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 June 30, 2000 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
June 30, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S>
<C>
Item 1. Financial Statements
Statements of Financial Condition
June 30, 2000 (Unaudited) and December 31, 1999..........2
Statements of Operations for the Quarters Ended
June 30, 2000 and 1999 (Unaudited).......................3
Statements of Operations for the Six Months Ended
June 30, 2000 and 1999 (Unaudited).......................4
Statements of Changes in Partners' Capital for
the Six Months Ended June 30, 2000 and 1999
(Unaudited)..............................................5
Statements of Cash Flows for the Six Months Ended
June 30, 2000 and 1999 (Unaudited).......................6
Notes to Financial Statements (Unaudited).............7-12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................13-22
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ..................................... 23-35
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................36-37
Item 5. Other Information.................................37-38
Item 6. Exhibits and Reports on Form 8-K.....................38
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COLUMBIA FUTURES FUND
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
June 30, December 31,
2000 1999 $
$
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 7,486,167 8,131,783
Net unrealized gain on open contracts (MS & Co.)
216,647 -
Net unrealized loss on open contracts (MSIL)
(3,300) -
Net unrealized gain (loss) on open contracts (Carr)
(76,787) 334,288
Total net unrealized gain on open contracts 136,560 33
4,288
Total Trading Equity 7,622,727 8,466,071
Interest receivable (DWR) 29,537 30,338
Due from DWR 11,959 _____-___
Total Assets 7,664,223 8,496,409
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Administrative expenses payable 87,331 61,609
Accrued management fees 25,172 28,023
Redemptions payable 20,606 51,621
Total Liabilities 133,109 141,253
Partners' Capital
Limited Partners (2,655.375 and 2,780.964
Units, respectively) 7,257,790 8,065,143
General Partner (100 Units) 273,324 290,013
Total Partners' Capital 7,531,114 8,355,156
Total Liabilities and Partners' Capital 7,664,223 8,496,409
NET ASSET VALUE PER UNIT 2,733.24 2,900.13
<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 June 30,
2000 1999
$ $
<S> <C> <C>
REVENUES
Trading profit (loss):
Realized (7,130)305,815
Net change in unrealized (251,934) (4,493)
Total Trading Results (259,064) 301,322
Interest Income (DWR) 94,355 88,612
Total Revenues (164,709) 389,934
EXPENSES
Brokerage commissions (DWR) 87,454 97,324
Management fees 79,300 97,282
Administrative expenses 18,000 17,000
Transaction fees and costs 6,819 6,363
Incentive fees _______-__ 187
Total Expenses 191,573 218,156
NET INCOME (LOSS) (356,282) 171,778
NET INCOME (LOSS) ALLOCATION
Limited Partners (343,358) 166,150
General Partner (12,924) 5,628
NET INCOME (LOSS) PER UNIT
Limited Partners (129.24) 56.28
General Partner (129.24) 56.28
<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 Six Months Ended June 30,
2000 1999
$ $
<S> <C> <C>
REVENUES
Trading profit (loss):
Realized (42,366) 476,737
Net change in unrealized (197,728) (118,550)
Total Trading Results (240,094) 358,187
Interest Income (DWR) 187,123 177,363
Total Revenues (52,971) 535,550
EXPENSES
Brokerage commissions (DWR) 193,825 187,412
Management fees 162,706 196,183
Administrative expenses 36,000 34,000
Transaction fees and costs 13,805 12,394
Incentive fees _______-__ 187
Total Expenses 406,336 430,176
NET INCOME (LOSS) (459,307) 105,374
NET INCOME (LOSS) ALLOCATION
Limited Partners (442,618) 101,761
General Partner (16,689) 3,613
NET INCOME (LOSS) PER UNIT
Limited Partners (166.89) 36.13
General Partner (166.89) 36.13
<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 Six Months Ended June 30, 2000 and 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S>
<C> <C> <C>
<C>
Partners' Capital,
December 31, 1998 3,199.179 $9,827,470 $317,099 $10,144,5
69
Net Income
- 101,761 3,613 105,374
Redemptions (229.416) (725,545)
- (725,545)
Partners' Capital,
June 30, 1999 2,969.763 $9,203,686 $320,712$9,524,398
Partners' Capital,
December 31, 1999 2,880.964 $8,065,143 $290,013$8,355,156
Net Loss
- (442,618) (16,689) (459,307)
Redemptions (125.589) (364,735) ______-__ (364,73
5)
Partners' Capital,
June 30, 2000 2,755.375 $7,257,790 $273,324 $7,531
,114
<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 Six Months Ended June 30,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S>
<C> <C>
Net income (loss) (459,307) 105,374
Noncash item included in net income (loss):
Net change in unrealized 197,728 118,550
(Increase) decrease in operating assets:
Interest receivable (DWR) 801 588
Due from DWR (11,959) -
Increase (decrease) in operating liabilities:
Administrative expenses payable 25,722 24,124
Accrued management fees (2,851) (1,810)
Net cash provided by (used for) operating activities (249,866)
246,826
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable(31,015) 77,151
Redemptions of Units (364,735) (725,545)
Net cash used for financing activities (395,750) (648,394)
Net decrease in cash (645,616) (401,568)
Balance at beginning of period 8,131,783 9,719,676
Balance at end of period 7,486,167 9,318,108
<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, 1999 Annual Report on Form 10-K.
1. Organization
Columbia Futures Fund is a New York 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"). Morgan Stanley & Co., Inc. ("MS & Co.")
and Morgan Stanley & Co. International Limited ("MSIL") provide
clearing and execution services. Prior to May 2000, Carr Futures
Inc. provided clearing and execution services. Demeter, DWR, MS
& Co. and MSIL are wholly-owned subsidiaries of Morgan Stanley
Dean Witter & Co.
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The sole trading advisor to the Partnership is John W. Henry &
Company, Inc. (the "Trading Advisor").
2. Related Party Transactions
The Partnership's cash is on deposit with DWR, MS & Co., and MSIL
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.
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In June 1998, the Financial Accounting Standards Board ("FASB")
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. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133," which defers the required
implementation of SFAS No. 133 until fiscal years beginning after
June 15, 2000. However, the Partnership had previously elected
to adopt the provisions of SFAS No. 133 beginning with the fiscal
year ended December 31, 1998. SFAS No. 133 supersedes SFAS No.
119 and No. 105, which required the 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 are reported as a
component of "Equity in futures interests trading accounts" on
the statements of financial condition and totaled $136,560 and
$334,288 at June 30, 2000 and December 31, 1999, respectively.
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Of the $136,560 net unrealized gain on open contracts at June 30,
2000, $170,199 related to exchange-traded futures contracts and
$(33,639) related to off-exchange-traded forward currency
contracts.
Of the $334,288 net unrealized gain on open contracts at December
31, 1999, $308,189 related to exchange-traded futures contracts
and $26,099 related to off-exchange-traded forward currency
contracts.
Exchange-traded futures contracts held by the Partnership at June
30, 2000 and December 31, 1999 mature through June 2001 and
December 2000, respectively. Off-exchange-traded forward currency
contracts held by the Partnership at June 30, 2000 and December
31, 1999 mature through September 2000 and March 2000,
respectively.
The Partnership has 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.
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Partnership also has credit risk because DWR, MS & Co., and
MSIL 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. DWR, MS
& Co., and MSIL each as a futures commission merchant for 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 $7,656,366 and
$8,439,972 at June 30, 2000 and December 31, 1999, 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 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 MS & Co.,
the sole counterparty on all of such contracts, to perform. The
Partnership has a netting agreement with MS & Co. This
agreement, which seeks to reduce both the Partnership's and MS &
Co.'s exposure on off-exchange-
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
traded forward currency contracts, should materially decrease the
Partnership's credit risk in the event of MS & Co.'s bankruptcy
or insolvency.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and MS & Co. and MSIL as clearing brokers in
separate futures trading accounts established for the Trading
Advisor, which assets are used as margin to engage in trading.
The assets are held in either non-interest-bearing bank accounts
or in securities and instruments permitted by the CFTC for
investment of customer segregated or secured funds. The
Partnership's assets held by the commodity brokers may be used as
margin solely for the Partnership's trading. Since the
Partnership's sole purpose is to trade in futures and forwards it
is expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership's investment in futures and forwards, may, from
time to time, be illiquid. Most U.S. futures exchanges limit
fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures contract has
increased or decreased by an amount equal to the daily limit,
positions in that futures contract can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. These market conditions could prevent the Partnership
from promptly liquidating its futures
<PAGE>
contracts and result in restrictions on redemptions.
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, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources. The Partnership does not have, or expect to
have, any capital assets. Redemptions of additional units of
limited partnership interest ("Unit(s)") in the future will
affect the amount of funds available for investment in futures
interests in subsequent periods. It is not possible to estimate
the amount and therefore, the impact of future redemptions of
Units.
Results of Operations
General. The Partnership's results depend on its Trading Advisor
and the ability of the Trading Advisor's trading programs to take
advantage of price movements or other profit opportunities in the
futures, forwards, and options markets. The following presents a
<PAGE>
summary of the Partnership's operations for the quarter and six
months ended June 30, 2000 and 1999, respectively, and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Advisor trades in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Advisor or will be profitable in the
future. Consequently, the results of operations of the
Partnership are difficult to discuss other than in the context of
its Trading Advisor's trading activities on behalf of the
Partnership as a whole and how the Partnership has performed in
the past.
For the Quarter and Six Months Ended June 30, 2000
For the quarter ended June 30, 2000, the Partnership recorded
total trading losses net of interest income of $164,709 and
posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 3.1% were recorded in the
currency markets primarily from short Japanese yen positions as
the value of the yen appreciated against the U.S. dollar during
May and June due to speculation that the Japanese government was
considering an economic stimulus package, data which indicated
strong first-quarter growth and signaled that an end is near to
Japan's 16-month old zero interest rate policy. Additional
losses of approximately 2.5% were experienced in global interest
rate futures markets primarily from short positions in U.S.
interest rate futures as prices moved higher later in the month
<PAGE>
on volatility in the U.S. stock market and economic reports
suggesting that the U.S. economy may be slowing. In the energy
markets, losses of approximately 1.4% were incurred from long
crude oil futures positions during April as oil prices moved
lower due to a larger-than-expected build-up in crude oil stocks
and concern that OPEC may have produced above its supply target
for April. Newly established short crude oil futures positions
incurred additional losses as prices jumped amid supply concerns.
Smaller losses of approximately 0.5% were recorded in the metals
markets primarily from trading copper futures during May as
prices moved inconsistently on technically based factors. A
portion of overall Partnership losses was offset by gains
recorded in the global stock index futures markets of
approximately 1.2% primarily from short DAX Index futures
positions as prices dropped on profit-taking and due to weakness
in U.S. stock prices. Additional gains of approximately 1.1%
were recorded in the soft commodities markets primarily from
short coffee futures positions as prices declined during April on
technical factors. Long sugar futures positions were also
profitable as prices trended to 22-month highs during June due to
strong demand and declining production from Brazil. In the
agricultural markets, smaller gains of approximately 0.7%
resulted from short soybean oil futures positions during June as
prices declined on uncertainty about demand and forecasts for
some moisture relief in dry regions. Short corn futures
positions were also profitable as prices moved lower during May
<PAGE>
due to heavy rain and cooler temperatures in the major corn
producing regions. Total expenses for the three months ended
June 30, 2000 were $191,573, resulting in a net loss of $356,282.
The value of a Unit decreased from $2,862.48 at March 31, 2000 to
$2,733.24 at June 30, 2000.
For the six months ended June 30, 2000, the Partnership recorded
total trading losses net of interest income of $52,971 and posted
a decrease in Net Asset Value per Unit. The most significant
losses of approximately 4.6% were recorded in the global interest
rates futures markets primarily from long German government bond
futures positions as prices moved lower during the second
quarter, following U.S. Treasury prices downward. Long Japanese
interest rate futures positions also experienced losses in this
market complex as prices slid lower in early February in reaction
to the Japanese yen's weakness and a higher Nikkei 225 Index.
Newly established short positions incurred losses during March as
yields on the Japanese government bond moved upwards as investors
braced for an interest rate hike for the first time in a decade.
Additional losses of approximately 2.6% were recorded in the
currency markets primarily from short Japanese yen positions as
the yen's value strengthened against the U.S. dollar during the
second quarter on speculation that the Japanese government was
considering an economic stimulus package, indications of strong
first-quarter growth, and signals of an end to Japan's zero
interest rate policy. Smaller losses of approximately 1.9% were
<PAGE>
experienced in the metals markets primarily from short gold
futures positions as prices spiked sharply higher during February
following an announcement by a large producer that it was
suspending gold hedging activities. Later in the month, newly
established long gold futures positions incurred additional
losses as prices fell from weakness in the Australian dollar and
the sale of seven tons of gold by the Dutch central bank. A
portion of overall Partnership losses was offset by gains of
approximately 2.0% recorded in the global stock index futures
markets primarily from short DAX Index futures positions as
prices dropped on profit-taking and weakness in U.S. stock
prices. Additional gains of approximately 0.9% were recorded in
the energy markets primarily from long heating oil futures
positions as oil prices powered to nine-year highs during the
first quarter on concerns about future output levels amid
dwindling stockpiles and increasing demand. In the soft
commodities markets, gains of approximately 0.9% resulted
primarily from long sugar futures positions as prices trended to
22-month highs during June due to strong demand and declining
production from Brazil. Short coffee futures were also
profitable during the second quarter as prices declined on
technical factors. Smaller gains of approximately 0.3% were
experienced in the agricultural markets primarily from short
soybean oil futures positions as prices declined during June on
uncertainty about demand and forecasts for some moisture relief
in dry regions. Total expenses for the six months ended June 30,
<PAGE>
2000 were $406,336, resulting in a net loss of $459,307. The
value of a Unit decreased from $2,900.13 at December 31, 1999 to
$2,733.24 at June 30, 2000.
For the Quarter and Six Months Ended June 30, 1999
For the quarter ended June 30, 1999, the Partnership recorded
total trading revenues including interest income of $389,934 and
posted an increase in Net Asset Value per Unit. The most
significant gains of approximately 2.4% were recorded in the
global interest rate futures markets primarily from long Japanese
government bond futures positions as investors moved into higher
yielding long-term debt instruments during April and May after
the government proposed no new economic spending plans.
Additional gains of approximately 0.9% were experienced in the
energy markets during April primarily from long crude oil futures
positions as oil prices rallied due to declines in inventory
levels and growing confidence that oil-exporting countries are
cutting production. Oil prices jumped higher during June on
unexpected declines in U.S. stockpiles and on news of refinery
outages, thus resulting in additional profits for the
Partnership's long positions. In the global stock index futures
markets, profits of approximately 0.6% were recorded primarily
from long Nikkei Index futures positions as Japanese equity
prices moved higher during April following gains on Wall Street
and on hopes that the Japanese government would take more
measures to stimulate their economy. Additional gains were
<PAGE>
recorded during June as the Japanese benchmark index reached its
highest level in more than a year and a half encouraged by recent
economic growth data in Japan. Smaller gains of approximately
0.3% were recorded in the currency markets primarily from short
positions in the euro as the value of most European currencies
weakened steadily versus the U.S. dollar during April due to lack
of economic growth in the European community, the ongoing
military conflict in Kosovo and strong economic data out of the
U.S. Short euro positions were also profitable during June as
the value of the U.S. dollar strengthened against the European
common currency after tame U.S. inflation data eased fears that
the Federal Reserve was about to embark on a series of rate
hikes. These gains were partially offset by losses in the metals
markets of approximately 1.5% primarily from short silver futures
positions as prices were boosted higher during April by
perceptions of tightening supply levels and technically-driven
buying. Newly established long silver futures positions resulted
in additional losses during June as prices decreased after a
widely watched survey showed that silver demand fell in 1998.
Additional losses of approximately 0.9% were incurred in the soft
commodities markets during the latter half of the quarter
primarily from long coffee futures positions as prices declined
due to warm weather in Brazil and ample warehouse supplies.
Total expenses for the three months ended June 30, 1999 were
$218,156, resulting in net income of $171,778. The value of a
Unit increased from $3,150.84 at March 31, 1999 to $3,207.12 at
June 30, 1999.
<PAGE>
For the six months ended June 30, 1999, the Partnership recorded
total trading revenues including interest income of $535,550 and
posted an increase in Net Asset Value per Unit. The most
significant gains of approximately 2.1% were recorded in the
currency markets primarily from short euro positions as the value
of the U.S. dollar strengthened versus the European common
currency throughout a majority of the first half of the year on
the strength of the U.S. economy, concerns pertaining to the
economic health of Europe and Japan and ongoing military action
in Yugoslavia. Additional gains of approximately 1.8% were
recorded in the energy markets primarily from long crude oil
futures positions as oil prices moved significantly higher during
March on news that OPEC and non-OPEC countries had reached an
agreement to cut total output by approximately two million
barrels a day beginning April 1st. Oil prices continued to climb
higher during April due to declines in inventory levels and
growing confidence in production cutbacks. In the global stock
index futures markets, gains of approximately 0.6% resulted
primarily from long futures positions in the Nikkei and ASE All
Ordinaries Index during April. The Tokyo equity benchmark moved
higher following gains on Wall Street and on hopes that the
Japanese government would take more measures to stimulate their
economy. Australian stock prices moved higher due to April's
rise in commodity prices, particularly gold. Smaller gains of
approximately 0.2% were recorded in the global interest rate
futures markets primarily
<PAGE>
from long Japanese bond futures positions as prices moved higher
during April and May after the government proposed no new
economic spending plans. A portion of these gains was offset by
losses in the metals markets of approximately 2.0% primarily 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. Short
silver futures positions established in April were also
unprofitable as prices were boosted higher by perceptions of
tightening supply levels and technically-driven buying. Newly
established long silver futures positions were once again
unfavorable during June as prices decreased on news of lower
demand. Additional losses of approximately 1.2% were experienced
in the soft commodities markets primarily from short coffee
futures positions during mid-March as prices surged as option-
related buying triggered waves of buy-stops at several key
resistance levels, attracting fund short-covering. Newly
established long coffee futures positions also resulted in losses
during the second quarter as prices declined amid warmer
temperatures in Brazil and ample supplies. Total expenses for
the six months ended June 30, 1999 were $430,176, resulting in
net income of $105,374. The value of a Unit increased from
$3,170.99 at December 31, 1998 to $3,207.12 at June 30, 1999.
<PAGE>
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
<PAGE>
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act 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.
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures interests are settled daily through variation
margin.
<PAGE>
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model 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, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the Partner-
ship's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
<PAGE>
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 tables indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of June 30, 2000 and 1999. As
of June 30, 2000 and 1999, the Partnership's total capitalization
was approximately $8 million and $10 million, respectively.
Primary Market June 30, 2000 June 30, 1999
Risk Category Value at Risk Value at Risk
Currency (1.82)% (2.96)%
Interest Rate (1.19) (0.79)
Equity (0.76) (0.23)
Commodity (0.83) (0.50)
Aggregate Value at Risk (2.57)% (3.13)%
Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual Market 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 June 30, 2000 and 1999 only and is not necessarily
<PAGE>
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures interests, the
composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.
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 July 1,
1999 through June 30, 2000.
Primary Market Risk Category High Low Average
Currency (3.00)% (1.82)% (2.61)%
Interest Rate (1.19) (0.79) (0.95)
Equity (0.76) (0.23) (0.46)
Commodity (0.83) (0.49) (0.66)
Aggregate Value at Risk (3.13)% (2.57)% (2.87)%
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
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the
<PAGE>
Partnership to typically be many times the total capitalization
of the Partnership. The value of the Partnership's open
positions thus creates a "risk of ruin" not typically found in
other investments. The relative size of the positions held may
cause the Partnership to incur losses greatly in excess of VaR
within a short period of time, given the effects of the leverage
employed and market volatility. The VaR tables above, as well as
the past performance of the Partnership, gives no indication of
such "risk of ruin". In addition, VaR risk measures should be
viewed in light of the methodology's limitations, which include
the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
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 VaR tables above present the results of the Partnership's VaR
for each of the Partnership's market risk exposures and on an
aggregate basis at June 30, 2000 and for the end of the four
quarterly reporting periods from July 1, 1999 through June 30,
2000. 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 or monitor risk. There can
be no assurance that the Partnership's actual losses on a
particular day will not exceed the VaR amounts indicated above 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. At June
30, 2000 the Partnership's cash balance at DWR was approximately
91% of its total Net Asset Value. 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 (A) those disclosures that are
statements of historical fact and (B) 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 June 30, 2000, 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 is 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. For the
second quarter of 2000, 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 at June 30,
2000 was in the interest rate complex. Exposure was spread
across the Japanese, U.S. and German 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
positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially
<PAGE>
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.
The G-7 countries consist of France, U.S., Britain, Germany,
Japan, Italy and Canada. 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 June 30, 2000, the Partnership's primary
exposures were in the DAX (German), 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 G-7 indices. Static markets would not cause major market
<PAGE>
changes but would make it difficult for the Partnership to avoid
being "whipsawed" into numerous small losses.
Commodity.
Energy. On June 30, 2000, the Partnership's energy exposure was
shared primarily by futures contracts 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. It is possible that volatility will
remain high. Significant profits and losses, which have been
experienced in the past, are expected to continue to be
experienced in this market.
Soft Commodities and Agriculturals. On June 30, 2000, the
Partnership had exposure in the markets that comprise these
sectors. Most of the exposure, however, was in the sugar, coffee
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. Exposure
was evident in the gold market as gold prices were volatile
<PAGE>
during the quarter. Silver prices have remained volatile over
this period, and the Trading Advisor has from time to time taken
positions as it has perceived market opportunities to develop.
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 June 30, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances are in euros, Japanese yen and British pounds.
The Partnership controls the non-trading risk of these balances
by regularly converting these balances back into dollars upon
liquidation of the respective position.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different market sectors and trading
approaches, and monitoring the performance of the Trading Advisor
daily. In addition, the Trading Advisor establishes
diversification
<PAGE>
guidelines, often 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. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-Q for the quarter ended March 31, 2000 and
Form 10-K for the year ended December 31, 1999.
On October 25, 1996, the Market Surveillance Committee (the
"Committee") of the National Association of Securities Dealers
("NASD") filed a formal complaint against MS & Co. and seven
current and former traders, alleging violations of certain NASD
rules relating to manipulative and deceptive practices, locked
and crossed markets, and failure to supervise. Hearings were
held in June and July 1997. On April 13, 1998 the Committee
ruled that MS & Co. and the seven traders had engaged in
manipulative and deceptive practices and improperly locked or
crossed markets, but not that MS & Co. had failed to supervise
its traders. The Committee levied a fine of $1,000,000 on MS &
Co., a fine of $100,000 and a 90-day suspension on one of its
former traders, and fines of $25,000 and 30-day suspensions on
each of the remaining current and former traders. On January 18,
2000 the National Adjudicatory Council, which heard the appeal,
issued a ruling which upheld the Committee's April 1998 decision,
however, the National Adjudicatory Council reduced the firm's
fine to $495,000, reversed all previously imposed suspensions
against the traders,
<PAGE>
reduced the fine for each of six traders to $2,500 and dismissed
all charges against the seventh trader.
On January 11, 1999, the Securities and Exchange Commission
brought an action against 28 NASDAQ market makers, including MS &
Co., and 51 individuals, including one current and one former
trader employed by MS & Co., for certain conduct during 1994.
The core of the charges against MS & Co. concerns improper or
undisclosed coordination of price quotes with other broker-
dealers and related reporting, recordkeeping and supervisory
deficiencies in violation of Sections 15(b)(4)(E), 15(c)(1) and
(2) and 17(a) of the Securities Exchange Act and Rules 15c1-2,
15c2-7 and 17a-3 promulgated thereunder. Without admitting or
denying the charges, MS & Co. consented to the entry of a cease
and desist order and to the payment of a civil penalty of
$350,000, disgorgement of $4,170 and to submit certain of its
procedures to an independent consultant for review. In addition,
one current and one former trader employed by MS & Co. accepted
suspensions of less than two months each and were fined $25,000
and $30,000 respectively.
Item 5. OTHER INFORMATION
Effective July 1, 2000, Lewis A. Raibley, III resigned as Chief
Financial Officer and a Director of Demeter and Dean Witter
Futures Currency Management Inc. Effective July 10, 2000,
Raymond
<PAGE>
E. Koch replaced Lewis A. Raibley, III as Chief Financial Officer
of Demeter.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
3.01 Amendment to Limited Partnership Agreement of Columbia
Futures Fund, dated as of February 14, 1985,
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, File No. 0-12431.
10.01 Advisory Agreement among the Partnership, Demeter and
JWH dated as of January 20, 1987, 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. File No. 0-12431.
10.03 Amended and Restated Customer Agreement, dated as of
December 1, 1997, between the Partnership and Dean Witter
Reynolds Inc. is incorporated by reference to Exhibit 10.03 of
the Partnership's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000, File No. 0-12431.
10.04 Customer Agreement, dated as of December 1, 1997, among
the Partnership, Carr Futures, Inc., and Dean Witter Reynolds
Inc. is incorporated by reference to Exhibit 10.04 of the
Partnership's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000, File No. 0-12431.
10.05 International Foreign Exchange Master Agreement, dated
as of August 1, 1997, between the Partnership and Carr Futures,
Inc. is incorporated by reference to Exhibit 10.05 of the
Partnership's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000, File No. 0-12431.
10.06 Customer Agreement, dated as of May 1, 2000 between
Morgan Stanley & Co. Incorporated, the Partnership and Dean
Witter Reynolds Inc. is filed herewith.
(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)
August 9, 2000 By:/s/Raymond E. Koch __________
Raymond E. Koch
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.
