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 June 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 __
<TABLE>
Part I. Financial Information
Item 1. Financial Statements
Following are Financial Statements for the fiscal quarter ended June 30, 1999
and the additional time frames as noted:
Fiscal Quarter Year to Date Fiscal Year Fiscal Quarter Year to Date
Ended 6/30/99 To 6/30/99 Ended 12/31/98 Ended 6/30/98 To 6/30/98
-------------- -------------- -------------- --------------------------
<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
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF FINANCIAL CONDITION
Jun 30, 1999 Dec 31, 1998
--------------- --------------
<S> <C> <C>
ASSETS
Equity in commodity futures
trading accounts:
Account balance $10,746,377 11,060,948
Unrealized gain on open
futures contracts 814,005 1,255,115
--------------- --------------
11,560,382 12,316,063
Interest receivable 33,787 34,361
--------------- --------------
Total assets $11,594,169 $12,350,424
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued commissions on open
futures contracts due to AXP Advisors and $30,760 $48,329
Accrued management fee 35,507 37,278
Accrued incentive fee 0 0
Accrued operating expenses 36,754 53,140
Redemptions payable 118,410 143,490
--------------- --------------
Total liabilities 221,431 282,237
Partners' Capital:
Limited partners (15,728.92 units 10,925,111 11,617,111
outstanding at 6/30/99, 16,597.42
units outstanding at 12/31/98) (see Note 1)
General partners (644.45 units out- 447,627 451,076
standing at 6/30/99 and 12/31/98) (see Note 1)
--------------- --------------
Total partners' capital 11,372,738 12,068,187
--------------- --------------
Total liabilities and
partners' capital $11,594,169 $12,350,424
=============== ==============
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)
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF OPERATIONS
Apr 1, 1999 Jan 1, 1999 Apr 1, 1998 Jan 1, 1998
through through through through
Jun 30, 1999 Jun 30, 1999 Jun 30, 1998 Jun 30, 1998
--------------- -------------- ------------- -------------
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REVENUES
Gains on trading of commodity futures
and forwards contracts, physical
commodities and related options:
Realized gain (loss) on closed positions $545,563 $640,534 ($337,600) ($133,325)
Change in unrealized gain (loss)
on open positions 619,708 (441,110) (375,051) (693,797)
Interest income 95,395 196,060 112,604 233,123
Foreign currency transaction gain (loss) (6,424) (38,472) (27,061) (55,641)
--------------- -------------- ------------- -------------
Total revenues $1,254,242 $357,012 ($627,108) ($649,640)
EXPENSES
Commissions paid to AXP Advisors and CIS 133,389 248,568 152,261 279,006
Exchange fees 5,142 7,902 2,929 6,046
Management fees 102,610 205,770 100,091 209,213
Incentive fees 0 0 0 0
Operating expenses 9,960 19,460 5,262 16,639
--------------- -------------- ------------- -------------
Total expenses 251,101 481,700 260,543 510,904
--------------- -------------- ------------- -------------
Net profit (loss) $1,003,141 ($124,688) ($887,651) ($1,160,544)
=============== ============== ============= =============
PROFIT (LOSS) PER UNIT OF
PARTNERSHIP INTEREST $60.39 ($5.34) ($47.31) ($61.48)
=============== ============== ============= =============
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)
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period January 1, 1999 through June 30, 1999
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) (121,240) (3,449) (124,689)
Redemptions (see Note 1) (868.50) (570,760) 0 (570,760)
--------------- -------------- ------------- -------------
Partners' capital at June 30, 1999 15,728.92 $10,925,111 $447,627 $11,372,738
=============== ============== ============= =============
Net asset value per unit
January 1, 1999 $699.93 $699.93
Net profit (loss) per unit (5.34) (5.34)
-------------- -------------
Net asset value per unit
June 30, 1999 $694.59 $694.59
* 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)
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF CASH FLOWS
Jan 1, 1999 Jan 1, 1998
through through
Jun 30, 1999 Jun 30, 1998
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net profit/(loss) ($124,688) ($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 441,110 693,797
Interest receivable 574 8,665
Accrued liabilities (35,726) (46,702)
Redemptions payable (25,080) 194,543
--------------- --------------
Net cash provided by (used in)
operating activities 256,189 (310,241)
Cash flows from financing activities:
Partner redemptions (570,760) (688,086)
--------------- --------------
Net cash provided by (used in)
financing activities (570,760) (688,086)
--------------- --------------
Net increase (decrease) in cash (314,571) (998,327)
Cash at beginning of period 11,060,948 11,875,917
--------------- --------------
Cash at end of period $10,746,377 $10,877,590
=============== ==============
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)
</TABLE>
IDS MANAGED FUTURES II, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 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) 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.
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 $0 for the
periods ended June 30, 1999
and June 30, 1998, respectively.
(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 June 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 June 30, 1999:
COMMODITY GROUP UNREALIZED GAIN/(LOSS)
AGRICULTURAL COMMODITIES 11,162
FOREIGN CURRENCIES 70,232
STOCK INDICES 93,067
ENERGIES 23,752
METALS 73,584
INTEREST RATE INSTRUMENTS 542,208
__________
TOTAL 814,005
The range of maturity dates of these
exchange traded open contracts is
July of 1999 to June of 2000.
The average open trade equity for
the period of January 1, 1999
to June 30, 1999 was $728,671.
The margin requirement at June 30, 1999
was $1,779,149. To meet this requirement,
the Partnership had on deposit with
the Clearing Broker $10,711,760
in segregated funds and $848,622
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 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
on the Euro surrounded the conflict in
Kosovo, as investors saw the dollar as a
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.
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.
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 currently underway. 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 begun developing various
"contingency plans" in the event that mission
critical systems should fail. This development
is proceeding on schedule.
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.
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
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.
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.
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.
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.
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.
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
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: August 12, 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>
<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>
<CIK> 0000813831
<NAME> IDS MANAGED FUTURES II, L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 11,560,382
<SECURITIES> 0
<RECEIVABLES> 33,787
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,594,169
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,594,169
<CURRENT-LIABILITIES> 221,431
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,372,738
<TOTAL-LIABILITY-AND-EQUITY> 11,594,169
<SALES> 0
<TOTAL-REVENUES> 1,254,242
<CGS> 0
<TOTAL-COSTS> 251,101
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,003,141
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,003,141
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,003,141
<EPS-BASIC> 60.39
<EPS-DILUTED> 60.39
</TABLE>
