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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File No. 0-16515
December 31, 1996
IDS MANAGED FUTURES, L.P.
(Exact name of registrant as specified in its charter)
Delaware 06-1189438
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification #)
233 South Wacker Drive, Suite 2300, Chicago, IL 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 460-4000
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the
Act: Units of Limited Partnership Interest
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K: [X]
There is no public market for the units of limited
partnership interest. Accordingly, information with respect to
the aggregate market value of units of limited partnership
interest held by non-affiliates has not been supplied.
Registrant has no voting stock.
IDS MANAGED FUTURES, L.P.
STATEMENTS OF FINANCIAL CONDITION
Dec 31, 1996 Dec 31, 1995
--------------- -------------
ASSETS
Cash at Escrow Agent $650,100 $0
Equity in commodity futures
trading accounts:
Account balance 39,998,782 31,440,196
Unrealized gain on open
futures contracts 868,069 1,705,569
--------------- -------------
41,516,951 33,145,765
Interest receivable 152,358 130,109
Prepaid G.P. fee 0 0
--------------- -------------
Total assets $41,669,309 $33,275,874
=============== =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued commissions on open
futures contracts due to AXP Advisors and C $67,464 $64,903
Accrued exchange, clearing, and NFA fees $2,539 $1,785
Accrued management fee 108,053 97,719
Accrued incentive fee 851,045 33,129
Accrued operating expenses 155,590 141,246
Redemptions payable 132,361 370,419
Selling and Offering Expenses Payable 57,309 52,721
--------------- -------------
Total liabilities 1,374,361 761,922
Partners' Capital:
Limited partners ( 122,175.79 and 39,545,526 31,889,868
118,310.38 units outstanding at
12/31/96 and 12/31/95, respectively) (see Note 1)
General partners (2,315.34 units outstanding 749,421 624,084
12/31/96 and 12/31/95, respectively) (see Note 1)
--------------- -------------
Total partners' capital 40,294,948 32,513,952
--------------- -------------
Total liabilities and
partners' capital $41,669,309 $33,275,874
=============== =============
See Accompanying notes to financial statements.
IDS MANAGED FUTURES, L.P.
STATEMENTS OF OPERATIONS
1996 1995 1994
--------------- ------------- --------------
REVENUES
Gains on trading of commodity futures
and forwards contracts, physical
commodities and related options:
Realized gain (loss) on closed positions $9,559,339 $6,474,664 ($1,300,245)
Change in unrealized gain (loss)
on open positions (837,500) 365,549 691,537
Interest income 1,575,843 1,389,521 760,250
Foreign currency transaction gain (loss) (108,047) 189,505 127,359
--------------- ------------- --------------
Total revenues 10,189,635 8,419,239 278,901
EXPENSES
Commissions paid to AXP Advisors and CIS 851,858 701,468 639,227
Exchange, clearing and NFA fees 30,222 18,571 15,677
Management fees 1,088,343 1,027,360 704,158
Incentive fees 978,214 449,841 186,976
General Partner fee to IDS Futures Corp. and 447,067 326,936 203,019
Operating expenses 92,456 139,795 60,072
--------------- ------------- --------------
Total expenses 3,488,160 2,663,971 1,809,129
--------------- ------------- --------------
Net profit (loss) $6,701,475 $5,755,268 ($1,530,228)
=============== ============= ==============
PROFIT (LOSS) PER UNIT OF LIMITED PARTNERSHIP IN $54.14 $50.46 ($16.30)
PROFIT (LOSS) PER UNIT OF GENERAL PARTNERSHIP IN $54.14 $50.46 ($16.30)
=============== ============= ==============
(see Note 1) (see Note 1) (see Note 1)
See accompanying notes to financial statements.
IDS MANAGED FUTURES, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996,1995, AND 1994
Total
Limited General Partners'
Units* Partners Partners Capital
--------------- ------------- -------------- -------------
Balance at December 31, 1993 61,241.82 14,415,300 349,700 $14,765,000
Sale of partnership interests 47,310.54 12,353,922 108,000 $12,461,922
Selling commissions and organization & offering 0.00 (1,464,994) (9,360) ($1,474,354)
Net sales of partnership interests 47,310.54 10,888,928 98,640 $10,987,568
Net loss 0.00 (1,502,638) (27,590) ($1,530,228)
Redemptions (1,940.13) (445,141) 0 ($445,141)
Balance at December 31, 1994 106,612.23 23,356,449 420,750 $23,777,199
Sale of partnership interests 20,710.64 5,731,623 102,880 $5,834,503
Selling commissions and organization & offering 0.00 (517,959) (3,000) ($520,959)
Net sales of partnership interests 20,710.64 5,213,664 99,880 $5,313,544
Net profit 0.00 5,651,813 103,454 $5,755,267
Redemptions (9,012.50) (2,332,058) 0 ($2,332,058)
Balance at December 31, 1995 118,310.37 31,889,868 624,084 $32,513,952
Sale of partnership interests 17,812.20 5,568,008 0 $5,568,008
Selling commissions and organization & offering 0.00 (488,220) 0 ($488,220)
Net sales of partnership interests 17,812.20 5,079,788 0 $5,079,788
Net profit 0.00 6,576,138 125,337 $6,701,475
Redemptions (13,946.78) (4,000,267) 0 ($4,000,267)
Balance at December 31, 1996 122,175.79 39,545,527 749,421 40,294,948
Net asset value per unit at December 31, 1996 (see Note 1) $323.68 $323.68
Net asset value per unit at December 31, 1995 (see Note 1) $269.54 $269.54
Net asset value per unit at December 31, 1994 (see Note 1) $219.08 $219.08
*Units of limited partnership interest; all unit amounts reflect
the 3-for-1 split as described in Note 1.
See accompanying notes to financial statements.
IDS MANAGED FUTURES, L.P.
STATEMENTS OF CASH FLOWS
1996 1995 1994
--------------- ------------- --------------
Cash flows from operating activities:
Net profit (loss) 6,701,475 5,755,267 (1,530,228)
Adjustments to reconcile net profit
(loss) to net cash provided by
(used in) operating activities:
Change in assets and liabilities:
Unrealized gain (loss) on open
futures contracts 837,500 (365,549) (691,537)
Interest receivable (22,249) (26,543) (70,759)
Accrued liabilities 793,189 83,358 (50,372)
--------------- ------------- --------------
Net cash provided by (used in)
operating activities 8,309,915 5,446,533 (2,342,896)
Cash flows from financing activities:
Additional Units Sold 4,486,997 5,313,544 10,987,568
Partner Redemptions (4,238,326) (2,061,191) (356,888)
--------------- ------------- --------------
Net cash provided by (used in)
financing activities 248,671 3,252,353 10,630,680
--------------- ------------- --------------
Net increase (decrease) in cash 8,558,586 8,698,886 8,287,784
Cash at beginning of period 31,440,196 22,741,310 14,456,526
--------------- ------------- --------------
Cash at end of period $39,998,782 $31,440,196 $22,744,310
=============== ============= ==============
See accompanying notes to financial statements.
Index to exhibits on page 22
Documents Incorporated by Reference
Incorporated by Reference in Part IV, Item 14 is
Post-Effective Amendment No. 1 to Registration Statement No.
33-86894 of the Partnership on Form S-1 under the Securities Act
of 1933, filed on June 7, 1996.
Part I
Item 1. Business
IDS Managed Futures, L.P. (the "Partnership") is a limited
partnership organized on December 16, 1986 under the Delaware
Revised Uniform Limited Partnership Act. The Partnership was
formed to speculatively trade commodity interests, including
futures contracts, forward contracts, physical commodities, and
related options thereon pursuant to the trading instructions of
independent trading advisors. The General Partners of the
Partnership are CIS Investments, Inc. ("CISI") and IDS Futures
Corporation ("IDS Futures") (collectively, the "General
Partners"). The General Partners are registered commodity pool
operators under the Commodity Exchange Act, as amended (the "CE
Act") and are responsible for administering the business and
affairs of the Partnership exclusive of trading decisions. CISI
is an affiliate of Cargill Investor Services, Inc. ("CIS"), the
clearing broker for the Partnership. IDS Futures is an affiliate
of American Express Financial Advisors Inc. ("AXP Advisors"),
formerly IDS Financial Services Inc., which acts as the
Partnership's introducing broker and selling agent. Trading
decisions for the Partnership are made by two independent
commodity trading advisors, John W. Henry & Company, Inc. and
Sabre Fund Management Limited.
CIS is a "Futures Commission Merchant", the General Partners
are "Commodity Pool Operators", AXP Advisors is an "Introducing
Broker" and the trading advisors to the Partnership are
"Commodity Trading Advisors" as those terms are used in the CE
Act. As such, they are registered with and subject to regulation
by the Commodity Futures Trading Commission ("CFTC") and the
National Futures Association ("NFA"). AXP Advisors and CIS are
also registered as broker-dealers with the National Association
of Securities Dealers, Inc. ("NASD") and the Securities and
Exchange Commission (the "SEC").
Units of limited partnership interest ("Units") were offered
initially by AXP Advisors commencing March 27, 1987 and
concluding June 16, 1987. Subsequent offerings commenced March
29, 1993, January 31, 1994 and June 26, 1995. The total amount
of the initial offering was $7,500,000 and the total amount of
the combined reopenings was $80,000,000. After the initial
purchase price of $250 per Unit, investors purchase Units at the
then current net asset value per Unit; investors affiliated with
the selling agent of the Partnership are not required to pay
selling commissions, and the current offering has varied selling
commission rates depending on the total dollar amount of the
investment. Therefore, the total number of Units authorized for
the Partnership is not determinable and therefore is not
disclosed in the financial statements.
At the close of business on February 28, 1995 each Unit was
divided into three Units (a "3 for 1 split"), each of which has a
Net Asset Value per Unit equal to the previous Net Asset Value
per Unit divided by three. Accordingly, the total number of
Units outstanding tripled as of that date.
Should the Partnership engage in forward transactions in foreign
currencies, CIS Financial Services, Inc. ("CISFS") will act as
the Partnership's forward contract broker and in that capacity
will arrange for the Partnership to contract directly for forward
transactions in foreign currencies. CISFS is a direct participant
in the interbank market for foreign currencies. The Partnership
will act as a principal in each transaction entered into with a bank,
and CISFS will act only as the Partnership's agent in brokering
these transactions.
Under the terms of the Limited Partnership Agreement, the General
Partners may not select Partnership transactions involving the
purchase or sale of any commodity interests, but must select one
or more advisors to direct the Partnership's trading with respect
thereto. Initially, the General Partners chose and caused the
Partnership to enter into Advisory Contracts with each of John W.
Henry and Company, Inc. ("JWH") and Sabre Fund Management Limited
("Sabre") (collectively, the "Advisors"). Commencing on June 16,
1987, after the conclusion of the offering period with respect to
the Partnership's Limited Partnership Units, the Advisors began
to provide commodity trading instructions to CIS on behalf of the
Partnership. The General Partners felt it appropriate to make a
change in trading advisor systems; 70 percent of the assets
formerly managed by JWH pursuant to its Original Investment
Program were allocated to another program operated by JWH, the KT
Financial and Metals Portfolio, as of February 28, 1989. The
remaining assets in the JWH Original Investment Program were
closed due to disappointing performance as of October 13, 1989.
This money was reallocated to Sabre in early 1990. In February
1991, the General Partners felt it prudent to realign the assets
of the Partnership so that JWH and Sabre were each allocated 50%
of the trading assets.
The General Partners are responsible for the preparation of
monthly and annual reports to the Limited Partners; filing
reports required by the CFTC, the NFA, the SEC and any other
Federal or State agencies having jurisdiction over the
Partnership's operations; calculation of the Net Asset Value
(meaning the total assets less total liabilities of the
Partnership) and directing payment of the management and
incentive fees payable to the Advisors under the Advisory
Contracts.
The General Partners provide suitable facilities and procedures
for handling redemptions, transfers, distributions of profits (if
any) and orderly liquidation of the Partnership. Although CIS,
an affiliate of CISI (one of the General Partners) acts as the
Partnership's clearing broker, the General Partners are
responsible for selecting another clearing broker in the event
CIS is unable or unwilling to continue in that capacity. The
General Partners are further authorized, on behalf of the
Partnership (i) to enter into a brokerage clearing agreement and
related customer agreements with their affiliates, CIS and AXP
Advisors, pursuant to which those firms render clearing and
introducing brokerage services to the Partnership; (ii) to cause
the Partnership to pay brokerage commissions at the rates
provided for in the brokerage agreement (until August 31, 1995
this rate was $50 per round turn trade to CIS which in turn
reallocated $30 per round turn trade to AXP Advisors; effective
September 1, 1995, which was the first business day of the month
following the initial closing of the new offering, the round turn
brokerage commission rate was decreased from $50 to $35 per round
turn trade to CIS which in turn reallocates $20 per round turn
trade to AXP Advisors) and NFA, exchange, clearing, delivery,
insurance, storage, service and other fees and charges including
surcharges on foreign exchanges with higher incremental costs
incidental to the Partnership's trading; and (iii) to receive an
annual administrative fee equal, in the case of IDS Futures, to
1.45% of the Partnership's Net Asset Value ("NAV") on the first
business day of each fiscal year and, in the case of CISI, to
0.3% of the Partnership's NAV on the first business day of each
fiscal year until December 31, 1992. Commencing January 1, 1993,
the annual administrative fee payable to IDS Futures was reduced
to 1.125% and the annual administrative fee payable to CISI was
reduced to 0.25%. Although no increase to brokerage commissions
or administrative fees is anticipated, such fees as allowed in
the Prospectus may be increased at rates equivalent to increases
in the Consumer Price Index or other comparable measure of
inflation.
The Advisory Contracts between the Partnership and the Advisors
provide that the Advisors shall each have sole discretion in and
responsibility for the selection of the Partnership's commodity
transactions with respect to that portion of the Partnership's
assets allocated to it. The Advisory Contracts were amended on
April 30, 1996, effective January 31, 1996, to extend the term of
each Advisory Contract through December 31, 1996 with the
automatic extension of its terms for three additional one-year
terms (beginning January 1 and ending December 31 of each year)
through December 1999, unless earlier terminated in accordance
with the termination provisions contained therein. The renewal
right is applicable irrespective of any change in Advisors or any
reallocation of Partnership assets among Advisors or to other
trading advisors by the Partnership.
The Advisory Contracts shall terminate automatically with respect
to both Advisors in the event that the Partnership is terminated
in accordance with the Restated and Amended Limited Partnership
Agreement. The Advisory Contracts may be terminated by the
Partnership with respect to any Advisor individually upon written
notice to the Advisor in the event that (i) the Partnership
assets allocated to the Advisor has trading losses in excess of
30% of the assets originally allocated to the Advisor; (ii) the
Advisor is unable, to any material extent, to use its agreed upon
Trading Approach; (iii) the Advisor's registration is revoked or
not renewed; (iv) there is unauthorized assignment of the Contract
by the Advisor (v) the Advisor dissolves, merges, consolidates with
another entity, sells a substantial portion of its assets, changes
control, become bankrupt or insolvent or has a change in
executive officer; or (vi) the General Partners determine in good
faith that such termination is necessary for the protection of
the Partnership.
An Advisor may terminate the Advisory Contract at any time upon
written notice to the Partnership in the event (i) that its
continued trading on behalf of the Partnership would require the
Advisor to become registered as an investment advisor under the
Investment Advisors Act of 1940; (ii) that assets in excess of
50% of the initially allocated assets are reallocated from the
Advisor; (iii) that the registration of either General Partner
is revoked, suspended, terminated or not renewed; (iv) that the
General Partners elect to have the Advisor use a trading approach
which is different from that initially used; (v) that the General
Partners override a trading instruction or impose additional trading
limitations; (vi) that there is an unauthorized assignment of the
Advisory Contract by the General Partners; or (vii) other good cause
is shown to which the written consent of the General Partners is
also obtained. An Advisor may also terminate the Advisory Contract
on 60 days written notice to the General Partners during any renewal
term.
The Advisors will continue to advise other futures trading
accounts. The Advisors and their officers, directors and
employees also will be free to trade commodity interests for
their own accounts provided such trading is consistent with the
Advisors' obligations and responsibilities to the Partnership.
To the extent that the Advisors recommend similar or identical
trades to the Partnership and other accounts which they manage,
the Partnership may compete with those accounts for the execution
of the same or similar trades.
The Partnership initially paid JWH a monthly management fee of
1/4 of 1% of the Partnership's NAV under management as of the end
of the month, whether or not the Partnership was profitable, and
quarterly incentive fee of 18% of trading profits achieved on the
NAV of the Partnership allocated to such Advisor's management
until June 30, 1992. Effective July 1, 1992, the Partnership
began paying JWH 1/3 of 1% of the month end NAV of the
Partnership and a quarterly incentive fee of 15% of the
Partnership's net trading profits, if any, attributable to its
management. The Partnership initially paid Sabre a monthly
management fee of 1/4 of 1% of the Partnership's NAV under
management. As of December 1991 the General Partners reduced
Sabre's management fee from 1/4 of 1% to 1/8% of 1% until such
time as the trading performance for assets allocated to Sabre
reached a 25% performance return. Effective July 1, 1993,
Sabre's management fee was returned to the 1/4 of 1% level as
this performance return had been reached. Effective January 1,
1996, Sabre's monthly management fee was again reduced from 1/4
of 1% to 1/8 of 1% of the Partnership's Net Asset Value subject
to Sabre's trading performance. This reduction in management
fees continued until the cumulative trading performance of Sabre
reached 40%, which was reached at the end of January 1997.
Therefore, the management fee was adjusted back to 1/4 of 1%
effective February 1, 1997. The calculation and payment of such
incentive fees is not affected by the performance of the other
Advisor. See pages 6-8 of Exhibit 10.1 incorporated by reference
herein for a description of NAV and trading profits. The
incentive fee is paid to an Advisor only when the cumulative
trading profits for assets allocated to that Advisor at the end
of a quarter exceed the highest previous cumulative trading
profits at the end of a quarter for which an incentive fee was
paid to the Advisor.
The Limited Partnership Agreement provides that (i) funds
will be invested only in futures contracts which are traded in
sufficient volume to permit, in the opinion of each Advisor, ease
of taking and liquidating positions; (ii) no Advisor will
establish futures positions in a commodity interest such that the
margin required for those positions, when added to that required
for existing positions for the same commodity interest, would
exceed 15% of the Partnership assets allocated to the Advisor;
(iii) it is expected that 20% to 60% of the Net Assets of the
Partnership will normally be committed to initial margin, however,
no Advisor may commit more than 66 2/3% of the assets under its
management to initial margins; (iv) the Partnership will not
generally enter into an open position for a particular commodity
interest during a delivery month; (v) the Partnership may not trade
in securities or options on securities, commodity futures contracts,
or physical commodities unless such options have been approved
for trading on a designated contract market by the CFTC; the
Partnership may trade in foreign options if permitted under the
CE Act and CFTC regulations; the Partnership may trade in futures
contracts, futures contracts on foreign currencies through foreign
and domestic commodity exchanges and forward contracts on foreign
currencies; (vi) the Partnership may not engage in pyramiding,
but may employ spreads or straddles; (vii) the Partnership's
assets will not be commingled with the assets of any other
person; (viii) no Advisor will be permitted to engage in churning
the assets of the Partnership; and (ix) no rebates or give-ups
may be paid to or received by the General Partners. The
Partnership will not generally utilize borrowing except for
short-term borrowing when the Partnership takes delivery of a
physical commodity. Material changes in these trading policies
must be approved by a vote of a majority of the outstanding
Limited Partnership Units.
The Partnership's net assets are deposited in the Partnership's
account with CIS, the Partnership's clearing broker. The
Partnership earns interest on 100 percent of the Partnership's
average monthly cash balance on deposit with the Clearing Broker
at a rate equal to 90 percent of the average 90-day Treasury bill
rate for U.S. Treasury bills issued during that month.
The Partnership currently has no salaried employees and all
administrative services performed for the Partnership are
performed by the General Partners. The General Partners have no
employees other than their officers and directors, all of whom
are employees of the affiliated companies of the General
Partners. For these administrative services, the General
Partners received an annual fee, as described above, equal to 1.75%
of the NAV on the first day of the Partnership's fiscal year (paid
on a pro rata basis for the first year of the Partnership's trading)
until December 31, 1992. Commencing January 1, 1993 the annual
administrative fee for the General Partners was reduced to 1.375%
of the NAV on the first day of the Partnership's fiscal year.
The Partnership's business constitutes only one segment for
financial reporting purposes; it is a limited partnership whose
purpose is to trade, buy, sell, spread or otherwise acquire, hold
or dispose of commodity interests including futures contracts,
forward contracts, physical commodities and related options
thereon. The Partnership does not engage in the production or
sale of any goods or services. The objective of the Partnership
business is appreciation of its assets through speculative
trading in such commodity interests. Financial information about
the Partnership's business, as of December 31, 1996, is set forth
under Items 6 and 7 herein.
Competition
Each Advisor and its principals, affiliates and employees are
free to trade for their own accounts and to manage other
commodity accounts during the term of the Advisory Contract and
to use the same information and trading strategy which the
Advisor obtains, produces or utilizes in the performance of
services for the Partnership. To the extent that the Advisor
recommends similar or identical trades to the Partnership and
other accounts which it manages, the Partnership may compete with
those accounts for the execution of the same or similar trades.
Other trading advisors who are not affiliated with the
Partnership may utilize trading methods which are similar in some
respects to those methods used by the Partnership's Advisors.
These other trading advisors could also be competing with the
Partnership for the same or similar trades as requested by the
Partnership's Advisors.
Item 2. Properties
The Partnership does not utilize any physical properties in the
conduct of its business. The General Partners use the offices of
CIS and AXP Advisors, at no additional charge to the Partnership,
to perform their administration functions, and the Partnership
uses the offices of CIS, again at no additional charge to the
Partnership, as its principal administrative offices.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Part II
Item 5. Market for the Registrant's Units and Related Security
Holder Matters
(a) There is no established public market for
the Units and none is expected to develop.
(b) As of December 31, 1996, there were
122,175.79 Units held by Limited Partners
and 2,315.34 Units held by the General
Partners. A total of 13,946.78 Units had
been redeemed by Limited Partners during
the period from January 1, 1996 to December
31, 1996 (28,274.06 Units were redeemed
prior to calendar year 1996). The
Partnership's Restated and Amended Limited
Partnership Agreement (Exhibit 3.1 hereto)
contains a full description of redemption
and distribution procedures.
(c) To date no distributions have been made to
partners in the Partnership.
The Limited Partnership Agreement does not provide for regular or
periodic cash distributions, but gives the General Partners sole
discretion in determining what distributions, if any, the Partnership
will make to its partners. The General Partners have not declared
any such distributions to date, and do not currently intend to
declare such distributions.
Item 6. Selected Financial Data
Year ended December 31,
1992 1993 1994 1995 1996
1. Operating Revenues(000) $ 258 $3,444 $ 279 $8,419 $10,190
2. Income (Loss) From
Continuing Operations(000)(284) 2,362 (1,530) 5,755 6,701
3. Income (Loss) Per Unit (6.04) 65.22 (16.30) 50.46 54.14
4. Total Assets(000) 5,980 15,135 24,185 33,276 41,669
5. Long Term Obligations 0 0 0 0 0
6. Cash Dividend Per Unit 0 0 0 0 0
Note: All references to Units reflect the 3-for-1 Unit split
effective February 28, 1995.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Most United States commodity exchanges limit the amount
of fluctuation in commodity futures contract prices during a
single trading day by regulations. These regulations specify
what are referred to as "daily price fluctuation limits" or
"daily limits". The daily limits establish the maximum amount
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular
commodity, no trades may be made at a price beyond the limit.
Positions in the commodity could then be taken or liquidated only
if traders are willing to effect trades at or within the limit
during the period for trading on such day. Because the "daily
limit" rule only governs price movement for a particular trading
day, it does not limit losses. In the past, futures prices have
moved the daily limit for numerous consecutive trading days and
thereby prevented prompt liquidation of futures positions on one
side of the market, subjecting commodity futures traders holding
such positions to substantial losses for those days.
It is also possible for an exchange or the CFTC to suspend trading
in a particular contract, order immediate settlement of a particular
contract, or direct that trading in a particular contract be for
liquidation only.
The Partnership's net assets are held in a brokerage account with
CIS. The Partnership initially earned interest on 100% of the
Partnership's average monthly cash balance at a rate equal to 80%
of the average yield on the 90-day U.S. Treasury Bills issued during
that month until July 31, 1993. Commencing August 1, 1993, the
Partnership began to earn interest at a rate of 90% of the average
yield on the 90-day U.S. Treasury Bills issued during that month.
For the calendar year ended December 31, 1996 CIS had paid or accrued
to pay interest of $1,575,843 to the Partnership. Similarly, for the
calendar year ended December 31, 1995 CIS had paid or accrued to pay
interest of $1,389,521 to the Partnership.
For the fiscal year ended December 31, 1996, investors redeemed a
total of 13,946.78 Units for $4,000,267. For the fiscal year ended
December 31, 1995, investors redeemed a total of 9,012.50 Units for
$2,332,058.
During 1996, Limited Partners purchased 17,812.20 Units for
$5,568,008. The General Partners did not purchase any Units in 1996.
On December 31, 1996, the Partnership had unrealized profits of
$868,069 and cash on deposit of $39,998,782. These positions
required margin deposits at CIS of $2,645,728. The total balance
of the Partnership's account at CIS was $41,516,951. These figures
compare to unrealized profits of $1,705,569, cash on deposit of
$31,440,196, margin requirements of $3,655,729 and total balance of
the Partnership's account of $33,145,765 as of December 31, 1995.
On December 31, 1994, the Partnership had unrealized profits of
$1,340,020 and cash on deposit at CIS of $22,041,930. These
positions required margin deposits at CIS of $2,923,318. The total
balance of the Partnership's account was $23,381,950.
During the fiscal year ended December 31, 1996, the Partnership had
no credit exposure to a counterparty which is a foreign commodities
exchange which was material.
The Partnership currently only trades on recognized global
futures exchanges. In the event the Partnership begins trading
over the counter contracts, any credit exposure to a counterparty
which exceeds 10% of the Partnership's total assets will be
disclosed.
See Footnote 5 of the Financial Statements for procedures
established by the General Partners to monitor and minimize
market and credit risks for the Partnership. In addition to the
procedures set out in Footnote 5, the General Partners review on
a daily basis reports of the Partnership's performance, including
monitoring of the daily net asset value of the Partnership. The
General Partners also review the financial situation of the
Partnership's Clearing Broker on a monthly basis. The General
Partners rely on the policies of the Clearing Broker to monitor
specific credit risks. The Clearing Broker does not engage in
proprietary trading 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.
Results of Operations
The Partnership posted positive returns for 1996 and 1995 but
suffered modest losses for its Limited Partners in 1994.
In 1996 there were numerous opportunities in the global futures
markets and the Advisors were well-positioned to profit from many
of them. The Partnership produced a net gain of 20.01% for the
calendar year. The profits for the Partnership were made in the
latter part of the year in currencies, global interest rates,
energies and precious metals. The U.S. dollar reached a ten-week
high against the Japanese yen, the German mark and the Swiss
franc in September as sound economic fundamentals kept the U.S.
dollar strong against most of the major currencies. The British
pound was even stronger than the U.S. dollar as Europe debated
European Monetary Union issues and viewed the pound as a safe
haven. These factors led to excellent trends in the currency
markets and profitable trading. Signs of a slowing U.S. economy
drove the 30-year Treasury bond to its highest level in six and
one-half years. Foreign central banks were heavy buyers of U.S.
bonds, producing a nice profit for the Partnership. In Asia,
investors flocked to the higher-yielding Australian bond as the
yield on the Japanese Government bond was at its lowest level in
the nation's history. The Partnership benefited handsomely from
opposite positions in both the Australian and Japanese bonds.
The Partnership ended the year with a profit of $6,701,475.
In 1995 the Advisors were well-positioned to capitalize on many
trading opportunities, especially in the financial sector, which
produced a net gain of 23.03% for the year. The first quarter of
the year was the most profitable for the Partnership. The
February collapse of Barings PLC created opportunities,
especially in the Far Eastern markets. The Barings demise had a
global effect, sending stock prices falling around the world and
driving investors toward the safety of German marks and U.S.
Treasury bonds. The German mark benefited substantially from the
uncertain state of many world economies and gained steadily
versus the U.S. and other European currencies. Long positions in
foreign exchange generated sizable gains, with positions in the
Japanese yen, yen bond and the Nikkei 225 being the most
favorable. The balance of the year was much quieter in terms of
market opportunities, trends and profits. The Partnership ended
the year with a profit of $5,755,268.
The year 1994 was a challenging year for the Partnership, which
posted a loss of 6.9%. Economic and political instability
worldwide created disruptions in the financial markets. The U.S.
Administration was under fire, there was major trade tension
between the U.S. and Japan, instability in Russia, an
assassination in Mexico and conflict in Korea, all resulting in a
sharp decline in global stock and bond prices. The Yen/U.S.
Dollar relationship fluctuated sharply due to the concerns of
trade barriers or a potential trade war with Japan. The U.S.
Dollar declined relative to the European currencies and even
reached the lowest post World War II levels versus the Japanese
Yen. Physical commodities offered a few opportunities. Coffee
had a major rally after a severe freeze devastated the growing
area in Brazil, sugar prices rose to a three year high in October
and there were modest gains in precious metals. The Partnership
ended the year with a loss of $1,530,228.
In September and November of 1996, JWH, one of the commodity
trading advisors of the Partnership, was named as a co-defendant
in class action lawsuits brought in the Superior Court of the
State of California, Los Angeles County, the Supreme Court of the
State of New York, New York County, and the Superior Court of the
State of Delaware, New Castle County. The actions, which seek
unspecified damages, purport to be brought on behalf of investors
in certain Dean Witter, Discover & Co. commodity pools, some of
which are advised by JWH, and are primarily directed at Dean
Witter's alleged fraudulent selling practices in connection with
the marketing of those pools. JWH is essentially alleged to have
aided and abetted or directly participated with Dean Witter in
those practices. JWH believes the allegations against it are
without merit and it intends to contest these allegations
vigorously.
The primary sources of growth for the Partnership over the last
three years have been additional sales (net sales of $14.6
million) and trading gains (over $10.9 million). In particular,
both sources caused the increase in "Cash on deposit with the
Clearing Broker" and "Total partners' capital" on the Statement
of Financial Condition. Since the total capital increased
significantly, the interest earned on those assets increased,
showing over $12,000 more "Interest receivable" at the end of
1996 over 1995.
Trading gains were significantly greater in the last quarter of
1996 compared to the last quarter of 1995. This resulted in the
increase of over approximately $800,000 in "Accrued incentive
fees" recorded as of the end of the year from 1995 to 1996 in the
Statement of Financial Condition. During times of increased
trading gains, investors tend to redeem fewer units of the
Partnership. This is evident in the reduction of approximately
$138,000 in "Redemptions payable" from 1995 to 1996. Although
the total trading gains for 1996 were greater than for 1995, more
of the gains had been realized as of the last day of the year in
1996 than 1995, and "Unrealized gain on open futures contracts"
shows a decrease of $837,500.
From 1995 to 1996 there was an increase of over $650,000 in
"Receivable for units sold". This variance is caused by the
delay of a wire transfer from the escrow agent for the
Partnership to the Clearing Broker on the last day of the year
for the new Partnership subscribers in December. In 1995, the
wire had already been received by the Clearing Broker on the last
day of the year, so no receivable was recorded. Since this
year-end wire was not received at the Clearing Broker until
January 2, 1997, the investment from the December 1996 month-end
subscribers to the Partnership are recorded as a receivable.
The Partnership recognized an increase in excess of $7 million in
trading gains from 1994 to 1995, and another increase of almost
$2 million from 1995 to 1996. Although the unrealized gain
balance was lower at the end of 1996 versus 1995, more profits
had been realized during the year, so the Partnership realized a
net trading gain increase. These increases in trading gains
showed their most direct impact in the increase in "Incentive
fees" over the periods, showing an increase of $263,000 from
1994 to 1995 and another $528,000 in 1995 to 1996. Trading
losses from 1994 that had to be recouped prior to additional
incentive fees being earned by the traders caused the variance
between the increase in trading profits versus the increase in
incentive fees.
These increases in trading income, as well as the increased sales
of the Partnership resulted in increases in "Interest income"
($600,000 in 1994 to 1995 and $186,000 in 1995 to 1996),
"Management fees" ($300,000 and $60,000) and "General partner fee
to IDSFC and CISI" ($124,000 and $120,000). The increase in
total capital of the Partnership allowed the traders to increase
the size of their trades over the periods. These larger number
of contracts traded caused the increase in both "Commissions paid
to AXP Advisors and CIS" ($62,000 for 1994 to 1995 and $150,000
for 1995 to 1996) as well as "Exchange, clearing and NFA fees"
($3,000 and $12,000).
The trading gains for 1995 and the Illinois Personal Property
Replacement Tax accrued from them caused the increase of $79,000
in "Operating expenses" from 1994. The actual tax due was less
than the amount accrued. The reversal of the overaccrual caused
the decrease noted in 1996.
The dollar showed greater strength in 1996, when compared to the
two earlier years during which the dollar had weakened. This
dollar strength caused the Partnership to record a loss of
$108,000 in 1996 on currencies held by the Partnership in other
than U.S. Dollars, when 1995 and 1994 had shown gains of $190,000
and $127,000 respectively.
Inflation
Inflation does have an effect on commodity prices and the
volatility of commodity markets; however, continued inflation is
not expected to have a material adverse effect on the
Partnership's operations or assets.
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements and the notes
thereto appearing on Pages 24 through 35 of this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
The Partnership is managed by its General Partners, IDS Futures
Corporation and CIS Investments, Inc. The officers and directors
of the General Partners as of December 31, 1996 were as follows:
IDS Futures Corporation
Lori J. Larson (born in August 1958), President and Director.
Ms. Larson was elected President of IDS Futures Corporation
effective November 14, 1996, replacing Wendell L. Halvorson who
resigned as President. She has been employed by American Express
Financial Corporation since 1981 and currently holds the title of
Vice President. Since August 1988 she has been responsible for
day-to-day management of vendor relationships, due diligence
review and operational aspects for the limited partnerships
distributed by AXP Advisors. In addition, she has
responsibility for the product development of publicly offered
mutual funds in the IDS Mutual Fund Group. Ms. Larson has held a
variety of management positions with American Express Financial
Corporation throughout her career. She is a graduate of and has
an M.B.A. from the University of Minnesota.
Michael L. Weiner (born in July 1946), Vice President, Secretary
and Treasurer. Mr. Weiner is the Vice President-Corporate Tax
Operations of American Express Financial Corporation. He has
been employed by American Express Financial Corporation since
1975. His responsibilities include research, planning and
compliance for the American Express Financial Corporation
corporate tax group. Mr. Weiner is also an officer of AXP
Advisors. Mr. Weiner graduated from the University of Minnesota
Law School in 1974 and completed the Masters of Business
Administration program at St. Thomas College of Minnesota in
1979.
John M. Knight (born in February 1952), Vice President. Mr.
Knight has been employed by American Express Financial
Corporation since July 1975. He is currently Controller-Variable
Assets, thus charged with overall finance responsibilities for
Mutual Funds, Limited Partnerships, Variable Annuities and Wealth
Management Services. From 1981 to March 1994 he held a number of
positions in the IDS Certificate Company, including Controller of
that organization. Mr. Knight is a graduate of the University of
Wisconsin-Eau Claire and a FLMI.
Peter J. Anderson (born in March 1942), Director. Mr. Anderson
is Chairman and Chief Investment Officer of IDS Advisory Group
Inc., as well as Senior Vice President - Investments and a member
of the board of directors of American Express Financial Advisors
Inc. Mr. Anderson joined IDS Advisory Group Inc. in April 1982
as Senior Vice President - IDS Equity Advisors, a division of IDS
Advisory Group Inc. He became President of IDS Advisory Group in
January 1985. In July 1987 Mr. Anderson was named Senior Vice
President of American Express Financial Advisors Inc. and at that
point assumed responsibility for common stock mutual funds. In
January 1993 Mr. Anderson assumed responsibility for the
portfolio management, research and economic functions of American
Express Financial Advisors Inc. Mr. Anderson has a B.A. from
Yale University and an M.B.A. with a major in finance from
Wharton Graduate School.
Morris Goodwin, Jr. (born in August 1951), Director. Mr. Goodwin
has served as Vice President and Corporate Treasurer of American
Express Financial Corporation since July 1989. He is responsible
for corporate cash management, treasury operations, short term
portfolio investment, capital allocation, liquidity management
and financing and corporate wide asset acquisition and
management. Mr. Goodwin served as Chief Financial Officer of IDS
Bank & Trust from 1988 to 1990. From 1980 until 1987, Mr.
Goodwin held various positions with Morgan Stanley & Co., Inc.
He is a graduate of Williams College and holds an M.B.A. from
Stanford Graduate School of Business.
CIS Investments, Inc.
Hal T. Hansen (born in November 1936), President and Director.
Mr. Hansen has been President of Cargill Investor Services, Inc.
since November 1978. He serves on the Executive Committees of
the Board of Directors of the NFA and the Futures Industry
Association ("FIA") and is Chairman of the NFA. Mr. Hansen
graduated from the University of Kansas in 1958. He started work
at Cargill, Incorporated in 1958 and was employed by Cargill
S.A.C.I. in Argentina from 1965 to 1969. Mr. Hansen has been
employed by Cargill Investor Services, Inc. since 1974.
L. Carlton Anderson (born in August 1937), Vice President and
Director. Mr. Anderson is a graduate of Northwestern University,
Evanston, Illinois. He started working at Cargill, Incorporated
in 1959 in the Commodity Marketing Division. He served as
President of Stevens Industries Inc., Cargill's peanut shelling
subsidiary, from 1979 to 1981. He has been employed by Cargill
Investor Services, Inc. since 1981 and is currently a Vice
President of CIS and the Director in charge of the Portfolio
Diversification Group. Mr. Anderson recently served on the Board
of Directors of the Managed Futures Association.
Richard A. Driver (born in September 1947), Vice President and
Director. Mr. Driver became a Vice President and Director of
CISI on June 29, 1993. Mr. Driver graduated from the University
of North Carolina in 1969 and received a Masters Degree from
American Graduate School of International Management in 1973.
Mr. Driver began working for Cargill, Incorporated in 1973 and
joined Cargill Investor Services, Inc. in 1977 as Vice President
of Operations.
Christopher Malo (born in August 1956), Vice President. Mr. Malo
graduated from Indiana University in 1976. He started working at
Cargill, Incorporated in June 1978 as an internal auditor. He
transferred to Cargill Investor Services, Inc. in August 1979 and
served as Secretary/Treasurer from November 1983 until July 1991.
He was elected as a Vice President in July 1991. He is a member
of the FIA Operations Division and has served as Chairman of the
FIA Finance Committee.
Barbara A. Pfendler (born in May 1953), Vice President. Ms.
Pfendler graduated from the University of Colorado in 1975. She
has held various merchandising and management positions within
Cargill's Oilseed Processing Division before transferring to CIS
in 1986 where she is responsible for all marketing activities of
the Portfolio Diversification Group. She was appointed Vice
President of CISI in May 1990 and Vice President of CIS in June
1996.
Donald J. Zyck (born in October 1961), Secretary and Treasurer.
Mr. Zyck graduated from Northern Illinois University, DeKalb,
Illinois in 1983. He began working at Cargill Investor Services,
Inc. in April 1985 as a Staff Accountant. From January 1988 to
October 1994 he was Manager of Treasury Operations at CIS. He
was elected Controller, Secretary and Treasurer of CIS in October
1994.
Bruce H. Barnett (born in June 1947), Assistant Secretary. Mr.
Barnett graduated in 1968 from Southern Connecticut State
College. New York University Law School awarded Mr. Barnett a
J.D. in 1971 and an LL.M. in 1973. He started working at
Cargill, Incorporated in 1990 as Vice President, Taxes. From
1987 to 1990, Mr. Barnett was employed in various positions at
Unilever, a European based multinational corporation.
Henry W. Gjersdal, Jr. (born in May 1954), Assistant Secretary.
Mr. Gjersdal received a bachelor of arts degree from Gustavus
Adolphus College in 1976 and a J.D. degree from the University of
Michigan in 1979. He is a member of the American Bar Association
and the Tax Executives Institute. He joined the Law Department
of Cargill, Incorporated in April 1981. He had previously been
an associate with Doherty, Rumble and Butler, Minneapolis,
Minnesota. In June 1985 he was named European Tax Manager for
Cargill, International, Geneva, and in 1987 was named Senior Tax
Attorney for the Law Department. He became Assistant Tax
Director in the Tax Department in December 1990. Mr. Gjersdal
was named Assistant Vice President of Cargill, Incorporated's
Administrative Division in April 1994 with responsibility for the
audit and international groups in Cargill's Tax Department and
became Assistant Secretary on June 25, 1996.
Patrice H. Halbach (born in August 1953), Assistant Secretary.
Ms. Halbach graduated phi beta kappa from the University of
Minnesota with a bachelor of arts degree in history. In 1980 she
received a J.D. degree cum laude from the University of
Minnesota. She is a member of the Tax Executives Institute, the
American Bar Association and the Minnesota Bar Association. Ms.
Halbach joined the Law Department of Cargill, Incorporated in
February 1983. She had previously been an attorney with
Fredrikson & Byron, Minneapolis, Minnesota. In December 1990 she
was named Senior Tax Manager for Cargill, Incorporated's Tax
Department and became Assistant Tax Director in March 1993 and
was responsible for the oversight of federal audits and
international compliance. She was named Assistant Vice President
of Cargill, Incorporated's Administrative Division in April 1994.
She became Assistant Secretary on June 25, 1996.
Each officer and director holds such office until the election
and qualification of his or her successor or until his or her
earlier death, resignation or removal.
Item 11. Executive Compensation
The Partnership has no officers or directors. The General
Partners, IDS Futures and CISI, administer the business and
affairs of the Partnership (exclusive of Partnership trading
decisions which are made by independent commodity trading
advisors). The officers and directors of the General Partners
receive no compensation from the Partnership for acting in their
respective capacities with the General Partners.
All operating and administrative expenses attributable to the
Partnership are paid by the General Partners except for brokerage
commissions, NFA, clearing and exchange fees, advisory fees,
legal, accounting, auditing, printing, recording and filing fees
and postage charges which are paid directly by the Partnership.
All expenses other than brokerage commissions incurred by the
Partnership and administrative fees are paid to persons not
affiliated with the Partnership. For the services performed through
December 31, 1992 on behalf of the Partnership, the General Partners
received an annual administrative fee totaling 1.75% of the
Partnership's net assets. On January 1, 1993 this fee was reduced
to 1.375%. The General Partners received a total of $447,067 in
1996, $326,936 in 1995 and $203,019 in 1994 for this fee.
CIS, an affiliate of CISI, is the Partnership's clearing broker.
During the year ended December 31, 1996, the Partnership accrued
and paid $851,858 in brokerage commissions to CIS, as compared to
$701,468 for 1995 and $639,227 for 1994. Of these commissions,
$20 per round turn trade is paid to AXP Advisors as the
Partnership's introducing broker and $15 is retained by CIS as
clearing broker (based on a commission rate of $35 per round turn
trade). Prior to September 1, 1995, $30 per round turn trade was
paid to AXP Advisors and $20 was retained by CIS (based on a
commission rate of $50 per round turn trade).
The Partnership did not transact any business through CISFS
during the year ended December 31, 1996 and therefore paid no
commissions to CISFS.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) As of December 31, 1996, no person was
known to the Partnership to own beneficially
more than 5% of the outstanding Units.
(b) As of December 31, 1996, the General
Partners beneficially owned 2,315.34 Units or
approximately 1.86% of the Units outstanding
as of that date. In addition, Lori J.
Larson, President of IDS Futures,
beneficially owned 19.06 Units or .015% of
the outstanding Units.
(c) As of December 31, 1996, no arrangements
were known to the registrant, including any
pledges by any person of Units of the
Partnership or shares of its General Partners
or the parents of the General Partners, such
that a change in control of the Partnership
may occur at a subsequent date.
Item 13. Certain Relationships and Related Transactions.
(a) None other than the compensation
arrangements described herein.
(b) None.
(c) None.
(d) Not Applicable.
Part IV
Item 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K
(a) The following documents are included herein:
(1) Financial Statements:
a. Report of Independent Public
Accountants.
b. Statements of Financial Condition
as of December 31, 1996 and 1995.
c. Statements of Operations,
Statements of Partners' Capital and
Statements of Cash Flows for the
years ended December 31, 1996, 1995
and 1994.
d. Notes to Financial Statements.
(2) All financial statement schedules
have been omitted either because the
information required by the schedules is
not applicable, or because the
information required is contained in the
financial statements included herein or
the notes hereto.
(3) Exhibits:
See the Index to Exhibits annexed hereto.
(b) Reports on Form 8-K:
(1) None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: March 25, 1997 IDS Managed Futures, L.P.
By: IDS Futures Corporation By: CIS Investments, Inc.
(General Partner) (General Partner)
By: /s/ Lori J. Larson By: /s/ Hal T. Hansen
President President
By: /s/ Michael L. Weiner By: /s/ Donald J. Zyck
V.P., Secretary and Secretary and Treasurer
Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the date
indicated.
Date: March 25, 1997
/s/ Lori J. Larson /s/ Hal T. Hansen
Director and President Director and President
/s/ Morris Goodwin, Jr. /s/ L. Carlton Anderson
Director Director and Vice
President
/s/ Michael L. Weiner /s/ Donald J. Zyck
V.P., Secretary and Secretary and
Treasurer Treasurer
Index to Exhibits
Number Exhibit
3.1 Amended and Restated Limited Partnership
Agreement (Incorporated by reference to
Post-Effective Amendment No. 1 to the
Registration Statement as filed by the
Partnership on June 7, 1996).
10.1 Advisory Agreements dated as of March 27,
1987 between IDS Managed Futures, L.P. and
each of John W. Henry & Company, Inc. and
Sabre Fund Management Limited, and Amended
Advisory Contracts dated January 23, 1992 and
April 30, 1996. (Incorporated by reference
to Post-Effective Amendment No. 1 to the
Registration Statement as filed by the
Partnership on June 7, 1996).
Index to Financial Statements
IDS Managed Futures, L.P.
Report of Independent Public Accountants Page 24
Statements of Financial Condition as of
December 31, 1996 and 1995 Page 25
Statements of Operations, for the years ended
December 31, 1996, 1995 and 1994 Page 26
Statements of Changes in Partners' Capital,
for the years ended December 31, 1996,
1995 and 1994 Page 27
Statements of Cash Flows, for the years ended
December 31, 1996, 1995 and 1994 Page 28
Notes to Financial Statements Page 29
Acknowledgment Page 35