof pursuant to
paragraph (bb) shall be allocated next among all Partners whose
capital accounts are in excess of their allocation accounts (after the
adjustments in paragraph (bb)) in the ratio that each such Partner's
excess bears to all such Partners' excesses. In the event that gain to
be allocated pursuant to this paragraph (cc) is greater than the
excess of all such Partners' capital accounts over all such allocation
accounts, the excess will be allocated among all Partners in the ratio
that each Partner's capital account bears to all Partners' capital
accounts.
(dd) Loss shall be allocated first to each Partner who has
redeemed any Units during the fiscal year up to the excess, if any, of
the allocation account attributable on a PRO RATA basis to the
redeemed Units over the amount received upon redemption of the Units.
(ee) Loss remaining after the allocation thereof pursuant to
paragraph (dd) shall be allocated next among all Partners whose
allocation accounts are in excess of their capital accounts (after the
adjustments in paragraph (dd)) in the ratio that each such Partner's
excess bears to all such Partners' excesses. In the event that loss to
be allocated pursuant to this paragraph (ee) is greater than the
excess of all such allocation accounts over all such Partners' capital
accounts, the excess loss will be allocated among all Partners in the
ratio that each Partner's capital accounts bears to all Partners'
capital accounts.
(2) In the event that a Unit has been assigned, the allocations
prescribed by this Paragraph (c) shall be made with respect to such
Unit without regard to the assignment, except that in the year of
assignment the allocations prescribed by this Paragraph (e) shall, to
the extent permitted for federal income tax purposes, be allocated
between the assignor and assignee using the interim closing of the
books method.
(3) The allocation for federal income tax purposes of Profit and Loss,
as set forth herein, is intended to allocate taxable profit and loss
among Partners generally in the ratio and to the extent that net
profit and net loss are allocated to such Partners under paragraph (b)
hereof so as to eliminate, to the extent possible, any disparity
between a Partner's capital account and his allocation account with
respect to each Unit then outstanding, consistent with the principles
set forth in Section 704(c) of the Internal Revenue Code of 1986, as
amended (the "CODE").
(d) DEFICIT BALANCES. Notwithstanding anything herein to the contrary,
in the event that at the end of any Partnership taxable year any Partner's
capital account is adjusted for, or such Partner is allocated, or there is
distributed to such Partner any item described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) in an amount not reasonably expected at the
end of such year, and such treatment creates a deficit balance in such Partner's
capital account, then such Partner shall be allocated all items of income and
gain of the Partnership for such year and for all subsequent taxable years of
the Partnership until such deficit balance has been eliminated. In the event
that any such unexpected adjustments, allocations or distributions create a
deficit balance in the capital accounts of more than one Partner in any
Partnership taxable year, all items of income and gain of the Partnership for
such taxable year and all subsequent taxable years shall be allocated among all
such Partners in proportion to their respective deficit balances until such
deficit balances have been eliminated. Upon the dissolution and termination of
the Partnership, each General Partner must contribute an amount equal to any
deficit balance in his capital account.
(e) REDEMPTIONS AND DISTRIBUTIONS. No Limited Partner shall have
priority over any other Limited Partner either as to return of cash
contributions or as to profits, losses or distributions.
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(f) JUDGMENT OF GENERAL PARTNERS. Except with respect to matters as to
which the General Partners are granted discretion hereunder, the opinion of the
independent public accountants retained by the Partnership from time to time
shall be final and binding with respect to all computations and determinations
required to be made hereunder, PROVIDED, HOWEVER, that if, in the event that any
computation or determination involves a choice of different alternatives, the
accountants making such computations and determinations shall be permitted to
rely upon the judgment of the General Partners. Notwithstanding any provision
herein to the contrary, if in the judgment of the General Partners, the
allocations for federal income tax purposes (i) shall not satisfy the
requirements of Section 704(b) of the Code or Regulations promulgated
thereunder, (ii) shall violate any other provision of the Code or Regulations or
(iii) shall not properly take into account any expenditure by, or receipt of,
the Partnership, the General Partners shall adjust the allocations accordingly.
No adjustment made by the General Partners pursuant to this paragraph 8(f) shall
materially and adversely affect the amount of cash which would otherwise be
credited to a Limited Partner, without his consent.
9. EXPENSES AND LIMITATION THEREOF.
IDS Financial Services Inc. (the "SELLING AGENT") was paid $15 for
each Unit sold by it to members of the public in the initial offering of Units,
but no selling commission shall be charged in connection with any sales of Units
to representatives and employees of IDS Financial Services Inc. and certain of
its corporate affiliates. The General Partners initially advanced all other
organization and offering expenses of the Partnership, including legal,
accounting, auditing, filing, registration and recording fees, printing expenses
and escrow charges. The General Partners were subsequently reimbursed by the
Partnership for advancing the Partnership's organization and offering expenses
prior to the commencement of trading by the Partnership. However, the General
Partners were entitled to any of the payments called for by this paragraph 9
only if subscriptions for at least $1,000,000 were received and accepted by the
General Partners, subject to a maximum reimbursement of such expenses, when
added to the selling commissions, equal to 15% of the value of the Units sold
prior to any reduction for selling commissions. The terms and provisions of this
Section 9 that pertain to the Partnership's original offering to the public
shall be superseded by the terms and provisions of the prospectus given to
investors in connection with any subsequent offering.
The Partnership's assets will be deposited in the Partnership's
account with Cargill Investor Services, Inc., the Partnership's clearing broker.
Cargill Investor Services, Inc. will credit the Partnership at month-end with
interest income on 100% of the Partnership's average monthly Net Asset Value at
a rate equal to 90% of the average yield on the 90 day U.S. Treasury Bills
issued during that month.
The General Partners shall each receive as compensation for acting as
General Partners an annual administrative fee equal, in the case of IDS Futures
Corporation, to 1.45% of the Partnership's Net Asset Value on the first business
day of each Partnership fiscal year and, in the case of CIS Investments, Inc.,
to 0.3% of the Partnership's Net Asset Value on the first business day of each
Partnership fiscal year.
After December 31, 1992, the annual administrative fee payable to IDS
Futures Corporation will be 1.125% of the Partnership's beginning Net Asset
Value on the first business day of each Partnership fiscal year, and the annual
administrative fee payable to CIS Investments, Inc. will be 0.25% of the
Partnership's Net Asset Value on the first business day of each Partnership
fiscal year.
Each General Partner shall share in all Partnership income, gain,
losses, deductions and credits to the extent of its interest in the Partnership.
The Partnership will pay its periodic operating expenses relating to legal,
accounting, auditing, printing, filing and recording fees; management and
incentive fees; brokerage commissions and any incidental trading charges
(including all delivery, insurance, storage, service or other charges paid to
third parties in connection with the Partnership's trading); extraordinary
expenses, and any items for which payment may be made by the Partnership as set
forth in paragraph 21. All of such expenses shall be billed directly to the
Partnership. The aggregate annual expenses of every character paid or incurred
by the Partnership, including management and advisory fees based on the
Partnership's Net Asset Value but excluding commodity brokerage commissions,
incentive fees, legal, audit and extraordinary expenses calculated at least
quarterly on a basis consistently applied, shall be reasonable but in no event
shall exceed 1/2 of 1% of Net Asset Value per month. Appropriate reserves may be
created, accrued and charged against the Partnership's assets for contingent
liabilities, if any, as of the date any such contingent liability becomes known
to the General Partners.
Additionally, the summation of the Administrative Fees and
Administrative Expenses, Brokerage Commissions and transaction fees and costs to
be paid by the Partnership, any Management Fee, any Advisory Fee, and any
financial benefit from interest income earned on Partnership assets in excess of
the interest paid to the Partnership shall total no more than 14% of the
Partnership's Net Asset Value available for trading and the Net Asset Value
available for trading shall not exceed 100% of the Partnership's Net Asset
Value. The General Partners will annually review the total of these expenses
paid by the Partnership to ensure that they do not exceed 14% of the Net Asset
Value available for trading. Should these expenses total more than 14% of the
Net Asset Value available for trading, the General Partners will pay and will
not be reimbursed by the Partnership for such excess.
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10. LIMITED LIABILITY OF LIMITED PARTNERS.
Each Unit, when purchased in accordance with this Agreement, shall be
fully paid and nonassessable. Any provisions of this Agreement to the contrary
notwithstanding, no Limited Partner shall be liable for the Partnership
obligations in excess of the capital contributed by him and profits attributable
thereto, if any, and such other amounts as he may be liable for pursuant to the
Act. If the Partnership were unable otherwise to meet its obligations, the
Limited Partners might be required to repay to the Partnership for a period of
one year after the return of a Limited Partner's capital contribution or any
part thereof such returned capital contribution, including profits, if any, any
distributions and amounts received upon redemption, and interest thereon, but
only to the extent necessary to discharge the Partnership's liabilities to
creditors who extended credit to the Partnership during the period such capital
contribution was held by the Partnership.
11. RETURN OF LIMITED PARTNER'S CAPITAL CONTRIBUTION.
Except to the extent that a Limited Partner shall have the right to
withdraw capital in accordance with paragraph 16 below, no Limited Partner shall
have any right to demand the return of his capital contribution or any profits
added thereto, except upon termination and dissolution of the Partnership. In no
event shall a Limited Partner be entitled to demand or receive property other
than cash.
The General Partners shall not be personally liable for the return or
repayment of all or any portion of the capital or profits of any Partner (or
assignee), it being expressly agreed that any such return of capital or
profits made pursuant to this Agreement shall be made solely from the assets
(which shall not include any right of contribution from the General Partners)
of the Partnership.
CONDUCT OF THE PARTNERSHIP'S BUSINESS
12. TRADING POLICIES.
The Partnership shall adhere to the following trading policies:
(a) Funds will be invested only in futures contracts which are traded
in sufficient volume to permit, in the opinion of the Advisors to the
Partnership, ease of taking and liquidating positions. The Advisors may at any
time determine to expand or reduce the number of commodity interests traded by
that portion of assets under their respective control.
(b) No Advisor will acquire on behalf of the Partnership additional
positions in any commodity interest if such additional positions, when added
to the existing open positions initiated by the Advisor, would result in a net
long or short position for that commodity interest requiring as margin or
premiums more than 15% of the Partnership assets allocated to that Advisor's
management. For purposes of implementing this policy, soybeans will be treated
as one commodity interest and soybean oil and soybean meal will be treated
together as one commodity interest.
(c) The Partnership will not normally be as highly leveraged as
permitted in the case of an investment by an individual. On the basis of
information supplied by the Advisors, the General Partners estimate that
between 20% and 60% of the Partnership's assets will normally be committed as
initial margin (although the percentage may be more or less than such range
from time to time). To reduce the Clearing Broker's risk, additional
restrictions on the leverage of the Partnership may be imposed by the Clearing
Broker without notice at any time.
(d) No Advisor will acquire on behalf of the Partnership additional
positions in any commodity interest if such additional positions, when added
to the existing open positions initiated by the Advisor, would result in
aggregate net long or short positions (including any forward contracts) for
all commodity interests requiring as margin or premiums more than 66 2/3% of
the Partnership's assets allocated to that Advisor's management.
(e) The Partnership will not generally enter into an open position
for a particular commodity during a delivery month for that commodity.
However, the Partnership may occasionally make or accept delivery of a
commodity. This may occur because an Advisor's trading strategy may, from time
to time, identify certain trends which occur in delivery months which can be
taken advantage of by the Partnership. The Partnership may take delivery of a
commodity and take a corresponding short position in the commodity by selling
futures contracts for the commodity. The Partnership will not engage in cash
commodity transactions, except as indicated above, unless the cash position is
hedged.
(f) The Partnership will not employ the trading technique, commonly
known as "pyramiding," in which the speculator uses unrealized profits on
existing positions as margin for the purchase or sale of additional positions
in the same or a related commodity interest. However, the Advisors may take
into account the Partnership's open trade equity in assets of the Partnership
in determining whether to acquire additional commodity futures contracts on
behalf of the Partnership.
(g) The Partnership will not purchase, sell or trade in securities or
write, purchase, sell or trade in options to purchase or sell securities,
commodity futures contracts or physical commodities unless such options have
been approved for trading on a designated contract market by the CFTC. The
Partnership may trade in foreign options if permitted under the Commodity
Exchange Act, as amended, and CFTC regulations,
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but only when and to the extent authorized in writing by the General Partners to
the Advisors. The Partnership may trade in futures contracts on securities.
(h) The Partnership will not generally utilize borrowings, except for
short-term borrowings where the Partnership takes delivery of any cash commodity
or to the extent that Cargill Investor Services, Inc., as the Partnership's
clearing broker, obtains lines of credit for the trading of forward contracts
with banks. The Partnership will not make any loans.
(i) The Advisors may, from time to time, employ trading techniques such
as spreads or straddles on behalf of the Partnership. The term "spread" or
"straddle" describes a transaction involving the simultaneous buying and selling
of commodity interests dealing with the same or different commodity interests
but involving different delivery dates or markets, and in which the trader
expects to earn profits from a widening or narrowing movement of the two prices
of the commodity interests.
(j) The Partnership may trade in futures contracts on foreign
currencies through foreign and domestic commodity exchanges, including the
International Monetary Market Division of the Chicago Mercantile Exchange. The
Partnership may also establish positions in foreign currencies through banks or
in the interbank market. Forward contracts on foreign currencies will be
transacted only with banks having in excess of $100,000,000 in combined capital
and surplus. No specific limitation on the percentage or amount of forward
contracts, if any, engaged in by the Partnership has been imposed.
(k) The Partnership's assets will not be commingled with the assets of
any other person; funds used to satisfy margin requirements will not be
considered commingled.
(l) No Advisor to the Partnership will be permitted to engage in
churning the assets of the Partnership.
(m) No rebates or give ups may be paid to or received by the General
Partners, nor may the General Partners participate in any reciprocal business
arrangements which could circumvent this prohibition, but retention of Cargill
Investor Services, Inc. to act as the Partnership's clearing broker and
retention of American Express Financial Advisors Inc. to act as the
Partnership's introducing broker shall not be deemed to violate this
prohibition. The General Partners and their affiliates shall not establish or
participate in any reciprocal business arrangements which would circumvent the
restrictions against dealing with affiliates or other interested parties, but
this prohibition shall not be deemed to prevent the Partnership from using the
services of Cargill Investor Services, Inc. as clearing broker or American
Express Financial Advisors Inc. as introducing broker.
Material changes in the trading policies described above must be
approved by a vote of a majority of the outstanding Units (not including Units
held by the General Partners or their corporate affiliates). A change in
commodity interests traded shall not be deemed to be a material change in the
trading policies. If the General Partners determine, in their sole discretion,
using prudent business judgment, that any trading instructions issued by the
Partnership's Advisors violate one of the Partnership's trading policies, the
General Partners may negate such trading instructions.
13. REPORTS AND STATEMENTS.
The General Partners, in their sole discretion, may cause the
Partnership to make, refrain from making or, once having made, revoke, the
election referred to in Section 754 of the Internal Revenue Code of 1986, as
amended, and any similar election provided by state or local law or any similar
provision enacted in lieu thereof. Each Limited Partner shall be furnished as of
the end of each month and as of the end of each fiscal year with (i) such
reports (in such detail) as are required to be given to Limited Partners by the
rules of the Commodity Futures Trading Commission, (ii) any other reports (in
such detail) as are required by any other governmental authority which has
jurisdiction over the activities of the Partnership; and (iii) any other reports
or information which the General Partners, in their discretion, determine to be
necessary or appropriate. Each Limited Partner shall be furnished an annual
report containing audited financial statements examined by an independent public
accountant within 90 days after the close of each fiscal year, setting forth,
among other matters:
(a) The Net Asset Value of the Partnership and the Net Asset Value per
Unit at the end of the fiscal year or the total value of a Partner's interest in
the Partnership;
(b) the total amount of (i) management, administrative, and advisory
fees, (ii) brokerage commissions and fees for commodity and other investment
transactions during the fiscal year and (iii) all other expenses incurred or
accrued by the Partnership during the fiscal year;
(c) any change in the Partnership's commodity trading advisors or any
material change in the management of the Partnership's commodity trading
advisors;
(d) any other material business dealings between the Partnership, the
General Partners, the commodity trading advisors, its commodity broker or any
principal of any of the foregoing;
(e) the actual performance of the Partnership during prescribed time
periods;
(f) a statement of financial condition as of the close of the fiscal
year and preceding fiscal year;
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(g) statements of income (loss), changes in financial position and
changes in partners' equity during the fiscal year and the previous fiscal year;
and
(h) appropriate footnote disclosures and such further material
information as may be necessary to make the financial statements not misleading.
In addition to the annual report, the General Partners will furnish
each Limited Partner, within 30 days of the end of each month, with an account
statement (unaudited) covering such month, which statement shall contain
generally the same type of information set forth in the items (a) - (e) above.
Each Limited Partner shall also be notified within seven business days from the
date of any decline in the Net Asset Value per Unit to less than 50% of the Net
Asset Value per Unit since the last business day on which the Partnership's Net
Asset Value was calculated, and shall at that time be provided with a
description of Limited Partners' voting rights hereunder. The General Partners
will also furnish each Limited Partner with tax information not later than March
15 of each year in a form which may be utilized in the preparation of income tax
returns.
14. PARTNERSHIP RECORDS.
Proper books of account and records relating to the Partnership's
business shall be made and kept by the General Partners as required by the
Commodity Exchange Act, as amended, and the rules and regulations promulgated
thereunder. Such books and records shall be kept on an accrual basis. Limited
Partners or their duly authorized representatives may inspect and copy (upon
payment of reasonable reproduction costs) such books and records during normal
business hours at the Partnership's principal office. Upon request, copies of
such books and records will be sent to any Limited Partner if reasonable
reproduction and distribution costs are paid by such Limited Partner, or as
otherwise required by the Commodity Exchange Act, as amended, and the rules and
regulations promulgated thereunder.
ADMISSION AND WITHDRAWAL OF PARTNERS
15. TRANSFERS OF UNITS.
Subject to compliance with the suitability standards of the
Partnership, federal and state securities laws and the rules of any other
applicable governmental authority, Units may be assigned, transferred or
disposed of at the election of a Limited Partner upon written notice to the
General Partners. No consent of the General Partners is necessary. No
assignment, transfer or disposition shall be effective against the Partnership
or the General Partners until the General Partners receive the written notice
described below. The assignee shall become a substituted Limited Partner in the
Partnership only upon the consent of the General Partners (which consent may be
granted or withheld at their sole discretion). An assignee who becomes a
substituted limited partner will be subject to all of the rights and liabilities
of the assigning limited partner. An assignment of Units will not be permitted
if, in the judgment of the General Partners, such assignment may cause the
partnership to be taxable under the Internal Revenue Code as a corporation or an
association rather than as a partnership.
The written notice of assignment shall specify the name and address of
the assignee, the date of assignment, shall include a statement by the assignee
that he agrees to give written notice to the General Partners upon any
subsequent assignment and shall be signed by the assignor (or his duly
authorized representative) and assignee. The General Partners may, in their sole
discretion, waive receipt of the above-described notice or waive any defect
therein. If an assignment, transfer or disposition occurs by reason of the death
of a Limited Partner or assignee, written notice of such assignment may be given
by the duly authorized representative of the estate of the Limited Partner or
assignee and shall be supported by such proof of legal authority and valid
assignment as may be reasonably requested by the General Partners. Neither the
estate nor any beneficiary of a deceased Limited Partner or assignee will have
any right to withdraw any capital or profits from the Partnership except by
redemption of Units. A substituted Limited Partner shall have all rights and
powers and shall be subject to all the restrictions and liabilities of his
assignor; PROVIDED, HOWEVER, that a substituted Limited Partner shall not be
subject to those liabilities of which he was ignorant at the time he became a
substituted Limited Partner and which could not be ascertained from the
Certificate of Limited Partnership. Each Limited Partner agrees that with the
consent of the General Partners any assignee may become a substituted Limited
Partner without the further act or consent of any Limited Partner. Each Limited
Partner agrees that he has no right to consent to and will not consent to any
person or entity becoming a substituted Limited Partner, except as set forth in
the preceding sentence. If the General Partners withhold consent, an assignee
shall not become a substituted Limited Partner and shall not have any of the
rights of a Limited Partner, except that the assignee shall be entitled to
receive that share of capital or profits and shall have that right of redemption
to which his assignor would otherwise have been entitled. An assigning Limited
Partner shall remain liable to the Partnership as provided in the Act,
regardless of whether his assignee becomes a substituted Limited Partner.
16. REDEMPTION OF UNITS.
No redemptions are permitted during the first six months after an
investor has been first admitted to the Partnership. Thereafter, a Limited
Partner (or any assignee of Units whom the General Partners have received
written notice as described in paragraph 15 above) may withdraw from the
Partnership all or any part of his capital contributions and undistributed
profits, if any, effective as of the last trading day of any month. Redemption
amounts may be designated either in terms of a number of Units or an amount in
dollars. The minimum redemption amount, whether requested in terms of
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dollars or Units, is the lesser of $500 or the Net Asset Value of two Units,
unless the Limited Partner is redeeming his entire interest in the Partnership.
Redemptions may be obtained by a Limited Partner by requiring the Partnership to
redeem any or all of his Units based on Net Asset Value per Unit, calculated as
of the close of business (as determined by the General Partners) on the
effective date of redemption; PROVIDED, that (1) there remains property of the
Partnership sufficient to pay all liabilities, contingent or otherwise, of the
Partnership (except any liability to Partners on account of their capital
contributions) and (2) the General Partners shall have timely received a Request
for Redemption as hereinafter defined. As used herein, Request for Redemption
shall mean a letter in the form specified by the General Partners sent by a
Limited Partner (or any assignee of whom the General Partners have received
written notice as described in paragraph 15 above) and received by the General
Partners ten days prior to the end of the month of the requested redemption. A
form of Request for Redemption may be obtained by written request to the General
Partners. The General Partners may declare additional redemption dates upon
notice to the Limited Partners. Upon redemption, a Partner (or any assignee of
whom the General Partners have received written notice as described above) shall
receive from the Partnership for each Unit redeemed an amount based on the Net
Asset Value per Unit, less any amount owing by such Partner (and assignees, if
any) to the Partnership. If redemption is requested by an assignee, all amounts
owed by the Partner to whom such Units was sold by the Partnership as well as
all amounts owed by all assignees who owned such Unit shall be deducted from the
amount paid to such assignee upon redemption of his Units. An assignee shall not
be entitled to redemption until the General Partners have received written
notice (as described in Paragraph 15 above) of the assignment, transfer or
disposition under which the assignee claims an interest in the Units to be
redeemed and shall have no claim against the Partnership or the General Partners
with respect to distributions or amounts paid on redemption of Units prior to
the receipt by the General Partners or such notice. Profits and losses shall be
allocated to Partners in proportion to their respective units and to their
respective dates of redemption in accordance with Section 8(b) hereof. The
Partnership's commodity positions will be liquidated to the extent necessary to
effect redemptions. Redemptions are contingent upon the Partnership having
property sufficient to discharge its liabilities (contingent or otherwise) on
the effective date of redemption. If the General Partners determine that
permitting the number of redemptions sought would be detrimental to the tax
status of the Partnership, they may restrict the number of redemptions to be
permitted, and shall select by lot so many redemptions as will not, in their
judgment, impair the Partnership's tax status.
After the 3-for-1 split of Units (as described in paragraph 17 hereof)
occurs, if the Net Asset Value per Unit (as defined in paragraph 4(a) hereof)
decreases below $125 (after adding back any distributions from the Partnership
to the Limited Partners), at the close of business on any trading day, the
Partnership will attempt to liquidate all open positions as expeditiously as
possible and suspend trading. Within ten business days after the date of any
such suspension of trading, the General Partners shall either give notice to the
Limited Partners of their intention to withdraw from the Partnership or shall
declare a special redemption date. Such special redemption date, if declared,
shall be a business day within 30 business days from the date of suspension of
trading by the Partnership, and the General Partners shall mail notice of such
date to each Limited Partner (and assignee of Units of whom they have notice
pursuant to paragraph 15 above) by first class mail, postage prepaid, not later
than ten business days prior to such special redemption date together with
instructions as to the procedure such Partner or assignee must follow to have
his Units redeemed on such date. Upon redemption pursuant to a special
redemption date, a Partner (or any assignee of whom the General Partners have
received written notice as described in paragraph 15 above) shall receive from
the Partnership for each Unit redeemed an amount equal to the Net Asset Value
per Unit determined as of the close of business on such special redemption date
less any amount owing by such Partner (and assignees, if any) to the
Partnership. If redemption is requested by an assignee, all amounts owed by the
Partner to whom such Unit was sold by the Partnership as well as all amounts
owed by all assignees who owned such Unit shall be deducted from the amount paid
to such assignee upon redemption of his Unit. An assignee shall not be entitled
to redemption until the General Partners have received written notice (as
described in paragraph 15 above) of the assignment, transfer or disposition
under which the assignee claims an interest in the Units to be redeemed. If,
after such special redemption date, the Partnership's Net Asset value is at
least $500,000, the Partnership will resume trading, unless the General Partners
elect to withdraw from the Partnership.
Payment will be made within ten business days after the effective date
of redemption or special date of redemption, except that under special
circumstances, including but not limited to inability to liquidate commodity
positions as of the effective date of redemption (including any special
redemption date) or default or delay in payments due the Partnership from
commodity brokers, banks or other persons, the Partnership may in turn delay
payment to Partners requesting redemption of Units of the proportionate part of
the Net Asset Value of the Units represented by the sums which are the subject
of such default or delay.
The General Partners may require any subscriber which is an employee
benefit plan subject to Title I of the Employee Retirement Income Security Act
of 1974 to withdraw in whole or in part from the Partnership through redemption
of its Units if such withdrawal, in the General Partners' sole good faith
judgment, is necessary to avoid violation by the Partnership and/or Limited
Partners which are employee benefit plans of applicable provisions of such
statute.
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17. OFFERING OF UNITS OF LIMITED PARTNERSHIP INTEREST.
The General Partners on behalf of the Partnership shall (i) cause to be
filed a registration statement or registration statements, and such amendments
thereto as the General Partners deem advisable, with the Securities and Exchange
Commission for the registration and public offering of Units, (ii) qualify Units
for sale under the securities laws of such States of the United States or other
jurisdictions as the General Partners shall deem advisable and (iii) take such
action with respect to the matters described in (i) and (ii) as it shall deem
advisable or necessary. The expenses of the Partnership in connection with such
filings, qualifications and offerings, other than selling commissions, shall be
advanced by the General Partners, but the Partnership will subsequently
reimburse the General Partners for such expenses out of the proceeds of the
offering. The terms and provisions of this Section 17 that pertain to the
Partnership's original offering to the public shall be superseded by the terms
and provisions of the prospectus given to investors in connection with any
subsequent offering.
The General Partners are authorized to take such action and make such
arrangements for the sale of the Units as they deem appropriate, including
without limitation (i) the execution on behalf of the Partnership of a selling
agreement appointing American Express Financial Advisors Inc. as agent of the
Partnership for the offer and sale of the Units during the offering period as
contemplated in a prospectus and appointing American Express Financial Advisors
Inc. as the Fund's introducing broker, and (ii) the indemnification of American
Express Financial Advisors Inc. and John W. Henry & Company, Inc. and Sabre Fund
Management Limited (the Partnership's initial Advisors) and each person
controlling them against certain liabilities incurred in connection with the
issuance and sale of the Units. The General Partners will keep copies of all
subscription agreements (including suitability records) signed by Limited
Partners in connection with public offerings of Units for a period of six years.
If the Partnership shall not have obtained during the period of its
initial public offering of the Units subscriptions representing an aggregate
offering price of $1,000,000 this Agreement shall terminate, and all capital
contributed to the Partnership shall be promptly returned to the contributors
thereof. In addition, any interest which shall have accrued (from the time of
deposit of each subscription to the time such funds are released by the Escrow
Agent referred to below) shall be promptly distributed to such contributors. The
General Partners and officers, directors, shareholders and employees of Cargill
Investor Services, Inc. and American Express Financial Advisors Inc., may
subscribe for Units and any such subscriptions shall be included in determining
whether the minimum subscription requirement is met. All initial subscriptions
will be held in escrow by the Marquette Bank Minneapolis, N.A. (the "ESCROW
AGENT"). The Partnership shall not commence trading operations unless and until
the General Partners have accepted subscriptions for Units representing an
aggregate offering price of $1,000,000 pursuant to the Partnership's initial
public offering of Units. The allocable portion of any interest earned on each
subscription shall be distributed to each subscriber. The General Partners may
terminate any offering of Units at any time. The aggregate of all capital
contributions shall be available to the Partnership to carry on its business,
and no interest shall be paid by the Partnership on any such contributions after
such contributions are released by the Escrow Agent.
All Units subscribed for upon receipt of a check or draft of the
subscriber are issued subject to the collection of the funds represented by such
check or draft. In the event a check or draft of a subscriber for Units
representing payment for Units is returned unpaid, the Partnership shall cancel
the Units issued to such subscriber represented by such returned check or draft
and the General Partners shall file an amendment, if required, to the
Partnership's Certificate of Limited Partnership reflecting such cancellation.
Any losses or profits sustained by the Partnership in connection with the
Partnership's commodity trading allocable to such canceled Units shall be deemed
an increase or decrease in Net Asset Value and allocated among the remaining
partners as described in paragraph 8 above. Each subscriber agrees to reimburse
the Partnership for any expenses or losses incurred in connection with any such
cancellation of Units issued to him.
As of the close of business on February 28, 1995, regardless of whether
Units are then being offered, each Unit shall be divided into three Units, each
of which shall have Net Asset Value per Unit equal to one-third the Net Asset
Value per Unit on that date prior to such division. The resulting Net Asset
Value per Unit will constitute the Net Asset Value per Unit thereafter.
18. ADMISSION OF ADDITIONAL PARTNERS.
At any time the General Partners may, in their sole discretion and
subject to applicable law, admit additional Limited Partners, each of which
newly admitted Limited Partner shall contribute cash to the capital of the
Partnership for each Unit of Limited Partnership Interest to be acquired in at
least the minimum amount specified in paragraph 7. Pursuant to paragraph 15, the
General Partners may consent to and admit any assignee of Units as a substituted
Limited Partner. There is no limit on the total number of Units which may be
outstanding.
19. POWER OF ATTORNEY.
Each Limited Partner, by the execution of this Agreement, whether by
counterpart or separate instrument, does irrevocably constitute and appoint the
General Partners his true and lawful attorneys and agents, with full power of
substitution and with full power and authority in his name, place and stead, to
admit additional Limited Partners, to file,
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prosecute, defend, settle or compromise any and all actions at law or suits in
equity for or on behalf of the Partnership with respect to any claim, demand or
liability asserted or threatened by or against the Partnership, and to execute,
acknowledge, swear to, deliver, file and record in the appropriate public
offices and publish (i) all certificates and other instruments (including
counterparts of this Agreement) which the General Partners deem appropriate to
qualify or continue the Partnership as a limited partnership in the
jurisdictions in which the Partnership may conduct business or which may be
required to be filed by the Partnership under the laws of any jurisdiction; (ii)
all instruments which the General Partners deem appropriate to reflect a change
or modification of the Partnership in accordance with the terms of this
Agreement relating to the Partnership or any amendment thereto; (iii) all
conveyances and other instruments which the General Partners deem appropriate to
reflect the dissolution and termination of the Partnership; and (iv)
certificates of assumed name. The Power of Attorney granted herein shall be
irrevocable and deemed to be a power coupled with an interest and shall survive
the incapacity or death of a Limited Partner. Each Limited Partner hereby agrees
to be bound by any representation made by the General Partners and by any
successor thereto, acting in good faith pursuant to such Power of Attorney. Each
Limited Partner agrees to execute a special Power of Attorney on a document
separate from this Agreement. In the event of any conflict between this
Agreement and any instruments filed by the General Partners pursuant to the
Power of Attorney granted in this paragraph 19, this Agreement shall control.
20. WITHDRAWAL OF A PARTNER.
The Partnership shall terminate and be dissolved upon the withdrawal of
the General Partners. A General Partner may withdraw from the Partnership at any
time on 120 days' written notice by first class mail, postage prepaid to each
Limited Partner. If the Limited Partners or the remaining General Partner elect
to continue the Partnership, the withdrawing General Partner shall pay all
expenses incurred as a result of its withdrawal. The withdrawing General Partner
shall cease to be a General Partner as of the day of such withdrawal, and shall
then receive a return of its capital plus any portion of compensation as a
General Partner accrued and owing to it at such time.
If any of the events specified below occurs in regard to a General
Partner, the General Partner shall be considered to have submitted a notice of
withdrawal from the Partnership as of the date of the occurrence of such event:
(a) any levy or attachment by a creditor on or by any person claiming a
lien on any material interest of the General Partner if such levy or attachment
is not cured within 10 days;
(b) any assignment by the General Partner of any interest for the
benefit of creditors;
(c) any voluntary filing by the General Partner, or filing by another
against the General Partner, of any petition for adjudication of such General
Partner as insolvent or bankrupt;
(d) any use of any insolvency or similar act by the General Partner;
(e) any filing by the General Partner of a petition for reorganization
or arrangement under any provision of state or federal bankruptcy laws then in
force and effect;
(f) any appointment in any insolvency proceeding of any receiver or
trustee for the General Partner or any material portion of the General Partner's
property;
(g) any adjudgment of bankruptcy or insolvency, or entry of an order
for relief in any bankruptcy or insolvency proceeding; and
(h) the filing of any petition for, or consent to, any of the foregoing
by the General Partner or the filing of an answer or other pleading admitting or
failing to contest material allegations contained in a petition filed against it
in any proceeding of such nature.
Unless written consent from all Limited Partners is obtained permitting
a General Partner to continue to act in that capacity, a General Partner shall
be considered to have submitted a notice of withdrawal if 120 days after the
commencement of any proceeding against it seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
statute, law or regulation such proceeding has not been dismissed, or if within
90 days after the appointment without its consent or acquiescence of a trustee,
receiver or liquidator of the General Partner or all or any substantial part of
its properties, the appointment is not vacated or stayed, or within 90 days
after the expiration of any such stay, the appointment is not vacated.
A Limited Partner will cease to be a Partner upon redemption or
assignment of all of his Units. The death, legal disability, withdrawal,
insolvency or dissolution of a Limited Partner shall not terminate or dissolve
the Partnership and such Limited Partner, his estate, custodian or personal
representative shall have no right to withdraw or value such Limited Partner's
interest in the Partnership except as provided in paragraph 16 above. Each
Limited Partner (and any assignee of a Limited Partner's interest) expressly
agrees that, in the event of his death, he waives on behalf of himself and his
estate and any person interested therein to waive, the furnishing of any
inventory, accounting or appraisal of the assets of the Partnership and any
right to an audit of the Partnership other than those expressly granted or
established in paragraph 13.
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INDEMNIFICATION
21. INDEMNIFICATION.
(a) A General Partner and its Affiliates, shall bear no liability to
the Partnership or to any Limited Partner for any loss suffered by the
Partnership which arises out of any action or inaction of the General Partner or
its Affiliates if such action or inaction did not constitute negligence or
misconduct of the General Partner or its Affiliate and if the General Partner or
its Affiliate, in good faith, determined that its course of conduct for which
exculpation is sought was in the best interest of the Partnership, and if the
General Partner or its Affiliate was acting on behalf of or performing services
for the Partnership and wholly within the scope of authority of the General
Partner.
(b) A General Partner and its Affiliates, may be indemnified by the
Partnership, but only out of the assets of the Partnership and not from the
assets of the Limited Partners, against expenses, including attorney's fees,
judgments and amounts paid in settlement, actually and reasonably incurred by
the General Partner or such Affiliates in connection with the Partnership
PROVIDED that such expense were not the result of negligence or misconduct on
the part of the General Partner or its Affiliate, the General Partner or its
Affiliate determined in good faith that its course of conduct was in the best
interests of the Partnership, and the General Partner or its Affiliate was
acting on behalf of or performing services for the Partnership and wholly within
the scope of authority of the General Partner. The Partnership shall not advance
Partnership funds to a General Partner or any of its Affiliates for legal
expenses and other costs incurred as a result of any legal action brought
against the General Partner or its Affiliate.
(c) Notwithstanding subparagraph (a) and subparagraph (b) of this
paragraph 21, the General Partner and its Affiliates and any person acting as a
broker-dealer shall not be indemnified for any losses, liabilities or expenses
arising from or out of an alleged violation of federal or state securities laws
unless (1) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee, or
(2) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (3) a court of
competent jurisdiction approves a settlement of the claims against a particular
indemnitee and finds that indemnification of the settlement and related costs
should be made.
(d) In any claim for indemnification for federal or state securities
law violations, the party seeking indemnification shall place before the court
the positions of the Securities and Exchange Commission and the Massachusetts
Securities Division, and the position of any state regulatory authority where
partnership interests were offered or sold with respect to the issue of
indemnification for securities law violations.
(e) For purposes of this Paragraph 21 an Affiliate is: any person
owning or controlling, directly or indirectly, either General Partner or who is
under common control with a General Partner, and any officer or director of
either General Partner, and each affiliate may be entitled to exculpation or
indemnification under this Paragraph 21 in circumstances in which such Affiliate
is being sued for an act of such General Partner solely because of its
relationship to the General Partner, or in circumstances in which such person is
actually performing the duties of the General Partner in regard to the
Partnership.
(f) The Partnership shall not incur the cost of that portion of any
liability insurance which may insure either General Partner and its Affiliates
who are performing services on behalf of the Partnership for any liability as to
which such person is prohibited from being indemnified hereunder.
GOVERNANCE OF THE PARTNERSHIP
22. AMENDMENTS AND MEETINGS.
(a) AMENDMENTS PROPOSED BY THE GENERAL PARTNERS. If at any time during
the term of the Partnership the General Partners shall deem it necessary or
desirable to amend this Agreement, such amendment shall be effective only if
embodied in an instrument signed by the General Partners and by Limited Partners
owning more than fifty percent (50%) of the Units then owned by the Limited
Partners (not including any Units held by the General Partners or their
corporate affiliates) and if made in accordance with and to the extent
permissible under the Act. For purposes of obtaining a written vote, the General
Partners may require response within a specified time with respect to amendments
proposed by them. Any such supplemental or amendatory agreement shall be adhered
to and have the same effect from and after its effective date as if the same had
originally been embodied in and formed a part of this Agreement; PROVIDED,
HOWEVER, that no such supplemental or amendatory agreement shall change or alter
this paragraph 22, extend the term of the Partnership, change the Partnership to
a general partnership, change the liability or reduce the capital account of any
Partner or modify the percentage or profits, losses or distributions to which
any Partner is entitled. In addition, reduction of the capital account of any
assignee or modification of the percentage of profits, losses or distributions
to which an assignee is entitled hereunder shall not be effected by amendment or
supplement to this Agreement without such assignee's consent.
The General Partners may amend this Agreement without the consent of
the Limited Partners in order: (i) to clarify any inaccuracy, ambiguity or
reconcile any inconsistency; (ii) to add to the representations, duties or
obligations of the General Partners or surrender any right or power of the
General Partners for the benefit of the Limited Partners; (iii) to delete or add
any provision of this Agreement required to be deleted or added by the staff of
the Securities and Exchange Commission or other federal agency or any state
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<PAGE>
securities official or similar official or in order to opt to be governed by any
amendment or successor statute to the Act; (iv) change the name of the
Partnership or the location of the principal place of business of the
Partnership; (v) change this Agreement in any manner that is appropriate or
necessary to qualify or maintain the qualification of the Partnership as a
limited partnership or a partnership in which the Limited Partners have limited
liability under the laws of any state or that is appropriate or necessary to
ensure that the Partnership will not be treated as an association taxable as a
corporation for federal income tax purposes; (vi) change this Agreement in any
manner that does not adversely affect the Limited Partners in any material
respect or that is required or contemplated by other provisions of this
Agreement; (vii) make any amendment that is appropriate or necessary, in the
opinion of the General Partners, to prevent the Partnership or the General
Partners or their directors or officers from in any manner being subjected to
the provisions of the Investment Company Act of 1940, as amended, the Investment
Advisers Act of 1940, as amended, or "plan asset" regulations adopted under
ERISA, regardless of whether substantially similar to plan asset regulations
currently applied or proposed by the United States Department of Labor; or
(viii) make any other amendment similar to the foregoing; PROVIDED, that no such
amendment will be adverse to the interests of the Limited Partners.
(b) MEETINGS; AMENDMENTS PROPOSED BY THE LIMITED PARTNERS. Upon payment
of the costs of reproduction and mailing, any Limited Partner upon written
request addressed to the General Partners shall be entitled to obtain from the
General Partners a list of the names and addresses of record of all Limited
Partners and the number of Units held by each; PROVIDED, HOWEVER, that any
Limited Partner requesting such list shall give written assurance that the list
will not in any event be used for commercial purposes. In addition, such list
will be made available at the Partnership's principal office for the review of
any Limited Partner or his representative at reasonable times. Upon receipt of a
written request, signed by Limited Partners owning at least 10% of the Units
then owned by Limited Partners, that a meeting of the Partnership be called to
vote upon any matter which the Limited Partners may vote upon pursuant to this
Agreement, the General Partners shall, by written notice to each Limited Partner
of record delivered in person or by certified mail, within fifteen days after
such receipt, call a meeting of the Partnership. Such meeting shall be held at
least thirty but not more than fifty days after the mailing of such notice, and
such notice shall specify the date, a reasonable place and time, and the purpose
of such meeting. Partners may vote in person or by proxy at any such meeting. At
any meeting called pursuant to this subparagraph 22(b), upon affirmative vote
(which may be in person or by proxy) of Limited Partners owning more than 50% of
the Units then owned by the Limited Partners (not including any Units held by
the General Partners or their corporate affiliates), the following actions may
be taken: (i) this Amended and Restated Limited Partnership Agreement may be
amended in accordance with and only to the extent permissible under the Act;
PROVIDED, HOWEVER, that no amendment shall alter this paragraph 22, extend the
term of the Partnership, change the Partnership to a general partnership, change
the liability or reduce the capital account of any Partner or modify the
percentage of profits, losses or distributions to which any Partner is entitled
(in addition, reduction of the capital account of any assignee or modification
of the percentage of profits, losses or distributions to which an assignee is
entitled hereunder shall not be effected by amendment or supplement to this
Agreement without such assignee's consent); (ii) the Partnership may be
dissolved; (iii) the General Partners may be removed; (iv) a successor (or
successors) general partner may be elected as long as the Partnership continues
to have one General Partner, PROVIDED that the election of a general partner at
a time when there is no remaining General Partner, after an event of withdrawal
or removal of the last remaining General Partner, may only be conducted in
accordance with the Act; (v) a new general partner or general partners may be
elected if the General Partners elect to withdraw from the Partnership,
PROVIDED, that the appointment of the new general partner(s) is effective as of
the date of any such withdrawal; (vi) any contracts with the General Partners or
any of their affiliates may be terminated on sixty days notice without penalty;
and (vii) the sale of all the assets of the Partnership may be approved.
(c) PROXY RULES. In the event the Partnership is required to comply
with Regulation 14A under the Securities Exchange Act of 1934 (the "PROXY
RULES") or any successor regulation, the foregoing time periods specified in
this paragraph 22 may be altered by the General Partners so as not to conflict
therewith.
23. GOVERNING LAWS.
The validity and construction of this Agreement shall be governed by
and construed by the laws of the State of Delaware without regard to principles
of conflicts of law; PROVIDED, that the foregoing choice of law shall not
restrict the application of any state's securities laws to the sale of Units to
its residents or within such state.
24. MISCELLANEOUS.
(a) NOTICES. All notices or other communications required or permitted
to be given pursuant to this Agreement shall be in writing and shall be
considered as properly given or made if mailed postage prepaid, or if
telegraphed, by prepaid telegram, and addressed, if to IDS Managed Futures, L.P.
c/o CIS Investments, Inc., and IDS Futures Corporation, 233 South Wacker Drive,
Suite 2300, Chicago, Illinois 60606, and if to a Limited Partner, to the address
set forth above such Limited Partner's signature on the signature page annexed
hereto. Any Limited Partner may change his address by giving notice in writing
to the General Partners stating his new address, and the General Partners may
change their address by giving such notice to all Partners. Commencing on the
tenth day after the giving of such notice by any Limited Partner or the General
Partners, such
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newly designated address shall be such Partner's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.
(b) BINDING EFFECT. This Agreement shall inure to and be binding upon
all of the parties, their successors and assigns, custodians, estates, heirs and
personal representatives. For purposes of determining the rights of any Partner
or assignee hereunder, the Partnership and the General Partners may rely upon
the Partnership records as to who are Partners and assignees and all Partners
and assignees agree that their rights shall be determined and that they shall be
bound thereby.
(c) HEADINGS. Paragraph headings in no way define, extend or describe
the scope of this Agreement or the effect of any of its provisions.
(d) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which shall
constitute one instrument.
CIS INVESTMENTS, INC.
GENERAL PARTNER
By: /s/ Hal T. Hansen
----------------------------
President
IDS FUTURES CORPORATION
GENERAL PARTNER
By: /s/ Janis E. Miller
---------------------------
President
FOR THE LIMITED PARTNERS:
CIS INVESTMENTS, INC.
AS ATTORNEY-IN-FACT
By: /s/ Hal T. Hansen
-----------------------------
President
IDS FUTURES CORPORATION
AS ATTORNEY-IN-FACT
By: /s/ Janis E. Miller
-----------------------------
President
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EXHIBIT B
IDS MANAGED FUTURES, L.P.
--------------------
SUBSCRIPTION REQUIREMENTS
Purchaser represents (for Purchaser, and if Purchaser is an entity, on
behalf of and with respect to each of Purchaser's shareholders, partners or
beneficiaries) by executing and delivering the Fund's Subscription Agreement and
Power of Attorney, that he/she meets the financial requirements applicable to
his/her state of residence and that he/she is of legal age to execute this
Agreement. If Purchaser no longer meets such financial requirements, or if any
other information provided in connection with this subscription becomes
inaccurate, prior to his/her admission to the Fund as a limited partner, he/she
will immediately notify the General Partners. Purchaser is urged to review
carefully the responses, representations and warranties he/she is making herein
and in the Subscription Agreement and Power of Attorney. Purchaser agrees that
this subscription may be accepted or rejected in whole or in part by CIS
Investments, Inc. ("CISI") and IDS Futures Corporation ("IDS Futures")
(collectively, the "General Partners") in their sole and absolute discretion.
Purchaser certifies that he/she has received a Prospectus of the Fund dated
April 30, 1999. Purchaser acknowledges that the representations and warranties
herein are made through the Fund's Subscription Agreement and Power of Attorney
to, and may be relied upon by, the Fund, the General Partners, and the Selling
Agent.
Purchaser should read the following notices: (a) he/she can lose
his/her entire investment in the Fund; (b) there is no assurance that the Fund
will have results similar to the past performance of the Fund; (c) CISI, a
General Partner, is a wholly-owned subsidiary of Cargill Investor Services Inc.
("CIS"), the Fund's clearing broker, and IDS Futures, a General Partner, is an
affiliate of American Express Financial Advisors Inc., the Fund's selling agent
and introducing broker, and conflicts of interest therefore exist; (d) CIS, the
Fund's clearing broker, and American Express Financial Advisors Inc., the Fund's
introducing broker, will receive, pursuant to the brokerage agreement described
in the Prospectus, substantial brokerage commissions from the Fund which will
exceed the lowest such rates which are otherwise available; (e) the redemption
of Units is restricted, he/she will have no right to demand distributions from
the Fund and the transferability of Units is also restricted; (f) investment in
the Fund and trading in commodity interests have certain special federal income
tax aspects and that he/she should seek such advice from qualified sources as
he/she deems necessary; (g) the performance data of the Fund in the Prospectus
should be read only in conjunction with the notes accompanying such information,
and that such data should not be interpreted to mean that the Fund will have
performance results similar to those reported in the future or that it will
realize any profits; and (h) the Fund has entered into advisory agreements with
John W. Henry & Company, Inc. ("JWH") and Welton Investment Corporation
("Welton") as the Fund's commodity trading advisors and brokerage agreements
with American Express Financial Advisors Inc. and CIS as the Fund's introducing
and clearing brokers, respectively.
Purchaser also agrees by delivering the Fund's Subscription Agreement
and Power of Attorney that he/she shall become a limited partner, and he/she
hereby agrees to each and every term of the Amended and Restated Limited
Partnership Agreement as if his/her signature were subscribed thereto. The
General Partners, as the Purchaser's Attorneys-in-Fact, may subscribe his/her
name to the Certificate of Limited Partnership and the Amended and Restated
Limited Partnership Agreement.
SPECIAL REQUIREMENTS FOR EMPLOYEE PENSION PLANS OR INDIVIDUAL RETIREMENT
ACCOUNTS
If the undersigned is acting on behalf of an "employee benefit plan,"
as defined in and subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or any "plan," as defined in Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code") (each such employee
benefit plan and plan, a "Plan"), the individual signing this Subscription
Agreement and Power of Attorney on behalf of the undersigned, in addition to the
representations and warranties set forth above, hereby further represents and
warrants as, or on behalf of the fiduciary of the Plan responsible for
purchasing a Unit (the "Plan Fiduciary") that: (a) the Plan Fiduciary has
considered an investment in the Fund for such Plan in light of the risks
relating thereto; (b) the Plan Fiduciary has determined that, in view of such
considerations, the investment in the Fund for such Plan is consistent with the
Plan Fiduciary's responsibilities under ERISA; (c) the Plan's investment in the
Fund does not violate and is not otherwise inconsistent with the terms of any
legal document constituting the Plan or any trust agreement thereunder; (d) the
Plan's investment in the Fund has been duly authorized and approved by all
necessary parties; (e) none of the General Partners, JWH, Welton, IDS Futures,
CIS, CIS Financial Services, Inc. ("CISFS"), any Selling Agent, wholesaler or
correspondent, U.S. Bank National Association (the "Escrow Agent"), any of their
respective affiliates or any of their respective agents or employees (i) has
investment discretion with respect to the investment of assets of the Plan used
to purchase Units; (ii) has authority or responsibility to or regularly gives
investment advice with respect to the assets of the Plan used to purchase Units
for a fee and pursuant to an agreement or understanding that such advice will
serve as a primary basis for investment decisions with respect to the Plan and
that such advice will be based on the particular investment needs of the Plan;
or (iii) is an employer maintaining or contributing to the Plan; and (f) the
Plan Fiduciary (i) is authorized to make, and is responsible for, the decision
to invest in the Fund, including the determination that such investment is
consistent with the requirement imposed by
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Section 404 of ERISA that Plan investments be diversified so as to minimize the
risk of large losses, (ii) is independent of the General Partners, JWH, Welton,
CIS, IDS Futures, CISFS, any Selling Agent, wholesaler or correspondent, the
Escrow Agent and any of their respective affiliates, and (iii) is qualified to
make such investment decision. The undersigned will, at the request of the
General Partners, furnish the General Partners with such information as the
General Partners may reasonably require to establish that the purchase of Units
by the Plan does not violate any provision of ERISA or the Code, including,
without limitation, those provisions relating to "prohibited transactions" by
"parties in interest" or "disqualified persons" as defined therein.
SUITABILITY REQUIREMENTS
The states listed below require that residents of those states must
meet higher minimum suitability requirements and/or higher minimum investments
than those established by the Fund of a net worth of at least $45,000 (exclusive
of home, furnishings and automobiles) plus a minimum annual gross income of at
least $45,000 or, in the alternative, a net worth of $150,000 (exclusive of
home, furnishings and automobiles) and a minimum investment of $1,000.
Massachusetts, Minnesota, Missouri and North Carolina require that
residents of those states must meet minimum suitability requirements of a net
worth (excluding home, furnishings and automobiles) of at least $60,000 plus a
gross annual income of at least $60,000 or, in the alternative, a net worth of
at least $225,000 (exclusive of home, furnishings and automobiles).
California: Net worth of at least $100,000 (exclusive of home,
furnishings and automobile) plus an annual gross income of at least $65,000 or,
in the alternative, a net worth of at least $250,000.
Iowa: Net worth of at least $100,000 (exclusive of home, furnishings
and automobile) plus an annual taxable income of at least $75,000 or, in the
alternative, a net worth of at least $350,000.
Michigan: Net worth of at least $60,000 (exclusive of home,
furnishings, automobiles and investment in the Fund) plus a gross annual income
of at least $60,000 or, in the alternative, a net worth (as defined above) of at
least $225,000. Additionally, a subscriber's investment in the Fund may not
exceed 10% of his or her net worth (exclusive of home, furnishings, automobiles
and investment in the Fund).
Pennsylvania: Net worth of at least $275,000 (exclusive of home,
furnishings and automobiles). Additionally, if subscriber's net worth, as
described above, is less than $1,000,000, then subscriber's investment in the
Fund may not exceed 10% of his/her net worth.
Tennessee: A gross income of at least $65,000 in the most recent past
tax year and in the current tax year and a net worth of $65,000 (exclusive of
home, furnishings and automobile) or, in the alternative, a net worth (exclusive
of home, furnishings and automobile) of at least $250,000.
Oregon and Texas: Net worth of at least $60,000 (exclusive of home,
furnishings and automobiles) plus an annual taxable income of at least $60,000
or, in the alternative, a net worth of at least $225,000.
Washington: Net worth (exclusive of home, furnishings and automobiles)
or joint net worth with spouse in excess of $1,000,000 or an income in excess of
$200,000 or joint income with spouse in excess of $300,000 in each of the last
two tax years and reasonably expects to achieve the same level of income in the
current year.
MINIMUM INVESTMENT CRITERIA
Although the General Partners of the Fund believe that a minimum
investment of $1,000 is appropriate for the Fund, the states listed below
require that residents of those states must make a larger initial minimum
investment in the Fund.
<TABLE>
<S> <C>
Iowa: $3,000
Minnesota: $2,500
Nebraska: $5,000
North Carolina: $5,000
Texas: $5,000
</TABLE>
ATTENTION CALIFORNIA RESIDENTS:
The General Partners, pursuant to Section 260.141.11 of the California Code
of Regulations, are required to deliver to each California investor a copy of
the rules regarding the restriction on transferring your limited partnership
units.
RULE 260.141.11. RESTRICTION ON TRANSFER
(a) The issuer of any security upon which a restriction on transfer has been
imposed pursuant to Sections 260.141.10 or 260.534 shall cause a copy of this
section to be delivered to each issuee or transferee of such security at the
time the certificate evidencing the security is delivered to the issuee or
transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
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(3) to any person described in Subdivision (i) of Section 25102 of the Code
or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's
ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting as
such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign
state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal transaction,
or as an underwriter or member of an underwriting syndicate or selling
group;
(9) if the interest sold or transferred is a pledge or other lien given by
the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or 25121
of the Code, of the securities to be transferred, PROVIDED that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or by
a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113 of
the Code, PROVIDED that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who are
neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to the
administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property Law or by the
administrator of the unclaimed property law of another state, if, in
either such case, such person (i) discloses to potential purchasers at
the sale that transfer of the securities is restricted under this rule,
(ii) delivers to each purchaser a copy of this rule, and (iii) advises
the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not involve
a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102; PROVIDED that any such transfer is on
the condition that any certificate evidencing the security issued to
such transferee shall contain the legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10- point size, reading as follows:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
B-3
<PAGE>
IDS MANAGED FUTURES, L.P.
--------------------
SUBSCRIPTION INSTRUCTIONS
Subscribers for Units of limited partnership interest in IDS Managed
Futures, L.P. must deliver an executed copy of the Subscription Agreement and
Power of Attorney (Exhibit C) with a check for the amount of such subscription
payable to U.S. Bank National Association. The minimum subscription (including
subscriptions of Individual Retirement Accounts, Keogh Plans and Employee
Benefit Plans) is $1,000 (certain states have higher minimum amounts); any
greater subscription amount must be in increments of $100. Each subscriber
should review carefully the Subscription Requirements (Exhibit B) before
completing and executing the Subscription Agreement and Power of Attorney
(Exhibit C).
The subscriber should return the completed Subscription Agreement and
Power of Attorney and the check to: American Express Financial Advisors Inc.,
Geographic Service Team, P.O. Box 74, Minneapolis, Minnesota 55440. Subscription
checks must be made payable to U.S. Bank National Association, St. Paul,
Minnesota as Escrow Agent for IDS Managed Futures, L.P.
C-i
<PAGE>
EXHIBIT C
IDS MANAGED FUTURES, L.P.
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY
(1) SUBSCRIPTIONS. The undersigned ("Subscriber") hereby subscribes
for units of limited partnership interest ("Units") in IDS Managed Futures, L.P.
(the "Fund") at a price per Unit, if an Affiliated Purchaser, equal to the Net
Asset Value per Unit as of the close of business on the last business day of the
month in which the General Partners accept such subscriptions and admit the
subscribers as Limited Partners, plus the amount of the Offering Expense Charge
on a per Unit basis, and if a non-Affiliated Purchaser, at a price per Unit
equal to the Net Asset Value per Unit as of the last business day of the month
in which the General Partners accept such subscriptions and admit the
subscribers as Limited Partners, plus the amount of the Sales Charge and the
Offering Expense Charge on a per Unit basis (minimum initial subscription:
$1,000 including subscriptions for Individual Retirement Accounts and Keogh
Plans). Concurrently with or prior to delivery of this Subscription Agreement
and Power of Attorney, the Subscriber is delivering a check payable to U.S. Bank
National Association as escrow agent for IDS Managed Futures, L.P. for the
amount of his/her subscription to American Express Financial Advisors Inc.,
Geographic Service Team, P.O. Box 74, Minneapolis, Minnesota 55440. The General
Partners may, in their sole and absolute discretion, accept or reject this
subscription, and this subscription cannot be revoked, cancelled, or terminated
by subscriber except as provided below. If this subscription is accepted,
subscriber agrees to contribute the amount of the subscription to the Fund and
to be bound by the terms of its Amended and Restated Limited Partnership
Agreement.
All subscription documents from a potential investor must be received
by American Express Financial Advisors Inc. by the tenth calendar day of the
month if they are to be considered for acceptance by the Fund in that month.
American Express Financial Advisors Inc. will promptly send a confirmation of
the investment and a copy of the Fund's most recent monthly account statement to
the potential investor. The mailing of the confirmation and the account
statement marks the beginning of the "Free Look" period. The Free Look period is
16 days. During this time the prospective investor will have the opportunity to
determine whether he or she wishes his or her subscription to be retained by the
Fund. The potential investor must notify American Express Financial Advisors
Inc. by mail or telephone (pursuant to instructions in the notice from American
Express Financial Advisors Inc.) of his or her decision NOT to invest. No
further action is required in response to the notification from American Express
Financial Advisors Inc. if the investor elects to subscribe. The investor's
negative response must be received by American Express Financial Advisors Inc.
during the Free Look period. Investors electing to withdraw their subscription
pursuant to the above alternative will promptly receive a return of their
subscription funds from the escrow agent. The investor may withdraw his or her
subscription for any reason during the Free Look period. All subscriptions are
subject to acceptance by the General Partners.
(2) REPRESENTATIONS AND WARRANTIES. In addition to the
representations to be acknowledged in the box on the facing page, Subscriber
represents that he/she has had an opportunity to ask questions relating to the
Subscription Requirements or to the Prospectus.
(3) POWER OF ATTORNEY. In connection with the interest in IDS Managed
Futures, L.P. acquired or to be acquired pursuant to this subscription,
Subscriber hereby irrevocably constitutes and appoints CIS Investments, Inc. and
IDS Futures Corporation (the General Partners of the Fund), with full power of
substitution, his/her true and lawful attorneys-in-fact, with full power and
authority in his/her name, place, and stead, to admit additional limited
partners to the Fund, to file, prosecute, defend, settle or compromise any and
all actions at law or suits in equity for or on behalf of the Fund with respect
to any claim, demand or liability asserted or threatened by or against the Fund,
and to execute, acknowledge, swear to, deliver, file and record on his/her
behalf in the appropriate public offices and publish (i) all certificates and
other instruments (including but not limited to a Certificate of Limited
Partnership and a certificate of doing business under an assumed name) which the
General Partners deem appropriate to qualify or continue the Fund as a limited
partnership in the jurisdictions in which the Fund may conduct business or which
may be required to be filed by the Fund or the Partners under the laws of any
jurisdiction; (ii) all instruments which the General Partners deem appropriate
to reflect a change or modification of the Fund in accordance with the terms of
the Limited Partnership Agreement relating to the Fund or any amendment thereto;
and (iii) all conveyances and other instruments which the General Partners deem
appropriate to reflect the dissolution and termination of the Fund. The
foregoing grant of authority is a special power of attorney coupled with an
interest, is irrevocable, and shall survive Subscriber's death or incapacity.
Subscriber hereby agrees to be bound by any representation made by the General
Partners and by any successor thereto, acting in good faith pursuant hereto.
C-1
<PAGE>
LIMITED PARTNERSHIP PURCHASE PLAN AGREEMENT
Please complete this form for each limited partnership sponsored by
companies in the American Express Financial Corporation Group of companies when
making purchases without a sales commission. Mail or route this form, the
American Express Financial Advisors Inc. new business application, the
partnership subscription agreement and a check to:
American Express Financial Advisors Inc.
Geographic Service Team
P.O. Box 74
Minneapolis, MN 55440
The following individuals are eligible to purchase limited partnership
interests without paying a sales commission:
Advisors, managers and employees of companies in the American
Express Financial Corporation Group of Companies.
Eligible persons may purchase limited partnership interests in
partnerships sponsored by the American Express Financial Group of Companies
without paying the sales charge which is the base selling commission payable to
American Express Financial Advisors Inc., not including any dealer/manager fee
or other similar charge.
I understand that the total discount I receive will be reported on my
Form W-2 or 1099 as taxable income to me. (100% to independent contractors; 80%
for employees).
I represent that I have purchased these limited partnership interests
as an investment and not with a view toward their resale.
Please check the appropriate box and fill out your employee or advisor
number below. Advisor numbers must include the check digit.
I am an
1. _____ Independent Contractor (veteran advisor, district manager)
2. _____ American Express Employee (first year advisors, division
V.P., region V.P., associate manager, training and recruiting
manager, division staff, home office staff)
Advisor/Employee Number_________________________________________________________
Unit/DO Number______________________ Advisor/Employee Name________________
Partnership Name____________________ ParTnership Account Number_____________
(Entered by New Business)
Investment Amount $_________________
Signature___________________________ Date________________
C-2
<PAGE>
EXHIBIT D
IDS MANAGED FUTURES
REQUEST FOR REDEMPTION
IDS MANAGED FUTURES, L.P. ______________________________
c/o American Express Financial Advisors Inc. Date
Geographic Service Team
P.O. Box 74
Minneapolis, Minnesota 55440
Dear Sirs:
The undersigned hereby requests redemption of $_______ or _______ Units
(please designate redemption amount in terms of dollars or Units or write "all")
of the partnership identified below, less any amount the undersigned owes to
such Fund. The undersigned hereby represents and warrants that he, she, or it is
the true and lawful owner of the Unit or Units to which this request relates
with full power and authority to request redemption of such Unit(s). The
undersigned acknowledges that no redemptions are permitted during the first six
months after he/she has been first admitted to the Fund. Further, the
undersigned acknowledges that if he/she redeems all of his/her Units, he/she
will not be permitted to purchase any Units offered by the Fund for six months
following the date of any such redemption. Such Unit(s) are not subject to any
pledge or otherwise encumbered in any fashion. Redemption shall be effective as
of the last trading day of the month in which the General Partners receive this
Request, PROVIDED that the General Partners receive notice ten days in advance
of such date, and shall be in an amount based on Net Asset Value per Unit on
such date. The minimum redemption amount, whether requested in terms of dollars
or Units, is the lesser of $500 or the Net Asset Value of two Units, unless the
undersigned is redeeming his/her entire interest in the Fund.
C-3
<PAGE>
SIGNATURES MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS OF
LIMITED PARTNERSHIP INTEREST ARE REGISTERED
Please forward such funds by mail to the undersigned at:
- ------------------------------------- -------------------------------------
Name Street, City, State and Zip Code
Please forward such funds to the following IDS account:
- ------------------------------------- -------------------------------------
Product Name Account Number
- -------------------------------------
Subscriber Tax ID Number
ENTITY LIMITED PARTNER: INDIVIDUAL LIMITED PARTNER:
(or Assignee) (Or Assignee)
- ------------------------------------- -------------------------------------
(Name of entity)
- ------------------------------------- -------------------------------------
(Authorized trustee partner
or corporate officer)
- ------------------------------------- -------------------------------------
(Print title of authorized (Signature of all partners
trustee, partner or corporate officer) or assignees)
- ------------------------------------- -------------------------------------
Customer Account Number Name of Partnership
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below are estimates of the approximate amounts of fees and
expenses payable by the Registrant in connection with updating the Prospectus
and preparing and filing this Post-Effective Amendment No. 6 to the Registration
Statement. (Such fees and expenses will be paid jointly by the General Partners,
and in return, the General Partners will receive the Offering Expense Charge as
described in the Prospectus):
<TABLE>
<CAPTION>
APPROPRIATE
AMOUNT
------
<S> <C>
Printing Expenses....................................................................... 85,000.00
Accounting Fees and Expenses............................................................ 25,000.00
Seminars................................................................................ 100,000.00
Blue Sky Fees and Expenses (excluding Legal Fees)....................................... 40,000.00
Legal Fees and Expenses................................................................. 70,000.00
Escrow Fees............................................................................. 26,700.00
Marketing Expenses...................................................................... 85,000.00
Miscellaneous Expenses.................................................................. 50,000.00
-------------
TOTAL............................................................................. $481,700.00
=============
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 21 of the Limited Partnership Agreement included herein as
Exhibit 3.1, provides for indemnification of the General Partners, their
officers, directors and persons owning or controlling the General Partners,
under the circumstances described therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
There have been no recent sales of unregistered securities.
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(1) EXHIBITS
The following documents are filed herewith and made a part of this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER -----------------------
------
<S> <C>
1.1* Form of Selling Agreement among Registrant, American
Express Financial Advisors Inc., IDS Futures
Corporation and CIS Investments, Inc.
1.2* Form of Amendment to Selling Agreement among
Registrant, American Express Financial Advisors
Inc., IDS Futures Corporation and CIS Investments,
Inc.
3.1 Amended and Restated Limited Partnership Agreement (attached to Prospectus as Exhibit A).
3.2 Subscription Requirements (attached to Prospectus as Exhibit B).
3.3 Subscription Agreement and Power of Attorney (attached to Prospectus as Exhibit C).
3.4 Request for Redemption (attached to Prospectus as Exhibit D).
II-1
<PAGE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER -----------------------
------
<S> <C>
5.1* Opinion of Sidley & Austin relating to the legality of the Units.
8.1* Opinion of Sidley & Austin with respect to federal income tax consequences.
10.1.1* Advisory Contract between Registrant and John W. Henry & Company Inc. and Sabre Fund
Management Limited.
10.1.2* Amendment to Advisory Contract between Registrant and John W. Henry & Company, Inc.
10.1.3* Amendment to Advisory Contract between Registrant and Sabre Fund Management Limited.
10.1.4* Amendment to Advisory Contract between Registrant, John W. Henry & Company, Inc., and
Sabre Fund Management Limited dated April 30, 1996.
10.1.5* Advisory Contract between Registrant and Welton Investment Corporation dated July 2, 1997.
10.1.6 Amendment to Advisory Contract between Registrant and John W. Henry & Company, Inc. dated
December 31, 1999.
10.2* Escrow Agreement between Registrant and First Trust National Association (replaces prior
Escrow Agreement between Registrant and First Bank National Association).
10.3* Brokerage Agreement between Registrant, Cargill Investor Services, Inc., and American
Express Financial Advisors Inc.
10.4* Form of Net Worth Agreement between Cargill Investor Services, Inc. and CIS
Investments, Inc. and between IDS Financial Corporation and IDS Futures Corporation.
10.5* Form of Representation Agreement between IDS Managed Futures, L.P., American Express
Financial Advisors Inc., CIS Investments, Inc., Cargill Investor Services, Inc., IDS Futures
Corporation, John W. Henry & Co., Inc. and Sabre Fund Management Limited.
10.6* Foreign Exchange Account Agreement between CIS Financial Services, Inc. and Registrant.
10.7* Form of Representation Agreement between IDS Managed Futures, L.P., American Express
Financial Advisors Inc., CIS Investments, Inc., Cargill Investor Services, Inc., IDS Futures
Corporation and Welton Investment Corporation.
10.8 Form of Guarantee between Cargill, Incorporated and the Registrant 23.1 The consent of KPMG LLP.
23.1 The consent of KPMG LLP.
23.2 The consent of Ernst & Young LLP.
23.3 The consent of Sidley & Austin.
27.1 Financial Date Schedule
</TABLE>
- -------------------------
* Previously filed.
(2) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are required to be filed with the
registration statement.
ITEM 17. UNDERTAKINGS.
(a)(1) The undersigned registrant hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20
II-2
<PAGE>
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any such action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement or Registration Statement
Amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago in the State of Illinois on March 2, 2000.
IDS MANAGED FUTURES, L.P.
By: CIS Investments, Inc., General Partner
By: /s/ Bernard W. Dan
---------------------------------------
Bernard W. Dan
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Registration Statement Amendment has been signed below
by the following persons on behalf of CIS Investments, Inc., a general partner
of the Registrant, in the capacities indicated on March 2, 2000.
/s/ Bernard W. Dan President and Director
- --------------------------------- (Principal Executive Officer)
Bernard W. Dan
/s/ Shaun D. O'Brien Treasurer and Director
- --------------------------------- (Principal Financial and Accounting Officer)
Shaun D. O'Brien
/s/ Barbara A. Pfendler Vice President and Director
- ---------------------------------
Barbara A. Pfendler
(Being the principal executive officer, the principal financial and
accounting officer and a majority of the directors of CIS Investments, Inc.)
CIS INVESTMENTS, INC., a general partner of Registrant
By: /s/ Bernard W. Dan
------------------------
Bernard W. Dan
President
II-4
<PAGE>
IDS MANAGED FUTURES, L.P.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<S> <C>
1.1* Form of Selling Agreement among Registrant, American Express Financial Advisors Inc.,
IDS Futures Corporation and CIS Investments, Inc.
1.2* Form of Amendment to Selling Agreement among Registrant, American Express Financial
Advisors Inc., IDS Futures Corporation and CIS Investments, Inc.
3.1 Amended and Restated Limited Partnership Agreement (attached to Prospectus as
Exhibit A).
3.2 Subscription Requirements (attached to Prospectus as Exhibit B).
3.3 Subscription Agreement and Power of Attorney (attached to Prospectus as Exhibit C).
3.4 Request for Redemption (attached to Prospectus as Exhibit D).
5.1* Opinion of Sidley & Austin relating to the legality of the Units.
8.1* Opinion of Sidley & Austin with respect to federal income tax consequences.
10.1.1* Advisory Contract between Registrant and John W. Henry & Co., Inc. and Sabre Fund
Management Limited.
10.1.2* Amendment to Advisory Contract between Registrant and John W. Henry & Co., Inc.
10.1.3* Amendment to Advisory Contract between Registrant and Sabre Fund Management Limited.
10.1.4* Amendment to Advisory Contract between Registrant, John W. Henry & Co., Inc., and
Sabre Fund Management Limited dated April 30, 1996.
10.1.5* Advisory Contract between Registrant and Welton Investment Corporation dated July 2,
1997.
10.1.6 Amendment to Advisory Contract between Registrant and John W. Henry & Co. Inc. dated
December 31, 1999
10.2* Escrow Agreement between Registrant and First Trust National Association (replaces prior
Escrow Agreement between Registrant and First Bank National Association).
10.3* Brokerage Agreement between Registrant, Cargill Investor Services, Inc., and American
Express Financial Advisors Inc.
10.4* Form of Net Worth Agreement between Cargill Investor Services, Inc. and CIS
Investments, Inc. and between IDS Financial Corporation and IDS Futures Corporation.
10.5* Form of Representation Agreement between IDS Managed Futures, L.P., American Express
Financial Advisors Inc., CIS Investments, Inc., Cargill Investor Services, Inc., IDS Futures
Corporation, John W. Henry & Co., Inc. and Sabre Fund Management Limited.
10.6* Foreign Exchange Account Agreement between CIS Financial Services, Inc. and Registrant.
10.7* Form of Representation Agreement between IDS Managed Futures, L.P., American Express
Financial Advisors Inc., CIS Investments, Inc., Cargill Investor Services, Inc., IDS Futures
Corporation and Welton Investment Corporation.
10.8 Form of Guarantee between Cargill, Incorporate and IDS Managed Futures, L.P.
23.1 The consent of KPMG LLP.
23.2 The consent of Ernst & Young LLP.
23.3 The consent of Sidley & Austin.
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* Previously filed.
<PAGE>
EXHIBIT 10.1.6
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.
1
<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
--------------------------
2
<PAGE>
EXHIBIT 10.8
B-XXX CISNEW-AMXRESS
DATE
COUNTERPARTY NAME AND ADDRESS
1. In consideration of your carrying accounts with, and entering into
transactions with AND/OR THROUGH, our subsidiary, CIS Financial Services, Inc.
(the "Subsidiary") FOR XXXX, 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. However, in no event shall the Guarantor's liability
under this guarantee exceed the maximum aggregate amount of _______________
(currency) ________________, 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, 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, in no event shall the
guarantee be interpreted to allow the Counterparty to recover more from the
Guarantor, the Subsidiary, or any combination of the payments from both such
parties, than the Subsidiary's total outstanding obligations hereby guaranteed,
plus accrued interest and the reasonable costs of enforcement as noted 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.
<PAGE>
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 _____________ or may be revoked by the
Guarantor at any time by the Guarantor sending the Counterparty a written notice
of such revocation 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 revocation, which transaction has a settlement date beyond
the effective date of such expiration or revocation.
<PAGE>
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 Name
Counterparty Address
Counterparty Address
Contact Name:
Phone Number:
Fax Number:
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 Center Treasury #3
Phone Number: 612/742-2309
Fax Number: 612/742-4027
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.
<PAGE>
CARGILL, INCORPORATED
By: By:
---------------------------- ------------------------------
Title: Title:
------------------------- ---------------------------
(183941)
<PAGE>
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Selected
Financial Information" and "Lawyers; Accountants" and the use of our report
dated January 21, 2000 with respect to the statements of financial condition of
IDS Managed Futures, L.P. as of December 31, 1999 and 1998 and the related
statements of operations, changes in partners' capital, and cash flows for the
years ended December 31, 1999, 1998, and 1997 and to the use of our report dated
July 23, 1999 with respect to the statements of financial condition of CIS
Investments, Inc. as of May 31, 1999 and 1998 and the related statements of
income, changes in stockholder's equity and cash flows for the years ended May
31, 1999 and 1998 included in Post-Effective Amendment No. 6 to the Form S-1
Registration Statement (Reg. No. 33-86894) and related Prospectus of IDS Managed
Futures, L.P.
KPMG LLP
February 29, 2000
Chicago, Illinois
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Lawyers;
Accountants" and to the use of our report dated February 15, 2000 with respect
to the balance sheet of IDS Futures Corporation included in Post-Effective
Amendment No. 6 to the Registration Statement (Form S-1 No. 33-86894) and
related Prospectus of IDS Managed Futures, L.P for the registration of
$22,500,000 of limited partnership interests.
/s/ Ernst & Young
March 2, 2000
Minneapolis, Minnesota
<PAGE>
EXHIBIT 23.3
CONSENT OF COUNSEL
We consent to the references to our firm under the captions "Tax Consequences"
and "Lawyers; Accountants" in Post-Effective Amendment No. 6 to the Form S-1
Registration Statement (Reg. No. 33-86894) as filed with the United States
Securities Exchange Commission on or about March 2, 2000 and the related
Prospectus of IDS Managed Futures, L.P.
Sidley & Austin
March 2, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF FINANCIAL CONDITION AS OF DECEMBER 31, 1999 AND THE STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31,1999, EACH OF WHICH HAS BEEN AUDITED
BY KPMG LLP AND IS SET FORTH IN PART ONE OF THE PROSPECTUS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 45,354,529
<SECURITIES> 0
<RECEIVABLES> 183,939
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47,833,439
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 47,833,439
<CURRENT-LIABILITIES> 1,529,452
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 47,833,439
<SALES> 0
<TOTAL-REVENUES> (5,873,245)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,532,838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,406,083)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,406,083)
<EPS-BASIC> (69.61)
<EPS-DILUTED> (69.61)
</TABLE>
