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 June 30, 1996 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 number 33-36656
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3589337
(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
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 1996
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
June 30, 1996 (Unaudited) and December 31, 1995............2
Statements of Operations for the Quarters Ended
June 30, 1996 and 1995 (Unaudited).........................3
Statements of Operations for the Six Months Ended
June 30, 1996 and 1995 (Unaudited).........................4
Statements of Changes in Partners' Capital for the
Six Months Ended June 30, 1996 and 1995
(Unaudited).................................................5
Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 (Unaudited).........................6
Notes to Financial Statements........................... 7-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................................12-16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................17
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
June 30, December 31,
1996 1995
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 76,949,182 78,404,128
Net unrealized gain on open contracts 3,083,340 3,621,113
Total Trading Equity 80,032,522 82,025,241
Interest receivable (DWR) 244,960 252,974
Total Assets 80,277,482 82,278,215
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 637,786 738,931
Incentive fee payable 305,865 320,038
Accrued management fee 266,309 272,903
Accrued administrative expenses 198,824 279,755
Accrued brokerage commissions (DWR) 159,867 99,604
Bank fee payable 20,744 21,336
Accrued transaction fees and costs 10,494 6,603
Total Liabilities 1,599,889 1,739,170
Partners' Capital
Limited Partners (43,880.561 and
46,435.540 Units, respectively) 77,000,038 78,914,381
General Partner (956 Units) 1,677,555 1,624,664
Total Partners' Capital 78,677,593 80,539,045
Total Liabilities and Partners' Capital 80,277,482 82,278,215
NET ASSET VALUE PER UNIT 1,754.76 1,699.44
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended June 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 3,274,360 15,391,336
Net change in unrealized (376,714) (11,436,650)
Total Trading Results 2,897,646 3,954,686
Interest Income (DWR) 730,327 821,900
Total Revenues 3,627,973 4,776,586
EXPENSES
Management fees 800,677 888,590
Brokerage commissions (DWR) 720,448 494,868
Incentive fees 312,901 491,393
Transaction fees and costs 44,119 90,170
Letter of credit fees 20,744 32,760
Administrative expenses - 27,000
Total Expenses 1,898,889 2,024,781
NET INCOME 1,729,084 2,751,805
NET INCOME ALLOCATION
Limited Partners 1,692,901 2,702,637
General Partner 36,183 49,168
NET INCOME PER UNIT
Limited Partners 37.84 51.43
General Partner 37.84 51.43
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Six Months Ended June 30,
1996 1995
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 5,343,065 21,904,260
Net change in unrealized (537,773) (2,131,076)
Total Trading Results 4,805,292 19,773,184
Interest Income (DWR) 1,437,239 1,602,878
Total Revenues 6,242,531 21,376,062
EXPENSES
Management fees 1,616,681 1,695,290
Brokerage commissions (DWR) 1,430,735 1,509,342
Incentive fees 475,303 1,272,590
Transaction fees and costs 92,175 156,656
Letter of credit fees 31,570 84,839
Administrative expenses 27,000 54,000
Total Expenses 3,673,464 4,772,717
NET INCOME 2,569,067 16,603,345
NET INCOME ALLOCATION
Limited Partners 2,516,176 16,311,791
General Partner 52,891 291,554
NET INCOME PER UNIT
Limited Partners 55.32 304.97
General Partner 55.32 304.97
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital
December 31, 1994 56,372.344 $ 75,121,362 $1,295,936 $ 76,417,298
Net Income - 16,311,791 291,554 16,603,345
Redemptions (5,397.161) (8,373,564) - (8,373,564)
Partners' Capital
June 30, 1995 50,975.183 $ 83,059,589 $1,587,490 $ 84,647,079
Partners' Capital
December 31, 1995 47,391.540 $ 78,914,381 $1,624,664 $80,539,045
Net Income - 2,516,176 52,891 2,569,067
Redemptions (2,554.979) (4,430,519) - (4,430,519)
Partners' Capital
June 30, 1996 44,836.561 $ 77,000,038 $1,677,555 $ 78,677,593
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Six Months Ended June 30,
1996 1995
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income 2,569,067 16,603,345
Noncash item included in net income:
Net change in unrealized 537,773 2,131,076
(Increase) decrease in operating assets:
Interest receivable (DWR) 8,014 (7,457)
Increase (decrease) in operating liabilities:
Incentive fee payable (14,173) 482,614
Accrued management fee (6,594) 34,085
Accrued administrative expenses (80,931) 14,263
Accrued brokerage commissions (DWR) 60,263 (35,345)
Bank fee payable (592) 32,760
Accrued transaction fees and costs 3,891 (2,359)
Net cash provided by operating activities 3,076,718 19,252,982
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in redemptions payable (101,145) (383)
Redemptions of units (4,430,519) (8,373,564)
Net cash used for financing activities (4,531,664) (8,373,947)
Net increase (decrease) in cash (1,454,946) 10,879,035
Balance at beginning of period 78,404,128 74,414,633
Balance at end of period 76,949,182 85,293,668
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER PRINCIPAL SECURED FUTURES L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management, all
adjustments necessary for a fair presentation of the results of
operations and financial condition. The financial statements and
condensed notes herein should be read in conjunction with the
Partnership's December 31, 1995 Annual Report on Form 10-K.
1. Organization
Dean Witter Principal Secured Futures 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. Demeter Management
Corporation ("the General Partner") has retained John W. Henry &
Co. ("JWH") as the trading manager of the Partnership. Both the
General Partner and the commodity broker, Dean Witter Reynolds,
Inc. ("DWR"), are wholly owned subsidiaries of Dean Witter,
Discover & Co.
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 based on current 13-week U.S. Treasury Bill rates.
Brokerage expenses incurred by the Partnership are paid to DWR.
<PAGE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
3. Financial Instruments
The Partnership trades futures and forward contracts in interest
rates, stock indices, commodities, currencies, petroleum and
precious metals. Futures and forwards represent contracts for
delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms of
the contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest
rate volatility. At June 30, 1996, open contracts were:
Contract or
Notional Amount
$
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 53,433,000
Commitments to Sell 161,973,000
Commodity Futures:
Commitments to Purchase 6,934,000
Commitments to Sell 32,238,000
Foreign Futures:
Commitments to Purchase 114,186,000
Commitments to Sell 28,419,000
Off-Exchange-Traded Forward
Currency Contracts
Commitments to Purchase 60,046,000
Commitments to Sell 61,483,000
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward commitments
to purchase and to sell the same currency on the same date in the
future. These commitments are economically offsetting, but are not
offset in the forward market until the settlement date.
<PAGE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The unrealized gain on open contracts is reported as a component of
"Equity in Commodity futures trading accounts" on the Statement of
Financial Condition and totaled $3,083,340 at June 30, 1996. Of
this amount, $2,865,105 related to exchange-traded futures
contracts and $218,235 related to non-exchange-traded forward
currency contracts.
Exchange-traded futures contracts held by the Partnership at June
30, 1996 mature through June 1997. Off-exchange traded forward
currency contracts held by the Partnership at June 30, 1996 mature
through September 1996. 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
<PAGE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
with respect to exchange-traded futures contracts including an
amount equal to the net unrealized gain on all open futures
contracts, which funds totaled $79,814,287 at June 30, 1996. With
respect to the Partnership's non-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 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 quarter ended June 30, 1996, the average fair value of
financial instruments held for trading purposes was as follows:
Assets Liabilities
$ $
Exchange-Traded Contracts
Financial Futures 49,708,000 104,906,000
Commodity Futures 18,387,000 14,926,000
Foreign Futures 75,304,000 30,470,000
Off-Exchange-Traded Forward
Currency Contracts 102,772,000 154,351,000
4. Subsequent Event
On July 31, 1996, with the Partnership's NAV above $1,000 per unit,
the agreement of guarantee which assured investors who redeemed
their units on July 31, 1996 a minimum Net Asset Value of $1,000
<PAGE>
DEAN WITTER PRINCIPAL SECURED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
per unit expired. Effective August 1, 1996, the Partnership was
renamed Dean Witter Portfolio Strategy Fund L.P. and will continue
trading in a non-guaranteed format. As a result, both the
reduction of interest income of 1.125% per annum for the letter of
credit fee paid by DWR and the letter of credit fee of 1% of new
appreciation have been eliminated.
Effective September 1, 1996, maximum total brokerage commissions
and transaction fees chargeable to the Partnership will be capped
at .65% per month of adjusted Net Assets as defined in the Limited
Partnership Agreement.
<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 commodity futures, forward
contracts on foreign currencies 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 Partner-
ship'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, forward
contracts and other commodity interests may be illiquid. If the
price of 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 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.
<PAGE>
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 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 the
Limited Partners, it is not possible to estimate the amount and
therefore, the impact of future redemptions.
Results of Operations
For the Quarter and Six Months Ended June 30, 1996
For the quarter ended June 30, 1996, the Partnership's total
trading revenues including interest income were $3,627,973. During
the second quarter, the Partnership posted an increase in Net Asset
Value per Unit. The most significant trading gains were recorded
in the currency markets as the value of the Swiss franc and German
mark moved lower versus the U.S. dollar and other world currencies
during April. Losses from transactions involving the Japanese yen
during April offset a portion of the gains within this complex. In
the metals markets, a decline in precious metals prices resulted in
profits for the Partnership's short gold and silver futures
<PAGE>
positions during June. Additional gains were recorded in the
agricultural markets from long corn futures positions as prices
moved in an upward direction during April and May. Gains
experienced from sugar and cotton futures trading during May more
than offset losses in coffee futures during the quarter. In
financial futures trading, losses were recorded as trendless price
movement was experienced in non-U.S. interest rate and global stock
index futures throughout the quarter. Trading gains recorded in
April from short U.S. interest rate futures positions, as prices in
these markets moved lower, offset a portion of these losses. In
the energy markets, small losses in crude oil futures during May
offset a portion of overall Partnership gains for the fiscal
quarter. Total expenses for the quarter were $1,898,889, resulting
in net income of $1,729,084. The value of an individual Unit in
the Partnership increased from $1,716.92 at March 31, 1996 to
$1,754.76 at June 30, 1996.
For the six months ended June 30, 1996, the Partnership's total
trading revenues including interest income were $6,242,531. During
the first half of the year, the Partnership posted an increase in
Net Asset Value per Unit. The most significant trading gains were
recorded in the currency markets as a decline in the value of the
Swiss franc and German mark relative to the U.S. dollar resulted in
profits for the Fund's short positions during the second quarter,
as well as during January. Additional gains were recorded during
the first quarter from transactions involving the Australian dollar
and Japanese yen. In the metals markets, gains recorded during
June from short gold futures positions more than offset losses in
<PAGE>
silver during the first quarter. Trading in the agricultural
sector also resulted in gains as long corn futures positions
profited as prices moved higher early in the second quarter. In
the financial futures markets, losses were recorded from trendless
price movement in non-U.S. interest rate and global stock index
futures. Trading gains from short U.S. interest rate positions
during March and April, as prices moved lower, offset a portion of
these losses. Trading losses in crude oil futures during January
and May, coupled with smaller losses in coffee futures, offset a
portion of overall Fund gains for the first half of the year.
Total expenses for the period were $3,673,464, resulting in net
income of $2,569,067. The value of an individual Unit in the
Partnership increased from $1,699.44 at December 31, 1995 to
$1,754.76 at June 30, 1996.
For the Quarter and Six Months Ended June 30, 1995
For the quarter ended June 30, 1995, the Partnership's total
trading revenues including interest income were $4,776,586. During
the second quarter, the Partnership posted an increase in Net Asset
Value per Unit. The most significant trading gains were recorded
in global interest rate futures. Gains were recorded in April and
May as global interest rate futures prices trended higher,
resulting in trading gains from U.S. Treasury bond and Treasury
note, Australian bond and European bond futures. Stock index
futures also provided gains to the Partnership due to trading in
global stock index futures. Smaller gains in crude oil futures,
due in part to gains in April and June, and in coffee and sugar
futures added to the overall gains for the quarter. Trading losses
<PAGE>
in currencies, gold and the soybean products offset a portion of
the Partnership's overall gains. Total expenses for the period were
$2,024,781, resulting in net income of $2,751,805. The value of an
individual Unit in the Partnership increased from $1,609.12 at
March 31, 1995 to $1,660.55 at June 30, 1995.
For the six months ended June 30, 1995, the Partnership's total
trading revenues including interest income were $21,376,062.
During the first six months, the Partnership posted an increase in
Net Asset Value per Unit. The most significant trading gains were
recorded in currencies. Currency trading provided profits for the
Partnership during February, March and April. During these months,
the value of foreign currencies versus the U.S. dollar steadily
increased allowing for profits in transactions involving the
Japanese yen, German mark and Swiss franc. During this same time
period, global interest rate futures prices also moved higher and
the Partnership was able to take advantage of trends in U.S.
Treasury bond and Treasury note, Japanese bond, Australian bond and
German bond futures. Smaller gains were recorded from trading
global stock index futures. Gains in June from decreasing crude
oil prices also contributed to the overall gains. Trading losses
in gold, silver, the soybean products, heating oil and sugar offset
a portion of the Partnership's overall gains for the first half of
the year. Total expenses for the period were $4,772,717, resulting
in net income of $16,603,345. The value of an individual Unit in
the Partnership increased from $1,355.58 at December 31, 1994 to
$1,660.55 at June 30, 1995.
<PAGE>
PART II. OTHER INFORMATION
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 Secured
Futures Fund L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
August 12, 1996 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 Secured Futures Fund L.P. and is qualified in its
entirety by references to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 76,949,182
<SECURITIES> 0
<RECEIVABLES> 244,960
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 80,277,482<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 80,277,482<F2>
<SALES> 0
<TOTAL-REVENUES> 6,242,531<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,673,464
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,569,067
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,569,067
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,569,067
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $3,083,340.
<F2>Liabilities include redemptions payable of $637,786, accrued brokerage
commissions of $159,867, accrued management fees of $266,309, accrued
administrative expenses of $198,824, bank fees payable of $20,744,
accrued transaction fees and costs of $10,494 and incentive fee payable of
$305,865.
<F3>Total revenues includes realized trading revenue of $5,343,065, net
change in unrealized of $(537,773) and interest income of $1,437,239.
</FN>
</TABLE>
