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. 33-36656
DEAN WITTER PORTFOLIO STRATEGY 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
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 PORTFOLIO STRATEGY FUND L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1997
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
March 31, 1997 (Unaudited) and December 31, 1996.........2
Statements of Operations for the Quarters Ended
March 31, 1997 and 1996 (Unaudited)......................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 1997 and 1996 (Unaudited).......4
Statements of Cash Flows for the Quarters Ended
March 31, 1997 and 1996 (Unaudited)......................5
Notes to Financial Statements (Unaudited) ............6-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................12-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................17-18
Item 6. Exhibits and Reports on Form 8-K.............19
</TABLE>
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<TABLE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1997 1996
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 86,830,837 87,847,358
Net unrealized gain on open contracts 2,053,613 3,053,880
Total Trading Equity 88,884,450 90,901,238
Interest receivable (DWR) 316,939 300,473
Total Assets 89,201,389 91,201,711
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 447,985 688,115
Incentive fee payable 402,175 2,587,891
Accrued management fee 296,536 303,128
Administrative expenses payable 157,948 158,510
Accrued brokerage commissions (DWR) 83,761 141,879
Accrued transaction fees and costs 5,962 10,045
Total Liabilities 1,394,367 3,889,568
Partners' Capital
Limited Partners (39,150.791 and
39,981.953 Units, respectively) 85,714,022 85,273,194
General Partner (956 Units) 2,093,000 2,038,949
Total Partners' Capital 87,807,022 87,312,143
Total Liabilities and Partners' Capital 89,201,389 91,201,711
NET ASSET VALUE PER UNIT 2,189.33 2,132.79
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
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<TABLE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 4,397,321 2,068,706
Net change in unrealized (1,000,267) (161,059)
Total Trading Results 3,397,054 1,907,647
Interest Income (DWR) 917,333 706,912
Total Revenues 4,314,387 2,614,559
EXPENSES
Management fees 899,470 816,003
Brokerage commissions (DWR) 627,392 710,287
Incentive fees 409,220 162,402
Transaction fees and costs 50,392 48,058
Administrative expenses 9,000 27,000
Bank fees - 10,826
Total Expenses 1,995,474 1,774,576
NET INCOME 2,318,913 839,983
NET INCOME ALLOCATION
Limited Partners 2,264,862 823,275
General Partner 54,051 16,708
NET INCOME PER UNIT
Limited Partners 56.54 17.48
General Partner 56.54 17.48
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
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 47,391.540 $78,914,381 $1,624,664 $80,539,045
Net Income - 823,275 16,708 839,983
Redemptions (1,365.360) (2,355,942) - (2,355,942)
Partners' Capital,
March 31, 1996 46,026.180 $77,381,714 $1,641,372 $79,023,086
Partners' Capital,
December 31, 1996 40,937.953 $85,273,194 $2,038,949 $87,312,143
Net Income - 2,264,862 54,051 2,318,913
Redemptions (831.162) (1,824,034) - (1,824,034)
Partners' Capital,
March 31, 1997 40,106.791 $85,714,022 $2,093,000 $87,807,022
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income 2,318,913 839,983
Noncash item included in net income :
Net change in unrealized 1,000,267 161,059
(Increase) decrease in operating assets:
Interest receivable (DWR) (16,466) 12,552
Receivable from DWR - (334)
Increase (decrease) in operating liabilities:
Incentive fee payable (2,185,716) (174,565)
Accrued management fee (6,592) (4,876)
Administrative expenses payable (562) (68,210)
Accrued brokerage commissions (DWR) (58,118) (13,159)
Accrued transaction fees and costs (4,083) (656)
Bank fees payable - (11,285)
Net cash provided by operating activities 1,047,643 740,509
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable (240,130) 227,317
Redemptions of units (1,824,034) (2,355,942)
Net cash used for financing activities (2,064,164) (2,128,625)
Net decrease in cash (1,016,521) (1,388,116)
Balance at beginning of period 87,847,358 78,404,128
Balance at end of period 86,830,837 77,016,012
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND 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, 1996 Annual Report on Form 10-K.
1. Organization
Dean Witter Portfolio Strategy Fund L.P. (the "Partnership"),
(formerly named Dean Witter Principal Secured Futures Fund) 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 ("Demeter"), the Partnership's general
partner, has retained John W. Henry & Company ("JWH"), Inc. as
the trading manager of the Partnership. The commodity broker is
Dean Witter Reynolds Inc. ("DWR"). Both Demeter and DWR are
wholly owned subsidiaries of Dean Witter, Discover & Co. ("DWD").
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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 March 31, 1997 and
December 31, 1996, open contracts were:
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Contract or Notional Amount
March 31, 1997 December 31, 1996
$ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 9,218,000 65,197,000
Commitments to Sell 138,139,000 70,325,000
Commodity Futures:
Commitments to Purchase 8,821,000 5,005,000
Commitments to Sell 4,931,000 30,977,000
Foreign Futures:
Commitments to Purchase 3,228,000 42,509,000
Commitments to Sell 51,118,000 67,755,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 62,541,000 89,146,000
Commitments to Sell 72,203,000 38,531,000
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward
commitments to purchase and to sell the same currency on the same
date in the future. These commitments are economically
offsetting, but are not offset in the forward market until the
settlement date.
The net unrealized gain on open contracts is reported as a
component of "Equity in Commodity futures trading accounts" on
the Statement of Financial Condition and totaled $2,053,613 and
$3,053,880 at March 31, 1997 and December 31, 1996, respectively.
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Of the $2,053,613 net unrealized gain on open contracts at March
31, 1997, $1,993,109 related to exchange-traded futures contracts
and $60,504 related to off-exchange-traded forward currency
contracts. Of the $3,053,880 net unrealized gain on open
contracts at December 31, 1996, $3,465,469 related to exchange-
traded futures contracts and $(411,589) 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 March 1998
and December 1997, respectively. Off-exchange-traded forward
currency contracts held at March 31, 1997 and December 31, 1996,
mature through June 1997 and March 1997, respectively. The
contract amounts in the above table represent the Partnership's
extent of involvement in the particular class of financial
instrument, but not the credit risk 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.
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 amount equal to the net unrealized gain on
all open futures contracts, which funds totaled $88,823,946 and
$91,312,827 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.
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
For the quarter ended March 31, 1997 and for 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 22,086,000 119,940,000
Commodity Futures 8,070,000 16,123,000
Foreign Futures 74,291,000 29,869,000
Off-Exchange-Traded Forward
Currency Contracts 93,170,000 94,377,000
December 1996
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 102,149,000 96,292,000
Commodity Futures 13,649,000 28,690,000
Foreign Futures 116,142,000 42,572,000
Off-Exchange-Traded Forward
Currency Contracts 113,353,000 134,819,000
4. Subsequent Event
Demeter has determined to reopen the Partnership for additional
investment and has registered with the Securities and Exchange
Commission 50,000 units to be offered to investors for a limited
time in a public offering.
<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 and 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
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 and
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
<PAGE>
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
trading revenues including interest income were $4,314,387.
During the first quarter, the Partnership posted an increase in
Net Asset Value per Unit. The most significant gains were
recorded in currencies as the value of the U.S. dollar
experienced a strong upward trend relative to the Japanese yen
and Singapore dollar during a majority of the quarter.
Additional currency gains were recorded from short positions in
most major European currencies as the value of the U.S. dollar
also trended higher versus these currencies. A portion of these
gains was offset by currency losses from transactions involving
the British pound as its value moved without consistent direction
during the quarter. Gains were also recorded in agricultural
futures as long positions in soybean meal and corn futures
profited from an upward price trend during February and March.
Smaller gains were recorded in metals from short gold futures
positions as prices trended steadily lower during January. A
portion of the Partnership's overall gains for the quarter was
offset by losses in the energy markets as prices moved in a short-
term volatile pattern during January and March. Smaller losses
were recorded in financial
<PAGE>
futures due primarily to choppy price movement in British
interest rate futures during March, as well as in U.S. interest
rate futures during February. Total expenses for the period were
$1,995,474, resulting in net income of $2,318,913. The value of
an individual Unit in the Partnership increased from $2,132.79 at
December 31, 1996 to $2,189.33 at March 31, 1997.
For the Quarter Ended March 31, 1996
For the quarter ended March 31, 1996, the Partnership's total
trading revenues including interest income were $2,614,559.
During the first quarter, the Partnership posted an increase in
Net Asset Value per Unit. The most significant trading gains were
recorded in the currency and financial futures markets. In the
currency markets, gains were experienced in January as a
declining trend in the value of the Japanese yen led to profits
in short Japanese yen positions. In March, gains were recorded
from long Australian dollar positions as the value of the
Australian dollar increased relative to the U.S. dollar and other
European currencies. Additional gains in the currency markets
were experienced in January from short positions in the Swiss
franc and German mark. These gains more than offset the losses
recorded in February as a result of a sharp reversal in the value
of the Japanese yen and
<PAGE>
most major European currencies relative to the U.S. dollar. In
the financial futures markets, long European interest rate
futures positions experienced gains in January as prices moved
higher during the month. During March, gains were recorded from
trading U.S. interest rate futures. A portion of these gains was
offset by losses experienced in February from previously
established long positions in European bond futures as prices
moved lower. Losses were experienced in the metals markets in
February and March as trendless price movements resulted in
losses from trading precious metals futures. In the energy
markets, losses were recorded in January as a sharp and sudden
price reversal downward in crude oil prices resulted in losses
for the Fund's previously established long positions. These
losses more than offset gains recorded in March as crude and
heating oil prices moved higher. Smaller losses were recorded in
the soft commodities and agricultural markets during the quarter.
Total expenses for the quarter were $1,774,576, resulting in net
income of $839,983. The value of an individual Unit in the
Partnership increased from $1,699.44 at December 31, 1995 to
$1,716.92 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"), the
Partnership (under its original name), and certain limited
partnership commodity pools of which Demeter is the general
partner, and certain trading advisors (including JWH) 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
(including JWH) on behalf of all purchasers of interests in
various limited partnership commodity pools, including the
Partnership, 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,
<PAGE>
unjust enrichment, and conversion in connection with 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 and the Partnership
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 or the Partnership.
<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 Portfolio Strategy
Fund L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
May 9, 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 Portfolio Strategy 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> 86,830,837
<SECURITIES> 0
<RECEIVABLES> 316,939<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 89,201,389<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 89,201,389<F3>
<SALES> 0
<TOTAL-REVENUES> 4,314,387<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,995,474
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,318,913
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,318,913
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,318,913
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $316,939.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $2,053,613.
<F3>Liabilities include redemptions payable of $447,985, accrued brokerage
commissions of $83,761, accrued management fees of $296,536, accrued
administrative expenses of $157,948, accrued transaction fees and costs
of $5,962 and incentive fee payable of $402,175.
<F4>Total revenues include realized trading revenue of $4,397,321, net
change in unrealized of $(1,000,267) and interest income of $917,333.
</FN>
</TABLE>
