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 BALANCED L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3782232
(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
<PAGE>
<TABLE>
DEAN WITTER SPECTRUM BALANCED 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).........6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..10-13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings................................17-18
Item 6. Exhibits and Reports on Form 8-K....................19
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER SPECTRUM BALANCED 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 19,209,575 19,127,125
Net unrealized gain on open contracts 11,548 216,593
Net option premiums 200,200 -
Total Trading Equity 19,421,323 19,343,718
Subscriptions receivable 510,662 191,569
Interest receivable (DWR) 87,194 85,483
Total Assets 20,019,179 19,620,770
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 171,388 801,425
Accrued brokerage commissions (DWR) 91,172 92,147
Accrued management fees 20,721 20,943
Total Liabilities 283,281 914,515
Partners' Capital
Limited Partners (1,614,053.201 and
1,591,356.003 Units, respectively) 19,521,185 18,499,873
General Partner (17,752.928 Units) 214,713 206,382
Total Partners' Capital 19,735,898 18,706,255
Total Liabilities and Partners' Capital 20,019,179 19,620,770
NET ASSET VALUE PER UNIT 12.09 11.63
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER SPECTRUM BALANCED L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1997 1996
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 1,041,124 (972,104)
Net change in unrealized (205,045) (277,224)
Total Trading Results 836,079 (1,249,328)
Interest Income (DWR) 249,143 184,650
Total Revenues 1,085,222 (1,064,678)
EXPENSES
Brokerage commissions (DWR) 265,834 230,158
Management fees 60,416 47,950
Total Expenses 326,250 278,108
NET INCOME (LOSS) 758,972 (1,342,786)
NET INCOME (LOSS) ALLOCATION
Limited Partners 750,641 (1,328,894)
General Partner 8,331 (13,892)
NET INCOME (LOSS) PER UNIT
Limited Partners .46 (1.03)
General Partner .46 (1.03)
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE> DEAN WITTER SPECTRUM BALANCED 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 1,222,168.050 $14,604,689 $149,811 $14,754,500
Continuous Offering 300,493.984 3,358,649 40,000 3,398,649
Net Loss - (1,328,894) (13,892) (1,342,786)
Redemptions (7,400.283) (84,577) - (84,577)
Partners' Capital
March 31, 1996 1,515,261.751 $16,549,867 $175,919 $16,725,786
Partners' Capital
December 31, 1996 1,609,108.931 $18,499,873 $206,382 $18,706,255
Continuous Offering 105,298.810 1,281,890 - 1,281,890
Net Income - 750,641 8,331 758,972
Redemptions (82,601.612) (1,011,219) - (1,011,219)
Partners' Capital
March 31, 1997 1,631,806.129 $19,521,185 $214,713 $19,735,898
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER SPECTRUM BALANCED 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) 758,972 (1,342,786)
Noncash item included in net income (loss):
Net change in unrealized 205,045 277,224
Increase in operating assets:
Net option premiums (200,200) -
Interest receivable (DWR) (1,711) (1,692)
Increase (decrease) in operating liabilities:
Accrued brokerage commissions (DWR) (975) 12,165
Accrued management fees (222) 2,535
Incentive fees payable - (49,873)
Net cash provided by (used for) operating activities 760,909 (1,102,427)
CASH FLOWS FROM FINANCING ACTIVITIES
Continuous offering 1,281,890 3,398,649
Increase in subscriptions receivable (319,093) (89,679)
Decrease in redemptions payable (630,037) (13,588)
Redemptions of units (1,011,219) (84,577)
Net cash provided by (used for) financing activities (678,459) 3,210,805
Net increase in cash 82,450 2,108,378
Balance at beginning of period 19,127,125 13,409,068
Balance at end of period 19,209,575 15,517,446
The accompanying footnotes are an integral part
of these financial statements.
</TABLE>
<PAGE>
DEAN WITTER SPECTRUM BALANCED 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 Balanced 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 for the Partnership, Demeter
Management Corporation ("Demeter") has retained RXR, Inc. as the
trading manager 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 BALANCED 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, options, forward contracts on
futures and related instruments 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 BALANCED 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 11,066,000 18,417,000
Commitments to Sell 38,783,000 13,206,000
Commodity Futures:
Commitments to Purchase 7,195,000 4,064,000
Commitments to Sell 1,466,000 4,337,000
Foreign Futures:
Commitments to Purchase 649,000 61,568,000
Commitments to Sell 57,728,000 4,802,000
Off-Exchange-Traded
Forward Currency Contracts
Commitments to Purchase 12,266,000 8,070,000
Commitments to Sell 21,240,000 17,843,000
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 net 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 $11,548 and
$216,593
<PAGE>
DEAN WITTER SPECTRUM BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
at March 31, 1997 and December 31, 1996, respectively. Of the
$11,548 net unrealized gain on open contracts at March 31, 1997
$22,357 related to exchange-traded forward currency contracts and
$(10,809) related to off-exchange-traded forward currency
contracts. 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.
Exchange-traded futures contracts held by the Partnership at
March 31, 1997 and December 31, 1996 mature through June 1997.
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 non-performance.
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 BALANCED 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 $19,231,932 and $19,420,011 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 BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
the ability of DWR, the counterparty on all such contracts, to
perform.
For the quarter ended March 31, 1997 and the year ended 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 22,514,000 24,182,000
Options on Financial Futures 1,232,000 4,931,000
Commodity Futures 6,549,000 2,184,000
Options on Commodity Futures - 268,000
Foreign Futures 44,929,000 19,556,000
Off-Exchange-Traded Forward
Currency Contracts 7,819,000 21,682,000
December 31, 1996
Assets Liabilities
$ $
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
<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 trading commodity futures and
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
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 contracts,
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 limit.
<PAGE>
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, forward contracts on foreign
currencies 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 $1,085,222.
During the first quarter, the Partnership posted a gain in Net
Asset Value per Unit. The most significant gains were recorded in
the currency markets due primarily to a strengthening in the
value of the U.S. dollar relative to most major currencies during
January and February. Additional gains were recorded in the
stock portion of the portfolio from long S&P 500 Index futures
positions as domestic stock prices moved higher during January
and February before reversing lower during March. Trading gains
were also experienced in the managed futures portion of the
balanced portfolio from short positions in oil and gas futures as
prices in these markets moved lower during February. A portion
of the overall gains was offset by losses recorded from long
positions in the bond portion of the portfolio as U.S. bond
prices moved in a choppy pattern early in the quarter before
moving lower during March. Total expenses for the period were
$326,250, resulting in net income of $758,972. The value of an
individual Unit in the Partnership increased from $11.63 at
December 31, 1996 to $12.09 at March 31, 1997.
<PAGE>
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 $1,064,678. During
the first quarter, the Partnership posted a loss in Net Asset
Value per Unit. The most significant losses were recorded in the
bond portion of the balanced portfolio from long positions in
U.S. Treasury bond futures as prices moved dramatically lower
during February and into March. Additional losses were recorded
in the managed futures portion of the balanced portfolio in
February as global interest rate futures also reversed their
upward trend. Trading losses were also experienced in the
managed futures portion of the portfolio in the currency markets
during February as a sudden upward move occurred in the value of
most European currencies relative to the U.S. dollar. A portion
of these losses was offset by gains from short positions in the
Japanese yen during January and March. Smaller losses were
recorded in the managed futures portion of the portfolio from
trading soft commodities, base metals and energy futures during
the first quarter. A small portion of the overall losses for the
quarter was offset by gains in the stock portion of the balanced
portfolio as S&P 500 index futures prices moved higher during the
quarter. Total expenses for the period were $278,108, resulting
in a net
<PAGE>
loss of $1,342,786. The value of an individual Unit in the
Partnership decreased from $12.07 at December 31, 1995 to $11.04
at March 31, 1996.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, and on March 19, 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
other 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
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 uty, fraudulent and unfair business practices, unjust
enrichment, and conversion in connection with the sale and
operation of the various limited partnership commodity pools.
The
<PAGE>
complaints seek unspecified amounts of compensatory and punitive
damages and other relief. It is possible that additional similar
actions may be filed and that, in the course of these actions,
other parties could be added as defendants. The Dean Witter
Parties believe that they and the Partnership have strong
defenses to, and they will vigorously contest, the actions.
Although the ultimate outcome of legal proceedings cannot be
predicted with certainty, it is the opinion of management of the
Dean Witter Parties that the resolution of the actions will not
have a material adverse effect on the financial condition or the
results of operations of any of the Dean Witter Parties.
<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 Balanced L.P.
(Registrant)
By: Demeter Management Corporation
(General Partner)
May 13, 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 Balanced L.P. and is qualified in its entirety by
references to such financial instruments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 19,209,575
<SECURITIES> 0
<RECEIVABLES> 597,856<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,019,179<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,019,179<F3>
<SALES> 0
<TOTAL-REVENUES> 1,085,222<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 326,250
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 758,972
<INCOME-TAX> 0
<INCOME-CONTINUING> 758,972
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 758,972
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include subscriptions receivable of $510,662 and interest
receivable of $87,194.
<F2>In addition to cash and receivables, total assets include net unrealized
gain on open contracts of $11,548 and net option premiums of $200,200.
<F3>Liabilities include redemptions payable of $171,388, accrued brokerage
commissions of $91,172 and accrued management fees of $20,721.
<F4>Total revenue includes realized trading revenue of $1,041,124, net
change in unrealized of $(205,045) and interest income of $249,143.
</FN>
</TABLE>
