UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the period ended December 31, 1996 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ________________to___________________
Commission File Number 33-80146
DEAN WITTER SPECTRUM BALANCED L.P.
(Exact name of registrant as specified in its Limited Partnership Agreement)
DELAWARE 13-3782232
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
c/o Demeter Management Corporation
Two World Trade Center, New York, N.Y. - 62nd Flr. 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment of this Form 10K. [ X ]
State the aggregate market value of the Units of Limited Partnership Interest
held by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which units were sold, or the average bid
and asked prices of such units, as of a specified date within 60 days prior to
the date of filing: $19,128,099.16 at January 31, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
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<TABLE>
DEAN WITTER SPECTRUM BALANCED L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1996
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Page No.
<S> <C>
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . 1
Part I .
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . 2-3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . 4-5
Item 4. Submission of Matters to a Vote of Security Holders . . .5
Part II.
Item 5. Market for the Registrant's Partnership Units and
Related Security Holder Matters . . . . . . . . . . . . .6
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . .7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . .8-13
Item 8. Financial Statements and Supplementary Data. . . . . . .13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . .14
Part III.
Item 10. Directors, Executive Officers, Promoters and
Control Persons of the Registrant . . . . . . . . . 15-18
Item 11. Executive Compensation . . . . . . . . . . . . . . . . 18
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . 18
Item 13. Certain Relationships and Related Transactions . . . . 19
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . 20
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<TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference as
follows:
<CAPTION>
Documents Incorporated Part of Form 10-K
<S> <C>
Partnership's Registration Statement
On Form S-1, File No. 333-3222
(including the Partnership's latest
Prospectus dated April 30, 1996
Supplement October 23, 1996). I and IV
December 31, 1996 Annual Report for
the Dean Witter Spectrum Series II and IV
</TABLE>
<PAGE>
PART I
Item 1. BUSINESS
(a) General Development of Business. Dean Witter Spectrum Balanced
L.P. (the "Partnership") is a Delaware limited partnership formed to
engage in the speculative trading of futures and forward contracts and
options on futures contracts, and on physical commodities, and other
commodity interests, including foreign currencies, financial instruments,
precious and industrial metals, energy products, and agriculturals
(collectively "futures interests").
An aggregate of 10,000,000 Units of limited partnership interest
("Units") in the Partnership and its affiliated partnership's, Dean Witter
Spectrum Strategic L.P. and Dean Witter Spectrum Technical L.P., were
registered pursuant to a Registration Statement on Form S-1 (File No. 33-
80146) which became effective on September 15, 1994, with an arbitrary
allocation of 4,000,000 Units to the Partnership. The offering of units
was underwritten initially at $10.00 per unit on a "best efforts" basis by
Dean Witter Reynolds Inc. ("DWR"), a commodity broker and an affiliated
corporation of the Partnership's General Partner, Demeter Management
Corporation ("Demeter"). The Partnership commenced operations on November
2, 1994 an aggregate of 14,000,000 additional Units in the Partnership
were registered pursuant to the Registration Statement on Form S-1 (File
Nos. 333-00494 and 333-3222), which became effective on January 31, 1996
and April 30, 1996, respectively. Units of limited partnership interest
are offered at monthly closings at a price equal to 100% of the Net Asset
Value per Unit as of the close of business on the last day of the month.
The Partnership's Net Asset Value per Unit as of December 31, 1996 was
$11.63, representing a decrease of 3.6% from the Net Asset Value per Unit
of $12.07 on December 31, 1995. For a more detailed description of the
<PAGE>
Partnership's business, see subparagraph (c).
(b) Financial Information about Industry Segments. The
Partnership's business comprises only one segment for financial reporting
purposes, speculative trading of commodity futures contracts and other
commodity interests. The relevant financial information is presented in
Items 6 and 8.
(c) Narrative Description of Business. The Partnership is in the
business of speculative trading in commodity futures contracts and other
commodity interests, pursuant to trading instructions provided by RXR,
Inc., its independent trading advisors. For a detailed description of the
different facets of the Partnership's business, see those portions of the
Partnership's Prospectus, dated April 30, 1996, filed as part of the
Registration Statement on Form S-1 (File No. 333-3222) (see "Documents
Incorporated by Reference" Page 1), set forth below and the corresponding
portions of the Prospectus Supplement dated October 23, 1996.
Facets of Business
1. Summary 1. "Summary of the Prospectus"
(Pages 1-9).
2. Futures, Options and 2. "The Futures, Options and
Forward Markets and Forwards Markets"
(Pages 142-146).
3. Partnership's Trading 3. "Trading Policies" (Page 33)
Arrangements and "The Trading Managers"
Policies (Pages 58-136).
4. Management of the Part- 4. "The Management Agreements"
nership (Page 137). "The General
Partner" (Pages 48-57) and
"The Commodity Broker" (Page
141). "The Limited
Partnership Agreements"
(Pages 146-149).
5. Taxation of the Partner- 5. "Material Federal Income Tax
ship's Limited Partners Considerations" and "State
and Local Income Tax Aspects"
(Pages 154-161).
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(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 broker) enters
into forward contract transactions where foreign banks are the contracting
party and futures contracts on foreign exchanges.
Item 2. PROPERTIES
The executive and administrative offices are located within the
offices of DWR. The DWR offices utilized by the Partnership are located
at Two World Trade Center, 62nd Floor, New York, NY 10048.
Item 3. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, 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. ("DWFCM"), Dean Witter, Discover
& Co. ("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
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business practices, unjust enrichment, and conversion in connection with
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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS
There is no established public trading market for the Units of
Limited Partnership Interest in the Partnership. The number of holders
of Units at December 31, 1996 was approximately 3,103. No distributions
have been made by the Partnership since it commenced trading operations
on November 2, 1994. Demeter has sole discretion to decide what distri-
butions, if any, shall be made to investors in the Partnership. No
determination has yet been made as to future distributions.
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Item 6. SELECTED FINANCIAL DATA (in dollars)
<CAPTION>
For the
Period from
November 2, 1994
(commencement
For the Years Ended December 31, of operations) to
<S> <C> <C> <C>
1996 1995 December 31, 1994
Total Revenues
(including interest) 893,626 2,329,813 (17,216)
Net Income (Loss) (357,966) 1,559,664 (52,306)
Net Income (Loss)
Per Unit (Limited
& General Partners) (.44) 2.24 (.17)
Total Assets 19,620,770 14,923,682 3,817,871
Total Limited
Partners' Capital 18,499,873 14,604,689 3,701,277
Net Asset Value Per
Unit of Limited
Partnership Interest 11.63 12.07 9.83
</TABLE>
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity. The Partnership's assets are on deposit in separate
commodity interest trading accounts with DWR, the commodity broker, and
are used by the Partnership as margin to engage in commodity futures,
forward contracts and other commodity interest trading. DWR holds such
assets in either designated depositories or in securities approved by the
Commodity Futures Trading Commission ("CFTC") for investment of customer
funds. The Partnership's assets held by DWR may be used as margin solely
for the Partnership's trading. Since the Partnership's sole purpose is to
trade in commodity futures contracts and other commodity interests, it is
expected that the Partnership will continue to own such liquid assets for
margin purposes.
The Partnership's investment in commodity futures contracts, forward
contracts and other commodity interests may be illiquid. If the price for
a futures contract for a particular commodity has increased or decreased
by an amount equal to the "daily limit", positions in the commodity can
neither be taken nor liquidated unless traders are willing to effect
trades at or within the limit. Commodity futures prices have occasionally
moved the daily limit for several consecutive days with little or no
trading. Such market conditions could prevent the Partnership from
promptly liquidating its commodity futures positions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world currencies
have low trading volume and are illiquid, which may prevent the
Partnership from trading in potentially profitable markets or prevent the
Partnership from promptly liquidating unfavorable positions in such
markets and subjecting it to substantial losses.
<PAGE>
Either of these market conditions could result in restrictions on
redemptions.
Market Risk. The Partnership trades futures, options and forward
contracts in interest rates, stock indices, commodities and currencies.
In entering into these contracts there exists a risk to the Partnership
(market risk) that such contracts may be significantly influenced by
market conditions, such as interest rate volatility, resulting in such
contracts being less valuable. If the markets should move against all of
the futures interest positions held by the Partnership at the same time,
and if the Trading Advisor were unable to offset futures interest
positions of the Partnership, the Partnership could lose all of its assets
and the Limited Partners would realize a 100% loss. The Partnership has
established Trading Policies, which include standards for liquidity and
leverage which help control market risk. Both the Trading Advisor and
Demeter monitor the Partnership's trading activities on a daily basis to
ensure compliance with the Trading Policies. Demeter may (under terms of
the Management Agreement) override the trading instructions of the Trading
Advisor to the extent necessary to comply with the Partnership's Trading
Policies.
Credit Risk. In addition to market risk, the Partnership is subject
to credit risk in that a counterparty may not be able to meet its
obligations to the Partnership. The counterparty of the Partnership for
futures contracts traded in the United States and most foreign exchanges
on which the Partnership trades is the clearinghouse associated with such
exchange. In general, a clearinghouse is backed by the membership of the
exchange and will act in the event of non-performance by one of its
members or one of its member's customers, and as such, should
significantly reduce this credit risk. In cases where the Partnership
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trades on exchanges where the clearinghouse is not funded or guaranteed by
the membership, or where the exchange is a "principals' market" in which
performance is the responsibility of the exchange member and not the
exchange or a clearinghouse, or when the Partnership enters into off-
exchange member and not the exchange or a clearinghouse, or when the
Partnership enters into off-exchange contracts with a counterparty, the
sole recourse of the Partnership will be the clearinghouse, the exchange
member or the off-exchange contract counterparty, as the case may be, or
when the Partnership enters into off-exchange contracts with a
counterparty, the sole recourse of the Partnership will be the
clearinghouse or the counterparty as the case may be. With respect to
futures contracts, DWR, in its business as an international commodity
broker, constantly monitors the credit-worthiness of the exchanges and
clearing members of the foreign exchanges with which it does business for
clients, including the Partnership. DWR employees also from time to time
serve on supervisory or management committees of such exchanges. If DWR
believes that there was a problem with the credit-worthiness of an
exchange on which the Partnership deals, it would so advise Demeter. With
respect to exchanges of which DWR is not a member, DWR acts only through
clearing brokers it has determined to be creditworthy. If DWR believed
that a clearing broker with which it deals on behalf of clients were not
creditworthy, it would terminate its relationship with such broker.
While DWR monitors the creditworthiness and risks involved in
dealing on the various exchanges (and their clearinghouses) and with other
exchange members, there can be no assurance that an exchange (or its
clearinghouse) or other exchange member will be able to meet its
obligations to the Partnership. DWR has not undertaken to indemnify the
Partnership against any loss. Further, the law is unclear, particularly
<PAGE>
with respect to trading in various non-U.S. jurisdictions, as to whether
DWR has any obligation to protect the Partnership from any liability in
the event that an exchange or its clearinghouse or another exchange member
defaults on its obligations on trades effected for the Partnership.
Although DWR monitors the creditworthiness of the foreign exchanges
and clearing brokers with which it does business for clients, DWR does not
have the capability to precisely quantify the Partnership's exposure to
risks inherent in its trading activities on foreign exchanges, and, as a
result, the risk is not monitored by DWR on an individual client basis
(including the Partnership). In this regard, DWR must clear its customer
trades through one or more other clearing brokers on each exchange where
DWR is not a clearing member. Such other clearing brokers calculate the
net margin requirements of DWR in respect of the aggregate of all of DWR's
customer positions carried in DWR's omnibus account with that clearing
broker. Similarly, DWR calculates a net margin requirement for the
exchange-traded futures positions of each of its customers, including the
Partnership. Neither DWR nor DWR's respective clearing brokers on each
foreign futures exchange calculates the margin requirements of an
individual customer, such as the Partnership, in respect of the customer's
aggregate contract positions on any particular exchange. With respect to
forward contract trading, the Partnership trades with only those
counterparties which Demeter, together with DWR, have determined to be
creditworthy. As set forth in the Partnership's Trading Policies, in
determining creditworthiness, Demeter and DWR consult with the Corporate
Credit Department of DWR. Currently, the Partnership deals solely with
DWR as its counterparty on forward contracts. While DWR and Demeter
monitor creditworthiness and risk involved in dealing on the various
exchanges and with counterparties, there can be no assurance that an
<PAGE>
exchange or counterparty will be able to meet its obligations to the
Partnership. See "Financial Instruments", under Notes to Financial
Statements - in its 1996 Annual Report to Partners, incorporated by
reference in this Form 10-K.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets. Redemptions of additional Units in
the future will impact the amount of funds available for investments in
commodity futures, forward contracts on foreign currencies and other
commodity interests in subsequent periods. As redemptions are at the
discretion of Limited Partners, it is not possible to estimate the amount
and therefore, the impact of future redemptions.
Results of Operations. As of December 31, 1996, the Partnership's
total capital was $18,706,255, an increase of $3,951,755 from the
Partnership's total capital of $14,754,500 at December 31, 1995. For the
year ended December 31, 1996, the Partnership incurred a net loss of
$357,966, total subscriptions aggregated $7,259,621 and redemptions
aggregated $2,949,900.
For the year ended December 31, 1996, the Partnership's total
trading revenues including interest income were $893,626. The
Partnership's total expenses for the year were $1,251,592, resulting in a
net loss of $357,966. the value of an individual unit in the Partnership
decreased from $12.07 at December 31, 1995 to $11.63 at December 31, 1996.
As of December 31, 1995, the Partnership's total capital was
$14,754,500, an increase of $10,956,655 from the Partnership's total
capital of $3,797,845 at December 31, 1994. For the year ended December
31, 1995, the Partnership generated net income of $1,559,664, total
subscriptions aggregated $9,609,381 and redemptions aggregated $242,390.
<PAGE>
For the year ended December 31, 1995, the Partnership's total
trading revenues including interest income were $2,329,813. The
Partnership's total expenses for the year were $770,149, resulting in net
income of $1,559,664. The value of an individual unit in the Partnership
increased from $9.83 at December 31, 1994 to $12.07 at December 31, 1995.
As of December 31, 1994, the Partnership's total capital was
$3,797,845, an increase of $3,797,825 from the Partnership's total capital
of $20 at November 2, 1994 (commencement of operations). For the period
from November 2, 1994 to December 31, 1994, the Partnership incurred a net
loss of $52,306, total subscriptions aggregated $3,850,131 and there were
no redemptions.
For the period from November 2, 1994 (commencement of operations) to
year ended December 31, 1994, the Partnership's total trading losses net
of interest income were $17,216. The Partnership's total expenses for the
period were $35,090, resulting in a net loss of $52,306. The value of an
individual unit in the Partnership decreased from $10.00 at November 2,
1994 to $9.83 at December 31, 1994.
The Partnership's overall performance record represents varied
results of trading in different commodity markets. For a further
description of trading results, refer to the letter to the Limited
Partners in the accompanying 1996 Annual Report to Partners, incorporated
by reference in this Form 10-K. The Partnership's gains and losses are
allocated among its Limited Partners for income tax purposes.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item appears in the attached 1996
Annual Report to Partners and is incorporated by reference in this Annual
Report on Form 10-K.
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS OF THE REGISTRANT
General Partner
Demeter, a Delaware corporation, was formed on August 18, 1977 to
act as a commodity pool operator and is registered with the CFTC as a
commodity pool operator and currently is a member of the National Futures
Association ("NFA") in such capacity. Demeter is wholly-owned by DWD and
is an affiliate of DWR. DWD, DWR and Demeter may each be deemed to be
"promoters" and/or a "parent" of the Partnership within the meaning of the
federal securities laws.
Dean Witter Reynolds Inc.
DWR is a financial services company which provides to its
individual, corporate and institutional clients services as a broker in
securities and commodity interest contracts, a dealer in corporate,
municipal and government securities, an investment banker, an investment
adviser and an agent in the sale of life insurance and various other
products and services. DWR is a member firm of the New York Stock
Exchange, the American Stock Exchange, the Chicago Board Options Exchange,
and other major securities exchanges, and is a clearing member of the
Chicago Board of Trade, the Chicago Mercantile Exchange, the Commodity
Exchange Inc., and other major commodities exchanges.
DWR is registered with the CFTC as a futures commission merchant and
is a member of the NFA in such capacity. DWR is currently servicing its
clients through a network of 371 branch offices with approximately 9,080
account executives servicing individual and institutional client accounts.
<PAGE>
Directors and Officers of the General Partner
The directors and officers of Demeter as of December 31, 1996 are
as follows:
Richard M. DeMartini, age 44, is the Chairman of the Board and a
Director of Demeter. Mr. DeMartini is also the Chairman of the Board and
a Director of DWFCM, a registered commodity trading advisor. Mr.
DeMartini has served as President and Chief Operating Officer of Dean
Witter Capital, a division of DWR since January 1989. From January 1988
until January 1989, Mr. DeMartini served as President and Chief Operating
Officer of the Consumer Banking Division of DWD, and from May 1985 until
January 1988 was President and Chief Executive Officer of the Consumer
Markets Division of DWD. Mr. DeMartini currently serves as a Director of
DWD and DWR, and has served as an officer of DWR for the past five years.
Mr. DeMartini has been with DWD and its affiliates for 22 years.
Mark J. Hawley, age 53, is President and a Director of Demeter. Mr.
Hawley joined DWR in February 1989 and currently serves as Executive Vice
President and Director of DWR's Managed Futures and Precious Metals
Department. Mr. Hawley also serves as President of DWFCM. 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 & Co.
Lawrence Volpe, age 49, is a Director of Demeter and DWFCM. Mr.
Volpe joined DWR as a Senior Vice President and Controller in
<PAGE>
September 1983, and currently holds those positions. From July 1979 to
September 1983, he was associated with E.F. Hutton & Company Inc. and
prior to his departure, held the positions of First Vice President and
Assistant Controller. From 1970 to July 1979, he was associated with
Arthur Anderson & Co. and prior to his departure he served as audit
manager in the financial services division.
Joseph G. Siniscalchi, age 51, is a Director of Demeter. Mr.
Siniscalchi joined DWR in July 1984 as a First Vice President, Director
of General Accounting. He is currently Senior Vice President and
Controller of the Dean Witter Financial Division of DWR. From February
1980 to July 1984, Mr. Siniscalchi was Director of Internal Audit at
Lehman Brothers Kuhn Loeb, Inc.
Laurence E. Mollner, age 55, is a Director of Demeter. Mr. Mollner
joined DWR in May 1979 as Vice President and Director of Commercial Sales.
He is currently Executive Vice President and Deputy Director of the
Futures Markets Division of DWR.
Edward C. Oelsner III, age 54, is a Director of Demeter. Mr.
Oelsner joined DWR in March 1981 as a Managing Director in the Corporate
Finance Department. He currently manages DWR's Retail Products Group
within the Corporate Finance Department. While Mr. Oelsner has extensive
experience in the securities industry, he has no experience in commodity
interests trading.
Robert E. Murray, age 36, is a Director of Demeter. Mr. Murray is
currently a Senior Vice President of the DWR Managed Futures Division and
is a Director and the Senior Administrative Officer of DWFCM. Mr. Murray
graduated from Geneseo State University in May 1983 with a B.A. degree in
Finance. Mr. Murray began at DWR in 1984 and is currently the Director
of Product Development for the Managed Futures Division and is responsible
<PAGE>
for the development and maintenance of the proprietary Fund Management
System utilized by Demeter and DWFCM for organizing information and
producing reports for monitoring investors' accounts.
Patti L. Behnke, age 36, is Vice President and Chief Financial
Officer of Demeter. Ms. Behnke joined DWR in 1991 as Assistant Vice
President of Financial Reporting and is currently First Vice President and
Director of Financial Reporting and Managed Futures Accounting in the
Capital Markets division of DWR. From August 1988 to September 1990, Ms.
Behnke was Assistant Controller of L.F. Rothschild & Co. and from
September 1986 to August 1988, she was associated with Carteret Savings
Bank as Assistant Vice President - Financial Analysis. From April 1982 to
September 1986, Ms. Behnke was an auditor at Arthur Andersen & Co.
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, 1996, there were no persons as beneficial owner of more than
5 percent of the Units of Limited Partnership Interest in the Partnership.
(b) Security Ownership of Management - At December 31, 1996,
Demeter owned 17,752.928 Units of General Partnership Interest
representing a 1.10 percent interest in the Partnership.
(c) Changes in Control - None
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to
Financial Statements", in the accompanying 1996 Annual Report to Partners,
incorporated by reference in this Form 10-K. In its capacity as the
Partnership's retail commodity broker, DWR received commodity brokerage
commissions (paid and accrued by the Partnership) of $1,030,310 for the
year ended December 31, 1996.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and report of independent public
accountants, all appearing in the accompanying 1996 Annual Report to
Partners, are incorporated by reference in this Form 10-K:
- Report of Deloitte & Touche LLP, independent auditors, for the
years ended December 31, 1996 and 1995 and the period from
November 2, 1994 (commencement of operations) to December 31,
1994.
- Statements of Financial Condition as of December 31, 1996 and
1995.
- Statements of Operations, Changes in Partners' Capital, and
Cash Flows for the years ended December 31, 1996 and 1995 and
the period from November 2, 1994 (commencement of operations)
to December 31, 1994.
- Notes to Financial Statements.
With the exception of the aforementioned information and the
information incorporated in Items 7, 8 and 13, the 1996 Annual Report to
Partners is not deemed to be filed with this report.
2. Listing of Financial Statement Schedules
No financial statement schedules are required to be filed with this
report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Partnership during the
last quarter of the period covered by this report.
(c) Exhibits
Refer to Exhibit Index on Page E-1.
<PAGE>
SIGNATURES
Pursuant to the requirement of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DEAN WITTER SPECTRUM BALANCED L.P.
(Registrant)
BY: Demeter Management Corporation,
General Partner
March 27, 1997 BY: /s/ Mark J. Hawley
Mark J. Hawley, Director and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Demeter Management Corporation.
BY: /s/ Mark J. Hawley March 27, 1997
Mark J. Hawley, Director and
President
/s/ Richard M. DeMartini March 27, 1997
Richard M. DeMartini, Director
and Chairman of the Board
/s/ Lawrence Volpe March 27, 1997
Lawrence Volpe, Director
/s/ Laurence E. Mollner March 27, 1997
Laurence E. Mollner, Director
/s/ Joseph G. Siniscalchi March 27, 1997
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III March 27, 1997
Edward C. Oelsner III, Director
/s/ Robert E. Murray March 27, 1997
Robert E. Murray, Director
/s/ Patti L. Behnke March 27, 1997
Patti L. Behnke, Chief Financial
Officer and Principal Accounting
Officer
<PAGE>
EXHIBIT INDEX
ITEM METHOD OF FILING
-3. Limited Partnership Agreement of
the Partnership, dated as of
May 27, 1994. (1)
- -10. Form of the Management Agreement among
the Partnership, Demeter Management
Corporation and RXR, Inc. dated as (2)
of November 1, 1994.
- -10. Customer Agreement between the
Partnership and Dean Witter
Reynolds Inc., dated as of (3)
November 1, 1994.
- -10. Form of Amended and Restated Customer
Agreement between the Partnership and
Dean Witter Reynolds Inc., dated as
of September 1, 1996. (4)
- -13. December 31, 1996 Annual Report to Limited Partners. (5)
(1) Incorporated by reference to Exhibit 3.01 and Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File No. 33-80146).
(2) Incorporated by reference to Exhibit 10.02 of the Partnership's
Registration Statement on Form S-1 (File No. 33-80146).
(3) Incorporated by reference to Exhibit 10.01 of the Partnership's
Registration Statement on Form S-1 (File No. 33-80146).
(4) Incorporated by reference to Exhibit 10.01(a) of the Partnership's
Registration Statement on Form S-1 (File No. 333-3222).
(5) Filed herewith.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Dean
Witter Spectrum Balanced Fund L.P. and is qualified in its entirety by
references to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 19,127,125
<SECURITIES> 0
<RECEIVABLES> 277,052<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,620,770<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 19,620,770<F3>
<SALES> 0
<TOTAL-REVENUES> 893,626<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,251,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (357,966)
<INCOME-TAX> 0
<INCOME-CONTINUING> (357,966)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (357,966)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include subscription receivable of $191,569 and interest
receivable of $85,483.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $216,593.
<F3>Liabilities include redemptions payable of $801,425, accrued brokerage
commission of $92,147, and accrued management fees of $20,942.
<F4>Total revenue includes realized trading revenue of $177,564, net
change in unrealized of ($175,835) and interest income of $891,897.
</FN>
</TABLE>
<PAGE>
Dean Witter Spectrum Series
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
December 31, 1996
Annual Report
[LOGO]DEAN WITTER
<PAGE>
DEAN WITTER
Two World Trade Center
62nd Floor
New York, NY 10048
Telephone (212) 392-8899
DEAN WITTER SPECTRUM SERIES
ANNUAL REPORT
1996
Dear Limited Partner:
This marks the third annual report for Dean Witter Spectrum Series. The Net
Asset Value per Unit for each of the three Spectrum Funds on December 31, 1996
were as follows:
<TABLE>
<CAPTION>
% CHANGE
FUNDS N.A.V. FOR YEAR
----- ------ --------
<S> <C> <C>
Spectrum Balanced ("DWSB") $11.63 -3.7%
Spectrum Strategic ("DWSS") $10.67 -3.5%
Spectrum Technical ("DWST") $13.61 +18.4%
</TABLE>
DEAN WITTER SPECTRUM BALANCED L.P. replicates a balanced portfolio of stocks,
bonds and managed futures utilizing the futures, options and forward markets.
Small gains were recorded during January from short Japanese yen and European
currency positions as the value of these currencies moved lower versus the U.S.
dollar. DWSB recorded losses during February primarily as a result of a sharp
move lower in U.S. Treasury bond futures and in the managed futures portion of
the portfolio in global interest rate futures and currencies. In March, losses
were recorded in the bond portion of the balanced portfolio as U.S. Treasury
bond futures prices decreased as well as in the managed futures portion from
trading Australian and European bond futures.
Profits were posted during April primarily from trading in the agricultural
markets. Additional gains were recorded from transactions involving most
European cur-
<PAGE>
rencies relative to the U.S. dollar. A portion of the Fund's overall gains for
the month was offset by losses in the stock portion of the balanced portfolio.
Losses were recorded during May in the managed futures portion of the balanced
portfolio from trading global interest rate futures as prices moved in a
trendless pattern. Additional losses were recorded in currencies as the value
of the Japanese yen was trendless. Gains were recorded in June from short
positions in copper futures as prices plunged on news of significant losses in
copper by Sumitomo Corporation. Additional gains were recorded from trading in
soft commodities, energies and agriculturals. Losses in global interest rate
futures and currencies offset a majority of these profits.
In July, gains were recorded from long Swiss franc, German mark and French
franc positions due to a strong upward move in their value relative to the U.S.
dollar. Additional gains were recorded from long Australian bond futures
positions as prices moved higher late in the month. A portion of these gains
was offset by losses recorded in the stock and bond portions of the balanced
portfolio. During August, losses were recorded in currencies primarily due to
trend reversals in the German mark and Australian dollar. In the bond portion
of the balanced portfolio, losses were recorded as U.S. bond futures prices
moved lower. Trading gains recorded from long crude oil futures and S&P 500
Index futures positions, as prices in both these markets moved higher, helped
mitigate overall losses. Profits were recorded during September from gains in
each portion of the balanced portfolio. The most significant gains were
recorded in the managed futures portion from long global bond futures positions
as prices moved steadily higher. Additional gains were recorded in both the
stock and bond portions
<PAGE>
as S&P 500 Index and U.S. Treasury note futures prices finished the month
higher.
Profits in October were recorded from long global bond futures positions as
prices continued to trend higher. Additional gains were recorded from long U.S.
stock and bond futures positions as prices in these markets also finished the
month higher. Strong gains were recorded in November in the managed futures
sector from long global bond futures positions as prices continued to trend
higher. Additional gains were recorded from long U.S. Treasury note futures
positions, and in the stock portion from long S&P 500 Index futures positions.
Losses in December were recorded in the managed futures portion of the balanced
portfolio from long global bond futures positions as prices reversed sharply
lower, thus giving back a portion of previous months' profits. Additional
losses were recorded in the stock and bond portion of the balanced portfolio
from long U.S. Treasury note and S&P 500 Index futures positions.
FOR DEAN WITTER SPECTRUM STRATEGIC L.P., a Fund managed by three trading
advisors who employ fundamental trading methodologies in a diverse portfolio of
futures, recorded net losses for the year. DWSS recorded gains during January
as the value of the U.S. dollar increased relative to most world currencies
resulting in profits from short German mark and Japanese yen positions.
Additional gains were recorded from trading gold, silver and crude oil futures.
DWSS recorded significant losses in February due primarily to a sharp reversal
in European and U.S. interest rate futures prices. Additional losses were
recorded in currencies as the downward move in the Japanese yen and most
European currencies during January abruptly reversed in February. Small losses
in March were recorded from trading Japanese and European bond futures, as well
as from U.S.
<PAGE>
and German stock index futures. Additional losses were recorded in soft
commodities and currencies. Gains experienced in agriculturals and energies
offset a portion of overall losses during March.
In April, trading gains were recorded from trading corn, wheat and soybean
futures. Additional gains were recorded in currencies from short positions in
the German mark and Swiss franc as the value of these currencies moved lower
relative to the U.S. dollar and other world currencies. During May, losses were
recorded in energies as oil and gas prices moved lower after a previous move
upward. Smaller losses were recorded from trading in global bond futures.
Losses in June were recorded in agriculturals from trading wheat and soybean
futures. Additional losses were recorded in metals, energies and U.S. financial
futures. Gains in currencies and soft commodities helped mitigate overall
losses during June.
In July, DWSS recorded losses from trading corn, wheat and soybean futures as
prices in these markets moved lower. Additional losses were recorded in
currencies from short Japanese yen positions as its value moved sharply higher
versus the U.S. dollar. Smaller losses were recorded in soft commodities and
metals. Gains recorded in financial futures offset a portion of overall losses
during the month. Modest gains were recorded during August primarily due to
long positions in soybean products as prices increased. Additional gains were
recorded from long Japanese bond futures and in currencies from transactions
involving the Japanese yen and Australian dollar. During September, gains were
recorded in financial futures from long European and Japanese bond futures
positions as prices moved steadily higher. Additional gains were
recorded from long S&P 500 Index futures
<PAGE>
positions as prices moved sharply higher. Smaller gains were recorded in the
currency and energy markets.
Gains in October were recorded from a continued upward move in Japanese and
European bond futures. Additional gains were recorded from long S&P 500 Index
futures positions as prices moved higher early in the month. Gains were also
recorded in currencies from long British pound and Canadian dollar positions.
In November, DWSS recorded gains from long positions in global stock index and
bond futures as prices in these markets moved higher. Profits were also
recorded in metals from long copper positions and short gold positions. During
December, losses were recorded from long global interest rate futures positions
as prices reversed sharply lower. Additional losses were recorded in
agricultural commodities, metals, and energies.
DEAN WITTER SPECTRUM TECHNICAL L.P., a Fund managed by three trading advisors
who employ long-term technical trend-following trading systems across a diverse
portfolio of futures, 1996 proved to be a successful year. DWST recorded gains
during January as the value of the U.S. dollar moved higher relative to most
world currencies resulting in profits from short Japanese yen, Swiss franc and
German mark positions. Additional gains were recorded from long European
interest rate, eurodollar and global stock index futures positions as prices
increased. Losses were recorded during February due to dramatic reversals in
several key market complexes. The most significant losses were recorded in the
currency markets as the previous downward move in the value of the Japanese yen
and most European currencies abruptly reversed. Additional losses were recorded
from previously established long positions in
<PAGE>
global interest rate futures and stock index futures. Gains in March were
recorded in energies from long crude oil positions as prices trended higher.
Additional gains were recorded from a declining value in the Japanese yen and
an increasing value of the Australian dollar. A portion of these gains was
offset by losses recorded in the metals, financial futures and agricultural
markets.
In April, gains were recorded in currencies from short positions in the German
mark and Swiss franc as the value of these currencies trended lower versus the
U.S. dollar and other world currencies. Additional gains were recorded in the
agricultural and energy markets. Losses were recorded during May as a result of
sharp trend reversals and trendless price movement in a majority of the markets
traded. The most significant of these losses were recorded in Japanese bond and
Nikkei Index futures. Additional losses were experienced from long copper
futures positions as prices moved sharply lower during mid-month. DWST recorded
gains during June due primarily to short positions in copper futures as prices
continued to move lower on news of significant losses incurred in copper by
Sumitomo Corporation. Additional gains in metals were recorded from short gold,
silver and aluminum futures positions. Smaller gains were recorded in the
energy and currency markets.
In July, DWST recorded losses in currencies from short positions in the
Japanese yen as its value moved sharply higher versus the U.S. dollar.
Additional losses were recorded from global stock index and U.S. interest rate
futures as prices moved in a short-term volatile pattern. Smaller losses were
recorded in the agricultural and energy markets. Small losses were recorded
during
August primarily due to trend reversals and
<PAGE>
choppy price movement in the currency markets. The most significant losses were
recorded from short positions in the Australian dollar as its value reversed
higher relative to the U.S. dollar and other world currencies. A majority of
these losses was offset by gains recorded in financial futures and energies.
During September, gains were recorded due primarily to a strong upward trend in
oil prices. Additional gains were recorded in financial futures from long
European and Japanese bond futures positions as prices moved steadily higher.
Strong gains in October were recorded as long positions in global interest rate
futures profited from a continued upward trend. In currencies, long British
pound positions profited as its value increased dramatically relative to the
U.S. dollar, and from short Japanese yen positions as its value decreased. In
November, significant gains were recorded as global interest rate futures
prices continued to trend higher. Additional gains were recorded in currency
trading from long British pound positions. Smaller profits were recorded in
metals from long copper and short gold futures positions. Losses were recorded
in December from long global interest rate futures positions as prices reversed
sharply lower, thus giving back a portion of previous months' profits.
Additional losses were recorded in currencies from long Australian dollar
positions as its value decreased sharply relative to the U.S. dollar early in
the month.
1996 proved to be the second consecutive successful year for DWST as the Fund's
ability to benefit from trends in global interest rate futures and the currency
markets during September, October and November, coupled with the Trading
Advisors' ability to limit losses during
periods of trendless price movement earlier
<PAGE>
in the year, produced strong gains for the year. In Spectrum Balanced, losses
were recorded during the year despite positive performance from U.S. stock
index futures during a majority of the year as a relatively light exposure to
this area relative to bonds resulted in losses during early 1996. Spectrum
Strategic recorded losses as the gains experienced in currencies and global
bond futures during September, October and November, were offset by losses
experienced in these same sectors during February and from short-term
volatility in the energy and domestic commodities markets during the second
half of the year. Since inception in November 1994, DWSB has increased by 16.3%
(a compound annualized return of 7.5%), DWSS has increased by 6.7% (a compound
annualized return of 3.2%) and DWST has increased by 36.1% (a compound
annualized return of 15.9%).
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation at Two World Trade Center, 62nd Floor,
New York, N.Y. 10048 or your Dean Witter Account Executive.
I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is not a
guarantee of future results.
Sincerely,
/s/Mark J. Hawley
Mark J. Hawley
President
Demeter Management Corporation
General Partner
<PAGE>
DEAN WITTER SPECTRUM SERIES
INDEPENDENT AUDITORS' REPORT
To the Limited Partners and the General Partner of
Dean Witter Spectrum Balanced L.P.
Dean Witter Spectrum Strategic L.P.
Dean Witter Spectrum Technical L.P.:
We have audited the accompanying statements of financial condition of Dean
Witter Spectrum Balanced L.P., Dean Witter Spectrum Strategic L.P. and Dean
Witter Spectrum Technical L.P., (collectively, the "Partnerships"), as of
December 31, 1996 and 1995 and the related statements of operations, changes in
partners' capital, and cash flows for the years ended December 31, 1996 and
1995 and the period from November 2, 1994 (commencement of operations) to
December 31, 1994. These financial statements are the responsibility of the
Partnerships' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Dean Witter Spectrum Balanced L.P., Dean
Witter Spectrum Strategic L.P. and Dean Witter Spectrum Technical L.P., as of
December 31, 1996 and 1995 and the results of their operations and their cash
flows for the years ended December 31, 1996 and 1995 and the period from
November 2, 1994 (commencement of operations) to December 31, 1994 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 17, 1997
New York, New York
<PAGE>
DEAN WITTER SPECTRUM BALANCED L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- ---
1996 1995
---------- ----------
$ $
<S> <C> <C> <C>
ASSETS
Equity in Commodity futures trading accounts:
Cash 19,127,125 13,409,068
Net unrealized gain on open contracts 216,593 392,428
---------- ----------
Total Trading Equity 19,343,718 13,801,496
Subscriptions receivable 191,569 1,061,057
Interest receivable (DWR) 85,483 61,129
---------- ----------
Total Assets 19,620,770 14,923,682
========== ==========
LIABILITIES AND PARTNERS'
CAPITAL LIABILITIES
Redemptions payable 801,425 38,746
Accrued brokerage commissions (DWR) 92,147 66,673
Accrued management fee 20,943 13,890
Incentive fees payable -- 49,873
---------- ----------
Total Liabilities 914,515 169,182
---------- ----------
PARTNERS' CAPITAL
Limited Partners (1,591,356.003 and 1,209,758.681
Units, respectively) 18,499,873 14,604,689
General Partner (17,752.928 and
12,409.369 Units, respectively) 206,382 149,811
---------- ----------
Total Partners' Capital 18,706,255 14,754,500
---------- ----------
Total Liabilities and
Partners' Capital 19,620,770 14,923,682
========== ==========
NET ASSET VALUE PER UNIT 11.63 12.07
========== ==========
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS PERIOD FROM
ENDED NOVEMBER 2, 1994
DECEMBER 31, (COMMENCEMENT
-------------------- OF OPERATIONS) TO
1996 1995 DECEMBER 31, 1994
--------- --------- -----------------
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 177,564 1,508,581 (61,916)
Net change in unrealized (175,835) 373,624 18,804
--------- --------- -------
Total Trading Results 1,729 1,882,205 (43,112)
Interest income (DWR) 891,897 447,608 25,896
--------- --------- -------
Total Revenues 893,626 2,329,813 (17,216)
--------- --------- -------
EXPENSES
Brokerage commissions (DWR) 1,030,310 503,995 29,040
Management fee 221,282 104,999 6,050
Incentive fees -- 161,155 --
--------- --------- -------
Total Expenses 1,251,592 770,149 35,090
--------- --------- -------
NET INCOME (LOSS) (357,966) 1,559,664 (52,306)
========= ========= =======
NET INCOME (LOSS) ALLOCATION:
Limited Partners (354,537) 1,536,421 (50,640)
General Partner (3,429) 23,243 (1,666)
NET INCOME (LOSS) PER UNIT:
Limited Partners (.44) 2.24 (.17)
General Partner (.44) 2.24 (.17)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
$ $
<S> <C> <C>
ASSETS
Equity in Commodity futures trading accounts:
Cash 45,997,912 29,593,927
Net unrealized gain on open contracts 140,355 1,819,403
Net option premiums (45,325) (19,873)
---------- ----------
Total Trading Equity 46,092,942 31,393,457
Subscriptions receivable 833,091 1,547,750
Interest receivable (DWR) 163,643 108,075
---------- ----------
Total Assets 47,089,676 33,049,282
========== ==========
LIABILITIES AND PARTNERS'
CAPITAL LIABILITIES
Redemptions payable 1,490,536 77,310
Accrued brokerage commissions (DWR) 323,442 212,825
Accrued management fees 156,821 97,291
Incentive fees payable -- 198,924
---------- ----------
Total Liabilities 1,970,799 586,350
---------- ----------
PARTNERS' CAPITAL
Limited Partners (4,184,723.907 and 2,905,719.741
Units, respectively) 44,645,423 32,132,595
General Partner (44,377.944 and 29,872.079 Units,
respectively) 473,454 330,337
---------- ----------
Total Partners' Capital 45,118,877 32,462,932
---------- ----------
Total Liabilities and
Partners' Capital 47,089,676 33,049,282
========== ==========
NET ASSET VALUE PER UNIT 10.67 11.06
========== ==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS FOR THE
PERIOD FROM
NOVEMBER 2, 1994
(COMMENCEMENT
FOR THE YEARS ENDED OF OPERATIONS)
DECEMBER 31, TO
--------------------- DECEMBER 31,
1996 1995 1994
---------- --------- ----------------
<S> <C> <C> <C>
$ $ $
REVENUES
Trading Profit (Loss):
Realized 4,980,402 3,408,036 (221,731)
Net change in unrealized (1,679,048) 1,451,792 367,611
---------- --------- --------
Total Trading Results 3,301,354 4,859,828 145,880
Interest income (DWR) 1,604,026 887,226 55,127
---------- --------- --------
Total Revenues 4,905,380 5,747,054 201,007
---------- --------- --------
EXPENSES
Brokerage commissions (DWR) 3,398,205 1,802,579 121,039
Management fees 1,587,213 824,036 55,333
Incentive fees 726,825 437,310 18,841
---------- --------- --------
Total Expenses 5,712,243 3,063,925 195,213
---------- --------- --------
NET INCOME (LOSS) (806,863) 2,683,129 5,794
========== ========= ========
NET INCOME (LOSS) ALLOCATION:
Limited Partners (799,980) 2,659,882 5,704
General Partner (6,883) 23,247 90
NET INCOME (LOSS) PER UNIT:
Limited Partners (.39) 1.05 .01
General Partner (.39) 1.05 .01
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
----------- ----------
$ $
<S> <C> <C> <C>
ASSETS
Equity in Commodity futures trading accounts:
Cash 106,460,248 52,705,410
Net unrealized gain on open contracts 2,533,889 4,086,548
Net option premiums 328,955 --
----------- ----------
Total Trading Equity 109,323,092 56,791,958
Subscriptions receivable 5,117,123 3,091,196
Interest receivable (DWR) 381,841 192,688
----------- ----------
Total Assets 114,822,056 60,075,842
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage commissions (DWR) 776,253 387,839
Redemptions payable 683,809 184,326
Accrued management fees 376,365 177,298
----------- ----------
Total Liabilities 1,836,427 749,463
----------- ----------
PARTNERS' CAPITAL
Limited Partners (8,216,910.942 and 5,105,307.329
Units, respectively) 111,852,280 58,726,495
General Partner (83,258.292 and 52,150.079 Units,
respectively) 1,133,349 599,884
----------- ----------
Total Partners' Capital 112,985,629 59,326,379
----------- ----------
Total Liabilities and Partners' Capital 114,822,056 60,075,842
=========== ==========
NET ASSET VALUE PER UNIT 13.61 11.50
=========== ==========
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
NOVEMBER 2, 1994
FOR THE YEARS ENDED (COMMENCEMENT
DECEMBER 31, OF OPERATIONS) TO
--------------------- DECEMBER 31,
1996 1995 1994
---------- --------- -----------------
<S> <C> <C> <C>
$ $ $
REVENUES
Trading Profit (Loss):
Realized 26,334,748 4,446,595 (786,137)
Net change in unrealized (1,552,659) 3,362,093 724,455
---------- --------- --------
Total Trading Results 24,782,089 7,808,688 (61,682)
Interest income (DWR) 3,242,977 1,430,845 67,617
---------- --------- --------
Total Revenues 28,025,066 9,239,533 5,935
---------- --------- --------
EXPENSES
Brokerage commissions (DWR) 6,997,531 3,003,934 149,907
Management fees 3,273,649 1,373,227 68,529
Incentive fees 1,852,569 600,504 19,678
---------- --------- --------
Total Expenses 12,123,749 4,977,665 238,114
---------- --------- --------
NET INCOME (LOSS) 15,901,317 4,261,868 (232,179)
========== ========= ========
NET INCOME (LOSS) ALLOCATION:
Limited Partners 15,737,852 4,226,249 (229,460)
General Partner 163,465 35,619 (2,719)
NET INCOME (LOSS) PER UNIT:
Limited Partners 2.11 1.72 (.22)
General Partner 2.11 1.72 (.22)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND THE PERIOD FROM NOVEMBER 2,
1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------- ---------- ------- ----------
$ $ $
<S> <C> <C> <C> <C>
DEAN WITTER SPECTRUM BALANCED L.P.
Partners' Capital,
November 2, 1994 2.000 10 10 20
Initial Offering 249,337.719 2,395,153 98,224 2,493,377
Continuous Offering 136,998.578 1,356,754 -- 1,356,754
Net Loss -- (50,640) (1,666) (52,306)
------------- ---------- ------- ----------
Partners' Capital,
December 31, 1994 386,338.297 3,701,277 96,568 3,797,845
Continuous Offering 856,935.520 9,609,381 30,000 9,639,381
Net Income -- 1,536,421 23,243 1,559,664
Redemptions (21,105.767) (242,390) -- (242,390)
------------- ---------- ------- ----------
Partners' Capital,
December 31, 1995 1,222,168.050 14,604,689 149,811 14,754,500
Continuous Offering 647,218.304 7,199,621 60,000 7,259,621
Net Loss -- (354,537) (3,429) (357,966)
Redemptions (260,277.423) (2,949,900) -- (2,949,900)
------------- ---------- ------- ----------
Partners' Capital
December 31, 1996 1,609,108.931 18,499,873 206,382 18,706,255
============= ========== ======= ==========
DEAN WITTER SPECTRUM STRATEGIC L.P.
Partners' Capital,
November 2, 1994 2.000 10 10 20
Initial Offering 671,717.229 6,617,182 99,990 6,717,172
Continuous Offering 519,075.104 5,168,943 27,000 5,195,943
Net Income -- 5,704 90 5,794
------------- ---------- ------- ----------
Partners' Capital,
December 31, 1994 1,190,794.333 11,791,839 127,090 11,918,929
Continuous Offering 1,880,517.736 19,071,379 180,000 19,251,379
Net Income -- 2,659,882 23,247 2,683,129
Redemptions (135,720.249) (1,390,505) -- (1,390,505)
------------- ---------- ------- ----------
Partners' Capital,
December 31, 1995 2,935,591.820 32,132,595 330,337 32,462,932
Continuous Offering 1,784,521.074 18,480,024 150,000 18,630,024
Net Loss -- (799,980) (6,883) (806,863)
Redemptions (491,011.043) (5,167,216) -- (5,167,216)
------------- ---------- ------- ----------
Partners' Capital
December 31, 1996 4,229,101.851 44,645,423 473,454 45,118,877
============= ========== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND THE PERIOD FROM NOVEMBER 2,
1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------- ----------- --------- -----------
$ $ $
<S> <C> <C> <C> <C>
DEAN WITTER SPECTRUM TECHNICAL L.P.
Partners' Capital,
November 2, 1994 2.000 10 10 20
Initial Offering 795,200.117 7,838,027 113,974 7,952,001
Continuous
Offering 731,002.303 7,163,212 48,000 7,211,212
Net Loss -- (229,460) (2,719) (232,179)
------------- ----------- --------- -----------
Partners' Capital,
December 31, 1994 1,526,204.420 14,771,789 159,265 14,931,054
Continuous
Offering 3,799,373.914 41,608,374 405,000 42,013,374
Net Income -- 4,226,249 35,619 4,261,868
Redemptions (168,120.926) (1,879,917) -- (1,879,917)
------------- ----------- --------- -----------
Partners' Capital,
December 31, 1995 5,157,457.408 58,726,495 599,884 59,326,379
Continuous
Offering 3,684,340.110 44,072,998 370,000 44,442,998
Net Income -- 15,737,852 163,465 15,901,317
Redemptions (541,628.284) (6,685,065) -- (6,685,065)
------------- ----------- --------- -----------
Partners' Capital,
December 31, 1996 8,300,169.234 111,852,280 1,133,349 112,985,629
============= =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SPECTRUM BALANCED L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE NOVEMBER 2, 1994
YEARS ENDED (COMMENCEMENT
DECEMBER 31, OF OPERATIONS) TO
---------------------- DECEMBER 31,
1996 1995 1994
---------- ---------- -----------------
$ $ $
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) (357,966) 1,559,664 (52,306)
Noncash item included in net
income (loss):
Net change in unrealized 175,835 (373,624) (18,804)
Increase in operating assets:
Interest receivable (DWR) (24,354) (44,925) (16,204)
Increase (decrease) in
operating liabilities:
Accrued brokerage
commissions (DWR) 25,474 50,100 16,573
Accrued management fee 7,053 10,437 3,453
Incentive fee payable (49,873) 49,873 --
---------- ---------- ---------
Net cash provided
by (used for) operating
activities (223,831) 1,251,525 (67,288)
---------- ---------- ---------
CASH FLOWS FROM
FINANCING ACTIVITIES
Offering of units 7,259,621 9,639,381 3,850,131
Increase (decrease) in
subscriptions receivable 869,488 (538,337) (522,720)
Increase in redemptions payable 762,679 38,746 --
Redemptions of units (2,949,900) (242,390) --
---------- ---------- ---------
Net cash provided
by financing activities 5,941,888 8,897,400 3,327,411
---------- ---------- ---------
Net increase in cash 5,718,057 10,148,925 3,260,123
Balance at beginning of period 13,409,068 3,260,143 20
---------- ---------- ---------
Balance at end of period 19,127,125 13,409,068 3,260,143
========== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE NOVEMBER 2, 1994
YEARS ENDED (COMMENCEMENT
DECEMBER 31, OF OPERATIONS) TO
---------------------- DECEMBER 31,
1996 1995 1994
---------- ---------- -----------------
$ $ $
<S> <C> <C> <C>
CASH FLOWS FROM-
OPERATING ACTIVITIES
Net income (loss) (806,863) 2,683,129 5,794
Noncash item included in net income
(loss):
Net change in unrealized 1,679,048 (1,451,792) (367,611)
(Increase) decrease in operating
assets:
Net option premiums 25,452 (26,584) 46,457
Interest receivable (DWR) (55,568) (72,271) (35,804)
Increase (decrease) in operating
liabilities:
Accrued brokerage commissions (DWR) 110,617 140,765 72,060
Accrued management fees 59,530 64,349 32,942
Incentive fees payable (198,924) 180,083 18,841
---------- ---------- ----------
Net cash provided by (used for)
operating activities 813,292 1,517,679 (227,321)
---------- ---------- ----------
CASH FLOWS FROM-
FINANCING ACTIVITIES
Offering of units 18,630,024 19,251,379 11,913,115
(Increase) decrease in
subscriptions receivable 714,659 488,896 (2,036,646)
Increase in redemptions payable 1,413,226 77,310 --
Redemptions of units (5,167,216) (1,390,505) --
---------- ---------- ----------
Net cash provided by financing
activities 15,590,693 18,427,080 9,876,469
---------- ---------- ----------
Net increase in cash 16,403,985 19,944,759 9,649,148
Balance at beginning of period 29,593,927 9,649,168 20
---------- ---------- ----------
Balance at end of period 45,997,912 29,593,927 9,649,168
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
NOVEMBER 2, 1994
FOR THE YEARS ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS) TO
----------------------- DECEMBER 31,
1996 1995 1994
----------- ---------- ----------------
$ $ $
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) 15,901,317 4,261,868 (232,179)
Noncash item included
in net income (loss):
Net change in unrealized 1,552,659 (3,362,093) (724,455)
Increase in operating assets:
Net option premiums (328,955) -- --
Interest receivable (DWR) (189,153) (146,210) (46,478)
Increase (decrease) in operating
liabilities:
Accrued brokerage commissions (DWR) 388,414 295,915 91,924
Accrued management fees 199,067 135,276 42,022
Incentive fees payable -- (19,678) 19,678
----------- ---------- ----------
Net cash provided by (used for)
operating activities 17,523,349 1,165,078 (849,488)
----------- ---------- ----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Offering of units 44,442,998 42,013,374 15,163,213
Increase in subscriptions
receivable (2,025,927) (606,947) (2,484,249)
Increase in redemptions payable 499,483 184,326 --
Redemptions of units (6,685,065) (1,879,917) --
----------- ---------- ----------
Net cash provided by financing
activities 36,231,489 39,710,836 12,678,964
----------- ---------- ----------
Net increase in cash 53,754,838 40,875,914 11,829,476
Balance at beginning of period 52,705,410 11,829,496 20
----------- ---------- ----------
Balance at end of period 106,460,248 52,705,410 11,829,496
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Dean Witter Spectrum Balanced L.P. ("Spectrum Balanced"), Dean
Witter Spectrum Strategic L.P. ("Spectrum Strategic") and Dean Witter Spectrum
Technical L.P. ("Spectrum Technical") (individually, a "Partnership," or
collectively, the "Partnerships") are limited partnerships organized to engage
in the speculative trading of futures and forward contracts, options on futures
contracts and on physical commodities, and other commodities interests,
including foreign currencies, financial instruments, precious and industrial
metals, energy products, and agriculturals. The general partner for each
Partnership is Demeter Management Corporation ("Demeter"). The commodity broker
is Dean Witter Reynolds Inc. ("DWR"). Both DWR and the General Partner are
wholly-owned subsidiaries of Dean Witter, Discover & Co. ("DWD").
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by the General and Limited Partners
based upon their proportional ownership interests.
BASIS OF ACCOUNTING--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements.
REVENUE RECOGNITION--Commodity futures contracts and forward contracts on
foreign currencies are open commitments until settlement date. They are valued
at market and the resulting unrealized gains and losses are reflected in
income. Monthly, DWR pays each Partnership interest income based upon 80% of
its average daily Net Assets for the month in the case of Spectrum Strategic
and Spectrum Technical and 100% in the case of Spectrum Balanced. The interest
rate is equal to a prevailing rate on U.S. Treasury Bills. For purposes of such
interest payments, Net Assets do not include monies due the Partnership on
forward contracts and other commodity interests, but not actually received.
NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using the
weighted average number of units outstanding during the period.
EQUITY IN COMMODITY FUTURES TRADING ACCOUNTS--The Partnerships' assets "Equity
in Commodity futures trading accounts" consist of cash on deposit at DWR to be
used as margin for trading and the net asset or liability related to unrealized
gains or losses on open contracts and the net option premiums paid and/or
received. The asset or liability related to the unrealized gains or losses on
forward contracts is presented as a net amount because each Partnership has a
master netting agreement with DWR.
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS--
Prior to September 1, 1996, brokerage fees for Spectrum Balanced were accrued
at a monthly rate of 1/2 of 1% of the Net Assets as of the first day of each
month. Effective September 1, 1996, brokerage fees were accrued at a monthly
rate of 11/24 of 1% of the Net Assets as of the first day of the month.
Prior to September 1, 1996, brokerage fees for Spectrum Strategic and Spectrum
Technical were accrued at a monthly rate of 35/48 of 1% of the Net Assets as of
the first day of each month. Effective September 1, 1996, brokerage fees were
accrued at a monthly rate of 33/48 of 1% of the Net Assets as of the first day
of the month.
Such fees will cover all brokerage commissions, transaction fees and costs and
ordinary administrative and continuing offering expenses.
OPERATING EXPENSES--The Partnerships incur monthly management fees and may
incur incentive fees. All common administrative and continuing offering
expenses including legal, auditing, accounting, filing fees and other related
expenses, are borne by DWR through the brokerage fees paid by each Partnership.
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 each Partnership's revenues
and expenses for income tax purposes.
DISTRIBUTIONS--Distributions, other than on redemption of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
CONTINUING OFFERING--Units of each Partnership are offered at a price equal to
100% of the Net Asset Value per Unit as of the close of business on the last
day of the month. No selling commissions or charges related to the continuing
offering of Units will be paid by the Limited Partners or the Partnership. DWR
will pay all such costs.
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 the last day that is six months
after the closing at which a person becomes a limited partner, upon five
business days advance notice by redemption form to Demeter. Thereafter, Units
may be redeemed as of the end of any month upon five business days advance
notice by redemption form to Demeter. However, any Units redeemed at or prior
to the end of the twelfth, eighteenth, or twenty-fourth full months following
the closing at which such person first becomes a limited partner, may be
assessed a
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
redemption charge equal to 3%, 2% or 1%, respectively, of the Net Asset Value
per Unit on the date of such redemption. Redemptions must be made in whole
Units, in a minimum amount of 50 Units, unless a Limited Partner is redeeming
his entire interest in a Partnership.
EXCHANGES--On the last day of the first month which occurs more than six months
after a person first becomes a Limited Partner in any of the Partnerships, and
the end of each month thereafter, Limited Partners may exchange their
investment among the Partnerships (subject to certain restrictions outlined in
the Limited Partnership Agreement) without paying additional charges.
DISSOLUTION OF THE PARTNERSHIP--Each Partnership will terminate on December 31,
2035 regardless of its financial condition at such time, or at an earlier date
if certain conditions occur as defined in each Partnership's Limited
Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
Each Partnership pays brokerage commissions to DWR as described in Note 1. Each
Partnership's cash is on deposit with DWR in commodity trading accounts to meet
margin requirements as needed. DWR pays interest on these funds as described in
Note 1. Each Partnership is authorized to issue and sell Units at Monthly
Closings at a price per Unit equal to 100% of the Net Asset Value of a Unit of
such Partnership as of the close of business on the date of such monthly
closing.
3. TRADING ADVISORS
Demeter, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership are as follows:
Dean Witter Spectrum Balanced L.P.
RXR, Inc.
Dean Witter Spectrum Strategic L.P.
Blenheim Investments, Inc.
A. Gary Shilling & Co., Inc.
Willowbridge Associates Inc.
Dean Witter Spectrum Technical L.P.
Campbell & Company, Inc.
Chesapeake Capital Corporation
John W. Henry & Company, Inc. ("JWH")
Compensation to the trading advisors by the Partnerships consists of a
management fee and an incentive fee as follows:
MANAGEMENT FEE--The management fee is accrued at the rate of 5/48 of 1% of the
Net Assets on the first day of each month (a 1.25% annual rate) to Spectrum
Balanced.
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The management fee is accrued at the rate of 1/3 of 1% per month of the Net
Assets allocated to each trading advisor on the first day of each month (a 4%
annual rate) to Spectrum Strategic and Spectrum Technical.
INCENTIVE FEE--Each Partnership will pay a monthly incentive fee equal to 15%
of the "Trading Profits", as defined in the Limited Partnership Agreement,
experienced with respect to each trading manager's allocated Net Assets as of
the end of each calendar month. When trading losses are incurred, no incentive
fee will be paid in subsequent months until all such losses are recovered.
4. FINANCIAL INSTRUMENTS
The Partnerships trade 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 December 31, 1996 and 1995, open contracts were:
<TABLE>
<CAPTION>
SPECTRUM BALANCED
---------------------
CONTRACT OR
NOTIONAL AMOUNT
---------------------
1996 1995
---------- ----------
$ $
EXCHANGE-TRADED CONTRACTS
<S> <C> <C>
Financial Futures:
Commitment to Purchase 18,417,000 10,185,000
Commitment to Sell 13,206,000 1,286,000
Commodity Futures:
Commitment to Purchase 4,064,000 4,769,000
Commitment to Sell 4,337,000 1,109,000
Foreign Futures:
Commitment to Purchase 61,568,000 16,671,000
Commitment to Sell 4,802,000 73,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS
Commitment to Purchase 8,070,000 6,993,000
Commitment to Sell 17,843,000 6,806,000
</TABLE>
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC
-----------------------
CONTRACT OR
NOTIONAL AMOUNT
-----------------------
1996 1995
----------- -----------
$ $
EXCHANGE-TRADED CONTRACTS
<S> <C> <C>
Financial Futures:
Commitment to Purchase 15,204,000 112,590,000
Commitment to Sell 28,092,000 27,712,000
Options Written 5,212,000 9,865,000
Commodity Futures:
Commitment to Purchase 36,735,000 142,365,000
Commitment to Sell 16,911,000 20,701,000
Options Written 2,126,000 8,762,000
Foreign Futures:
Commitment to Purchase 37,389,000 88,628,000
Commitment to Sell 10,787,000 17,287,000
Options Written -- 200,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS
Commitment to Purchase 1,157,000 242,000
Commitment to Sell 1,121,000 242,000
<CAPTION>
SPECTRUM TECHNICAL
-----------------------
CONTRACT OR
NOTIONAL AMOUNT
-----------------------
1996 1995
----------- -----------
$ $
EXCHANGE-TRADED CONTRACTS
<S> <C> <C>
Financial Futures:
Commitment to Purchase 113,494,000 107,671,000
Commitment to Sell 88,136,000 20,387,000
Options Written 4,505,000 --
Commodity Futures:
Commitment to Purchase 21,658,000 51,165,000
Commitment to Sell 51,283,000 15,282,000
Foreign Futures:
Commitment to Purchase 112,745,000 136,327,000
Commitment to Sell 81,929,000 8,149,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS
Commitment to Purchase 40,864,000 7,035,000
Commitment to Sell 24,397,000 44,415,000
</TABLE>
A portion of the amounts indicated as off-balance-sheet risk in forward
currency contracts is due to offsetting forward commitments to purchase and to
sell the same currency on the same date in the future. These commitments are
economically offsetting, but are not offset in the forward market until the
settlement date.
The unrealized gains on open contracts are reported as a component of "Equity
in Commodity futures trading accounts" on the Statements of Financial Condition
and totaled at December 31, 1996 and 1995, respectively, $216,593 and $392,428
for Spectrum Balanced, $140,355 and $1,819,403 for Spectrum Strategic, and
$2,533,889 and $4,086,548 for Spectrum Technical.
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
For Spectrum Balanced, of the $216,593 net unrealized gain on open contracts at
December 31, 1996, $292,886 related to exchange-traded futures contracts and
$(76,293) related to off-exchange-traded forward currency contracts. Of the
$392,428 net unrealized gain on open contracts at December 31, 1995, $428,893
related to exchange traded futures contracts and ($36,465) related to off-
exchange-traded forward currency contracts.
For Spectrum Strategic, 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. The $1,819,403
net unrealized gain on open contracts at December 31, 1995, related entirely to
exchange traded futures and option contracts.
For Spectrum Technical, of the $2,533,889 net unrealized gain on open contracts
at December 31, 1996, $2,802,603 related to exchange-traded futures contracts
and $(268,714) related to off-exchange-traded forward currency contracts. Of
the $4,086,548 net unrealized gain on open contracts at December 31, 1995,
$4,164,279 related to exchange traded futures and option contracts and
($77,731) related to off-exchange-traded forward currency contracts.
The contract amounts in the above table represent the Partnerships' 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 Partnerships'
Statements of Financial Condition.
Exchange-traded contracts and off-exchange-traded forward currency contracts
held by the Partnerships at December 1996 and 1995 mature as follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
SPECTRUM BALANCED
Exchange-Traded Contracts June 1997 June 1996
Off-Exchange-Traded
Forward Currency
Contracts January 1997 January 1996
SPECTRUM STRATEGIC
Exchange-Traded Contracts December 1997 December 1996
Off-Exchange-Traded
Forward Currency
Contracts January 1997 January 1996
SPECTRUM TECHNICAL
Exchange-Traded Contracts December 1997 December 1996
Off-Exchange-Traded
Forward Currency
Contracts March 1997 January 1996
</TABLE>
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Partnerships also have credit risk because DWR acts as the futures
commission merchant or the sole counterparty, with respect to most of the
Partnerships' assets. Exchange-traded futures 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 contracts, including an amount equal to the net unrealized gain
on all open futures contracts, which funds totaled at December 31, 1996 and
1995 respectively, $19,420,011 and $13,837,961 for Spectrum Balanced,
$46,138,105 and $31,413,330 for Spectrum Strategic and $109,262,851 and
$56,869,689 for Spectrum Technical. 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 Partnerships are at
risk to the ability of DWR, the counterparty on all of such contracts, to
perform.
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
For the years ended December 31, 1996 and 1995 the average fair value of
financial instruments held for trading purposes was as follows:
<TABLE>
<CAPTION>
1996
----------------------
SPECTRUM BALANCED
----------------------
ASSETS LIABILITIES
---------- -----------
$ $
<S> <C> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures 24,615,000 8,611,000
Options on Financial Futures 375,000 2,717,000
Commodity Futures 3,317,000 2,528,000
Foreign Futures 31,242,000 11,045,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 18,038,000 16,158,000
<CAPTION>
1995
----------------------
SPECTRUM BALANCED
----------------------
ASSETS LIABILITIES
---------- -----------
$ $
<S> <C> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures 10,315,000 1,410,000
Commodity Futures 2,419,000 649,000
Foreign Futures 6,285,000 1,934,000
OFF-EXCHANGE-TRADED FOREIGN CURRENCY CONTRACTS 4,014,000 4,079,000
<CAPTION>
1996
----------------------
SPECTRUM STRATEGIC
----------------------
ASSETS LIABILITIES
---------- -----------
$ $
<S> <C> <C>
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 FORWARD CURRENCY CONTRACTS 4,367,000 4,704,000
<CAPTION>
1995
----------------------
SPECTRUM STRATEGIC
----------------------
ASSETS LIABILITIES
---------- -----------
$ $
<S> <C> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures 28,704,000 16,932,000
Commodity Futures 51,920,000 11,250,000
Foreign Futures 31,941,000 11,889,000
OFF-EXCHANGE-TRADED FOREIGN CURRENCY CONTRACTS 71,000 48,000
</TABLE>
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1996
-----------------------
SPECTRUM TECHNICAL
-----------------------
ASSETS LIABILITIES
----------- -----------
$ $
<S> <C> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures 131,914,000 117,625,000
Options on Financial Futures 5,437,000 375,000
Commodity Futures 40,606,000 45,449,000
Options on Commodity Futures 5,157,000 --
Foreign Futures 144,435,000 60,257,000
Options on Foreign Futures 7,143,000 --
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 35,572,000 39,498,000
<CAPTION>
1995
-----------------------
SPECTRUM TECHNICAL
-----------------------
ASSETS LIABILITIES
----------- -----------
$ $
<S> <C> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures 45,660,000 26,140,000
Commodity Futures 19,938,000 11,023,000
Foreign Futures 50,015,000 19,011,000
OFF-EXCHANGE-TRADED FOREIGN CURRENCY CONTRACTS 21,986,000 18,280,000
</TABLE>
5. LEGAL MATTERS
On September 6, 10, and 20, 1996, 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 (including JWH) 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 (including
JWH) 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 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
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
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.
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DEAN WITTER REYNOLDS INC.
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