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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, 1997
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]
The aggregate market value of the voting and non voting common
equity held by non affiliates of the Registrant as of February
28, 1997 is: $48,886,485
Index to exhibits on page 23
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.
Incorporated by Reference in Part IV, Item 14 is Post-Effective
Amendment No. 3 to Registration Statement No. 33-86894 of the
Partnership on Form S-1 under the Securities Act of 1933, filed
on July 31, 1997.
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 for the fiscal year ended December
31, 1997 were made by two independent commodity trading
advisors, John W. Henry & Company, Inc. and Sabre Fund
Management Limited, until July 7, 1997. On July 2, 1997 the
General Partners entered into an agreement to add Welton
Investment Corporation as an additional independent commodity
trading advisor for the Partnership and effective July 8, 1997
the assets of the Partnership were re-allocated among the three
independent commodity trading advisors. The General Partners
elected not to renew the Advisory Contract of Sabre Fund
Management Limited and it expired on December 31, 1997.
Effective January 1,1998, all of the assets of the Partnership
are managed by John W. Henry & Company, Inc. and Welton
Investment Corporation.
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, June 26, 1995 and August 26, 1997.
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 on the last
business day of the month; 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"). 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 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. On July 2,
1997 the General Partners entered into an agreement to add
Welton Investment Corporation ("Welton") as an additional
independent commodity trading advisor for the Partnership and
effective July 8, 1997 the assets of the Partnership were
re-allocated among the three independent commodity trading
advisors. In accordance with the terms of the Advisory Contract
between the Partnership and Sabre, the General Partners elected
not to renew the Advisory Contract for Sabre and it expired on
December 31, 1997. Effective January 1,1998, all of the assets
of the Partnership are managed by JWH and Welton. Collectively,
JWH, Sabre and Welton are herein referred to as the "Advisors".
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 with JWH and
Sabre were amended on April 30, 1996 (but made effective back to
the date of January 31, 1996) to extend the term of each
Advisory Contract through December 31, 1996 with the automatic
renewal for three additional twelve-month 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 General Partners
elected not to renew the Advisory Contract for Sabre and it
expired on December 31, 1997. The Advisory Contract with Welton
commenced on July 2, 1997 and will continue until December 31,
1998, with automatic renewal for three additional twelve-month
terms (beginning January 1 and ending December 31 of each year)
through December 2001, unless earlier terminated in accordance
with the termination provisions contained therein. The renewal
right is applicable irrespective of any change in trading
advisors of the Partnership or any reallocation of Partnership
assets among the trading advisors or to other trading advisors.
The Advisory Contracts shall terminate automatically 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 a 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 the end of the month and a quarterly incentive
fee of 18% of trading profits achieved on the NAV of the
Partnership allocated to such Advisor's 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 General Partners elected not to
renew the Advisory Contract of Sabre and it expired on December
31, 1997. Pursuant to an agreement between the Partnership and
Welton, the Partnership pays Welton a monthly management fee of
1/4 of 1% of the month-end net asset value of the Partnership
under its management and a quarterly incentive fee of 18% of
trading profits achieved on the NAV of the Partnership allocated
to such Advisor's management. 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 calculation and
payment of incentive fees is not affected by the performance of
the other Advisors.
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,
1997, 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, 1997, there were 137,994.05 Units held
by Limited Partners and 2,619.16 Units held by the General
Partners. A total of 10,395.53 Units had been redeemed by
Limited Partners during the period from January 1, 1997 to
December 31, 1997 (42,220.84 Units were redeemed prior to
calendar year 1997). 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,
1993 1994 1995 1996 1997
1. Operating Revenues(000) $3,444 $ 279 $8,419 $10,190 $7,619
2. Income (Loss) From
Continuing Operations(000)2,362 (1,530) 5,755 6,701 3,778
3. Income (Loss) Per Unit 65.22 (16.30) 50.46 54.14 28.09
4. Total Assets(000) 15,135 24,185 33,276 41,669 50,592
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,
1997 CIS had paid or accrued to pay interest of $2,032,524 to
the Partnership. Similarly, for the calendar year ended
December 31, 1996 CIS had paid or accrued to pay interest of
$1,575,843 to the Partnership.
For the fiscal year ended December 31, 1997, investors redeemed
a total of 10,395.53 Units for $3,515,603. For the fiscal year
ended December 31, 1996, investors redeemed a total of 13,946.78
Units for $4,000,267.
During 1997, Limited Partners purchased 26,213.79 Units for
$9,652,700. The General Partners purchased 303.82 Units for
$100,000 in 1997.
On December 31, 1997, the Partnership had unrealized profits of
$2,454,648 and cash on deposit of $47,936,067. These positions
required margin deposits at CIS of $4,973,284. The total
balance of the Partnership's account at CIS was $50,390,715.
These figures compare to unrealized profits of $868,069, cash on
deposit of $39,998,782, margin requirements of $2,645,728 and
total balance of the Partnership's account of $41,516,951 as of
December 31, 1996. On December 31, 1995, the Partnership had
unrealized profits of $1,705,569 and cash on deposit at CIS of
$31,440,196. These positions required margin deposits at CIS of
$3,655,729. The total balance of the Partnership's account was
$33,145,765.
During the fiscal year ended December 31, 1997, 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.
Year 2000 Issue
The Partnership does not have any anticipated costs, problems
or uncertainties associated with the Year 2000 issue. The
Partnership relies on the General Partners to provide the
Partnership with certain calculations and reports, so if the
Year 2000 issue is material to the General Partners, then it may
impact the Partnership. However, the Year 2000 issue is not
material for the General Partners since the administration
software is currently being replaced and will be in compliance
with Y2000 prior to the end of 1998. In addition, the Clearing
Broker is undergoing an intensive review to determine what areas
(if any) are not in compliance with Y2000, and expects to be in
compliance by the end of 1998. Neither the software replacement
nor the compliance review are expected to be material or to
yield noncompliance issues that are material.
Results of Operations
The Partnership posted positive returns for 1997, 1996 and 1995.
In 1997 the global futures markets showed a great deal of
volatility and the Advisors were well positioned to profit from
several of these moves. The Partnership produced a net gain of
8.68% for the calendar year. The year 1997 was marked by
declining gold prices and interest rates around the globe and a
rising U.S. dollar relative to the German mark and Japanese yen.
The strength of these market moves proved beneficial to the
Partnership. The price of gold declined to the lowest level in
over a decade reflecting its declining value as an alternative
monetary asset as central banks increased their willingness to
sell or lease the precious metal. Solid gains were generated in
the global interest rate markets, particularly in the Japanese
Government bond where yields plummeted to historic lows as the
nation sank relentlessly into a recession. Strong gains were
also recorded in Australian 10-year bonds and 3-year notes and
in German and Italian bonds. Gains were realized in positions
in the German mark, which weakened in world markets as hopes for
European monetary union rose. The U.S. dollar dominated the
world currencies reflecting sound economic fundamentals in the
U.S. The Partnership benefited from the upward price movement
in natural gas during the summer and fall. However, energy
markets were disappointing as ample world inventories and mild
weather kept supply and demand in balance. In addition, losses
were incurred in agricultural markets, despite strong
performance by coffee futures earlier in the year. The
Partnership ended the year with a profit of $3,778,125.
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.
In addition to the above general analysis of the markets that
resulted in the trading gains of the Partnership, following is
an analysis of the changes in the various line items of the
financial statements which should enhance the readers
understanding of the results of the past fiscal year.
The primary sources of growth for the Partnership during the
past 3 years have been additional sales (net sales of $19.3
million not including redemptions of $9.8 million) and trading
gains (almost $16.25 million). This growth is reflected in the
increases reported in "Cash on deposit with Clearing Broker" and
"Total partners' capital" on the Statement of Financial
Condition. This significant increase in capital on deposit
caused the increase in both the interest earned during the year
and the "Interest receivable" at the end of the year.
Trading gains at the end of the year were significantly greater
in 1996 than in 1997. As a result, "Accrued incentive fees" for
1997 were reduced by $670,000. In addition, since the total
earnings of the Partnership were $3 million less in 1997 than
1996 and $2 million less than 1995, total incentive fees paid in
1997 were almost $600,000 less than paid during 1996 and $50,000
less than 1995. At the end of 1997, the Partnership had a $1.6
million greater "Unrealized gain..." balance than at the end of
1996. This greater balance is directly reflected in the
"Increase (decrease) in unrealized gain on open futures
contracts" on the Statement of Operations and is significantly
greater than the changes in unrealized gains for both 1996 and
1995.
Although the number of investors was larger in 1997 than 1996,
the total redemptions for the year were $0.5 million less.
However, since the fund had enjoyed a strong 1995, 1996 and
first half of 1997, when the Partnership experienced losses in
the last half of 1997, some investors took it as a signal to
move out of their investment. As a result, "Redemptions
payable" at the end of the year were $360,000 greater than at
the end of 1996.
In 1997, funds had already been transferred from escrow to the
Partnership on the last day of the year. Therefore, unlike at
the end of 1996, there is no "Receivable for units sold" balance
at the end of the year.
The greater asset level of the fund in 1997 over 1996 caused
the increase in both "Accrued management fees" at the end of the
year and in "Management fees" for the entire year as well as
"Commission paid", "Accrued commissions" and "General partner
fee", all of which are dependent on the level of assets for
calculation, or on the amount of trading done which is very
dependent on the level of assets.
Despite the increase in unrealized trading income as discussed
above, total trading income for 1997 was down significantly from
1996 and 1995, showing reductions of $2.6 million and $0.8
million, respectively.
The dollar continued to strengthen compared to the other
currencies traded by the Partnership through 1997, causing a
loss of $546,000 during the year, compared to a loss of $108,000
in 1996 and a gain of $189,000 in 1995.
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 7(A). Quantitative and Qualitative Disclosures About Market
Risk
Not Applicable.
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements and the notes
thereto appearing on Pages 25 through 352 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, 1997 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.
Lori J. Larson resigned as President and Director of IDS
Futures Corporation on January 20, 1998. Peter L. Slattery, a
Director of IDS Futures Corporation, replaced Ms. Larson as
President effective the same date.
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 and Services, thus charged with
overall finance responsibilities for Mutual Funds, Limited
Partnerships, Variable Annuities, Retail Retirement Plans,
Personal Trust 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.
Peter L. Slattery (born in July 1965), Director. Mr. Slattery
is the Director of Non-Proprietary Products for American Express
Financial Advisors, Variable Assets division. During his tenure
at AEFA, he has led the transition to multiple classes for the
IDS mutual fund line, developed five new retail funds and led
the creation of the flagship Flexible Portfolio Annuity. He
currently is responsible for all Non-proprietary relationships
involving products sold through AEFA's various distribution
channels. Mr. Slattery holds a BS from Babson College and an
MBA from the University of Colorado.
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 and
has been President and Director of CISI since June 1983.
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, is currently Vice
President of Cargill Investor Services, Inc., and has been Vice
President and Director of CISI since June 1983. Mr. Anderson
recently served on the Board of Directors of the Managed Futures
Association.
Richard A. Driver (born in September 1947), Vice President,
Treasurer and Director. Mr. Driver has served as Vice President
and Director of CISI since June 1993 and was elected Treasurer
of CISI in August 1997. 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. Mr. Driver currently serves as Vice
President, Controller, Treasurer and Director of Cargill
Investor Services, Inc.
Jan R. Waye (born in June 1948), Senior Vice President. Mr.
Waye assumed the position of Senior Vice President of Cargill
Investor Services, Inc. in September 1996, after returning from
London where he held various management positions for Cargill
Investor Services, Ltd. including most recently Managing
Director for CIS Europe. He was appointed Senior Vice President
of CISI in June 1997. Mr. Waye joined Cargill, Incorporated in
1970 and served in various commodity trading and management
positions in Chesapeake, VA; Winnipeg, Manitoba; and Vancouver,
BC. In 1978 he moved to New York and shortly thereafter
Minneapolis as head of Foreign Exchange for Cargill's metals
trading business. This unit formed the nucleus of Cargill's
Financial Markets Group as it started operations in 1983. Mr.
Waye served in various management positions in the Financial
Markets Group until 1988 when he assisted in the management and
sale of Cargill's life insurance business in Akron, Ohio. He
moved to London in late 1988. Mr. Waye has served as a member
of the Board of LIFFE, the London International Financial
Futures and Options Exchange, and as Vice Chairman of its
Membership and Rules Committee. He also Served on the Board of
the London Commodity Exchange up to its merger with LIFFE. Mr.
Waye graduated from Concordia College, Moorhead, MN, with a B.A.
degree in Communications and Economics in 1970.
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 as the Sales Manager for the Fund Services Group. She
was appointed Vice President of CISI in May 1990 and Vice
President of Cargill Investor Services, Inc. in June 1996. Ms.
Pfendler is currently the manager in charge of all activities of
the Fund Services Group at Cargill Investor Services, Inc.
Rebecca S. Steindel (born in April 1965), Secretary. Ms.
Steindel graduated from the University of Illinois in 1987. She
began working at Cargill Investor Services, Inc. in August 1987.
She has held various financial and risk management positions at
Cargill Investor Services, Inc. and was elected Risk and
Compliance Officer and Secretary of Cargill Investor Services,
Inc. in August 1997. Ms. Steindel was elected Secretary of CISI
in September 1997. She currently serves on the Board of
Directors and Executive Committee of the FIA Financial
Management Division.
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 of CISI
in June 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 of CISI in June
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 $554,056 in 1997,
$447,067 in 1996 and $326,936 in 1995 for this fee.
CIS, an affiliate of CISI, is the Partnership's clearing
broker. During the year ended December 31, 1997, the
Partnership accrued and paid $1,142,101 in brokerage commissions
to CIS, as compared to $851,858 in 1996 and $701,468 in 1995.
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, 1997 and therefore paid no
commissions to CISFS.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) As of December 31, 1997, no person was known to the
Partnership to own beneficially more than 5% of the
outstanding Units.
(b) As of December 31, 1997, the General Partners
beneficially owned 2,619.16 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 .014% of the outstanding
Units.
(c) As of December 31, 1997, 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 31,1997 and 1996.
c. Statements of Operations,
Statements of Partners' Capital
and Statements of Cash Flows for
the years ended December 31, 1997,
1996 and 1995.
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) The following Form 8-K was filed with the Securities
and Exchange Commission on behalf of the
Partnership during the fiscal quarter ended December
31, 1997:
a) Form 8-K dated December 31, 1997 to report
that, in accordance with the terms of the
Advisory Contract between the Partnership
and Sabre Fund Management Limited, the
General Partners elected not to renew the
Advisory Contract and it expired on December
31, 1997.
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 26, 1998 IDS Managed Futures, L.P.
By: IDS Futures Corporation By: CIS Investments, Inc.
(General Partner) (General Partner)
By: /s/ Peter L. Slattery By: /s/ Hal T. Hansen
Peter L. Slattery Hal T. Hansen
President President
By: /s/ Michael L. Weiner By: /s/ Richard A. Driver
Michael L. Weiner Richard A. Driver
Vice President, Secretary and Vice President
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 26, 1998
/s/ Peter L. Slattery /s/ Hal T. Hansen
Peter L. Slattery Hal T. Hansen
Director and President Director and President
/s/ Peter J. Anderson /s/ L. Carlton Anderson
Peter J. Anderson L. Carlton Anderson
Director Director and Vice President
/s/ Michael L. Weiner /s/ Richard A. Driver
Michael L. Weiner Richard A. Driver
Vice President, Secretary and Vice President and
Treasurer Treasurer
Index to Exhibits
Number Exhibit
3.1 Amended and Restated Limited Partnership
Agreement.
10.1 Advisory Contract dated as of March 27, 1987
between CIS Investments, Inc., IDS Futures
Corporation, IDS Managed Futures, L.P., John W.
Henry & Company, Inc. and Sabre Fund Management
Limited.
10.2 Amended Advisory Contracts dated January 23, 1992
between CIS Investments, Inc., IDS Futures
Corporation, IDS Managed Futures, L.P. and each
of John W. Henry & Company, Inc. and Sabre Fund
Management Limited.
10.3 Amended Advisory Contract dated April 30, 1996
between CIS Investments, Inc., IDS Futures
Corporation, IDS Managed Futures, L.P., John W.
Henry & Company, Inc. and Sabre Fund Management
Limited.
10.4 Advisory Contract dated as of July 2, 1997 between
CIS Investments, Inc., IDS Futures Corporation, IDS
Managed Futures, L.P. and Welton Investment
Corporation (Incorporated by reference to
Post-Effective Amendment No. 3 to the Registration
Statement as filed by the Partnership on July 31,
1997).
Note: Exhibits 3.1, 10.1, 10.2 and 10.3 are
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 25
Statements of Financial Condition as of
December 31, 1997 and 1996 Page 26
Statements of Operations, for the years ended
December 31, 1997, 1996 and 1995 Page 27
Statements of Changes in Partners' Capital,
for the years ended December 31, 1997,
1996 and 1995 Page 28
Statements of Cash Flows, for the years ended
December 31, 1997, 1996 and 1995 Page 29
Notes to Financial Statements Page 30
Acknowledgment Page 35
Independent Auditors' Report
The Partners
IDS Managed Futures, L.P.:
We have audited the accompanying statements of financial
condition of IDS Managed Futures, L.P. as of December 31, 1997
and 1996, and the related statements of operations, partners'
capital, and cash flows for each of the years in the three-year
period ended December 31, 1997. These financial statements are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of IDS Managed Futures, L.P. as of December 31, 1997 and 1996,
and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
January 30, 1998
KPMG Peat Marwick LLP
IDS MANAGED FUTURES, L.P.
Statements of Financial Condition
December 31, 1997 and 1996
Assets 1997 1996
----------- -------
Assets:
Receivable for units sold $0 650,100
Equity in commodity futures trading accounts:
Cash on deposit with Clearing Broker 47,936,067 39,998,782
Unrealized gain on open futures
and options contracts 2,454,648 868,069
---------- ----------
50,390,715 41,516,951
Interest receivable 201,717 152,358
---------- ----------
Total Assets $50,592,432 41,669,309
=========== ==========
Liabilities and Partners' Capital
Liabilities:
Accrued commissions on open futures and options contracts
due to AXP Advisors and CIS $99,412 67,464
Accrued exchange, clearing, and NFA fees 3,642 2,539
Accrued management fees 150,667 108,053
Accrued incentive fees 184,102 851,045
Accrued operating expenses 114,033 155,590
Accrued selling commissions and organization
and offering expenses 86,819 57,309
Redemptions payable 490,756 132,361
--------- ---------
Total liabilities 1,129,431 1,374,361
Partners capital:
Limited partners (137,994.05 and 122,175.79
units outstanding at December 31, 1997
and 1996, respectively) (see note 1) 48,541,669 39,545,527
General partners (2,619.16 and 2,315.34
units outstanding at December 31, 1997
and 1996) (see note 1) 921,332 749,421
---------- ----------
Total partners capital 49,463,001 40,294,948
---------- ----------
Total liabilities and partners' capital $50,592,432 41,669,309
=========== ==========
See accompanying notes to financial statements.
IDS MANAGED FUTURES, L.P.
Statements of Operations
Years ended December 31, 1997 and 1996, and 1995
1997 1996 1995
-------- --------- --------
Revenues:
Gain on trading of commodity futures contracts:
Realized gain on closed positions $4,545,484 9,559,339 6,474,664
Increase (decrease) in unrealized gain
on open futures contracts 1,586,579 (837,500) 365,549
Interest income 2,032,524 1,575,843 1,389,521
Foreign currency transaction gain (loss) (546,087) (108,047) 189,505
---------- ----------- ---------
Total revenues 7,618,500 10,189,635 8,419,239
Expenses:
Commission paid to AXP Advisors and CIS 1,142,101 851,858 701,468
Exchange, clearing, and NFA fees 41,957 30,222 18,571
Management fees 1,609,144 1,088,343 1,027,360
Incentive fees 396,625 978,214 449,841
General partner fee to IDSFC and CISI 554,056 447,067 326,936
Operating expenses 96,492 92,456 139,796
-------- -------- --------
Total expenses 3,840,375 3,488,160 2,663,972
--------- --------- ---------
Net profit $3,778,125 6,701,475 5,755,267
========== ========= =========
Profit (loss) per unit of limited partnership interest (s 28.09 54.14 50.46
Profit (loss) per unit of general partnership interest (s 28.09 54.14 50.46
See accompanying notes to financial statements.
IDS MANAGED FUTURES, L.P.
Statements of Partners' Capital
Years ended December 31, 1997, 1996 and 1995
Total
Limited General Partners'
Units* partners partners capital
-------- -------- -------- --------
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 costs 0 (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 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 costs 0 (488,220) 0 (488,220)
--------- ---------- -------- ----------
Net sales of partnership interests 17,812.20 5,079,788 0 5,079,788
Net profit 0 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
Sale of partnership interests 26,213.79 9,652,700 100,000 9,752,700
Selling commissions and organization
and offering costs 0 (844,169) (3,000) (847,169)
--------- ---------- -------- ----------
Net sales of partnership interests 26,213.79 8,808,531 97,000 8,905,531
Net profit 0 3,703,214 74,911 3,778,125
Redemptions (10,395.53) (3,515,603) 0 (3,515,603)
----------- ------------ ------- -----------
Balance at December 31, 1997 137,994.05 $48,541,669 921,332 49,463,001
========== =========== ======= ==========
Net asset value per unit at December 31, 1997 (see note 1 $351.77 351.77
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
*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
Years ended December 31, 1997, 1996, and 1995
1997 1996 1995
-------- ------- ------
Cash flows from operating activities:
Net profit $3,778,125 6,701,475 5,755,267
Adjustments to reconcile net profit to
net cash provided by operating activities:
Change in assets and liabilities:
Decrease (increase) in unrealized gain
on open futures contracts (1,586,579) 837,500 (365,549)
Increase in interest receivable (49,359) (22,249) (26,543)
Increase (decrease) in accrued liabilities (632,835) 793,189 83,358
---------- --------- ----------
Net cash provided by operating activities 1,509,352 8,309,915 5,446,533
Cash flows from financing activities:
Net proceeds from sale of units 9,585,141 4,486,997 5,313,544
Partner redemptions (3,157,208) (4,238,326) (2,061,191)
----------- ----------- -----------
Net cash provided by financing activities 6,427,933 248,671 3,252,353
--------- --------- ---------
Net increase in cash 7,937,285 8,558,586 8,698,886
Cash at beginning of year 39,998,782 31,440,196 22,741,310
---------- ---------- ----------
Cash at end of year $47,936,067 39,998,782 31,440,196
========== ========== ==========
See accompanying notes to financial statements.
(1) General Information and Summary
IDS Managed Futures, L.P. (the Partnership), a limited
partnership organized on December 16, 1986 under the- Delaware
Revised Uniform Limited Partnership Act, was formed to engage in
the speculative trading of commodity interests including futures
contracts, forward contracts, physical commodities, and related
options thereon pursuant to the trading instructions of
independent trading advisors. The Partnership began trading on
June 16, 1987. The General Partners are IDS Futures Corporation
(IDSFC) and CIS Investments, Inc. (CISI). The clearing broker
is Cargill Investor Services, Inc. (Clearing Broker or CIS), the
parent company of CISI.
Each unit of limited partnership interest was divided into
three units ("3-for-1 split") at the close of business on
February 28, 1995, each unit having 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. For comparative purposes, the respective prior
years' unit amounts and net asset value per unit amounts have
been restated for the 3-for-1 split.
Units of the Partnership representing an additional investment
of $10,000,000 were offered by American Express Financial
Advisors, Inc. (AXP Advisors), formerly IDS Financial Services
Inc., commencing March 29, 1993. An additional investment of
$20,000,000 was offered by AXP Advisors commencing January 31,
1994. Commencing June 26, 1995, AXP Advisors offered an
additional investment of $50,000,000. By December 31, 1997, a
total of 140,808 units representing a total investment of
$40,078,819 of limited partnership interest had been sold in the
combined offerings. During the offerings, the General Partners
purchased a total of 1,341 additional units representing a total
investment of $359,880. Selling commissions of $2,346,202 were
paid to AXP Advisors by the new limited partners. All new
investors paid organization and offering expenses totaling
$1,857,701. See the IDS Managed Futures, L.P. prospectus dated
August 26, 1997 for further details concerning the offerings.
The Partnership shall be terminated on December 31, 2006 if
none of the following occur prior to that date: (1) investors
holding more than 50% of the outstanding units notify the
General Partners to dissolve the Partnership as of a specific
date; (2) disassociation of the General Partners with the
Partnership; (3) bankruptcy of the Partnership; (4) decrease in
the net asset value to less than $500,000; (5) the Partnership
is declared unlawful; or (6) the net asset value per unit
declines to less than $125 per unit and the Partners elect to
terminate the Partnership.
(2) Summary of Significant Accounting Policies
The accounting and reporting policies of the Partnership
conform to generally accepted accounting principles and to
general practices within the commodities industry. The
following is a description of the more significant of those
policies which the Partnership follows in preparing its
financial statements.
Revenue Recognition
Commodity futures contracts, forward contracts, physical
commodities, and related options are recorded on the trade date.
All such transactions are reported on an identified cost basis.
Unrealized gains and losses reflected in the statements of
financial condition represent the difference between original
contract amount and market value (as determined by exchange
settlement prices for futures contracts and related options and
cash dealer prices at a predetermined time for forward
contracts, physical commodities, and their related options) as
of the last business day of the year or as of the last date of
the financial statements.
The Partnership earns interest on 100% of the Partnership's
average monthly cash balance on deposit with the Clearing Broker
at a rate equal to 90% of the average 90-day Treasury bill rate
for Treasury bills issued during that month.
Redemptions
No redemptions are permitted by a subscriber during the first
six months after he or she has been admitted to the Partnership.
Thereafter, a limited partner may cause any or all of his or
her units to be redeemed by the Partnership effective as of the
last trading day of any month of the Partnership based on the
Net Asset Value per unit on 10 days' written notice to the
General Partners. Payment will be made within 10 business days
of the effective date of the redemption. The Partnership's
Limited Partnership Agreement contains a full description of
redemption and distribution procedures.
Commissions
Brokerage commissions and National Futures Association (NFA)
clearing and exchange fees are accrued on a round-turn basis on
open commodity futures contracts. Prior to June 26, 1995 the
Partnership paid CIS commissions on trades executed on its
behalf at a rate of $50.00 per round-turn contract. With the
June 26, 1995 offering, the rate was changed to $35.00 per
round-turn contract. The first subscribers to that offering
came into the fund at the end of August 1995. Therefore, the
new rate became applicable in September 1995. The Partnership
pays this commission directly to CIS and CIS then reallocates
the appropriate portion to AXP Advisors.
Foreign Currency Transactions
Trading accounts in foreign currency denominations are
susceptible both to movements in the underlying contract markets
as well as to fluctuation in currency rates. Translation of
foreign currencies into U.S. dollars for closed positions are
translated at an average exchange rate for the year, while
year-end balances are translated at the year-end currency rates.
The impact of the translation is reflected in the statements of
operations.
Statements of Cash Flows
For purposes of the statements of cash flows, cash includes
cash on deposit with Clearing Broker in commodity futures
trading accounts.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
(3) Fees
Management fees are accrued and paid monthly, incentive fees
are accrued monthly and paid quarterly, and General Partners'
administrative fees are paid annually and amortized monthly.
Trading decisions for the period of these financial statements
were made by the following Commodity Trading Advisors (CTAs):
John W. Henry & Company, Inc. (JWH); Welton Investment
Corporation (Welton); and Sabre Fund Management Limited (Sabre).
Under signed agreement for the periods presented prior to
January 1, 1996, Sabre received a monthly management fee of 1/4
of 1% of the month-end net asset value of the Partnership under
their management and 18% of the Partnership's net trading
profits, if any, in each quarter attributable to their trading.
Effective January 1, 1996, the agreement with Sabre was changed
to reduce the management fees paid to them to 1/8th of 1% of the
month-end net assets. Effective February 1, 1997 the agreement
with Sabre was changed to increase the management fees paid to
them to 1/4 of 1% of the month-end net assets. The agreement
with Sabre, which expired on December 31, 1997, was not renewed.
Under signed agreement, JWH will receive a monthly management
fee of 1/3 of 1% of the month-end net asset value of the
Partnership under its management and 15% of the Partnership's
net trading profits, if any, attributable to its management.
Under signed agreement, Welton will receive a monthly
management fee of 1/4 of 1% of the month-end net asset value of
the Partnership under its management and 18% of the
Partnership's net trading profits, if any, attributable to its
management.
The Partnership pays an annual administrative fee of 1.125% and
.25% of the beginning of the year net asset value of the
Partnership to IDSFC and CISI, respectively.
(4) Income Taxes
No provision for Federal income taxes has been made in the
accompanying financial statements as each partner is responsible
for reporting income (loss) based on the pro rata share of the
profits or losses of the Partnership. The Partnership is
responsible for the Illinois State Partnership Information and
Replacement Tax based on the operating results of the
Partnership. Such tax amounted to $56,820, $100,027, and
$86,546 for the years ended December 31, 1997, 1996, and 1995,
respectively, and is included in operating expenses in the
statement of operations.
(5) Financial Instruments with Off-balance Sheet Risk
The Partnership was formed to speculatively trade commodity
interests. The Partnership's commodity interest transactions
and its related cash balance are on deposit with the Clearing
Broker at all times. In the event that volatility of trading of
other customers of the Clearing Broker impaired the ability of
the Clearing Broker to satisfy its obligations to the
Partnership, the Partnership would be exposed to off-balance
sheet risk. Such risk is defined in Statement of Financial
Accounting Standards No. 105 (SFAS 105) as a credit risk. To
mitigate this risk, the Clearing Broker, pursuant to the
mandates of the Commodity Exchange Act, is required to maintain
funds deposited by customers relating to futures contracts in
regulated commodities in separate bank accounts which are
designated as segregated customers' accounts. In addition, the
Clearing Broker has set aside funds deposited by customers
relating to foreign futures and options in separate bank
accounts which are designated as customer secured accounts.
Lastly, the Clearing Broker is subject to the Securities and
Exchange Commission's Uniform Net Capital Rule which requires
the maintenance of minimum net capital at least equal to 4% of
the funds required to be segregated pursuant to the Commodity
Exchange Act. The Clearing Broker has controls in place to make
certain that all customers maintain adequate margin deposits for
the positions which they maintain at the Clearing Broker. Such
procedures should protect the Partnership from the off-balance
sheet risk as mentioned earlier. The Clearing Broker does not
engage in proprietary trading and thus has no direct market
exposure.
The contractual amounts of commitments to purchase and sell
exchange traded futures contracts were $137,689,850 and
$231,540,372, respectively, on December 31, 1997 and
$154,754,517 and $243,080,588, respectively, on December 31,
1996. The contractual amounts of these instruments reflect the
extent of the Partnership's involvement in the related futures
contracts and do not reflect the risk of loss due to
counterparty performance. Such risk is defined by SFAS 105 as
credit risk. The counterparty of the Partnership for futures
contracts traded in the United States and most non-U.S.
exchanges on which the Partnership trades is the Clearing House
associated with the exchange. In general, Clearing Houses are
backed by the membership and will act in the event of
nonperformance by one of their members or one of the members'
customers and as such should significantly reduce this credit
risk. In the cases where the Partnership trades on exchanges on
which the Clearing House is not backed by the membership, the
sole recourse of the Partnership for nonperformance will be the
Clearing House.
The average fair value of commodity interests was $2,545,273
and $2,610,468 during 1997 and 1996, respectively. Fair value
as of December 31, 1997 and 1996 was $2,454,648 and $868,069,
respectively. The net gains or losses arising from the trading
of commodity interests are presented in the statement of
operations.
The Partnership holds futures and futures options positions on
the various exchanges throughout the world. The Partnership
does not trade over-the-counter contracts. As defined by SFAS
105, futures positions are classified as financial instruments.
SFAS 105 requires that the Partnership disclose the market risk
of loss from all of its financial instruments. Market risk is
defined as the possibility that future changes in market prices
may make a financial instrument less valuable or more onerous.
If the markets should move against all of the futures positions
held by the Partnership at the same time, and if the markets
moved such that the CTAs were unable to offset the futures
positions of the Partnership, the Partnership could lose all of
its assets and the partners would realize a 100% loss. As of
December 31, 1997, the Partnership has contracts with two CTAs
who make the trading decisions. One of the CTAs trades a
program diversified among all commodity groups, while the other
is diversified among the various futures contracts in the
financial and metals group. Both CTAs trade on U.S. and
non-U.S. exchanges. Such diversification should greatly reduce
this market risk.
At December 31, 1997, the cash requirement of the commodity
interests of the Partnership was $4,973,284. This cash
requirement was met by $44,749,995 held in segregated funds and
$5,641,720 held in secured funds. At December 31, 1996, the
cash requirement of the commodity interests of the Partnership
of $2,645,728 was met by $36,476,241 being held in segregated
funds and $4,390,609 being held in secured funds. At December
31, 1997 and 1996, cash was on deposit with the Clearing Broker
which exceeded the cash requirement amount.
The following chart discloses the dollar amount of the
unrealized gain or loss on open contracts related to exchange
traded contracts for the Partnership at December 31, 1997 and
1996:
Commodity Group 1997 1996
Agricultural $ 315,072 $ 51,555
Currency 257,116 654,101
Stock Indices 226,950 119,401
Energies 52,616 30,565
Metals 1,219,510 210,043
Interest 383,384 (197,596)
Total $2,454,648 $ 868,069
The range of maturity dates of these exchange traded open
contracts is January 1998 to September 1998.
Acknowledgment
To the best of my knowledge and belief, the information
contained herein is accurate and complete.
/s/ Richard A. Driver
Richard A. Driver
Treasurer, CIS Investments, Inc.,
one of the General Partners and Commodity Pool Operators of
IDS Managed Futures, L.P.