-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MF8g04HIEKdsPFnnovtrS2CgevaPQJUWT3Nmt55FYOu2D76uCz+WxyGXV2icq0o2 V1r0WlO5LgqCqF6WtRmcdA== 0000895239-98-000001.txt : 19980401 0000895239-98-000001.hdr.sgml : 19980401 ACCESSION NUMBER: 0000895239-98-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WITTER DEAN WORLD CURRENCY FUND L P CENTRAL INDEX KEY: 0000895239 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133700691 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-23826 FILM NUMBER: 98580812 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER 62ND FLR STREET 2: C/O DEMETER MANAGEMENT CORP CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123925454 MAIL ADDRESS: STREET 1: C/O DEMETER MANAGEMENT CORP STREET 2: TWO WORLD TRADE CENTER 62ND FL CITY: NEW YORK STATE: NY ZIP: 10048 10-K 1 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 period ended December 31, 1997 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 33-55806 DEAN WITTER WORLD CURRENCY FUND L.P. (Exact name of registrant as specified in its Limited Partnership Agreement) DELAWARE 13-3700691 (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) c/o Demeter Management Corporation Two World Trade Center, New York, N.Y. - 62nd Flr. 10048 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 392-5454 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered None None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest (Title of Class) (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 10K. [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, or the average bid and asked prices of such units, as of a specified date within 60 days prior to the date of filing: $29,912,696.08 at January 31, 1998. DOCUMENTS INCORPORATED BY REFERENCE (See Page 1) DEAN WITTER WORLD CURRENCY FUND L.P. INDEX TO ANNUAL REPORT ON FORM 10-K DECEMBER 31, 1997
Page No. DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . 1 Part I . Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . 2-5 Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . 5 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . 5-7 Item 4. Submission of Matters to a Vote of Security Holders . . 7 Part II. Item 5. Market for the Registrant's Partnership Units and Related Security Holder Matters . . . . . . . . . . . . .8 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . .9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . 10-17 Item 8. Financial Statements and Supplementary Data. . . . . . 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . 17 Part III. Item10. Directors, Executive Officers, Promoters and Control Persons of the Registrant . . . . . . . . . 18-22 Item11. Executive Compensation . . . . . . . . . . . . . . . . 23 Item12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . 23 Item13. Certain Relationships and Related Transactions . . . . 23 Part IV. Item14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 24
DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference as follows:
Documents Incorporated Part of Form 10-K Partnership's Registration Statements On Forms S-1, File Nos. 33-55806, 33-61148 and 33-63312 I and IV December 31, 1997 Annual Report for the Dean Witter World Currency Fund L.P. II and IV
PART I Item 1. BUSINESS (a) General Development of Business. Dean Witter World Currency Fund L.P. (the "Partnership") is a Delaware limited partnership formed to engage in the speculative trading of futures and forward contracts and options on futures on a diversified portfolio of foreign currencies and related instruments. 60,000 Units of limited partnership interest in the Partnership were registered pursuant to a Registration Statement on Form S-1 (File No. 33-55806) which became effective on February 5, 1993. The offering of units was underwritten on a "best efforts" basis by Dean Witter Reynolds Inc. ("DWR"). The Partnership's general partner is Demeter Management Corporation ("Demeter"). DWR and Demeter are wholly-owned subsidiaries of Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"). The Partnership commenced operations on April 2, 1993. Additional units of limited partnership interests in the Partnership were registered pursuant to a Registration Statement on Form S-1 (File No. 33-61148) which became effective on April 27, 1993 and a Registration Statement on Form S-1 (File No. 33-63312, into which File Nos. 33-61148 and 33-55806 were subsumed), which became effective on June 2, 1993. Through July 31, 1997, the sole commodity broker for the Partnership's transactions was DWR. On July 31, 1997, DWR closed the sale of its institutional futures business and foreign currency trading operations to Carr Futures, Inc. ("Carr"), a subsidiary of Credit Agricole Indosuez. Following the sale, Carr became the clearing commodity broker for the Partnership's futures and futures options trades and the counterparty on the Partnership's foreign currency trades. DWR serves as the non-clearing commodity broker for the Partnership with Carr providing all clearing services for the Partnership's transactions. The Partnership's net asset value per unit, as of December 31, 1997 was $993.79, representing an increase of 39.35 percent from the net asset value per unit of $713.17 at December 31, 1996. For a more detailed description of the Partnership's business see subparagraph (c). (b) Financial Information about Industry Segments. The Partnership's business comprises only one segment for financial reporting purposes, speculative trading of futures interests and other commodity 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 in futures contracts interests, pursuant to trading instructions provided by John W. Henry & Company, Inc. ("JWH") and Millburn Ridgefield Corporation, its independent trading advisors (the "Trading Advisors"). For a detailed description of the different facets of the Partnership's business, see those portions of the Partnership's Prospectus, dated February 5, 1993, filed as part of the Registration Statement on Form S-1 ( File No. 33- 55806) (see "Documents Incorporated by Reference" Page 1), set forth below. Facets of Business 1. Summary 1. "Summary of the Prospectus" (Pages 1-8). 2. Currency Markets 2. "The Currency Markets" (Pages 80-88). 3. Partnership's Trading 3. "Trading Policies" (Page Arrangements and 75). "The Trading Policies Advisors" (Pages 34-74). 4. Management of the Part- 4. "The Management Agree- nership ments" (Pages 77-80). "The General Partner" (Pages 30- 33) and "The Commodity Broker" (Page 76-77). "The Limited Partnership Agreement" (Pages 89- 93). 5. Taxation of the Partner- 5. "Federal Income Tax nership's Limited Partners Aspects" and "State and Local Income Tax Aspects" (Pages 97- 104). (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 interest in limited partnership commodity pools sold by DWR. Named defendants include DWR, Demeter, Dean Witter Futures & Currency Manage- ment Inc. ("DWFCM"), MSDWD (all such parties referred to hereafter as the "Dean Witter Parties"), the Partnership, 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 including the Partnership sold by DWR. 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 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 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. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 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, 1997 was approximately 3,683. No distributions have been made by the Partnership since it commenced trading operations on April 2, 1993. 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. Item 6. SELECTED FINANCIAL DATA (in dollars)
For the Period from April 2, 1993 (commencement For the Years Ended December 31, of operations) to 1997 1996 1995 1994 December 31, 1993 Total Revenues (including interest) 12,366,515 5,746,636 4,814,020 (12,285,075) (13,521,231) Net Income (Loss) 9,849,370 3,438,844 1,480,810 (19,768,097) (21,491,018) Net Income (Loss) Per Unit (Limited & General Partners) 280.62 81.88 12.50 (207.71) (173.50) Total Assets 32,260,016 27,427,364 31,591,379 49,603,246 90,786,961 Total Limited Partners' Capital 30,674,029 25,668,776 29,734,237 46,629,315 88,549,902 Net Asset Value Per Unit of Limited Partnership Interest 993.79 713.17 631.29 618.79 826.50
Item 7. 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 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 commodity futures 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 for 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. 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. Market Risk. The Partnership trades futures, options and forward contracts in interest rates, stock indices, commodities and currencies. In entering into these contracts there exists a risk to the Partnership (market risk) that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interest positions held by the Partnership at the same time, and if the Trading Advisors were unable to offset futures interest positions of the Partnership, the Partnership could lose all of its assets and the Limited Partners would realize a 100% loss. The Partnership has established Trading Policies, which include standards for liquidity and leverage which help control market risk. Both the Trading Advisors and Demeter monitor the Partnership's trading activities on a daily basis to ensure compliance with the Trading Policies. Demeter may (under terms of the Management Agreements) override the trading instructions of a Trading Advisor to the extent necessary to comply with the Partnership's Trading Policies. Credit Risk. In addition to market risk, in entering into futures, options and forward contracts there is a credit risk to the Partnership that the counterparty on a 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 contracts with a counterparty, the sole recourse of the Partnership will be the clearinghouse, the exchange member or the off-exchange 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 or MSDWD 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 the credit risks of all partnership's for which it serves as General Partner in several ways. First, it monitors each 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 each 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 each partnership's potential margin liability, exchange by exchange. Demeter is then able to monitor the individual partnership's potential net credit exposure to each exchange by adding the unrealized trading gains on that exchange, if any, to the partnership's margin liability thereon. Second, as discussed earlier, each partnership's trading policies limit the amount of partnership 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 any partnership to any single exchange and, historically, such partnership 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 has climbed above that level, Demeter has dealt with the situations on a case by case basis, carefully weighing whether the increased level of credit exposure remained appropriate. Demeter expects to continue to deal with such situations in a similar manner in the future. Third, Demeter has secured, with respect to Carr acting as the clearing broker for the partnerships, a guarantee by Credit Agricole Indosuez, Carr's parent, of the payment of the "net liquidating value" of the transactions (futures, options and forward contracts) in each partnership's account. As of December 31, 1997, Credit Agricole Indosuez' total capital was over $3.25 billion and it is currently rated AA2 by Moody's. With respect to forward contract trading, the partnerships trade with only those counterparties which Demeter, together with DWR, have determined to be creditworthy. At the date of this filing, the partnerships deal only with Carr as their counterparty on forward 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 1997 Annual Report to Partners, incorporated by reference in this Form 10-K. 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. As of December 31, 1997, the Partnership's total capital was $31,874,031, an increase of $5,344,100 from the Partnership's total capital of $26,529,931, at December 31, 1996. For the year ended December 31, 1997, the Partnership generated net income of $9,849,370 and total redemptions aggregated $4,505,270. For the year ended December 31, 1997, the Partnership's total trading revenues including interest income were $12,366,515. The Partnership's total expenses for the year were $2,517,145, resulting in net income of $9,849,370. The value of an individual unit in the partnership icreased from $713.17 at December 31, 1996 to $993.79 at December 31, 1997. As of December 31, 1996, the Partnership's total capital was $26,529,931, a decrease of $3,966,591 from the Partnership's total capital of $30,496,522 at December 31, 1995. For the year ended December 31, 1996, the Partnership generated net income of $3,438,844, and total redemptions aggregated $7,405,435. For the period ended December 31, 1996, the Partnership's total trading revenues including interest income were $5,746,636. The Partnership's total expenses for the period were $2,307,792, resulting in net income of $3,438,844. The value of an individual unit in the Partnership increased from $631.29 at December 31, 1995 to $713.17 at December 31, 1996. As of December 31, 1995, the Partnership's total capital was $30,496,522, a decrease of $16,879,981 from the Partnership's total capital of $47,376,503 at December 31, 1994. For the year ended December 31, 1995, the Partnership generated net income of $1,480,810 and total redemptions aggregated $18,360,791. For the year ended December 31, 1995, the Partnership's total trading revenues including interest income were $4,814,020. The Partnership's total expenses for the year were $3,333,210, resulting in net income of $1,480,810. The value of an individual unit in the Partnership increased from $618.79 at December 31, 1994 to $631.29 at December 31, 1995. The Partnership's overall performance record represents varied results of trading in different commodity markets. For a further description of trading results, refer to the letter to the Limited Partners in the accompanying 1997 Annual Report to Partners, incorporated by reference in this Form 10-K. The Partnership's gains and losses are allocated among its Limited Partners for income tax purposes. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item appears in the attached 1997 Annual Report to Partners 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. PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE REGISTRANT General Partner Demeter, a Delaware corporation, was formed on August 18, 1977 to act as a commodity pool operator and is registered with the CFTC as a commodity pool operator and currently is a member of the National Futures Association ("NFA") in such capacity. Demeter is wholly-owned by MSDWD and is an affiliate of DWR. MSDWD, DWR and Demeter may each be deemed to be "promoters" and/or a "parent" of the Partnership within the meaning of the federal securities laws. On July 21, 1997, MSDWD, the sole shareholder of Demeter, appointed a new Board of Directors consisting of Richard M. DeMartini, Mark J. Hawley, Lawrence Volpe, Joseph G. Siniscalchi, Edward C. Oelsner III, and Robert E. Murray. Dean Witter Reynolds Inc. DWR is a financial services company which provides to its individual, corporate and institutional clients services as a broker in securities and commodity interest contracts, a dealer in corporate, municipal and government securities, an investment adviser and an agent in the sale of life insurance and various other products and services. DWR is a member firm of the New York Stock Exchange, the American Stock Exchange, the Chicago Board Options Exchange, and other major securities exchanges. DWR is registered with the CFTC as a futures commission merchant and is a member of the NFA in such capacity. As of December 31, 1997, DWR is servicing its clients through a network of approximately 401 branch offices with approximately 10,155 account executives servicing individual and institutional client accounts. Directors and Officers of the General Partner The directors and officers of Demeter as of December 31, 1997 are as follows: Richard M. DeMartini, age 45, is the Chairman of the Board and a Director of Demeter. Mr. DeMartini is also Chairman of the Board and a Director of Dean Witter Futures & Currency Management Inc. ("DWFCM"). Mr. DeMartini is president and chief operating officer of MSDWD's Individual Asset Management Group. He was named to this position in May of 1997 and is responsible for Dean Witter InterCapital, Van Kampen American Capital, insurance services, managed futures, unit trust, investment consulting services, Dean Witter Realty, and NOVUS Financial Corporation. Mr. DeMartini is a member of the MSDWD management committee, a director of the InterCapital funds, a trustee of the TCW/DW funds and a trustee of the Van Kampen American Capital and Morgan Stanley retail funds. Mr. DeMartini has been with Dean Witter his entire career, joining the firm in 1975 as an account executive. He served as a branch manager, regional director and national sales director, before being appointed president and chief operating officer of the Dean Witter Consumer Markets. In 1988 he was named president and chief operating officer of Sears' Consumer Banking Division and in January 1989 he became president and chief operating officer of Dean Witter Capital. Mr. DeMartini has served as chairman of the board of the Nasdaq Stock Market, Inc. and vice chairman of the board of the National Association of Securities Dealers, Inc. A native of San Francisco, Mr. DeMartini holds a bachelor's degree in marketing from San Diego State University. Mark J. Hawley, age 54, is President and a Director of Demeter. Mr. Hawley is also President and a Director of DWFCM. Mr. Hawley joined DWR in February 1989 as Senior Vice President and is currently the Executive Vice President and Director of DWR's Managed Futures Department. 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. Lawrence Volpe, age 50, is a Director of Demeter and DWFCM. Mr. Volpe joined DWR as a Senior Vice President and Controller in September 1983, and currently holds those positions. From July 1979 to September 1983, he was associated with E.F. Hutton & Company Inc. and prior to his departure, held the positions of First Vice President and Assistant Controller. From 1970 to July 1979, he was associated with Arthur Anderson & Co. and prior to his departure served as audit manager in the financial services division. Joseph G. Siniscalchi, age 52, 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 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 55, 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 37, is a Director of Demeter. Mr. Murray is also a Director of DWFCM. Mr. Murray is currently 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 Product Development for the Managed Futures Department. He is responsible for the development and maintenance of the proprietary Fund Management System utilized by DWFCM and Demeter in organizing information and producing reports for monitoring clients' accounts. Mr. Murray currently serves as a Director of the Managed Funds Association. Mr. Murray graduated from Geneseo State University in May 1983 with a B.A. degree in Finance. Patti L. Behnke, age 37, is Vice President and Chief Financial Officer of Demeter. Ms. Behnke joined DWR in April 1991 as Assistant Vice President of Financial Reporting and is currently a First Vice President and Director of Financial Reporting and Managed Futures Accounting in the Individual Asset Management Group. Prior to joining DWR, Ms. Behnke held positions of increasing responsibility at L.F. Rothschild & Co. and Carteret Savings Bank. Ms. Behnke began her career at Arthur Anderson & Co., where she was employed in the audit division from 1982-1986. She is a member of the AICPA and the New York State Society of Certified Public Accountants. 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. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Security Ownership of Certain Beneficial Owners - As of December 31, 1997, there were no persons known to be beneficial owners of more than 5 percent of the Units of Limited Partnership Interest in the Partnership. (b) Security Ownership of Management - At December 31, 1997, Demeter owned 1,207.506 Units of General Partnership Interest representing a 3.76 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 Financial Statements", in the accompanying 1997 Annual Report to Partners, incorporated by reference in this Form 10-K. In its capacity as the Partnership's retail commodity broker, DWR received commodity brokerage commissions (paid and accrued by the Partnership) of $888,907 for the year ended December 31, 1997. 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 public accountants, all appearing in the accompanying 1997 Annual Report to Partners, are incorporated by reference in this Form 10-K: - Report of Deloitte & Touche LLP, independent auditors, for the years ended December 31, 1997, 1996 and 1995. - Statements of Financial Condition as of December 31, 1997 and 1996. - Statements of Operations, Changes in Partners' Capital, and Cash Flows for the years ended December 31, 1997, 1996 and 1995. - Notes to Financial Statements. With exception of the aforementioned information and the information incorporated in Items 7, 8 and 13, the 1997 Annual Report to Partners 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. SIGNATURES Pursuant to the requirement 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 WORLD CURRENCY FUND L.P. (Registrant) BY: Demeter Management Corporation, General Partner March 24, 1998 BY: /s/ Mark J. Hawley Mark J. Hawley, 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/ Mark J. Hawley March 24, 1998 Mark J. Hawley, Director and President /s/ Richard M. DeMartini March 24, 1998 Richard M. DeMartini, Director and Chairman of the Board /s/ Lawrence Volpe March 24, 1998 Lawrence Volpe, Director /s/ Joseph G. Siniscalchi March 24, 1998 Joseph G. Siniscalchi, Director /s/ Edward C. Oelsner III March 24, 1998 Edward C. Oelsner III, Director /s/ Robert E. Murray March 24, 1998 Robert E. Murray, Director /s/ Patti L. Behnke March 24, 1998 Patti L. Behnke, Chief Financial Officer and Principal Accounting Officer EXHIBIT INDEX ITEM METHOD OF FILING -3. Limited Partnership Agreement of the Partnership, dated as of December 8, 1992. (1) - -10. Form of the Management Agreements among the Partnership, Demeter and CCA Capital Management (2) Inc., Colorado Commodities Management Corporation, Ezra Zask Associates Inc. and Millburn Ridgefield Corporation dated as of March 1, 1993. - -10. Customer Agreement Between the Partnership and DWR, dated as of (3) March 1, 1993. - -10. Management Agreement among the Partnership, Demeter and JWH dated as of June 1, 1995. (4) - -13. December 31, 1997 Annual Report to Limited Partners. (5) (1) Incorporated by reference to Exhibit 3.01 and Exhibit 3.02 of the Partnership's Registration Statement on Form S-1 (File No. 33-55806). (2) Incorporated by reference to Exhibit 10.02 of the Partnership's Registration Statement on Form S-1 (File No. 33-55806). (3) Incorporated by reference to Exhibit 10.01 of the Partnership's Registration Statement on Form S-1 (File No. 33-55806). (4) Incorporated by reference to Exhibit 10.03 of the Partnership's Annual Report on Form 10K for the fiscal year ended December 31, 1995. (5) Filed herewith. World Currency Fund December 31, 1997 Annual Report [LOGO] DEAN WITTER DEAN WITTER Two World Trade Center 62nd Floor New York, NY 10048 Telephone (212) 392-8899 DEAN WITTER WORLD CURRENCY FUND L.P. ANNUAL REPORT 1997 Dear Limited Partner: This marks the fifth annual report for the Dean Witter World Currency Fund L.P. (the "Fund"). The Fund began the year trading at a Net Asset Value per Unit of $713.17, and increased by 39.4% to $993.79 on December 31, 1997. The Fund has decreased by .6% since its inception of trading in April 1993 ( a compound annualized return of -0.1%). The Fund recorded significant gains during January as advisors took advantage of a strong upward move in the value of the U.S. dollar. Profits were recorded from short positions in the Japanese yen, German mark and both the Swiss and French francs. During February, the Fund experienced gains as the value of the U.S. dollar continued to strengthen versus most world currencies. The most significant gains were recorded from short German mark, Swiss franc, Japanese yen and Singapore dollar positions. The Fund experienced losses during March from short positions in the German mark and Swiss franc as the value of these currencies moved higher versus the U.S. dollar after trending lower previously. A portion of these losses was offset as the value of the Singapore dollar continued to trend lower. The Fund recorded gains during April as the value of the U.S. dollar continued to strengthen relative to the Japanese yen. Smaller gains were recorded from short positions in the German mark and Singapore dollar. A portion of these gains was offset by losses recorded from transactions involving the British pound as its value moved in a trendless range during the month. In May, the Fund recorded losses from previously established short Japanese yen positions as its value increased sharply early in the month. This upward move resulted in new long positions, which experienced losses late in the month as the yen decreased in value. During June, the Fund experienced gains from short German mark positions as the value of the U.S. dollar increased versus the mark. Additional gains were recorded from long Japanese yen positions. The Fund recorded gains during July from a strengthening in value of the U.S. dollar versus most world currencies. The most significant gains were recorded from short positions in European and Pacific Rim currencies. In August, the Fund recorded losses due to trend reversals and choppy movement in the value of most European currencies. The most significant losses were recorded from short German mark and Swiss franc positions. A majority of the months' losses was offset by gains resulting from the Asian currency crisis from short Malaysian ringgit and Singapore dollar positions. During September, the Fund experienced small profits due primarily to the continued weakening trend in the value of the Malaysian ringgit. A portion of these gains was offset by losses experienced from trendless movement in the value of the British pound and Swiss franc. The Fund recorded losses during October due primarily to short positions in the German mark and Swiss franc as the value of these currencies strengthened relative to the U.S. dollar. Smaller losses were recorded from transactions involving the Mexican peso. The Fund posted profits during November from short Japanese yen positions as its value moved sharply lower amid concerns over Asian economic stability. Smaller gains were recorded from short Australian dollar and Malaysian ringgit positions. As the economic turmoil in the Far East continued during December, additional gains were recorded from short positions in Pacific Rim currencies, as well as the German mark and Swiss franc. Overall, the Fund recorded extremely strong profits for the year due primarily to a strengthening in value of the U.S. dollar versus most world currencies throughout much of 1997. The most significant gains were recorded from short positions in the Japanese yen during January and February. Additional gains were recorded as the U.S. dollar increased in value versus most European and Pacific Rim currencies during July. In the wake of the Asian currency crisis during November and December, the Fund was again able to capture profits from short positions in the Japanese yen and other Pacific Rim currencies. Should you have any questions concerning this report, please feel free to contact Demeter Management Corporation at Two World Trade Center, 62nd Floor, New York, NY 10048, or your Dean Witter Account Executive. I hereby affirm, that to the best of my knowledge and belief, the information contained in this report is accurate and complete. Past performance is not a guarantee of future results. Sincerely, /s/ Mark J. Hawley Mark J. Hawley President Demeter Management Corporation General Partner DEAN WITTER WORLD CURRENCY FUND L.P. INDEPENDENT AUDITORS' REPORT The Limited Partners and the General Partner: We have audited the accompanying statements of financial condition of Dean Witter World Currency Fund L.P. (the "Partnership") as of December 31, 1997 and 1996 and the related statements of operations, changes in partners' capital, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Dean Witter World Currency Fund L.P. as of December 31, 1997 and 1996 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP February 17, 1998 New York, New York DEAN WITTER WORLD CURRENCY FUND L.P. STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, --------------------- 1997 1996 ---------- ---------- $ $ ASSETS Equity in Commodity futures trading accounts: Cash 31,327,827 25,825,801 Net unrealized gain on open contracts 775,529 1,242,668 Net option premiums 49,687 230,200 ---------- ---------- Total Trading Equity 32,153,043 27,298,669 Interest receivable (DWR) 106,973 87,895 Due from DWR -- 40,800 ---------- ---------- Total Assets 32,260,016 27,427,364 ========== ========== LIABILITIES AND PARTNERS' CAPITAL LIABILITIES Redemptions payable 305,335 779,025 Accrued management fees 80,650 68,410 Accrued brokerage commissions (DWR) -- 26,388 Accrued administrative expenses -- 21,908 Accrued transaction fees and costs -- 1,702 ---------- ---------- Total Liabilities 385,985 897,433 ---------- ---------- PARTNERS' CAPITAL Limited Partners (30,865.833 and 35,992.609 Units, respectively) 30,674,029 25,668,776 General Partner (1,207.506 Units) 1,200,002 861,155 ---------- ---------- Total Partners' Capital 31,874,031 26,529,931 ---------- ---------- Total Liabilities and Partners' Capital 32,260,016 27,427,364 ========== ========== NET ASSET VALUE PER UNIT 993.79 713.17 ========== ==========
The accompanying notes are an integral part of these financial statements. DEAN WITTER WORLD CURRENCY FUND L.P. STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995 ---------- --------- --------- $ $ $ REVENUES Trading Profit (Loss): Realized 11,608,498 2,720,213 1,451,982 Net change in unrealized (467,139) 1,877,237 1,539,185 ---------- --------- --------- Total Trading Results 11,141,359 4,597,450 2,991,167 Interest income (DWR) 1,225,156 1,149,186 1,822,853 ---------- --------- --------- Total Revenues 12,366,515 5,746,636 4,814,020 ---------- --------- --------- EXPENSES Management fees 922,702 871,626 1,225,699 Brokerage commissions (DWR) 888,907 1,280,404 1,730,874 Incentive Fee 564,539 -- -- Administrative expenses 75,084 74,537 106,193 Transaction fees and costs 65,913 81,225 270,444 ---------- --------- --------- Total Expenses 2,517,145 2,307,792 3,333,210 ---------- --------- --------- NET INCOME 9,849,370 3,438,844 1,480,810 ========== ========= ========= NET INCOME ALLOCATION: Limited Partners 9,510,523 3,339,974 1,465,713 General Partner 338,847 98,870 15,097 NET INCOME PER UNIT: Limited Partners 280.62 81.88 12.50 General Partner 280.62 81.88 12.50
STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
UNITS OF PARTNERSHIP LIMITED GENERAL INTEREST PARTNERS PARTNER TOTAL ----------- ----------- --------- ----------- $ $ $ Partners' Capital, December 31, 1994 76,563.617 46,629,315 747,188 47,376,503 Net Income -- 1,465,713 15,097 1,480,810 Redemptions (28,255.254) (18,360,791) -- (18,360,791) ----------- ----------- --------- ----------- Partners' Capital, December 31, 1995 48,308.363 29,734,237 762,285 30,496,522 Net Income -- 3,339,974 98,870 3,438,844 Redemptions (11,108.248) (7,405,435) -- (7,405,435) ----------- ----------- --------- ----------- Partners' Capital, December 31, 1996 37,200.115 25,668,776 861,155 26,529,931 Net Income -- 9,510,523 338,847 9,849,370 Redemptions (5,126.776) (4,505,270) -- (4,505,270) ----------- ----------- --------- ----------- Partners' Capital, December 31, 1997 32,073.339 30,674,029 1,200,002 31,874,031 =========== =========== ========= ===========
The accompanying notes are an integral part of these financial statements. DEAN WITTER WORLD CURRENCY FUND L.P. STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995 ---------- ---------- ----------- $ $ $ CASH FLOWS FROM OPERATING ACTIVITIES Net income 9,849,370 3,438,844 1,480,810 Noncash item included in net income: Net change in unrealized 467,139 (1,877,237) (1,539,185) (Increase) decrease in operating assets: Net option premiums 180,513 (34,462) 608,212 Interest receivable (DWR) (19,078) 25,983 86,762 Due from DWR 40,800 (40,800) 86,859 Increase (decrease) in operating liabilities: Accrued management fees 12,240 (10,260) (45,137) Accrued brokerage commissions (DWR) (26,388) 14,004 12,384 Accrued administrative expenses (21,908) (75,389) 30,668 Accrued transaction fees and costs (1,702) 1,083 619 ---------- ---------- ----------- Net cash provided by operating activities 10,480,986 1,441,766 721,992 ---------- ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Decrease in redemptions payable (473,690) (126,862) (1,130,420) Redemptions of units (4,505,270) (7,405,435) (18,360,791) ---------- ---------- ----------- Net cash used for financing activities (4,978,960) (7,532,297) (19,491,211) ---------- ---------- ----------- Net increase (decrease) in cash 5,502,026 (6,090,531) (18,769,219) Balance at beginning of period 25,825,801 31,916,332 50,685,551 ---------- ---------- ----------- Balance at end of period 31,327,827 25,825,801 31,916,332 ========== ========== ===========
The accompanying notes are an integral part of these financial statements. DEAN WITTER WORLD CURRENCY FUND L.P. NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION--Dean Witter World Currency Fund L.P. (the "Partnership") is a limited partnership organized to engage in the speculative trading of commodity futures contracts, commodity options contracts and forward contracts on foreign currencies. The general partner for the Partnership is Demeter Management Corporation ("Demeter"). Demeter is a wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"). On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean Witter, Discover & Co. ("DWD"). At that time DWD changed its corporate name to Morgan Stanley, Dean Witter, Discover & Co. Demeter has retained John W. Henry & Company, Inc. ("JWH") and Millburn Ridgefield Corporation ("Milburn") as the trading advisors of the Partnership. Through July 31, 1997, the sole commodity broker for the Partnership's transactions was Dean Witter Reynolds Inc. ("DWR"), also a subsidiary of MSDWD. On July 31, 1997, DWR closed the sale of its institutional futures business and foreign currency trading operations to Carr Futures, Inc. ("Carr"), a subsidiary of Credit Agricole Indosuez. Following the sale, Carr became the clearing commodity broker for the Partnership's futures and futures options trades and the counterparty on the Partnership's foreign currency trades. DWR will continue to serve as the non-clearing commodity broker for the Partnership with Carr providing all clearing services for the Partnership's transactions. Demeter is required to maintain a 1% minimum interest in the equity of the Partnership and income (losses) are shared by Demeter and the Limited Partners based upon their proportional ownership interests. BASIS OF ACCOUNTING--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements. REVENUE RECOGNITION--Commodity futures contracts, commodity options and forward contracts on foreign currencies are open commitments until settlement date. They are valued at market and the resulting unrealized gains and losses are reflected in income. Monthly, DWR pays the Partnership interest income based upon 80% of the average daily Net Assets for the month at a rate equal to the average yield on 13-week U.S. Treasury Bills issued during the month. For purposes of such interest payments, Net Assets do not include monies due the Partnership on forward contracts and other commodity interests, but not actually received. DEAN WITTER WORLD CURRENCY FUND L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using the weighted average number of units outstanding during the period. EQUITY IN COMMODITY FUTURES TRADING ACCOUNTS--The Partnership's asset "Equity in Commodity futures trading accounts" consists of cash on deposit at DWR and Carr to be used as margin for trading and the net asset or liability related to unrealized gains or losses on open contracts. The asset or liability related to the unrealized gains or losses on forward contracts is presented as a net amount in each period due to master netting agreements. BROKERAGE COMMISSIONS AND RELATED TRANSACTION FEES AND COSTS--The Partnership accrues brokerage commissions on a half-turn basis at 80% of DWR's published non-member rates. Transaction fees and costs are accrued on a half-turn basis. Prior to September 1, 1996 brokerage commissions were capped at 3/4 of 1% per month of the Net Assets allocated to each trading advisor as defined in the Limited Partnership Agreement. Effective September 1, 1996, brokerage commissions and transaction fees chargeable to the Partnership have been capped at 13/20 of 1% per month of the Partnership's month-end Net Assets as defined in the Limited Partnership Agreement. OPERATING EXPENSES--The Partnership bears all operating expenses related to its trading activities, to a maximum of 1/4 of 1% annually of the Partnership's average month end Net Assets. These include filing fees, clerical, administrative, auditing, accounting, mailing, printing, and other incidental operating expenses as permitted by the Limited Partnership Agreement. In addition, the Partnership incurs a monthly management fee and may incur an incentive fee. REDEMPTIONS--Limited Partners may redeem some or all of their Units at 100% of the Net Asset Value per Unit as of the end of any month upon five business days advance notice by redemption form to Demeter. DISTRIBUTIONS--Distributions, other than on redemptions of Units, are made on a pro-rata basis at the sole discretion of Demeter. No distributions have been made to date. INCOME TAXES--No provision for income taxes has been made in the accompanying financial statements, as partners are individually responsible for reporting income or loss based upon their respective share of the Partnership's revenues and expenses for income tax purposes. DEAN WITTER WORLD CURRENCY FUND L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) DISSOLUTION OF THE PARTNERSHIP--The Partnership will terminate on December 31, 2025 or at an earlier date if certain conditions set forth in the Limited Partnership Agreement occur. 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. DWR pays interest on these funds as described in Note 1. Under its Customer Agreement with DWR, the Partnership pays DWR brokerage commissions as described in Note 1. 3. TRADING ADVISORS Compensation to JWH and Millburn consists of a management fee and an incentive fee as follows: MANAGEMENT FEE--The Partnership pays a monthly management fee equal to 1/4 of 1% per month of the Partnership's adjusted Net Assets, as defined, as of the last day of each month. INCENTIVE FEE--The Partnership pays a quarterly incentive fee to each trading advisor equal to 17.5% of "Trading Profits", as defined in the Limited Partnership Agreement, experienced with respect to the Net Assets allocated to such trading advisor as of the end of each calendar quarter. Such incentive fee is accrued in each month in which Trading Profits occur. In those months in which Trading Profits are negative, previous accruals, if any, during the incentive period are reduced. In those instances in which a Limited Partner redeems an investment, the incentive fee, (earned through the redemption date), is to be paid to such advisor on those redemptions in the month of such redemptions. 4. FINANCIAL INSTRUMENTS The Partnership trades commodity futures contracts, options contracts and forward contracts on foreign currencies. Futures, options 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 December 31, 1997 and 1996, open contracts were:
CONTRACT OR NOTIONAL AMOUNT --------------------------- 1997 1996 ------------- ------------- $ $ EXCHANGE-TRADED CONTRACTS Financial Futures: Commitments to Purchase -- 8,348,000 Commitments to Sell -- 64,040,000 OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS: Commitments to Purchase 56,832,000 111,517,000 Commitments to Sell 114,502,000 131,009,000
DEAN WITTER WORLD CURRENCY 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 offsetting, but are not offset in the forward market until the settlement date. The unrealized gains on open contracts are reported as a component of "Equity in Commodity futures trading accounts" on the Statements of Financial Condition and totaled $775,529 and $1,242,668 at December 31, 1997 and 1996, respectively. Of the $775,529 net unrealized gain on open contracts at December 31, 1997, $(24,755) related to exchange-traded futures contracts and $800,284 related to off-exchange-traded forward currency contracts. Of the $1,242,668, net unrealized gain on open contracts at December 31, 1996, $1,289,462 related to exchange-traded futures contracts and $(46,794) related to off-exchange-traded forward currency contracts. Exchange-traded futures contracts held by the Partnership at December 31, 1997 and 1996 mature through March 1998 and March 1997, respectively. Off-exchange- traded forward currency contracts held by the Partnership at December 31, 1997 and 1996 mature through March 1998 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. 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 Partnerships' assets. Exchange-traded futures and options 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 the Partnership's exchange-traded futures and options contracts, are required pursuant to regulations of the Commodity Futures Trading Commission 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 and option contracts, which funds totaled $31,303,072 and $27,115,263 at December 31, 1997 and 1996, respectively. With respect to the Partnership's off- exchange-traded forward currency contracts, there DEAN WITTER WORLD CURRENCY FUND L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 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 of such contracts, to perform. Carr's parent, Credit Agricole Indosuez has guaranteed Carr's obligations to the Partnership. For the years ended December 31, 1997 and 1996, the average fair value of financial instruments held for trading purposes was as follows:
1997 ----------------------- ASSETS LIABILITIES ----------- ----------- $ $ EXCHANGE-TRADED CONTRACTS Financial Futures 6,501,000 19,214,000 OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 130,462,000 152,556,000 1996 ----------------------- ASSETS LIABILITIES ----------- ----------- $ $ EXCHANGE-TRADED CONTRACTS Financial Futures 11,267,000 36,511,000 Options on Financial Futures 31,535,000 -- OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 150,360,000 162,534,000
5. LEGAL MATTERS 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., MSDWD (all such parties referred to hereafter as the "Dean Witter Parties"), the Partnership, 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 DEAN WITTER WORLD CURRENCY FUND L.P. NOTES TO FINANCIAL STATEMENTS--(CONCLUDED) 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 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. DEAN WITTER REYNOLDS INC. Two World Trade Center 62nd Floor New York, NY 10048 FIRST-CLASS MAIL ZIP + 4 PRESORT U.S. POSTAGE PAID BROOKLYN, NY PERMIT NO. 148 EX-27 2
5 The schedule contains summary financial information extracted from Dean Witter World Currency Fund L.P. and is qualified in its entirety by reference to such financial instruments. 12-MOS DEC-31-1997 DEC-31-1997 31,327,827 0 106,973 0 0 0 0 0 32,260,016 0 0 0 0 0 0 32,260,016 0 12,366,515 0 0 2,517,145 0 0 9,849,370 0 9,839,370 0 0 0 9,849,370 0 0 Receivables include interest receivable of $106,973 and due from DWR of $0. In addition to cash and receivables, total assets include net unrealized gain on open contracts of $775,529 and net option premiums of $49,687. Liabilities include redemptions payable of $305,335, accrued brokerage commission of $0, accrued management fees of $80,650, accrued administrative expenses of $0, accrued transaction fees and costs of $0. Total revenue includes realized trading revenue of $11,608,498, net change in unrealized of $(467,139) and interest income of $1,225,156.
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