THIS DOCUMENT IS A COPY OF THE FORM 10-K FILED ON APRIL 1, 1999
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION
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 year ended December 31, 1998 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 0-18314
DEAN WITTER PRINCIPAL PLUS FUND L.P.
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(Exact name of registrant as specified in its Limited Partnership Agreement)
DELAWARE 13-3541588
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
c/o Demeter Management Corporation
Two World Trade Center, - 62nd Flr., New York, N.Y. 10048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(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 10-K. [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 as of a specified
date within 60 days prior to the date of filing: $49,866,728.68 at January 31,
1999.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
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DEAN WITTER PRINCIPAL PLUS FUND L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
-----------------------------------
DECEMBER 31, 1998
-----------------
Page No.
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . . 1
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Part I .
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . 2-4
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . 4-6
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 . . . . . . . . 9-18
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . 19-31
Item 8. Financial Statements and Supplementary Data . . . . 31
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . 32
Part III.
Item 10. Directors and Executive Officers of the
Registrant. . . . . . . . . . . . . . . . . . . . . 33-37
Item 11. Executive Compensation. . . . . . . . . . . . . . . 37
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . 38
Item 13. Certain Relationships and Related Transactions. . . 38
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . 39
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference as follows:
Documents Incorporated Part of Form 10-K
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Partnership's Prospectus dated
November 8, 1995 I
Annual Report to Dean Witter
Principal Plus Fund L.P.
Limited Partners for the year
ended December 31, 1998 II, III and IV
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PART I
Item 1. BUSINESS
(a) General Development of Business. Dean Witter Principal Plus Fund
L.P. (the "Partnership") is a Delaware limited partnership organized 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 physical commodities (collectively, "futures interests"). The
general partner for the Partnership is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter Reynolds Inc.
("DWR") and an unaffiliated clearing commodity broker, Carr Futures Inc.
("Carr"), provides clearing and execution services. Both Demeter and DWR are
wholly-owned subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW"). The
Trading Manager to the Partnership is RXR Inc. (the "Trading Manager").
The Partnership's Net Asset Value per Unit, as of December 31, 1998,
was $1,887.62, representing an increase of 10.54 percent from the Net Asset
Value per Unit of $1,707.59 at December 31, 1997. For a more detailed
description of the Partnership's business see subparagraph (c).
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(b) Financial Information about Industry Segments. For financial
information reporting purposes the Partnership is deemed to engage in one
industry segment, the speculative trading of futures interests. The relevant
financial information is presented in Items 6 and 8.
(c) Narrative Description of Business. The Partnership is in the
business of speculative trading of futures interests, pursuant to trading
instructions provided by its Trading Manager. For a detailed description of the
different facets of the Partnership's business, see those portions of the
Partnership's Prospectus, dated November 8, 1995, (the "Prospectus"),
incorporated by reference in this Form 10-K, set forth below.
Facets of Business
1. Summary 1. "Summary of the Prospectus"
(Pages 2-14).
2. Commodity Markets 2. "The Futures, Options and
Forward Markets"
(Pages 51-56).
3. Partnership's Commodity 3. "Trading Policies" (Page
Trading Arrangements and 62). "The Trading Advisor"
Policies (Page 58-62). "The Yield
Pool" (Pages 63). "The
Trading Company" (Pages
63-64).
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4. Management of the Part- 4. "The Management Agreement"
nership (Pages 66-67). "The General
Partner" (Pages
48-50) and "The Commodity
Broker" (Pages 64-65).
"The Limited Partnership
Agreement" (Pages 70-73).
5. Taxation of the Partnership's 5. "Material Federal Income
Limited Partners Tax Aspects" and
"State and Local
Income Tax Aspects"
(Pages 77-86).
(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., MSDW (all such
parties referred to hereafter as the
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"Dean Witter Parties"), certain other limited partnership commodity pools of
which Demeter is the general partner, and certain trading advisors 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 partnership
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 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 New York Supreme Court
dismissed the New York action in November 1998, but granted plaintiffs leave to
file an amended
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complaint, which they did in early December 1998. The defendants have filed a
motion to dismiss the amended complaint with prejudice on February 1, 1999. 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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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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, 1998 was approximately 3,081. No distributions have been made by
the Partnership since it commenced operations on February 14, 1990. 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.
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Item 6. SELECTED FINANCIAL DATA (in dollars)
For the Years Ended December 31,
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1998 1997 1996 1995 1994
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Total Revenues
(including
interest) 10,243,111 10,461,123 (677,358) 12,663,471 (2,601,083)
Net Income (Loss) 7,203,198 7,414,966 (3,646,323) 9,397,649 (6,379,229)
Net Income (Loss)
Per Unit (Limited
& General Partners) 180.03 227.74 (82.41) 238.12 (124.78)
Total Assets 54,061,143 54,294,132 54,096,992 42,581,908 66,189,009
Total Limited
Partners' Capital 51,660,212 51,607,436 50,688,703 39,547,302 61,577,369
Net Asset Value Per
Unit of Limited
Partnership Interest 1,887.62 1,707.59 1,479.85 1,562.26 1,324.14
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Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity. Assets of the Partnership are deposited with DWR as
non-clearing broker and Carr as clearing broker in separate futures interest
trading accounts. Such assets are held in either non-interest bearing bank
accounts 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 futures interests, it is expected that
the Partnership will continue to own such liquid assets for margin purposes.
The Partnership's investment in futures interests may, from time to
time, be illiquid. Most United States futures exchanges limit fluctuations in
certain futures interest prices during a single day by regulations referred to
as "daily price fluctuations limits" or "daily limits". Pursuant to such
regulations, during a single trading day no trades may be executed at prices
beyond the daily limit. If the price of a particular futures interest has
increased or decreased by an amount equal to the daily limit, positions in such
futures interest can neither be taken nor liquidated unless traders are willing
to effect trades at or
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within the limit. Futures interests 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 futures
interests and result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. 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 from promptly liquidating unfavorable
positions, 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. Future redemptions and exchanges of Units will affect
the amount of funds available for investment in futures interests in subsequent
periods. Since they 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, 1998, the Partnership's
total capital was $52,264,165, a decrease of $681,697 from the Partnership's
total capital of $52,945,862 at December 31, 1997. For the
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year ended December 31, 1998, the Partnership generated net income of
$7,203,198, and total redemptions aggregated $7,884,895.
For the year ended December 31, 1998, the Partnership's total trading
revenues, including interest income, were $8,079,935. Gains recorded on the
Yield Pool totaled $2,163,176. The partnership's total expenses for the year
were $2,958,490, resulting in net income before minority interest of $7,284,621.
The minority interest in such gains was $81,423, resulting in net income of
$7,203,198 for the Partnership. The value of an individual unit in the
Partnership increased from $1,707.59, at December 31, 1997 to $1,887.62 at
December 31, 1998.
As of December 31, 1997, the Partnership's total capital was
$52,945,862, an increase of $1,097,049 from the Partnership's total capital of
$51,848,813, at December 31, 1996. For the year ended December 31, 1997, the
Partnership generated net income of $7,414,966 and total redemptions aggregated
$6,317,917.
For the year ended December 31, 1997, the Partnership's total trading
revenues including interest income were $8,529,013. Gains recorded on the Yield
Pool totaled $1,932,110. The Partnership's total expenses for the year were
$2,956,963, resulting in net income before minority interest of $7,504,160. The
minority interest in such gains was $89,194, resulting in net income of
$7,414,966 for the Partnership. The
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value of an individual unit in the Partnership increased from $1,479.85 at
December 31, 1996 to $1,707.59 at December 31, 1997.
As of December 31, 1996, the Partnership's total capital was
$51,848,813, an increase of $11,076,869 from the Partnership's total capital of
$40,771,944 at December 31, 1995. For the year ended December 31, 1996, the
Partnership incurred a net loss of $3,646,323, total subscriptions aggregated
$21,697,912, and total redemptions aggregated $6,974,720.
For the year ended December 31, 1996, the Partnership's total trading
revenues net of interest income were $1,465,184. Losses recorded on the Yield
Pool totaled $2,142,542. The Partnership's total expenses for the year were
$3,061,681, resulting in a net loss before minority interest of $3,739,039. The
minority interest in such losses was $92,716, resulting in a net loss of
$3,646,323 for the Partnership. The value of an individual unit in the
Partnership decreased from $1,562.26 at December 31, 1995 to $1,479.85 at
December 31, 1996.
The Partnership's overall performance record represents varied results
of trading in different futures interests markets. For a further description of
trading results, refer to the letter to the Limited Partners in the accompanying
Annual Report to Limited Partners for the year ended December 31, 1998,
incorporated by reference in this Form 10-K. The Partnership's gains and losses
are allocated among its partners for income tax purposes.
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<PAGE>
Credit Risk. In entering into futures and forward contracts there is a
credit risk to the Partnership that the counterparty on the 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-traded contracts with a counterparty, the
sole recourse of the Partnership will
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be the clearinghouse, the exchange member or the off-exchange-traded 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, MSDW 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 these credit risks of all Partnerships for which it
serves as general partner in several ways. First, it monitors the 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 the 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 the Partnership's
potential margin liability, exchange by exchange. Demeter is then able to
monitor the Partnership's potential net credit exposure to each
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exchange by adding the unrealized trading gains on that exchange, if any, to the
Partnership's margin liability thereon.
Second, the Partnership's trading policies limit the amount of its 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 the Partnership to a
single exchange and, historically, the Partnership's 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 may climb above that level,
Demeter deals with the situation on a case by case basis, carefully weighing
whether the increased level of credit exposure remains appropriate.
Third, Demeter has secured, with respect to Carr acting as the clearing
broker for the Partnership, a guarantee by Credit Agricole Indosuez, Carr's
parent, of the payment of the "net liquidating value" of the transactions
(futures and forward contracts) in the Partnership's account.
With respect to forward contract trading, the Partnership trades with
only those counterparties which Demeter, together with DWR, have determined to
be creditworthy. At the date of this filing, the Partnership deals only with
Carr as its counterparty on forward
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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 Annual Report to Limited Partners for the year ended December 31,
1998, incorporated by reference in this Form 10-K.
Year 2000 Problem. Commodity pools, like financial and business
organizations and individuals around the world, depend on the smooth functioning
of computer systems. Many computer systems in use today cannot recognize the
computer code for the year 2000, but revert to 1900 or some other date. This is
commonly known as the "Year 2000 Problem". The Partnership could be adversely
affected if computer systems used by it or any third party with whom it has a
material relationship do not properly process and calculate date-related
information and data concerning dates on or after January 1, 2000. Such a
failure could adversely affect the handling or determination of futures trades
and prices and other services.
MSDW began its planning for the Year 2000 Problem in 1995, and
currently has several hundred employees working on the matter. It has developed
its own Year 2000 compliance plan to deal with the problem and had the plan
approved by the company's executive management, Board of Directors and
Information Technology Department. Demeter is coordinating with MSDW to address
the Year 2000 Problem with respect to
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Demeter's computer systems that affect the Partnership. This includes hardware
and software upgrades, systems consulting and computer maintenance.
Beyond the challenge facing internal computer systems, the systems
failure of any of the third parties with whom the Partnership has a material
relationship - the futures exchanges and clearing organizations through which it
trades, Carr, or the Trading Manager - could result in a material financial risk
to the Partnership. All U.S. futures exchanges are subject to monitoring by the
CFTC of their Year 2000 preparedness and the major foreign futures exchanges are
also expected to be subject to market-wide testing of their Year 2000 compliance
during 1999. Demeter intends to monitor the progress of Carr and the Trading
Manager throughout 1999 in their Year 2000 compliance and, where applicable, to
test its external interface with Carr and the Trading Manager.
A worst case scenario would be one in which trading of contracts on
behalf of the Partnership becomes impossible as a result of the Year 2000
Problem encountered by any third parties. A less catastrophic but more likely
scenario would be one in which trading opportunities diminish as a result of
technical problems resulting in illiquidity and fewer opportunities to make
profitable trades. MSDW has begun developing various "contingency plans" in the
event that the systems of
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such third parties fail. Demeter intends to consult closely with MSDW in
implementing those plans. Despite the best efforts of both Demeter and MSDW,
however, it is possible that these steps will not be sufficient to avoid any
adverse impact to the Partnership.
Risks Associated With the Euro - On January 1, 1999, eleven countries
in the European Union established fixed conversion rates on their existing
sovereign currencies and converted to a common single currency (the "euro").
During a three-year transition period, the sovereign currencies will continue to
exist but only as a fixed denomination of the euro. Conversion to the euro
prevents the Trading Manager from trading in certain currencies and thereby
limits its ability to take advantage of potential market opportunities that
might otherwise have existed had separate currencies been available to trade.
This could adversely affect the performance results of the Partnership.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the speculative trading
of futures interests. The market sensitive instruments held by the Partnership
are acquired solely for speculative trading purposes and, as a result, all or
substantially all of the Partnership's assets are subject to the risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
integral, not incidental, to the Partnership's primary business activities.
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The futures interests traded by the Partnership involve varying degrees of
related market risk. Such market risk is often dependent upon changes in the
level or volatility of interest rates, exchange rates, and/or market values of
financial instruments and commodities. Fluctuations in related market risk based
upon the aforementioned factors result in frequent changes in the fair value of
the Partnership's open positions, and, consequently, in its earnings and cash
flow.
The Partnership's total market risk is influenced by a wide variety of factors,
including the diversification effects among the Partnership's existing open
positions, the volatility present within the market(s) and the liquidity of the
market(s). At varying times, each of these factors may act to exacerbate or mute
the market risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative of its future
results. Any attempt at quantifying the Partnership's market risk must be
qualified by the inherent uncertainty of its speculative trading, which may
cause future losses and volatility (i.e. "risk of ruin") far in excess of the
Partnership's experience to date and/or any reasonable expectation premised upon
historical changes in the fair value of its market sensitive instruments.
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Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partnership's market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in this section are deemed to be forward-looking
statements for purposes of the safe harbor, except for statements of historical
fact.
The Partnership accounts for open positions on the basis of mark-to-market
accounting principles. As such, any loss in the fair value of the Partnership's
open positions is directly reflected in the Partnership's earnings, whether
realized or unrealized, and the Partnership's cash flow, as profits and losses
on open positions of exchange traded futures interests are settled daily through
variation margin.
The Partnership's risk exposure in the various market sectors traded by the
Trading Manager is estimated below in terms of Value at Risk ("VaR"). The VaR
model employed by the Partnership incorporates numerous variables that could
impact the fair value of the Partnership's trading portfolio. The Partnership
estimates VaR using a model based on historical simulation with a confidence
level of 99%. Historical
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simulation involves constructing a distribution of hypothetical daily changes in
trading portfolio value. The VaR model generally takes into account linear
exposures to price and interest rate risk. Market risks that are incorporated in
the VaR model include equity and commodity prices, interest rates, foreign
exchange rates, as well as correlation that exists among these variables. The
hypothetical changes in portfolio value are based on daily observed percentage
changes in key market indices or other market factors ("market risk factors") to
which the portfolio is sensitive. In the case of the Partnership's VaR, the
historical observation period is approximately four years. The Partnership's
one-day 99% VaR corresponds to the negative change in portfolio value that,
based on observed market risk factor moves, would have been exceeded once in 100
trading days.
VaR models such as the Partnership's are continually evolving as trading
portfolios become more diverse and modeling techniques and systems capabilities
improve. It must also be noted that the VaR model is used to quantify market
risk for historic reporting purposes only and is not utilized by either Demeter
or the Trading Manager in their daily risk management activities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the Partnership's
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open positions by market category as of December 31, 1998. As of December 31,
1998, the Partnership's total capitalization was approximately $50 million.
Primary Market December 31, 1998
Risk Category Value at Risk
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Interest Rate (.33)%
Currency (.14)
Equity (1.34)
Commodity (.15)
Aggregate Value at Risk (1.27)%
Aggregate value at risk represents the aggregate VaR of the Partnership's open
positions as a percentage of total net assets and not the sum of the VaR of the
individual categories listed above. Aggregate VaR will be lower as it takes into
account correlation among different positions and categories.
The table above represents the VaR of the Partnership's open positions at
December 31, 1998 only and is not necessarily representative of either the
historic or future risk of an investment in the Partnership.
As the Partnership's sole business is the speculative trading of primarily
futures interests, the composition of its portfolio of open positions can change
significantly over any given time period or even
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within a single trading day. Such changes in open positions could materially
impact market risk as measured by VaR either positively or negatively.
The table below supplements the year end VaR by presenting the Partnership's
high, low and average VaR as a percentage of total net assets for the four
quarterly reporting periods from January 1, 1998 through December 31, 1998.
Primary Market Risk Category High Low Average
- ---------------------------- ---- --- -------
Interest Rate (.81)% (.21)% (.53)%
Currency (.39) (.10) (.22)
Equity (1.34) (.50) (.88)
Commodity (.15) (.10) (.13)
Aggregate Value at Risk (1.33)% (.97)% (1.15)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the Partnership is
typically many times the applicable margin requirements, as such margin
requirements generally range between 2% and 15% of contract face value.
Additionally, due to the use of leverage, the face value of the market sector
instruments held by the Partnership is typically many times the total
capitalization of the Partnership. The financial magnitude of the Partnership's
open positions thus creates a "risk of
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ruin" not typically found in other investment vehicles. Due to the relative size
of the positions held, certain market conditions, may cause the Partnership to
incur losses greatly in excess of VaR within a short period of time. The
foregoing VaR tables, as well as the past performance of the Partnership, gives
no indication of such "risk of ruin". In addition, VaR risk measures should be
interpreted in light of the methodology's limitations, which include the
following: past changes in market risk factors will not always yield accurate
predictions of the distributions and correlations of future market movements;
changes in portfolio value in response to market movements may differ from the
responses implicit in a VaR model; published VaR results reflect past trading
positions while future risk depends on future positions; VaR using a one-day
time horizon does not fully capture the market risk of positions that cannot be
liquidated or hedged within one day; and the historical market risk factor data
used for VaR estimation may provide only limited insight into losses that could
be incurred under certain unusual market movements.
The foregoing VaR tables present the results of the Partnership's VaR for the
Partnership's market risk exposures and on an aggregate basis December 31, 1998
and for the end of quarter periods during calendar 1998. Since VaR is based on
historical data, VaR should not be viewed as predictive of the Partnership's
future financial performance or its
- 24 -
<PAGE>
ability to manage and monitor risk and there can be no assurance that the
Partnership's actual losses on a particular day will not exceed the VaR amounts
indicated below or that such losses will not occur more than 1 in 100 trading
days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash balances not
needed for margin. However, such balances, as well as any market risk they may
represent, are immaterial. The Partnership also maintains a substantial portion
(approximately 15%) of its available assets in cash at DWR. A decline in
short-term interest rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered material.
The Partnership also has non-trading risk on the zero-coupon U.S. Treasury
Securities it holds to support the guaranteed Net Asset Value per Unit at the
Guaranteed Redemption Date of August 31, 2003. The fair value of these
securities is subject to interest rate risk.
For non-trading securities, the Partnership measures its market risk using
sensitivity analysis. The sensitivity analysis estimates the potential change in
fair value based on a hypothetical 10% change in interest rates.
Based on the current valuation of the Zero-Coupon U.S.
- 25 -
<PAGE>
Treasury Securities, such a change in interest rates will cause an approximately
1.78% decline in their fair value. Such a change will not have a material effect
on the Net Asset Value per Unit.
Materiality, as used throughout this section, is based on an assessment of
reasonably possible market movements and the potential losses caused by such
movements, taking into account the leverage, optionality and multiplier features
of the Partnership's market sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's market risk
exposures - except for (i) those disclosures that are statements of historical
fact and (ii) the descriptions of how the Partnership manages its primary market
risk exposures - constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. The Partnership's primary market risk exposures as well as the strategies
used and to be used by Demeter and the Trading Manager for managing such
exposures are subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's risk controls
to differ materially from the objectives of such strategies. Government
interventions, defaults and expropriations, illiquid markets, the
- 26 -
<PAGE>
emergence of dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market participants, increased
regulation and many other factors could result in material losses as well as in
material changes to the risk exposures and the risk management strategies of the
Partnership. Investors must be prepared to lose all or substantially all of
their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of December 31, 1998, by market sector. It may be anticipated
however, that these market exposures will vary materially over time.
Interest Rate. Interest rate risk is the principal market exposure of
the Partnership. Interest rate movements directly affect the price of the
sovereign bond futures positions held by the Partnership and indirectly the
value of its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's primary interest rate
exposure is to interest rate fluctuations in the United States and the other G-7
countries. However, the Partnership also takes futures positions in the
government debt of smaller nations e.g. Australia. Demeter anticipates that G-7
interest rates will remain the primary market exposure of the Partnership for
the foreseeable future. The changes in interest rates which have the most effect
on the Partnership
- 27 -
<PAGE>
are changes in long-term, as opposed to short-term, rates. Most of the
speculative future positions held by the Partnership are in medium-to-long term
instruments. Consequently, even a material change in short-term rates would have
little effect on the Partnership were the medium-to-long term rates to remain
steady.
Currency. The Partnership's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two currencies other
than the U.S. dollar. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound positions. Demeter does not
anticipate that the risk profile of the Partnership's currency sector will
change significantly in the future, although it is difficult at this point to
predict the effect of the introduction of the Euro on the Trading Manager's
currency trading strategies.
Equity. The Partnership's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the
- 28 -
<PAGE>
Partnership are by law limited to futures on broadly based indices. As of
December 31, 1998, the Partnership's primary exposures were in the S&P 500,
Financial Times (England), Nikkei (Japan) and DAX (Germany) stock indices.
Demeter anticipates little, if any, trading in non-G-7 stock indices. The
Partnership is primarily exposed to the risk of adverse price trends or static
markets in the major U.S., European and Japanese indices. (Static markets would
not cause major market changes but would make it difficult for the Partnership
to avoid being "whipsawed" into numerous small losses).
Commodity.
Metals. The Partnership's primary metals market exposure is to
fluctuations in the price of gold and silver. Although the Trading Manager will
from time to time trade base metals such as aluminum, copper, nickel and zinc,
the principal market exposures of the Partnership have consistently been in the
precious metals, gold and silver. The Trading Manager's gold trading has been
increasingly limited due to the long-lasting and mainly non-volatile decline in
the price of gold over the last 10-15 years. However, silver prices have
remained volatile over this period, and the Trading Manager has from time to
time taken substantial positions as they have perceived market opportunities to
develop. Demeter anticipates that gold and silver will remain the primary metals
market exposure for the Partnership.
- 29 -
<PAGE>
Soft Commodities. One of the Partnership's primary commodities exposure
is to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions. Soybeans, grains, cocoa and
sugar accounted for the substantial bulk of the Partnership's commodities
exposure as of December 31, 1998. The Partnership has market exposure to live
cattle and lean hogs. However, Demeter anticipates that the Trading Manager will
maintain an emphasis on soybeans, grains, cocoa and sugar, in which the
Partnership has historically taken it's largest positions.
Energy. The Partnership's primary energy market exposure is to gas and
oil price movements, often resulting from political developments in the Middle
East. Although the Trading Manager trades natural gas to a limited extent, oil
is by far the dominant energy market exposure of the Partnership. Oil prices are
currently depressed, but they can be volatile and substantial profits and losses
have been and are expected to continue to be experienced in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following were the only non-trading risk exposures of the Partnership as of
December 31, 1998:
Foreign Currency Balances. The Partnership's primary foreign currency
balances are in Japanese yen, German
marks, British pounds, French
- 30 -
<PAGE>
francs and euros. The Partnership controls the non-trading risk of these
balances by regularly converting these balances back into U.S. dollars at
varying intervals, depending upon such factors as size, volatility, etc.
Zero-Coupon U.S. Treasury Securities. It is the Partnership's intention to hold
the Zero-Coupon U.S. Treasury Securities until their August 15, 2003 maturity
date except as need to fund quarterly redemptions. Consequently, the period to
period interest rate risk these securities are subject to is not considered
material.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Partnership and the Trading Manager, severally, attempt
to manage the risk of the Partnership's open positions are essentially the same
in all market categories traded. Demeter attempts to manage the Partnership's
market exposure by (i) diversifying the Partnership's assets among different
market sectors and trading approaches, and (ii), monitoring the performance of
the Trading Manager on a daily basis. In addition, the Trading Manager
establishes diversification guidelines, often set in terms of the maximum margin
to be committed to positions in any one market sector or market sensitive
instrument.
- 31 -
<PAGE>
Demeter monitors and controls the risk of the Partnership's non-trading
instruments, cash and Zero-Coupon U.S. Treasury Securities, which are the only
Partnership investments directed by Demeter, rather than the Trading Manager.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item appears in the Annual Report to
Limited Partners for the year ended December 31, 1998 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.
- 32 -
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There are no directors or executive officers of the Partnership. The Partnership
is managed by Demeter.
Directors and Officers of the General Partner
The directors and officers of Demeter as of the close of business on
December 31, 1998 were as follows:
Mark J. Hawley, age 55, is Chairman of the Board and a Director of
Demeter. Mr. Hawley is also Chairman of the Board and a Director of DWFCM. Mr.
Hawley previously served as President of Demeter throughout 1998. Mr. Hawley
joined DWR in February 1989 as Senior Vice President and is currently the
Executive Vice President and Director of DWR's Product Management for Individual
Asset Management. In this capacity, Mr. Hawley is responsible for directing the
activities of the firm's Managed Futures, Insurance, and Unit Investment Trust
Business. 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.
Joseph G. Siniscalchi, age 53, 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
- 33 -
<PAGE>
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 56, 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 38, is President and a Director of Demeter. Mr.
Murray is also President and a Director of DWFCM. Effective as of the close of
business on December 31, 1998, Mr. Murray replaced Mr. Hawley as President of
Demeter. Mr. Murray is also 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 the Managed Futures
Department. In this capacity, Mr. Murray is responsible for overseeing all
aspects of
- 34 -
<PAGE>
the firm's Managed Futures Department. Mr. Murray currently serves as a Director
of the Managed Funds Association, an industry association for investment
professionals in futures, hedge funds and other alternative investments. Mr.
Murray graduated from Geneseo State University in May 1983 with a B.A. degree in
Finance.
Lewis A. Raibley, III, age 36, is Vice President, Chief Financial
Officer and a Director of Demeter. Effective as of the close of business on
December 31, 1998, Mr. Raibley was elected to Demeter's Board of Directors. Mr.
Raibley is currently Senior Vice President and Controller in the Individual
Asset Management Group of MSDW. From July 1997 to May 1998, Mr. Raibley served
as Senior Vice President and Director in the Internal Reporting Department of
MSDW and prior to that, from 1992 to 1997, he served as Senior Vice President
and Director in the Financial Reporting and Policy Division of Dean Witter
Discover & Co. He has been with MSDW and its affiliates since June 1986.
Mitchell M. Merin, age 45, became a Director of Demeter on March 17,
1999. Mr. Merin was appointed the Chief Operating Officer of Asset Management
for MSDW in December 1998 and the President and Chief Executive Officer of
Morgan Stanley Dean Witter Advisors in February 1998. He has been an Executive
Vice President of DWR since 1990, during which time he has been director of
DWR's Taxable Fixed Income and Futures divisions, managing director in Corporate
Finance and corporate treasurer. Mr. Merin received his Bachelor's degree from
Trinity
- 35 -
<PAGE>
College in Connecticut and his M.B.A. degree in finance and accounting from the
Kellogg Graduate School of Management of Northwestern University in 1977.
Richard A. Beech, age 47, became a Director of Demeter on March 17,
1999. Mr. Beech has been associated with the futures industry for over 23 years.
He has been at DWR since August 1984 where he is presently Senior Vice President
and head of Branch Futures. Mr. Beech began his career at the Chicago Mercantile
Exchange, where he became the Chief Agricultural Economist doing market
analysis, marketing and compliance. Prior to joining DWR, Mr. Beech also had
worked at two investment banking firms in Operations, Research, Managed Futures
and Sales Management.
Ray Harris, age 42, became a Director of Demeter on March 17, 1999. Mr.
Harris is currently Senior Vice President, Planning and Administration for
Morgan Stanley Dean Witter Asset Management and has worked at DWR or its
affiliates since July 1982, serving in both financial and administrative
capacities. From August 1994 to January 1999, he worked in two separate DWR
affiliates, Discover Financial Services and Novus Financial Corp., culminating
as Senior Vice President. Mr. Harris received his B.A. degree from Boston
College and his M.B.A. in finance from the University of Chicago.
- 36 -
<PAGE>
Richard M. DeMartini, age 46, previously served as the Chairman of the
Board and as a Director of Demeter throughout 1998. Effective as of the close of
business on December 31, 1998, Mr. DeMartini resigned as the Chairman of the
Board and as a Director of Demeter due to changes in his responsibilities within
MSDW.
Lawrence Volpe, age 51, served as a Director to Demeter throughout
1998. Effective as of the close of business on December 31, 1998, Mr. Volpe
resigned as a Director of Demeter.
Patti L. Behnke, age 38, served as Vice President and Chief Financial
Officer of Demeter through May 1998. Effective June 1, 1998, Ms. Behnke resigned
as Vice President and Chief Financial Officer of Demeter in order to take on new
responsibilities as Operations Officer - Controllers Division for MSDW, and was
replaced by Mr. Raibley.
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.
- 37 -
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - As of December
31, 1998, there were no persons known to be beneficial owners of more than 5
percent of the Units.
(b) Security Ownership of Management - At December 31, 1998, Demeter
owned 308 Units of General Partnership Interest representing a 1.16 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
Consolidated Financial Statements", in the accompanying Annual Report to Limited
Partners for the year ended December 31, 1998, 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 by the Partnership) of
$2,125,259 for the year ended December 31, 1998.
- 38 -
<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 report of independent auditors,
all appearing in the accompanying Annual Report to Limited Partners for the year
ended December 31, 1998, are incorporated by reference in this Form 10-K:
- Report of Deloitte & Touche LLP, independent auditors, for the
years ended December 31, 1998, 1997 and 1996.
- Consolidated Statements of Financial Condition as of December
31, 1998 and 1997.
- Consolidated Statements of Operations, Changes in Partners'
Capital, and Cash Flows for the years ended December 31, 1998,
1997 and 1996.
- Notes to Consolidated Financial Statements.
With the exception of the aforementioned information and the
information incorporated in Items 7, 8 and 13, the Annual Report to Limited
Partners for the year ended December 31, 1998 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.
- 39 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements 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 PLUS FUND L.P.
(Registrant)
BY: Demeter Management Corporation,
General Partner
March 29, 1999 BY: /s/ Robert E. Murray
-----------------------------------
Robert E. Murray, 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/ Robert E. Murray March 29, 1999
---------------------------------------
Robert E. Murray, Director and
President
/s/ Mark J. Hawley March 29, 1999
----------------------------------------
Mark J. Hawley, Director
and Chairman of the Board
/s/ Joseph G. Siniscalchi March 29, 1999
----------------------------------------
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III March 29, 1999
----------------------------------------
Edward C. Oelsner III, Director
/s/ Mitchell M. Merin March 29, 1999
----------------------------------------
Mitchell M. Merin, Director
/s/ Richard A. Beech March 29, 1999
----------------------------------------
Richard A. Beech, Director
/s/ Ray Harris March 29, 1999
----------------------------------------
Ray Harris, Director
/s/ Lewis A. Raibley, III March 29, 1999
-----------------------------------------
Lewis A. Raibley, III, Director, Chief
Financial Officer and Principal
Accounting Officer
- 40 -
<PAGE>
EXHIBIT INDEX
-------------
ITEM METHOD OF FILING
- - 3.01 Amended and Restated Limited
Partnership Agreement of
the Partnership, dated as of
August 29, 1995. (1)
- -10.01 Amended and Restated Management
Agreement among the
Partnership, Demeter and RXR, Inc.
dated as of December 29, 1995. (2)
- -10.02 Amended and Restated Customer
Agreement between the Partnership
and DWR, dated as of December 29, 1995. (3)
10.01 Amended and Restated Customer Agreement,
dated as of December 1, 1997, between
the Partnership and Dean Witter Reynolds
Inc. is filed herewith.
10.02 Customer Agreement, dated as of
December 1, 1997, among the Partnership,
Carr Futures, Inc., and Dean Witter
Reynolds Inc. is filed herewith.
10.03 International Foreign Exchange Master
Agreement, dated as of August 1, 1997,
between the Partnership and Carr Futures,
Inc. is filed herewith.
- -13.01 December 31, 1998 Annual Report to Limited Partners. (4)
(1) Incorporated by reference to Exhibit 3.01 and Exhibit 3.02 of the
Partnership's Registration Statement (File No. 33-95414) on Form S-1.
(2) Incorporated by reference to Exhibit 10.02 of the Partnership's
Registration Statement (File No. 33-95414) on Form S-1.
(3) Incorporated by reference to Exhibit 10.01 of the Partnership's
Registration Statement (File No. 33-95414) on Form S-1.
(4) Filed herewith.
E-1
<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 statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,270,594
<SECURITIES> 0
<RECEIVABLES> 34,344
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,108,399<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 52,108,399<F2>
<SALES> 0
<TOTAL-REVENUES> 8,290,367<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,958,490
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,250,454<F4>
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,250,454<F4>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,250,454<F4>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets
include net unrealized gain on open contracts of $1,200,707
and investment in U.S. Treasury bills of $41,602,754.
<F2>Liabilities include redemptions payable of $956,163, accrued
brokerage fee of $173,174, accrued administrative fees of $156,280,
accrued management fee of $43,293 and incentive fees payable of $147,477.
<F3>Total revenue includes realized trading revenue of $4,803,195, net
change in unrealized of $421,275, interest income of $2,855,465 and
change in valuation of Yield Pool of $210,432.
<F4>Income-Pretax, Income Continuing and Net Income includes minority
interest in income of $81,423.
</FN>
</TABLE>
