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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
[No Fee Required]
For the fiscal year ended December 31, 1997 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from _______________to
______________________
Commission File Number 0-12431
COLUMBIA FUTURES FUND
(Exact name of registrant as specified in its Limited Partnership
Agreement)
NEW YORK 13-
3103617
(State or other jurisdiction of
(I.R.S. Employer
incorporation of organization)
Identification No.)
c/o Demeter Management Corporation
Two World Trade Center, New York, N.Y. - 62nd Flr.
10048
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code
(212) 392-5454
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange
Title of each class
on which registered
None
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment of this Form 10K. [X ]
State the aggregate market value of the Units of Limited
Partnership Interest held by non-affiliates of the registrant.
The aggregate market value shall be computed by reference to the
price at which units were sold, or the average bid and asked
prices of such units, as of a specified date within 60 days prior
to the date of filing: $9,017,653.69 at January 31, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
COLUMBIA FUTURES FUND
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1997
Page No.
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . .
. . . . 1
Part I .
Item 1. Business. . . . . . . . . . . . . . . . . . . . .
. . 2-3
Item 2. Properties. . . . . . . . . . . . . . . . . . . .
. . 4
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . .
. 4-5
Item 4. Submission of Matters to a Vote of Security
Holders . . 6
Part II.
Item 5. Market for the Registrant's Partnership Units and
Related Security Holder Matters . . . . . . . . .
. . 7
Item 6. Selected Financial Data . . . . . . . . . . . . .
. . . 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . .
. . 9-16
Item 8. Financial Statements and Supplementary Data. . . .
. 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . .
. 16
Part III.
Item10. Directors, Executive Officers, Promoters and
Control Persons of the Registrant . . . . . . . .
. 17-22
Item11. Executive Compensation . . . . . . . . . . . . . .
. . 22
Item12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . .
. 22
Item13. Certain Relationships and Related Transactions . .
22-23
Part IV.
Item14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . .
. 24
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by
reference as follows:
Documents Incorporated Part
of Form 10-K
Partnership's Annual Report on Form
IV
10-K for the fiscal year ended
December 31, 1985, File No. 0-12431
Partnership's Annual Report on Form
IV
10-K for the fiscal year ended
December 31, 1986, File No. 0-12431
December 31, 1997 Annual Report for
II & IV
the Columbia Futures Fund
PART I
Item 1. BUSINESS
(a) General Development of Business. Columbia Futures
Fund (the "Partnership") is a New York limited partnership
formed on December 24, 1981, to engage in the speculative
trading of commodity futures contracts, including futures
contracts in foreign currencies and financial instruments,
and other commodity interests ("collectively futures
interests"). The Partnership commenced trading on July 15,
1983. The Partnership's General Partner is Demeter
Management Corporation ("Demeter"). Demeter is a wholly-
owned subsidiary of Morgan Stanley, Dean Witter, Discover &
Co. ("MSDWD").
Through July 31, 1997, the sole commodity broker for
most of the Partnership's transactions was Dean Witter Reynolds,
Inc, ("DWR") also a subsidiary of MSDWD. On July 31,
1997, DWR closed the sale of its institutional futures
business and foreign currency trading operations to Carr
Futures, Inc. ("Carr"), a subsidiary of Credit Agricole
Indosuez. Following the sale, Carr became the clearing
commodity broker for the Partnership's futures and futures
options trades and the counterparty on the Partnership's
foreign currency trades. DWR will continue to serve as the
non-clearing commodity broker for the Partnerships with Carr
providing all clearing services for the Partnerships'
transactions.
Since 1988, the sole trading advisor of the Partnership
is John W. Henry & Company, Inc. ("JWH") or the "Trading
Advisor". The Partnership's net asset value per unit of
limited partnership interest ("Unit"), as of December 31,
1997, was $2,830.91, representing an increase of 22.6
percent from the net asset value per unit of $2,309.06 at
December 31, 1996.
(b) Financial Information about Industry Segments. The
Partner-ship's business comprises only one segment for
financial reporting purposes, speculative trading of
commodity futures contracts and other commodity interests.
The relevant financial information is presented in Items 6
and 8.
(c) Narrative Description of Business. The Partnership
was formed to engage in speculative trading of futures
contracts and commodity interests (including futures
contracts in foreign currencies and financial instruments),
pursuant to trading instructions provided by JWH.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales. The Partnership has not
engaged in any operations in foreign countries; however,
the Partnership (through the commodity brokers) enters into
forward contract transactions where foreign banks
are the contracting party and trades in futures interests on
foreign exchanges.
Item 2. PROPERTIES
The executive and administrative offices are located
within the offices of DWR. The DWR offices utilized by the
Partnership are located at Two World Trade Center, 62nd
Floor, New York, NY 10048.
Item 3. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, and on March 13,
1997, similar purported class actions were filed in the
Superior Court of the State of California, County of Los
Angeles, on behalf of all purchasers of interests in limited
partnership commodity pools sold by DWR. Named defendants
include DWR, Demeter, Dean Witter Futures and Currency
Management, Inc.("DWFCM"), MSDWD, (all such parties referred
to hereafter as the "Dean Witter Parties"), certain limited
partnership commodity pools of which Demeter is the general
partner, and certain trading advisors (including JWH) to
those pools. On June 16, 1997, the plaintiffs in the above
actions filed a consolidated amended complaint, alleging,
among other things, that the defendants committed fraud,
deceit, negligent misrepresentation, various violations of
the California Corporations Code, intentional and negligent
breach of fiduciary duty, fraudulent and unfair business
practices, unjust enrichment, and conversion in the sale and
operation of the various limited partnerships commodity
pools. Similar purported class actions were also filed on
September 18 and 20, 1996, in the Supreme Court of the
State of New York, New York County, and on November 14, 1996
in the Superior Court of the State of Delaware, New Castle
County, against the Dean Witter Parties and certain trading
advisors (including JWH) on behalf of all purchasers of
interests in various limited partnership commodity pools
sold by DWR. A consolidated and amended complaint in the
action pending in the Supreme Court of the State of New York
was filed on August 13, 1997, alleging that the defendants
committed fraud, breach of fiduciary duty, and negligent
misrepresentation in the sale and operation of the various
limited partnership commodity pools. On December 16, 1997,
upon motion of the plaintiffs, the action pending in the
Superior Court of the State of Delaware was voluntarily
dismissed without prejudice. The complaints seek unspecified
amounts of compen-satory and punitive damages and other
relief. It is possible that additional similar actions may
be filed and that, in the course of these actions, other
parties could be added as defendants. The Dean Witter
Parties believe that they have strong defenses to, and they
will vigorously contest, the actions. Although the ultimate
outcome of legal proceedings cannot be predicted with
certainty, it is the opinion of management of the Dean
Witter Parties that the resolution of the actions will not
have a material adverse effect on the financial condition or
the results of operations of any of the Dean Witter Parties.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the
Units of Limited Partnership Interest in the Partnership.
The number of holders of Units at December 31, 1997 was
approximately 649. No distributions have been made by the
Partnership since it commenced trading operations on July
15, 1983. Demeter has sole discretion to decide what
distributions, if any, shall be made to investors in the
Partnership. No determination has yet been made as to
future distributions.
Item 6. SELECTED FINANCIAL DATA (in dollars)
For the Years Ended December 31,
1997 1996 1995 1994
1993
Total Revenues
(including interest) 2,827,745 2,295,489 2,756,685 482,814 1,994,437
Net Income (Loss) 1,782,050 1,340,938 1,815,259 (404,752) 1,024,820
Net Income (Loss)
Per Unit (Limited
& General Partners) 521.85 370.17 426.63 (92.18) 201.43
Total Assets 9,737,821 8,628,063 7,892,138 6,694,540 7,970,769
Total Limited Partners'
Capital 9,177,928 8,110,079 7,493,781 6,428,721 7,479,264
Net Asset Value Per
Unit of Limited
Partnership Interest 2,830.91 2,309.06 1,938.89 1,512.26 1,604.44
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity. The Partnership's assets are deposited in
separate commodity trading accounts with DWR and Carr, the
commodity brokers, and are used by the Partnership as margin
to engage in commodity futures contract trading. DWR and
Carr hold such assets in either designated depositories or
in securities approved by the Commodity Futures Trading
Commission ("CFTC") for investment of customer funds. The
Partnership's assets held by DWR and Carr may be used as
margin solely for the Partnership's trading. Since the
Partnership's sole purpose is to trade in commodity futures
contracts and other commodity interests, it is expected that
the Partnership will continue to own such liquid assets for
margin purposes.
The Partnership's investment in commodity futures
contracts and other commodity interests may be illiquid. If
the price for a futures contract for a particular commodity
has increased or decreased by an amount equal to the "daily
limit", positions in the commodity can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Commodity futures prices have
occasionally moved the daily limit for several consecutive
days with little or no trading. Such market conditions
could prevent the Partnership from promptly liquidating its
commodity futures positions.
There is no limitation on daily price moves in trading
forward contracts on foreign currencies. The markets for
some world currencies have low trading volume and are
illiquid, which may prevent the Partnership from trading in
potentially profitable markets or prevent the Partnership
from promptly liquidating unfavorable positions in such
markets and subjecting it to substantial losses. Either of
these market conditions could result in restrictions on
redemptions.
Market Risk. The Partnership trades futures, options
and forward contracts in interest rates, stock indices,
commodities and currencies. In entering into these
contracts there exists a risk to the Partnership (market
risk) that such contracts may be significantly influenced by
market conditions, such as interest rate volatility,
resulting in such contracts being less valuable. If the
markets should move against all of the futures interest
positions held by the Partnership at the same time, and if
the Trading Advisor were unable to offset futures interest
positions of the Partnership, the Partnership could lose all
of its assets and the Limited Partners would realize a 100%
loss. The Partnership has established Trading Policies,
which include standards for liquidity and leverage which
help control market risk. Both the Trading Advisor and
Demeter monitor the Partnership's trading activities on a
daily basis to ensure compliance with the Trading Policies.
Demeter may
(under terms of the Management Agreement) override the
trading instructions of the Trading Advisor to the extent
necessary to comply with the Partnership's Trading Policies.
Credit Risk. In addition to market risk, in entering
into futures, options and forward contracts there is a
credit risk to the Partnership that the counterparty on a
contract will not be able to meet its obligations to the
Partnership. The ultimate counterparty of the Partnership
for futures contracts traded in the United States and most
foreign exchanges on which the Partnership trades is the
clearinghouse associated with such exchange. In general, a
clearinghouse is backed by the membership of the exchange
and will act in the event of non-performance by one of its
members or one of its member's customers, and, as such,
should significantly reduce this credit risk. For example,
a clearinghouse may cover a default by (i) drawing upon a
defaulting member's mandatory contributions and/or non-
defaulting members' contributions to a clearinghouse
guarantee fund, established lines or letters of credit with
banks, and/or the clearinghouse's surplus capital and other
available assets of the exchange and clearinghouse, or (ii)
assessing its members. In cases where the Partnership
trades on a foreign exchange where the clearinghouse is not
funded or guaranteed by the membership or where the exchange
is a "principals' market" in which performance is the
responsibility of the exchange member and not the
exchange or a clearinghouse, or when the Partnership enters
into off-exchange contracts with a counterparty, the sole
recourse of the Partnership will be the clearinghouse, the
exchange member or the off-exchange contract counterparty,
as the case may be.
There can be no assurance that a clearinghouse,
exchange or other exchange member will meet its obligations
to the Partnership and the Partnership is not indemnified
against a default by such parties from Demeter or MSDWD or
DWR. Further, the law is unclear as to whether a commodity
broker has any obligation to protect its customers from loss
in the event of an exchange, clearinghouse or other exchange
member default on trades effected for the broker's
customers; any such obligation on the part of the broker
appears even less clear where the default occurs in a non-US
jurisdiction.
Demeter deals with the credit risks of all
Partnership's for which it serves as General Partner in
several ways. First, it monitors each Partnership's credit
exposure to each exchange on a daily basis, calculating not
only the amount of margin required for it but also the
amount of its unrealized gains at each exchange, if any.
The Commodity Brokers inform each Partnership, as with all
their customers, of its net margin requirements for all its
existing open positions, but do not break that net figure
down, exchange by exchange. Demeter, however, has installed
a system which permits it to monitor each partnership's
potential margin liability, exchange by exchange. Demeter
is then able to monitor the individual partnership's
potential net credit exposure to each exchange by adding the
unrealized trading gains on that exchange, if any, to the
partnership's margin liability thereon.
Second, as discussed earlier, each partnership's
trading policies limit the amount of partnership Net Assets
that can be committed at any given time to futures contracts
and require, in addition, a certain minimum amount of
diversification in the partnership's trading, usually over
several different products. One of the aims of such trading
policies has been to reduce the credit exposure of any
partnership to any single exchange and, historically, such
partnership exposure has typically amounted to only a small
percentage of its total Net Assets. On those relatively few
occasions where a partnership's credit exposure has climbed
above that level, Demeter has dealt with the situations on a
case by case basis, carefully weighing whether the increased
level of credit exposure remained appropriate. Demeter
expects to continue to deal with such situations in a
similar manner in the future.
Third, Demeter has secured, with respect to Carr acting
as the clearing broker for the partnerships, a guarantee by
Credit Agricole Indosuez, Carr's parent, of the payment of
the "net liquidating value" of the transactions (futures,
options and forward contracts) in each partnership's
account. As of December 31, 1997, Credit Agricole
Indosuez' total capital was over $3.25 billion and it is
currently rated AA2 by Moody's.
With respect to forward contract trading, the
partnerships trade with only those counterparties which
Demeter, together with DWR, have determined to be
creditworthy. At the date of this filing, the
partnerships deal only with Carr as their counterparty on
forward contracts. The guarantee by Carr's parent,
discussed above, covers these forward contracts.
See "Financial Instruments" under Notes to Financial
Statements in the Partnership's 1997 Annual Report to
Partners, incorporated by reference in this Form 10-K.
Capital Resources. The Partnership does not have, nor
does it expect to have, any capital assets. Redemptions of
additional Units of Limited Partnership Interest in the
future will affect the amount of funds available for
investments in subsequent periods. As redemptions are at
the discretion of Limited Partners, it is not possible to
estimate the amount and therefore the impact of future
redemptions.
Results of Operations. As of December 31, 1997, the
Partnership's total capital was $9,461,019, an increase of
$1,120,034 from the Partnership's total capital of
$8,340,985 at December 31, 1996. For the year ended
December 31, 1997, the Partnership generated net income of
$1,782,050 and total redemptions aggregated $662,016.
For the year ended December 31, 1997, the Partnership's
total trading revenues including interest income were
$2,827,745. The Partnership's total expenses for the year
were $1,045,695, resulting in net income of $1,782,050. The
value of an individual unit in the Partnership increased
from $2,309.06 at December 31, 1996 to $2,830.91 at December
31, 1997.
As of December 31, 1996, the Partnership's total
capital was $8,340,985, an increase of $653,315 from the
partnership's total capital of $7,687,670 at December 31,
1995. For the year ended December 31, 1996, the Partnership
generated net income of $1,340,938 and total redemptions
aggregated $687,623.
For the year ended December 31, 1996, the Partnership's
total trading revenues including interest income were
$2,295,489. The Partnership's total expenses for the year
were $954,551, resulting in net income of $1,340,938. The
value of an individual unit in the Partnership increased
from $1,938.89 at December 31, 1995 to $2,309.06 at December
31, 1996.
As of December 31, 1995, the Partnership's total
capital was $7,687,670, an increase of $1,107,723 from the
Partnership's total capital of $6,579,947 at December 31,
1994. For the year ended December
31, 1995, the Partnership generated net income of $1,815,259
and total redemptions aggregated $707,536.
For the year ended December 31, 1995, the Partnership's
total trading revenues including interest income were
$2,756,685. The Partnership's total expenses for the year
were $941,426, resulting in net income of $1,815,259. The
value of an individual unit in the Partnership
increased from $1,512.26 at December 31, 1994 to $1,938.89
at December 31, 1995.
The Partnership's overall performance record represents
varied results of trading in different commodity markets.
For a further description of trading results, refer to the
letter to the Limited Partners in the accompanying 1997
Annual Report to Partners, incorporated by reference in this
Form 10-K. The Partnership's gains and losses are allocated
among its Limited Partners for income tax purposes.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item appears in the
attached 1997 Annual Report to Partners and is incorporated
by reference in this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS OF THE REGISTRANT
General Partner
Demeter, a Delaware corporation, was formed on August
18, 1977 to act as a commodity pool operator and is
registered with the CFTC as a commodity pool operator and
currently is a member of the National Futures Association
("NFA") in such capacity. Demeter is wholly-owned by MSDWD
and is an affiliate of DWR. MSDWD, DWR and Demeter may each
be deemed to be "promoters" and/or a "parent" of the
Partnership within the meaning of the federal securities
laws.
On July 21, 1997, MSDWD, the sole shareholder of
Demeter, appointed a new Board of Directors consisting of
Richard M. DeMartini, Mark J. Hawley, Lawrence Volpe, Joseph
G. Siniscalchi, Edward C. Oelsner III, and Robert E. Murray.
Dean Witter Reynolds Inc.
DWR is a financial services company which provides to
its individual, corporate and institutional clients services
as a broker in securities and commodity interest contracts,
a dealer in corporate, municipal and government securities,
an investment adviser and an agent in the sale of life
insurance and various other products and services. DWR is a
member firm of the New York Stock Exchange, the American
Stock Exchange, the Chicago Board Options Exchange, and
other major securities
exchanges.
DWR is registered with the CFTC as a futures commission
merchant and is a member of the NFA in such capacity. As of
December 31, 1997, DWR is servicing its clients through a
network of approximately 401 branch offices with
approximately 10,155 account executives servicing individual
and institutional client accounts.
Directors and Officers of the General Partner
The directors and officers of Demeter as of December
31, 1997 are as follows:
Richard M. DeMartini, age 45, is the Chairman of the
Board and a Director of Demeter. Mr. DeMartini is also
Chairman of the Board and a Director of Dean Witter Futures
& Currency Management Inc. ("DWFCM"). Mr. DeMartini is
president and chief operating officer of MSDWD's Individual
Asset Management Group. He was named to this position in
May of 1997 and is responsible for Dean Witter InterCapital,
Van Kampen American Capital, insurance services, managed
futures, unit trust, investment consulting services, Dean
Witter Realty, and NOVUS Financial Corporation. Mr.
DeMartini is a member of the MSDWD management committee, a
director of the InterCapital funds, a trustee of the TCW/DW
funds and a trustee of the Van Kampen American Capital and
Morgan Stanley retail funds. Mr. DeMartini has been with
Dean Witter his entire career, joining the firm in 1975 as
an account executive. He
served as a branch manager, regional director and national
sales director, before being appointed president and chief
operating officer of the Dean Witter Consumer Markets. In
1988 he was named president and chief operating officer of
Sears' Consumer Banking Division and in January 1989 he
became president and chief operating officer of Dean Witter
Capital. Mr. DeMartini has served as chairman of the board
of the Nasdaq Stock Market, Inc. and vice chairman of the
board of the National Association of Securities Dealers,
Inc. A native of San Francisco, Mr. DeMartini holds a
bachelor's degree in marketing from San Diego State
University.
Mark J. Hawley, age 54, is President and a Director of
Demeter. Mr. Hawley is also President and a Director of
DWFCM. Mr. Hawley joined DWR in February 1989 as Senior
Vice President and is currently the Executive Vice President
and Director of DWR's Managed Futures Department. From 1978
to 1989, Mr. Hawley was a member of the senior management
team at Heinold Asset Management, Inc., a CPO, and was
responsible for a variety of projects in public futures
funds. From 1972 to 1978, Mr. Hawley was a Vice President
in charge of institutional block trading for the Mid-West at
Kuhn Loeb & Company.
Lawrence Volpe, age 50, is a Director of Demeter and
DWFCM. Mr. Volpe joined DWR as a Senior Vice President and
Controller in September 1983, and currently holds those
positions. From July 1979 to September
1983, he was associated with E.F. Hutton & Company Inc. and
prior to his departure, held the positions of First Vice
President and Assistant Controller. From 1970 to July 1979,
he was associated with Arthur Anderson & Co. and prior to
his departure served as audit manager in the financial
services division.
Joseph G. Siniscalchi, age 52, is a Director of
Demeter. Mr. Siniscalchi joined DWR in July 1984 as a First
Vice President, Director of General Accounting and served as
a Senior Vice President and Controller for DWR's Securities
division through 1997. He is currently Executive Vice
President and Director of the Operations Division of DWR.
From February 1980 to July 1984, Mr. Siniscalchi was
Director of Internal Audit at Lehman Brothers Kuhn Loeb,
Inc.
Edward C. Oelsner, III, age 55, is a Director of
Demeter. Mr. Oelsner is currently an Executive Vice
President and head of the Product Development Group at Dean
Witter InterCapital Inc., an affiliate of DWR. Mr. Oelsner
joined DWR in 1981 as a Managing Director in DWR's
Investment Banking Department specializing in coverage of
regulated industries and, subsequently, served as head of
the DWR Retail Products Group. Prior to joining DWR, Mr.
Oelsner held positions at The First Boston Corporation as a
member of the Research and Investment Banking Departments
from 1967 to 1981. Mr. Oelsner received his M.B.A. in
Finance from the Columbia University Graduate School of
Business in 1966 and an A.B. in Politics from Princeton
University in 1964.
Robert E. Murray, age 37, is a Director of Demeter.
Mr. Murray is also a Director of DWFCM. Mr. Murray is
currently a Senior Vice President of DWR's Managed Futures
Department and is the Senior Administrative Officer of
DWFCM. Mr. Murray began his career at DWR in 1984 and is
currently the Director of Product Development for the
Managed Futures Department. He is responsible for the
development and maintenance of the proprietary Fund
Management System utilized by DWFCM and Demeter in
organizing information and producing reports for monitoring
clients' accounts. Mr. Murray currently serves as a
Director of the Managed Funds Association. Mr. Murray
graduated from Geneseo State University in May 1983 with a
B.A. degree in Finance.
Patti L. Behnke, age 37, is Vice President and Chief
Financial Officer of Demeter. Ms. Behnke joined DWR in
April 1991 as Assistant Vice President of Financial
Reporting and is currently a First Vice President and
Director of Financial Reporting and Managed Futures
Accounting in the Individual Asset Management Group. Prior
to joining DWR, Ms. Behnke held positions of increasing
responsibility at L.F. Rothschild & Co. and Carteret Savings
Bank. Ms. Behnke began her career
at Arthur Anderson & Co., where she was employed in the
audit division from 1982-1986. She is a member of the AICPA
and the New York State Society of Certified Public
Accountants.
Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive
officers. As a limited partnership, the business of the
Partnership is managed by Demeter which is responsible for
the administration of the business affairs of the
Partnership but receives no compensation for such services.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT (a) Security Ownership of Certain
Beneficial Owners - As of December 31, 1997 there were no
persons known to be beneficial owners of more than 5 percent
of the Units of Limited Partnership Interest in the
Partnership.
(b) Security Ownership of Management - At December 31,
1997, Demeter owned 100 Units of General Partnership
Interest in the Partnership representing a 2.99 percent
interest in the Partnership.
(c) Changes in Control - None
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of
"Notes to Financial Statements", in the accompanying 1997
Annual Report to
Partners, incorporated by reference in this Form 10-K. In
its capacity as the Partnership's retail commodity broker,
DWR received commodity brokerage commissions (paid and
accrued by the Partnership) of $341,945 for the year ended
December 31, 1997.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORT ON FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and reports of
independent accountants, all appearing in the accompanying
1997 Annual Report to Partners, are incorporated by
reference in this Form 10-K:
- Report of Deloitte & Touche LLP, independent
auditors, for the years ended December 31, 1997,
1996 and 1995.
- Statements of Financial Condition as of
December 31, 1997 and 1996.
- Statements of Operations, Changes in
Partners' Capital, and Cash Flows for the years
ended December 31, 1997, 1996 and 1995.
- Notes to Financial Statements.
With the exception of the aforementioned information
and the information incorporated in Items 7, 8, and 13, the
1997 Annual Report to Partners is not deemed to be filed
with this report.
2. Listing of Financial Statement Schedules
No financial statement schedules are required to be
filed with this report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the
Partnership during the last quarter of the period covered by
this report.
(c) Exhibits
Refer to Exhibit Index on Page E-1.
SIGNATURES
Pursuant to the requirement of Sections 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
COLUMBIA FUTURES
FUND
(Registrant)
BY: Demeter
Management Corporation,
General
Partner
March 24, 1998 BY: /s/ Mark J. Hawley
Mark J. Hawley, Director and
President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Demeter Management Corporation.
BY: /s/ Mark J. Hawley March 24,
1998
Mark J. Hawley, Director and
President
/s/ Richard M. DeMartini March 24,
1998
Richard M. DeMartini, Director
and Chairman of the Board
/s/ Lawrence Volpe March 24,
1998
Lawrence Volpe, Director
/s/ Joseph G. Siniscalchi March 24,
1998
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III March 24,
1998
Edward C. Oelsner III, Director
/s/ Robert E. Murray March 24,
1998
Robert E. Murray, Director
/s/ Patti L. Behnke March 24,
1998
Patti L. Behnke, Chief Financial
Officer and Principal Accounting
Officer
EXHIBIT INDEX
Item METHOD
OF FILING
- - -3. Amendment to Limited Partnership (1)
Agreement of Columbia Futures Fund,
dated as of February 14, 1985.
- - -10. Advisory Agreement among the Partnership, (2)
Demeter and JWH dated as of January
20, 1987.
- - -10. December 31, 1997 Annual Report to Limited Partners. (3)
(1)
Incorporated by reference to Exhibit 3.01 of the Partnership's
Annual
Report on Form 10-K for the fiscal year ended December 31, 1985,
File No. 0-
12431.
(2)
Incorporated by reference to Exhibit 10.03 of the Partnership's
Annual
Report on Form 10-K for the fiscal year ended December 31, 1986,
File No. 0-
12431.
(3) Filed
herewith.
Columbia
Futures
Fund
December 31, 1997
Annual Report
[LOGO OF DEAN WITTER APPEARS HERE]
DEAN WITTER
Two World Trade Center 62nd Floor
New York, NY 10048 Telephone (212) 392-8899
COLUMBIA FUTURES FUND
ANNUAL REPORT
1997
Dear Limited Partner:
This marks the fifteenth annual report for the Columbia Futures Fund (the
"Fund"). This is the thirteenth report filed by Demeter Management Corporation,
the Fund's General Partner since February 1985. The Fund began the year trading
at a Net Asset Value per Unit of $2,309.06 and increased by 22.6% to $2,830.91
on December 31, 1997. Since its inception in 1983, the Fund has increased by
188.9% (a compound annualized return of 7.6%).
During January, the Fund posted gains in currencies as a result of a
strengthening in the value of the U.S. dollar versus the Japanese yen, German
mark and Swiss franc. Additional gains were recorded from long Japanese and
French bond futures positions and from short Nikkei Index futures positions.
The Fund recorded gains during February as the value of the U.S. dollar
continued to strengthen relative to most major currencies. Additional gains
were recorded from long coffee futures positions as prices trended higher.
These gains were partially offset by losses from trading U.S. and Australian
bond futures as prices moved in a trendless pattern. During March, profits were
recorded from short positions in the Japanese yen and Singapore dollar as the
value of these currencies trended lower versus the U.S. dollar. Additional
gains were recorded from an upward price trend in corn and soybean meal
futures. A portion of these gains was offset by losses in energies from short
crude oil futures positions.
In April, the Fund recorded losses primarily from long positions in Japanese
government bond futures, as prices moved lower, and from short
positions in U.S. interest rate futures, as domestic bond prices moved sharply
higher late in the month. Smaller losses were recorded in the agricultural and
energy markets as prices moved in a short-term volatile pattern. During May,
the Fund recorded losses primarily from trading the Japanese yen as its value
moved without consistent direction. Smaller losses were recorded from short-
term volatile price movement in crude oil futures. The Fund also recorded
losses during June primarily from long positions in coffee futures as prices
moved dramatically lower. Losses were also recorded from trading crude oil
futures as oil prices continued to move without consistent direction.
During July, the Fund posted profits primarily from a strengthening in the
value of the U.S. dollar relative to most world currencies. Gains were also
recorded from long positions in global bond futures as prices moved higher
during the month. In August, gains were recorded from short positions in the
Malaysian ringgit and Singapore dollar late in the month. Smaller gains were
recorded in the soft commodities and financial futures markets. In September, a
small portion of the Fund's gains for the quarter was given back due to
trendless price movement in coffee, sugar and crude oil futures. Smaller losses
were recorded in the agricultural markets from trading corn futures. These
losses were partially offset by gains recorded from short Malaysian ringgit
positions.
The Fund recorded profits during October primarily from short positions in the
Singapore dollar and Malaysian ringgit as the values of these currencies
declined sharply relative to the U.S. dollar. Additional gains were recorded
from long positions in Japanese government bond futures as prices moved higher.
In November, the Fund recorded gains from short Japanese yen, Australian dollar
and Malaysian ringgit positions as the value of these currencies weakened
versus the U.S. dollar in response to the economic turmoil in Asia. Additional
gains were recorded in metals from long silver futures positions as prices
moved higher. During December, the Fund experienced significant gains
from short positions in the Singapore dollar, Malaysian ringgit and Australian
dollar as the values of these Pacific Rim currencies continued to decline.
Additional gains were experienced from long silver futures positions, as well
as European bond futures, as prices in these markets moved higher.
Overall, the Fund recorded strong gains in 1997 from sustained price movements
in the currency markets during January and February, and then again in the
fourth quarter from short positions in most Pacific Rim currencies as their
values declined relative to the U.S. dollar. Additional gains were also
recorded from long positions in global interest rate futures as prices in these
markets trended upward during the third quarter. These gains, coupled with John
W. Henry & Company, Inc.'s ability to limit losses during periods of short-term
price volatility and sharp trend reversals, contributed to the overall success
of the Fund during the year.
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation at Two World Trade Center, 62nd Floor,
New York, NY 10048, or your Dean Witter Account Executive.
I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is not a
guarantee of future results.
Sincerely,
/s/ Mark J. Hawley
Mark J. Hawley
President
Demeter Management Corporation
General Partner
COLUMBIA FUTURES FUND
INDEPENDENT AUDITORS' REPORT
The Limited Partners and the General Partner:
We have audited the accompanying statements of financial condition of Columbia
Futures Fund (the "Partnership") as of December 31, 1997 and 1996 and the
related statements of operations, changes in partners' capital, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Columbia Futures Fund as of December 31,
1997 and 1996 and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
February 17, 1998
New York, New York
COLUMBIA FUTURES FUND
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
-------------------
1997 1996
--------- ---------
$ $
ASSETS
Equity in Commodity futures trading accounts:
Cash 9,092,300 8,233,513
Net unrealized gain on open
contracts 611,751 365,976
--------- ---------
Total Trading Equity 9,704,051 8,599,489
Interest receivable (DWR) 33,770 28,574
--------- ---------
Total Assets 9,737,821 8,628,063
========= =========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Incentive fee payable 173,722 150,103
Administrative expenses payable 56,762 67,548
Accrued management fee 32,163 28,381
Redemptions payable 14,155 23,091
Accrued brokerage commissions (DWR) -- 16,631
Accrued transaction fees and costs -- 1,324
--------- ---------
Total Liabilities 276,802 287,078
--------- ---------
PARTNERS' CAPITAL
Limited Partners (3,242.046 and 3,512.282 Units, respec-
tively) 9,177,928 8,110,079
General Partner (100 Units) 283,091 230,906
--------- ---------
Total Partners' Capital 9,461,019 8,340,985
--------- ---------
Total Liabilities and Partners'
Capital 9,737,821 8,628,063
========= =========
NET ASSET VALUE PER UNIT 2,830.91 2,309.06
========= =========
The accompanying notes are an integral part of these financial statements.
COLUMBIA FUTURES FUND
STATEMENTS OF OPERATIONS
FOR THE YEARS
ENDED
DECEMBER 31,
------------------------------
1997 1996 1995
--------- --------- ---------
$ $ $
REVENUES
Trading Profit (Loss):
Realized 2,224,474 2,453,483 2,608,057
Net change in unrealized 245,775 (470,252) (197,683)
--------- --------- ---------
Total Trading Results 2,470,249 1,983,231 2,410,374
Interest income (DWR) 357,496 312,258 346,311
--------- --------- ---------
Total Revenues 2,827,745 2,295,489 2,756,685
--------- --------- ---------
EXPENSES
Management fee 344,682 302,169 306,556
Brokerage commissions (DWR) 341,945 397,597 361,179
Incentive fee 251,113 150,977 115,561
Administrative expenses 79,000 72,000 129,000
Transaction fees and costs 28,955 31,808 29,130
--------- --------- ---------
Total Expenses 1,045,695 954,551 941,426
--------- --------- ---------
NET INCOME 1,782,050 1,340,938 1,815,259
========= ========= =========
NET INCOME ALLOCATION:
Limited Partners 1,729,865 1,303,921 1,772,596
General Partner 52,185 37,017 42,663
NET INCOME PER UNIT:
Limited Partners 521.85 370.17 426.63
General Partner 521.85 370.17 426.63
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
----------- --------- ------- ---------
$ $ $
Partners' Capital, December 31, 1994 4,351.065 6,428,721 151,226 6,579,947
Net Income -- 1,772,596 42,663 1,815,259
Redemptions (386.083) (707,536) -- (707,536)
--------- --------- ------- ---------
Partners' Capital, December 31, 1995 3,964.982 7,493,781 193,889 7,687,670
Net Income -- 1,303,921 37,017 1,340,938
Redemptions (352.700) (687,623) -- (687,623)
--------- --------- ------- ---------
Partners' Capital,
December 31, 1996 3,612.282 8,110,079 230,906 8,340,985
Net Income -- 1,729,865 52,185 1,782,050
Redemptions (270.236) (662,016) -- (662,016)
--------- --------- ------- ---------
Partners' Capital,
December 31, 1997 3,342.046 9,177,928 283,091 9,461,019
========= ========= ======= =========
The accompanying notes are an integral part of these financial statements.
COLUMBIA FUTURES FUND
STATEMENTS OF CASH FLOWS
FOR THE YEARS
ENDED
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 1,782,050 1,340,938 1,815,259
Noncash item included in net income:
Net change in unrealized (245,775) 470,252 197,683
Increase in operating assets:
Interest receivable (DWR) (5,196) (1,138) (650)
Increase (decrease) in
operating liabilities:
Incentive fee payable 23,619 150,103 --
Administrative expenses payable (10,786) (29,063) 89,859
Accrued management fee 3,782 2,556 3,675
Accrued brokerage commissions (DWR) (16,631) (4,062) 1,393
Accrued transaction fees and costs (1,324) (375) 335
--------- --------- ---------
Net cash provided by operating activities 1,529,739 1,929,211 2,107,554
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in redemptions payable (8,936) (36,549) (5,387)
Redemptions of units (662,016) (687,623) (707,536)
--------- --------- ---------
Net cash used for financing activities (670,952) (724,172) (712,923)
--------- --------- ---------
Net increase in cash 858,787 1,205,039 1,394,631
Balance at beginning of period 8,233,513 7,028,474 5,633,843
--------- --------- ---------
Balance at end of period 9,092,300 8,233,513 7,028,474
========= ========= =========
The accompanying notes are an integral part of these financial statements.
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Columbia Futures Fund (the "Partnership") is a limited
partnership organized to engage in the speculative trading of commodity futures
contracts, commodity options contracts and forward contracts on foreign
currencies. The general partner for the Partnership is Demeter Management
Corporation ("Demeter"). Demeter is a wholly-owned subsidiary of Morgan
Stanley, Dean Witter, Discover & Co. ("MSDWD").
On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean
Witter, Discover & Co. ("DWD"). At that time DWD changed its corporate name to
Morgan Stanley, Dean Witter, Discover & Co.
Through July 31, 1997, the sole commodity broker for the Partnership's
transactions was Dean Witter Reynolds Inc. ("DWR"), also a subsidiary of MSDWD.
On July 31, 1997, DWR closed the sale of its institutional futures business and
foreign currency trading operations to Carr Futures, Inc. ("Carr"), a
subsidiary of Credit Agricole Indosuez. Following the sale, Carr became the
clearing commodity broker for the Partnership's futures and futures options
trades and the counterparty on the Partnership's foreign currency trades. DWR
will continue to serve as the non-clearing commodity broker for the Partnership
with Carr providing all clearing services for the Partnership's transactions.
Demeter is required to maintain a 1% minimum interest in the equity of the
Partnership and income (losses) are shared by the General and Limited Partners
based upon their proportional ownership interests.
BASIS OF ACCOUNTING--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements.
REVENUE RECOGNITION--Commodity futures contracts and forward contracts on
foreign currencies are open commitments until settlement date. They are valued
at market and the resulting unrealized gains and losses are reflected in
income. Monthly, DWR pays the Partnership interest income based upon 80% of the
average equity at a rate equal to the average yield on 13-Week U.S. Treasury
Bills issued during such month.
NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using the
weighted average number of units outstanding during the period.
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
EQUITY IN COMMODITY FUTURES TRADING ACCOUNTS--The Partnership's asset "Equity
in Commodity futures trading accounts" consists of cash on deposit at DWR and
Carr to be used as margin for trading and the net asset or liability related to
unrealized gains or losses on open contracts. The asset or liability related to
the unrealized gains or losses on forward contracts is presented as a net
amount in each period due to master netting agreements.
BROKERAGE COMMISSIONS AND RELATED TRANSACTION FEES AND COSTS--Brokerage
commissions are accrued at 80% of DWR's published non-member rates on a half-
turn basis. Transaction fees and costs are accrued on a half-turn basis.
Through March 31, 1995, brokerage commissions were capped at 1% per month of
the adjusted Net Assets allocated to each trading program employed by the
Trading Manager.
From April 1, 1995 through August 31, 1996, the caps for brokerage commissions
were reduced to 3/4 of 1%.
As of September 1, 1996, brokerage commissions and transaction fees chargeable
to the Partnership are capped at 13/20 of 1% per month of the Partnership's
month-end Net Assets (as defined in the Limited Partnership Agreement).
OPERATING EXPENSES--The Partnership bears all operating expenses related to its
trading activities. These include filing fees, clerical, administrative,
auditing, accounting, mailing, printing, and other incidental operating
expenses as permitted by the Limited Partnership Agreement. In addition, the
Partnership incurs a monthly management fee and may incur an incentive fee.
Demeter bears all other operating expenses.
INCOME TAXES--No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of the Partnership's revenues
and expenses for income tax purposes.
DISTRIBUTIONS--Distributions, other than on redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
REDEMPTIONS--Limited Partners may redeem their Units as of the end of any
calendar month upon ten days advance notice by redemption form to Demeter.
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DISSOLUTION OF THE PARTNERSHIP--The Partnership will terminate on December 31,
2002 regardless of its financial condition at such time, or at an earlier date
if certain conditions occur as defined in the Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
The Partnership pays brokerage commissions to DWR on trades executed on its
behalf as described in Note 1. The Partnership's cash is on deposit with DWR
and Carr in commodity trading accounts to meet margin requirements as needed.
DWR pays interest on these funds as described in Note 1. For general
administrative services performed for the Partnership, Demeter receives a
monthly administration fee which equals $1.50 per limited partner outstanding.
For the years ended December 31, 1997, 1996 and 1995 Demeter received $11,979,
$13,101 and $14,483, respectively, for such administrative services.
3. TRADING ADVISOR
Demeter, on behalf of the Partnership, retains a commodity trading advisor to
make all trading decisions for the Partnership. Since January 22, 1988, John W.
Henry & Company, Inc. ("JWH") has served as the sole trading advisor.
Compensation to the trading manager consists of a management fee and an
incentive fee as follows:
MANAGEMENT FEE--The management fee is accrued daily at the rate of 1/3 of 1%
per month of the Partnership's managed Net Assets at each month-end.
INCENTIVE FEE--At the end of each quarter or upon redemption
of a Partnership Unit, an incentive fee is assessed each Unit
equal to 15 percent of the excess of the Unit value,
excluding interest earned during the period, over the Unit
value at the time immediately following the last incentive
payment. Such incentive fee is accrued in each month in which
new appreciation occurs. In those months in which new
appreciation is negative, previous accruals, if any, during
each fiscal quarter will be reduced.
4. FINANCIAL INSTRUMENTS
The Partnership trades futures and forward contracts in interest rates, stock
indices, commodities, currencies, petroleum, and precious metals. Futures and
forwards represent contracts for delayed delivery of an instrument at a
specified date and price. Risk arises from changes in the value of these
contracts and the potential inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may significantly
influence the market
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
value of these contracts, including interest rate volatility. At December 31,
1997 and 1996 open contracts were:
CONTRACT OR NOTIONAL AMOUNT
----------------------------
1997 1996
-------------- -------------
$ $
EXCHANGE-TRADED CONTRACTS
Financial Futures:
Commitments to Purchase 8,412,000 5,890,000
Commitments to Sell 3,094,000 5,281,000
Commodity Futures:
Commitments to Purchase 1,948,000 1,723,000
Commitments to Sell 3,352,000 5,004,000
Foreign Futures:
Commitments to Purchase 3,862,000 3,327,000
Commitments to Sell 4,056,000 4,040,000
OFF-EXCHANGE-TRADED FORWARD
CURRENCY CONTRACTS
Commitments to Purchase 6,966,000 9,367,000
Commitments to Sell 20,155,000 6,091,000
A portion of the amounts indicated as off-balance-sheet risk in forward
currency contracts is due to offsetting forward commitments to purchase and to
sell the same currency on the same date in the future. These commitments are
economically offsetting, but are not offset in the forward market until the
settlement date.
The net unrealized gain on open contracts is reported as a component of "Equity
in Commodity futures trading accounts" on the Statements of Financial Condition
and totaled $611,751 and $365,976 at December 31, 1997 and 1996, respectively.
Of the $611,751 net unrealized gain on open contracts at December 31, 1997,
$424,057 related to exchange-traded futures contracts and $187,694 related to
off-exchange-traded forward currency contracts.
Of the $365,976 net unrealized gain on open contracts at December 31, 1996,
$381,231 related to exchange-traded futures contracts and $(15,255) related to
off-exchange-traded forward currency contracts.
Exchange-traded futures contracts held by the Partnership at December 31, 1997
and 1996 mature through December 1998 and September 1997, respectively. Off-
exchange-traded forward currency contracts held by the Partnership at December
31, 1997 and 1996 mature through March 1998 and March 1997, respectively.
The contract amounts in the above table represent the Partnership's extent of
involvement in the particular class of financial instrument, but not the credit
risk
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
associated with counterparty nonperformance. The credit risk associated with
these instruments is limited to the amounts reflected in the Partnership's
Statements of Financial Condition.
The Partnership also has credit risk because either DWR or Carr acts as the
futures commission merchant or the counterparty, with respect to most of the
Partnership's assets. Exchange-traded futures contracts are marked to market on
a daily basis, with variations in value settled on a daily basis. DWR and
Carr, as the futures commission merchants for the Partnership's exchange-traded
futures contracts, are required pursuant to regulations of the Commodity
Futures Trading Commission to segregate from their own assets, and for the sole
benefit of their commodity customers, all funds held with respect to exchange-
traded futures contracts including an amount equal to the net unrealized gain
on all open futures contracts, which funds totaled $9,516,357 and $8,614,744 at
December 31, 1997 and 1996, 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. Carr's parent, Credit Agricole Indosuez, has guaranteed Carr's
obligations to the Partnership.
For the years ended December 31, 1997 and 1996, the average fair value of
financial instruments held for trading purposes was as follows:
1997
----------------------
ASSETS LIABILITIES
---------- -----------
$ $
EXCHANGE-TRADED CONTRACTS:
Financial Futures 7,750,000 6,950,000
Commodity Futures 4,075,000 3,836,000
Foreign Futures 5,415,000 2,274,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 14,901,000 19,757,000
1996
----------------------
ASSETS LIABILITIES
---------- -----------
$ $
EXCHANGE-TRADED CONTRACTS:
Financial Futures 7,988,000 9,207,000
Commodity Futures 6,451,000 5,433,000
Foreign Futures 8,788,000 3,870,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 13,160,000 15,230,000
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
5. LEGAL MATTERS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported
class actions were filed in the Superior Court of the State of California,
County of Los Angeles, on behalf of all purchasers of interests in limited
partnership commodity pools sold by DWR. Named defendants include DWR, Demeter,
Dean Witter Futures & Currency Management Inc., MSDWD (all such parties
referred to hereafter as the "Dean Witter Parties"), certain limited
partnership commodity pools of which Demeter is the general partner, and
certain trading advisors (including JWH) to those pools. On June 16, 1997, the
plaintiffs in the above actions filed a consolidated amended complaint,
alleging, among other things, that the defendants committed fraud, deceit,
negligent misrepresentation, various violations of the California Corporations
Code, intentional and negligent breach of fiduciary duty, fraudulent and unfair
business practices, unjust enrichment, and conversion in the sale and operation
of the various limited partnerships commodity pools. Similar purported class
actions were also filed on September 18 and 20, 1996, in the Supreme Court of
the State of New York, New York County, and on November 14, 1996 in the
Superior Court of the State of Delaware, New Castle County, against the Dean
Witter Parties and certain trading advisors (including JWH) on behalf of all
purchasers of interests in various limited partnership commodity pools sold by
DWR. A consolidated and amended complaint in the action pending in the Supreme
Court of the State of New York was filed on August 13, 1997, alleging that the
defendants committed fraud, breach of fiduciary duty, and negligent
misrepresentation in the sale and operation of the various limited partnership
commodity pools. On December 16, 1997, upon motion of the plaintiffs, the
action pending in the Superior Court of the State of Delaware was voluntarily
dismissed without prejudice. The complaints seek unspecified amounts of
compensatory and punitive damages and other relief. It is possible that
additional similar actions may be filed and that, in the course of these
actions, other parties could be added as defendants. The Dean Witter Parties
believe that they have strong defenses to, and they will vigorously contest,
the actions. Although the ultimate outcome of legal proceedings cannot be
predicted with certainty, it is the opinion of management of the Dean Witter
Parties that the resolution of the actions will not have a material adverse
effect on the financial condition or the results of operations of any of the
Dean Witter Parties.
DEAN WITTER REYNOLDS INC.
Two World Trade Center
62nd Floor
New York, NY 10048
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