<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
for the quarterly period ended September 30, 1999
Commission File Number 0-17443
IDS MANAGED FUTURES II, L.P.
(Exact name of registrant as specified in its charter)
Delaware 06-1207252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification #)
233 South Wacker Dr., Suite 2300, Chicago, IL 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 460-4000
Not Applicable
Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Following are Financial Statements for the fiscal quarter ended September 30,
1999 and the additional time frames as noted:
<TABLE>
<CAPTION>
FISCAL QUARTER YEAR TO DATE FISCAL YEAR FISCAL QUARTER YEAR TO DATE
ENDED 9/30/99 TO 9/30/99 ENDED 12/31/98 ENDED 9/30/98 TO 9/30/98
-------------- ------------ -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Statement of
Financial Condition X X
Statement of
Operations X X X X
Statement of Changes
in Partners' Capital X
Statement of
Cash Flows X X
Notes to Financial
Statements X
</TABLE>
<PAGE>
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEP 30, 1999 DEC 31, 1998
------------ ------------
<S> <C> <C>
ASSETS
Equity in commodity futures trading accounts:
Account balance $10,168,583 11,060,948
Unrealized gain on open
futures contracts (233,081) 1,255,115
----------- -----------
9,935,502 12,316,063
Interest receivable 32,541 34,361
----------- -----------
TOTAL ASSETS $ 9,968,043 $12,350,424
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued commissions on open
futures contracts due to AXP Advisors and CIS $ 24,373 $ 48,329
Accrued management fee 30,431 37,278
Accrued incentive fee 0 0
Accrued operating expenses 42,629 53,140
Redemptions payable 89,144 143,490
----------- -----------
Total liabilities 186,577 282,237
Partners' Capital:
Limited partners (15,257.90 units 9,385,068 11,617,111
outstanding at 9/30/99, 16,597.42
units outstanding at 12/31/98) (see Note 1)
General partners (644.45 units out- 396,398 451,076
standing at 9/30/99 and 12/31/98) (see Note 1)
----------- -----------
Total partners' capital 9,781,466 12,068,187
----------- -----------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 9,968,043 $12,350,424
=========== ===========
</TABLE>
In the opinion of management, these statements reflect all adjustments necessary
to fairly state the financial condition of IDS Managed Futures II, L.P. (See
Note 6)
<PAGE>
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
JUL 1, 1999 JAN 1, 1999 JUL 1, 1998 JAN 1, 1998
THROUGH THROUGH THROUGH THROUGH
SEP 30, 1999 SEP 30, 1999 SEP 30, 1998 SEP 30, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Gains on trading of commodity futures
and forwards contracts, physical
commodities and related options:
Realized gain (loss) on closed positions ($132,058) $508,476 $131,147 ($2,177)
Change in unrealized gain (loss)
on open positions (1,048,468) (1,489,578) 2,531,956 1,838,159
Interest income 102,111 298,171 108,151 341,274
Foreign currency transaction gain (loss) 16,541 (21,931) 6,157 (49,484)
----------- ----------- ---------- ----------
Total revenues ($1,061,874) ($704,862) $2,777,411 $2,127,771
EXPENSES
Commissions paid to AXP Advisors and CIS 113,048 361,616 137,445 416,451
Exchange fees 3,996 11,898 3,125 9,171
Management fees 97,154 302,924 106,407 315,620
Incentive fees 0 0 102,439 102,439
Operating expenses 9,500 28,960 28,299 44,937
----------- ----------- ---------- ----------
Total expenses 223,698 705,398 377,715 888,619
----------- ----------- ---------- ----------
NET PROFIT (LOSS) ($1,285,572) ($1,410,260) $2,399,696 $1,239,152
=========== =========== ========== ==========
PROFIT (LOSS) PER UNIT OF
PARTNERSHIP INTEREST ($79.49) ($84.83) $133.73 $72.25
=========== =========== ========== ==========
</TABLE>
This Statement of Operations, in the opinion of management, reflects all
adjustments necessary to fairly state the financial condition of IDS Managed
Futures II, L. P. (See Note 6)
<PAGE>
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD JANUARY 1, 1999 THROUGH SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
LIMITED GENERAL
UNITS* PARTNERS PARTNERS TOTAL
--------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Partners' capital at January 1, 1999 16,597.42 $11,617,111 $451,076 $12,068,187
Net profit (loss) (1,355,584) (54,678) (1,410,261)
Redemptions (see Note 1) (1,339.52) (876,460) 0 (876,460)
--------- ----------- -------- -----------
Partners' capital at September 30, 1999 15,257.90 $ 9,385,068 $396,398 $ 9,781,466
========= =========== ======== ===========
Net asset value per unit
January 1, 1999 $699.93 $699.93
Net profit (loss) per unit (84.83) (84.83)
----------- --------
Net asset value per unit
September 30, 1999 $615.10 $615.10
</TABLE>
* Units of Limited Partnership interest.
This Statement of Changes in Partners' Capital, in the opinion of management,
reflects all adjustments necessary to fairly state the financial condition of
IDS Managed Futures II, L. P. (See Note 6)
<PAGE>
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JAN 1, 1999 JAN 1, 1998
THROUGH THROUGH
SEP 30, 1999 SEP 30, 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net profit/(loss) ($1,410,261) ($1,160,544)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Change in assets and liabilities:
Unrealized gain (loss) on open
futures contracts 1,488,196 693,797
Interest receivable 1,820 8,665
Accrued liabilities (41,314) (46,702)
Redemptions payable (54,346) 194,543
----------- -----------
Net cash provided by (used in)
operating activities (15,906) (310,241)
Cash flows from financing activities:
Partner redemptions (876,460) (688,086)
----------- -----------
Net cash provided by (used in)
financing activities (876,460) (688,086)
----------- -----------
Net increase (decrease) in cash (892,365) (998,327)
Cash at beginning of period 11,060,948 11,875,917
----------- -----------
Cash at end of period $10,168,583 $10,877,590
=========== ===========
</TABLE>
This Statement of Cash Flows, in the opinion of management, reflects all
adjustments necessary to fairly state the financial condition of IDS Managed
Futures II, L. P. (See Note 6)
<PAGE>
IDS MANAGED FUTURES II, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(1) GENERAL INFORMATION AND SUMMARY
IDS Managed Futures II, L.P. (the "Partnership") is a limited partnership
organized on April 21, 1987 under the Delaware Revised Uniform Limited
Partnership Act. The Partnership was formed to speculatively trade commodity
interests, including futures contracts, forward contracts, physical commodities
and related options thereon pursuant to the trading instructions of independent
trading advisors. The General Partners of the Partnership are CIS Investments,
Inc. ("CISI") and IDS Futures Corporation ("IDS Futures") (collectively, the
"General Partners"). The General Partners are registered commodity pool
operators under the Commodity Exchange Act, as amended, and are responsible for
administering the business and affairs of the Partnership exclusive of trading
decisions. CISI is an affiliate of Cargill Investor Services, Inc. ("CIS"), the
clearing broker for the Partnership. IDS Futures is an affiliate of American
Express Financial Advisors Inc. ("AEFA"), formerly IDS Financial Services Inc.,
which acts as the Partnership's introducing broker and selling agent. Trading
decisions for the Partnership during the period of these financials were made by
two independent commodity trading advisors, John W. Henry & Company, Inc.
("JWH") and Welton Investment Corporation ("Welton").
Units of limited partnership interest ("Units") were offered by AEFA commencing
July 14, 1987 through December 31, 1988. The total amount of the offering was
$40,000,000. There is no definite number of Units authorized for the Partnership
because investors affiliated with the Selling Agent of the Partnership were not
required to pay selling commissions. 60,127.14 Units representing a total
investment of $14,983,249 had been sold and accepted into the Partnership during
the offering period from July 14, 1987 to December 31, 1988 (excluding 627.95
Units purchased by the General Partners for $150,110). A final group of
investors purchasing Units worth $423,750 between December 20, 1988 and December
31, 1988 were admitted into the Partnership on January 31, 1989, at a Net Asset
Value of $255.27. The General Partners also purchased an additional $3,960 of
Units on January 31, 1989.
No redemptions were permitted by a subscriber during the first six months after
he or she was admitted to the Partnership. Thereafter, a Limited Partner may
cause any or all of his or her Units to be redeemed by the Partnership effective
as of the last trading day of any month of the Partnership based on the Net
Asset Value per Unit on ten days written notice to the General Partners. There
are no additional charges to the investors at redemption. The General Partners
may declare additional redemption dates upon notice to the Limited Partners.
Payment will be made within ten business days of the effective date of the
redemption. The Partnership's Limited Partnership Agreement contains a full
description of redemption and distribution procedures.
The Partnership shall be terminated on December 31, 2007 if none of the
following occur prior to that date: (1) investors holding more than 50 percent
of the outstanding Units notify the General Partners to dissolve the Partnership
as of a specific date; (2) disassociation of the General Partners with the
Partnership; (3) bankruptcy of the Partnership; (4) decrease in the net asset
value to less than $1,500,000; (5) the Partnership is declared unlawful, or (6)
<PAGE>
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 reported on an
identified cost basis. Unrealized gains and losses reflected in the statements
of financial condition represent the difference between original contract amount
and market value (as determined by exchange settlement prices for futures
contracts and related options and cash dealer prices at a predetermined time for
forward contracts, physical commodities and their related options) as of the
last business day of the quarter.
The Partnership earns interest on 100 percent of the Partnership's average
monthly cash balance on deposit with the Clearing Broker at a rate equal to 80
percent of the average 90-day Treasury bill rate for U.S. Treasury bills issued
during that month.
Redemptions
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. Redemptions are
based on the Net Asset Value per unit as of the last day of the month and
require ten days' written notice to the General Partners. Payment will be made
within ten business days of the effective date of the redemption. The
Partnership's Limited Partnership Agreement contains a full description of
redemption and distribution procedures.
Commissions
Brokerage commissions and National Futures Association clearing and exchange
fees are accrued on a round-turn basis on open commodity futures contracts. The
Partnership pays CIS commissions on trades executed on its behalf at a rate of
$58.75 per round turn contract. For trades executed by Welton Investment
Corporation, the Partnership pays $43.75 per round turn contract. The
Partnership pays these commissions directly to CIS and CIS then reallocates the
appropriate portion to AEFA.
<PAGE>
Foreign Currency Transactions
Trading accounts in foreign currency denominations are susceptible to both
movements in underlying contract markets as well as fluctuations in currency
rates. Translation of foreign currencies into U.S. dollars for closed positions
are translated at an average exchange rate for the quarter while quarter-end
balances are translated at the quarter-end currency rates. The impact of the
translation is reflected in the statement of operations.
Statements of Cash Flow
For purposes of the statements of cash flows, cash represents cash on deposit
with the Clearing Broker in commodity futures trading accounts.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
(3) FEES
Management fees are accrued and paid monthly and incentive fees are accrued
monthly and paid quarterly. Trading decisions for the periods covered in these
financial statements were made by JWH and Welton, the Partnership's Commodity
Trading Advisors ("CTAs"). See Note 1 for the specific periods of trading for
each CTA.
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 dated July 8, 1997, 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.
(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 and $18,799 for the periods ended September 30, 1999 and
September 30, 1998, respectively.
<PAGE>
(5) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Partnership was formed to speculatively trade Commodity Interests. It has
commodity transactions and all of its cash on deposit at its Clearing Broker at
all times. In the event that volatility of trading of other customers of the
Clearing Broker impaired the ability of the Clearing Broker to satisfy its
obligations to the Partnership, the Partnership would be exposed to off-balance
sheet risk. Such risk is defined in Statement of Financial Accounting Standards
No. 105 ("SFAS 105") as a credit risk. To mitigate this risk, the Clearing
Broker, pursuant to the mandates of the Commodity Exchange Act, is required to
maintain funds deposited by customers relating to futures contracts in regulated
commodities in separate bank accounts which are designated as segregated
customers' accounts. In addition, the Clearing Broker has set aside funds
deposited by customers relating to foreign futures and options in separate bank
accounts that are designated as customer secured accounts. Lastly, the Clearing
Broker is subject to the Securities and Exchange Commission's Uniform Net
Capital Rule which requires the maintenance of minimum net capital at least
equal to 4% of the funds required to be segregated pursuant to the Commodity
Exchange Act. The Clearing Broker has controls in place to make certain that all
customers maintain adequate margin deposits for the positions that 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 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
its members or one of the members' customers and as such should significantly
reduce this credit risk. In the cases where the Partnership trades on exchanges
on which the Clearing House is not backed by the membership, the sole recourse
of the Partnership for nonperformance will be the Clearing House.
The Partnership holds futures and futures options positions on the various
exchanges throughout the world. The Partnership does not trade over-the-counter
contracts. As defined by SFAS 105, futures positions are classified as financial
instruments. SFAS 105 requires that the Partnership disclose the market risk of
loss from all of its financial instruments. Market risk is defined as the
possibility that future changes in market prices may make a financial instrument
less valuable or more onerous. If the markets should move against all of the
futures positions held by the Partnership at the same time, and if the markets
moved such that the Trading Advisors were unable to offset the futures positions
of the Partnership, the Partnership could lose all of its assets and the
partners would realize a 100% loss. As of September 30, 1999 the Partnership had
contracts with two CTAs who make the trading decisions. One of the CTAs trades a
program diversified among all commodity groups, while the other is diversified
among the various futures contracts in the financials and metals group. Both
CTAs trade on U.S. and non-U.S. exchanges. Such diversification should greatly
reduce this market risk. Cash was on deposit with the Clearing Broker in each
time period of the financial statements that exceeded the cash requirements of
the Commodity Interests of the Partnership.
The following chart discloses the dollar amount of the unrealized gain or loss
on open contracts related to exchange traded contracts for the Partnership as of
September 30, 1999:
<PAGE>
<TABLE>
<CAPTION>
COMMODITY GROUP UNREALIZED GAIN/(LOSS)
<S> <C>
AGRICULTURAL COMMODITIES 713
FOREIGN CURRENCIES 85,319
STOCK INDICES (19,039)
ENERGIES 14,828
METALS (379,379)
INTEREST RATE INSTRUMENTS 64,477
--------
TOTAL (233,081)
</TABLE>
The range of maturity dates of these exchange traded open contracts is October
of 1999 to September of 2000. The average open trade equity for the period of
January 1, 1999 to September 30, 1999 was $638,817.
The margin requirement at September 30, 1999 was $1,316,165. To meet this
requirement, the Partnership had on deposit with the Clearing Broker $9,055,658
in segregated funds and $879,843 in secured funds.
(6) FINANCIAL STATEMENT PREPARATION
The interim financial statements are unaudited, but reflect all adjustments that
are, in the opinion of management, necessary for a fair statement of the results
for the interim periods presented. These adjustments consist primarily of normal
recurring accruals. These interim financial statements should be read in
conjunction with the audited financial statements of the Partnership for the
year ended December 31, 1998, as filed with the Securities and Exchange
Commission on March 29, 1999, as part of its Annual Report on Form 10-K.
The results of operations for interim periods are not necessarily indicative of
the operating results to be expected for the fiscal year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
FISCAL QUARTER ENDED SEPTEMBER 30, 1999
The Partnership recorded a loss of $1,285,572 or $79.49 per Unit for the third
quarter of 1999. This compares to a gain of $2,399,696 or $133.73 per Unit for
the third quarter of 1998.
In the first month of the quarter the Partnership posted a loss resulting
primarily from excessive volatility in the currency markets. The Partnership
posted a small loss during the second month of the quarter resulting primarily
from losses in global interest rates and the Japanese Nikkei stock index. During
the third month of the quarter, the Partnership surrendered profits due
<PAGE>
to rapidly escalating gold prices and the Partnership's short gold positions.
Overall, the third quarter of fiscal 1999 ended negatively for the
Partnership accounts managed by JWH. At September 30, 1999, JWH was managing
69% of the Partnership's assets and Welton was managing 31% of the
Partnership's assets.
The Partnership posted a loss for July, largely due to excessive volatility in
the currency markets. After gaining value versus the world's currencies for
several weeks, the U.S. dollar ran out of steam by the mid-month. As a result,
the Partnership posted losses from long Dollar positions against the Euro, Swiss
franc and Japanese yen. The decline of the Dollar continued through month end,
which prompted short Dollar positions to be established.
Losses in the currency markets wiped out smaller gains that came from global
interest rates, metals, energy and the agricultural sectors. Short positions in
the 10-year and 30-year U.S. bonds provided profits as the long bond yield rose
above 6.1%. The Partnership's strongest gains in this sector came from Europe
where interest rates continued to rise. Profits were earned from short positions
in the Euro Bund, Euro Bobl and U.K. Gilt. Likewise, the Partnership continued
to profit from its short positions in the gold market as the price of gold fell
to its lowest level in 20 years; $253.70 per troy ounce. All in all, the
Partnership posted a loss of $352,424 or $21.52 per Unit in July.
In August, the Partnership posted another small loss. Gains for the Partnership
were the result of a weaker U.S. dollar, versus the Yen and Euro specifically.
Stronger crude oil prices and lower gold prices also provided gains.
Unfortunately, these gains were offset by losses in global interest rates and
the Japanese Nikkei stock index. Long positions in the Japanese stock index (the
Nikkei) that were profitable for the entire year were closed out and small
losses were recorded during August.
Currencies provided some resurrection in the form of a stronger Yen and Euro
versus the U.S. dollar. Since mid-July, the Partnership held profitable long
positions in the Yen and Euro looking for these currencies to strengthen against
the Dollar. Long positions in crude oil performed well as prices rose $2 per
barrel during August exceeding $22 per barrel. Gold prices again plummeted
through a 20-year low to $253.00 per troy ounce. Notwithstanding these gains,
the Partnersip posted a loss of $342,112 or $21.14 per Unit in August.
The Partnership had a difficult time in the markets during September. Losses
were primarily attributable to its short gold position, as the price rose over
$50 per ounce. The price of gold escalated rapidly after 15 European central
banks announced that they wouldn't sell or lease additional gold for the next
five years.
Unfortunately, gains in Crude oil and the Japanese Yen were offset by losses in
gold, as well as short positions in the U.S. and Japanese bond markets. The
Partnership's long positions in Crude oil performed well as prices rose nearly
another $2 per barrel. Currencies provided small gains as the Japanese yen
strengthened against the U.S. dollar for the second consecutive month. In
addition, long yen positions proved profitable relative to the European
currencies. Notwithstanding these gains, the Partnership posted a loss of
$591,036 or $36.83 per Unit in September.
During the quarter investors redeemed a total of 471.02 Units. At the end of the
quarter there were 16,373.37 Units outstanding (including 644.45 Units owned by
the General Partners).
<PAGE>
During the fiscal quarter ended September 30, 1999, the Partnership had no
material credit exposure to a counterparty which is a foreign commodities
exchange.
The Partnership currently only trades on recognized global futures exchanges. In
the event the Partnership begins trading over the counter contracts, any credit
exposure to a counterparty which exceeds 10% of the Partnership's total assets
will be disclosed.
See Footnote 5 of the Financial Statements for procedures established by the
General Partners to monitor and minimize market and credit risks for the
Partnership. In addition to the procedures set out in Footnote 5, the General
Partners review on a daily basis reports of the Partnership's performance,
including monitoring of the daily net asset value of the Partnership. The
General Partners also review the financial situation of the Partnership's
Clearing Broker on a monthly basis. The General Partners rely on the policies of
the Clearing Broker to monitor specific credit risks. The Clearing Broker does
not engage in proprietary trading and thus has no direct market exposure which
provides the General Partners assurance that the Partnership will not suffer
trading losses through the Clearing Broker.
Year 2000 Issue
CIS surveyed its major applications in 1996 to see if they were Year 2000
compliant. Systems identified with Year 2000 issues were targeted for
replacement or modification. Replacement and modification projects are nearly
complete. In addition, CIS has dedicated resources to assess our work processes
and verify that it will be able to handle the changes in the next millennium.
This process addresses software applications as well as key vendor, bank and
customer relationships.
During 1997, CIS participated in developing the industry-wide test plan with the
Futures Industry Association, with whom it continues to work closely. CIS has
participated in BETA testing, which began in September 1998, and participated
again with the FIA in "street wide" testing during the second quarter of 1999.
In addition, CIS has developed various "contingency plans" in the event that
mission critical systems should fail.
CIS is taking this issue seriously and has a goal of maintaining reasonable
procedures in order to eliminate as much risk as possible to its customers
(including the Partnership), its counterparties and itself. Despite the best
efforts of CIS, CISFS and CISI, there can be no assurance that the above steps
will be sufficient or that all potential problems have been identified in order
to avoid any adverse impact to the Partnership. CIS and its affiliates make no
representations or warrants related to Year 2000 readiness or compliance,
including but not limited to business interruption, whether from failures in
their own computer systems, those of the Advisors, or any other third party.
<PAGE>
FISCAL QUARTER ENDED SEPTEMBER 30, 1998
The Partnership recorded a gain of $2,399,696 or $133.73 per Unit for the third
quarter of 1998. This compares to a gain of $901,228 or $45.23 per Unit for the
third quarter of 1997.
The Partnership suffered losses during the first month of the quarter largely as
a result of losses in interest rates and stock indices. During the second and
third months of the quarter, the Partnership experienced solid gains in interest
rates and smaller gains in currencies and stock indices. Overall, the third
quarter of fiscal 1998 ended positively for the Partnership's accounts managed
by John W. Henry & Company, Inc. and Welton Investment Corporation. At September
30, 1998, John W. Henry & Company, Inc. was managing 66.1% of the Partnership's
assets and Welton Investment Corporation was managing 33.9% of the Partnership's
assets.
In July, the Partnership incurred small losses as unprofitable positions in
interest rates, stock indices and agricultural commodities offset moderate gains
in gold and crude oil. The price of gold declined at month end along with the
Japanese yen's fall in world markets; gold and the Japanese yen have moved in
lockstep since early June, reflecting the diminishing demand for gold as the
region's economies retract. Crude oil prices fell at month end following an
earlier rise, as reports indicated a build-up in U.S. inventory. Gains in
long-term European bond markets failed to offset losses in other long-term
interest rates traded. Corn prices plunged on favorable weather conditions for
crops; profitable positions in corn and smaller gains in wheat, soybean oil and
live cattle did not offset losses in other markets traded. The Partnership
recorded a loss of $95,170 or $5.27 per Unit in July.
In August, the Partnership posted solid gains, led by profitable positions in
global interest rates. Leading gains in the bond market were positions in German
and U.S. bonds, which benefited from investors' flight to quality during the
month, and the Japanese Government bond, where the yield on the benchmark
10-year bond dropped to 1.105%, a historic low. The U.S. dollar made little
progress against the Japanese yen as Japanese officials renewed their threats of
intervention in the currency markets. The world's supply of crude oil
skyrocketed in August, up 11% from a year earlier, holding prices down. The
price of crude oil has been halved from its 1997 high of $26.62 per barrel;
positions in this key energy market resulted in gains. The Partnership recorded
a gain of $1,344,996 or $74.70 per Unit in August.
In September, the Partnership recorded gains as profitable positions in interest
rates and smaller gains in currencies and stock indices offset losses in metals,
energy and agricultural commodities. Except for Australian bonds, which
reflected the uncertainty of an upcoming election in that country, positions in
all interest rates traded were profitable. Gains were strongest in German, U.S.
and Japanese government bonds; in all three markets, yields declined to historic
levels. Profitable positions in the German mark and Swiss franc and smaller
gains in the British pound offset losses in other currencies traded. Positions
in gold and silver resulted in losses as prices of both metals rose. Sugar
plummeted to an 11-year low during the month on reduced demand and expectations
of record crops in Brazil; gains in sugar and cocoa failed to offset losses in
other agricultural commodities traded, but the Partnership recorded a gain of
$1,149,870 or $64.30 per Unit in September.
<PAGE>
During the quarter, investors redeemed a total of 293.73 Units. At the end of
the quarter there were 17,757.38 Units outstanding (including 644.45 Units owned
by the General Partners).
During the fiscal quarter ended September 30, 1998, the Partnership had no
material credit exposure to a counterparty which is a foreign commodities
exchange.
FISCAL QUARTER ENDED JUNE 30, 1999
The Partnership recorded a gain of $1,003,141 or $60.39 per Unit for the second
quarter of 1999. This compares to a loss of $887,650 or $47.31 per Unit for the
second quarter of 1998.
In the first month of the quarter the Partnership posted a gain resulting
primarily from an appreciating Japanese stock market, rising crude oil prices,
falling commodity prices and continued appreciation of the U.S. Dollar versus
the Euro and Swiss Franc. The Partnership posted a gain during the second month
of the quarter resulting primarily from the declining price of gold and the
continued decline of the Euro currency. During the third month of the quarter,
the partnership posted a gain as it continued to benefit from the freefall in
gold prices and the declining Euro currency. Overall, the second quarter of
fiscal 1999 ended positively for the Partnership accounts managed by both JWH
and Welton. At June 30, 1999, JWH was managing 69.7% of the Partnership's assets
and Welton was managing 30.3% of the Partnership's assets.
In April, currencies were the most favorable sector for the Partnership. The
continued flight to quality to the U.S. dollar provided opportunities for the
Partnership to profit from long U.S.dollar positions versus the Euro and Swiss
franc. As the conflict in Kosovo persisted, the flow of money into the U.S.
dollar continued. Trading in the Japanese yen and Australian dollar was also
profitable. Confidence in the Japanese stock market restored performance in the
Nikkei 225 as the index was up approximately 20% year to date. A long position
in the Nikkei helped the Partnership generate profits as did long positions in
the S&P 500 Index and Hang Seng Index.
During April, the unprofitable trading sectors were mainly interest rates and
precious metals. As Europe cut interest rates mid-month, the Fund's position
went from short to long. Short U.S. bond positions generated a small profit by
month end. Short gold positions were also unprofitable. In the interim, this
position turned profitable as the United Kingdom decided to sell off over 50% of
its gold reserves putting severe pressure on the price of gold. All in all, the
partnership posted a gain of $173,580 or $10.32 per Unit in April.
In May, gold fell below $270 per ounce, a 20 year low. The Partnership benefited
from this price decline since it held short gold positions during the month. The
interest rate rumors in the US, coupled with the inflation fears caused the
continuation of the decline in the US 10 year and 30 year bonds. The Partnership
held short positions in this sector during May, resulting in profits for the
period. In addition, the Partnership held long positions in the Japanese
government bond which were profitable.
For the third consecutive month, currencies continued to provide gains for the
Partnership. Profit opportunities came from long US dollar positions versus the
Euro and Swiss franc. During May, we saw the Euro fall to its lowest level
versus the US dollar since its inception at the beginning of the year. Pressure
<PAGE>
on the Euro surrounded safe haven. Small gains also came from the Japanese yen.
Overall, the Partnership posted a gain of $263,823 or $15.87 per Unit in May.
In June, the rumor of the Fed raising interest rates in the US became a reality.
The Partnership's short positions in the 10-year and 30-year bonds provided
profits and strong gains were posted as European bond prices continued to erode.
A big reason was the weakening Euro, which declined 13%, depreciating in a
straight line against the U.S. dollar since its inception January 1, 1999. Short
positions in the German Bund, the German Bobl and U.K. Gilt provided the lion's
share of performance. Currencies also provided gains for the Partnership for the
fourth consecutive month. Once again, the profit opportunities came from long US
dollar positions versus the Euro and Swiss franc. Pressure on the Euro which
initially resulted from the conflict in Kosovo, now also seemed to be
attributable to investors losing confidence in the Euro.
During June, the Partnership continued to profit from its short positions in the
gold market. Long positions in the Nikkei stock index have been profitable for
the Partnership for the entire year, as the percentage gain in this index for
1999 is 26.64%. Short positions in the agricultural complex, especially in
coffee, caused losses as the prices of these commodities rebounded.
Additionally, continued long positions in crude oil were favorable as oil prices
gained nearly 80% in 1999. Overall, the Partnership posted a gain of $565,738 or
$34.20 per Unit in June.
During the quarter investors redeemed a total of 450.33 Units. At the end of the
quarter there were 16,373.37 Units outstanding (including 644.45 Units owned by
the General Partners).
During the fiscal quarter ended June 30, 1999, IDS Futures elected Patricia L.
the conflict in Kosovo, as investors saw the dollar as a Moren to replace former
vice-president John M. Knight and CISI experienced the following officer
changes: Shaun D. O'Brien replaced former Vice President & Treasurer Richard
A. Driver; James Clemens replaced Henry W. Gjersdal as Assistant Secretary;
Lillian Lundeen replaced Bruce H. Barnett as Assistant Secretary.
During the fiscal quarter ended June 30, 1999, the Partnership had no material
credit exposure to a counterparty which is a foreign commodities exchange.
FISCAL QUARTER ENDED JUNE 30, 1998
The Partnership recorded a loss of $887,650 or $47.31 per Unit for the second
quarter of 1998. This compares to a loss of $875,007 or $43.38 per Unit for the
second quarter of 1997.
During the first and third months of the quarter, the Partnership experienced
losses primarily as a result of unprofitable positions in currencies, interest
rates and metals, while during the second month gains were recorded primarily
due to gains in the currency, interest rate, metals and energy markets. Overall,
the second quarter of fiscal 1998 ended negatively for the Partnership accounts
managed by JWH and Welton. At June 30, 1998, JWH was managing 61% of the
Partnership's assets and Welton was managing 39% of the Partnership's assets.
In April, positions in nearly all markets traded were unprofitable. Positions in
the U.S. 30-year bond and Euro dollar markets resulted in losses for interest
rate futures. Unprofitable positions in the German mark and Swiss
<PAGE>
franc offset gains in other currencies traded. Silver prices fell following
reports that a major investment company had sold a third of its holdings.
Losses in silver and copper offset profits in gold. Sugar prices fell to a
five-year low on prospects of a large Brazilian crop. Positions in sugar
resulted in profits as did positions in coffee, wheat, corn and soybean oil.
The Partnership recorded a loss of $731,219 or $38.72 per Unit in April.
In May, modest gains were recorded reflecting profitable positions in interest
rates, metals, energies and currencies. The strongest gains overall came from
positions in the Japanese yen, Japanese Government bond, silver and crude oil.
Silver prices slumped as investors who bought on hopes of rising value lost
patience and took profits. Crude oil prices were pressured by worries of
oversupply in world markets. Gains were also recorded in positions in the
Australian dollar as a nervous market dealt with rumors of further currency
devaluations in Asia; the Australian currency fell to a 12-year low against the
U.S. dollar. Positions in stock indices and agricultural commodities resulted in
losses overall; but the Partnership recorded a gain of $264,294 or $14.21 per
Unit in May.
In June, losses were recorded due largely to unprofitable positions in global
interest rates and metals. Unprofitable positions in the Japanese Government
bond led losses in global interest rates as the yield rose from record lows
following intervention to support the yen. A marginal gain in the Japanese yen
failed to offset losses in the British pound and Swiss franc. Positions in gold
and silver also resulted in losses as the prices of both metals remained coupled
to movements in the Japanese yen. Gains were recorded in crude oil positions as
inventories worldwide continued to exceed demand and prices fell. Profitable
positions in cotton, sugar, coffee and corn offset losses in other agricultural
markets. The Partnership recorded a loss of $420,725 or $22.80 per Unit in June.
During the quarter, investors redeemed a total of 834.60 Units. At the end of
the quarter there were 18,051.09 Units outstanding (including 644.45 Units owned
by the General Partners).
During the fiscal quarter ended June 30, 1998, the Partnership had no material
credit exposure to a counterparty which is a foreign commodities exchange.
FISCAL QUARTER ENDED MARCH 31, 1999
The Partnership recorded a loss of $1,127,829 or $65.73 per Unit for the first
quarter of 1999. This compares to a loss of $272,893 or $14.17 per Unit for the
first quarter of 1998.
In the first month of the quarter the Partnership posted a loss resulting
primarily from volatility in the currency sector as well as Japanese interest
rates. The Partnership posted a small loss for the second month of the quarter
resulting primarily from trading in interest rates. During the third month of
the quarter concerns about the military conflict in Kosovo mounted. As a result
the global markets experienced increased volatility, namely in precious metals
and interest rates, and the Partnership posted a small loss. Overall, the first
quarter of fiscal 1999 ended negatively for the Partnership accounts managed by
JWH and Welton. At March 31, 1999, JWH was managing 67% of the Partnership's
assets and Welton was managing 33% of the Partnership's assets.
<PAGE>
Currencies were the most volatile sector for the month of January; namely short
positions in the British pound and long positions in the Japanese yen. The
anxiously awaited Euro began trading and started out the year on a positive note
as short positions rendered small profits for the Partnership. The only
profitable interest rate market was in Germany where the Partnership maintained
a long German bund position, thereby taking advantage of falling German rates.
Short positions in the Japanese government bond and Australian bond positions
created losses for the Partnership. Coffee prices vacillated; rising in December
and falling in January. The Partnership posted losses from long coffee
positions. Long sugar positions were also unprofitable. The Nikkei stock index
provided the majority of the loss in the stock indices, as short positions were
unprofitable. Crude oil prices showed no direction during the month. Short
positions were retained during January and resulted in a small loss for the
Partnership. All in all, the Partnership posted a loss of $510,801 or $29.62 per
Unit in January.
In February, agricultural prices declined steadily throughout the month as the
Partnership was positioned to profit from short positions in coffee, corn,
wheat, and soybeans. Energy prices eroded allowing short positions in crude and
heating oil to provide profits. Long silver positions in the precious metals
sector were profitable and the Nikkei stock index provided gains amidst a
falling and then rising market. Currency trading rendered gains from short
positions in the Euro, British pound and Swiss franc as each currency declined
against the U.S. dollar. These gains were able to cover losses in the Australian
dollar and Japanese yen. Interest rates were the only unprofitable sector for
the Partnership. On the plus side, the Partnership was able to take advantage of
rising interest rates in the U.S. 10-year notes and 30-year bonds. However, long
Japanese government bond and German bund positions recorded more significant
losses. Overall, the Partnership posted a loss of $103,337 or $6.03 per Unit in
February.
In March, silver and gold positions were extremely volatile as the Partnership
recorded losses from long silver positions and short gold positions. Short bond
positions in Australia and in the United Kingdom were unprofitable as interest
rates in both began to rise. However, long Japanese government bond positions
were the largest loser in this sector as bond prices plummeted. The price
decline in the agricultural complex, which provided profit opportunities during
February from short positions, saw a reversal in March as sustained short corn
and coffee positions gave back profits. Currencies were the most favorable
sector for the Partnership. A flight to quality in the U.S. dollar has provided
opportunities for the Partnership to profit from long U.S. dollar positions
versus the Euro and Swiss franc. The conflict in Kosovo has exacerbated the
crisis-related selling of the Euro and the flow of money into the U.S. dollar.
The Nikkei stock index moved sharply higher during March and the Partnership
profited from long positions. Long positions in the Australian All-Ordinaries
index were also profitable. A sharp rise in energy prices gave way to profits
from long positions in crude oil. Rumors of gasoline shortages as well as the
decision of world oil producers to cut oil production pushed crude prices higher
throughout the month. Overall, the Partnership posted a loss of $513,691 or
$30.08 per Unit in March.
During the quarter, investors redeemed a total of 418.16 Units. At the end of
the quarter there were 16,823.71 Units outstanding (including 644.45 Units owned
by the General Partners).
During the fiscal quarter ended March 31, 1999, the Partnership had no material
credit exposure to a counterparty which is a foreign commodities exchange.
<PAGE>
FISCAL QUARTER ENDED MARCH 31, 1998
The Partnership recorded a loss of $272,893 or $14.17 per Unit for the first
quarter of 1998.
During the first two months of the quarter, the Partnership experienced losses
primarily as a result of unprofitable positions in currencies and interest
rates, while during the third month gains were recorded primarily due to gains
in the currency and energy markets. Overall, the first quarter of fiscal 1998
ended negatively for the Partnership account managed by JWH and positively for
the Partnership account managed by Welton. At March 31, 1998, JWH was managing
62.1% of the Partnership's assets and Welton was managing 37.9% of the
Partnership's assets.
In January, performance was negatively impacted by sharp reversals in Japanese
financial markets and in gold. Investor optimism over efforts to revive ailing
Asian economies boosted the Japanese yen against the U.S. dollar and gave
support to the Nikkei; positions in both resulted in losses for the Partnership.
Benign inflation news in Europe and the U.S. boosted bond markets in both
regions, resulting in gains for the Partnership. These gains were offset by
losses in stock indices and in gold prices. Positions in crude oil and coffee
produced small gains for the Partnership. Overall, the Partnership recorded a
loss of $353,393 or $18.40 per Unit in January.
In February, losses were incurred in nearly all currencies traded. Trading was
also unprofitable in U.S. Treasury bonds, interest rates and gold. The purchase
of large quantities of silver by a major investor caused the prices of the
precious metal to soar in world markets, before succumbing to some profit taking
at month end; positions in silver resulted in gains for the Partnership.
Profitable positions in most European bonds failed to offset losses in other
long- and short-term interest rates. Gains in sugar, corn and cotton offset
losses in other agricultural commodities traded. The Partnership recorded a loss
of $47,483 or $2.49 per Unit in February.
In March, the U.S. dollar rose against most of its major counterparts, gaining
strength from the flight of international capital from a deteriorating Japanese
economy and the purchase of dollars to buy U.S. Treasury bonds as yields in key
European bond markets hit post-war lows. Positions in the Swiss franc and the
German mark resulted in gains for the Partnership. The market for crude oil
generated a lot of excitement during the month, following the surprise
announcement by OPEC and non-OPEC oil-producing nations of an agreement to cut
production. Positions in energy markets were profitable overall. Inflation
concerns, fueled by rising oil prices, propelled gold prices sharply higher.
Positions in gold were unprofitable, as were positions in silver, which became
more volatile during the month. Except for small gains in soybeans and
soybean-derivative markets, positions in agricultural commodities resulted in
losses overall. The Partnership recorded a gain of $127,983 or $6.72 per Unit in
March.
During the quarter, investors redeemed a total of 315.18 Units. At the end of
the quarter there were 18,885.71 Units outstanding (including 644.45 Units owned
by the General Partners).
During the fiscal quarter ended March 31, 1998, the Partnership had no material
credit exposure to a counterparty which is a foreign commodities exchange.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
There has been no material change with respect to market risk since the
"Quantitative and Qualitative Disclosures About Market Risk" was made in the
Form 10K of the Partnership dated December 31, 1998.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership and its affiliates are from time to time parties to
various legal actions arising in the normal course of business. The General
Partners believe that there is no proceeding threatened or pending against the
Partnership or any of its affiliates which, if determined adversely, would have
a material adverse effect on the financial condition or results of operations of
the Partnership.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
Date: November 11, 1999 IDS MANAGED FUTURES II, L.P.
By: CIS Investments, Inc.,
One of its General Partners
By: /s/ Shaun D. O'Brien
Shaun D. O'Brien
Treasurer & Vice President
(Duly authorized Officer of the
General Partner and the Principal
Financial Officer of the General
Partner)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM IDS MANAGED
FUTURES II, L.P. FOR THE SECOND QUARTER OF 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 9,935,502
<SECURITIES> 0
<RECEIVABLES> 32,541
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,968,043
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,968,043
<CURRENT-LIABILITIES> 186,577
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,781,466
<TOTAL-LIABILITY-AND-EQUITY> 9,968,043
<SALES> 0
<TOTAL-REVENUES> (1,061,874)
<CGS> 0
<TOTAL-COSTS> 223,698
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,285,572)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,285,572)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,285,572)
<EPS-BASIC> (79.49)
<EPS-DILUTED> (79.49)
</TABLE>
