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 [Fee Required]
For the fiscal year ended December 31, 1995 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 33-25041
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
(Exact name of registrant as specified in its Limited Partnership Agreement)
DELAWARE 13-3498819
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
c/o Demeter Management Corp.
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:
Title of each class Name of each exchange
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: $4,717,441.22 at January 31, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
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<TABLE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1995
<CAPTION>
Page No.
<S> <C>
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . . 1
Part I.
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . 2-3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 4
Item 4. Submission of Matters to a Vote of Security Holders . . 4
Part II.
Item 5. Market for the Registrant's Partnership Units and
Related Security Holder Matters . . . . . . . . . . . . 5
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 7-8
Item 8. Financial Statements and Supplementary Data. . . . . . . 8
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . 9
Part III.
Item 10. Directors, Executive Officers, Promoters and
Control Persons of the Registrant . . . . . . . . . . 10-13
Item 11. Executive Compensation . . . . . . . . . . . . . . . . 13
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . 13
Item 13. Certain Relationships and Related Transactions . . . . 14
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . 15
/TABLE
<PAGE>
<TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference as
follows:
<CAPTION>
Documents Incorporated Part of Form 10-K
<S>
<S> <C>
Partnership's Registration Statement
on Form S-1, File No. 33-25041 I and IV
December 31, 1995 Annual Report
for the Dean Witter Principal
Guaranteed Fund II L.P. II and IV
</TABLE>
<PAGE>
PART I
Item 1. BUSINESS
(a) General Development of Business. Dean Witter Principal
Guaranteed Fund II L.P. (the "Partnership") is a Delaware limited
partnership formed to engage in the speculative trading of commodity
futures contracts and other commodity interests, including, but not
limited to, forward contracts on foreign currencies and options on futures
contracts and physical commodities.
Units of limited partnership interest in the Partnership were
registered pursuant to a Registration Statement on Form S-1 (File No. 33-
25041) which became effective on December 21, 1988. The offering of units
was underwritten on a "best efforts" basis by Dean Witter Reynolds Inc.
("DWR"), a commodity broker and affiliated corporation of the
Partnership's General Partner, Demeter Management Corporation ("Demeter").
The Partnership commenced trading on March 1, 1989. On April 20, 1995 the
Partnership terminated trading and all open positions were liquidated.
While the Guaranteed Redemption Date (the date on which investors are
guaranteed $1,000 per Unit) is not until March 31, 1996, the rise in NAV
above the guaranteed level presented Limited Partners with the opportunity
to obtain the return of their initial investment earlier than the
Guaranteed Redemption Date. For this reason and the fact that pursuant to
the Partnership's Leverage Policy only 17% of the Partnership's assets
were available for trading, the General Partner determined it was in the
best interests of Limited Partners and of the Partnership to terminate
trading and to recommend that Limited Partners redeem their Units. The
Partnership's net asset value per unit, as of December 31, 1995, was
$1,046.10, representing an increase of 7.30 percent from the net asset
<PAGE>
value per unit of $974.93 at December 31, 1994. For a more detailed
description of the Partnership's business see subparagraph (c).
(b) Financial Information about Industry Segments. Until it
terminated trading, the Partnership'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 in the
business of speculative trading in commodity futures contracts and other
commodity interests, pursuant to trading instructions provided by
independent trading advisors, as described in (a) above, the Partnership
terminated trading on April 20, 1995. Until the guaranteed redemption
date, the Partnership will maintain cash for the benefit of unitholders
and will engage in no further business activities.
(d) Financial Information About Foreign and Domestic
Operations Export Sales.
The Partnership had not engaged in any operations in foreign
countries; however, prior to the termination of trading, the Partnership
(through the commodity broker) entered into forward contract transactions
where foreign banks were the contracting party and futures contracts 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.
<PAGE>
Item 3. LEGAL PROCEEDINGS
Demeter is not aware of any material pending legal proceedings to
which the Partnership is a party or to which any of its assets are
subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS
There is no established public trading market for the Units of
Limited Partnership Interest in the Partnership. The number of holders of
Units at December 31, 1995 was approximately 915. No distributions have
been made by the Partnership since it commenced trading operations on
March 1, 1989. 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.
Limited Partnership Units are registered for sale to the public in
certain Canadian provinces.
<PAGE>
<TABLE>
Item 6. SELECTED FINANCIAL DATA (in dollars)
<CAPTION>
For the Years Ended December 31,
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
Total Revenues
(including interest) 1,540,256 30,020 9,517,761 6,946,359 19,759,900
Net Income (Loss) 1,163,469 (2,764,836) 3,740,895 (4,461,104) 1,987,077
Net Income (Loss)
Per Unit (Limited
& General Partners) 71.17 (86.14) 94.14 (45.98) 24.64
Total Assets 5,248,778 24,082,817 36,678,907 53,787,163 96,101,329
Total Limited
Partners' Capital 4,701,302 23,308,615 33,985,223 49,765,595 85,594,690
Net Asset Value Per
Unit of Limited
Partnership Interest 1,046.10 974.93 1,061.07 966.93 1,012.91
</TABLE>
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity. The Partnership's assets are deposited in separate
commodity trading accounts with DWR, the commodity broker, and prior to
the termination of trading were used by the Partnership as margin to
engage in commodity futures, forward contracts and other commodity
interest trading. DWR holds such assets in either designated depositories
or in securities approved by the Commodity Futures Trading Commission
("CFTC") for investment of customer funds. Since the Partnership has
terminated trading, the liquidity risks associated with commodity future,
forward contract and commodity interest trading are no longer present.
Partnership cash balances at DWR will be used to Fund future redemptions.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets.
Results of Operations. As of December 31, 1995, the Partnership's
total capital was $5,165,770, a decrease of $18,575,713 from the
Partnership's total capital of $23,741,483 at December 31, 1994. For the
year ended December 31, 1995, the Partnership generated net income of
$1,163,469, and total redemptions aggregated $19,739,182.
For the year ended December 31, 1995, the Partnership's total
trading revenues including interest income were $1,540,256. The
Partnership's total expenses for the year were $376,787, resulting in net
income of $1,163,469. The value of an individual unit in the Partnership
increased from $974.93 at December 31, 1994 to $1,046.10 at December 31,
1995.
As of December 31, 1994, the Partnership's total capital was
$23,741,483, an increase of $12,005,113 from the Partnership's total
capital of $35,746,596 at December 31, 1993. For the year ended December
31, 1994, the Partnership incurred a net loss of $2,764,836, and total
<PAGE>
redemptions aggregated $9,240,277.
For the year ended December 31, 1994, the Partnership's total
trading revenues including interest income were $30,020. The
Partnership's total expenses for the year were $2,794,856, resulting in a
net loss of $2,764,836. The value of an individual unit in the
Partnership decreased from $1,061.07 at December 31, 1993 to $974.93 at
December 31, 1994.
As of December 31, 1993, the Partnership's total capital was
$35,746,596, a decrease of $15,624,104 from the Partnership's total
capital of $51,370,700 at December 31, 1992. For the year ended December
31, 1993, the partnership generated net income of $3,740,895, and total
redemptions aggregated $19,364,999.
For the year ended December 31, 1993, the Partnership's total
trading revenues including interest income were $9,517,761. The
Partnership's total expenses for the year were $5,776,866, resulting in
net income of $3,740,895. The value of an individual unit in the Partner-
ship increased from $966.93 at December 31, 1992 to $1,061.07 at December
31, 1993.
The Partnership's overall performance record represented 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 1995 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 1995
Annual Report to Partners and is incorporated by reference in this Annual
Report on Form 10-K.
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS OF THE REGISTRANT
General Partner
Demeter, a Delaware corporation, was formed on August 18, 1977 to
act as a commodity pool operator and is registered with the CFTC as a
commodity pool operator and currently is a member of the National Futures
Association ("NFA") in such capacity. Demeter is wholly-owned by Dean
Witter, Discover & Co. ("DWD") and is an affiliate of DWR. DWD, DWR and
Demeter may each be deemed to be "promoters" and/or a "parent" of the
Partnership within the meaning of the federal securities laws.
Dean Witter Reynolds Inc.
DWR is a financial services company which provides to its
individual, corporate and institutional clients services as a broker in
securities and commodity interest contracts, a dealer in corporate,
municipal and government securities, an investment banker, an investment
adviser and an agent in the sale of life insurance and various other
products and services. DWR is a member firm of the New York Stock
Exchange, the American Stock Exchange, the Chicago Board Options Exchange,
and other major securities exchanges, and is a clearing member of the
Chicago Board of Trade, the Chicago Mercantile Exchange, the Commodity
Exchange Inc., and other major commodities exchanges.
DWR is registered with the CFTC as a futures commission merchant and
is a member of the NFA in such capacity. DWR is currently servicing its
clients through a network of 350 branch offices with approximately 8,500
account executives servicing individual and institutional client accounts.
<PAGE>
Directors and Officers of the General Partner
The directors and officers of Demeter as of December 31, 1995 are as
follows:
Richard M. DeMartini, age 43, is the Chairman of the Board and a
Director of Demeter. Mr. DeMartini is also the Chairman of the Board and
a Director of Dean Witter Futures & Currency Management Inc. ("DWFCM"), a
registered commodity trading advisor. Mr. DeMartini has served as
President and Chief Operating Officer of Dean Witter Capital, a division
of DWR since January 1989. From January 1988 until January 1989, Mr.
DeMartini served as President and Chief Operating Officer of the Consumer
Banking Division of DWD, and from May 1985 until January 1988 was
President and Chief Executive Officer of the Consumer Markets Division of
DWD. Mr. DeMartini currently serves as a Director of DWD and DWR, and has
served as an officer of DWR for the past five years. Mr. DeMartini has
been with DWD and its affiliates for 18 years. While Mr. DeMartini has
extensive experience in the securities industry, he has no experience in
commodity interests trading.
Mark J. Hawley, age 52, is President and a Director of Demeter. Mr.
Hawley joined DWR in February 1989 as Senior Vice President and Director
of DWR's Managed Futures and Precious Metals Department. Mr. Hawley also
serves as President of DWFCM. From 1978 to 1989, Mr. Hawley was a member
of the senior management team at Heinold Asset Management, Inc., a
commodity pool operator, and was responsible for a variety of projects in
public futures funds. From 1972 to 1978, Mr. Hawley was a Vice President
in charge of institutional block trading for the Mid-West at Kuhn Loeb &
Co.
Lawrence Volpe, age 48, is a Director of Demeter and DWFCM. Mr.
Volpe joined DWR as a Senior Vice President and Controller in September
<PAGE>
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 he served as audit manager in
the financial services division.
Joseph G. Siniscalchi, age 50, is a Director of Demeter. Mr.
Siniscalchi joined DWR in July 1984 as a First Vice President, Director of
General Accounting. He is currently Senior Vice President and Controller
of the Financial Markets Division of DWR. From February 1980 to July
1984, Mr. Siniscalchi was Director of Internal Audit at Lehman Brothers
Kuhn Loeb, Inc.
Laurence E. Mollner, age 54, is a Director of Demeter. Mr. Mollner
joined DWR in May 1979 as Vice President and Director of Commercial Sales.
He is currently Executive Vice President and Deputy Director of the
Futures Markets Division of DWR.
Edward C. Oelsner III, age 53, is a Director of Demeter. Mr.
Oelsner joined DWR in March 1981 as a Managing Director in the Corporate
Finance Department. He currently manages DWR's Retail Products Group
within the Corporate Finance Department. While Mr. Oelsner has extensive
experience in the securities industry, he has no experience in commodity
interests trading.
Robert E. Murray, age 35, is a Director of Demeter. Mr. Murray is
currently a First Vice President of the DWR Managed Futures Division and
is a Director and the Senior Administrative Officer of DWFCM. Mr. Murray
graduated from Geneseo State University in May 1983 with a B.A. degree in
Finance. Mr. Murray began at DWR in 1984 and is currently the Director of
Product Development for the Managed Futures Division and is responsible
<PAGE>
for the development and maintenance of the proprietary Fund Management
System utilized by Demeter and DWFCM for organizing information and
producing reports for monitoring investors' accounts.
Patti L. Behnke, age 35, is Vice President and Chief Financial
Officer of Demeter. Ms. Behnke joined DWR in 1991 as Assistant Vice
President of Financial Reporting and is currently First Vice President and
Director of Financial Reporting and Managed Futures Accounting in the
Capital Markets division of DWR. From August 1988 to September 1990, Ms.
Behnke was Assistant Controller of L.F. Rothschild & Co. and from
September 1986 to August 1988, she was associated with Carteret Savings
Bank as Assistant Vice President - Financial Analysis. From April 1982 to
September 1986, Ms. Behnke was an auditor at Arthur Andersen &
Co.
Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers. As a
limited partnership, the business of the Partnership is managed by Demeter
which is responsible for the administration of the business affairs of the
Partnership but receives no compensation for such services.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - As of
December 31, 1995, there were no persons as beneficial owners of more than
5 percent of the Units of Limited Partnership Interest in the Partnership.
(b) Security Ownership of Management - At December 31, 1995,
Demeter owned 444 Units of General Partnership Interest representing a
8.99 percent interest in the Partnership.
(c) Changes in Control - None
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to
Financial Statements", in the accompanying 1995 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
fees (paid and accrued from the Partnership) of $103,290 for the year
ended December 31, 1995.
<PAGE>
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and reports of independent public
accountants, all appearing in the accompanying 1995 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, 1995, 1994 and 1993.
- Statements of Financial Condition as of December 31, 1995 and
1994.
- Statements of Operations, Changes in Partners' Capital, and
Cash Flows for the years ended December 31, 1995, 1994 and
1993.
- Notes to Financial Statements.
With exception of the aforementioned information and the information
incorporated in Items 7, 8 and 13, the 1995 Annual Report to Partners is
not deemed to be filed with this report.
2. Listing of Financial Statement Schedules
No financial statement schedules are required to be filed with this
report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Partnership during the
last quarter of the period covered by this report.
(c) Exhibits
Refer to Exhibit Index on Page E-1.
<PAGE>
SIGNATURES
Pursuant to the requirement of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
(Registrant)
BY: Demeter Management Corporation,
General Partner
March 21, 1996 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 21, 1996
Mark J. Hawley, Director and
President
/s/ Richard M. DeMartini March 21, 1996
Richard M. DeMartini, Director
and Chairman of the Board
/s/ Lawrence Volpe March 21, 1996
Lawrence Volpe, Director
/s/ Laurence E. Mollner March 21, 1996
Laurence E. Mollner, Director
/s/ Joseph G. Siniscalchi March 21, 1996
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III March 21, 1996
Edward C. Oelsner III, Director
/s/ Robert E. Murray March 21, 1996
Robert E. Murray, Director
/s/ Patti L. Behnke March 21, 1996
Patti L. Behnke, Chief Financial
Officer
<PAGE>
EXHIBIT INDEX
Item Method of Filing
- - 3. Limited Partnership Agreement of
the Partnership, dated as of
December 21, 1988. (1)
- - 10. Management Agreement among the
Partnership, Demeter Management
Corporation and Commodities
Corporation dated as of December 21, 1988. (2)
- - 10. Letter of Credit and Reimbursement
Agreement among the Partnership,
Demeter Management Corporation,
Commodities Corporation and Citibank (3)
N.A. dated as of December 21, 1989.
- -10. Agreement of Guarantee between the
Partnership and C.C. Guarantee
Corporation dated as of December 21, 1989. (4)
- - 10. Customer Agreement between the Partnership
and Dean Witter Reynolds Inc., dated as of
December 31, 1989. (5)
- - 10. Paying Agency Agreement between Demeter
Management Corporation and the Limited
Partners dated as of December 21, 1989. (6)
- - 13. December 31, 1995 Annual Report to Limited Partners. (7)
(1) Incorporated by reference to Exhibit 3.01 and Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1.
(2) Incorporated by reference to Exhibit 10.02 of the Partnership's
Registration Statement on Form S-1.
(3) Incorporated by reference to Exhibit 10.05 of the Partnership's
Registration Statement on Form S-1
(4) Incorporated by reference to Exhibit 10.06 of the Partnership's
Registration Statement on Form S-1.
(5) Incorporated by reference to Exhibit 10.01 of the Partnership's
Registration Statement on Form S-1.
(6) Incorporated by reference to Exhibit 10.07 of the Partnership's
Registration Statement on Form S-1.
(7) Filed herewith.
- E-1 -
<PAGE>
Principal
Guaranteed
Fund II
December 31, 1995
Annual Report
[LOGO] DEAN WITTER
<PAGE>
DEAN WITTER
Two World Trade Center
62nd Floor
New York, NY 10048
Telephone (212) 392-8899
PRINCIPAL GUARANTEED FUND II
ANNUAL REPORT
1995
Dear Limited Partner:
This marks the seventh annual report for the Dean Witter Principal Guaranteed
Fund II ("PGF II"). PGF II began 1995 trading at a Net Asset Value per Unit of
$974.93 and increased by 7.3% to close the year at $1,046.10. Since its
inception in 1989, PGF II has increased by 4.6% (a compound annualized return
of 0.7%).
In January, PGF II recorded net losses as trendless price movement in a
majority of the markets traded was experienced. In financial futures trading,
short-term volatile price movement in both U.S. and international bond futures
resulted in losses for PGF II. Choppy movement in metals, agricultural and soft
commodities prices resulted in additional Fund losses for the month. During
February, PGF II recorded net profits as gains were recorded from long U.S. and
Japanese bond futures positions as prices moved higher during the month.
Smaller gains were recorded during February in currency trading as the value of
most major world currencies, particularly the German mark, Swiss Franc and
Japanese yen, moved higher versus the U.S. dollar. In March, PGF II posted
profits as long positions in the Japanese yen and Swiss franc profited from a
continued increase in value relative to the U.S. dollar. Additional gains were
recorded in interest rate futures as a result of holding long positions in
Japanese government bond futures.
In April, PGF II recorded net profits as trading gains in Japanese government
bond
<PAGE>
futures were recorded for the third consecutive month. Additional gains were
recorded early in the month from long positions in the Japanese yen as the
value of the yen continued to increase versus the U.S. dollar. Smaller gains
were recorded from long positions in energy futures as oil and gas prices moved
higher during April.
On April 20, 1995 PGF II terminated trading and all open positions were
liquidated. While the Guaranteed Redemption Date (the date on which investors
are guaranteed $1,000 per Unit) is not until March 31, 1996, the rise in Net
Asset Value presented Limited Partners with the opportunity to obtain the
return of their initial investment earlier than the Guaranteed Redemption Date.
For this reason and the fact that pursuant to PGF II's Leverage Policy, only
17% of PGF II's assets were available for trading, the General Partner
determined it was in the best interests of Limited Partners and of PGF II to
terminate trading and to recommend that Limited Partners redeem their Units.
All profits recorded after April 20, 1995 were the result of interest income
credited to the Fund more than offsetting the Letter of Credit Fee charged.
Due to the fact that PGF II has terminated futures trading, its assets are
currently being held in an account with Dean Witter Reynolds, where Dean Witter
is paying PGF II interest on 100% of its assets at a prevailing rate on U.S.
Treasury bills. PGF II's assets will receive such interest until Investors
redeem their Units or until the Guaranteed Redemption Date. No further futures
trading will be undertaken for PGF II's account. ALTHOUGH PGF II WILL NOT TRADE
AND WILL EARN INTEREST, IT IS OBLIGATED TO CONTINUE PAYING A LETTER OF CREDIT
FEE TO CITIBANK AT AN ANNUAL RATE OF 1.125% UNTIL THE GUARANTEED REDEMPTION
DATE.
Should you have any questions concerning this report, please feel free to
contact
<PAGE>
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.
Sincerely,
/s/ Mark J. Hawley
Mark J. Hawley
President
Demeter Management Corporation
General Partner
<PAGE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
INDEPENDENT AUDITORS' REPORT
The Limited Partners and the General Partner:
We have audited the accompanying statements of financial condition of Dean
Witter Principal Guaranteed Fund II L.P. (the "Partnership") as of December 31,
1995 and 1994 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, 1995. 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 Dean Witter Principal Guaranteed Fund II
L.P. as of December 31, 1995 and 1994 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche
February 21, 1996
New York, New York
<PAGE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ----------
$ $
<S> <C> <C>
ASSETS
Equity in Commodity futures trading
accounts:
Cash 5,224,820 23,482,196
Net unrealized gain on open contracts -- 483,674
--------- ----------
Total Trading Equity 5,224,820 23,965,870
Interest receivable (DWR) 23,958 116,947
--------- ----------
Total Assets 5,248,778 24,082,817
========= ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 83,008 314,454
Accrued brokerage fee (DWR) -- 15,433
Accrued management fee -- 10,583
Accrued transaction fees and costs -- 864
--------- ----------
Total Liabilities 83,008 341,334
--------- ----------
PARTNERS' CAPITAL
Limited Partners (4,494.128 and 23,908.041 Units,
respectively) 4,701,302 23,308,615
General Partner (444 Units) 464,468 432,868
--------- ----------
Total Partners' Capital 5,165,770 23,741,483
--------- ----------
Total Liabilities and Partners' Capital 5,248,778 24,082,817
========= ==========
NET ASSET VALUE PER UNIT 1,046.10 974.93
========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED
DECEMBER 31,
--------------------------------
1995 1994 1993
--------- ---------- ---------
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 1,177,944 390,413 8,511,844
Net change in unrealized (483,674) (1,489,983) (156,666)
--------- ---------- ---------
Total Trading Results 694,270 (1,099,570) 8,355,178
Interest income (DWR) 845,986 1,129,590 1,162,583
--------- ---------- ---------
Total Revenues 1,540,256 30,020 9,517,761
--------- ---------- ---------
EXPENSES
Brokerage fee (DWR) 103,290 1,285,637 2,758,787
Letter of credit fees 162,453 329,710 490,375
Management fee 70,827 881,412 1,891,346
Transaction fees and costs 40,217 298,097 636,358
--------- ---------- ---------
Total Expenses 376,787 2,794,856 5,776,866
--------- ---------- ---------
NET INCOME (LOSS) 1,163,469 (2,764,836) 3,740,895
========= ========== =========
Net Income (Loss) Allocation:
Limited Partners 1,131,869 (2,636,632) 3,584,627
General Partner 31,600 (128,204) 156,268
Net Income (Loss) per Unit:
Limited Partners 71.17 (86.14) 94.14
General Partner 71.17 (86.14) 94.14
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
----------- ----------- ---------- -----------
$ $ $
<S> <C> <C> <C> <C>
Partners' Capital,
December 31, 1992 53,127.601 49,765,595 1,605,105 51,370,700
Net Income -- 3,584,627 156,268 3,740,895
Redemptions (19,438.334) (19,364,999) -- (19,364,999)
----------- ----------- ---------- -----------
Partners' Capital,
December 31, 1993 33,689.267 33,985,223 1,761,373 35,746,596
Net Loss -- (2,636,632) (128,204) (2,764,836)
Redemptions (9,337.226) (8,039,976) (1,200,301) (9,240,277)
----------- ----------- ---------- -----------
Partners' Capital December
31, 1994 24,352.041 23,308,615 432,868 23,741,483
Net Income 1,131,869 31,600 1,163,469
Redemptions (19,413.913) (19,739,182) -- (19,739,182)
----------- ----------- ---------- -----------
Partners' Capital, December
31, 1995 4,938.128 4,701,302 464,468 5,165,770
=========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED
DECEMBER 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
$ $ $
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) 1,163,469 (2,764,836) 3,740,895
Noncash item included in net income
(loss):
Net change in unrealized 483,674 1,489,983 156,666
(Increase) decrease in operating
assets:
Net option premiums -- 48,386 (3,048)
Interest receivable (DWR) 92,989 (34,018) 46,163
Decrease in operating liabilities:
Accrued brokerage fee (DWR) (15,433) (187,449) (145,181)
Accrued management fee (10,583) (128,513) (99,498)
Accrued transaction fees and costs (864) (16,230) (9,965)
----------- ----------- -----------
Net cash provided by (used for)
operating activities 1,713,252 (1,592,677) 3,686,032
----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Decrease in redemptions payable (231,446) (258,785) (1,229,508)
Redemptions of units (19,739,182) (9,240,277) (19,364,999)
----------- ----------- -----------
Net cash used for financing activities (19,970,628) (9,499,062) (20,594,507)
----------- ----------- -----------
Net decrease in cash (18,257,376) (11,091,739) (16,908,475)
Balance at beginning of period 23,482,196 34,573,935 51,482,410
----------- ----------- -----------
Balance at end of period 5,224,820 23,482,196 34,573,935
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Dean Witter Principal Guaranteed Fund II L.P. (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 (the "General Partner"). The commodity broker is Dean
Witter Reynolds Inc. ("DWR"). Both DWR and the General Partner are wholly-owned
subsidiaries of Dean Witter, Discover & Co. The General Partner had retained
Commodities Corporation (U.S.A.) N.V. ("C.C.") as the trading manager of the
Partnership.
The General Partner 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.
During April, 1995, the Net Asset Value per unit of the Partnership rose above
$1,000. The General Partner determined it was in the best interest of investors
and the Partnership to terminate trading and to recommend that investors redeem
their units. All trading was terminated and all open positions were liquidated
as of April 20, 1995.
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, commodity options 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 daily Net Assets for the month that are allocated for
commodity trading and 100% of the average daily Net Assets for the month that
are not allocated for commodity trading at a rate equal to the average yield on
13-Week U.S. Treasury Bills issued during such month. As noted above, on April
20, 1995, trading was terminated and all open positions were liquidated.
Effective April 20, 1995, DWR is paying the Partnership interest income based
on 100% of all of the Partnership's average daily Net Assets at a rate equal to
the prevailing rate on 13-week U.S. Treasury Bills. For purposes of such
interest payments, Net Assets do not include monies due the Partnership on
forward contracts and other commodity interests, but not actually received.
<PAGE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using the
weighted average number of units outstanding during the period.
EQUITY IN COMMODITY FUTURES TRADING ACCOUNTS--The Partnership's asset "Equity
in Commodity futures trading accounts" consists of cash on deposit at DWR to be
used as margin for trading and the net asset or liability related to unrealized
gains or losses on open contracts and the net option premiums paid or received.
The asset or liability related to the unrealized gains or losses on forward
contracts is presented as a net amount because the Partnership has a master
netting agreement with DWR.
BROKERAGE FEES AND RELATED TRANSACTION FEES AND COSTS--Through April 20, 1995,
the monthly brokerage fee was equal to 35/48 of 1% per month of the
Partnership's adjusted month-end Net Assets, as defined in the Limited
Partnership Agreement, that were allocated for commodity trading. Transaction
fees and costs were accrued on a half-turn basis.
OPERATING EXPENSES--Through April 20, 1995, The Partnership incurred a monthly
management fee and was eligible to incur an incentive fee. Also, pursuant to a
Letter of Credit and Reimbursement Agreement with C. C. and Citibank, N.A.
("Citibank"), the Partnership pays to Citibank a monthly Letter of Credit fee
equal to 3/32 of 1% of the amount available to be drawn under the letter of
credit. The amount available to be drawn under the letter of credit equals
$1,000 multiplied by the total Partnership units outstanding, which at December
31, 1995 and 1994 equals $4,938,128 and $24,352,041, respectively. The General
Partner and/or DWR bear all other operating expenses.
GUARANTEE--The Partnership has entered into an Agreement of Guarantee, which is
supported by the above-mentioned letter of credit, with C.C. and C.C. Guarantee
Corporation pursuant to which any Limited Partner who redeems Units as of March
31, 1996 (the "Guaranteed Redemption Date") will receive at least $1,000 for
each Unit redeemed.
REDEMPTIONS--Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit on the special redemption dates described in the
Limited Partnership Agreement or as of the last day of any month upon five
business days advance notice by redemption form to the General Partner.
DISTRIBUTIONS--The Partnership will not make any distributions until after the
Guaranteed Redemption Date, and thereafter will only make distributions on a
pro-rata basis at the sole discretion of the General Partner.
<PAGE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
DISSOLUTION OF THE PARTNERSHIP--The Partnership will terminate on December 31,
2025 or at an earlier date if certain conditions set forth in the Limited
Partnership Agreement occur.
Citibank has the right, under certain circumstances, to cause the Partnership
to deposit it's Net Assets in a non-interest bearing demand deposit account at
Citibank until the Guaranteed Redemption Date. Such amounts will subsequently
be returned to the Partnership for distribution to the Limited Partners.
2. RELATED PARTY TRANSACTIONS
The Partnership's cash is on deposit with DWR in commodity trading accounts to
meet margin requirements as needed. DWR pays interest on these funds as
described in Note 1. Under its Customer Agreement with DWR, the Partnership
paid DWR a monthly brokerage fee as described in Note 1.
3. TRADING MANAGER
Until the Partnership terminated trading, the General Partner had retained C.C.
as the trading manager of the Partnership. Compensation to C.C. as trading
manager consisted of a management fee and an incentive fee as follows:
MANAGEMENT FEE--As of the last day of each month, the Partnership paid a
monthly management fee equal to 1/2 of 1% of the Partnership's adjusted Net
Assets, as defined in the Limited Partnership Agreement, that were allocated to
commodity interest trading accounts which the trading advisors traded on behalf
of the Partnership.
INCENTIVE FEE--The Partnership paid an annual incentive fee to C.C. equal to
20% of the Partnership's "New Appreciation", as defined in the Limited
Partnership Agreement, of the Partnership's Net Assets as of the end of each
annual incentive period ending on the last day in February. Such incentive fee
was accrued in each month in which "New Appreciation" occurred. In those months
in which "New Appreciation" was negative, previous accruals, if any, during the
incentive period were reduced. In those instances in which a Limited Partner
redeems an investment, the incentive fee (if earned through a redemption date)
was to be paid to C.C. on those redemptions in the month of such redemptions.
<PAGE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. LEVEL OF ASSETS TRADED
Pursuant to the Letter of Credit and Reimbursement Agreement, maximum Net
Assets allocable to trading were adjusted as necessary due to changes in Net
Asset value per Unit, current interest rates and the time remaining until the
Guaranteed Redemption Date. To accomplish this, C.C. reallocated assets among
the trading advisors and a non-traded reserve account. The assets not allocated
to trading advisors earned interest income at a rate equal to the average yield
on 13-week U.S. Treasury Bills and no management and brokerage fees were
charged on such assets. On April 20, 1995, trading was terminated and all open
positions were liquidated.
5. FINANCIAL INSTRUMENTS
Prior to the April 20, 1995 termination of trading, the Partnership traded
futures, options and forward contracts in interest rates, stock indices,
commodities, currencies, petroleum, and precious metals. Futures and forwards
represent contracts for delayed delivery of an instrument at a specified date
and price. Risk arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms of the
contracts. There are numerous factors which may significantly influence the
market value of these contracts, including interest rate volatility. There were
no open positions at December 31, 1995. At December 31, 1994, open contracts
were:
<TABLE>
<CAPTION>
CONTRACT OR
NOTIONAL AMOUNT
---------------
1994
---------------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS
Financial Futures:
Commitments to Purchase 3,857,000
Commitments to Sell 11,724,000
COMMODITY FUTURES:
Commitments to Purchase 4,039,000
Commitments to Sell 1,087,000
FOREIGN FUTURES:
Commitments to Purchase 1,008,000
Commitments to Sell 2,597,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS
Commitments to Purchase 9,000
Commitments to Sell --
</TABLE>
The unrealized gains on open contracts are reported as a component of "Equity
in Commodity futures trading accounts" on the Statements of Financial Condition
and totaled $0 and $483,674 at December 31, 1995 and 1994, respectively.
<PAGE>
DEAN WITTER PRINCIPAL GUARANTEED FUND II L.P.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
Of the $483,674 net unrealized gain on open contracts at December 31, 1994,
$376,243 related to exchange traded futures contracts and $107,431 related to
off-exchange-traded forward currency contracts.
Exchange-traded futures contracts held by the Partnership at December 31, 1994
matured through June 1995. Off-exchange-traded forward currency contracts held
by the Partnership at December 31, 1994 matured through January 1995. The
contract amounts in the above table represent the Partnership's extent of
involvement in the particular class of financial instrument, but not the credit
risk associated with counterparty nonperformance. The credit risk associated
with these instruments is limited to the amounts reflected in the Partnership's
Statements of Financial Condition.
The Partnership also had credit risk because the sole counterparty, with
respect to most of the Partnership's assets, is DWR. Exchange-traded futures
and options contracts are marked to market on a daily basis, with variations in
value settled on a daily basis. DWR, as the futures commission merchant for all
of the Partnership's exchange-traded futures and options contracts, is required
pursuant to regulations of the Commodity Futures Trading Commission to
segregate from its own assets, and for the sole benefit of its commodity
customers, all funds held by DWR with respect to exchange-traded futures and
option contracts including an amount equal to the net unrealized gain on all
open futures and option contracts which funds totaled $5,224,820 and
$23,858,439 at December 31, 1995 and 1994, respectively. With respect to the
Partnership's off-exchange-traded forward currency and option 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 and option
contracts be segregated. With respect to those off-exchange-traded forward
currency contracts, the Partnership is at risk to the ability of DWR, the
counterparty on all of such contracts, to perform.
6. SUBSEQUENT EVENT
Management has determined to terminate the Partnership as of March 31, 1996.
The Partnership will be liquidated and holders of Units as of March 31, 1996
will receive a distribution equal to the Net Asset Value per Unit on that date
multiplied by their respective number of Units.
<PAGE>
DEAN WITTER REYNOLDS INC.
Two World Trade Center
62nd Floor
New York, NY 10048
FIRST-CLASS MAIL
ZIP + 4 PRESORT
U.S. POSTAGE PAID
BROOKLYN, NY
PERMIT NO. 148
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean Witter
Principal Guaranteed Fund II L.P. and is qualified in its entirety by references
to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,224,820
<SECURITIES> 0
<RECEIVABLES> 23,958
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,248,778
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,248,778<F1>
<SALES> 0
<TOTAL-REVENUES> 1,540,256<F2>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 376,787
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,163,469
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,163,469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,163,469
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Liabilities are redemptions payable of $83,008.
<F2>Total revenues includes realized trading revenue of $1,177,944, net
change in unrealized of ($483,674) and interest income of $845,986.
</FN>
</TABLE>
