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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 0-23826
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 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:
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)
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: $19,588,331 at January 31,
2000.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
DEAN WITTER WORLD CURRENCY FUND 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. . . . . . . . . . . . . . . . .
. . .4-6
Item 4. Submission of Matters to a Vote of Security Holders
. . .6
Part II.
Item 5. Market for the Registrant's Partnership
Units and Related Security Holder Matters . .. .
. . . . . 7
Item 6. Selected Financial Data . . . . . . . . . . . .. .
. . . .8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . .
. . 9-21
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . .
. 21-30
Item 8. Financial Statements and Supplementary Data . . .
. . . 30
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . .
. . . . .31
Part III.
Item 10. Directors and Executive Officers of the
Registrant . . 32-36
Item 11. Executive Compensation . . . . . . . . . . . . . .
. . . 36
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . .
. . . . 36
Item 13. Certain Relationships and Related Transactions
. . 36-37
Part IV.
Item 14.Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . .
. . . 38
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 2, 1993 I
Annual Report to Dean Witter
World Currency Fund 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 World Currency
Fund L.P. (the "Partnership") is a Delaware limited partnership
organized to engage primarily in the speculative trading of
commodity futures, options and forward contracts on foreign
currencies (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. Both Demeter and DWR are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW"). John
W. Henry & Company and Millburn Ridgefield Corporation are the
trading advisors (the "Trading Advisors") to the Partnership.
The Partnership's Net Asset Value per unit of limited partnership
interest ("Unit(s)") as of December 31, 1999 was $993.59,
representing an increase of 2.7 percent from the Net Asset Value
per Unit of $967.90 at December 31, 1998.
(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 Advisors. For a
detailed description of the different facets of the Partnership's
business, see those portions of the Partnership's prospectus,
dated June 2, 1993, (the "Prospectus") incorporated by reference
in this Form 10-K, 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
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, Dean Witter
Futures & Currency Management Inc. ("DWFCM"), MSDW, the
Partnership, 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, 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. 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 LIMITED PARTNERSHIP
INTERESTS 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 2,734.
(c) Distributions
No distributions have been made by the Partnership since it
commenced operations on April 2, 1993. 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) 2,391,766 1,274,004 12,366,515 5
,746,636 4,814,020
Net Income (Loss) 684,200 (682,212) 9,849,370 3,438,844
1,480,810
Net Income (Loss)
Per Unit (Limited
& General Partners) 25.69 (25.89) 280.62 81.88
12.50
Total Assets 20,709,272 25,105,387 32,260,016 27,427,364
31,591,379
Total Limited
Partners' Capital 19,950,579 24,485,689 30,674,029 25,668,776
29,734,237
Net Asset Value Per
Unit 993.59 967.90 993.79 713.17
631.29
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 each 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, forwards, and options, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.
The Partnership's investment in futures, forwards, and options
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 or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options 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 or options
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
Advisors and the ability of each Trading Advisors' 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 Advisors trade 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 Advisors 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
Advisors' trading activities on behalf of the Partnership and how
the Partnership has performed in the past.
At December 31, 1999, the Partnership's total capital was
$20,261,082, a decrease of $4,527,081 from the Partnership's
total capital of $24,788,163 at December 31, 1998. For the year
ended December 31, 1999, the Partnership generated net income of
$684,200, and total redemptions aggregated $5,211,281.
For the year ended December 31, 1999, the Partnership recorded
total trading revenues, including interest income, of $2,391,766
and posted an increase in Net Asset Value per Unit. Gains of
approximately 13.61% were recorded from
euro positions. Throughout a majority of the first half of the
year, gains were recorded from short positions in the euro as the
value of the European common currency declined relative to the
U.S. dollar on the strength of the U.S. economy, concerns
pertaining to the economic health of Europe and growing
uncertainty about the military action in Yugoslavia. During
November, currencies such as the euro and the Swiss franc resumed
previous downward trends and thus proved profitable for the
Partnership. The Japanese yen produced gains of approximately
1.34%, primarily from long positions as the value of the yen
strengthened versus the U.S. dollar and other major currencies on
optimism regarding economic recovery in that country. A portion
of the Partnership's overall gains was offset by losses of
approximately 5.03% experienced from short-term volatility in the
British pound throughout a majority of the year. Additional
losses of approximately 3.93% were incurred primarily during
January from short Norwegian krone positions as its value
strengthened versus the U.S. dollar due to a rise in oil prices
and the possibility that this Scandinavian currency could be
linked to the euro sometime in the future. Smaller losses were
recorded in trading several emerging market currencies, such as
the Singapore dollar, approximately 2.30%, and the South African
rand, approximately 1.30%, primarily during October's difficult
period for trend-following money managers. Total expenses for
the year were $1,707,566, resulting in net income of $684,200.
The value of a Unit increased from $967.90 at December 31, 1998
to $993.59 at December 31, 1999.
At December 31, 1998, the Partnership's total capital was
$24,788,163, a decrease of $7,085,868 from the Partnership's
total capital of $31,874,031 at December 31, 1997. For the year
ended December 31, 1998, the Partnership generated a net loss of
$682,212, and total redemptions aggregated $6,403,656.
For the year ended December 31, 1998, the Partnership recorded
total trading revenues, including interest income, of $1,274,004
and posted a decrease in Net Asset Value per Unit. The
Partnership recorded a net loss during 1998, primarily from
losses of approximately 3.72% due to trendless movement in the
value of the British pound relative to the U.S. dollar throughout
a majority of the year. Additional losses were recorded from the
German mark, by approximately 3.18%, the Swiss franc, by
approximately 3.00%, the Australian dollar, by approximately
1.89%, the euro, by approximately 1.85% and the Norwegian krone,
by approximately 1.43%. These losses were mitigated by gains
recorded of approximately 7.25% from the South African rand
primarily during the second quarter from short positions, as
economic concerns in South Africa weighed on its currency.
Additional gains of approximately 6.69% were recorded from
Japanese yen primarily during the fourth quarter from long
positions as the yen strengthened amid optimism regarding the
Japanese financial crisis. Total expenses for the year were
$1,956,216, resulting in a net loss of $682,212. The value of a
Unit decreased from $993.79 at December 31, 1997 to $967.90 at
December 31, 1998.
At 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 recorded
total trading revenues, including interest income, of $12,366,515
and posted an increase in Net Asset Value per Unit. Overall, the
Partnership recorded extremely strong profits for the year.
Profits were recorded due to a strengthening in value of the U.S.
dollar versus most world currencies throughout much of 1997.
Gains of approximately 13.93% were recorded from the Japanese yen
primarily from short positions during January and February.
Additional gains were recorded from the German mark, by
approximately 11.06% and Singapore dollars, by approximately
5.00% primarily 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
Partnership was again able to capture profits from short
positions in the Japanese yen and other Pacific Rim currencies.
Total expenses for the year were $2,517,145, resulting in net
income of $9,849,370. The value of a Unit increased from $713.17
at December 31, 1996 to $993.79 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 Advisors were 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 Advisors' internal controls, the
Trading Advisors 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 Advisors and Demeter
monitor the Partnership's trading activities to ensure compliance
with the trading policies. Demeter may require the Trading
Advisors 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, options 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 each Trading Advisor
throughout 1999 in their Year 2000 compliance and, where
applicable, tested its external interfaces, with Carr and the
Trading Advisors. In addition, Demeter, the commodity brokers,
the Trading Advisors 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 Advisors from trading those
sovereign currencies and thereby limits their 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 its
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 Advisors 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 $20 million and $25 million,
respectively.
Primary Market December 31, 1999
December 31, 1998
Risk Category Value at Risk Value at
Risk
Currency (2.09)% (1.41)%
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
Currency (4.30)% (2.09)% (3.25)%
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.
The 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 90%) 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 Advisors 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 is the primary trading risk exposure of the
Partnership as of December 31, 1999, in its market sector. It
may be anticipated however, that this market exposures will vary
materially over time.
Currency. The Partnership's currency exposure is to exchange
rate fluctuations, primarily fluctuations which 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 major exposures
were in the euro currency crosses and outright U.S. dollar
positions. (Outright positions consist of the U.S. dollar vs.
other currencies. These other currencies include the major and
minor currencies).
Demeter does not anticipate that the risk profile of the
Partnership's currency sector will change significantly in the
future. 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.
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 does not have foreign
currency balances as of December 31, 1999.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisors, 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 Trading Advisors, each of
whose strategies focus on different market sectors and trading
approaches, and monitoring the performance of the Trading
Advisors daily. In addition, the Trading Advisors establish
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 instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisors.
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
ACOUNTING 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 312.506 Units of General Partnership Interest
representing a 1.53 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 $909,447 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 WORLD
CURRENCY FUND L.P.
(Registrant)
BY: Demeter Management
Corporation,
General Partner
March 30, 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 30,
2000
Robert E. Murray, Director,
Chairman of the Board and
President
/s/ Joseph G. Siniscalchi _______ March 30,
2000
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III ________ March 30,
2000
Edward C. Oelsner III, Director
/s/ Mitchell M. Merin ______ March 30, 2000
Mitchell M. Merin, Director
/s/ Richard A. Beech ______ March 30, 2000
Richard A. Beech, Director
/s/ Ray Harris _____ March 30,
2000
Ray Harris, Director
/s/ Lewis A. Raibley, III __________ March 30, 2000
Lewis A. Raibley, III, Director, Chief
Financial Officer and Principal Accounting
Officer
EXHIBIT INDEX
ITEM
METHOD OF FILING
3.01 Limited Partnership Agreement of
the Partnership, dated as of
December 8, 1992. (1)
10.01 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.
10.02Management Agreement among the
Partnership, Demeter and JWH
dated as of June 1, 1995. (3)
10.03
Amended and Restated Customer Agreement,
dated as of December 1, 1997, between
the Partnership and Dean Witter Reynolds Inc. (4)
10.04
Customer Agreement, dated as of December 1,
1997, among the Partnership, Carr Futures
Inc., and Dean Witter Reynolds Inc. (5)
10.05
International Foreign Exchange Master Agreement,
dated as of August 1, 1997, between the
Partnership and Carr Futures, Inc. (6)
13.01 December
31, 1999 Annual Report to Limited Partners. (7)
(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 10.03 of the
Partnership's Annual Report on Form 10K for the fiscal year
ended December 31, 1995.
(4) Incorporated by reference to Exhibit 10.03 of the
Partnership's Form 10-K (File No. 0-23826) for fiscal year ended
December 31, 1998.
(5) Incorporated by reference to Exhibit 10.04 of the
Partnership's Form 10-K (File No. 0-23826) for fiscal year ended
December 31, 1998.
(6) Incorporated by reference to Exhibit 10.05 of the
Partnership's Form 10-K (File No. 0-23826) for fiscal year ended
December 31, 1998.
(7) Filed herewith.
World
Currency
Fund
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 World Currency Fund L.P.
Annual Report
1999
Dear Limited Partner:
This marks the seventh 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 $967.90, and increased by 2.7% to $993.59 on December 31, 1999. The
Fund has decreased by 0.6% since its inception of trading in April 1993 (a com-
pound annualized return of -0.1%).
Overall, the Fund recorded a gain in Net Asset Value per Unit during 1999. The
most significant gains were recorded throughout the first half of the year from
short positions in the euro as the value of the European common currency de-
clined relative to the U.S. dollar on the strength of the U.S. economy, con-
cerns pertaining to the economic health of Europe, and growing uncertainty
about the military action in Yugoslavia. During November, currencies such as
the euro, Swiss franc and Japanese yen resumed previous downward trends and
thus proved profitable for the Fund. Long Japanese yen positions were also
profitable as the value of the yen strengthened versus the U.S. dollar and
other major currencies on optimism regarding economic recovery in that country.
A portion of the Fund's overall gains was offset by losses experienced from
short-term volatility experienced in the British pound throughout a majority of
the year. Additional losses were incurred during January from short Norwegian
krone positions as its value strengthened versus the U.S. dollar due to a rise
in oil prices and the possibility that this Scandinavian currency could be
linked to the euro sometime in the future. Smaller losses were recorded in
trading several emerging market currencies, such as the Singapore dollar and
South African rand, primarily during October's difficult period for trend-fol-
lowing money managers.
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 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 Wit-
ter World Currency 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 responsibility 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 mate-
rial 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 World Currency Fund L.P. at De-
cember 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 6)
New York, New York
Dean Witter World Currency Fund L.P.
Statements of Financial Condition
December 31,
---------------------
1999 1998
---------- ----------
$ $
ASSETS
Equity in futures interests trading
accounts:
Cash 20,485,336 26,130,701
Net unrealized gain (loss) on open contracts 149,925 (1,101,440)
---------- ----------
Total Trading Equity 20,635,261 25,029,261
Interest receivable (DWR) 74,011 76,126
---------- ----------
Total Assets 20,709,272 25,105,387
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 381,996 248,498
Accrued management fees 51,737 62,749
Accrued administrative expenses 14,457 5,977
---------- ----------
Total Liabilities 448,190 317,224
---------- ----------
PARTNERS' CAPITAL
Limited Partners (20,079.269 and 25,297.735 Units,
respectively) 19,950,579 24,485,689
General Partner (312.506 Units) 310,503 302,474
---------- ----------
Total Partners' Capital 20,261,082 24,788,163
---------- ----------
Total Liabilities and Partners' Capital 20,709,272 25,105,387
========== ==========
NET ASSET VALUE PER UNIT 993.59 967.90
========== ==========
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,
--------------------------------
1999 1998 1997
--------- ---------- ----------
$ $ $
REVENUES
Trading profit (loss):
Realized 277,017 2,059,332 11,608,498
Net change in unrealized 1,251,365 (1,876,969) (467,139)
--------- ---------- ----------
Total Trading Results 1,528,382 182,363 11,141,359
Interest income (DWR) 863,384 1,091,641 1,225,156
--------- ---------- ----------
Total Revenues 2,391,766 1,274,004 12,366,515
--------- --------- ----------
EXPENSES
Brokerage commissions (DWR) 909,447 955,692 888,907
Management fees 689,650 869,146 922,702
Administrative expenses 60,280 73,700 75,084
Transaction fees and costs 48,189 57,678 65,913
Incentive fee -- -- 564,539
--------- ---------- ----------
Total Expenses 1,707,566 1,956,216 2,517,145
--------- ---------- ----------
NET INCOME (LOSS) 684,200 (682,212) 9,849,370
========= ========== ==========
Net Income (Loss) Allocation:
Limited Partners 676,171 (677,089) 9,510,523
General Partner 8,029 (5,123) 338,847
Net Income (Loss) per Unit:
Limited Partners 25.69 (25.89) 280.62
General Partner 25.69 (25.89) 280.62
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 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
Net loss -- (677,089) (5,123) (682,212)
Redemptions (6,463.098) (5,511,251) (892,405) (6,403,656)
---------- ---------- --------- ----------
Partners' Capital, December
31, 1998 25,610.241 24,485,689 302,474 24,788,163
Net Income -- 676,171 8,029 684,200
Redemptions (5,218.466) (5,211,281) -- (5,211,281)
---------- ---------- --------- ----------
Partner's Capital,
December 31, 1999 20,391.775 19,950,579 310,503 20,261,082
========== ========== ========= ==========
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,
----------------------------------
1999 1998 1997
---------- ---------- ----------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 684,200 (682,212) 9,849,370
Noncash item included in net income
(loss):
Net change in unrealized (1,251,365) 1,876,969 467,139
(Increase) decrease in operating assets:
Interest receivable (DWR) 2,115 30,847 (19,078)
Net option premiums -- 49,687 180,513
Due from DWR -- -- 40,800
Increase (decrease) in operating
liabilities:
Accrued management fees (11,012) (17,901) 12,240
Accrued administrative expenses 8,480 5,977 (21,908)
Accrued brokerage commissions (DWR) -- -- (26,388)
Accrued transaction fees and costs -- -- (1,702)
---------- ---------- ----------
Net cash provided by (used for)
operating activities (567,582) 1,263,367 10,480,986
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions
payable 133,498 (56,837) (473,690)
Redemptions of Units (5,211,281) (6,403,656) (4,505,270)
---------- ---------- ----------
Net cash used for financing activities (5,077,783) (6,460,493) (4,978,960)
---------- ---------- ----------
Net increase (decrease) in cash (5,645,365) (5,197,126) 5,502,026
Balance at beginning of period 26,130,701 31,327,827 25,825,801
---------- ---------- ----------
Balance at end of period 20,485,336 26,130,701 31,327,827
========== ========== ==========
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 primarily in the speculative trading of
commodity futures, options and forward contracts on foreign currencies (collec-
tively, "futures interests").
The general partner for the Partnership is Demeter Management Corporation ("De-
meter"). The non-clearing commodity broker is Dean Witter Reynolds Inc. ("DWR")
and an unaffiliated clearing commodity broker, Carr Futures Inc. ("Carr"), pro-
vides clearing and execution services. Demeter and DWR are wholly-owned subsid-
iaries 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.
The trading advisors for the Partnership are John W. Henry & Company, Inc.
("JWH") and Millburn Ridgefield Corporation ("Milburn"), (the "Trading Advi-
sors").
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 prof-
its (loss) on open contracts from one period to the next in the statements of
operations. 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 As-
sets do not include monies due the Partnership on futures interests, but not
actually received.
Net Income (Loss) per Unit--Net income (loss) per unit of limited partnership
interest ("Unit(s)") is computed using
Dean Witter World Currency Fund L.P.
Notes to Financial Statements--(Continued)
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 financial
condition, consists of (A) cash on deposit with DWR and Carr to be used as mar-
gin for trading; (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, and (C) the net option premiums, which represent the
net of all monies paid and/or received for such option premiums.
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 in 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--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.
Brokerage commissions and transaction fees are capped at 13/20 of 1% per month
(a maximum 7.8% annual rate) of the Partnership's month-end Net Assets.
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 av-
erage month-end Net Assets. These include filing fees, clerical, administra-
tive, 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 redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
Dean Witter World Currency Fund L.P.
Notes to Financial Statements--(Continued)
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.
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 pays DWR brokerage commissions 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.
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 (a 3% annual rate) of the Partnership's adjusted Net Assets as of
the end of each month.
Incentive Fee--The Partnership pays a quarterly incentive fee to each trading
advisor equal to 17.5% of trading profits experienced with respect to the Net
Assets allocated to such trading advisor as of the end of each calendar quar-
ter. Trading profits represent the amount by which profits from futures, for-
wards and options trading exceed losses after brokerage commissions, management
fees, transaction fees and costs and administrative expenses are deducted. 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 Units, the incentive fee, (earned through the redemption date), is paid
to such advisor on those redeemed units in the month of redemption.
4. Financial Instruments
The Partnership trades futures, options and forward contracts on foreign cur-
rencies. 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.
Dean Witter World Currency Fund L.P.
Notes to Financial Statements--(Continued)
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 Instruments and Hedging Activities--Deferral of the Effective
Date of SFAS No. 133," which defers the required implementation of SFAS No. 133
until fiscal years beginning after June 15, 2000. However, the Partnership had
previously elected to adopt the provisions of SFAS No. 133 beginning with the
fiscal year ended December 31, 1998. SFAS No. 133 supersedes 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 gain (loss) on open contracts are reported as a component of
"Equity in futures interests trading accounts" on the statements of financial
condition and totaled $149,925 and ($1,101,440) at December 31, 1999 and 1998,
respectively.
The $149,925 net unrealized gain on open contracts at December 31, 1999 and the
($1,101,440) net unrealized loss on open contracts at December 31, 1998 related
to off-exchange-traded forward currency contracts.
Off-exchange-traded forward currency contracts held by the Partnership at De-
cember 31, 1999 and 1998 mature through March 2000 and March 1999, respective-
ly.
The Partnership has credit risk associated with counterparty nonperformance.
The credit risk associated with the instruments in which the Partnership is
involved is limited to the amounts reflected in the Partnership's statements of
financial condition.
The Partnership also has credit risk because DWR or Carr act as the futures
commission merchants or the counterparties, with respect to most of the Part-
nerships' assets. Exchange-traded futures and futures-styled options 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 and futures-styled 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
futures-styled option contracts, including an amount equal to the
Dean Witter World Currency Fund L.P.
Notes to Financial Statements--(Continued)
net unrealized gains/(losses) on all open futures and futures-styled option
contracts, which funds totaled $20,485,336 and $26,130,701 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 (loss) 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.
The Partnership has a netting agreement with Carr. This agreement, which seeks
to reduce both the Partnership's and Carr's exposure on off-exchange-traded
forward currency contracts, should materially decrease the Partnership's credit
risk in the event of Carr's bankruptcy or insolvency. Carr's parent, Credit
Agricole Indosuez, has guaranteed to the Partnership payment of the net liqui-
dating value of the Partnership's account with Carr (including foreign currency
contracts).
5. 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, Dean Witter Futures & Currency Management Inc., MSDW, the
Partnership, 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 Cor-
porations 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 com-
plaints 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
Dean Witter World Currency Fund L.P.
Notes to Financial Statements--(Concluded)
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 opera- tion of the various limited partner-
ship 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 dis-
missed without prejudice.
6. Subsequent Event
On March 3, 2000, the plaintiffs in the New York action referred to in Note 5
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
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