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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, 1998
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]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant as of February 28, 1999: $11,344,681
Index to exhibits on page 30
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" or the "Clearing Broker"), 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,
1998 were made by two independent commodity trading advisors, 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 ("SEC").
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 Partnership 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 Investment Management Company and Neims-Stoken Partnership were
allocated among the remaining Advisors. The assets formerly managed by John
W. Henry & Company, Inc. pursuant to its Original Trading Method were
allocated to another program operated by John W. Henry & Company, Inc., the
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 began
trading assets in August 1991. As of November 16, 1994 Chang Crowell
Management Corporation was terminated as an Advisor to the Partnership and
on December 12, 1994 the assets formerly managed by Chang Crowell Management
Corporation were allocated to Sabre Fund Management Limited. On July 8, 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 August 1, 1997 the assets of the Partnership were
re-allocated among John W. Henry & Company, Inc., Sabre Fund Management
Limited and Welton Investment Corporation. 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. Collectively, JWH 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 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 (the Partnership pays
commissions on trades executed on its behalf by John W. Henry & Company, Inc.
at a rate of $58.75 per round turn contract to CIS which in turn reallocates
$37.25 per round turn contract to AXP Advisors, an affiliate of IDS Futures;
the Partnership pays commissions on trades executed on its behalf by Welton
Investment Corporation at a rate of $43.75 per round turn contract to CIS
which in turn reallocates $27.15 per round turn contract 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 Advisory Contracts between the Partnership and 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 Contract
with John W. Henry & Company, Inc. ("JWH") was amended on April 30, 1996 (but
made effective back to the date of March 31, 1996) to extend the term of the
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 Advisory
Contract with Welton Investment Corporation ("Welton") commenced on July 8,
1997 and continued 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 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 pays JWH 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. 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. The Partnership pays
JWH a quarterly incentive fee of 15% and pays Welton a quarterly incentive
fee of 18% 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, 1998 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, 1998, there were 16,597.42 Units held
by Limited Partners and 644.45 Units held by the General
Partners. A total of 1,959.02 Units had been redeemed by
Limited Partners during the period from January 1, 1998 to
December 31, 1998 (43,234.98 Units were redeemed prior to
calendar year 1998). 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,
1994 1995 1996 1997 1998
1. Operating Revenues (000) $ (508) $3,731 $3,870 $1,742 $2,027
2. Income (Loss) From
Continuing Operations(000) (1,544) 2,690 2,566 657 961
3. Income (Loss) Per Unit (61.10) 112.27 120.48 33.22 57.27
4. Total Assets (000) 9,434 11,190 13,360 12,558 12,350
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, 1998 CIS had
paid or accrued to pay interest of $438,352 to the Partnership. Similarly,
for the calendar year ended December 31, 1997, CIS had paid or accrued to pay
interest of $505,885 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, 1998, investors redeemed a total of 1,959.02
Units for $1,232,450. In 1997 investors redeemed a total of 1,617.25 Units
for $1,005,098.
On December 31, 1998, the Partnership had unrealized profits of $1,255,115
and cash on deposit at CIS of $11,060,948. These positions required margin
deposits at CIS of $1,341,752. The total balance of the Partnership's
account was $12,316,063. These figures compare to unrealized profits of
$636,775, cash on deposit of $11,875,917, margin requirement of $1,289,365
and total balance of the Partnership's account of $12,512,692 as of December
31, 1997. On December 31, 1996, the Partnership had unrealized profits of
$365,959 and cash on deposit of $12,950,198. These positions required margin
requirements at CIS of $906,578. The total balance of the Partnership's
account was $13,316,157.
During the fiscal year ended December 31, 1998, 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.
Year 2000 Readiness Disclosure
CIS surveyed major applications in 1996 to see if they were Year 2000
compliant. Systems identified with Year 2000 issues were targeted for
replacement or modification. Replacement and modification projects are
currently underway. In addition, CIS has dedicated resources to assess our
work processes and verify that it will be able to handle the changes in the
next millennium. This process addresses software applications as well as key
vendor, bank and customer relationships.
During 1997, CIS participated in developing the industry-wide test plan with
the Futures Industry Association, with whom it continues to work closely.
CIS has participated in BETA testing, which began in September 1998, and will
participate again with the FIA in "street wide" testing during the second
quarter of 1999.
In addition, CIS has begun developing various "contingency plans" in the event
that mission critical systems should fail. This development is proceeding on
schedule.
CIS is taking this issue seriously and has a goal of maintaining reasonable
procedures in order to eliminate as much risk as possible to its customers
(including the Partnership), its counterparties and itself. Despite the best
efforts of CIS, CISFS and CISI, there can be no assurance that the above steps
will be sufficient or that all potential problems have been identified in
order to avoid any adverse impact to the Partnership. CIS and its affiliates
make no representations or warrants related to Year 2000 readiness or
compliance, including but not limited to business interruption, whether from
failures in their own computer systems, those of the Advisors, or any other
third party.
Results of Operations
The Partnership posted positive returns for 1998, 1997 and 1996.
1998
The year 1998 was marked by declining global interest rates and commodity
prices and extremely volatile currency fluctuations. The Partnership produced
a net gain of 8.55% for the calendar year. One of the key markets that
consistently reported profits during the year was the energy sector, primarily
crude oil. Short crude oil prices throughout the year were beneficial to
the Partnership. Additionally, coffee prices fell 28% during the year and the
Partnership benefited from its short positions in coffee prices.
The first quarter was marked by a flight to quality in the bond market, namely
German bunds and U.S. bonds amidst turbulence in the Asian markets. The U.S.
dollar remained volatile for the first two months of the year and strengthened
during March, primarily versus the German mark and Swiss franc. The
volatility in both these sectors produced overall losses for the Partnership.
Warren Buffett was rumored and then confirmed to be holding significant silver
positions anticipating a rise in silver prices. Long silver prices were
beneficial to the Partnership.
In the second quarter, the U.S. dollar strengthened against the Japanese yen
until the U.S. Government intervened to support the Japanese yen, essentially
selling the U.S. dollar and depressing the value of the U.S. dollar relative
to most major world currencies. By July, the U.S. dollar was back at all-time
highs against the Japanese yen. Overall, the Partnership gained as a result
of the fluctuation of the U.S. dollar. However, the ripple effect created
volatility for the U.S. dollar versus the European currencies and the
Partnership lost on its positions in these currencies. Precious metals,
namely silver, reversed as prices slumped. Gold prices seesawed up and down
never settling on direction. The volatility in these markets was unprofitable
to the Partnership.
The third quarter was highlighted by a devaluation of the Russian ruble which
sent shock waves through the world equity markets as traders liquidated
equities in favor of sovereign debt. Even prior to the Russian crisis, the
Partnership was well positioned to take advantage of rising bonds. The
Partnership was long the U.S., German and Japan bond markets. Interest rates
on the U.S. 30-year long bond fell below 5%, the lowest level in over 30 years.
In addition, the Partnership was short the Nikkei and FTSE equity indices.
Gold and silverprices fell to 1998 lows, as short positions in these precious
metals were profitable.
The fourth quarter saw extremes in the currency sector as the U.S. dollar
again gyrated for the last three months of the year. The long Japanese yen
position that provided the only profit for the Partnership in October was the
largest losing position in November, yet by December, long Japanese yen
positions were providing profits. The Fed eased interest rates one quarter
point three times in seven weeks. However, long U.S. bond positions reaped
few rewards as these rate cuts had already been factored in the market.
Global stock indices rebounded beginning in October and long positions in the
S&P and German DAX proved rewarding. The Partnership ended the year with a
profit of $961,031.
1997
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 5.45% 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 $657,271.
1996
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.
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
Introduction
Past Results Are Not Necessarily Indicative of Future Performance
The Partnership is a speculative commodity pool. The market sensitive
instruments held by it are acquired for speculative trading purposes, and all
or substantially all of the Partnership's assets are subject to the risk of
trading loss. Unlike an operating company, the risk of market sensitive
instruments is integral, not incidental, to the Partnership's main line of
business.
Market movements result in frequent changes in the fair market value of the
Partnership's open positions and, consequently, in its earnings and cash flow.
The Partnership's market risk is influenced by a wide variety of factors,
including the level and volatility of interest rates, exchange rates, equity
price levels, the market value of financial instruments and commodity
contracts, the diversification effects among the Partnership's open positions
and the liquidity of the markets in which it trades.
The Partnership can acquire and/or liquidate both long and short positions in
a wide range of different markets. Consequently, it is not possible to
predict how a particular future market scenario will affect performance, and
the Partnership's past performance is not necessarily indicative of its
future results.
Value at Risk is a measure of the maximum amount which the Partnership could
reasonably be expected to lose in a givenmarket sector. However, the inherent
uncertainty of the Partnership's speculative trading and the recurrence in the
markets traded by the Partnership of market movements far exceeding
expectations could result in actual trading or non-trading losses far beyond
the indicated Value at Risk or the Partnership's experience to date (i.e.,
"risk of ruin"). In light of the foregoing as well as the risks and
uncertainties intrinsic to all future projections, the inclusion of the
quantification included in this section should not be considered to
constitute any assurance or representation that the Partnership's losses in
any market sector will be limited to Value at Risk or by the Partnership's
attempts to manage its market risk.
Standard of Materiality
Materiality as used in this section, "Qualitative and Quantitative Disclosures
About Market Risk," is based on an assessment of reasonably possible market
movements and the potential losses caused by such movements, taking into
account the leverage, optionality and multiplier features of the Partnership's
market sensitive instruments.
Quantifying the Partnership's Trading Value at Risk
Qualitative Forward-Looking Statements
The following quantitative disclosures regarding the Partnership's market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934). All
quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of
historical fact.
The Partnership's risk exposure in the various market sectors traded by the
Trading Advisors is quantified below in terms of Value at Risk. Due to the
Partnership's mark-to-market accounting, any loss in the fair value of the
Partnership's open positions is directly reflected in the Partnership's
earnings (realized or unrealized) and cash flow (at least in the case of
exchange-traded contracts in which profits and losses on open positions are
settled daily through variation margin).
Exchange maintenance margin requirements have been used by the Partnership as
the measure of its Value at Risk. Maintenance margin requirements are set by
exchanges to equal or exceed the maximum losses reasonably expected to be
incurred in the fair value of any given contract in 95%-99% of any one-day
intervals. The maintenance margin levels are established by dealers and
exchanges using historical price studies as well as an assessment of current
market volatility (including the implied volatility of the options on a given
futures contract) and economic fundamentals to provide a probabilistic
estimate of the maximum expected near-term one-day price fluctuation.
Maintenance margin has been used rather than the more generally available
initial margin, because initial margin includes a credit risk component which
is not relevant to Value at Risk.
In the case of market sensitive instruments which are not exchange traded
(which will be forward currencies should the Partnership begin trading them),
the margin requirements for the equivalent futures positions have been used
as Value at Risk. In those rare cases in which a futures-equivalent margin is
not available, dealers' margins have been used.
The fair value of the Partnership's futures and forward positions does not
have any optionality component. However, Welton also trades commodity options
on behalf of the Partnership. The Value at Risk associated with options is
reflected in the following table as the margin requirement attributable to the
instrument underlying each option. Where this instrument is a futures
contract, the futures margin, and where this instrument is a physical
commodity, the futures-equivalent maintenance margin has been used. This
calculation is conservative in that it assumes that the fair value of an
option will decline by the same amount as the fair value of the underlying
instrument, whereas, in fact, the fair values of the options traded by the
Partnership in all cases fluctuate to a lesser extent than those of the
underlying instruments.
In quantifying the Partnership's Value at Risk, 100% positive correlation in
the different positions held in each market risk category has been assumed.
Consequently, the margin requirements applicable to the open contracts have
simply been aggregated to determine each trading category's aggregate Value
at Risk. The diversification effects resulting from the fact that the
Partnership's positions are rarely, if ever, 100% positively correlated have
not been reflected.
The Partnership's Trading Value at Risk in Different Market Sectors
The following table indicates the trading Value at Risk associated with the
Partnership's open positions by market category as of December 31, 1998. All
open position trading risk exposures of the Partnership have been included in
calculating the figures set forth below. As of December 31, 1998, the
Partnership's total capitalization was approximately $12.1 million.
December 31, 1998
% of Total
Market Sector Value at Risk (000 omitted) Capitalization
Interest Rates $ 854 7.1%
Currencies $ 163 1.3%
Stock Indices $ 123 1.0%
Precious Metals $ 96 0.8%
Commodities $ 26 0.2%
Energies 20 0.2%
Total $1,281 10.6%
Material Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership is
typically many times the applicable maintenance margin requirement
(maintenance margin requirements generally ranging between approximately 1%
and 10% of contract face value) as well as many times the capitalization of
the Partnership. The magnitude of the Partnership's open positions creates a
"risk of ruin" not typically found in most other investment vehicles.
Because of the size of its positions, certain market conditions _ unusual,
but historically recurring from time to time _ could cause the Partnership to
incur severe losses over a short period of time. The foregoing Value at Risk
table as well as the past performance of the Partnership give no indication
of this "risk of ruin."
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash balances not
needed for margin. However, these balances (as well as any market risk they
represent) are immaterial.
The Partnership holds substantially all of its assets in cash on deposit with
CIS and CISFS. The Partnership has cash flow risk on these cash deposits
because if interest rates decline, so will the interest paid out by CIS and
CISFS at the 90% of 90-day Treasury bill rate. As of December 31, 1998, the
Partnership had approximately $53 million in cash on deposit with CIS and
CISFS.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's market risk
exposures except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Partnership and the Trading Advisors
manage the Partnership's primary market risk exposures constitute forward-
looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act. The Partnership's primary market
risk exposures as well as the strategies used and to be used by the Trading
Advisors for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual results of
the Partnership's risk controls to differ materially from the objectives of
such strategies. Government interventions, defaults and expropriations,
illiquid markets, the emergence of dominant fundamental factors, political
upheavals, changes in historical price relationships, an influx of new market
participants, increased regulation and many other factors could result in
material losses as well as in material changes to the risk exposures and the
risk management strategies of the Partnership. There can be no assurance
that the Partnership's current market exposure and/or risk management
strategies will not change materially or that any such strategies will be
effective in either the short-or long-term. Investors must be prepared to
lose all or substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the Partnership as
of December 31, 1998, by market sector.
Interest Rates. Interest rate risk is the principal market exposure of the
Partnership. Interest rate movements directly affect the price of the
sovereign bond positions held by the Partnership and indirectly the value of
its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries
materially impact the Partnership's profitability. The Partnership's primary
interest rate exposure is to interest rate fluctuations in the United States
and the other G-7 countries. However, the Partnership also takes positions in
the government debt of smaller nations e.g., Australia and New Zealand. The
General Partners anticipate that G-7 interest rates will remain the primary
market exposure of the Partnership for the foreseeable future. The changes
in interest rates which have the most effect on the Partnership are changes
in long-term, as opposed to short-term, rates. Most of the speculative
positions held by the Partnership are in medium- to long-term instruments.
Consequently, even a material change in short-term rates would have little
effect on the Partnership were the medium- to long-term rates to remain
steady.
Currencies. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates _ i.e., positions between two currencies
other than the U.S. dollar. However, the Partnership's major exposures have
typically been in the dollar/yen, dollar/mark, dollar/Swiss franc and dollar/
pound positions. The General Partners do not anticipate that the risk
profile of the Partnership's currency sector will change significantly in the
future, although it is difficult at this point to predict the effect of the
introduction of the Euro on the Trading Advisors currency trading strategies.
The currency trading Value at Risk figure includes foreign margin amounts
converted into U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Partnership in expressing
Value at Risk in a functional currency other than dollars.
Stock Indices. The Partnership's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Partnership
are by law limited to futures on broadly based indices. As of December 31,
1998, the Partnership's primary exposures were in the S&P and NASDAQ (US),
FTSE (England) and Hang Seng (Hong Kong) stock indices. The General Partners
anticipate little trading in non-G-7 stock indices. The Partnership is
primarily exposed to the risk of adverse price trends or static markets in the
major U.S., European and Japanese indices. (Static markets would not cause
major market changes but would make it difficult for the Partnership to avoid
being "whipsawed" into numerous small losses.)
Metals. The Partnership's metals market exposure is to fluctuations in the
price of gold and silver as well as various of the industrial metals. The
Trading Advisors have from time to time taken substantial positions as they
have perceived market opportunities to develop. The General Partners
anticipate that trading will continue across most of the available metals
contracts.
Commodities. The Partnership's primary commodities exposure is to
agricultural price movements which are often directly affected by severe or
unexpected weather conditions. Soybean oil, coffee, cattle, cotton and rubber
accounted for the substantial bulk of the Partnership's commodities exposure
as of December 31, 1998. In the past, the Partnership also has had material
market exposure to grains, sugar and cocoa and may do so again in the future.
Welton and the Partnership will continue to trade a wide variety of commodity
contracts.
Energy. The Partnership's primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle
East. Although the Trading Advisors trade natural gas to a limited extent,
oil and oil products are by far the dominant energy market exposure of the
Partnership. Oil prices are currently depressed, but they can be volatile and
substantial profits and losses have been and are expected to continue to be
experienced in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Partnership as
of December 31, 1998.
Foreign Currency Balances. The Partnership's primary foreign currency
balances are in Japanese yen, German marks, British pounds and Australian
dollars. The Partnership controls the non-trading risk of these balances by
regularly converting these balances back into dollars (no less frequently
than twice a month).
Cash Position. The Partnership holds substantially all its assets in cash at
CIS and CISFS, earning interest at 80% of the average 90-day Treasury bill
rate for Treasury bills issued during each month.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The General Partners monitor the Partnership's performance and the
concentration of its open positions, and consult with the Trading Advisors
concerning the Partnership's overall risk profile. If the General Partners
felt it necessary to do so, the General Partners could require the Trading
Advisors to close out individual positions as well as entire programs traded
on behalf of the Partnership. However, any such intervention would be a
highly unusual event. The General Partners primarily rely on the Trading
Advisors own risk control policies while maintaining a general supervisory
overview of the Partnership's market risk exposures.
Risk Management
JWH attempts to control risk in all aspects of the investment process from
confirmation of a trend to determining the optimal exposure in a given market,
and to money management issues such as the startup or upgrade of investor
accounts. JWH double checks the accuracy of market data, and will not trade
a market without multiple price sources for analytical input. In constructing
a portfolio, JWH seeks to control overall risk as well as the risk of any one
position, and JWH trades only markets that have been identified as having
positive performance characteristics. Trading discipline requires plans for
the exit of a market as well as for entry. JWH factors the point of exit
into the decision to enter (stop loss). The size of JWH's positions in a
particular market is not a matter of how large a return can be generated but
of how much risk it is willing to take relative to that expected return.
To attempt to reduce the risk of volatility while maintaining the potential
for excellent performance, proprietary research is conducted on an ongoing
basis to refine the JWH investment strategies. Research may suggest
substitution of alternative investment methodologies with respect to
particular contracts; this may occur, for example, when the testing of a new
methodology has indicated that its use might have resulted in different
historical performance. In addition, risk management research and analysis
may suggest modifications regarding the relative weighting among various
contracts, the addition or deletion of particular contracts from a program,
or a change in position size in relation to account equity. The weighting of
capital committed to various markets in the investment programs is dynamic,
and JWH may vary the weighting at its discretion as market conditions,
liquidity, position limit considerations and other factors warrant.
JWH may determine that risks arise when markets are illiquid or erratic, such
as may occur cyclically during holiday seasons, or on the basis of irregularly
occurring market events. In such cases, JWH at its sole discretion may
override computer-generated signals and may at times use discretion in the
application of its quantitative models, which may affect performance
positively or negatively.
Adjustments in position size in relation to account equity have been and
continue to be an integral part of JWH's investment strategy. At its
discretion, JWH may adjust the size of a position in relation to equity in
certain markets or entire programs. Such adjustments may be made at certain
times for some programs but not for others. Factors which may affect the
decision to adjust the size of a position in relation to account equity
include ongoing research, program volatility, assessments of current market
volatility and risk exposure, subjective judgment, and evaluation of these
and other general market conditions.
Welton's portfolios are subject to an on-going process of monitoring and
review. Risk is managed at all levels in the investment process. In advance
of entering a position, the risk of each trade is determined in relationship
to the potential exposure and volatility impact of that open position in an
account proportionate to its size. Multiple indicators of risk exposure are
calculated including initial risk, volatility, intra-period volatility, open
equity risk, and margin exposure. Various risk measures for each trade are
determined before trade entry and monitored throughout the life span of the
trade.
The factors used to assess risk exposure and performance risks more generally
include (i) initial risk per trade (by model and market); (ii) volatility
(standard deviation of returns) per trade throughout the holding period; (iii)
open equity risk (by market, market group and portfolio); (iv) margin to
equity ratio (by market and portfolio); (v) judgment of extraordinary event
or report risk; (vi) portfolio level volatility (standard deviation and
negative semi-variant standard deviation); (vii) slippage (model efficiency
and market liquidity) monitoring overtime; and (viii) value-at-risk measures
by market, sector, macro-economic views, and portfolio. Multiple other
factors would need to be included for business risks, implementation quality
assessments, and the like. Furthermore, Welton retains the right to exercise
discretion.
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements and the notes thereto appearing
on Pages 32 through 41 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, 1998 were as follows:
IDS Futures Corporation
Peter L. Slattery (born in July 1965), President and 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.
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 was
Controller - Variable Assets and Services of American Express Financial
Corporation until February 1999, thus charged with overall finance
responsibilities for Mutual Funds, Limited Partnerships, Variable Annuities,
Retail Retirement Plans, Personal Trust and Wealth Management Services. In
February 1999 Mr. Knight was appointed Vice President - Investment Accounting
of American Express Financial Corporation. 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.
CIS Investments, Inc.
Bernard W. Dan (born in December 1960), President and Director. Mr. Dan has
served as President and Director of CISI since June 1, 1998. He received a
B.S. degree in accounting from St. John's University, Collegeville, Minnesota.
He joined Cargill Investor Services, Inc. in 1985 and held various operational
positions. In 1986 Mr. Dan was assigned to Cargill Investor Services, Ltd.
in London as Administrative Manager for all operational activities. In 1989
Mr. Dan was assigned to the CIS New York Regional Office as the Administrative
Manager. Mr. Dan was named Director of Cargill Investor Services (Singapore)
Pte Ltd. at the formation of the company in November 1994 and continued in
that position until April 1997. Mr. Dan was named President of Cargill
Investor Services, Inc. on June 1, 1998. Mr. Dan actively serves within the
futures industry on exchange committees and industry user groups.
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.
Barbara A. Pfendler (born in May 1953), Vice President and Director. Ms.
Pfendler was appointed Vice President of CISI in May 1990 and Director of CISI
in June 1998. Ms. Pfendler graduated from the University of Colorado in 1975.
She began her career with Cargill, Incorporated in 1975, holding various
merchandising and management positions within Cargill Incorporated's Oilseed
Processing Division before transferring to Cargill Investor Services, Inc. in
1986. She is currently the manager responsible for all activities of the Fund
Services Group at Cargill Investor Services, Inc. She was appointed Vice
President of Cargill Investor Services, Inc. in June 1996 and Director Cargill
Investor Services, Inc. in June 1998.
Jn R. Waye (born in June 1948), Vice President. Mr. Waye was appointed Vice
President of CISI in June 1997. Mr. Waye graduated from Concordia College,
Moorhead, MN, with a B.A. degree in Communications and Economics in 1970.
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. Mr. Waye joined Cargill,
Incorporated in 1970 and served in various commodity trading and management p
ositions 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. 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.
Christopher Malo (born in August 1956), Vice President. Mr. Malo graduated
from Indiana University in 1976 with a B.S. in Accounting and further
completed the University of Minnesota Executive Program in 1993. 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 and Controller from November 1983 until July 1991. He was
elected Vice President, Administration and Operations in July 1991. Mr. Malo
was Managing Director in Europe from 1996 until January 1999, responsible for
CIS activities and operations in Europe, the Middle East and Russia. He was
an active member of the FIA-UK Chapter and LIFFE Membership and Rules
Committee. He currently serves on the Board of the FIA in Chicago.
Ronald L. Davis (born in September 1953), Vice President. Mr. Davis was
elected Vice President of CISI in June 1998. Mr. Davis graduated from
Illinois Institute of Technology, Chicago, Illinois with a B.S. in 1975 and
with an M.B.A in 1977. He began his career in the futures industry with A.G.
Becker, Incorporated in 1980 and joined Cargill Investor Services, Inc.
in 1987 as the Administrative Manager of the Fund Services Group. He is
responsible for all administrative, accounting and reporting functions of all
CISI funds. In June 1998 Mr. Davis became Business Development Manager of the
Fund Services Group.
Rebecca S. Steindel (born in April 1965), Secretary. Ms. Steindel was elected
Secretary of CISI in September 1997. 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. 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
was elected Assistant Secretary of CISI in June 1996. 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.
Patrice H. Halbach (born in August 1953), Assistant Secretary. Ms. Halbach
became Assistant Secretary of CISI in June 1996. 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. She was named
Assistant Vice President of Cargill, Incorporated's Administrative Division
in April 1994. In January 1999 she was named Vice President, Tax, of Cargill,
Incorporated. In her current position as Vice President, Tax, Ms. Halbach
oversees Cargill, Incorporated's global tax function.
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, 1998, the Partnership accrued and paid $487,291 in b
rokerage 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.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) As of December 31, 1998, no person was known to the Partnership to
own beneficially more than 5% of the outstanding Units.
(b) As of December 31, 1998, the General Partners beneficially owned
644.45 Units or approximately 3.74% of the Unitsoutstanding 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, 1998, 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, 1998 and 1997
c. For the years ended December 31, 1998, 1997 and 1996: 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
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 26, 1999 IDS Managed Futures II, L.P.
By: IDS Futures Corporation By: CIS Investments, Inc.
(General Partner) (General Partner)
By: /s/ Peter L. Slattery By: /s/ Bernard W. Dan
Peter L. Slattery Bernard W. Dan
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, 1999
/s/ Peter L. Slattery /s/ Bernard W. Dan
Peter L. Slattery Bernard W. Dan
Director and President Director and
President
/s/ Peter J. Anderson /s/ Barbara A. Pfendler
Peter J. Anderson Barbara A. Pfendler
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 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 Contract dated as of July 14, 1987 between CIS
Investments, Inc., IDS Futures Corporation, IDS Managed
Futures II, L.P., 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).
10.2 Amended Advisory Contracts dated March 31, 1992 between CIS
Investments, Inc., IDS Futures Corporation, IDS Managed
Futures II, 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 II, L.P., John W. Henry & Company, Inc. and Sabre
Fund Management Limited.
10.4 Advisory Contract dated as of July 8, 1997 between CIS
Investments, Inc., IDS Futures Corporation, IDS Managed
Futures II, L.P. and Welton Investment Corporation.
Index to Financial Statements
IDS Managed Futures II, L.P.
Report of Independent Public Accountants 32
Statements of Financial Condition as of
December 31, 1998 and 1997 33
Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 34
Statements of Changes in Partners' Capital for the
years ended December 31, 1998, 1997 and 1996 35
Statements of Cash Flows for the years ended December
31, 1998, 1997 and 1996 36
Notes to Financial Statements 37
Acknowledgment 41
Independent Auditors' Report
The Partners
IDS Managed Futures II, L.P.:
We have audited the accompanying statements of financial condition of IDS
Managed Futures II, L.P. (the Partnership) as of December 31, 1998 and 1997,
and the related statements of operations, partners' capital, and cash flows
for each of the years in the three-year period ended December 31, 1998. 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 II, L.P.
as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1998 in conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
February 5, 1999
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF FINANCIAL CONDITION
Dec 31, 1998 Dec 31, 1997
--------------- -------------
ASSETS
Cash at Escrow Agent $0 $0
Equity in commodity futures
trading accounts:
Account balance 11,060,948 11,875,917
Unrealized gain on open
futures contracts 1,255,115 636,775
--------------- -------------
12,316,063 12,512,692
Interest receivable 34,361 45,359
Prepaid G.P. fee 0 0
--------------- -------------
Total assets $12,350,424 $12,558,051
=============== =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued commissions on open
futures contracts due to AXP Advisors and C $47,870 $49,202
Accrued exchange, clearing, and NFA fees $459 $932
Accrued management fee 37,278 37,769
Accrued incentive fee 0 44,664
Accrued operating expenses 53,140 47,272
Redemptions payable 143,490 38,606
--------------- -------------
Total liabilities 282,237 218,445
Partners' Capital:
Limited partners ( 16,597.42 and 11,617,111 11,925,442
18,556.44 units outstanding at
12/31/98 and 12/31/97, respectively)
General partners (644.45 units outstanding at 451,076 414,164
12/31/98 and 12/31/97, respectively)
--------------- -------------
Total partners' capital 12,068,187 12,339,606
--------------- -------------
Total liabilities and
partners' capital $12,350,424 $12,558,051
=============== =============
See Accompanying notes to financial statements.
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF OPERATIONS
1998 1997 1996
--------------- ------------- --------------
REVENUES
Gains on trading of commodity futures
and forwards contracts, physical
commodities and related options:
Realized gain (loss) on closed positions $1,015,551 $1,170,528 $3,650,325
Change in unrealized gain (loss)
on open positions 618,340 270,816 (199,699)
Interest income 438,352 505,885 452,869
Foreign currency transaction gain (loss) (44,816) (205,540) (33,881)
--------------- ------------- --------------
Total revenues 2,027,427 1,741,689 3,869,614
EXPENSES
Commissions paid to AXP Advisors and CIS 487,291 496,134 443,885
Exchange, clearing and NFA fees 9,945 11,108 9,629
Management fees 425,915 455,236 415,370
Incentive fees 102,439 101,866 384,059
Operating expenses 40,806 20,074 50,442
--------------- ------------- --------------
Total expenses 1,066,396 1,084,418 1,303,385
--------------- ------------- --------------
Net profit (loss) $961,031 $657,271 $2,566,229
=============== ============= ==============
PROFIT (LOSS) PER UNIT OF LIMITED PARTNERSHIP IN $57.27 $33.22 $120.48
PROFIT (LOSS) PER UNIT OF GENERAL PARTNERSHIP IN $57.27 $33.22 $120.48
=============== ============= ==============
See accompanying notes to financial statements.
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998,1997, AND 1996
Total
Limited General Partners'
Units* Partners Partners Capital
--------------- ------------- -------------- -------------
Balance at December 31, 1995 21,884.34 10,700,674 315,117 $11,015,791
Net loss 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 profit 0.00 635,869 21,402 $657,271
Redemptions (1,617.25) (1,005,098) 0 ($1,005,098)
Balance at December 31, 1997 18,556.44 11,925,442 414,164 $12,339,606
Net profit 0.00 924,119 36,912 $961,031
Redemptions (1,959.02) (1,232,450) 0 ($1,232,450)
Balance at December 31, 1998 16,597.42 11,617,111 451,076 $12,068,187
Net asset value per unit at December 31, 1998 699.93 699.93
Net asset value per unit at December 31, 1997 642.66 642.66
Net asset value per unit at December 31, 1996 609.44 609.44
*Units of limited partnership interest
See accompanying notes to financial statements.
IDS MANAGED FUTURES II, L.P.
STATEMENTS OF CASH FLOWS
1998 1997 1996
--------------- ------------- --------------
Cash flows from operating activities:
Net profit (loss) 961,031 657,271 2,566,229
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 (618,340) (270,816) 199,699
Interest receivable 10,998 (1,391) (4,380)
Accrued liabilities (41,092) (331,285) 356,365
--------------- ------------- --------------
Net cash provided by (used in)
operating activities 312,597 53,779 3,117,913
Cash flows from financing activities:
Partner Redemptions (1,127,566) (1,128,060) (752,926)
--------------- ------------- --------------
Net cash provided by (used in)
financing activities (1,127,566) (1,128,060) (752,926)
--------------- ------------- --------------
Net increase (decrease) in cash (814,969) (1,074,281) 2,364,987
Cash at beginning of period 11,875,917 12,950,198 10,585,211
--------------- ------------- --------------
Cash at end of period $11,060,948 $11,875,917 $12,950,198
=============== ============= ==============
See accompanying notes to financial statements.
(1) General Information and Summary
IDS Managed Futures II, L.P. (the Partnership), a limited partnership
organized in April 1987 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 General Partners are IDS Futures Corporation and CIS
Investments, Inc. The clearing broker is Cargill Investor Services, Inc.
(Clearing Broker or CIS), the parent company of CIS Investments, Inc.
The Partnership shall be terminated on December 31, 2007 if none of the
following occur prior to that date: (1) investors holding more than 50% of
the outstanding units notify the General Partners to dissolve the Partnership
as of a specific date; (2) disassociation of the General Partners with the
Partnership; (3) bankruptcy of the Partnership; (4) decrease in the net asset
value to less than $1,500,000; (5) the Partnership is declared unlawful; or
(6) the net asset value per unit declines to less than $125 per unit and the
partners elect to terminate the Partnership.
(2) Summary of Significant Accounting Policies
The accounting and reporting policies of the Partnership conform to generally
accepted accounting principles and to general practices within the
commodities industry. The following is a description of the more significant
of those policies which the Partnership follows in preparing its financial
statements.
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities, and
related options are recorded on the trade date. All such transactions are
reported on an identified cost basis. Unrealized gains and losses reflected
in the statements of financial condition represent the difference between
original contract amount and market value (as determined by exchange
settlement prices for futures contracts and relatedoptions 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 80% of the
average 90-day treasury bill rate for U.S. Treasury bills issued during that
month.
Redemptions
A Limited Partner may cause any or all of his or her units to be redeemed by
the Partnership effective as of the last trading day of any month. Redemptions
are based on the Net Asset Value per unit as of the last day of the month and
require ten days' written notice to the General Partners. Payment will be made
within ten business days of the effective date of the redemption. The
Partnership's Limited Partnership Agreement contains a full description of
redemption and distribution procedures.
Commissions
Brokerage commissions and National Futures Association (NFA) clearing and
exchange fees are accrued on a round-turn basis on open commodity futures
contracts. The Partnership pays CIS commissions on trades executed on its
behalf at a rate of $58.75 per round-turn contract. For trades executed by
Welton Investment Corporation, the Partnership pays $43.75 per round-turn
contract. The Partnership pays these commissions directly to CIS and CIS then
reallocates the appropriate portion to American Express Financial Advisors
Inc. (AXP Advisors).
Foreign Currency Transactions
Trading accounts in foreign currency denominations are susceptible to both
movements in underlying contract markets as well as fluctuations in currency
rates. Translation of foreign currencies into U.S. dollars for closed
positions is 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 represents cash and cash
on deposit with the Clearing Broker in commodity futures trading accounts.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
(3) Fees
Management fees are accrued and paid monthly and incentive fees are accrued
monthly and paid quarterly. Trading decisions for the periods of these
financial statements were made by the following Commodity Trading Advisors
(CTAs): Sabre Fund Management Limited (Sabre); John W. Henry & Company, Inc.
(JWH); and Welton Investment Corporation (Welton).
Under signed agreement for the periods presented prior to January 1, 1996,
Sabre received a monthly management fee of 1/3 of 1% of the month-end net
asset value of the Partnership under their management and 15% 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 1/6 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 dated July 8, 1997, Welton will receive a monthly
management fee of 1/4 of 1% of the month-end net asset value of the
Partnership under its management and 18% of the Partnership's net trading
profits, if any, attributable to its management.
(4) Income Taxes
No provision for Federal income taxes has been made in the accompanying
financial statements as each partner is responsible for reporting income
(loss) based on the pro rata share of the profits or losses of the
Partnership. The Partnership is responsible for the Illinois State
Partnership Information and Replacement Tax based on the operating results
of the Partnership. Such tax amounted to $15,141, $9,828, and $38,387 for
the years ended December 31, 1998, 1997, and 1996 respectively, and is
included in operating expenses in the statements of operations.
(5) Financial Instruments with Off-balance Sheet Risk
The Partnership was formed to trade commodity interests speculatively. The
Partnership's commodity interest transactions and related cash balances 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 Stateent 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 $187,152,308 and $177,725,114, respectively, on
December 31, 1998, and $35,623,858 and $59,633,383, respectively, on December
31, 1997. 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 nonperformance. 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 $917,156 and $720,402
during 1998 and 1997, respectively. Fair value as of December 31, 1998 and
1997 was $1,255,115 and $636,775. 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, 1998,
the Partnership has contracts with two CTAs who make the trading decisions.
One of the CTAs trades a program which is diversified among all commodity
groups, while the other is diversified among the various futures contracts in
the financial and metals group. Both traders trade on U.S. and non-U.S.
exchanges. Such diversification should greatly reduce this market risk.
At December 31, 1998, the cash requirement of the commodity interests of the
Partnership was $1,341,752. This cash requirement is met by $10,740,220 held
in segregated funds and $1,575,843 held in secured funds. At December 31,
1997, the cash requirement of the commodity interests of the Partnership was
$1,289,365. This cash requirement was met by $10,885,627 held in segregated
funds and $1,627,065 held in secured funds. At December 31, 1998 and 1997,
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, 1998 and 1997:
Commodity Group 1998 1997
Agricultural 19,755 77,847
Currency 82,163 57,907
Stock Indice 116,185 67,958
Energies 25,324 13,762
Metals (10) 318,096
Interest 1,011,698 101,205
Total 1,255,115 636,775
The range of expiration dates of these exchange traded open contracts is
January 1999 to December 1999.
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 II, L.P.