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, 2000
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,
2000 and the additional time frames as noted:
<TABLE>
<CAPTION>
Fiscal Quarter Year to Date Fiscal Year Fiscal Quarter Year to Date
Ended 9/30/00 Ended 9/30/00 Ended 12/31/99 Ended 9/30/99 Ended 9/30/99
------------- ------------- -------------- ------------- -------------
<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
UNAUDITED
<TABLE>
<CAPTION>
Sep 30, 2000 Dec 31, 1999
------------ ------------
<S> <C> <C>
ASSETS
Equity in commodity futures trading accounts:
Account balance $5,818,905 8,533,968
Unrealized gain (loss) on open
futures contracts (360,329) 446,557
----------------- -----------------
5,458,576 8,980,525
Interest receivable 24,337 31,072
----------------- -----------------
TOTAL ASSETS $5,482,913 $9,011,597
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued commissions on open
futures contracts due to AXP Advisors and CIS $12,101 $12,624
Accrued management fee 16,403 27,236
Accrued incentive fee 0 0
Accrued operating expenses 24,350 32,000
Redemptions payable 57,339 81,245
----------------- -----------------
Total liabilities 110,193 153,105
Partners' Capital:
Limited partners (12,123.20 units 5,101,531 8,490,927
outstanding at 9/30/00, 14,887.18
units outstanding at 12/31/99) (see Note 1)
General partners (644.45 units out- 271,189 367,565
standing at 9/30/00 and 12/31/99) (see Note 1)
----------------- -----------------
Total partners' capital 5,372,720 8,858,492
----------------- -----------------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $5,482,913 $9,011,597
================= =================
Net asset per outstanding unit of partnership interest $420.81 $570.35
</TABLE>
See accompanying notes to financial statements.
<PAGE>
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Jul 1, 2000 Jan 1, 2000 Jul 1, 1999 Jan 1, 1999
through through through through
Sep 30, 2000 Sep 30, 2000 Sep 30, 1999 Sep 30, 1999
------------ ------------ ------------ ------------
<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 ($198,543) ($1,000,475) ($132,058) $508,476
Change in unrealized gain (loss)
on open positions (277,680) (806,886) (1,048,468) (1,489,578)
Interest income 66,316 244,245 102,111 298,171
Foreign currency transaction gain (loss) (13,713) (60,605) 16,541 (21,931)
----------------- ----------------- --------------- ---------------
Total revenues (losses) ($423,620) ($1,623,721) ($1,061,874) ($704,862)
EXPENSES
Commissions paid to AXP Advisors and CIS 86,150 274,046 113,048 361,616
Exchange fees 1,800 7,663 3,996 11,898
Management fees 53,119 187,891 97,154 302,924
Incentive fees 0 0 0 0
Operating expenses 7,894 24,187 9,500 28,960
----------------- ----------------- --------------- ---------------
Total expenses 148,963 493,787 223,698 705,398
----------------- ----------------- --------------- ---------------
NET PROFIT (LOSS) ($572,583) ($2,117,508) ($1,285,572) ($1,410,260)
================= ================= =============== ===============
PROFIT (LOSS) PER UNIT OF
PARTNERSHIP INTEREST ($43.56) ($149.54) ($79.49) ($84.83)
================= ================= =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
IDS MANAGED FUTURES II, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD JANUARY 1, 2000 THROUGH SEPTEMBER 30, 2000
UNAUDITED
<TABLE>
<CAPTION>
Limited General
Units* Partners Partners Total
------ -------- -------- -------
<S> <C> <C> <C> <C>
Partners' capital at January 1, 2000 14,887.18 $8,490,927 $367,565 $8,858,492
Net profit (loss) (2,021,132) (96,376) (2,117,508)
Redemptions (see Note 1) (2,763.98) (1,368,264) 0 (1,368,264)
----------------- ----------------- --------------- ---------------
Partners' capital at September 30, 2000 12,123.20 $5,101,531 $271,189 $5,372,720
================= ================= =============== ===============
Net asset value per unit
January 1, 2000 $570.35 $570.35
Net profit (loss) per unit (149.54) (149.54)
----------------- ---------------
Net asset value per unit
September 30, 2000 $420.81 $420.81
</TABLE>
* Units of Limited Partnership interest.
See accompanying notes to financial statements.
<PAGE>
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Jan 1, 2000 Jan 1, 1999
through through
Sep 30, 2000 Sep 30, 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net profit/(loss) ($2,117,507) ($1,410,261)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Change in assets and liabilities:
Decrease (Increase) in unrealized gain on open
futures and forward contracts 806,886 1,488,196
(Increase) Decrease in interest receivable 6,735 1,820
Increase (Decrease) in accrued liabilities (19,007) (41,314)
----------------- -----------------
Net cash provided by (used in)
operating activities (1,322,893) 38,440
Cash flows from financing activities:
Partner redemptions (1,392,170) (930,806)
----------------- -----------------
Net cash provided by (used in)
financing activities (1,392,170) (930,806)
----------------- -----------------
Net increase (decrease) in cash (2,715,063) (892,366)
Cash at beginning of period 8,533,968 11,060,948
----------------- -----------------
Cash at end of period $5,818,905 $10,168,582
================= =================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
IDS MANAGED FUTURES II, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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" or the
"Clearing Broker"), 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
<PAGE>
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 91-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
<PAGE>
Brokerage commissions and National Futures Association clearing and exchange
fees are accrued on a half-turn basis on open commodity futures contracts. The
Partnership pays CIS commissions on trades executed on its behalf at a rate of
$29.375 per round turn contract. For trades executed by Welton Investment
Corporation, the Partnership pays $21.875 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.
Effective October 1, 2000, the management and incentive fees earned by JWH and
Welton will change to a monthly management fee of 1/6 of 1% of the month-end Net
Asset Value of the Partnership assets under its management and 20% of the
Partnership's net trading profits, if any, attributable to its management.
<PAGE>
(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.
(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 the Clearing Broker at
all times. In the event that volatility of trading of other customers of the
Clearing Broker impaired the ability of the Clearing Broker to satisfy its
obligations to the Partnership, the Partnership would be exposed to off-balance
sheet risk. Such risk is defined in Statement of Financial Accounting Standards
No. 105 ("SFAS 105") as a credit risk. To mitigate this risk, the Clearing
Broker, pursuant to the mandates of the Commodity Exchange Act, is required to
maintain funds deposited by customers relating to futures contracts in regulated
commodities in separate bank accounts which are designated as segregated
customers' accounts. In addition, the Clearing Broker has set aside funds
deposited by customers relating to foreign futures and options in separate bank
accounts 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 Forward
Currency Broker is the counterparty for the Partnership's forward transactions.
CISFS policies require that it executes transactions only with top rated
financial institutions with assets in excess of $100,000,000.
The Partnership holds futures positions on the various exchanges throughout the
world and forward positions with CISFS which transacts with various top rated
banks throughout the world. As defined by SFAS 105, futures and forward currency
contracts 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
<PAGE>
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 and forward
positions held by the Partnership at the same time, and if the markets moved
such that the CTAs were unable to offset the futures and forward positions of
the Partnership, the Partnership could lose all of its assets and the partners
would realize a 100% loss. As of September 30, 2000 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.
The margin requirement at September 30, 2000 was $776,225. To meet this
requirement, the Partnership had on deposit with the Clearing Broker $4,670,149
in segregated funds, $660,941 in secured funds, and $127,486 in non-regulated
funds. 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, 2000:
<TABLE>
<CAPTION>
COMMODITY GROUP UNREALIZED GAIN/(LOSS)
<S> <C>
AGRICULTURAL COMMODITIES (6,270)
FOREIGN CURRENCIES (240,274)
STOCK INDICES (4,677)
ENERGIES (68,724)
METALS (25,880)
INTEREST RATE INSTRUMENTS (14,504)
--------
TOTAL (360,329)
</TABLE>
The range of maturity dates of these exchange traded open contracts is October
2000 to September 2001. The average open trade equity for the period of January
1, 2000 to September 30, 2000 was $282,420.
(6) FINANCIAL STATEMENT PREPARATION
<PAGE>
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, 1999, as filed with the Securities and Exchange
Commission on March 28, 2000, 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, 2000
The Partnership recorded a loss of $572,583 or $43.56 per unit for the third
quarter of 2000. This compares to a loss of $1,285,572 or $79.49 per Unit for
the third quarter of 1999.
The Partnership posted losses in July and September. Performance in August was
up slightly. Markets continued the erratic, trend-less patterns that occurred in
the second quarter. Both the John W. Henry & Company, Inc. (JWH) and the Welton
Investment Corporation (Welton) experienced losses this quarter. As of September
30, 2000 JWH was managing 61% of the Partnership's assets while Welton was
managing the remaining 39%.
In July, an apparent economic slowdown in the U.S., uncertainty over the ending
of zero interest rates in Japan and one-half of one percent rise in European
interest rates provided a difficult trading environment for the Partnership.
Currency trading provided the lion's share of the losses in the portfolio.
Profits in long U.S. dollar positions waned as signs of a slowdown in the U.S.
economy weakened the dollar versus major currencies. Most damaging was the
aforementioned rise in the European interest rate, which served to bolster an
increasingly positive Euro sentiment. The rally in the Euro resulted in the
majority of currency losses in June. Many global interest rate positions proved
to be unprofitable as short-term volatility over the likely direction of
interest rates denied the Partnership of profitable trends. The index sector was
down in sympathy with interest rates.
<PAGE>
On the positive side, surging petroleum prices allowed long positions in the
energy sector to continue to accrue profits. Profitable positions in sugar,
soybeans and coffee supported performance in the non-financial markets. Metals'
trading was slightly negative. In summation, the Partnership recorded a loss of
$214,361or $15.71 per unit in July.
The Partnership benefited from a strong U.S. dollar and a resurgence in energy
prices to record a gain in August. Energies contributed the majority of the
profits for the month with Brent crude oil prices hitting 10-year highs and U.S.
crude coming within $1 of a new post Gulf War record. Long U.S. dollar positions
posted gains for the portfolio when the beleaguered Euro sank to a three-month
low against the U.S. dollar and dragged the Swiss franc along with it. The
British pound also set six-year lows against the U.S. dollar amid the perception
that interest rates will hold for some time in Britain. These gains were
somewhat offset by losses which occurred when the Japanese economy strengthened,
causing a rally against our short Yen position.
Short Nikkei positions proved unprofitable when the Index rose for the month in
response to the Bank of Japan's decision to hike interest rates thus ending
their 18-month zero interest rate policy. Interest rates, metals and
agricultural commodities were unchanged for the month. Profits made by Welton
overcame a small loss for JWH which made August a profitable month. The
Partnership recorded a gain of $39,361 or $2.95 per Unit in August.
Currency markets were caught off guard September 22 when massive central bank
intervention supported the Euro and temporarily halted its decline. After having
been up almost 6% earlier in the month, performance suffered when the central
banks from Canada, Japan, the United Kingdom and the U.S. agreed to purchase
over 6 billion Euros. The Central Bankers intervened because the Euro had
declined to a level that could create inflation in its member countries. Their
action led to reverberations throughout the currency and interest rate markets.
Despite the gains seen early in the month, this intervention caused positions in
European and Asian currencies and foreign and U.S. debt markets to be mostly
unprofitable. In the energy sector, crude oil prices, after rising to over $39 a
barrel, fell sharply on news that OPEC increased production and the Clinton
administration released 30 million barrels from the U.S. strategic supply.
Despite this increase in supply, crude oil inventory is at a 20 year low and
remains susceptible to additional price dislocations. With consumption expected
to increase in winter, we feel optimistic about the Partnership's long
positions.
Metals were profitable across the board in September with short gold positions
tracking the Euro to end the month lower. In addition, long copper positions
supported by falling inventories and robust demand were profitable. Agricultural
commodities were off slightly due to losses in sugar as world sugar supplies
remain burdensome and potential sales from India continue to weigh on the
market. The Partnership suffered a loss of $397,583 or $30.80 per unit in
September.
Effective October 1, fees paid to the Partnership's Trading Advisors, the Welton
Investment Company and the John W. Henry Company were changed. The annual
<PAGE>
Management fee will now be 2% (down from 4%) while the incentive fee will be 20%
(up from 15%) of new net high profits. These changes will reduce the "breakeven"
for the Partnership by 2% and put a greater emphasis on profitability.
Investors redeemed a total of 877.69 Units during the quarter. At the end of the
quarter there were 12,767.65 Units outstanding (including 644.45 Units owned by
the General Partner).
During the fiscal quarter ended September 30, 2000, the Partnership had no
material credit exposure to a counter-party which is a foreign commodities
exchange or to any counter-party dealing in over the counter contracts which was
material.
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 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
<PAGE>
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 15,257.90 Units outstanding (including 644.45 Units owned by
the General Partners).
During the fiscal quarter ended September 30, 1999, the Partnership had no
material credit exposure to a counterparty which is a foreign commodities
exchange.
FISCAL QUARTER ENDED JUNE 30, 2000
The Partnership recorded a loss of $744,105 or $53.43 per Unit for the second
quarter of 2000. This compares to a gain of $1,003,141 or $60.39 per Unit for
the second quarter of 1999.
The Partnership posted losses every month in the second quarter. The world's
interest rate, currency, stock index and metals markets had been focusing on
inflation indicators which had been sending mixed signals. This led to
trend-less, erratic markets which are difficult for managers utilizing long-term
trend following strategies such as the John W. Henry & Company, Inc. ("JWH") and
Welton Investment Corporation ("Welton"). At June
<PAGE>
30, 2000, JWH was managing 65% of the Partnership's assets and Welton was
managing 35% of the Partnership's assets.
In April, volatility in stocks led to a stronger U.S. dollar versus Euro and
profits for the Partnership. Despite an interest rate increase by European
central banks, the dollar reached an all time high versus the Euro. Additional
profits were accrued in long dollar positions against the British, Swiss, and
Australian currencies. Stock index trading suffered, especially in Japan.
Although the Partnership's metals positions were up slightly, overall trading in
non-financial markets was down slightly with the energy and food markets showing
losses. This was an especially difficult area for Welton, who was down over 7%.
The Partnership recorded a loss of $101,514 or $7.11 per unit in April.
In May, mixed inflationary signals set the scene for two major trend reversals.
The U.S. interest rate market had a volatile change of direction as rates headed
lower and the Euro abruptly reversed its long term down trend versus the U.S.
dollar. After having been profitable for the majority of May, the Partnership
closed lower when both trends reversed. Trading in U.S. bonds was down sharply,
as was Euro denominated interest rate trading. After hitting all-time lows
against the dollar in April, the Euro appreciated and profits accumulated by the
Partnership in April were given back. Short positions in the Nikkei made the
stock index sector the only positive performing financial area. Long positions
in the energy sector produced positive results as petroleum prices continued to
surge. Trading in metals, foods and fibers was flat. The Partnership recorded a
loss of $200,536 or $14.27 per unit in May.
In June, uncertainty regarding an economic slowdown in the U.S. and an interest
rate rise in Europe provided a conflicting climate for trading. These events
created problems in the currency sector, which was the worst performing area in
June. JWH found this area especially difficult. The Partnershi's positions in
interest rates, metals and stock indices were unprofitable as well. On the
positive side, surging petroleum prices allowed long positions in the energy
sector to continue to accrue profits. Profitable positions in sugar and soybean
oil allowed the agricultural sector to show a small positive return for the
month. However, the Partnership recorded a loss of $442,055 or $32.05 per unit
in June.
Investors redeemed a total of 645.08 Units during the quarter. At the end of the
quarter there were 13,645.33 Units outstanding (including 644.45 Units owned by
the General Partners).
During the fiscal quarter ended June 30, 2000, the Partnership had no material
credit exposure to a counter-party which is a foreign commodities exchange or to
any counter-party dealing in over the counter contracts which was material.
FISCAL QUARTER ENDED JUNE 30, 1999
<PAGE>
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 Partnership'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 U.S., coupled with the inflation fears caused the
continuation of the decline in the U.S. 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 U.S. dollar positions versus
the Euro and Swiss franc. During May, the Euro fell to its lowest level versus
the U.S. 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.
<PAGE>
In June, the rumor of the Fed raising interest rates in the U.S. 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 U.S. dollar positions versus the Euro and Swiss franc. Pressure on the Euro
which initially resulted from the conflict in Kosovo, 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 had been profitable for
the Partnership for the entire year, as the percentage gain in this index for
1999 was 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.
FISCAL QUARTER ENDED MARCH 31, 2000
The Partnership recorded a loss of $800,820 or $52.55 per Unit for the first
quarter of 2000. This compares to a loss of $1,127,829 or $65.73 per Unit for
the first quarter of 1999.
In the first month of the quarter the Partnership posted a loss resulting
primarily from volatility in the currency sector. The Partnership posted a loss
for the second month of the quarter resulting primarily from trading in global
interest rates. During the third month of the quarter currency destabilization
and massive capital shifts out of the U.S. dollar resulted in a loss for the
Partnership. Overall, the first quarter of fiscal 2000 ended negatively for the
Fund accounts managed by JWH(R) and Welton. At March 31, 2000,
<PAGE>
JWH was managing 60% of the Fund's assets and Welton was managing 40% of the
Fund's assets.
January 2000 marked the turning of the millennium. This coupled with the
build-up to Y2K came and went without a hitch. However, the currency sector was
all but quiet as extreme volatility prompted large swings in the price of the
U.S. dollar relative to the Japanese yen. Within the first couple of days of the
New Year, the Japanese banks intervened and started pouring money into the
dollar. This abrupt reversal in the dollar/yen relationship resulted in a
reversal of the Partnership positions from long yen to short yen within a matter
of days. Short Australian dollar positions proved difficult and also resulted in
losses. Stock indices, namely the Nikkei fell in response to volatility in the
tech sector, which is factored into that index. Long positions hurt the
Partnership performance as did long positions in the S&P 500 and Paris CAC-40
index. Sustained long coffee positions were unprofitable as coffee prices
continue to fall. Despite realizing profits from short U.S. bond and long
Japanese Government Bond positions, as well as maintaining long profitable crude
oil and short aluminum positions, the Partnership posted overall losses. All in
all, the Partnership posted a loss of $464,596 or $29.91 per Unit in January.
Changing expectations regarding economic growth and inflation created a
difficult trading environment in February. The strategic news item was the U.S.
Federal Reserve's decision to buy back part of the debt, which led to a powerful
rally in the U.S.30-year bond. The decision by the Fed created havoc in our
interest rate portfolio, which was dominated by short positions. Losses were
taken in North American, Asian, and European interest rates. The yield on the
10-year U.S. government bond currently exceeds that of the 30-year, creating an
inverted yield curve, which is a very unusual occurrence. Currency trading was
mixed. Profitable long U.S. dollar positions were bolstered by the revised 4th
quarter GNP number, which reflected a robust economy. However, gains in the
dollar were offset by losses incurred by long European/short Japanese positions.
Surging energy prices supported performance in non-financial markets. Food and
grain markets were once again featureless. Precious metals trading suffered as
gold prices rallied and then fell sharply. Equity indices gained on some lost
ground in January as U.S. and European equity indices rose. Long positions here
had a small positive impact. On March 2, the General Partners received a letter
from Verne Sedlacek, President of John W. Henry & Company, Inc. detailing
modifications to the Financial and Metals trading program. All changes are
designed to add balance to the program without giving up any upside potential.
Most noteworthy are the dramatic reductions in precious metals and Far Eastern
interest rate trading as well as the addition of offshore stock indices, base
metals, and expansion of non-dollar currency trading. JWH remains steadfast in
their commitment to research. Overall, the Fund posted a loss of $258,991 or
$17.38 per Unit in February.
In March, profit taking in U.S. stocks led to massive capital shifts out of the
U.S. dollar and into the Japanese yen. These events destabilized currency and
stock markets worldwide and resulted in losses for the Partnership. The
appreciation of the yen contributed to Partnership losses in that long positions
in the dollar and euro versus the yen both suffered. Marginal gains in dollar
positions against Europe and Australia's currencies proved inadequate in
offsetting these losses. Non-financial markets were, for the most
<PAGE>
part, quiet in March. Profits in long crude oil, heating oil, and gasoline
positions were reduced when OPEC agreed to expand oil production. Performance in
precious, as well as, industrial metals was down slightly. The food and grain
markets were featureless. Positive performance in March came from the interest
rate sector. The 7% correction in tech stocks coupled with the U.S. treasury's
continued buying of longer dated bonds led to positive performance in the
Partnership's bond position. The European Central Bank's decision to raise
short-term interest rates led to purchasing European bonds, which assisted the
Partnership position as well. Stock indices, namely the appreciation in the S&P
500 contributed to the Partnership performance. Overall, the Partnership posted
a loss of $77,233 or $5.26 per Unit in March.
During the quarter, investors redeemed a total of 1,241.22 Units. At the end of
the quarter there were 14,290.41 Units outstanding (including 644.45 Units owned
by the General Partners).
During the fiscal quarter ended March 31, 2000, 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
<PAGE>
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>
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, 1999.
<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
Exhibit-27
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.
IDS MANAGED FUTURES II, L.P.
----------------------------
Date: November 9, 2000 By: CIS Investments, Inc.,
One of its General Partners
By: /s/ Rebecca Steindel
------------------------
Rebecca Steindel
Treasurer and Secretary
(Duly authorized officer of the General
Partner and the Principal Financial
Officer of the General Partner)
