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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. 0-17443
December 31, 1996
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 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 II, L.P.
STATEMENTS OF FINANCIAL CONDITION
Dec 31, 1996 Dec 31, 1995
--------------- -------------
ASSETS
Cash at Escrow Agent $0 $0
Equity in commodity futures
trading accounts:
Account balance 12,950,198 10,585,211
Unrealized gain on open
futures contracts 365,959 565,658
--------------- -------------
13,316,157 11,150,869
Interest receivable 43,968 39,588
Prepaid G.P. fee 0 0
--------------- -------------
Total assets $13,360,125 $11,190,457
=============== =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued commissions on open
futures contracts due to AXP Advisors and C $37,329 $36,318
Accrued exchange, clearing, and NFA fees $775 $535
Accrued management fee 40,724 36,944
Accrued incentive fee 356,409 10,682
Accrued operating expenses 75,887 70,279
Redemptions payable 161,568 19,908
--------------- -------------
Total liabilities 672,692 174,666
Partners' Capital:
Limited partners ( 20,173.69 and 12,294,671 10,700,674
21,884.34 units outstanding at
12/31/96 and 12/31/95, respectively)
General partners (644.45 units outstanding at 392,762 315,117
12/31/96 and 12/31/95, respectively)
--------------- -------------
Total partners' capital 12,687,433 11,015,791
--------------- -------------
Total liabilities and
partners' capital $13,360,125 $11,190,457
=============== =============
See Accompanying notes to financial statements.
IDS MANAGED FUTURES II, 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 $3,650,325 $3,155,319 ($1,020,859)
Change in unrealized gain (loss)
on open positions (199,699) 19,036 11,502
Interest income 452,869 470,866 356,050
Foreign currency transaction gain (loss) (33,881) 86,209 145,531
--------------- ------------- --------------
Total revenues 3,869,614 3,731,430 (507,776)
EXPENSES
Commissions paid to AXP Advisors and CIS 443,885 340,999 465,039
Exchange, clearing and NFA fees 9,629 6,116 11,678
Management fees 415,370 430,581 422,292
Incentive fees 384,059 185,847 133,131
Operating expenses 50,442 77,547 4,113
--------------- ------------- --------------
Total expenses 1,303,385 1,041,090 1,036,253
--------------- ------------- --------------
Net profit (loss) $2,566,229 $2,690,340 ($1,544,029)
=============== ============= ==============
PROFIT (LOSS) PER UNIT OF LIMITED PARTNERSHIP IN $120.48 $112.27 ($61.10)
PROFIT (LOSS) PER UNIT OF GENERAL PARTNERSHIP IN $120.48 $112.27 ($61.10)
=============== ============= ==============
See accompanying notes to financial statements.
IDS MANAGED FUTURES II, 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 25,928.21 11,351,198 282,139 $11,633,337
Net loss 0.00 (1,504,653) (39,376) ($1,544,029)
Redemptions (1,944.80) (812,167) 0 ($812,167)
Balance at December 31, 1994 23,983.41 9,034,378 242,763 $9,277,141
Net profit 0.00 2,617,986 72,354 $2,690,340
Redemptions (2,099.07) (951,690) 0 ($951,690)
Balance at December 31, 1995 21,884.34 10,700,674 315,117 $11,015,791
Net profit 0.00 2,488,584 77,645 $2,566,229
Redemptions (1,710.65) (894,587) 0 ($894,587)
Balance at December 31, 1996 20,173.69 12,294,671 392,762 $12,687,433
Net asset value per unit at December 31, 1996
Net asset value per unit at December 31, 1995
Net asset value per unit at December 31, 1994
*Units of limited partnership interest
See accompanying notes to financial statements.
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF CASH FLOWS
1996 1995 1994
--------------- ------------- --------------
Cash flows from operating activities:
Net profit (loss) 2,566,229 2,690,340 (1,544,029)
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 199,699 (19,036) (11,502)
Interest receivable (4,380) (1,973) (11,970)
Accrued liabilities 356,365 44,556 (69,544)
--------------- ------------- --------------
Net cash provided by (used in)
operating activities 3,117,913 2,713,887 (1,637,045)
Cash flows from financing activities:
Partner Redemptions (752,926) (978,820) (835,350)
--------------- ------------- --------------
Net cash provided by (used in)
financing activities (752,926) (978,820) (835,350)
--------------- ------------- --------------
Net increase (decrease) in cash 2,364,987 1,735,067 (2,472,395)
Cash at beginning of period 10,585,211 8,850,144 11,322,539
--------------- ------------- --------------
Cash at end of period $12,950,198 $10,585,211 $8,850,144
=============== ============= ==============
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. 2 to the Registration Statement declared
effective on May 4, 1988.
Part I
Item 1. Business
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 (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.
CIS is a "Futures Commission Merchant," the General Partners
are "Commodity Pool Operators," IDS 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 ("SEC").
Through March 3, 1989 trading decisions for the Partnership
were made by five independent commodity trading advisors,
Commodity Monitors, Inc., John W. Henry & Company, Inc., Mint
Investment Management Company, Neims-Stoken Partnership and Sabre
Fund Management Limited. Mint Investment Management Company no
longer traded assets of the Partnership after March 3, 1989 and
Neims-Stoken Partnership no longer traded assets of the
Partnership after October 13, 1989. In addition, Commodity
Monitors, Inc. ceased trading at the end of April 1991. Chang
Crowell Management Corporation began trading assets of the
Partnership in August 1991 and ceased trading on November 16,
1994. At December 31, 1996, John W. Henry & Company, Inc. and
Sabre Fund Management Limited made all trading decisions for the
Partnership.
The General Partners each contributed $77,035 (a total of
$154,070) in cash to the capital of the Partnership, which was
approximately 1.05% of the total contributions to the Partnership
(less selling commissions) by all Partners. The General Partners
received in exchange for such contribution 644.4502 Units
(322.2251 Units each).
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 trading advisors to direct the Partnership's trading with
respect thereto. Initially, the General Partners chose and
caused the Partnership to enter into an Advisory Contract with
each of Commodity Monitors, Inc., John W. Henry and Company,
Inc., Mint Investment Management Company, Neims-Stoken
Partnership and Sabre Fund Management Limited (collectively, the
"Advisors"). Commencing on March 1, 1988, after the conclusion
of the initial 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. Mint Investment Management Company gave notice to
the Fund that they were withdrawing as an Advisor due to a
restructuring of their business. After February 28, 1989 Mint
Investment Management Company no longer traded assets of the
Partnership. Further, Neims-Stoken Partnership was closed out on
October 13, 1989 due to poor trading performance. The assets
remaining from both Mint and Neims-Stoken were allocated among
the remaining Advisors.
The assets formerly managed by John W. Henry & Company, Inc.
("JWH") pursuant to its Original Trading Method were allocated to
another program operated by JWH, the KT Financial and Metals
Portfolio as of February 1989. Further, Commodity Monitors, Inc.
ceased trading assets of the Partnership due to poor trading
performance in April 1991 and Chang Crowell Management
Corporation ("Chang Crowell") began trading assets in August
1991. As of November 16, 1994 Chang Crowell was terminated as an
Advisor to the Partnership and on December 12, 1994 the assets
formerly managed by Chang Crowell were allocated to Sabre Fund
Management Limited ("Sabre").
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 the 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 ($58.75 per round turn
trade to CIS which in turn reallocates $37.25 per round turn
trade to AXP Advisors) and NFA, exchange, clearing, delivery,
insurance, storage, service and other fees and charges incidental
to the Partnership's trading. The Partnership shall not pay
brokerage commissions to CIS and AXP Advisors at rates higher
than those established in the Prospectus for a period of 60
months from the date the Partnership commences trading except for
trades placed at certain foreign exchanges for which the
Partnership is charged a surcharge equal to the increased
incremental cost to CIS; thereafter, such brokerage commissions
may be increased at rates equivalent to increases in the Consumer
Price Index or other comparable measure of inflation.
The original Advisory Contract between the Partnership and each
of the Advisors provides that the Advisors shall each have sole
discretion in and responsibility for the selection of the
Partnership's commodity transactions with respect to the portion
of the Partnership's assets allocated to it. The Advisory
Contracts were amended on April 30, 1996, effective March 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 each Advisor in the event that the Partnership is terminated
in accordance with the 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 Advisory Contract by the
Advisor; (v) the Advisor dissolves, merges, consolidates with
another entity, sells a substantial portion of its assets,
changes control, becomes 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 that (i) 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) assets in excess of 50% of
the initially allocated assets are reallocated from the Advisor;
(iii) the registration of either General Partner is revoked,
suspended, terminated or not renewed; (iv) the General Partners
elect to have the Advisor use a trading approach which is
different from that initially used; (v) the General Partners
override a trading instruction or impose additional trading
limitations; (vi) 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 paid JWH and Chang Crowell a monthly management
fee of 1/3 of 1% of the Partnership's Net Asset Value ("NAV")
under management as of the end of the month. Effective November
6, 1994 Chang Crowell ceased making trading decisions for the
Partnership. Initially the Partnership paid Sabre a monthly
management fee of 1/3 of 1% of the month-end net assets under
management. Effective December 1, 1991, the Advisory Contract
with Sabre was changed to reduce management fees paid to them to
1/6 of 1% of month-end net assets until such time as the assets
allocated to Sabre showed a profit of 25%. The Partnership
raised Sabre's management fee to 1/3 of 1% on September 1, 1993
because the 25% profit was achieved. Pursuant to an agreement
between the Partnership and Sabre dated December 26, 1995 and
effective January 1, 1996, Sabre's monthly management fee was
again reduced from 1/3 of 1% to 1/6 of 1% of the Partnership's
Net Asset Value subject to Sabre's trading performance. This
reduction in management fees will continue until such time that
the cumulative trading performance of Sabre reaches 40%. The
Partnership pays each Advisor a quarterly incentive fee of 15% of
trading profits achieved on the NAV of the Partnership allocated
by the General Partners to such Advisor's management. The
calculation and payment of such incentive fees shall not be
affected by the performance of any other Advisor.
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 that 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 that 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 that 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 no 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 were deposited in the Partnership's
account with CIS, the Partnership's clearing broker. CIS credits
the Partnership at month end with interest income on 100% of the
Partnership's average monthly cash balance at a rate equal to 80%
of the average 90-day Treasury Bill rate for Treasury Bills
issued during the month. The organization and offering expenses
for the Partnership were advanced by the General Partners. The
General Partners began being reimbursed for these expenses in
March 1989 with payments at the end of each month from interest
income credited to the Partnership by CIS.
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.
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.
For a description of commodity trading and its regulation, see
the Registration Statement on Form S-1 included in the exhibits
hereto.
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.
In addition, 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 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, 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
20,173.69 Units held by Limited Partners and
644.45 Units held by the General Partners. A
total of 1,710.65 Units had been redeemed by
Limited Partners during the period from
January 1, 1996 to December 31, 1996
(39,907.08 Units were redeemed prior to
calendar year 1996). The Partnership's
Limited Partnership Agreement (Exhibit 3.1
hereto) contains a full description of
purchase, redemptions 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) $ 80 $4,715 $(508) $3,731 $3,870
2. Income (Loss) From
Continuing Operations(000) (790) 3,312 (1,544) 2,690 2,566
3. Income (Loss) Per Unit (19.55) 118.26 (61.10) 112.27 120.48
4. Total Assets (000 9,464 11,883 9,434 11,190 13,360
5. Long Term Obligations 0 0 0 0 0
6. Cash Dividend Per Unit 0 0 0 0 0
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 deposited in cash with CIS and as
long as CIS acts as the Partnership's clearing broker, the
Partnership will earn 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. For the
calendar year ended December 31, 1996 CIS had paid or accrued to pay
interest of $452,869 to the Partnership. Similarly, for the calendar
year ended December 31, 1995, CIS had paid or accrued to pay interest
of $470,866 to the Partnership.
The General Partners each contributed a total of $77,035 for which
they each received 322.2251 Units of Partnership interest. The
purchase of Units was set forth in the Prospectus to meet the 1%
minimum investment by the General Partners. The total amount
subscribed was contributed to the capital of the Partnership.
The Limited Partners contributed a total of $15,406,999 for which
they received 61,791.42 Units of Partnership interest.
For the year ended December 31, 1996, investors redeemed a total of
1,710.65 Units for $894,587. In 1995 investors redeemed a total of
2,099.07 Units for $951,690.
On December 31, 1996, the Partnership had unrealized profits of
$365,959 and cash on deposit at CIS of $12,950,198. These positions
required margin deposits at CIS of $906,578. The total balance of
the Partnership's account was $13,316,157. These figures compare to
unrealized profits of $565,658, cash on deposit of $10,585,211,
margin requirement of $1,204,662 and total balance of the
Partnership's account of $11,150,869 as of December 31, 1995.
On December 31, 1994, the Partnership had unrealized profits of
$546,622 and cash on deposit of $8,850,144. These positions required
margin requirements at CIS of $1,375,181. The total balance of the
Partnership's account was $9,396,766.
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 market 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 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 24.6% 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 $2,566,229.
In 1995 the Advisors were well-positioned to capitalize on many
trading opportunities, especially in the financial sector, which
produced a net gain of 29.8% 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 $2,690,340.
The year 1994 was a challenging year for the Partnership, which
posted a loss of 14%. 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 $1,544,029.
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.
Realized trading gains for the year caused the increase in "Cash
on deposit with the Clearing Broker" of $2.4 million during 1996.
Even with the lower balance in "Unrealized gain on open futures
contracts" at the end of the year caused by the Partnership's
traders realizing more of their trading gains prior to the end of
the year than they did at the end of 1995, the Partnership
recorded a gain of $2.2 million for 1996.
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 $345,000 in "Accrued incentive
fees" recorded as of the end of the year from 1995 to 1996 in the
Statement of Financial Condition. Investor redemptions for
December increased from 1995 to 1996 by $140,000 as investors
chose to realize the gains they earned in the Partnership.
The Partnership recognized an increase in excess of $4 million in
trading gains from 1994 to 1995, and another increase of almost
$.5 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 $53,000 from 1994
to 1995 and another $198,000 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.
Increased balances at the Clearing Broker from trading gains
resulted in increases in "Interest income" ($125,000 in 1994 to
1995).
During periods of loss, traders tend to trade more actively,
exiting positions before the losses become large. This activity,
coupled with a lower capital balance from the losses experienced
in 1994 and the lower level of trading that could take place,
caused the decrease of $124,000 in "Commission paid to AXP
Advisors and CIS" during 1995. The increase in total capital of
the Partnership from the trading gains in both 1995 and 1996
allowed the traders to increase the size of their trades during
the year. These larger number of contracts traded caused the
increase in "Commissions paid to AXP Advisors and CIS" of
$100,000 in 1996.
The trading gains for 1995 and the Illinois Personal Property
Replacement Tax accrued from them caused the increase of $73,000
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
$34,000 in 1996 on currencies held by the Partnership in other
than US Dollars, when 1995 and 1994 had shown gains of $86,000
and $146,000 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 34 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 he 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 will be paid to persons not affiliated with the
Partnership.
CIS, an affiliate of CISI, is the Partnership's clearing broker.
During the year ended December 31, 1996, the Partnership accrued
and paid $443,885 in brokerage commissions and exchange fees to
CIS. Of these commissions, $37.25 per round-turn trade is paid
to AXP Advisors as the Partnership's Introducing Broker and
$21.50 is retained by CIS as Clearing Broker for trades placed by
JWH and Sabre.
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 644.45 Units or approximately
3.10% of the Units outstanding as of that date.
In addition, Michael L. Weiner, Vice President,
Secretary and Treasurer of IDS Futures,
beneficially owned 1 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. For the years ended December 31,
1996, 1995 and 1994:
Statements of Operations
Statements of Changes in Partners' Capital
Statements of Cash Flows
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 thereto.
(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 II, L.P.
(Registrant)
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 Secretary and Treasurer
and 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 Limited Partnership Agreement dated July
14, 1987. (Incorporated by reference to
the Post-Effective Amendment No. 2 to
the Registration Statement No. 33-13939
declared effective on May 4, 1988.)
10.1 Advisory Agreements dated as of July 14,
1987 between IDS Managed Futures II,
L.P. and each of Commodity Monitors,
Inc., John W. Henry & Company, Inc.,
Mint Investment Management Company,
Neims-Stoken Partnership and Sabre Fund
Management Limited. Advisory Agreement
dated as of August 9,1991 between IDS
Managed Futures II, L.P. and Chang
Crowell Management Corporation. Amended
Advisory Contracts dated March 31, 1992
and April 30, 1996 between IDS Managed
Futures II, L.P. and each of John W.
Henry & Company, Inc. and Sabre Fund
Management Limited. (Incorporated by
reference to the Post-Effective
Amendment No. 2 to the Registration
Statement No. 33-13939 declared
effective on May 4, 1988.)
Exhibits 3.1, 10.1 and the Prospectus filed under Form S-1, including
its supplements dated May 4, 1988 and November 11, 1988, are herein
incorporated by reference to Registration Statement No. 33-13938
declared effective on July 14, 1987, Post-Effective Amendment No. 1
declared effective on April 27, 1988 and Post-Effective Amendment
No. 2 declared effective on May 4, 1988.
Index to Financial Statements
IDS Managed Futures II, 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 34