UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-12431
COLUMBIA FUTURES FUND
(Exact name of registrant as specified in its charter)
New York 13-3103617
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
c/o Demeter Management Corporation
Two World Trade Center, 62 Fl., New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
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
<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 1999
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
September 30, 1999 (Unaudited) and December 31, 1998.....2
Statements of Operations for the Quarters Ended
September 30, 1999 and 1998 (Unaudited)..................3
Statements of Operations for the Nine Months Ended
September 30, 1999 and 1998 (Unaudited)..................4
Statements of Changes in Partners' Capital for
the Nine Months Ended September 30, 1999 and 1998
(Unaudited)..............................................5
Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998 (Unaudited)..................6
Notes to Financial Statements (Unaudited).............7-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................12-21
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ..................................... 21-33
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................. 34
Item 6. Exhibits and Reports on Form 8-K.....................34
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COLUMBIA FUTURES FUND
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31,
1999 1998
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 8,772,635 9,719,676
Net unrealized gain on open contracts 349,191 499,104
Total Trading Equity 9,121,826 10,218,780
Interest receivable (DWR) 29,368 29,902
Due from DWR 585 -
Total Assets 9,151,779 10,248,682
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Administrative expenses payable 96,129 54,390
Redemptions payable 61,592 15,855
Accrued management fees 30,085 33,868
Total Liabilities 187,806 104,113
Partners' Capital
Limited Partners (2,810.763 and
3,099.179 Units, respectively) 8,656,013 9,827,470
General Partner (100 Units) 307,960 317,099
Total Partners' Capital 8,963,973 10,144,569
Total Liabilities and Partners' Capital 9,151,779 10,248,682
NET ASSET VALUE PER UNIT 3,079.60 3,170.99
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended September 30,
1999 1998
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized (207,066) 143,426
Net change in unrealized (31,363) (125,696)
Total Trading Results (238,429) 17,730
Interest Income (DWR) 89,778 102,819
Total Revenues (148,651) 120,549
EXPENSES
Brokerage commissions (DWR) 110,572 75,580
Management fees 91,008 101,499
Administrative expenses 21,000 14,000
Transaction fees and costs 7,244 5,755
Total Expenses 229,824 196,834
NET LOSS (378,475) (76,285)
NET LOSS ALLOCATION
Limited Partners (365,723) (73,894)
General Partner (12,752) (2,391)
NET LOSS PER UNIT
Limited Partners (127.52) (23.91)
General Partner (127.52) (23.91)
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Nine Months Ended September 30,
1999 1998
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 269,671 1,192,374
Net change in unrealized (149,913) 101,330
Total Trading Results 119,758 1,293,704
Interest Income (DWR) 267,141 292,350
Total Revenues 386,899 1,586,054
EXPENSES
Brokerage commissions (DWR) 297,984 239,853
Management fees 287,191 287,278
Administrative expenses 55,000 46,000
Transaction fees and costs 19,638 17,010
Incentive fees 187 133,846
Total Expenses 660,000 723,987
NET INCOME (LOSS) (273,101) 862,067
NET INCOME (LOSS) ALLOCATION
Limited Partners (263,962) 835,614
General Partner (9,139) 26,453
NET INCOME (LOSS) PER UNIT
Limited Partners (91.39) 264.53
General Partner (91.39) 264.53
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <c > <C>
Partner's Capital,
December 31, 1997 3,342.046 $9,177,928 $283,091 $9,461,019
Net Income - 835,614 26,453 862,067
Redemptions (120.850) (352,068) -
(352,068)
Partners' Capital,
September 30, 1998 3,221.196 $9,661,474 $309,544 $9,9
71,018
Partner's Capital,
December 31, 1998 3,199.179 $9,827,470 $317,099 $10,144,5
69
Net Loss - (263,962) (9,139) (273,101)
Redemptions (288.416) (907,495) -
(907,495)
Partners' Capital,
September 30, 1999 2,910.763 $8,656,013 $ 307,960 $8,963,
973
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Nine Months Ended September 30,
1999 1998
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) (273,101) 862,067
Noncash item included in net income (loss):
Net change in unrealized 149,913 (101,330)
(Increase) decrease in operating assets:
Interest receivable (DWR) 534 2,081
Due from DWR (585) -
Increase (decrease) in operating liabilities:
Administrative expenses payable 41,739 29,121
Accrued management fees (3,783) 1,059
Incentive fees payable - (173,722)
Net cash provided by (used for) operating activities (85,283)
619,276
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in redemptions payable 45,737 16,799
Redemptions of units (907,495) (352,068)
Net cash used for financing activities (861,758) (335,269)
Net increase (decrease) in cash (947,041) 284,007
Balance at beginning of period 9,719,676 9,092,300
Balance at end of period 8,772,635 9,376,307
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management,
all adjustments necessary for a fair presentation of the results
of operations and financial condition of Columbia Futures Fund
(the "Partnership"). The financial statements and condensed
notes herein should be read in conjunction with the Partnership's
December 31, 1998 Annual Report on Form 10-K.
1. Organization
Columbia Futures Fund is a limited partnership organized to
engage primarily in the speculative trading of futures contracts
and forward contracts in foreign currencies, financial
instruments and other commodity interests (collectively,
"futures interests"). The general partner is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker is
Dean Witter Reynolds Inc. ("DWR") and an unaffiliated clearing
commodity broker, Carr Futures Inc. ("Carr"), provides clearing
and execution services. Both Demeter and DWR are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW"). The
sole trading advisor to the Partnership is John W. Henry &
Company, Inc. (the "Trading Advisor").
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interests trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on current 13-week U.S.
Treasury bill rates. The Partnership pays brokerage commissions
to DWR.
3. Financial Instruments
The Partnership trades futures contracts and forward contracts in
foreign currencies, financial instruments and other commodity
interests. 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.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
effective for fiscal years beginning after June 15, 1999. The
Partnership elected to adopt the provisions of SFAS No. 133
beginning with the fiscal year that ended December 31, 1998.
SFAS No. 133 supersedes SFAS No. 119 and No. 105, which required
the
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
disclosure of average aggregate fair values and contract/notional
values, respectively, of derivative financial instruments for an
entity which carries its assets at fair value. The application
of SFAS No. 133 does not have a significant effect on the
Partnership's financial statements.
The net unrealized gain on open contracts is reported as a
component of "Equity in futures interests trading accounts" on
the Statements of Financial Condition and totaled $349,191 and
$499,104 at September 30, 1999 and December 31, 1998,
respectively.
Of the $349,191 net unrealized gain on open contracts at
September 30, 1999, $194,418 related to exchange-traded futures
contracts and $154,773 related to off-exchange-traded forward
currency contracts.
Of the $499,104 net unrealized gain on open contracts at December
31, 1998, $694,869 related to exchange-traded futures contracts
and $(195,765) related to off-exchange-traded forward currency
contracts.
Exchange-traded futures contracts held by the Partnership at
September 30, 1999 and December 31, 1998 mature through September
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2000 and September 1999, respectively. Off-exchange-traded
forward currency contracts held by the Partnership at September
30, 1999 and December 31, 1998 mature through December 1999 and
March 1999, respectively.
The Partnership is subject to the credit risk associated with
counterparty non-performance. The credit risk associated with
the instruments in which the Partnership is involved is limited
to the amounts reflected in the Partnership's Statements of
Financial Condition. DWR and Carr act as the futures commission
merchants or the counterparties 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. Each of DWR and Carr, as a futures
commission merchant for all of the Partnership's exchange-traded
futures contracts, are required, pursuant to regulations of the
Commodity Futures Trading Commission ("CFTC") to segregate from
their own assets, and for the sole benefit of their commodity
customers, all funds held by them with respect to exchange-traded
futures contracts, including an amount equal to the net
unrealized gain on all open futures contracts, which funds, in
the aggregate, totaled $8,967,053 and $10,414,545 at September
30, 1999 and December 31, 1998, respectively.
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 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 Carr, the
sole counterparty on all of such contracts, to perform. Carr's
parent, Credit Agricole Indosuez, has guaranteed to the
Partnership payment of the net liquidating value of the
transactions in the Partnership's account with Carr (including
foreign currency contracts).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - Assets of the Partnership are deposited with DWR as
non-clearing broker and Carr as clearing broker in separate
futures interest trading accounts. Such assets are held in either
non-interest bearing bank accounts or in securities approved by
the CFTC for investment of customer funds. The Partnership's
assets held by DWR and Carr may be used as margin solely for the
Partnership's trading. Since the Partnership's sole purpose is
to trade in futures interests, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.
The Partnership's investment in futures interests may, from time
to time, be illiquid. Most United States futures exchanges limit
fluctuations in certain futures interest prices during a single
day by regulations referred to as "daily price fluctuations
limits" or "daily limits". Pursuant to such regulations, during
a single trading day no trades may be executed at prices beyond
the daily limit. If the price for a particular futures interest
has increased or decreased by an amount equal to the daily limit,
positions in such futures interest can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Futures interests 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 futures interests and result in
restrictions on redemptions.
<PAGE>
There is no limitation on daily price moves in trading forward
contracts on foreign currency. 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 from promptly liquidating unfavorable positions,
subjecting it to substantial losses. Either of these market
conditions could result in restrictions on redemptions.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets. Future redemptions of Units
of Limited Partnership Interest ("Unit(s)") will affect the
amount of funds available for investment in futures interests in
subsequent periods. Since they 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
For the Quarter and Nine Months Ended September 30, 1999
For the quarter ended September 30, 1999, the Partnership
recorded total trading losses net of interest income of $148,651
and posted a decrease in Net Asset Value per Unit. The most
significant losses were recorded in the global interest rate
futures markets during July and September from short Japanese
government bond futures positions as prices rallied on fears that
strength in the Japanese yen would slow down that country's
budding recovery. Additional losses were experienced in the
<PAGE>
metals markets during July from short silver futures positions as
prices rose after a fall in U.S. market reserves and the
announcement of a cutback in metal production. In the currency
markets, losses were recorded during August and early September
from long positions in the European common currency, the euro,
and the Swiss franc as the U.S. dollar rallied higher versus most
major currencies on August 23 amid a rally in U.S. stock prices,
and on September 10 after an intervention by the Bank of Japan.
As a result, new short positions were established in the euro and
the Swiss franc only to result in additional losses as these
currencies strengthened versus the U.S. dollar during the latter
half of September after the U.S. trade figures reflected a record
deficit. Smaller losses were incurred during August in the
agricultural markets from long corn futures positions as prices
decreased due to an unexpectedly large U.S. Department of
Agriculture estimate for this year's corn crop. These losses
were partially offset by gains in the energy markets throughout
the quarter from long crude oil futures positions as oil prices
mounted higher during July after a fall in U.S. oil inventories,
production difficulties in Nigeria and continued adherence to
output reductions from OPEC countries. Oil prices continued to
climb during August and September on increased demand, fears of
production problems and an announcement by OPEC ministers
confirming that they will uphold their global cutbacks until
April of next year. Additional gains were recorded in the soft
commodities markets during July from short coffee futures
positions as prices fell amid diminished fears of impending frost
<PAGE>
damage to Brazilian plantations and on predictions that Brazil
would reap a record harvest next year. Total expenses for the
three months ended September 30, 1999 were $229,824, resulting in
a net loss of $378,475. The value of a Unit decreased from
$3,207.12 at June 30, 1999 to $3,079.60 at September 30, 1999.
For the nine months ended September 30, 1999, the Partnership
recorded total trading revenues including interest income of
$386,899 and, after expenses, posted a decrease in Net Asset
Value per Unit. The most significant net losses were recorded in
the metals markets from long silver futures positions as prices
retreated during mid-March after Berkshire Hathaway's annual
report failed to provide any new information on the company's
silver positions. Additional losses were incurred in this market
during the second quarter as supply and demand concerns resulted
in short-term price volatility. Additional losses were
experienced in the global interest rate futures markets during
July and September from short Japanese government bond futures
positions as prices rallied on fears that strength in the
Japanese yen would slow down that country's budding recovery.
Smaller losses were recorded in the agricultural markets from
long corn futures positions as prices decreased due to an
unexpectedly large U.S. Department of Agriculture estimate for
this year's corn crop. These losses were mitigated by profits
recorded in the energy markets from long crude oil futures
<PAGE>
positions as oil prices climbed higher during April, June, August
and September amid tightening of supply and growing global
demand. Additional gains were recorded in the currency markets
from short positions in the European common currency, the euro,
as the value of the U.S. dollar strengthened versus the euro
throughout a majority of the first half of the year on the
strength in the U.S. economy, concerns pertaining to the economic
health of Europe and Japan and ongoing military action in
Yugoslavia. Total expenses for the nine months ended September
30, 1999 were $660,000, resulting in a net loss of $273,101. The
value of a Unit decreased from $3,170.99 at December 31, 1998 to
$3,079.60 at September 30, 1999.
For the Quarter and Nine Months Ended September 30, 1998
For the quarter ended September 30, 1998, the Partnership
recorded total trading revenues including interest income of
$120,549 and, after expenses, posted a decrease in Net Asset
Value per Unit. The most significant net losses were recorded in
the currency markets from transactions involving the British
pound and Australian dollar as the value of these currencies
failed to move with consistent direction relative to the U.S.
dollar throughout a majority of the quarter. Smaller currency
losses were recorded during September from short Japanese yen
positions as the value of the yen strengthened versus the U.S.
dollar as a Japanese official hinted that Japan may intervene to
support the yen. As a result of this strengthening in the yen,
new long positions were
<PAGE>
established during mid-September, only to result in additional
losses as the value of the yen decreased due to the failure of
the Japanese government to present any new initiatives toward
economic recovery in that country. In other markets, choppy
price movement in coffee prices throughout the quarter resulted
in losses being recorded in soft commodities. Smaller losses
were recorded in metals from long silver futures positions during
July, as silver prices moved lower, and from short silver futures
positions during September as precious metals prices were boosted
higher by the weakness in the U.S. dollar. A majority of these
losses were offset by gains recorded in the financial futures
markets during August and September from long positions in
German, U.S. and Japanese bond futures as the volatility in
global stock markets and worldwide economic uncertainty drove
investors to these "safe havens", thus pushing prices higher.
Smaller profits were recorded in the agricultural markets during
July and August from short corn futures positions as grain prices
decreased on reports of abundant supplies. Total expenses for
the three months ended September 30, 1998 were $196,834,
resulting in a net loss of $76,285. The value of a Unit
decreased from $3,119.35 at June 30, 1998 to $3,095.44 at
September 30, 1998.
For the nine months ended September 30, 1998, the Partnership
recorded total trading revenues including interest income of
$1,586,054 and posted an increase in Net Asset Value per Unit.
The most significant gains were recorded in the financial futures
markets during August and September from long positions in
German,
<PAGE>
U.S. and Japanese bond futures as prices moved sharply higher due
to a "flight-to-quality" by investors seeking refuge from the
worldwide economic uncertainty and subsequent volatility.
Additional profits were recorded in the currency markets from
short South African rand positions as its value moved
significantly lower during May and June despite an effort by the
South African government to prevent its currency from declining
further. In energies, gains were recorded from short crude oil
futures positions as oil prices moved lower throughout a majority
of the first quarter despite the threat of a conflict in the
Persian Gulf. Short positions in crude oil futures continued to
profit during the second quarter and early part of the third
quarter as oil prices moved lower following a spike higher in
late March. Smaller gains were recorded in the agricultural
markets during July and August as short corn futures positions
profited from a decline in grain prices. These gains were
partially offset by losses incurred in the metals markets during
July from long silver futures positions, as prices moved lower,
and during September from short silver futures positions, as
precious metals prices were pushed higher by the weakness in the
U.S. dollar. Additional losses were recorded in metals from
trading gold futures as gold prices moved without consistent
direction during the first quarter. In soft commodities, smaller
loses were recorded from trading cotton futures throughout a
majority of the first nine months of the year. Total expenses
for the nine months ended September 30, 1998 were $723,987,
resulting in net income of $862,067. The value of a Unit
increased from $2,830.91 at December 31, 1997 to $3,095.44 at
September 30, 1998.
<PAGE>
Year 2000 Problem. Commodity pools, like financial and business
organizations and individuals around the world, depend on the
smooth functioning of computer systems. Many computer systems in
use today cannot recognize the computer code for the year 2000,
but revert to 1900 or some other date. This is commonly known as
the "Year 2000 Problem". The Partnership could be adversely
affected if computer systems used by it or any third party with
whom it has a material relationship do not properly process and
calculate date-related information and data concerning dates on
or after January 1, 2000. Such a failure could adversely affect
the handling or determination of futures trades and prices and
other services.
MSDW began its planning for the Year 2000 Problem in 1995, and
currently has several hundred employees working on the matter.
It has developed its own Year 2000 compliance plan to deal with
the problem and had the plan approved by the company's executive
management, Board of Directors and Information Technology
Department. Demeter is coordinating with MSDW to address the Year
2000 Problem with respect to Demeter's computer systems that
affect the Partnership. This includes hardware and software
upgrades, systems consulting and computer maintenance.
Beyond the challenge facing internal computer systems, the
systems failure of any of the third parties with whom the
Partnership has a material relationship - the futures exchanges
and clearing organizations through which it trades, Carr, or the
Trading Advisor - could result in a material financial risk to
<PAGE>
the Partnership. All U.S. futures exchanges are subject to
monitoring by the CFTC of their Year 2000 preparedness and the
major foreign futures exchanges are also expected to be subject
to market-wide testing of their Year 2000 compliance during 1999.
Demeter intends to monitor the progress of Carr and the Trading
Advisor throughout 1999 in their Year 2000 compliance and, where
applicable, to test its external interface with Carr and the
Trading Advisor.
A worst case scenario would be one in which trading of contracts
on behalf of the Partnership becomes impossible as a result of
the Year 2000 problem encountered by any third parties. A less
catastrophic but more likely scenario would be one in which
trading opportunities diminish as a result of technical problems
resulting in illiquidity and fewer opportunities to make
profitable trades. MSDW has begun developing various "contingency
plans" in the event that the systems of such third parties fail.
Demeter intends to consult closely with MSDW in implementing
those plans. Despite the best efforts of both Demeter and MSDW,
however, it is possible that these steps will not be sufficient
to avoid any adverse impact to the Partnership.
Risks Associated With the Euro. On January 1, 1999, eleven
countries in the European Union established fixed conversion
rates on their existing sovereign currencies and converted to a
common single currency (the "euro"). During a three-year
transition period, the sovereign currencies will continue to
<PAGE>
exist but only as a fixed denomination of the euro. Conversion
to the euro prevents the Trading Advisor from trading in certain
currencies and thereby limits its ability to take advantage of
potential market opportunities that might otherwise have existed
had separate currencies been available to trade. This could
adversely affect the performance results of the Partnership.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures interests. The market-sensitive
instruments held by the Partnership are acquired solely for
speculative trading purposes and, as a result, 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 primary business activities.
The futures interests traded by the Partnership involve varying
degrees of related market risk. Such market risk is often
dependent upon changes in the level or volatility of interest
rates, exchange rates, and/or market values of financial
instruments and commodities. Fluctuations in related market risk
based upon the aforementioned factors result in frequent changes
in the fair value of the Partnership's open positions, and,
consequently, in its earnings and cash flow.
<PAGE>
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification effects among
the Partnership's existing open positions, the volatility present
within the market(s), and the liquidity of the market(s). At
varying times, each of these factors may act to exacerbate or
mute the market risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt at quantifying the
Partnership's market risk must be qualified by the inherent
uncertainty of its speculative trading, which may cause future
losses and volatility (i.e. "risk of ruin") far in excess of the
Partnership's experience to date and/or any reasonable
expectation premised upon historical changes in the fair value of
its market-sensitive instruments.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partner-
ship'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 of 1933 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.
<PAGE>
The Partnership accounts for open positions on the basis of mark-
to-market accounting principles. As such, any loss in the fair
value of the Partnership's open positions is directly reflected
in the Partnership's earnings, whether realized or unrealized,
and the Partnership's cash flow, as profits and losses on open
positions of exchange-traded futures interests are settled daily
through variation margin.
The Partnership's risk exposure in the various market sectors
traded by the Trading Advisor is estimated below in terms of
Value at Risk ("VaR"). The VaR model employed by the Partnership
incorporates numerous variables that could impact the fair value
of the Partnership's trading portfolio. The Partnership
estimates VaR using a model based on historical simulation with a
confidence level of 99%. Historical simulation involves
constructing a distribution of hypothetical daily changes in
trading portfolio value. The VaR model generally takes into
account linear exposures to price and interest rate risk. Market
risks that are incorporated in the VaR model include equity and
commodity prices, interest rates, foreign exchange rates, as well
as correlation that exists among these variables. The
hypothetical changes in portfolio value are based on daily
observed percentage changes in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. In the case of the Partnership's VaR, the historical
observation period is approximately four years. The
Partnership's one-day 99% VaR corresponds to the negative change
in portfolio value that, based
<PAGE>
on observed market risk factor moves, would have been exceeded
once in 100 trading days.
VaR models such as the Partnership's are continually evolving as
trading portfolios become more diverse and modeling techniques
and systems capabilities improve. It must also be noted that the
VaR model is used to quantify market risk for historic reporting
purposes only and is not utilized by either Demeter or the
Trading Advisor in their daily risk management activities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by market category as of September 30, 1999. As of September 30,
1999, the Partnership's total capitalization was approximately $9
million.
Primary Market September 30, 1999
Risk Category Value at Risk
Currency (2.75)%
Interest Rate (0.98)
Equity (0.37)
Commodity (0.67)
Aggregate Value at Risk (2.92)%
<PAGE>
Aggregate value at risk represents the aggregate VaR of the
Partnership's open positions and not the sum of the VaR of the
individual categories listed above. Aggregate VaR will be lower
as it takes into account correlation among different positions
and categories.
The table above represents the VaR of the Partnership's open
positions at September 30, 1999 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. As the Partnership's sole
business is the speculative trading of primarily futures
interests, the composition of its portfolio of open positions can
change significantly over any given time period or even within a
single trading day. Such changes in open positions could
materially impact market risk as measured by VaR either
positively or negatively.
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR as a percentage of total
Net Assets for the four quarterly reporting periods from October
1, 1998 through September 30, 1999.
Primary Market Risk Category High Low Average
Currency (3.00)% (1.07)% (2.45)%
Interest Rate (0.98) (0.60) (0.80)
Equity (0.37) (0.23) (0.32)
Commodity (0.67) (0.49) (0.55)
Aggregate Value at Risk (3.13)% (1.47)% (2.63)%
<PAGE>
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 margin require-
ments, as such margin requirements generally range between 2% and
15% of contract face value. Additionally, due to the use of
leverage, the face value of the market sector instruments held by
the Partnership is typically many times the total capitalization
of the Partnership. The financial magnitude of the Partnership's
open positions thus creates a "risk of ruin" not typically found
in other investment vehicles. Due to the relative size of the
positions held, certain market conditions may cause the
Partnership to incur losses greatly in excess of VaR within a
short period of time. The foregoing VaR tables, as well as the
past performance of the Partnership, gives no indication of such
"risk of ruin". In addition, VaR risk measures should be
interpreted in light of the methodology's limitations, which
include the following: past changes in market risk factors will
not always yield accurate predictions of the distributions and
correlations of future market movements; changes in portfolio
value in response to market movements may differ from the
responses implicit in a VaR model; published VaR results reflect
past trading positions while future risk depends on future
positions; VaR using a one-day time horizon does not fully
capture the market risk of positions that cannot be liquidated or
hedged within one day; and the historical market risk factor data
used for VaR estimation may provide only limited insight into
losses that could be incurred under certain unusual market
movements.
<PAGE>
The foregoing VaR tables present the results of the Partnership's
VaR for the Partnership's market risk exposures and on an
aggregate basis at September 30, 1999 and for the end of the four
quarterly reporting periods from October 1, 1998 through
September 30, 1999. Since VaR is based on historical data, VaR
should not be viewed as predictive of the Partnership's future
financial performance or its ability to manage and monitor risk
and there can be no assurance that the Partnership's actual
losses on a particular day will not exceed the VaR amounts
indicated or that such losses will not occur more than 1 in 100
trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. However, such balances, as well
as any market risk they may represent, are immaterial. The
Partnership also maintains a substantial portion (approximately
88%) of its available assets in cash at DWR. A decline in short-
term interest rates will result in a decline in the Partnership's
cash management income. This cash flow risk is not considered
material.
Materiality, as used throughout this section, 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.
<PAGE>
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 manages its 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
Demeter and the Trading Advisor 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.
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 September 30, 1999, by market sector. It may
be anticipated however, that these market exposures will vary
materially over time.
<PAGE>
Currency. The primary market exposure in the Partnership at
September 30, 1999 was in the currency sector. The Partnership's
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions
influence these fluctuations. The Partnership trades in a large
number of currencies, including cross-rates - i.e., positions
between two currencies other than the U.S. dollar. For the third
quarter of 1999, the Partnership's major exposures were in
outright U.S. dollar positions. (Outright positions consist of
the U.S. dollar vs. other currencies. These other currencies
include the major and minor currencies). Demeter does not
anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future. The currency
trading VaR 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 VaR in a functional currency other than dollars.
Interest Rate. The second largest market exposure this
quarter was in the interest rate complex. Exposure was spread
across the Japanese, U.S., German and Australian interest rate
sectors. Interest rate movements directly affect the price of
the sovereign bond futures positions held by the Partnership and
indirectly affect the value of its stock index and currency
<PAGE>
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 generally to interest rate
fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions in the
government debt of smaller nations - e.g. Australia. Demeter
anticipates that G-7 and Australian interest rates will remain
the primary interest rate 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 futures
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.
Equity. 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 September 30, 1999, the
Partnership's primary exposures were in the All Ordinaries
(Australia) and Nikkei (Japan) stock indices. The Partnership is
primarily exposed to the risk of adverse price trends or static
markets in the Australian and Japanese indices. (Static markets
would not cause major market changes but would make it difficult
<PAGE>
for the Partnership to avoid being "whipsawed" into numerous
small losses).
Commodity.
Energy. On September 30, 1999, the Partnership's energy
exposure was in the crude and heating oil markets. Price
movements in these markets result from political developments in
the Middle East, weather patterns, and other economic
fundamentals. As oil prices have increased about 100% this year,
and, given that the agreement by OPEC to cut production is
approaching expiration in March 2000, it is possible that
volatility will remain on the high end. Significant profits and
losses have been and are expected to continue to be experienced
in this market.
Soft Commodities and Agriculturals. On September 30, 1999,
the Partnership had a reasonable amount of exposure in the
markets that comprise these sectors. Most of the exposure,
however, was in the coffee, sugar and corn markets. Supply and
demand inequalities, severe weather disruption and market
expectations affect price movements in these markets.
Metals. The Partnership's primary metals market exposure
is to fluctuations in the price of gold and silver. Although the
Partnership will, from time to time, trade base metals such as
copper, the principal market exposures of the Partnership have
consistently been in precious metals, gold and silver. A
significant amount of exposure was evident in the gold market as
the price of gold increased dramatically following bullish
comments by the European Central Bank. Silver prices have
<PAGE> also
been volatile over this period, and the Trading Advisor has, from
time to time, taken substantial positions as perceived market
opportunities developed. Demeter anticipates that gold and silver
will remain the primary metals market exposure for the
Partnership.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of September 30, 1999:
Foreign Currency Balances. The Partnership's primary foreign
currency balances are in Japanese yen, Singapore dollars, South
African rands, British pounds and euros. The Partnership controls
the non-trading risk of these balances by regularly converting
these balances back into dollars upon liquidation of the
respective positions.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Partnership and the Trading Advisor
attempt to manage the risk of the Partnership's open positions
are essentially the same in all market categories traded.
Demeter attempts to manage the Partnership's market exposure by
(i) diversifying the Partnership's assets among different market
sectors and trading approaches, and (ii), monitoring the
performance of the Trading Advisor on a daily basis. In
addition, the Trading Advisor establishes diversification
guidelines, often
<PAGE>
set in terms of the maximum margin to be committed to positions
in any one market sector or market-sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash, which is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The following supplements Legal Proceedings previously disclosed
in the Partnership's 1998 Form 10-K:
In the New York action, the motion to dismiss the amended
complaint with prejudice has been fully briefed and argued and
the Dean Witter Parties are awaiting the New York Supreme Court's
decision.
In the California action, on September 24, 1999, the Superior
Court in the State of California entered an order dismissing the
consolidated amended complaint without prejudice on consent.
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits - None.
B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements 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)
November 12, 1999 By:/s/ Lewis A. Raibley, III
Lewis A. Raibley, III
Director and Chief Financial
Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Columbia Futures Fund and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,772,635
<SECURITIES> 0
<RECEIVABLES> 29,953<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,151,779<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,151,779<F3>
<SALES> 0
<TOTAL-REVENUES> 386,899<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 660,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (273,101)
<INCOME-TAX> 0
<INCOME-CONTINUING> (273,101)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (273,101)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $29,368 and due from
DWR of $585.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $349,191.
<F3>Liabilities include redemptions payable of $61,592, accrued
management fees of $30,085 and administrative expenses payable of
$96,129.
<F4>Total revenues include realized trading revenue of $269,671,
net change in unrealized of $(149,913) and interest income of $267,141.
</FN>
</TABLE>
