UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT
[X] Annual report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from _______________to ______________________
Commission File Number 0-12431
COLUMBIA FUTURES FUND
(Exact name of registrant as specified in its Limited Partnership Agreement)
NEW YORK 13-3103617
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
c/o Demeter Management Corporation
Two World Trade Center, New York, N.Y. - 62nd Flr. 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
(Title of Class)
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 (section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment of this Form 10K. [ X ]
State the aggregate market value of the Units of Limited Partnership Interest
held by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which units were sold, or the average bid
and asked prices of such units, as of a specified date within 60 days prior to
the date of filing: $8,311,955.84 at January 31, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
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<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1996
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Page No.
<S> <C>
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . 1
Part I .
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . 3-4
Item 4. Submission of Matters to a Vote of Security Holders . . 4
Part II.
Item 5. Market for the Registrant's Partnership Units and
Related Security Holder Matters . . . . . . . . . . . . 5
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . 7-12
Item 8. Financial Statements and Supplementary Data. . . . . . 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . 12
Part III.
Item 10. Directors, Executive Officers, Promoters and
Control Persons of the Registrant . . . . . . . . . .13-16
Item 11. Executive Compensation . . . . . . . . . . . . . . . . 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . 16
Item 13. Certain Relationships and Related Transactions . . . . 17
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . 18
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<TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference as
follows:
<CAPTION>
Documents Incorporated Part of Form 10-K
<S> <C>
Partnership's Annual Report on Form IV
10-K for the fiscal year ended
December 31, 1985, File No. 0-12431
Partnership's Annual Report on Form IV
10-K for the fiscal year ended
December 31, 1986, File No. 0-12431
December 31, 1996 Annual Report for II & IV
the Columbia Futures Fund
</TABLE>
<PAGE>
PART I
Item 1. BUSINESS
(a) General Development of Business. Columbia Futures Fund (the
"Partnership") is a New York limited partnership formed on December 24,
1981, to engage in the speculative trading of commodity futures contracts,
including futures contracts in foreign currencies and financial
instruments, and other commodity interests ("futures interests")
collectively. The Partnership commenced trading on July 15, 1983.
Since 1985, the general partner of the Partnership is Demeter
Management Corporation ("Demeter"). The commodity broker is Dean Witter
Reynolds Inc. ("DWR"). Both DWR and Demeter are wholly-owned subsidiaries
of Dean Witter, Discover & Co. ("DWD"). Since 1988, the sole trading
advisor of the Partnership is John W. Henry & Company, Inc. ("JWH") or the
"Trading Advisor"). The Partnership's net asset value per unit of limited
partnership interest ("Unit"), as of December 31, 1996, was $2,309.06,
representing an increase of 19.09 percent from the net asset value per
unit of $1,938.89 at December 31, 1995.
(b) Financial Information about Industry Segments. The Partner-
ship's business comprises only one segment for financial reporting
purposes, speculative trading of commodity futures contracts and other
commodity interests. The relevant financial information is presented in
Items 6 and 8.
(c) Narrative Description of Business. The Partnership was formed
to engage in speculative trading of futures contracts on domestic
exchanges (including futures contracts in foreign currencies and financial
instruments).
(d) Financial Information About Foreign and Domestic Operations and
Export Sales. The Partnership has not engaged in any operations in
<PAGE>
foreign countries; however, the Partnership (through the commodity
broker) enters into forward contract transactions where foreign banks are
the contracting party and futures contracts on foreign exchanges.
Item 2. PROPERTIES
The executive and administrative offices are located within the
offices of Dean Witter Reynolds Inc. ("DWR"). The DWR offices utilized
by the Partnership are located at Two World Trade Center, 62nd Floor, New
York, NY 10048.
Item 3. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, similar purported class actions
were filed in the Superior Court of the State of California, County of Los
Angeles, on behalf of all purchasers of interests in limited partnership
commodity pools sold by DWR. Named defendants include DWR, Demeter, Dean
Witter Futures and Currency Management, Inc.("DWFCM"), (all such parties
referred to hereafter as the "Dean Witter Parties"), certain limited
partnership commodity pools of which Demeter is the general partner, and
certain trading advisors (including JWH) the Partnership's sole trading
advisor) to those pools. Similar purported class actions were also filed
on September 18 and 20, 1996, in the Supreme Court of the State of New
York, New York County, and on November 14, 1996 in the Superior Court of
the State of Delaware, New Castle County, against the Dean Witter Parties
and certain trading advisors (including JWH) on behalf of all purchasers
of interests in various limited partnership commodity pools sold by DWR.
Generally, these complaints allege, among other things, that the
defendants committed fraud, deceit, misrepresentation, breach of fiduciary
duty, fraudulent and unfair business practices, unjust enrichment, and
conversion in connection with the sale and operation of the various
limited partnership commodity pools. The complaints seek unspecified
<PAGE>
amounts of compensatory and punitive damages and other relief. It is
possible that additional similar actions may be filed and that, in the
course of these actions, other parties could be added as defendants. The
Dean Witter Parties believe that they have strong defenses to, and they
will vigorously contest, the actions. Although the ultimate outcome of
legal proceedings cannot be predicted with certainty, it is the opinion of
management of the Dean Witter Parties that the resolution of the actions
will not have a material adverse effect on the financial condition or the
results of operations of any of the Dean Witter Parties.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS
There is no established public trading market for the Units of
Limited Partnership Interest in the Partnership. The number of holders
of Units at December 31, 1996 was approximately 703. No distributions
have been made by the Partnership since it commenced trading operations
on July 15, 1983. Demeter has sole discretion to decide what
distributions, if any, shall be made to investors in the Partnership. No
determination has yet been made as to future distributions.
<PAGE>
<TABLE>
Item 6. SELECTED FINANCIAL DATA (in dollars)
<CAPTION>
For the Years Ended December 31,
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Total Revenues
(including interest) 2,295,489 2,756,685 482,814 1,994,437 970,393
Net Income (Loss) 1,340,938 1,815,259 (404,752) 1,024,820 12,961
Net Income (Loss)
Per Unit (Limited
& General Partners) 370.17 426.63 (92.18) 201.43 27.72
Total Assets 8,628,063 7,892,138 6,694,540 7,970,769 7,691,748
Total Limited Partners'
Capital 8,110,079 7,493,781 6,428,721 7,479,264 7,187,699
Net Asset Value Per
Unit of Limited
Partnership Interest 2,309.06 1,938.89 1,512.26 1,604.44 1,403.01
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity. The Partnership's assets are deposited in separate
commodity trading accounts with DWR, the commodity broker, and are used
by the Partnership as margin to engage in commodity futures contract
trading. DWR holds such assets in either designated depositories or in
securities approved by the Commodity Futures Trading Commission ("CFTC")
for investment of customer funds. The Partnership's assets held by DWR
may be used as margin solely for the Partnership's trading. Since the
Partnership's sole purpose is to trade in commodity futures contracts and
other commodity interests, it is expected that the Partnership will
continue to own such liquid assets for margin purposes.
The Partnership's investment in commodity futures contracts and
other commodity interests may be illiquid. If the price for a futures
contract for a particular commodity has increased or decreased by an
amount equal to the "daily limit", positions in the commodity can neither
be taken nor liquidated unless traders are willing to effect trades at or
within the limit. Commodity futures prices have occasionally moved the
daily limit for several consecutive days with little or no trading. Such
market conditions could prevent the Partnership from promptly liquidating
its commodity futures positions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world currencies
have low trading volume and are illiquid, which may prevent the
Partnership from trading in potentially profitable markets or prevent the
Partnership from promptly liquidating unfavorable positions in such
markets and subjecting it to substantial losses.
Either of these market conditions could result in restrictions on
redemptions.<PAGE>
Market Risk. The Partnership trades futures, options and forward
contracts in interest rates, stock indices, commodities and currencies.
In entering into these contracts there exists a risk to the Partnership
(market risk) that such contracts may be significantly influenced by
market conditions, such as interest rate volatility, resulting in such
contracts being less valuable. If the markets should move against all of
the futures interest positions held by the Partnership at the same time,
and if the Trading Advisor were unable to offset futures interest
positions of the Partnership, the Partnership could lose all of its assets
and the Limited Partners would realize a 100% loss. The Partnership has
established Trading Policies, which include standards for liquidity and
leverage which help control market risk. Both the Trading Advisor and
Demeter monitor the Partnership's trading activities on a daily basis to
ensure compliance with the Trading Policies. Demeter may (under terms of
the Management Agreement) override the trading instructions of the Trading
Advisor to the extent necessary to comply with the Partnership's Trading
Policies.
Credit Risk. In addition to market risk, the Partnership is subject
to credit risk in that a counterparty may not be able to meet its
obligations to the Partnership. The counterparty of the Partnership for
futures contracts traded in the United States and most foreign exchanges
on which the Partnership trades is the clearinghouse associated with such
exchange. In general, a clearinghouse is backed by the membership of the
exchange and will act in the event of non-performance by one of its
members or one of its member's customers, and as such, should
significantly reduce this credit risk. In cases where the Partnership
trades on exchanges where the clearinghouse is not funded or guaranteed by
the membership or where the exchange is a "principals' market" in which
<PAGE>
performance is the responsibility of the exchange member and not the
exchange or a clearinghouse, or when the Partnership enters into off-
exchange member and not the exchange or a clearinghouse, or when the
Partnership enters into off-exchange contracts with a counterparty, the
sole recourse of the Partnership will be the clearinghouse, the exchange
member or the off-exchange contract counterparty, as the case may be.or
when the Partnership enters into off-exchange contracts with a
counterparty, the sole recourse of the Partnership will be the
clearinghouse or the counterparty as the case may be. With respect to
futures contracts, DWR, in its business as an international commodity
broker, constantly monitors the creditworthiness of the exchanges and
clearing members of the foreign exchanges with which it does business for
clients, including the Partnership. DWR employees also from time to time
serve on supervisory or management committees of such exchanges. If DWR
believed that there was a problem with the creditworthiness of an exchange
on which the Partnership deals, it would so advise Demeter. With respect
to exchanges of which DWR is not a member, DWR acts only through clearing
brokers it has determined to be creditworthy. If DWR believed that a
clearing broker with which it deals on behalf of clients were not
creditworthy, it would terminate its relationship with such broker.
While DWR monitors the creditworthiness and risks involved in
dealing on the various exchanges (and their clearinghouses) and with other
exchange members, there can be no assurance that an exchange (or its
clearinghouse) or other exchange member will be able to meet its
obligations to the Partnership. DWR has not undertaken to indemnify the
Partnership against any loss. Further, the law is unclear, particularly
with respect to trading in various non-U.S. jurisdictions, as to whether
DWR has any obligation to protect the Partnership from any liability in
<PAGE>
the event that an exchange or its clearinghouse or another exchange member
defaults on its obligations on trades effected for the Partnership.
Although DWR monitors the creditworthiness of the foreign exchanges
and clearing brokers with which it does business for clients, DWR does not
have the capability to precisely quantify the Partnership's exposure to
risks inherent in its trading activities on foreign exchanges, and, as a
result, the risk is not monitored by DWR on an individual client basis
(including the Partnership). In this regard, DWR must clear its customer
trades through one or more other clearing brokers on each exchange where
DWR is not a clearing member. Such other clearing brokers calculate the
net margin requirements of DWR in respect of the aggregate of all of DWR's
customer positions carried in DWR's omnibus account with that clearing
broker. Similarly, DWR calculates a net margin requirement for the
exchange-traded futures positions of each of its customers, including the
Partnership. Neither DWR nor DWR's respective clearing brokers on each
foreign futures exchange calculates the margin requirements of an
individual customer, such as the Partnership, in respect of the customer's
aggregate contract positions on any particular exchange. With respect to
forward contract trading, the Partnership trades with only those
counterparties which Demeter, together with DWR, have determined to be
creditworthy. As set forth in the Partnership's Trading Policies, in
determining creditworthiness, Demeter and DWR consult with the Corporate
Credit Department of DWR. Currently, the Partnership deals solely with
DWR as its counterparty on forward contracts. While DWR and Demeter
monitor creditworthiness and risk involved in dealing on the various
exchanges and with counterparties, there can be no assurance that an
exchange or counterparty will be able to meet its obligations to the
Partnership. See "Financial Instruments", - under Notes to Financial
<PAGE>
Statements in its 1996 Annual Report to Partners, incorporated by
reference in this Form 10-K.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets. Redemptions of additional Units in
the future will impact the amount of funds available for investments in
commodity futures, forward contracts on foreign currencies and other
commodity interests in subsequent periods. As redemptions are at the
discretion of Limited Partners, it is not possible to estimate the amount
and therefore, the impact of future redemptions.
Results of Operations. As of December 31, 1996, the Partnership's
total capital was $8,340,985, an increase of $653,315 from the
Partnership's total capital of $7,687,670 at December 31, 1995. For the
year ended December 31, 1996, the Partnership generated net income of
$1,340,938 and total redemptions aggregated $687,623.
For the year ended December 31, 1996, the Partnership's total
trading revenues including interest income were $2,295,489. The
Partnership's total expenses for the period were $954,551, resulting in
net income of $1,340,938. The value of an individual unit in the
Partnership increased from $1,938.89 at December 31, 1995 to $2,309.06 at
December 31, 1996.
As of December 31, 1995, the Partnership's total capital was
$7,687,670, an increase of $1,107,723 from the Partnership's total capital
of $6,579,947 at December 31, 1994. For the year ended December 31,
1995, the Partnership generated net income of $1,815,259 and total
redemptions aggregated $707,536.
For the year ended December 31, 1995, the Partnership's total
trading revenues including interest income were $2,756,685. The
Partnership's total expenses for the year were $941,426, resulting in net
<PAGE>
income of $1,815,259. The value of an individual unit in the Partnership
increased from $1,512.26 at December 31, 1994 to $1,938.89 at December 31,
1995.
As of December 31, 1994, the Partnership's total capital was
$6,579,947, a decrease of $1,218,600 from the Partnership's total capital
of $7,798,547 at December 31, 1993. For the year ended December 31, 1994,
the Partnership incurred a net loss of $404,752 and total redemptions
aggregated $813,848.
For the year ended December 31, 1994, the Partnership's total
trading revenues including interest income were $482,814. The
Partnership's total expenses for the year were $887,566, resulting in a
net loss of $404,752. The value of an individual unit in the Partnership
decreased from $1,604.44 at December 31, 1993 to $1,512.26 at December 31,
1994.
The Partnership's overall performance record represents varied
results of trading in different commodity markets. For a further
description of trading results, refer to the letter to the Limited
Partners in the accompanying 1996 Annual Report to Partners, incorporated
by reference in this Form 10-K. The Partnership's gains and losses are
allocated among its Limited Partners for income tax purposes.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item appears in the attached 1996
Annual Report to Partners and is incorporated by reference in this Annual
Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS OF THE REGISTRANT
General Partner
Demeter, a Delaware corporation, was formed on August 18, 1977 to
act as a commodity pool operator and is registered with the CFTC as a
commodity pool operator and currently is a member of the National Futures
Association ("NFA") in such capacity. Demeter is wholly-owned by DWD and
is an affiliate of DWR. DWD, DWR and Demeter may each be deemed to be
"promoters" and/or a "parent" of the Partnership within the meaning of the
federal securities laws.
Dean Witter Reynolds Inc.
DWR is a financial services company which provides to its
individual, corporate and institutional clients services as a broker in
securities and commodity interest contracts, a dealer in corporate,
municipal and government securities, an investment banker, an investment
adviser and an agent in the sale of life insurance and various other
products and services. DWR is a member firm of the New York Stock
Exchange, the American Stock Exchange, the Chicago Board Options Exchange,
and other major securities exchanges, and is a clearing member of the
Chicago Board of Trade, the Chicago Mercantile Exchange, the Commodity
Exchange Inc., and other major commodities exchanges.
DWR is registered with the CFTC as a futures commission merchant and
is a member of the NFA in such capacity. DWR is currently servicing its
clients through a network of 371 branch offices with approximately 9,080
account executives servicing individual and institutional client accounts.
<PAGE>
Directors and Officers of the General Partner
The directors and officers of Demeter as of December 31, 1996 are
as follows:
Richard M. DeMartini, age 44, is the Chairman of the Board and a
Director of Demeter. Mr. DeMartini is also the Chairman of the Board and
a Director of DWFCM, a registered commodity trading advisor. Mr.
DeMartini has served as President and Chief Operating Officer of Dean
Witter Capital, a division of DWR since January 1989. From January 1988
until January 1989, Mr. DeMartini served as President and Chief Operating
Officer of the Consumer Banking Division of DWD, and from May 1985 until
January 1988 was President and Chief Executive Officer of the Consumer
Markets Division of DWD. Mr. DeMartini currently serves as a Director of
DWD and DWR, and has served as an officer of DWR for the past five years.
Mr. DeMartini has been with DWD and its affiliates for 22 years.
Mark J. Hawley, age 53, is President and a Director of Demeter. Mr.
Hawley joined DWR in February 1989 and currently serves as Executive Vice
President and Director of DWR's Managed Futures and Precious Metals
Department. Mr. Hawley also serves as President of DWFCM. From 1978 to
1989, Mr. Hawley was a member of the senior management team at Heinold
Asset Management, Inc., a commodity pool operator, and was responsible for
a variety of projects in public futures funds. From 1972 to 1978, Mr.
Hawley was a Vice President in charge of institutional block trading for
the Mid-West at Kuhn Loeb & Co.
Lawrence Volpe, age 49, is a Director of Demeter and DWFCM. Mr.
Volpe joined DWR as a Senior Vice President and Controller in September
1983, and currently holds those positions. From July 1979 to September
1983, he was associated with E.F. Hutton & Company Inc. and prior to his
<PAGE>
departure, held the positions of First Vice President and Assistant
Controller. From 1970 to July 1979, he was associated with Arthur
Anderson & Co. and prior to his departure he served as audit manager in
the financial services division.
Joseph G. Siniscalchi, age 51, is a Director of Demeter. Mr.
Siniscalchi joined DWR in July 1984 as a First Vice President, Director
of General Accounting. He is currently Senior Vice President and
Controller of the Dean Witter Financial Division of DWR. From February
1980 to July 1984, Mr. Siniscalchi was Director of Internal Audit at
Lehman Brothers Kuhn Loeb, Inc.
Laurence E. Mollner, age 55, is a Director of Demeter. Mr. Mollner
joined DWR in May 1979 as Vice President and Director of Commercial Sales.
He is currently Executive Vice President and Deputy Director of the
Futures Markets Division of DWR.
Edward C. Oelsner III, age 54, is a Director of Demeter. Mr.
Oelsner joined DWR in March 1981 as a Managing Director in the Corporate
Finance Department. He currently manages DWR's Retail Products Group
within the Corporate Finance Department. While Mr. Oelsner has extensive
experience in the securities industry, he has no experience in commodity
interests trading.
Robert E. Murray, age 36, is a Director of Demeter. Mr. Murray is
currently a Senior Vice President of the DWR Managed Futures Division and
is a Director and the Senior Administrative Officer of DWFCM. Mr. Murray
graduated from Geneseo State University in May 1983 with a B.A. degree in
Finance. Mr. Murray began at DWR in 1984 and is currently the Director
of Product Development for the Managed Futures Division and is responsible
<PAGE>
for the development and maintenance of the proprietary Fund Management
System utilized by Demeter and DWFCM for organizing information and
producing reports for monitoring investors' accounts.
Patti L. Behnke, age 36, is Vice President and Chief Financial
Officer of Demeter. Ms. Behnke joined DWR in 1991 as Assistant Vice
President of Financial Reporting and is currently First Vice President and
Director of Financial Reporting and Managed Futures Accounting in the
Capital Markets division of DWR. From August 1988 to September 1990, Ms.
Behnke was Assistant Controller of L.F. Rothschild & Co. and from
September 1986 to August 1988, she was associated with Carteret Savings
Bank as Assistant Vice President - Financial Analysis. From April 1982 to
September 1986, Ms. Behnke was an auditor at Arthur Andersen & Co.
Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers. As a
limited partnership, the business of the Partnership is managed by Demeter
which is responsible for the administration of the business affairs of the
Partnership but receives no compensation for such services.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - As of
December 31, 1996 there were no persons as beneficial owners of more than
5 percent of the Units of Limited Partnership Interest in the Partnership.
(b) Security Ownership of Management - At December 31, 1996,
Demeter owned 100 Units of General Partnership Interest in the Partnership
representing a 2.77 percent interest in the Partnership.
(c) Changes in Control - None
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to
Financial Statements", in the accompanying 1996 Annual Report to Partners,
incorporated by reference in this Form 10-K. In its capacity as the
Partnership's retail commodity broker, DWR received commodity brokerage
commissions (paid and accrued by the Partnership) of $397,597 for the year
ended December 31, 1996.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT ON FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and reports of independent
accountants, all appearing in the accompanying 1996 Annual Report to
Partners, are incorporated by reference in this Form 10-K:
- Report of Deloitte & Touche LLP, independent auditors, for the
years ended December 31, 1996, 1995 and 1994.
- Statements of Financial Condition as of December 31, 1996 and
1995.
- Statements of Operations, Changes in Partners' Capital, and
Cash Flows for the years ended December 31, 1996, 1995 and
1994.
- Notes to Financial Statements.
With the exception of the aforementioned information and the
information incorporated in Items 7, 8, and 13, the 1996 Annual Report to
Partners is not deemed to be filed with this report.
2. Listing of Financial Statement Schedules
No financial statement schedules are required to be filed with this
report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Partnership during the
last quarter of the period covered by this report.
(c) Exhibits
Refer to Exhibit Index on Page E-1.
<PAGE>
SIGNATURES
Pursuant to the requirement of Sections 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.
COLUMBIA FUTURES FUND
(Registrant)
BY: Demeter Management Corporation,
General Partner
March 24, 1997 BY: /s/ Mark J. Hawley
Mark J. Hawley, Director and
President
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 dates indicated.
Demeter Management Corporation.
BY: /s/ Mark J. Hawley March 24, 1997
Mark J. Hawley, Director and
President
/s/ Richard M. DeMartini March 24, 1997
Richard M. DeMartini, Director
and Chairman of the Board
/s/ Lawrence Volpe March 24, 1997
Lawrence Volpe, Director
/s/ Laurence E. Mollner March 24, 1997
Laurence E. Mollner, Director
/s/ Joseph G. Siniscalchi March 24, 1997
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III March 24, 1997
Edward C. Oelsner III, Director
/s/ Robert E. Murray March 24, 1997
Robert E. Murray, Director
/s/ Patti L. Behnke March 24, 1997
Patti L. Behnke, Chief Financial
Officer and Principal Accounting
Officer
<PAGE>
EXHIBIT INDEX
Item METHOD OF FILING
- - 3. Amendment to Limited Partnership (1)
Agreement of Columbia Futures Fund,
dated as of February 14, 1985.
- -10. Advisory Agreement among the Partnership, (2)
Demeter Management Corporation, and John
W. Henry & Company, Inc. dated as of January
20, 1987.
- -10. December 31, 1996 Annual Report to Limited Partners. (3)
(1) Incorporated by reference to Exhibit 3.01 of the Partnership's Annual
Report on Form 10-K for the fiscal year ended December 31, 1985.
(2) Incorporated by reference to Exhibit 10.03 of the Partnership's Annual
Report on Form 10-K for the fiscal year ended December 31, 1986.
(3) Filed herewith.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Columbia Futures Fund and is qualified in its entirety by references to
such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,233,513
<SECURITIES> 0
<RECEIVABLES> 28,574
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,628,063<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,628,063<F2>
<SALES> 0
<TOTAL-REVENUES> 2,295,489<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 954,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,340,938
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,340,938
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,340,938
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $365,976.
<F2>Liabilities include incentive fees payable of $150,103, redemptions
payable of $23,091, accrued management fees of $28,381, accrued brokerage
commissions of $16,631, accrued transaction fees and costs of $1,324 and
accrued administrative expense payable of $67,548.
<F3>Total revenues include realized trading revenue of $2,453,483, net change
in unrealized of ($470,252) and interest income of $312,258.
</FN>
</TABLE>
<PAGE>
Columbia Futures Fund
December 31, 1996
Annual Report
LOGO DEAN WITTER
<PAGE>
DEAN WITTER
Two World Trade Center 62nd Floor
New York, NY 10048
Telephone (212) 392-8899
COLUMBIA FUTURES FUND
ANNUAL REPORT
1996
Dear Limited Partner:
This marks the fourteenth annual report for the Columbia Futures Fund (the
"Fund"). This is the twelfth report filed by Demeter Management Corporation,
the Fund's General Partner since February 1985. The Fund began the year trading
at a Net Asset Value per Unit of $1,938.89 and increased by 19.1% to $2,309.06
on December 31, 1996. Since its inception in 1983, the Fund has increased by
135.6% (a compound annualized return of 6.6%).
During January, the Fund posted gains in currencies from short positions in
most major world currencies versus the U.S. dollar. Additional gains were
recorded from long global interest rate and stock index futures positions. The
Fund experienced difficult performance during February due primarily to several
sharp reversals higher in the value of the Japanese yen and most major European
currencies versus the U.S. dollar. Smaller losses were recorded from choppy
price movement in energy futures and soft commodities. During March, profits
were recorded as a result of gains experienced from long Australian dollar
positions. Smaller currency gains were recorded from short positions in the
Japanese yen. Additional gains were recorded from long crude oil futures
positions as energy prices moved higher.
In April, the Fund recorded gains primarily from short Swiss franc and German
mark positions as the value of these currencies moved lower versus the U.S.
dollar. Additional gains were recorded from long agricultural and energy
futures positions. During May, the Fund recorded losses as a
<PAGE>
portion of April's gains was given back due to a sudden downward move in oil
prices. Smaller losses were recorded from trendless price movement in non-U.S.
financial futures. The Fund recorded gains during June due primarily to short
positions in metals as prices declined during the month. Additional gains were
recorded in currencies from short Japanese yen positions as the value of the
yen moved lower.
During July, the Fund recorded losses primarily from short Japanese yen
positions as its value increased sharply relative to the U.S. dollar. Smaller
losses were recorded from transactions involving the Swiss franc, as well as
from choppy price movement in agricultural futures. During August, losses were
recorded primarily from short Australian dollar positions as its value moved
sharply higher versus other world currencies. Smaller losses were recorded from
a reversal higher in coffee and cotton futures prices. In September, the Fund
profited primarily from long crude oil futures positions as oil prices trended
higher. Additional gains were recorded from short corn futures positions, as
well as from a strong upward move in global bond futures prices.
Strong profits were recorded during October and November primarily from long
positions in global bond futures as prices continued to trend higher.
Additional gains were recorded in currencies from long British pound positions
as its value moved higher relative to other world currencies. Smaller currency
gains during this period were recorded from short Japanese yen and Swiss franc
positions. During December, the Fund experienced small gains primarily from
long crude oil futures positions as prices finished the month higher.
Additional gains were recorded from short corn and soybean futures positions. A
majority of these gains were offset by losses recorded in global interest rate
futures as the previous upward price trend reversed sharply lower. Losses in
<PAGE>
this sector were relatively small compared to previous months' profits as long
positions in these markets (U.S., European and Japanese bond futures) had been
reduced earlier in December.
Overall, the Fund experienced strong profits during 1996 as the diversified
trading programs of the Fund's sole Trading Advisor, John W. Henry & Company,
Inc. ("JWH"), took advantage of price trends in financial futures, currencies
and energies in the last four months of the year and limited losses during
periods of non-trending and sharply reversing price movement in global futures
and commodities. These diversified programs have benefited the Fund since JWH
took over as sole Trading Advisor in 1988 and we believe they will continue to
do so, given the opportunity for trending market conditions.
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation at Two World Trade Center, 62nd Floor,
New York, NY 10048 or your Dean Witter Account Executive.
I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is not a
guarantee of future results.
Sincerely,
/s/Mark J. Hawley
Mark J. Hawley
President
Demeter Management Corporation
General Partner
<PAGE>
COLUMBIA FUTURES FUND
INDEPENDENT AUDITORS' REPORT
The Limited Partners and the General Partner:
We have audited the accompanying statements of financial condition of Columbia
Futures Fund (the "Partnership") as of December 31, 1996 and 1995 and the
related statements of operations, changes in partners' capital, and cash flows
for each of the three years in the period ended December 31, 1996. 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, such financial statements present fairly, in all material
respects, the financial position of Columbia Futures Fund as of December 31,
1996 and 1995 and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/Deloitte & Touche LLP
February 17, 1997
New York, New York
<PAGE>
COLUMBIA FUTURES FUND
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
--------- ---------
$ $
<S> <C> <C>
ASSETS
Equity in Commodity futures trading accounts:
Cash 8,233,513 7,028,474
Net unrealized gain on open
contracts 365,976 836,228
--------- ---------
Total Trading Equity 8,599,489 7,864,702
Interest receivable (DWR) 28,574 27,436
--------- ---------
Total Assets 8,628,063 7,892,138
========= =========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Incentive fee payable 150,103 --
Administrative expenses payable 67,548 96,611
Accrued management fee 28,381 25,825
Redemptions payable 23,091 59,640
Accrued brokerage commissions (DWR) 16,631 20,693
Accrued transaction fees and costs 1,324 1,699
--------- ---------
Total Liabilities 287,078 204,468
--------- ---------
PARTNERS' CAPITAL
Limited Partners (3,512.282 and 3,864.982 Units, respec-
tively) 8,110,079 7,493,781
General Partner (100 Units) 230,906 193,889
--------- ---------
Total Partners' Capital 8,340,985 7,687,670
--------- ---------
Total Liabilities and Partners'
Capital 8,628,063 7,892,138
========= =========
NET ASSET VALUE PER UNIT 2,309.06 1,938.89
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COLUMBIA FUTURES FUND
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED
DECEMBER 31,
------------------------------
1996 1995 1994
--------- --------- --------
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 2,453,483 2,608,057 442,848
Net change in unrealized (470,252) (197,683) (215,114)
--------- --------- --------
Total Trading Results 1,983,231 2,410,374 227,734
Interest income (DWR) 312,258 346,311 255,080
--------- --------- --------
Total Revenues 2,295,489 2,756,685 482,814
--------- --------- --------
EXPENSES
Brokerage commissions (DWR) 397,597 361,179 416,667
Management fee 302,169 306,556 293,249
Incentive fee 150,977 115,561 78,504
Administrative expenses 72,000 129,000 66,000
Transaction fees and costs 31,808 29,130 33,146
--------- --------- --------
Total Expenses 954,551 941,426 887,566
--------- --------- --------
NET INCOME (LOSS) 1,340,938 1,815,259 (404,752)
========= ========= ========
NET INCOME (LOSS) ALLOCATION:
Limited Partners 1,303,921 1,772,596 (407,149)
General Partner 37,017 42,663 2,397
NET INCOME (LOSS) PER UNIT:
Limited Partners 370.17 426.63 (92.18)
General Partner 370.17 426.63 (92.18)
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
----------- --------- -------- ---------
$ $ $
<S> <C> <C> <C> <C>
Partners' Capital, December 31,
1993 4,860.614 7,479,264 319,283 7,798,547
Net Income (Loss) -- (407,149) 2,397 (404,752)
Redemptions (509.549) (643,394) (170,454) (813,848)
--------- --------- -------- ---------
Partners' Capital, December 31,
1994 4,351.065 6,428,721 151,226 6,579,947
Net Income -- 1,772,596 42,663 1,815,259
Redemptions (386.083) (707,536) -- (707,536)
--------- --------- -------- ---------
Partners' Capital, December 31,
1995 3,964.982 7,493,781 193,889 7,687,670
Net Income -- 1,303,921 37,017 1,340,938
Redemptions (352.700) (687,623) -- (687,623)
--------- --------- -------- ---------
Partners' Capital,
December 31, 1996 3,612.282 8,110,079 230,906 8,340,985
========= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COLUMBIA FUTURES FUND
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED
DECEMBER 31,
--------------------------------
1996 1995 1994
--------- --------- ----------
$ $ $
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 1,340,938 1,815,259 (404,752)
Noncash item included in net income (loss):
Net change in unrealized 470,252 197,683 215,114
Increase in operating assets:
Interest receivable (DWR) (1,138) (650) (10,578)
Increase (decrease) in
operating liabilities:
Incentive fee payable 150,103 -- (58,253)
Administrative expenses payable (29,063) 89,859 (41,648)
Accrued management fee 2,556 3,675 (4,093)
Accrued brokerage commissions (DWR) (4,062) 1,393 (2,284)
Accrued transaction fees and costs (375) 335 (245)
--------- --------- ----------
Net cash provided by (used for) operating
activities 1,929,211 2,107,554 (306,739)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable (36,549) (5,387) 48,894
Redemptions of units (687,623) (707,536) (813,848)
--------- --------- ----------
Net cash used for financing activities (724,172) (712,923) (764,954)
--------- --------- ----------
Net increase (decrease) in cash 1,205,039 1,394,631 (1,071,693)
Balance at beginning of period 7,028,474 5,633,843 6,705,536
--------- --------- ----------
Balance at end of period 8,233,513 7,028,474 5,633,843
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Columbia Futures Fund (the "Partnership") is a limited
partnership organized to engage in the speculative trading of commodity futures
contracts and forward contracts on foreign currencies. The general partner for
the Partnership is Demeter Management Corporation ("Demeter"). The commodity
broker is Dean Witter Reynolds Inc. ("DWR"). Both DWR and Demeter are wholly-
owned subsidiaries of Dean Witter, Discover & Co. ("DWD").
Demeter is required to maintain a 1% minimum interest in the equity of the
Partnership and income (losses) are shared by the General and Limited Partners
based upon their proportional ownership interests.
BASIS OF ACCOUNTING--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements.
REVENUE RECOGNITION--Commodity futures contracts and forward contracts on
foreign currencies are open commitments until settlement date. They are valued
at market and the resulting unrealized gains and losses are reflected in
income. Monthly, DWR pays the Partnership interest income based upon 80% of the
average equity at a rate equal to the average yield on 13-Week U.S. Treasury
Bills issued during such month.
NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using the
weighted average number of units outstanding during the period.
EQUITY IN COMMODITY FUTURES TRADING ACCOUNTS--The Partnership's asset "Equity
in Commodity futures trading accounts" consists of cash on deposit at DWR to be
used as margin for trading and the net asset or liability related to unrealized
gains or losses on open contracts. The asset or liability related to the
unrealized gains or losses on forward contracts is presented as a net amount
because the Partnership has a master netting agreement with DWR.
BROKERAGE COMMISSIONS AND RELATED TRANSACTION FEES AND COSTS--Brokerage
commissions are accrued at 80% of DWR's published non-member rates on a half-
turn basis. Transaction fees and costs are accrued on a half-turn basis.
Through March 31, 1995, brokerage commissions were capped at 1% per month of
the adjusted Net Assets allocated to each trading program employed by the
Trading Manager.
From April 1, 1996 through August 31, 1996, the caps for brokerage commissions
were reduced to 3/4 of 1%.
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Effective September 1, 1996, brokerage commissions and transaction fees
chargeable to the Partnership were capped at 13/20 of 1% per month of the
Partnership's month-end Net Assets (as defined in the Limited Partnership
Agreement).
OPERATING EXPENSES--The Partnership bears all operating expenses related to its
trading activities. These include filing fees, clerical, administrative,
auditing, accounting, mailing, printing, and other incidental operating
expenses as permitted by the Limited Partnership Agreement. In addition, the
Partnership incurs a monthly management fee and may incur an incentive fee.
Demeter bears all other operating expenses.
INCOME TAXES--No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of the Partnership's revenues
and expenses for income tax purposes.
DISTRIBUTIONS--Distributions, other than on redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
REDEMPTIONS--Limited Partners may redeem their Units as of the end of any
calendar month upon ten days advance notice by redemption form to Demeter.
DISSOLUTION OF THE PARTNERSHIP--The Partnership will terminate on December 31,
2002 regardless of its financial condition at such time, unless the term is
extended in accordance with the Limited Partnership Agreement, upon a decline
in Net Assets to less than $250,000, a decline in the Net Asset Value Per Unit
to less than $343.22, or under certain other circumstances as defined in the
Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
The Partnership pays brokerage commissions to DWR on trades executed on its
behalf as described in Note 1. The Partnership's cash is on deposit with DWR in
commodity trading accounts to meet margin requirements as needed. DWR pays
interest on these funds as described in Note 1. For general administrative
services performed for the Partnership, Demeter receives a monthly
administration fee which equals $1.50 per limited partner outstanding. For the
years ended December 31, 1996, 1995 and 1994 Demeter received $13,101, $14,483
and $15,888, respectively for such administrative services.
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. TRADING MANAGER
Demeter, on behalf of the Partnership, retains a commodity trading manager to
make all trading decisions for the Partnership. Since January 22, 1988, John W.
Henry & Company, Inc. ("JWH") has served as the sole trading manager.
Compensation to the trading manager consists of a management fee and an
incentive fee as follows:
MANAGEMENT FEE--The management fee is accrued daily at the rate of 1/3 of 1%
per month of the Partnership's managed Net Assets at each month-end.
INCENTIVE FEE--At the end of each quarter or upon redemption
of a Partnership Unit, an incentive fee is assessed each Unit
equal to 15 percent of the excess of the Unit value,
excluding interest earned during the period, over the Unit
value at the time immediately following the last incentive
payment. Such incentive fee is accrued in each month in which
new appreciation occurs. In those months in which new
appreciation is negative, previous accruals, if any, during
each fiscal quarter will be reduced.
4. FINANCIAL INSTRUMENTS
The Partnership trades futures and forward contracts in interest rates, stock
indices, commodities, currencies, petroleum, and precious metals. Futures and
forwards represent contracts for delayed delivery of an instrument at a
specified date and price. Risk arises from changes in the value of these
contracts and the potential inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest rate
volatility. At December 31, 1996 and 1995 open contracts were:
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL AMOUNT
----------------------------
1996 1995
------------- --------------
$ $
<S> <C> <C>
EXCHANGE-TRADED CONTRACTS
Financial Futures:
Commitments to Purchase 5,890,000 8,458,000
Commitments to Sell 5,281,000 --
Commodity Futures:
Commitments to Purchase 1,723,000 10,525,000
Commitments to Sell 5,004,000 3,128,000
Foreign Futures:
Commitments to Purchase 3,327,000 9,982,000
Commitments to Sell 4,040,000 615,000
OFF-EXCHANGE-TRADED FORWARD
CURRENCY CONTRACTS
Commitments to Purchase 9,367,000 5,654,000
Commitments to Sell 6,091,000 15,147,000
</TABLE>
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A portion of the amounts indicated as off-balance-sheet risk in forward
currency contracts is due to offsetting forward commitments to purchase and to
sell the same currency on the same date in the future. These commitments are
economically offsetting, but are not offset in the forward market until the
settlement date.
The net unrealized gain on open contracts is reported as a component of "Equity
in Commodity futures trading accounts" on the Statements of Financial Condition
and totaled $365,976 and $836,228 at December 31, 1996 and 1995, respectively.
Of the $365,976 net unrealized gain on open contracts at December 31, 1996,
$381,231 related to exchange-traded futures contracts and $(15,255) related to
off-exchange-traded forward currency contracts. Of the $836,228 net unrealized
gain on open contracts at December 31, 1995, $858,691 related to exchange-
traded futures contracts and $(22,463) related to off-exchange-traded forward
currency contracts.
Exchange-traded futures contracts held by the Partnership at December 31, 1996
and 1995 mature through September 1997 and December 1996, respectively. Off-
exchange-traded forward currency contracts held by the Partnership at December
31, 1996 and 1995 mature through March 1997 and January 1996, respectively. The
contract amounts in the above table represent the Partnership's extent of
involvement in the particular class of financial instrument, but not the credit
risk associated with counterparty nonperformance. The credit risk associated
with these instruments is limited to the amounts reflected in the Partnership's
Statements of Financial Condition.
The Partnership also has credit risk because DWR acts as the futures commission
merchant or the sole counterparty, with respect to most of the Partnership's
assets. Exchange-traded futures contracts are marked to market on a daily
basis, with variations in value settled on a daily basis. DWR, as the futures
commission merchant for all of the Partnership's exchange-traded futures
contracts, is required pursuant to regulations of the Commodity Futures Trading
Commission to segregate from its own assets, and for the sole benefit of its
commodity customers, all funds held by DWR with respect to exchange-traded
futures contracts including an amount equal to the net unrealized gain on all
open futures contracts, which funds totaled $8,614,744 and $7,887,165 at
December 31, 1996 and 1995, respectively. With respect to the Partnership's
off-exchange-traded forward currency contracts, there are no daily settlements
of variations in value nor is there any requirement that
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
an amount equal to the net unrealized gain on open forward contracts be
segregated. With respect to those off-exchange-traded forward currency
contracts, the Partnership is at risk to the ability of DWR, the counterparty
on all of such contracts, to perform.
For the years ended December 31, 1996 and 1995, the average fair value of
financial instruments held for trading purposes was as follows:
<TABLE>
<CAPTION>
1996
----------------------
ASSETS LIABILITIES
---------- -----------
$ $
EXCHANGE-TRADED CONTRACTS:
<S> <C> <C>
Financial Futures 7,988,000 9,207,000
Commodity Futures 6,451,000 5,433,000
Foreign Futures 8,788,000 3,870,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 13,160,000 15,230,000
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------
ASSETS LIABILITIES
--------- -----------
$ $
EXCHANGE-TRADED CONTRACTS:
<S> <C> <C>
Financial Futures 7,009,000 5,950,000
Commodity Futures 5,776,000 3,383,000
Foreign Futures 5,277,000 2,371,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 7,829,000 9,743,000
</TABLE>
5. LEGAL MATTERS
On September 6, 10, and 20, 1996, similar purported class actions were filed in
the Superior Court of the State of California, County of Los Angeles, on behalf
of all purchasers of interests in limited partnership commodity pools sold by
DWR. Named defendants include DWR, Demeter, Dean Witter Futures & Currency
Management Inc., DWD (all such parties referred to hereafter as the "Dean
Witter Parties"), certain limited partnership commodity pools of which Demeter
is the general partner, and certain trading advisors (including JWH) to those
pools. Similar purported class actions were also filed on September 18 and 20,
1996, in the Supreme Court of the State of New York, New York County, and on
November 14, 1996 in the Superior Court of the State of Delaware, New Castle
County, against the Dean Witter Parties and certain trading advisors (including
JWH) on behalf of all purchasers of interests in various limited partnership
commodity pools sold by DWR. Generally, these complaints allege, among other
things, that the defendants committed fraud, deceit, misrepresentation, breach
of fiduciary duty, fraudulent and unfair business practices, unjust enrichment,
and conversion in connection with the sale and operation of the various
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
limited partnership commodity pools. The complaints seek unspecified amounts of
compensatory and punitive damages and other relief. It is possible that
additional similar actions may be filed and that, in the course of these
actions, other parties could be added as defendants. The Dean Witter Parties
believe that they have strong defenses to, and they will vigorously contest,
the actions. Although the ultimate outcome of legal proceedings cannot be
predicted with certainty, it is the opinion of management of the Dean Witter
Parties that the resolution of the actions will not have a material adverse
effect on the financial condition or the results of operations of any of the
Dean Witter Parties.
<PAGE>
DEAN WITTER REYNOLDS INC.
Two World Trade Center
62nd Floor
New York, NY 10048
FIRST-CLASS MAIL
ZIP + 4 PRESORT
U.S. POSTAGE PAID
BROOKLYN, NY
PERMIT NO. 148
