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 March 31, 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
March 31, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
March 31, 2000 (Unaudited) and December 31, 1999.........2
Statements of Operations for the Quarters Ended
March 31, 2000 and 1999 (Unaudited)......................3
Statements of Changes in Partners' Capital for
the Quarters Ended March 31, 2000 and 1999
(Unaudited)..............................................4
Statements of Cash Flows for the Quarters Ended
March 31,2000 and 1999 (Unaudited)...................... 5
Notes to Financial Statements (Unaudited).............6-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................11-17
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ..................................... 17-29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................... 30
Item 5. Other Information................................... 30
Item 6. Exhibits and Reports on Form 8-K.....................31
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COLUMBIA FUTURES FUND
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
2000 1999
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 7,745,859 8,131,783
Net unrealized gain on open contracts 388,494 334,288
Total Trading Equity 8,134,353 8,466,071
Interest receivable (DWR) 32,540 30,338
Due from DWR 4,647 -
Total Assets 8,171,540 8,496,409
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Administrative expenses payable 75,476 61,609
Redemptions payable 27,176 51,621
Accrued management fee 26,898 28,023
Total Liabilities 129,550 141,253
Partners' Capital
Limited Partners (2,709.453 and
2,780.964 Units, respectively)7,755,742 8,065,143
General Partner (100 Units) 286,248 290,013
Total Partners' Capital 8,041,990 8,355,156
Total Liabilities and Partners' Capital 8,171,540 8,496,409
NET ASSET VALUE PER UNIT 2,862.48 2,900.13
<FN>
The accompanying notes are an integral part
of these financial statements.
/table>
<PAGE>
</TABLE>
<TABLE>-
COLUMBIA FUTURES FUND
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
2000 1999
$ $
REVENUES
<S> <c > <C>
Trading profit (loss):
Realized (35,236) 170,922
Net change in unrealized 54,206 (114,057)
Total Trading Results 18,970 56,865
Interest Income (DWR) 92,768 88,751
Total Revenues 111,738 145,616
EXPENSES
Brokerage commissions (DWR) 106,371 90,088
Management fees 83,406 98,901
Administrative expenses 18,000 17,000
Transaction fees and costs 6,986 6,031
Total Expenses 214,763 212,020
NET LOSS (103,025) (66,404)
NET LOSS ALLOCATION
Limited Partners (99,260) (64,389)
General Partner (3,765) (2,015)
NET LOSS PER UNIT
Limited Partners (37.65) (20.15)
General Partner (37.65) (20.15)
<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 Quarters Ended March 31, 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 $10,1
44,569
Net Loss - (64,389) (2,015) (66,404)
Redemptions (144.416) (453,100) -
(453,100)
Partners' Capital,
March 31, 1999 3,054.763 $9,309,981 $315,084 $9,625,0
65
Partners' Capital,
December 31, 1999 2,880.964 $8,065,143 $290,013 $8,355,1
56
Net Loss - (99,260) (3,765)(103,025)
Redemptions (71.511) (210,141) -
(210,141)
Partners' Capital,
March 31, 2000 2,809.453 $7,755,742 $286,248 $8,041,9
90
<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 Quarters Ended March 31,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss (103,025) (66,404)
Noncash item included in net loss:
Net change in unrealized (54,206) 114,057
Increase in operating assets:
Interest receivable (DWR) (2,202) (767)
Due from DWR (4,647) -
Increase (decrease) in operating liabilities:
Administrative expenses payable 13,867 8,864
Accrued management fee (1,125) (1,029)
Net cash provided by (used for) operating activities (151,338)
54,721
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable(24,445)210,930
Redemptions of Units (210,141) (453,100)
Net cash used for financing activities (234,586) (242,170)
Net decrease in cash (385,924) (187,449)
Balance at beginning of period 8,131,783 9,719,676
Balance at end of period 7,745,859 9,532,227
<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") 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. 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 ("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
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 gains on open contracts are reported as a
component of "Equity in futures interests trading accounts" on
the statements of financial condition and totaled $388,494 and
$334,288 at March 31, 2000 and December 31, 1999, respectively.
Of the $388,494 net unrealized gain on open contracts at March
31, 2000, $230,103 related to exchange-traded futures contracts
and $158,391 related to off-exchange-traded forward currency
contracts.
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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
March 31, 2000 and December 31, 1999 mature through March 2001
and December 2000, respectively. Off-exchange-traded forward
currency contracts held by the Partnership at March 31, 2000 and
December 31, 1999 mature through June 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.
The Partnership also has credit risk because 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 the Partnership's
exchange-traded futures contracts, are required, pursuant to
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 $7,975,962 and $8,439,972 at
March 31, 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 Carr, the sole
counterparty on all of such contracts, to perform. The
Partnership has a netting agreement with Carr. This agreement,
which seeks to reduce both the Partnership's and Carr's exposure
on off-exchange-traded forward currency contracts, should
materially decrease the Partnership's credit risk in the event of
Carr's bankruptcy or insolvency. 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 - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker 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
<PAGE>
its futures 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 and 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 investments 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 three months
ended March 31, 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 Ended March 31, 2000
For the quarter ended March 31, 2000, the Partnership recorded
total trading revenues, including interest income, of $111,738
and, after expenses, posted a decrease in Net Asset Value per
Unit. The most significant losses of approximately 2.2% were
recorded in the global interest rate futures markets from long
positions in Japanese government bond futures as prices slid
lower earlier in 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 1.4% were experienced in the metals markets from
<PAGE>
short gold futures positions as prices spiked sharply higher
during February following an announcement by Placer Dome, a large
producer, that it was suspending gold hedging activities. Newly
established long gold futures positions resulted in additional
losses as gold prices fell later in the month from the weakness
of the Australian dollar and the sale of seven tons of gold by
the Dutch central bank. In the agricultural markets, losses of
approximately 0.5% were incurred from long corn and wheat futures
positions as prices in these markets declined during February as
a result of insufficient demand and heavy rain in the U.S.
production area. Smaller losses of approximately 0.2% were
recorded in the soft commodities markets from the trendless price
movement in the cocoa futures markets during March. A portion
of overall Fund losses was offset by gains recorded in the energy
markets of approximately 2.2% from long crude oil futures
positions as oil prices powered to nine-year highs during the
first half of the quarter on concerns about future output levels
amid dwindling stockpiles and increasing demand. Additional
gains of approximately 0.9% were produced in the currency markets
from short euro positions as the value of the European common
currency weakened during the first half of the quarter versus the
U.S. dollar and Japanese yen, undermined by expectations that
interest rates would be held steady by the European Central Bank.
Smaller gains of approximately 0.8% were experienced in the
global stock index futures markets throughout the quarter from
<PAGE>
long Nikkei 225 Index futures positions. The Nikkei ended the
quarter at a 40-month high due to the surge in Japanese
technology issues, linked to industrial production in that
nation, and the belief that institutions would add these issues
to their portfolios prior to fiscal year-end. Total expenses
for the three months ended March 31, 2000 were $214,763,
resulting in a net loss of $103,025. The value of a Unit
decreased from $2,900.13 at December 31, 1999 to $2,862.48 at
March 31, 2000.
For the Quarter Ended March 31, 1999
For the quarter ended March 31, 1999, the Partnership recorded
total trading revenues, including interest income, of $145,616
and, after expenses, posted a decrease in Net Asset Value per
Unit. The most significant losses of approximately 2.1% were
recorded in the global interest rate futures markets primarily
from short Japanese government bond futures positions as prices
increased amid a sell-off in global stock markets during mid-
January and a "flight-to-quality" due to the renewed financial
market turmoil in Brazil. Losses were also recorded from long
Japanese government bond futures positions as prices dropped
during mid-March as bond yields rose following comments by Bank
of Japan Governor Masaru Hayami that he expected interest rates
in Japan to rise over time. In the metals markets, losses of
approximately 0.5% were experienced primarily from long silver
futures positions as prices declined during mid-March after
<PAGE>
Berkshire Hathaway's annual report failed to provide any new
information on the company's silver positions. In soft
commodities, losses of approximately 0.3% were recorded primarily
from short coffee futures positions as prices surged in late-
March as options-related buying triggered waves of buy-stops at
several key resistance levels, attracting fund short-covering.
These losses were partially offset by gains of approximately 1.8%
recorded in the currency markets during February and March
primarily from short euro positions as the value of the U.S.
dollar hit new highs versus the European common currency on the
strength of the U.S. economy, concerns pertaining to the economic
health of Europe and Japan and growing uncertainty about the
military action in Yugoslavia. In the energy markets, gains of
approximately 0.9% were recorded primarily from long crude oil
futures positions as oil prices moved significantly higher amid a
substantial recovery in oil prices during March that was largely
attributed to the news that both OPEC and non-OPEC countries had
reached an agreement to cut total output by approximately two
million barrels a day beginning April 1, 1999. Total expenses for
the three months ended March 31, 1999 were $212,020, resulting in
a net loss of $66,404. The value of a Unit decreased from
$3,170.99 at December 31, 1998 to $3,150.84 at March 31, 1999.
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
<PAGE>
common single currency (the euro). During a three-year
transition period, the sovereign currencies will continue to
exist but only as a fixed denomination of the euro. Conversion
to the euro prevents the Trading Advisor from trading those
sovereign 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 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.
<PAGE>
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.
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).
<PAGE>
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.
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
<PAGE>
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the
Partnership'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
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 March 31, 2000 and 1999. As
of March 31, 2000 and 1999, the Partnership's total
capitalization was approximately $8 million and $10 million,
respectively.
<PAGE>
Primary Market March 31, 2000 March 31, 1999
Risk Category Value at Risk Value at Risk
Currency (2.67)% (3.00)%
Interest Rate (0.99) (0.83)
Equity (0.49) (0.36)
Commodity (0.82) (0.49)
Aggregate Value at Risk (2.76)% (3.01)%
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 March 31, 2000 and 1999 only and is not necessarily
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.
<PAGE>
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 April 1,
1999 through March 31, 2000.
Primary Market Risk Category High Low Average
Currency (3.00)% (2.67)% (2.85)%
Interest Rate (0.99) (0.79) (0.90)
Equity (0.49) (0.23) (0.36)
Commodity (0.82) (0.49) (0.62)
Aggregate Value at Risk (3.13)% (2.76)% (2.95)%
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 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
<PAGE>
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.
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 March 31, 2000 and for the end of the four
quarterly reporting periods from April 1, 1999 through March 31,
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
<PAGE>
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. The
Partnership also maintains a substantial portion (approximately
81%) 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.
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
<PAGE>
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 March 31, 2000, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
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
<PAGE>
and general economic conditions influence these fluctuations.
The Partnership trades in a large number of currencies. For the
first 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 March 31,
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
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
<PAGE>
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 March 31, 2000, 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 for the
Partnership to avoid being "whipsawed" into numerous small
losses).
Commodity
Energy - On March 31, 2000, 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,
<PAGE>
weather patterns, and other economic fundamentals. It is
possible that volatility will remain high and that 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 March 31, 2000, the
Partnership had a reasonable amount of 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
during the quarter. Silver prices have remained volatile over
this period, and the Trading Advisor has from time to time taken
positions as they have perceived market opportunities to develop.
Demeter anticipates that gold and silver will remain the primary
metals market exposure for the Partnership.
<PAGE>
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of March 31, 2000:
Foreign Currency Balances - The Partnership's primary foreign
currency balances are in Australian dollars. 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 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
On March 3, 2000, the plaintiffs in the New York action filed an
appeal of the order dismissing the consolidated complaint.
(Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-K for the year ended December 31, 1999 for
a more detailed discussion).
Item 5. OTHER INFORMATION
Effective January 31, 2000, Mark J. Hawley resigned as Chairman
of the Board and a Director of Demeter and Dean Witter Futures
Currency Management Inc. ("DWFCM") and Robert E. Murray replaced
him as Chairman of the Board of Demeter and DWFCM.
Demeter has determined, commencing in May 2000, to transfer the
Partnership's futures and options clearing from Carr to Morgan
Stanley & Co. Incorporated ("MS & Co."), an affiliate of Demeter,
while trades on the London Metal Exchange will be cleared by
Morgan Stanley & Co. International Limited ("MSIL"), also an
affiliate of Demeter. In addition, MSIL and MS & Co., rather
than Carr, will act as the counterparty on all of the
Partnership's foreign currency forward trades. DWR will continue
to act as the non-clearing commodity broker for the Partnership.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
10.03 Amended and Restated Customer Agreement, dated as of
December 1, 1997, between the Partnership and Dean Witter
Reynolds Inc. is filed herewith.
10.04 Customer Agreement, dated as of December 1, 1997, among
the Partnership, Carr Futures, Inc., and Dean Witter Reynolds
Inc. is filed herewith.
10.05 International Foreign Exchange Master Agreement,
dated as of August 1, 1997, between the Partnership and
Carr Futures, 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)
May 12, 2000 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,745,859
<SECURITIES> 0
<RECEIVABLES> 37,187<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,171,540<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,171,540<F3>
<SALES> 0
<TOTAL-REVENUES> 111,738<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 214,763
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (103,025)
<INCOME-TAX> 0
<INCOME-CONTINUING> (103,025)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (103,025)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $32,540 and due from DWR
of $4,647.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $388,494.
<F3>Liabilities include redemptions payable of $27,176, accrued
management fees of $26,898 and administrative expenses payable
of $75,476.
<F4>Total revenues include realized trading revenue of $(35,236),
net change in unrealized of $54,206 and interest income of
$92,768.
</FN>
</TABLE>
