UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Period ended March 31, 1997 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 33-80146
DEAN WITTER SPECTRUM STRATEGIC L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3782225
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
c/o Demeter Management Corp.
Two World Trade Center, New York, NY 62 Fl. 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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<TABLE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1997
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition March 31, 1997
(Unaudited) and December 31, 1996.....................2
Statements of Operations for the Quarters Ended
March 31, 1997 and 1996 (Unaudited)...................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 1997 and 1996 (Unaudited)....4
Statements of Cash Flows for the Quarters Ended
March 31, 1997 and 1996 (Unaudited)...................5
Notes to Financial Statements (Unaudited).......6-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..........12-16
Part II. OTHER INFORMATION
Item 1. Legal Proceedings..............................17-18
Item 6. Exhibits and Reports on Form 8-K..................19
</TABLE>
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<TABLE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1997 1996
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in Commodity futures trading accounts:
Cash 48,818,325 45,997,912
Net unrealized gain on open contracts 5,426,798 140,355
Net option premiums (4,223) (45,325)
Total Trading Equity 54,240,900 46,092,942
Subscriptions receivable 2,854,243 833,091
Interest receivable (DWR) 177,416 163,643
Total Assets 57,272,559 47,089,676
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued brokerage commissions (DWR) 345,216 323,442
Redemptions payable 300,328 1,490,536
Incentive fees payable 299,585 -
Accrued management fees 167,377 156,821
Total Liabilities 1,112,506 1,970,799
Partners' Capital
Limited Partners (4,459,504.318 and
4,184,723.907 Units, respectively) 55,561,469 44,645,423
General Partner (48,043.831 and
44,377.944 Units respectively) 598,584 473,454
Total Partners' Capital 56,160,053 45,118,877
Total Liabilities and Partners' Capital 57,272,559 47,089,676
NET ASSET VALUE PER UNIT 12.46 10.67
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
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<TABLE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 3,635,449 (1,315,884)
Net change in unrealized 5,286,443 (445,487)
Total Trading Results 8,921,892 (1,761,371)
Interest Income (DWR) 483,943 333,537
Total Revenues 9,405,835 (1,427,834)
EXPENSES
Brokerage commissions (DWR) 966,423 741,949
Management fees 468,569 339,178
Incentive fees 299,585 210,774
Total Expenses 1,734,577 1,291,901
NET INCOME (LOSS) 7,671,258 (2,719,735)
NET INCOME (LOSS) ALLOCATION
Limited Partner 7,591,128 (2,692,588)
General Partner 80,130 (27,147)
NET INCOME (LOSS) PER UNIT
Limited Partners 1.79 (.87)
General Partner 1.79 (.87)
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 1997 and 1996
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital
December 31, 1995 2,935,591.820 $32,132,595 $330,337 $32,462,932
Continuous Offering 587,070.509 6,133,712 60,000 6,193,712
Net Loss - (2,692,588) (27,147) (2,719,735)
Redemptions (52,459.721) (560,700) - (560,700)
Partners' Capital
March 31, 1996 3,470,202.608 $35,013,019 $363,190 $35,376,209
Partners' Capital
December 31, 1996 4,229,101.851 $44,645,423 $473,454 $45,118,877
Continuous Offering 467,490.212 5,485,719 45,000 5,530,719
Net Income - 7,591,128 80,130 7,671,258
Redemptions (189,043.914) (2,160,801) - (2,160,801)
Partners' Capital
March 31, 1997 4,507,548.149 $55,561,469 $598,584 $56,160,053
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1997 1996
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) 7,671,258 (2,719,735)
Noncash item included in net income (loss):
Net change in unrealized (5,286,443) 445,487
Increase in operating assets:
Net option premiums (41,102) (119,378)
Interest receivable (DWR) (13,773) (595)
Increase (decrease) in operating liabilities:
Accrued brokerage commissions (DWR) 21,774 36,507
Incentive fees payable 299,585 (198,924)
Accrued management fees 10,556 16,689
Net cash provided by (used for) operating activities 2,661,855 (2,539,949)
CASH FLOWS FROM FINANCING ACTIVITIES
Continuous offering 5,530,719 6,193,712
Increase in subscriptions receivable (2,021,152) (205,483)
Increase (decrease) in redemptions payable (1,190,208) 172,990
Redemptions of units (2,160,801) (560,700)
Net cash provided by financing activities 158,558 5,600,519
Net increase in cash 2,820,413 3,060,570
Balance at beginning of period 45,997,912 29,593,927
Balance at end of period 48,818,325 32,654,497
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management,
all adjustments necessary for a fair presentation of the results
of operations and financial condition. The financial statements
and condensed notes herein should be read in conjunction with the
Partnership's December 31, 1996 Annual Report on Form 10K.
1. Organization
Dean Witter Spectrum Strategic L.P. (the "Partnership") is a
limited partnership organized to engage in the speculative
trading of futures and forward contracts, options on future
contracts and on physical commodities, and other commodity
interests, including foreign currencies, financial instruments,
precious and industrial metals, energy products and
agriculturals. The general partner of the Partnership, Demeter
Management Corporation ("Demeter"), has retained Blenheim
Investments, Inc., A. Gary Shilling & Company, Inc., and
Willowbridge Associates Inc. as the trading advisors of the
Partnership. Both Demeter and the commodity broker, Dean Witter
Reynolds Inc. ("DWR") are wholly owned subsidiaries of Dean
Witter, Discover & Co. ("DWD").
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Related Party Transactions
The Partnership's cash is on deposit with DWR in commodity
trading accounts to meet margin requirements as needed. DWR pays
interest on these funds based on prevailing U.S. Treasury Bill
rates. Brokerage expenses incurred by the Partnership are paid
to DWR.
3. Financial Instruments
The Partnership trades futures and forward contracts in interest
rates, stock indices, commodities, currencies, petroleum and
precious metals. Futures and forwards represent contracts for
delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms
of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility. At March 31, 1997 and
December 31, 1996, open contracts were:
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Contract or Notional Amount
March 31, 1997 December 31, 1996
$ $
Exchange-Traded Contracts
Financial Futures:
Commitments to Purchase 13,928,000 15,204,000
Commitments to Sell 185,298,000 28,092,000
Options Written 1,179,000 5,212,000
Commodity Futures:
Commitments to Purchase 174,529,000 36,735,000
Commitments to Sell 38,474,000 16,911,000
Options Written 31,315,000 2,126,000
Foreign Futures:
Commitments to Purchase 83,446,000 37,389,000
Commitments to Sell 21,070,000 10,787,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 238,000 1,157,000
Commitments to Sell 177,000 1,121,000
A portion of the amounts indicated as off-balance-sheet risk in
forward currency contracts is due to offsetting forward
commitments to purchase and to sell the same currency on the same
date in the future. These commitments are economically
offsetting, but are not offset in the forward market until the
settlement date.
The unrealized gain on open contracts is reported as a component
of "Equity in Commodity futures trading accounts" on the
Statement of Financial Condition and totaled $5,426,798 and
$140,355 at March 31, 1997 and December 31, 1996, respectively.
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Of the $5,426,798 net unrealized gain on open contracts at March
31, 1997, $5,427,548 related to exchange-traded futures contracts
and $(750) related to off-exchange-traded forward currency
contracts. Of the $140,355 net unrealized gain on open contracts
at December 31, 1996, $140,193 related to exchange-traded futures
contracts and $162 related to off-exchange-traded forward
currency contracts.
Exchange-traded futures contracts held by the Partnership at
March 31, 1997 and December 31, 1996 mature through September
1998 and December 1997, respectively. Off-exchange-traded
forward currency contracts held by the Partnership at March 31,
1997 and December 31, 1996 mature through April 1997 and January
1997, respectively. The contract amounts in the above table
represent the Partnership's extent of involvement in the
particular class of financial instrument, but not the credit risk
associated with counterparty nonperformance. The credit risk
associated with these instruments is limited to the amounts
reflected in the Partnership's Statements of Financial Condition.
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Partnership also has credit risk because DWR acts as the
futures commission merchant or the sole counterparty, with
respect to most of the Partnership's assets. Exchange-traded
futures and options contracts are marked to market on a daily
basis, with variations in value settled on a daily basis. DWR,
as the futures commission merchant for all of the Partnership's
exchange-traded futures contracts, is required pursuant to
regulations of the Commodity Futures Trading Commission to
segregate from its own assets and for the sole benefit of its
commodity customers all funds held by DWR with respect to
exchange-traded futures and options contracts including an amount
equal to the net unrealized gain on all open futures contracts,
which funds totaled $54,245,873 and $46,138,105 at March 31, 1997
and December 31, 1996, respectively. With respect to the
Partnership's off-exchange-traded forward currency contracts,
there are no daily settlements of variations in value nor is
there any requirement that an amount equal to the net unrealized
gain on open forward contracts be segregated. With respect to
those off-exchange-traded forward currency contracts, the
Partnership is at risk to
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
the ability of DWR, the counterparty on all such contracts, to
perform.
For the quarters ended March 31, 1997 and December 31, 1996, the
average fair value of financial instruments held for trading
purposes was as follows:
March 31, 1997
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 14,293,000 102,917,000
Options on Financial Futures 462,000 1,598,000
Commodity Futures 104,254,000 24,652,000
Options on Commodity Futures 22,809,000 9,492,000
Foreign Futures 66,763,000 14,306,000
Options on Foreign Futures 1,536,000 -
Off-Exchange-Traded
Currency Contracts 784,000 1,976,000
December 31, 1996
Assets Liabilities
$ $
Exchange-Traded Contracts:
Financial Futures 41,783,000 37,098,000
Options on Financial Futures 10,093,000 1,401,000
Commodity Futures 93,183,000 8,843,000
Options on Commodity Futures 17,066,000 2,566,000
Foreign Futures 59,665,000 12,417,000
Options on Foreign Futures 3,267,000 16,000
Off-Exchange-Traded
Currency Contracts 4,367,000 4,704,000
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership's assets are on deposit in separate
commodity interest trading accounts with DWR, and are used by the
Partnership as margin to engage in commodity futures, forward
contracts on foreign currencies and other commodity interest
trading. DWR holds such assets in either designated depositories
or in securities approved by the Commodity Futures Trading
Commission for investment of customer funds. The Partnership's
assets held by DWR may be used as margin solely for the
Partnership's trading. Since the Partnership's sole purpose is
to trade in commodity futures contracts, forward contracts on
foreign currencies and other commodity interests, it is expected
that the Partnership will continue to own such liquid assets for
margin purposes.
The Partnership's investment in commodity futures and forward
contracts and other commodity interests may be illiquid. If the
price for the futures contract for a particular commodity has
increased or decreased by an amount equal to the "daily limit",
positions in the commodity can neither be taken nor liquidated
unless traders are willing to effect trades at or within the
<PAGE>
limit. Commodity futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. Such market conditions could prevent the Partnership
from promptly liquidating its commodity futures positions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets. Redemptions of additional
Units in the future will impact the amount of funds available for
investments in commodity futures contracts and other commodity
interests. As redemptions are at the discretion of Limited
Partners, it is not possible to estimate the amount and
therefore, the impact of future redemptions.
<PAGE>
Results of Operations
For the Quarter Ended March 31, 1997
For the quarter ended March 31, 1997, the Partnership's total
trading revenues including interest income were $9,405,835.
During the first quarter, the Partnership posted an increase in
Net Asset Value per Unit. The most significant gains were
recorded during February in the energy markets from short crude,
heating and gas oil futures positions as oil prices moved lower.
Additional gains were recorded from long positions in silver and
base metals futures as prices increased. Trading gains were also
recorded in the agricultural markets from long soybean futures
positions as prices moved higher in February and March. In the
currency markets, gains were recorded from short positions in the
Swiss franc and Japanese yen as the value of the U.S. dollar
strengthened versus these currencies during January and February.
Additional gains were recorded during March from short positions
in U.S. interest rate and S&P 500 Index futures as prices in
these markets moved lower. A small portion of the overall gains
for the quarter was offset by losses in global interest rate
futures as prices moved in a choppy pattern during a majority of
the quarter. Total expenses for the period were $1,734,577,
resulting in net income of $7,671,258. The value of an
individual Unit in the
<PAGE>
Partnership increased from $10.67 at December 31, 1996 to $12.46
at March 1997.
For the Quarter Ended March 31, 1996
For the quarter ended March 31, 1996, the Partnership's total
trading losses net of interest income were $1,427,834. During
the first quarter, the Partnership posted a loss in Net Asset
Value per Unit. The most significant losses for the quarter were
recorded during February as a result of sharp and sudden price
movements in many of the markets traded by the Partnership. As a
result, losses were recorded in financial futures from trading
global interest rate futures. In the currency markets, losses
were recorded as the downward move in the value of the Japanese
yen and most European currencies, which had resulted in
significant gains during January, abruptly reversed. Additional
losses were recorded during February in the energy markets due
primarily from trading crude oil futures. Smaller losses were
recorded in the soft commodities markets during the quarter due
to short-term choppy price movement. A portion of the overall
losses for the quarter was offset in March by gains recorded from
transactions involving the Australian dollar and Japanese yen.
Additionally, gains were recorded in the agricultural markets
from
<PAGE>
long corn futures positions as prices moved higher during the
quarter. Smaller gains were recorded from trading hog, soybean
and wheat futures. Gains experienced in the metals markets from
trading silver futures during January also helped to mitigate a
portion of the overall losses for the quarter. Total expenses
for the period were $1,291,901, resulting in a net loss of
$2,719,735. The value of an individual Unit in the Partnership
decreased from $11.06 at December 31, 1995 to $10.19 at March 31,
1996.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar
purported class actions were filed in the Superior Court of the
State of California, County of Los Angeles, on behalf of all
purchasers of interests in limited partnership commodity pools
sold by DWR. Named defendants include DWR, Demeter, Dean Witter
Futures & Currency Management, Inc., DWD, (all such parties
referred to hereafter as the "Dean Witter Parties"), certain
limited partnership commodity pools of which Demeter is the
general partner, and certain trading advisors to those pools.
Similar purported class actions were also filed on September 18
and 20, 1996 in the Supreme Court of the State of New York, New
York County, and on November 14, 1996 in the Superior Court of
the State of Delaware, New Castle County, against the Dean Witter
Parties and certain trading advisors on behalf of all purchasers
of interests in various limited partnership commodity pools sold
by DWR. Generally, these complaints allege, among other things,
that the defendants committed fraud, deceit, misrepresentation,
breach of fiduciary duty, fraudulent and unfair business
practices, unjust enrichment, and conversion in connection with
<PAGE>
the sale and operation of the various limited partnership
commodity pools. The complaints seek unspecified amounts of
compensatory and punitive damages and other relief. It is
possible that additional similar actions may be filed and that,
in the course of these actions, other parties could be added as
defendants. The Dean Witter Parties believe that they have
strong defenses to, and they will vigorously contest, the
actions. Although the ultimate outcome of legal proceedings
cannot be predicted with certainty, it is the opinion of
management of the Dean Witter Parties that the resolution of the
actions will not have a material adverse effect on the financial
condition or the results of operations of any of the Dean Witter
Parties.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dean Witter Spectrum Strategic
L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
May 14, 1997 By: /s/ Patti L. Behnke
Patti L. Behnke
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Spectrum Strategic L.P. and is qualified in its entirety by
reference to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 48,818,325
<SECURITIES> 0
<RECEIVABLES> 3,031,659<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 57,272,559<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 57,272,559<F3>
<SALES> 0
<TOTAL-REVENUES> 9,405,835<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,734,577
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,671,258
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,671,258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,671,258
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $177,416 and subscriptions
receivable of $2,854,243.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $5,426,798 and net option premiums of $(4,223).
<F3>Liabilities include redemptions payable of $300,328, accrued brokerage
commissions of $345,216, incentive fee payable of $299,585 and accrued
management fees of $167,377.
<F4>Total revenues include realized trading revenue of $3,635,449, net
change in unrealized of $5,286,443 and interest income of $483,943.
</FN>
</TABLE>
