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, 1998 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 Corporation
Two World Trade Center, 62 Fl. New York, NY 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 PORTFOLIO STRATEGY FUND L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1998
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
March 31, 1998 (Unaudited) and December 31, 1997.........2
Statements of Operations for the Quarters Ended
March 31, 1998 and 1997 (Unaudited)......................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 1998 and 1997 (Unaudited).......4
Statements of Cash Flows for the Quarters Ended
March 31, 1998 and 1997 (Unaudited)......................5
Notes to Financial Statements (Unaudited) ............6-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................11-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................15-16
Item 6. Exhibits and Reports on Form 8-K........
.........17
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1998 1997
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 125,101,456 125,280,410
Net unrealized gain on open contracts 5,120,674 9,771,078
Total Trading Equity 130,222,130 135,051,488
Interest receivable (DWR) 437,534 493,617
Due from DWR 68,371
- -
Total Assets 130,728,035 135,545,105
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 858,736 583,707
Management fee payable 435,470 451,563
Accrued administrative expenses 87,133 76,076
Incentive fee payable - 801,115
Total Liabilities 1,381,339 1,912,461
Partners' Capital
Limited Partners (54,076.872 and
55,349.245 Units, respectively) 127,099,758 131,363,711
General Partner (956 Units) 2,246,938 2,268,933
Total Partners' Capital 129,346,696 133,632,644
Total Liabilities and Partners' Capital130,728,035 135,545,105
NET ASSET VALUE PER UNIT 2,350.35 2,373.36
<FN>
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1998 1997
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 4,798,524 4,397,321
Net change in unrealized (4,650,404) (1,000,267)
Total Trading Results 148,120 3,397,054
Interest Income (DWR) 1,355,553 917,333
Total Revenues 1,503,673 4,314,387
EXPENSES
Brokerage commissions (DWR) 1,341,867 627,392
Management fee 1,319,880 899,470
Transaction fees and costs 106,208 50,392
Administrative expenses 27,000 9,000
Incentive fees - 409,220
Total Expenses 2,794,955 1,995,474
NET INCOME (LOSS) (1,291,282) 2,318,913
NET INCOME (LOSS) ALLOCATION
Limited Partners (1,269,287) 2,264,862
General Partner (21,995) 54,051
NET INCOME (LOSS) PER UNIT
Limited Partners (23.01) 56.54
General Partner (23.01) 56.54
<FN>
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, 1998 and 1997
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C>
<C> <C>
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
Partners' Capital
December 31, 1997 56,305.245 $131,363,711 $2,268,933
$133,632,644
Net Loss - (1,269,287) (21,995)
(1,291,282)
Redemptions (1,272.373) (2,994,666) -
(2,994,666)
Partners' Capital
March 31, 1998 55,032.872 $127,099,758 $2,246,938
$129,346,696
<FN>
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,
1998 1997
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) (1,291,282) 2
,318,913
Noncash item included in net income (loss):
Net change in unrealized 4,650,404 1
,000,267
(Increase) decrease in operating assets:
Interest receivable (DWR) 56,083 (16,466)
Due from DWR (68,371) -
Increase (decrease) in operating liabilities:
Management fee payable (16,093) (6,592)
Accrued administrative expenses 11,057 (562)
Incentive fee payable (801,115) (
2,185,716)
Accrued brokerage commissions (DWR)- (58,118)
Accrued transaction fees and costs -
(4,083)
Net cash provided by operating activities 2,540,683
1,047,643
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable275,029 (
240,130)
Redemptions of units (2,994,666) (
1,824,034)
Net cash used for financing activities (2,719,637) (
2,064,164)
Net decrease in cash (178,954) (
1,016,521)
Balance at beginning of period 125,280,410 8
7,847,358
Balance at end of period 125,101,456 8
6,830,837
<FN>
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 of Dean Witter Portfolio
Strategy Fund L.P. (the "Partnership"). The financial statements
and condensed notes herein should be read in conjunction with the
Partnership's December 31, 1997 Annual Report on Form 10-K.
1. Organization
Dean Witter Portfolio Strategy Fund L.P., (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, Inc. ("JWH"), as the trading manager of the
Partnership. The non-clearing commodity broker is Dean Witter
Reynolds Inc. ("DWR"), with an unaffiliated broker, Carr Futures,
Inc. ("Carr"), providing clearing and execution services. Both
Demeter and DWR are wholly-owned subsidiaries of Morgan Stanley
Dean Witter & Co. ("MSDW").
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in
commodity trading accounts to meet margin requirements as needed.
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, options contracts and forward
contracts in interest rates, stock indices, commodities and
currencies. 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, 1998 and
December 31, 1997, open contracts were:
Contract or Notional Amount
March 31, 1998 December 31, 1997
$ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 49,107,000 231,632,000
Commitments to Sell 273,733,000 83,000,000
Commodity Futures:
Commitments to Purchase 16,784,000 20,890,000
Commitments to Sell 30,255,000 51,155,000
Foreign Futures:
Commitments to Purchase 268,402,000 198,296,000
Commitments to Sell 77,718,000 85,638,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 68,098,000 78,711,000
Commitments to Sell 129,743,000 126,515,000
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 off-
setting, 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 Statements of Financial Condition and totaled $5,120,674 and
$9,771,078 at March 31, 1998 and December 31, 1997, respectively.
Of the $5,120,674 net unrealized gain on open contracts at March
31, 1998, $1,983,425 related to exchange-traded futures contracts
and $3,137,249 related to off-exchange-traded forward currency
contracts.
Of the $9,771,078 net unrealized gain on open contracts at
December 31, 1997, $9,025,112 related to exchange-traded futures
contracts and $745,966 related to off-exchange-traded forward
currency contracts.
Exchange-traded futures contracts held by the Partnership at
March 31, 1998 and December 31, 1997 mature through March 1998
and December 1998, respectively. Off-exchange-traded forward
currency
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
contracts held at March 31, 1998 and December 31, 1997 mature
through June 1998 and March 1998, respectively.
The contract amounts in the above table represent the
Partnership's extent of involvement in the particular class of
financial instrument, but not the credit risk associated with
counterparty nonperformance. The credit risk associated with
these instruments is limited to the amounts reflected in the
Partnership's Statements of Financial Condition.
The Partnership also has credit risk because either DWR or Carr
acts as the futures commission merchant or the 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 and Carr, as
the futures commission merchants for all of the Partnership's
exchange-traded futures contracts, are required pursuant to
regulations of the Commodity Futures Trading Commission ("CFTC")
to segregate from their own assets and for the sole benefit of
their commodity customers, all funds held by them with respect to
exchange-traded futures and option contracts including an amount
equal to the net unrealized gain on all open futures contracts,
which funds totaled $127,084,881 and $134,305,522 at March 31,
1998 and December 31, 1997, respectively. With respect to the
Partnership's off-exchange-traded forward currency contracts,
<PAGE>
DEAN WITTER PORTFOLIO STRATEGY FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 Carr, the sole
counterparty on all such contracts, to perform. Carr's parent,
Credit Agricole Indosuez, has guaranteed Carr's obligations to
the Partnership.
For the quarter ended March 31, 1998 and for the year ended
December 31, 1997, the average fair value of financial
instruments held for trading purposes was as follows:
March 1998
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 192,125,000 108,736,000
Commodity Futures 23,338,000 36,604,000
Foreign Futures 233,014,000 59,808,000
Off-Exchange-Traded Forward
Currency Contracts 156,405,000 212,004,000
December 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 164,149,000 101,742,000
Commodity Futures 21,882,000 32,801,000
Foreign Futures 101,980,000 48,040,000
Off-Exchange-Traded Forward
Currency Contracts 116,463,000 112,657,000
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership's assets are on deposit in separate
commodity interest trading accounts with DWR and Carr, the
commodity brokers, and are used by the Partnership as margin to
engage in commodity futures, forward contracts and other
commodity interest trading. DWR and Carr hold such assets in
either designated depositories or in securities approved by the
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 commodity futures contracts, forward contracts and
other commodity interests, it is expected that the Partnership
will continue to own such liquid assets for margin purposes.
The Partnership's investment in commodity futures contracts,
forward contracts and other commodity interests may be illiquid.
If the price of a 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 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 of Limited Partnership Interest in the future will affect
the amount of funds available for investments in subsequent
periods. As redemptions 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
For the Quarter Ended March 31, 1998
For the quarter ended March 31, 1998, the Partnership's total
trading revenues including interest income were $1,503,673.
During the first quarter, the Partnership recorded a loss in Net
Asset Value per Unit. The most significant losses were recorded
in the metals markets as a result of choppy price movement in
gold futures during the quarter, as well as from long silver
futures positions during March, as silver prices reversed lower
after trending higher previously. In currencies, losses recorded
from short positions in the Japanese yen as its value increased
<PAGE>
versus the U.S. dollar during January and early February more
than offset gains from short positions in the Swiss franc and
German mark during March. In the agricultural markets, losses
were experienced from short corn futures positions during January
and March. Additional losses were recorded in global stock index
futures from trading Nikkei Index futures during January and
March as Japanese equity prices moved in a choppy pattern as the
stability of the Japanese economy remained in question. A
portion of the Partnership's overall losses was offset by gains
recorded in the energy markets from short positions in crude oil
futures as oil prices moved downward throughout a majority of the
quarter despite a potential conflict in the Persian Gulf during
February. In financial futures, gains recorded from long
positions in German and French interest rate futures more than
offset losses from trading Japanese and U.S. interest rate
futures during the quarter. Total expenses for the period were
$2,794,955, resulting in a net loss of $1,291,282. The value of
an individual Unit in the Partnership decreased from $2,373.36 at
December 31, 1997 to $2,350.35 at March 31, 1998. Partnership
results of operations for the quarter ended March 31, 1998 are
not comparable to the same period in 1997 due to the significant
additional investments made on August 1, 1997 as discussed in
Note 1 to the Partnership's December 31, 1997 Annual Report on
Form 10-K.
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.
<PAGE>
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 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.
<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 interest in limited partnership commodity pools
sold by DWR. Named defendants include DWR, Demeter, Dean Witter
Futures & Currency Management Inc., MSDW (all such parties
referred to hereafter as the "Dean Witter Parties"), the
Partnership (under its original name), certain other limited
partnership commodity pools of which Demeter is the general
partner, and certain trading advisors (including JWH), 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 (including JWH) on behalf of all
purchasers of interests in various limited partnership commodity
pools, including the Partnership, sold by DWR. A consolidated and
amended complaint in the action pending in the Supreme Court of
<PAGE>
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 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 11, 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 125,101,456
<SECURITIES> 0
<RECEIVABLES> 505,905<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 130,728,035<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 130,728,035<F3>
<SALES> 0
<TOTAL-REVENUES> 1,503,673<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,794,955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,291,282)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,291,282)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,291,282)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $437,534 and due from DWR
of $68,371.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $5,120,674.
<F3>Liabilities include redemptions payable of $858,736, management fee
payable of $435,470 and accrued administrative expenses of $87,133.
<F4>Total revenue includes realized trading revenue of $4,798,524, net
change in unrealized of $(4,650,404) and interest income of $1,355,553.
</FN>
</TABLE>
