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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[No Fee Required]
For the year ended December 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 0-17178
DEAN WITTER MULTI-MARKET PORTFOLIO L.P.
(Exact name of registrant as specified in its Limited Partnership
Agreement)
DELAWARE 13-3469595
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
c/o Demeter Management Corporation
Two World Trade Center, - 62nd Flr., New York, N.Y.
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:
Title of each class
Name of each exchange
on which
registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check-mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check-mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment of this Form 10-K.[X ]
State the aggregate market value of the Units of Limited
Partnership Interest held by non-affiliates of the registrant.
The aggregate market value shall be computed by reference to the
price at which units were sold as of a specified date within 60
days prior to the date of filing: $7,728,832 at January 31, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
DEAN WITTER MULTI-MARKET PORTFOLIO L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1999
Page No.
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . .
. . . . . 1
Part I .
Item 1. Business. . . . . . . . . . . . . . . . . . . . . .
. . . . 2-4
Item 2. Properties. . . . . . . . . . . . . . . . . . . . .
. . . . 4
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . .
. . 5-6
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. . . . . . . . . .
. .10-23
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . .
. 23-36
Item 8. Financial Statements and Supplementary Data. . . . . .
. . .36
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . .
. . 36
Part III.
Item10. Directors and Executive Officers of the Registrant .
. . 37-41
Item11. Executive Compensation . . . . . . . . . . . . . . . .
. . . 41
Item12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . .
. . . . 41
Item13. Certain Relationships and Related Transactions . . . .
. . 42
Part IV.
Item14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . .
. . 43
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference
as follows:
Documents Incorporated Part of Form 10-K
Partnership's Prospectus dated
June 24, 1988 I
Annual Report to Dean Witter
Multi-Market Portfolio L.P.
Limited Partners for the year
ended December 31, 1999 II, III and IV
PART I
Item 1. BUSINESS
(a) General Development of Business. Dean Witter Multi-Market
Portfolio L.P. (formerly, Dean Witter Principal Guaranteed Fund
L.P.) (the "Partnership") is a Delaware limited partnership
organized to engage primarily in the speculative trading of
futures contracts, forward contracts, and other commodity
interests (collectively, "futures interests").
The general partner for the Partnership is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker is
Dean Witter Reynolds Inc. ("DWR") and an unaffiliated clearing
commodity broker, Carr Futures Inc. ("Carr"), provides clearing
and execution services. The Trading Advisor is Dean Witter
Futures & Currency Management Inc. ("DWFCM" or the "Trading
Advisor"). Demeter, DWR and DWFCM are wholly-owned subsidiaries
of Morgan Stanley Dean Witter & Co. ("MSDW").
The Partnership's Net Asset Value per unit of limited partnership
interest ("Unit(s)") as of December 31, 1999 was $1,100.09,
representing a loss of 8.8 percent from the Net Asset Value per
Unit of $1,205.86 at December 31, 1998. For a more detailed
description of the Partnership's business see subparagraph (c).
(b) Financial Information about Industry Segments. For financial
information reporting purposes, the Partnership is deemed to
engage in one industry segment, the speculative trading of
futures interests. The relevant financial information is
presented in Items 6 and 8.
(c) Narrative Description of Business. The Partnership is in the
business of speculative trading of futures interests, pursuant to
trading instructions provided by the Trading Advisor. For a
detailed description of the different facets of the Partnership's
business, see those portions of the Partnership's prospectus (the
"Prospectus"), dated June 24, 1988, incorporated by reference in
this Form 10-K, set forth below:
Facets of Business
1. Summary 1. "Summary of the Prospectus"
(Pages 2-11 of the
Prospectus).
2. Commodity Markets 2. "The Commodities Markets"
(Pages 158-168 of the
Prospectus).
3. Partnership's Commodity 3. "Trading Policies" (Pages
Trading Arrangements and 153-154 of the Prospectus
Policies and Supplemental Informa-
tion Regarding Dean
Witter Futures & Currency
Management Inc. dated
August 27, 1993).
4. Management of the Partnership 4. "The Management
Agreement"
(Pages 156-158 of the
Prospectus and
Supplemental
Information Regarding
Dean Witter Futures &
Currency
Management Inc.
dated August 27,
1993).
"The General
Partner"
(Pages 36-52 of
the
Prospectus) "The
Commodity Broker"
(Pages 154-155 of
the
Prospectus) and
"The
Limited
Partnership
Agreement" (Pages
169-
174 of the
Prospectus).
5. Taxation of the Partnership's 5. "Material Federal Income
Limited Partners Tax Considerations"
and "State and Local
Income Tax Aspects"
(Pages 176-185 of the
Prospectus).
(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
The class actions first filed in 1996 in California and in New
York State courts were each dismissed in 1999. However, in the
New York State class action, plaintiffs appealed the trial
court's dismissal of their case on March 3, 2000.
On September 6, 10, and 20, 1996, and on March 13, 1997,
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, DWFCM, MSDW,
certain limited partnership commodity pools of which Demeter is
the general partner (all such parties referred to hereafter as
the "Morgan Stanley Dean Witter Parties") and certain trading
advisors to those pools. On June 16, 1997, the plaintiffs in the
above actions filed a consolidated amended complaint, alleging,
among other things, that the defendants committed fraud, deceit,
negligent misrepresentation, various violations of the California
Corporations Code, intentional and negligent breach of fiduciary
duty, fraudulent and unfair business practices, unjust
enrichment, and conversion in the sale and operation of the
various limited partnership commodity pools. The complaints seek
unspecified amounts of compensatory and punitive damages and
other relief. The court entered an order denying class
certification on August 24, 1999. On September 24, 1999, the
court entered an order dismissing
the case without prejudice on consent. 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 Morgan Stanley Dean Witter Parties
and certain trading advisors on behalf of all purchasers of
interests in various limited partnership commodity pools sold by
DWR. A consolidated and amended complaint in the action pending
in the Supreme Court of the State of New York was filed on August
13, 1997, alleging that the defendants committed fraud, breach of
fiduciary duty, and negligent misrepresentation in the sale and
operation of the various limited partnership commodity pools. The
complaints seek unspecified amounts of compensatory and punitive
damages and other relief. The New York Supreme Court dismissed
the New York action in November 1998, but granted plaintiffs
leave to file an amended complaint, which they did in early
December 1998. The defendants filed a motion to dismiss the
amended complaint with prejudice on February 1, 1999. By
decision dated December 21, 1999, the New York Supreme Court
dismissed the case with prejudice.
In addition, 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.
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
(a) Market Information
There is no established public trading market for Units of the
Partnership.
(b) Holders
The number of holders of Units at December 31, 1999 was
approximately 1,312.
(c) Distributions
No distributions have been made by the Partnership since it
commenced trading operations on August 31, 1988. Demeter has
sole discretion to decide what distributions, if any, shall be
made to investors in the Partnership. Demeter currently does not
intend to make any distribution of Partnership profits.
Item 6. SELECTED FINANCIAL DATA (in dollars)
For the Years
Ended December 31,
1999 1998 1997
1996 1995
Total Revenues
(including interest) (52,906) 1,454,762 2,476,075 358,079 1,268,953
Net Income (Loss) (848,874) 540,864 1,393,549 (1,110,424)
(1,045,666)
Net Income (Loss)
Per Unit (Limited
& General Partners) (105.77) 64.23 133.87 (73.06)
(73.49)
Total Assets 8,030,735 10,054,538 11,035,294 12,169,963 15,916,814
Total Limited
Partners' Capital 7,791,740 9,851,534 10,451,503 1
1,628,908 15,216,606
Net Asset Value Per
Unit 1,100.09 1,205.86
1,141.63 1,007.76 1,080.82
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker in separate futures
trading accounts established for the Trading Advisor, which
assets are used as margin to engage in trading. The assets are
held in either non-interest-bearing bank accounts or in
securities and instruments permitted by the Commodity Futures
Trading Commission ("CFTC") for investment of customer segregated
or secured funds. The Partnership's assets held by the commodity
brokers may be used as margin solely for the Partnership's
trading. Since the Partnership's sole purpose is to trade in
futures and forwards, it is expected that the Partnership will
continue to own such liquid assets for margin purposes.
The Partnership's investment in futures and forwards may, from
time to time, be illiquid. Most U.S. futures exchanges limit
fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures contract has
increased or decreased by an amount equal to the daily limit,
positions in that futures contract can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for
several consecutive days with little or no trading. These market
conditions could prevent the Partnership from promptly
liquidating its futures contracts and result in restrictions on
redemptions.
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.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources. The Partnership does not have, or expect to
have, any capital assets. Redemptions of Units in the future
will affect the amount of funds available for investments in
futures interests in subsequent periods. It is not possible to
estimate the amount and therefore, the impact of future
redemptions of Units.
Results of Operations.
General. The Partnership's results depend on its Trading Advisor
and the ability of the Trading Advisor's trading programs to take
advantage of price movements or other profit opportunities in the
futures, forwards, and options markets. The following presents a
summary of the Partnership's operations for the three years ended
December 31, 1999 and a general discussion of its trading
activities during each period. It is important to note, however,
that the Trading Advisor trades in various markets at different
times and that prior activity in a particular market does not
mean that such market will be actively traded by the Trading
Advisor or will be profitable in the future. Consequently, the
results of operations of the Partnership are difficult to discuss
other than in the context of its Trading Advisor's trading
activities on behalf of the Partnership as a whole and how the
Partnership has performed in the past.
At December 31, 1999, the Partnership's total capital was
$7,901,749, a decrease of $2,070,371 from the Partnership's total
capital of $9,972,120 at December 31, 1998. For the year ended
December 31, 1999, the Partnership generated a net loss of
$848,874 and total redemptions aggregated $1,221,497.
For the year ended December 31, 1999, the Partnership recorded
total trading losses, net of interest income, of $52,906 and
posted a decrease in Net Asset Value per Unit. The Partnership
experienced losses in the global interest rate futures markets of
approximately 8.93%, primarily from short Australian interest
rate futures positions as prices increased during July and August
on the temporary strength in U.S. bonds and weaker-than-expected
business spending data out of Australia. Additional losses were
recorded from short Japanese bond futures positions as prices
increased during the first and third quarters. In the currency
markets, losses of approximately 6.92% were recorded primarily
from Australian dollar positions. Throughout a majority of the
first quarter, losses were experienced from long Australian
dollar positions as its value dropped significantly relative to
the U.S. dollar on speculation regarding potential currency
devaluations in the Asian region. Early in the third quarter,
additional losses were recorded from long positions in this
currency due to depressed commodities prices, emerging market
concerns and on-going talks that China may eventually devalue its
currency. Newly established short positions in the Australian
dollar resulted in losses during September as its value
strengthened relative to the U.S. dollar following the rally in
gold prices. Offsetting currency gains of 3.82% were recorded
from Japanese yen positions, primarily long positions. During
the third quarter, gains were recorded from long positions in the
Japanese yen
as the value of the yen climbed to a 44-month high versus the
U.S. dollar due to continued optimism over Japan's economic
recovery. The energy markets produced gains of approximately
7.21%. During March, gains were recorded from long positions in
oil futures as prices moved significantly higher on news that
both OPEC and non-OPEC countries had reached an agreement to cut
total output beginning April 1st. Gains were also recorded in
this market complex during the third quarter after OPEC ministers
confirmed that they would uphold their global cutbacks until
April of 2000. Total expenses for the year were $795,968,
resulting in a net loss of $848,874. The value of a Unit
decreased from $1,205.86 at December 31, 1998 to $1,100.09 at
December 31, 1999.
At December 31, 1998, the Partnership's total capital was
$9,972,120, a decrease of $828,723 from the Partnership's total
capital of $10,800,843 at December 31, 1997. For the year ended
December 31, 1998, the Partnership generated net income of
$540,864 and total redemptions aggregated $1,369,587.
For the year ended December 31, 1998, the Partnership recorded
total trading revenues, including interest income, of $1,454,762
and posted an increase in Net Asset Value per Unit. Gains of
approximately 13.35% were recorded in the global interest rate
futures markets from bond futures in most major world countries
throughout the year. The most significant gains were recorded in
German bond futures, (approximately 5.34%), U.S. bond futures,
(approximately
4.15%) and Japanese bond futures, (approximately 2.85%) from
primarily long positions during August and September as investors
sought the safety of fixed income investments from notable
volatility in the global financial markets. Additional profits
were recorded from short Japanese government bond futures
positions during December as prices declined amid a surge in
Japanese bond yields, which was attributed to news that Japan's
Ministry of Finance would end outright purchases of government
debt. Total expenses for the year were $913,898, resulting in
net income of $540,864. The value of a Unit increased from
$1,141.63 at December 31, 1997 to $1,205.86 at December 31, 1998.
At December 31, 1997, the Partnership's total capital was
$10,800,843, a decrease of $1,136,439 from the Partnership's
total capital of $11,937,282, at December 31, 1996. For the year
ended December 31, 1997, the Partnership generated net income of
$1,393,549 and total redemptions aggregated $2,529,988.
For the year ended December 31, 1997, the Partnership recorded
total trading revenues, including interest income, of $2,476,075
and posted an increase in Net Asset Value per Unit. 1997 was a
profitable year for the Partnership. Gains of approximately
20.07% were recorded in the currency markets primarily from
sustained price movements during January and February and then
again in November and December from short Japanese yen positions
as the value of the U.S. dollar increased versus the yen. A
portion of the Partnership's overall
gains was offset by losses of approximately 4.74% recorded in the
global interest rate futures markets primarily due to a sharp
trend reversal in international interest rate futures prices
during the fourth quarter and as a result of short-term
volatility in domestic bond and stock index futures. Offsetting
gains were recorded from long global interest rate futures
positions during June and July. Although many of the profitable
periods with long price trends were followed by trend reversals
and short-term volatile price movement, DWFCM's intermediate to
long-term trend following trading methodology was able to retain
profits. Total expenses for the year were $1,082,526, resulting
in net income of $1,393,549. The value of a Unit increased from
$1,007.76 at December 31, 1996 to $1,141.63 at December 31, 1997.
The Partnership's overall performance record represents varied
results of trading in different futures interests markets. For a
further description of 1999 trading results, refer to the letter
to the Limited Partners in the accompanying Annual Report to
Limited Partners for the year ended December 31, 1999, which is
incorporated by reference to Exhibit 13.01 of this Form 10-K.
The Partnership's gains and losses are allocated among its
partners for income tax purposes.
Credit Risk.
Financial Instruments. The Partnership is a party to financial
instruments with elements of off-balance sheet market and credit
risk. The Partnership may trade futures, forwards, and options
in a portfolio of agricultural commodities, energy products,
foreign currencies, interest rates, precious and base metals,
soft commodities, and stock indices. In entering into these
contracts, the Partnership is subject to the 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 positions held by the Partnership at the same
time, and if the Trading Advisor was unable to offset positions
of the Partnership, the Partnership could lose all of its assets
and investors would realize a 100% loss.
In addition to the Trading Advisor's internal controls, the
Trading Advisor must comply with the trading policies of the
Partnership. These trading policies include standards for
liquidity and leverage with which the partnership must comply.
The Trading Advisor and Demeter monitor the Partnership's trading
activities to ensure compliance with the trading policies.
Demeter may require the Trading Advisor to modify positions of
the Partnership if Demeter believes they violate the
Partnership's trading policies.
In addition to market risk, in entering into futures, forwards,
and options 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 or
guarantor of the Partnership for futures contracts traded in the
United States and the 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, which should
significantly reduce this credit risk. For example, a
clearinghouse may cover a default by 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 assessing its members. In cases where the
Partnership trades off-exchange forward contracts with a
counterparty, the sole recourse of the Partnership will be the
forward contracts counterparty.
There is no assurance that a clearinghouse or exchange will meet
its obligations to the Partnership, and Demeter and the commodity
brokers will not indemnify the Partnership against a default by
such parties. 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 or
clearinghouse defaulting on trades effected for the broker's
customers. Any such obligation on the part of a broker appears
even less clear where the default occurs in a non-U.S.
jurisdiction.
Demeter deals with these credit risks of the Partnership in
several ways. First, it monitors the Partnership's credit
exposure to each exchange on a daily basis, calculating not only
the amount of margin required for it but also the amount of its
unrealized gains at each exchange, if any. The commodity brokers
inform the Partnership, as with all their customers, of its net
margin requirements for all its existing open positions, but do
not break that net figure down, exchange by exchange. Demeter,
however, has installed a system which permits it to monitor the
Partnership's potential margin liability, exchange by exchange.
As a result, Demeter is able to monitor the 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, the Partnership's trading policies limit the amount of
its Net Assets that can be committed at any given time to futures
contracts and require, in addition, a minimum amount of
diversification in the Partnership's trading,
usually over several different products. One of the aims of such
trading policies has been to reduce the credit exposure of the
Partnership to a single exchange and, historically, the
Partnership's exposure to any one exchange has typically amounted
to only a small percentage of its total Net Assets. On those
relatively few occasions where the Partnership's credit exposure
may climb above such level, Demeter deals with the situation on a
case by case basis, carefully weighing whether the increased
level of credit exposure remains appropriate. Material changes
to the trading policies may be made only with the prior written
approval of the limited partners owning more than 50% of Units
then outstanding.
Third, Demeter has secured, with respect to Carr acting as the
clearing broker for the Partnership, a guarantee by Credit
Agricole Indosuez, Carr's parent, of the payment of the "net
liquidating value" of the transactions (futures and forward
contracts) in the Partnership's account.
With respect to forward contract trading, the Partnership trades
with only those counterparties which Demeter, together with DWR,
have determined to be creditworthy. At the date of this filing,
the Partnership deals only with Carr as its counterparty on
forward contracts. The guarantee by Carr's parent, discussed
above, covers these forward contracts.
See "Financial Instruments" under Notes to Financial Statements
in the Partnership's Annual Report to Limited Partners for the
year ended December 31, 1999, which is incorporated by reference
to Exhibit 13.01 of this Form
10-K.
Year 2000. Commodity pools, like financial and business
organizations and individuals around the world, depend on the
smooth functioning of computer systems. The Year 2000 issue
arose since many of the world's computer systems (including those
in non-information technology systems) traditionally recorded
years in a two-digit format. If not addressed, such computer
systems may have been unable to properly interpret dates beyond
the year 1999, which may have led to business disruptions in the
U.S. and internationally. Such disruptions could have adversely
affected the handling or determination of futures trades and
prices and other services for the Partnership. Accordingly,
Demeter has fully participated in a firmwide initiative
established by MSDW to address issues associated with the Year
2000. As part of this initiative, MSDW reviewed its global
software and hardware infrastructure for mainframe, server and
desktop computing environments and engaged in extensive
remediation and testing. The Year 2000 initiative also
encompassed the review of agencies, vendors and facilities for
Year 2000 compliance.
Since 1995, MSDW prepared actively for the Year 2000 issue to
ensure that it would have the ability to respond to any critical
business process failure, to prevent the loss of workspace and
technology, and to mitigate any potential financial loss or
damage to its global franchise. Where necessary, contingency
plans were expanded or developed to address specific Year 2000
risk scenarios, supplementing existing business policies and
practices. In conjunction with MSDW's Year 2000 preparations,
Demeter monitored the progress of Carr and the Trading Advisor
throughout 1999 in their Year 2000 compliance and, where
applicable, tested its external interfaces, with Carr and the
Trading Advisor. In addition, Demeter, the commodity brokers,
the Trading Advisor and all U.S. futures exchanges were subjected
to monitoring by the CFTC of their Year 2000 preparedness, and
the major foreign futures exchanges engaged in market-wide
testing of their Year 2000 compliance during 1999.
MSDW and Demeter consider the transition into the Year 2000
successful from the perspective of their internal systems and
global external interactions. Over the millennial changeover
period, no material issues were encountered, and MSDW, Demeter
and the Partnership conducted business as usual.
Risks Associated With the Euro. On January 1, 1999, eleven
countries in the European Union established fixed conversion
rates on their existing sovereign currencies and converted to a
common single currency (the euro). During a
three-year transition period, the sovereign currencies will
continue to exist but only as a fixed denomination of the euro.
Conversion to the euro prevents the Trading Advisor from trading
those sovereign currencies and thereby limits its ability to take
advantage of potential market opportunities that might otherwise
have existed had separate currencies been available to trade.
This could adversely affect the performance results of the
Partnership.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these
factors result in frequent changes in the fair value of the
Partnership's open positions, and, consequently, in its earnings
and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934).
All quantitative disclosures in this section are deemed to be
forward-looking statements for purposes of the safe harbor,
except for statements of historical fact.
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and cash
flow. Profits and losses on open positions of exchange-traded
futures interests are settled daily through variation margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage
changes observed in key market indices or other market factors
("market risk factors") to which the portfolio is sensitive. The
historical observation period of the Partnership's VaR is
approximately four years. The one-day 99% confidence level of
the Partnership's VaR corresponds to the negative change in
portfolio value that, based on observed market risk factors,
would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisors in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following tables indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of December 31, 1999 and 1998.
As of December 31, 1999 and 1998, the Partnership's total
capitalization was approximately $8 million and $10 million,
respectively.
Primary Market December 31, 1999 December 31,
1998
Risk Category Value at Risk Value at
Risk
Interest Rate (.22)% (.50)%
Currency (.79) (.95)
Commodity (.81) (1.03)
Equity (.16) (.19)
Aggregate Value at Risk (1.26)% (1.37)%
Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual Market Categories listed above. Aggregate VaR will be
lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open
positions at December 31, 1999 and 1998 only and is not
necessarily representative of either the historic or future risk
of an investment in the Partnership. Because the Partnership's
only business is the speculative trading of futures interests,
the composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.
The table below supplements the year end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
Net Assets for the four quarterly reporting periods from January
1, 1999 through December 31, 1999.
Primary Market Risk Category High Low
Average
Interest Rate (1.87)% (.22)% (.92)%
Currency (1.94) (.79) (1.59)
Commodity (1.32) (.81) (1.02)
Equity (.72) (.16) (.36)
Aggregate Value at Risk (3.05)% (1.26)% (2.25)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
typically found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past
performance of the Partnership, gives no indication of such "risk
of ruin". In addition, VaR risk measures should be viewed in
light of the methodology's limitations, which include the
following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
VaR tables above present the results of the Partnership's VaR for
each of the Partnership's market risk exposures and on an
aggregate basis at December 31, 1999 and for the end of the four
quarterly reporting periods during calendar year 1999. Since VaR
is based on historical data, VaR should not be viewed as
predictive of the Partnership's future financial performance or
its ability to
manage or monitor risk. There can be no assurance that the
Partnership's actual losses on a particular day will not exceed
the VaR amounts indicated above or that such losses will not
occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial. The Partnership also
maintains a substantial portion (approximately 89%) of its
available assets in cash at DWR. A decline in short-term
interest rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered
material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-
sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation and many other factors could result in
material losses as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of December 31, 1999, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
Interest Rate. The largest exposure during the fourth quarter was
in the interest rate sector. Exposure was spread across the U.S.,
Swiss, Australian, and Japanese interest rate sectors. Interest
rate movements directly affect
the price of the sovereign bond positions held by the Partnership
and indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially
impact the Partnership's profitability.
The Partnership's primary interest rate exposure is generally to
interest rate fluctuations in the G-7 countries and Australia.
The G-7 countries consist of France, U.S., Britain, Germany,
Japan, Italy and Canada. Demeter anticipates that G-7 and
Australian interest rates will remain the primary interest rate
exposure of the Partnership for the foreseeable future. The
changes in interest rates, which have the most effect on the
Partnership, are changes in long-term and medium-term
instruments. Consequently, even a material change in short-term
rates would have little effect on the Partnership, were the
medium to long term rates to remain steady.
Currency. The next most significant exposure in the Partnership
is in the currency complex. The Partnership's currency exposure
is to exchange rate fluctuations, primarily fluctuations that
disrupt the historical pricing relationships between different
currencies and currency pairs. Interest rate changes as well as
political and general economic conditions influence these
fluctuations. The Partnership trades in a large number of
currencies,
including cross-rates i.e., positions between two currencies
other than the U.S. Dollar.
For the fourth quarter of 1999, the Partnership's foreign
currency exposure was in the euro currency crosses and outright
U.S. dollar positions (outright positions consist of the U.S.
dollar vs. other currencies). The currency trading VaR figure
includes foreign margin amounts converted into U.S. dollars with
an incremental adjustment to reflect the exchange rate risk
inherent to the dollar-based Partnership in expressing VaR in a
functional currency other than dollars.
Commodity.
Metals. The next noteworthy exposure was in the base and
precious metals markets. The Partnership's metals market exposure
in the fourth quarter of 1999 was to fluctuations in the prices
of base metals, as well as exposure in the gold and silver
markets. A significant amount of exposure was evident in the
base metals as the Partnership held sizeable positions due to a
period of low volatility prior to the upward price breakout.
The Partnership aims to equally weight market exposure in the
metals as much as possible, however base metals, during periods
of volatility, may affect
performance more dramatically than the precious metals markets.
Demeter anticipates that base metals will remain the primary
metals market exposure of the Partnership.
Energy. On December 31, 1999, the Partnership's energy exposure
was in futures contracts in the New York and Brent crude oil
markets. Price movements in these markets result from political
developments in the Middle East, weather patterns, and other
economic fundamentals. As oil prices have increased over 100%
this year, and, given that the agreement by OPEC to cut
production is closing in on expiring in March of 2000, it is
possible that volatility will remain on the high end. Significant
profits and losses have been and are expected to continue to be
experienced in these markets.
Soft Commodities. On December 31, 1999, the Partnership had
moderate exposure in the markets that comprise these sectors.
Most of the exposure however was in the cotton and sugar markets.
Supply and demand inequalities, severe weather disruptions and
market expectations affect price movements in these markets.
Equity. The Partnership's equity exposure on December 31, 1999
to price risk in the S&P 500 futures index was noteworthy. The
stock index futures traded by the Partnership are by law limited
to futures on broadly-based indices. Demeter anticipates little,
if any, trading in non G-7 stock indices. The
Partnership is primarily exposed to the risk of adverse price
trends or static markets in the U.S. and Japanese indices.
(Static markets would not cause major market changes but would
make it difficult for the Partnership to avoid being "whipsawed"
into numerous small losses.)
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of December 31, 1999:
Foreign Currency Balances. The Partnership's foreign currency
balances are in Japanese yen, British pounds, euros, Swiss francs
and Australian dollars. The Partnership controls the non-trading
risk of these balances by regularly converting these balances
back into dollars upon liquidation of the respective position.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different market sectors and trading
approaches, and monitoring the performance of the Trading Advisor
daily. In addition, the Trading Advisor establishes
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instruments, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are incorporated by reference to the
Partnership's Annual Report which is filed as Exhibit 13.01
hereto.
Supplementary data specified by Item 302 of Regulation S-K
(selected quarterly financial data) is not applicable.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There are no directors or executive officers of the Partnership.
The Partnership is managed by Demeter.
Directors and Officers of the General Partner
The directors and officers of Demeter are as follows:
Robert E. Murray, age 39, is Chairman of the Board, President and
a Director of Demeter. Mr. Murray is also Chairman of the Board,
President and a Director of DWFCM. Effective as of the close of
business on January 31, 2000, Mr. Murray replaced Mr. Hawley as
Chairman of the Board of Demeter and DWFCM. Mr. Murray is
currently a Senior Vice President of DWR's Managed Futures
Department. Mr. Murray began his career at DWR in 1984 and is
currently the Director of the Managed Futures Department. In this
capacity, Mr. Murray is responsible for overseeing all aspects of
the firm's Managed Futures Department. Mr. Murray currently
serves as Vice Chairman and a Director of the Managed Funds
Association, an industry association for investment professionals
in futures, hedge funds and other alternative investments. Mr.
Murray graduated from Geneseo State University in May 1983 with a
B.A. degree in Finance.
Mitchell M. Merin, age 46, is a Director of Demeter. Mr. Merin
is also a Director of DWFCM. Mr. Merin was appointed the Chief
Operating Officer of Individual Asset Management for MSDW in
December 1998 and the President and Chief Executive Officer of
Morgan Stanley Dean Witter Advisors in February 1998. He has
been an Executive Vice President of DWR since 1990, during which
time he has been director of DWR's Taxable Fixed Income and
Futures divisions, Managing Director in Corporate Finance and
Corporate Treasurer. Mr. Merin received his Bachelor's degree
from Trinity College in Connecticut and his M.B.A. degree in
finance and accounting from the Kellogg Graduate School of
Management of Northwestern University in 1977.
Joseph G. Siniscalchi, age 54, 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 57, is a Director of Demeter. Mr.
Oelsner is currently an Executive Vice President and head of the
Product Development Group at Morgan Stanley Dean Witter Advisors,
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.
Lewis A. Raibley, III, age 37, is Vice President, Chief Financial
Officer and a Director of Demeter. Mr. Raibley is also a
Director of DWFCM. Mr. Raibley is currently Senior Vice
President and Controller in the Individual Asset Management Group
of MSDW. From July 1997 to May 1998, Mr. Raibley served as
Senior Vice President and Director in the Internal Reporting
Department of MSDW and prior to that, from 1992 to 1997, he
served as Senior Vice President and Director in the Financial
Reporting and Policy Division of Dean Witter Discover & Co. He
has been with MSDW and its affiliates since June 1986.
Richard A. Beech, age 48, is a Director of Demeter. Mr. Beech
has been associated with the futures industry for over 23 years.
He has been at DWR since August 1984 where he is presently Senior
Vice President and head of Branch Futures. Mr. Beech began his
career at the Chicago Mercantile Exchange, where he became the
Chief Agricultural Economist doing market
analysis, marketing and compliance. Prior to joining DWR, Mr.
Beech also had worked at two investment banking firms in
operations, research, managed futures and sales management.
Ray Harris, age 43, is a Director of Demeter. Mr. Harris is
currently Executive Vice President, Planning and Administration
for Morgan Stanley Dean Witter Asset Management and has worked at
DWR or its affiliates since July 1982, serving in both financial
and administrative capacities. From August 1994 to January 1999,
he worked in two separate DWR affiliates, Discover Financial
Services and Novus Financial Corp., culminating as Senior Vice
President. Mr. Harris received his B.A. degree from Boston
College and his M.B.A. in finance from the University of Chicago.
Mark J. Hawley, age 56, served as Chairman of the Board and a
Director of Demeter and DWFCM throughout 1999. Mr. Hawley joined
DWR in February 1989 as Senior Vice President and served as
Executive Vice President and Director of DWR's Product Management
for Individual Asset Management throughout 1999. In this
capacity, Mr. Hawley was responsible for directing the activities
of the firm's Managed Futures, Insurance, and Unit Investment
Trust Business. From 1978 to 1989, Mr. Hawley was a member of
the senior management team at Heinold Asset Management, Inc., a
commodity pool operator, 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. Mr. Hawley
resigned effective January 31, 2000.
All of the foregoing directors have indefinite terms.
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, 1999 there were no persons known to be beneficial
owners of more than 5 percent of the Units.
(b) Security Ownership of Management - At December 31, 1999,
Demeter owned 100 Units of General Partnership Interest
representing a 1.39 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 Annual Report to
Limited Partners for the year ended December 31, 1999 which is
incorporated by reference to Exhibit 13.01 of 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 $493,558 for the year ended December 31, 1999.
In its capacity as the Partnership's trading advisor, DWFCM
received management fees of $264,552 for the year ended December
31, 1999.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and report of independent
auditors, all appearing in the accompanying Annual Report to
Limited Partners for the year ended December 31, 1999, are
incorporated by reference to Exhibit 13.01 of this Form 10-K:
- - Report of Deloitte & Touche LLP, independent auditors, for
the years ended December 31, 1999, 1998 and 1997.
- - Statements of Financial Condition as of December 31, 1999
and 1998.
- - Statements of Operations, Changes in Partners' Capital, and
Cash Flows for the years ended December 31, 1999, 1998 and
1997.
- - Notes to Financial Statements.
With the exception of the aforementioned information and the
information incorporated in Items 7, 8 and 13, the Annual Report
to Limited Partners for the year ended December 31, 1999 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 requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DEAN WITTER MULTI-
MARKET PORTFOLIO L.P.
(Registrant)
BY: Demeter
Management Corporation,
General
Partner
March 29, 2000 BY: /s/ Robert E. Murray
Robert E. Murray, Director,
Chairman of the Board and
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Demeter Management Corporation.
BY: /s/ Robert E. Murray ____ March 29,
2000
Robert E. Murray, Director,
Chairman of the Board and
President
/s/ Joseph G. Siniscalchi ___ March 29,
2000
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III ___ March 29,
2000
Edward C. Oelsner III, Director
/s/ Mitchell M. Merin _______ March 29, 2000
Mitchell M. Merin, Director
/s/ Richard A. Beech ________ March 29, 2000
Richard A. Beech, Director
/s/ Ray Harris ___ March 29,
2000
Ray Harris, Director
/s/ Lewis A. Raibley, III ___ March 29,
2000
Lewis A. Raibley, III, Director, Chief
Financial Officer and Principal
Accounting Officer
EXHIBIT INDEX
Item
3.01 Limited Partnership Agreement of the Partnership, dated as
of June 24, 1988 is incorporated by reference to Exhibit
3.01 and Exhibit 3.02 of the Partnership's Registration
Statement on Form S-1 (File No. 33-21532).
19.01 Supplemental Information Regarding DWFCM dated August 27,
1993 is incorporated by reference to Exhibit 19 of
the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.
13.01 December 31, 1999 Annual Report to Limited Partners is
filed herewith.
Multi-
Market
Portfolio
December 31, 1999
Annual Report
MORGAN STANLEY DEAN WITTER
Demeter Management Corporation
Two World Trade Center
62nd Floor
New York, NY 10048
Telephone (212) 392-8899
Dean Witter Multi-Market Portfolio L.P.
(formerly, Dean Witter Principal Guaranteed Fund)
Annual Report 1999
Dear Limited Partner:
This marks the twelfth annual report for the Dean Witter Multi-Market Portfolio
L.P. (the "Fund"). The Fund began the year at a Net Asset Value per Unit of
$1,205.86 and finished the year at a Net Asset Value per Unit of $1,100.09, re-
flecting a loss of 8.8%. Since its inception in September 1988, the Fund has
increased by 10.0% (a compound annualized return of 0.8%).
Overall, the Fund experienced difficulty in the global interest rate futures
markets primarily from short Australian interest rate futures positions as
prices increased during July and August on the temporary strength in U.S. bonds
and weaker-than-expected business spending data out of Australia. Additional
losses were recorded from short Japanese bond futures positions as prices in-
creased during the first quarter and third quarter. In the currency markets,
losses were recorded throughout a majority of the first quarter from long Aus-
tralian dollar positions as its value dropped significantly relative to the
U.S. dollar on speculation regarding potential currency devaluations in the
Asian region. Early in the third quarter, losses were recorded from long posi-
tions in this currency due to depressed commodities prices, emerging market
concerns and on-going talks that China may eventually devalue its currency.
Newly established short positions in the Australian dollar resulted in addi-
tional losses during September as its value strengthened relative to the U.S.
dollar following the rally in gold prices. Offsetting currency gains were rec-
orded during the third quarter from long positions in the Japanese yen as the
value of the yen climbed to a 44-month high versus the U.S. dollar due to con-
tinued optimism over Japan's economic recovery. The energy markets were profit-
able during March from long positions in oil futures as prices moved signifi-
cantly higher on news that both OPEC and non-OPEC countries had reached an
agreement to cut total output beginning April 1st. Gains were also recorded in
this market during the third quarter after OPEC ministers confirmed that they
would uphold their global cutbacks until April of 2000.
While we are disappointed that the Fund had a difficult year in 1999, we remind
investors that managed futures funds such as Multi-Market Portfolio are de-
signed to provide diversification and non-correlation, that is the ability to
perform independently, of global equities and bonds. Managed futures have his-
torically performed independently of traditional investments, such as stocks
and bonds. Managed futures have historically performed independently of tradi-
tional investments, such as stocks and bonds. This is referred to as non-corre-
lation, or the potential for managed futures to perform when traditional mar-
kets such as stocks and bonds may experience difficulty performing. Of course,
managed futures funds will not automatically be profitable during unfavorable
periods for these traditional investments and vice versa. The degree of non-
correlation of any given managed futures fund will vary, particularly as a re-
sult of market conditions, and some funds will have significantly lesser de-
grees of non-correlation (i.e., greater correlation) with stocks and bonds than
others. 1999 proved to be another strong year for equities, due in large part
to continued growth and stability in most major world economies accompanied by
low inflation. This environment, while strong for equities, provided few major
sustained price trends in the world's futures and currency markets, and as
such, a difficult trading environment for the money manager in this Fund whose
trading strategy relies on the existence of longer-term price trends for trad-
ing opportunities. Nevertheless, we remain confident in the role that managed
futures investments play in the overall investment portfolio, and we believe
this confidence is well-founded based on the longer-term diversified non-corre-
lated returns of this alternative investment. Demeter Management Corporation,
as General Partner to the Fund, has been and continues to be an active investor
with more than $18 million invested among the 24 man-
aged futures funds to which we act as General Partner.
Should you have any questions concerning this report, please feel free to con-
tact Demeter Management Corporation at Two World Trade Center, 62nd Floor, New
York, NY 10048, or your Morgan Stanley Dean Witter Financial Advisor.
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/ Robert E. Murray
Robert E. Murray
Chairman
Demeter Management Corporation
General Partner
Dean Witter Multi-Market Portfolio L.P.
Independent Auditors' Report
The Limited Partners and the General Partner:
We have audited the accompanying statements of financial condition of Dean Wit-
ter Multi-Market Portfolio L.P. (formerly Dean Witter Principal Guaranteed Fund
L.P.) (the "Partnership") as of December 31, 1999 and 1998 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, 1999. These financial
statements are the responsibility of the Partnership's management. Our respon-
sibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of materi-
al misstatement. An audit includes examining, on a test basis, evidence sup-
porting 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 pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, such financial statements present fairly, in all material re-
spects, the financial position of Dean Witter Multi-Market Portfolio L.P. at
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 14, 2000
(March 3, 2000 as to Note 5)
New York, New York
Dean Witter Multi-Market Portfolio L.P.
Statements of Financial Condition
December 31,
--------------------
1999 1998
--------- ----------
$ $
ASSETS
Equity in futures interests trading accounts:
Cash 7,643,949 9,760,647
Net unrealized gain on open contracts 358,067 263,650
--------- ----------
Total Trading Equity 8,002,016 10,024,297
Interest receivable (DWR) 28,719 30,027
Due from DWR -- 214
--------- ----------
Total Assets 8,030,735 10,054,538
========= ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 108,909 57,282
Accrued management fee (DWFCM) 20,077 25,136
--------- ----------
Total Liabilities 128,986 82,418
--------- ----------
PARTNERS' CAPITAL
Limited Partners (7,082.809 and 8,169.739 Units,
respectively) 7,791,740 9,851,534
General Partner (100 Units) 110,009 120,586
--------- ----------
Total Partners' Capital 7,901,749 9,972,120
--------- ----------
Total Liabilities and Partners' Capital 8,030,735 10,054,538
========= ==========
NET ASSET VALUE PER UNIT 1,100.09 1,205.86
========= ==========
The accompanying notes are an integral part of these financial statements.
Dean Witter Multi-Market Portfolio L.P.
Statements of Operations
For the Years Ended
December 31,
-------------------------------
1999 1998 1997
-------- ---------- ---------
$ $ $
REVENUES
Trading profit (loss):
Realized (473,435) 2,510,342 552,341
Net change in unrealized 94,417 (1,434,215) 1,476,857
-------- ---------- ---------
Total Trading Results (379,018) 1,076,127 2,029,198
Interest income (DWR) 326,112 378,635 446,877
-------- ---------- ---------
Total Revenues (52,906) 1,454,762 2,476,075
-------- ---------- ---------
EXPENSES
Brokerage commissions (DWR) 493,558 564,599 675,853
Management fee (DWFCM) 264,552 305,385 341,705
Transaction fees and costs 37,858 43,914 64,968
-------- ---------- ---------
Total Expenses 795,968 913,898 1,082,526
-------- ---------- ---------
Net Income (Loss) (848,874) 540,864 1,393,549
======== ========== =========
Net Income (Loss) Allocation:
Limited Partners (838,297) 515,914 1,352,583
General Partner (10,577) 24,950 40,966
Net Income (Loss) per Unit:
Limited Partners (105.77) 64.23 133.87
General Partner (105.77) 64.23 133.87
Statements of Changes in Partners' Capital
For the Years Ended December 31, 1999, 1998 and 1997
Units of
Partnership Limited General
Interest Partners Partner Total
----------- ---------- -------- ----------
$ $ $
Partners' Capital, December 31,
1996 11,845.388 11,628,908 308,374 11,937,282
Net income -- 1,352,583 40,966 1,393,549
Redemptions (2,384.523) (2,529,988) -- (2,529,988)
---------- ---------- -------- ----------
Partners' Capital, December 31,
1997 9,460.865 10,451,503 349,340 10,800,843
Net income -- 515,914 24,950 540,864
Redemptions (1,191.126) (1,115,883) (253,704) (1,369,587)
---------- ---------- -------- ----------
Partners' Capital, December 31,
1998 8,269.739 9,851,534 120,586 9,972,120
Net loss -- (838,297) (10,577) (848,874)
Redemptions (1,086.930) (1,221,497) -- (1,221,497)
---------- ---------- -------- ----------
Partners' Capital, December 31,
1999 7,182.809 7,791,740 110,009 7,901,749
========== ========== ======== ==========
The accompanying notes are an integral part of these financial statements.
Dean Witter Multi-Market Portfolio L.P.
Statements of Cash Flows
For the Years Ended
December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) (848,874) 540,864 1,393,549
Noncash item included in net income
(loss):
Net change in unrealized (94,417) 1,434,215 (1,476,857)
(Increase) decrease in operating assets:
Interest receivable (DWR) 1,308 4,321 6,874
Due from DWR 214 8,044 (6,630)
Increase (decrease) in operating
liabilities:
Accrued management fee (DWFCM) (5,059) (2,452) (2,831)
Accrued brokerage commissions (DWR) -- -- (14,948)
Accrued transaction fees and costs -- -- (2,350)
---------- ---------- ----------
Net cash provided by (used for) operating
activities (946,828) 1,984,992 (103,193)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions
payable 51,627 (149,581) 21,899
Redemptions of Units (1,221,497) (1,369,587) (2,529,988)
---------- ---------- ----------
Net cash used for financing activities (1,169,870) (1,519,168) (2,508,089)
---------- ---------- ----------
Net increase (decrease) in cash (2,116,698) 465,824 (2,611,282)
Balance at beginning of period 9,760,647 9,294,823 11,906,105
---------- ---------- ----------
Balance at end of period 7,643,949 9,760,647 9,294,823
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
Dean Witter Multi-Market Portfolio L.P.
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Organization--Dean Witter Multi-Market Portfolio L.P. (the "Partnership") is a
limited partnership organized to engage in the speculative trading of futures
contracts, forward contracts and other commodity interests (collectively,
"futures interests").
The general partner for the Partnership is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter Reynolds Inc.
("DWR") and an unaffiliated clearing commodity broker, Carr Futures Inc.
("Carr"), provides clearing and execution services. The Trading Advisor is Dean
Witter Futures & Currency Management Inc. ("DWFCM" or the "Trading Advisor").
Demeter, DWR and DWFCM are wholly-owned subsidiaries of Morgan Stanley Dean
Witter & Co. ("MSDW").
On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean Wit-
ter, Discover & Co. ("DWD"). At that time DWD changed its corporate name to
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"). Effective February 19,
1998, MSDWD changed its corporate name to Morgan Stanley Dean Witter & Co.
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.
Use of Estimates--The financial statements are prepared in accordance with gen-
erally accepted accounting principles, which require management to make esti-
mates and assumptions that affect the reported amounts in the financial state-
ments and related disclosures. Management believes that the estimates utilized
in the preparation of the financial statements are prudent and reasonable. Ac-
tual results could differ from those estimates.
Revenue Recognition--Futures interests are open commitments until settlement
date. They are valued at market on a daily basis and the resulting net change
in unrealized gains and losses are reflected in the change in unrealized profit
(loss) on open contracts from one period to the next in the statements of oper-
ations. 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. For purposes of such interest payments, Net Assets
do not include monies due the Partnership on futures interests, but not actual-
ly received.
Net Income (Loss) per Unit--Net income (loss) per unit of limited partnership
interest ("Unit(s)") is com-
Dean Witter Multi-Market Portfolio L.P.
Notes to Financial Statements--(Continued)
puted using the weighted average number of Units outstanding during the period.
Equity in Futures Interests Trading Accounts--The Partnership's asset "Equity
in futures interests trading accounts," reflected in the statements of finan-
cial condition, consists of (A) cash on deposit with DWR and Carr to be used as
margin for trading and (B) net unrealized gains or losses on open contracts,
which are valued at market, and calculated as the difference between original
contract value and market value.
The Partnership, in the normal course of business, enters into various con-
tracts with Carr acting as its commodity broker. Pursuant to brokerage agree-
ments with Carr, to the extent that such trading results in unrealized gains or
losses, the amounts are offset and reported on a net basis on the Partnership's
statements of financial condition.
The Partnership has offset the fair value amounts recognized for forward con-
tracts executed with the same counterparty as allowable under terms of the mas-
ter netting agreement with Carr, the sole counterparty on such contracts. The
Partnership has consistently applied its right to offset.
Brokerage Commissions and Related Transaction Fees and Costs--Brokerage commis-
sions are accrued 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. Total bro-
kerage commissions, transaction fees and costs are capped at 13/20 of 1% (a
7.8% maximum annual rate) per month of the Partnership's month-end Net Assets.
Operating Expenses--The Partnership incurs a monthly management fee and may in-
cur an incentive fee. Demeter and/or DWR bear all other operating expenses.
Redemptions--Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the last day of any month upon five business
days advance notice by redemption form to Demeter.
Distributions--Distributions, other than 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 Multi-Market Portfolio 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 Part-
nership Agreement occur.
2. Related Party Transactions
The Partnership pays brokerage commissions to DWR as described in Note 1. The
Partnership's cash is on deposit with DWR and Carr in futures interests trading
accounts to meet margin requirements as needed. DWR pays interest on these
funds as described in Note 1.
Demeter, on behalf of the Partnership and itself, has entered into a Management
Agreement with DWFCM to make all trading decisions for the Partnership.
Compensation to DWFCM by the Partnership consists of a management fee and an
incentive fee as follows:
Management Fee--As of the last day of each month, the Partnership pays a month-
ly management fee equal to 1/4 of 1% (a 3% annual rate) of the Partnership's
adjusted Net Assets, as defined, that are allocated to futures interest trading
accounts which DWFCM trades on behalf of the Partnership.
Incentive Fee--The Partnership will pay a quarterly incentive fee equal to 15%
of the trading profits earned by the Partnership as of the end of each calendar
quarter. Trading profits represent the amount by which profits from futures,
forwards and options trading exceed losses after brokerage commissions, manage-
ment fees and transaction fees and costs have been deducted. No incentive fee
will be paid until the existing trading loss carryforward (adjusted for
redemptions) has been recovered.
3. Financial Instruments
The Partnership trades futures contracts, forward contracts and other commodity
interests. 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 un-
der the terms of the contracts. There are numerous factors which may signifi-
cantly influence the market value of these contracts, including interest rate
volatility.
In June 1998, the Financial Accounting Standards Board ("FASB") issued State-
ment of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Deriva-
tive Instruments and Hedging Activities" effective for fiscal years beginning
after June 15, 1999. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Investments and Hedging Activities--Deferral of the Effective
Date of SFAS No. 133," which defers the re-
Dean Witter Multi-Market Portfolio L.P.
Notes to Financial Statements--(Continued)
quired implementation of SFAS No. 133 until fiscal years beginning after June
15, 2000. However, the Partnership had previously elected to adopt the provi-
sions of SFAS No. 133 beginning with the fiscal year ended December 31, 1998.
SFAS No. 133 supercedes SFAS No. 119 and No. 105, which required the disclosure
of average aggregate fair values and contract/notional values, respectively, of
derivative financial instruments for an entity which carries its assets at fair
value. The application of SFAS No. 133 does not have a significant effect on
the Partnership's financial statements.
The net unrealized gains on open contracts are reported as a component of "Eq-
uity in futures interests trading accounts" on the statements of financial con-
dition and totaled $358,067 and $263,650 at December 31, 1999 and 1998, respec-
tively.
Of the $358,067 net unrealized gain on open contracts at December 31, 1999,
$327,051 related to exchange-traded futures contracts and $31,016 related to
off-exchange-traded forward currency contracts.
Of the $263,650 net unrealized gain on open contracts at December 31, 1998,
$638,989 related to exchange-traded futures contracts and $(375,339) related to
off-exchange-traded forward currency contracts.
Exchange-traded futures contracts held by the Partnership at December 31, 1999
and 1998 mature through September 2000 and June 1999, respectively. Off-
exchange-traded forward currency contracts held by the Partnership at December
31, 1999 and December 31, 1998 mature through March 2000, and April 1999, re-
spectively.
The Partnership has credit risk associated with counterparty nonperformance.
The credit risk associated with the instruments in which the Partnership is in-
volved is limited to the amounts reflected in the Partnership's statements of
financial condition.
The Partnership also has credit risk because DWR and Carr act as the futures
commission merchants or the counterparties, with respect to most of the Part-
nership's assets. Exchange-traded futures contracts are marked to market on a
daily basis, with variations in value settled on a daily basis. Each of DWR and
Carr, as a futures commission merchant for the Partnership's exchange-traded
futures 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 contracts, including an amount equal to the
net unrealized gains on
Dean Witter Multi-Market Portfolio L.P.
Notes to Financial Statements--(Continued)
all open futures contracts, which funds, in the aggregate, totaled $7,971,000
and $10,399,636 at December 31, 1999 and 1998, 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 segregat-
ed. 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. The Partnership has a netting agreement with Carr.
This agreement, which seeks to reduce both the Partnership's and Carr's expo-
sure on off-exchange-traded forward currency contracts, should materially de-
crease the Partnership's credit risk in the event of Carr's bankruptcy or in-
solvency. Carr's parent, Credit Agricole Indosuez, has guaranteed to the Part-
nership payment of the net liquidating value of the Partnership's account with
Carr (including foreign currency contracts).
4. Legal Matters
The class actions first filed in 1996 in California and in New York State
courts were each dismissed in 1999. On September 6, 10, and 20, 1996, and on
March 13, 1997, purported class actions were filed in the Superior Court of the
State of California, County of Los Angeles, on behalf of all purchasers of in-
terests in limited partnership commodity pools sold by DWR. Named defendants
include DWR, Demeter, DWFCM, MSDW, certain limited partnership commodity pools
of which Demeter is the general partner (all such parties referred to hereafter
as the "Morgan Stanley Dean Witter Parties") and certain trading advisors to
those pools. On June 16, 1997, the plaintiffs in the above actions filed a con-
solidated 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 du-
ty, fraudulent and unfair business practices, unjust enrichment, and conversion
in the sale and operation of the various limited partnership commodity pools.
The complaints seek unspecified amounts of compensatory and punitive damages
and other relief. The court entered an order denying class certification on Au-
gust 24, 1999. On September 24, 1999, the court entered an order dismissing the
case without prejudice on consent. 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 Morgan Stanley Dean Witter
Parties and certain trading advisors on behalf of all purchasers of interests
in various limited partnership commodity pools sold by DWR. A consolidated and
amended com-
Dean Witter Multi-Market Portfolio L.P.
Notes to Financial Statements--(Concluded)
plaint 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. The complaints seek unspeci-
fied amounts of compensatory and punitive damages and other relief. The New
York Supreme Court dismissed the New York action in November 1998, but granted
plaintiffs leave to file an amended complaint, which they did in early December
1998. The defendants filed a motion to dismiss the amended complaint with prej-
udice on February 1, 1999. By decision dated December 21, 1999, the New York
Supreme Court dismissed the case with prejudice.
In addition, on December 16, 1997, upon motion of the plaintiffs, the action
pending in the Superior Court of the State of Delaware was voluntarily dis-
missed without prejudice.
5. Subsequent Event
On March 3, 2000, the plaintiffs in the New York action referred to in Note 4
filed an appeal of the order dismissing the consolidated complaint.
MORGAN STANLEY DEAN WITTER & CO.
Two World Trade Center
62nd Floor
New York, NY 10048
Presorted
First Class Mail
U.S. Postage Paid
Brooklyn, NY
Permit No. 148