UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Period ended March 31, 1997 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 33-30891
DEAN WITTER PRINCIPAL PLUS FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3541588
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
c/o Demeter Management Corp.
Two World Trade Center, New York, NY 62 Fl. 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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<TABLE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1997
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
March 31, 1997 (Unaudited) and December 31, 1996......2
Consolidated Statements of Operations for the
Quarters Ended March 31, 1997 and 1996 (Unaudited)....3
Consolidated Statements of Changes in Partners'
Capital for the Quarters Ended March 31, 1997 and
1996 (Unaudited)......................................4
Consolidated Statements of Cash Flows for the
Quarters Ended March 31, 1997 and 1996(Unaudited).....5
Notes to Consolidated Financial Statements
(Unaudited)........................................6-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..........13-17
Part II. OTHER INFORMATION
Item 1. Legal Proceedings..............................18-19
Item 6. Exhibits and Reports on Form 8-K..................20
</TABLE>
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<TABLE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1997 1996
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 6,969,772 6,625,325
Net unrealized gain (loss) on open contracts (250,531) 197,384
Net option premiums 369,600 -
Total Trading Equity 7,088,841 6,822,709
Investment in Zero-coupon U.S. Treasury Securities 45,006,339 47,247,655
Interest receivable (DWR) 31,565 26,628
Total Assets 52,126,745 54,096,992
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 1,977,795 1,657,380
Accrued administration fees 202,077 203,250
Accrued brokerage fees (DWR) 184,716 186,774
Accrued management fee 46,179 46,693
Accrued transaction fees and costs 3,030 4,108
Total Liabilities 2,413,797 2,098,205
Minority Interest 161,940 149,974
Partners' Capital
Limited Partners (32,908.704 and
34,253.485 Units, respectively) 48,398,050 50,688,703
General Partner (783 Units) 1,152,958 1,160,110
Total Partners' Capital 49,551,008 51,848,813
Total Liabilities and Partners' Capital 52,126,745 54,096,992
NET ASSET VALUE PER UNIT 1,470.72 1,479.85
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 1,583,071 (2,670,129)
Net change in unrealized (447,915) (601,711)
Total Trading Results 1,135,156 (3,271,840)
Interest Income 751,442 696,037
Change in value of Yield Pool (1,441,268) (2,671,047)
Total Revenues 445,330 (5,246,850)
EXPENSES
Brokerage fees (DWR) 556,673 538,896
Management fees 139,168 134,121
Transaction fees and costs 30,532 47,931
Administrative expenses 27,000 26,000
Total Expenses 753,373 746,948
LOSS BEFORE MINORITY INTEREST (308,043) (5,993,798)
Minority interest in (income) loss (11,967) 91,805
NET LOSS (320,010) (5,901,993)
NET LOSS ALLOCATION
Limited Partners (312,858) (5,787,644)
General Partner (7,152) (114,349)
NET LOSS PER UNIT
Limited Partners (9.13) (146.03)
General Partner (9.13) (146.03)
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 1997 and 1996
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital
December 31, 1995 26,097.968 $39,547,302 $1,224,642 $40,771,944
Subscriptions 13,844.606 21,697,912 - 21,697,912
Net Loss - (5,787,644) (114,349) (5,901,993)
Redemptions (909.486) (1,288,042) - (1,288,042)
Partners' Capital
March 31, 1996 39,033.088 $54,169,528 $1,110,293 $55,279,821
Partners' Capital
December 31, 1996 35,036.485 $50,688,703 $1,160,110 $51,848,813
Net Loss - (312,858) (7,152) (320,010)
Redemptions (1,344.781) (1,977,795) - (1,977,795)
Partners' Capital
March 31, 1997 33,691.704 $48,398,050 $1,152,958 $49,551,008
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss (320,010) (5,901,993)
Noncash item included in net loss:
Net change in unrealized 447,915 601,711
(Increase) decrease in operating assets:
Net option premiums (369,600) -
Investment in zero-coupon U.S. Treasury Securities 2,241,316 32,867,974
Interest receivable (DWR) (4,937) (1,287)
Investment in U.S. Treasury Bills - (49,053,420)
Increase (decrease )in operating liabilities:
Accrued administration fees (1,173) (42,457)
Accrued brokerage fees (DWR) (2,058) 57,663
Accrued management fee (514) 14,416
Accrued transaction fees and costs (1,078) 5,958
Net cash provided by (used for) operating activities 1,989,861 (21,451,435)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in redemptions payable 320,414 139,684
Minority interest 11,967 (91,805)
Redemptions of units (1,977,795) (1,288,042)
Subscriptions of units - 21,697,912
Net cash provided by (used for) financing activities (1,645,414) 20,457,749
Net increase (decrease) in cash 344,447 (993,686)
Balance at beginning of period 6,625,325 8,897,293
Balance at end of period 6,969,772 7,903,607
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management,
all adjustments necessary for a fair presentation of the results
of operations and financial condition. The consolidated
financial statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 1996 Annual
Report on Form 10-K.
1. Organization
Dean Witter Principal Plus Fund 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 ("Demeter"). The commodity broker is Dean Witter
Reynolds Inc. ("DWR"). Demeter has retained RXR Inc. as the
trading manager of the Trading Company. Both Demeter and DWR are
wholly-owned subsidiaries of Dean Witter, Discover & Co. ("DWD").
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Revenue Recognition
The investment in zero-coupon U.S. Treasury Securities (the
"Yield Pool") maintained to provide for the Partnership's
guaranteed return is valued at the lesser of cost plus accreted
interest or market value. For the quarter ended March 31, 1997,
$665,090 of interest income has been accreted on the Yield Pool.
At March 31, 1997, the cost of the Yield Pool was $45,452,013 and
the accreted interest receivable thereon was $3,047,398. The
market value of the Yield Pool on March 31, 1997 is approximately
$45,006,339.
3. 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 based on current 13-week U.S. Treasury
Bill rates. Brokerage expenses incurred by the Partnership are
paid to DWR.
4. Financial Instruments
The Partnership trades futures, forward contracts and options in
interest rates, stock indices, commodities, currencies, petroleum
and precious metals. Futures and forwards represent contracts
for
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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. At March 31, 1997 and
December 31, 1996, open contracts were:
Contract or Notional Amount
March 31, 1997 December 31, 1996
$ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 29,915,000 36,738,000
Commitments to Sell 58,122,000 19,776,000
Commodity Futures:
Commitments to Purchase 10,002,000 5,550,000
Commitments to Sell 1,960,000 5,879,000
Foreign Futures:
Commitments to Purchase 865,000 83,456,000
Commitments to Sell 77,089,000 6,403,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 16,321,000 11,219,000
Commitments to Sell 28,213,000 24,545,000
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 unrealized gain (loss) on open contracts is reported as a
component of "Equity in Commodity futures trading accounts" on
the Statement of Financial Condition and totaled $(250,531) and
$197,384 at March 31, 1997 and December 31, 1996, respectively.
Of the $(250,531) net unrealized loss on open contracts at March
31, 1997, $(235,077) was related to exchange-traded futures
contracts and ($15,454) related to off-exchange-traded forward
currency contracts. Of the $197,384 net unrealized gain on open
contracts at December 31, 1996, $302,539 related to exchange-
traded futures contracts and $(105,155) related to off-exchange-
traded forward currency contracts.
Exchange-traded futures contracts held by the Partnership at
March 31, 1997 and December 31, 1996 mature through June 1997.
Off-
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
exchange-traded forward currency contracts held at March 31, 1997
and December 31, 1996 mature through April 1997 and January 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 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 DWR acts as the
futures commission merchant or the sole 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, as the
futures commission merchant for all of the Partnership's exchange-
traded futures 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 contracts including
an
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
amount equal to the net unrealized gain on all open futures
contracts, which funds totaled $6,969,772 and $6,927,864 at March
31, 1997 and December 31, 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 DWR, the counterparty on
all such contracts, to perform.
For the quarters ended March 31, 1997 and the year ended December
31, 1996, the average fair value of financial instruments held
for trading purposes was as follows:
March 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 46,352,000 38,057,000
Options on Financial Futures 2,274,000 9,665,000
Commodity Futures 9,109,000 3,369,000
Foreign Futures 62,150,000 26,388,000
Off-Exchange-Traded Forward
Currency Contracts 10,794,000 30,028,000
<PAGE>
DEAN WITTER PRINCIPAL PLUS FUND L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
December 1996
Assets
Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 48,280,000 20,650,000
Options on Financial Futures 717,000 4,639,000
Commodity Futures 6,775,000 3,814,000
Foreign Futures 51,243,000 17,579,000
Off-Exchange-Traded Forward
Currency Contracts 30,644,000 28,108,000
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership's assets are on deposit in separate
commodity interest trading accounts with DWR, and are used by the
Partnership as margin to engage in trading 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
for investment of customer funds. The Partnership's assets held
by DWR may be used as margin solely for the Partnership's
trading. Since the Partnership's sole purpose is to trade in
commodity futures contracts, forward contracts on foreign
currencies 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,
forward contracts and other commodity interests may be illiquid.
If the price for the 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
<PAGE>
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.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets. Redemptions of additional
Units in the future will impact the amount of funds available for
investments in commodity futures and forward contracts and other
commodity interests. As redemptions are at the discretion of
Limited Partners, it is not possible to estimate the amount and
therefore, the impact of future redemptions.
<PAGE>
Results of Operations
For the Quarter ended March 31, 1997
For the quarter ended March 31, 1997, the Partnership's total
revenues, including interest income and change in value of Yield
Pool were $445,330. During the first quarter, the Partnership
posted a loss in Net Asset Value per Unit. The most significant
gains were recorded in the currency markets due primarily to a
strengthening in the value of U.S. dollar relative to most major
currencies during January and February. Additional gains were
recorded in the stock portion of the portfolio from long S&P 500
index futures positions as domestic stock prices moved higher
during January and February before reversing lower during March.
Trading gains were also experienced in the managed futures
portion of the balanced portfolio from short positions in oil and
gas futures as prices in these markets moved lower during
February. A portion of the overall gains for the quarter was
offset by losses recorded from long positions in the bond portion
of the portfolio as U.S. bond prices moved in a choppy pattern
during the quarter. Additionally, losses during the quarter were
attributed to a decline in the value of the zero coupon United
States Treasury securities held in the guarantee portion of the
<PAGE>
Partnership. Total expenses for the quarter were $753,373
resulting in a loss before minority interest of $308,043. The
minority interest in such loss was $11,967 resulting in a net
loss of $320,010 for the Partnership. The value of an individual
Unit in the Partnership decreased from $1,479.85 at December 31,
1996 to $1,470.72 at March 31, 1997.
For the Quarter Ended March 31, 1996
For the quarter ended March 31, 1996, the Partnership's total
trading losses, net of interest income and including a decrease
in value of the Yield Pool were $5,246,850. During the first
quarter, the Partnership posted a decrease in Net Asset Value per
Unit. The most significant losses were recorded in the bond
portion of the balanced portfolio from long positions in U.S.
Treasury bond futures as prices moved dramatically lower during
February and into March. Additional losses during the quarter
were attributed to a decline in the value of the zero-coupon
United States Treasury securities held in the guarantee portion
of the Partnership. Losses were also recorded in the managed
futures portion of the balanced portfolio in February as global
interest rate futures also reversed their upward trend. Trading
losses
<PAGE>
were also experienced in the managed futures portion of the
portfolio in the currency markets during February as a sudden
upward move occurred in the value of most European currencies
relative to the U.S. dollar A portion of these losses was offset
by gains from short positions in the Japanese yen during January
and March. Smaller losses were recorded in the managed futures
portion of the portfolio from trading soft commodities, base
metals and energy futures during the first quarter. A small
portion of the overall losses for the quarter was offset by gains
in the stock portion of the balanced portfolio as S&P 500 index
futures prices moved higher during the quarter. Total expenses
for the quarter were $746,948, resulting in a loss before
minority interest of $5,993,798. The minority interest in such
loss was $91,805, resulting in a net loss of $5,901,993 for the
Partnership. The value of an individual Unit in the Partnership
decreased from $1,562.26 at December 31, 1995 to $1,416.23 at
March 31, 1996.
<PAGE>
PART II. OTHER INFORMATION
Item 1. 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 & Currency Management, Inc., DWD (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 to those 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 on behalf of all purchasers
of interests in various limited partnership commodity pools sold
by DWR. Generally, these complaints allege, among other things,
that the defendants committed fraud, deceit, misrepresentation,
breach of fiduciary duty, fraudulent and unfair business
practices, unjust enrichment, and conversion in connection with
<PAGE>
the sale and operation of the various limited partnership
commodity pools. 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.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dean Witter Principal Plus
Fund L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
May 13, 1997 By: /s/ Patti L. Behnke
Patti L. Behnke
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Principal Plus Fund L.P. and is qualified in its entirety by
reference to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,969,772
<SECURITIES> 0
<RECEIVABLES> 31,565
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,126,745<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 52,126,745<F2>
<SALES> 0
<TOTAL-REVENUES> 445,330<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 753,373
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (320,010)<F4>
<INCOME-TAX> 0
<INCOME-CONTINUING> (320,010)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (320,010)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net unrealized
loss on open contracts of $250,531, net option premiums of $369,600 and
Investment in U.S. Treasury Securities of $45,006,339.
<F2>Liabilities include redemptions payable of $1,977,795, accrued brokerage
fee of $184,716, accrued administrative fees of $202,077, accrued
management fees of $46,179, and accrued transaction fees and costs of
$3,030.
<F3>Total revenues include realized trading revenue of $1,583,071, net
change in unrealized of $(447,915), interest income of $751,442 and
change in valuation of Yield Pool of $(1,441,268).
<F4>Income-Pretax, Income Continuing and Net Income includes minority
interest in loss of $11,967.
</FN>
</TABLE>
