<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 28, 1999
REGISTRATION NO. 333-90483
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
PRE-EFFECTIVE AMENDMENT NO.1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER DOCUMENT)
<TABLE>
<S> <C> <C>
DELAWARE 6799 13-3968008
(State of Organization (Primary Standard Industrial (I.R.S. Employer
of Issuer) Classification Code Number) Identification Number)
</TABLE>
-------------------
Two World Trade Center, 62nd Floor
New York, New York 10048
(212) 392-8899
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Robert E. Murray
DEMETER MANAGEMENT CORPORATION
Two World Trade Center, 62nd Floor
New York, New York 10048
(212) 392-8899
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
Edwin L. Lyon, Esq. Isaac Finkle, Esq.
Cadwalader, Wickersham & Taft Dean Witter Reynolds Inc.
1333 New Hampshire Avenue, N.W. Two World Trade Center, 65th Floor
Washington, D.C. 20036 New York, New York 10048
(202) 862-2200 (212) 392-5530
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
-------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NO. REGISTRATION ITEM LOCATION IN PROSPECTUS
- -------- ----------------------------------------------- -----------------------------------------
<C> <S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus........ Facing Page; Front Cover Pages.
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................... Inside Front Cover Page; Table of
Contents.
3. Summary Information, Risk Factors, and Ratio of
Earnings to Fixed Charges..................... Summary; Risk Factors; Description of
Charges; Use of Proceeds; The General
Partner; The Commodity Brokers.
4. Use of Proceeds................................ Use of Proceeds.
5. Determination of Offering Price................ Plan of Distribution.
6. Dilution....................................... Not Applicable.
7. Selling Security Holders....................... Not Applicable.
8. Plan of Distribution........................... Plan of Distribution.
9. Description of Securities to be Registered..... The Limited Partnership Agreements.
10. Interests of Named Experts and Counsel......... Not Applicable.
11. Information with Respect to the Registrant
(a) Description of Business.................. Summary; Risk Factors; Use of Proceeds;
The Trading Advisors; The Futures,
Options and Forwards Markets; The
Limited Partnership Agreements.
(b) Description of Property.................. Not Applicable.
(c) Legal Proceedings........................ Certain Litigation; The Trading Advisors.
(d) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters..................... Risk Factors.
(e) Financial Statements..................... Independent Auditors' Reports.
(f) Selected Financial Data.................. Selected Financial Data.
(g) Supplementary Financial Information...... Selected Financial Data.
(h) Management's Discussion and Analysis
of Financial Condition and Results of
Operations.............................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.
(i) Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.............................. Not Applicable.
(j) Quantitative and Qualitative Disclosures
About Market Risk....................... Quantitative and Qualitative Disclosures
About Market Risk.
(k) Directors and Executive Officers......... The General Partner.
(l) Executive Compensation................... Summary; Conflicts of Interest; Fiduciary
Responsibility; Description of Charges;
Risk Factors; The Trading Advisors; The
General Partner; The Commodity Brokers.
(m) Security Ownership of Certain Beneficial
Owners and Management................... Capitalization; The General Partner;
Independent Auditors' Reports.
(n) Certain Relationships and Related
Transactions............................ Summary; Conflicts of Interest; Fiduciary
Responsibility; Description of Charges;
Risk Factors; The Trading Advisors; The
General Partner; The Commodity Brokers.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................... Fiduciary Responsibility.
</TABLE>
<PAGE>
EXPLANATORY STATEMENT
The Prospectus contained in this Registration Statement relates not only to
7,000,000 Units of Limited Partnership Interest of Morgan Stanley Tangible Asset
Fund L.P. ("MSTAF") covered by this Registration Statement, but to:
(i) 3,121,100.290 Units of Limited Partnership Interest of Morgan Stanley
Dean Witter Spectrum Select L.P. remaining unsold as of November 30, 1999 from
Registration Statement Nos. 333-47829 and 333-68773, and 4,500,000 Units of
Limited Partnership Interest covered by a new Registration Statement on Form S-1
filed simultaneously herewith;
(ii) 10,702,061.673 Units of Limited Partnership Interest of Morgan Stanley
Dean Witter Spectrum Technical L.P. remaining unsold as of November 30, 1999
from Registration Statement Nos. 33-80146, 333-00494, 333-3222, 333-47831, and
333-68779;
(iii) 2,958,874.647 Units of Limited Partnership Interest of Morgan Stanley
Dean Witter Spectrum Strategic L.P. remaining unsold as of November 30, 1999
from Registration Statement Nos. 33-80146, 333-00494, and 333-3222, and
6,500,000 Units of Limited Partnership Interest covered by a new Registration
Statement on Form S-1 filed simultaneously herewith;
(iv) 3,472,438.090 Units of Limited Partnership Interest of Morgan Stanley
Dean Witter Spectrum Global Balanced L.P. remaining unsold as of November 30,
1999 from Registration Statement Nos. 33-80146, 333-00494, and 333-3222, and
3,000,000 Units of Limited Partnership Interest covered by a new Registration
Statement on Form S-1 filed simultaneously herewith; and
(v) 12,000,000 Units of Limited Partnership Interest of Morgan Stanley Dean
Witter Spectrum Currency L.P. covered by a Registration Statement on Form S-1
filed simultaneously herewith.
MSTAF will change its name to Morgan Stanley Dean Witter Spectrum Commodity
L.P. on or before the date this Registration Statement is declared effective.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION: DECEMBER 28, 1999
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
<TABLE>
<CAPTION>
MINIMUM NUMBER NET
OF UNITS THAT MAXIMUM ASSET
MUST BE SOLD AVAILABLE VALUE
TO BREAK ESCROW UNITS PER UNIT
------------------ -------------- ---------
$
<S> <C> <C> <C>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P. ........... not applicable 7,621,100.290 21.65
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P. ........ not applicable 10,702,061.673 14.36
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P. ........ not applicable 9,458,874.647 14.49
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P. .. not applicable 6,472,438.090 15.81
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P. ......... 600,000 12,000,000.000 10.00
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P. ........ not applicable 7,000,000.000 7.41
</TABLE>
Each partnership trades futures, forwards and options contracts pursuant to
trading programs employed by the trading advisors for that partnership. You may
purchase units as of the last day of each month. The price you pay for each unit
will equal 100% of the net asset value per unit on the date of purchase. The
total number of units available and the net asset value per unit for each
partnership as of November 30, 1999 is set forth above, except that the net
asset value per unit of Spectrum Currency is its initial offering price.
<TABLE>
<S> <C>
Minimum Initial Purchase...................... $5,000 or $2,000 (for IRAs only)
in one or more partnerships
Minimum Per Partnership....................... $1,000
Minimum Purchase for Existing Investors....... $500
</TABLE>
Before you invest you will be required to represent and warrant that you meet
applicable state minimum financial suitability standards. You are encouraged to
discuss your investment with financial, legal and tax advisors before you
invest.
Your subscription funds will be held in escrow at The Chase Manhattan Bank, New
York, New York until they are transferred to the partnership whose units you
have purchased.
THESE ARE SPECULATIVE SECURITIES. YOU COULD LOSE ALL OR SUBSTANTIALLY ALL OF
YOUR INVESTMENT IN THE PARTNERSHIPS. READ THIS PROSPECTUS CAREFULLY AND CONSIDER
THE "RISK FACTORS" SECTION BEGINNING ON PAGE - . IN PARTICULAR, YOU SHOULD BE
AWARE THAT:
- Each partnership's futures, forwards and options trading is speculative and
trading performance has been, and is expected to be, volatile.
- With the exception of Spectrum Commodity, each partnership's trading is
highly leveraged, which accentuates the trading profit or trading loss on a
trade.
- Past performance is not necessarily indicative of future results.
- You may not redeem your units until you have been an investor for at least
six months.
- If you redeem units within 24 months after they are purchased, you will pay
a redemption charge except in defined circumstances.
- Units will not be listed on an exchange and no other secondary market will
exist for the units.
- The fixed expenses of each partnership will require the partnership to earn
annual net trading profits, after taking into account estimated interest
income, of the following percentages of average annual net assets:
<TABLE>
<CAPTION>
Without a With a 2%
Redemption Charge Redemption Charge
----------------- -----------------
% %
<S> <C> <C>
Spectrum Select............................ 6.49 8.53
Spectrum Technical......................... 7.49 9.53
Spectrum Strategic......................... 7.39 9.43
Spectrum Global Balanced................... 1.15 3.19
Spectrum Currency.......................... 4.34 6.38
Spectrum Commodity......................... 3.34 5.38
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN ANY ONE OF THESE POOLS NOR HAS THE COMMISSION PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
MORGAN STANLEY DEAN WITTER
DEAN WITTER REYNOLDS INC.
-
<PAGE>
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU
TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS
ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE
POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS
THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID
DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A
COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED TO EACH POOL BEGINNING AT
PAGE - AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT
IS TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE - .
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THESE COMMODITY POOLS. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN ANY OF THESE COMMODITY POOLS, YOU SHOULD
CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE
PRINCIPAL RISK FACTORS OF THIS INVESTMENT, BEGINNING AT PAGE - .
YOU SHOULD ALSO BE AWARE THAT EACH OF THESE COMMODITY POOLS MAY TRADE
FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE
THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET,
MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO
THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY
BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR
MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR EACH POOL MAY
BE EFFECTED.
(i)
<PAGE>
TABLE OF CONTENTS
PART ONE
DISCLOSURE DOCUMENT
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary................................... 1
Risk Factors.............................. 10
Trading and Performance Risks........... 10
The partnerships' trading is
speculative and volatile............ 10
The partnerships' trading is highly
leveraged........................... 10
Options trading can be more volatile
than futures trading................ 10
You should not rely on the past
performance of a partnership in
deciding to purchase units.......... 10
Spectrum Currency does not have an
operating history................... 10
Spectrum Currency is a new fund and
will be subject to special risks
during its start-up period.......... 10
Spectrum Commodity is subject to
greater risk of loss during periods
of low inflation.................... 11
Market illiquidity may cause less
favorable trade prices.............. 11
Trading on foreign exchanges presents
greater risks to each partnership
than trading on U.S. exchanges...... 11
The unregulated nature of the forwards
markets creates counterparty risks
that do not exist in futures trading
on exchanges........................ 11
The partnerships are subject to
speculative position limits......... 12
The partnerships could lose assets and
have their trading disrupted if a
commodity broker or others become
bankrupt............................ 12
Euro conversion limits a trading
advisor's ability to trade
individual currencies and could
result in trading losses............ 12
Potential inability to trade or report
results because of year 2000
problems............................ 12
Partnerships and Offering Risks......... 13
Each partnership incurs substantial
charges............................. 13
Incentive fees may be paid by a
partnership even though the
partnership sustains trading
losses.............................. 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Restricted investment liquidity in the
units............................... 13
Conflicts of interest in each
partnership's structure............. 14
An investment in units may not
diversify an overall portfolio...... 14
No assurance that units of Spectrum
Currency will be sold............... 14
Trading Advisor Risks................... 14
Reliance on the trading advisors to
trade successfully.................. 14
Market factors may adversely influence
the trading programs................ 14
Possible consequences of using
multiple trading advisors for
Spectrum Select, Spectrum Technical,
Spectrum Strategic, and Spectrum
Currency............................ 14
Spectrum Global Balanced and Spectrum
Commodity are single-advisor funds
and lack the diversity of a
multi-advisor fund.................. 14
Increasing the assets managed by a
trading advisor may adversely affect
performance......................... 15
Limited partners will not be aware of
changes to trading programs......... 15
Limited term of management agreements
may limit access to a trading
advisor............................. 15
Taxation Risks.......................... 15
Even though the partnerships do not
intend to make distributions, you
will be liable for taxes on your
share of any trading profits and any
other income of the partnerships in
which you have invested............. 15
The partnerships' tax returns could be
audited............................. 15
Conflicts of Interest..................... 15
Fiduciary Responsibility and Liability.... 17
Description of Charges.................... 19
Use of Proceeds........................... 24
The Spectrum Series....................... 26
Selected Financial Data................... 36
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 39
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Quantitative and Qualitative Disclosures
About Market Risk....................... 51
The General Partner....................... 61
The Trading Advisors...................... 66
Exchange Right............................ 114
Redemptions............................... 115
The Commodity Brokers..................... 116
Litigation................................ 118
The Limited Partnership Agreements........ 119
Plan of Distribution...................... 122
Subscription Procedure.................... 125
Purchases by Employee Benefit Plans--
ERISA Considerations.................... 127
Material Federal Income Tax
Considerations.......................... 128
State and Local Income Tax Aspects........ 133
Legal Matters............................. 134
Experts................................... 134
Where You Can Find More Information....... 134
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PART TWO
STATEMENT OF
ADDITIONAL INFORMATION
The Futures, Options, and Forwards
Markets................................. 135
Potential Advantages...................... 139
Supplemental Performance
Information............................. 152
Glossary of Terms......................... 182
Financial Statements...................... F-1
Exhibit A - Form of Amended and
Restated Limited Partnership
Agreements.......................... A-1
Annex - Request for Redemption........ A-24
Exhibit B - Specimen Form of
Subscription and Exchange Agreement
and Power of Attorney............... B-1
Exhibit C - Subscription Agreement
Update Form......................... C-1
</TABLE>
(iii)
<PAGE>
THE DATE OF THIS PROSPECTUS IS , 1999.
SUMMARY
Because this is a summary, it does not contain all of the information that
may be important to you. You should read the entire prospectus and its exhibits
carefully before you decide to invest.
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
The Morgan Stanley Dean Witter Spectrum Series consists of six continuously
offered limited partnerships, each organized in the State of Delaware:
<TABLE>
<CAPTION>
SPECTRUM SERIES PARTNERSHIP DATE ORGANIZED
- --------------------------- --------------------
<S> <C>
Spectrum Select March 21, 1991
Spectrum Technical April 29, 1994
Spectrum Strategic April 29, 1994
Spectrum Global Balanced April 29, 1994
Spectrum Currency October 20, 1999
Spectrum Commodity July 31, 1997
</TABLE>
The offices of each Partnership are located at Two World Trade Center, 62nd
Floor, New York, New York 10048, telephone (212) 392-8899.
The Spectrum Series of partnerships offers you the choice of investing in
managed futures funds with different trading advisors employing a variety of
trading programs, as well as the opportunity to shift investments among the
partnerships. The business of the partnerships is to engage in speculative
trading of futures contracts and options on futures contracts and in forward
contracts.
A futures contract is an agreement to buy or sell a fixed amount of a
commodity or other underlying product, instrument or index at a predetermined
price at a specified time in the future. In order to secure its obligation to
make or take delivery under a futures contract, the trader must deposit funds,
referred to as margin, with the commodity broker through which it trades. An
option on a futures contract gives the buyer of the option, in exchange for a
one-time payment known as premium, the right, but not the obligation, to buy or
sell a futures contract at a specified price within a specified period of time.
The seller of an option on a futures contract receives the premium payment and
has the obligation to buy or sell the futures contract at the specified price
within the specified period of time. Futures contracts and options on futures
contracts are traded on U.S. and foreign exchanges. A forward contract is an
agreement directly between two parties to buy or sell a fixed amount of an
underlying product at an agreed price at an agreed date in the future. Forward
contracts are not traded on exchanges, but rather are traded in the dealer
markets. A partnership may take long positions in futures, forwards and options
contracts in which the partnership is obligated to take delivery of the
underlying commodity, product, instrument or indices. A partnership also may
take short positions in those contracts in which the partnership has an
obligation to deliver the underlying commodity, product, instrument or indices.
Futures, forwards and options contracts are traded in a number of commodities,
products, instruments, and indices, including foreign currencies, financial
instruments, precious and industrial metals, energy products, agricultural
commodities, stock indices and "soft" commodities like cotton and cocoa.
The investment objective of each Spectrum Series partnership is to achieve
capital appreciation and, to a lesser extent Spectrum Global Balanced, to
provide investors with the opportunity to diversify a portfolio of traditional
investments consisting of stocks and bonds. While the partnerships have the same
over-all investment objective, and many of their trading advisors, often in the
same general style, trade in the same futures, forwards and options contracts,
each trading advisor and its trading programs trades differently. Each
partnership has a different mix of trading advisors and trading programs. You
should review and compare the specifics of each partnership, its terms and its
trading advisors before selecting one or more partnerships in which to invest.
1
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
This partnership currently allocates its assets among three trading
advisors: EMC Capital Management, Inc., Rabar Market Research Inc., and Sunrise
Capital Management, Inc. The trading advisors employ proprietary trading
programs that seek to profit through the analysis of technical market
information, such as analyzing actual daily, weekly and monthly price
fluctuations, volume variations and changes in open interest. The trading
advisors collectively trade futures, forwards and options in a portfolio of
agricultural commodities, energy products, foreign currencies, interest rates,
precious and base metals, soft commodities and stock indices.
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
This partnership currently allocates its assets among three trading
advisors: Campbell & Company, Inc., Chesapeake Capital Corporation and John W.
Henry & Company, Inc. The trading advisors employ proprietary trading programs
that seek to identify and follow long-term trends through the analysis of
technical market information. The trading advisors collectively trade futures,
forwards and options in a portfolio of agricultural commodities, energy
products, foreign currencies, interest rates, precious and base metals, soft
commodities and stock indices.
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
This partnership currently allocates its assets among three trading
advisors: Allied Irish Capital Management, Ltd. Blenheim Investments, Inc., and
Willowbridge Associates Inc. The trading advisors primarily employ discretionary
trading approaches that seek to profit through the analysis of fundamental
market information, such as supply and demand levels and economic and
geopolitical indicators, and, to a lesser extent, technical market information.
The trading advisors collectively trade futures, forwards and options in a
portfolio of agricultural commodities, energy products, foreign currencies,
interest rates, precious and base metals, soft commodities and stock indices.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
This partnership currently allocates its assets to a single trading advisor,
RXR, Inc. RXR offers a balanced portfolio trading approach using futures,
forwards and options to gain long biased exposure to global stock markets and
global bond markets, as well as long and short exposure to a component of
managed futures contracts in agricultural commodities, energy products, foreign
currencies, precious and base metals, and soft commodities.
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
This new partnership will allocate its assets between two trading advisors:
John W. Henry & Company, Inc. and Sunrise Capital Partners, LLC. The trading
advisors employ proprietary trading programs that seek to identify favorable
price relationships between and among various global currency markets through
the analysis of technical market information. The trading programs employed for
the partnership trade world currencies primarily in the forward dealer markets,
but also in the futures and options market.
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
This partnership currently allocates its assets to a single trading advisor,
Morgan Stanley Dean Witter Commodities Management Inc. The trading advisor
employs a proprietary trading approach that seeks to identify long-only trends
through the disciplined analysis of technical market information. The trading
advisor trades futures and options in a portfolio of agricultural commodities,
precious and base metals, soft commodities and energy products.
2
<PAGE>
WHO MAY SUBSCRIBE
INVESTMENT CONSIDERATIONS
You should purchase units in a partnership only if you understand the risks
involved in the investment and only if your financial condition permits you to
bear those risks, including the risk of losing all or substantially all of your
investment in the partnership. You should invest in the units only with the risk
capital portion of your investment portfolio.
MINIMUM INVESTMENT
If you are a new investor in the Spectrum Series of partnerships, you must
invest at least $5,000, unless you are investing through an IRA, in which case
your minimum investment is $2,000. You may allocate your investment among any
one or more of the partnerships in the Spectrum Series, but you must invest at
least $1,000 in a partnership. Once you become an investor in any Spectrum
Series partnership, you may increase that investment with an additional
contribution of at least $500.
If you are an investor in another limited partnership for which Demeter
Management Corporation serves as the general partner and commodity pool
operator, you may redeem your interest in that other partnership and use the
proceeds to invest in any one or more of the Spectrum Series of partnerships.
The general partner may, in its sole discretion, reject any subscription in
whole or in part.
FINANCIAL SUITABILITY
Unless otherwise specified in the subscription agreement under "State
Suitability Requirements," you must have either: a net worth of at least
$75,000, exclusive of home, furnishings, and automobiles; or both a net worth of
at least $30,000, exclusive of home, furnishings, and automobiles, and an annual
income of at least $30,000. You should be aware, however, that certain States
impose more restrictive suitability and/ or higher minimum investment
requirements. Before you invest you will be required to represent and warrant
that you meet the applicable State minimum financial suitability standard set
forth in the subscription agreement, which may also require a greater minimum
investment.
LIMITED REVOCATION RIGHT
After you subscribe for units in any Spectrum Series partnership, you will
have limited rights to revoke your subscription. You may only revoke a
subscription and receive a full refund of the subscription amount, plus any
accrued interest, within five business days after execution of the subscription
agreement or no later than 3:00 P.M., New York City time, on the date of the
applicable monthly closing, whichever comes first, by delivering written notice
to your Morgan Stanley Dean Witter financial advisor.
THE OFFERING OF UNITS
SPECTRUM CURRENCY'S INITIAL OFFERING
12,000,000 Units of Spectrum Currency are being offered for sale at $10 per
unit at its initial closing, which is currently scheduled to be held as of
January 31, 2000. The period from the date of this prospectus through May 31,
2000 is the initial offering period for Spectrum Currency. The initial offering
period, however, may be extended to July 31, 2000 in the sole discretion of the
general partner. The general partner must receive and accept subscriptions for
at least 600,000 units during the initial offering period in order for Spectrum
Currency to commence trading operations. If investors do not subscribe for at
least 600,000 units of Spectrum Currency during the initial offering period, the
offering will terminate and each subscriber's customer account will be credited
for the full subscription amount, with interest.
THE SPECTRUM SERIES CONTINUOUS OFFERING
Each partnership, including Spectrum Currency once it has held its initial
closing, offers units of limited partnership interest at monthly closings held
as of the last day of each month. You can purchase
3
<PAGE>
units at a price equal to 100% of a partnership's month-end net asset value. The
general partner calculates each partnership's net asset value per unit on a
monthly basis by dividing the partnership's net assets by the number of its
outstanding units. A partnership's net assets is its assets minus its
liabilities.
ESCROW TERMS
During Spectrum Currency's initial offering period and during each
partnership's continuous offering, your subscription will be transferred to, and
held in escrow by, The Chase Manhattan Bank, New York, New York. Subscription
funds held in escrow will be invested in the escrow agent's money market account
and will earn interest at the rate then paid by the bank on that money market
account. If the general partner accepts your subscription, the escrow agent will
pay the subscription amount to the appropriate partnerships and pay any interest
earned on those funds to Dean Witter. In turn, Dean Witter will credit your
customer account with the interest. If the general partner rejects a
subscription, your account will be credited in an amount equal to the rejected
subscription amount, together with any interest earned on those funds while held
in escrow.
SUMMARY OF RISK FACTORS YOU SHOULD CONSIDER
- These are speculative securities.
- You could lose all or substantially all of your investment in the
partnerships.
- Past performance is not necessarily indicative of future results.
- Each partnership's futures, forwards and options trading is speculative
and trading performance has been, and is expected to be, volatile.
- With the exception of Spectrum Commodity, each partnership's trading is
highly leveraged, which accentuates the trading profit or loss on a trade.
- You may not redeem your units until you have been an investor for at least
six months.
- If you redeem units within 24 months after they are purchased, you will
pay a redemption charge except in defined circumstances.
- Units will not be listed on an exchange and no other secondary market will
exist for the units.
- Each partnership pays substantial charges and fees and must earn
substantial trading profits in order to pay these expenses.
- Profits earned by a partnership will be taxable to an investor even though
the general partner does not intend to make any distributions.
MAJOR CONFLICTS OF INTEREST
- Because the general partner, Dean Witter, Morgan Stanley, Morgan Stanley
International, and Morgan Stanley Dean Witter Commodities Management are
affiliates of each other, the fees payable to those parties and the other
terms relating to the operation of the partnerships and the sale of units
were not negotiated by an independent party.
- Because your Morgan Stanley Dean Witter financial advisor receives a
portion of the brokerage fees paid by the partnerships, your financial
advisor has a conflict of interest in advising you in the purchase or
redemption of units.
- The trading advisors, commodity brokers and general partner may trade
futures, forwards and options for their own accounts and, thus, they may
compete with a partnership for positions. Also, the other commodity pools
managed by the general partner and the trading advisors compete with the
partnerships for positions. These conflicts can result in less favorable
prices on the partnerships' transactions.
4
<PAGE>
THE GENERAL PARTNER
The general partner of each Partnership is Demeter Management Corporation, a
Delaware corporation. The general partner is or has been the general partner of
35 commodity pools and currently operates 21 other commodity pools in addition
to those in the Spectrum Series. As of November 30, 1999, the general partner
managed $1.3 billion of client assets. The general partner's main business
office is located at Two World Trade Center, 62nd Floor, New York, New York
10048, telephone (212) 392-8899.
THE COMMODITY BROKERS
The commodity brokers for the partnerships are responsible for assuring that
the partnerships' trades are properly processed and recorded or "cleared" by the
clearinghouse affiliated with the exchange on which the trade took place, and
for holding the partnerships' funds deposited with the commodity brokers as
margin for the trades.
Dean Witter is the non-clearing commodity broker for each partnership. As
non-clearing broker, Dean Witter holds each partnership's funds and provides
margin funds to the clearing brokers for the partnership's futures, forwards and
options positions.
Carr Futures Inc. serves as the clearing commodity broker for each
partnership except Spectrum Commodity. The clearing commodity broker for
Spectrum Commodity is Morgan Stanley & Co. Incorporated, with all trades on the
London Metal Exchange cleared by Morgan Stanley International Limited. The
clearing commodity broker is responsible for processing and clearing the futures
and options transactions placed by a trading advisor for the account of a
partnership. Carr Futures also acts as the dealer on each foreign currency
forward contract for the partnerships.
5
<PAGE>
ORGANIZATIONAL CHART
Following is an organizational chart for each partnership, showing the
relationships among the various parties involved with this offering. With the
exception of Carr Futures and all of the trading advisors except Morgan Stanley
Dean Witter Commodities Management, all parties are affiliates of Morgan Stanley
Dean Witter & Co.
[CHART]
- ---------
* Demeter presently serves as general partner for 21 other commodity pools,
Dean Witter acts as the non-clearing commodity broker for all of the pools,
and Carr Futures acts as the clearing commodity broker for all of the pools
except Spectrum Commodity. Morgan Stanley acts as the clearing commodity
broker for Spectrum Commodity, and Morgan Stanley International serves as
the clearing commodity broker for that pool's trades that take place on the
London Metal Exchange. Dean Witter has also served as selling agent for all
but one of the pools managed by Demeter. All of the pools, including the
partnerships, are managed and traded independently of one another.
6
<PAGE>
FEES TO BE PAID BY THE PARTNERSHIPS
The partnerships pay the following monthly fees:
<TABLE>
<CAPTION>
MANAGEMENT FEE BROKERAGE FEE
(ANNUAL RATE) INCENTIVE FEE(1) (ANNUAL RATE)
-------------- ---------------- -------------
<S> <C> <C> <C>
% % %
Spectrum Select 3 15 7.25
Spectrum Technical 4 15 or 19(2) 7.25
Spectrum Strategic 3 or 4(3) 15 7.25
Spectrum Global Balanced 1.25 15 4.60
Spectrum Currency 3 or 4(4) 15 4.60
Spectrum Commodity 2.5 20 4.60
</TABLE>
- ---------
(1) Each partnership pays its trading advisors a monthly incentive fee, except
Spectrum Commodity which pays its trading advisor an annual incentive fee.
(2) Campbell and JWH-Registered Trademark- each receive a monthly incentive fee
equal to 15% of any trading profits. Chesapeake receives a monthly incentive
fee equal to 19% of any trading profits. Trading profits represent the
amount by which profits from futures, forwards and options trading exceed
losses, after brokerage, management and incentive fees have been paid.
(3) Blenheim and Willowbridge each receive a monthly management fee at a 4%
annual rate. Allied Irish receives a monthly management fee at a 3% annual
rate.
(4) JWH-Registered Trademark- receives a monthly management fee at a 4% annual
rate. Sunrise Capital Partners receives a monthly management fee at a 3%
annual rate.
The management fee payable to each trading advisor and the brokerage fee
payable to Dean Witter are based on a percentage of net assets and will be paid
monthly regardless of a partnership's performance. The partnerships pay each
trading advisor an incentive fee only if trading profits are earned on the
portion of net assets managed by the trading advisor. You should understand
that, except in the case of Spectrum Global Balanced and Spectrum Commodity,
each of which has only one trading advisor, a trading advisor may receive an
incentive fee even though the partnership as a whole is not profitable.
Neither you nor the partnerships will pay any selling commissions, or
organizational, initial, or continuing offering expenses in connection with the
offering of units by the partnerships. Dean Witter will pay all costs incurred
in connection with the organization of Spectrum Currency and its initial
offering of units. Dean Witter will also pay all costs incurred in connection
with the continuing offering of units of each partnership, and will pay the
ordinary administrative expenses of each partnership. Each partnership will pay
any extraordinary expenses it may incur.
BREAK EVEN ANALYSIS
Following is a table that sets forth the fees and expenses that you would
incur on an initial investment of $5,000 in each partnership and the amount that
your investment must earn, after taking into account estimated interest income,
in order to break even after one year and more than two years. The fees and
expenses applicable to each partnership are described above.
7
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM
SPECTRUM SPECTRUM SPECTRUM GLOBAL SPECTRUM SPECTRUM
SELECT TECHNICAL STRATEGIC BALANCED CURRENCY COMMODITY
-------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ $ $ $ $ $
Management Fee.......................... 150.00 200.00 195.00 62.50 175.00 125.00
Brokerage Fee........................... 362.50 362.50 362.50 230.00 230.00 230.00
Less: Interest Income (1)............... (188.00) (188.00) (188.00) (235.00) (188.00) (188.00)
Incentive Fee (2)....................... -- -- -- -- -- --
Redemption Charge (3)................... 102.04 102.04 102.04 102.04 102.04 102.04
Amount of trading profits a partnership
must earn for you to recoup your
initial investment at the end of one
year after paying a redemption
charge................................ 426.54 426.54 471.54 159.54 319.04 269.04
Trading profits as percentage of net
assets that a partnership must earn
for you to recoup your initial
investment at the end of one year
after paying a redemption charge...... 8.53% 9.53% 9.43% 3.19% 6.38% 5.38%
Amount of trading profits a partnership
must earn each year for you to recoup
your initial investment after two
years with no redemption charge....... 324.50 324.50 369.50 57.50 217.00 167.00
Trading profits as percentage of net
assets that a partnership must earn
each year for you to recoup your
initial investment after two years
with no redemption charge............. 6.49% 7.49% 7.39% 1.15% 4.34% 3.34%
</TABLE>
- ---------
(1) The partnerships do not directly invest in interest-bearing instruments.
Instead, each partnership is paid interest by Dean Witter at the blended
rate Dean Witter earns on its U.S. Treasury bill investments with all
customer segregated funds, as if 80% (100% in the case of Spectrum Global
Balanced) of the partnership's average daily net assets for the month were
invested at that rate. The rate used in the calculations was estimated based
upon current rates of approximately 4.70%.
(2) Incentive fees are paid to a trading advisor only on trading profits on the
assets of the partnership managed by that trading advisor. Trading profits
are determined after deducting all partnership expenses attributable to the
partnership assets managed by the trading advisor, other than any
extraordinary expenses, and do not include interest income. Therefore,
incentive fees will be zero at the partnership's breakeven point on the
assets managed by the trading advisor. Further, there do not need to be
trading profits to cover the redemption charge because the interest earned
by the partnership during the year will exceed the redemption charge to the
investor. Note, however, that because one trading advisor to a partnership
could be profitable and earn an incentive fee while the other trading
advisors are unprofitable such that the partnership has an overall trading
loss, it is possible for a partnership to pay an incentive fee at a time
when it has incurred overall losses.
(3) Units redeemed at the end of one year from the date of purchase are
generally subject to a 2% redemption charge; after two years there are no
redemption charges.
REDEMPTION CHARGES INCURRED BY YOU
You will pay a redemption charge of 2% of the net asset value of the units
redeemed if you redeem within the first twelve months after the units were
purchased, and 1% if you redeem units within the thirteenth through
twenty-fourth months after the units were purchased. Units are not subject to a
redemption charge after you have owned them for more than 24 months.
You will not incur a redemption charge if you redeem units during the first
24 months after they were issued in the following circumstances:
- If you purchase at least $500,000 of units.
8
<PAGE>
- If you redeem units immediately following notice of an increase in
brokerage, management or incentive fees.
- If you redeem units in connection with an exchange for units in another
Spectrum Series partnership.
- If you acquire units with the proceeds from the redemption of interests in
a non-Spectrum Series partnership for which Demeter serves as the general
partner, you will not be subject to a redemption charge on those units
when they are redeemed.
- If you previously redeemed units and paid a redemption charge or held
those units for at least 24 months, you will not have to pay a redemption
charge on subsequently purchased units provided they are purchased within
12 months of the redemption of the old units and the purchase price of the
new units does not exceed the net proceeds received from the prior
redemption.
REDEMPTIONS
Once you have been an investor in the Spectrum Series of partnerships for
more than six months, you are permitted to redeem any part of your investment,
even if subsequent purchases have been held for less than six months. However,
you will pay a redemption charge if your redeemed units were purchased within 24
months of the date of redemption. Unless you are redeeming your entire interest
in a partnership, redemptions may only be made in whole units, with a minimum of
50 units required for each redemption.
EXCHANGE RIGHT
As an investor in the Spectrum Series of partnerships, you may redeem units
in any Spectrum Series partnership after you have been an investor for six
months and use the proceeds to purchase units in one or more of the other
Spectrum Series of partnerships, at a price equal to 100% of the net asset value
per unit, without incurring any redemption or other charge on the transaction.
DISTRIBUTIONS
The General Partner currently does not intend to make any distribution of
partnership profits.
TAX CONSIDERATIONS
Even though the general partner currently does not intend to make
distributions, your allocable share of the trading profits and other income of
the partnerships in which you invest will be taxable to you.
The trading activities of each Partnership, in general, generate capital
gains and loss and ordinary income. 40% of any trading profits on U.S.
exchange-traded contracts are taxed as short-term capital gains at your ordinary
income tax rate, while 60% of such gains are taxed at your long-term capital
gains tax rate. We expect that each partnership's trading gains from other
contracts will be primarily short-term capital gains. This tax treatment applies
regardless of how long you hold your units.
You may deduct losses on units against capital gains income. You may deduct
losses in excess of capital gains against ordinary income only to the extent of
$3,000 per year. Consequently, you could pay tax on a partnership's interest
income even though you have lost money on your units.
9
<PAGE>
RISK FACTORS
This section includes all of the principal risks that you will face with an
investment in the partnerships.
TRADING AND PERFORMANCE RISKS
THE PARTNERSHIPS' TRADING IS SPECULATIVE AND VOLATILE. The rapid
fluctuations in the market prices of futures, forwards and options makes an
investment in the partnerships volatile. Volatility is caused by changes in
supply and demand relationships; weather; agricultural, trade, fiscal, monetary
and exchange control programs; domestic and foreign political and economic
events and policies; and changes in interest rates. If a trading advisor
incorrectly predicts the direction of prices, large losses may occur. As can be
seen from the information in the performance capsules for the partnerships on
pages 31 to 34, each partnership has experienced volatility in its performance
on both a monthly and an annual basis.
THE PARTNERSHIPS' TRADING IS HIGHLY LEVERAGED. The trading advisors for
each partnership use substantial leverage when trading, which could result in
immediate and substantial losses. For example, if 10% of the face value of a
contract is deposited as margin for that contract, a 10% decrease in the value
of the contract would cause a total loss of the margin deposit. A decrease of
more than 10% in the value of the contract would cause a loss greater than the
amount of the margin deposit.
The leverage employed by the partnerships in their trading can vary
substantially from month to month and can be significantly higher or lower than
the averages set forth below. As an example of the leverage employed by the
partnerships, except Spectrum Currency, which is a new fund and does not have a
trading history, set forth below is the average of the underlying value of each
partnership's month-end positions for the period September, 1998 to August,
1999, as compared to the average month-end net assets of the partnership during
that period. While the leverage employed on a trade will accentuate the trading
profit or loss on that trade, one partnership's overall leverage as compared to
another partnership's overall leverage does not necessarily mean that it will be
more volatile than the other partnership. This can be seen by a review of the
monthly rates of return for the partnerships on pages 31 to 34.
<TABLE>
<S> <C>
Spectrum Select 12.1 times net assets
Spectrum Technical 10.8 times net assets
Spectrum Strategic 7.5 times net assets
Spectrum Global Balanced 6.6 times net assets
Spectrum Commodity 1.4 times net assets
</TABLE>
OPTIONS TRADING CAN BE MORE VOLATILE THAN FUTURES TRADING. Each partnership
may trade options on futures. Although successful options trading requires many
of the same skills as successful futures trading, the risks are different.
Successful options trading requires a trader to accurately assess near-term
market volatility because that volatility is immediately reflected in the price
of outstanding options. Correct assessment of market volatility can therefore be
of much greater significance in trading options than it is in many long-term
futures strategies where volatility does not have as great an effect on the
price of a futures contract.
YOU SHOULD NOT RELY ON THE PAST PERFORMANCE OF A PARTNERSHIP IN DECIDING TO
PURCHASE UNITS. Since the future performance of a partnership is unpredictable,
each partnership's past performance is not necessarily indicative of future
results.
SPECTRUM CURRENCY DOES NOT HAVE AN OPERATING HISTORY. The CFTC requires a
commodity pool operator to disclose to prospective pool participants the actual
performance record of the pool for which the operator is soliciting
participants. YOU SHOULD NOTE THAT SPECTRUM CURRENCY HAS NOT COMMENCED TRADING
AND DOES NOT HAVE ANY PERFORMANCE HISTORY.
SPECTRUM CURRENCY IS A NEW FUND AND WILL BE SUBJECT TO SPECIAL RISKS DURING
ITS START-UP PERIOD. During its start-up period, Spectrum Currency's performance
may be more volatile because it will not have had time to develop a
fully-diversified portfolio. The more concentrated the trading, the greater the
possibility of volatility, which can result in greater losses. The general
partner believes the start-up period could last for one to three months after
the initial closing.
10
<PAGE>
SPECTRUM COMMODITY IS SUBJECT TO GREATER RISK OF LOSS DURING PERIODS OF LOW
INFLATION. During periods of low or no commodity price inflation, Spectrum
Commodity is more likely to experience losses because it is a long-only
commodity fund. As a long-only commodity fund, the partnership will not be
profitable unless commodity prices increase. For example, Spectrum Commodity
experienced losses during its initial year of trading, as 1998 was a year
characterized by a deflationary environment with respect to the commodities
traded by the partnership.
MARKET ILLIQUIDITY MAY CAUSE LESS FAVORABLE TRADE PRICES. Although the
trading advisors for each partnership generally will purchase and sell actively
traded contracts where last trade price information and quoted prices are
readily available, the prices at which a sale or purchase occur may differ from
the prices expected, particularly in circumstances where a market has limited
trading volume. In addition, most U.S. futures exchanges have established "daily
price fluctuation limits" which preclude the execution of trades at prices
outside of the limit, and, from time to time, the CFTC or the exchanges may
suspend trading in market disruption circumstances. In these cases it is
possible that a partnership could be required to maintain a losing position that
it otherwise would execute and incur significant losses or be unable to
establish a position and miss a profit opportunity.
TRADING ON FOREIGN EXCHANGES PRESENTS GREATER RISKS TO EACH PARTNERSHIP THAN
TRADING ON U.S. EXCHANGES.
- Each partnership trades on exchanges located outside the U.S. Trading on
U.S. exchanges is subject to CFTC regulation and oversight, including for
example minimum capital requirements for commodity brokers, regulation of
trading practices on the exchanges, prohibitions against trading ahead of
customer orders, prohibitions against filling orders off exchanges,
prescribed risk disclosure statements, testing and licensing of industry
sales personnel and other industry professionals, and record keeping
requirements. Trading on foreign exchanges is not regulated by the CFTC or
any other U.S. governmental agency or instrumentality and may be subject
to regulations that are different from those to which U.S. exchange
trading is subject, provide less protection to investors than trading on
U.S. exchanges and may be less vigorously enforced than regulations in the
U.S.
- Positions on foreign exchanges also are subject to the risk of exchange
controls, expropriation, excessive taxation or government disruptions.
- A partnership could incur losses when determining the value of its foreign
positions in U.S. dollars because of fluctuations in exchange rates.
Each partnership must deposit margin with respect to the partnership's
futures and options contracts on both U.S. exchanges and on foreign exchanges
and must deposit margin with respect to its foreign currency forward contracts
to assure the partnership's performance on those contracts. Set forth below for
each partnership is the average percentage of month-end margin requirements for
the period September, 1998 to August, 1999 that relate to futures and options
contracts on foreign exchanges as compared to the partnership's total average
month-end margin requirements. This information will provide you with a sense of
the magnitude of each partnership's trading on foreign exchanges, and,
therefore, the relevance of the risks described in the prior paragraph to each
partnership. You should be aware, however, that the percentage of each
partnership's margin requirements that relate to positions on foreign exchanges
varies from month to month and can be significantly higher or lower than the
percentages set forth below.
<TABLE>
<CAPTION>
%
---------
<S> <C>
Spectrum Select 35.8
Spectrum Technical 39.2
Spectrum Strategic 22.3
Spectrum Global Balanced 47.9
Spectrum Commodity 17.1
</TABLE>
THE UNREGULATED NATURE OF THE FORWARDS MARKETS CREATES COUNTERPARTY RISKS
THAT DO NOT EXIST IN FUTURES TRADING ON EXCHANGES. Unlike futures contracts,
forwards contracts are entered into between private parties off an exchange and
are not regulated by the CFTC or by any other U.S. government agency. Because
forwards contracts are not traded on an exchange, the performance of those
contracts is not guaranteed by an exchange or its clearinghouse and the
partnership is at risk to the ability of the
11
<PAGE>
counterparty to the trade to perform on the forwards contract. Because trading
in the forwards markets is not regulated, there are no specific standards or
regulatory supervision of trade pricing and other trading activities that occur
in those markets. Because the partnerships trade forwards contracts in foreign
currency only with Carr Futures, they are at risk to the creditworthiness and
trading practices of Carr Futures as the counterparty to the trades.
As the counterparty to all of the partnerships' foreign currency forwards
contracts, Carr Futures requires the partnerships to make margin deposits with
Carr Futures to assure the partnerships' performance on those contracts, just as
Carr Futures requires the partnerships to deposit margin on their futures
contracts. Set forth below for each partnership that trades foreign currency
forwards contracts is the average percentage of month-end total margin
requirements for the period September, 1998 to August, 1999 that relate to
forwards contracts. This information will provide you with a sense of the
magnitude of each partnership's trading in the forwards contracts markets as
compared to its trading of futures and options contracts on regulated exchanges,
and, therefore, the relevance of the risks described in the prior paragraphs to
each partnership. Once it begins trading, Spectrum Currency will trade
extensively in foreign currency forward contracts. You should be aware that the
percentage of each partnership's margin requirements that relate to forwards
contracts varies from month to month and can be significantly higher or lower
than the percentages set forth below.
<TABLE>
<CAPTION>
%
---------
<S> <C>
Spectrum Select 6.8
Spectrum Technical 12.4
Spectrum Strategic 0.0
Spectrum Global Balanced 5.8
</TABLE>
THE PARTNERSHIPS ARE SUBJECT TO SPECULATIVE POSITION LIMITS. The CFTC and
U.S. futures exchanges have established speculative position limits on the
maximum number of futures and options positions that may be held or controlled
by any one person or group. Therefore, a trading advisor may have to reduce the
size of its futures position in order to avoid exceeding position limits, which
could adversely affect the profitability of a partnership.
THE PARTNERSHIPS COULD LOSE ASSETS AND HAVE THEIR TRADING DISRUPTED IF A
COMMODITY BROKER OR OTHERS BECOME BANKRUPT. The partnerships' assets could be
lost or impounded and trading suspended if a commodity broker, an exchange or a
clearinghouse becomes insolvent or involved in lengthy bankruptcy proceedings.
EURO CONVERSION LIMITS A TRADING ADVISOR'S ABILITY TO TRADE INDIVIDUAL
CURRENCIES AND COULD RESULT IN TRADING LOSSES. On January 1, 1999, eleven
countries in the European Union established fixed conversion rates on their
existing sovereign currencies and converted to a common single currency. During
a three-year transition period, the existing sovereign currencies will continue
to exist but only as a fixed denomination of the euro. Conversion to the euro
prevents each trading advisor from trading those sovereign currencies and
thereby limits its ability to take advantage of potential market opportunities
that might otherwise have existed had separate currencies been available to
trade, except Spectrum Commodity, which does not trade currencies. This could
adversely affect the performance results of the partnerships, particularly
Spectrum Currency, which is a currency-only fund.
POTENTIAL INABILITY TO TRADE OR REPORT RESULTS BECAUSE OF YEAR 2000
PROBLEMS. Commodity pools, like financial and business organizations and
individuals around the world, depend on the smooth functioning of computer
systems. Many computer systems in use today cannot recognize the computer code
for the year 2000, but revert to 1900 or some other date. This is commonly known
as the "Year 2000 Problem." The partnerships could be adversely affected if
computer systems used by them or any third party with whom they have a material
relationship do not properly process and calculate data concerning dates on or
after January 1, 2000. Such a failure could adversely affect the handling or
determination of futures trades and prices and other services.
Morgan Stanley Dean Witter & Co., the parent company of Dean Witter, the
general partner, Morgan Stanley, Morgan Stanley International, and Morgan
Stanley Dean Witter Commodities Management, began its planning for the Year 2000
Problem in 1995, and currently has several hundred employees working on the
matter. It has developed its own Year 2000 compliance plan to deal with the
problem and had the
12
<PAGE>
plan approved by the company's executive management, Board of Directors and
Information Technology Department. The general partner is coordinating with
Morgan Stanley Dean Witter & Co. to address the Year 2000 Problem with respect
to the general partner's computer systems. This includes hardware and software
upgrades, systems consulting and computer maintenance.
Beyond the challenge facing internal computer systems, the systems failure
of any of the third parties with whom the partnerships have a material
relationship--the futures exchanges and clearing organizations through which
they trade, Carr Futures and the trading advisors--could result in a material
financial risk to the partnerships. The general partner, the commodity brokers,
the trading advisors and all U.S. futures exchanges are subject to monitoring by
the CFTC for their Year 2000 preparedness, and the major foreign futures
exchanges have engaged in market-wide testing of their Year 2000 compliance
during 1999. The general partner has monitored the progress of Carr Futures and
each trading advisor throughout 1999 in their Year 2000 compliance and, where
applicable, has tested its external interface with Carr Futures and the trading
advisors.
A worst case scenario would be one in which trading of contracts on behalf
of the partnerships becomes impossible as a result of the Year 2000 Problem
encountered by any third parties. Morgan Stanley Dean Witter & Co. has developed
various "contingency plans" in the event that the systems of such third parties
fail. The general partner intends to consult closely with Morgan Stanley Dean
Witter & Co. in implementing those plans. Despite the best efforts of both the
general partner and Morgan Stanley Dean Witter & Co., however, it is possible
that these steps will not be sufficient to avoid any adverse impact to the
partnerships.
PARTNERSHIPS AND OFFERING RISKS
EACH PARTNERSHIP INCURS SUBSTANTIAL CHARGES. Each partnership must pay
substantial charges and must earn significant trading profits just to pay those
expenses. We estimate the percentage of partnership net assets that must be
earned each year in order for each partnership to break even without accounting
for a redemption charge to be:
<TABLE>
<S> <C>
Spectrum Select............... 6.49%
Spectrum Technical............ 7.49
Spectrum Strategic............ 7.39
Spectrum Global Balanced...... 1.15%
Spectrum Currency............. 4.34
Spectrum Commodity............ 3.34
</TABLE>
INCENTIVE FEES MAY BE PAID BY A PARTNERSHIP EVEN THOUGH THE PARTNERSHIP
SUSTAINS TRADING LOSSES. Each partnership pays each of its trading advisors an
incentive fee based upon partnership trading profits earned by that trading
advisor. These trading profits include unrealized appreciation on open
positions. Accordingly, it is possible that a partnership will pay an incentive
fee on trading profits that do not become realized. Also, each trading advisor
will retain all incentive fees paid to it, even if the assets of a partnership
managed by the trading advisor incur a subsequent loss after payment of an
incentive fee. Because incentive fees are paid monthly for all partnerships
except Spectrum Commodity, it is possible that an incentive fee may be paid to a
trading advisor during a year in which the assets allocated to the trading
advisor suffer a loss for the year.
For all of the partnerships except Spectrum Global Balanced and Spectrum
Commodity, which have only one trading advisor, it is also possible that one
trading advisor for a partnership may generate trading profits on which it has
earned an incentive fee whereas the other trading advisors incur losses such
that the partnership is paying an incentive fee when it has sustained an overall
trading loss.
RESTRICTED INVESTMENT LIQUIDITY IN THE UNITS. There is no secondary market
for units and you are not permitted to redeem your units until you have been an
investor in the Spectrum Series of partnerships for at least six months. After
the initial six-month period, you may redeem your units at any month-end, but
you may have to pay a redemption charge if you redeem units during the first
twenty-four months after they were purchased. Your right to receive payment on a
redemption is not absolute and is dependent upon the partnership having
sufficient assets to pay its liabilities on the redemption date, and the general
partner receiving your request for redemption at least five business days before
the redemption date.
13
<PAGE>
CONFLICTS OF INTEREST IN EACH PARTNERSHIP'S STRUCTURE.
- The general partner, Dean Witter, Morgan Stanley, Morgan Stanley
International, and Morgan Stanley Dean Witter Commodities Management are
affiliates. As a result, the brokerage fees and other terms relating to
the operation of the partnerships and the sale of the units have not been
independently negotiated. In addition, the management fee paid by Spectrum
Commodity to its trading advisor and the terms of its management agreement
have not been independently negotiated.
- Employees of Dean Witter receive a portion of the brokerage fees paid by
the partnerships. Therefore, those employees have a conflict of interest
in advising you in the purchase or redemption of units.
- The trading advisors, commodity brokers, and general partner may trade
futures, forwards and options for their own accounts, and thus, they may
compete with a partnership for positions. Also, the other commodity pools
managed by the general partner and the trading advisors compete with the
partnerships for positions. These conflicts can result in less favorable
prices on the partnerships' transactions.
AN INVESTMENT IN UNITS MAY NOT DIVERSIFY AN OVERALL PORTFOLIO. Because
futures, forwards, and options have historically performed independently of
traditional investments, the general partner believes that managed futures funds
like the partnerships can diversify a portfolio of stocks and bonds. However,
the general partner cannot assure you that any of the partnerships will perform
with a significant degree of non-correlation to your other investments in the
future. Spectrum Global Balanced, in particular, will have greater correlation
to the performance of stocks and bonds. Information showing the monthly
correlation comparison of each Spectrum Series partnership with a sufficient
operating history to the S&P 500 Index and to the Salomon Corporate Bond Index
is provided on pages 154 to 164.
NO ASSURANCE THAT UNITS OF SPECTRUM CURRENCY WILL BE SOLD. Spectrum
Currency will not commence trading operations unless 600,000 units are
subscribed for during the initial offering period and accepted by the general
partner. Because Dean Witter, as selling agent, will only use its best efforts
to offer and sell the units, neither the general partner nor Dean Witter can
assure you that Dean Witter will raise the minimum amount required to commence
trading. Further, while the general partner, Dean Witter, any other firm selling
units, and the trading advisors, and their respective affiliates may subscribe
for units in Spectrum Currency, so that the 600,000 unit minimum is met, they
are not required to do so.
TRADING ADVISOR RISKS
RELIANCE ON THE TRADING ADVISORS TO TRADE SUCCESSFULLY. The trading
advisors are responsible for making all trading decisions for the partnerships.
The general partner cannot assure you that the trading programs employed by the
trading advisors will be successful.
MARKET FACTORS MAY ADVERSELY INFLUENCE THE TRADING PROGRAMS. Often, the
most unprofitable market conditions for the partnerships are those in which
prices "whipsaw," moving quickly upward, then reversing, then moving upward
again, then reversing again. In these conditions, the trading advisors may
establish positions based on incorrectly identifying both the brief upward or
downward price movements as trends when in fact no trends sufficient to generate
profits develop.
POSSIBLE CONSEQUENCES OF USING MULTIPLE TRADING ADVISORS FOR SPECTRUM
SELECT, SPECTRUM TECHNICAL, SPECTRUM STRATEGIC, AND SPECTRUM CURRENCY. Each of
Spectrum Select, Spectrum Technical, Spectrum Strategic and Spectrum Currency
has more than one trading advisor, and each trading advisor will make trading
decisions independent of the other trading advisors. As a result, it is possible
that the trading advisors for a partnership could hold opposite positions in the
same or similar futures, forwards or options, thereby offsetting any potential
for profit from these positions for the partnership. It is also possible that
the trading advisors for a partnership may hold similar positions in the same or
similar futures, forwards or options, thereby compounding a potential losing
position.
SPECTRUM GLOBAL BALANCED AND SPECTRUM COMMODITY ARE SINGLE-ADVISOR FUNDS AND
LACK THE DIVERSITY OF A MULTI-ADVISOR FUND. Spectrum Global Balanced and
Spectrum Commodity are each managed by a single trading advisor. Therefore,
these partnerships lack the potential benefit of trading advisor diversification
employed by each of the other Spectrum Series partnerships.
14
<PAGE>
INCREASING THE ASSETS MANAGED BY A TRADING ADVISOR MAY ADVERSELY AFFECT
PERFORMANCE. The rates of return achieved by trading advisors may diminish as
the assets under their management increases. This can occur for many reasons
including the inability of the trading advisor to execute larger position sizes
at desired prices and because of the need to adjust the advisor's trading
program to avoid exceeding speculative position limits. These are limits
established by the CFTC and the exchanges on the number of speculative futures
and option contracts in a commodity that one trader may own or control. You
should know that the trading advisors have not agreed to limit the amount of
additional assets that they will manage.
LIMITED PARTNERS WILL NOT BE AWARE OF CHANGES TO TRADING PROGRAMS. Because
of the proprietary nature of each trading advisor's trading programs, limited
partners generally will not be advised if adjustments are made to a trading
advisor's trading program in order to accomodate additional assets under
management or for any other reason.
LIMITED TERM OF MANAGEMENT AGREEMENTS MAY LIMIT ACCESS TO A TRADING
ADVISOR. When the management agreement with a trading advisor expires, the
general partner may not be able to enter into arrangements with that trading
advisor or another trading advisor on terms substantially similar to the
management agreements described in this prospectus. Currently, most of the
management agreements have one-year terms, which renew annually unless
terminated by the general partner or the trading advisor.
TAXATION RISKS
EVEN THOUGH THE PARTNERSHIPS DO NOT INTEND TO MAKE DISTRIBUTIONS, YOU WILL
BE LIABLE FOR TAXES ON YOUR SHARE OF ANY TRADING PROFITS AND ANY OTHER INCOME OF
THE PARTNERSHIPS IN WHICH YOU HAVE INVESTED. For U.S. federal income tax
purposes, if a partnership in which you own units has taxable income for a year,
that income will be taxable to you in accordance with your allocable share of
income from the partnership, whether or not any amounts have been distributed to
you. The general partner presently does not intend to make distributions from
the partnerships. Accordingly, it is anticipated that you will incur tax
liabilities as a result of being allocated taxable income from a partnership
even though you will not receive current cash distributions with which to pay
the taxes.
THE PARTNERSHIPS' TAX RETURNS COULD BE AUDITED. The IRS could audit a
partnership's tax return. If an audit results in an adjustment to a
partnership's tax return, you could be required to file an amended tax return.
CONFLICTS OF INTEREST
While the general partner, Dean Witter and their affiliates will seek to
avoid conflicts of interest to the extent feasible and to resolve all conflicts
that may arise equitably and in a manner consistent with their responsibilities
to the partnerships, no specific policies regarding conflicts of interest have
been or are intended to be adopted by the general partner or the partnerships.
The following are actual and potential conflicts of interest that do and may
continue to exist with respect to the partnerships.
THE FEES PAYABLE TO AFFILIATES OF THE GENERAL PARTNER WERE NOT NEGOTIATED AT
ARMS-LENGTH OR REVIEWED BY ANY INDEPENDENT PARTY FOR FAIRNESS
The general partner, Dean Witter, Morgan Stanley and Morgan Stanley
International are wholly-owned subsidiaries of Morgan Stanley Dean
Witter & Co. Dean Witter is the non-clearing commodity broker for each
partnership and receives a monthly brokerage fee for effecting transactions for
each partnership. Morgan Stanley is the clearing commodity broker for Spectrum
Commodity and receives a portion of the monthly brokerage fee payable to Dean
Witter for effecting transactions for that partnership. Morgan Stanley
International is the commodity broker for Spectrum Commodity's trades on the
London Metal Exchange; however, Morgan Stanley International's fees are paid by
Morgan Stanley, and not by the partnership. Because the general partner is an
affiliate of Dean Witter and Morgan Stanley, the flat-rate brokerage fees
charged to each partnership have not been negotiated at arm's-length. Moreover,
the general partner has a conflict of interest in managing the partnerships for
your benefit, and in obtaining favorable brokerage fees for Dean Witter and
retaining Dean Witter, Morgan Stanley and Morgan Stanley International as
commodity brokers. In addition, the brokerage fees generated by the partnerships
are used by Dean Witter as a factor in determining the salaries and bonuses of
Dean Witter's employees who are also officers and directors of the general
partner. Customers of Dean Witter who maintain commodity trading accounts with
over $1,000,000 pay commissions at negotiated rates that may be substantially
less than the rate paid by each partnership.
15
<PAGE>
While each partnership has the right to seek lower commission rates from
other commodity brokers at any time, the general partner believes that the
customer agreements and other arrangements between each partnership and the
commodity brokers are fair, reasonable and competitive, and represent the best
price and services available, considering the following factors. Dean Witter
pays the expenses of organizing the partnerships, offering the units, and the
partnerships' ordinary administrative expenses. None of these expenses would
ordinarily be paid by an independent commodity broker, and these expenses would
otherwise have to be borne by the partnerships. Further, the general partner
provides ongoing services to the partnerships, including administering the
redemption and exchanges of units, and the general partner has financial
obligations as the general partner of the partnerships. The general partner is
not reimbursed or otherwise compensated by the partnerships for these services
or obligations.
The general partner reviews the brokerage arrangements annually to ensure
that they are fair, reasonable and competitive, and that they represent the best
price and services available, taking into consideration the size and trading
activity of each partnership and the services provided, and the costs, expenses,
and risk borne, by Dean Witter and the general partner.
THE TERMS OF THIS OFFERING WERE NOT SUBJECT TO INDEPENDENT DUE DILIGENCE
The partnerships, Dean Witter, and the general partner are represented by a
single counsel. Therefore, the terms of this offering relating to those parties
were not negotiated at arm's-length. In addition, no independent due diligence
has been conducted with respect to this offering.
EMPLOYEES OF DEAN WITTER ARE COMPENSATED BASED UPON YOUR INVESTMENT AND
REDEMPTION DECISIONS
Dean Witter pays a significant portion of the brokerage fees it receives
from each partnership to its employees for providing continuing assistance to
limited partners. Therefore, because Dean Witter employees are directly
compensated based on your decision to purchase and retain units in a
partnership, they have a conflict of interest when advising you to purchase or
redeem units in a partnership.
THE SELECTION OF A TRADING ADVISOR MAY BENEFIT DEAN WITTER
The general partner is responsible for selecting and replacing, if
necessary, each trading advisor. However, since selecting trading advisors who
engage in a high volume of trades will increase Dean Witter's costs as
non-clearing broker, without necessarily increasing revenue, the general partner
has an incentive to select trading advisors who execute trades less frequently.
THE GENERAL PARTNER HAS A DISINCENTIVE TO REPLACE THE TRADING ADVISOR FOR
SPECTRUM COMMODITY WHICH IS AN AFFILIATE OF THE GENERAL PARTNER
Morgan Stanley Dean Witter Commodities Management is the trading advisor for
Spectrum Commodity and receives a monthly management fee and a possible annual
incentive fee. Because the general partner and Morgan Stanley Dean Witter
Commodities Management are both wholly-owned subsidiaries of Morgan Stanley Dean
Witter & Co., they are affiliates and, as such, the terms of the management
agreement, including the management and incentive fees, have not been negotiated
at arm's-length. Further, the general partner has a disincentive to remove and
replace Morgan Stanley Dean Witter Commodities Management as trading advisor.
AFFILIATES OF THE GENERAL PARTNER, THE TRADING ADVISORS, AND THE COMMODITY
BROKERS MAY TRADE FOR THEIR OWN ACCOUNTS IN COMPETITION WITH THE PARTNERSHIPS
The general partner does not trade futures, forwards or options for its own
account, but officers, directors and employees of the general partner, the
commodity brokers, and the trading advisors and their affiliates, principals,
officers, directors and employees, may trade futures, forwards and options for
their own proprietary accounts. Their trading records will not be available to
you. As a result, you will not be able to compare the performance of their
trading to the performance of the partnerships.
Carr Futures and Morgan Stanley are large futures commission merchants,
handling substantial customer business in physical commodities and futures,
forwards and options. Thus, Carr Futures and Morgan Stanley may effect
transactions for the account of a partnership in which the other parties to such
transactions are employees or affiliates of the general partner, a trading
advisor, Carr Futures or Morgan Stanley, or customers or correspondents of Carr
Futures or Morgan Stanley. These persons might also compete with a partnership
in bidding on purchases or sales of futures, forwards and options without
knowing that the partnership is also bidding. It is possible that transactions
for these other persons might be effected when similar trades for one or more
partnerships are not executed or are executed at less favorable prices.
16
<PAGE>
THE TRADING ADVISORS MANAGE OTHER ACCOUNTS THAT MAY COMPETE WITH THE
PARTNERSHIPS
- Each trading advisor manages other accounts trading futures, forwards and
options, in addition to the partnership's accounts. Each trading advisor
must aggregate futures and options positions in other accounts managed by
it with futures and options positions in the applicable partnership's
account for speculative position limits purposes. This may require a
trading advisor to liquidate or modify positions for all of its accounts,
which could adversely affect the partnership's performance.
- Each trading advisor either currently manages or may in the future manage
accounts that pay fees higher than the fees paid by the partnerships. A
trading advisor may, therefore, have a conflict of interest in rendering
advice to a partnership because the compensation it receives for managing
another account exceeds the compensation it receives for managing the
partnership's account.
- If a trading advisor makes trading decisions for other accounts and a
partnership's account at or about the same time, the partnership may be
competing with those other accounts for the same or similar positions.
- The trading advisors' records for these other accounts will not be made
available to you. As a result, you will not be able to compare the
performance of these accounts to the performance of the partnerships.
THE LACK OF DISTRIBUTIONS INCREASES THE FEES PAID TO AFFILIATES OF THE GENERAL
PARTNER
The general partner is responsible for determining whether and when to
distribute trading profits earned by a partnership. Since the general partner
currently does not intend to distribute trading profits, Dean Witter and Morgan
Stanley will receive increased brokerage fees, and Morgan Stanley Dean Witter
Commodities Management will receive increased management fees, because these
fees are based upon the net asset value of a partnership, and net asset value
will increase by retaining a partnership's trading profits.
CUSTOMER AGREEMENTS WITH THE COMMODITY BROKERS PERMIT ACTIONS WHICH COULD RESULT
IN LOSSES OR LOST PROFIT OPPORTUNITY
Under each customer agreement for a partnership, all funds, futures,
forwards, options, and securities positions, and credits carried for the
partnership, are held as security for its obligations to the commodity broker;
the margins necessary to initiate or maintain open positions will be established
by the commodity broker from time to time; and the commodity broker may close
out positions, purchase futures, forwards and options, or cancel orders at any
time it deems necessary for its protection, without the consent of the
partnership. For example, a commodity broker may determine to take any of these
actions if prices in the futures markets are moving rapidly against a
partnership's positions and the commodity broker is concerned that potential
losses could exceed the partnership's assets such that the commodity broker
would be left to incur the loss. While not a likely occurrence, it is possible
for the trading advisors to believe that market conditions will change and that
existing positions or trades they wish to make would be profitable, such that
the actions of the commodity broker preclude the partnership from engaging in
profitable transactions or avoiding losses.
Each commodity broker or the general partner, or the investors in each
partnership by majority vote, may terminate the brokerage relationship upon 60
days' prior written notice.
FIDUCIARY RESPONSIBILITY AND LIABILITY
You should be aware that the general partner has a fiduciary duty under the
limited partnership agreements and the Delaware Revised Uniform Limited
Partnership Act to exercise good faith and fairness in all dealings affecting
the partnerships. The limited partnership agreements do not permit the general
partner to limit, by any means, the fiduciary duty it owes to investors. In the
event that you believe the general partner has violated its responsibilities,
you may seek legal relief under the Partnership Act, the Commodity Exchange Act,
applicable federal and state securities laws, and other applicable laws. Each
trading advisor also has a fiduciary duty under applicable law to each
partnership it advises.
The limited partnership agreements, the customer agreements, and the selling
agreement provide that the general partner, the commodity brokers, Dean Witter
(as selling agent), any other firm selling units, and their affiliates shall not
be liable to a partnership or its investors for any act or omission by or on
behalf of the partnership which the general partner, the commodity brokers, Dean
Witter (as selling agent), or any additional seller, as applicable, determines
in good faith to be in the best interests of the partnership, unless the act or
omission constituted misconduct or negligence.
17
<PAGE>
Under the limited partnership agreements, the customer agreements, and the
selling agreement, each partnership has agreed to indemnify and defend the
general partner, the commodity brokers, Dean Witter (as selling agent), any
additional seller, and their affiliates, against any loss, liability, damage,
cost or expense (including attorneys' and accountants' fees and expenses) they
incur which arise from acts or omissions undertaken by or on behalf of the
partnership, including claims by investors. These indemnities apply where the
general partner, the commodity brokers, Dean Witter (as selling agent), or any
additional seller, as applicable, has determined, in good faith, that the act or
omission was in the best interests of the partnership, and the act or omission
was not the result of misconduct or negligence. Payment of any indemnity by a
partnership would reduce the net assets of that partnership. The partnerships do
not carry liability insurance covering such potential losses or indemnification
exposure.
No indemnification of the general partner, the commodity brokers, Dean
Witter (as selling agent), any additional seller, or their affiliates by a
partnership is permitted for losses, liabilities, or expenses arising out of
alleged violations of federal or state securities laws unless a court has found
in favor of the indemnitee on the merits of the claim, or a court has dismissed
the claim with prejudice on the merits, or a court has approved a settlement on
the claim and found that the indemnification should be made by the partnership.
Where court approval for indemnification is sought, the person claiming
indemnification must advise the court of the views on indemnification of the SEC
and the relevant state securities administrators. It is the opinion of the SEC
that indemnification for liabilities arising under the Securities Act of 1933
for directors, officers or controlling persons of a partnership or the general
partner is against public policy and is therefore unenforceable. The CFTC has
issued a statement of policy relating to indemnification of officers and
directors of a futures commission merchant, such as the commodity brokers, and
its controlling persons under which the CFTC has taken the position that whether
such an indemnification is consistent with the policies expressed in the
Commodity Exchange Act will be determined by the CFTC on a case-by-case basis.
Each management agreement generally provides that the trading advisor and
its affiliates will not be liable to the partnership or the general partner or
their partners, officers, shareholders, directors or controlling persons. The
trading advisor is, however, liable for acts or omissions of these persons if
the act or omission constitutes a breach of the management agreement or a
representation, warranty or covenant in the management agreement, misconduct or
negligence, or is the result of such persons not having acted in good faith and
in the reasonable belief that such actions or omissions were in, or not opposed
to, the best interests of the partnership. Each partnership has agreed to
indemnify and defend its trading advisor(s) and their affiliates against any
loss, claim, damage, liability, cost and expense resulting from a demand, claim,
lawsuit, action, or proceeding (other than those incurred as a result of claims
brought by or in the right of the indemnified party), relating to the trading
activities of the partnership, if a court finds, or independent counsel renders
an opinion, that the action or inaction giving rise to the claim did not
constitute negligence, misconduct or a breach of the management agreement or a
representation, warranty or covenant of the trading advisor in that agreement,
and was done in good faith and in a manner the indemnified party reasonably
believed to be in, or not opposed to, the best interests of the partnership.
Each partnership will also indemnify its trading advisor(s) and their
affiliates against any loss, claim, damage, liability, cost and expense, arising
under the federal securities laws, the Commodity Exchange Act, or the securities
or Blue Sky law of any jurisdiction, in respect of the offer or sale of units.
This indemnification will be made for liabilities resulting from a breach by the
partnership or the general partner of any representation, warranty or agreement
in the management agreement relating to the offering, or an actual or alleged
misleading or untrue statement of a material fact, or an actual or alleged
omission of a material fact, made in the registration statement, prospectus or
related selling material, so long as the statement or omission does not relate
to the trading advisor or its principals, was not made in reliance upon, and in
conformity with, information or instructions furnished by the trading advisor,
and does not result from a breach by the trading advisor of any representation,
warranty or agreement relating to the offering.
The foregoing involves a rapidly developing and changing area of the law and
if you have questions concerning the duties of the partnerships, the general
partner, the commodity brokers, any additional seller or the trading advisors,
you should consult with your attorney.
18
<PAGE>
DESCRIPTION OF CHARGES
CHARGES TO EACH PARTNERSHIP
Each partnership is subject to substantial charges, all of which are
described below.
SPECTRUM SELECT
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading advisors.......................... Monthly management fee. 1/12 of 3% of the net assets allocated to
each trading advisor.
Monthly incentive fee. 15% of the trading profits experienced
with respect to each trading advisor's
allocated net assets.
Dean Witter............................... Monthly brokerage fee. 1/12 of 7.25% of net assets.
Financial benefit to Dean Witter from The compensating balance and excess net
interest earned on the partnership's interest benefit to Dean Witter is
assets in excess of the interest paid to estimated at less than 2% of the
the partnership and from compensating partnership's annual average month-end net
balance treatment in connection with its assets. The aggregate of the brokerage fee
designation of a bank or banks in which payable by the partnership and net excess
the partnership's assets are deposited. interest and compensating balance benefits
to Dean Witter (after crediting the
partnership with interest) will not exceed
14% annually of the partnership's average
month-end net assets during a calendar
year.
</TABLE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading advisors.......................... Monthly management fee. 1/12 of 4% of the net assets allocated to
each trading advisor.
Monthly incentive fee. 15% of the trading profits experienced
with respect to the net assets allocated
to each of Campbell and JWH, and 19% with
respect to Chesapeake.
Dean Witter............................... Monthly brokerage fee. 1/12 of 7.25% of net assets.
Financial benefit to Dean Witter from The compensating balance and excess net
interest earned on the partnership's interest benefit to Dean Witter is
assets in excess of the interest paid to estimated at less than 2% of the
the partnership and from compensating partnership's annual average month-end net
balance treatment in connection with its assets. The aggregate of the brokerage fee
designation of a bank or banks in which payable by the partnership and net excess
the partnership's assets are deposited. interest and compensating balance benefits
to Dean Witter (after crediting the
partnership with interest) will not exceed
14% annually of the partnership's average
month-end net assets during a calendar
year.
</TABLE>
19
<PAGE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading advisors.......................... Monthly management fee. 1/12 of 4% of the net assets allocated to
each of Blenheim and Willowbridge, and
1/12 of 3% with respect to Allied Irish.
Monthly incentive fee. 15% of the trading profits experienced
with respect to each trading advisor's
allocated net assets.
Dean Witter............................... Monthly brokerage fee. 1/12 of 7.25% of net assets.
Financial benefit to Dean Witter from The compensating balance and excess net
interest earned on the partnership's interest benefit to Dean Witter is
assets in excess of the interest paid to estimated at less than 2% of the
the partnership and from compensating partnership's annual average month-end net
balance treatment in connection with its assets. The aggregate of the brokerage fee
designation of a bank or banks in which payable by the partnership and net excess
the partnership's assets are deposited. interest and compensating balance benefits
to Dean Witter (after crediting the
partnership with interest) will not exceed
14% annually of the partnership's average
month-end net assets during a calendar
year.
</TABLE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading advisor........................... Monthly management fee. 1/12 of 1.25% of net assets.
Monthly incentive fee. 15% of the trading profits.
Dean Witter............................... Monthly brokerage fee. 1/12 of 4.60% of net assets.
Financial benefit to Dean Witter from The compensating balance and excess net
interest earned on the partnership's interest benefit to Dean Witter is
assets in excess of the interest paid to estimated at less than 1% of the
the partnership and from compensating partnership's annual average month-end net
balance treatment in connection with its assets. The aggregate of the brokerage fee
designation of a bank or banks in which payable by the partnership and net excess
the partnership's assets are deposited. interest and compensating balance benefits
to Dean Witter (after crediting the
partnership with interest) will not exceed
14% annually of the partnership's average
month-end net assets during a calendar
year.
</TABLE>
20
<PAGE>
SPECTRUM CURRENCY
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading advisors.......................... Monthly management fee. 1/12 of 4% of the net assets allocated to
JWH, and 1/12 of 3% with respect to
Sunrise Capital Partners.
Monthly incentive fee. 15% of the trading profits experienced
with respect to each trading advisor's
allocated net assets.
Dean Witter............................... Monthly brokerage fee. 1/12 of 4.60% of net assets.
Financial benefit to Dean Witter from The compensating balance and excess net
interest earned on the partnership's interest benefit to Dean Witter is
assets in excess of the interest paid to estimated at less than 2% of the
the partnership and from compensating partnership's annual average month-end net
balance treatment in connection with its assets. The aggregate of the brokerage fee
designation of a bank or banks in which payable by the partnership and net excess
the partnership's assets are deposited. interest and compensating balance benefits
to Dean Witter (after crediting the
partnership with interest) will not exceed
14% annually of the partnership's average
month-end net assets during a calendar
year.
</TABLE>
SPECTRUM COMMODITY
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading advisor........................... Monthly management fee. 1/12 of 2.5% of net assets.
Annual incentive fee. 20% of trading profits.
Dean Witter............................... Monthly brokerage fee. 1/12 of 4.60% of net assets.
Financial benefit to Dean Witter from The compensating balance and excess net
interest earned on the partnership's interest benefit to Dean Witter is
assets in excess of the interest paid to estimated at less than 2% of the
the partnership and from compensating partnership's annual average month-end net
balance treatment in connection with its assets. The aggregate of brokerage fees
designation of a bank or banks in which payable by the partnership, and net excess
the partnership's assets are deposited. interest and compensating balance benefits
to Dean Witter (after crediting the
partnership with interest) will not exceed
14% annually of the partnership's average
month-end net assets during a calendar
year.
</TABLE>
21
<PAGE>
TRADING ADVISORS
Each partnership pays each of its trading advisors a monthly management fee,
whether or not the assets of the partnership as a whole or the assets allocated
to such trading advisor are profitable. In addition, each partnership pays each
of its trading advisors an incentive fee if trading profits are earned on the
net assets allocated to such trading advisor.
MONTHLY MANAGEMENT FEE. Each partnership pays each of its trading advisors
a monthly management fee based on the net assets under management as of the
first day of each month, at the rate set forth in the above chart. The monthly
management fee compensates the trading advisor for the services performed in
connection with the net assets under management.
Following is an example of the management fee payable by a partnership. If
the net assets of Spectrum Select equaled $200,000,000 as of the first day of
each month during the fiscal year, the trading advisors would receive an
aggregate monthly management fee for the year of $6,000,000 ( 1/12 of 3% of
$200,000,000 per month, or $500,000 times 12). The management fee payable to the
trading advisors in the foregoing example would be divided among them based on
the portion of the $200,000,000 in net assets allocated to each such trading
advisor at the beginning of each month.
INCENTIVE FEE. Each partnership pays an incentive fee to each of its
trading advisors if trading profits are experienced with respect to allocated
net assets, at the rate set forth in the above chart. Trading profits means the
net futures, forwards, and options profits (realized and unrealized) earned on
the trading advisor's allocated net assets, decreased by monthly management fees
and brokerage fees that are chargeable to the trading advisor's allocated net
assets, with such trading profits and items of decrease determined from the end
of the last period for which an incentive fee was earned by the trading advisor.
Extraordinary expenses of the partnership, if any, are not deducted in
determining trading profits. An extraordinary expense would result from an event
that is both unusual in nature and infrequent in occurrence, such as litigation.
No incentive fee is paid on interest earned by any partnership.
In the case of Spectrum Commodity, whose trading advisor is eligible to
receive an annual incentive fee, any accrued incentive fees with respect to
units of Spectrum Commodity that are redeemed during the year will be deducted
and paid to the trading advisor at the time of redemption, even though it may
not qualify for an incentive fee at year-end.
If incentive fees are paid to a trading advisor and the partnership fails to
earn trading profits for any subsequent period, the trading advisor will retain
the incentive fees previously paid. However, no subsequent incentive fees will
be paid to the trading advisor until the trading advisor has again earned
trading profits. If a trading advisor's allocated net assets are reduced or
increased because of redemptions, additions or reallocations that occur at the
end of or subsequent to an incentive period in which the trading advisor
experiences a trading loss, the trading loss which must be recovered will be
adjusted pro rata.
Following is an example of the incentive fee payable by a partnership. If a
trading advisor for Spectrum Select earns trading profits of $1,000,000 for the
period ended January 31, 2000, the trading advisor will receive an incentive fee
of $150,000 for that period (15% of $1,000,000). If, however, the trading
advisor experiences realized and/or unrealized trading losses, or fees offset
trading profits, so as to result in a $250,000 loss for the period ended
February 29, 2000, an incentive fee will not be paid to the trading advisor for
that period. In order for the trading advisor to earn an incentive fee in the
following period ending March 31, 2000, the trading advisor will have to earn
trading profits exceeding $250,000 for that period, since the incentive fee is
payable based upon trading profits measured from the last period for which an
incentive fee was paid (I.E., January 31), and not from the immediately
preceding period. The foregoing example assumes no redemptions or reallocations
or additional purchases of units during the periods in question, which would
require adjustments as described above.
COMMODITY BROKERS
BROKERAGE FEES. Commodity brokerage fees for futures, forwards, and options
trades are typically paid on the completion or liquidation of a trade and are
referred to as "roundturn commissions," which cover both the initial purchase
(or sale) of a futures interest and the subsequent offsetting sale (or
purchase). However, pursuant to the customer agreements with the commodity
brokers, the partnerships pay a monthly flat-rate brokerage fee based on their
net assets as of the first day of each month, at the rate set forth in the above
chart, irrespective of the number of trades executed on a partnership's behalf.
22
<PAGE>
Following is an example of the brokerage fee payable by a partnership. If
the net assets of Spectrum Select equaled $200,000,000 as of the first day of
each month during the fiscal year, Dean Witter would receive an aggregate
monthly brokerage fee for the year of $14,500,000 ( 1/12 of 7.25% of
$200,000,000 per month, or $1,208,333, times 12).
From the flat-rate brokerage fees received from the partnerships, Dean
Witter pays or reimburses the partnerships for all fees and costs incurred by
Carr Futures, Morgan Stanley, and Morgan Stanley International in executing
trades on behalf of the partnerships, including floor brokerage fees, exchange
fees, clearinghouse fees, National Futures Association fees, "give up" fees, any
taxes (other than income taxes), any third party clearing costs incurred by Carr
Futures, Morgan Stanley, and Morgan Stanley International, costs associated with
taking delivery of futures interests, and fees for execution of forward contract
transactions.
Dean Witter also pays, from the brokerage fees it receives, the ordinary
administrative expenses of each partnership, the organizational costs of
Spectrum Currency and the initial offering of its units (estimated to be
approximately $300,000 in the aggregate), and the continuing offering expenses
of each partnership. Ordinary administrative expenses include legal, accounting
and auditing expenses, printing and mailing expenses, and filing fees incurred
in preparing reports, notices and tax information to limited partners and
regulatory bodies. The organizational and initial offering costs of Spectrum
Currency, and the continuing offering expenses of each partnership, include
legal, accounting and auditing fees, printing costs, filing fees, escrow fees,
marketing costs (which include costs relating to sales seminars and the
preparation of customer sales kits and brochures), and other related fees and
expenses.
While each partnership pays a flat-rate brokerage fee, rather than
"roundturn commissions" on each trade, it is estimated, based upon the trading
advisors' historical trading, that such flat-rate brokerage fee would
approximate roundturn commissions ranging from approximately:
$35-45 for Spectrum Select
$40-50 for Spectrum Technical
$30-40 for Spectrum Strategic
$45-55 for Spectrum Global Balanced
$45-55 for Spectrum Currency
$75-80 for Spectrum Commodity
You should note that the approximate roundturn commissions set forth above
include administrative, organizational, offering, and other expenses, for which
Dean Witter is responsible, but are typically paid separately from roundturn
commissions. The foregoing estimates are based on past results and may vary in
the future.
FINANCIAL BENEFITS. Each partnership deposits all of its assets with the
commodity brokers in connection with the partnership's futures, forwards and
options trading. Dean Witter then pays each partnership the rate that Dean
Witter earns on its U.S. Treasury bill investments with all customer segregated
funds, as if 80% (100% in the case of Spectrum Global Balanced) of the
partnership's average net assets for the month were invested at that rate. The
commodity brokers, as they are permitted under CFTC regulations, invest a
portion of the partnerships' funds in CFTC specified securities and other
instruments and retain any interest earned on those investments. Instead of
investing the partnership's funds, Dean Witter may choose to deposit the funds
in non-interest-bearing bank accounts at various banks (currently seven banks),
in exchange for which the banks offer Dean Witter affiliates advantageous
interest rates on loans up to the amount of the deposits. This is known as
compensating balance treatment. The benefit to Dean Witter and its affiliates
from this compensating balance treatment is the difference between the lending
rate they would have received without the deposits and the rate they receive by
reason of the deposits. The benefit to Dean Witter from this compensating
balance arrangement and the investment of the partnerships' funds will vary
depending upon market conditions. The approximate benefit to Dean Witter
currently for each partnership is set forth in the Description of Charges table
beginning on page - . For more information regarding Dean Witter's interest
crediting arrangements with the partnerships and the investment of customer
funds by the commodity brokers. See "Use of Proceeds--Interest Credits" on
page - .
EXTRAORDINARY EXPENSES
Each partnership is obligated to pay any extraordinary expenses it may
incur. Extraordinary expenses will be determined in accordance with generally
accepted accounting principles, which generally include events that are both
unusual in nature and occur infrequently, such as litigation.
23
<PAGE>
EXPENSE LIMITATIONS
The general partner may permit an increase, subject to state limits
described below, in the management, incentive and brokerage fees payable by a
partnership only on the first business day following a redemption date. Prior to
any such increase, the following conditions must be satisfied:
- notice of the increase must be mailed to investors at least five business
days prior to the last date on which a "request for redemption" must be
received by the general partner;
- the notice must describe investors' redemption and voting rights; and
- investors must not be subject to any redemption charges if they redeem
units at the first redemption date following the notice.
Each partnership's fees and expenses are subject to limits imposed under
guidelines applied by state securities regulators, as set forth in Section 7(e)
of the limited partnership agreement, including the limitation that the
aggregate of the brokerage fees payable by the partnership to any commodity
broker and the net excess interest and compensating balance benefits to any
commodity broker, after crediting the partnership with interest, shall not
exceed 14% annually of the partnership's average month-end net assets during the
calendar year. The general partner will pay any fees and expenses in excess of
any such limits.
REDEMPTION CHARGES
You may redeem all or part of your investment in any Spectrum Series
partnership at any month-end once you have been an investor in that partnership
for at least six months, regardless of when your units were actually purchased.
Units redeemed on or before the last day of the twelfth month after they
were purchased, are subject to a redemption charge equal to 2% of the net asset
value of a unit on the redemption date. Units redeemed after the last day of the
twelfth month and on or before the last day of the twenty-fourth month after
they were purchased, are subject to a redemption charge equal to 1% of the net
asset value of a unit on the redemption date. If you redeem units after the last
day of the twenty-fourth month after they were purchased, you will not be
subject to a redemption charge. Any redemption charges will be paid to Dean
Witter.
The following is an example of a redemption charge that may be payable by
you to Dean Witter. If you redeem $5,000 worth of units in Spectrum Select after
the sixth month and prior to the last day of the twelfth month after the units
were purchased, you will be subject to the full 2% redemption charge. In that
case, an aggregate redemption charge equal to $100 (2% of $5,000 will be
deducted from the proceeds of your redemption).
USE OF PROCEEDS
The partnerships engage in the speculative trading of futures, forwards, and
options contracts. The proceeds received by each partnership from the sale of
its units and the continuing capital contributions made by the general partner
to each partnership will be deposited in separate commodity trading accounts
established by the commodity brokers for each of the trading advisors. All of
the funds in a partnership's trading accounts will be used to engage in trading
futures, forwards, and options contracts.
The partnerships' assets held by the commodity brokers will be segregated or
secured in accordance with the Commodity Exchange Act and CFTC regulations. The
partnerships' trading on various U.S. futures exchanges is subject to CFTC
regulation and the rules of the exchanges. The partnerships' trading on foreign
futures exchanges is subject to regulation by foreign regulatory authorities and
the rules of the exchanges.
Each partnership's margin commitments with respect to its U.S. commodity
futures positions have ranged, and are anticipated to range, between 10% and 40%
of net assets (except Spectrum Select, which has ranged, and is anticipated to
range, between 20% and 40%, and Spectrum Commodity, which has ranged, and is
anticipated to range, between 5% and 15%). However, a partnership's margin
levels could deviate substantially from that range in the future.
24
<PAGE>
The partnerships may trade on one or more of the following foreign futures
exchanges and, from time to time, may trade on other foreign exchanges:
- Deutsche Terminborse/Eurex
- Hong Kong Futures Exchange Ltd.
- International Petroleum Exchange of London Ltd.
- Italian Derivatives Market
- London International Financial Futures Exchange Ltd.
- London Commodity Exchange
- London Metal Exchange
- London Securities and Derivatives Exchange
- Marche a Terme International de France
- MEFF Renta Fija
- MEFF Renta Variable
- Montreal Exchange
- New Zealand Futures and Options Exchange
- Osaka Securities Exchange
- Singapore International Monetary Exchange
- Swiss Options and Financial Futures Exchange AG
- Sydney Futures Exchange
- Tokyo Grain Exchange
- Tokyo International Financial Futures Exchange
- Tokyo Stock Exchange
- Winnipeg Commodity Exchange
In connection with foreign futures and options contracts, the partnerships'
assets may be deposited by the commodity brokers in accounts with non-U.S. banks
and foreign brokers that are segregated on the books of those banks or brokers
for the benefit of their customers. All non-U.S. banks and foreign brokers will
be qualified depositories pursuant to relevant CFTC Advisories. All non-U.S.
banks will be subject to the local bank regulatory authorities, and the foreign
brokers will be members of the exchanges on which the futures and option trades
are to be executed, and will be subject to the regulatory authorities in the
jurisdictions in which they operate.
At each monthly closing, the trading advisors for each partnership are
currently allocated the net proceeds from additional investments received by
that partnership, and redemptions from that partnership are allocated to them,
in the following proportions:
<TABLE>
<CAPTION>
PERCENTAGE OF NET
ASSETS ALLOCATED TO
EACH TRADING
ADVISOR AS OF
SPECTRUM SELECT ADDITIONS REDEMPTIONS NOVEMBER 30, 1999
- --------------- --------- ----------- -------------------
% % %
<S> <C> <C> <C>
EMC Capital Management, Inc...... 0 33 1/3 18.5
Rabar Market Research, Inc....... 50 33 1/3 43.8
Sunrise Capital Management,
Inc............................ 50 33 1/3 37.7
SPECTRUM TECHNICAL
- -----------------------------------
Campbell & Company, Inc.......... 33 1/3 33 1/3 33.8
Chesapeake Capital Corporation... 33 1/3 33 1/3 23.9
John W. Henry & Company, Inc.
Original Investment Program.... 16 2/3 16 2/3 21.9
Financial and Metals
Portfolio.................... 16 2/3 16 2/3 20.4
SPECTRUM STRATEGIC
- -----------------------------------
Allied Irish Capital Management,
Ltd............................ 75 0 14.6
Blenheim Investments, Inc........ 0 100 45.4
Willowbridge Associates Inc...... 25 0 40.0
SPECTRUM GLOBAL BALANCED
- -----------------------------------
RXR, Inc......................... 100 100 100
SPECTRUM CURRENCY
- -----------------------------------
John W. Henry & Company, Inc..... 50 50 N/A
Sunrise Capital Partners, LLC.... 50 50 N/A
SPECTRUM COMMODITY
- -----------------------------------
Morgan Stanley Dean Witter
Commodities Management Inc..... 100 100 100
</TABLE>
25
<PAGE>
In the future, the proceeds from each monthly closing and redemptions may be
allocated in different proportions. Further, the general partner may adjust the
portion of a partnership's assets traded by a trading advisor through
reallocations of assets among the partnership's trading advisors. With respect
to Spectrum Currency, after net assets allocated to JWH reach $30 million, JWH
has the right to reject any additional monthly allocations that exceed 10% of
its allocated net assets.
The assets of the partnerships are not commingled with the assets of one
another or any other entity. Margin deposits and deposits of assets with a
commodity broker do not constitute commingling.
INTEREST CREDITS
The partnerships' funds held by the commodity brokers will either be held
and invested together with other customer segregated or secured funds of the
commodity brokers, or will be held in non-interest-bearing bank accounts. In
either case, the partnerships will receive interest at the rate earned by Dean
Witter on its U.S. Treasury bill investments with customer segregated funds as
if 80% (100% in the case of Spectrum Global Balanced) of their respective
average daily net assets for the month were invested at that rate. For purposes
of these interest credits, net assets do not include monies due a partnership on
or with respect to futures, forwards or options contracts which have not been
received. Dean Witter retains any interest earned in excess of the interest
credited by Dean Witter to the partnerships.
To the extent the partnerships' funds are held by the commodity brokers in
customer segregated accounts relating to trading in U.S. exchange-traded futures
and options, those funds, along with segregated funds of other customers in the
accounts, may be invested by the commodity brokers, under applicable CFTC
regulations, only in instruments that are obligations of the U.S., general
obligations of any state or any political subdivision thereof, or obligations
fully guaranteed as to principal and interest by the U.S., or in designated
reverse repurchase agreements with respect to those instruments. To the extent
the partnerships' funds are held by the commodity brokers in secured accounts
relating to trading in futures or options contracts on non-U.S. exchanges or in
forward contracts, such funds may be invested by the commodity brokers, under
applicable CFTC regulations, only in the instruments described above for
customer segregated funds, in equity and debt securities traded on established
securities markets in the U.S., and in commercial paper and other debt
instruments that are rated in one of the top two rating categories by Moody's
Investor Service, Inc. or Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc. A significant portion of the partnerships' funds
held by Dean Witter will be held in secured accounts and will be invested in
short-term commercial paper rated AAA or the equivalent or in other permitted
debt instruments rated AAA or the equivalent.
To the extent that the partnerships' funds are held in non-interest-bearing
bank accounts, Dean Witter or its affiliates will benefit from compensating
balance treatment in connection with Dean Witter's designation of a bank or
banks in which the partnership's assets are deposited, meaning that Dean Witter
or its affiliates will receive favorable loan rates from such bank or banks by
reason of such deposits. To the extent that any excess interest and compensating
balance benefits to Dean Witter or its affiliates exceed the interest Dean
Witter is obligated to credit to the partnerships, they will not be shared with
the partnerships.
THE SPECTRUM SERIES
GENERAL
Each partnership is a limited partnership formed under the laws of Delaware.
<TABLE>
<CAPTION>
DATE PARTNERSHIP
DATE PARTNERSHIP BEGAN OR IS EXPECTED
WAS FORMED TO BEGIN OPERATIONS
---------------- --------------------
<S> <C> <C>
Spectrum Select............................. March 21, 1991 August 1, 1991
Spectrum Technical.......................... April 29, 1994 November 2, 1994
Spectrum Strategic.......................... April 29, 1994 November 2, 1994
Spectrum Global Balanced.................... April 29, 1994 November 2, 1994
Spectrum Commodity.......................... July 31, 1997 January 2, 1998
Spectrum Currency........................... October 20, 1999 Initial closing
</TABLE>
26
<PAGE>
Each partnership calculates its net asset value per unit independently of
the other partnerships. Each partnership's performance depends solely on the
performance of its trading advisor(s).
Each Spectrum Series partnership is continuously offering its units for sale
at monthly closings held as of the last day of each month. Except for its
initial closing, where Spectrum Currency will offer units at a price of $10 per
unit, the purchase price per unit is equal to 100% of the net asset value of a
unit as of the date of the monthly closing at which the general partner accepts
a subscription. Following is a summary of information relating to the sale of
units of all partnerships that have commenced operations through November 30,
1999:
<TABLE>
<CAPTION>
NUMBER
TOTAL GENERAL OF
UNITS UNITS AVAILABLE PROCEEDS PARTNER LIMITED
SOLD FOR SALE RECEIVED CONTRIBUTIONS PARTNERS
-------------- --------------- ------------ ------------- --------
$ $
<S> <C> <C> <C> <C> <C>
Spectrum Select*................... 17,992,866.810 3,121,100.290 277,351,590 1,680,000 15,973
Spectrum Technical................. 22,297,938.327 10,702,061.673 296,797,979 2,511,984 25,672
Spectrum Strategic................. 9,541,125.353 2,958,874.647 103,479,730 787,000 10,722
Spectrum Global Balanced........... 4,527,561.910 3,472,438.090 59,852,468 533,234 6,922
Spectrum Commodity................. 4,195,493.632 0 41,235,223 430,000 2,867
</TABLE>
- ---------
* The number of units sold has been adjusted to reflect a 100-for-1 unit
conversion that took place on April 30, 1998, when Spectrum Select became
part of the Spectrum Series of partnerships.
INVESTMENT OBJECTIVES
The investment objective of each Spectrum Series partnership is to achieve
capital appreciation and, to a lesser extent Spectrum Global Balanced, to
provide investors with the opportunity to diversify a portfolio of traditional
investments consisting of stocks and bonds. While the partnerships have the same
over-all investment objective and many of the trading advisors for the various
partnerships employ trading programs of the same general style and trade in the
same futures, forwards and options contracts, each trading advisor and its
trading programs trades differently. Each partnership has a different mix of
trading advisors and trading programs. You should review and compare the
specifics of each partnership, its terms and its trading advisors before
selecting one or more partnerships in which to invest.
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
Spectrum Select currently utilizes three trading advisors, each of whom
employs systematic, technical trading models. EMC uses an aggressive systematic
trading approach that blends several independent methodologies designed to
identify emerging trends and follow existing trends. This program seeks
significant trends in favorable periods, while accepting a corresponding decline
in unfavorable market cycles. Rabar uses a systematic approach with discretion,
limiting the equity committed to each trade, market, and sector. Rabar's trading
program uses constant research and analysis of market behavior. Sunrise's
investment approach attempts to detect a trend, or lack of a trend, with respect
to a particular market by analyzing price movement and volatility over time.
Sunrise's trading system consists of multiple, independent and parallel systems,
each designed to seek out and extract different market inefficiencies over
different time horizons. For a more detailed discussion of the Spectrum Select
trading advisors and their various programs see "The Trading Advisors--Morgan
Stanley Dean Witter Spectrum Select L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
Spectrum Technical currently uses three trading advisors, each of whom
employs technically based trading models to achieve its objective. Campbell uses
a highly disciplined systematic approach designed to detect and react to price
movements in the futures and forwards markets. Campbell's core systematic
approach has been used for over twenty years. The trading methodology employed
by Chesapeake is based on the analysis of interrelated mathematical and
statistical formulas, including the technical analysis of historical data, used
to determine optimal price support and resistance levels and market entry and
exit points in various futures, forwards and options markets. This trading
system was designed in the 1980s and is continually updated based on research.
JWH's trading program uses historical data and proprietary systems to detect
emerging price trends. Positions are established under strict guidelines and are
retained
27
<PAGE>
in markets where price movements have exceeded the expectations of most
fundamental investors. For a more detailed discussion of the Spectrum Technical
trading advisors and their various programs see "The Trading Advisors--Morgan
Stanley Dean Witter Spectrum Technical L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
Spectrum Strategic currently utilizes three trading advisors, each of whom
employs a fundamental investment approach that evaluates key economic
indicators, such as supply and demand levels and geopolitical conditions. Allied
Irish employs multiple investment professionals using a discretionary approach.
Several strategies are applied to investments in a broad range of financial
instruments. Blenheim's program has a strong global concentration, using a
discretionary approach supplemented by a systematic and mathematical investment
process. Investments are made in markets in which Blenheim has a clear
understanding of fundamental factors and geopolitical forces that influence
price behavior. Willowbridge also uses a discretionary trading approach.
Willowbridge maintains a small number of core positions at any time,
representing those it believes to have the most favorable reward-to-risk ratios.
For a more detailed discussion of the Spectrum Strategic trading advisors and
their various programs see "The Trading Advisors--Morgan Stanley Dean Witter
Spectrum Strategic L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
Spectrum Global Balanced utilizes one trading advisor that trades a
multi-strategy portfolio of futures forwards and options, consisting of world
equity, global bonds, currency, and commodity markets. Within the long biased
global stock and global bond components of the fund, RXR, Inc. analyzes various
fundamental information. Within the long and short global currency and commodity
components of the fund, RXR employs a technical trend-following trading system.
RXR uses a computer-based model to reallocate assets among various market
sectors within each of the independent strategies. For a more detailed
discussion of RXR, the sole trading advisor for Spectrum Global Balanced, and
its trading program, see "The Trading Advisors--Morgan Stanley Dean Witter
Spectrum Global Balanced L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
Spectrum Currency will utilize two trading advisors, each of whom employs
proprietary trading models that seek to identify favorable price relationships
between and among various global currency markets through the disciplined
analysis of technical market information. JWH employs a trading methodology
structured and market-weighted to take into account the potentially higher
volatility of a portfolio exclusively trading in currency markets. Volatility
and risk are reduced by applying the principles of spread trading by
establishing two related foreign currency positions at or about the same time.
Sunrise's trading program applies the principles of spread trading, including
adding multiple additional currencies to a portfolio and reweighting the
emphasis given the different markets traded, all in an attempt to adjust the
potentially higher volatility of a portfolio which trades in a less diversified
group of markets. For a more detailed discussion of the Spectrum Currency
trading advisors see "The Trading Advisors--Morgan Stanley Dean Witter Spectrum
Currency L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
Spectrum Commodity utilizes one trading advisor to engage in the long-only
speculative trading of a diverse mix of tangible commodity futures and options,
including metals, energy, food, fiber and agricultural markets. As its primary
focus is tangible commodities, Spectrum Commodity does not participate in
financial markets, such as interest rate, stock index, or currency futures and
options. The trading program seeks to benefit from supply and demand dynamics,
based on consumer and producer reactions to price movements, by over-weighting
exposure to commodities that are historically undervalued and showing signs of
strengthening, and under-weighting exposure to those markets that are
historically overvalued and showing signs of weakening. For a more detailed
discussion of the trading advisor for Spectrum Commodity and its trading
program, see "The Trading Advisor--Morgan Stanley Dean Witter Spectrum Commodity
L.P." on page - .
28
<PAGE>
TRADING POLICIES
The trading advisors will manage the funds allocated to them in accordance
with the following trading policies.
TRADING POLICIES FOR ALL PARTNERSHIPS:
- The partnership will not employ the trading technique commonly
known as "pyramiding," in which the speculator uses unrealized profits on
existing positions in a given futures interests due to favorable price
movement as margin specifically to buy or sell additional positions in the
same or a related futures interest. Taking into account the partnership's
open trade equity (I.E., the profit or loss on an open futures interest
position) on existing positions in determining generally whether to acquire
additional futures interest positions on behalf of the partnership will not
be considered to constitute "pyramiding."
- The partnership will not under any circumstances lend money to
affiliated entities or otherwise. The partnership will not utilize
borrowings except if the partnership purchases or takes delivery of
commodities. If the partnership borrows money from the general partner or
any "affiliate" thereof (as defined in Section 14(c) of the limited
partnership agreement), the lending entity in such case (the "lender") may
not receive interest in excess of its interest costs, nor may the lender
receive interest in excess of the amounts which would be charged the
partnership (without reference to the general partner's financial abilities
or guarantees) by unrelated banks on comparable loans for the same purpose,
nor may the lender or any affiliate thereof receive any points or other
financing charges or fees regardless of the amount. Use of lines of credit
in connection with its forward trading does not, however, constitute
borrowing for purposes of this trading limitation.
- The partnership will not permit "churning" of the partnership's
assets. Churning is the unnecessary execution of trades so as to generate
increased brokerage commissions.
TRADING POLICY FOR ALL PARTNERSHIPS EXCEPT SPECTRUM COMMODITY:
- The partnership will trade currencies and other commodities in the
interbank and forward contract markets only with banks, brokers, dealers,
and other financial institutions which the general partner, in conjunction
with Dean Witter, has determined to be creditworthy. In determining the
creditworthiness of a counterparty to a forward contract, the general
partner and Dean Witter will consult with the Corporate Credit Department of
Dean Witter.
TRADING POLICIES FOR ALL PARTNERSHIPS EXCEPT SPECTRUM GLOBAL BALANCED, SPECTRUM
CURRENCY, AND SPECTRUM COMMODITY:
- The trading advisors will trade only in those futures interests
that have been approved by the general partner. The partnership normally
will not establish new positions in a futures interest for any one contract
month or option if such additional positions would result in a net long or
short position for that futures interest requiring as margin or premium more
than 15% of the partnership's net assets. In addition, the partnership will,
except under extraordinary circumstances, maintain positions in futures
interests in at least two market segments (I.E., agricultural items,
industrial items (including energies), metals, currencies, and financial
instruments (including stock, financial, and economic indexes)) at any one
time.
- The partnership will not acquire additional positions in any
futures interest if such additional positions would result in the aggregate
net long or short positions for all futures interests requiring as margin or
premium for all outstanding positions more than 66 2/3% of the partnership's
net assets. Under certain market conditions, such as an abrupt increase in
margins required by a commodity exchange or its clearinghouse or an
inability to liquidate open positions because of daily price fluctuation
limits, or both, the partnership may be required to commit as margin amounts
in excess of the foregoing limit. In such event, the trading advisors will
reduce their open positions to comply with the foregoing limit before
initiating new positions.
29
<PAGE>
- The trading advisors will not generally take a position after the
first notice day in any futures interest during the delivery month of that
futures interest, except to match trades to close out a position on the
interbank foreign currency or other forward markets or liquidate trades in a
limit market.
TRADING POLICY FOR SPECTRUM SELECT AND SPECTRUM COMMODITY ONLY:
- The partnership will not purchase, sell, or trade securities
(except securities approved by the CFTC for investment of customer funds).
TRADING POLICIES FOR SPECTRUM GLOBAL BALANCED ONLY:
- The trading advisor will trade only in those futures interests that
have been approved by the general partner. In addition, the partnership
will, except under extraordinary circumstances, maintain positions in
futures interests in at least two market segments (I.E., agricultural items,
industrial items (including energies), metals, currencies, and financial
instruments (including stock, financial, and economic indexes)) at any one
time.
- The trading advisors will not generally take a position after the
first notice day in any futures interest during the delivery month of that
futures interest, except to match trades to close out a position on the
interbank foreign currency or other forward markets or liquidate trades in a
limit market. The partnership may, with the general partner's prior
approval, purchase "cash" stocks and bonds, or options on stock or bond
indices, on a temporary basis under unusual circumstances in which it is not
practicable or economically feasible to establish the partnership's stock
index or bond portfolios in the futures markets, and may acquire "cash"
instruments in its short-term interest rate futures component.
Material changes to the trading policies described above may be made only
with the prior written approval of limited partners owning more than 50% of
units of the relevant partnership then outstanding. The general partner will
notify the limited partners within seven business days after any material change
in the Partnership's trading policies so approved by the limited partners.
PERFORMANCE RECORDS
A summary of performance information for each partnership, except for
Spectrum Currency, which does not have an operating history, from its
commencement of trading through November 30, 1999 is set forth in Capsules I
through VI below. All performance information has been calculated on an accrual
basis in accordance with generally accepted accounting principles. You should
read the footnotes on page -, which are an integral part of the following
capsules.
-------------------
You are cautioned that the information set forth in each capsule is not
indicative of, and has no bearing on, any trading results that may be attained
by any partnership in the future. Past results are not a guarantee of future
results. We cannot assure you that a partnership will be profitable or will
avoid incurring substantial losses. You should also note that interest income
may constitute a significant portion of a partnership's total income and may
generate profits where there have been realized or unrealized losses from
futures, forwards, and options trading.
30
<PAGE>
CAPSULE I
PERFORMANCE OF SPECTRUM SELECT
Type of pool: publicly-offered fund
Inception of trading: August 1991
Aggregate subscriptions: $279,031,590
Current capitalization: $210,368,199
Current net asset value per unit: $21.65
Worst monthly % drawdown in past five years: (12.11)% (February 1996)
Worst monthly % drawdown since inception: (13.72)% (January 1992)
Worst month-end peak-to-valley past five years: (26.78)% (15 months, June
1995-August 1996)
Worst month-end peak-to-valley since inception: (26.78)% (15 months, June
1995-August 1996)
Cumulative return since inception: 116.50%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
----------------------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994 1993 1992 1991
- ----- ---- ---- ---- ---- ---- ---- ---- ---- ----
% % % % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January................................. (2.90) 0.87 3.93 (0.38) (8.13) (11.67) 0.31 (13.72)
February................................ 5.45 2.16 4.75 (12.11) 9.61 (6.79) 14.84 (6.09)
March................................... (2.50) 0.23 0.31 (0.22) 20.58 12.57 (0.59) (3.91)
April................................... 3.70 (6.72) (5.46) 4.07 9.06 (0.95) 10.35 (1.86)
May..................................... (4.38) 1.79 (1.18) (3.65) 11.08 6.84 1.95 (1.42)
June.................................... 0.34 0.93 0.16 1.37 (1.70) 10.30 0.21 7.19
July.................................... (4.40) (0.97) 9.74 (1.44) (10.61) (4.91) 13.90 10.72
August.................................. (0.44) 19.19 (6.22) (0.46) (4.81) (6.95) (0.95) 6.69 (6.20)
September............................... 1.69 6.24 0.93 3.34 (7.76) 1.25 (4.13) (5.24) 6.32
October................................. (8.39) (5.14) (3.77) 13.30 (3.35) (4.78) (4.97) (3.17) (2.28)
November................................ 3.29 (4.16) 0.62 6.76 1.37 5.68 (1.30) 1.39 (2.93)
December................................ 1.19 3.35 (3.36) 11.19 (2.72) 8.14 (3.58) 38.67
Compound Annual/Period
Rate of Return........................ (9.03) 14.15 6.22 5.27 23.63 (5.13) 41.63 (14.45) 31.18
(11 (5
months) months)
</TABLE>
CAPSULE II
PERFORMANCE OF SPECTRUM TECHNICAL
Type of pool: publicly-offered fund
Inception of trading: November 1994
Aggregate subscriptions: $299,309,963
Current capitalization: $258,121,021
Current net asset value per unit: $14.36
Worst monthly % drawdown: (9.96)% (October 1999)
Worst month-end peak-to-valley drawdown: (14.08)% (6 months, May 1999-October
1999)
Cumulative return since inception: 43.60%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
- ----- ---- ---- ---- ---- ---- ----
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
January............................... (4.96) (1.16) 3.67 4.78 (1.84)
February.............................. 2.48 0.41 1.13 (6.39) 5.10
March................................. (2.48) 1.31 (1.82) 1.24 10.21
April................................. 7.18 (4.62) (2.93) 4.82 3.60
May................................... (5.00) 3.28 (3.75) (3.84) 0.69
June.................................. 5.13 (1.10) 0.69 3.21 (1.12)
July.................................. (3.90) (0.98) 9.33 (4.80) (2.44)
August................................ 0.95 10.29 (5.97) (0.35) (0.63)
September............................. (1.51) 4.35 1.85 5.50 (3.33)
October............................... (9.96) (0.73) 0.36 9.92 (0.09)
November.............................. 1.84 (6.17) 1.01 8.34 0.93 (0.90)
December.............................. 5.98 4.57 (3.88) 6.09 (1.31)
Compound Annual/Period
Rate of Return...................... (10.92) 10.18 7.49 18.35 17.59 (2.20)
(11 months) (2 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
31
<PAGE>
CAPSULE III
PERFORMANCE OF SPECTRUM STRATEGIC
Type of pool: publicly-offered fund
Inception of trading: November 1994
Aggregate subscriptions: $104,266,730
Current capitalization: $97,655,287
Current net asset value per unit: $14.49
Worst monthly % drawdown: (13.38)% (May 1999)
Worst month-end peak-to-valley drawdown: (32.11)% (16 months, April 1997-July
1998)
Cumulative return since inception: 44.90%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
- ----- ---- ---- ---- ---- ---- ----
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
January................................. (3.55) 5.32 (0.66) 3.71 (3.50)
February................................ 11.76 (3.37) 10.09 (10.29) 1.45
March................................... (3.45) 0.37 6.77 (0.97) 7.86
April................................... 2.00 (11.06) (6.90) 6.08 0.00
May..................................... (13.38) (7.40) 0.78 (3.05) (0.66)
June.................................... 21.85 (0.89) (1.63) (2.86) (6.38)
July.................................... (1.00) (5.26) 7.65 (4.91) (0.81)
August.................................. 5.31 11.82 (4.93) 1.14 4.00
September............................... 13.27 19.03 (6.03) 5.11 (0.39)
October................................. (9.55) 8.44 (6.24) 2.92 0.30
November................................ 4.85 (7.94) (2.22) 3.49 2.76 0.10
December................................ 2.76 5.62 (2.65) 6.24 0.00
Compound Annual/Period
Rate of Return........................ 25.45 7.84 0.37 (3.53) 10.49 0.10
(11 months) (2 months)
</TABLE>
CAPSULE IV
PERFORMANCE OF SPECTRUM GLOBAL BALANCED
Type of pool: publicly-offered fund
Inception of trading: November 1994
Aggregate subscriptions: $60,385,702
Current capitalization: $56,581,793
Current net asset value per unit: $15.81
Worst monthly % drawdown: (7.92)% (February 1996)
Worst month-end peak-to-valley drawdown: (10.64)% (4 months,
February 1996-May 1996)
Cumulative return since inception: 58.10%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
- ----- ---- ---- ---- ---- ---- ----
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
January.................................. (0.06) 2.25 3.35 0.41 1.32
February................................. (0.06) 1.49 3.16 (7.92) 4.62
March.................................... 0.00 2.24 (2.50) (1.08) 2.88
April.................................... 4.13 (1.78) (1.65) 1.27 2.15
May...................................... (4.99) (0.35) 1.68 (3.13) 4.38
June..................................... 2.28 0.00 3.64 0.46 0.79
July..................................... (1.67) (1.19) 11.89 0.83 (1.39)
August................................... (0.19) 2.55 (5.92) (0.82) (1.41)
September................................ (0.50) 5.11 3.26 2.30 1.61
October.................................. (1.77) 1.18 (1.69) 3.77 0.26
November................................. 1.93 2.66 (0.37) 4.76 2.72 (0.50)
December................................. 1.27 3.07 (3.88) 2.99 (1.21)
Compound Annual/Period
Rate of Return......................... (1.19) 16.36 18.23 (3.65) 22.79 (1.70)
(11 months) (2 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
32
<PAGE>
CAPSULE V
PERFORMANCE OF SPECTRUM COMMODITY
Type of pool: publicly-offered fund
Inception of trading: January 2, 1998
Aggregate subscriptions: $41,665,223
Current capitalization: $23,285,438
Current net asset value per unit: $7.41
Worst monthly % drawdown: (9.09)% (November 1998)
Worst month-end peak-to-valley drawdown: (38.60)% (13 Months, February
1998-February 1999)
Cumulative return since inception: (25.90)%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
-----------------------
MONTH 1999 1998
- ----- ---- ----
% %
<S> <C> <C>
January........................................... (1.52) 1.30
February.......................................... (3.86) (5.92)
March............................................. 8.68 0.10
April............................................. 2.37 (2.41)
May............................................... (5.92) (6.87)
June.............................................. 4.45 (3.23)
July.............................................. 0.44 (6.44)
August............................................ 6.15 (7.90)
September......................................... 4.55 7.19
October........................................... (2.77) (3.48)
November.......................................... 0.54 (9.09)
December.......................................... (3.38)
Compound Annual/Period
Rate of Return.................................. 12.79 (34.30)
(11 months)
</TABLE>
Capsule VI below provides the actual annual and year-to-date performance
information for Dean Witter Cornerstone IV, which is another currency-only fund
operated by the general partner and traded by JWH and Sunrise Capital Partners,
the same trading advisors that will trade for Spectrum Currency. JWH and Sunrise
Capital Partners will trade for Spectrum Currency using the same trading
strategies that they employ for Cornerstone IV.
CAPSULE VI
PERFORMANCE OF CORNERSTONE IV
Type of pool: publicly-offered fund
Inception of trading: May 1987
Aggregate subscriptions: $168,090,005
Current capitalization: $104,643,059
Current net asset value per unit: $4,703.27
Worst monthly % drawdown past five years: (7.65)% (January 1995)
Worst monthly % drawdown since inception: (21.04)% (September 1989)
Worst month-end peak-to-valley past five years: (37.85)% (18 months, August
1993-January 1995)
Worst month-end peak-to-valley since inception: (45.21)% (3 months, July
1989-September 1989)
Cumulative return since inception: 382.39%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
- ----- ---- ---- ---- ---- ---- ----
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
January..... (2.37) (1.58) 5.34 3.19 (7.65) (1.12)
February.... 0.84 (3.16) 6.55 (5.78) 6.27 (2.75)
March....... 2.23 2.51 1.45 2.80 27.02 0.29
April....... 1.19 (3.44) 1.23 2.97 2.39 (3.19)
May......... (1.37) 4.89 (5.54) 1.19 (4.83) (3.65)
June........ (0.67) 11.31 1.36 (0.23) (0.62) 6.72
July........ (5.28) 0.37 8.45 (3.51) (1.06) (4.21)
August...... 1.27 0.78 2.68 (2.69) 5.49 (3.57)
September... 2.39 (3.11) 0.45 0.32 (0.06) 1.66
October..... (3.77) 4.86 3.12 8.80 0.74 4.93
November.... 5.29 (4.24) 4.15 4.25 (2.57) (6.82)
December.... (1.49) 4.38 1.76 (0.52) (2.73)
Compound
Annual/
Period Rate
of Return.. (0.71) 6.80 38.41 12.97 22.96 (14.27)
(11 months)
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------------
MONTH 1993 1992 1991 1990 1989 1988 1987
- ----- ---- ---- ---- ---- ---- ---- ----
% % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C>
January..... (5.29) (9.64) (10.12) 3.15 15.72 (18.14)
February.... 12.92 (7.40) (6.91) 1.37 (14.64) 0.93
March....... (2.55) 1.60 26.00 6.09 3.44 5.06
April....... 0.03 (6.40) 1.83 3.01 1.84 3.41
May......... 3.95 2.71 1.24 (8.53) 12.56 25.38 (9.60)
June........ 0.92 15.10 9.45 12.26 0.01 12.95 (0.75)
July........ 5.87 7.47 (9.47) 23.25 (14.85) 6.93 (2.23)
August...... (5.57) 17.26 (8.50) 8.65 (18.51) 3.96 (12.61)
September... (2.10) (4.21) 6.69 (3.02) (21.04) (4.46) 0.00
October..... (7.48) (0.99) (5.29) 11.07 4.47 1.56 13.82
November.... (7.50) 0.60 5.26 (1.11) 11.40 8.77 11.80
December.... (0.78) (2.40) 27.40 (5.74) 14.97 (7.80) 13.39
Compound
Annual/
Period Rate
of Return.. (9.12) 10.37 33.52 57.77 (14.12) 37.51 10.61
(8 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
33
<PAGE>
Capsule VI-A below is a pro forma of Capsule VI, adjusted to reflect the
actual brokerage, management and incentive fees to be paid by Spectrum Currency,
rather than those which were paid by Cornerstone IV. The footnotes following
Capsule VI-A are an integral part of Capsule VI-A.
You are cautioned that the performance information set forth in the
following capsule performance summary is not indicative of, and has no bearing
on, the performance results that may be attained by Spectrum Currency in the
future. Past results are not a guarantee of future results. We cannot assure you
that Spectrum Currency will be profitable or will avoid incurring substantial
losses. You should also note that interest income may constitute a significant
portion of Spectrum Currency's total income and may generate profits where there
have been realized or unrealized losses from futures, forwards and options
trading.
CAPSULE VI-A
PRO FORMA PERFORMANCE OF CORNERSTONE IV
Worst monthly % drawdown: (20.32)% (January 1988)
Worst month-end peak-to-valley drawdown: (43.60)% (3 months, July 1989-September
1989)
Cumulative return since inception: - %
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
--------------------------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994 1993 1992
- ----- ---- ---- ---- ---- ---- ---- ---- ----
% % % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January........................... (3.02) (1.85) 5.33 3.18 (7.45) (1.16) (6.08) (11.25)
February.......................... 0.73 (4.07) 6.33 (5.81) 6.33 (2.63) 14.75 (8.58)
March............................. 2.55 2.76 1.15 2.70 27.16 0.46 (2.73) 2.06
April............................. 1.18 (4.25) 0.89 3.08 2.12 (3.23) 0.28 (6.42)
May............................... (1.83) 5.30 (5.58) 1.13 (4.99) (3.71) 4.47 3.14
June.............................. (0.59) 11.66 1.35 (0.17) (0.83) 6.99 1.27 17.70
July.............................. (5.30) 0.03 8.32 (3.53) (1.26) (4.25) 6.19 8.05
August............................ 1.14 0.53 2.03 (2.73) 5.43 (3.54) (6.67) 17.37
September......................... (3.85) 0.18 0.52 (0.19) 1.72 (1.99) (4.68)
October........................... 5.45 2.57 8.89 0.49 4.93 (7.26) (1.32)
November.......................... (5.30) 3.98 4.17 (2.79) (6.73) (7.19) 0.55
December.......................... (1.98) 4.24 1.81 (0.71) (2.71) (0.57) (2.70)
Compound Annual/Period
Rate of Return................... 3.09 34.63 13.14 21.34 (13.78) (7.54) 9.78
(11 months)
<CAPTION>
MONTHLY PERFORMANCE
------------------------------------------------------
MONTH 1991 1990 1989 1988 1987
- ----- ---- ---- ---- ---- ----
% % % % %
<S> <C> <C> <C> <C> <C>
January........................... (10.94) 3.64 17.65 (20.32)
February.......................... (6.68) 1.36 (17.29) 1.00
March............................. 28.71 6.08 4.14 5.83
April............................. 1.80 3.05 1.94 3.80
May............................... 1.30 (7.89) 14.32 27.74 (10.64)
June.............................. 10.08 13.16 0.18 13.33 (0.31)
July.............................. (10.89) 22.06 (14.37) 6.91 (2.05)
August............................ (8.29) 9.71 (17.75) 3.94 (12.21)
September......................... 7.05 (3.22) (19.92) (5.26) (0.22)
October........................... (5.01) 11.73 4.92 1.99 13.83
November.......................... 5.39 (1.33) 11.66 9.55 11.17
December.......................... 28.91 (6.51) 15.74 (9.00) 13.95
Compound Annual/Period
Rate of Return................... 37.10 59.88 (9.52) 36.99 10.22
(8 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FOOTNOTES TO CAPSULES I THROUGH VI
"Aggregate subscriptions" represent the total amount received for all units
purchased by investors since the partnership commenced operations.
"Drawdown" is the decline in the net asset value per unit.
"Worst month-end peak-to-valley drawdown" is the largest decline experienced
by a partnership, determined in accordance with CFTC Rule 4.10(1) and represents
the greatest cumulative percentage decline from any month-end net asset value
per unit that occurs without such month-end net asset value per unit being
equaled or exceeded by a subsequent month-end net asset value per unit. For
example, if the net asset value per unit of a partnership was $15 and declined
by $1 in each of January and February, increased by $1 in March and declined
again by $2 in April, a "peak-to-valley drawdown" analysis conducted as of the
end of April would consider that "drawdown" to be still continuing and to be $3
in amount because the $15 initial month-end net asset value per unit had not
been equaled or exceeded by a subsequent month-end net asset value per unit,
whereas if the net asset value of a unit had increased by $2 in March, the
January-February drawdown would have ended as of the end of February at the $2
level because the $15 initial net asset value per unit would have been equaled
in March. Such "drawdowns" are measured on the basis of month-end net asset
values only, and do not reflect intra-month figures.
"Monthly Performance" is the percentage change in net asset value per unit
from one month to another.
34
<PAGE>
"Compound Annual/Period Rate of Return" is calculated by multiplying on a
compound basis each of the monthly rates of return and not by adding or
averaging such monthly rates of return. For periods of less than one year, the
results are year-to-date.
FOOTNOTES TO CAPSULE VI-A PRO FORMA PERFORMANCE SUMMARY
Capsule VI-A above reflects pro forma rates of return for Spectrum Currency
as if it were in operation during the same periods as Cornerstone IV. These
rates of return are the result of the general partner making pro forma
adjustments to the actual past performance record of Cornerstone IV. The pro
forma adjustments are an attempt to reflect the actual brokerage, management and
incentive fees, which would have been paid or received by Spectrum Currency, as
opposed to the actual fees and expenses applicable to Cornerstone IV.
Furthermore, you must be aware that pro forma rates of return have inherent
limitations: (A) pro forma adjustments are only an approximate means of
modifying historical records to reflect certain aspects of the economic terms of
a commodity pool, constitute no more than mathematical adjustments to actual
performance numbers, and give no effect whatsoever to such factors as possible
changes in trading approach that might have resulted from the different fee
structure, interest income, and other factors; and (B) there are different means
by which the pro forma adjustments could have been made.
While the general partner believes that the information set forth in Capsule
VI-A is relevant to evaluating an investment in Spectrum Currency, no
representation is or could be made that the capsule presents what the
performance results would have been in the past or are likely to be in the
future. Past results are not a guarantee of future results. The results
presented in Capsule VI-A are hypothetical because no trades were actually made
under the terms set forth in the Capsule.
ADDITIONAL PARTNERSHIPS
In the future, additional partnerships may be added to the Spectrum Series
of partnerships and units of limited partnership interest of such partnerships
may be offered pursuant to an updated version of, or supplement to, this
prospectus. Such partnerships will generally have different trading advisors and
may have substantially different trading approaches or fee structures. You
should carefully review any updated version of, or supplement to, this
prospectus before making the decision to purchase units in any new Spectrum
Series partnership.
AVAILABILITY OF EXCHANGE ACT REPORTS
The partnerships are required to file periodic reports with the SEC, such as
annual and quarterly reports and proxy statements. You may read any of these
filed documents, or obtain copies by paying prescribed charges, at the SEC's
public reference rooms located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York
10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. The partnerships' SEC filings are
also available to the public from the SEC's Web site at "http://www.sec.gov."
35
<PAGE>
SELECTED FINANCIAL DATA
The following are the results of operations for each partnership (except
Spectrum Currency, which does not have an operating history) for the periods
indicated. Per unit results for Spectrum Select have been adjusted to reflect a
100-for-1 unit conversion that became effective on April 30, 1998.
SPECTRUM SELECT
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ $ $ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized (537,861) 25,414,460 36,087,729 15,940,851 26,876,393 65,987,157 19,134,352
Net change in unrealized 2,807,552 22,586,491 (1,192,107) 3,149,167 (10,950,217) (4,657,344) (7,758,820)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Trading Results 2,269,691 48,000,951 34,895,622 19,090,018 15,926,176 61,329,813 11,375,532
Interest income (Dean Witter) 5,571,066 5,105,202 6,883,110 7,405,511 6,120,347 7,969,749 6,044,870
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Revenues 7,840,757 53,106,153 41,778,732 26,495,529 22,046,523 69,299,562 17,420,402
----------- ----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
Brokerage fees (Dean Witter) 11,341,093 7,767,759 11,360,166 9,777,851 10,641,478 14,173,695 15,551,182
Management fees 4,692,864 3,715,645 5,202,158 5,239,533 4,583,197 5,626,908 5,452,353
Incentive fees -- 1,828,624 1,832,021 49,989 175,796 8,707,049 4,441,510
Transaction fees and costs -- 625,328 625,327 1,370,439 1,104,011 1,589,795 1,652,264
Administrative expenses -- 64,000 64,000 114,000 128,000 148,000 126,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses 16,033,957 14,001,356 19,083,672 16,551,812 16,632,482 30,245,447 27,223,309
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) (8,193,200) 39,104,797 22,695,060 9,943,717 5,414,041 39,054,115 (9,802,907)
=========== =========== =========== =========== =========== =========== ===========
NET INCOME (LOSS) ALLOCATION:
Limited partners (8,071,457) 38,436,723 22,302,202 9,781,168 5,283,411 38,580,172 (9,695,068)
General partner (121,743) 668,074 392,858 162,549 130,630 473,943 (107,839)
NET INCOME (LOSS) PER UNIT:
Limited partners (0.92) 5.02 2.95 1.22 .98 3.56 (.82)
General partner (0.92) 5.02 2.95 1.22 .98 3.56 (.82)
TOTAL ASSETS AT END OF PERIOD 225,066,694 208,966,583 202,668,038 169,541,807 167,588,012 179,342,999 171,613,080
TOTAL NET ASSETS AT END OF
PERIOD 222,117,910 204,396,888 200,082,516 166,773,321 163,786,285 176,446,260 168,189,328
NET ASSET VALUE PER UNIT AT
END OF PERIOD
Limited partners 22.88 25.87 23.80 20.85 19.62 18.64 15.08
General partner 22.88 25.87 23.80 20.85 19.62 18.64 15.08
</TABLE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE NINE MONTHS NOVEMBER 2, 1994
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31, (COMMENCEMENT OF
------------------------ ------------------------------------------------- OPERATIONS) TO
1999 1998 1998 1997 1996 1995 DECEMBER 31, 1994
----------- ----------- ----------- ----------- ----------- ---------- -------------------
$ $ $ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 14,704,626 13,007,107 35,224,194 13,777,460 26,334,748 4,446,595 (786,137)
Net change in
unrealized (6,261,686) 26,421,207 6,612,556 9,762,823 (1,552,659) 3,362,093 724,455
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total Trading Results 8,442,940 39,428,314 41,836,750 23,540,283 24,782,089 7,808,688 (61,682)
Interest income (Dean
Witter) 6,954,549 6,008,143 8,103,423 5,987,304 3,242,977 1,430,845 67,617
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total Revenues 15,397,489 45,436,457 49,940,173 29,527,587 28,025,066 9,239,533 5,935
----------- ----------- ----------- ----------- ----------- ---------- ----------
EXPENSES
Brokerage fees (Dean
Witter) 14,393,049 11,107,075 15,543,787 11,617,770 6,997,531 3,003,934 149,907
Management fees 7,940,992 5,955,922 8,403,764 5,832,758 3,273,649 1,373,227 68,529
Incentive fees 430,097 2,653,466 3,191,252 369,975 1,852,569 600,504 19,678
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total Expenses 22,764,138 19,716,436 27,138,803 17,820,503 12,123,749 4,977,665 238,114
----------- ----------- ----------- ----------- ----------- ---------- ----------
NET INCOME (LOSS) (7,366,649) 25,719,994 22,801,370 11,707,084 15,901,317 4,261,868 (232,179)
=========== =========== =========== =========== =========== ========== ==========
NET INCOME (LOSS)
ALLOCATION:
Limited partners (7,293,262) 25,458,926 22,571,217 11,589,197 15,737,852 4,226,249 (229,460)
General partner (73,387) 261,068 230,153 117,887 163,465 35,619 (2,719)
NET INCOME (LOSS) PER
UNIT:
Limited partners (0.46) 1.70 1.49 1.02 2.11 1.72 (.22)
General partner (0.46) 1.70 1.49 1.02 2.11 1.72 (.22)
TOTAL ASSETS AT END OF
PERIOD 283,588,918 251,043,295 258,673,911 184,769,817 114,822,056 60,075,842 15,084,678
TOTAL NET ASSETS AT END
OF PERIOD 279,382,330 246,498,391 255,101,434 181,950,507 112,985,629 59,326,379 14,931,054
NET ASSET VALUE PER UNIT
AT END OF PERIOD
Limited partners 15.66 16.33 16.12 14.63 13.61 11.50 9.78
General partner 15.66 16.33 16.12 14.63 13.61 11.50 9.78
</TABLE>
36
<PAGE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------------
1999 1998
------------ -----------
$ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 19,657,278 2,125,953
Net change in unrealized 11,237,514 4,475,848
----------- ----------
Total Trading Results 30,894,792 6,601,801
Interest income (Dean Witter) 2,025,084 1,732,273
----------- ----------
Total Revenues 32,919,876 8,334,074
----------- ----------
EXPENSES
Brokerage fees (Dean Witter) 4,078,080 3,169,563
Incentive fees 2,451,152 178,428
Management fees 2,199,368 1,675,367
----------- ----------
Total Expenses 8,728,600 5,023,358
----------- ----------
NET INCOME (LOSS) 24,191,276 3,310,716
=========== ==========
NET INCOME (LOSS) ALLOCATION:
Limited partners 23,935,478 3,271,967
General partner 255,798 38,749
NET INCOME (LOSS) PER UNIT:
Limited partners 3.73 0.55
General partner 3.73 0.55
TOTAL ASSETS AT END OF PERIOD 103,985,625 67,242,994
TOTAL NET ASSETS AT END OF PERIOD 101,216,109 65,479,623
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited partners 15.28 11.26
General partner 15.28 11.26
<CAPTION>
FOR THE PERIOD FROM
NOVEMBER 2, 1994
FOR THE YEARS ENDED DECEMBER 31, (COMMENCEMENT OF
----------------------------------------------------- OPERATIONS) TO
1998 1997 1996 1995 DECEMBER 31, 1994
----------- ----------- ----------- ----------- -------------------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 7,945,575 1,297,824 4,980,402 3,408,036 (221,731)
Net change in unrealized 2,771,722 2,387,258 (1,679,048) 1,451,792 367,611
---------- ---------- ---------- ---------- ----------
Total Trading Results 10,717,297 3,685,082 3,301,354 4,859,828 145,880
Interest income (Dean Witter) 2,379,478 2,304,248 1,604,026 887,226 55,127
---------- ---------- ---------- ---------- ----------
Total Revenues 13,096,775 5,989,330 4,905,380 5,747,054 201,007
---------- ---------- ---------- ---------- ----------
EXPENSES
Brokerage fees (Dean Witter) 4,402,540 4,414,327 3,398,205 1,802,579 121,039
Incentive fees 1,336,693 427,094 726,825 437,310 18,841
Management fees 2,342,447 2,212,788 1,587,213 824,036 55,333
---------- ---------- ---------- ---------- ----------
Total Expenses 8,081,680 7,054,209 5,712,243 3,063,925 195,213
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) 5,015,095 (1,064,879) (806,863) 2,683,129 5,794
========== ========== ========== ========== ==========
NET INCOME (LOSS) ALLOCATION:
Limited partners 4,958,188 (1,054,657) (799,980) 2,659,882 5,704
General partner 56,907 (10,222) (6,883) 23,247 90
NET INCOME (LOSS) PER UNIT:
Limited partners .84 0.04 (.39) 1.05 .01
General partner .84 0.04 (.39) 1.05 .01
TOTAL ASSETS AT END OF PERIOD 71,445,333 61,010,043 47,089,676 33,049,282 12,042,772
TOTAL NET ASSETS AT END OF PERIOD 70,421,775 59,095,581 45,118,877 32,462,932 11,918,929
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited partners 11.55 10.71 10.67 11.06 10.01
General partner 11.55 10.71 10.67 11.06 10.01
</TABLE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------
1999 1998
----------- -----------
$ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 1,814,125 1,376,863
Net change in unrealized (1,850,072) 2,422,095
---------- ----------
Total Trading Results (35,947) 3,798,958
Interest income (Dean Witter) 1,682,953 1,168,924
---------- ----------
Total Revenues 1,647,006 4,967,882
---------- ----------
EXPENSES
Brokerage fees (Dean Witter) 1,746,137 1,105,224
Management fee 474,498 290,828
Incentive fees 215,651 152,442
---------- ----------
Total Expenses 2,436,286 1,548,494
---------- ----------
NET INCOME (LOSS) (789,280) 3,419,388
========== ==========
NET INCOME (LOSS) ALLOCATION:
Limited partners (780,570) 3,382,644
General partner (8,710) 36,744
NET INCOME (LOSS) PER UNIT:
Limited partners (0.21) 1.46
General partner (0.21) 1.46
TOTAL ASSETS AT END OF PERIOD 56,311,849 41,039,826
TOTAL NET ASSETS AT END OF PERIOD 55,663,825 40,459,538
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited partners 15.79 15.21
General partner 15.79 15.21
<CAPTION>
FOR THE PERIOD FROM
NOVEMBER 2, 1994
FOR THE YEARS ENDED DECEMBER 31, (COMMENCEMENT OF
----------------------------------------------------- OPERATIONS) TO
1998 1997 1996 1995 DECEMBER 31, 1994
----------- ----------- ----------- ----------- -------------------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 5,113,920 3,683,460 177,564 1,508,581 (61,916)
Net change in unrealized 1,285,628 464,966 (175,835) 373,624 18,804
---------- ---------- ---------- ---------- ---------
Total Trading Results 6,399,548 4,148,426 1,729 1,882,205 (43,112)
Interest income (Dean Witter) 1,642,542 1,145,033 891,897 447,608 25,896
---------- ---------- ---------- ---------- ---------
Total Revenues 8,042,090 5,293,459 893,626 2,329,813 (17,216)
---------- ---------- ---------- ---------- ---------
EXPENSES
Brokerage fees (Dean Witter) 1,591,467 1,124,531 1,030,310 503,995 29,040
Management fee 422,960 269,162 221,282 104,999 6,050
Incentive fees 449,775 300,250 -- 161,155 --
---------- ---------- ---------- ---------- ---------
Total Expenses 2,464,202 1,693,943 1,251,592 770,149 35,090
---------- ---------- ---------- ---------- ---------
NET INCOME (LOSS) 5,577,888 3,599,516 (357,966) 1,559,664 (52,306)
========== ========== ========== ========== =========
NET INCOME (LOSS) ALLOCATION:
Limited partners 5,518,127 3,561,537 (354,537) 1,536,421 (50,640)
General partner 59,761 37,979 (3,429) 23,243 (1,666)
NET INCOME (LOSS) PER UNIT:
Limited partners 2.25 2.12 (.44) 2.24 (.17)
General partner 2.25 2.12 (.44) 2.24 (.17)
TOTAL ASSETS AT END OF PERIOD 46,317,786 25,923,024 19,620,770 14,923,682 3,817,871
TOTAL NET ASSETS AT END OF PERIOD 45,913,872 25,683,236 18,706,255 14,754,500 3,797,845
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited partners 16.00 13.75 11.63 12.07 9.83
General partner 16.00 13.75 11.63 12.07 9.83
</TABLE>
37
<PAGE>
SPECTRUM COMMODITY
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE NINE MONTHS JANUARY 2, 1998
ENDED SEPTEMBER 30, (COMMENCEMENT OF
------------------------- OPERATIONS) TO
1999 1998 DECEMBER 31, 1998
----------- ----------- -------------------
$ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 2,926,692 (7,201,840) (11,870,063)
Net change in unrealized 984,221 (892,798) (635,643)
---------- ---------- -----------
Total Trading Results 3,910,913 (8,094,638) (12,505,706)
Interest income (Morgan Stanley) 635,611 1,009,087 1,265,793
---------- ---------- -----------
Total Revenues 4,546,524 (7,085,551) (11,239,913)
---------- ---------- -----------
EXPENSES
Brokerage fees (Morgan Stanley and Morgan Stanley
International) 635,674 909,449 1,176,024
Management fees (MSDWCM) 435,393 622,910 805,496
Service fee (Demeter) 174,157 249,164 322,198
---------- ---------- -----------
Total Expenses 1,245,224 1,781,523 2,303,718
---------- ---------- -----------
NET INCOME (LOSS) 3,301,300 (8,867,074) (13,543,631)
========== ========== ===========
NET INCOME (LOSS) ALLOCATION:
Limited partners 3,257,557 (8,773,399) (13,398,948)
General partner 43,743 (93,675) (144,683)
NET INCOME (LOSS) PER UNIT:
Limited partners 1.01 (2.25) (3.43)
General partner 1.01 (2.25) (3.43)
TOTAL ASSETS AT END OF PERIOD 24,790,253 31,530,120 25,962,970
TOTAL NET ASSETS AT END OF PERIOD 24,459,723 31,178,737 24,908,316
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited partners 7.58 7.75 6.57
General partner 7.58 7.75 6.57
</TABLE>
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
LIQUIDITY
The partnership deposits its assets with the commodity brokers in separate
futures trading accounts established for each trading advisor, which assets are
used as margin to engage in trading. The assets are held in either
non-interest-bearing bank accounts or in securities and instruments permitted by
the CFTC for investment of customer segregated or secured funds. The
partnership's assets held by the commodity brokers may be used as margin solely
for the partnership's trading. Since the partnership's sole purpose is to trade
in futures, forwards, and options, it is expected that the partnership will
continue to own such liquid assets for margin purposes.
The partnership's investment in futures, forwards, and options may, from
time to time, be illiquid. Most U.S. futures exchanges limit fluctuations in
prices during a single day by regulations referred to as "daily price
fluctuations limits" or "daily limits." Trades may not be executed at prices
beyond the daily limit. If the price for a particular futures or options
contract has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be taken nor
liquidated unless traders are willing to effect trades at or within the limit.
Futures prices have occasionally moved the daily limit for several consecutive
days with little or no trading. These market conditions could prevent the
partnership from promptly liquidating its futures or options contract and result
in restrictions on redemptions.
There is no limitation on daily price moves in trading forward contracts on
foreign currency. The markets for some world currencies have low trading volume
and are illiquid, which may prevent the partnership from trading in potentially
profitable markets or prevent the partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to substantial losses.
Either of these market conditions could result in restrictions on redemptions.
The partnership has never had illiquidity affect a material portion of its
assets.
CAPITAL RESOURCES
The partnership does not have, or expect to have, any capital assets.
Redemptions, exchanges and sales of additional units in the future will affect
the amount of funds available for investments in futures interests in subsequent
periods. It is not possible to estimate the amount and therefore the impact of
future redemptions.
RESULTS OF OPERATIONS
GENERAL. The partnership's results depend on its trading advisors and the
ability of each trading advisor's trading programs to take advantage of price
movements or other profit opportunities in the futures, forwards, and options
markets. The following presents a summary of the partnership's operations for
the three years ended December 31, 1998, and the nine months ended
September 30, 1998 and 1999 and a general discussion of its trading activities
during each period. Spectrum Select has restated all per unit amounts to reflect
the 100-for-1 unit conversion that took place on April 30, 1998. It is important
to note, however, that the trading advisors trade in various markets at
different times and that prior activity in a particular market does not mean
that such market will be actively traded by the trading advisors or will be
profitable in the future. Consequently, the results of operations of the
partnership are difficult to discuss other than in the context of its trading
advisors' trading activities on behalf of the partnership as a whole and how the
partnership has performed in the past.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999. During the first nine
months of the year, Spectrum Select posted a decrease in net asset value per
unit. The most significant losses were experienced in the global stock index
futures markets from long positions in European stock index futures as prices
moved lower during January and early February amid skepticism regarding the
stability of emerging market economies. Prices in these markets continued to
decline during May and June amid fears of higher interest rates in the U.S. In
the metals markets, losses were experienced during the month of March from long
silver futures positions as prices declined during mid-month after Berkshire
Hathaway's
39
<PAGE>
annual report failed to provide any new information on the company's silver
positions. Offsetting gains were recorded from long positions in gold futures as
gold prices soared during September following the Bank of England's second gold
auction and an announcement by several European central banks stating that they
were to restrict the sales of gold reserves for five years. In the global
interest rate futures markets, losses were recorded during September from short
positions in Australian bond futures as prices spiked higher on technically
based buying and short covering. Losses were also recorded from short Japanese
government bond futures positions early in the first quarter as prices surged
higher in response to the Bank of Japan's aggressive easing of monetary policy.
Additional losses were experienced later in the first quarter from newly
established long positions as prices retreated following comments by Bank of
Japan Governor Masaru Hayami that he expected interest rates in Japan to rise
over time. Offsetting gains were recorded in this market sector from short
positions in European bond futures during April and June as prices declined due
to dampened sentiment regarding the European Monetary Union and fears of an
interest rate hike in the U.S. A portion of the Partnership's overall losses was
offset by gains recorded in the energy markets from long futures positions in
crude oil and its refined products, unleaded gas and heating oil, as prices
climbed higher during March following an agreement reached by both OPEC and
non-OPEC countries to cut total output beginning April 1st. Oil prices continued
to move higher throughout the third quarter due to declining supplies,
increasing demand, and evidence that output cuts were being adhered to. In soft
commodities, gains were recorded throughout a majority of the first quarter from
short cocoa futures positions as prices declined amid fears that Brazil's
financial troubles will have an adverse effect on supply and demand.
For the nine months ended September 30, 1999, Spectrum Select's total
trading revenues, including interest income, were $7,840,757. Total expenses for
the nine months were $16,033,957, resulting in a net loss of $8,193,200. The net
asset value of a unit in Spectrum Select decreased from $23.80 at December 31,
1998 to $22.88 at September 30, 1999.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. During the first nine
months of the year, Spectrum Select posted an increase in net asset value per
unit. The most significant gains were recorded in the financial futures markets
from long European (particularly German and French) and U.S. interest rate
futures positions as prices in these markets soared during the last quarter.
Smaller gains were recorded in this market complex from short positions in
global stock index futures, particularly German, U.S. and French stock index
futures, as equity prices around the world moved significantly lower during
August. Smaller gains were produced in the energy markets as short crude oil
futures positions benefited from price drops in oil during January, February,
June, July and August. The agricultural markets contributed smaller gains from
short positions in soybean meal futures during the first quarter. A portion of
the Partnership's overall gains was offset by losses in the metals markets
resulting from choppy price movement in silver and gold futures during the first
quarter, as well as losses during September from short positions as precious
metals prices moved sharply higher. Similarly, trading in copper futures created
losses during a majority of the first half of the year from trendless price
movement, as well as losses recorded during July from short positions as base
metals prices moved higher early in the month. In the currency markets,
transactions involving the British pound resulted in losses as its value moved
without consistent direction during a majority of the first nine months of the
year. Additional currency losses resulted from trading in the Swiss franc during
July and August and the Japanese yen during September. The soft commodities
markets recorded smaller losses from cotton futures trading due to weather
related volatility in cotton prices during August, offsetting first quarter
gains from short sugar futures positions.
For the nine months ended September 30, 1998, Spectrum Select's total
trading revenues, including interest income were $53,106,153. Total expenses for
the nine months were $14,001,356, resulting in net income of $39,104,797. The
net asset value of a unit in Spectrum Select increased from $20.85 at
December 31, 1997 to $25.87 at September 30, 1998.
1998 RESULTS. Spectrum Select recorded net profits during 1998. The
partnership experienced the majority of the gains in the global interest rate
futures markets, particularly from long positions in German, U.S. and Japanese
bond futures. Bond prices rallied in late August, as global stock prices
plunged, especially after Russia's decision to halt trading in foreign
currencies paralyzed that country's banking system and set off a
"flight-to-quality" into the global fixed income markets. The subsequent
volatility in the global financial markets and worldwide economic deterioration
continued to drive these profitable trades through September.
40
<PAGE>
For the year ended December 31, 1998, Spectrum Select's total revenues,
including interest income, were $41,778,732. Total expenses for the year were
$19,083,672, resulting in net income of $22,695,060. The net asset value of a
unit in Spectrum Select increased from $20.85 at December 31, 1997 to $23.80 at
December 31, 1998.
1997 RESULTS. Spectrum Select recorded net profits during 1997 primarily as
a result of a strengthening in the value of the U.S. dollar versus the Japanese
yen and most major world currencies throughout the year. Additional gains were
recorded from long global interest rate futures positions as U.S., Australian
and European interest rate futures trended higher in July. A portion of these
gains was offset by losses experienced from sharp trend reversals and short-term
volatile price movement in global bond futures during April and August. Overall,
the partnership's ability to capture profits in the currency and financial
futures complexes more than offset smaller losses incurred from trendless
pricing patterns and choppy price movement experienced in trading most
traditional commodities.
For the year ended December 31, 1997, Spectrum Select's total trading
revenues, including interest income, were $26,495,529. Total expenses for the
year were $16,551,812, resulting in net income of $9,943,717. The net asset
value of a unit in Spectrum Select increased from $19.62 at December 31, 1996 to
$20.85 at December 31, 1997.
1996 RESULTS. Spectrum Select recorded net profits for the year, due
primarily to trading in global financial futures as prices trended higher during
the period of September through November. Additional gains recorded in the
currency markets, primarily from long British pound positions during the fourth
quarter, contributed to offset losses recorded from trend reversals and choppy
price movement earlier in the year. Spectrum Select's exposure to domestic
commodities partially hindered performance in 1996, as agricultural and soft
commodities failed to provide sustained price trends during much of the year.
For the year ended December 31, 1996, Spectrum Select's total trading
revenues, including interest income, were $22,046,523. Total expenses for the
year were $16,632,482, resulting in net income of $5,414,041. The net asset
value of a unit in Spectrum Select increased from $18.64 at December 31, 1995 to
$19.62 at December 31, 1996.
To enhance the foregoing comparison of operations from year to year, you
should examine, line by line, the partnership's Statements of Operations and
Statements of Financial Condition.
FINANCIAL INSTRUMENTS
The partnership is a party to financial instruments with elements of
off-balance sheet market and credit risk. The partnership may trade futures and
options in interest rates, stock indices, commodities, currencies, petroleum and
precious metals. In entering into these contracts, the partnership is subject to
the market risk that such contracts may be significantly influenced by market
conditions, such as interest rate volatility, resulting in such contracts being
less valuable. If the markets should move against all of the positions held by
the partnership at the same time, and if the trading advisors were unable to
offset positions of the partnership, the partnership could lose all of its
assets and investors would realize a 100% loss. In addition to the trading
advisors' internal controls, each trading advisor must comply with the trading
policies of the partnership. These trading policies include standards for
liquidity and leverage with which the partnership must comply. The trading
advisors and the general partner monitor the partnership's trading activities to
ensure compliance with the trading policies. The general partner may require a
trading advisor to modify positions of the partnership if the general partner
believes they violate the partnership's trading policies.
In addition to market risk, in entering into futures, forwards, and options
contracts there is a credit risk to the partnership that the counterparty on a
contract will not be able to meet its obligations to the partnership. The
ultimate counterparty or guarantor of the partnership for futures contracts
traded in the U.S. and the foreign exchanges on which the partnership trades is
the clearinghouse associated with such exchange. In general, a clearinghouse is
backed by the membership of the exchange and will act in the event of
non-performance by one of its members or one of its member's customers, which
should significantly reduce this credit risk. For example, a clearinghouse may
cover a default by drawing upon a defaulting member's mandatory contributions
and/or non-defaulting members' contributions to a clearinghouse guarantee fund,
established lines or letters of credit with banks, and/or the clearinghouse's
surplus capital and other available assets of the exchange and clearinghouse, or
assessing its members. In
41
<PAGE>
cases where the partnership trades off-exchange forwards contracts with a
counterparty, the sole recourse of the partnership will be the forwards contract
counterparty. For a list of the foreign exchanges on which the partnership
trades, see "Use of Proceeds" on page - . FOR AN ADDITIONAL DISCUSSION OF THE
CREDIT RISKS RELATING TO TRADING ON FOREIGN EXCHANGES SEE "RISK FACTORS--TRADING
AND PERFORMANCE RISKS--TRADING ON FOREIGN EXCHANGES PRESENTS GREATER RISKS TO
EACH PARTNERSHIP THAN TRADING ON U.S. EXCHANGES" ON PAGE - .
There is no assurance that a clearinghouse or exchange will meet its
obligations to the partnership, and the general partner and commodity brokers
will not indemnify the partnership against a default by such parties. Further,
the law is unclear as to whether a commodity broker has any obligation to
protect its customers from loss in the event of an exchange or clearinghouse
defaulting on trades effected for the broker's customers. Any such obligation on
the part of a broker appears even less clear where the default occurs in a
non-U.S. jurisdiction.
The general partner deals with these credit risks of the partnership in
several ways. First, it monitors the partnership's credit exposure to each
exchange on a daily basis, calculating not only the amount of margin required
for it but also the amount of its unrealized gains at each exchange, if any. The
commodity brokers inform the partnership, as with all their customers, of its
net margin requirements for all its existing open positions, but do not break
that net figure down, exchange by exchange. The general partner, however, has
installed a system which permits it to monitor the partnership's potential
margin liability, exchange by exchange. As a result, the general partner is able
to monitor the partnership's potential net credit exposure to each exchange by
adding the unrealized trading gains on that exchange, if any, to the
partnership's margin liability thereon.
Second, the partnership's trading policies limit the amount of its net
assets that can be committed at any given time to futures contracts and require,
in addition, a minimum amount of diversification in the partnership's trading,
usually over several different products. One of the aims of such trading
policies has been to reduce the credit exposure of the partnership to a single
exchange and, historically, the partnership's exposure has typically amounted to
only a small percentage of its total net assets. On those relatively few
occasions where the partnership's credit exposure may climb above that level,
the general partner deals with the situation on a case by case basis, carefully
weighing whether the increased level of credit exposure remains appropriate.
Material changes to the trading policies may be made only with the prior written
approval of the limited partners owning more than 50% of units then outstanding.
Third, the general partner has secured, with respect to Carr Futures acting
as the clearing broker for the partnership, a guarantee by Credit Agricole
Indosuez, Carr Futures' parent, of the payment of the "net liquidating value" of
the transactions (futures, options and forward contracts) in the partnership's
account. As of December 31, 1998, Credit Agricole Indosuez' total equity was
$3.301 billion, and its senior unsecured debt is currently rated Aa2 by Moody's.
With respect to forward contract trading, the partnership trades with only
those counterparties which the general partner, together with Dean Witter, have
determined to be creditworthy. At the date of the prospectus, the partnership
deals only with Carr Futures as its counterparty on forward contracts. The
guarantee by Carr Futures' parent, discussed above, covers these forward
contracts.
Inflation has not been a major factor in the partnership's operations.
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Technical.
CAPITAL RESOURCES
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Capital Resources" on page - , which discussion is equally applicable
to Spectrum Technical.
42
<PAGE>
RESULTS OF OPERATIONS
GENERAL. The partnership's results depend on its trading advisors and the
ability of each trading advisor's trading programs to take advantage of price
movements or other profit opportunities in the futures interests markets. The
following presents a summary of the partnership's operations for the three years
ended December 31, 1998, and the nine months ended September 30, 1998 and 1999
and a general discussion of its trading activities during each period. It is
important to note, however, that the trading advisors trade in various markets
at different times and that prior activity in a particular market does not mean
that such market will be actively traded by the trading advisors or will be
profitable in the future. Consequently, the results of operations of the
partnership are difficult to discuss other than in the context of its trading
advisors' trading activities on behalf of the partnership as a whole and how the
partnership has performed in the past.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999. During the first nine
months of the year, Spectrum Technical posted a decrease in net asset value per
unit. The most significant losses were recorded in the global stock index
futures markets from long positions in German stock index futures as European
equity prices moved lower throughout the first quarter amid rising global bond
yields and skepticism regarding the stability of emerging market economies.
Losses were also incurred during late-July from long German stock index futures
positions as prices declined as investors reacted to the strengthening euro by
selling auto maker and export-dependent stocks. In the metals markets, losses
were recorded particularly during the month of March from long silver futures
positions as prices declined during mid-month after Berkshire Hathaway's annual
report failed to provide any new information on the company's silver positions.
Additional losses were experienced in the soft commodities markets from long
coffee futures positions as prices dropped during January on fears spurred by
the collapse of the Brazilian real and during June amid abundant supplies and
warmer temperatures in Brazil. In the global interest rate futures markets,
losses were recorded early in the first quarter from short Japanese government
bond futures positions as prices surged higher in response to the Bank of
Japan's aggressive easing of monetary policy. Additional losses were experienced
later in the first quarter from newly established long positions as prices
retreated following comments by Bank of Japan Governor Masaru Hayami that he
expected interest rates in Japan to rise over time. During September, losses
were recorded from short positions in Japanese government bond futures as prices
rallied on the strength of the Japanese yen and expectations that additional
monetary easing in that country will come. These losses were partially offset by
gains recorded in the energy markets from long positions in crude oil futures
and its refined products, unleaded gas, heating oil and gas oil, as prices
climbed higher during March following an agreement reached by both OPEC and
non-OPEC countries to cut total output beginning April 1st. Oil prices continued
to move higher throughout the third quarter due to declining supplies and
increasing demand. In the currency markets, gains were recorded from short
positions in the Swiss franc and the European common currency as the value of
these currencies declined versus the U.S. dollar throughout the first half of
the year. The weakness in these European currencies relative to the U.S. dollar
was largely attributed to concerns regarding European economic growth and
potentially widening interest rate differentials between Europe and the U.S.
Additional currency gains were recorded during August and September from long
Japanese yen positions as the value of the yen increased versus the U.S. dollar
due to positive economic data out of that country and optimism over Japan's
economic recovery.
For the nine months ended September 30, 1999, Spectrum Technical's total
trading revenues, including interest income, were $15,397,489. Total expenses
for the nine months were $22,764,138, resulting in a net loss of $7,366,649. The
net asset value of a unit in Spectrum Technical decreased from $16.12 at
December 31, 1998 to $15.66 at September 30, 1999.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. During the first nine
months of the year, Spectrum Technical posted an increase in net asset value per
unit. The most significant gains were recorded in the financial futures markets
from long German bond futures positions as prices trended higher during a
majority of the first nine months, particularly during the third quarter. Other
long European and U.S. interest rate futures positions contributed additional
gains, primarily during the last quarter, as a result of economic and political
instability worldwide. The agricultural markets provided gains from short corn
futures positions as grain prices moved lower during a majority of the last
quarter as supplies grew. The energy markets recorded gains from short crude oil
futures positions as oil prices declined during January and early February as
tensions eased in the Middle East. A portion of the Partnership's overall gains
was offset by losses in the metal markets from long gold futures positions as
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<PAGE>
gold prices moved lower during a majority of the second quarter, adding to
January's losses from short gold futures positions as prices moved higher during
that month. Additional losses in metals resulted from short silver futures
positions during September as precious metals prices pushed higher due to the
weak U.S. dollar and long copper futures positions during May as prices in this
market moved lower. The currency markets experienced additional losses primarily
from transactions involving the British pound as its value moved without
consistent direction during the first half of the year. These losses continued
during the third quarter as short British pound positions proved unfavorable
against the weakening U.S. dollar.
For the nine months ended September 30, 1998, Spectrum Technical's total
trading revenues, including interest income, were $45,436,457. Total expenses
for the nine months were $19,716,463, resulting in net income of $25,719,994.
The net asset value of a unit in Spectrum Technical increased from $14.63 at
December 31, 1997 to $16.33 at September 30, 1998.
1998 RESULTS. Spectrum Technical experienced a profitable year in 1998. The
partnership recorded net gains during the year due primarily to long positions
in global interest rate futures positions. The most significant gains were
experienced from long German, U.S. and Japanese bond futures positions during
August and September, as investors flocked to "safe haven" investments amid the
political and economic turmoil in Russia, Asia and Latin America. Short
positions in crude oil futures also contributed profits, as oil prices fell
throughout a majority of the year on reports of a supply surplus, despite
tensions in the Middle East. These gains were partially offset by losses
experienced from short-term price volatility in the metals markets, as investors
shifted investment capital from market to market amid global economic
uncertainty.
For the year ended December 31, 1998, Spectrum Technical's total trading
revenues, including interest income, were $49,940,173. Total expenses for the
year were $27,138,803, resulting in net income of $22,801,370. The net asset
value of a unit in Spectrum Technical increased from $14.63 at December 31, 1997
to $16.12 at December 31, 1998.
1997 RESULTS. Spectrum Technical experienced a profitable year in 1997, as
long positions in global interest rate futures resulted in gains during the
second half of the year. Additional profits from trading in foreign currencies
also contributed to the overall gains experienced for the year, primarily due to
a strengthening in the value of the U.S. dollar relative to the German mark
during January and February and of the U.S. dollar relative to the Japanese yen
and Australian dollar during the final quarter. These gains were partially
offset by losses from the trading of most tangible commodities, resulting from
trendless pricing patterns and choppy price movements, with the exception of a
profitable downward trend in gold prices.
For the year ended December 31, 1997, Spectrum Technical's total trading
revenues, including interest income, were $29,527,587. Total expenses for the
year were $17,820,503, resulting in net income of $11,707,084. The net asset
value of a unit in Spectrum Technical increased from $13.61 at December 31, 1996
to $14.63 at December 31, 1997.
1996 RESULTS. Spectrum Technical recorded significant profits during 1996
due primarily to the partnership's participation in global interest rate futures
and currencies during September, October and November. Gains were experienced
during the last quarter from long positions in global interest rate futures and
short positions in foreign currencies. The majority of the first three quarters
was characterized by profitable periods followed by losing periods resulting
from sharp trend reversals. The fourth quarter gains easily offset any losses
experienced during such periods of trendless pricing patterns and choppy price
movements earlier in the year.
For the year ended December 31, 1996, Spectrum Technical's total trading
revenues, including interest income, were $28,025,066. Total expenses for the
year were $12,123,749, resulting in net income of $15,901,317. The net asset
value of a unit in Spectrum Technical increased from $11.50 at December 31, 1995
to $13.61 at December 31, 1996.
To enhance the foregoing comparison of operations from year to year, you
should examine, line by line, the partnership's Statements of Operations and
Statements of Financial Condition. See "Selected Financial Data" and
"Independent Auditors' Report and Financial Statements of Morgan Stanley Dean
Witter Spectrum Series" contained in this prospectus.
44
<PAGE>
FINANCIAL INSTRUMENTS
See discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Financial Instruments" on page - , which discussion is equally
applicable to Spectrum Technical.
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Strategic.
CAPITAL RESOURCES
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Capital Resources" on page - , which discussion is equally applicable
to Spectrum Strategic.
RESULTS OF OPERATIONS
GENERAL. The partnership's results depend on its trading advisors and the
ability of each trading advisor's trading programs to take advantage of price
movements or other profit opportunities in the futures, forwards, and options
markets. The following presents a summary of the partnership's operations for
the three years ended December 31, 1998, and the nine months ended
September 30, 1998 and 1999 and a general discussion of its trading activities
during each period. It is important to note, however, that the trading advisors
trade in various markets at different times and that prior activity in a
particular market does not mean that such market will be actively traded by the
trading advisors or will be profitable in the future. Consequently, the results
of operations of the partnership are difficult to discuss other than in the
context of its trading advisors' trading activities on behalf of the partnership
as a whole and how the partnership has performed in the past.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999. During the first nine
months of the year, Spectrum Strategic posted an increase in net asset value per
unit. The most significant gains were recorded from long futures positions in
crude oil and its refined products, unleaded gas, heating oil and gas oil, as
prices climbed higher during March following an agreement reached by both OPEC
and non-OPEC countries to cut total output beginning April 1st. Oil prices
continued to move higher throughout the third quarter due to declining supplies,
increasing demand and evidence that output cuts were being adhered to. In the
metals markets, gains were recorded from long positions in gold futures as gold
prices soared during September following the Bank of England's second gold
auction and an announcement by several European central banks stating that they
were to restrict the sales of gold reserves for five years. Additional gains
were recorded from long copper futures positions as copper prices soared during
mid-April on a wave of fund buying and during June on news that a major U.S.
producer would cut back production. Copper prices also moved higher during
August and September resulting in profits for the partnership's long positions.
In the global interest rate futures markets, gains were recorded during February
from short U.S. interest rate futures positions as prices dropped in reaction to
Federal Reserve Chairman Alan Greenspan's warnings that a strong economy could
reignite inflation. A higher-than-expected rise in the Consumer Price Index and
fears of a tighter Federal Reserve monetary policy resulted in additional gains
in this market during May and June. These gains were partially offset by losses
recorded in the currency markets during January from long Japanese yen positions
after an intervention by the Bank of Japan boosted the U.S. dollar against the
yen and helped ease concerns about the impact of a strong yen on Japanese
exports. Losses were also recorded during March from short Japanese yen
positions as the value of the yen increased versus the U.S. dollar amid new
signs that Japan's economy may be on the mend. Losses were recorded from short
Japanese yen positions during June and July as its value reached a 5 1/2 month
high versus the U.S. dollar due to inflationary pressures in the United States
and optimistic prospects for economic growth in Japan. In the agricultural
markets, losses were recorded during May from long positions in soybean futures
as prices declined due to favorable planting forecasts and a bearish USDA
supply-demand report. During early July, losses were recorded from long soybean
futures positions as prices declined on forecasts for favorable crop weather in
the U.S. During August, additional losses were recorded from short positions in
soybeans, soybean meal and soybean oil futures as prices increased significantly
amid drier-than-expected weather in the U.S. Midwest, forecasts for very little
rain, and concerns about shriveling production. In the global stock index
futures markets, losses were recorded during March and April from short S&P 500
Index futures positions as equity prices increased in reaction to Wall Street
reaching a major milestone, as the Dow Jones Industrial Average hit 10,000 for
the first time and in response to an interest rate cut by the European Central
Bank.
45
<PAGE>
For the nine months ended September 30, 1999, Spectrum Strategic's total
trading revenues, including interest income, were $32,919,876. Total expenses
for the nine months were $8,728,600, resulting in net income of $24,191,276. The
net asset value of a unit in Spectrum Strategic increased from $11.55 at
December 31, 1998 to $15.28 at September 30, 1999.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. During the first nine
months of the year, Spectrum Strategic posted an increase in net asset value per
unit. The most significant gains were recorded from long German bond futures
positions as prices moved higher during a majority of the first half of the year
coupled with a sharp push higher during the third quarter. Likewise, long
positions in other European and U.S. interest rate futures contributed
additional gains in the financial futures sector as investors flocked to these
perceived safe investments amid economic and political instability worldwide
during August and September. A portion of the Partnership's overall gains was
offset by losses incurred in the soft commodities and currency markets. Long
sugar futures positions resulted in losses as sugar prices moved lower
throughout the first quarter. Trading in the Japanese yen also resulted in
losses, particularly from short positions held during early April as the value
of the yen spiked suddenly higher versus the U.S. dollar amid new optimism
regarding the Japanese economic stimulus package. In the metals markets, smaller
losses were experienced from long silver futures positions as silver prices
declined sharply during May. In the agricultural markets, long grain futures
positions held during the third quarter incurred losses as prices declined on
news of increasing supplies amid decreasing demand, returning previously
recorded gains in this sector.
For the nine months ended September 30, 1998, Spectrum Strategic's total
trading revenues, including interest income, were $8,334,074. Total expenses for
the nine months were $5,023,358, resulting in net income of $3,310,716. The net
asset value of a unit in Spectrum Strategic increased from $10.71 at
December 31, 1997 to $11.26 at September 30, 1998.
1998 RESULTS. Spectrum Strategic posted a net gain in 1998. The partnership
recorded profits primarily from long positions in global interest rate futures,
as the increased volatility in the global financial markets and worldwide
economic deterioration drove investors to a variety of "safe haven" investments
throughout August and September. Long positions in U.S., German, British, and
Japanese bond futures were the key contributors to these gains. Additional gains
were recorded in the currency markets in early October from long German mark
positions, as the mark's value increased relative to the U.S. dollar. This
weakness in the U.S. dollar was mainly caused by an unanticipated interest rate
cut by the Federal Reserve and the continuing possibility, and subsequent
reality, of presidential impeachment hearings. A portion of these gains was
offset by losses in the energy and soft commodities markets, primarily during
the fourth quarter from long positions in crude oil and cocoa futures.
For the year ended December 31, 1998, Spectrum Strategic's total trading
revenues, including interest income, were $13,096,775. Total expenses for the
year were $8,081,680, resulting in net income of $5,015,095. The net asset value
of a unit in Spectrum Strategic increased from $10.71 at December 31, 1997 to
$11.55 at December 31, 1998.
1997 RESULTS. Spectrum Strategic posted a small net gain in 1997, as profits
were recorded by the partnership's discretionary managers during the first
quarter primarily from commodities trading and during the year's final months
from a strengthening in the value of the U.S. dollar. A majority of these gains
were offset by losses experienced during the second quarter, as the volatility
in global stock index and bond futures that began in March did not develop in
line with the discretionary managers' points of view. In much of the second half
of the year, small losses were also recorded from a significant pattern of
short-term volatility underlying many future markets.
For the year ended December 31, 1997, Spectrum Strategic's total trading
revenues, including interest income, were $5,989,330. Total expenses for the
year were $7,054,209, resulting in a net loss of $1,064,879. The net asset value
of a unit in Spectrum Strategic increased from $10.67 at December 31, 1996 to
$10.71 at December 31, 1997.
46
<PAGE>
1996 RESULTS. Spectrum Strategic posted negative performance for 1996, due
primarily to losses resulting from sharp trend reversals in financial futures
and currency markets during February. During the latter half of the year,
increased volatility in energies and domestic commodities resulted in additional
losses to the partnership. A majority of the losses experienced earlier in the
year, however, were offset by gains during the last three quarters, particularly
in April from long positions in the agricultural markets and in September from
long positions in global interest rate futures and short positions in foreign
currencies.
For the year ended December 31, 1996, Spectrum Strategic's total trading
revenues, including interest income, were $4,905,380. Total expenses for the
year were $5,712,243, resulting in a net loss of $806,863. The net asset value
of a unit in Spectrum Strategic decreased from $11.06 at December 31, 1995 to
$10.67 at December 31, 1996.
To enhance the foregoing comparison of operations from year to year, you
should examine, line by line, the partnership's Statements of Operations and
Statements of Financial Condition.
FINANCIAL INSTRUMENTS
See discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Financial Instruments" on page - , which discussion is equally
applicable to Spectrum Strategic.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Global Balanced.
CAPITAL RESOURCES
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Capital Resources" on page - , which discussion is equally applicable
to Spectrum Global Balanced.
RESULTS OF OPERATIONS
GENERAL. The partnership's results depend on its trading advisor and the
ability of such trading advisor's trading programs to take advantage of price
movements or other profit opportunities in the futures interests markets. The
following presents a summary of the partnership's operations for the three years
ended December 31, 1998, and the nine months ended September 30, 1998 and 1999,
and a general discussion of its trading activities during each period. It is
important to note, however, that the trading advisor trades in various markets
at different times and that prior activity in a particular market does not mean
that such market will be actively traded by the trading advisor or will be
profitable in the future. Consequently, the results of operations of the
partnership are difficult to discuss other than in the context of its trading
advisor's trading activities on behalf of the partnership as a whole and how the
partnership has performed in the past.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999. During the first nine
months of the year, Spectrum Global Balanced posted a decrease in net asset
value per unit. The most significant net losses were experienced in the fixed
income component during February, April and May from long U.S. interest rate
futures positions as prices dropped in reaction to Federal Reserve Chairman Alan
Greenspan's warnings that a strong economy could reignite inflation. Fears that
the Federal Reserve eventually could boost target interest rates pushed down
domestic bond prices during the first and second quarters and forced yields
higher. During July and August, long U.S. interest rate futures positions
resulted in losses as domestic bond prices moved temporarily lower after Federal
Reserve Chairman Alan Greenspan commented that central bankers must consider
stock prices when setting monetary policy and as economic reports added to
concern that the U.S. Federal Reserve will raise interest rates. In the
agricultural markets, losses were recorded from long corn futures positions as
prices regressed in early April in reaction to reports by the USDA that the
expected corn surplus will be one of the biggest in years and from declining
demand from Asian markets. Later in April, corn prices fell due to technical
factors and on reports of favorable planting conditions. During early-August,
losses were experienced from short corn futures positions as prices increased
significantly amid drier-than-expected weather in the U.S.
47
<PAGE>
Midwest, forecasts for very little rain, and concerns about shriveling
production. These losses were partially offset by gains recorded in the energy
markets from long positions in crude and gas oil futures, as prices climbed
higher during March following an agreement reached by both OPEC and non-OPEC
countries to cut total output beginning April 1st. Oil prices continued to move
higher throughout the third quarter due to declining supplies, increasing demand
and adherence to output cuts. In the currency markets, gains were recorded
during August from short euro, Swiss franc, and Australian dollar positions
versus the Japanese yen as the value of the yen strengthened due to optimism
regarding the Japanese economy and Japanese investors selling euros looking to
hedge their investments. In the global stock index futures component, gains were
recorded during January and March from long Nikkei Index futures positions as
Japanese equity prices were pushed higher by positive economic factors in Japan
such as low interest rates, an easing credit stance, relatively stable exchange
rates, and an agreement to inject public funds into the indebted banking sector.
For the nine months ended September 30, 1999, Spectrum Global Balanced's
total trading revenues, including interest income, were $1,647,006. Total
expenses for the nine months were $2,436,286, resulting in a net loss of
$789,280. The net asset value of a unit in Spectrum Global Balanced decreased
from $16.00 at December 31, 1998 to $15.79 at September 30, 1999.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. During the first nine
months of the year, Spectrum Global Balanced posted an increase in net asset
value per unit. The most significant gains were recorded during the third
quarter in the global bond futures component of the balanced portfolio from long
positions in U.S. interest rate futures, particulary five-year Treasury note
futures. Additional gains in this sector were recorded from long European bond
futures positions during a majority of the first quarter, as well as during
August and September. The recent worldwide economic and political instability
created an extremely positive environment for bond prices during the third
quarter, thus resulting in gains for the Partnership's long positions. The stock
index futures component contributed smaller gains from long S&P 500 Index
futures positions as domestic stock prices climbed to record highs during the
first and second quarters. Overall trading results in the managed futures
component were mixed. Short corn and livestock futures positions produced
smaller profits as prices fell in these markets during late August. Gains were
recorded during the first quarter from short crude oil futures positions as oil
prices declined on reports of a potential agreement between the U.N. and Iraq. A
portion of the Partnership's overall gains was offset by losses experienced in
the soft commodities and metals markets. Long cotton futures positions resulted
in losses as cotton prices reversed lower during July on news of improved
weather conditions. Short positions in base metals futures early in the third
quarter proved unfavorable as prices moved higher early in July. As a result of
this move higher, new long positions were established in these markets which
resulted in additional losses as base metals prices regained their downward
momentum. Smaller losses were experienced in the currency markets primarily from
transactions involving the British pound as its value moved without consistent
direction relative to other currencies.
For the nine months ended September 30, 1998, Spectrum Global Balanced's
total trading revenues, including interest income, were $4,967,882. Total
expenses for the nine months were $1,548,494 resulting in net income of
$3,419,388. The net asset value of a unit in Spectrum Global Balanced increased
from $13.75 at December 31, 1997 to $15.21 at September 30, 1998.
1998 RESULTS. Spectrum Global Balanced experienced a profitable year in
1998. The partnership profited during the year primarily from long positions in
the global stock index futures component of the balanced portfolio. The most
significant gains were recorded from long S&P 500 Index futures positions, as
equity prices reached record levels during the first half and final quarter of
the year. Additional gains were recorded from long positions in European stock
index futures, with a majority of the gains experienced during the fourth
quarter amid the recovery of the U.S. stock markets. The global interest rate
futures markets were also key contributors to overall gains, as long global bond
futures positions benefited from a "flight-to-quality," given the global
economic uncertainty prevalent during the third quarter.
For the year ended December 31, 1998, Spectrum Global Balanced's total
trading revenues, including interest income, were $8,042,090. Total expenses for
the year were $2,464,202, resulting in net income of $5,577,888. The net asset
value of a unit in Spectrum Global Balanced increased from $13.75 at
December 31, 1997 to $16.00 at December 31, 1998.
1997 RESULTS. Spectrum Global Balanced had a successful year in 1997 due
primarily to a strengthening in the value of the U.S. dollar relative to most
foreign currencies during the first quarter, as
48
<PAGE>
well as during December. Additional gains were recorded from long positions in
S&P 500 Index futures, as U.S. equity prices continued to trend higher
throughout a majority of the year, and in Australian bond futures, as Australian
bond prices trended higher during the second and third quarters. The fixed
income component of Spectrum Global Balanced was also profitable, as U.S.
Treasury note and Treasury bond futures prices finished the year higher despite
trendless pricing patterns and choppy price movements throughout the first half
of the year.
For the year ended December 31, 1997, Spectrum Global Balanced's total
trading revenues, including interest income, were $5,293,459. Total expenses for
the year were $1,693,943, resulting in net income of $3,599,516. The net asset
value of a unit in Spectrum Global Balanced increased from $11.63 at
December 31, 1996 to $13.75 at December 31, 1997.
1996 RESULTS. Spectrum Global Balanced experienced negative performance in
1996, primarily due to losses experienced in the managed futures portion of the
balanced portfolio early in the year. Such losses resulted from sharp trend
reversals in U.S. bond futures, interest rate futures, and currencies. In the
second half of the year, the partnership offset some of those losses by
recording profits in the managed futures portion of the balanced portfolio. Such
profits resulted from gains in long positions in U.S. bond futures, global bond
futures, and stock index futures. Despite positive performance from U.S. stock
index futures during a majority of the year, a relatively light exposure to this
area relative to bond futures resulted in losses for the year.
For the year ended December 31, 1996, Spectrum Global Balanced's total
trading revenues, including interest income, were $893,626. Total expenses for
the year were $1,251,592, resulting in a net loss of $357,966. The net asset
value of a unit in Spectrum Global Balanced decreased from $12.07 at
December 31, 1995 to $11.63 at December 31, 1996.
To enhance the foregoing comparison of operations from year to year, you
should examine, line by line, the partnership's Statements of Operations and
Statements of Financial Condition.
FINANCIAL INSTRUMENTS
See discussion under "Morgan Stanley Dean Witter Spectrum Select
L.P.--Financial Instruments" on page - , which discussion is equally
applicable to Spectrum Global Balanced.
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Currency.
CAPITAL RESOURCES
See the discussion under "Morgan Stanley Dean Witter Spectrum
Select L.P.--Capital Resources" on page - , which discussion is equally
applicable to Spectrum Currency.
RESULTS OF OPERATIONS
Spectrum Currency is a new commodity pool and as a result it does not have
an operating history.
FINANCIAL INSTRUMENTS
See discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Financial Instruments" on page - , which discussion is equally
applicable to Spectrum Currency.
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Commodity.
49
<PAGE>
CAPITAL RESOURCES
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Capital Resources" on page - , which discussion is equally applicable
to Spectrum Commodity.
RESULTS OF OPERATIONS
GENERAL. The partnership's results depend on its trading advisor and the
ability of its trading advisor's trading program to take advantage of price
movements or other profit opportunities in the futures interests markets. The
following presents a summary of the partnership's operations for the year ended
December 31, 1998, and the nine months ended September 30, 1998 and 1999 and a
general discussion of its trading activities during each period. It is important
to note, however, that the trading advisor trades in various markets at
different times and that prior activity in a particular market does not mean
that such market will be actively traded by the trading advisor or will be
profitable in the future. Consequently, the results of operations of the
partnership are difficult to discuss other than in the context of its trading
advisor's trading activities on behalf of the partnership as a whole and how the
partnership has performed in the past.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999. During the first nine
months of the year, Spectrum Commodity posted an increase in net asset value per
unit. The most significant gains were recorded in the energy markets from long
futures positions in crude oil and its refined products, unleaded gas and
heating oil, as prices climbed higher during March following an agreement
reached by both OPEC and non-OPEC countries to cut total output beginning
April 1st. Oil prices continued to move higher throughout the third quarter due
to declining supplies, increasing demand and adherence to the agreed-upon output
cuts. In the metals markets, gains were recorded during April, June, August and
September from long positions in nickel, copper and aluminum futures as base
metal prices increased due to strong producer demand, tightening supply levels
and reports that several major copper producers would be reducing production. In
the livestock markets, gains were recorded from long positions in feeder cattle
futures as prices increased early in July on a decline in corn prices. During
September, additional gains were recorded from long positions in feeder and live
cattle futures as cattle prices moved higher due to an increase in cash prices
and beef demand. These gains were partially offset by losses recorded in the
soft commodities markets from long positions in cocoa and coffee futures as
prices in these markets declined during the first half of the year amid fears
that economic turmoil in Brazil would lead them to flood the market with
increased exports and on forecasts for favorable growing weather in that region.
During the third quarter, losses were experienced from long coffee futures
positions as prices slid lower due to increased supplies, diminishing fears of
impending frost damage to Brazilian plantations and on predictions of record
harvests in Brazil next year. In the agricultural markets, losses were recorded
from long positions in corn, wheat and soybean futures as grain prices moved
lower on concerns regarding Brazil's economic status, higher-than-expected
supply levels and on reports of favorable crop weather.
For the nine months ended September 30, 1999, Spectrum Commodity's total
trading revenues, including interest income, were $4,546,524. Total expenses for
the nine months were $1,245,224, resulting in net income of $3,301,300. The net
asset value of a unit in Spectrum Commodity increased from $6.57 at
December 31, 1998 to $7.58 at September 30, 1999.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998. During the first nine
months of the year, Spectrum Commodity posted a decrease in net asset value per
unit. The most significant losses were recorded in the agricultural markets from
long positions in corn and wheat futures as grain prices moved lower during a
majority of the year, with the exception of brief spikes higher in June and
September. Smaller losses were recorded from long positions in livestock futures
during the first eight months of the year. In the energy markets, losses were
experienced throughout a majority of the first three quarters of the year from
long positions in oil and gas futures despite brief spikes higher during the
months of March and September. Additional partnership losses recorded in the
metals markets during the second and third quarters from long positions in
precious and base metals futures more than offset profits recorded during the
first quarter from long silver, gold and platinum futures. In soft commodities,
losses were recorded during much of the first six months from long positions in
coffee futures as prices moved lower. A portion of these losses was offset by
gains recorded during the second quarter from long positions in orange juice
futures.
50
<PAGE>
For the first nine months ended September 30, 1998, Spectrum Commodity's
total trading loss net of interest income was $7,085,551. Total expenses for the
nine months ended September 30, 1998 were $1,781,523, resulting in a net loss of
$8,867,074. The net asset value of a unit in Spectrum Commodity decreased from
$10.00 at the inception of trading on January 2, 1998 to $7.75 at September 30,
1998.
1998 RESULTS. Spectrum Commodity recorded net losses during 1998. Spectrum
Commodity adheres to a long-only approach to trading traditional commodity
markets. This approach encountered significant difficulty during the entire
year, given the magnitude and unrelenting nature of declines in a broad-based
majority of commodities markets. The major factors impacting the commodity
markets in 1998 were the emerging market economies, global economic instability,
and unusual weather patterns. Demand for almost every commodity was negatively
impacted by the downturn in virtually all of the world's emerging economies, as
currency woes quickly spread worldwide. The ultimate contractions in demand for
commodities (from affected economies) had a severe negative impact in the supply
increases being provided by the world's producers, particularly within the
energy and metals markets.
For the year ended December 31, 1998, Spectrum Commodity's total trading
loss, net of interest income, was $11,239,913. Spectrum Commodity's total
expenses for the year were $2,303,718, resulting in a net loss of $13,543,631.
The net asset value of a unit in Spectrum Commodity decreased from $10.00 at
inception of trading on January 2, 1998 to $6.57 at December 31, 1998.
To enhance the foregoing comparison of operations, you should examine, line
by line, the partnership's Statements of Operations and Statements of Financial
Condition.
FINANCIAL INSTRUMENTS
Spectrum Commodity trades futures, forwards, and options in metals, energy
and agricultural markets. 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.
The credit risk associated with the instruments in which the partnership is
involved is limited to the amounts reflected in the partnership's Statement of
Financial Condition.
Spectrum Commodity also has credit risk because Dean Witter, Morgan Stanley
and Morgan Stanley International act as commodity brokers with respect to
Spectrum Commodity's assets. Exchange-traded futures contracts are marked to
market on a daily basis, with variations in value settled on a daily basis. Each
of Dean Witter and Morgan Stanley, as commodity brokers for Spectrum Commodity's
exchange-traded futures contracts, are required, pursuant to regulations of the
CFTC, to segregate from their own assets and for the sole benefit of their
commodity customers, all funds held by them with respect to exchange-traded
futures contracts including an amount equal to the net unrealized loss on all
open futures contracts.
The discussion of credit risks relating to foreign exchanges under "--Morgan
Stanley Dean Witter Spectrum Select L.P.--Financial Instruments" on page - is
equally applicable to Spectrum Commodity.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
INTRODUCTION
Each partnership is a commodity pool involved in the speculative trading of
futures, forwards, and options. The market sensitive instruments held by each
partnership are acquired for speculative trading purposes only and, as a result,
all or substantially all of each partnership's assets are at risk of trading
loss. Unlike an operating company, the risk of market sensitive instruments is
central, not incidental, to each partnership's main business activities.
The futures, forwards, and options traded by each partnership involve
varying degrees of market risk. Market risk is often dependent upon changes in
the level or volatility of interest rates, exchange rates, and
51
<PAGE>
prices of financial instruments and commodities. Fluctuations in market risk
based upon these factors result in frequent changes in the fair value of each
partnership's open positions, and, consequently, in its earnings and cash flow.
Each partnership's total market risk is influenced by a wide variety of
factors, including the diversification among each partnership's open positions,
the volatility present within the markets, and the liquidity of the markets. At
different times, each of these factors may act to increase or decrease the
market risk associated with each partnership.
Each partnership's past performance is not necessarily indicative of its
future results. Any attempt to numerically quantify a partnership's market risk
is limited by the uncertainty of its speculative trading. The partnership's
speculative trading may cause future losses and volatility (I.E. "risk of ruin")
that far exceed the partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
QUANTIFYING THE PARTNERSHIPS' TRADING VALUE AT RISK
THE FOLLOWING QUANTITATIVE DISCLOSURES REGARDING EACH PARTNERSHIP'S MARKET
RISK EXPOSURES CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
SAFE HARBOR FROM CIVIL LIABILITY PROVIDED FOR SUCH STATEMENTS BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 (SET FORTH IN SECTION 27A OF THE
SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934).
ALL QUANTITATIVE DISCLOSURES IN THIS SECTION ARE DEEMED TO BE FORWARD-LOOKING
STATEMENTS FOR PURPOSES OF THE SAFE HARBOR, EXCEPT FOR STATEMENTS OF HISTORICAL
FACT.
Each partnership accounts for open positions using mark-to-market accounting
principles. Any loss in the market value of a partnership's open positions is
directly reflected in the partnership's earnings, whether realized or
unrealized, and cash flow. Profits and losses on open positions of
exchange-traded futures interests are settled daily through variation margin.
Each partnership's risk exposure in the market sectors traded by the trading
advisors is estimated below in terms of Value at Risk ("VaR"). The VaR model
used by each partnership includes many variables that could change the market
value of a partnership's trading portfolio. Each partnership estimates VaR using
a model based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of hypothetical daily
changes in the value of a trading portfolio. The VaR model takes into account
linear exposures to price and interest rate risk. Market risks that are
incorporated in the VaR model include equity and commodity prices, interest
rates, foreign exchange rates and correlation among these variables. The
hypothetical changes in portfolio value are based on daily percentage changes
observed in key market indices or other market factors ("market risk factors")
to which the portfolio is sensitive. The historical observation period of each
partnership's VaR is approximately four years. The one-day 99% confidence level
of each partnership's VaR corresponds to the negative change in portfolio value
that, based on observed market risk factors, would have been exceeded once in
100 trading days.
VaR models, including the partnerships', are continuously evolving as
trading portfolios become more diverse and modeling techniques and systems
capabilities improve. Please note that the VaR model is used to numerically
quantify market risk for historic reporting purposes only and is not utilized by
either the general partner or the trading advisors in their daily risk
management activities.
EACH PARTNERSHIP'S VALUE AT RISK IN DIFFERENT MARKET SECTORS
The following tables indicate the VaR associated with each partnership's
open positions, as a percentage of total net assets, by primary market risk
category as of September 30, 1999.
52
<PAGE>
SPECTRUM SELECT:
As of September 30, 1999, Spectrum Select's total capitalization was
approximately $222 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Interest Rate............................................... (0.50)
Currency.................................................... (1.20)
Equity...................................................... (0.31)
Commodity................................................... (1.48)
Aggregate Value at Risk..................................... (1.93)
</TABLE>
SPECTRUM TECHNICAL:
As of September 30, 1999, Spectrum Technical's total capitalization was
approximately $279 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Interest Rate............................................... (1.31)
Currency.................................................... (1.84)
Equity...................................................... (0.39)
Commodity................................................... (1.07)
Aggregate Value at Risk..................................... (2.57)
</TABLE>
SPECTRUM STRATEGIC:
As of September 30, 1999, Spectrum Strategic's total capitalization was
approximately $101 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Equity...................................................... (1.78)
Interest Rate............................................... (0.52)
Currency.................................................... (1.58)
Commodity................................................... (3.13)
Aggregate Value at Risk..................................... (3.96)
</TABLE>
SPECTRUM GLOBAL BALANCED:
As of September 30, 1999, Spectrum Global Balanced's total capitalization
was approximately $55 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Interest Rate............................................... (0.45)
Equity...................................................... (0.51)
Currency.................................................... (0.42)
Commodity................................................... (0.40)
Aggregate Value at Risk..................................... (0.90)
</TABLE>
SPECTRUM COMMODITY:
As of September 30, 1999, Spectrum Commodity's total capitalization was
approximately $24 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Commodity................................................... (2.04)
Aggregate Value at Risk..................................... (2.04)
</TABLE>
Aggregate Value at Risk, listed above for each partnership, represents the
aggregate VaR of all of a partnership's open positions and not the sum of the
VaR of the individual Market Categories. Aggregate VaR will be lower as it takes
into account correlation among the different positions and categories.
53
<PAGE>
The tables above represent the VaR of each partnership's open positions at
September 30, 1999 only and are not necessarily representative of either the
historic or future risk of an investment in that partnership. Because the only
business of each partnership is the speculative trading of futures, forwards,
and options, the composition of a partnership's trading portfolio can change
significantly over any given time period, or even within a single trading day.
Any changes in open positions could positively or negatively materially impact
market risk as measured by VaR.
The tables below supplement the September 30, 1999 VaR (set forth above) by
presenting each partnership's high, low and average VaR, as a percentage of
total net assets, for the four quarterly reporting periods from October 1, 1998
through September 30, 1999.
SPECTRUM SELECT
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Interest Rate........ (1.61) (0.46) (0.91)
Currency............. (1.52) (0.51) (1.08)
Equity............... (0.82) (0.31) (0.51)
Commodity............ (1.48) (0.77) (1.00)
Aggregate Value at
Risk............... (2.83) (1.28) (1.91)
</TABLE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Interest Rate......... (2.11) (1.25) (1.48)
Currency.............. (2.58) (0.68) (1.87)
Equity................ (1.15) (0.39) (0.75)
Commodity............. (1.07) (0.60) (0.84)
Aggregate Value at
Risk................ (3.80) (1.60) (2.78)
</TABLE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Equity............... (2.41) (0.23) (1.49)
Interest Rate........ (1.97) (0.31) (1.16)
Currency............. (2.98) (0.07) (1.76)
Commodity............ (3.13) (0.46) (1.77)
Aggregate Value at
Risk............... (4.88) (0.58) (3.10)
</TABLE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Interest Rate........ (0.76) (0.45) (0.60)
Equity............... (1.74) (0.51) (1.07)
Currency............. (0.53) (0.26) (0.42)
Commodity............ (0.40) (0.26) (0.32)
Aggregate Value at
Risk............... (1.70) (0.90) (1.34)
</TABLE>
SPECTRUM COMMODITY
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Commodity............................................ (2.04) (1.78) (1.89)
Aggregate Value at Risk.............................. (2.04) (1.78) (1.89)
</TABLE>
LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK
The face value of the market sector instruments held by each partnership is
typically many times the applicable margin requirements. Margin requirements
generally range between 2% and 15% of contract face value. Additionally, the use
of leverage causes the face value of the market sector instruments held by each
partnership to typically be many times the total capitalization of a
partnership. The value of a partnership's open positions thus creates a "risk of
ruin" not usually found in other investments. The relative size of the positions
held may cause a partnership to incur losses greatly in excess of VaR within a
short period of time, given the effects of the leverage employed and market
volatility. The VaR tables above, as well as the past performance of the
partnerships, give no indication of this "risk of ruin." In addition, VaR risk
measures should be viewed in light of the methodology's limitations, which
include the following:
- past changes in market risk factors will not always result in accurate
predictions of the distributions and correlations of future market
movements;
- changes in portfolio value caused by market movements may differ from
those of the VaR model;
- VaR results reflect past trading positions while future risk depends on
future positions;
54
<PAGE>
- VaR using a one-day time horizon does not fully capture the market risk
of positions that cannot be liquidated or hedged within one day; and
- the historical market risk data used for VaR estimation may provide
only limited insight into losses that could be incurred under unusual
market movements.
The VaR tables above present the results of each partnership's VaR for each
partnership's market risk exposures and on an aggregate basis at September 30,
1999 and for the end of the quarter periods from October 1, 1998 through
September 30, 1999. Since VaR is based on historical data, VaR should not be
viewed as predictive of a partnership's future financial performance or its
ability to manage or monitor risk. There can be no assurance that a
partnership's actual losses on a particular day will not exceed the VaR amounts
indicated above or that losses will not occur more than once in 100 trading
days.
NON-TRADING RISK
Each partnership has non-trading market risk on its foreign cash balances
not needed for margin. These balances and any market risk they may represent are
immaterial. Each partnership also maintains a substantial portion (approximately
77-92%) of its available assets in cash at Dean Witter. A decline in short-term
interest rates will result in a decline in a partnership's cash management
income. This cash flow risk is not considered to be material.
Materiality, as used throughout this section, is based on an assessment of
reasonably possible market movements and any associated potential losses, taking
into account the leverage, optionality, and multiplier features of a
partnership's market sensitive instruments.
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES
THE FOLLOWING QUALITATIVE DISCLOSURES REGARDING EACH PARTNERSHIP'S MARKET
RISK EXPOSURES--EXCEPT FOR (A) THOSE DISCLOSURES THAT ARE STATEMENTS OF
HISTORICAL FACT AND (B) THE DESCRIPTIONS OF HOW A PARTNERSHIP MANAGES ITS
PRIMARY MARKET RISK EXPOSURES--CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT. EACH PARTNERSHIP'S PRIMARY MARKET RISK EXPOSURES AS WELL AS THE
STRATEGIES USED AND TO BE USED BY THE GENERAL PARTNER AND THE TRADING ADVISORS
FOR MANAGING SUCH EXPOSURES ARE SUBJECT TO NUMEROUS UNCERTAINTIES, CONTINGENCIES
AND RISKS, ANY ONE OF WHICH COULD CAUSE THE ACTUAL RESULTS OF EACH PARTNERSHIP'S
RISK CONTROLS TO DIFFER MATERIALLY FROM THE OBJECTIVES OF SUCH STRATEGIES.
GOVERNMENT INTERVENTIONS, DEFAULTS AND EXPROPRIATIONS, ILLIQUID MARKETS, THE
EMERGENCE OF DOMINANT FUNDAMENTAL FACTORS, POLITICAL UPHEAVALS, CHANGES IN
HISTORICAL PRICE RELATIONSHIPS, AN INFLUX OF NEW MARKET PARTICIPANTS, INCREASED
REGULATION AND MANY OTHER FACTORS COULD RESULT IN MATERIAL LOSSES AS WELL AS IN
MATERIAL CHANGES TO THE RISK EXPOSURES AND THE RISK MANAGEMENT STRATEGIES OF
EACH PARTNERSHIP. INVESTORS MUST BE PREPARED TO LOSE ALL OR SUBSTANTIALLY ALL OF
THEIR INVESTMENT IN A PARTNERSHIP.
SPECTRUM SELECT
The following were the primary trading risk exposures of Spectrum Select as
of September 30, 1999, by market sector. It may be anticipated, however, that
these market exposures will vary materially over time.
CURRENCY. Currency risk is the principal market exposure of Spectrum
Select. Spectrum Select's currency exposure is to exchange rate fluctuations,
primarily fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. These fluctuations are
influenced by interest rate changes as well as political and general economic
conditions. The partnership trades in a large number of currencies, including
cross-rates--I.E., positions between two currencies other than the U.S. dollar.
The partnership's major exposures were in the euro currency crosses and outright
U.S. dollar positions. The general partner does not anticipate that the risk
profile of the partnership's currency sector will change significantly in the
future, although it is difficult at this point to predict the effect of the
introduction of the euro on the trading advisors' currency trading strategies.
The currency trading VaR figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the exchange rate risk
inherent to the dollar-based partnership in experiencing VaR in functional
currency other than dollars.
55
<PAGE>
INTEREST RATE. Interest rate movements directly affect the price of the
sovereign bond futures positions held by the partnership and indirectly the
value of its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the partnership's profitability. The partnership's exposure in the
interest rate market complex was spread across the U.S., European, Japanese,
Australian, and German interest rate sectors. However, the partnership's primary
interest rate exposure is generally to interest rate fluctuations in the U.S.
and the other G-7 countries. The G-7 countries consist of France, U.S., Britain,
Germany, Japan, Italy, and Canada. However, the partnership also takes futures
positions in the government debt of smaller nations--E.G. Australia and Spain.
The general partner anticipates that G-7 and Australian interest rates will
remain the primary market exposure of the partnership for the foreseeable
future. The changes in interest rates which have the most effect on the
partnership are changes in long-term, as opposed to short-term, rates. Most of
the speculative futures positions held by the partnership are in medium-to-long
term instruments. Consequently, even a material change in short-term rates would
have little effect on the partnership were the medium-to-long term rates to
remain steady.
EQUITY. Spectrum Select's primary equity exposure is to equity price risk
in the G-7 countries. The stock index futures traded by the partnership are by
law limited to futures on broadly based indices. As of September 30, 1999, the
partnership's primary exposures were in the S&P 500, All Ordinaries (Australia),
and FTSE (Britain) stock indices. The partnership is primarily exposed to the
risk of adverse price trends or static markets in the U.S., European and
Japanese indices. Static markets would not cause major market changes but would
make it difficult for the partnership to avoid being "whipsawed" into numerous
small losses.
COMMODITY.
METALS. Spectrum Select's primary metals market exposure is to fluctuations
in the price of gold and silver. Although the trading advisors will, from time
to time, trade base metals such as aluminum, copper, lead, nickel and zinc, the
principal market exposures of the partnership have consistently been in the
precious metals, gold and silver. A significant amount of exposure was evident
in the gold market as the price of gold increased dramatically following bullish
comments by the European Central Bank. Silver prices have remained volatile over
this period, and the trading advisors have from time to time taken substantial
positions as they have perceived market opportunities to develop. The general
partner anticipates that gold and silver will remain the primary metals market
exposure for the partnership.
ENERGY. Spectrum Select's primary energy market exposure is to natural gas
and oil price movements, often resulting from political developments in the
Middle East, weather patterns, and other economic fundamentals. As oil prices
have increased about 100% this year, and, given that the agreement by OPEC to
cut production is approaching expiration in March 2000, it is possible that
volatility will remain on the high end. Substantial profits and losses have been
and are expected to continue to be experienced in this market. Natural gas has
exhibited more volatility than the oil markets on an intra-day and daily basis
and is expected to continue in this choppy pattern.
SOFT COMMODITIES AND AGRICULTURALS. Spectrum Select had a reasonable amount
of exposure to fluctuations in the price of soft commodities, which are often
directly affected by severe or unexpected weather conditions, supply and demand
inequalities and market expectation. Coffee, corn and soybeans accounted for the
substantial bulk of the partnership's soft commodities and agriculturals
exposure as of September 30, 1999.
SPECTRUM TECHNICAL
The following were the primary trading risk exposures of Spectrum Technical
as of September 30, 1999, by market sector. It may be anticipated however, that
these market exposures will vary materially over time.
INTEREST RATE. Interest rate risk is the principal market exposure of
Spectrum Technical. Exposure was primarily spread across the U.S., German,
Japanese, British, and Australian interest rate sectors. Interest rate movements
directly affect the price of the sovereign bond futures positions held by the
partnership and indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country as well as relative interest
rate movements between countries materially impact the partnership's
profitability. The partnership's primary interest rate exposure is generally to
interest rate
56
<PAGE>
fluctuations in the U.S. and the other G-7 countries. However, the partnership
also takes futures positions in the government debt of smaller nations--E.G.
Australia. The general partner anticipates that G-7 and Australian interest
rates will remain the primary interest rate exposure of the partnership for the
foreseeable future. The changes in interest rates which have the most effect on
the partnership are changes in long-term, as opposed to short-term, rates. Most
of the speculative futures positions held by the partnership are in
medium-to-long term instruments. Consequently, even a material change in
short-term rates would have little effect on the partnership were the
medium-to-long term rates to remain steady.
CURRENCY. Spectrum Technical's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The partnership trades in a large number of
currencies, including cross-rates--I.E., positions between two currencies other
than the U.S. dollar. For the third quarter of 1999, the partnership's major
exposures were in the euro currency crosses and outright U.S. dollar positions.
The general partner does not anticipate that the risk profile of the
partnership's currency sector will change significantly in the future, although
it is difficult at this point to predict the effect of the introduction of the
Euro on the trading advisors' currency trading strategies. The currency trading
VaR figure includes foreign margin amounts converted into U.S. dollars with an
incremental adjustment to reflect the exchange rate risk inherent to the
dollar-based partnership in expressing VaR in a functional currency other than
dollars.
EQUITY. Spectrum Technical's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the partnership are
by law limited to futures on broadly based indices. As of September 30, 1999,
the partnership's primary exposures were in the S&P 500, FTSE (Britain) and ASE
(Australia) stock indices. The partnership is primarily exposed to the risk of
adverse price trends or static markets in the major U.S., European and Japanese
indices. Static markets would not cause major market changes but would make it
difficult for the partnership to avoid being "whipsawed" into numerous small
losses.
COMMODITY.
METALS. Spectrum Technical's primary metals market exposure is to
fluctuations in the price of gold and silver. Although the trading advisors will
from time to time trade base metals such as aluminum, copper, nickel, and zinc,
the principal market exposures of the partnership have consistently been in the
precious metals, gold and silver and, to a much lesser extent, platinum. A
significant amount of exposure was evident in the gold market as the price of
gold increased dramatically following bullish comments by the European Central
Bank. Silver prices have also been volatile over this period, and the trading
advisors have from time to time taken substantial positions as they have
perceived market opportunities to develop. The general partner anticipates that
gold and silver will remain the primary metals market exposure for the
partnership.
ENERGY. Spectrum Technical's primary energy market exposure is to oil and
natural gas price movements, often resulting from political developments in the
Middle East, weather patterns, and other economic fundamentals. As oil prices
have increased about 100% this year, and given that the agreement by OPEC to cut
production is approaching expiration in March 2000, it is possible that
volatility will remain on the high end. Substantial profits and losses have been
and are expected to continue to be experienced in this market. Natural gas, also
a primary energy market exposure, has exhibited more volatility than the oil
markets on an intra-day and daily basis and is expected to continue in this
choppy pattern.
SOFT COMMODITIES AND AGRICULTURALS. Spectrum Technical had a reasonable
amount of exposure in the markets that comprise these sectors. Most of the
exposure was in the sugar, soybeans, coffee, and livestock markets. Supply and
demand inequalities, severe weather disruption and market expectations affect
price movements in these markets.
SPECTRUM STRATEGIC
The following were the primary trading exposures of Spectrum Strategic as of
September 30, 1999. It may be anticipated however, that these market exposures
will vary materially over time.
57
<PAGE>
EQUITY. Spectrum Strategic's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the partnership are
by law limited to futures on broadly based indices. As of September 30, 1999,
the partnership's primary exposure was in the S&P 500 stock index. The
partnership is primarily exposed to the risk of adverse price trends or static
markets in the major U.S., European and Japanese indices. Static markets would
not cause major market changes but would make it difficult for the partnership
to avoid being "whipsawed" into numerous small losses.
INTEREST RATE. Interest rate movements directly affect the price of the
sovereign bond futures positions held by the partnership and indirectly the
value of its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the partnership's profitability. The partnership's exposure in the
interest rate market complex was spread across the U.S., Japanese, German, and
European interest rate sectors. The partnership's primary interest rate exposure
is generally to interest rate fluctuations in the U.S. and the other G-7
countries. The general partner anticipates that G-7 interest rates will remain
the primary market exposure of the partnership for the foreseeable future. The
changes in interest rates which have the most effect on the partnership are
changes in long-term, as opposed to short-term, rates. Most of the speculative
futures positions held by the partnership are in medium-to-long term
instruments. Consequently, even a material change in short-term interest rates
would have little effect on the partnership were the medium-to-long term rates
to remain steady.
CURRENCY. Spectrum Strategic's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions influence these
fluctuations. The partnership trades in a large number of currencies, including
cross-rates--I.E., positions between two currencies other than the U.S. dollar.
For the third quarter of 1999, the Partnership's major exposures were in
outright U.S. dollar positions. Outright positions consist of the U.S. dollar
vs. other currencies. These other currencies include the major and minor
currencies. The general partner does not anticipate that the risk profile of the
partnership's currency sector will change significantly in the future, although
it is difficult at this point to predict the effect of the Euro on the trading
advisors' currency trading strategies. The currency VaR figure includes foreign
margin amounts converted into U.S. dollars with an incremental adjustment to
reflect the exchange rate risk inherent to the dollar-based partnership in
expressing VaR in a functional currency other than dollars.
COMMODITY.
ENERGY. Spectrum Strategic's primary energy market exposure is to oil and
natural gas price movements, often resulting from political developments in the
Middle East, weather patterns, and other economic fundamentals. As oil prices
have increased about 100% this year, and, given that the agreement by OPEC to
cut production is approaching expiration in March 2000, it is possible that
volatility will remain on the high end. Substantial profits and losses have been
and are expected to continue to be experienced in this market. Natural gas has
exhibited more volatility than the oil markets on an intra-day and daily basis
and is expected to continue in this choppy pattern.
METALS. Spectrum Strategic's primary metals exposure is to fluctuations in
the price of gold and silver. Although the trading advisors will from time to
time trade base metals such as aluminum, copper, nickel and zinc, the principal
market exposures of the partnership have consistently been in the precious
metals, gold and silver. A significant amount of exposure was evident in the
gold market as the price of gold increased dramatically following bullish
comments by the European Central Bank. Silver prices have also remained volatile
over this period, and the trading advisors have from time to time taken
substantial positions as they have perceived market opportunities to develop.
The general partner anticipates that gold and silver will remain the primary
metals market exposure for the partnership.
SOFT COMMODITIES AND AGRICULTURALS. The partnership had a reasonable amount
of exposure in the markets that comprise these sectors. Most of the exposure was
in the cocoa, soybeans and wheat markets. Supply and demand inequalities, severe
weather disruption and market expectations affect price movements in these
markets.
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<PAGE>
SPECTRUM GLOBAL BALANCED
The following were the primary trading risk exposures of Spectrum Global
Balanced as of September 30, 1999, by market sector. It may be anticipated
however, that these market exposures will vary materially over time.
INTEREST RATE. Interest rate risk is the principal market exposure of
Spectrum Global Balanced. Interest rate movements directly affect the price of
the sovereign bond futures positions held by the partnership and indirectly the
value of its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the partnership's profitability. Exposure was spread across the U.S.,
European, Japanese, and Australian interest rate sectors. The partnership's
primary interest rate exposure is generally to interest rate fluctuations in the
U.S. and the other G-7 countries. However, the partnership also takes futures
positions in the government debt of smaller nations--E.G. Australia and Spain.
The general partner anticipates that G-7 and Australian interest rates will
remain the primary market exposure of the partnership for the foreseeable
future. The changes in interest rates which have the most effect on the
partnership are changes in long-term, as opposed to short-term, rates. Most of
the speculative future positions held by the partnership are in medium-to-long
term instruments. Consequently, even a material change in short-term rates would
have little effect on the partnership were the medium-to-long term rates to
remain steady.
EQUITY. Spectrum Global Balanced's primary equity exposure is to equity
price risk in the G-7 countries. The stock index futures traded by the
partnership are by law limited to futures on broadly based indices. As of
September 30, 1999, the partnership's primary exposures were in the S&P 500,
Nikkei (Japan), DAX (Germany), and FTSE (Britain) stock indices. The partnership
is primarily exposed to the risk of adverse price trends or static markets in
the major U.S., European, and Japanese indices. Static markets would not cause
major market changes but would make it difficult for the partnership to avoid
being "whipsawed" into numerous small losses.
CURRENCY. Spectrum Global Balanced's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions influence these
fluctuations. The partnership trades in a large number of currencies, including
cross-rates--I.E., positions between two currencies other than the U.S. dollar.
The Partnership's major exposures were in the euro currency crosses and outright
U.S. dollar positions. Outright positions consist of the U.S. dollar vs. other
currencies. These other currencies include the major and minor currencies. The
general partner does not anticipate that the risk profile of the partnership's
currency sector will change significantly in the future, although it is
difficult at this point to predict the effect of the introduction of the Euro on
RXR's currency trading strategies. The currency trading VaR figure includes
foreign margin amounts converted into U.S. dollars with an incremental
adjustment to reflect the exchange rate risk inherent to the dollar-based
partnership in expressing VaR in a functional currency other than dollars.
COMMODITY.
SOFT COMMODITIES AND AGRICULTURALS. The Partnership had a reasonable amount
of exposure in the markets that comprise these sectors. Most of the exposure was
in the sugar, corn, and livestock markets. Supply and demand inequalities,
severe weather disruption, and market expectations affect price movements in
these markets.
ENERGY. Spectrum Global Balanced's primary energy market exposure is to oil
and natural gas price movements, often resulting from political developments in
the Middle East, weather patterns, and other economic fundamentals. As oil
prices have increased about 100% this year, and, given that the agreement by
OPEC to cut production is approaching expiration in March 2000, it is possible
that volatility will remain on the high end. Significant profits and losses have
been and are expected to continue to be experienced in this market. Natural gas,
also a primary energy market exposure, has exhibited more volatility than the
oil markets on an intra-day and daily basis and is expected to continue in this
choppy pattern.
METALS. Spectrum Global Balanced's metals market exposure is to
fluctuations in the price of base metals. During periods of volatility, base
metals will affect performance dramatically. The general partner anticipates
that the base metals will remain the primary metals market exposure for the
partnership.
59
<PAGE>
SPECTRUM COMMODITY
The following were the primary trading risk exposures of Spectrum Commodity
as of September 30, 1999, by market sector. It may be anticipated however, that
these market exposures will vary materially over time.
COMMODITY.
METALS. Spectrum Commodity's primary metals market exposure is to
fluctuations in the price of gold and silver. While the partnership's trading
advisor will, from time to time, trade base metals such as copper, nickel,
aluminum, and zinc, the principal market exposures of the partnership have
consistently been in precious metals, gold, silver and, to a much lesser extent,
platinum. A significant amount of exposure was evident in the gold market as the
price of gold increased dramatically following bullish comments by the European
Central Bank. Silver prices have also been volatile over this period, and the
trading advisor has, from time to time, taken substantial positions when
perceived market opportunities developed. The general partner anticipates that
gold and silver will remain the primary metals market exposure for the
partnership.
SOFT COMMODITIES AND AGRICULTURALS. The partnership had a reasonable amount
of exposure in the markets that comprise these sectors. Most of the exposure was
in the coffee, corn and sugar markets. Supply and demand inequalities, severe
weather disruption and market expectations affect price movements in these
markets.
ENERGY. Spectrum Commodity's energy exposure was shared by futures
contracts in the oil and natural gas markets. Price movements in these markets
result from political developments in the Middle East, weather patterns, and
other economic fundamentals. As oil prices have increased about 100% this year,
and, given that the agreement by OPEC to cut production is approaching
expiration in March 2000, it is possible that volatility will remain on the high
end. Significant profits and losses have been and are expected to continue to be
experienced in this market. Natural gas, also a primary energy market exposure,
has exhibited more volatility than the oil markets on an intra-day and daily
basis and is expected to continue in this choppy pattern.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following was the only non-trading risk exposure of each partnership at
September 30, 1999:
FOREIGN CURRENCY BALANCES. The partnerships, except Spectrum Commodity,
have primary foreign currency balances in Japanese yen, British pounds,
Australian dollars, Swiss francs, Mexican pesos, Singapore dollars, euros, and
South African rands. Each partnership controls the non-trading risk of these
balances by regularly converting these balances back into U.S. dollars at
varying intervals, depending on size and volatility factors.
QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE
Each partnership and the trading advisors, separately, attempt to manage the
risk of a partnership's open positions in essentially the same manner in all
market categories traded. The general partner attempts to manage market exposure
by diversifying a partnership's assets among different trading advisors in a
multi-advisor partnership, each of whose strategies focus on different market
sectors and trading approaches, and monitoring the performance of the trading
advisors daily. In addition, the trading advisors establish diversification
guidelines, often set in terms of the maximum margin to be committed to
positions in any one market sector or market sensitive instrument.
The general partner monitors and controls the risk of each partnership's
non-trading instrument, cash. Cash is the only partnership investment directed
by the general partner, rather than the trading advisors.
60
<PAGE>
THE GENERAL PARTNER
The general partner and commodity pool operator of each partnership is
Demeter Management Corporation, a Delaware corporation formed on August 18, 1977
to act as a commodity pool operator. Effective in 1977, the general partner
became registered with the CFTC as a commodity pool operator and is currently a
member of the National Futures Association in such capacity. The general
partner's main business office is located at Two World Trade Center, 62nd Floor,
New York, New York 10048, telephone (212) 392-8899. The general partner is an
affiliate of Dean Witter, Morgan Stanley, Morgan Stanley International, and
Morgan Stanley Dean Witter Commodities Management in that all such companies are
wholly-owned subsidiaries of Morgan Stanley Dean Witter & Co., which is a
publicly-owned company subject to the reporting requirements of the Securities
Exchange Act of 1934. Morgan Stanley Dean Witter & Co.'s SEC file number is
1-11758.
The general partner is or has been the general partner and commodity pool
operator for 35 commodity pools, including five other commodity pools which are
exempt from certain disclosure requirements pursuant to CFTC Rule 4.7. As of
November 30, 1999, the general partner had approximately $1.4 billion in
aggregate net assets under management, making it one of the largest operators of
commodity pools in the U.S. As of November 30, 1999, there were over 67,000
investors in the commodity pools managed by Demeter.
The general partner is required to maintain its net worth at an amount equal
to at least 10% of the total contributions to each limited partnership for which
it acts as a general partner. Morgan Stanley Dean Witter & Co. has contributed
to the general partner the capital necessary to permit the general partner to
meet its net worth obligations as general partner of each partnership and
intends to continue to do so. The general partner's minimum net worth
requirements may be modified by the general partner at its option without notice
to or the consent of the limited partners, provided the modification does not
adversely affect the partnership or the limited partners. The general partner
and its principals are not obligated to purchase units but may do so.
According to Morgan Stanley Dean Witter & Co.'s 1998 annual report and Form
10-Q for the quarter ended August 31, 1999, Morgan Stanley Dean Witter & Co. had
total shareholders' equity of $14,119 million and total assets of $317,590
million as of November 30, 1998 (audited), and total shareholders' equity of
$15,445 million and total assets of $340,870 million as of August 31, 1999
(unaudited). Additional financial information regarding Morgan Stanley Dean
Witter & Co. is included in the financial statements filed as part of that
annual report and Form 10-Q. Morgan Stanley Dean Witter & Co. will provide to
you, upon request, copies of its most recent Forms 10-K, 10-Q and 8-K, as filed
from time to time with the SEC. These reports will be available from the SEC, in
the same manner described under "The Spectrum Series--Availability of Exchange
Act Reports" on page - , or will be available at no charge to you by writing
to Morgan Stanley Dean Witter & Co. at 1585 Broadway, New York, New York 10036
(Attn: Investor Relations).
Because of their relationship to the partnerships and each other, Morgan
Stanley Dean Witter & Co., Dean Witter and the general partner may have
liability as a promoter or parent of the partnerships if any violations of the
federal securities laws occur in connection with the offering of units.
DIRECTORS AND OFFICERS OF THE GENERAL PARTNER
Mark J. Hawley, age 56, is Chairman of the Board and a Director of the
general partner. Mr. Hawley is also Chairman of the Board and a Director of Dean
Witter Futures & Currency Management Inc. Mr. Hawley joined Dean Witter in
February 1989 as Senior Vice President and is currently the Executive Vice
President and Director of Dean Witter's Product Management for Individual Asset
Management. In this capacity, Mr. Hawley is responsible for directing the
activities of the firm's Managed Futures, Insurance, and Unit Investment Trust
Business. From 1978 to 1989, Mr. Hawley was a member of the senior management
team at Heinold Asset Management, Inc., a commodity pool operator, and was
responsible for a variety of projects in public futures funds. From 1972 to
1978, Mr. Hawley was a Vice President in charge of institutional block trading
for the Mid-West at Kuhn Loeb & Company.
Robert E. Murray, age 38, is President and a Director of the general
partner. Mr. Murray is also President and a Director of Dean Witter Futures &
Currency Management Inc. Mr. Murray is currently a Senior Vice President of Dean
Witter's Managed Futures Department. Mr. Murray began his career at Dean
61
<PAGE>
Witter in 1984 and is currently the Director of the Managed Futures Department.
In this capacity, Mr. Murray is responsible for overseeing all aspects of the
firm's Managed Futures Department. Mr. Murray currently serves as Vice Chairman
and a Director of the Managed Funds Association, an industry association for
investment professionals in futures, hedge funds and other alternative
investments. Mr. Murray graduated from Geneseo State University in May 1983 with
a B.A. degree in Finance.
Mitchell M. Merin, age 45, is a Director of the general partner. Mr. Merin
is also a Director of Dean Witter Futures & Currency Management Inc. Mr. Merin
was appointed the chief operating officer of asset management for Morgan Stanley
Dean Witter & Co. in December 1998 and the President and chief executive officer
of Morgan Stanley Dean Witter Advisors in February 1998. He has been an
Executive Vice President of Dean Witter since 1990, during which time he has
been director of Dean Witter's Taxable Fixed Income and Futures divisions,
managing director in Corporate Finance and corporate treasurer. Mr. Merin
received his Bachelor's degree from Trinity College in Connecticut and his
M.B.A. degree in finance and accounting from the Kellogg Graduate School of
Management of Northwestern University in 1977.
Joseph G. Siniscalchi, age 54, is a Director of the general partner.
Mr. Siniscalchi joined Dean Witter in July 1984 as a First Vice President,
Director of General Accounting and served as Senior Vice President and
Controller for Dean Witter's Securities Division through 1997. He is currently
Executive Vice President and Director of the Operations Division of Dean Witter.
From February 1980 to July 1984, Mr. Siniscalchi was Director of Internal Audit
at Lehman Brothers Kuhn Loeb, Inc.
Edward C. Oelsner III, age 57, is a Director of the general partner. Mr.
Oelsner is currently an Executive Vice President and head of the Product
Development Group at Morgan Stanley Dean Witter Advisors, an affiliate of Dean
Witter. Mr. Oelsner joined Dean Witter in 1981 as a Managing Director in Dean
Witter's Investment Banking Department specializing in coverage of regulated
industries and, subsequently, served as head of the Dean Witter Retail Products
Group. Prior to joining Dean Witter, Mr. Oelsner held positions at The First
Boston Corporation as a member of the Research and Investment Banking
Departments from 1967 to 1981. Mr. Oelsner received his M.B.A. in Finance from
the Columbia University Graduate School of Business in 1966 and an A.B. in
Politics from Princeton University in 1964.
Lewis A. Raibley, III, age 37, is Vice President, Chief Financial Officer,
and a Director of the general partner. Mr. Raibley is also a Director of Dean
Witter Futures & Currency Management Inc. Mr. Raibley is currently Senior Vice
President and Controller in the Individual Asset Management Group of Morgan
Stanley Dean Witter & Co. From July 1997 to May 1998, Mr. Raibley served as
Senior Vice President and Director in the Internal Reporting Department of
Morgan Stanley Dean Witter & Co. and prior to that, from 1992 to 1997, he served
as Senior Vice President and Director in the Financial Reporting and Policy
Division of Dean Witter Discover & Co. He has been with Morgan Stanley Dean
Witter & Co. and its affiliates since June 1986.
Richard A. Beech, age 48, is a Director of the general partner. Mr. Beech
has been associated with the futures industry for over 23 years. He has been at
Dean Witter since August 1984, where he is presently Senior Vice President and
head of Branch Futures. Mr. Beech began his career at the Chicago Mercantile
Exchange, where he became the Chief Agricultural Economist doing market
analysis, marketing and compliance. Prior to joining Dean Witter, Mr. Beech also
had worked at two investment banking firms in operations, research, managed
futures and sales management.
Ray Harris, age 43, is a Director of the general partner. Mr. Harris is
currently Senior Vice President, Planning and Administration for Morgan Stanley
Dean Witter Asset Management and has worked at Dean Witter or its affiliates
since July 1982, serving in both financial and administrative capacities. From
August 1994 to January 1999, he worked in two separate Dean Witter affiliates,
Discover Financial Services and Novus Financial Corp., culminating as Senior
Vice President. Mr. Harris received his B.A. degree from Boston College and his
M.B.A. in finance from the University of Chicago.
The general partner and its officers and directors may, from time to time,
trade commodity interest contracts for their own proprietary accounts. The
records of trading in such accounts will not be made available to you for
inspection.
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<PAGE>
As of the date of this prospectus, Mark J. Hawley, Chairman of the Board and
a Director of the general partner and Robert E. Murray, President and a Director
of the general partner, own 2,000 and 81.169 units of Spectrum Select,
respectively, which amounts are less than 1% of the outstanding units of that
partnership. In addition, Mr. Murray owns 209.644 units of Spectrum Commodity,
which amount is less than 1% of the outstanding units of that partnership. As of
the date of this prospectus, Mr. Hawley and Mr. Murray did not beneficially own
units of any other partnership, and none of the other directors or executive
officers of the general partner beneficially owned units of any partnership.
DESCRIPTION AND PERFORMANCE INFORMATION OF COMMODITY POOLS OPERATED BY THE
GENERAL PARTNER
The following table summarizes information relating to each of the other
commodity pools operated by the general partner except those commodity pools
exempt from disclosure under CFTC Rule 4.7.
While each of these commodity pools has essentially the same
objective--appreciation of assets through speculative trading--the structure,
including fees, interest income arrangements, and trading advisors, and the
performance of these pools varies widely. There are significant differences
between the partnerships and the commodity pools described on the following
page. For example, some of the commodity pools have principal protection
features to protect investors against the loss of their investment principal,
and none of these other commodity pools has the same mix of trading advisors,
trading strategies, and fee structures as those employed by the partnerships.
All summary performance information is current as of November 30, 1999. In
reviewing the following summary performance information, you should understand
that performance is calculated on an accrual basis in accordance with generally
accepted accounting principles and is "net" of all fees and charges, and a more
complete presentation of the performance of the futures funds operated or
managed by the general partner and/or its affiliates is available without charge
upon request to the general partner.
Past performance is not necessarily indicative of future results and
material differences exist between the commodity pools described in the chart
and the partnerships. There is no assurance that the partnerships will perform
in a manner comparable to any of the commodity pools described below. You should
also note that interest income may constitute a significant portion of a
commodity pool's total income and may generate profits where there have been
realized or unrealized losses from futures, forwards, and options trading.
63
<PAGE>
DEMETER MANAGEMENT CORPORATION
CAPSULE SUMMARY OF PERFORMANCE INFORMATION REGARDING COMMODITY POOLS OPERATED
(EXCEPT AS OTHERWISE INDICATED, BEGINNING JANUARY 1, 1994 THROUGH NOVEMBER 30,
1999)
<TABLE>
<CAPTION>
CURRENT CURRENT CUMULATIVE
TOTAL NET ASSET RETURN
START CLOSE AGGREGATE NET ASSET VALUE PER SINCE
FUND TYPE/FUND(1) DATE(2) DATE(3) SUBSCRIPTION(4) VALUE(5) UNIT(6) INCEPTION(7)
- ----------------- ------- ------- --------------- ----------- --------- ------------
$ $ $ %
<S> <C> <C> <C> <C> <C> <C>
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Dean Witter Commodity Partners Jan-81 Dec-88 9,648,397 739,757 488.29 (51.37)
Columbia Futures Fund(11) Jul-83 N/A
DW Diversified Futures Fund L.P.(12) Apr-88 N/A
DW Multi-Market Portfolio L.P.(13) Sep-88 N/A
DW Diversified Futures Fund II L.P. Jan-89 N/A
DW Diversified Futures Fund III L.P. Nov-90 N/A
DW Portfolio Strategy Fund L.P.(14) Feb-91 N/A
DWFCM International Access Fund L.P. Mar-94 N/A
Morgan Stanley Dean Witter Charter Graham L.P. Mar-99 N/A
Morgan Stanley Dean Witter Charter Millburn L.P. Mar-99 N/A
Morgan Stanley Dean Witter Charter Welton L.P. Mar-99 N/A
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
DW Cornerstone Fund I Jan-85 Dec-91 19,122,276 281,303 456.80 (53.15)
DW Cornerstone Fund II(15) Jan-85 N/A
DW Cornerstone Fund III(15) Jan-85 N/A
DW Cornerstone Fund IV(15) May-87 N/A
DW Global Perspective Portfolio L.P. Mar-92 N/A
DW World Currency Fund L.P. Apr-93 N/A
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund III L.P. Jul-89 Sep-95 126,263,000 7,022,437 1,000.00 0.00
DW Principal Plus Fund L.P.(16) Feb-90 N/A
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund II L.P. Mar-89 Mar-96 162,203,303 4,966,449 1,056.55 5.66
PRIVATELY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/ Chesapeake L.P. Nov-94 N/A
Morgan Stanley Dean Witter/JWH Futures Fund L.P. Feb-96 N/A
PRIVATELY-OFFERED FUND WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/Market Street Futures Oct-98 N/A
Fund L.P.
<CAPTION>
WORST WORST PEAK-
MONTHLY % TO-VALLEY
FUND TYPE/FUND(1) DRAWDOWN(8) DRAWDOWN(9)
- ----------------- ----------- -----------
% %
<S> <C> <C>
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Dean Witter Commodity Partners (34.48) (64.23)
7/88 4/86-12/88
Columbia Futures Fund(11) (17.54) (42.58)
4/86 7/83-9/85
DW Diversified Futures Fund L.P.(12) (12.85) (24.86)
5/90 5/95-6/96
DW Multi-Market Portfolio L.P.(13) (13.26) (29.84)
2/96 5/95-6/96
DW Diversified Futures Fund II L.P. (13.41) (25.62)
8/89 5/95-6/96
DW Diversified Futures Fund III L.P. (13.62) (27.00)
1/92 5/95-6/96
DW Portfolio Strategy Fund L.P.(14) (14.40) (25.65)
1/92 1/92-4/92
DWFCM International Access Fund L.P. (12.87) (22.84)
1/95 8/94-1/95
Morgan Stanley Dean Witter Charter Graham L.P. (8.00) (9.80)
3/99 3/99-5/99
Morgan Stanley Dean Witter Charter Millburn L.P. (3.77) (3.77)
7/99 7/99
Morgan Stanley Dean Witter Charter Welton L.P. (7.70) (14.50)
3/99 3/99-8/99
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
DW Cornerstone Fund I (20.88) (64.47)
8/91 4/86-8/91
DW Cornerstone Fund II(15) (11.74) (32.70)
9/89 7/88-10/89
DW Cornerstone Fund III(15) (18.28) (32.35)
2/89 2/89-10/89
DW Cornerstone Fund IV(15) (21.04) (45.21)
9/89 7/89-9/89
DW Global Perspective Portfolio L.P. (8.55) (40.90)
2/96 8/93-1/95
DW World Currency Fund L.P. (9.68) (46.04)
5/95 8/93-1/95
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund III L.P. (13.98) (30.93)
1/92 5/90-4/92
DW Principal Plus Fund L.P.(16) (7.48) (13.08)
2/96 2/96-5/96
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund II L.P. (5.62) (14.69)
1/91 8/89-4/92
PRIVATELY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/ Chesapeake L.P. (17.34) (25.36)
5/99 9/98-7/99
Morgan Stanley Dean Witter/JWH Futures Fund L.P. (8.49) (19.66)
5/97 1/98-7/98
PRIVATELY-OFFERED FUND WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/Market Street Futures (8.59) (13.03)
Fund L.P. 3/99 3/99-7/99
<CAPTION>
COMPOUND ANNUAL RATES OF RETURN(10)
-------------------------------------------------------------------
FUND TYPE/FUND(1) 1999 1998 1997 1996 1995 1994
- ----------------- ---------- --------- --------- ---------- --------- ----------
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Dean Witter Commodity Partners
Columbia Futures Fund(11) (1.97) 12.01 22.60 19.09 28.21 (5.75)
(11 months)
DW Diversified Futures Fund L.P.(12) (4.97) 6.22 11.96 (2.66) (4.56) 7.68
(11 months)
DW Multi-Market Portfolio L.P.(13) (3.73) 5.63 13.28 (6.76) (6.37) 2.66
(11 months)
DW Diversified Futures Fund II L.P. (3.66) 5.22 11.28 (4.83) (2.90) 5.41
(11 months)
DW Diversified Futures Fund III L.P. (4.79) 5.39 12.29 (4.73) (4.02) 5.89
(11 months)
DW Portfolio Strategy Fund L.P.(14) 2.72 9.46 11.28 25.50 25.37 (5.41)
(11 months)
DWFCM International Access Fund L.P. (4.20) 5.07 26.22 3.97 21.88 (7.32)
(11 months) (10 months)
Morgan Stanley Dean Witter Charter Graham L.P. (1.90)
(9 months)
Morgan Stanley Dean Witter Charter Millburn L.P. 3.00
(9 months)
Morgan Stanley Dean Witter Charter Welton L.P. (14.50)
(9 months)
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
DW Cornerstone Fund I
DW Cornerstone Fund II(15) 1.07 12.54 18.05 11.47 26.50 (8.93)
(11 months)
DW Cornerstone Fund III(15) (7.37) 9.13 10.24 8.24 27.50 (10.04)
(11 months)
DW Cornerstone Fund IV(15) (4.29) 6.80 38.41 12.97 22.96 (14.27)
(11 months)
DW Global Perspective Portfolio L.P. (0.30) 11.25 11.16 9.26 16.76 (31.62)
(11 months)
DW World Currency Fund L.P. 2.50 (2.61) 39.35 12.97 2.02 (25.13)
(11 months)
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund III L.P. 5.21 1.08
(9 months)
DW Principal Plus Fund L.P.(16) (2.86) 10.54 15.39 (5.28) 17.98 (8.61)
(11 months)
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund II L.P. 1.00 7.30 (8.12)
(3 months)
PRIVATELY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/ Chesapeake L.P. (10.86) 19.93 15.38 15.23 15.80 11.57
(11 months) (2 months)
Morgan Stanley Dean Witter/JWH Futures Fund L.P. (0.45) 4.04 13.66 18.17
(11 months) (11 months)
PRIVATELY-OFFERED FUND WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/Market Street Futures (5.72) 0.26
Fund L.P. (11 months) (3 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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FOOTNOTES TO DEMETER MANAGEMENT CORPORATION PERFORMANCE INFORMATION
1. "Publicly-offered" funds are pools offered to the public.
"Privately-offered" funds are pools offered in private placements exempt
from registration. Funds with "principal protection" are pools with an
investment feature that guarantees the return of the amount originally
invested, generally within 5 to 7 years. Funds without "principal
protection" do not guarantee the return of an investor's investment.
2. "Start Date" is the month and year that the pool began trading.
3. "Close Date" is the month and year that the pool liquidated its assets and
stopped doing business.
4. "Aggregate Subscriptions" is the aggregate of all amounts contributed to the
pool, including investments that were later redeemed by investors.
5. "Current Total Net Asset Value" is the net asset value of the pool as of
November 30, 1999, or, in the case of liquidated pools, the net asset value
of the pool on the date of liquidation.
6. "Current Net Asset Value per Unit" is calculated by dividing the current
total net asset value by the total number of units outstanding as of
November 30, 1999, or, in the case of liquidated pools, the date of
liquidation.
7. "Cumulative Return Since Inception" is the percentage change in the net
asset value of a unit from its Start Date through November 30, 1999, or, in
the case of liquidated pools, from its Start Date through the date of
liquidation.
8. "Drawdown" means losses experienced by the pool over the specified period
and is calculated by dividing net performance by beginning equity.
"Drawdown" is measured on the basis of monthly returns only, and does not
reflect intra-month figures. The month in which the worst monthly drawdown
occurred during the history of the pool is set forth under "Worst Monthly %
Drawdown."
9. "Peak-to-Valley Drawdown" is the largest percentage decline in the net asset
value per unit over the history of the fund. This need not be a continuous
decline, but can be a series of positive and negative returns where the
negative returns are larger than the positive ones. The months during which
the worst peak-to-valley drawdown occurred are set forth under "Worst
Peak-to-Valley Drawdown."
10. "Compound Annual Rates of Return" are calculated annually by multiplying on
a compound basis each of the monthly rates of return during the year (not
shown), and not by adding or averaging such monthly rates of return. For the
year in which a pool commenced operations and for 1999, "Compound Annual
Rates of Return" reflect the compounded monthly rates of return (not shown)
from the Start Date for, or the beginning of, such partial year.
11. Columbia was a publicly-offered fund with more than one advisor from its
inception in July 1983 through January 1988, at which point it became a
publicly-offered fund with one advisor.
12. Diversified's net asset value per unit was revalued from $3,964.23 to
$1,000.00 after the close of business on August 31, 1995. All investors in
Diversified prior to August 31, 1995 had their units increased by a
corresponding amount to reflect this revaluation, and all return
calculations in the table have been adjusted accordingly.
13. Multi-Market was a publicly-offered fund with more than one advisor with
principal protection from its inception in September 1988 through September
30, 1993, at which point it was changed to a publicly-offered fund with one
advisor without principal protection.
14. Portfolio Strategy was a publicly-offered fund with one advisor with
principal protection from its inception in February 1991 through July 31,
1996, at which point it was changed to a publicly-offered fund with one
advisor without principal protection.
15. Subscriptions for interests in Cornerstone II, Cornerstone III, and
Cornerstone IV included an up-front 7.625% of net asset value selling
commission and continuing offering expense charge until sales to new
investors were terminated on September 30, 1994. Because sales occurred
throughout the year and, therefore, the amount of the net asset value-based
charge varied among investors, it was not practicable to include the
up-front charge in determining the Cornerstone Funds' annual return for
1994.
16. The performance record of Principal Plus includes the performance of Dean
Witter Principal Plus Fund Management L.P., an affiliated pool.
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THE TRADING ADVISORS
MANAGEMENT AGREEMENTS
Each trading advisor has entered into a management agreement with a
partnership and the general partner. The trading advisor is responsible for
directing the investment and reinvestment in futures, forwards, and options of
the partnership's assets allocated to such trading advisor. Each management
agreement will terminate if the partnership terminates, and may be terminated by
the partnership at any time without penalty. In addition, each management
agreement may be terminated by the partnership at any month-end upon 5 days'
prior written notice to the trading advisor. Each partnership may also terminate
its management agreement(s) immediately for events that the general partner
believes would have an immediate adverse effect on the partnership, such as a
violation of a partnership's trading policy. Each management agreement may also
be terminated by the trading advisor for events that it deems would have a
material adverse effect on its abilities to perform under the management
agreement, such as the implementation of a new trading limitation not agreed to
by the trading advisor.
INTRODUCTION TO TRADING ADVISOR DESCRIPTIONS
The biographies of the principals and brief summaries of the trading
programs of the trading advisors for each partnership are set forth below. The
success of each partnership is dependent upon the collective success of its
trading advisors in their trading for the partnership. However, in evaluating
these descriptions, an investor should be aware that the trading advisors'
trading methods are proprietary and confidential, the trading advisors selected
for a partnership may change over time, and even if the same trading advisors
continue to trade for a partnership, they may make substantial modifications to
their trading programs. Investors generally will not be made aware of when a
trading advisor makes a modification to its trading program.
The descriptions of the trading advisors, their trading programs and their
principals are general and are not intended to be exhaustive. It is not possible
to provide a precise description of any trading advisor's trading program.
Furthermore, the trading advisors may refer to specific aspects of their trading
programs, which aspects may also be applicable to other trading advisors that
did not choose to make specific reference to these aspects of their own trading
programs. As a consequence, contrasts in the following descriptions may not, in
fact, indicate a substantive difference between the different programs involved.
However, all non-proprietary information about a trading program that the
trading advisor believes to be material has been included.
Morgan Stanley Dean Witter Commodities Management is the only trading
advisor affiliated with the general partner, Dean Witter, Morgan Stanley, Morgan
Stanley International, or any of their affiliates.
A trading advisor's registration with the CFTC or its membership in the
National Futures Association should not be taken as an indication that any such
agency has recommended or approved the trading advisor.
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
1. EMC CAPITAL MANAGEMENT, INC.
EMC is an Illinois corporation, registered with the CFTC as a commodity
trading advisor and commodity pool operator. EMC was incorporated in January
1988 for the purpose of acting as a commodity trading advisor, and was
registered with the CFTC as a commodity trading advisor in May of 1988 and as a
commodity pool operator in February 1991. Ms. Elizabeth A. Cheval is EMC's
Chairman, sole principal, sole director and beneficial owner. EMC and
Ms. Cheval are also members of the National Futures Association. EMC's business
address is 2201 Waukegan Road, Suite West 240, Bannockburn, Illinois 60015.
PRINCIPAL
Ms. Elizabeth A. Cheval is the Chairman, sole principal, and sole Director
of EMC. In 1984, Ms. Cheval was selected with a select group of other
individuals by Richard J. Dennis, Jr., a speculative investor in futures and
options, to invest for his personal account. As his employee, Ms. Cheval
received extensive training from Mr. Dennis, who personally supervised her
investment activities. In 1986, she became self-employed and continued to invest
for accounts of family members of Mr. Dennis until May of
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1988 when Mr. Dennis elected to discontinue his trading program. Prior to
working with Mr. Dennis, Ms. Cheval worked with A.G. Becker, a Chicago-based
brokerage firm, on the floor of the Chicago Board of Trade. Ms. Cheval has
invested in futures since 1983, when she began trading financial futures for her
own account. Ms. Cheval received a B.A. in Mathematics from Lawrence University
in 1978.
At this time, neither EMC nor Ms. Cheval trades for its or her own account,
but each reserves the right to do so in the future. If either EMC or Ms. Cheval
engage in such trading, you will not be able to inspect such records. You should
also be aware that EMC is currently the commodity pool operator and commodity
trading advisor of the EMC Premier Fund, L.P., a commodity pool for which EMC
acts as the general partner. Ms. Cheval is currently a limited partner in a
commodity pool for which EMC is a trading advisor.
THE EMC TRADING PROGRAMS
EMC currently trades its Classic Program for Spectrum Select. In the near
future, EMC may trade a portion of its allocated Spectrum Select assets pursuant
to EMC's New Program. The exact nature of EMC's investment programs is
proprietary and confidential. The following descriptions of the Classic Program
and New Program are, by necessity, general and not exhaustive.
EMC's investment strategies are technical rather than fundamental in nature.
In other words, they are developed from analysis of patterns of actual monthly,
weekly, and daily price movements and are not based on analysis of fundamental
supply and demand factors, general economic factors or anticipated world events.
EMC relies on historical analysis of these price patterns to interpret current
market behavior and to evaluate technical indicators for trade initiations and
liquidations.
EMC's investment strategies used in each program are trend-following. This
means that initiation and liquidation of positions in a particular market are
generally in the direction of the price trend in that market, although at times
counter-trend elements also may be employed.
In both programs EMC employs an investment strategy which utilizes a blend
of systems (or, stated another way, a number of systems simultaneously). The
strategies are diversified in that each program follows a number of futures
interests and often invests in more than ten different interests at one time.
The specific types of contracts to be traded through both programs will vary
over time. These may include futures contracts, options on futures contracts and
cash commodities. Examples of futures, forwards, and options traded by EMC
include precious and base metals, U.S. and foreign financial instruments, stock
indices, foreign currencies, grains and grain products, energy products such as
crude oil, and soft commodities such as cocoa, orange juice, sugar, and coffee.
EMC may invest in other futures interests in the future.
EMC also may trade in currency forward contracts on the foreign exchange
markets and engage in transactions in physical commodities, commonly known as an
"exchange for physical" or "EFP."
As of November 30, 1999, EMC managed approximately $50.2 million of client
assets pursuant to its Classic Program and approximately $57.6 million in all of
its programs. These figures include notional funds.
The futures interest contracts in both programs typically have been chosen
for reasons which include their historical performance and for their customary
liquidity. EMC may frequently invest, however, in less liquid markets. EMC
generally commits approximately 15% to 35% of an account's equity as margin on
open positions although this percentage can vary.
EMC believes that the development of a futures investment strategy is a
continual process. As a result of on-going research and development, EMC has
made enhancements and modifications in the specifics of its trading method. It
is likely that EMC will make similar enhancements and modifications in the
future. This means that the methods that EMC may use in the future might differ
from those presently used. Because EMC's methods are proprietary and
confidential, the general partner may not be aware of such changes in EMC's
investment methods.
EMC's risk management largely will be dictated by the amount of EMC's
allocated share of Spectrum Select's net assets. However, as profits are
generated or losses are incurred, the risk management techniques that EMC
employs for Spectrum Select will be modified.
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If possible within existing market conditions, EMC adheres to the
requirements of a money management system which determines and limits the equity
committed to each position and sets optimal stop-losses for each position and
each account. The level of liquidation determined by this money management
system can override liquidations determined by technical indicators, especially
when an account has not generated profits or is experiencing losses.
Under EMC's investment method, profits, if any, are generated by only a
small percentage of the total number of trades placed. As a result, Spectrum
Select's net assets allocated to EMC will experience times of substantial
drawdowns. These drawdowns may be as high as 50% or more of the amount of funds
initially allocated to EMC. In addition, EMC may experience drawdowns well in
excess of 50% from peak levels of account performance. Substantial drawdowns do
not, however, necessarily indicate a failure in the investment strategies, but
rather are to be expected under the EMC programs. Prospective investors must,
therefore, be prepared to withstand these periods of unprofitable trading.
COMPARISON OF PROGRAMS
As noted above, the Classic Program and the New Program share some common
elements. Each program utilizes a diversified technical trend-following approach
and invests in a number of global markets. Each program also utilizes a blend of
systems and employs proprietary money management principles designed to control
risk within the portfolio.
The programs do, however, differ from one another in a number of significant
respects. First, the blend of systems utilized in the Classic Program generally
invests more aggressively than the blend utilized in the New Program. Second,
the New Program may make use of countertrend elements more frequently than the
Classic Program. Also of significance is the fact that the degree of leverage
utilized in the Classic Program is typically higher than in the New Program.
Finally, the specific money management principles employed also may differ.
The Classic Program is designed to achieve a higher potential return and is
likely to experience greater drawdowns and higher volatility over the long run.
The New Program is likely to have a lower return, smaller drawdowns and lower
volatility over the long run. Since past performance is not necessarily
indicative of future results, there can be no assurance that the programs will
perform in this manner either on a relative or absolute basis.
2. RABAR MARKET RESEARCH, INC.
Rabar is an Illinois corporation and is registered with the CFTC as a
commodity trading advisor and a commodity pool operator. It is a member of the
National Futures Association in such capacities. Rabar, originally named Rainbow
Market Research, Inc. when it was incorporated in November 1986, adopted its
present name in January 1989. It was registered as a commodity trading advisor
and a commodity pool operator in June 1988. Rabar has managed accounts
continuously since July 1988. The business address of Rabar is 10 Bank Street,
Suite 830, White Plains, New York 10606-1933.
PRINCIPALS
Paul Rabar, President of Rabar, first traded commodity futures in 1980. He
worked as an account executive at E.F. Hutton from 1981 to 1983 and then at
Clayton Brokerage until 1984. In 1985, Mr. Rabar was selected by Richard J.
Dennis, Jr., a speculative trader of futures and options, to participate in
Mr. Dennis' commodity futures trading program. Mr. Rabar participated in that
program in 1985 and 1986, managing an account for Mr. Dennis, and in 1987 and
1988 managed an account for another speculative trader of futures and options.
He traded his own account from May 1988 until January 1989, when he invested in
a futures fund to which Rabar is one of the advisors. Mr. Rabar is a graduate of
the New England Conservatory of Music. He did additional work--primarily in
science and mathematics--at Harvard University, and in 1979 and 1980 was an
assistant instructor of physics there.
Jeffrey Izenman is the Executive Vice President of Rabar, having joined the
firm in that capacity in November 1998. Prior to that, from September 1994
through October 1998, he was the President of EMC where he was responsible for
business development, client relations and various administrative and
operational aspects of the firm. From January 1995 through December 1998, Mr.
Izenman was also a member of the Board of Directors of the Managed Funds
Association and was a member of the Association's executive committee for three
years from 1996 through 1998. Mr. Izenman is also a member of the Business
Conduct Committee of the National Futures Association. Prior to joining EMC,
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Mr. Izenman was a partner in the law firm of Katten Muchin & Zavis from October
1988 through August 1994, and an associate with that firm from September 1982
through September 1988. There he specialized in the representation of commodity
trading advisors (including Rabar) and commodity pool operators, as well as
securities investment advisers and hedge fund operators. Mr. Izenman received
his JD degree from the University of Michigan Law School in May 1982 and a B.S.
in Accountancy from the University of Illinois in May 1979.
Rabar is the commodity pool operator and trading advisor to Rabar Futures
Fund, L.P., a private commodity pool. Rabar is also the trading advisor to Rabar
International Futures Fund, Ltd., a commodity pool organized in the Cayman
Islands, which is not open to U.S. investors.
It should be noted that Rabar and/or Mr. Rabar currently, and Rabar,
Mr. Rabar, and Mr. Izenman may in the future, invest in commodity pools that are
advised by Rabar. Any of these pools may be beneficially owned solely or
primarily by Mr. Rabar.
Rabar does not currently trade an account for itself, and Mr. Izenman does
not currently trade an account for himself, but either may do so in the future.
Mr. Rabar, however, currently trades a personal account. Such trading occurs
only in markets which are considered too illiquid to trade on behalf of clients,
although Mr. Rabar may trade in other markets in the future. Records of Rabar's,
Mr. Rabar's and Mr. Izenman's personal trading will not be open to inspection by
you.
THE RABAR TRADING PROGRAM
Rabar's objective is to achieve appreciation of Spectrum Select's assets
which it is allocated through speculative trading of futures interests,
including but not limited to domestic and foreign future contracts and options
on future contracts, forward contracts and spot contracts, and cash commodities.
Rabar primarily trades future contracts for its existing clients. The specific
future interests will be selected from time to time by Rabar on the basis
discussed below. Examples of future contracts now traded by Rabar include, but
are not necessarily limited to, future contracts on currencies, U.S. and
non-U.S. financial instruments, precious and base metals, U.S. and non-U.S.
stock indices, energy products, grains, and soft commodities. Rabar may also
engage in exchange for physicals transactions. At times, Rabar may trade
futures, forwards, and options for some clients which it does not trade for
Spectrum Select. As of November 30, 1999 Rabar was managing approximately $246
million of client assets pursuant to its trading program (notional funds
included).
Rabar's trading strategies have been internally researched and developed.
They are technical rather than fundamental in nature, I.E., they are developed
from the research and analysis of patterns of monthly, weekly, and daily price
movements, and of such indicators as volume and open interest. Rabar does,
however, consider the effects of some key fundamental factors, especially for
the purpose of controlling risk.
Rabar's risk management techniques include diversification, I.E., Rabar
commits equity to many markets and to a number of trading strategies. Also, the
trading program at all times adheres to the requirements of a money management
system which determines and limits the equity committed to each trade, each
market, each commodity complex, and each account. Furthermore, the risk assumed
and, consequently, the potential for profit experienced by a particular account
at different times, and by different accounts at the same time, vary
significantly according to market conditions, the size of a given account, the
percentage gained or lost in that account, and the perceived risk aversion of
that account's owner. Consequently, you should not expect the same performance
as any other account traded previously, simultaneously, or subsequently by Rabar
or Mr. Rabar.
Rabar's trading program also emphasizes current and ongoing research and
analysis of market behavior in order to continue to develop strategies for
profiting from the changing character of that behavior. Rabar believes that the
development of a commodity trading strategy is a continual process. As a result
of further analysis and research into the performance of Rabar's methods,
changes have been made from time to time in the specific manner in which these
trading methods evaluate price movements in various commodities. It is likely
that similar revisions will be made in the future. As a result of such
modifications, the future trading methods that may be used by Rabar might differ
from those presently being used. The general partner may not be aware of such
changes in Rabar's trading methods.
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The markets typically traded by Rabar have been chosen for their historical
performance, and for their customary liquidity. However, from time to time Rabar
may trade in newer or less liquid markets. There can be no assurance of
liquidity.
Rabar's methods are proprietary and confidential. The foregoing description
is general and is not intended to be exhaustive. As stated, trading decisions
require the exercise of judgment by Rabar. The decision not to trade certain
commodities or not to make certain trades may result at times in missing price
moves and hence profits of great magnitude, which other trading advisors who are
willing to trade these commodities may be able to capture. There is no assurance
that the performance of Rabar will result in profitable trading.
You should anticipate substantial losses of the portion of Spectrum Select's
assets allocated to Rabar over long periods of time since profits, if any, are
usually generated by only a few trades. Even more substantial losses of profits
may occur because all profits are subjected to ever-increasing risk by Rabar and
because large portions of unrealized profits in particular are usually given
back before Rabar determines that trend reversals against its positions have
occurred.
3. SUNRISE CAPITAL MANAGEMENT, INC.
Sunrise Capital Management is a California corporation with offices at 990
Highland Drive, Suite 303, Solana Beach, California 92075-2472. Sunrise Capital
Management (formerly known as Sunrise Commodities, Inc.) was organized in 1983
and continues the business of Sunrise Commodities, a California sole
proprietorship organized in 1982. Sunrise Capital Management was registered in
February 1983 as a commodity trading advisor and in April 1990 as a commodity
pool operator with the CFTC and is a member of the National Futures Association
in such capacities. In January 1995, Sunrise and Commodity Monitors, Inc.
organized Sunrise Capital Partners, LLC, a California limited liability company.
Sunrise Capital Partners is wholly-owned by Sunrise Capital Management and
Commodity Monitors and was registered in February 1995 as a commodity trading
advisor and commodity pool operator with the CFTC and is a member of the
National Futures Association in such capacities. CMI is a California corporation
organized in October 1977, and is the successor to the partnership of Harris &
Slaughter. CMI was registered in November 1977 with the CFTC as a commodity
trading advisor and is a member of the National Futures Association in such
capacity. Sunrise Capital Partners and CMI are also located at the address of
Sunrise Capital Management set forth above. Sunrise Capital Management and
Sunrise Capital Partners currently operate five commodity pools.
PRINCIPALS
Mr. Martin P. Klitzner is President, Secretary and a Director of Sunrise
Capital Management, and a Managing Director of Sunrise Capital Partners. In 1967
and 1968, Mr. Klitzner received a B.A. and an M.B.A, respectively, from the
University of Michigan. He did post graduate work in economics at the University
of California, Los Angeles, from 1968 to 1971. Mr. Klitzner joined Sunrise
Capital Management in December 1982, and has exclusive operational control of
day-to-day activities, which include the supervision of trading procedures.
Mr. Richard C. Slaughter is a Managing Director of Sunrise Capital Partners.
Mr. Slaughter is responsible for research and trading systems development. In
1974, he received a B.S. in finance from San Diego State University. He has
pursued graduate studies in finance at the State University and in systems
management at the University of Southern California. Mr. Slaughter has been a
Professor of Finance, instructing M.B.A. candidates in securities analysis and
portfolio management. Mr. Slaughter, a co-founder of CMI in 1977, serves as its
President. He was responsible, along with Dr. Forrest, for the development of
CMI's current trading systems. Mr. Slaughter began trading commodities on a
full-time basis in 1975 for his own account and as a commodity trading advisor.
Dr. Gary B. Davis is the Chairman of the Board and Chief Financial Officer
of Sunrise Capital Management. In 1968 and 1970, Dr. Davis received a B.S. and
Medical degree, respectively, from the University of Michigan. From 1980 to
1990, Dr. Davis served on the faculty of the University of California, San Diego
as an Associate Professor of Radiology. Dr. Davis has studied and traded the
commodity futures markets since 1979. Dr. Davis currently concentrates his
efforts in the research and trading systems development activities of Sunrise
and Sunrise Capital Partners.
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Dr. John V. Forrest engages in research and trading systems development on
behalf of Sunrise Capital Partners. In 1962, he received a B.A. from Notre Dame
and in 1966 received a Medical Degree from the State University of New
York--Downstate Medical Center. Dr. Forrest retired in September 1997 as a
Professor of Radiology at the University of California, San Diego, where he has
served on the faculty since 1976. Dr. Forrest joined CMI in September 1991 and
is a co-developer, with Mr. Slaughter, of CMI's current trading systems. He was
President and sole shareholder of Cresta Commodities, a commodity trading
advisor, from September 1981 to August 1989. Dr. Forrest began trading the
commodity markets in 1975.
Mr. Martin M. Ehrlich is Vice President and a Director of Sunrise Capital
Management, and Vice President-Marketing of Sunrise Capital Partners. His
academic background includes studies at the University of Cincinnati where he
majored in business administration. Mr. Ehrlich joined Sunrise Capital
Management in 1986 after having been a long-time investor with Sunrise Capital
Management. Prior to assuming responsibilities for marketing and public
relations for Sunrise Capital Management, Mr. Ehrlich was an independent
businessman and investor.
Ms. Marie Laufik is Vice President and a Director of Sunrise Capital
Management and Vice President-Trading of Sunrise Capital Partners. Ms. Laufik is
head trader and is responsible for supervising trading and back-office
operations. In 1979, Ms. Laufik received a Master's degree in Economics from the
University of Prague. Ms. Laufik worked for a Czechoslovakian import/export
company for nine years before immigrating to the United States. Mrs. Laufik was
a commodity trader for Cresta Commodities. Mrs. Laufik joined Sunrise Capital
Management in August 1988.
Elissa Davis is a principal of Sunrise Capital Management and Sunrise
Capital Partners by virtue of her role as a Trustee of the Davis Family Trust.
Mrs. Davis is not active in the management of either Sunrise Capital Management
or Sunrise Capital Partners and has not been involved in any other business
activities during the past five years.
The Davis Family Trust, dated October 12, 1989, is a director and the sole
shareholder of Sunrise Capital Management; Gary B. Davis and his wife, Elissa
Davis, are trustees and the sole beneficiaries of this Trust.
Sunrise Capital Management, Sunrise Capital Partners, their principals and
their affiliates intend to trade or to continue to trade commodity interests for
their own accounts. You will not be permitted to inspect the personal trading
records of Sunrise Capital Management, Sunrise Capital Partners, their
principals, or their affiliates, or the written policies relating to such
trading.
DESCRIPTION OF TRADING PROGRAMS
Sunrise Capital Management and Sunrise Capital Partners utilize technical
trend-following systems, trading a wide continuum of time windows. Most of these
time frames are decidedly long-term by industry standards. Pro-active money
management strategies are designed to protect open profits and to minimize
exposure to non-directional markets.
In providing commodity trading advice, Sunrise Capital Management trades the
CIMCO Program for Spectrum Select and Sunrise Capital Partners trades the
Currency Program with minor modifications for Spectrum Currency.
The Sunrise CIMCO--Diversified Financial Program was designed by Sunrise
Capital Management to participate exclusively in the highly liquid financial
markets. This program trades the major currencies as outrights against the U.S.
dollar and selectively against each other. Interest rate futures, both long and
short term (including U.S. and foreign bonds, notes and euro products), stock
indices, including S&P 500, precious and industrial metals, including aluminum,
gold, silver and copper, natural gas and crude oil are also traded in this
program. These commodity interests are traded on futures exchanges but may also
be traded in the interbank or cash markets when appropriate.
The Currency Program follows approximately ten different major and minor
currency markets, which may include, but are not limited to, the Japanese yen,
British pound, euro currency, Swiss franc, Canadian dollar, Australian dollar,
Swedish krona, New Zealand dollar, Singapore dollar, and South African rand. The
Currency Program trades currency futures contracts on the International Monetary
Market Division of
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the Chicago Mercantile Exchange and forward currency contracts in the interbank
markets. In order to achieve adequate diversification for the Currency Program,
major and minor currencies are traded as crossrates selectively against each
other and/or as outrights against the U.S. dollar.
As of November 30, 1999 Sunrise Capital Management and Sunrise Capital
Partners were managing approximately $87 million of client assets pursuant to
the CIMCO Program, approximately $63 million of client assets pursuant to the
Currency Program, and approximately $560 million of client assets in all of
their programs.
Relying on technical analysis, Sunrise Capital Management and Sunrise
Capital Partners believe that future price movements in all markets may be more
accurately anticipated by analyzing historical price movements within a
quantitative framework rather than attempting to predict or forecast changes in
price through fundamental economic analysis. The trading methodologies employed
by Sunrise Capital Management and Sunrise Capital Partners are based on programs
analyzing a large number of interrelated mathematical and statistical formulas
and techniques which are quantitative, proprietary in nature and which have been
either learned or developed by Dr. Davis, Dr. Forrest and/or Mr. Slaughter. The
profitability of the trading programs, traded pursuant to technical analysis
emphasizing mathematical and charting approaches, will depend upon the
occurrence in the future, as in the past, of major trends in some markets. If
there are no trends, the trading programs are likely to be unprofitable.
Sunrise's trading systems attempt to detect a trend, or lack of a trend,
with respect to a particular futures interest in a program by analyzing price
movement and volatility over time. Sunrise's trading system consists of
multiple, independent and parallel systems, each designed and tested to seek out
and extract different market inefficiencies on different time horizons. These
systems will generate a signal to sell a "short" contract or purchase a "long"
contract based upon their identification of a price trend in the particular
futures interest. If the systems do not detect a price trend, a "neutral"
trading signal will be generated. While this neutral signal is designed to
filter out high-risk "whipsaw" markets, it is successful on only a limited
basis. Successful speculative futures interests trading employing
trend-following techniques, such as Sunrise's system, depends to a large degree
upon not trading non-directional, volatile markets. Accordingly, to the extent
that this neutral trading signal is not generated during a non-trending market,
trading would likely be unsuccessful because an account would trade such
markets.
Trend-following trading systems, such as those employed by Sunrise Capital
Management and Sunrise Capital Partners, will seldom effect market entry or exit
at the most favorable price in the particular market trend. Rather, this type of
trading system seeks to close out losing positions quickly and to hold portions
of profitable positions for as long as the trading system determines that the
particular market trend continues to offer reasonable profit potential. The
number of losing transactions may exceed substantially the number of profitable
transactions. However, if the approach is successful, these losses should be
more than offset by gains.
While Sunrise Capital Management and Sunrise Capital Partners rely primarily
on mechanical technical trading systems in making investment decisions, the
strategy does include the latitude to depart from this approach if market
conditions are such that, in the opinion of Sunrise Capital Management or
Sunrise Capital Partners, as the case may be, execution of trades recommended by
the mechanical systems would be difficult or unusually risky. There may occur
the rare instance in which Sunrise Capital Management or Sunrise Capital
Partners, as the case may be, will override the system to decrease market
exposure. Any modification of trading instructions could adversely affect the
profitability of an account. Among the possible consequences of such a
modification would be (1) the entrance of a trade at a price significantly worse
than a system's signal price, (2) the complete negation of a signal which
subsequently would have produced a profitable trade, or (3) the premature
termination of an existing trade. Neither Sunrise Capital Management nor Sunrise
Capital Partners is under any obligation to notify clients, the general partner,
or you of this type of deviation from its mechanical systems, since it is an
integral part of its overall trading method.
A technical trading system consists of a series of fixed rules applied
systematically. However, the system still requires Sunrise Capital Management
and Sunrise Capital Partners to make subjective judgments. For example, the
trading advisor must select the markets it will follow and futures interests it
will actively trade, along with the contract months in which it will maintain
positions. Sunrise Capital Management and Sunrise Capital Partners must also
subjectively determine when to liquidate positions in a contract month which is
about to expire and initiate a position in a more distant contract month.
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Sunrise Capital Management and Sunrise Capital Partners engage in ongoing
research that may lead to significant modifications from time to time. Sunrise
Capital Management or Sunrise Capital Partners (as the case may be) will notify
the general partner if modifications to its trading systems or portfolio
structure are material.
Sunrise Capital Management and Sunrise Capital Partners believe that the
development of a commodity trading strategy is a continual process. As a result
of further analysis and research into the performance of Sunrise Capital
Management and Sunrise Capital Partners' methods, changes have been made from
time to time in the specific manner in which these trading methods evaluate
price movements in various futures interests, and it is likely that similar
revisions will be made in the future. As a result of such modifications, the
trading methods that may be used by Sunrise Capital Management and Sunrise
Capital Partners in the future might differ from those presently being used.
Each of Sunrise Capital Management and Sunrise Capital Partners has
discretionary authority to make all trading decisions, including upgrading or
downgrading the trading size of the Spectrum accounts it manages to reflect
additions, withdrawals, trading profits, and/or trading losses, without prior
consultation or notice. In addition, each advisor may from time to time adjust
the leverage applicable to the assets allocated to it; PROVIDED, HOWEVER, any
such adjustments will be consistent with the leverage parameters described
herein and in the overall investment objectives and trading policies of the
accounts they manage for Spectrum Select and Spectrum Currency. Such adjustments
may be in respect of certain markets or in respect of the overall CIMCO
investment portfolio or Currency Program. Factors which may affect the decision
to adjust leverage include: inflows and outflows of capital, trading levels
below $3,000,000, ongoing research, volatility of individual markets, risk
considerations, and Sunrise Capital Management and Sunrise Capital Partners'
subjective judgement and evaluation of general market conditions. Adjustments to
leverage may result in greater profits or losses and increased brokerage costs.
No assurance can be given that any leverage adjustment will be to your financial
advantage.
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
1. CAMPBELL & COMPANY, INC.
Campbell is a Maryland corporation organized in April, 1978 as a successor
to a partnership originally organized in January, 1974. Campbell has been
registered with the CFTC as a commodity trading advisor since May 1978 and is a
member of the National Futures Association in such capacity. Campbell's
principal place of business is located at 210 W. Pennsylvania Ave., Suite 770,
Towson, MD 21204.
PRINCIPALS
Mr. Richard M. Bell serves as a Senior Vice-President--Trading. Mr. Bell
began his employment with Campbell in May, 1990. His duties include managing
daily trade execution of the assets under Campbell's management. From September,
1986 through May, 1990 Mr. Bell was the managing general partner of several
partnerships registered as broker-dealers involved in market making on the floor
of the Philadelphia Stock Exchange and Philadelphia Board of Trade. From July,
1975 through September, 1986 Mr. Bell was a stockholder and Executive
Vice-President of Tague Securities, Inc., a registered broker-dealer. Mr. Bell
owns seats on the Philadelphia Stock Exchange and a Philadelphia Currency
Participation, all of which are leased out. Mr. Bell graduated from Lehigh
University with a B.S. in Finance.
Mr. D. Keith Campbell has served as Chairman of the Board since it began
operations and was President until January 1994, and Chief Executive Officer
until January 1, 1998. Mr. Campbell is the majority voting stockholder. From
1971 through June, 1978 he was a registered representative of a futures
commission merchant. Mr. Campbell has acted as a commodity trading advisor since
January, 1972 when, as general partner of Campbell Fund, a limited partnership
engaged in commodity futures trading, he assumed sole responsibility for trading
decisions made on behalf of Campbell Fund. Since then he has applied various
technical trading systems to numerous discretionary commodity trading accounts.
Mr. Campbell is registered with the CFTC as a commodity pool operator and is a
member of the National Futures Association in such capacity. He is also
registered as an associated person of Campbell.
Mr. William C. Clarke, III joined Campbell in June, 1977. He is an Executive
Vice-President and a Director. Mr. Clarke holds a B.S. in Finance from Lehigh
University where he graduated in 1973.
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Mr. Clarke currently oversees all aspects of research which involves the
development of proprietary trading models and portfolio management methods.
Mr. Clarke is registered as an associated person of Campbell.
Mr. Bruce L. Cleland joined Campbell in January, 1993. Mr. Cleland serves as
President, Chief Executive Officer and a Director. From May, 1986 through
December, 1992 Mr. Cleland served in various principal roles with the following
firms; President, Institutional Brokerage Corp., a floor broker; President,
Institutional Advisory Corp., a commodity trading advisor and commodity pool
operator; President, F&G Management, Inc., a commodity trading advisor;
President, Hewlett Trading Corporation, a commodity pool operator. In January,
1983 Mr. Cleland was employed by Rudolf Wolff Futures, Inc., a futures
commission merchant, where he served as President until April, 1986.
Mr. Cleland graduated in 1969 from Victoria University in Wellington, New
Zealand where he received a Bachelor of Commerce and Administration degree.
Mr. Cleland is registered as an associated person of Campbell.
Xiaohua Hu serves as a Vice President--Research. Mr. Hu has been employed by
Campbell since 1994 in the Research Department, where he has a major role in the
ongoing research and development of Campbell's trading systems. From 1992 to
1994 Mr. Hu was employed in Japan by Line System as a software engineer, where
he participated in the research and development of computer software, including
programs for production systems control and software development. Mr. Hu
received his B.A. in Manufacturing Engineering from Changsha University of
Technology in China in 1982. He went on to receive an M.A. and Ph.D. in Systems
and Information Engineering from the Toyohashi University of Technology, in
Japan, in 1987 and 1992 respectively. During his studies at Toyohashi, Mr. Hu
was also a Visiting Researcher in Computer Science and Operations Research and
published several research papers.
Phil Lindner, serves as Vice President--Information Technology. Mr. Lindner
has been employed by Campbell since October, 1994, became the IT Director in
March, 1996, and Vice President in January, 1998. Mr. Lindner oversees
Campbell's computer and telecommunications systems, including a staff of
programmers that program proprietary applications for Campbell's trading, fund
administration, and accounting functions, and provide complete computer systems
support to all Campbell employees. Prior to joining Campbell, Mr. Lindner worked
as a programmer and manager for Amtote, a provider of race-track computer
systems.
Mr. James M. Little serves as Executive Vice-President/Marketing and as a
Director. Mr. Little holds a B.S. in Economics and Psychology from Purdue
University. Mr. Little joined Campbell in April, 1990. From March, 1989 through
April, 1990 Mr. Little was a registered representative of A.G. Edwards &
Sons, Inc. Prior to that, from January, 1984 through March, 1989 he was the
Chief Executive Officer of James Little & Associates, Inc., a registered
commodity pool operator and registered broker-dealer. Mr. Little has extensive
experience in the futures industry having worked in the areas of hedging, floor
trading and managed futures. He is the co-author of THE HANDBOOK OF FINANCIAL
FUTURES, and is a frequent contributor to investment industry publications.
Mr. Little is registered as an associated person of Campbell.
Ms. Theresa D. Livesey serves as the Chief Financial Officer, Treasurer,
Secretary and a Director. Ms. Livesey is registered as an associated person of
Campbell. Ms. Livesey joined Campbell in June, 1991. In addition to her role as
Chief Financial Officer, Ms. Livesey also oversees administration and compliance
at Campbell. From December, 1987 to June, 1991 she was employed by Bank Maryland
Corp, a publicly held company. When she left she was Vice-President and Chief
Financial Officer. Prior to that time, she worked with Ernst & Young.
Ms. Livesey is a C.P.A. and has a B.S. in Accounting from the University of
Delaware. Ms. Livesey is registered as an associated person of Campbell.
V. Todd Miller serves as a Vice President--Research. Mr. Miller has been
employed by Campbell since 1994 in the Research Department, where he has a major
role in the ongoing research and development of Campbell's trading systems. From
1993 to 1994, Mr. Miller was an assistant professor in the department of
Computer Information Science at the University of Florida, where he taught
classes in object oriented programming, numerical analysis, and programming in
C, C++ and LISP. Mr. Miller holds a variety of degrees from the University of
Florida, beginning with an Associates degree in architecture. He followed that
in 1986 with a B.A. in Business with a concentration in computer science. In
1988 he received his M.A. in Engineering with a concentration in artificial
intelligence. He completed his education in 1993 with a Ph.D. in Engineering
with a concentration in computer simulation.
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Albert Nigrin serves as a Vice President--Research. Mr. Nigrin has been
employed by Campbell since 1995 in the Research Department, where he has a major
role in the ongoing research and development of Campbell's trading systems. From
1991-1995 Mr. Nigrin was an assistant professor in the department of Computer
Science and Information Systems at American University in Washington D.C., where
he taught classes in artificial intelligence, computer programming and
algorithms to both graduate and undergraduate students. While teaching, he also
wrote and published a book with MIT Press, NEURAL NETWORKS FOR PATTERN
RECOGNITION. Mr. Nigrin received a B.A. in Electrical Engineering in 1984 from
Drexel University. He then proceeded directly to a Ph.D. program and received
his degree in Computer Science in 1990 from Duke University, where his doctoral
studies concentrated in the areas of artificial intelligence and neural
networks.
Markus Rutishauser serves as Vice President--Trading, and has been employed
by Campbell since October, 1993, with responsibility for day-to-day foreign
exchange trading. Prior to joining Campbell, Mr. Rutishauser worked two years at
Maryland National Bank in Baltimore as an Assistant Vice President in foreign
exchange trading. Prior to that, Mr. Rutishauser was employed by Union Bank of
Switzerland, spending four years in their Zurich office and another four years
in their New York office, in the Foreign Exchange Department. Mr. Rutishauser
graduated from the University of Fairfield with a degree in Finance. He
subsequently completed his MBA at the University of Baltimore in January, 1996.
Mr. C. Douglas York has been employed by Campbell since November 1992. He is
a Senior Vice President--Trading. His duties include managing daily trade
execution for foreign exchange markets. From January 1991 through October 1992,
Mr. York worked for Black & Decker as Global Foreign Exchange Manager. He holds
a B.A. in Government from Franklin and Marshall College. Mr. York is an
associated person of Campbell.
Any principal of Campbell may trade futures interests for his or her own
accounts. In addition, Campbell manages proprietary accounts for its deferred
compensation plan and principals. Campbell has written procedures that govern
proprietary trading by principals. Trading records for proprietary trading
accounts are available for review by clients upon reasonable notice. Such trades
may or may not be in accordance with the Campbell trading program described
below.
THE CAMPBELL TRADING PROGRAM
Campbell trades the assets allocated to it by the partnership pursuant to
its Financial, Metal & Energy Large Portfolio, which trades exclusively in
futures, options and forward contracts, including foreign currencies, precious
and base metals, crude oil and petroleum products, energy products, stock market
indices, and interest rate futures. As of November 30, 1999, Campbell was
managing approximately $1.3 billion of client assets pursuant to the Financial
Metals & Energy Large Portfolio and approximately $1.7 billion in all of its
programs.
Campbell makes trading decisions using proprietary technical trading models,
which analyze market statistics. There can be no assurance that the trading
models currently being used will produce results similar to those produced in
the past. Campbell's trading models are designed to detect and exploit
medium-term to long-term price changes, while also applying proven risk
management and portfolio management principles.
Campbell believes that utilizing multiple trading models for the same client
account provides an important level of diversification, and is most beneficial
when multiple contracts of each market are traded. More or fewer trading models
than are currently used may be used in the future. Every trading model may not
trade every market. It is possible that one trading model may establish a long
position while another trading model establishes a short position in the same
market. Since it is unlikely that both positions would prove profitable, in
retrospect one or both trades will appear to have been unnecessary. It is
Campbell's policy to follow trades signaled by each trading model independent of
what the other models may be recommending.
Over the course of a long-term trend, there are times when the risk of the
market may not appear to be justified by the potential reward. In such
circumstances some of Campbell's trading models may exit a winning position
prior to the end of a price trend. While there is some risk to this method (for
example, being out of the market during a significant portion of a price trend),
our research indicates that this is well compensated for by the decreased
volatility of performance which may result.
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Campbell's trading models may include trend-following trading models,
counter-trend trading models, and trading models that do not seek to identify or
follow price trends at all. Campbell expects to develop additional trading
models and to modify models currently in use and may or may not employ all such
models for all clients' accounts. The trading models currently used by Campbell
may be eliminated from use if Campbell ever believes such action is warranted.
While Campbell normally follows a disciplined systematic approach to
trading, on occasion it may override the signals generated by the trading
models. Such action may not be beneficial to the results achieved.
Campbell applies risk management and portfolio management strategies to
measure and manage overall portfolio risk. These strategies include portfolio
structure, risk balance, capital allocation, and risk limitation. One objective
of risk and portfolio management is to determine periods of relatively high and
low portfolio risk, and when such points are reached, Campbell may reduce or
increase position size accordingly. It is possible, however, that during periods
of reduction in position size the return that would have been realized had the
account been fully invested would be reduced.
Campbell may, from time to time, increase or decrease the total number of
contracts held based on increases or decreases in an account's assets, changes
in market conditions, perceived changes in portfolio-wide risk factors, or other
factors which may be deemed relevant.
Campbell estimates that, based on the amount of margin required to maintain
positions in the markets currently traded, aggregate margin for all positions
held in a client's account will range between 20% and 40% of the account's net
assets. From time to time, margin commitments may be above or below these
ranges.
The number of contracts that Campbell believes can be bought or sold in a
particular market without undue adverse price movement may at times be limited
because of illiquidity. In such cases a client's portfolio would be influenced
by liquidity factors because its positions in such markets might be
substantially smaller than its positions in other markets which offer greater
liquidity.
2. CHESAPEAKE CAPITAL CORPORATION
Chesapeake was incorporated under the laws of the Commonwealth of Virginia
in February 1988 for the purpose of offering advisory and investment portfolio
management services to both retail and institutional investors in trading
futures interest contracts. On August 19, 1991, Chesapeake was merged into
Chesapeake Capital Corporation, an Illinois corporation formed on August 13,
1991. References herein to "Chesapeake" refer to the Virginia corporation prior
to August 19, 1991 and the Illinois corporation on and after August 19, 1991.
Chesapeake has been registered with the CFTC as a commodity trading advisor and
as a commodity pool operator since June 20, 1988 and May 8, 1991, respectively,
and has also been a member of the National Futures Association since June
20,1988. Chesapeake's principal place of business is located at 500 Forest
Avenue, Richmond, Virginia 23229. All business records will be kept at
Chesapeake's principal place of business.
PRINCIPALS
Mr. R. Jerry Parker, Jr., received a Bachelor of Science degree in Commerce,
with an emphasis in Accounting, from the University of Virginia in
January 1980. Mr. Parker worked in the accounting field for four years after
graduating from college and became a licensed Certified Public Accountant in
Virginia in 1982. From November 1983 until January 1987, Mr. Parker was employed
as an exempt commodity trading advisor by Mr. Richard J. Dennis, a principal and
shareholder of Richard J. Dennis & Company, a Chicago-based commodity trading
advisor and commodity pool operator registered with the CFTC, in his "Turtle"
training program. From January 1987 until February 1988, Mr. Parker traded for
Mr. Thomas Dennis as an exempt commodity trading advisor. From November 1983
through February 1988, Mr. Parker had complete discretionary trading authority
over a futures portfolio of $1 million to $1.5 million. In February 1988,
Mr. Parker ceased trading for Mr. Thomas Dennis and formed Chesapeake, where he
serves as the Chairman of the Board of Directors, Chief Executive Officer and a
Principal.
Mr. John M. Hoade received a Bachelor of Science degree in Business
Administration from Lynchburg College in 1978. From September 1976 through
December 1990, Mr. Hoade was employed by Thurston
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Metals, Inc., a distributor and processor of specialty metals, located in
Lynchburg, Virginia, in sales, marketing and general management. Mr. Hoade
joined Chesapeake in December 1990 to direct the operations and marketing
efforts of the company. Mr. Hoade is President, Secretary, and a Principal.
Braxton Glasgow, III received a Bachelor of Science degree in Accounting
from the University of North Carolina - Chapel Hill in 1975 and is a Certified
Public Accountant. Prior to joining Chesapeake in May 1995, Mr. Glasgow was
President of Shoe Factory, Inc. in Richmond, Virginia from January 1992 through
May 1995, Executive Vice President of Intershoe, Inc. in Millersburg
Pennsylvania from November 1989 through January 1992 and Managing Director of
Signet Investment Banking Company in Richmond, Virginia from September 1986
through November 1989 where he specialized in merger and acquisition taxation.
Mr. Glasgow is a member of Chesapeake's Executive Committee and is registered as
an Associated Person and Principal of Chesapeake with the National Futures
Association. Mr. Glasgow is Director of Marketing and Executive Vice President
of Chesapeake where he is responsible for marketing, sales and new product
development.
Robert S. Parker, Jr. received his Bachelor of Science degree in Commerce,
with an emphasis in Accounting, from the University of Virginia in 1965.
Mr. Parker worked in the accounting field for two years and became a Certified
Public Accountant in Virginia. He then attended law school at the College of
William and Mary where he received a Juris Doctor degree in 1970. Mr. Parker has
been engaged in the practice of law since then, with an emphasis in tax and
business matters. Mr. Parker is a member of Chesapeake's Executive Committee and
is registered as a Principal of Chesapeake with the National Futures
Association. Mr. Parker has been General Counsel of Chesapeake since February
1996.
Chesapeake and its principals may, from time to time, trade futures,
forwards, and options contracts and securities for their own proprietary
accounts. Such trades may or may not be in accordance with the Chesapeake
trading program described below.
THE CHESAPEAKE TRADING PROGRAMS
Prior to June 1, 1998, the assets allocated to Chesapeake by Spectrum
Technical were traded pursuant to its Diversified Program and its Financial and
Metals Program. Since June 1, 1998, the assets of Spectrum Technical allocated
to Chesapeake have been traded pursuant to its Diversified 2XL Program. The
Diversified 2XL Program emphasizes a maximum range of diversification with a
global portfolio of futures interests contracts, including, but not limited to,
agricultural products, precious and industrial metals, currencies, financial
instruments, and stock, financial and economic indices. Chesapeake tracks
commodities, futures contracts, options on futures contracts and commodities,
spot and forward currency contracts and swap contracts. Chesapeake will not
trade cash commodities or swap contracts for the partnership without the general
partner's consent. Chesapeake may trade on U.S. and non-U.S. exchanges and
markets. The decision to add or subtract markets from this program periodically
shall be at the sole discretion of Chesapeake.
The investment programs generally offered by Chesapeake are the "Diversified
Program," the "Diversified 2XL Program," and the "Diversified 3XL Program,"
collectively, the "trading programs". The Diversified Program is Chesapeake's
longest operating investment portfolio, with a performance record beginning in
February 1988. While all of the Chesapeake trading programs employ the same
general trading methodology, as described below, the various past and present
Chesapeake trading programs differ and have differed in their emphasis on
certain markets or market sectors and the exclusion of others and/ or their use
of leverage. The Diversified 2XL Program, which Chesapeake trades for Spectrum
Technical, began trading in April 1994. The Diversified 2XL Program utilizes the
same trading system as the Diversified Program, except that the Diversified 2XL
Program is generally traded on an upleveraged basis generally equal to
approximately two times the leverage applied to a fully-funded Diversified
Program account (although at times a different level may be used and the
partnership's returns may vary significantly from a 2:1 relationship from the
returns of Diversified Program accounts). Ultimately, the appropriate leverage
to be employed by the partnership in its trading, as determined at the sole
discretion of Chesapeake, will be determined by the performance factors
associated with the partnership and the partnership only, regardless of the
intended performance relationship of the partnership to other accounts trading
in other programs that may utilize more or less leverage. The following overview
is not intended as a detailed and exhaustive review of the trading methodology
or programs, or systems employed by Chesapeake, as their exact nature is
proprietary and confidential.
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As of November 30, 1999, Chesapeake was managing approximately $176 million
of customer funds in the Diversified 2XL Program ("notional funds" excluded) and
approximately $907 million of client assets in all of its programs ("notional
funds" excluded).
Chesapeake believes that future price movements in all markets may be more
accurately anticipated by historical price movements within a quantitative or
technical analysis than through fundamental economic analysis. The trading
methodologies employed by Chesapeake are based on the analysis of a large number
of interrelated mathematical and statistical formulas and techniques which are
quantitative in nature and are proprietary and confidential.
In addition to such mathematical evaluations, Chesapeake employs a technique
of technical analysis generally known as "charting" to attempt to determine
optimal support and resistance levels and entry and exit points in the various
markets. To determine the overall technical condition of the market and to be
used as a timing mechanism for all trades, Chesapeake also makes extensive use
of internally-generated market information, which includes, but is not limited
to, price volatility, open interest, daily price action and volume.
The results of the trading programs, traded pursuant to technical analysis
emphasizing mathematical and charting approaches, will depend upon the
occurrence in the future, as in the past, of major trends in some markets. If
there are no trends, the Diversified 2XL Program is likely to be unprofitable.
There have been trendless periods in the past which can be expected to recur,
and any factor which lessens the prospect of trends in the future, such as
increased governmental control, regulation, or participation as a purchaser or
seller in futures markets (including joint governmental control or regulation
of, or participation in, international currency markets), lessens the prospect
that programs utilizing technical analysis, including the Diversified 2XL
Program, will be profitable in the future. In addition, the future profitability
of the Diversified 2XL Program would also be adversely affected by factors which
increase the number of signals leading to unprofitable trades. For example, a
significant increase in technically-oriented trading (trend-following or
otherwise) in a particular commodity might cause a change in the pattern of
price movements in a manner which might be unfavorable.
Trend-following trading systems, such as those employed by Chesapeake, will
seldom effect market entry or exit at the most favorable price in the particular
market trend. Rather, a trend following trading system seeks to close out losing
positions quickly and to hold portions of profitable positions for as long as
the trading system determines that the particular market trend continues to
exist. There can be no assurance, however, that profitable positions can be
liquidated at the most favorable price in a particular trend. As a result, the
number of losing transactions may exceed substantially the number of profitable
transactions.
The trading programs are oriented toward the preservation of original
equity. The commencement of trading or a drawdown from starting equity are
considered the situations of highest risk, and risk management techniques at
this point are emphasized over those which invite greater risk in the interest
of enhancing performance. These risk management techniques include
diversification, I.E., commitment of equity to multiple markets and to a number
of trading strategies. Also, the trading programs adhere to the requirements of
a money management system which determines and limits the equity committed to
each trade, each market, each commodity complex (in trading programs which trade
in more than one commodity complex) and each account.
Chesapeake believes that a long-term commitment to its trading programs is
necessary for profitable trading. Chesapeake will attempt to take a limited
number of positions over the long-term to capture major price movements while
limiting downside risk on open positions. Clients, such as Spectrum Technical,
must give the markets ample time to develop the type of trends on which
Chesapeake's systems can capitalize in order to have a reasonable chance for
their investment to be successful.
Exchanges on which transactions will take place will include, but are not
limited to, all exchanges in the U.S., as well as non-U.S. exchanges which
include but are not limited to the Belgian Futures and Options Exchange, the
London International Financial Futures and Options Exchange Ltd., the
International Petroleum Exchange of London Ltd., the London Metal Exchange, the
London Commodity Exchange, the Italian Derivatives Market, the Marche a Terme
International de France, the Mercado Espanol de Futuros Financieros, the Eurex
Deutschland, the Hong Kong Futures Exchange Ltd., the
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Montreal Exchange, the Tokyo Commodity Exchange, the Tokyo International
Financial Futures Exchange, the Tokyo Stock Exchange, the Singapore
International Monetary Exchange, the Sydney Futures Exchange Ltd., and the
Winnipeg Commodity Exchange. In addition, Chesapeake continually monitors
numerous markets, both U.S. and non-U.S., and may initiate trades at any point
it determines that a market is sufficiently liquid and tradeable using the
methods employed by Chesapeake.
Chesapeake renders advice regarding transactions in physical commodities,
including exchange of futures for physicals transactions. An exchange for
physicals is a transaction permitted under the rules of many futures exchanges
in which two parties exchange a cash market position for a futures market
position (or vice versa) without making an open, competitive trade on the
exchange. The prices at which such transactions are executed are negotiated
between the parties.
Chesapeake has generally used between 10% and 30% of the equity in a
fully-funded Diversified Program account as original margin for trading, but at
times the margin-to-equity ratio can be higher. The Diversified 2XL Program
generally trades at approximately double the Diversified Program level.
The risk assumed and, consequently, the potential for profit experienced by
a particular account at different times, and by different accounts at the same
time, vary significantly according to the trading program(s) used, the market
conditions, the percentage gained or lost in the account, the size of the
account, the brokerage commissions charged to the account, the management and
incentive fees charged to the account, the contracts, if any, excluded from the
account by the client, and when the account commenced trading. Accordingly, no
client should expect to achieve the same performance as that of any other
account traded previously, simultaneously, or subsequently by Chesapeake.
Programs that exclude or emphasize certain markets will, of course, perform
differently than programs utilizing different markets. For programs that differ
in terms of leverage only (I.E., Diversified Program, Diversified 2XL Program
and Diversified 3XL Program), Chesapeake generally attempts to manage accounts
in such programs such that the gross returns (before fees), positive or
negative, are a multiple of each other based on the leverage differential (E.G.,
the Diversified 3XL Program gross returns, positive or negative, are generally
intended to be approximately triple those of the Diversified Program on an
annual or year to date basis, while the Diversified 2XL Program returns,
positive or negative, are generally intended to be approximately double those of
the Diversified Program, on an annual or year to date basis). However, many
factors can significantly impact account performance and these performance
relationships, including but not limited to differences in the timing of
additions and withdrawals and the resulting adjustment trades; varying fills;
changes in position size to reduce risk during losing periods by Chesapeake that
impact an account in one program but not other account(s) in other programs that
use proportionately higher or lower leverage; differences in brokerage
commissions; and other factors. Accordingly, every program will underperform or
overperform the anticipated multiple or fraction of a differently leveraged
program.
Decisions concerning the liquidation of positions, the futures interests
contracts to be traded and the size of positions to be taken or maintained will
require to some degree the exercise of judgment by Chesapeake. A decision not to
trade certain futures, forwards, and options contracts due to lack of liquidity,
excess volatility or for any other reason may result at times in clients, such
as Spectrum Technical, missing significant profit opportunities which might
otherwise have been captured by Chesapeake.
The trading strategies and systems utilized by Chesapeake's trading
programs, including the Diversified 2XL Program, may be revised from time to
time by Chesapeake, as a result of ongoing research and development that seeks
to devise new trading strategies and systems, as well as test methods currently
employed. The trading strategies and systems used by Chesapeake in the future
may differ significantly from those presently used, due to the changes which may
result from this research.
3. JOHN W. HENRY & COMPANY, INC. (JWH-REGISTERED TRADEMARK-)
John W. Henry & Company began managing assets in 1981 as a sole
proprietorship and was later incorporated in the state of California as John W.
Henry & Co., Inc. to conduct business as a commodity trading advisor. In 1997,
JWH reincorporated in the state of Florida. JWH's offices are at One Glendinning
Place, Westport Connecticut, 06880, 203-221-0431 and 301 Yamato Road, Suite
2200, Boca Raton, Florida.
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JWH's registration as a commodity trading advisor became effective in November
1980. JWH is a member of the National Futures Association in this capacity.
"JWH" is the registered trademark of John W. Henry & Company, Inc.
PRINCIPALS
Mr. John W. Henry is chairman of the JWH Board of Directors and is trustee
and sole beneficiary of the John W. Henry Trust dated July 27, 1990. He is also
a member of the JWH Investment Policy Committee. In addition, he is a principal
of Westport Capital Management Corporation, Global Capital Management Limited,
JWH Asset Management, Inc., and JWH Financial Products, Inc., all affiliates of
JWH. Mr. Henry currently concentrates his activities at JWH on portfolio
management, research and new system development, day-to-day decisions involving
the strategic direction and business of the firm and frequent dialogue with
trading supervisors. He is the exclusive owner of trading systems licensed to
Elysian Licensing Corporation, a corporation wholly owned by Mr. Henry, and
sublicensed by Elysian Licensing Corporation to JWH and utilized by JWH in
managing investor accounts.
Mr. Henry has served on the Board of Directors of the Futures Industry
Association, the National Association of Futures Trading Advisors, and the
Managed Futures Trade Association, and has served on the Nominating Committee of
the National Futures Association. He has also served on a panel created by the
Chicago Mercantile Exchange and the Chicago Board of Trade to study cooperative
efforts related to electronic trading, common clearing, and issues regarding a
potential merger. In 1989, Mr. Henry established residency in Florida, and since
that time has performed services from that location as well as from the offices
of JWH in Westport, Connecticut. Since the beginning of 1987, he has devoted,
and will continue to devote, considerable time to activities in businesses other
than JWH and its affiliates, including acting as chairman of the Florida Marlins
Baseball Club LLC, which continues to be operated by professional baseball
staff.
Mr. Mark H. Mitchell is vice chairman, counsel to the firm and a member of
the JWH Board of Directors. His duties include the coordination and allocation
of responsibilities among JWH and its affiliates. He is also vice chairman and a
director of JWH Asset Management, Inc. and JWH Financial Products, Inc. Prior to
joining JWH in January 1994, he was a partner at Chapman and Cutler in Chicago,
where he headed the law firm's futures law practice from August 1983 to
December 1993. He also served as general counsel of the MFA and general counsel
of the National Association of Futures Trading Advisors. Mr. Mitchell is
currently a member of the National Futures Association commodity pool
operator/commodity trading advisor Advisory Committee. In addition, he has
served as a member of the National Futures Association Special Committee for the
Review of a Multi-tiered Regulatory Approach to National Futures Association
Rules, the MFA Government Relations Committee, and the Executive Committee of
the Futures Industry Association Law and Compliance Division. In 1985,
Mr. Mitchell received the Richard P. Donchian Award for Outstanding
Contributions to the Field of Commodity Money Management. He received an A.B.
with honors from Dartmouth College and a J.D. from the University of California
at Los Angeles, where he was named to the Order of the Coif, the national legal
honorary society.
Mr. Verne O. Sedlacek is the president and chief operating officer and a
member of the JWH Investment Policy Committee. He is responsible for the
day-to-day management of the firm. Mr. Sedlacek is also president and director
of Westport Capital Management Corporation and Global Capital Management Limited
and vice president of JWH Financial Products, Inc. Prior to joining JWH in July
1998, he was the executive vice president and chief financial officer of Harvard
Management Company, Inc., a wholly owned subsidiary of Harvard University which,
at the time of his departure, managed approximately $14 billion of
University-related funds. At Harvard Management Company, he was responsible for
managing the areas of personnel, budgets, systems, performance analysis,
contracts, credit, compliance, custody, operations, cash management, securities
lending and market risk evaluation; he joined Harvard Management in March 1983.
Mr. Sedlacek currently serves on the Boards of Directors of the Futures
Industry Association and the Chicago Mercantile Exchange, and is a member of the
Global Markets Advisory Committee of the CFTC. He is also a member of the
National Futures Association/Futures Industry Institute Best Practices Study End
User Expert Panel. He received an A.B. in Economics from Princeton University,
and an M.B.A. in Accounting from New York University and was certified as a
C.P.A. by the State of New York in 1978.
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Dr. Mark S. Rzepczynski is a senior vice president, research and trading and
a member of the JWH Investment Policy Committee. He is also a vice president of
JWH Financial Products, Inc. Prior to joining JWH in May 1998, he was vice
president and director of taxable credit and quantitative research in the fixed
income division of Fidelity Management and Research from May 1995 to
April 1998, where he oversaw credit and quantitative research recommendations
for all Fidelity taxable fixed income funds. From April 1993 to April 1995, he
was a portfolio manager and director of research for CSI Asset Management, Inc.,
a fixed-income money management subsidiary of Prudential Insurance. Dr.
Rzepczynski has a B.A. CUM LAUDE, Honors in Economics from Loyola University of
Chicago, and an A.M. and Ph.D. in Economics from Brown University.
Mr. E. Lyndon Tefft is a senior vice president and the chief financial
officer. He is also the treasurer of Westport Capital Management Corporation and
JWH Asset Management, Inc., vice president of JWH Financial Products, Inc., and
director, secretary, and treasurer of JWH Securities, Inc. Prior to joining JWH
in October 1998, Mr. Tefft was the Director of MIS and a vice president at
Harvard Management Company, Inc. where he was responsible for directing the
design, development, and operation of global equity, bond, and derivative
trading, accounting, and settlement systems beginning in May 1994. Mr. Tefft
received a B.S. in Industrial Management from Purdue University, and an M.B.A.
from Wharton School of Business at the University of Pennsylvania.
Ms. Elizabeth A.M. Kenton is a senior vice president, compliance. She is
responsible for the
day-to-day management of compliance, as well as overall issues pertaining to
administration and human resources. Ms. Kenton is also a vice president of JWH
Asset Management, Inc. and JWH Financial Products, Inc., and a director of
Westport Capital Management Corporation and Global Capital Management Limited.
Since joining JWH in March 1989, Ms. Kenton has held positions of increasing
responsibility in research and development, administration and regulatory
compliance. Ms. Kenton received a B.S. in Finance from Ithaca College.
Mr. David M. Kozak is a senior vice president, general counsel and secretary
to the corporation. He is also secretary of JWH Asset Management, Inc. and JWH
Financial Products, Inc., and director and secretary of Westport Capital
Management Corporation. Prior to joining JWH in September 1995, he had been a
partner at the law firm of Chapman and Cutler from 1989 and an associate from
September 1983. In his practice there, he concentrated in commodity futures law
with an emphasis on commodity money management.
Mr. Kozak is currently the secretary and a director of the MFA and is a
member of that organization's Executive Committee and chairman of its Government
Relations Committee. He is also a member of the Special Committee on CPO/CTA
Disclosure Issues and the Special Committee for the Review of Multi-tiered
Regulatory Approach to National Futures Association Rules, both of the National
Futures Association. He is chairman of the subcommittee on commodity trading
advisor and commodity pool operator issues of the Futures Regulation Committee
of the Association of the Bar of the City of New York. He received a B.A. from
Lake Forest College, an M.A. from The University of Chicago, and a J.D. from
Loyola University of Chicago.
Mr. David I. Ginsberg is a member of the JWH Board of Directors and special
advisor to the chairman. Mr. Ginsberg joined JWH in October 1999. He served as
the managing director of the Multi-Manager Group at Global Asset Management from
its inception in September 1989 until July 1995. This GAM group was, and
continues to be, one of the largest multi-advisor groups specializing in hedge
funds. Since leaving GAM, Mr. Ginsberg has been a private investor. Mr. Ginsberg
received a M.B.A. with a concentration in Finance from Boston University and a
B.A. from Kenyon College. Mr. Ginsberg is a member of the board of directors of
GAM Diversity, Inc., a global multi-advisor hedge fund with assets in excess of
$1 billion that specializes in hedge funds, and a director of the Adelphi Europe
Fund, a hedge fund specializing in European equities.
Mr. Kevin S. Koshi is a senior vice president, proprietary trading, and a
member of the JWH Investment Policy Committee. He is responsible for the
implementation and oversight of the firm's proprietary strategies and
investments. Mr. Koshi joined JWH in August 1988 as a professional in the
finance department, and since 1990 has held positions of increasing
responsibility in the trading department. He received a B.S. in Finance from
California State University at Long Beach.
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Mr. Matthew J. Driscoll is a vice president, trading, and chief trader and a
member of the JWH Investment Policy Committee. He is responsible for the
supervision and administration of all aspects of order execution strategies and
implementation of trading policies and procedures. Mr. Driscoll joined JWH in
March 1991 as a member of the trading department. Since joining the firm, he has
held positions of increasing responsibility as they relate to the development
and implementation of JWH's trading strategies and procedures; he has played a
major role in the development of JWH's 24-hour trading operation. He attended
Pace University.
Mr. Christopher E. Deakins is a vice president, investor services,
responsible for general business development and management of the investor
services department. He is also director and vice president of JWH Securities,
Inc. Prior to joining JWH in August 1995, he was a vice president, national
sales, and a member of the management team at RXR Capital Management, Inc.,
where he was responsible for business development, institutional sales, and
broker-dealer support from August 1986 to July 1995. Currently he serves on the
Institutional Money Management Advisory Committee of the New York Mercantile
Exchange. Mr. Deakins received a BA in Economics from Hartwick College.
Mr. Edwin B. Twist is a director of JWH. He is also a director of JWH Asset
Management, Inc. and JWH Financial Products, Inc. Mr. Twist joined JWH as
internal projects manager in September 1991 and has been a director since August
1993. His responsibilities include assisting with the day-to-day administration
and internal projects of JWH's Florida office.
Mr. Julius A. Staniewicz is a vice president, senior strategist and a member
of the JWH Investment Policy Committee. He is also president of JWH Asset
Management, Inc. and JWH Financial Products, Inc. He joined JWH in March of
1992. Mr. Staniewicz received a B.A. in Economics from Cornell University.
The following is a list of additional principals of JWH: Ms. Nancy O. Fox,
C.P.A., vice president, investment support; Mr. Andrew D. Willard, vice
president, information technology; Mr. Paul D. Braica, C.P.A., vice president,
analytics; Ms. Florence Y. Sofer, vice president, marketing; Mr. Robert B.
Lendrim, vice president, investor services; and Ms. Wendy B. Goodyear, vice
president, investor services.
THE JWH-REGISTERED TRADEMARK- INVESTMENT PROGRAMS
JWH specializes in managing institutional and individual capital in the
global futures, financial futures, and foreign exchange markets. Since 1981, JWH
has developed and implemented proprietary trend-following trading techniques
that focus on intermediate- and long-term trends. JWH currently operates 11
investment programs.
JWH utilizes the Original Investment Program and the Financial and Metals
Portfolio for Spectrum Technical.
THE ORIGINAL INVESTMENT PROGRAM. The Original Investment Program began
trading client capital in October 1982 and was the first program offered by JWH.
The Original Investment Program seeks to capitalize on long-term trends in a
broad spectrum of worldwide financial and non-financial futures markets
including interest rates, non-U.S. stock indices, currencies, metals, energies,
and agricultural commodity markets. This program always maintains a
position--long or short--in every market traded.
In 1992, a broad research effort was initiated to enhance the risk/reward
ratios of the Original Investment Program without changing its trading
philosophy. Global markets were added; sector allocations were shifted, with
increased weighting given to financial markets; and some contracts were
eliminated. The quantitative model underlying the program was not changed.
Beginning in October 1995 the position size in relation to account equity in
this program was reduced 25%. Today, the Original Investment Program is one of
JWH's largest and historically best-performing programs, manifesting lower
volatility since the above changes were implemented in 1992.
THE FINANCIAL AND METALS PORTFOLIO. The Financial and Metals Portfolio,
which began trading client capital in October 1994, is both JWH's largest and
second longest running program. The program seeks to identify and capitalize on
intermediate-term price movements in four worldwide market sectors: interest
rates, currencies, non-U.S. stock indices, and metals. This program takes a
position when trends are identified but may take a neutral stance or liquidate
open positions in nontrending markets. Beginning in
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August 1992 the position size in relation to account equity in this program was
reduced 50%. The quantitative model underlying the program was not changed.
Since the changes were implemented in 1992 the Financial and Metals Portfolio
has experienced lower volatility.
As of November 30, 1999, JWH was managing approximately $248 million of
client assets pursuant to its Original Investment Program, approximately
$825 million of client assets pursuant to its Financial and Metals Portfolio,
approximately $76 million of client assets pursuant to its International Foreign
Exchange Program, and approximately $2.0 billion in all of its programs.
INVESTMENT PHILOSOPHY AND METHODOLOGY.
The JWH investment philosophy is based on the premise that market prices,
rather than market fundamentals, are the key aggregator of information necessary
to make investment decisions. The firm maintains that changes in market prices
initially reflect human reactions to new or emerging information or events that
will cause trends, but that prices eventually reflect all relevant information.
The price adjustments process takes time, however, since reactions of market
participants to changing market dynamics initially may be inefficient; that is,
investors may not react immediately to information because of differing
abilities to process and evaluate data, differing levels of risk tolerance, or
uncertainty. Gradual price adjustments manifest themselves in long-term trends,
which themselves can influence the course of events and from which profit
opportunities can arise. JWH believes that such market inefficiencies can be
exploited through a combination of trend detection and risk management.
Systematic risk taking may be rewarded, as markets adjust to a new price.
There is strong economic and statistical evidence to suggest that trends do
exist in most markets although they may be difficult to identify. Since the
firm's founding, JWH has employed analytical methods to identify short to
long-term trends. Comprehensive research undertaken by the firm's founder,
John W. Henry, led to the development of disciplined systematic quantitative
models. JWH's computer models examine market data for systematic price behavior
or relationships which will characterize a trend. When price trends are
identified, the JWH trading system generates buy and sell signals for
implementing trades. The strict application of these signals is one of the most
important aspects of JWH's investment process.
JWH attempts to control risk throughout the investment process. This
includes the confirmation of a trend, determining the optimal exposure in a
given market, and money management issues such as the startup or upgrade of an
account. JWH's research on these and other issues has resulted in investment
program modifications from time to time that have decreased from previous levels
the overall volatility of its investment programs while maintaining the
potential for generating attractive performance returns.
DURATION OF POSITIONS HELD.
JWH's historical performance demonstrates that, because trends often last
longer than most market participants expect, significant returns can be
generated from positions held over a long period of time. Therefore, market
exposure to profitable positions is not changed based on the time horizon of the
trade; positions held for two to four months are not unusual, and positions have
been held for more than one year. Losing positions are generally pared
relatively quickly, with most closing within a few days or weeks. However, if
the JWH system detects a profitable underlying trend, a position trading at a
loss may be retained in order to capture the potential benefits of participating
in that trend. Throughout the investment process, risk controls designed to
reduce the possibility of an extraordinary loss in any one market are
maintained.
DISCRETIONARY ASPECTS.
JWH at its sole discretion may override computer-generated signals and may
at times use discretion in the application of its quantitative models, which may
affect performance positively or negatively. This could occur, for example, when
JWH determines that markets are illiquid or erratic, such as may occur
cyclically during holiday seasons, or on the basis of irregularly occurring
market events. Subjective aspects in JWH's application of its quantitative
models also include the determination of position size in relation to account
equity, timing of commencement of trading an account, the investment of assets
associated with additions, redemptions, and reallocations, contracts and
contract months traded, and effective trade execution.
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PROGRAM MODIFICATIONS.
Proprietary research is conducted on an ongoing basis to refine the JWH
investment strategies. While the basic philosophy underlying the firm's
investment methodology has remained intact throughout its history, the potential
benefits of employing more than one investment methodology, or in varying
combinations, is a subject of continual testing, review and evaluation.
Extensive research may suggest substitution of alternative investment
methodologies with respect to particular contracts; this may occur, for example,
when the testing of a different methodology has indicated that its use might
have resulted in different historical performance. In addition, risk management
research and analysis may suggest modifications regarding the relative weighting
among various contracts, the addition or deletion of particular contracts for an
investment program, or a change in position size in relation to account equity.
However, most investment programs maintain a consistent portfolio composition to
allow opportunities in as many major market trends as possible.
All cash in a JWH investment program is available to be used to trade in a
JWH program, although the amounts committed to margin will vary from time to
time. As capital in each JWH investment program increases, additional emphasis
and weighting may be placed on markets which historically have demonstrated the
greatest liquidity and profitability. Furthermore, the weighting of capital
committed to various markets in the investment programs is dynamic, and JWH may
vary the weighting at its discretion as market conditions, liquidity, position
limit considerations and other factors warrant. Spectrum Technical
will generally not be informed of such changes.
OVERSIGHT OF TRADING POLICIES.
The JWH Investment Policy Committee is a senior-level advisory group,
broadly responsible for evaluating and overseeing trading policies. The
Investment Policy Committee provides a forum for shared responsibility, meeting
periodically to discuss issues relating to implementation of JWH's investment
process and its application to markets, including research on new markets and
strategies in relation to JWH trading models. Typical issues analyzed by the
Investment Policy Committee include liquidity, position size, capacity,
performance cycles, and new product and market strategies. The Investment Policy
Committee also makes the discretionary decisions concerning investment program
selection, asset allocation, and leverage levels for the Strategic Allocation
Program, a multi-program asset allocation methodology. Composition of the
Investment Policy Committee, and participation in its discussions and decisions
by non-members, may vary over time. All recommendations of the Investment Policy
Committee require approval by the chairman. The Investment Policy Committee does
not make day-to-day trading decisions.
ADJUSTING THE SIZE OF POSITIONS TAKEN.
Adjustments in position size in relation to account equity have been and
continue to be an integral part of JWH's investment strategy. At its discretion,
JWH may adjust the size of a position in relation to equity in the account that
is taken in markets or entire investment programs. Such adjustments may be made
at certain times for some investment programs but not for others. Factors which
may affect the decision to adjust the size of a position in relation to account
equity include ongoing research, program volatility, current market volatility,
risk exposure, subjective judgment and evaluation of these and other general
market conditions. Such decisions to change the size of a position may
positively or negatively affect performance and will alter risk exposure for an
account. Adjustments in position size relative to account equity may lead to
greater profits or losses, more frequent and larger margin calls, and greater
brokerage expense. No assurance is or can be given that such adjustments will
result in profits for client accounts. JWH reserves the right to alter, at its
sole discretion and without notification to Spectrum Technical, its policy
regarding adjustments in position size relative to account equity.
ADDITION, REDEMPTION AND REALLOCATION OF CAPITAL FOR COMMODITY POOL OR FUND
ACCOUNTS.
Investors purchase or redeem units at net asset value on the close of
business on the last business day of the month. In order to provide market
exposure commensurate with the fund's equity on the date of these transactions,
JWH's general practice is to adjust positions as near as possible to the close
of business on the last trading date of the month. The intention is to provide
for additions and redemptions at a net asset value that will be the same for
each of these transactions, and to eliminate possible variations in net asset
values that could occur as a result of inter-day price changes if, for example,
additions were calculated on the first day of the subsequent month. Therefore,
JWH may, at its sole discretion, adjust its
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investment of the assets associated with the addition or redemption as near as
possible to the close of business on the last business day of the month to
reflect the amount then available for trading. Based on JWH's determination of
liquidity or other market conditions, JWH may decide to commence trading earlier
in the day on, or before, the last business day of the month, or at its sole
discretion, delay adjustments to trading for an account to a date or time after
the close of business on the last day of the month. No assurance is given that
JWH will be able to achieve the objectives described above in connection with
fund equity level changes. The use of discretion by JWH in the application of
this procedure may affect performance positively or negatively.
PHYSICAL AND CASH COMMODITIES.
JWH may trade in physical or cash commodities for immediate or deferred
delivery, including specifically gold bullion, as well as futures, options, and
forward contracts when it believes that cash markets offer comparable or
superior market liquidity or ability to execute transactions at a single price.
In addition, the CFTC does not comprehensively regulate cash transactions, which
are subject to the risk of counterparty failure, inability or refusal to perform
with respect to such contracts. JWH will not trade physical or cash commodities
for the Spectrum Series, other than in connection with exchange of futures for
physical transactions, without the general partner's consent.
EQUITY DRAWDOWNS.
Historically, only thirty to forty percent of all trades made pursuant to
JWH's programs have been profitable. Large profits on a few trades in positions
that typically exist for several months have produced favorable results overall.
The greatest cumulative percentage decline in daily net asset value that JWH has
experienced since inception in any single program on a composite basis was
nearly sixty percent. You should understand that similar or greater drawdowns
are possible in the future.
LEGAL CONCERNS.
There neither now exists nor has there previously ever been any material
administrative, civil or criminal action against JWH or its principals.
JWH and Mr. Henry may engage in discretionary trading for their own
accounts, and may trade for the purpose of testing new investment programs and
concepts, as long as such trading does not amount to a breach of fiduciary duty.
In the course of such trading, JWH and Mr. Henry may take positions in their own
accounts which are the same or opposite from investor positions, due to testing
a new quantitative model or program, a neutral allocation system, and/or trading
pursuant to individual discretionary methods; on occasion, their orders may
receive better fills than investor accounts. Records for these accounts will not
be made available to you.
Employees and principals of JWH (other than Mr. Henry) are not permitted to
trade in futures, options on futures or forward contracts. However, such
principals and employees may invest in investment vehicles that trade futures,
options on futures, or forward contracts, when an independent trader manages
trading in that vehicle, and in the JWH Employee Fund, L.P., for which JWH is
the trading advisor. Records for these accounts will not be made available to
you.
Principals of JWH serve on the boards of directors and committees of various
organizations, both in and outside of the managed futures industry. In such
capacities, these individuals have a fiduciary duty to the other organizations
they serve, and they are required to act in the best interests of those
organizations, even if those actions were to be adverse to the interest of JWH
and its clients.
OTHER INVESTMENT PROGRAMS OPERATED BY JWH.
In addition to the Original Investment Program and the Financial and Metals
Portfolio, JWH currently operates nine other investment programs in three
categories for U.S. and non-U.S. investors, none of which are used by JWH for
Spectrum Technical. Each program is operated separately and independently.
- BROADLY DIVERSIFIED programs invest in a broad spectrum of worldwide
financial and nonfinancial futures and forward markets including
currencies, interest rates, non-U.S. stock indices, metals, energies, and
agricultural commodities. Investment choices include a program that always
maintains a position--long or short--in a market (two-phase investment
style), a program that takes a position
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when trends are identified but may take a neutral stance or liquidate open
positions in nontrending markets (three-phase investment style), and a
program that uses a combination of the two-phase and three-phase
investment styles (five-phase investment style) to invest in both long-
and short-term price trends.
- FINANCIAL programs invest in worldwide financial futures and forward
markets including currencies, interest rates, and stock indices in
addition to the metals and energies markets. The range of investment
choices includes diversified financial programs, sector-focused programs,
and a program that takes positions from several currency perspectives.
Some programs use a two-phase investment style while others use a
three-phase investment style. Another program uses a combination of the
three-phase investment style and the three-phase forex investment style
described below.
- FOREIGN EXCHANGE programs invest in a wide range of world currencies
primarily traded on the interbank market. Investment choices include a
program that trades a range of major and minor currencies, a program
focused on major currencies only, and a program that trades major
currencies against the U.S. dollar. Programs use either the three-phase
investment style or a slight variation called three-phase forex which
incorporates specialized intra-day volatility filters.
THE GLOBAL DIVERSIFIED PORTFOLIO. The Global Diversified Portfolio, which
began trading client capital in June 1988, seeks to capitalize on
intermediate-term price movements in a broad spectrum of worldwide financial and
non-financial markets including interest rates, stock indices, currencies,
metals, energies, and agricultural commodity markets. This program uses the
three-phase investment style.
JWH GLOBALANALYTICS-REGISTERED TRADEMARK- FAMILY OF PROGRAMS. Introduced in
June 1997 as the firm's most broadly diversified investment program, JWH
GlobalAnalytics-Registered Trademark- Family of Programs is the result of
extensive research and testing by the firm. Unlike other JWH programs, which
invest in intermediate or long-term price movements, JWH
GlobalAnalytics-Registered Trademark- invests in both long- and short-term price
movements. The program invests in a broad spectrum of worldwide financial and
non-financial markets including interest rates, non-U.S. stock indices,
currencies, metals, energies, and agricultural commodity markets. JWH modified
this program in January 1993 by adding new markets to enhance overall
diversification. The quantitative model underlying the program was not changed.
This program uses the five-phase investment style.
THE WORLD FINANCIAL PERSPECTIVE. The World Financial Perspective, which
began trading client capital in April 1987, seeks to capitalize on long-term
price movements in five worldwide market sectors: interest rates, stock indices,
currencies, metals, and energies. Rather than concentrating on the profit
potential available solely from the point of view of one country, the program
trades from different vantage points. The program holds positions from several
currency perspectives, including the British pound, Canadian dollar, euro,
Japanese yen, Swiss franc and U.S. dollar. This program uses the two-phase
investment style. JWH modified The World Financial Perspective in January 1993
by adding new markets to enhance overall diversification. The quantitative model
underlying the program was not changed.
THE GLOBAL FINANCIAL PORTFOLIO. The Global Financial Portfolio, which began
trading client capital in June 1994, seeks to identify and capitalize on
long-term price movements in five worldwide market sectors: interest rates,
non-U.S. stock indices, currencies, metals, and energies. This program uses the
two-phase investment style. Beginning in April 1995 the position size in
relation to account equity in this program was reduced 50%. Since the change was
implemented in 1995 the Global Financial Portfolio has experienced lower
volatility. In 1997 the sector allocation for the program was expanded to
include metals. The quantitative model underlying the program was not changed.
THE INTERNATIONAL CURRENCY AND BOND PORTFOLIO. The International Currency
and Bond Portfolio, which began trading client capital in January 1993, seeks to
identify and capitalize on intermediate-term price movements in the currency and
interest rate markets. The International Currency and Bond Portfolio targets
currencies and the long-term portion of interest rate markets of major
industrialized nations. Currency positions are held both as outrights--positions
taken in foreign currencies versus the U.S. dollar--and cross rates--foreign
currencies traded against each other. This program uses both types of the
three-phase investment styles. Beginning in May 1998 the position size in
relation to account equity in this program was increased 20%.
THE INTERNATIONAL FOREIGN EXCHANGE PROGRAM. The International Foreign
Exchange Program, which began trading client capital in August 1986, seeks to
identify and capitalize on intermediate-term
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movements in a broad range of both major and minor currencies primarily trading
on the interbank market. Positions are taken as outrights against the U.S.
dollar, or non-dollar cross rates. This program uses the three-phase forex
investment style.
THE WORLDWIDE BOND PROGRAM. The Worldwide Bond Program, which began trading
client capital in July 1996, seeks to capitalize on intermediate-term trends by
investing in the long-term portion of the worldwide interest rate markets.
Although the Worldwide Bond Program concentrates in one sector, diversification
is achieved by trading the interest rate markets of major industrialized
countries. This program uses the three-phase investment style. Due to the
limited number of markets traded, the Worldwide Bond Program may be less
diversified than other JWH financial programs.
THE G-7 CURRENCY PORTFOLIO. The G-7 Currency Portfolio, which began trading
client capital in February 1991, seeks to identify and capitalize on
intermediate-term price movements in the highly liquid currencies of major
industrialized nations. These currencies allow for trading outrights against the
U.S. dollar or non-dollar cross rates. With the advent of the European Union
single currency of 11 countries, the currency exposures formerly traded for
Germany, France, and Italy are now executed in the euro. This program uses the
three-phase forex investment style. Beginning in May 1998 the position size in
relation to account equity in this program was increased 50%. The quantitative
model underlying the program was not changed.
THE DOLLAR PROGRAM. The Dollar Program, which began trading client capital
in July 1996, seeks to identify and capitalize on intermediate-term price
movements in the foreign exchange sector, trading major currencies against the
U.S. dollar. This program uses the three-phase investment style. Due to the
limited number of markets traded in the Dollar Program, the program may be less
diversified than other JWH foreign exchange programs.
InterRate-TM- began trading client capital in 1988 and closed in 1996. This
program was designed to enhance returns available in U.S. treasury bills to
provide both secure income and collateral for a portfolio of interbank forward
and exchange-traded futures contracts. The Yen Financial Portfolio, which began
trading client capital in 1992 and closed in 1997, offered investors access to a
select group of Japanese financial futures markets. The program was designed to
capitalize on intermediate and long-term price movements and attempted to exit
the markets during periods when sustained trends were not identified. The
Delevered Yen Financial and Metals Profile, which began trading client capital
in 1995 and closed in 1996, was opened at the request of a client. This program
was traded at approximately one half of the position size in relation to account
equity of the traditional Financial and Metals Portfolio and was traded from the
perspective of the Japanese yen.
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
1. ALLIED IRISH CAPITAL MANAGEMENT, LTD.
Allied Irish is an Irish corporation registered with the CFTC as a commodity
trading advisor since January 1994 and is a member of the National Futures
Association in that capacity. Allied Irish's business office is located at
85 Pembroke Road, Ballsbridge, Dublin 4. Allied Irish is not affiliated with the
general partner, Dean Witter, or any other trading advisor for the partnerships.
As a commodity trading advisor, Allied Irish specializes in trading interest
rate, currency and equity index futures contracts as well as foreign exchange on
the interbank cash market. The primary focus of Allied Irish's futures trading
is on the U.S., European and Japanese futures exchanges with some participation
in other markets. Foreign exchange trading covers the major currencies.
Allied Irish began trading for Spectrum Strategic on May 1, 1999.
PRINCIPALS
Colm Doherty became a non-executive Director of Allied Irish in
January 1994. He joined AIB Group in September 1989 and in January 1994 he
became Head of Investment Banking in the Capital Markets Division. In August
1999, he became Group General Manager of AIB Capital Markets. He is responsible
for AIB's investment banking, international treasury and corporate lending
businesses. Mr. Doherty formerly worked with First Chicago, a commercial bank,
from July 1984 as Vice President and General Manager and prior to that he had a
career in Industrial Credit Corporation as a senior lending executive.
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Tony Gannon is a Director of Allied Irish and is an associated person. He
became registered as an associated person of Allied Irish in January 1994. He
graduated from University College, Dublin with a Bachelor of Commerce degree in
1987 and during 1987-1988 obtained a first class honors Master of Business
Studies (Finance) degree. He joined Gandon Securities Ltd., a securities house,
in July 1988, and traded and researched firstly short-term interest rates and
then international bonds. He was an associated person with Gandon Fund
Management Ltd., a trading advisor wholly-owned by Gandon Securities Ltd., from
July 1991 to September 1993. From November 1991 he traded client funds by
combining strict money management and risk management skills with a pattern
recognition trading style. Mr. Gannon was the sole trader for the Gandon Fund
Management Breakout Program from June 1992 to September 1993. He left Gandon
Securities and Gandon Fund Management in September 1993 and joined Allied Irish
that month. Mr. Gannon was a founding member of Allied Irish and traded a
portion of the Worldwide Financial Futures Program using a discretionary trend
following approach up to August 1998. He is now responsible for trading system
research and product development within Allied Irish.
Dr. Eileen Fitzpatrick became a non-executive Director of Allied Irish in
August 1997. She is the Investment Director of AIB Investment Managers Limited,
an investment advisor, a position she has held since September 1996. She had
previously worked as Head of International Equity Sales in Goodbody
Stockbrokers, a securities brokerage firm, from March 1995 to September 1996,
and in the same capacity at NCB stockbrokers, a securities brokerage firm, from
November 1993 to February 1995. Before that she had worked with AIB Investment
Managers as Head of International Equity Management from October 1988 to
October 1993.
Gerry Grimes is Managing Director of Allied Irish, an associated person of
Allied Irish and a member of the Institute of Bankers. He became registered as
an associated person of Allied Irish in January 1994. For 10 years up to
March 1988, Mr. Grimes was employed by the Central Bank of Ireland in the
following investment management positions: Chief Dealer, Money Market Division;
Chief Dealer, Management of Official External Reserves; and Chief Forex Dealer.
He represented Ireland on sub-committees of the European Central Bank Governors
Committee in Basle. He has experience in liquidity and interest rate management,
investment of external reserves ($5 billion) and their currency allocation and
the management of the Irish pound in the European Exchange Rate Mechanism.
Mr. Grimes joined Gandon Securities as a trader in March 1988 where he traded a
range of interest rate contracts, and was appointed a Director in October 1990.
He was an associated person with Gandon Fund Management from July 1991 to
September 1993. From mid 1991, he was responsible for the development of Gandon
Fund Management's activities including the marketing and development of managed
futures programs. He left Gandon Securities and Gandon Fund Management in
September 1993 and joined Allied Irish that month. Mr. Grimes was a founding
member of Allied Irish and is now responsible for the overall management,
development and control of Allied Irish's activities.
Chris Johns is Director of Investment Strategy at Allied Irish. He became a
Director of Allied Irish in August 1997. After receiving his B.A. (first class
honors) in Business Studies in 1980 he went on to complete his M.Sc. in
economics at Queen Mary College, University of London. Post-graduate research
and teaching at London and Cambridge Universities was followed by a two-year
posting at the National Institute of Economic and Social Research, producing
forecasts and analysis for the U.K. and world economies. In 1985 Mr. Johns moved
to the U.K. Treasury, working as a member of a team responsible for advising the
U.K. government on all matters relating to monetary and fiscal policy. In 1986
he joined UBS Phillips & Drew, initially as a U.K. economist, subsequently
becoming head of foreign exchange research and strategy. In 1989 he joined the
Investment Bank of Ireland, an investment bank, beginning a six-year period with
Bank of Ireland group, progressing to Chief Economist. In June 1995, he joined
ABN Amro Hoare Govett, an investment bank, in London as Chief European
Strategist.
Ian Kelly became Company Secretary of Allied Irish in August 1997. He is a
member of the Institute of Chartered Accountants of Ireland. He is Chief
Operating Officer of Allied Irish and is responsible for financial control,
compliance and the back-office operations of the company. He joined Allied Irish
in August 1997. Prior to joining Allied Irish, he worked from July 1994 to
August 1997 in Financial Control in AIB Capital Markets Plc., an investment
bank, and before that he worked with Coopers & Lybrand, an accountancy firm,
from 1987 to June 1994.
Maeliosa O'hOgartaigh became a non-executive Director of Allied Irish in
August 1997. Mr. O'hOgartaigh is a member of the Institute of Chartered
Accountants Ireland and is currently Financial Controller of AIB
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Capital Markets Plc., a position he has held since March 1995. He became a
principal of Allied Irish in May 1995 when he was appointed Company Secretary to
Allied Irish, a position now held by Mr. Ian Kelly. Prior to joining AIB in
November 1989, Mr. O'hOgartaigh worked with Arthur Andersen & Co., an
accountancy firm.
John Parsons became a Director of Allied Irish in January 1995. He graduated
from Queen's University, Belfast with a B.Sc. in Computer Science and Statistics
in 1986, and went on to obtain a Master of Business Administration degree from
Cardiff University, in 1987. Before joining Allied Irish, Mr. Parsons worked for
SBC Warburg in London as a proprietary trader in the Fixed Interest & Treasury
Division. Prior to that, he worked with the Bank of Ireland Group from
January 1989 to March 1993, initially as a Portfolio Manager with the Bank's
fund management group and ultimately as Head of European Government Bonds with
the Bank's Treasury operation. Mr. Parsons trades a portion of the worldwide
Financial Futures Program and he is the sole trader of the Equity Program
offered by Allied Irish.
Neil Ramsey became a non-executive Director of Allied Irish in
November 1997. He is Chairman and Chief Executive Officer of Ramsey Quantitative
Systems Inc., an investment adviser based in Kentucky, where he is responsible
for the leadership of quantitative strategies development and directing the
investments of all outside client capital allocated to the company. He is also
the founder and President of Ramsey Financial Inc., a Kentucky corporation which
is registered with the CFTC as a commodity pool operator, commodity trading
advisor and introducing broker, and is a member of the National Futures
Association. Ramsey Financial is engaged in the management of proprietary and
client investment capital through the allocation of funds to independent money
managers as well as managing a portion of the funds on a discretionary basis.
Prior to joining RFI he was a consultant with Boston Consulting Group where he
worked with domestic and foreign multinationals in developing corporate
strategies.
Michael Swift joined Allied Irish in August 1998 and is a Director of Allied
Irish. Mr. Swift is involved in product and market research. In 1984 he
graduated from University College, Galway, with a Bachelor of Commerce degree
and joined the Bank of Ireland Group in July 1984 where he worked in a number of
investment positions until July 1998. From June 1997 to July 1998 he held the
position of Head of Foreign Exchange and Euro Interest Rate Trading. Between
September 1994 and May 1997 he was Treasurer in the Bank's New York office,
where he was responsible for trading foreign exchange and US interest rate
markets. Prior to this he was Head of the Bank's Irish pound interest rate
trading desk from May 1993. Mr. Swift traded a portion of the Worldwide
Financial Futures Program between August 1998 and August 1999.
David Tease is a Director of Allied Irish and an associated person. He
became registered as an associated person of Allied Irish in January 1994. In
1975 he obtained a masters degree in agricultural economics from Queen's
University, Belfast. Initially, Mr. Tease worked as an Economist with the
Northern Ireland Department of Agriculture and then joined the Agricultural
Credit Corporation (now known as ACC Bank) a semi-state financial institution.
He became Treasury Manager there in 1984. In September 1985, Mr. Tease obtained
a Master of Business Administration degree from University College, Dublin. From
October 1986, he was employed by Citicorp Investment Bank, Dublin and was Vice
President in charge of trading Irish pound, UK pound and US dollar government
bonds. In June 1988 he was appointed Director of International Bond Trading with
Bank of Ireland Group Treasury where he was in control of the international bond
desk trading a range of international interest rate markets. In April 1989, he
joined Gandon Securities as Executive Director involved with securities trading.
Subsequently, Mr. Tease was made responsible for trading in international fixed
interest rate markets and strategic positioning in short-term interest rates and
currencies. He acted as an associated person with Gandon Fund Management from
July 1991 to September 1993. He was responsible for a team of interest rate
traders and during his last two years he was the major trader in Gandon Fund
Management's Global Financial program. He left Gandon Securities and Gandon Fund
Management in September 1993 and joined Allied Irish that month. Mr. Tease was a
founding member of Allied Irish and trades a portion of the Worldwide Financial
Futures Program.
Allied Irish and its principals may, from time to time, trade futures,
forwards, and options contracts for their own proprietary accounts.
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ALLIED IRISH'S TRADING STRATEGIES
Allied Irish offers three trading programs, but will only trade the
Worldwide Financial Futures Program for Spectrum Strategic. Trading for Spectrum
Strategic will be at four times the leverage Allied Irish normally applies for
the Worldwide Financial Futures Program. The two other trading programs offered
by Allied Irish are the Foreign Exchange Program and the Equity Index Program.
WORLDWIDE FINANCIAL FUTURES PROGRAM
The Worldwide Financial Futures Program is designed to provide returns using
a multi-trader trading approach on a broad range of financial instruments. The
capital is sub-allocated to a range of traders' trading styles, including a
portion traded by two individual traders, Mr. Tease and Mr. Parsons. The
allocation of capital to the individual traders may be altered at the discretion
of Allied Irish. A portion of the program is allocated and traded on a consensus
basis by the trading team. A further portion is traded using a systematic
approach. Diversification is enhanced because no overall house view is imposed
on the traders in the program, and this independence of operation is viewed as a
key strength.
Over several years Mr. Tease has established a knowledge of the main
industrial economies and their financial markets. This has been achieved by a
process of studying these economies through an ongoing review of relevant
research and by building up a substantial network of contacts with market
economists and opinion formers. Against this background understanding of the
main economies, Mr. Tease looks for trading opportunities which fit with his
fundamental view of where interest rates should be headed versus their current
levels. Account is taken of market technicals, especially momentum as expressed
in stochastic analysis, for the timing of trade execution, while resistance and
support levels as defined by congestion patterns help with appropriate entry and
exit points. Mr. Tease prefers to establish trades that prevail over a 1-3 week
time-frame, but this can depend on market conditions. Trades that produce a
substantial proportion of the expected return in a short time are usually
exited.
Mr. Parsons' approach to trading markets is based on a fundamental analysis
of economic, fiscal and monetary developments in the world's major economies.
The majority of his trading activity is European-based. He believes that the key
to successful trading in Europe is a clear understanding of German monetary
developments. Having compiled a set of expectations for the major interest rate,
equity, and foreign exchange markets, Mr. Parsons then looks for significant
levels of divergence relative to the market's expectations as a signal to enter
a particular position. He uses technical analysis to help identify trends and
trend changes as well as to seek to improve entry and exit levels. Mr. Parsons
sets profit/loss parameters for each trade on entry and adopts a two week view
to positioning in normal market conditions.
Since July 1999 a portion of the Worldwide Financial Futures Program is
traded on a strategic fundamental basis, which aims to seek out longer term
strategic moves in the foreign exchange, interest rate and equity markets. Given
that the objective of each trade is more long term than the other fundamental
elements of the program, this element can be subject to greater overall
volatility. This is traded on a committee basis by the trading team.
Since September 1999 a portion of the Worldwide Financial Futures Program is
traded on a technical basis. The system has been developed to be consistent with
Allied Irish's investment approach to financial markets. The system differs from
most trend following trading systems in that a profit objective is built into
the trade from inception and this has created a historical return profile
similar to Allied Irish's. The system utilizes a break-out oriented approach
that attempts to initiate trading at low risk entry points where the market has
a higher probability than average of participating in a medium to long term
trend. The concept of the system is to allow for participation in a market when
the volatility conditions of the market allow for the highest pre-conditional
probability of trend persistence.
The futures contracts currently traded in the Worldwide Financial Futures
Program include U.S., European and Asian interest rate, currency and stock index
contracts. For most contracts, options may also be used from time to time.
Options may be either bought or sold in this program.
It should be noted that in relation to currency futures on both the Chicago
Mercantile Exchange and the financial derivatives division of the New York
Cotton Exchange, Allied Irish may convert spot transactions to futures contracts
using the exchange for physicals mechanism.
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FOREIGN EXCHANGE PROGRAM
The Foreign Exchange Program specializes in trading the inter-bank foreign
exchange market. A fundamental assessment of market information is the main
factor underlying the trading approach. To this end an assessment of the
fundamental economic policy forces at work in different countries is first made.
This is related to socio-political factors in play. A judgment is then made on
how much of the economic and political influences are priced in following a
review of international capital flows. In this regard consultation is made with
a network of experts in the world's currency markets. Finally the price levels
are examined in detail to determine appropriate trade parameters.
EQUITY INDEX PROGRAM
The objective of the Equity Index Program is to achieve value added of 10%
and to maintain a Sharpe ratio of greater than one. This low-risk approach is
designed to minimize correlations with major global equity returns. The
underlying investment approach is broadly similar to that taken in Allied
Irish's other two programs in that the main inputs are an analysis of
macroeconomic and global political trends. For the Equity Index Program
additional analysis is conducted in terms of an extended equity valuation
framework. That framework involves a number of distinct steps.
RISK MANAGEMENT
The management of risk positions takes place at two levels within the
programs--at the overall program level by the trading controller and at the
position taking level where each trader uses his individual money management
skills.
Given that the programs involve a multi-trader approach, a program
controller role is adopted. Mr. Grimes is the trading controller for all three
programs. This role involves the following: assessing the performance and risk
of the programs from an overall level as distinct from a trader level;
monitoring the traders' adherence to the risk parameters for each program as set
out below; allocating equity between the individual traders of a program;
ensuring that the programs' overall objectives and those of individual traders
are compatible; controlling the operations of the order desk and ensuring the
positions are agreed between traders, order desk, back office and counterparty;
and liaising with clients and conveying their views, wishes and concerns to the
trading team.
To control the levels of exposure a daily end-of-day position report
including contract open positions, margin utilized by contract and margin
utilized by trader is produced for the Worldwide Financial Futures and Equity
Index Programs. The report for the Foreign Exchange Program looks at positions
in equivalent U.S. dollar amount versus underlying U.S. dollar equity invested.
For the Worldwide Financial Futures and Equity Index Programs, margin to
equity is used to control position size while in the Foreign Exchange Program a
gearing of equity is used to limit position size. Given the nature of the
programs offered and the experience of the trading team, a limit of 6% margin to
equity is normally applied for the Worldwide Financial Futures and Equity Index
Programs and a gearing of 3 times equity for the Foreign Exchange Program.
PAST PERFORMANCE OF ALLIED IRISH
The past performance information for the program traded by Allied Irish for
Spectrum Strategic is set forth below. Allied Irish trades the net assets of
Spectrum Strategic allocated to it pursuant to its Worldwide Financial Futures
Program at four times the leverage normally employed by that program.
Capsule A-1 is a pro forma of an account from Capsule A, adjusted for the
increased leverage employed by Allied Irish for Spectrum Strategic, and also
adjusted for the brokerage, management, and incentive fees applied to Spectrum
Strategic. The footnotes following Capsule A are an integral part of the
Capsule.
You are cautioned that the performance information set forth in the
following capsule performance summary is not indicative of, and may have no
bearing on, any trading results which may be attained by Allied Irish or
Spectrum Strategic in the future, since past performance is not a guarantee of
future results and other trading advisors will be investing funds of Spectrum
Strategic. In addition, Allied Irish trades the net assets allocated to it at
four times the leverage it normally applies to the Worldwide Financial Futures
Program, which will significantly increase volatility as well as profits and
losses. Spectrum Strategic cannot assure you that Allied Irish or the
partnership will make any profit or will be able to
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avoid incurring substantial losses. You should also note that interest income
may constitute a significant portion of a commodity pool's total income and may
generate profits where there have been realized or unrealized losses from
futures interests trading.
CAPSULE A
ALLIED IRISH CAPITAL MANAGEMENT, LTD.
WORLDWIDE FINANCIAL FUTURES PROGRAM
Name of commodity trading advisor: Allied Irish Capital
Management, Ltd.
Name of program: Worldwide Financial Futures Program
Inception of trading by commodity trading advisor: November 1993
Inception of trading in program: November 1993
Number of open accounts: 57
Aggregate assets overall: $1,305,230,000
Aggregate assets in program: $985,530,000
Largest monthly drawdown*: (2.11)%--(5/94)
Worst peak-to-valley drawdown: (2.11)%--(5/94)
1999 year-to-date return (11 months): 4.18%
1998 annual return: 5.06%
1997 annual return: 8.86%
1996 annual return: 12.39%
1995 annual return: 12.57%
1994 annual return: 3.47%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FOOTNOTES TO ALLIED IRISH CAPSULE A PERFORMANCE SUMMARY
"Inception of trading by commodity trading advisor" is the date on which
Allied Irish began trading client accounts.
"Inception of trading in program" is the date on which Allied Irish began
trading client accounts pursuant to the program shown.
"Number of open accounts" is the number of accounts directed by Allied Irish
pursuant to the program shown as of August 31, 1999.
"Aggregate assets overall" is the aggregate amount of assets in
non-proprietary accounts under the management of Allied Irish as of August 31,
1999 and includes notional equity. Notional equity represents the additional
amount of equity that exceeds the amount of equity actually committed to Allied
Irish for management.
"Aggregate assets in program" is the aggregate amount of assets in the
program specified as of August 31, 1999 and includes notional equity.
"Largest monthly drawdown" is the largest loss experienced by a single
account in the program in any calendar month during the most recent five
calendar years and year-to-date expressed as a percentage of the total equity in
the account and includes the month and year of such drawdown.
"Worst peak-to-valley drawdown" is the largest calendar month to calendar
month loss experienced by a single account in the program during the most recent
five calendar years and year-to-date expressed as a percentage of total equity
in the account and includes the months and years in which it occurred. For
example, a worst peak-to-valley drawdown in an account of "(10)%-(1/95-8/95)"
means that the peak-to-valley drawdown was 10% and lasted from January 1995 to
August 1995.
"Annual and year-to-date return" is computed on a compounded monthly basis
assuming reinvestment of accrued profits. The rate of return is computed by
reference to total equity in the program. These numbers represent the composite
performance of all accounts in the program, not the performance of any specific
account.
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CAPSULE A-1
ALLIED IRISH CAPITAL MANAGEMENT, LTD.
PRO FORMA OF AN ACCOUNT FROM CAPSULE A
WORLDWIDE FINANCIAL FUTURES PROGRAM
Largest monthly drawdown: (5.74)% - (11/98)
Worst peak-to-valley drawdown: (8.47)% - (10/98-1/99)
1999 year-to-date return (11 months): - %
1998 annual return: (0.93)%
1997 annual return: 15.05%
1996 annual return: 32.42%
1995 annual return: 23.35%
1994 annual return (2 months): (0.53)%
FOOTNOTES TO ALLIED IRISH CAPSULE A-1 PRO FORMA PERFORMANCE SUMMARY
Capsule A-1 above reflects pro forma rates of return, which are the result
of the general partner and Allied Irish making pro forma adjustments to the
actual past performance record of a client account managed pursuant to the
Worldwide Financial Futures Program, the trading program employed for Spectrum
Strategic by Allied Irish. The pro forma adjustments are an attempt to reflect
the current brokerage, management and incentive fees, and historical interest
income, and the degree of leverage applied for the portion of Spectrum
Strategic's net assets traded by Allied Irish, as opposed to the actual fees,
expenses and interest income and leverage applicable to the account.
Capsule A-1 must be read in conjunction with the description of Allied Irish
and its trading programs above. Furthermore, you must be aware that pro forma
rates of return have inherent limitations: (A) pro forma adjustments are only an
approximate means of modifying historical records to reflect aspects of the
economic terms of a commodity pool, constitute no more than mathematical
adjustments to actual performance numbers, and give no effect whatsoever to such
factors as possible changes in trading approach that might have resulted from
the different fee structure, interest income, leverage, and other factors
applicable to Spectrum Strategic as compared to Allied Irish's actual trading;
and (B) there are different means by which the pro forma adjustments could have
been made.
While the general partner believes that the information set forth in
Capsule A-1 is relevant to evaluating an investment in Spectrum Strategic, no
representation is or could be made that the capsule presents what the
performance results of the portion of Spectrum Strategic's net assets traded by
Allied Irish would have been in the past or are likely to be in the future. Past
results are not a guarantee of future results.
2. BLENHEIM INVESTMENTS, INC.
Blenheim is a New Jersey corporation which was formed in 1988 to provide
commodity trading advisory services to clients. Blenheim has been registered
with the CFTC as a commodity trading advisor and commodity pool operator since
March 1989, and is a member of the National Futures Association in such
capacities. Blenheim's address is Post Office Box 7242, Two Worlds Fair Drive,
Somerset, New Jersey 08875-7242.
PRINCIPALS
Mr. Willem Kooyker is the Chief Executive Officer, Chairman and sole
shareholder of Blenheim. He is registered with the CFTC as an associated person
of Blenheim and a member of the National Futures Association in that capacity.
He is a former member of the Board of Directors of the NY Coffee, Sugar and
Cocoa Exchange, a former president of the NY Cocoa Clearing Association, and a
former member of the NY Mercantile Exchange. He received a BA CUM LAUDE in
Economics from Baruch College in New York and an MBA in International Finance
and Economics from New York University.
Mr. Kooyker began his trading career in the international commodities
business in 1964 with Internatio-Muller in Rotterdam, The Netherlands, where
eventually he became managing director of the
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International Trading Group. He stayed in this position until 1981, when he
joined Commodities Corporation, Princeton, New Jersey, where he became
President. At the time, Commodities Corporation was an active fund management
company, operating predominantly in the futures markets. In October 1984, Mr.
Kooyker started a new company, Tricon Holding Company, Ltd., a joint venture
between Commodities Corporation and a group of Middle Eastern investors, which
was a trading and consulting company in the futures as well as the physicals
markets predominantly directed towards energy and industrial commodities. Tricon
currently remains only active in the forest products industry, where it operates
two sawmills in the western states of the United States. In January 1989, Mr.
Kooyker started Blenheim, an independent fund management company and an advisor
to several investment funds.
Concurrent, but separate from Blenheim, Mr. Kooyker is a majority owner, but
not an officer, of Derivatives Portfolio Management, L.L.C., a Delaware limited
liability company formed in 1993 to provide administrative, risk management, and
consulting services to institutions, commodity pool operators, and individual
fund managers engaged in the financial instruments, securities, and futures
markets as well as the cash trading business.
Mr. Kooyker is also sole shareholder and President of Gauss Mathematica
Corporation, a New Jersey corporation that develops and leases futures trading
systems. Blenheim and Gauss have entered into a license agreement that allows
Blenheim to use Gauss computerized trading systems for its clients.
In 1996, Mr. Kooyker became a 50% shareholder in The Thornton Group, L.L.C.,
a consulting company to entrepreneurial startup enterprises. Thornton performs
various investment banking functions.
Guy J. Castranova, has been the Secretary of Blenheim and Gauss since their
inceptions. Mr. Castranova is an Executive Vice President and Chief Operating
Officer of DPM, as well as a Vice President and Controller of Tricon.
Mr. Castranova has been with Tricon since October 1986 and is responsible for
the risk management of all physicals trading as well as the administration of
all general and consolidation accounting. Prior to joining Tricon,
Mr. Castranova was an accountant with two energy firms.
In 1980 Mr. Castranova graduated from Saint Joseph's University, with a BS
degree in Accounting. He is registered as an associated person and Principal of
Blenheim, Tricon and DPM and is a member of the National Futures Association in
those capacities.
Blenheim and its principals may, from time to time, trade futures, forwards,
and options contracts for their own proprietary accounts. Such trades may or may
not be in accordance with the Blenheim trading program described below.
THE BLENHEIM TRADING PROGRAM
Blenheim's trading program was developed by Mr. Kooyker. The objective of
Blenheim's Global Markets Strategy, which is employed on behalf of Spectrum
Strategic, is to capture substantial profits through the establishment of
strategic primary investment positions in a variety of markets, with an emphasis
in global fixed income, currency, stock indices, energy and other commodity
markets. Blenheim concentrates in those markets which, in its judgment and
discretion, have a high degree of liquidity and a wide spectrum of historical
price movement relative to other markets. Blenheim may, however, trade to a
limited extent in illiquid instruments for which market quotations are not
readily available. Diversification in an account's portfolio is a major
consideration in Blenheim's trading program. While many of its trades are made
on a short-term basis, Blenheim's basic strategy is to attempt to participate in
long-term major price movements.
As of November 30, 1999, Blenheim was managing approximately $48 million of
client assets pursuant to its trading program.
Blenheim relies primarily on its experience in trading, and utilizes
fundamental, geopolitical, and technical factors in its analysis and evaluation
of the markets. Blenheim has a team of economists, financial analysts and
traders that regularly monitor world-wide economic and political trends in order
to identify and evaluate possible market and price imbalances. Operating within
a global framework, long-term macroeconomic indicators are assessed on a
multinational, country-by-country and market specific basis. Factors such as
fiscal/monetary policies and capital flows across international borders are
evaluated
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for their potential impact on the equity, fixed income, currency and commodity
markets. Additionally, Blenheim's trading group utilizes the econometric signals
as well as numerous other market sentiment factors in an effort to take
advantage of short-term trading opportunities.
Within the realm of technical analysis, Blenheim has developed and will
continue to develop a series of systematic processes of investing that will
supplement the discretionary trading efforts. In the future, Blenheim may place
a greater emphasis on its non-discretionary technical analysis than on its
discretionary trading efforts. The goal of the system's strategy is to achieve
maximum risk adjusted profit potential. The strategy is driven not by one, but a
series of trading systems, that are traded in conjunction with one another.
Various techniques are employed in managing the portfolio and position
volatility. Blenheim generally initiates medium size positions at a market entry
level determined by it, rather than initially taking a larger position while
waiting to see the direction in which the market actually moves. This initial
position, generally considered the core strategic position, is typically
initiated upon Blenheim's determination of an unsustainable level of market
disequilibrium that has not been reflected in the current market price.
In addition to managing the individual positions, Blenheim will also
evaluate the positions within the context of an account's portfolio. Separate
strategic positions are evaluated for direct and indirect correlation
characteristics in order to further anticipate and manage portfolio volatility.
Despite these precautions, Blenheim's trading program may be extremely volatile
at times.
The trading strategy of Blenheim has evolved and will continue to do so
based on on-going research, testing of data and trading experience. Prior to
1991, Blenheim traded almost exclusively in the commodity markets, with a
particular emphasis on energy products. Since then, Blenheim has become quite
active in the global fixed income and currency markets. Blenheim may in its sole
discretion add to the portfolio additional commodity interests or cease trading
particular items. On rare occasions, Blenheim may withdraw from all markets.
Blenheim's diversified portfolio of approximately thirty-five markets are
actively traded on domestic and foreign markets through the use of futures,
forwards, options on futures, and over-the-counter transactions. Through
mid-1995, approximately 30% to 45% of equity, including notional funds, was
generally committed to margin. Recently the percentage has been between 25% and
30%. In the future the percentage committed may, from time to time, be
substantially higher or lower.
Blenheim may leverage the account of Spectrum Strategic differently than the
standard account using the Global Market Strategy, but will not leverage the
account at more than 50% above the leverage of a standard account.
3. WILLOWBRIDGE ASSOCIATES INC.
Willowbridge is a Delaware corporation organized in January 1988.
Willowbridge's main business address is 101 Morgan Lane, Suite 180, Plainsboro,
New Jersey 08536. Willowbridge has been registered with the CFTC as a commodity
pool operator and commodity trading advisor since May 1988 and is a member of
the National Futures Association in such capacities. In addition,
Doublewood, Inc., Union Spring Asset Management, Inc. and Limerick Financial
Corporation are registered commodity pool operators and commodity trading
advisors.
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PRINCIPALS
Mr. Philip L. Yang has been the sole shareholder, Director and President
since September 1, 1992, and also held those positions from the time he formed
Willowbridge in January 1988 through September 1989. Mr. Yang is registered as
an associated person of Willowbridge. He is individually registered with the
CFTC as a commodity pool operator and a commodity trading advisor and is a
member of the National Futures Association in such capacities. He is also a
Principal and an associated person of Doublewood, Union Spring and Limerick.
From 1983 through August 1988 and from October 1989 through August 1992,
Mr. Yang was a Senior Vice President at Caxton Corporation, a commodity trading
advisory firm, serving initially as Director of Research, where his research
concentration was in the development and application of computerized trading
models for a broad range of financial markets, and later as Director of
Commodity Trading. Mr. Yang obtained a bachelor's degree with honors from the
University of California at Berkeley, where he was inducted into Phi Beta Kappa.
He received his master's degree from the Wharton School of the University of
Pennsylvania. He co-authored with Richard G. Faux, Jr. "Managed Futures: The
Convergence with Hedge Funds," a chapter in EVALUATING AND IMPLEMENTING HEDGE
FUND STRATEGIES, a book published in 1996 by Euromoney Publications.
Mr. Michael Y. Gan has been the Executive Vice-President since September 1,
1992. Mr. Gan is registered as an associated person of Willowbridge. He is
individually registered with the CFTC as a commodity pool operator and a
commodity trading advisor and is a member of the National Futures Association in
such capacities. He is also a Principal and an associated person of Doublewood
and Union Spring. Mr. Gan was the sole shareholder, Director and President of
Willowbridge from October 1989 through August 1992. From 1983 to 1989, he worked
in the foreign exchange trading group at Marine Midland Bank in New York. In
this capacity, Mr. Gan was responsible for research into technical analysis, as
well as proprietary trading for the firm in both currency futures and options.
He had been promoted to Assistant Vice President prior to his resignation.
Mr. Gan graduated SUMMA CUM LAUDE from the University of the Philippines with a
B.S. in Chemical Engineering and subsequently graduated with honors from the
Wharton School of the University of Pennsylvania with an M.B.A. in Finance.
Ms. Theresa C. Morris is the Senior Vice President. Ms. Morris has been
employed by Willowbridge since its inception in August 1988, and is registered
as an associated person of Willowbridge. Ms. Morris is also a Principal and an
associated person of Doublewood, Union Spring and Limerick. Ms. Morris oversees
administration, operations and compliance at Willowbridge. Prior to her current
duties, Ms. Morris was responsible for analyzing and trading the technical
signals generated by the computerized trading models. Ms. Morris has over twenty
years of experience in the futures and financial industry. She attended
Brookdale College, majoring in international business.
Mr. Richard G. Faux, Jr. has been Executive Director since April 1995. He is
registered as an associated person and a Principal of Willowbridge. He is also
an associated person of Doublewood, and President, Principal, and an associated
person of Union Spring. Mr. Faux co-founded MC Baldwin Financial Company in 1989
and served as its Co-Chief Executive until April 1995, at which time MC Baldwin
was an international trading manager which developed futures funds for its
partner, Mitsubishi Corporation, and other institutional clients. Prior to
forming MC Baldwin, Mr. Faux was President of Merrill Lynch Options/Futures
Management Inc., a futures fund subsidiary of Merrill Lynch. Before Mr. Faux's
joining Merrill Lynch in 1985, it had raised only $13 million in futures funds.
When he left, the company had raised $930 million, including one of the first
multi-advisor futures funds. Previously, he spent four years at Thomas McKinnon
Securities, Inc. where he helped develop futures funds, including one of the
first financial futures funds. Earlier, Mr. Faux spent ten years at Kuhn Loeb &
Co. (now Lehman Brothers). He is a graduate of Brown University and the Columbia
University Graduate School of Business.
Mr. John C. Plimpton is Director of Investment Services. He joined
Willowbridge Associates Inc. in February 1995 and is responsible for marketing
the firm's various investment strategies as well as maintaining client service.
Mr. Plimpton is registered as an associated person and a Principal of
Willowbridge. His prior futures industry experience was with Beacon Management
Corporation (USA), a commodity trading advisor and commodity pool operator,
where he held a marketing position specializing in the Japanese institutional
market from January 1989 to December 1990. From January 1991 to August 1994, as
a representative of Prudential Life Insurance, and from August 1994 to present,
as sole shareholder and President of Plimpton Financial Group, a financial
services company, Mr. Plimpton
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concentrated on insurance and benefit services for wealthy families and venture
businesses. Since 1985, Mr. Plimpton has been involved in a number of privately
held businesses, as well as serving as director of Inolex Chemical Company, a
speciality chemical company owned by his family. He earned his B.A. degree in
Economics from the University of Chicago and his M.B.A. in Corporate Finance and
Corporate Accounting from the William E. Simon School of Management at the
University of Rochester.
Mr. James J. O'Donnell is a Vice President. He oversees Willowbridge's
computer and information needs, including trading information systems,
accounting information systems and support for ongoing research of new
computerized trading systems and effectiveness testing of existing trading
systems. Mr. O'Donnell has been employed by Willowbridge since September 1,
1992. From June 1987 through August 1992, Mr. O'Donnell was Manager of Computer
Information Systems at Caxton Corporation. From April 1979 through May 1987,
Mr. O'Donnell was manager of Research Information Systems at Commodities
Corporation. Prior to that, he was employed by Penn Mutual from September 1973
through March 1979 as Senior Programmer Analyst. He is a graduate of LaSalle
University with a B.A. in mathematics.
Mr. Steven R. Crane is a Vice President. He oversees the accounting and
financial reporting for Willowbridge. Mr. Crane has been employed by
Willowbridge since April 1993. Prior to that, he was employed by Caxton
Corporation from April 1992 to April 1993 as a Senior Accountant. From
September 1989 through April 1992, Mr. Crane worked as a Senior Auditor for
Deloitte & Touche LLP. Mr. Crane is a Certified Public Accountant and a member
of the AICPA. He graduated MAGNA CUM LAUDE from North Carolina State University
with a B.A. in accounting.
Willowbridge, its principals and their families, its employees, and its
affiliates, have traded, and may continue to trade, futures, forwards, and
options contracts for their own accounts. Such trades may or may not be in
accordance with the Willowbridge trading strategies described below.
THE WILLOWBRIDGE TRADING PROGRAM
Willowbridge's trading strategies are available only through one of its five
"investment programs." An investment program consists of one or more trading
strategies or a combination thereof. Willowbridge currently offers: the Select
Investment Program; the Currency Investment Program; the Primary Investment
Program; the Currency, Financials and Metals Investment Program; and the VAT
Investment Program. Set forth below is a brief description of the Select
Investment Program which is utilized by Willowbridge for Spectrum Strategic. The
Select Investment Program allows the general partner to determine the allocation
of its funds among one or more of seven trading strategies. As of the date of
this prospectus, of the Spectrum Strategic assets allocated to Willowbridge, all
have been allocated to the XLIM Trading Approach.
XLIM, which was first applied in February 1988, is traded on a discretionary
basis by Mr. Yang. Trading decisions are based primarily on Mr. Yang's analysis
of technical factors, fundamentals and market action. XLIM trades are selected
from a wide variety of futures contracts, forwards, spots and options on U.S.
and international markets, including but not limited to, financial instruments,
currencies, precious and base metals and agricultural commodities. Mr. Yang
reserves the right to change the portfolio composition of XLIM. While trading
decisions are based on fundamental and technical market analysis, of equal
importance is the anecdotal information Mr. Yang pieces together about specific
market opportunities. He then develops expectations and formulates
reward-to-risk judgments about the markets. Mr. Yang emphasizes only a small
number of core positions at any time, selecting those for which he believes the
reward-to-risk is the most favorable and for which he believes he has an
advantage over conventional market expectations. Only a small amount of capital
is initially risked; incremental positions are then added as open equity profits
are built up. Likewise the additional positions are liquidated if the market
moves against them. It is intended that approximately 15-40% of the assets under
management pursuant to the XLIM Trading Approach will normally be committed as
margin for trading, but from time to time the percentage of assets committed may
be substantially more or less. XLIM's historical rates of return and drawdown
information accompany its performance capsules.
As of November 30, 1999, Willowbridge was managing approximately
$358 million of client assets pursuant to the XLIM Trading Approach and
approximately $751 million of client assets in its other programs.
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The other strategies which in the future may be available to Spectrum
Strategic under the Select Investment Program include the five Willowbridge
Trading Systems and the MTech discretionary trading approach of Mr. Gan.
The Vulcan system is a computerized version of a systematic, technical
charting system. The model uses the concepts of pattern recognition,
support/resistance levels and counter-trend liquidations in making trading
decisions. Positions are generally held for 10 to 15 trading days.
The Argo system, like Vulcan, is a computerized version of an experienced
chartist trader. However, Argo has a relatively slower time horizon than Vulcan
and its focus is primarily on major, long-term price moves. It is intended that
Argo's positions will generally be held from 20 to 30 trading days.
The Titan system is a technical trend-following system coupled with a
counter-trend mechanism for adjusting position size. Unlike Vulcan, Titan
applies various technical factors in an effort to monitor the overall market
environment in order to recognize major trends. The number of days the system
will hold a position, based on an average of the number of days the initial base
position would be held combined with the number of days any additional positions
would be held, is generally 15 days.
The Rex system is an options trading system which uses proprietary
statistical analyses to determine whether an option for a particular market is
intrinsically cheap or expensive. The Rex model attempts to purchase underpriced
options and sell overpriced options. For risk control, the Rex model uses a
variety of proprietary rules based on volatility, price direction, time decay
and net-delta levels.
The Siren system incorporates real-time price information to determine
situations when price is moving away from market value. Siren can best be
characterized as a top and bottom picking model which attempts to determine
patterns of market activity that often signal a major change in price direction.
Siren's time frame is generally 18 to 25 trading days.
As the trading programs used by Willowbridge are proprietary and
confidential, the discussion above is necessarily of a general nature and is not
intended to be exhaustive. Willowbridge reserves the right to alter its trading
programs without the prior approval of the general partner.
Pursuant to a licensing agreement between Caxton Corporation and
Willowbridge, Willowbridge has been granted the sole and exclusive right to use
the five Systems described above. The licensing agreement will be continued
until December 31, 2001 and will be renewed for successive one year terms unless
either Willowbridge or Caxton has given 90 days' notice to the other prior to
such date of its intention not to renew. The licensing agreement may also be
terminated in the case of an uncured material breach or in extraordinary
situations. Willowbridge pays royalties to Caxton based on fees generated by
Willowbridge's trading.
If Willowbridge's five Systems discussed above are no longer available to
Willowbridge (because of licensing arrangements), Willowbridge may offer only
the XLIM and the MTech Trading Approaches in its Select Investment Program.
The MTech Trading Approach, which commenced trading January 1991, is a
highly discretionary and judgmental trading approach relying primarily on
Mr. Gan's subjective analysis of the markets. Trading decisions are made on the
basis of technical as well as fundamental analysis. MTech currently trades in
the U.S. and international futures, forward, spot and options markets. Mr. Gan
reserves the right to change the portfolio composition of MTech.
For each of the five Systems, risk is managed on a market by market level as
well as on an overall portfolio level. On the market level, risk is managed
primarily by utilizing proprietary volatility filters. When these filters detect
a certain excessive level of volatility in the markets traded, they will signal
that the Systems should no longer be trading in the markets in which the filters
have detected excessive volatility. In this way, the Systems do not participate
in markets in which there are extremes in market action. On the portfolio level,
risk is managed by utilizing a proprietary portfolio cutback rule. When
cumulative profits have reached a certain level, this rule determines that
positions should be halved across the entire portfolio. In this way, risk is
reduced while allowing the Systems to continue to participate in the markets,
albeit at a reduced level. After the portfolio has been traded at half, the rule
will then determine when to increase positions to again trade at the full level.
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MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
RXR, INC.
RXR, a New York corporation, was organized in June, 1983. RXR's address is
Financial Centre, 695 East Main Street, Suite 102, Stamford, Connecticut 06901.
RXR has been registered as a commodity trading advisor since July 1984 and as a
commodity pool operator since 1983, and is a member of the National Futures
Association in such capacities.
RXR is a wholly-owned subsidiary of The RXR Group Inc., a Delaware
corporation, which acts as a holding company, also holding all of the stock of
RXR Securities Inc. and RXR Capital Management Inc. RXR Securities is registered
with the CFTC as an introducing broker and is also registered as a securities
broker/dealer with the SEC. RXR Securities is a member of the NASD and of the
National Futures Association. RXR Capital is registered with the CFTC as a
commodity trading advisor and commodity pool operator, is a member of the
National Futures Association in such capacities, and is registered as an
investment adviser with the SEC.
PRINCIPALS
Mr. Mark Rosenberg is the founder and Chief Executive Officer of RXR. He is
also Chairman of the Investment Policy Committee, and a Director of each of RXR,
RXR Capital, RXR Group and RXR Securities.
RXR and RXR Capital were founded in 1983 and 1985, respectively, with the
goal of establishing a money management company that would utilize futures,
options and derivatives in the development of innovative investment and risk
management programs for both institutional and fund clients.
Mr. Rosenberg serves as a member of the Board of Directors of the Futures
Industry Association. He is an arbitrator for the National Futures Association
and a member of the Financial Advisory Boards of both the Chicago Mercantile
Exchange and New York's Commodity Exchange, Inc.. Mr. Rosenberg is also a
Director of the Foundation of Finance and Banking Research. Prior to forming RXR
in 1983, Mr. Rosenberg spent 14 years in the securities and futures industry,
most of those years with Merrill Lynch, Pierce, Fenner & Smith Incorporated, and
later at Prudential-Bache Securities, Inc., where he headed a group that
specialized in institutional hedging and alternative asset management.
Mr. Peter A. Hinrichs is the Chief Financial Officer, Treasurer and a
Director of RXR, RXR Capital, RXR Group and RXR Securities. He has been with RXR
since its founding in 1983. Mr. Hinrichs is a member of the Investment Policy
Committee and has responsibilities for Administration, Operations, Information
Technology, Human Resources and Facilities Management for RXR and its
affiliates. Prior to joining RXR, Mr. Hinrichs spent several years in trading,
operations, and administration at Merrill Lynch Futures Inc. and later at
Prudential Bache Securities.
Mr. Hinrichs graduated from Curry College in 1981 with a Bachelor of Science
degree in business management. He is a member of the Board of Directors of
Fountain House Inc., a non-profit rehabilitation center for the mentally ill and
is an active fund raiser for a number of charitable organizations.
Mr. James F. Tomeo is Executive Vice President and is a Director of the RXR
Group and of RXR. He has been with the firm since 1986. Mr. Tomeo is a member of
the Investment Policy Committee and is responsible for the firm's strategic
planning and project development. He is the former Chairman of the International
Committee of the Managed Funds Association and is the U.S. representative to the
Education and Research Committee of the Alternative Investment Management
Association based in Europe. Before joining RXR, Mr. Tomeo worked for Donaldson,
Lufkin and Jenrette as an alternative investment consultant and for the LTV
Corporation in New York. Mr. Tomeo graduated from Bucknell University in 1980
with a Bachelor of Science degree in business administration, the University of
Hartford in 1987 with a Master of Business Administration degree, and the
Institute of International Studies and Training (Japanese business study
program) in 1988. He also studied international finance and corporate markets at
New York University.
Principals and employees of RXR are not permitted to trade futures, options
on futures or forward contracts for their own accounts. Principals and employees
are, however, permitted to invest in funds traded by RXR.
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RXR'S INVESTMENT PHILOSOPHY
RXR uses a global macro investment philosophy which has its roots in Modern
Portfolio Theory and the design of efficiently allocated portfolios. In the
global equity and fixed income areas, RXR analyzes various fundamental
information from the world economies such as growth data, labor wage rates,
central bank interest rate policy and inflation, to determine its approach to
the markets. In the foreign exchange and commodity components, RXR analyzes
price data to determine profit and risk potential. A proprietary asset
allocation model is used to adjust exposure among approximately 40 markets so
that no one market or sector can dominate performance. The trading program
utilized for Spectrum Global Balanced was designed to provide investors with a
global investment alternative. Through the controlled use of futures and forward
contracts, RXR manages both U.S. and non-U.S. capital markets, currency, and
commodity exposure in a single, integrated portfolio.
As of November 30, 1999, RXR was managing approximately $351.2 million of
client assets pursuant to its Balanced Portfolio Program and approximately
$356.3 million in all of its programs.
RESEARCH AND DEVELOPMENT
Research and development calls on the talents of personnel from several
areas within the company. Under the leadership of its Board of Directors, the
process begins with research. RXR has developed macro-economic and technical
models that can detect price dislocations resulting from daily market activity
and major changes in global business cycles. Using this information, portfolio
managers construct investment portfolios that address the specific actuarial
assumptions of their clients.
The development of the trading program utilized for Spectrum Global Balanced
stems from RXR's work managing multi-asset portfolios for its institutional
clients. In 1986, RXR began managing a portfolio called the Institutional
Balanced Portfolio Program, composed of US stock, bond, and non-US financial and
commodity interests. Its objective was capital appreciation with controlled
volatility, a concept pioneered by Professor John Lintner of Harvard University,
who conducted research on the addition of managed futures to portfolios of U.S.
stocks and bonds. Effective June 1, 1998, RXR broadened the hedged equity and
fixed income components to include participation in the world's major developed
capital markets.
No representation is made and no guarantee is given that Spectrum Global
Balanced's objective will be realized or that RXR will achieve any particular
level of performance or amount of profits in its trading for Spectrum Global
Balanced's account. Losses incurred in the global and tangible assets component
could cause Spectrum Global Balanced's account to substantially underperform
accounts managed by asset allocation systems which do not include a managed
futures component. In addition, because the general partner has instructed RXR
to manage Spectrum Global Balanced's account at 1.4 times the amount of leverage
it would normally apply in managing the actively managed component of an IBP
Program account, the performance results achieved for Spectrum Global Balanced
by RXR may be more volatile than an IBP Program account concurrently managed by
RXR and its affiliates.
Prospective investors must recognize not only that the foregoing discussion
attempts to present only the most basic framework describing the trading program
employed for Spectrum Global Balanced, but also due to the proprietary and
confidential nature of all trading approaches, any description will inevitably
be general in nature. Furthermore, RXR's trading methods are continually
evolving, as are the markets themselves.
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
1. JOHN W. HENRY & COMPANY, INC.
JWH makes trading decisions for Spectrum Currency pursuant to the
International Foreign Exchange Program. The International Foreign Exchange
Program, which began trading client capital in August 1986, seeks to identify
and capitalize on intermediate-term movements in a broad range of both major and
minor currencies primarily trading on the interbank market. Positions are taken
as outrights against the U.S. dollar, or non-dollar cross rates. This program
uses the three-phase forex investment style. For a detailed
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description of JWH, its principals, and trading systems, including the
International Foreign Currency Program, see "The Trading Advisors--Morgan
Stanley Dean Witter Spectrum Technical L.P.--3. John W. Henry & Company, Inc."
on page - .
PAST PERFORMANCE OF JWH
The following are the capsule performance records of all accounts managed by
JWH and JWH Investments, Inc., an affiliate of JWH which has ceased operations.
All performance information is current as of October 31, 1999. The notes on
page - are an integral part of these capsules.
PERFORMANCE OF THE EXCLUSIVE FUND ACCOUNTS
Pursuant to JWH's Strategic Allocation program, which is currently subject
to an exclusivity arrangement with one client operating two funds (the
"Exclusive Fund Accounts"), JWH makes various discretionary trading adjustments
for the accounts of those funds, including selection of programs, ongoing
allocations and reallocations of fund assets among the investment programs and
periodic adjustments to the position size in relation to account equity. As a
result of a change made to these accounts on May 8, 1998, these accounts have
traded differently from the other accounts in the respective JWH investment
programs. For details concerning the Exclusive Fund Account capsule performance
records for these programs, see page - . JWH believes that because these
modified programs have been employed as part of the Strategic Allocation
Program, which is now available on a limited basis, the capsule performance
records are the most representative performance record of these programs as they
have been traded in the Strategic Allocation Program. The capsule performance
records reflect the performance of these accounts from May 8, 1998.
You are cautioned that the performance information set forth in the
following capsule performance summaries are not indicative of, and may have no
bearing on, any trading results which may be attained by JWH or Spectrum
Currency in the future, since past performance is not a guarantee of future
results and another trading advisor will be investing funds of Spectrum
Currency. In addition, Spectrum Currency cannot assure you that JWH or the
partnership will make any profit or will be able to avoid incurring substantial
losses. You should also note that interest income may constitute a significant
portion of a commodity pool's total income and may generate profits where there
have been realized or unrealized losses from futures interests trading.
JOHN W. HENRY & COMPANY, INC.
INTERNATIONAL FOREIGN EXCHANGE PROGRAM
Name of commodity trading advisor: John W. Henry & Company, Inc.
Name of program: International Foreign Exchange Program
Inception of trading by commodity trading advisor: October 1982
Inception of trading in program: August 1986
Number of open accounts: 4
Aggregate assets overall: $2.0 billion
Aggregate assets in program: $75.7 million
Largest monthly drawdown: (8.3)%--(5/97)
Worst peak-to-valley drawdown: (35.9)%--(9/92 - 1/95)
1999 year-to-date return (10 months): (9.7)%
1998 annual return: 13.9%
1997 annual return: 71.1%
1996 annual return: 3.7%
1995 annual return: 16.9%
1994 annual return: (6.3)%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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JOHN W. HENRY & COMPANY, INC. PROGRAMS
JANUARY 1, 1994 - OCTOBER 31, 1999
<TABLE>
<CAPTION>
GLOBAL
FINANCIAL AND ORIGINAL INVESTMENT DIVERSIFIED GLOBAL FINANCIAL G-7 CURRENCY
METALS PORTFOLIO PROGRAM PORTFOLIO PORTFOLIO PORTFOLIO
NAME OF PROGRAM: ---------------- ------------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Inception of Client Account Trading in
Program: October 1984 October 1982 June 1988 June 1994 February 1991
Number of Open Accounts: 26 18 8 4 4
Assets Managed in Program: $824,980,639 $248,056,550 $117,761,608 $73,245,908 $35,574,260
Assets Managed in JWH: $2.0 billion $2.0 billion $2.0 billion $2.0 billion $2.0 billion
Worst Monthly Decline on an Individual (10.1)% (16.3)% (15.0)% (19.5)% (12.3)%
Account Basis: (2/96) (10/94) (10/99) (11/94) (11/94)
Worst Peak-to-Valley Decline on an (30.5)% (31.0)% (24.1)% (48.9)% (31.4)%
Individual Account Basis: (6/94-1/95) (7/94-10/94) (6/95-10/95) (7/94-1/95) (10/92-1/95)
% % % % %
--------------- --------------- --------------- --------------- ---------------
1999 Compound Annual Rate of Return
(10 months): (13.6) (12.9) (13.0) (1.2)
1998 Compound Annual Rate of Return: 7.2 10.8 23.5 9.9 (4.8)
1997 Compound Annual Rate of Return: 15.2 5.7 3.3 4.9 21.0
1996 Compound Annual Rate of Return: 29.7 22.6 26.9 32.4 14.5
1995 Compound Annual Rate of Return: 38.5 53.2 19.6 86.2 32.2
1994 Compound Annual Rate of Return: (5.3) (5.7) 10.1 (37.7) (4.9)
(7 mos.)
<CAPTION>
JWH GLOBAL- JWH
ANALYTICS-REGISTERED TRADEMARK- GLOBAL
FAMILY OF ANALYTICS-REGISTERED TRADEMARK- INTERNATIONAL CURRENCY
PROGRAMS* 99 AND BOND PORTFOLIO
NAME OF PROGRAM: ------------------------------- ------------------------------- ----------------------
<S> <C> <C> <C>
Inception of Client Account Trading in
Program: June 1997 March 1999 January 1993
Number of Open Accounts: 0 1 0
Assets Managed in Program: $0 $6,995,731 $0
Assets Managed in JWH: 2.0$billion $2.0 billion $2.0 billion
Worst Monthly Decline on an Individual (5.0)% (9.4)% (7.8)%
Account Basis: (4/98) (10/99) (7/94)
Worst Peak-to-Valley Decline on an (5.3)% (15.1)% (23.6)%
Individual Account Basis: (4/98-5/98) (7/99-10/99) (7/94-1/95)
% % %
-------------- --------------- ---------------
1999 Compound Annual Rate of Return (12.3)
(10 months): N/A (8 mos.) (0.2)
1998 Compound Annual Rate of Return: (3.6) N/A 16.1
(5 mos.)
1997 Compound Annual Rate of Return: 17.6 N/A 17.0
(7 mos.)
1996 Compound Annual Rate of Return: N/A N/A 19.9
1995 Compound Annual Rate of Return: N/A N/A 36.5
1994 Compound Annual Rate of Return: N/A N/A (2.3)
</TABLE>
- ---------------------------
*This performance data is only through May 7, 1998. The program continues to
operate, but only as a portion of a special JWH multi-program trading strategy
that is currently the subject of an exclusivity agreement. For performance
information subsequent to May 7, 1998, see page - for the Exclusive Fund
Accounts.
The Notes to JWH's Programs on page - are an integral part of this table.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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JOHN W. HENRY & COMPANY, INC. PROGRAMS
JANUARY 1, 1994 - OCTOBER 30, 1999 (CONT'D)
<TABLE>
<CAPTION>
DELEVERED YEN
DENOMINATED
THE WORLD FINANCIAL WORLDWIDE BOND FINANCIAL AND
PERSPECTIVE DOLLAR PROGRAM* PROGRAM* METALS PROFILE INTERRATE-TM-
NAME OF PROGRAM: ------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
October 1995; December 1988;
Inception of Client Account Trading in ceased trading ceased trading
Program: April 1987 July 1996 July 1996 12/96 7/96
Number of Open Accounts: 2 0 0 0 0
Assets Managed in Program: $26,095,533 $0 $0 $0 $0
Assets Managed in JWH: $2.0 billion $2.0 billion $2.0 billion $2.0 billion $2.0 billion
Worst Monthly Decline on an Individual (11.7)% (8.4)% (3.8)% (3.2)% (3.1)%
Account Basis: (2/94) (5/97) (4/97) (2/96) (11/94)
Worst Peak-to-Valley Decline on an (25.9)% (11.6)% (6.2)% (5.1)% (19.7)%
Individual Account Basis: (7/94-1/95) (5/97-9/97) (12/96-5/97) (2/96-8/96) (9/92-11/93)
% % % % %
--------------- --------------- --------------- --------------- ---------------
1999 Compound Annual Rate of Return
(11 months): (4.6) N/A N/A N/A N/A
1998 Compound Annual Rate of Return: 7.2 (4.9) (0.4) N/A N/A
(5 mos.) (5 mos.)
1997 Compound Annual Rate of Return: 10.4 6.8 9.5 N/A N/A
1996 Compound Annual Rate of Return: 40.9 10.6 17.8 9.4 5.79
(6 mos.) (6 mos.) (7 mos.)
1995 Compound Annual Rate of Return: 32.2 N/A N/A 0.2 5.19
(3 mos.)
1994 Compound Annual Rate of Return: (15.2) N/A N/A N/A 3.42
<CAPTION>
JWHII
KT DIVERSIFIED FINANCIAL AND METALS
PROGRAM PORTFOLIO
NAME OF PROGRAM: --------------- --------------------
<S> <C> <C>
January 1984;
Inception of Client Account Trading in ceased trading September 1991;
Program: 2/94 ceased trading 7/95
Number of Open Accounts: 0 0
Assets Managed in Program: $0 $0
Assets Managed in JWH: $2.0 billion $2.0 billion
Worst Monthly Decline on an Individual (19.6)% (4.8)%
Account Basis: (8/93) (7/94)
Worst Peak-to-Valley Decline on an (33.9)% (12.2)%
Individual Account Basis: (8/93-2/94) (7/94-12/94)
% %
--------------- ---------------
1999 Compound Annual Rate of Return
(11 months): N/A N/A
1998 Compound Annual Rate of Return: N/A N/A
1997 Compound Annual Rate of Return: N/A N/A
1996 Compound Annual Rate of Return: N/A N/A
1995 Compound Annual Rate of Return: N/A 30.3
(7 mos.)
1994 Compound Annual Rate of Return: (14.0) (0.8)
(2 mos.)
</TABLE>
- ---------------------------
*This performance data is only through May 7, 1998. The program continues to
operate, but only as a portion of a special JWH multi-program trading strategy
that is currently the subject of an exclusivity agreement. For performance
information subsequent to May 7, 1998, see page - for the Exclusive Fund
Accounts.
The Notes to JWH's Programs on page - are an integral part of this table.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
103
<PAGE>
JOHN W. HENRY & COMPANY, INC. PROGRAMS
EXCLUSIVE FUND ACCOUNTS
MAY 8, 1998 - OCTOBER 31, 1999
<TABLE>
<CAPTION>
GLOBAL
DIVERSIFIED
FINANCIAL AND METALS ORIGINAL INVESTMENT PORTFOLIO GLOBAL FINANCIAL
PORTFOLIO EXCLUSIVE PROGRAM EXCLUSIVE EXCLUSIVE PORTFOLIO EXCLUSIVE
NAME OF PROGRAM: -------------------- ------------------- --------------- -------------------
<S> <C> <C> <C> <C>
Inception of Client Account Trading in
Program: May 1998 May 1998 May 1998 May 1998
Number of Open Accounts: 2 2 2 2
Assets Managed in Program: $64,356,955 $99,834,416 $49,603,167 $81,655,009
Assets Managed in JWH: $2.0 billion $2.0 billion $2.0 billion $2.0 billion
Worst Monthly Decline on an Individual (8.7)% (12.0)% (14.0)% (8.8)%
Account Basis: (10/99) (11/98) (10/99) (10/99)
Worst Peak-to-Valley Decline on an (19.2)% (13.9)% (18.4)% (11.6)%
Individual Account Basis: (7/99-10/99) (7/99-10/99) (8/99-10/99) (7/99-10/99)
% % % %
--------------- --------------- --------------- ---------------
1999 Compound Annual Rate of Return
(10 months): (12.8) (7.9) (8.3) (1.1)
1998 Compound Annual Rate of Return: 33.5 20.2 39.7 18.4
(8 mos.) (8 mos.) (8 mos.) (8 mos.)
1997 Compound Annual Rate of Return: N/A N/A N/A N/A
1996 Compound Annual Rate of Return: N/A N/A N/A N/A
1995 Compound Annual Rate of Return: N/A N/A N/A N/A
1994 Compound Annual Rate of Return: N/A N/A N/A N/A
<CAPTION>
JWH GLOBAL-
ANALYTICS-TM-
G-7 CURRENCY WORLDWIDE BOND FAMILY OF DOLLAR PROGRAM
PORTFOLIO EXCLUSIVE PROGRAM EXCLUSIVE PROGRAMS EXCLUSIVE EXCLUSIVE
NAME OF PROGRAM: ------------------- ----------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Inception of Client Account Trading in
Program: May 1998 May 1998 May 1998 May 1998
Number of Open Accounts: 2 2 2 2
Assets Managed in Program: $57,106,464 $29,080,585 $91,809,696 $29,649,368
Assets Managed in JWH: $2.0 billion $2.0 billion $2.0 billion $2.0 billion
Worst Monthly Decline on an Individual (8.6)% (7.0)% (9.2)% (7.2)%
Account Basis: (11/98) (10/98) (10/99) (11/98)
Worst Peak-to-Valley Decline on an (11.9)% (7.4)% (13.5)% (7.7)%
Individual Account Basis: (11/98-1/99) (10/98-11/98) (7/99-10/99) (11/98-1/99)
% % % %
--------------- --------------- --------------- ---------------
1999 Compound Annual Rate of Return
(10 months): 9.8 (3.1) (6.6) 7.3
1998 Compound Annual Rate of Return: 0.7 25.9 25.5 2.7
(8 mos.) (8 mos.) (8 mos.) (8 mos.)
1997 Compound Annual Rate of Return: N/A N/A N/A N/A
1996 Compound Annual Rate of Return: N/A N/A N/A N/A
1995 Compound Annual Rate of Return: N/A N/A N/A N/A
1994 Compound Annual Rate of Return: N/A N/A N/A N/A
<CAPTION>
INTERNATIONAL
FOREIGN EXCHANGE
PROGRAM
EXCLUSIVE
NAME OF PROGRAM: ----------------
<S> <C>
Inception of Client Account Trading in
Program: April 1999
Number of Open Accounts: 2
Assets Managed in Program: $25,763,276
Assets Managed in JWH: $2.0 billion
Worst Monthly Decline on an Individual (6.3)%
Account Basis: (7/99)
Worst Peak-to-Valley Decline on an (10.8)%
Individual Account Basis: (4/99-10/99)
%
---------------
1999 Compound Annual Rate of Return (10.6)
(10 months): (7 mos.)
1998 Compound Annual Rate of Return: N/A
1997 Compound Annual Rate of Return: N/A
1996 Compound Annual Rate of Return: N/A
1995 Compound Annual Rate of Return: N/A
1994 Compound Annual Rate of Return: N/A
</TABLE>
- ---------------------------
The Notes to JWH's Programs on page - are an integral part of this table.
For an explanation of the Exclusive Fund Accounts, please see "Performance of
the Exclusive Fund Accounts" on page - .
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
104
<PAGE>
JOHN W. HENRY & COMPANY, INC. PROGRAMS
YEN FINANCIAL PORTFOLIO
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JANUARY 1992
NUMBER OF OPEN ACCOUNTS: 0
ASSETS MANAGED IN PROGRAM: $0
ASSETS MANAGED BY JWH: $2.0 BILLION
<TABLE>
<CAPTION>
AGGREGATE COMPOUND WORST WORST
INCEPTION OF ASSETS ANNUAL RATE MONTHLY PEAK-TO-VALLEY
ACCOUNT NO. TRADING AUGUST 31, 1999 OF RETURN DECLINE DECLINE
- --------------------- ------------ --------------- ----------------- ------------ -----------------------
% % %
<C> <C> <C> <S> <C> <C> <C> <C> <C>
1 1/92 closed - 3/97 1997: (3.3) (3 mos.) (7.3) (7/95) (30.5) (4/95 - 7/96)
1996: (8.5)
1995: 20.6
1994: (13.0)
2 1/93 closed - 1/97 1997: (0.1) (1 mo.) (6.9) (7/95) (29.0) (4/95 - 7/96)
1996: (9.9)
1995: 21.0
1994: (8.8)
3 1/94 closed - 1/97 1997: (2.4) (1 mo.) (6.0) (7/95) (26.6) (4/95 - 7/96)
1996: (10.9)
1995: 22.4
1994: (7.5)
4 6/94 closed - 3/97 1997: 1.4 (3 mos.) (6.5) (7/95) (22.3) (4/95 - 7/96)
1996: (0.6)
1995: 24.2
1994: (1.6) (7 mos.)
5 8/94 closed - 3/97 1997: (2.4) (3 mos.) (7.1) (7/95) (30.4) (4/95 - 7/96)
1996: (6.0)
1995: 21.1
1994: (4.3) (5 mos.)
6 1/95 closed - 3/97 1997: (3.7) (3 mos.) (7.5) (7/95) (35.5) (4/95 - 7/96)
1996: (13.5)
1995: 13.2
7 3/94 closed - 3/97 1997: 4.0 (3 mos.) (6.7) (7/96) (15.9) (2/96 - 7/96)
1996: 7.8
1995: 28.1
1994: (11.2) (10 mos.)
10 3/94 closed - 12/94 1994: (7.4) (10 mos.) (5.4) (5/94) (10.5) (4/94 - 12/94)
11 11/93 closed - 8/95 1995: 20.0 (8 mos.) (9.0) (8/95) (18.8) (4/95 - 8/95)
1994: (13.4)
12 11/93 closed - 1/95 1995: (0.6) (1 mo.) (6.3) (5/94) (16.5) (4/94 - 1/95)
1994: (15.0)
13 12/92 closed - 3/96 1996: (4.1) (3 mos.) (4.9) (7/95) (15.8) (12/93 - 1/95)
1995: 31.4
1994: (14.1)
14 1/93 closed - 12/95 1995: 10.9 (6.2) (7/95) (15.8) (4/95 - 12/95)
1994: (4.1)
15 4/93 closed - 9/94 1994: (19.0) (9 mos.) (5.8) (5/94) (19.9) (11/93 - 9/94)
16 1/94 closed - 8/94 1994: (6.7) (8 mos.) (5.5) (5/94) (11.0) (4/94 - 8/94)
17 12/92 closed - 1/96 1996: 0.3 (1 mo.) (6.0) (7/95) (12.4) (4/95 - 10/95)
1995: 26.6
1994: (5.1)
18 3/94 closed - 4/96 1996: (6.3) (4 mos.) (6.2) (7/95) (18.5) (4/95 - 4/96)
1995: 18.5
1994: (10.1) (10 mos.)
19 12/94 closed - 4/96 1996: (7.8) (4 mos.) (6.6) (7/95) (21.1) (4/95 - 4/96)
1995: 18.3
1994: 0.2 (1 mo.)
20 6/94 closed - 12/94 1994: (7.9) (7 mos.) (5.1) (7/94) (10.4) (6/94 - 11/94)
21 6/94 closed - 3/95 1995: 48.1 (3 mos.) (3.6) (7/94) (9.9) (6/94 - 1/95)
1994: (6.6) (7 mos.)
22 4/94 closed - 9/94 1994: (4.6) (6 mos.) (4.7) (5/94) (7.0) (4/94 - 9/94)
23 3/94 closed - 9/94 1994: (9.7) (7 mos.) (6.3) (5/94) (11.0) (4/94 - 9/94)
24 4/94 closed - 9/94 1994: (9.8) (6 mos.) (9.1) (5/94) (12.9) (4/94 - 9/94)
25 4/93 closed - 12/94 1994: (16.6) (6.1) (5/94) (17.9) (11/93 - 12/94)
26 9/93 closed - 12/94 1994: (12.4) (6.0) (5/94) (14.1) (4/94 - 12/94)
</TABLE>
The Yen Financial Portfolio closed in March 1997.
- ---------
The Notes to JWH's programs on page - are an integral part of this table.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
105
<PAGE>
NOTES TO JWH PROGRAMS' CAPSULE PERFORMANCE SUMMARIES
An investor should note that the composite capsule performance presentations
include individual accounts which, even though traded according to the same
investment program, have materially different rates of return. The reasons for
this are numerous material differences among accounts:
- procedures governing timing for the commencement of trading and means of
moving toward full portfolio commitment of new accounts;
- the period during which accounts are active;
- client trading restrictions, including futures vs. forward contracts and
contract months;
- trading size to equity ratio resulting from JWH procedures for the
commencement of trading and full portfolio commitment for new accounts and new
capital;
- the size of the account, which can influence the size of positions taken
and restrict the account from participating in all markets available to an
investment program;
- the amount of interest income earned by an account, which will depend on
the rates paid by an FCM on equity deposits and/or on the portion of an account
invested in interest-bearing obligations such as U.S. Treasury bills;
- the amount of management and incentive fees paid to JWH and the amount of
brokerage commissions paid, which will vary and will depend on the fees
negotiated by the client with the broker;
- the timing of orders to open or close positions;
- the market conditions, which in part determine the quality of trade
executions;
- variations in fill prices; and
- the timing of additions and withdrawals.
Notwithstanding these material differences among accounts, the composite
remains a valid representation of the accounts included therein.
For the purpose of determining whether material differences exist among
accounts traded pursuant to the same investment program, JWH utilizes the
following method. The gross trading performance of each JWH investment program
and each individual JWH account within the relevant program is reviewed and the
following parameters established by interpretations of the Division of Trading
and Markets of the CFTC are calculated:
- if the arithmetic average of two percentages is greater than 10 percentage
points and the difference between the two is less than 10% of their average;
- if the arithmetic average of the two percentages is greater than 5 points
but less than 10 points and the difference between the two is 1.5 percentage
points or less; and
- if the arithmetic average of the two percentages is less than 5 points and
the difference between the two is 1.0 percentage point or less.
If one of the above parameters is satisfied in the review, then the results
within the designated range are deemed "materially the same" or "not materially
different." The above parameters determine if differences between accounts are
materially different. The gross trading performance of each JWH investment
program and each individual JWH account within the relevant program not
satisfying the above parameters is then reviewed to determine whether any
material differences detected could produce misleading composite performance
results. With the exception of accounts that were established at levels below
JWH's current minimum account size, JWH's policy is to provide separate
performance capsules
106
<PAGE>
when an account is consistently performing differently on a gross trading basis
from the other JWH accounts traded pursuant to the same investment program and
the continued inclusion of that account in the composite would create a
distortion in the composite rate of return.
The composite rates of return indicated should not be taken as
representative of any rate of return actually achieved by any single account
represented in the records. You are further cautioned that the data set forth in
the performance capsule records is not indicative of any results which may be
attained by JWH in the future since past performance is not necessarily
indicative of future results.
During the periods covered by the preceding capsule performance records, and
particularly since 1989, JWH has increased and decreased position size in
relation to account equity in certain markets and entire investment programs,
and also altered the composition of the markets and contracts for certain
programs. In general since 1992, JWH began implementing certain position size
adjustments that were of a more permanent nature. While historical returns
represent actual performance achieved, you should be aware that the position
size relative to account equity currently utilized may be significantly
different from that used during previous time periods. You should be aware of
the following position size adjustments relative to account equity:
Original Investment Program - reduced 25% commencing in October 1995
Financial and Metals Portfolio - reduced 50% commencing in August 1992
Global Financial Portfolio - reduced 50% commencing in April 1995
International Currency and Bond Portfolio - increased 20% commencing in May
1998
G-7 Currency Portfolio - increased 50% commencing in May 1998
From the beginning of the performance records shown, JWH and JWH
Investments, Inc. accrued incentive fees. Interest income, management fees,
commissions, and other expenses were reflected on a cash basis (with the
exception of the programs specifically noted below) until August, 1998, when the
accrual method was fully adopted for all programs not already utilizing that
method. The recording of specified items on a cash basis before August, 1998,
should not, for most months, be materially different from presenting rates of
return on an accrual basis; any differences in rates of return are immaterial to
the overall performance record. JWH reflected all items of net performance on an
accrual basis for the G-7 Currency program and International Currency and Bond
Portfolio for the entire period shown, and for the Worldwide Bond Program,
Dollar Program, and JWH Global Analytics-Registered Trademark- Family of
Programs from the inception of client trading. Beginning September 1, 1998, all
JWH programs utilized the full accrual basis.
The calculation of management and incentive fees are subject to variation
due to the agreed upon definitions contained in each account's advisory
agreement. Management fees range historically from 0% to 6% of assets under
management; incentive fees range from 0% to 25% of trading profits. From time to
time, such variations in advisory fees may have a material impact on the
performance of an account.
"Number of Open Accounts" is the number of accounts directed by JWH or JWH
Investments, Inc. pursuant to the investment program shown as of November 30,
1999.
"Assets Managed in Program" is the aggregate amount of total equity,
excluding "notional" equity under management of JWH or JWH Investments, Inc. in
the investment program shown as of November 30, 1999.
"Worst Monthly Decline on an Individual Account Basis" is the largest
monthly loss experienced by any single account in the relevant investment
program in any calendar month covered by the capsule. "Loss" for these purposes
is calculated on the basis of the loss experienced by the individual account,
expressed as a percentage of total equity (including "notional" equity) in the
account. Worst monthly decline information includes the month and year of such
decline.
"Worst Peak-to-Valley Decline on an Individual Account Basis" is the largest
percentage decline by any single account in the relevant investment program
(after eliminating the effect of additions and withdrawals) during the period
covered by the capsule from any month-end net asset value, without such month
end net asset value being equaled or exceeded as of a subsequent month-end by
the individual account, expressed as a percentage of the total equity in the
account. The worst peak-to-valley decline since inception is the worst
peak-to-valley decline by the program as a composite.
107
<PAGE>
"Compound Annual Rate of Return" is calculated by compounding the monthly
rates of return over the number of periods in a given year. For example, each
month's monthly rate of return in hundredths is added to one (1) and the result
is multiplied by the previous month's compounded monthly rate of return
similarly expressed. One (1) is then subtracted from the product. For periods
less than one year, the results are year to date.
Proprietary capital is included in the rates of return for the Original
Investment Program, the Global Diversified Portfolio, the Global Financial
Portfolio, and the G-7 Currency Portfolio pursuant to an investment in a fund.
These proprietary accounts have been traded in exactly the same manner as client
funds, and have been subject to all of the same fees and expenses charged to a
client investment in the fund; therefore there is no material impact on the
rates of return presented. The International Currency and Bond Portfolio also
had proprietary capital as an investment in a fund. This proprietary account was
traded in the exact same manner that client funds would be traded, and was
subject to all of the same fees and expenses that would be charged to a client
investment in a fund, had there been other client accounts traded; therefore
there is no material impact to the rates of return presented. In addition,
during the period from May 1991 through August 1995, the Financial and Metals
Portfolio included two proprietary accounts which had no material impact on the
rates of return.
ADDITIONAL NOTE TO THE GLOBAL FINANCIAL PORTFOLIO CAPSULE PERFORMANCE RECORD
The timing of individual account openings has had a material impact on
compound rates of return. Based on the account startup methodology used by JWH,
the performance of individual accounts composing the Global Financial Portfolio
composite performance summary has varied. In 1994, the two accounts that were
open generated separate rates of return of negative 44% and negative 17%,
respectively. For the period January 1995 through June 1995, the three open
accounts achieved separate rates of return of 101%, 75% and 67%. By June 1995,
these accounts maintained mature positions and were performing consistently with
each other. Due to the six month period in 1995 of varied performance, the three
accounts achieved annual rates of return for 1995 of 122%, 92%, and 78%.
ADDITIONAL NOTE TO THE JWH GLOBALANALYTICS-REGISTERED TRADEMARK- 99 CAPSULE
PERFORMANCE RECORD
In March 1999, an additional account began trading pursuant to the JWH
GlobalAnalytics Family of Programs methodology. Due to the size of the account,
it may have different results than other accounts using this same methodology.
As a result, performance is shown separately.
ADDITIONAL NOTE TO THE YEN FINANCIAL PORTFOLIO CAPSULE PERFORMANCE RECORD
The Yen Financial Portfolio was traded from the Japanese yen perspective. As
the equity mix between U.S. dollars and Japanese yen varied, performance from
each perspective also varied.
The performance of the Yen Financial Portfolio is presented on an individual
account basis due to material differences among accounts' historical
performance. Account performance varied historically due to a number of factors
unique to this portfolio, including whether the portfolio was denominated in
U.S. dollars or yen, the extent of hedging currency conversions, the amounts and
frequency of currency conversions and account size. Several of these factors
that materially influenced performance depended on clients' specific choices
that effectively resulted in customized client portfolios.
ADDITIONAL NOTE TO THE CAPSULE PERFORMANCE RECORDS OF THE DISCONTINUED PROGRAMS
Capsule performance records are included for InterRate-TM-, the Delevered
Yen Denominated Financial and Metals Profile, the KT Diversified Program and the
Yen Financial Portfolio. All of these programs have been discontinued.
2. SUNRISE CAPITAL PARTNERS, LLC
The principals and senior officers of Sunrise Capital Partners are as
follows:
<TABLE>
<S> <C>
Martin P. Klitzner.......................................... Principal, Managing Director
Richard C. Slaughter........................................ Principal, Managing Director
Dr. Gary B. Davis........................................... Principal
Dr. John V. Forrest......................................... Principal
Martin M. Ehrlich........................................... Principal, Vice President
Marie Laufik................................................ Principal, Vice President
Elissa Davis................................................ Principal
</TABLE>
108
<PAGE>
The principals of Sunrise Capital Partners will make trading decisions for
Spectrum Currency pursuant to the Sunrise trading system described previously,
but with minor modifications to the system to account for the trading of an
exclusive portfolio of diverse world currencies. Such modifications have
consisted principally of applying the principles of spread trading, including
multiple additional currencies to a portfolio and reweighting the emphasis given
the different markets traded, all in an attempt to adjust to the potentially
higher volatility of a portfolio which trades in a less diversified group of
markets. Principals of Sunrise Capital Partners have utilized the modified
trading system to trade currency portfolios since October 1985. Sunrise Capital
Partners normally commits between 40 and 60% of an accounts equity as margin on
open positions pursuant to the trading system. For a detailed description of
Sunrise Capital Partners, its principals and trading systems, including the
Currency Program, see "The Trading Advisors--Morgan Stanley Dean Witter Spectrum
Select--Sunrise Capital Management, Inc." on page - .
SUNRISE CAPITAL PARTNERS PERFORMANCE
The following is the composite performance of all accounts managed by
Sunrise Capital Partners. All performance information is current as of
November 30, 1999. Not all of these programs are presently used by Spectrum
Currency.
You are cautioned that the performance information set forth in the
following capsule performance summaries are not indicative of, and may have no
bearing on, any trading results which may be attained by Sunrise Capital
Partners or Spectrum Currency in the future, since past performance is not a
guarantee of future results and another trading advisor will be investing funds
of Spectrum Currency. In addition, Spectrum Currency cannot assure you that
Sunrise Capital Partners or the partnership will make any profit or will be able
to avoid incurring substantial losses. You should also note that interest income
may constitute a significant portion of a commodity pool's total income and may
generate profits where there have been realized or unrealized losses from
futures interests trading.
SUNRISE CURRENCY PROGRAM
(Calculations based on Fully-Funded Subset Method)
Name of commodity trading advisor: Sunrise Capital Partners
Name of program: Sunrise Currency Program
Inception of trading by commodity trading advisor: June 1980
Inception of trading in program: October 1985
Number of open accounts: 9
Aggregate assets overall: $560.6 million
Aggregate assets in program: $63.0 million
Largest monthly drawdown: (11.22)%--(1/95)
Worst peak-to-valley drawdown: (58.60)%--(7/93 - 1/95)
1999 year-to-date return (11 months): 7.4%
1998 annual return: (1.9)%
1997 annual return: 10.9%
1996 annual return: 20.2%
1995 annual return: 34.0%
1994 annual return: (22.1)%
SUNRISE CIMCO~DIVERSIFIED FINANCIAL PROGRAM
Name of commodity trading advisor: Sunrise Capital Partners
Name of program: Sunrise CIMCO~Diversified Financial Program
Inception of trading by commodity trading advisor: June 1980
Inception of trading in program: October 1990
Number of open accounts: 2
Aggregate assets overall: $560.6 million
Aggregate assets in program: $87.0 million
Largest monthly drawdown: (12.04)%--(1/94)
Worst peak-to-valley drawdown: (44.47)%--(7/93 - 1/95)
1999 year-to-date return (11 months): 0.9%
1998 annual return: 7.7%
1997 annual return: (2.8)%
1996 annual return: 26.1%
1995 annual return: 50.9%
1994 annual return: (28.8)%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
109
<PAGE>
SUNRISE DIVERSIFIED PROGRAM
(Calculations based on Fully-Funded Subset Method)
Name of commodity trading advisor: Sunrise Capital Partners
Name of program: Sunrise Diversified Program
Inception of trading by commodity trading advisor: June 1980
Inception of trading in program: June 1980
Number of open accounts: 26
Aggregate assets overall: $560.6 million
Aggregate assets in program: $64.7 million
Largest monthly drawdown: (14.97)%--(1/94)
Worst peak-to-valley drawdown: (39.68)%--(12/91 - 2/94)
1999 year-to-date return (11 months): 8.3%
1998 annual return: 17.0%
1997 annual return: 11.3%
1996 annual return: 21.7%
1995 annual return: 40.0%
1994 annual return: (5.5)%
SUNRISE EXPANDED DIVERSIFIED PROGRAM
(Calculations based on Fully-Funded Subset Method)
Name of commodity trading advisor: Sunrise Capital Partners
Name of program: Sunrise Expanded Diversified Program
Inception of trading by commodity trading advisor: June 1980
Inception of trading in program: January 1989
Number of open accounts: 25
Aggregate assets overall: $560.6 million
Aggregate assets in program: $338.3 million
Largest monthly drawdown: (10.99)%--(8/94)
Worst peak-to-valley drawdown: (29.82)%--(7/93 - 4/94)
1999 year-to-date return (11 months): 6.7%
1998 annual return: 25.8%
1997 annual return: 20.7%
1996 annual return: 19.3%
1995 annual return: 11.5%
1994 annual return: 1.6%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
NOTES TO SUNRISE CAPITAL PARTNERS CAPSULE PERFORMANCE SUMMARIES
In reviewing Sunrise Capital Partners' performance, prospective investors
should understand that such performance is calculated on the accrual basis in
accordance with generally accepted accounting principles and is "net" of all
fees and charges and includes interest income applicable to the accounts
comprising each composite performance record. Such a composite performance is
not necessarily indicative of the performance of any individual investor
account. All accounting activity and balances, for the purposes of calculating
performance, are US dollar denominated.
The following terms used in describing Sunrise Capital Partners' performance
are defined as follows:
"Drawdown" means losses experienced by an account traded pursuant to the
identified trading program over a specified period. Drawdowns are measured on
the basis of month-end net asset values only.
"Worst peak-to-valley drawdown" means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by an account
within a trading program during any period in which the initial month-end net
asset value is not equaled or exceeded by a subsequent month-end net asset
value.
"Monthly Rates of Return" are calculated by dividing the net performance by
the sum total of the beginning net asset value plus time-weighted additions
minus time-weighted withdrawals made during the month. Time weight is calculated
by multiplying an addition by the number of days in the month it was
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available for trading and/or a withdrawal by the number of days in the month it
was not available for trading divided by the total number of days in the month.
In accordance with CFTC rules, monthly rates of return are shown only for
programs currently offered by Sunrise Capital Partners. The Fully Funded Subset
is used to calculate the monthly rates of return for Sunrise's Diversified
Program (starting December 1996), Sunrise's Expanded Diversified Program
(starting March 1997), and Sunrise's Currency Program (starting April 1997).
Sunrise's CIMCO~Diversified Financial Program (from inception), as well as
Sunrise's Diversified Program prior to December 1996, Sunrise's Expanded
Diversified Program prior to March 1997, and Sunrise's Currency Program prior to
April 1997 calculate the monthly rates of return as described above.
"Annual return" is the product of the monthly rates of return; i.e.,
(1 + the Monthly Rate of Return for the first month of the year or
period) x (1 + the Monthly Rate of Return for the next succeeding month), etc.
"Aggregate assets overall" includes all assets under management, in programs
both open and closed to investment, for Sunrise Capital Management, Inc.,
Commodity Monitors, Inc. and Sunrise Capital Partners; these assets are
estimated through the date indicated and may be subject to adjustment.
"Aggregate assets in program" are estimated through the date indicated and
may be subject to adjustment.
The Fully-Funded Subset Summaries include notional funds in excess of the
10% disclosure threshold established by the CFTC and reflect the adoption of a
method of presenting rate-of-return and performance disclosure authorized by the
CFTC, referred to as the Fully-Funded Subset method. This method permits
notional and fully-funded accounts to be included in a single performance
summary. Starting December 1996, this Fully Funded Subset is used to calculate
the monthly rates of return for the Sunrise Diversified Program only. All other
Sunrise programs, including the Sunrise Diversified Program prior to December
1996, calculate the monthly rates of return as described above.
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
MORGAN STANLEY DEAN WITTER COMMODITIES MANAGEMENT INC.
Morgan Stanley Dean Witter Commodities Management is a Delaware corporation
and a wholly owned subsidiary of Morgan Stanley Dean Witter. The trading advisor
became registered as a commodity pool operator and a commodity trading advisor
on June 4, 1992, and is a member of the National Futures Association in such
capacities. The trading advisor currently acts as the general partner and/or
trading advisor for several U.S. and offshore funds. The trading advisor's
offices are located at 1221 Avenue of the Americas, New York, New York 10020.
PRINCIPALS
Wayne D. Peterson is a Director and the President of Morgan Stanley Dean
Witter Commodities Management. Prior to heading Morgan Stanley Dean Witter
Commodities Management, Mr. Peterson worked in Morgan Stanley's Structured
Products Group, having previously worked for eight years in Morgan Stanley's
Commodities Department. Mr. Peterson joined Morgan Stanley in 1982, was named a
Vice President in 1987 and a Principal in 1988. Mr. Peterson received a B.A.
degree in mathematics and economics from Cornell University in 1980 and an
M.B.A. from the University of Chicago in 1982.
Jeffrey S. Alvino is a Director and Vice President of Morgan Stanley Dean
Witter Commodities Management. Mr. Alvino joined Morgan Stanley in 1990, was
named a Vice President in 1996 and Principal in 1998. Prior to joining Morgan
Stanley, Mr. Alvino worked at Deloitte & Touche. Mr. Alvino received a B.S.
degree in accounting from Lehigh University in 1988, is a Certified Public
Accountant and a Chartered Financial Analyst.
Messrs. Peterson and Alvino will be responsible for making trading decisions
for the partnership.
MORGAN STANLEY DEAN WITTER COMMODITIES MANAGEMENT'S TRADING PROGRAM
The trading program employed by the trading advisor on behalf of Spectrum
Commodity, which is generally technical in nature, is designed to capture the
overall rate of commodity price inflation by maintaining long positions in
commodity futures interests. The portfolio is maintained in a diversified manner
and looks to overweight and underweight individual commodities based on their
relative strength. The liquidity of each commodity also will influence its level
of inclusion in Spectrum Commodity's
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portfolio. The trading program will be continuously evaluated over time and may
be refined and modified in the future, including the possibility, upon prior
notice to investors, that MSDWCM may maintain short positions in commodity
futures interests for Spectrum Commodity's account.
The trading program encompasses a broad range of commodities, including
commodity futures interests on metals, energy products, agriculturals, and other
commodities selected by the trading advisor from time to time. At present, the
trading advisor may invest Spectrum Commodity's assets in the following types of
commodity futures interests on the futures markets indicated: Chicago Board of
Trade (corn, wheat, soybeans, soybean oil, soybean meal, oats); Commodity
Exchange, Inc. (platinum, silver, copper, gold); Chicago Mercantile Exchange
(live cattle, feeder cattle, lean hogs, pork bellies, lumber); Coffee, Sugar &
Cocoa Exchange, Inc. (coffee, sugar, cocoa); London Metals Exchange (aluminum,
lead, copper, nickel, tin, zinc); New York Cotton Exchange (cotton, orange
juice); International Petroleum Exchange (brent crude oil, gas oil); and New
York Mercantile Exchange (crude oil, heating oil, gasoline, natural gas).
The trading advisor currently limits its trading program in the following
manner (although it may change these policies in the future with prior approval
of the general partner):
- Spectrum Commodity will maintain only long positions in commodity futures
and options.
- Spectrum Commodity trades only commodity futures and options that are
now, or may hereafter be, traded on U.S. or non-U.S. commodity exchanges.
- Spectrum Commodity will not trade futures or options on financial
instruments (including stock indices) and foreign currencies.
- The underlying value of the positions entered into in the commodity
futures and options markets (the "portfolio value") will be targeted at 1.0 to
2.0 times the assets of Spectrum Commodity with an expected average of
1.5 times the assets of Spectrum Commodity.
- Upon every portfolio reweighting:
- A minimum of 10% of the assets of Spectrum Commodity will be exposed
to each of the following commodities sectors: energy, precious metals
and base metals.
- A maximum of 20% of the portfolio value will be exposed to any one
particular commodity.
- A maximum of 40% of the portfolio value will be exposed to any one of
the following commodities sectors: energy, precious metals and base
metals. A maximum of 30% of the portfolio value will be exposed to any
one of the other commodities sectors.
MORGAN STANLEY DEAN WITTER COMMODITIES MANAGEMENT'S PERFORMANCE RECORD
Capsule I sets forth the actual performance record of a commodity pool that
has been traded solely by the trading advisor since the pool commenced trading
in April 1994, and that employs the same trading program on an unleveraged basis
that is employed for the partnership on a leveraged basis. Capsule II sets forth
the actual performance record of a commodity pool that had been traded by the
trading advisor since the pool commenced trading in February 1993 through
November 1999. The commodity pool in Capsule II did not employ the trading
program that is employed for the partnership; therefore, performance information
set forth in Capsule II has less significance to a prospective investor than the
performance information set forth in Capsule I. The commodity pools in both
Capsule I and Capsule II are privately offered pursuant to Regulation D of the
Securities Act of 1933, as amended. The trading advisor also acts as commodity
pool operator and trading advisor for several other funds that are operated
pursuant to an exemption under CFTC Rule 4.7. The performance of these funds has
not been included herein. The notes following Capsule I and Capsule II are an
integral part thereof.
You should note that the fees and expenses paid by the partnership and the
leverage employed in trading for the partnership are higher than that applicable
to the account in Capsule I (which required a $250,000 minimum investment). The
account included in Capsule I was traded in a manner such that the underlying
value of its futures interest positions was targeted at 1.0 times the assets of
the account. The assets of the partnership are traded in a manner such that the
underlying value of its futures interest positions are targeted at 1.0 to 2.0
times the assets of the partnership, with an expected average of 1.5 times the
assets of the partnership. As a result, the volatility of the partnership's
account is greater than that of the account in Capsule I. In addition, while the
expenses paid by the partnership are higher than those paid by the account in
Capsule I, the general partner and the trading advisor believe that if the
account in Capsule I had employed leverage at a constant 1.5 times its assets,
the increase in performance
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returns during years of positive returns would have more than compensated for
the higher expenses; during periods of negative returns, losses would have been
greater. However, while the partnership targets its leverage, on average, at 1.5
times its assets, the partnership is not traded at a constant leverage of 1.5
times its assets. Therefore, the partnership's performance returns have been
higher and lower than the account in Capsule I.
You are cautioned that the performance information set forth in the
performance tables and the footnotes that follow is not indicative of, and has
no bearing on, any trading results that may be attained by Spectrum Commodity in
the future since past results are not necessarily indicative of future results.
There can be no assurance that Spectrum Commodity will make any profits at all
or will be able to avoid incurring substantial losses. You should also note that
interest income may constitute a significant portion of a commodity pool's total
income and, in certain instances, may generate profits where there have been
realized or unrealized losses from commodity trading.
MORGAN STANLEY DEAN WITTER COMMODITIES MANAGEMENT INC.
MS COMMODITY INVESTMENT PORTFOLIO STRATEGY
CAPSULE I
Name of commodity trading advisor: Morgan Stanley Dean Witter Commodities
Management Inc.
Name of program: MS Commodity Investment Portfolio Strategy
Inception of client trading by commodity trading advisor: February 1993
Inception of client trading in program: May 1994
Number of open accounts: 4
Aggregate assets overall: $188,000,000
Aggregate assets in program: $164,000,000
Largest monthly % drawdown: (7.65)%--(11/98)
Largest peak-to-valley drawdown: (34.63)%--(8/97-present)
<TABLE>
<CAPTION>
MONTHLY RATES OF RETURN 1999 1998 1997 1996 1995 1994
- ----------------------- ---- -------- -------- -------- -------- ----
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
January................... (0.82) (1.68) 1.35 (0.70) (0.82)
February.................. (3.09) (5.48) 2.26 2.45 0.21
March..................... 7.72 0.43 1.30 3.93 1.69
April..................... 1.97 (1.73) 0.29 1.64 0.34
May....................... (3.39) (5.86) 0.58 (0.99) (1.17) 7.32
June...................... 4.08 (1.54) (2.24) 0.13 (0.36) 4.83
July...................... 0.57 (5.57) 3.19 (0.12) 1.40 2.06
August.................... 4.26 (6.42) (1.59) 4.91 1.86 (0.82)
September................. 3.44 8.02 0.86 (0.95) 1.01 0.50
October................... (1.57) (2.03) 0.49 (0.90) 0.46 0.38
November.................. 0.16 (7.65) (1.67) 2.36 1.49 1.88
December.................. (2.10) (3.53) 2.45 5.53 1.35
Compound (period)
Rate of Return.......... 13.50 (28.12) 1.09 14.92 12.09 18.61
(11 months) (8 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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CAPSULE II
MORGAN STANLEY DEAN WITTER COMMODITIES MANAGEMENT INC.
MS COMMODITY YIELD FUND STRATEGY
Name of commodity trading advisor: Morgan Stanley Dean Witter Commodities
Management Inc.
Name of program: MS Commodity Yield Fund Strategy
Inception of client trading by commodity trading advisor: February 1993
Inception of client trading in program: February 1993
Number of open accounts: 0
Aggregate assets overall: $188,000,000
Aggregate assets in program: None
Largest monthly % drawdown: (8.07)%--(5/94)
Largest peak-to-valley drawdown: (16.58)%--(11/93-8/94)
1998 annual return: (2.98)%
1997 annual return: (6.07)%
1996 annual return: 16.33%
1995 annual return: (3.26)%
1994 annual return: (9.25)%
1993 annual return (11 months): 16.20%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FOOTNOTES TO MORGAN STANLEY DEAN WITTER COMMODITY MANAGEMENT'S CAPSULES I AND II
All rates of return are net of fees and expenses and include all interest
income earned by the partnership.
"Largest Monthly % Drawdown" represents the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by the partnership
during any one month period.
"Largest Peak-to-Valley Drawdown" represents the greatest cumulative
percentage decline in month-end net asset value due to losses sustained by the
partnership during any period in which a month-end net asset value is not
equaled or exceeded by a subsequent net asset value.
Capsules I and II have been prepared in accordance with generally accepted
accounting principles consistently applied under the accrual basis of
accounting. Table information is current as of August 31, 1999.
"Number of Open Accounts" and "Aggregate Assets in Program" in Capsule I
include three accounts which, pursuant to CFTC Rule 4.7, are not included in the
performance results.
EXCHANGE RIGHT
If the conditions described below are satisfied, you may redeem your units
in any partnership as of the last day of any calendar month and use the proceeds
to purchase units of one or more other partnerships. However, a Spectrum
Series exchange will only be permitted as of the sixth month-end after you first
became an investor in any Spectrum Series partnership, and as of the last day of
each month thereafter. Each unit you purchase in a Spectrum Series exchange will
be issued and sold at a price per unit equal to 100% of the net asset value of a
unit as of the close of business on the exchange date. Any units you redeem in a
Spectrum Series exchange will not be subject to a redemption charge. Units you
acquire in a Spectrum Series exchange will be subject to redemption charges, but
will be deemed to have the same purchase date as the units you exchanged for
purposes of determining the applicability of any redemption charges. Thus, for
example, if you hold units of Spectrum Strategic for 12 months, exchange those
units for units of Spectrum Technical, then redeem any of those units 15 months
later, you will not have to pay a redemption charge, because those units will be
deemed to have been held for 27 months.
When you request a Spectrum Series exchange, additional conditions must be
satisfied. First, the partnership from which you are redeeming must have assets
sufficient to discharge its liabilities and redeem units. In order to effect a
Spectrum Series exchange, you must send a subscription agreement to a
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Morgan Stanley Dean Witter & Co. branch office, and that Agreement must be
received by the general partner at least five business days prior to the
applicable exchange date. In that agreement, you must acknowledge that you are
still eligible to purchase units on the exchange date. You must redeem a minimum
of 50 units in a Spectrum Series exchange, unless you are liquidating your
entire interest in a partnership. A form of subscription agreement is annexed to
this prospectus as Exhibit B, and additional copies of the subscription
agreement may be obtained by written request to the general partner or from a
local Morgan Stanley Dean Witter & Co. branch office.
In order to effect a Spectrum Series exchange, each partnership must have a
sufficient number of units registered and qualified for sale under federal and
applicable state securities laws pursuant to a current prospectus. While the
general partner intends to maintain a sufficient number of registered units to
effect series exchanges, it is under no obligation to do so. Therefore, the
general partner cannot assure you that any units will be available for sale on
an exchange date. Furthermore, states may impose significant burdens on, or
alter the requirements for, qualifying units for sale. In that event, the
general partner may not continue qualifying units for sale in those states, and
residents of those states would not be eligible for a Spectrum Series exchange.
In addition, states may impose more restrictive suitability and/ or investment
requirements than those set forth in the form of subscription agreement. Any
such restrictions may limit the ability of residents of those states to effect a
Spectrum Series exchange. In the event that not all subscription agreements can
be processed because an insufficient number of units is available for sale on an
exchange date, the general partner will allocate units in the manner it
determines in its sole discretion.
Units of any new partnership in the Spectrum Series of partnerships may be
offered to investors pursuant to exercise of the Spectrum Series exchange right.
Before purchasing units of a new partnership, you will be required to receive a
copy of a prospectus and any supplement to this prospectus describing the new
partnership and its units, and you will be required to execute a new
subscription agreement to purchase units of that partnership.
Since a Spectrum Series exchange is equivalent to a redemption and an
immediate reinvestment of the proceeds of the redemption, you should carefully
review the portions of this prospectus describing redemptions and the tax
consequences before effecting a Spectrum Series exchange.
REDEMPTIONS
Once you are an investor in a Spectrum Series partnership for at least six
months, you may redeem all or part of your units, regardless of when such units
were purchased. Redemptions may only be made in whole units, with a minimum of
50 units required for each redemption, unless you are redeeming your entire
interest in a partnership. The general partner will redeem your units in the
order in which they were purchased.
Redemptions will only be effective as of the last day of the month in which
a request for redemption in proper form has been timely received by the general
partner. A "request for redemption" is a letter in the form specified by the
general partner that must be sent by you to a local Morgan Stanley Dean
Witter & Co. branch office and received by the general partner at least 5
business days prior to the redemption date. A form of request for redemption is
annexed to the limited partnership agreement, which agreement is annexed to this
prospectus as Exhibit A. Additional copies of the request for redemption may be
obtained by written request to the general partner or a local Morgan Stanley
Dean Witter & Co. branch office.
If you redeem units, you will receive 100% of the net asset value of each
unit redeemed as of the redemption date, less any applicable redemption charges.
The "net asset value" of a unit is an amount equal to the partnership's net
assets allocated to capital accounts represented by units, divided by the number
of units outstanding. "Net assets" means the total assets of a partnership,
including all cash and cash equivalents (valued at cost), accrued interest and
amortization of original issue discount, and the market value of all open
futures, forwards, and options positions and other assets of the partnership,
less the total liabilities of the partnership, including, but not limited to,
all brokerage, incentive and management fees, and extraordinary expenses, as
determined in accordance with generally accepted accounting principles
consistently applied under the accrual basis of accounting. The market value of
a futures contract traded on a U.S. exchange means the settlement price on the
exchange on which that
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futures contract is traded on the day net assets are being determined. However,
if a futures contract could not have been liquidated on that day because of the
operation of daily limits or other rules of the exchange or otherwise, the
settlement price on the first subsequent day on which the futures contract could
be liquidated will be the market value of that futures contract for that day.
The market value of a forward or futures contract traded on a foreign exchange
or market means its market value as determined by the general partner on a basis
consistently applied for each different variety of forward contract or futures
interest.
If you redeem units on or prior to the last day of the twelfth month from
the date of their purchase, those units will be subject to a redemption charge
equal to 2% of their net asset value on the redemption date. If you redeem units
after the last day of the twelfth month and on or prior to the last day of the
twenty-fourth month from the date of their purchase, those units will be subject
to a redemption charge equal to 1% of their net asset value on the redemption
date. If you redeem units after the last day of the twenty-fourth month from the
date of their purchase, those units will not be subject to a redemption charge.
All redemption charges will be paid to Dean Witter.
Your units will be exempt from redemption charges under the following
circumstances:
- If you purchase $500,000 or more of units, those units will not be subject
to redemption charges, but will be subject to the other restrictions on
redemptions.
- If you redeem units at the first redemption date following notice of an
increase in brokerage, management, or incentive fees, those units will not
be subject to redemption charges.
- If you redeem units in a Spectrum Series exchange, the units you redeem
will not be subject to redemption charges and, for purposes of determining
the applicability of future redemption charges, the units you acquire will
be deemed to have the same purchase date as the units you exchanged.
- If you redeem units of any other partnership which Demeter serves as the
general partner, the units you redeem from the other limited partnership
will be subject to any applicable redemption charges, but the Spectrum
Series units you purchase will not be subject to redemption charges.
- If you redeem units and have either paid a redemption charge with respect
to the units or held the units for at least 24 months, you will not be
subject to redemption charges with respect to any newly purchased units,
provided the new units are purchased within twelve months of and in an
amount no greater than the net proceeds of the prior redemption, and are
held for at least six months from the date of purchase. In that event, you
will still be subject to the minimum purchase and suitability
requirements.
The general partner will endeavor to pay redemptions within 10 business days
after the redemption date. A partnership may be forced to liquidate open futures
interests positions to satisfy redemptions in the event it does not have
sufficient cash on hand. SEE "RISK FACTORS--PARTNERSHIPS AND OFFERING
RISKS--RESTRICTED INVESTMENT LIQUIDITY IN THE UNITS" ON PAGE - . When you
redeem units, payment will be made by credit to your customer account with Dean
Witter, or by check mailed to you if your account is closed. Your right to
redeem units is contingent upon the redeeming partnership having assets
sufficient to discharge its liabilities on the redemption date, and timely
receipt by the general partner of your request for redemption as described
above.
The terms and conditions applicable to redemptions in general, other than
those prohibiting redemptions before the sixth month-end following the closing
at which you first became an investor in a Spectrum Series partnership, and
providing that redemptions may only be made as of the end of a calendar month,
will also apply to redemptions effected on "special redemption dates." See "The
Limited Partnership Agreements--Reports to Limited Partners" on page - .
THE COMMODITY BROKERS
DEAN WITTER REYNOLDS INC., CARR FUTURES INC., MORGAN STANLEY & CO. INCORPORATED
AND MORGAN STANLEY INTERNATIONAL LIMITED
Dean Witter Reynolds Inc., a Delaware corporation, acts as the partnerships'
non-clearing commodity broker. Dean Witter, as the non-clearing commodity
broker, holds each partnership's funds in customer
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segregated or secured accounts, and provides all required margin funds to the
clearing commodity brokers. Carr Futures Inc., a Delaware corporation, acts as
the clearing commodity broker and foreign currency forward counterparty for all
of the partnerships other than Spectrum Commodity. Morgan Stanley & Co.
Incorporated, a Delaware corporation, acts as the clearing commodity broker for
Spectrum Commodity. Dean Witter monitors each partnership's futures positions
that either Carr Futures or Morgan Stanley report they are carrying for any
errors in trade prices or trade fill. Dean Witter also serves as the non-
clearing commodity broker for all of the other commodity pools for which Demeter
serves as general partner and commodity pool operator.
Dean Witter is a principal operating subsidiary of Morgan Stanley Dean
Witter & Co., which is a publicly-owned company. Dean Witter is a financial
services company which provides to its individual, corporate and institutional
clients services as a broker in securities, futures, and options, a dealer in
corporate, municipal and government securities, an investment adviser, and an
agent in the sale of life insurance and various other products and services.
Dean Witter is a member firm of the New York Stock Exchange, the American Stock
Exchange, the Chicago Board Options Exchange, other major securities exchanges,
and the National Association of Securities Dealers, Inc. Dean Witter is
registered with the CFTC as a futures commission merchant and is a member of the
National Futures Association in such capacity. Dean Witter is currently
servicing its clients through a network of 450 offices nationwide with 12,000
financial advisors servicing individual and institutional client accounts.
Carr Futures is the broker directly accountable to the futures exchange or
clearinghouse for the trades of all partnerships other than Spectrum Commodity.
All payments, including margin payments, to and from the futures exchanges
resulting from those partnerships' trades, flow through Carr Futures. In
addition, Carr Futures also acts as the counterparty on each partnership's
foreign currency forward contracts. Carr Futures is a subsidiary of Credit
Agricole Indosuez, which had total equity of approximately $3.301 billion at
December 31, 1998 and which is itself a subsidiary of Caisse Nationale de Credit
Agricole, one of the ten largest banks in the world. Carr Futures' parent has
guaranteed the payment of the net liquidating value of the transactions in each
partnership's account with Carr Futures. Carr Futures has been registered under
the Commodity Exchange Act as a futures commission merchant and has been a
member of the National Futures Association in such capacity since August 1987.
Carr Futures' global headquarters is located at 10 South Wacker Drive, Suite
1100, Chicago, Illinois 60606. Carr Futures acts as a commodity broker to
individuals, corporate and institutional clients and is a clearing member of the
Chicago Board of Trade, the Chicago Mercantile Exchange, the Commodity Exchange
Inc., and other major commodities exchanges.
Morgan Stanley is the clearing commodity broker for Spectrum Commodity for
all U.S. futures and options trades. Morgan Stanley has its main business office
located at 1585 Broadway, New York, New York 10036. Morgan Stanley is registered
as a futures commission merchant, is a member of the National Futures
Association and is a member of most major U.S. and foreign commodity exchanges.
Morgan Stanley is registered with the SEC as a broker-dealer and is a member of
the NASD.
Morgan Stanley International, a United Kingdom corporation, acts as Spectrum
Commodity's clearing commodity broker solely with regard to any trading on the
London Metal Exchange. Morgan Stanley International has its main business office
located at 25 Cabot Square, Canary Wharf, London E14 4QA, England, is regulated
by the United Kingdom Securities and Futures Authority as a member firm, and is
a member of the London Metals Exchange and other securities and commodities
exchanges worldwide.
Morgan Stanley Dean Witter & Co., the parent company of Morgan Stanley,
Morgan Stanley International, and Dean Witter, is a worldwide financial services
firm, employing, directly and through its subsidiaries, more than 45,000 people
worldwide in 409 offices throughout the United States and 20 foreign countries.
Morgan Stanley Dean Witter & Co. is a publicly-traded company whose shares are
listed on the New York Stock Exchange; its common stock had a market value of
approximately $48 billion at August 31, 1999. At that date, Morgan Stanley Dean
Witter & Co. had leading market positions in its three primary businesses
(securities, asset management and credit services), and it ranked among the top
five asset managers globally, with over $415 billion in assets under management.
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BROKERAGE ARRANGEMENTS
The partnerships' brokerage arrangements with Dean Witter, Carr Futures,
Morgan Stanley and Morgan Stanley International have been discussed previously.
See "Conflicts of Interest" on page - and "Description of Charges--Commodity
Brokers" on page - .
The general partner will review at least annually the brokerage arrangements
of each partnership to ensure that those arrangements are fair, reasonable, and
competitive, and represent the best price and services available, taking into
consideration:
- the size of the partnership;
- the futures, forwards, and options trading activity;
- the services provided by the commodity broker or any affiliate thereof to
the partnership;
- the cost incurred by the commodity broker or any affiliate thereof in
organizing and operating the partnership and offering units;
- the overall costs to the partnership;
- any excess interest and compensating balance benefits to the commodity
broker from assets held thereby; and
- if the general partner does not receive any direct compensation from the
partnership for its services as general partner, the risks incurred by the
general partner as general partner of the partnership.
Each customer agreement sets forth a standard of liability for the commodity
broker and provides for indemnities of the commodity broker. See "Fiduciary
Responsibility and Liability" on page - .
LITIGATION
At any given time, the commodity brokers are involved in numerous legal
actions, some of which seek significant damages.
On May 16, 1996, an NASD arbitration panel awarded damages and costs against
Dean Witter and one of its financial advisors in the amount of approximately
$1.1 million, including punitive damages, to three customers who alleged, among
other things, fraud and misrepresentation in connection with their individually
managed futures accounts (not commodity pools).
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported
class actions were filed in the Superior Court of the State of California,
County of Los Angeles, on behalf of all purchasers of interests in limited
partnership commodity pools sold by Dean Witter. Named defendants include Dean
Witter, Demeter, Dean Witter Futures and Currency Management Inc., Morgan
Stanley Dean Witter & Co., Spectrum Select (under its original name) and certain
other limited partnership commodity pools of which Demeter is the general
partner, and certain trading advisors to those pools. On June 16, 1997, the
plaintiffs in the above actions filed a consolidated amended complaint,
alleging, among other things, that the defendants committed fraud, deceit,
negligent misrepresentation, various violations of the California Corporations
Code, intentional and negligent breach of fiduciary duty, fraudulent and unfair
business practices, unjust enrichment, and conversion in the sale and operation
of the various limited partnership commodity pools. The court entered an order
denying class certification on August 24, 1999. On September 24, 1999, the court
entered an order dismissing the case without prejudice on consent.
Similar purported class actions were also filed on September 18 and 20, 1996
in the Supreme Court of the State of New York, New York County, and on
November 14, 1996 in the Superior Court of the State of Delaware, New Castle
County, against the Morgan Stanley Dean Witter affiliated parties and certain
trading advisors on behalf of all purchasers of interests in various limited
partnership commodity pools sold by Dean Witter. A consolidated and amended
complaint in the action pending in the Supreme Court of the State of New York
was filed on August 13, 1997, alleging that the defendants committed fraud,
breach of fiduciary duty, and negligent misrepresentation in the sale and
operation of the various limited partnership commodity pools. On December 16,
1997, upon motion of the plaintiffs, the action pending in the Superior Court of
the State of Delaware was voluntarily dismissed without prejudice. The New York
Supreme Court dismissed the New York action in November 1998, but granted
plaintiffs leave to file an
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amended complaint, which they did in early December 1998. The defendants filed a
motion to dismiss the amended complaint with prejudice on February 1, 1999. The
motion has been fully briefed and argued and the defendants are awaiting the
court's decision. 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,
including the other partnerships, could be added as defendants. The Morgan
Stanley Dean Witter affiliated 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 Morgan Stanley Dean Witter affiliated 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
affiliated parties.
On May 30, 1995 the United Kingdom Securities and Futures Authority
announced that it had reached a settlement with Morgan Stanley International in
a disciplinary proceeding against the firm. The proceeding involved the conduct
of foreign exchange business by a former employee for five private client
accounts in 1991. In accordance with the settlement, Morgan Stanley
International paid the Authority a fine of L240,000 and made a contribution
towards the Authority's costs. In reaching its settlement with Morgan Stanley
International, the Authority took into account the following factors: Morgan
Stanley International reported the matter to the Authority and cooperated fully
in the investigation; Morgan Stanley International took over the clients'
positions promptly and offered to restore the clients to their original
positions; and Morgan Stanley International conducted its own internal review
and promptly took steps to improve its procedure.
During the five years preceding the date of this prospectus, other than as
described above, there have been no material criminal, civil, or administrative
actions pending, on appeal, or concluded against the commodity brokers, the
general partner, or any of their principals, which the general partner believes
would be material to an investor's decision to invest in the partnerships.
THE LIMITED PARTNERSHIP AGREEMENTS
This section of the prospectus summarizes all material provisions of the
limited partnership agreement of each partnership that are not discussed
elsewhere in the prospectus. A form of the limited partnership agreements is
annexed to the prospectus as Exhibit A. Each limited partnership agreement is
identical, except as noted otherwise below or in Exhibit A.
NATURE OF THE PARTNERSHIPS
Spectrum Select was formed on March 21, 1991; Spectrum Technical, Spectrum
Strategic and Spectrum Global Balanced were each formed on April 29, 1994;
Spectrum Commodity was formed on July 31, 1997; and Spectrum Currency was formed
on October 20, 1999. Each partnership was formed under Delaware law. The fiscal
year of each partnership begins on January 1 of each year and ends on the
following December 31.
The units that you purchase and pay for in this offering will be fully paid
and nonassessable. You may be liable to a partnership for liabilities that arose
before the date of a redemption or Spectrum Series exchange. Your liability,
however, will not exceed the sum of your unredeemed capital contribution,
undistributed profits, if any, any distributions and amounts received upon a
redemption or deemed received on a Spectrum Series exchange, together with
interest on any such amount. However, a partnership will not make a claim
against you for any amounts received in connection with a redemption of units or
a Spectrum Series exchange unless the net assets of the partnership are
insufficient to discharge the liabilities of the partnership that arose before
any distributions were made to you. The general partner will be liable for all
obligations of a partnership to the extent that the assets of the partnership
are insufficient to pay those obligations.
MANAGEMENT OF PARTNERSHIP AFFAIRS
You will not participate in the management or operations of a partnership.
Under each limited partnership agreement, the general partner is solely
responsible for managing the partnership.
The general partner may use a partnership's funds only to operate the
business of that partnership. The general partner may hire an affiliate to
perform services for the partnership if the general partner
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determines that the affiliate is qualified to perform the services, and can
perform those services under competitive terms that are fair and reasonable. Any
agreement with an affiliate must be for a term not in excess of one year and be
terminable by the partnership without penalty upon 60 days' written notice.
Other responsibilities of the general partner include:
- determining whether a partnership will make a distribution;
- administering redemptions and series exchanges;
- preparing monthly and annual reports;
- preparing and filing tax returns for each partnership;
- signing documents on behalf of each partnership and its limited partners
pursuant to powers of attorney; and
- supervising the liquidation of a partnership, if necessary.
SHARING OF PROFITS AND LOSSES
You will have a capital account in each partnership in which you invest,
with an initial balance equal to the amount you paid for units of the
partnership. The general partner also has a capital account. Each partnership's
net assets will be calculated monthly, and your capital account will be adjusted
as necessary to reflect any increases or decreases that may have occurred since
the preceding month. Profits and losses will be shared by the general partner
and limited partners in proportion to the size of their respective capital
accounts. For a description of the federal tax allocations, see "Material
Federal Income Tax Considerations" on page -.
RESTRICTIONS ON TRANSFERS OR ASSIGNMENTS
While you may transfer or assign your units, the transferee or assignee may
not become a limited partner without the written consent of the general partner.
You may only withdraw capital or profits from a partnership by redeeming units.
The general partner may withdraw any portion of its interest in a partnership
that exceeds the amount required under the limited partnership agreement without
prior notice to or consent of the limited partners. In addition, the general
partner may withdraw or assign its entire interest in a partnership if it gives
120 days' prior written notice to the limited partners. If a majority of the
limited partners elect a new general partner or partners to continue the
business of the partnership, the withdrawing general partner must pay all
reasonable expenses incurred by the partnership in connection with its
withdrawal.
Any transfer or assignment of units by you will take effect at the end of
the month in which the transfer or assignment is made, subject to the following
conditions. A partnership is not required to recognize a transfer or assignment
until it has received at least 30 days' prior written notice from the limited
partner. The notice must be signed by the limited partner and include the
address and social security or taxpayer identification number of the transferee
or assignee and the number of units transferred or assigned. A transfer or
assignment of less than all units held by you cannot occur if as a result either
party to the transfer or assignment would own fewer than the minimum number of
units required for an investment in the partnership (subject to certain
exceptions relating to gifts, death, divorce, or transfers to family members or
affiliates). The general partner will not permit a transfer or assignment of
units unless it is satisfied that the transfer or assignment would not be in
violation of the Partnership Act or applicable federal, state or foreign
securities laws; and notwithstanding the transfer or assignment, the partnership
will continue to be classified as a partnership rather than as an association
taxable as a corporation under the Internal Revenue Code of 1986, as amended. No
transfer or assignment of units will be effective or recognized by a partnership
if the transfer or assignment would result in the termination of that
partnership for federal income tax purposes, and any attempt to transfer or
assign units in violation of the limited partnership agreement will be
ineffective. The limited partner must pay all costs, including any attorneys'
and accountants' fees, related to a transfer or assignment.
AMENDMENTS; MEETINGS
Each limited partnership agreement may be amended by the general partner and
by limited partners owning more than 50% of the units of that partnership. In
addition, the general partner may make certain
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amendments to a limited partnership agreement without the consent of the limited
partners, including any amendment that is not adverse to the limited partners or
required by the staff of the SEC, the CFTC, any other federal agency, any state
"Blue Sky" official, or other governmental official, or to comply with
applicable law. However, no amendment may be made to a limited partnership
agreement without the consent of all partners affected if that amendment would
reduce the capital account of any partner, modify the percentage of profits,
losses, or distributions to which any partner is entitled, or change or alter
the provisions of the limited partnership agreement relating to amendments
requiring the consent of all partners.
Upon written request to the general partner delivered either in person or by
certified mail, you or your authorized attorney or agent may obtain a list of
the names and addresses of, and units owned by, all limited partners in your
partnership, provided that you pay reasonable duplicating and postage costs.
Limited partners owning at least 10% of the units of a partnership may request a
meeting to consider any matter upon which limited partners may vote. Upon
receipt of such a request, the general partner must call a meeting of that
partnership, by written notice sent by certified mail or delivered in person
within 15 days of such request. The meeting must be held at least 30 but not
more than 60 days after the mailing by the general partner of notice of the
meeting. The notice must specify the date, a reasonable place and time, and the
purpose of the meeting.
At any meeting of the limited partners, the following actions may be taken
upon the affirmative vote of limited partners owning more than 50% of the units:
- amend the limited partnership agreement;
- dissolve the partnership;
- remove and replace the general partner;
- elect a new general partner or general partners if the general partner
terminates or liquidates or elects to withdraw from the partnership, or
becomes insolvent, bankrupt or is dissolved;
- terminate any contract with the general partner or any of its
affiliates on 60 days' prior written notice; and
- approve the sale of all or substantially all of the assets of the
partnership.
Any of the foregoing actions may also be taken by limited partners without a
meeting, without prior notice, and without a vote, by means of written consents
signed by limited partners owning the required number of units. Notice of any
actions taken by written consent must be given to non-consenting limited
partners within seven business days.
BOOKS AND RECORDS; REPORTS TO LIMITED PARTNERS
The books and records of each partnership are maintained at its principal
office for at least five years. You or your authorized attorney or agent will
have the right during normal business hours to inspect and copy the books and
records of each partnership of which you are a limited partner. Alternatively,
you may request that copies of the books and records be sent to you, provided
that you pay all reasonable reproduction and distribution costs. The partnership
will retain copies of subscription documentation in connection with purchases
and exchanges of units for at least six years.
Within 30 days after the close of each calendar month, the general partner
will provide such financial and other information with respect to each
partnership as the CFTC and National Futures Association, from time to time, may
require, together with information concerning any material change in the
brokerage commissions or fees payable by the partnerships to any commodity
broker. You will also receive within 90 days after the close of each fiscal year
an annual report containing audited financial statements for the partnerships.
Annual reports will provide a detailed statement of any transactions with the
general partner or its affiliates and of fees, commissions and any compensation
paid or accrued to the general partner or its affiliates. By March 15 of each
year, the partnership will provide you with the tax information
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necessary for you to prepare your federal income tax return. The net asset value
of each partnership's units, which is estimated daily by the general partner,
will be promptly supplied to you upon written request.
A written notice, including a description of limited partners' redemption
and voting rights, will be mailed to the limited partners of a partnership
within seven business days if any of the following events occur:
- net asset value of a unit decreases by at least 50% from the net asset
value of that unit as of the end of the immediately preceding month;
- the limited partnership agreement is materially amended;
- any change in trading advisors or any material change in a management
agreement;
- any change in commodity brokers or any material change in the
compensation arrangements with a commodity broker;
- any change in general partners or any material change in the
compensation arrangements with a general partner;
- any change in the partnership's fiscal year;
- any material change in the partnership's trading policies as specified
in the limited partnership agreement; or
- cessation of futures interests trading by the partnership.
If you receive a notice as to a 50% decrease in net asset value per unit,
that notice will also advise you that a "special redemption date" will take
place when limited partners may redeem their units in the same manner as
described under "Redemptions" on page - for regular redemption dates.
Further, following the close of business on the date of the 50% decrease giving
rise to that notice, the partnership will liquidate all existing positions as
promptly as reasonably practicable, and will suspend all futures, forwards, and
options trading through the special redemption date. The general partner will
then determine whether to reinstitute futures interests trading or to terminate
the partnership.
In addition, subject to limits imposed under state guidelines incorporated
in the limited partnership agreements, no increase in any of the management,
incentive or brokerage fees payable by the partnerships, or any of the caps on
fees, may take effect until the first business day following a redemption date.
In the event of such an increase:
- notice of the increase will be mailed to limited partners at least five
business days prior to the last date on which a "request for redemption"
must be received by the general partner with respect to the applicable
redemption date;
- the notice will describe the redemption and voting rights of limited
partners; and
- units redeemed at the first redemption date following the notice will not
be subject to any redemption charges.
Each limited partner expressly agrees that in the event of his death, he
waives on behalf of himself and his estate the furnishing of any inventory,
accounting, or appraisal of the assets of the partnership and any right to an
audit or examination of the books of the partnership.
PLAN OF DISTRIBUTION
GENERAL
Dean Witter is offering units pursuant to a selling agreement with the
partnerships and the general partner. With the approval of the general partner,
Dean Witter may appoint additional selling agents to make offers and sales of
the units. These additional selling agents may include any securities broker
which is a member in good standing of the NASD, as well as any foreign bank,
dealer, institution or person ineligible for membership in the NASD that agrees
not to make any offers or sales of units within
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the U.S. or its territories, possessions or areas subject to its jurisdiction,
or to U.S. citizens or residents. Any such non-NASD member must also agree to
comply with applicable provisions of the Conduct Rules of the NASD in making
offers and sales of units.
Dean Witter is offering the units on a "best efforts" basis without any
agreement by Dean Witter to purchase units. The general partner may in the
future register additional units of any partnership with the SEC. There is no
maximum amount of funds which may be contributed to a partnership. The general
partner may in the future subdivide or combine outstanding units of any
partnership, in its discretion, provided that any subdivision or combination
will not affect the net asset value of any limited partner's interest in the
partnership.
Each partnership has agreed to indemnify its trading advisors in connection
with the offer and sale of units with respect to any misleading or untrue
statement or alleged misleading or untrue statement of a material fact or
material omission or alleged omission unrelated to its trading advisor(s). Each
partnership has also agreed to indemnify Dean Witter, the general partner and
any additional sellers in connection with the offer and sale of units. See
"Fiduciary Responsibility and Liability" on page - .
INITIAL OFFERING OF SPECTRUM CURRENCY
Units of Spectrum Currency are being offered for sale at $10 per unit at its
initial closing, which is currently scheduled to be held as of January 31, 2000.
After the initial closing, unsold units will be sold in the continuing offering
with units of the other partnerships as described below.
The period from the date of this prospectus through May 31, 2000 is the
initial offering period for Spectrum Currency. The initial offering period,
however, may be extended to July 31, 2000, in the sole discretion of the general
partner. In order for Spectrum Currency to commence trading operations, the
general partner must receive and accept subscriptions for at least
600,000 units during the initial offering period. If less than 600,000 units of
Spectrum Currency are subscribed for during the initial offering period, the
offering will terminate and each subscriber's Dean Witter customer account will
be credited for the full subscription amount, with interest, within five
business days. The general partner, Dean Witter, any additional sellers, and the
trading advisors, and their respective affiliates may, but are not required to,
subscribe for units in Spectrum Currency. Units subscribed for by such entities
will be counted for purposes of determining whether the 600,000 unit minimum
subscription requirement has been satisfied. However, units subscribed for by
such entities during the initial offering period will be for investment purposes
only and not with a view towards redistribution, and may not be redeemed for a
period of two years after the initial closing if the partnership would not have
the minimum $6,000,000 in net assets remaining immediately following the
redemption.
CONTINUING OFFERING
Units of each partnership are being offered for sale at monthly closings
held on the last day of each month, beginning the first month following its
initial closing in the case of Spectrum Currency, and beginning January 31, 2000
in the case of Spectrum Commodity. Units will be offered and sold at the net
asset value of a unit of the partnership on the date of the monthly closing. The
sale amount will be delivered to the partnership that sold the unit.
ESCROW ARRANGEMENTS
During Spectrum Currency's initial offering period and during the continuing
offering, if your subscription is not immediately rejected by the general
partner, your subscription funds will be transferred to, and held in escrow by,
The Chase Manhattan Bank, New York, New York. These subscription funds held in
escrow will be invested in the escrow agent's money market account, and will
earn the interest rate then paid by the bank on that account. If the general
partner accepts your subscription, at any month-end closing, the escrow agent
will pay your subscription funds to the appropriate partnerships and pay any
interest earned on those funds to Dean Witter. Dean Witter in turn will credit
your Dean Witter customer account with the interest. If the general partner
rejects a subscription, the escrow agent will promptly pay the rejected
subscription funds and any interest earned to Dean Witter. Dean Witter will then
credit your Dean Witter customer account with those amounts, and the funds will
be immediately available for investment or withdrawal. If you closed your Dean
Witter customer account, any subscription returned and interest earned will be
paid by check. Interest will be
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earned on subscription funds from the day of deposit with the escrow agent to
the day that funds are either paid to the appropriate partnerships in the case
of accepted subscriptions or paid to Dean Witter in the case of rejected
subscriptions. At all times during Spectrum Currency's initial offering period
and during the continuing offering, and prior to each closing, subscription
funds will be in the possession of the escrow agent, and at no time will the
general partner hold or take possession of the funds.
COMPENSATION TO DEAN WITTER EMPLOYEES AND ADDITIONAL SELLING AGENTS
Except as described below, employees of Dean Witter will receive from Dean
Witter (payable solely from its own funds) a gross sales credit equal to 3% of
the net asset value per unit as of the closing for each unit sold by them and
issued at the closing. In addition, Dean Witter will continue to compensate
those employees who participated in this offering and continue to render
services to limited partners by paying them up to 86% of the brokerage fees
attributable to outstanding units sold by them and received by Dean Witter as
commodity broker for each partnership. This compensation will begin:
- in the case of Spectrum Select, Spectrum Technical, and Spectrum
Strategic, with the seventh month following the closing at which a unit
was issued;
- in the case of Spectrum Global Balanced, Spectrum Commodity, and Spectrum
Currency, with the tenth month after the closing at which a unit was
issued;
- the first month after a unit is issued pursuant to a non-series exchange;
or
- the month as of which such continuous compensation is first payable with
respect to units purchased in a Spectrum Series exchange, but with the
seventh or tenth month measured from the date the subscriber first became
a limited partner in a Spectrum Series partnership.
This compensation will continue until the applicable partnership terminates
or the unit is redeemed, whichever comes first. Dean Witter employees who sell
$500,000 or more of units to any single investor will not receive an initial
payment equal to 3% of the net asset value per unit. Those employees will only
be entitled to receive the continuing compensation payments described above
attributable to the outstanding units, starting with the first month after the
units are issued. No part of this compensation will be paid by any partnership.
Accordingly, net assets will not be reduced as a result of such compensation.
Each person receiving continuing compensation must be a Dean Witter employee
at the time of receipt of payment and must be registered as an associated person
with the CFTC and be a member of the National Futures Association in such
capacity only after either having passed the Series 3 or Series 31 examination
or having been "grandfathered" as an associated person qualified to do commodity
brokerage under the Commodity Exchange Act and the CFTC's regulations. These
employees must also perform additional services, including:
(a) inquiring of the general partner from time to time, at the request of
limited partners, as to the net asset value of each partnership's units;
(b) inquiring of the general partner, at the request of limited partners,
regarding the futures interests markets and the activities of the partnerships;
(c) responding to questions of limited partners with respect to the monthly
account statements, annual reports, financial statements and annual tax
information furnished periodically to limited partners;
(d) providing advice to limited partners as to when and whether to make
additional investments or to redeem or exchange units;
(e) assisting limited partners in the redemption or exchange of units; and
(f) providing such other services as limited partners from time to time may
reasonably request.
The additional compensation paid by Dean Witter may be deemed to be
underwriting compensation. The selling agreement among Dean Witter, the general
partner and the partnerships provides that this
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compensation may only be paid by Dean Witter as long as continuing services are
provided. Any limited partner may telephone, write or visit a financial advisor
at the Morgan Stanley Dean Witter branch office to avail himself of such
services.
Dean Witter will not pay its employees the 3% initial gross sales credit
described above with respect to units purchased pursuant to a Spectrum Series
exchange or non-series exchange. Such employees will, however, receive
continuing gross sales credits with respect to brokerage fees received by Dean
Witter from a partnership at the applicable rate.
Dean Witter may at any time implement cash sales incentive and/or
promotional programs for its employees who sell units. These programs will
provide for Dean Witter, and not any partnership or the general partner, to pay
Dean Witter's employees bonus compensation based on sales of units. Any such
program will be approved by the NASD prior to its start.
The aggregate of all compensation paid to employees of Dean Witter from the
initial 3% gross sales credit, the redemption charges received by Dean Witter,
and any sales incentives will not exceed 10% of the proceeds of the sale of
units.
Dean Witter may compensate any qualified additional selling agents for each
unit sold by it by paying a selling commission, from Dean Witter's own funds, as
determined by Dean Witter and the additional selling agents, but not to exceed
3% of the net asset value of the unit sold. Additional selling agents who are
properly registered as futures commission merchants or introducing brokers with
the CFTC and are members of the National Futures Association in such capacity
may also receive from Dean Witter, payable from Dean Witter's own funds,
continuing compensation for providing to limited partners the continuing
services described above. Additional selling agents that are affiliates of Dean
Witter may receive additional compensation from Dean Witter of up to 85% of the
brokerage fees generated by outstanding units sold by such additional selling
agents and received by Dean Witter as commodity broker for each partnership.
Additional selling agents that are not affiliates of Dean Witter may receive
additional compensation paid by Dean Witter of up to 35% of the brokerage fees
generated by outstanding units sold by such additional selling agents and
received by Dean Witter as commodity broker for each partnership. Additional
selling agents may pay all or a portion of such additional compensation to their
employees who have sold units and provide continuing services to limited
partners if those employees are properly registered with the CFTC and are
members of the National Futures Association. Additional compensation paid by
Dean Witter may be deemed to be underwriting compensation.
SUBSCRIPTION PROCEDURE
The minimum subscription for most subscribers is $5,000, except that the
minimum investment is:
- $2,000 in the case of an IRA; or
- for eligible subscribers purchasing units pursuant to a
non-series exchange, the lesser of
-- $5,000,
-- the proceeds from the redemption of five units, or two units in the
case of an IRA, from commodity pools other than any of the Morgan
Stanley Dean Witter Charter Series of partnerships,
-- the proceeds from the redemption of 500 units, or 200 units in the
case of an IRA, from any Charter Series partnership, or
-- the proceeds from the redemption of such subscriber's entire interest
in any other commodity pool which the general partner serves as
general partner and commodity pool operator.
A subscription may be for units of one partnership, or may be divided among
two or more partnerships, provided that:
- in the case of a new subscription, the minimum subscription for any one
partnership is $1,000; and
- in the case of a non-series exchange, the minimum subscription for any one
partnership is the proceeds of the redemption of one unit of the other
commodity pool, or 100 units in the case of any Charter Series
partnership.
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If you are an investor in a partnership and you wish to make an additional
investment in the same partnership, you may subscribe for units at a monthly
closing with a minimum investment in that partnership of $500.
In order to make your first purchase of units of a partnership, other than
by means of an exchange, you must complete, sign, and deliver to Dean Witter a
subscription agreement which will authorize the general partner and Dean Witter
to transfer the full subscription amount from your Dean Witter customer account
to the partnerships' Escrow Account. If your subscription agreement is received
by Dean Witter and not immediately rejected, you must have the appropriate
amount in your Dean Witter customer account on the first business day following
the date that your subscription agreement is received by Dean Witter. Dean
Witter will deduct the subscription amount from your customer account and
transfer funds into escrow with the escrow agent on that date. If you do not
have a Dean Witter customer account or an account with an affiliate of Dean
Witter, or do not have sufficient funds in your existing Dean Witter customer
account, you should make appropriate arrangements with your Morgan Stanley Dean
Witter & Co. financial advisor, or contact your local Morgan Stanley Dean Witter
branch office. Do not mail any payment to the general partner, as it will be
returned to you for proper placement with the Morgan Stanley Dean Witter branch
office where your account is maintained.
In the case of a Spectrum Series exchange or a non-series exchange, you must
complete, sign, and deliver to your Morgan Stanley Dean Witter & Co. financial
advisor a subscription agreement, which will authorize the general partner to
redeem all or a portion of your interest in a partnership or another commodity
pool which the general partner serves as general partner and commodity pool
operator, subject to terms of the applicable limited partnership agreement, and
to use the proceeds, after deducting any applicable redemption charges, to
purchase units in one or more of the partnerships.
In accordance with an NASD rule, Dean Witter will not subscribe for units on
your behalf if it has discretionary authority over your customer account, unless
it gets prior written approval from you.
If you subscribe by check, units will be issued subject to the collection of
the funds represented by the check. If your check is returned unpaid, Dean
Witter will notify the general partner, and the relevant partnership will cancel
the units issued to you represented by the check. Any losses or profits
sustained by the partnership allocable to the cancelled units will be allocated
among the remaining partners. In the limited partnership agreements, each
limited partner agrees to reimburse a partnership for any expense or loss
(including any trading loss) incurred in connection with the issuance and
cancellation of any units issued to the limited partner.
Subscriptions for units are generally irrevocable by subscribers. However,
you may revoke your subscription agreement and receive a full refund of the
subscription amount and any accrued interest, or revoke the redemption of units
in the other commodity pool in the case of an Exchange, within five business
days after execution of the subscription agreement or no later than 3:00 P.M.,
New York City time, on the date of the applicable monthly closing, whichever
comes first, by delivering written notice to your Morgan Stanley Dean Witter
financial advisor. There may be other rescission rights under applicable federal
and state securities laws. The general partner may reject any subscription, in
whole or in part, in its sole discretion.
A sample form of the subscription agreement is annexed to this prospectus as
Exhibit B. A separate copy of the subscription agreement accompanies this
prospectus or you may obtain one, after delivery of this prospectus, from a
local Morgan Stanley Dean Witter branch office. You will not receive any
certificate evidencing units, but you will be sent confirmations of purchases in
Dean Witter's customary form.
Once you are an investor in a partnership, you may make additional cash
purchases of units of that partnership without executing a new subscription
agreement, by contacting your Morgan Stanley Dean Witter financial advisor and
authorizing your financial advisor to deduct the additional amount you want to
invest from your Dean Witter customer account. Those amounts will be held in
escrow, and applied towards the purchase of units, in the same manner as initial
purchases described above. However, before you make any additional purchase of
units in this manner, you will be required to complete a subscription agreement
update form, a sample of which is annexed to this prospectus as Exhibit C, if a
new prospectus has been issued since the date of your original subscription
agreement. Further, your
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Morgan Stanley Dean Witter financial advisor will be required to confirm to the
general partner that the information you provided, and the representations and
warranties you made, in your original subscription agreement, including, in
particular, that you satisfy applicable minimum financial suitability
requirements, are still true and correct. You may not use the subscription
procedure described in this paragraph to purchase additional units in a
partnership by way of an exchange, or to purchase units of a partnership in
which you are not currently an investor; in either of those cases, you must
execute a new subscription agreement.
PURCHASES BY EMPLOYEE BENEFIT PLANS--ERISA CONSIDERATIONS
Units might or might not be a suitable investment for an employee benefit
plan. If you are a person with investment discretion on behalf of an employee
benefit plan, before proceeding with a purchase of units, you should determine
whether the purchase of units is permitted under the governing instruments of
the plan, and is appropriate for that particular plan in view of its overall
investment policy, the composition and diversification of its portfolio, and the
other considerations discussed below.
As used in this section, the term "employee benefit plans" refers to plans
and accounts of various types, including their related trusts, which provide for
the accumulation of a portion of an individual's earnings or compensation, as
well as investment income earned thereon, typically free from federal income tax
until such time as funds are distributed from the plan. These plans include
corporate pension and profit-sharing plans, such as so-called "401(k)" plans,
"simplified employee pension plans," so-called "Keogh" plans for self-employed
individuals (including partners), and, for purposes of this discussion,
individual retirement accounts, as described in Section 408 of the Internal
Revenue Code of 1986, as amended.
Notwithstanding the general requirement that investors in one or more
partnerships must invest a minimum of $5,000, a minimum purchase requirement of
$2,000 has been set for IRAs. The minimum subscription for any one of the
partnerships must be at least $1,000. Greater minimum purchases may be mandated
by the securities laws and regulations of certain states, and each investor
should consult the subscription agreement to determine the applicable investment
requirements.
If the assets of an investing employee benefit plan were to be treated, for
purposes of the reporting and disclosure provisions and certain other of the
fiduciary responsibility provisions of Title I of the Employee Retirement Income
Security Act of 1974, as amended, and Section 4975 of the Internal Revenue Code
of 1986, as including an undivided interest in each of the underlying assets of
a partnership, an investment in units would in general be an inappropriate
investment for the plan. A U.S. Department of Labor regulation defines "plan
assets" in situations where employee benefit plans purchase equity securities in
investment entities such as a partnership. The regulation provides that the
assets of an entity will not be deemed to be "plan assets" of an employee
benefit plan which purchases an equity security of the entity if the equity
security is a "publicly-offered security." A "publicly-offered security" is one
which is:
- freely transferable;
- held by more than 100 investors independent of the issuer and of each
other; and
- either registered under Section 12(b) or Section 12(g) of the Securities
Exchange Act of 1934, or sold to the plan as part of a public offering of
such securities pursuant to an effective registration statement under the
Securities Act of 1933, where the security is then timely registered under
Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934.
The units currently meet, and it is expected that the units will continue to
meet, the criteria of the Regulation.
The general partner believes, based upon the advice of its legal counsel,
that income earned by the partnerships will not constitute "unrelated business
taxable income" under Section 512 of the Internal Revenue Code of 1986 to
employee benefit plans and other tax-exempt entities. Although the Internal
Revenue Service has issued favorable private letter rulings to taxpayers in
somewhat similar circumstances, other taxpayers may not use or cite such rulings
as precedent. If you have investment discretion on behalf of an employee benefit
plan, you should consult a professional tax adviser regarding the application of
the foregoing matters to the purchase of units.
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Units may not be purchased with the assets of an employee benefit plan if
the general partner, Dean Witter, any additional selling agents, any trading
advisor or any of their respective affiliates either:
- has investment discretion with respect to the investment of such plan
assets;
- has authority or responsibility to give or regularly gives investment
advice with respect to such plan assets for a fee and pursuant to an
agreement or understanding that such advice will serve as a primary basis
for investment decisions with respect to the plan assets and that such
advice will be based on the particular investment needs of the plan; or
- is an employer maintaining or contributing to such plan.
Subscribing for units does not create an IRA or other employee benefit plan.
If you are considering the purchase of units on behalf of an IRA or other
employee benefit plan, you must first ensure that the plan has been properly
established in accordance with the Internal Revenue Code of 1986 and the
regulations and administrative rulings thereunder, and that the plan has been
adequately funded. Then, after all of the considerations discussed above have
been taken into account, the trustee or custodian of a plan who decides to or
who is instructed to do so may subscribe for units in one or more of the
partnerships, subject to the applicable minimum subscription requirement per
partnership.
Acceptance of subscriptions on behalf of IRAs or other employee benefit
plans is in no respect a representation by the general partner, Dean Witter, any
additional selling agents, any partnership, or any trading advisor that the
investment meets all relevant legal requirements with respect to investments by
plans generally or any particular plan, or that the investment is appropriate
for plans generally or any particular plan.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The general partner has been advised by counsel, Cadwalader, Wickersham &
Taft, that in its opinion, the following summary correctly describes the
material federal income tax consequences to a U.S. taxpayer who invests in a
partnership. The opinions appearing in this section are the opinions of
Cadwalader, Wickersham & Taft, except as otherwise specifically noted. The
following summary is based upon the Internal Revenue Code of 1986 rulings
thereon, regulations promulgated thereunder and existing interpretations
thereof, any of which could be changed at any time and which changes could be
retroactive. The federal income tax summary and the state and local income tax
summary that follow, in general, relate only to the tax implications of an
investment in the partnerships by individuals who are citizens or residents of
the U.S. Except as indicated below or under "Purchases by Employee Benefit
Plans-ERISA Considerations," the summaries do not address the tax implications
of an investment in the partnerships by corporations, partnerships, trusts and
other non-individuals. Moreover, the summaries are not intended as a substitute
for careful tax planning, particularly since certain of the tax consequences of
owning an interest in the partnerships may not be the same for all taxpayers,
such as non-individuals or foreign persons, or in light of an investor's
personal investment circumstances. A complete discussion of all federal, state
and local tax aspects of an investment in each partnership is beyond the scope
of the following summary, and prospective investors are urged to consult their
own tax advisors on these matters.
PARTNERSHIP STATUS
The general partner has been advised by its legal counsel, Cadwalader,
Wickersham & Taft, that in its opinion under current federal income tax law,
each partnership will be classified as a partnership and not as an association
(or a publicly traded partnership) taxable as a corporation. This opinion is
based upon the facts set forth in this prospectus, including that a principal
activity of each partnership consists of buying and selling futures, options,
and forward contracts, and at least 90% of the partnership's gross income during
each year consists of gains from such trading and interest income. No ruling has
been requested from the Internal Revenue Service with respect to classification
of each partnership and the general partner does not intend to request such a
ruling.
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If a partnership were treated as an association (or a publicly traded
partnership) taxable as a corporation, income or loss of the partnership would
not be passed through to its partners, and the partnership would be subject to
tax on its income at the rates applicable to corporations without deduction for
any distributions to its partners. In addition, all or a portion of any
distributions by the partnership to its partners could be taxable to the
partners as dividends or capital gains. The discussion that follows assumes that
each partnership will be treated as a partnership for federal income tax
purposes.
PARTNERSHIP TAXATION
PARTNERS, RATHER THAN A PARTNERSHIP ARE SUBJECT TO FEDERAL INCOME TAX. None
of the partnerships will pay federal income tax. Except as provided below with
respect to certain nonresident aliens, each limited partner will report his
distributive share of all items of partnership income, gain, loss, deduction,
and credit for the partnership's taxable year ending within or with the
partner's taxable year. A limited partner must report and pay tax on his share
of partnership income for a particular year whether or not he has received any
distributions from the partnership in that year. The characterization of an item
of profit or loss will usually be determined at the partnership level.
SYNDICATION EXPENSES. None of the partnerships nor any partner thereof will
be entitled to any deduction for syndication expenses (I.E., those amounts paid
or incurred in connection with issuing and marketing units). There is a risk
that some of the brokerage fees paid to Dean Witter could be treated as a
nondeductible payment by the partnerships of syndication expenses.
ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES. In general, each limited
partnership agreement allocates items of ordinary income and expense pro rata
among the partners based upon their respective capital accounts as of the end of
the month in which such items are accrued. Net recognized capital gain or loss
is generally allocated among all partners based upon their respective capital
accounts. However, net recognized capital gain or loss is allocated first to
partners who have redeemed units in the partnership during a taxable year to the
extent of the difference between the amount received on the redemption and the
allocation account as of the date of redemption attributable to the redeemed
units. Any remaining net recognized capital gain or loss is next allocated among
all those partners whose capital accounts differ from their allocation accounts
based on the respective differences for each partner.
The special allocation of each partnership's net gain or loss upon a
redemption of units, which retains the same character as in the hands of the
partnership, may alter the character of a redeeming limited partner's income (by
reducing the amount of long-term capital gain recognized upon receipt of
redemption proceeds) and may accelerate the recognition of income by the limited
partner.
These allocation provisions are designed to reconcile tax allocations to
economic allocations. However, the general partner cannot assure you that the
Internal Revenue Service will not challenge the allocations, including each
partnership's tax allocations in respect of redeemed units.
If the allocation provided by each limited partnership agreement is not
respected by the Internal Revenue Service for federal income tax purposes, the
amount of income or loss allocated to the partners for federal income tax
purposes may be increased or reduced or the character of the income or loss may
be modified.
CASH DISTRIBUTIONS AND REDEMPTIONS
Because of the special allocation of partnership gain or loss upon a
redemption of units, the amounts received upon the partial or complete
redemption of a limited partner's units normally will not result in additional
taxable income or loss to the limited partner. However, distributions by a
partnership and amounts received upon the partial or complete redemption of a
limited partner's units will be taxable to the limited partners to the extent
cash distributions by a partnership or amounts received upon redemption by a
limited partner exceed the partner's adjusted tax basis in his units. Such
excess will be taxable to him as though it were a gain from a sale of the units.
A loss will be recognized upon a redemption of units only if, following the
redemption of all of a limited partner's units, the partner has any tax basis in
his units remaining. In such case, the limited partner will recognize loss to
the extent of the remaining basis. See "Redemptions." Generally, if a limited
partner is not a "dealer" with respect to his interest in the partnership and he
has held his interest in the partnership for more than one year, the gain or
loss would be long-term capital gain or loss.
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GAIN OR LOSS ON TRADING ACTIVITY
NATURE OF PARTNERSHIP INCOME. Each partnership does not expect to hold its
futures, forwards or options for sale to customers. For federal income tax
purposes substantially all of the profit and loss generated by each partnership
from its trading activities is expected to be capital gain and loss, which in
turn may be either short-term, long-term or a combination thereof. Nevertheless,
certain foreign currency transactions could result in ordinary gain or loss, as
discussed below. Further, interest paid to a partnership will be taxable
currently to the limited partners as ordinary income. Thus, during taxable years
in which little or no profit is generated from trading activities, a limited
partner may still have interest income.
MARK-TO-MARKET. Section 1256 contracts held at the end of a partnership's
taxable year will be treated as having been sold for the fair market value on
the last day of the taxable year, and gain or loss will be taken into account
for the year. Gain or loss with respect to a Section 1256 contract is generally
treated as short-term capital gain or loss to the extent of 40% of the gain or
loss, and long-term capital gain or loss to the extent of 60% of the gain and
loss. Section 1256 contracts include regulated futures contracts which are
futures contracts traded on regulated U.S. and certain foreign exchanges;
foreign currency contracts that are traded in the interbank market and relate to
currencies for which positions are also traded through regulated futures
contracts; and U.S. and certain foreign exchange-traded options on commodities,
including options on regulated futures contracts, debt securities and stock
indices. While the partnerships expect that a majority of their trading
activities will be conducted in Section 1256 contracts, the partnerships also
expect that a portion of their trading activities will be conducted in contracts
that do not presently qualify as Section 1256 contracts, such as positions in
futures contracts on most foreign exchanges and foreign currency forward
contracts that do not relate to currencies for which positions are also traded
through regulated futures contracts.
SECTION 988. Currency gain or loss with respect to foreign currency forward
contracts that do not relate to currencies for which positions are also traded
through regulated futures contracts and futures contracts traded on most foreign
exchanges may be treated as ordinary income or loss under Internal Revenue Code
of 1986 Section 988. Each partnership has elected to treat these contracts as
Section 1256 contracts (I.E., marked-to-market at year end). Pursuant to this
election, gain or loss with respect to these contracts is treated as entirely
short-term capital gain or loss.
Subject to certain limitations, a limited partner, other than a corporation,
estate or trust, may elect to carry back net Section 1256 contract losses to
each of the three preceding years. Net Section 1256 contract losses carried back
to prior years may only be used to offset net Section 1256 contract gains.
Generally, such losses are carried back as 40% short-term capital losses and 60%
long-term capital losses. Capital assets not marked to market under
Section 1256, such as any non-currency forward contracts, are not subject to the
60/40 tax regime for Section 1256 contracts, and gain or loss on sale generally
will be long-term only if such property has been held for more than one year.
STRADDLES. If a partnership incurs a loss upon the disposition of any
position which is part of a "straddle" (I.E., two or more offsetting positions),
recognition of that loss for tax purposes will be deferred until the partnership
recognizes the gain in the offsetting position of the straddle (or successor
position, or offsetting position to the successor position). Interest and other
carrying charges allocable to positions which are part of a straddle must be
capitalized, rather than deducted currently. Certain modified "short sale" rules
may apply to positions held by a partnership so that what might otherwise be
characterized as long-term capital gain would be characterized as short-term
capital gain or potential short-term capital loss as long-term capital loss.
For purposes of applying the above rules restricting the deductibility of
losses with respect to offsetting positions, if a limited partner takes into
account gain or loss with respect to a position held by the partnership, the
limited partner will be treated as holding the partnership's position, except to
the extent otherwise provided in regulations. Accordingly, positions held by a
partnership may limit the deductibility of realized losses sustained by a
limited partner with respect to positions held for his own account, and
positions held by a limited partner for his own account may limit his ability to
deduct realized losses sustained by a partnership. Thus, straddles may not be
used to defer gain from one taxable year to the next. Reporting requirements
generally require taxpayers to disclose all unrecognized gains with respect to
positions held at the end of the taxable year. The above principle, whereby a
limited partner may be treated as holding partnership positions, may also apply
to require a limited partner to capitalize (rather than deduct) interest and
carrying charges allocable to property held by him.
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Where the positions of a straddle are comprised of both Section 1256 and
non-Section 1256 contracts, a partnership will be subject to the mixed straddle
rules of the Internal Revenue Code of 1986 and the regulations promulgated
thereunder. The appropriate tax treatment of any gains and losses from trading
in mixed straddles will depend on what elections a partnership makes. Each
partnership has elected to place all of its positions in a "mixed straddle"
account which is marked-to-market daily. Under a special account cap, not more
than 50% of net capital gain may be long-term capital gain, and not more than
40% of net capital loss may be short-term capital loss.
TAXATION OF LIMITED PARTNERS
LIMITATIONS ON DEDUCTIBILITY OF PARTNERSHIP LOSSES. The amount of
partnership loss, including capital loss, which a limited partner will be
entitled to take into account for federal income tax purposes is limited to the
tax basis of his units, except in the case of certain limited partners including
individuals and closely-held C corporations, for which he is "at risk" with
respect to the units as of the end of the partnership's taxable year in which
such loss occurred.
Generally, a limited partner's initial tax basis will be the amount paid for
each unit. A limited partner's adjusted tax basis will be his initial tax basis
reduced by the limited partner's share of partnership distributions, losses and
expenses and increased by his share of partnership income and gains. The amount
for which a limited partner is "at risk" with respect to his units in a
partnership is generally equal to his tax basis for the units, less: any amounts
borrowed in connection with his acquisition of the units for which he is not
personally liable and for which he has pledged no property other than his units;
any amounts borrowed from persons who have a proprietary interest in the
partnership; and any amounts borrowed for which the limited partner is protected
against loss through guarantees or similar arrangements.
Because of the limitations imposed upon the deductibility of capital losses
referred to below, a limited partner's share of a partnership's net capital
losses, if any, will not materially reduce his federal income tax on his
ordinary income. In addition, certain expenses of a partnership might be
deductible by a limited partner only as itemized deductions and, therefore, will
not reduce the federal taxable income of a limited partner who does not itemize
his deductions. Furthermore, an individual who is subject to the alternative
minimum tax for a taxable year may not realize any tax benefit from such
itemized deductions.
LIMITATIONS ON DEDUCTIBILITY OF PASSIVE LOSSES. The partnerships' income
will not be treated as a "passive activity" for purposes of the limitation on
the deduction of passive activity losses.
LIMITED DEDUCTION OF CERTAIN EXPENSES. Certain miscellaneous itemized
deductions, such as expenses incurred to maintain property held for investment,
are deductible only to the extent that they exceed 2% of the adjusted gross
income of an individual, trust or estate. The amount of certain itemized
deductions allowable to individuals is further reduced by an amount equal to the
lesser of (i) 3% of the individual's adjusted gross income in excess of a
certain threshold amount and (ii) 80% of the itemized deductions. Moreover, such
investment expenses are miscellaneous itemized deductions that are not
deductible by a non-corporate taxpayer in calculating its alternative minimum
tax liability. Based upon the current and contemplated activities of the
partnerships, the general partner has been advised by its legal counsel that, in
such counsel's opinion, the expenses incurred by the partnerships in their
futures interests trading businesses should not be subject to the 2% "floor" or
the 3% phaseout, except to the extent that the Internal Revenue Service
promulgates regulations that so provide. However, that advice is not binding on
a court or the Internal Revenue Service, and the Internal Revenue Service could
assert, and a court could agree, that such expenses of the partnerships
(including incentive fees) are investment expenses which are subject to these
limitations.
TAX LIABILITY WILL EXCEED DISTRIBUTIONS. Under federal tax laws, a limited
partner must report and pay tax on his share of any partnership income each
year, even though the general partner does not intend to make any distributions
from the partnerships.
TAX ON CAPITAL GAINS AND LOSSES. For individuals, trusts and estates,
"long-term capital gains" are currently taxed at a maximum marginal tax rate of
20% and "short-term capital gains" and other income are taxed at a maximum
marginal tax rate of 39.6%. Corporate taxpayers are currently subject to a
maximum marginal tax rate of 35% on all capital gains and income.
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The excess of capital losses over capital gains is deductible by an
individual against ordinary income on a one-for-one basis, subject to an annual
limitation of $3,000 ($1,500 in the case of married individuals filing a
separate return). Excess capital losses may be carried forward.
Net losses from Section 1256 contracts are treated as 60% long-term capital
loss and 40% short-term capital loss. Such losses may, at the individual
taxpayer's election, be carried back to each of the preceding three years and
applied against gains from Section 1256 contracts.
ALTERNATIVE MINIMUM TAX. The alternative minimum tax for individuals is
imposed on "alternative minimum taxable income" in excess of certain exemption
amounts. Alternative minimum taxable income consists of taxable income
determined with certain adjustments and increased by the amount of items of tax
preference. Alternative minimum taxable income may not be offset by certain
interest deductions, including (in certain circumstances) interest incurred to
purchase or carry units in the partnerships. Corporations are also subject to an
alternative minimum tax. The extent to which the alternative minimum tax will be
imposed will depend on the overall tax situation of each limited partner at the
end of such taxable year.
LIMITATION ON DEDUCTIBILITY OF INTEREST ON INVESTMENT
INDEBTEDNESS. Interest paid or accrued on indebtedness properly allocable to
property held for investment is investment interest. Such interest is generally
deductible by non-corporate taxpayers only to the extent it does not exceed net
investment income. A limited partner's distributive share of net partnership
income and any gain from the disposition of units will be treated as investment
income, except that a limited partner's net capital gain from the disposition of
units is investment income only if the limited partner waives the benefit of the
preferential tax rate on the gain. It is not clear whether a limited partner's
distributive share of partnership net capital gain constitutes investment income
where the gain is taxed at the maximum rate for capital gains. Interest expense
incurred by a limited partner to acquire his units generally will be investment
interest. Any investment interest disallowed as a deduction in a taxable year
solely by reason of the limitation above is treated as investment interest paid
or accrued in the succeeding taxable year.
TAXATION OF FOREIGN LIMITED PARTNERS. A non-resident alien individual,
foreign corporation or foreign partnership not otherwise engaged in a United
States trade or business or acting as a dealer in commodities should not be
deemed to be engaged in a United States trade or business solely by virtue of an
investment as a limited partner in the partnerships. Capital gains earned by the
partnerships and allocated to such a foreign limited partner will, as a general
rule, not be subject to United States federal income taxation or withholding,
but may be subject to taxation by the jurisdiction in which the foreign limited
partner is resident, organized or operating. Interest income earned by the
partnerships will, as a general rule, likewise not be subject to United States
federal income tax or withholding, but may be subject to tax in other
jurisdictions to which the foreign limited partner is connected. Prospective
foreign limited partners who are engaged in a United States trade or business or
who act as dealers in commodities may be subject to United States income tax and
should consult their tax advisors before investing in a partnership.
The estate of a deceased foreign limited partner may be liable for U.S.
estate tax and may be required to obtain an estate tax release from the Internal
Revenue Service in order to transfer the units of such foreign limited partner.
FOREIGN PERSONS SHOULD CONSULT THEIR OWN TAX ADVISERS BEFORE DECIDING
WHETHER TO INVEST IN THE PARTNERSHIPS.
TAX ELECTIONS. The Internal Revenue Code of 1986 provides for optional
adjustments to the basis of partnership property upon distributions of
partnership property to a partner (Section 734) and transfers of units,
including transfers by reason of death (Section 743), provided that a
partnership election has been made pursuant to Section 754. As a result of the
complexities and added expense of the tax accounting required to implement such
an election, the general partner does not presently intend to make such an
election for any of the partnerships. Therefore, any benefits which might be
available to the partners by reason of such an election will be foreclosed.
TAX RETURNS AND INFORMATION. The partnerships will file their information
returns using the accrual method of accounting. Within 75 days after the close
of each partnership's taxable year, the partnership will furnish each limited
partner, and any assignee of the units of a limited partner, copies of the
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partnership's Schedule K-1 indicating the limited partner's distributive share
of tax items and any additional information as is reasonably necessary to permit
the limited partner to prepare his own federal and state tax returns.
PARTNERSHIP'S TAXABLE YEAR. Each partnership has the calendar year as its
taxable year.
UNRELATED BUSINESS TAXABLE INCOME OF EMPLOYEE BENEFIT PLAN LIMITED PARTNERS
AND OTHER TAX-EXEMPT INVESTORS. Income allocated to a limited partner which is
an employee benefit plan or other tax-exempt entity should not be subject to tax
under Section 511 of the Internal Revenue Code of 1986, provided that the units
purchased by such plans and entities are not "debt-financed."
However, if a partnership were to purchase physical commodities with
borrowed funds (whether upon delivery under a futures or forward contract or
otherwise) and to sell those commodities at a gain, the gain would likely
constitute unrelated business income. The partnerships are entitled to engage in
such leveraged purchases of physical commodities. Tax exempt investors should
see "Purchases by Employee Benefit Plans--ERISA Considerations."
TAX AUDITS
All partners are required under the Internal Revenue Code of 1986 to report
all the partnership items on their own returns consistently with the treatment
by the partnership, unless they file a statement with the Internal Revenue
Service disclosing the inconsistencies. Adjustments in tax liability with
respect to partnership items will be made at the partnership level. The general
partner will represent each partnership during any audit and in any dispute with
the Internal Revenue Service. Each limited partner will be informed by the
general partner of the commencement of an audit of a partnership. In general,
the general partner may enter into a settlement agreement with the Internal
Revenue Service on behalf of, and binding upon, limited partners owning less
than a 1% profits interest if the partnership has more than 100 partners.
However, prior to settlement, such a limited partner may file a statement with
the Internal Revenue Service stating that the general partner does not have the
authority to settle on behalf of the limited partner.
The period for assessing a deficiency against a partner in a partnership
with respect to a partnership item is the later of three years after the
partnership files its return or, if the name and address of the partner does not
appear on the partnership return, one year after the Internal Revenue Service is
furnished with the name and address of the partner. In addition, the general
partner may consent on behalf of each partnership to the extension of the period
for assessing a deficiency with respect to a partnership item. As a result, a
limited partner's federal income tax return may be subject to examination and
adjustment by the Internal Revenue Service for a partnership item more than
three years after it has been filed.
-------------------
All of the foregoing statements are based upon the existing provisions of
the Internal Revenue Code of 1986 and the regulations promulgated thereunder and
the existing administrative and judicial interpretations thereof. The general
partner cannot assure you that legislative, administrative, or judicial changes
will not occur which will modify such statements.
The foregoing statements are not intended as a substitute for careful tax
planning, particularly since certain of the federal income tax consequences of
purchasing units may not be the same for all taxpayers. The partnerships' tax
returns could be audited by the Internal Revenue Service and adjustments to the
returns could be made as a result of such audits. If an audit results in
adjustment, limited partners may be required to file amended returns and their
returns may be audited. Accordingly, prospective purchasers of units are urged
to consult their tax advisers with specific reference to their own tax situation
under federal law and the provisions of applicable state, local and foreign laws
before subscribing for units.
STATE AND LOCAL INCOME TAX ASPECTS
In addition to the federal income tax consequences for individuals described
under "Material Federal Income Tax Considerations" above, the partnerships and
their limited partners may be subject to various state and local taxes. Certain
of these taxes could, if applicable, have a significant effect on the amount of
tax payable in respect of an investment in the partnerships. A limited partner's
distributive share of the realized profits of a partnership may be required to
be included in determining his reportable income for state or local tax
purposes. Furthermore, state and local tax laws may not reflect recent changes
made to
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the federal income tax law and, therefore, may be inconsistent with the federal
income treatment of gains and losses arising from the partnerships' transactions
in Section 1256 contracts. Accordingly, prospective limited partners should
consult with their own tax advisers concerning the applicability of state and
local taxes to an investment in the partnerships.
The general partner has been advised by its legal counsel, Cadwalader,
Wickersham & Taft, that in such counsel's opinion, the partnerships should not
be liable for New York City unincorporated business tax. Limited partners who
are nonresidents of New York State will not be liable for New York State
personal income tax on such partners' income from the partnerships, but may be
liable for such tax to the extent such limited partners' allocable share of
income attributable to the partnerships' transactions involves tangible personal
property. Likewise, limited partners who are nonresidents of New York City will
not be liable for New York City earnings tax on the partners' income from the
partnerships. New York City residents may be subject to New York City personal
income tax on the partners' income from the partnerships. No ruling from the New
York State Department of Taxation and Finance or the New York City Department of
Finance has been, or will be, requested regarding such matters.
LEGAL MATTERS
Legal matters in connection with the units being offered hereby, including
the discussion of the material federal income tax considerations relating to the
acquisition, ownership and disposition of units, have been passed upon for each
partnership and the general partner by Cadwalader, Wickersham & Taft, 100 Maiden
Lane, New York, New York 10038. Cadwalader, Wickersham & Taft also has acted as
counsel for Dean Witter in connection with the offering of units. Cadwalader,
Wickersham & Taft may advise the general partner with respect to its
responsibilities as general partner of, and with respect to matters relating to,
the partnerships.
EXPERTS
The financial statements of Morgan Stanley Dean Witter Spectrum Global
Balanced L.P., Morgan Stanley Dean Witter Spectrum Strategic L.P., Morgan
Stanley Dean Witter Spectrum Technical L.P., and Morgan Stanley Dean Witter
Spectrum Select L.P. as of December 31, 1998 and 1997, and for the years ended
December 31, 1998, 1997 and 1996, and the statements of financial condition of
Demeter as of November 30, 1998 and 1997 included in this prospectus, have been
audited by Deloitte & Touche LLP. The financial statements of Morgan Stanley
Dean Witter Spectrum Commodity L.P. (formerly named Morgan Stanley Tangible
Asset Fund L.P.) as of December 31, 1998 and for the period from January 2, 1998
through December 31, 1998, have been audited by Deloitte & Touche LLP. The
statement of financial condition of Morgan Stanley Dean Witter Spectrum Currency
L.P. as of October 26, 1999, has been audited by Deloitte & Touche LLP.
All of the aforementioned financial statements have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports appearing herein,
and are included in reliance upon such reports of such firm given upon their
authority as experts in accounting and auditing. Deloitte & Touche LLP also acts
as independent auditors for Morgan Stanley Dean Witter & Co.
WHERE YOU CAN FIND MORE INFORMATION
The partnerships filed registration statements relating to the units
registered with SEC. This prospectus is part of the registration statements, but
the registration statements include additional information.
You may read any of the registration statements, or obtain copies by paying
prescribed charges, at the SEC's public reference rooms located at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549; 7 World Trade Center, Suite
1300, New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. For further information on the public
reference rooms, please call the SEC at 1-800-SEC-0330. The registration
statements are also available to the public from the SEC's Web site at
"http://www.sec.gov."
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PART TWO
STATEMENT OF ADDITIONAL INFORMATION
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE DOCUMENT AND A STATEMENT OF
ADDITIONAL INFORMATION. THESE PARTS ARE BOUND TOGETHER AND MAY NOT BE
DISTRIBUTED SEPARATELY.
THE FUTURES, OPTIONS, AND FORWARDS MARKETS
FUTURES CONTRACTS
Futures contracts are standardized contracts made on an domestic or foreign
exchange that call for the future delivery of specified quantities of various
commodities at a specified price, time, and place. The following are some of the
commodities traded on an exchange:
<TABLE>
<CAPTION>
<S> <C> <C>
- - agricultural and tropical (soft) commodities - currencies - metals
- - industrial goods - financial instruments - energy products
</TABLE>
The futures markets have undergone dramatic changes in the past 25 years.
According to statistics provided by the Futures Industry Association, in 1974
and 1999 activity in futures markets was divided as follows:
<TABLE>
<CAPTION>
IN 1974 1999
------- ----
% %
<S> <C> <C> <C>
Agricultural Products 82 Interest Rates 55
Metals 15 Stock Indices 16
Currencies 2 Agricultural Products 9
Lumber and Energy Products 1 Metals 9
Energy Products 8
Currencies 3
</TABLE>
By June 30, 1999, over $ - billion was invested in managed futures
interests.
A market participant can make a futures contract to buy or sell a commodity.
The contractual obligations may be satisfied either by taking or making, as the
case may be, physical delivery of an approved grade of the commodity or by
making an offsetting sale or purchase of an equivalent but opposite futures
contract on the same, or a mutually offsetting, exchange prior to the designated
date of delivery.
For example, if we sell one contract of December 2000 wheat on a commodity
exchange, we may fulfill the contract at any time prior to the December 2000
delivery date by purchasing one contract of December 2000 wheat on the same
exchange.
The difference between the price at which the futures contract is sold or
purchased and the price paid for the offsetting purchase or sale, after
allowance for brokerage commissions, constitutes the profit or loss to the
trader. Certain futures contracts, such as those for stock or other financial or
economic indices approved by the CFTC or Eurodollar contracts settle in cash
(irrespective of whether any attempt is made to offset such contracts) rather
than delivery of any physical commodity.
OPTIONS ON FUTURES
An option on a futures contract or on a physical commodity gives the buyer
of the option the right to take a position of a specified amount at a specified
price of a specific commodity (the "striking," "strike," or "exercise" price) in
the underlying futures contract or commodity.
The buyer of a "call" option acquires the right to take a long position
(I.E., the obligation to take delivery of a specified amount at a specified
price of a specific commodity) in the underlying futures contract or commodity.
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The buyer of a "put" option acquires the right to take a short position
(I.E., the obligation to make delivery of a specified amount at a specified
price of a specified commodity) in the underlying futures contract or commodity.
The purchase price of an option is referred to as its "premium." The seller
(or "writer") of an option is obligated to take a futures position at a
specified price opposite to the option buyer if the option is exercised. Thus,
the seller of a call option must stand ready to sell (take a short position in
the underlying futures contract) at the striking price if the buyer should
exercise the option. The seller of a put option, on the other hand, must stand
ready to buy (take a long position in the underlying futures contract) at the
striking price.
A call option on a futures contract is said to be "in-the-money" if the
striking price is below current market levels, and "out-of-the-money" if the
striking price is above current market levels. Conversely, a put option on a
futures contract is said to be "in-the-money" if the striking price is above
current market levels, and "out-of-the-money" if the striking price is below
current market levels.
Options have limited life spans, usually tied to the delivery or settlement
date of the underlying futures contract. An option that is out-of-the-money and
not offset by the time it expires becomes worthless. Options usually trade at a
premium above their intrinsic value (I.E., the difference between the market
price for the underlying futures contract and the striking price), because the
option trader is speculating on (or hedging against) future movements in the
price of the underlying contract. As an option nears its expiration date, the
market and intrinsic value typically move into parity. The difference between an
option's intrinsic and market values is referred to as the "time value" of the
option.
FORWARD CONTRACTS
Contracts for the future delivery of certain commodities may also be made
through banks or dealers pursuant to what are commonly referred to as "forward
contracts." A forward contract is a contractual right to purchase or sell a
specified quantity of a commodity at or before a specified date in the future at
a specified price and, therefore, it is similar to a futures contract. In
forward contract trading, a bank or dealer generally acts as principal in the
transaction and includes its anticipated profit (the "spread" between the "bid"
and the "asked" prices), and in some instances a mark-up, in the prices it
quotes for forward contracts. Unlike futures contracts, forward contracts are
not standardized contracts; rather, they are the subject of individual
negotiation between the parties involved. Because there is no clearinghouse
system applicable to forward contracts, forward contracts are not fungible, and
there is no direct means of "offsetting" a forward contract by purchase of an
offsetting position on the same exchange as one can a futures contract. In
recent years, the terms of forward contracts have become more standardized and
in some instances such contracts now provide a right of offset or cash
settlement as an alternative to making delivery on the contract.
HEDGERS AND SPECULATORS
The two broad classes of persons who trade futures interests contracts are
"hedgers" and "speculators." Commercial interests, including farmers, that
market or process commodities and financial institutions that market or deal in
commodities, including interest rate sensitive instruments, foreign currencies
and stocks, which are exposed to currency, interest rate and stock market risks,
may use the futures markets for hedging. Hedging is a protective procedure
designed to minimize losses that may occur because of price fluctuations
occurring, for example, between the time a processor makes a contract to buy or
sell a raw or processed commodity at a certain price and the time he must
perform the contract. The futures markets enable the hedger to shift the risk of
price fluctuations to the speculator. The speculator risks his capital with the
hope of making profits from price fluctuations in futures, forwards, and options
contracts. Speculators rarely take delivery of commodities, but rather close out
their positions by entering into offsetting purchases or sales of futures,
forwards, and options, contracts. Since the speculator may take either a long or
short position in the futures markets, it is possible for him to make profits or
incur losses regardless of whether prices go up or down. The partnerships will
trade for speculative rather than for hedging purposes.
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<PAGE>
FUTURES EXCHANGES
Futures exchanges provide centralized market facilities for trading futures
contracts and options (but not forward contracts). Members of, and trades
executed on, a particular exchange are subject to the rules of that exchange.
Among the principal exchanges in the United States are the Chicago Board of
Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, and
the New York Board of Trade.
Each futures exchange in the United States has an associated
"clearinghouse." Once trades between members of an exchange have been confirmed,
the clearinghouse becomes substituted for each buyer and each seller of
contracts traded on the exchange and, in effect, becomes the other party to each
trader's open position in the market. Thereafter, each party to a trade looks
only to the clearinghouse for performance. The clearinghouse generally
establishes some sort of security or guarantee fund to which all clearing
members of the exchange must contribute; this fund acts as an emergency buffer
that enables the clearinghouse to meet its obligations with regard to the "other
side" of an insolvent clearing member's contracts. Clearinghouses require margin
deposits and continuously mark positions to market to provide some assurance
that their members will be able to fulfill their contractual obligations. Thus,
a central function of the clearinghouses is to ensure the integrity of trades,
and members effecting futures transactions on an organized exchange need not
worry about the solvency of the party on the opposite side of the trade; their
only remaining concerns are the respective solvencies of their commodity broker
and the clearinghouse.
Foreign futures exchanges differ in certain respects from their U.S.
counterparts. In contrast to United States exchanges, certain foreign exchanges
are "principals' markets," where trades remain the liability of the traders
involved, and the exchange does not become substituted for any party. SEE
"REGULATIONS" BELOW AND "RISK FACTORS--TRADING AND PERFORMANCE RISKS--TRADING ON
FOREIGN EXCHANGES PRESENTS GREATER RISKS TO EACH PARTNERSHIP THAN TRADING ON
DOMESTIC EXCHANGES."
SPECULATIVE POSITION LIMITS
The CFTC and U.S. futures exchanges have established limits, referred to as
"speculative position limits" or "position limits," on the maximum net long or
net short speculative position that any person or group of persons (other than a
hedger, which the partnerships are not) may hold, own or control in certain
futures interests contracts. Among the purposes of speculative position limits
is to prevent a "corner" on a market or undue influence on prices by any single
trader or group of traders. The CFTC has jurisdiction to establish position
limits with respect to all commodities and has established position limits for
all agricultural commodities. In addition, the CFTC requires each United States
exchange to submit position limits for all commodities traded on such exchange
for approval by the CFTC. However, position limits do not apply to many currency
futures contracts. Position limits do not apply to forward contract trading or
generally to trading on foreign exchanges. SEE "RISK FACTORS--TRADING AND
PERFORMANCE RISKS--THE PARTNERSHIPS ARE SUBJECT TO SPECULATIVE POSITION LIMITS."
DAILY LIMITS
Most United States futures exchanges (but generally not foreign exchanges or
banks or dealers in the case of forward contracts) limit the amount of
fluctuation in futures interests contract prices during a single trading day by
regulation. These regulations specify what are referred to as "daily price
fluctuation limits" or more commonly "daily limits." The daily limits establish
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price. Once the daily limit has been
reached in a particular futures market, no trades may be made at a price beyond
the limit. SEE "RISK FACTORS--TRADING AND PERFORMANCE RISKS--MARKET ILLIQUIDITY
MAY CAUSE LESS FAVORABLE TRADE PRICES."
REGULATIONS
Futures exchanges in the United States are subject to regulation under the
Commodity Exchange Act by the CFTC, the governmental agency having
responsibility for regulation of futures exchanges and trading on those
exchanges.
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The CFTC also regulates the activities of "commodity trading advisors" and
"commodity pool operators" and has adopted regulations with respect to certain
of such persons' activities. The CFTC requires a commodity pool operator (such
as the general partner) to keep accurate, current and orderly records with
respect to each pool it operates. The CFTC may suspend the registration of a
commodity pool operator if the CFTC finds that the operator has violated the
Commodity Exchange Act or regulations thereunder and in certain other
circumstances. Suspension, restriction or termination of the general partner's
registration as a commodity pool operator would prevent it, until such time (if
any) as such registration were to be reinstated, from managing, and might result
in the termination of, the partnerships. The Commodity Exchange Act gives the
CFTC similar authority with respect to the activities of commodity trading
advisors, such as the trading advisors. If the registration of a trading advisor
as a commodity trading advisor were to be terminated, restricted or suspended,
the trading advisor would be unable, until such time (if any) as such
registration were to be reinstated, to render trading advice to the relevant
partnership. The partnerships themselves are not registered with the CFTC in any
capacity.
The Commodity Exchange Act requires all "futures commission merchants," such
as Dean Witter, Morgan Stanley, and Carr Futures, to meet and maintain specified
fitness and financial requirements, segregate customer funds from proprietary
funds and account separately for all customers' funds and positions, and to
maintain specified books and records open to inspection by the staff of the
CFTC. The partnerships have no present intention of using any introducing
brokers in their trading.
The Commodity Exchange Act also gives the states certain powers to enforce
its provisions and the regulations of the CFTC.
You are afforded certain rights for reparations under the Commodity Exchange
Act. You may also be able to maintain a private right of action for certain
violations of the Commodity Exchange Act. The CFTC has adopted
rules implementing the reparation provisions of the Commodity Exchange Act which
provide that any person may file a complaint for a reparations award with the
CFTC for violation of the Commodity Exchange Act against a floor broker, futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, and their respective associated persons.
Pursuant to authority in the Commodity Exchange Act, the National Futures
Association has been formed and registered with the CFTC as a "registered
futures association." At the present time, the National Futures Association is
the only non-exchange self-regulatory organization for commodities
professionals. National Futures Association members are subject to National
Futures Association standards relating to fair trade practices, financial
condition, and consumer protection. As the self-regulatory body of the
commodities industry, the National Futures Association promulgates rules
governing the conduct of commodity professionals and disciplines those
professionals who do not comply with such standards. The CFTC has delegated to
the National Futures Association responsibility for the registration of
commodity trading advisors, commodity pool operators, futures commission
merchants, introducing brokers and their respective associated persons and floor
brokers. Dean Witter, the general partner, Morgan Stanley, Carr Futures, and the
trading advisors are all members of the National Futures Association (the
partnerships themselves are not required to become members of the National
Futures Association).
The CFTC has no authority to regulate trading on foreign commodity exchanges
and markets. SEE "RISK FACTORS--TRADING AND PERFORMANCE RISKS--TRADING ON
FOREIGN EXCHANGES PRESENTS GREATER RISKS TO EACH PARTNERSHIP THAN TRADING ON
U.S. EXCHANGES."
MARGINS
"Initial" or "original" margin is the minimum amount of funds that a futures
trader must deposit with his commodity broker in order to initiate futures
trading or to maintain an open position in futures contracts. "Maintenance"
margin is the amount (generally less than initial margin) to which a trader's
account may decline before he must deliver additional margin. A margin deposit
is like a cash performance bond. It helps assure the futures trader's
performance of the futures contracts he purchases or sells. Futures contracts
are customarily bought and sold on margins that represent a very small
percentage (ranging upward from less than 2%) of the purchase price of the
underlying commodity being traded. Because of such low margins, price
fluctuations occurring in the futures markets may create profits and losses that
are greater, in relation to the amount invested, than are customary in other
forms of investment or speculation. The minimum amount of margin required in
connection with a particular futures contract
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<PAGE>
is set by the exchange on which such contract is traded, and may be modified
from time to time by the exchange during the term of the contract. SEE "RISK
FACTORS--TRADING AND PERFORMANCE RISKS--THE PARTNERSHIPS' TRADING IS HIGHLY
LEVERAGED."
Brokerage firms, such as Dean Witter, Morgan Stanley, and Carr Futures,
carrying accounts for traders in futures contracts may not accept lower, and
generally require higher, amounts of margin as a matter of policy in order to
afford further protection for themselves. Dean Witter, Morgan Stanley, and Carr
Futures presently intend to require each partnership to make margin deposits
equal to the exchange minimum levels for all futures contracts.
Trading in the currency forward contract market does not require margin, but
generally does require the extension of credit by a bank or dealer to those with
whom the bank or dealer trades. Since each partnership's trading will be
conducted through Carr Futures (Spectrum Commodity does not trade such currency
forwards), each partnership will be able to take advantage of Carr Future's
credit lines with several participants in the interbank market. Carr Futures
will require margin with respect to a partnership's trading of currency forward
contracts.
Margin requirements are computed each day by a trader's commodity broker.
When the market value of a particular open futures contract position changes to
a point where the margin on deposit does not satisfy maintenance margin
requirements, a margin call is made by the commodity broker. If the margin call
is not met within a reasonable time, the broker may close out the trader's
position. With respect to a partnership's trading, that partnership, and not its
limited partners personally or any other partnership, will be subject to margin
calls.
POTENTIAL ADVANTAGES
Developing a comprehensive financial plan entails evaluating options and
acting upon those options. In this fast-paced and ever-changing financial
environment, selecting from the broad array of investments available can be
difficult and time-consuming. Astute investors often turn to professional money
managers for the expertise and guidance needed to map out a successful
investment strategy. Morgan Stanley Dean Witter & Co., a global leader in
financial management, has developed the Spectrum Series of partnerships to
provide professional money management in the futures and forward markets.
An investment in a partnership is speculative and involves a high degree of
risk. The general partner and Dean Witter believe that managed futures
investments (such as the partnerships) can provide you with the potential for
long-term capital appreciation (with commensurate risk), but are appropriate
only for the aggressive growth portion of your comprehensive financial plan. SEE
"RISK FACTORS." Taking the risks into consideration, this investment does offer
the following potential advantages.
INVESTMENT DIVERSIFICATION
If you are not prepared to make a significant investment or spend
substantial time trading various futures, forwards, and options, you may still
participate in these markets through an investment in a Spectrum Series
partnership, obtaining diversification from more traditional investments in
stocks, bonds, and real estate. The general partner believes, on the basis of
the past experience of the partnerships, that the profit potential of a
partnership does not depend upon favorable general economic conditions, and that
a partnership is as likely to be profitable during periods of declining stock,
bond, and real estate markets as at any other time; conversely, a partnership
may be unprofitable during periods of generally favorable economic conditions.
Managed futures investments can serve to diversify your portfolio and smooth
overall portfolio volatility. Modern Portfolio Theory is the academic
affirmation of the value of diversification. Modern Portfolio Theory was
developed in the 1950s by Nobel Laureates William Sharpe and Harold Markowitz.
These two pioneers developed a framework for efficiently diversifying assets
within a portfolio. They suggested that investing in any asset class with
positive returns and low correlation to other assets improves the overall
risk/reward characteristics of the entire portfolio. In 1983, Dr. John H.
Lintner of Harvard University focused on the concepts of Modern Portfolio Theory
in a ground-breaking study about portfolio diversification. Specifically, Modern
Portfolio Theory was utilized to evaluate the addition of a managed futures
component to a diversified portfolio comprised of 60% stocks and 40% bonds. The
results of Lintner's work demonstrated that by including a variety of assets,
such as commodities, in a
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hypothetical portfolio, an investor may lower the portfolio's overall volatility
or risk. Lintner's findings were further supported by the works of Dr. Thomas
Schneeweis of the University of Massachusetts, Amherst, in his 1999 study, "The
Benefits of Managed Futures." Dr. Schneeweis concluded that "while ... the
correlation between managed futures and most traditional investments is
approximately zero, when asset returns are segmented according to whether the
traditional asset rose or fell, managed futures are often negatively correlated
in months when traditional asset returns are negative while being positively
correlated when traditional asset returns are positive."
The partnerships' combined benefits of growth potential (with commensurate
risk) and diversification can potentially reduce the overall volatility of your
portfolio, while increasing profits. By combining asset classes, you may create
a portfolio mix that provides the potential to offer the greatest possible
return within acceptable levels of volatility. While past performance is no
guarantee of future results, managed futures investments, such as the
partnerships, may profit (with commensurate risk) from futures interests market
moves, with the potential to enhance your overall portfolio.
The trading advisors' speculative trading techniques will be the primary
factor in the partnerships' success or failure. You should note that there are
always two parties to a futures, forward, or option contract; consequently, for
any gain achieved by one party on a contract, a corresponding loss is suffered.
Therefore, due to the nature of futures, forwards, and options trading, only 50%
of contract interests held by all market participants can experience gain at any
one time. Brokerage commissions and other costs of trading may reduce or
eliminate any gain that would otherwise be achieved.
The first step toward a sound financial future is to establish your
investment objectives. Based on your financial goals, requirements, and
investment preferences, your Morgan Stanley Dean Witter financial advisor can
help you determine the combination of asset classes as well as the type of
trading advisor that most suits your investment profile.
Asset allocation is the next critical step to help you achieve your
investment objectives. Asset allocation refers to the division of investment
dollars over a variety of asset classes in order to reduce overall volatility
through portfolio diversification, while increasing the long-term performance
potential of an investment portfolio. A fully diversified portfolio should
contain cash, income, growth and aggressive growth investments.
Managed futures investments are designed to fit into a total financial plan
as aggressive growth vehicles with the potential for long-term capital
appreciation (with commensurate risk). As part of a well-balanced and fully
diversified portfolio, managed futures can offer significant benefits.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Stocks 60%
Managed Futures 10%
Cash 5%
Bonds 25%
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<PAGE>
The table below is an empirical example of how different assets can react to
business cycles. In each case, the asset class is represented by a recognized
industry index for that asset.
ANNUAL RETURNS OF VARIOUS ASSET CLASSES OVER TIME
<TABLE>
<CAPTION>
U.S. TREASURY PUBLIC
U.S. BONDS (LEHMAN U.S. CORPORATE NON-U.S. MANAGED MANAGED
STOCKS BROTHERS BONDS STOCKS GLOBAL STOCKS FUTURES FUTURES FUNDS
(S&P 500 TREASURY (SALOMON CORPORATE (MSCI EAFE (MSCI WORLD (BARCLAY (MAR PUBLIC
INDEX) BOND INDEX) BOND INDEX) INDEX) INDEX) CTA INDEX) FUND INDEX)
-------- ------------- ------------------ ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
% % % % % % %
1981...... (5.0) 1.1 (1.2) (1.0) (3.3) 23.9 N/A
1982...... 21.6 41.1 42.5 (0.8) 11.3 16.7 N/A
1983...... 22.5 1.8 6.3 24.6 23.3 23.8 N/A
1984...... 6.2 14.7 16.9 7.9 5.8 8.7 1.4
1985...... 31.7 32.0 30.1 56.7 41.8 25.5 21.9
1986...... 18.6 24.2 19.9 69.9 42.8 3.8 (14.4)
1987...... 5.2 (2.7) (0.3) 24.9 16.8 57.3 43.1
1988...... 16.5 9.1 10.7 28.6 23.9 21.8 7.3
1989...... 31.6 18.9 16.2 10.8 17.2 1.8 4.7
1990...... (3.1) 4.6 6.8 (23.2) (16.5) 21.0 14.2
1991...... 30.4 17.9 19.9 12.5 19.0 3.7 10.0
1992...... 7.6 7.8 9.4 (11.8) (4.7) (0.9) (1.4)
1993...... 10.1 16.4 13.2 32.9 23.1 10.4 10.7
1994...... 1.3 (6.9) (5.8) 8.1 5.6 (0.7) (7.7)
1995...... 37.5 30.7 27.2 11.6 21.3 13.7 13.9
1996...... 22.8 (0.4) 1.3 6.4 14.0 9.1 9.8
1997...... 33.4 14.9 11.6 2.1 16.2 10.9 7.6
1998...... 28.6 13.5 12.5 20.3 24.8 7.0 7.9
1999*..... - - - - - - -
</TABLE>
- ---------
* 1999 returns are as of November 30, 1999.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
NOTES TO "ANNUAL RETURNS OF VARIOUS ASSET CLASSES OVER TIME" TABLE
For the analyses used in this table, the performance of independent indices
has been used to represent seven asset classes: U.S. stocks, U.S. Treasury
bonds, U.S. corporate bonds, international stocks, global stocks, managed
futures, and public managed futures funds. The respective indices used are the
Standard and Poor's 500 Stock Index, the Lehman Brothers Treasury Bond Index,
the Salomon Corporate Bond Index, the Morgan Stanley Capital International
("MSCI") EAFE Index, the MSCI World Index, the Barclay CTA Index, and the
Managed Account Reports Public Fund Index.
The S&P 500 Index and the Salomon Corporate Bond Index are compiled assuming
dividends and interest are re-invested.
The S&P 500 Index is based on a portfolio of 500 stocks (consisting of 400
industrials, 40 utilities, 20 transportations, and 40 financials). The weights
of the stocks in the portfolio at a given time reflect the stocks' total market
capitalization. The S&P 500 Index accounts for approximately 80% of the market
capitalization of all stocks listed on the New York Stock Exchange.
The Lehman Brothers Treasury Bond Index consists of all existing U.S.
Treasury bond issues.
The Salomon Corporate Bond Index is a benchmark of investment grade fixed
rate corporate issues with maturities of at least one year and in minimum
outstanding amounts of $100 million. The corporate issues encompass such
industry sectors as Manufacturing, Service, Energy, Consumer, Transportation,
Industrial-Other, Utility, and Finance.
The MSCI EAFE Index is comprised of 1,098 companies, representing a market
structure of 21 European and Pacific based countries covering 38 industries. The
index is used to represent international equities.
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The MSCI World Index is comprised of 1,456 companies, representing a market
structure of 22 countries around the world. The index is used to represent
global equities, including U.S. and Canadian markets.
The Barclay CTA Index provides a benchmark of performance of commodity
trading advisors. In order to qualify for inclusion in the Barclay CTA Index, a
commodity trading advisor must meet the following criteria: (1) the commodity
trading advisor must have four years of prior performance history; and (2) in
cases where a commodity trading advisor who is in the Barclay CTA Index
introduces an additional program, this additional program is added to the Index
only after its second year of trading. In 1998, there were 327 commodity trading
advisor programs which were included in the calculation of the Barclay CTA
Index.
The MAR Index averages managed futures fund performance for public funds.
MAR indices are dollar, or equity, weighted to reflect performance. To qualify
for inclusion in MAR's fund indices, an investment product must appear in MAR's
fund performance tables. MAR imposes no minimum size restriction on the funds
and/or pools that it tracks. As of August 31, 1999, there were 91 public funds
included in the calculation of the MAR Index.
The S&P 500 Index, Salomon Corporate Bond Index, and MSCI EAFE Index
performance data for stocks, corporate bonds, and international stocks,
respectively, are provided by Thomson Financial Software Solutions, Boston, MA.
The MSCI World Index performance data for global stocks are provided by Morgan
Stanley Capital International Inc., New York, NY. The Lehman Brothers Treasury
Bond Index and the Barclay CTA Index performance data for U.S. Treasury bonds
and managed futures, respectively, are provided by the Barclay Trading Group
Ltd., Fairfield, IA. The MAR Index performance data for public managed futures
funds was provided by Managed Account Reports, Inc., New York, NY. Performance
of any of these indices (which, by definition, are averages of many individual
investments) may not be representative of any specific investment within that
index's asset class.
The performance information of the asset classes above does not reflect the
effect of fees identical to those to be paid by the partnerships, including
management, incentive, and brokerage fees. Past performance is no guarantee of
future results. Note that while the Barclay CTA Index and the MAR Index reflect
results net of actual fees and expenses, the Barclay commodity trading advisor
Index includes accounts with trading advisors and fee structures that differ
from public managed futures funds (such as the partnerships), and the MAR Index
includes funds with trading advisors and fee structures that differ from the
partnerships. Also, the partnerships' trading strategies may be different from
the trading strategies employed by the trading advisors included in the Barclay
CTA Index and the public managed futures funds included in the MAR Index.
Accordingly, while the Barclay CTA Index is believed to be representative of
managed futures in general, and the MAR Index is believed to be representative
of public managed futures funds in general, the performance of the partnerships
may differ from the performance reflected in such indices.
CORRELATION TO TRADITIONAL INVESTMENTS
Managed futures have historically performed independently of traditional
investments, such as stocks and bonds. This is referred to as non-correlation,
or the potential for managed futures to perform when traditional markets such as
stocks and bonds may experience difficulty performing. Of course, managed
futures funds will not automatically be profitable during unfavorable periods
for these traditional investments, and vice versa. The degree of non-correlation
of any given managed futures fund will vary, particularly as a result of market
conditions, and some funds will have a significantly lesser degree of
non-correlation (I.E., greater correlation) with stocks and bonds than others.
Spectrum Global Balanced, a fund whose trading strategy is to offer a balanced
portfolio through exposure to the stock and bond markets in addition to the
futures markets, should be distinguished from other managed futures funds. Since
the Spectrum Global Balanced trading strategy is in part to gain exposure to the
stock and bond markets, it does not result in the same degree of non-correlation
to the stock and bond indices and in that way differs from the other managed
futures funds that Dean Witter offers.
The factors that influence the stock and bond markets can affect the futures
markets in different ways and to varying degrees. In this connection, an article
in the June 8, 1998 issue of BUSINESS WEEK, "Commodities are Cheap--Time to
Leap?" discusses the risks and potential rewards of investing in managed futures
funds, noting the low correlation of their performance to stocks and bonds.
142
<PAGE>
[CHART]
143
<PAGE>
[CHART]
144
<PAGE>
[CHART]
145
<PAGE>
[CHART]
146
<PAGE>
The following chart was prepared by the general partner to illustrate the
performance of managed futures against that of stocks from January 1982 through
August 31, 1999, using the recognized market indices of each asset. The Notes on
the next page are an integral part of the following chart.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MANAGED FUTURES VS. STOCKS MANAGED FUTURES STOCKS
12-MONTH HOLDING PERIOD PERFORMANCE BARCLAY'S CTA INDEX S&P 500 INDEX
RATES OF RETURN
<S> <C> <C>
(BARCLAY TRADING (THOMPSON FINANCIAL SOFTWARE
GROUP, FAIRFIELD, IA) SOLUTIONS, BOSTON, MA
12/81 23.90% -5.03%
1/82 19.68% -2.15%
2/82 22.38% -9.18%
3/82 36.81% -13.11%
4/82 34.16% -7.44%
5/82 33.64% -10.76%
6/82 22.58% -11.57%
7/82 14.52% -13.34%
8/82 15.91% 3.13%
9/82 30.14% 9.75%
10/82 29.02% 16.10%
11/82 14.97% 15.99%
12/82 16.68% 21.34%
1/83 35.84% 27.49%
2/83 19.89% 38.16%
3/83 13.97% 43.99%
4/83 13.88% 48.68%
5/83 21.23% 52.53%
6/83 3.85% 60.89%
7/83 17.83% 58.92%
8/83 23.21% 43.89%
9/83 12.85% 44.18%
10/83 18.58% 27.76%
11/83 19.50% 25.42%
12/83 23.75% 22.47%
1/84 6.22% 17.39%
2/84 15.67% 10.73%
3/84 15.59% 8.60%
4/84 13.59% 1.55%
5/84 7.70% -3.26%
6/84 6.16% -4.94%
7/84 24.90% -3.17%
8/84 5.36% 5.89%
9/84 9.35% 4.43%
10/84 2.87% 6.12%
11/84 4.15% 2.79%
12/84 8.74% 5.99%
1/85 9.78% 14.95%
2/85 16.02% 20.55%
3/85 12.57% 18.65%
4/85 13.21% 17.48%
5/85 10.18% 31.66%
6/85 16.27% 31.02%
7/85 9.21% 32.48%
8/85 16.78% 18.28%
9/85 3.67% 14.61%
10/85 15.37% 19.40%
11/85 24.49% 29.06%
12/85 25.50% 31.83%
1/86 24.64% 23.02%
2/86 35.92% 30.68%
3/86 45.10% 37.86%
4/86 38.81% 36.48%
5/86 31.60% 35.84%
6/86 36.26% 35.97%
7/86 23.46% 28.49%
8/86 31.90% 39.25%
9/86 34.95% 31.77%
10/86 21.01% 33.29%
11/86 13.05% 27.68%
12/86 3.82% 18.66%
1/87 12.63% 33.88%
2/87 -0.72% 29.39%
3/87 -2.84% 26.08%
4/87 26.48% 26.34%
5/87 29.26% 21.06%
6/87 26.93% 24.99%
7/87 28.75% 39.16%
8/87 20.42% 34.36%
9/87 28.42% 43.30%
10/87 34.78% 6.32%
11/87 49.66% -4.68%
12/87 57.27% 5.30%
1/88 39.63% -3.14%
2/88 39.76% -2.58%
3/88 30.57% -8.17%
4/88 2.74% -6.22%
5/88 13.99% -6.50%
6/88 50.09% -6.86%
7/88 31.52% -11.56%
8/88 34.50% -17.78%
9/88 34.61% -12.32%
10/88 36.00% 14.94%
11/88 28.51% 23.20%
12/88 21.76% 16.56%
1/89 25.93% 19.91%
2/89 20.71% 11.76%
3/89 29.56% 17.98%
4/89 31.52% 22.76%
5/89 35.10% 26.67%
6/89 7.40% 20.49%
7/89 15.00% 31.72%
8/89 7.71% 39.10%
9/89 3.61% 32.83%
10/89 -3.91% 26.12%
11/89 -4.21% 30.61%
12/89 1.80% 31.37%
1/90 1.86% 14.25%
2/90 6.36% 18.59%
3/90 5.71% 18.94%
4/90 13.34% 10.24%
5/90 -4.29% 16.29%
6/90 -4.34% 16.18%
7/90 2.83% 6.27%
8/90 16.50% -5.11%
9/90 23.49% -9.30%
10/90 32.87% -7.44%
11/90 29.27% -3.44%
12/90 21.02% -3.07%
1/91 13.35% 8.45%
2/91 11.53% 14.78%
3/91 12.89% 14.56%
4/91 5.95% 17.73%
5/91 10.30% 11.92%
6/91 11.85% 7.53%
7/91 2.34% 12.92%
8/91 -5.91% 26.95%
9/91 -5.97% 31.09%
10/91 -7.88% 33.32%
11/91 -7.21% 20.28%
12/91 3.73% 30.34%
1/92 4.13% 22.61%
2/92 2.26% 15.96%
3/92 -3.71% 10.99%
4/92 -2.64% 13.97%
5/92 -1.77% 9.81%
6/92 -0.07% 13.26%
7/92 7.86% 12.61%
8/92 12.50% 7.77%
9/92 7.76% 10.94%
10/92 8.96% 9.96%
11/92 9.97% 18.44%
12/92 -0.91% 7.71%
1/93 1.91% 10.55%
2/93 10.36% 10.66%
3/93 11.84% 15.18%
4/93 16.34% 9.25%
5/93 17.93% 11.65%
6/93 14.02% 13.69%
7/93 13.36% 8.78%
8/93 7.37% 15.34%
9/93 8.20% 13.06%
10/93 7.37% 14.97%
11/93 6.26% 10.07%
12/93 10.37% 9.97%
1/94 8.69% 12.80%
2/94 1.57% 8.23%
3/94 4.16% 1.45%
4/94 -0.86% 5.29%
5/94 1.27% 4.26%
6/94 2.79% 1.46%
7/94 -1.92% 5.22%
8/94 -1.92% 5.53%
9/94 0.59% 3.72%
10/94 1.25% 3.82%
11/94 2.80% 1.09%
12/94 -0.65% 1.39%
1/95 0.90% 0.61%
2/95 5.85% 7.44%
3/95 10.41% 15.63%
4/95 13.71% 17.46%
5/95 11.20% 20.24%
6/95 7.09% 26.03%
7/95 6.88% 26.03%
8/95 12.88% 21.42%
9/95 10.86% 29.76%
10/95 10.74% 26.47%
11/95 10.05% 36.97%
12/95 13.64% 37.51%
1/96 18.77% 38.58%
2/96 9.38% 34.71%
3/96 3.39% 32.10%
4/96 8.28% 30.17%
5/96 5.62% 28.42%
6/96 6.63% 26.03%
7/96 6.19% 16.53%
8/96 2.92% 18.74%
9/96 5.35% 20.33%
10/96 11.17% 24.07%
11/96 13.84% 27.88%
12/96 9.12% 22.98%
1/97 10.42% 26.19%
2/97 20.00% 26.07%
3/97 18.59% 19.70%
4/97 10.37% 25.01%
5/97 12.94% 29.40%
6/97 13.43% 34.68%
7/97 21.88% 52.15%
8/97 17.97% 40.68%
9/97 16.58% 40.55%
10/97 8.74% 32.21%
11/97 6.59% 28.64%
12/97 10.89% 33.50%
1/98 7.39% 27.09%
2/98 2.74% 35.15%
3/98 3.91% 48.12%
4/98 1.79% 41.13%
5/98 2.24% 30.76%
6/98 2.52% 30.26%
7/98 -3.28% 19.28%
8/98 6.72% 8.04%
9/98 8.99% 8.97%
10/98 9.93% 21.85%
11/98 7.38% 23.60%
12/98 7.01% 28.58%
1/99 4.79% 32.52%
2/99 8.58% 19.79%
3/99 6.67% 18.53%
4/99 12.39% 21.94%
5/99 9.95% 21.07%
6/99 11.25% 22.70%
7/99 10.83% 20.19%
8/99 4.35% 39.87%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS.
</TABLE>
147
<PAGE>
NOTES TO "MANAGED FUTURES VS. STOCKS" TABLE:
Stocks are represented by the S&P 500 Index, provided by Thomson Financial
Software Solutions, Boston, MA; managed futures are represented by the Barclay
CTA Index, provided by Barclay Trading Group Ltd., Fairfield, IA. Each bar
represents the asset class performance derived from successive 12-month
hypothetical holding periods or windows. (A 12-month holding period is defined
as a period of 12 consecutive months, E.G., from January 1989 to December 1989;
the next would be from February 1989 to January 1990, etc.) Performance of any
of these indices (which, by definition, are averages of many individual
investments) may not be representative of any specific investment within that
index's asset class.
By overlaying returns, investors can see the potential benefits of a
diversified portfolio that includes both traditional asset classes as well as
assets that are non-traditional and non-correlated. There are many times when
both the managed futures and stock indices showed positive performance.
Obviously, though, there is no investment that only appreciates. There are 18
periods when managed futures showed negative returns, while stocks experienced
26 periods of negative returns during the studied time frame. While not a
guarantee of future results, this chart provides a clear indication of the
non-correlated aspect of managed futures. This non-correlation enables investors
with managed futures to potentially lower the overall volatility of their
portfolios.
The performance information of the asset classes above does not reflect the
effect of fees identical to those to be paid by the partnerships, including
management, incentive and brokerage fees. Past performance is no guarantee of
future results. Note that while the Barclay CTA Index reflects results net of
actual fees and expenses, it includes accounts with trading advisors and fee
structures that differ from public managed futures funds (such as the
partnerships). Also, the partnerships' trading strategies may be different from
the trading strategies employed by the trading advisors included in the Barclay
CTA Index. Accordingly, while the Barclay CTA Index is believed to be
representative of managed futures in general, the performance of public managed
futures funds as a subclass, or individually (in particular, the partnerships),
may differ.
-------------------
The following chart was prepared by the general partner to illustrate the
risk/return characteristics of a portfolio consisting of different combinations
of domestic stocks, corporate bonds, international equities and/or managed
futures, based on the performance of recognized market indices of each asset
over the period January 1981--August 31, 1999. The Notes on the next page are an
integral part of the following chart.
IMPROVED PORTFOLIO EFFICIENCY
JANUARY 1981 THROUGH SEPTEMBER 1999
STOCKS/BONDS/INTERNATIONAL EQUITIES/MANAGED FUTURES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD DEVIATION OF MONTHLY RETURNS AVERAGE MONTHLY RETURN
<S> <C> <C>
100% Stocks (S&P 500 Index) 4.2727% 1.3907%
100% Bonds (Salomon Corporate Bond Index) 2.6618% 0.9594%
100% Int'l Eqs. (MSCI EAFE Index) 5.0408% 1.1864%
100% Mgd Futures (Barclay CTA Index) 5.0251% 1.1516%
50% Stocks/50% Bonds 2.9273% 1.1750%
50% Stocks/30% Bonds/10% Int'l Eqs./10% Mgd. Futures 2.8817% 1.2170%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS.
</TABLE>
148
<PAGE>
NOTES TO "IMPROVED PORTFOLIO EFFICIENCY" TABLE ON PRIOR PAGE:
Stocks are represented by the S&P 500 Index, corporate bonds are represented
by the Salomon Corporate Bond Index, and international equities are represented
by the MSCI EAFE Index, each provided by Thomson Financial Software Solutions,
Boston, MA; managed futures are represented by the Barclay CTA Index, provided
by the Barclay Trading Group Ltd., Fairfield, IA. Performance of any of these
indices (which, by definition, are averages of many individual investments) may
not be representative of any specific investment within that index's asset
class.
The performance information of the asset classes above does not reflect the
effect of fees identical to those to be paid by the partnerships, including
management, incentive, and brokerage fees. Past performance is no guarantee of
future results. Note that while the Barclay CTA Index reflects results net of
actual fees and expenses, it includes accounts with trading advisors and fee
structures that differ from public managed futures funds (such as the
partnerships). Also, the partnerships' trading strategies may be different from
the trading strategies employed by the trading advisors included in the Barclay
CTA Index. Accordingly, while the Barclay CTA Index is believed to be
representative of managed futures in general, the performance of public managed
futures funds as a subclass, or individually (in particular, the partnerships),
may differ.
-------------------
PROFESSIONAL MANAGEMENT
Professional money management is one of the most significant benefits a
managed futures investment can offer. A professional trading advisor has several
advantages over an individual investor.
- CAPITALIZATION --A professional trading advisor is well capitalized, and
capable of managing market volatility.
- DISCIPLINE --A professional trading advisor applies an established,
disciplined approach to futures trading, with strict money management
policies and techniques.
- PLANNED STRATEGY --A professional trading advisor utilizes a researched
trading strategy designed to reduce risk while seeking long-term profit
opportunities.
- RISK CONTROL --Professional trading advisors offer a full time commitment
to risk control, applying risk management strategies and years of research
and experience.
- RESEARCH AND DEVELOPMENT --A professional trading advisor is committed to
ongoing research and development, in an effort to continuously improve
upon existing systems and technology in order to keep pace with industry
developments and potentially capitalize on market opportunities as they
occur.
In considering the advantages of utilizing a professional trading advisor,
you also should consider the fees a trading advisor will be paid to manage a
partnership's account. Depending on the partnership, the annual management fees
range from 1.25% to 4.0% of the average month-end net assets of a partnership
managed by the trading advisor, and incentive fees range from 15.0% to 20.0% of
trading profits.
THE TRADING ADVISOR SELECTION PROCESS
Each of the trading advisors for the partnerships was chosen by the general
partner based upon a strict selection process, including such criteria as
performance history, experience, personnel, and due diligence. The performance
history and trading experience of the trading advisors chosen for the
partnerships span a range of seven to twenty-two years, and each trading advisor
employs experienced personnel. Additionally, the general partner monitors daily
each trading advisor's activities on behalf of a partnership and periodically
conducts on-site due diligence visits to remain abreast of each trading
advisor's continuing efforts toward research and development. This selection
process is described below.
In order for a trading advisor to be selected by the general partner, a
qualitative and quantitative due diligence process is undertaken, considering
the factors described below. The general partner's primary objective in the
selection process is to allocate assets to trading advisors with
well-established performance histories and whom it believes have the potential
to continue to be successful in the future.
Monitoring is an important second phase in the due diligence process. The
general partner has invested significant resources into its proprietary Fund
Management System, a comprehensive
149
<PAGE>
computerized management system. This sophisticated system produces daily control
reports generated from actual trading data and enables the general partner to
closely monitor the activity and performance of trading advisors relative to
their historical profile.
Monitoring also occurs on a periodic basis by discussing with the trading
advisors their performance relative to profile and peer trading advisors, recent
market conditions and trading opportunities. Ongoing research and development,
and continued on-site due diligence visits are conducted. While the due
diligence process cannot guarantee future success, the general partner believes
the process can provide the basis for sound decision-making and can increase the
potential for future success.
TRADING ADVISOR EVALUATION AND SELECTION
<TABLE>
<S> <C>
Screening Trading advisors are screened from a pool of approximately
400.
Evaluation Trading advisors are categorized and evaluated based on
quantitative and qualitative factors.
Selection Trading advisors are selected based on quantitative and
qualitative analysis.
Monitoring Daily and periodic monitoring and reporting takes place on
an ongoing basis.
</TABLE>
Trading advisors are analyzed by a combination of qualitative and
quantitative factors, including:
QUALITATIVE FACTORS
- Experience of staff responsible for development and management of trading
approach
- Development of trading advisor's profile
- Consistency of trading approach
- On-site office visit to trading advisor headquarters
- Ongoing commitment to research and development
- Flexibility to expand in order to meet demands of growth in assets
QUANTITATIVE MEASURES
- Review of historic performance returns
- Review of performance versus managed futures industry
- Review of risk, including standard deviation of monthly returns and worst
decline periods
- Scrutiny of performance in key periods
- Leverage policies of trading advisors
- Correlation analysis of trading advisor returns versus managed futures
industry indices and other asset class indices
FUTURES, FORWARDS AND OPTIONS TRADED
Adding managed futures investments to a traditional portfolio of stocks and
bonds can provide qualified investors with access to major world economic
markets. At any given time, managed futures investments can participate in a
broad array of markets, selected from among approximately 75 global futures and
forward markets on approximately 20 exchanges worldwide.
<TABLE>
<CAPTION>
PARTICIPATION IN OVER 75 MARKETS WORLDWIDE
PLUS ENERGIES, AGRICULTURALS, AND METALS
UNITED STATES UNITED KINGDOM FRANCE GERMANY
- --------------------- -------------- ------ -------
<S> <C> <C> <C>
Bonds, Bills, & Notes Long Gilt Notional Bond Bund
Dollar Short Sterling Pibor Mark
S&P 500 Pound Franc DAX
FT-SE 100 CAC 40
</TABLE>
<TABLE>
<CAPTION>
RUSSIA CHINA JAPAN AUSTRALIA
- ------ ----- ----- ---------
<S> <C> <C> <C>
Ruble Hang Seng Index Government Bonds 3-year & 10-year bonds
Yen Dollar
Nikkei 225 All Ordinaries Index
</TABLE>
150
<PAGE>
<TABLE>
<CAPTION>
MAJOR FUTURES MARKETS TRADED
AGRICULTURALS FOREIGN EXCHANGE STOCK INDICES INTEREST RATES
- ------------- ---------------- ------------- --------------
<S> <C> <C> <C>
Azuki (R. Beans) Australian dollar All Ordinaries Australian bonds
Corn Brazilian real CAC 40 British bonds
Feeder cattle British pound DAX Canadian bonds
Live cattle Canadian dollar Dow Jones Euro bonds
Lean hogs Czech krona Industrial French bonds
Pork bellies European common FTSE 100 German bonds
Soybean meal currency Hang Seng Italian bonds
Soybean oil French franc IBEX-35 PLUS Japanese bonds
Soybeans German mark Mexican IPC Mexican bonds
Wheat Greek drachma MIB 30 New Zealand bonds
Hong Kong dollar NASDAQ 100 Spanish bonds
Indonesian rupiah Nikkei 225 Swiss bonds
Japanese yen S&P 500 U.S. bonds
Mexican peso Swedish U.S. notes
New Zealand dollar Taiwan
Norwegian kroner Toronto
Singapore dollar
South African rand
Spanish peseta
Swedish kroner
Swiss franc
Thai baht
</TABLE>
<TABLE>
<CAPTION>
METALS SOFTS ENERGIES
- ------ ----- --------
<S> <C> <C> <C>
Aluminum Cocoa Crude oil
Copper Coffee Gas oil
Lead Cotton Heating oil
Gold Lumber Natural gas
Nickel Orange juice Unleaded gas
Palladium Rubber
Platinum Sugar
Silver
Tin
Zinc
</TABLE>
Each partnership normally trades a portfolio of diverse futures interests,
but may trade a greater or lesser number of futures interests from time to time.
Each limited partner will obtain greater diversification in futures interests
traded than would be possible trading individually, unless substantially more
than the minimum investment described herein were committed to the futures
interests markets.
EXCHANGE RIGHT
At the sixth month-end after a person first becomes a limited partner in any
Spectrum Series partnership, and each calendar month thereafter, a limited
partner may shift his investment among the partnerships. This permits a limited
partner to select one or more partnerships which best suit his investment needs
and objectives, which may change from time to time. A limited partner is not
required to pay any redemption charges in connection with a Spectrum
Series exchange.
DIVERSIFIED PROFESSIONAL TRADING MANAGEMENT
Trading decisions for each partnership will be made by trading advisors
retained by the general partner. The trading approaches employed on behalf of
each partnership by its trading advisors are not available for investments as
small as the required minimum investment in each partnership. A limited
partner's investment in each partnership is allocated among the trading advisors
for such partnership. This
151
<PAGE>
permits a limited partner to receive the benefits from different trading systems
being employed by such partnership. A limited partner can further diversify his
professional trading management by dividing his investment among one or more of
the partnerships. For example, an investor owning units of all six partnerships
would have the benefit of having his investment managed by 11 trading advisors.
LIMITED LIABILITY
Unlike an individual who invests directly in futures interests, an investor
in a partnership cannot be individually subject to margin calls and cannot lose
more than the amount of his unredeemed capital contribution, his share of
undistributed profits, if any, and, under certain circumstances, any
distributions and amounts received upon redemption, or deemed received on an
exchange of units, and interest thereon.
INTEREST INCOME
Many commodity brokers permit accounts above a certain size to deposit
margin for futures interests in the form of interest-bearing obligations, such
as U.S. Treasury bills, rather than cash, thus enabling the account to earn
interest on funds being used for futures trading, or such brokers pay interest
at U.S. Treasury bill rates on a portion of the cash deposited in the account.
Each partnership deposits its assets in separate commodity trading accounts with
the commodity brokers. Dean Witter credits each partnership at each month-end
with interest income as if 80% (100%, in the case of Spectrum Global Balanced),
of each partnership's average daily net assets for the month were invested at a
prevailing rate on U.S. Treasury bills. Generally, an individual trader would
not receive any interest on the funds in his commodity account unless he
committed substantially more than the minimum investment required for the
partnerships. While the partnerships are credited with interest by Dean Witter
on the respective percentage of their assets deposited as margin as described
above, the form of margin posted, whether cash or interest-bearing obligations
(such as U.S. Treasury bills), does not reduce the risks inherent in the trading
of futures interests.
ADMINISTRATIVE CONVENIENCE
The partnerships are structured so as to provide limited partners with
numerous services designed to alleviate the administrative details involved in
engaging directly in futures interests trading, including monthly and annual
financial reports (showing, among other things, the net asset value of a unit,
trading profits or losses, and expenses), and all tax information relating to
the partnerships necessary for limited partners to complete their federal income
tax returns.
SUPPLEMENTAL PERFORMANCE INFORMATION
The tables on the following pages contain summary performance information
and certain other data for each partnership, supplementing the information in
Part I of this prospectus.
152
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM SELECT STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisors: EMC Capital Management, Inc.
Rabar Market Research, Inc.
Sunrise Capital Management, Inc.
Began Trading: August 1, 1991
Total Assets in Fund: $212.5 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 12.3x
Monthly Management Fee: 1/12 of 3.00% of Beg. Net Assets
Monthly Brokerage Fee: 1/12 of 7.25% of Beg. Net Assets
Monthly Incentive Fee: 15.00% of Monthly Trading
Profits
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 10.55%
Standard Deviation of Monthly Returns: 7.66%
Annualized Standard Deviation: 26.49%
Sharpe Ratio: 0.23
Sortino Ratio: 0.55
Largest Decline Period (6/95 - 8/96): -26.78%
Average Recovery (No. of months): 8.80
Average Monthly Loss: -4.23%
Standard Deviation of Monthly Loss: 3.16%
% of Losing Months: 50.52%
Average Monthly Gain: 6.56%
Standard Deviation of Monthly Gain: 7.03%
% of Winning Months: 49.48%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Energies 12%
Agriculturals 6%
Stock Indices 13%
Interest Rates 28%
Foreign Exchange 23%
Metals 14%
Softs 4%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Select uses the technically-based, aggressive, trend-following trading
systems of EMC Capital Management, Inc., Rabar Market Research, Inc., and
Sunrise Capital Management, Inc. to participate in a portfolio of futures and
currency markets.
EMC uses an aggressive systematic trading approach that blends several
independent methodologies designed to identify emerging trends and follow
existing trends. This program seeks significant returns in favorable market
periods, while accepting a commensurate decline in unfavorable market cycles.
Rabar uses a systematic approach with discretion, limiting the equity committed
to each trade, market and sector. Rabar's trading program uses constant research
and analysis of market behavior.
Sunrise's investment approach attempts to detect a trend, or lack of a trend,
with respect to a particular market by analyzing price movement and volatility
over time. Sunrise's trading system consists of multiple, independent and
parallel systems, each designed to seek out and extract different market
inefficiencies over different time horizons.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C> <C>
AGRICULTURALS FOREIGN ENERGIES
Corn EXCHANGE Crude oil
Lean hogs Australian dollar Heating oil
Soybeans British pound Natural gas
Soybean meal Canadian dollar Unleaded gas
Soybean oil European common currency SOFTS
Wheat Hong Kong dollar Cocoa
STOCK Japanese yen Coffee
INDICES Singapore dollar Cotton
ASE All Ordinaries Spanish peseta Orange juice
CAC 40 Index Swedish kroner Sugar
DAX Index Swiss franc INTEREST
Dow Jones Industrial Index METALS RATES
FTSE Index Aluminum Australian bonds
Hang Seng Index Copper British bonds
IBEX 35 Index Gold Canadian bonds
MIB 30 Index Lead Eurodollar
NASDAQ 100 Index Nickel German bonds
Nikkei Index Platinum Italian bonds
S&P 500 Index Silver Japanese bonds
Tin Spanish bonds
Zinc U.S. Treasury bonds
U.S. Treasury notes
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
153
<PAGE>
SPECTRUM SELECT PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
31.18% -14.45% 41.63% -5.13% 23.63% 5.27% 6.22% 14.15% -5.46%
</TABLE>
(5 MONTHS) (8 MONTHS)
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR INDEX
SELECT
<S> <C> <C>
07/31/92 17.29% 10.82%
08/31/92 33.40% 20.71%
09/30/92 18.89% 13.91%
10/31/92 17.81% 14.62%
11/30/92 23.04% 15.01%
12/31/92 -14.45% -1.40%
01/31/93 -0.54% 5.66%
02/28/93 21.64% 15.85%
03/31/93 25.83% 15.98%
04/30/93 41.48% 22.42%
05/31/93 46.32% 22.74%
06/30/93 36.79% 17.48%
07/31/93 40.71% 14.79%
08/31/93 30.64% 8.84%
09/30/93 32.17% 9.38%
10/31/93 29.72% 8.75%
11/30/93 26.28% 6.98%
12/31/93 41.62% 10.74%
01/31/94 24.70% 7.66%
02/28/94 1.21% -1.18%
03/31/94 14.61% 1.65%
04/30/94 2.88% -3.13%
05/31/94 7.81% -1.70%
06/30/94 18.66% 0.13%
07/31/94 -0.93% -6.92%
08/31/94 -6.93% -8.75%
09/30/94 -1.70% -6.98%
10/31/94 -1.50% -5.24%
11/30/94 5.47% -3.91%
12/31/94 -5.12% -7.72%
01/31/95 -1.32% -8.09%
02/28/95 16.04% -0.20%
03/31/95 24.30% 7.71%
04/30/95 36.86% 13.02%
05/31/95 42.28% 13.48%
06/30/95 26.81% 8.31%
07/31/95 19.20% 7.93%
08/31/95 21.93% 12.11%
09/30/95 11.08% 8.67%
10/31/95 12.75% 7.38%
11/30/95 8.15% 7.98%
12/31/95 23.62% 13.89%
01/31/96 34.05% 22.29%
02/29/96 7.49% 7.63%
03/31/96 -11.05% -2.00%
04/30/96 -15.11% -0.53%
05/31/96 -26.37% -5.68%
06/30/96 -24.07% -3.39%
07/31/96 -16.27% -1.85%
08/31/96 -12.44% -2.71%
09/30/96 -1.90% 3.01%
10/31/96 15.00% 11.68%
11/30/96 21.11% 17.01%
12/31/96 5.27% 9.76%
01/31/97 9.82% 10.59%
02/28/97 30.88% 22.30%
03/31/97 31.58% 20.87%
04/30/97 19.53% 13.80%
05/31/97 22.60% 15.63%
06/30/97 21.13% 15.44%
07/31/97 34.86% 24.78%
08/31/97 27.06% 20.31%
09/30/97 24.09% 17.36%
10/31/97 5.40% 7.78%
11/30/97 -0.66% 3.00%
12/31/97 6.22% 7.62%
01/31/98 3.10% 4.09%
02/28/98 0.55% 0.69%
03/31/98 0.46% 1.49%
04/30/98 -0.88% -0.72%
05/31/98 2.08% 4.29%
06/30/98 2.87% 3.85%
07/31/98 -7.17% -3.46%
08/31/98 17.98% 8.24%
09/30/98 24.19% 11.53%
10/31/98 22.42% 12.61%
11/30/98 16.61% 8.10%
12/31/98 14.17% 7.92%
01/31/99 9.91% 5.55%
02/28/99 13.45% 8.33%
03/31/99 10.36% 7.04%
04/30/99 22.70% 16.27%
05/31/99 15.26% 8.96%
06/30/99 14.59% 11.26%
07/31/99 10.62% 9.55%
08/31/99 -7.60% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (7/31/91 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DATE SPECTRUM SELECT MAR S&P 500 INDEX SALOMON CORP. MSCI EAFE INDEX
INDEX BOND INDEX
<S> <C> <C> <C> <C> <C>
07/31/91 10.0000 10.0000 10.0000 10.0000 10.0000
08/31/91 9.3803 9.5650 10.2200 10.2700 9.8000
09/30/91 9.9733 9.9926 10.0463 10.5473 10.3586
10/31/91 9.7459 9.8097 10.1869 10.5895 10.5036
11/30/91 9.4608 9.8293 9.7692 10.7060 10.0204
12/31/91 13.1191 11.3745 10.8829 11.1771 10.5415
01/31/92 11.3197 10.4987 10.6979 10.9871 10.3201
02/29/92 10.6301 10.1123 10.8263 11.0970 9.9486
03/31/92 10.2145 10.0456 10.6206 11.0193 9.2920
04/30/92 10.0248 9.7704 10.9392 11.0303 9.3385
05/31/92 9.8825 9.7684 10.9720 11.4870 9.9642
06/30/92 10.5932 10.3486 10.8074 11.4870 9.4959
07/31/92 11.7290 11.0823 11.2613 11.8431 9.2585
08/31/92 12.5134 11.5455 11.0136 11.9497 9.8418
09/30/92 11.8575 11.3827 11.1458 12.0692 9.6548
10/31/92 11.4812 11.2438 11.2015 11.8761 9.1528
11/30/92 11.6406 11.3045 11.5711 11.9592 9.2443
12/31/92 11.2239 11.2152 11.7215 12.2343 9.2998
01/31/93 11.2587 11.0930 11.8270 12.5402 9.1045
02/28/93 12.9301 11.7153 11.9808 12.8662 8.7767
03/31/93 12.8531 11.6509 12.2324 12.9048 8.1974
04/30/93 14.1831 11.9608 11.9511 12.9693 8.2384
05/31/93 14.4599 11.9895 12.2499 12.9952 8.7904
06/30/93 14.4903 12.1574 12.2866 13.3721 8.3773
07/31/93 16.5044 12.7215 12.2497 13.5058 8.1679
08/31/93 16.3478 12.5663 12.7029 13.8975 8.6825
09/30/93 15.6726 12.4507 12.6013 13.9531 8.5175
10/31/93 14.8930 12.2278 12.8785 14.0229 8.0746
11/30/93 14.6995 12.0933 12.7368 13.7565 8.1553
12/31/93 15.8953 12.4198 12.8896 13.8528 8.2042
01/31/94 14.0396 11.9429 13.3407 14.1299 8.2042
02/28/94 13.0863 11.5774 12.9672 13.7201 8.4503
03/31/94 14.7308 11.8437 12.4096 13.1987 9.1939
04/30/94 14.5911 11.5867 12.5833 13.0667 10.0673
05/31/94 15.5894 11.7860 12.7720 12.9883 10.2787
06/30/94 17.1948 12.1738 12.4655 12.8844 10.1245
07/31/94 16.3510 11.8415 12.8893 13.2838 10.4789
08/31/94 15.2154 11.4673 13.4049 13.2439 11.0448
09/30/94 15.4054 11.5820 13.0698 12.8863 10.8018
10/31/94 14.6694 11.5866 13.3704 12.8219 11.1367
11/30/94 15.5030 11.6202 12.8757 12.8475 10.1678
12/31/94 15.0807 11.4610 13.0688 13.0531 10.8999
01/31/95 13.8543 10.9762 13.4217 13.3925 10.4857
02/28/95 15.1857 11.5546 13.9317 13.7809 10.4542
03/31/95 18.3108 12.7574 14.3497 13.9187 11.1128
04/30/95 19.9689 13.0955 14.7802 14.1553 11.5351
05/31/95 22.1808 13.3744 15.3566 15.0471 11.3967
06/30/95 21.8039 13.1858 15.7098 15.1675 11.2030
07/31/95 19.4896 12.7810 16.2439 15.0158 11.9088
08/31/95 18.5519 12.8564 16.2764 15.3311 11.4563
09/30/95 17.1124 12.5864 16.9600 15.5611 11.6854
10/31/95 16.5391 12.4417 16.9091 15.8412 11.3699
11/30/95 16.7660 12.5475 17.6362 16.2214 11.6883
12/31/95 18.6421 13.0532 17.9713 16.5945 12.1675
01/31/96 18.5719 13.4226 18.6003 16.6177 12.2162
02/29/96 16.3231 12.4360 18.7677 15.9979 12.2651
03/31/96 16.2873 12.5019 18.9554 15.7899 12.5227
04/30/96 16.9509 13.0257 19.2397 15.5373 12.8859
05/31/96 16.3321 12.6154 19.7207 15.5373 12.6540
06/30/96 16.5566 12.7390 19.7996 15.8014 12.7299
07/31/96 16.3186 12.5441 18.9284 15.8172 12.3607
08/31/96 16.2440 12.5077 19.3259 15.7065 12.3854
09/30/96 16.7868 12.9655 20.4082 16.1149 12.7198
10/31/96 19.0195 13.8951 20.9796 16.6950 12.5926
11/30/96 20.3051 14.6816 22.5531 17.1124 13.0963
12/31/96 19.6238 14.3278 22.1020 16.7873 12.9260
01/31/97 20.3951 14.8436 23.4723 16.7369 12.4736
02/28/97 21.3639 15.2088 23.6601 16.7871 12.6857
03/31/97 21.4307 15.1115 22.6900 16.4178 12.7364
04/30/97 20.2609 14.8229 24.0514 16.7133 12.8128
05/31/97 20.0226 14.5872 25.5185 16.9306 13.6456
06/30/97 20.0545 14.7054 26.6668 17.2523 14.3961
07/31/97 22.0071 15.6524 28.8001 18.1667 14.6264
08/31/97 20.6390 15.0482 27.1873 17.7307 13.5440
09/30/97 20.8314 15.2167 28.6826 18.1385 14.3025
10/31/97 20.0457 14.9763 27.7361 18.3743 13.2012
11/30/97 20.1704 15.1216 29.0120 18.5580 13.0692
12/31/97 20.8452 15.4195 29.5052 18.7436 13.1868
01/31/98 21.0270 15.4503 29.8298 19.0060 13.7934
02/28/98 21.4809 15.3143 31.9775 18.9870 14.6762
03/31/98 21.5295 15.3373 33.6084 19.0629 15.1312
04/30/98 20.0820 14.7161 33.9445 19.1582 15.2522
05/31/98 20.4400 15.2135 33.3674 19.4839 15.1759
06/30/98 20.6300 15.2713 34.7355 19.7177 15.2973
07/31/98 20.4300 15.1110 34.3534 19.9149 15.4503
08/31/98 24.3500 16.2881 29.3722 20.0941 13.5345
09/30/98 25.8700 16.9706 31.2550 20.9180 13.1231
10/31/98 24.5400 16.8654 33.7960 20.5206 14.5010
11/30/98 23.5200 16.3459 35.8576 21.0747 15.2406
12/31/98 23.8000 16.6401 37.9373 21.0958 15.8502
01/31/99 23.1100 16.3073 39.5307 21.3489 15.8026
02/28/99 24.3700 16.5894 38.3052 20.4949 15.4233
03/31/99 23.7600 16.4169 39.8374 20.4949 16.0711
04/30/99 24.6400 17.1097 41.3911 20.4539 16.7300
05/31/99 23.5600 16.5759 40.3977 20.0857 15.8768
06/30/99 23.6400 16.9903 42.6196 19.7643 16.4960
07/31/99 22.6000 16.5536 41.2899 19.5469 16.9909
08/31/99 22.5000 16.6595 41.0835 19.4883 17.0589
</TABLE>
CORRELATION ANALYSIS (7/91 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum Select MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Spectrum Select 1.00 0.92 0.06 0.33 0.05
MAR Index 1.00 0.15 0.37 0.06
S & P 500 Index 1.00 0.42 0.50
Salomon Corporate Bond Index 1.00 -0.01
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts Reports,
Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
partnership and in order to make an informed decision, you should read the
Spectrum Series prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
154
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM TECHNICAL STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisors: Campbell & Company, Inc.
Chesapeake Capital Corporation
John W. Henry & Company, Inc.
Began Trading: November 1, 1994
Total Assets in Fund: $281.2 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 8.0x
Monthly Management Fee: 1/12 of 4% of Beg. Net Assets
Monthly Brokerage Fee: 1/12 of 7.25% of Beg. Net Assets
Monthly Incentive Fee: 15% of Monthly Trading Profits to
Campbell and JWH, 19% to Chesapeake
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 10.08%
Standard Deviation of Monthly Returns: 4.38%
Annualized Standard Deviation: 15.14%
Sharpe Ratio: 0.37
Sortino Ratio: 0.83
Largest Decline Period (3/97 - 5/97): -8.27%
Average Recovery (No. of months): 2.69
Average Monthly Loss: -2.83%
Standard Deviation of Monthly Loss: 1.94%
% of Losing Months: 46.55%
Average Monthly Gain: 4.14%
Standard Deviation of Monthly Gain: 3.12%
% of Winning Months: 53.45%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Foreign Exchange 26%
Interest Rates 33%
Stock Indices 11%
Agriculturals 4%
Energies 10%
Metals 12%
Softs 4%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Technical is managed by Campbell & Company, Inc., Chesapeake Capital
Corporation, and John W. Henry & Company, Inc. These three trading advisors
employ a combination of investment approaches.
Campbell uses a highly disciplined systematic investment approach designed to
detect and react to price movements in the futures and forward markets.
Campbell's core systematic approach has been used successfully for over twenty
years.
The trading methodology employed by Chesapeake is based on the analysis of
interrelated mathematical and statistical formulas, including the technical
analysis of historical data, used to determine optimal price support and
resistance levels and market entry and exit points. This trading system was
designed in the 1980s and is continually updated based on research.
JWH's trading programs use historical data and proprietary systems to detect
emerging price trends. Positions are established under strict guidelines and are
retained in markets where price movements have exceeded the expectations of most
fundamental investors.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C> <C>
AGRICULTURALS ENERGIES STOCK
Corn Crude oil INDICES
Feeder cattle Gas oil ASE All Ordinaries
Lean hogs Heating oil CAC 40 Index
Live cattle Natural gas DAX Index
Pork bellies Unleaded gas Dow Jones Industrial Index
Soybeans METALS FTSE Index
Soybean meal Aluminum Hang Seng Index
Soybean oil Copper IBEX 35 Index
Wheat Gold NASDAQ 100 Index
FOREIGN Lead Nikkei Index
EXCHANGE Nickel S&P 500 Index
Australian dollar Platinum Swedish Index
British pound Silver Taiwan Index
Canadian dollar Tin Toronto Index
European common currency Zinc INTEREST
Hong Kong dollar SOFTS RATES
Indonesian rupiah Cocoa Australian bonds
Japanese yen Coffee British bonds
Mexican peso Cotton Canadian bonds
New Zealand dollar Orange juice Eurodollar
Norwegian kroner Sugar German bonds
Singapore dollar Japanese bonds
South African rand Spanish bonds
Spanish peseta Swiss bonds
Swedish kroner U.S. Treasury bonds
Swiss franc U.S. Treasury notes
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
155
<PAGE>
SPECTRUM TECHNICAL PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
-2.20% 17.59% 18.35% 7.49% 10.18% -1.36%
</TABLE>
(2 MONTHS) (8 MONTHS)
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL MAR INDEX
<S> <C> <C>
Oct-95 7.40% 7.38%
Nov-95 9.38% 7.98%
Dec-95 17.59% 13.89%
Jan-96 25.52% 22.29%
Feb-96 11.79% 7.63%
Mar-96 2.70% -2.00%
Apr-96 3.91% -0.53%
May-96 -0.78% -5.68%
Jun-96 3.57% -3.39%
Jul-96 1.07% -1.85%
Aug-96 1.35% -2.71%
Sep-96 10.60% 3.01%
Oct-96 21.69% 11.68%
Nov-96 30.63% 17.01%
Dec-96 18.35% 9.77%
Jan-97 17.10% 10.59%
Feb-97 26.51% 22.30%
Mar-97 22.68% 20.87%
Apr-97 13.62% 13.80%
May-97 13.73% 15.63%
Jun-97 10.94% 15.44%
Jul-97 27.41% 24.78%
Aug-97 20.23% 20.31%
Sep-97 16.06% 17.36%
Oct-97 5.97% 7.78%
Nov-97 -1.20% 3.00%
Dec-97 7.49% 7.62%
Jan-98 2.48% 4.09%
Feb-98 1.75% 0.69%
Mar-98 5.00% 1.50%
Apr-98 3.16% -0.72%
May-98 10.70% 4.29%
Jun-98 8.73% 3.85%
Jul-98 -1.53% -3.46%
Aug-98 15.50% 8.24%
Sep-98 18.33% 11.53%
Oct-98 17.04% 12.61%
Nov-98 8.72% 8.10%
Dec-98 10.18% 7.92%
Jan-99 5.95% 5.55%
Feb-99 8.13% 8.33%
Mar-99 4.08% 7.04%
Apr-99 16.96% 16.27%
May-99 7.59% 8.96%
Jun-99 14.38% 11.26%
Jul-99 10.99% 9.55%
Aug-99 1.60% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (10/31/94 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM S&P 500 INDEX SALOMON MAR MSCI EAFE
<S> <C> <C> <C> <C> <C>
Technical Corp. Bond Index Index
Index
Nov-94 10.00 10.0000 10.0000 10.0000 10.0000
Nov-94 9.91 9.63 10.02 10.029 9.13
Dec-94 9.7800 9.7745 10.1803 9.8916 9.7874
Jan-95 9.6000 10.0384 10.445 9.4732 9.4155
Feb-95 10.0900 10.4199 10.7479 9.9724 9.3873
Mar-95 11.1200 10.7325 10.8554 11.0105 9.9787
Apr-95 11.5200 11.0545 11.0399 11.3023 10.3579
May-95 11.6000 11.4856 11.7354 11.543 10.2336
Jun-95 11.4700 11.7498 11.8293 11.3802 10.0596
Jul-95 11.1900 12.1493 11.711 11.0308 10.6934
Aug-95 11.1200 12.1736 11.9569 11.0959 10.2871
Sep-95 10.7500 12.6849 12.1363 10.8629 10.4928
Oct-95 10.7400 12.6468 12.3548 10.738 10.2095
Nov-95 10.8400 13.1906 12.6513 10.8293 10.4954
Dec-95 11.5000 13.4412 12.9423 11.2657 10.9257
Jan-96 12.0500 13.9116 12.9604 11.5845 10.9694
Feb-96 11.2800 14.0368 12.477 10.733 11.0133
Mar-96 11.4200 14.1772 12.3148 10.7899 11.2446
Apr-96 11.9700 14.3899 12.1178 11.242 11.5707
May-96 11.5100 14.7496 12.1178 10.8879 11.3624
Jun-96 11.8800 14.8086 12.3238 10.9946 11.4306
Jul-96 11.3100 14.1570 12.3361 10.8264 11.0991
Aug-96 11.2700 14.4543 12.2497 10.795 11.1213
Sep-96 11.8900 15.2637 12.5682 11.1901 11.4216
Oct-96 13.0700 15.6911 13.0207 11.9924 11.3074
Nov-96 14.1600 16.8679 13.3462 12.6712 11.7597
Dec-96 13.6100 16.5305 13.0926 12.3658 11.6068
Jan-97 14.1100 17.5554 13.0533 12.811 11.2006
Feb-97 14.2700 17.6958 13.0925 13.1262 11.391
Mar-97 14.0100 16.9703 12.8045 13.0422 11.4366
Apr-97 13.6000 17.9885 13.035 12.7931 11.5052
May-97 13.0900 19.0858 13.2045 12.5897 12.253
Jun-97 13.1800 19.9447 13.4554 12.6917 12.9269
Jul-97 14.4100 21.5403 14.1685 13.509 13.1337
Aug-97 13.5500 20.3340 13.8285 12.9876 12.1618
Sep-97 13.8000 21.4524 14.1466 13.1331 12.8429
Oct-97 13.8500 20.7445 14.3305 12.9256 11.854
Nov-97 13.9900 21.6987 14.4738 13.051 11.7355
Dec-97 14.6300 22.0676 14.6185 13.3081 11.8411
Jan-98 14.4600 22.3103 14.8232 13.3347 12.3858
Feb-98 14.5200 23.9166 14.8084 13.2174 13.1785
Mar-98 14.7100 25.1363 14.8676 13.2372 13.587
Apr-98 14.0300 25.3877 14.9419 12.7011 13.6957
May-98 14.4900 24.9561 15.1959 13.1304 13.6272
Jun-98 14.3300 25.9793 15.3783 13.1803 13.7362
Jul-98 14.1900 25.6935 15.5321 13.0419 13.8736
Aug-98 15.6500 21.9679 15.6719 14.0579 12.1533
Sep-98 16.3300 23.3760 16.3144 14.6469 11.7838
Oct-98 16.2100 25.2765 16.0044 14.5561 13.0211
Nov-98 15.2100 26.8184 16.4365 14.1078 13.6852
Dec-98 16.1200 28.3739 16.4529 14.3617 14.2326
Jan-99 15.3200 29.5656 16.6503 14.0745 14.1899
Feb-99 15.7000 28.6491 15.9843 14.318 13.8493
Mar-99 15.3100 29.7951 15.9843 14.1691 14.431
Apr-99 16.4100 30.9571 15.9523 14.767 15.0227
May-99 15.5900 30.2141 15.6652 14.3063 14.2565
Jun-99 16.3900 31.8759 15.4146 14.664 14.8125
Jul-99 15.7500 30.8814 15.245 14.2871 15.2569
Aug-99 15.9000 30.7270 15.1993 14.3785 15.3179
</TABLE>
CORRELATION ANALYSIS (11/94 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum Technical MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Spectrum Technical 1.00 0.94 0.13 0.34 0.05
MAR Index 1.00 0.10 0.39 0.03
S & P 500 Index 1.00 0.36 0.67
Salomon Corporate Bond Index 1.00 0.02
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts Reports,
Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
partnership and in order to make an informed decision, you should read the
Spectrum Series prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
156
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM STRATEGIC STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisors: Allied Irish Capital Management,
Ltd.
Blenheim Investments Inc.
Willowbridge Associates Inc.
Began Trading: November 1, 1994
Total Assets in Fund: $88.7 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 7.2x
Monthly Management Fee: 1/12 of 4.00% of Beg. Net Assets
to Blenhiem and Willowbridge,
and 1/12 of 3.00% to Allied
Irish
Monthly Brokerage Fee: 1/12 of 7.25% of Beg. Net Assets
Monthly Incentive Fee: 15.00% of Monthly Trading
Profits
Investment Style: Fundamental
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 6.39%
Standard Deviation of Monthly Returns: 6.67%
Annualized Standard Deviation: 23.09%
Sharpe Ratio: 0.08
Sortino Ratio: 0.16
Largest Decline Period (4/97 - 7/98): -32.11%
Average Recovery (No. of months): 6.43
Average Monthly Loss: -4.37%
Standard Deviation of Monthly Loss: 3.41%
% of Losing Months: 48.28%
Average Monthly Gain: 5.49%
Standard Deviation of Monthly Gain: 5.31%
% of Winning Months: 51.72%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Foreign Exchange 11%
Interest Rates 13%
Stock Indices 16%
Agriculturals 3%
Energies 43%
Metals 11%
Softs 3%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Strategic is managed by Allied Irish Capital Management, Ltd., Blenheim
Investments Inc., and Willowbridge Associates, Inc. All three trading advisors
employ a fundamental investment approach that evaluates key economic indicators
such as supply and demand levels and geopolitical conditions.
Allied Irish employs multiple investment professionals using a discretionary
trading approach. Several strategies are applied to investments in a broad range
of financial instruments.
Blenheim's program has a strong global concentration using a discretionary
trading approach supplemented by a systematic and mathematical investment
process. Investments are made in markets in which the trading advisor has a
clear understanding of fundamental factors and geopolitical forces that
influence price behavior.
Willowbridge also uses a discretionary trading approach. Willowbridge maintains
a small number of core positions at any time, representing those believed to
have the most favorable reward-to-risk ratios.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C> <C>
AGRICULTURALS METALS STOCK
Corn Aluminum INDICES
Lean hogs Copper CAC 40 Index
Live cattle Gold DAX Index
Soybean Nickel FTSE Index
Soybean meal Silver NASDAQ 100 Index
Soybean oil Zinc Nikkei Index
Wheat ENERGIES S&P 500 Index
SOFTS Crude oil INTEREST
Cocoa Gas oil RATES
Coffee Heating oil British bonds
Lumber Natural gas Eurodollar
Sugar Unleaded gas French bonds
FOREIGN German bonds
EXCHANGE Italian bonds
Australian dollar Japanese bonds
British pound U.S. Treasury bonds
Canadian dollar U.S. Treasury notes
European common currency
Japanese yen
Swiss franc
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
157
<PAGE>
SPECTRUM STRATEGIC PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
0.10% 10.49% -3.53% 0.37% 7.84% 16.80%
</TABLE>
(2 MONTHS) (8 MONTHS)
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC MAR INDEX
<S> <C> <C>
Oct-95 1.30% 7.38%
Nov-95 4.00% 7.98%
Dec-95 10.49% 13.89%
Jan-96 18.74% 22.29%
Feb-96 5.00% 7.63%
Mar-96 -3.60% -2.00%
Apr-96 2.27% -0.53%
May-96 -0.19% -5.68%
Jun-96 3.56% -3.39%
Jul-96 -0.72% -1.85%
Aug-96 -3.45% -2.71%
Sep-96 1.88% 3.01%
Oct-96 4.54% 11.68%
Nov-96 5.28% 17.01%
Dec-96 -3.53% 9.77%
Jan-97 -7.59% 10.59%
Feb-97 13.41% 22.30%
Mar-97 22.28% 20.87%
Apr-97 7.31% 13.80%
May-97 11.55% 15.63%
Jun-97 12.97% 15.44%
Jul-97 27.89% 24.78%
Aug-97 20.22% 20.31%
Sep-97 7.48% 17.36%
Oct-97 -2.08% 7.78%
Nov-97 -7.48% 3.00%
Dec-97 0.37% 7.62%
Jan-98 6.42% 4.09%
Feb-98 -6.60% 0.69%
Mar-98 -12.20% 1.50%
Apr-98 -16.12% -0.72%
May-98 -22.93% 4.29%
Jun-98 -22.35% 3.85%
Jul-98 -31.66% -3.46%
Aug-98 -19.63% 8.24%
Sep-98 1.81% 11.53%
Oct-98 17.74% 12.61%
Nov-98 10.85% 8.10%
Dec-98 7.84% 7.92%
Jan-99 -1.24% 5.55%
Feb-99 14.22% 8.33%
Mar-99 9.87% 7.04%
Apr-99 26.00% 16.27%
May-99 17.87% 8.96%
Jun-99 44.90% 11.26%
Jul-99 51.42% 9.55%
Aug-99 42.60% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (10/31/94 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR INDEX S&P 500 SALOMON CORP. MSCI EAFE
STRATEGIC INDEX BOND INDEX INDEX
<S> <C> <C> <C> <C> <C>
Nov-94 10.0100 10.0290 9.6300 10.0200 9.1300
Dec-94 10.0100 9.8916 9.7745 10.1803 9.7874
Jan-95 9.6600 9.4732 10.0384 10.445 9.4155
Feb-95 9.8000 9.9724 10.4199 10.7479 9.3873
Mar-95 10.5700 11.0105 10.7325 10.8554 9.9787
Apr-95 10.5700 11.3023 11.0545 11.0399 10.3579
May-95 10.5000 11.5430 11.4856 11.7354 10.2336
Jun-95 9.8300 11.3802 11.7498 11.8293 10.0596
Jul-95 9.7500 11.0308 12.1493 11.711 10.6934
Aug-95 10.1400 11.0959 12.1736 11.9569 10.2871
Sep-95 10.1000 10.8629 12.6849 12.1363 10.4928
Oct-95 10.1300 10.7380 12.6468 12.3548 10.2095
Nov-95 10.4100 10.8293 13.1906 12.6513 10.4954
Dec-95 11.0600 11.2657 13.4412 12.9423 10.9257
Jan-96 11.4700 11.5845 13.9116 12.9604 10.9694
Feb-96 10.2900 10.7330 14.0368 12.477 11.0133
Mar-96 10.1900 10.7899 14.1772 12.3148 11.2446
Apr-96 10.8100 11.2420 14.3899 12.1178 11.5707
May-96 10.4800 10.8879 14.7496 12.1178 11.3624
Jun-96 10.1800 10.9946 14.8086 12.3238 11.4306
Jul-96 9.6800 10.8264 14.1570 12.3361 11.0991
Aug-96 9.7900 10.7950 14.4543 12.2497 11.1213
Sep-96 10.2900 11.1901 15.2637 12.5682 11.4216
Oct-96 10.5900 11.9924 15.6911 13.0207 11.3074
Nov-96 10.9600 12.6712 16.8679 13.3462 11.7597
Dec-96 10.6700 12.3658 16.5305 13.0926 11.6068
Jan-97 10.6000 12.8110 17.5554 13.0533 11.2006
Feb-97 11.6700 13.1262 17.6958 13.0925 11.391
Mar-97 12.4600 13.0422 16.9703 12.8045 11.4366
Apr-97 11.6000 12.7931 17.9885 13.035 11.5052
May-97 11.6900 12.5897 19.0858 13.2045 12.253
Jun-97 11.5000 12.6917 19.9447 13.4554 12.9269
Jul-97 12.3800 13.5090 21.5403 14.1685 13.1337
Aug-97 11.7700 12.9876 20.3340 13.8285 12.1618
Sep-97 11.0600 13.1331 21.4524 14.1466 12.8429
Oct-97 10.3700 12.9256 20.7445 14.3305 11.854
Nov-97 10.1400 13.0510 21.6987 14.4738 11.7355
Dec-97 10.7100 13.3081 22.0676 14.6185 11.8411
Jan-98 11.2800 13.3347 22.3103 14.8232 12.3858
Feb-98 10.9000 13.2174 23.9166 14.8084 13.1785
Mar-98 10.9400 13.2372 25.1363 14.8676 13.587
Apr-98 9.7300 12.7011 25.3877 14.9419 13.6957
May-98 9.0100 13.1304 24.9561 15.1959 13.6272
Jun-98 8.9300 13.1803 25.9793 15.3783 13.7362
Jul-98 8.4600 13.0419 25.6935 15.5321 13.8736
Aug-98 9.4600 14.0579 21.9679 15.6719 12.1533
Sep-98 11.2600 14.6469 23.3760 16.3144 11.7838
Oct-98 12.2100 14.5561 25.2765 16.0044 13.0211
Nov-98 11.2400 14.1078 26.8184 16.4365 13.6852
Dec-98 11.5500 14.3617 28.3739 16.4529 14.2326
Jan-99 11.1400 14.0745 29.5656 16.6503 14.1899
Feb-99 12.4500 14.3180 28.6491 15.9843 13.8493
Mar-99 12.0200 14.1691 29.7951 15.9843 14.431
Apr-99 12.2600 14.7670 30.9571 15.9523 15.0227
May-99 10.6200 14.3063 30.2141 15.6652 14.2565
Jun-99 12.9400 14.6640 31.8759 15.4146 14.8125
Jul-99 12.8100 14.2871 30.8814 15.245 15.2569
Aug-99 13.4900 14.3785 30.7270 15.1993 15.3179
</TABLE>
CORRELATION ANALYSIS (11/94 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum
Strategic MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Spectrum Strategic 1.00 0.62 0.07 0.05 0.10
MAR Index 1.00 0.10 0.39 0.03
S & P 500 Index 1.00 0.36 0.67
Salomon Corporate Bond Index 1.00 0.02
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts
Reports, Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
partnership and in order to make an informed decision, you should read the
Spectrum Series prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
158
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM GLOBAL BALANCED STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisor: RXR, Inc.
Began Trading: November 1, 1994
Total Assets in Fund: $55.1 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 5.8x
Monthly Management Fee: 1/12 of 1.25% of Beg. Net Assets
Monthly Brokerage Fee: 1/12 of 4.60% of Beg. Net Assets
Monthly Incentive Fee: 15.00% of Monthly Trading
Profits
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 10.04%
Standard Deviation of Monthly Returns: 3.05%
Annualized Standard Deviation: 10.54%
Sharpe Ratio: 0.53
Sortino Ratio: 0.78
Largest Decline Period (2/96 - 5/96): -10.64%
Average Recovery (No. of months): 3.18
Average Monthly Loss: -1.99%
Standard Deviation of Monthly Loss: 2.04%
% of Losing Months: 37.93%
Average Monthly Gain: 2.58%
Standard Deviation of Monthly Gain: 2.12%
% of Winning Months: 62.07%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Foreign Exchange 16%
Interest Rates 30%
Stock Indices 35%
Agriculturals 6%
Energies 7%
Metals 4%
Softs 2%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Global Balanced follows the tenets of Modern Portfolio Theory and
offers a balanced portfolio that participates in global stocks, global bonds,
and alternative investments within managed futures. Since the Spectrum Global
Balanced trading strategy is in part to gain exposure to the stock and bond
markets, it does not result in the same degree of non-correlation to the stock
and bond indices and in that way differs from the other managed futures funds
that Dean Witter offers.
Within global stock and global bond components of the fund, RXR, Inc. analyzes
various fundamental information, such as growth data, labor wage rates, central
bank interest rate policies and inflation, to determine its approaches to these
markets.
Within the global currency and commodity components of the fund, RXR employs a
technical trend-following trading system to analyze price data, determine profit
and risk potential and initiate trades overall.
RXR uses a computer-based model to reallocate assets among various market
sectors within each of the independent strategies.
The returns achieved by Spectrum Global Balanced will tend to be more highly
correlated to the performance of global stock and global bond markets than will
be the returns derived within other funds in the Spectrum Series.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C> <C>
AGRICULTURALS STOCK INTEREST
Corn INDICES RATES
Lean hogs DAX Index Australian bonds
Live cattle FTSE Index British bonds
Soybean oil Nikkei Index Euro bonds
Wheat S&P 500 Index Eurodollar
SOFTS FOREIGN French bonds
Cotton EXCHANGE German bonds
Sugar Australian dollar Italian bonds
ENERGIES British pound Japanese bonds
Crude oil Canadian dollar Spanish bonds
Gas oil European common currency U.S. Treasury
Natural gas Japanese yen bonds
METALS Mexican peso U.S. Treasury
Copper New Zealand dollar notes
Nickel Singapore dollar
Zinc Spanish peseta
Swiss franc
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
159
<PAGE>
SPECTRUM GLOBAL BALANCED PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
- -1.70% 22.79% -3.65% 18.23% 16.36% -0.81%
</TABLE>
(2 MONTHS) (8 MONTHS)
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM GLOBAL MAR PUBLIC
BALANCED FUND INDEX
<S> <C> <C>
10/31/95 14.10% 7.38%
11/30/95 17.79% 7.98%
12/31/95 22.79% 13.89%
01/31/96 21.69% 22.29%
02/29/96 7.10% 7.63%
03/31/96 2.99% -2.00%
04/30/96 2.10% -0.53%
05/31/96 -5.25% -5.68%
06/30/96 -5.56% -3.39%
07/31/96 -3.43% -1.85%
08/31/96 -2.86% -2.71%
09/30/96 -2.20% 3.01%
10/31/96 1.23% 11.68%
11/30/96 3.24% 17.01%
12/31/96 -3.65% 9.77%
01/31/97 -0.83% 10.59%
02/28/97 11.11% 22.30%
03/31/97 9.51% 20.87%
04/30/97 6.35% 13.80%
05/31/97 11.63% 15.63%
06/30/97 15.17% 15.44%
07/31/97 27.80% 24.78%
08/31/97 21.23% 20.31%
09/30/97 22.37% 17.36%
10/31/97 15.93% 7.78%
11/30/97 10.25% 3.00%
12/31/97 18.23% 7.62%
01/31/98 16.97% 4.09%
02/28/98 15.08% 0.69%
03/31/98 20.68% 1.50%
04/30/98 20.52% -0.72%
05/31/98 18.11% 4.29%
06/30/98 13.97% 3.85%
07/31/98 0.64% -3.46%
08/31/98 9.70% 8.24%
09/30/98 11.67% 11.53%
10/31/98 14.94% 12.61%
11/30/98 18.44% 8.10%
12/31/98 16.36% 7.92%
01/31/99 13.73% 5.55%
02/28/99 11.98% 8.33%
03/31/99 9.53% 7.04%
04/30/99 16.12% 16.27%
05/31/99 10.71% 8.96%
06/30/99 13.24% 11.26%
07/31/99 12.69% 9.55%
08/31/99 9.68% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (10/31/94 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED MAR PUBLIC FUND INDEX S&P 500 INDEX SALOMON CORP. BOND INDEX MSCI EAFE INDEX
<S> <C> <C> <C> <C> <C>
11/1/94 10.00 10.0000 10.0000 10.0000 10.0000
11/30/94 9.95 10.029 9.63 10.02 9.13
12/31/94 9.83 9.8916 9.7745 10.1803 9.7874
01/31/95 9.96 9.4732 10.0384 10.445 9.4155
02/28/95 10.42 9.9724 10.4199 10.7479 9.3873
03/31/95 10.72 11.0105 10.7325 10.8554 9.9787
04/30/95 10.95 11.3023 11.0545 11.0399 10.3579
05/31/95 11.43 11.543 11.4856 11.7354 10.2336
06/30/95 11.52 11.3802 11.7498 11.8293 10.0596
07/31/95 11.36 11.0308 12.1493 11.711 10.6934
08/31/95 11.20 11.0959 12.1736 11.9569 10.2871
09/30/95 11.38 10.8629 12.6849 12.1363 10.4928
10/31/95 11.41 10.738 12.6468 12.3548 10.2095
11/30/95 11.72 10.8293 13.1906 12.6513 10.4954
12/31/95 12.07 11.2657 13.4412 12.9423 10.9257
01/31/96 12.12 11.5845 13.9116 12.9604 10.9694
02/29/96 11.16 10.733 14.0368 12.477 11.0133
03/31/96 11.04 10.7899 14.1772 12.3148 11.2446
04/30/96 11.18 11.242 14.3899 12.1178 11.5707
05/31/96 10.83 10.8879 14.7496 12.1178 11.3624
06/30/96 10.88 10.9946 14.8086 12.3238 11.4306
07/31/96 10.97 10.8264 14.1570 12.3361 11.0991
08/31/96 10.88 10.795 14.4543 12.2497 11.1213
09/30/96 11.13 11.1901 15.2637 12.5682 11.4216
10/31/96 11.55 11.9924 15.6911 13.0207 11.3074
11/30/96 12.10 12.6712 16.8679 13.3462 11.7597
12/31/96 11.63 12.3658 16.5305 13.0926 11.6068
01/31/97 12.02 12.811 17.5554 13.0533 11.2006
02/28/97 12.40 13.1262 17.6958 13.0925 11.391
03/31/97 12.09 13.0422 16.9703 12.8045 11.4366
04/30/97 11.89 12.7931 17.9885 13.035 11.5052
05/31/97 12.09 12.5897 19.0858 13.2045 12.253
06/30/97 12.53 12.6917 19.9447 13.4554 12.9269
07/31/97 14.02 13.509 21.5403 14.1685 13.1337
08/31/97 13.19 12.9876 20.3340 13.8285 12.1618
09/30/97 13.62 13.1331 21.4524 14.1466 12.8429
10/31/97 13.39 12.9256 20.7445 14.3305 11.854
11/30/97 13.34 13.051 21.6987 14.4738 11.7355
12/31/97 13.75 13.3081 22.0676 14.6185 11.8411
01/31/98 14.06 13.3347 22.3103 14.8232 12.3858
02/28/98 14.27 13.2174 23.9166 14.8084 13.1785
03/31/98 14.59 13.2372 25.1363 14.8676 13.587
04/30/98 14.33 12.7011 25.3877 14.9419 13.6957
05/31/98 14.28 13.1304 24.9561 15.1959 13.6272
06/30/98 14.28 13.1803 25.9793 15.3783 13.7362
07/31/98 14.11 13.0419 25.6935 15.5321 13.8736
08/31/98 14.47 14.0579 21.9679 15.6719 12.1533
09/30/98 15.21 14.6469 23.3760 16.3144 11.7838
10/31/98 15.39 14.5561 25.2765 16.0044 13.0211
11/30/98 15.80 14.1078 26.8184 16.4365 13.6852
12/31/98 16.00 14.3617 28.3739 16.4529 14.2326
01/31/99 15.99 14.0745 29.5656 16.6503 14.1899
02/28/99 15.98 14.318 28.6491 15.9843 13.8493
03/31/99 15.98 14.1691 29.7951 15.9843 14.431
04/30/99 16.64 14.767 30.9571 15.9523 15.0227
05/31/99 15.81 14.3063 30.2141 15.6652 14.2565
06/30/99 16.17 14.664 31.8759 15.4146 14.8125
07/31/99 15.90 14.2871 30.8814 15.245 15.2569
08/31/99 15.87 14.3785 30.7270 15.1993 15.3179
</TABLE>
CORRELATION ANALYSIS (11/94 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum
Global
Balanced MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Spectrum Global Balanced 1.00 0.71 0.47 0.67 0.26
MAR Index 1.00 0.10 0.39 0.03
S & P 500 Index 1.00 0.36 0.67
Salomon Corporate Bond Index 1.00 0.02
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts
Reports, Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
partnership and in order to make an informed decision, you should read the
Spectrum Series prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
160
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
- --------------------------------------------------------------------------------
All of the performance data below is a pro forma of DW Cornerstone IV for the
Spectrum Currency fee structure and is through August 31, 1999.
SPECTRUM CURRENCY STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisors: John W. Henry & Company, Inc.
Sunrise Capital Partners, LLC
Began Trading: May 1, 1987
Total Assets in Fund: $ 103.6 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 2.7
Monthly Management Fee: 1/12 of 4.00% of Beg. Net Assets
to John W. Henry & Company, Inc.
and 1/12 of 3.00% to Sunrise
Capital Partners, LLC
Monthly Brokerage Fee: 1/12 of 4.60% of Beg. Net Assets
Monthly Incentive Fee: 15.00% of Monthly Trading Profits
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 13.43%
Standard Deviation of Monthly Returns: 8.61%
Annualized Standard Deviation: 29.78%
Sharpe Ratio: 0.30
Sortino Ratio: 0.54
Largest Decline Period (6/95 - 8/96): -43.60%
Average Recovery (No. of months): 7.84
Average Monthly Loss: -5.52%
Standard Deviation of Monthly Loss: 4.77%
% of Losing Months: 43.24%
Average Monthly Gain: 6.69%
Standard Deviation of Monthly Gain: 6.97%
% of Winning Months: 56.76%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Foreign Exchange 100%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Currency, managed by John W. Henry & Company, Inc. and Sunrise Capital
Partners, LLC, is structured to exclusively trade a portfolio of diverse world
currencies. Each trading advisor implements a technical, trend-following program
to participate in international currencies via the interbank market (a network
of major world banks and financial institutions) and futures contracts, and may
also trade in spot (cash) currency markets.
JWH's International Foreign Exchange Program, is structured and market-weighted
to take into account the potentially higher volatility of a portfolio
exclusively trading in currency markets. Volatility and risk are reduced by
applying the principles of spread trading by establishing two related foreign
currency positions at or about the same time.
Sunrise's trading program applies the principles of spread trading, including
multiple additional currencies to a portfolio and reweighting the emphasis given
to the different markets traded, in an attempt to adjust the potentially higher
volatility of a portfolio which trades in a less diversified group of markets.
FUTURES MARKETS TRADED
- ------------------------------------------------
FOREIGN
EXCHANGE
Australian dollar
British pound
Czech krona
European common currency
Greek drachma
Japanese yen
Mexican peso
New Zealand dollar
Norwegian kroner
Singapore dollar
South African rand
Swedish kroner
Swiss franc
Thai baht
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
161
<PAGE>
SPECTRUM CURRENCY PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.22% 36.99% -9.52% 59.88% 37.10% 9.78% -7.54% -13.78% 21.34% 13.14% 34.63% 3.09% -5.26%
(8 MONTHS) (8 MONTHS)
</TABLE>
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM CURRENCY MAR INDEX
<S> <C> <C>
4/30/88 -2.56% -1.22%
5/31/88 39.28% 7.84%
6/30/88 58.34% 26.45%
7/31/88 72.83% 15.67%
8/31/88 104.62% 21.13%
9/30/88 94.29% 23.80%
10/31/88 74.08% 25.14%
11/30/88 71.54% 17.59%
12/31/88 36.99% 7.26%
1/31/89 102.27% 19.88%
2/28/89 65.64% 11.23%
3/31/89 63.00% 16.74%
4/30/89 60.08% 17.87%
5/31/89 43.26% 22.71%
6/30/89 26.64% 6.35%
7/31/89 1.43% 13.47%
8/31/89 -19.74% 6.40%
9/30/89 -32.16% 3.32%
10/31/89 -30.21% -3.07%
11/30/89 -28.86% -2.00%
12/31/89 -9.52% 4.68%
1/31/90 -20.30% 0.71%
2/28/90 -2.32% 7.36%
3/31/90 -0.50% 7.69%
4/30/90 0.58% 12.99%
5/31/90 -18.96% -3.66%
6/30/90 -8.46% -2.20%
7/31/90 30.48% 1.07%
8/31/90 74.04% 11.28%
9/30/90 110.34% 16.17%
10/31/90 123.99% 22.75%
11/30/90 97.93% 20.62%
12/31/90 59.88% 14.23%
1/31/91 37.39% 7.28%
2/28/91 26.49% 6.80%
3/31/91 53.48% 9.85%
4/30/91 51.62% 5.39%
5/31/91 66.74% 10.61%
6/30/91 62.20% 9.53%
7/31/91 18.42% 2.06%
8/31/91 -1.01% -6.24%
9/30/91 9.49% -3.79%
10/31/91 -6.91% -6.22%
11/30/91 -0.57% -6.50%
12/31/91 37.10% 10.01%
1/31/92 36.62% 6.45%
2/29/92 33.84% 2.77%
3/31/92 6.13% -3.03%
4/30/92 -2.44% -5.17%
5/31/92 -0.67% -4.35%
6/30/92 6.20% 0.74%
7/31/92 28.78% 10.82%
8/31/92 64.81% 20.71%
9/30/92 46.75% 13.91%
10/31/92 52.45% 14.62%
11/30/92 45.45% 15.01%
12/31/92 9.78% -1.40%
1/31/93 16.18% 5.66%
2/28/93 45.83% 15.85%
3/31/93 38.98% 15.98%
4/30/93 48.94% 22.42%
5/31/93 50.86% 22.74%
6/30/93 29.80% 17.48%
7/31/93 27.56% 14.79%
8/31/93 1.44% 8.84%
9/30/93 4.30% 9.38%
10/31/93 -1.98% 8.75%
11/30/93 -9.53% 6.98%
12/31/93 -7.54% 10.74%
1/31/94 -2.70% 7.66%
2/28/94 -17.44% -1.18%
3/31/94 -14.73% 1.65%
4/30/94 -17.72% -3.13%
5/31/94 -24.16% -1.70%
6/30/94 -19.87% 0.14%
7/31/94 -27.75% -6.92%
8/31/94 -25.33% -8.75%
9/30/94 -22.50% -6.98%
10/31/94 -12.32% -5.24%
11/30/94 -11.88% -3.91%
12/31/94 -13.78% -7.72%
1/31/95 -19.27% -8.09%
2/28/95 -11.84% -0.20%
3/31/95 11.60% 7.72%
4/30/95 17.77% 13.02%
5/31/95 16.20% 13.48%
6/30/95 7.71% 8.31%
7/31/95 11.07% 7.93%
8/31/95 21.40% 12.11%
9/30/95 19.12% 8.67%
10/31/95 14.08% 7.38%
11/30/95 18.90% 7.98%
12/31/95 21.34% 13.89%
1/31/96 35.28% 22.29%
2/29/96 19.83% 7.63%
3/31/96 -3.22% -2.00%
4/30/96 -2.31% -0.53%
5/31/96 3.99% -5.67%
6/30/96 4.68% -3.39%
7/31/96 2.27% -1.85%
8/31/96 -5.64% -2.71%
9/30/96 -4.97% 3.01%
10/31/96 2.97% 11.68%
11/30/96 10.34% 17.01%
12/31/96 13.14% 9.77%
1/31/97 15.50% 10.59%
2/28/97 30.39% 22.30%
3/31/97 28.42% 20.87%
4/30/97 25.69% 13.80%
5/31/97 17.35% 15.63%
6/30/97 19.14% 15.43%
7/31/97 33.77% 24.78%
8/31/97 40.32% 20.31%
9/30/97 39.85% 17.36%
10/31/97 31.73% 7.78%
11/30/97 31.49% 3.00%
12/31/97 34.63% 7.62%
1/31/98 25.45% 4.09%
2/28/98 13.18% 0.69%
3/31/98 14.98% 1.49%
4/30/98 9.12% -0.72%
5/31/98 21.70% 4.29%
6/30/98 34.08% 3.85%
7/31/98 23.82% -3.46%
8/31/98 22.00% 8.24%
9/30/98 17.09% 11.53%
10/31/98 20.38% 12.61%
11/30/98 9.63% 8.10%
12/31/98 3.09% 7.92%
1/31/99 1.86% 5.55%
2/28/99 6.96% 8.33%
3/31/99 6.74% 7.04%
4/30/99 12.79% 16.26%
5/31/99 5.16% 8.95%
6/30/99 -6.38% 11.26%
7/31/99 -11.37% 9.55%
8/31/99 -10.83% 2.28%
9/30/99 -4.97% -1.34%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (4/30/87 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR S&P 500 SALOMON CORP. MSCI EAFE
CURRENCY INDEX INDEX BOND INDEX INDEX
<S> <C> <C> <C> <C> <C>
5/1/87 10.0000 10.0000 10.0000 10.0000 10.0000
5/31/87 8.9360 9.7460 10.0900 9.9500 10.0000
6/30/87 8.9083 9.5959 10.5945 10.0993 9.6800
7/31/87 8.7257 9.9404 11.1348 9.9781 9.6606
8/31/87 7.6603 9.5706 11.5468 9.8983 10.3851
9/30/87 7.6434 9.4060 11.2928 9.4826 10.2189
10/31/87 8.7005 9.4540 8.8648 9.9662 8.7883
11/30/87 9.6723 10.1763 8.1379 10.0958 8.8762
12/31/87 11.0216 10.8490 8.7564 10.3078 9.1425
1/31/88 8.7820 10.2469 9.1417 10.8438 9.3071
2/29/88 8.8698 10.3811 9.5531 10.9956 9.9307
3/31/88 9.3869 10.0946 9.2665 10.7867 10.5464
4/30/88 9.7436 9.8776 9.3777 10.6249 10.7046
5/31/88 12.4465 10.5098 9.4340 10.5612 10.3621
6/30/88 14.1056 12.1336 9.8680 10.9625 10.0927
7/31/88 15.0803 11.4978 9.8483 10.8419 10.4157
8/31/88 15.6745 11.5932 9.4938 10.8961 9.7387
9/30/88 14.8500 11.6442 9.9020 11.2557 10.1672
10/31/88 15.1455 11.8305 10.1892 11.5709 11.0416
11/30/88 16.5919 11.9666 10.0262 11.3742 11.7041
12/31/88 15.0986 11.6363 10.2067 11.4197 11.7743
1/31/89 17.7635 12.2844 10.9620 11.6481 11.9862
2/28/89 14.6922 11.5473 10.6770 11.4967 12.0461
3/31/89 15.3005 11.7840 10.9332 11.5657 11.8172
4/30/89 15.5973 11.6426 11.5127 11.8086 11.9236
5/31/89 17.8308 12.8965 11.9502 12.2573 11.2797
6/30/89 17.8629 12.9042 11.8904 12.7353 11.0879
7/31/89 15.2960 13.0461 12.9724 12.9645 12.4850
8/31/89 12.5810 12.3351 13.2059 12.7571 11.9232
9/30/89 10.0749 12.0304 13.1531 12.8081 12.4717
10/31/89 10.5706 11.4674 12.8506 13.1667 11.9728
11/30/89 11.8031 11.7277 13.0948 13.2589 12.5714
12/31/89 13.6609 12.1804 13.4091 13.2722 13.0365
1/31/90 14.1582 12.3716 12.5241 13.0200 12.5541
2/28/90 14.3508 12.3976 12.6619 13.0070 11.6753
3/31/90 15.2233 12.6902 13.0038 12.9940 10.4611
4/30/90 15.6876 13.1547 12.6917 12.7471 10.3774
5/31/90 14.4498 12.4246 13.8974 13.2442 11.5604
6/30/90 16.3514 12.6197 13.8140 13.5356 11.4564
7/31/90 19.9585 13.1851 13.7864 13.6710 11.6168
8/31/90 21.8965 13.7270 12.5318 13.2745 10.4900
9/30/90 21.1914 13.9755 11.9303 13.3940 9.0319
10/31/90 23.6772 14.0761 11.8945 13.5681 10.4409
11/30/90 23.3623 14.1465 12.6439 13.9480 9.8249
12/31/90 21.8414 13.9131 12.9979 14.1851 9.9919
1/31/91 19.4520 13.2717 13.5828 14.3979 10.3216
2/28/91 18.1526 13.2412 14.5336 14.5707 11.4260
3/31/91 23.3642 13.9403 14.8969 14.7310 10.7404
4/30/91 23.7848 13.8636 14.9416 14.9372 10.8478
5/31/91 24.0940 13.7430 15.5542 14.9969 10.9671
6/30/91 26.5227 13.8227 14.8543 14.9669 10.1665
7/31/91 23.6344 13.4564 15.5673 15.2213 10.6647
8/31/91 21.6751 12.8710 15.9098 15.6323 10.4514
9/30/91 23.2032 13.4463 15.6393 16.0544 11.0471
10/31/91 22.0407 13.2002 15.8583 16.1186 11.2018
11/30/91 23.2287 13.2266 15.2081 16.2959 10.6865
12/31/91 29.9441 15.3058 16.9418 17.0129 11.2422
1/31/92 26.5754 14.1273 16.6538 16.7237 11.0061
2/29/92 24.2952 13.6074 16.8536 16.8909 10.6099
3/31/92 24.7957 13.5176 16.5334 16.7727 9.9096
4/30/92 23.2038 13.1472 17.0294 16.8062 9.9591
5/31/92 23.9324 13.1446 17.0805 17.2264 10.6264
6/30/92 28.1684 13.9254 16.8243 17.5020 10.1270
7/31/92 30.4360 14.9127 17.5309 18.0446 9.8738
8/31/92 35.7227 15.5361 17.1452 18.2070 10.4958
9/30/92 34.0509 15.3170 17.3509 18.3891 10.2964
10/31/92 33.6014 15.1301 17.4377 18.0949 9.7610
11/30/92 33.7862 15.2118 18.0131 18.2216 9.8586
12/31/92 32.8740 15.0916 18.2473 18.6407 9.9079
1/31/93 30.8753 14.9271 18.4115 19.1067 9.9079
2/28/93 35.4294 15.7645 18.6508 19.6035 10.2150
3/31/93 34.4622 15.6778 19.0425 19.6427 11.1037
4/30/93 34.5587 16.0948 18.6045 19.7409 12.1586
5/31/93 36.1035 16.1334 19.0696 19.7804 12.4139
6/30/93 36.5620 16.3593 19.1268 20.3540 12.2277
7/31/93 38.8252 17.1184 19.0694 20.5575 12.6557
8/31/93 36.2356 16.9096 19.7750 21.1537 13.3391
9/30/93 35.5145 16.7540 19.6168 21.2383 13.0456
10/31/93 32.9361 16.4541 20.0484 21.3445 13.4500
11/30/93 30.5680 16.2731 19.8279 20.9390 12.2799
12/31/93 30.3938 16.7125 20.0658 21.0856 13.1641
1/31/94 30.0412 16.0707 20.7681 21.5073 14.2830
2/28/94 29.2511 15.5789 20.1866 20.8836 14.2402
3/31/94 29.3857 15.9372 19.3186 20.0900 13.6279
4/30/94 28.4365 15.5914 19.5891 19.8891 14.2139
5/31/94 27.3815 15.8596 19.8829 19.7698 14.1286
6/30/94 29.2955 16.3814 19.4057 19.6116 14.3264
7/31/94 28.0504 15.9342 20.0655 20.2196 14.4697
8/31/94 27.0574 15.4307 20.8681 20.1589 14.8170
9/30/94 27.5228 15.5850 20.3464 19.6146 14.3577
10/31/94 28.8797 15.5912 20.8144 19.5165 14.8459
11/30/94 26.9361 15.6364 20.0443 19.5555 14.1333
12/31/94 26.2061 15.4222 20.3450 19.8684 14.2181
1/31/95 24.2537 14.7698 20.8943 20.3850 13.6778
2/28/95 25.7890 15.5482 21.6883 20.9762 13.6368
3/31/95 32.7933 17.1668 22.3389 21.1860 14.4959
4/30/95 33.4885 17.6217 23.0091 21.5462 15.0467
5/31/95 31.8174 17.9970 23.9065 22.9036 14.8661
6/30/95 31.5533 17.7432 24.4563 23.0868 14.6134
7/31/95 31.1557 17.1985 25.2878 22.8559 15.5340
8/31/95 32.8475 17.3000 25.3384 23.3359 14.9437
9/30/95 32.7851 16.9367 26.4026 23.6859 15.2426
10/31/95 32.9457 16.7419 26.3234 24.1122 14.8310
11/30/95 32.0265 16.8842 27.4553 24.6909 15.2463
12/31/95 31.7991 17.5646 27.9770 25.2588 15.8714
1/31/96 32.8103 18.0617 28.9562 25.2841 15.9349
2/29/96 30.9040 16.7342 29.2168 24.3486 15.9986
3/31/96 31.7384 16.8229 29.5090 24.0321 16.3346
4/30/96 32.7159 17.5278 29.9516 23.6476 16.8083
5/31/96 33.0856 16.9757 30.7004 23.6712 16.5058
6/30/96 33.0294 17.1421 30.8232 24.0736 16.6048
7/31/96 31.8635 16.8798 29.4670 24.0977 16.1233
8/31/96 30.9936 16.8308 30.0858 23.9290 16.1555
9/30/96 31.1548 17.4468 31.7706 24.5512 16.5917
10/31/96 33.9245 18.6977 32.6602 25.4350 16.4258
11/30/96 35.3392 19.7560 35.1097 26.0709 17.0828
12/31/96 35.9788 19.2799 34.4075 25.5756 16.8607
1/31/97 37.8965 19.9740 36.5408 25.4989 16.2706
2/28/97 40.2953 20.4654 36.8331 25.5754 16.5472
3/31/97 40.7587 20.3344 35.3229 25.0127 16.6134
4/30/97 41.1215 19.9460 37.4423 25.4629 16.7131
5/31/97 38.8269 19.6289 39.7263 25.7939 17.7995
6/30/97 39.3511 19.7879 41.5140 26.2840 18.7785
7/31/97 42.6251 21.0622 44.8351 27.6771 19.0790
8/31/97 43.4904 20.2492 42.3243 27.0128 17.6672
9/30/97 43.5687 20.4760 44.6521 27.6341 18.6566
10/31/97 44.6884 20.1525 43.1786 27.9933 17.2200
11/30/97 46.4670 20.3480 45.1648 28.2732 17.0478
12/31/97 48.4372 20.7489 45.9326 28.5559 17.2012
1/31/98 47.5411 20.7904 46.4379 28.9557 17.9925
2/28/98 45.6062 20.6074 49.7814 28.9267 19.1440
3/31/98 46.8649 20.6383 52.3203 29.0424 19.7375
4/30/98 44.8731 19.8024 52.8435 29.1876 19.8954
5/31/98 47.2514 20.4717 51.9452 29.6838 19.7959
6/30/98 52.7609 20.5495 54.0750 30.0400 19.9543
7/31/98 52.7767 20.3337 53.4802 30.3404 20.1538
8/31/98 53.0564 21.9177 45.7256 30.6135 17.6547
9/30/98 51.0137 22.8361 48.6566 31.8687 17.1180
10/31/98 53.7939 22.6945 52.6124 31.2632 18.9154
11/30/98 50.9428 21.9955 55.8218 32.1073 19.8801
12/31/98 49.9341 22.3914 59.0595 32.1394 20.6753
1/31/99 48.4261 21.9436 61.5400 32.5251 20.6133
2/28/99 48.7796 22.3232 59.6323 31.2241 20.1186
3/31/99 50.0235 22.0910 62.0176 31.2241 20.9636
4/30/99 50.6138 23.0232 64.4363 31.1617 21.8231
5/31/99 49.6876 22.3049 62.8898 30.6008 20.7101
6/30/99 49.3944 22.8625 66.3487 30.1112 21.5178
7/31/99 46.7765 22.2749 64.2786 29.7800 22.1633
8/31/99 47.3098 22.4175 63.9572 29.6907 22.2520
9/30/99 48.4784 22.5296 62.2041 29.6907 22.4812
</TABLE>
CORRELATION ANALYSIS (5/87 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum
Currency MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Spectrum Currency 1.00 0.71 -0.09 0.10 -0.09
MAR Index 1.00 0.07 0.28 -0.05
S & P 500 Index 1.00 0.32 0.53
Salomon Corporate Bond Index 1.00 0.11
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Public
Fund Index performance data for managed futures is provided by Managed Accounts
Reports, Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
partnership and in order to make an informed decision, you should read the
Spectrum Series prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
162
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM COMMODITY STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisor: Morgan Stanley Dean Witter
Commodity Management, Inc.
Began Trading: January 2, 1998
Total Assets in Fund: $23.6 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 1.5x
Monthly Management Fee: 1/12 of 2.5% of Beg. Net Assets
Monthly Brokerage Fee: 1/12 of 4.60% of Beg. Net Assets
Annual Incentive Fee: 20.00% of Trading Profits
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: (17.57)%
Standard Deviation of Monthly Returns: 5.18%
Annualized Standard Deviation: 17.92%
Sharpe Ratio: -1.23
Sortino Ratio: -2.72
Largest Decline Period (2/98 - 2/99): -38.60%
Average Recovery (No. of months): N/A
Average Monthly Loss: -5.00%
Standard Deviation of Monthly Loss: 2.35%
% of Losing Months: 60.00%
Average Monthly Gain: 3.84%
Standard Deviation of Monthly Gain: 3.26%
% of Winning Months: 40.00%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Metals 33%
Energies 31%
Agriculturals 20%
Softs 16%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Commodity features a long-only, broadly-diversified, actively-managed
portfolio of traditional commodities.
Its trading advisor, Morgan Stanley Dean Witter Commodities Management Inc. uses
a technical approach to investing that is unique in the marketplace. The trading
strategy seeks to benefit from supply and demand dynamics (based on consumer and
producer reactions to price movements) by over-weighting exposure to commodities
that are historically undervalued and showing signs of strengthening, and
under-weighting exposure to those markets that are historically overvalued and
showing signs of weakening.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C>
AGRICULTURALS METALS
Corn Aluminum
Feeder cattle Copper
Lean hogs Gold
Live cattle Lead
Oats Nickel
Pork bellies Platinum
Soybeans Silver
Soybean meal Tin
Soybean oil Zinc
Wheat
SOFTS
Cocoa
Coffee
Cotton
Lumber
Orange juice
Sugar
ENERGIES
Crude oil
Gas oil
Heating oil
Natural gas
Unleaded gas
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
163
<PAGE>
SPECTRUM COMMODITY PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1999
<S> <C>
- -34.30% 10.35%
(8 MONTHS)
</TABLE>
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR INDEX
COMMODITY
<S> <C> <C>
12/31/98 -34.30% 7.92%
1/31/99 -36.13% 5.55%
2/28/99 -34.73% 8.33%
3/31/99 -29.14% 7.04%
4/30/99 -25.67% 16.27%
5/31/99 -24.91% 8.96%
6/30/99 -18.95% 11.26%
7/31/99 -12.99% 9.55%
8/31/99 0.28% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (12/31/97 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR INDEX S & P 500 INDEX SALOMON CORP. MSCI EAFE INDEX
COMMODITY BOND INDEX
<S> <C> <C> <C> <C> <C>
12/31/97 10.00 10.00 10.00 10.00 10.00
1/31/98 10.13 10.02 10.11 10.14 10.46
2/28/98 9.53 9.9318 10.8379 10.1299 11.1294
3/31/98 9.54 9.9467 11.3906 10.1704 11.4744
4/30/98 9.31 9.5439 11.5045 10.2213 11.5662
5/31/98 8.67 9.8665 11.3089 10.3951 11.5084
6/30/98 8.39 9.904 11.7726 10.5198 11.6005
7/31/98 7.85 9.8 11.6431 10.625 11.7165
8/31/98 7.23 10.5634 9.9549 10.7206 10.2637
9/30/98 7.75 11.006 10.593 11.1601 9.9517
10/31/98 7.48 10.9378 11.4542 10.9481 10.9966
11/30/98 6.8 10.6009 12.1529 11.2437 11.5574
12/31/98 6.57 10.7917 12.8578 11.2549 12.0197
1/31/99 6.47 10.5759 13.3978 11.39 11.9836
2/28/99 6.22 10.7589 12.9825 10.9344 11.696
3/31/99 6.76 10.647 13.5018 10.9344 12.1872
4/30/99 6.92 11.0963 14.0284 10.9125 12.6869
5/31/99 6.51 10.7501 13.6917 10.7161 12.0399
6/30/99 6.8 11.0189 14.4447 10.5446 12.5095
7/31/99 6.83 10.7357 13.994 10.4286 12.8848
8/31/99 7.25 10.8044 13.924 10.3973 12.9363
</TABLE>
CORRELATION ANALYSIS (1/98 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum
Commodity MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Spectrum Commodity 1.00 0.11 0.30 0.02 0.19
MAR Index 1.00 -0.34 0.13 -0.44
S & P 500 Index 1.00 0.15 0.79
Salomon Corporate Bond Index 1.00 -0.12
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts
Reports, Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
partnership and in order to make an informed decision, you should read the
Spectrum Series prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
164
<PAGE>
The following charts were prepared by the general partner to illustrate the
change in fund assets from the inception of trading in each partnership (other
than Spectrum Currency) through August 31, 1999, to reflect each partnership's
performance and net additions of capital.
SPECTRUM SELECT
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM SELECT
<S> <C>
Aug-91 $52.0
Dec-91* $80.7
Dec-92 $60.9
Dec-93** $199.2
Dec-94 $168.2
Dec-95 $176.4
Dec-96** $163.8
Dec-97 $166.8
Dec-98*** $200.1
Aug-99 $212.5
</TABLE>
Year-end net assets (millions)
* Spectrum Select had multiple closings during initial offering
** Re-opening of fund in September 1993 and November 1996
*** Effective May 1998, Spectrum Select became part of the Spectrum Series of
partnerships.
SPECTRUM TECHNICAL
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM TECHNICAL
<S> <C>
Nov-94 $8.0
Dec-94 $14.9
Dec-95 $59.3
Dec-96 $113.0
Dec-97 $182.0
Dec-98 $255.1
Aug-99 $281.2
</TABLE>
Year-end net assets (millions)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
165
<PAGE>
SPECTRUM STRATEGIC
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM STRATEGIC
<S> <C>
Nov-94 $6.7
Dec-94 $11.9
Dec-95 $32.5
Dec-96 $45.1
Dec-97 $59.1
Dec-98 $70.4
Aug-99 $88.7
</TABLE>
Year-end net assets (millions)
SPECTRUM GLOBAL BALANCED
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM GLOBAL BALANCED
<S> <C>
Nov-94 $2.5
Dec-94 $3.8
Dec-95 $14.8
Dec-96 $18.7
Dec-97 $25.7
Dec-98 $45.9
Aug-99 $55.1
</TABLE>
Year-end net assets (millions)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
166
<PAGE>
SPECTRUM COMMODITY
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM COMMODITY
<S> <C>
12/1/1997* $25.7
Dec-98 $24.9
Aug-99 $23.6
</TABLE>
Year-end net assets (millions)
* Fund had multiple closings during initial offering
-------------------
The following charts were prepared by the general partner to illustrate the
monthly performance, on a net asset value basis, of each partnership (other than
Spectrum Currency) versus that of the MAR Index, from the inception of trading
through August 31, 1999. The MAR Index represents the dollar-weighted average
performance of public managed futures funds. To qualify for inclusion in the MAR
Index, an investment product must appear in MAR's fund performance tables. MAR
imposes no minimum size restrictions on the public managed futures funds that it
tracks. As of August 31, 1999, there were 91 public managed futures funds
included in the calculation of the MAR Index.
SPECTRUM SELECT VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (NAV)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM SELECT
<S> <C> <C>
Aug-91 9.57 9.38
Sep-91 9.99 9.97
Oct-91 9.81 9.75
Nov-91 9.83 9.46
Dec-91 11.37 13.12
Jan-92 10.50 11.32
Feb-92 10.11 10.63
Mar-92 10.05 10.21
Apr-92 9.77 10.02
May-92 9.77 9.88
Jun-92 10.35 10.59
Jul-92 11.08 11.73
Aug-92 11.55 12.51
Sep-92 11.38 11.86
Oct-92 11.24 11.48
Nov-92 11.30 11.64
Dec-92 11.22 11.22
Jan-93 11.09 11.26
Feb-93 11.72 12.93
Mar-93 11.65 12.85
Apr-93 11.96 14.18
May-93 11.99 14.46
Jun-93 12.16 14.49
Jul-93 12.72 16.50
Aug-93 12.57 16.35
Sep-93 12.45 15.67
Oct-93 12.23 14.89
Nov-93 12.09 14.70
Dec-93 12.42 15.90
Jan-94 11.94 14.04
Feb-94 11.58 13.09
Mar-94 11.84 14.73
Apr-94 11.59 14.59
May-94 11.79 15.59
Jun-94 12.17 17.19
Jul-94 11.84 16.35
Aug-94 11.47 15.22
Sep-94 11.58 15.41
Oct-94 11.59 14.67
Nov-94 11.62 15.50
Dec-94 11.46 15.08
Jan-95 10.98 13.85
Feb-95 11.55 15.19
Mar-95 12.76 18.31
Apr-95 13.10 19.97
May-95 13.37 22.18
Jun-95 13.19 21.80
Jul-95 12.78 19.49
Aug-95 12.86 18.55
Sep-95 12.59 17.11
Oct-95 12.44 16.54
Nov-95 12.55 16.77
Dec-95 13.05 18.64
Jan-96 13.42 18.57
Feb-96 12.44 16.32
Mar-96 12.50 16.29
Apr-96 13.03 16.95
May-96 12.62 16.33
Jun-96 12.74 16.56
Jul-96 12.54 16.32
Aug-96 12.51 16.24
Sep-96 12.97 16.79
Oct-96 13.90 19.02
Nov-96 14.68 20.31
Dec-96 14.33 19.62
Jan-97 14.84 20.40
Feb-97 15.21 21.36
Mar-97 15.11 21.43
Apr-97 14.82 20.26
May-97 14.59 20.02
Jun-97 14.71 20.05
Jul-97 15.65 22.01
Aug-97 15.05 20.64
Sep-97 15.22 20.83
Oct-97 14.98 20.05
Nov-97 15.12 20.17
Dec-97 15.42 20.85
Jan-98 15.45 21.03
Feb-98 15.31 21.48
Mar-98 15.34 21.53
Apr-98 14.72 20.08
May-98 15.21 20.44
Jun-98 15.27 20.63
Jul-98 15.11 20.43
Aug-98 16.29 24.35
Sep-98 16.97 25.87
Oct-98 16.87 24.54
Nov-98 16.35 23.52
Dec-98 16.64 23.80
Jan-99 16.31 23.11
Feb-99 16.59 24.37
Mar-99 16.42 23.76
Apr-99 17.11 24.64
May-99 16.58 23.56
Jun-99 16.99 23.64
Jul-99 16.55 22.60
Aug-99 16.66 22.50
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
167
<PAGE>
SPECTRUM TECHNICAL VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (NAV)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM TECHNICAL
<S> <C> <C>
Oct-94 $10.00 $10.00
Nov-94 $10.03 $9.91
Dec-94 $9.89 $9.78
Jan-95 $9.47 $9.60
Feb-95 $9.97 $10.09
Mar-95 $11.01 $11.12
Apr-95 $11.30 $11.52
May-95 $11.54 $11.60
Jun-95 $11.38 $11.47
Jul-95 $11.03 $11.19
Aug-95 $11.10 $11.12
Sep-95 $10.86 $10.75
Oct-95 $10.74 $10.74
Nov-95 $10.83 $10.84
Dec-95 $11.27 $11.50
Jan-96 $11.58 $12.05
Feb-96 $10.73 $11.28
Mar-96 $10.79 $11.42
Apr-96 $11.24 $11.97
May-96 $10.89 $11.51
Jun-96 $10.99 $11.88
Jul-96 $10.83 $11.31
Aug-96 $10.80 $11.27
Sep-96 $11.19 $11.89
Oct-96 $11.99 $13.07
Nov-96 $12.67 $14.16
Dec-96 $12.37 $13.61
Jan-97 $12.81 $14.11
Feb-97 $13.13 $14.27
Mar-97 $13.04 $14.01
Apr-97 $12.79 $13.60
May-97 $12.59 $13.09
Jun-97 $12.69 $13.18
Jul-97 $13.51 $14.41
Aug-97 $12.99 $13.55
Sep-97 $13.13 $13.80
Oct-97 $12.93 $13.85
Nov-97 $13.05 $13.99
Dec-97 $13.31 $14.63
Jan-98 $13.33 $14.46
Feb-98 $13.22 $14.52
Mar-98 $13.24 $14.71
Apr-98 $12.70 $14.03
May-98 $13.13 $14.49
Jun-98 $13.18 $14.33
Jul-98 $13.04 $14.19
Aug-98 $14.06 $15.65
Sep-98 $14.65 $16.33
Oct-98 $14.56 $16.21
Nov-98 $14.11 $15.21
Dec-98 $14.36 $16.12
Jan-99 $14.07 $15.32
Feb-99 $14.32 $15.70
Mar-99 $14.17 $15.31
Apr-99 $14.77 $16.41
May-99 $14.31 $15.59
Jun-99 $14.66 $16.39
Jul-99 $14.29 $15.75
Aug-99 $14.38 $15.90
</TABLE>
SPECTRUM STRATEGIC VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (NAV)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM STRATEGIC
<S> <C> <C>
Oct-94 $10.03 $10.01
Dec-94 $9.89 $10.01
Jan-95 $9.47 $9.66
Feb-95 $9.97 $9.80
Mar-95 $11.01 $10.57
Apr-95 $11.30 $10.57
May-95 $11.54 $10.50
Jun-95 $11.38 $9.83
Jul-95 $11.03 $9.75
Aug-95 $11.10 $10.14
Sep-95 $10.86 $10.10
Oct-95 $10.74 $10.13
Nov-95 $10.83 $10.41
Dec-95 $11.27 $11.06
Jan-96 $11.58 $11.47
Feb-96 $10.73 $10.29
Mar-96 $10.79 $10.19
Apr-96 $11.24 $10.81
May-96 $10.89 $10.48
Jun-96 $10.99 $10.18
Jul-96 $10.83 $9.68
Aug-96 $10.80 $9.79
Sep-96 $11.19 $10.29
Oct-96 $11.99 $10.59
Nov-96 $12.67 $10.96
Dec-96 $12.37 $10.67
Jan-97 $12.81 $10.60
Feb-97 $13.13 $11.67
Mar-97 $13.04 $12.46
Apr-97 $12.79 $11.60
May-97 $12.59 $11.69
Jun-97 $12.69 $11.50
Jul-97 $13.51 $12.38
Aug-97 $12.99 $11.77
Sep-97 $13.13 $11.06
Oct-97 $12.93 $10.37
Nov-97 $13.05 $10.14
Dec-97 $13.31 $10.71
Jan-98 $13.33 $11.28
Feb-98 $13.22 $10.90
Mar-98 $13.24 $10.94
Apr-98 $12.70 $9.73
May-98 $13.13 $9.01
Jun-98 $13.18 $8.93
Jul-98 $13.04 $8.46
Aug-98 $14.06 $9.46
Sep-98 $14.65 $11.26
Oct-98 $14.56 $12.21
Nov-98 $14.11 $11.24
Dec-98 $14.36 $11.55
Jan-99 $14.07 $11.14
Feb-99 $14.32 $12.45
Mar-99 $14.17 $12.02
Apr-99 $14.77 $12.26
May-99 $14.31 $10.62
Jun-99 $14.66 $12.94
Jul-99 $14.29 $12.81
Aug-99 $14.38 $13.49
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
168
<PAGE>
SPECTRUM GLOBAL BALANCED VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (NAV)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM GLOBAL BALANCED
<S> <C> <C>
Oct-94 $10.03 $9.95
Dec-94 $9.89 $9.83
Jan-95 $9.47 $9.96
Feb-95 $9.97 $10.42
Mar-95 $11.01 $10.72
Apr-95 $11.30 $10.95
May-95 $11.54 $11.43
Jun-95 $11.38 $11.52
Jul-95 $11.03 $11.36
Aug-95 $11.10 $11.20
Sep-95 $10.86 $11.38
Oct-95 $10.74 $11.41
Nov-95 $10.83 $11.72
Dec-95 $11.27 $12.07
Jan-96 $11.58 $12.12
Feb-96 $10.73 $11.16
Mar-96 $10.79 $11.04
Apr-96 $11.24 $11.18
May-96 $10.89 $10.83
Jun-96 $10.99 $10.88
Jul-96 $10.83 $10.97
Aug-96 $10.80 $10.88
Sep-96 $11.19 $11.13
Oct-96 $11.99 $11.55
Nov-96 $12.67 $12.10
Dec-96 $12.37 $11.63
Jan-97 $12.81 $12.02
Feb-97 $13.13 $12.40
Mar-97 $13.04 $12.09
Apr-97 $12.79 $11.89
May-97 $12.59 $12.09
Jun-97 $12.69 $12.53
Jul-97 $13.51 $14.02
Aug-97 $12.99 $13.19
Sep-97 $13.13 $13.62
Oct-97 $12.93 $13.39
Nov-97 $13.05 $13.34
Dec-97 $13.31 $13.75
Jan-98 $13.33 $14.06
Feb-98 $13.22 $14.27
Mar-98 $13.24 $14.59
Apr-98 $12.70 $14.33
May-98 $13.13 $14.28
Jun-98 $13.18 $14.28
Jul-98 $13.04 $14.11
Aug-98 $14.06 $14.47
Sep-98 $14.65 $15.21
Oct-98 $14.56 $15.39
Nov-98 $14.11 $15.80
Dec-98 $14.36 $16.00
Jan-99 $14.07 $15.99
Feb-99 $14.32 $15.98
Mar-99 $14.17 $15.98
Apr-99 $14.77 $16.64
May-99 $14.31 $15.81
Jun-99 $14.66 $16.17
Jul-99 $14.29 $15.90
Aug-99 $14.38 $15.87
</TABLE>
SPECTRUM COMMODITY VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (NAV)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM COMMODITY
<S> <C> <C>
Dec-97
Jan-98 $10.02 $10.13
Feb-98 $9.93 $9.53
Mar-98 $9.95 $9.54
Apr-98 $9.54 $9.31
May-98 $9.87 $8.67
Jun-98 $9.90 $8.39
Jul-98 $9.80 $7.85
Aug-98 $10.56 $7.23
Sep-98 $11.01 $7.75
Oct-98 $10.94 $7.48
Nov-98 $10.60 $6.80
Dec-98 $10.79 $6.57
Jan-99 $10.58 $6.47
Feb-99 $10.76 $6.22
Mar-99 $10.65 $6.76
Apr-99 $11.10 $6.92
May-99 $10.75 $6.51
Jun-99 $11.02 $6.80
Jul-99 $10.74 $6.83
Aug-99 $10.80 $7.25
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
169
<PAGE>
-------------------
The following charts were prepared by the general partner to illustrate the
performance, on a rate of return basis, of each partnership (other than Spectrum
Currency) versus that of the MAR Index, from the inception of trading through
August 31, 1999.
SPECTRUM SELECT VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM SELECT MAR INDEX
<S> <C> <C>
YTD -5.46% 0.12%
1 YR. -7.60% 2.28%
2 YR. 4.41% 5.22%
3 YR. 11.48% 10.03%
5 YR. 8.13% 7.75%
Inception-to-Date 10.55% 6.51%
</TABLE>
Data: August 1, 1991 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
SPECTRUM TECHNICAL VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL MAR INDEX
<S> <C> <C>
YTD -1.36% 0.12%
1 YR. 1.60% 2.28%
2 YR. 8.33% 5.22%
3 YR. 12.16% 10.03%
Inception-to-Date 10.08% 7.81%
</TABLE>
Data: November 1, 1994 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
170
<PAGE>
SPECTRUM STRATEGIC VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC MAR INDEX
<S> <C> <C>
YTD 16.80% 0.12%
1 YR. 42.60% 2.28%
2 YR. 7.06% 5.22%
3 YR. 11.28% 10.03%
ITD 6.39% 7.81%
</TABLE>
Data: November 1, 1994 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
SPECTRUM GLOBAL BALANCED VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED MAR INDEX
<S> <C> <C>
YTD -0.81% 0.12%
1 YR. 9.68% 2.28%
2 YR. 9.69% 5.22%
3 YR. 13.41% 10.03%
Inception-to-Date 10.04% 7.81%
</TABLE>
Data: November 1, 1994 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
171
<PAGE>
SPECTRUM COMMODITY VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM COMMODITY MAR INDEX
<S> <C> <C>
YTD 10.35% 0.12%
1 YR. 0.28% 2.28%
Inception-to-Date -17.56% 4.75%
</TABLE>
Data: January 1, 1998 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
172
<PAGE>
The following chart was prepared to illustrate certain period performance
and statistical information relating to Spectrum Select, from the inception of
trading in August 1991 through August 1999. The "Restated NAV/unit" column
reflects the April 1998 100-to-1 unit conversion that took place when Spectrum
Select became part of the Spectrum Series of partnerships.
<TABLE>
<CAPTION>
SPECTRUM SELECT
HISTORICAL PERFORMANCE
- -------------------------------------------------------------------------------------------------------------
MONTH-END RESTATED 12 MO. 24 MO.
MONTHLY NAV/ NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- -------- --------
% $ $ % % % %
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning NAV per
unit 1,000.00 10.00
Aug-91 (6.20) 938.03 9.38
Sep-91 6.32 997.33 9.97 (0.27)
Oct-91 (2.28) 974.59 9.75
Nov-91 (2.93) 946.08 9.46
Dec-91 38.67 1,311.91 13.12 31.54 31.19
Jan-92 (13.72) 1,131.97 11.32
Feb-92 (6.09) 1,063.01 10.63
Mar-92 (3.91) 1,021.45 10.21 (22.14)
Apr-92 (1.86) 1,002.48 10.02
May-92 (1.42) 988.25 9.88
Jun-92 7.19 1,059.32 10.59 3.71
Jul-92 10.72 1,172.90 11.73 17.29
Aug-92 6.69 1,251.34 12.51 33.40
Sep-92 (5.24) 1,185.75 11.86 11.94 18.89
Oct-92 (3.17) 1,148.12 11.48 17.81
Nov-92 1.39 1,164.06 11.64 23.04
Dec-92 (3.58) 1,122.39 11.22 (5.34) (14.45) (14.45)
Jan-93 0.31 1,125.87 11.26 (0.54)
Feb-93 14.85 1,293.01 12.93 21.64
Mar-93 (0.60) 1,285.31 12.85 14.52 25.83
Apr-93 10.35 1,418.31 14.18 41.48
May-93 1.95 1,445.99 14.46 46.32
Jun-93 0.21 1,449.03 14.49 12.74 36.79
Jul-93 13.90 1,650.44 16.50 40.71 65.04
Aug-93 (0.95) 1,634.78 16.35 30.64 74.28
Sep-93 (4.13) 1,567.26 15.67 8.16 32.17 57.15
Oct-93 (4.97) 1,489.30 14.89 29.72 52.81
Nov-93 (1.30) 1,469.95 14.70 26.28 55.37
Dec-93 8.13 1,589.53 15.90 1.42 41.62 41.62 21.16
Jan-94 (11.67) 1,403.96 14.04 24.70 24.03
Feb-94 (6.79) 1,308.63 13.09 1.21 23.11
Mar-94 12.57 1,473.08 14.73 (7.33) 14.61 44.21
Apr-94 (0.95) 1,459.11 14.59 2.88 45.55
May-94 6.84 1,558.94 15.59 7.81 57.75
Jun-94 10.30 1,719.48 17.19 16.73 18.66 62.32
Jul-94 (4.91) 1,635.10 16.35 (0.93) 39.41
Aug-94 (6.95) 1,521.54 15.22 (6.93) 21.59
Sep-94 1.25 1,540.54 15.41 (10.41) (1.70) 29.92
Oct-94 (4.78) 1,466.94 14.67 (1.50) 27.77
Nov-94 5.68 1,550.30 15.50 5.47 33.18
Dec-94 (2.72) 1,508.07 15.08 (2.11) (5.12) (5.12) 34.36
Jan-95 (8.13) 1,385.43 13.85 (1.32) 23.05
Feb-95 9.61 1,518.57 15.19 16.04 17.44
Mar-95 20.58 1,831.08 18.31 21.42 24.30 42.46
Apr-95 9.06 1,996.89 19.97 36.86 40.79
May-95 11.08 2,218.08 22.18 42.28 53.40
Jun-95 (1.70) 2,180.39 21.80 19.08 26.81 50.47
Jul-95 (10.61) 1,948.96 19.49 19.20 18.09
Aug-95 (4.81) 1,855.19 18.55 21.93 13.48
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
173
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM SELECT
HISTORICAL PERFORMANCE
- -------------------------------------------------------------------------------------------------------------
MONTH-END RESTATED 12 MO. 24 MO.
MONTHLY NAV/ NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- -------- --------
% $ $ % % % %
<S> <C> <C> <C> <C> <C> <C> <C>
Sep-95 (7.76) 1,711.24 17.11 (21.52) 11.08 9.19
Oct-95 (3.35) 1,653.91 16.54 12.75 11.05
Nov-95 1.37 1,676.60 16.77 8.15 14.06
Dec-95 11.19 1,864.21 18.64 8.94 23.62 23.62 17.28
Jan-96 (0.38) 1,857.19 18.57 34.05 32.28
Feb-96 (12.11) 1,632.31 16.32 7.49 24.73
Mar-96 (0.22) 1,628.73 16.29 (12.63) (11.05) 10.57
Apr-96 4.07 1,695.09 16.95 (15.11) 16.17
May-96 (3.65) 1,633.21 16.33 (26.37) 4.76
Jun-96 1.37 1,655.66 16.56 1.65 (24.07) (3.71)
Jul-96 (1.44) 1,631.86 16.32 (16.27) (0.20)
Aug-96 (0.46) 1,624.40 16.24 (12.44) 6.76
Sep-96 3.34 1,678.68 16.79 1.39 (1.90) 8.97
Oct-96 13.30 1,901.95 19.02 15.00 29.65
Nov-96 6.76 2,030.51 20.31 21.11 30.98
Dec-96 (3.36) 1,962.38 19.62 16.90 5.27 5.27 30.13
Jan-97 3.93 2,039.51 20.40 9.82 47.21
Feb-97 4.75 2,136.39 21.36 30.88 40.68
Mar-97 0.31 2,143.07 21.43 9.21 31.58 17.04
Apr-97 (5.46) 2,026.09 20.26 19.53 1.46
May-97 (1.18) 2,002.26 20.02 22.60 (9.73)
Jun-97 0.16 2,005.45 20.05 (6.42) 21.13 (8.02)
Jul-97 9.74 2,200.71 22.01 34.86 12.92
Aug-97 (6.22) 2,063.90 20.64 27.06 11.25
Sep-97 0.93 2,083.14 20.83 3.87 24.09 21.73
Oct-97 (3.77) 2,004.57 20.05 5.40 21.20
Nov-97 0.62 2,017.04 20.17 (0.66) 20.31
Dec-97 3.35 2,084.52 20.85 0.07 6.22 6.22 11.82
Jan-98 0.87 2,102.70 21.03 3.10 13.22
Feb-98 2.16 2,148.09 21.48 0.55 31.60
Mar-98 0.23 2,152.95 21.53 3.28 0.46 32.19
Apr-98 (6.72) 2,008.20 20.08 (0.88) 18.47
May-98 1.78 2,044.00 20.44 2.08 25.15
Jun-98 0.93 2,063.00 20.63 (4.18) 2.87 24.60
Jul-98 (0.97) 2,043.00 20.43 (7.17) 25.19
Aug-98 19.19 2,435.00 24.35 17.98 49.90
Sep-98 6.24 2,587.00 25.87 25.40 24.19 54.11
Oct-98 (5.14) 2,454.00 24.54 22.42 29.03
Nov-98 (4.16) 2,352.00 23.52 16.61 15.83
Dec-98 1.19 2,380.00 23.80 (8.00) 14.17 14.17 21.28
Jan-99 (2.90) 2,311.00 23.11 9.91 13.31
Feb-99 5.45 2,437.00 24.37 13.45 14.07
Mar-99 (2.50) 2,376.00 23.76 (0.17) 10.36 10.87
Apr-99 3.70 2,464.00 24.64 22.70 21.61
May-99 (4.38) 2,356.00 23.56 15.26 17.67
Jun-99 0.34 2,364.00 23.64 (0.51) 14.59 17.88
Jul-99 (4.40) 2,260.00 22.60 10.62 2.69
Aug-99 (0.44) 2,250.00 22.50 (4.82) (5.46) (7.60) 9.02
Compounded annual rate of return: 10.55
Standard Deviation of Monthly Returns: 7.66
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
174
<PAGE>
The following chart was prepared to illustrate certain period peformance and
statistical information relating to Spectrum Technical, from the inception of
trading in November 1994 through August 1999.
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Beginning NAV per
unit 10.00
Nov-94 (0.90) 9.91
Dec-94 (1.31) 9.78 (2.20) (2.20)
Jan-95 (1.84) 9.60
Feb-95 5.10 10.09
Mar-95 10.21 11.12 13.70
Apr-95 3.60 11.52
May-95 0.69 11.60
Jun-95 (1.12) 11.47 3.15
Jul-95 (2.44) 11.19
Aug-95 (0.63) 11.12
Sep-95 (3.33) 10.75 (6.28)
Oct-95 (0.09) 10.74 7.40
Nov-95 0.93 10.84 9.38
Dec-95 6.09 11.50 6.98 17.59 17.59
Jan-96 4.78 12.05 25.52
Feb-96 (6.39) 11.28 11.79
Mar-96 1.24 11.42 (0.70) 2.70
Apr-96 4.82 11.97 3.91
May-96 (3.84) 11.51 (0.78)
Jun-96 3.21 11.88 4.03 3.57
Jul-96 (4.80) 11.31 1.07
Aug-96 (0.35) 11.27 1.35
Sep-96 5.50 11.89 0.08 10.60
Oct-96 9.92 13.07 21.69 30.70
Nov-96 8.34 14.16 30.63 42.89
Dec-96 (3.88) 13.61 14.47 18.35 18.35 39.16
Jan-97 3.67 14.11 17.10 46.98
Feb-97 1.13 14.27 26.51 41.43
Mar-97 (1.82) 14.01 2.94 22.68 25.99
Apr-97 (2.93) 13.60 13.62 18.06
May-97 (3.75) 13.09 13.73 12.84
Jun-97 0.69 13.18 (5.92) 10.94 14.91
Jul-97 9.33 14.41 27.41 28.78
Aug-97 (5.97) 13.55 20.23 21.85
Sep-97 1.85 13.80 4.70 16.06 28.37
Oct-97 0.36 13.85 5.97 28.96
Nov-97 1.01 13.99 (1.20) 29.06
Dec-97 4.57 14.63 6.01 7.49 7.49 27.22
Jan-98 (1.16) 14.46 2.48 20.00
Feb-98 0.41 14.52 1.75 28.72
Mar-98 1.31 14.71 0.55 5.00 28.81
Apr-98 (4.62) 14.03 3.16 17.21
May-98 3.28 14.49 10.70 25.89
Jun-98 (1.10) 14.33 (2.58) 8.73 20.62
Jul-98 (0.98) 14.19 (1.53) 25.46
Aug-98 10.29 15.65 15.50 38.86
Sep-98 4.35 16.33 13.96 18.33 37.34
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
175
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Oct-98 (0.73) 16.21 17.04 24.02
Nov-98 (6.17) 15.21 8.72 7.42
Dec-98 5.98 16.12 (1.29) 10.18 10.18 18.44
Jan-99 (4.96) 15.32 5.95 8.58
Feb-99 2.48 15.70 8.13 10.02
Mar-99 (2.48) 15.31 (5.02) 4.08 9.28
Apr-99 7.18 16.41 16.96 20.66
May-99 (5.00) 15.59 7.59 19.10
Jun-99 5.13 16.39 7.05 14.38 24.36
Jul-99 (3.90) 15.75 10.99 9.30
Aug-99 0.95 15.90 (2.99) (1.36) 1.60 17.34
Compounded annual rate of return: 10.08
Standard deviation of monthly returns: 4.38
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
176
<PAGE>
The following chart was prepared to illustrate certain period peformance and
statistical information relating to Spectrum Strategic, from the inception of
trading in November 1994 through August 1999.
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Beginning NAV per
unit 10.00
Nov-94 0.10 10.01
Dec-94 0.00 10.01 0.10 0.10
Jan-95 (3.50) 9.66
Feb-95 1.45 9.80
Mar-95 7.86 10.57 5.59
Apr-95 0.00 10.57
May-95 (0.66) 10.50
Jun-95 (6.38) 9.83 (7.00)
Jul-95 (0.81) 9.75
Aug-95 4.00 10.14
Sep-95 (0.39) 10.10 2.75
Oct-95 0.30 10.13 1.30
Nov-95 2.76 10.41 4.00
Dec-95 6.24 11.06 9.50 10.49 10.49
Jan-96 3.71 11.47 18.74
Feb-96 (10.29) 10.29 5.00
Mar-96 (0.97) 10.19 (7.87) (3.60)
Apr-96 6.08 10.81 2.27
May-96 (3.05) 10.48 (0.19)
Jun-96 (2.86) 10.18 (0.10) 3.56
Jul-96 (4.91) 9.68 (0.72)
Aug-96 1.14 9.79 (3.45)
Sep-96 5.11 10.29 1.08 1.88
Oct-96 2.92 10.59 4.54 5.90
Nov-96 3.49 10.96 5.28 9.49
Dec-96 (2.65) 10.67 3.69 (3.53) (3.53) 6.59
Jan-97 (0.66) 10.60 (7.59) 9.73
Feb-97 10.09 11.67 13.41 19.08
Mar-97 6.77 12.46 16.78 22.28 17.88
Apr-97 (6.90) 11.60 7.31 9.74
May-97 0.78 11.69 11.55 11.33
Jun-97 (1.63) 11.50 (7.70) 12.97 16.99
Jul-97 7.65 12.38 27.89 26.97
Aug-97 (4.93) 11.77 20.22 16.07
Sep-97 (6.03) 11.06 (3.83) 7.48 9.50
Oct-97 (6.24) 10.37 (2.08) 2.37
Nov-97 (2.22) 10.14 (7.48) (2.59)
Dec-97 5.62 10.71 (3.16) 0.37 0.37 (3.16)
Jan-98 5.32 11.28 6.42 (1.66)
Feb-98 (3.37) 10.90 (6.60) 5.93
Mar-98 0.37 10.94 2.15 (12.20) 7.36
Apr-98 (11.06) 9.73 (16.12) (9.99)
May-98 (7.40) 9.01 (22.93) (14.03)
Jun-98 (0.89) 8.93 (18.37) (22.35) (12.28)
Jul-98 (5.26) 8.46 (31.66) (12.60)
Aug-98 11.82 9.46 (19.63) (3.37)
Sep-98 19.03 11.26 26.09 1.81 9.43
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
177
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Oct-98 8.44 12.21 17.74 15.30
Nov-98 (7.94) 11.24 10.85 2.55
Dec-98 2.76 11.55 2.58 7.84 7.84 8.25
Jan-99 (3.55) 11.14 (1.24) 5.09
Feb-99 11.76 12.45 14.22 6.68
Mar-99 (3.45) 12.02 4.07 9.87 (3.53)
Apr-99 2.00 12.26 26.00 5.69
May-99 (13.38) 10.62 17.87 (9.15)
Jun-99 21.85 12.94 7.65 44.90 12.52
Jul-99 (1.00) 12.81 51.42 3.47
Aug-99 5.31 13.49 4.25 16.80 42.60 14.61
Compounded annual rate of return: 6.39
Standard deviation of monthly returns: 6.67
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
178
<PAGE>
The following chart was prepared to illustrate certain period peformance and
statistical information relating to Spectrum Global Balanced, from the inception
of trading in November 1994 through August, 1999.
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Beginning NAV per
unit 10.00
Nov-94 (0.50) 9.95
Dec-94 (1.21) 9.83 (1.70) (1.70)
Jan-95 1.32 9.96
Feb-95 4.62 10.42
Mar-95 2.88 10.72 9.05
Apr-95 2.15 10.95
May-95 4.38 11.43
Jun-95 0.79 11.52 7.46
Jul-95 (1.39) 11.36
Aug-95 (1.41) 11.20
Sep-95 1.61 11.38 (1.22)
Oct-95 0.26 11.41 14.10
Nov-95 2.72 11.72 17.79
Dec-95 2.99 12.07 6.06 22.79 22.79
Jan-96 0.41 12.12 21.69
Feb-96 (7.92) 11.16 7.10
Mar-96 (1.08) 11.04 (8.53) 2.99
Apr-96 1.27 11.18 2.10
May-96 (3.13) 10.83 (5.25)
Jun-96 0.46 10.88 (1.45) (5.56)
Jul-96 0.83 10.97 (3.43)
Aug-96 (0.82) 10.88 (2.86)
Sep-96 2.30 11.13 2.30 (2.20)
Oct-96 3.77 11.55 1.23 15.50
Nov-96 4.76 12.10 3.24 21.61
Dec-96 (3.88) 11.63 4.49 (3.65) (3.65) 18.31
Jan-97 3.35 12.02 (0.83) 20.68
Feb-97 3.16 12.40 11.11 19.00
Mar-97 (2.50) 12.09 3.96 9.51 12.78
Apr-97 (1.65) 11.89 6.35 8.58
May-97 1.68 12.09 11.63 5.77
Jun-97 3.64 12.53 3.64 15.17 8.77
Jul-97 11.89 14.02 27.80 23.42
Aug-97 (5.92) 13.19 21.23 17.77
Sep-97 3.26 13.62 8.70 22.37 19.68
Oct-97 (1.69) 13.39 15.93 17.35
Nov-97 (0.37) 13.34 10.25 13.82
Dec-97 3.07 13.75 0.95 18.23 18.23 13.92
Jan-98 2.25 14.06 16.97 16.01
Feb-98 1.49 14.27 15.08 27.87
Mar-98 2.24 14.59 6.11 20.68 32.16
Apr-98 (1.78) 14.33 20.52 28.18
May-98 (0.35) 14.28 18.11 31.86
Jun-98 0.00 14.28 (2.12) 13.97 31.25
Jul-98 (1.19) 14.11 0.64 28.62
Aug-98 2.55 14.47 9.70 33.00
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
179
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Sep-98 5.11 15.21 6.51 11.67 36.66
Oct-98 1.18 15.39 14.94 33.25
Nov-98 2.66 15.80 18.44 30.58
Dec-98 1.27 16.00 5.19 16.36 16.36 37.58
Jan-99 (0.06) 15.99 13.73 33.03
Feb-99 (0.06) 15.98 11.98 28.87
Mar-99 0.00 15.98 (0.12) 9.53 32.18
Apr-99 4.13 16.64 16.12 39.95
May-99 (4.99) 15.81 10.71 30.77
Jun-99 2.28 16.17 1.19 13.24 29.05
Jul-99 (1.67) 15.90 12.69 13.41
Aug-99 (0.19) 15.87 (1.86) (0.81) 9.68 20.32
Compounded annual rate of return: 10.04
Standard deviation of monthly returns: 3.05
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
180
<PAGE>
The following chart was prepared to illustrate certain period peformance and
statistical information relating to Spectrum Commodity, from the inception of
trading in January 1998 through August 1999.
<TABLE>
<CAPTION>
SPECTRUM COMMODITY
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Beginning NAV per
unit 10.00
Jan-98 1.30 10.13
Feb-98 (5.92) 9.53
Mar-98 0.10 9.54 (4.60)
Apr-98 (2.41) 9.31
May-98 (6.87) 8.67
Jun-98 (3.23) 8.39 (12.05)
Jul-98 (6.44) 7.85
Aug-98 (7.90) 7.23
Sep-98 7.19 7.75 (7.63)
Oct-98 (3.48) 7.48
Nov-98 (9.09) 6.80
Dec-98 (3.38) 6.57 (15.23) (34.30) (34.30)
Jan-99 (1.52) 6.47 (36.13)
Feb-99 (3.86) 6.22 (34.73)
Mar-99 8.68 6.76 2.89 (29.14)
Apr-99 2.37 6.92 (25.67)
May-99 (5.92) 6.51 (24.91)
Jun-99 4.45 6.80 0.59 (18.95)
Jul-99 0.44 6.83 (12.99)
Aug-99 6.15 7.25 6.62 10.35 0.28
Compounded annual rate of return: (17.56)
Standard deviation of monthly returns: 5.18
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
181
<PAGE>
GLOSSARY OF TERMS
The following glossary may assist prospective investors in understanding
certain terms used in this prospectus:
CLEARING BROKER. The entity responsible for assuring that futures and
options trades are properly processed and recorded or "cleared" by the
clearinghouse affiliated with the exchange on which the trades took place.
COMMODITY BROKER. The entity responsible for assuring that futures and
options trades for a client are properly processed and recorded or "cleared" by
the clearinghouse affiliated with the exchange on which the trade took place and
for holding the client's funds deposited with it as margin for the trades. In
the U.S. commodity brokers are registered under the Commodity Exchange Act as
futures commission merchants.
COMMODITY POOL. A partnership, trust or similar form of collective
investment vehicle which consolidates funds from investors for the purpose of
trading in commodity futures and options contracts.
COMMODITY POOL OPERATOR. Any person or entity that solicits funds in
connection with the sale of interests in a commodity pool or that manages the
operations of a commodity pool. A commodity pool operator must register under
the Commodity Exchange Act.
COUNTER-TREND LIQUIDATIONS. Closing out a position after a significant
price move on the assumption that the market is due for a correction.
CROSS RATE. The trading of one foreign currency against another foreign
currency.
DAILY PRICE FLUCTUATION LIMIT. The maximum permitted fluctuation imposed by
commodity exchanges in the price of a commodity futures contract for a given
commodity that can occur on an exchange on a given day in relation to the
previous day's settlement price, which maximum permitted fluctuation is subject
to change from time to time by the exchange. These limits generally are not
imposed on option contracts or outside the U.S.
DELIVERY. Means the process of satisfying a futures contract or a forward
contract by transferring ownership of a specified quantity and grade of a
commodity, product or instrument to the purchaser of the contract.
EXCHANGE FOR PHYSICAL. A transaction permitted under the rules of futures
exchanges in which two parties exchange a cash market (physical) commodity
position for a futures contract (or vice versa) without making a trade on the
exchange. The prices at which such transactions are executed are negotiated
between the parties.
FORWARD CONTRACT. A cash market transaction in which the buyer and seller
agree to the purchase and sale of a specific quantity of a commodity, product,
instrument or currency for delivery at some future time under such terms and
conditions as the two may agree upon.
FUNDAMENTAL ANALYSIS. The analysis of fundamental market information such
as supply and demand levels, weather, economic indicators and geopolitical
events.
FUTURES CONTRACT. A contract providing for the delivery or receipt at a
future date of a specified amount and grade of a traded commodity, product,
instrument, or indices at a specified price and delivery point, or for cash
settlement. A market participant can make a futures contract to buy or sell the
underlying commodity, product, instrument, or indices. The contractual
obligations may be satisfied either by taking or making, as the case may be,
physical delivery of the commodity, product, instrument, or indices or by making
an offsetting sale or purchase of an equivalent but opposite futures contract on
the same, or a mutually offsetting, exchange prior to the designated date of
delivery.
LONG CONTRACT OR LONG POSITION. A contract to accept delivery (I.E., to
buy) a specified amount of a commodity, product, instrument, or index at a
future date at a specified price.
MARGIN. A good faith deposit with a broker to assure fulfillment of a
purchase or sale of a futures, forward or options contract. Margins on these
contracts do not usually involve the payment of interest.
182
<PAGE>
MARGIN CALL. A demand for additional funds after the initial good faith
deposit required to maintain a customer's account in compliance with the
requirements of a particular commodity exchange or of a commodity broker.
NON-SERIES EXCHANGE. The use of proceeds from the redemption of interests
from another commodity pool for which Dean Witter acts as general partner and
commodity pool operator to acquire units in one or more of the partnerships.
NOTIONAL FUNDS. The amount by which the nominal account size exceeds the
amount of actual funds in the account.
OPEN POSITION. Means a contractual commitment arising under a long contract
or a short contract that has not been extinguished by an offsetting trade or by
delivery.
OPTION ON A FUTURES CONTRACT. A contract that gives the purchaser of the
option, in exchange for a one-time payment known as premium, the right, but not
the obligation, to buy or sell a futures contract at a specified price within a
specified period of time. The seller of an option on a futures contract receives
the premium payment and has the obligation to buy or sell the futures contract
at the specified price within the specified period of time.
OUTRIGHTS. The trading of one foreign currency against the U.S. dollar as
compared to a cross rate trade between two non-U.S. currencies.
PARAMETERS. Means a value that can be freely assigned in a trading system
in order to vary the timing of signals.
PATTERN RECOGNITION. Means the ability to identify patterns that appeared
to act as precursors of price advances or declines in the past.
RESISTANCE. Means a previous high. A price level over the market where
selling pressure overcomes buying pressure and a price advance is turned back.
SECULAR TREND. Means intermediate upswings and downswings in price that
over a long period of time constitutes a big move.
SHORT CONTRACT OR SHORT POSITION. Means a contract to make delivery of
(sell) a specified amount of a commodity, product, instrument or index at a
future date at a specified price.
SPECTRUM SERIES EXCHANGE. A redemption of units in a partnership with the
proceeds used to purchase units of one or more of the other partnerships.
SPECULATIVE POSITION LIMIT. Means the maximum number of speculative futures
or option contracts in any one commodity (on one exchange), imposed by the CFTC
or a U.S. commodity exchange, that can be held or controlled at one time by one
person or a group of persons acting together. These limits generally are not
imposed for trading on markets or exchanges outside the U.S.
STOP-LOSS ORDER. Means an order to buy or sell at the market when a
definite price is reached, either above or below the price of the instrument
that prevailed when the order was given.
SUPPORT. Means a previous low. A price level under the market where buying
interest is sufficiently strong to overcome selling pressure.
SYSTEMATIC TECHNICAL CHARTING SYSTEMS. Means a system that is technical in
nature and based on chart patterns as opposed to pure mathematical calculations.
TECHNICAL ANALYSIS. The analysis of technical market information by a
trading advisor such as analyzing actual daily, weekly and monthly price
fluctuations, trading volume variations and changes in numbers of open positions
in various futures and options contracts.
TRADING ADVISOR. Any person or entity that provides advice as to the
purchase or sale of futures, forwards or options contracts. A commodity trading
advisor must register under the Commodity Exchange Act.
183
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Limited Partners and the General Partner of
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
Morgan Stanley Dean Witter Spectrum Select L.P.
Morgan Stanley Dean Witter Spectrum Strategic L.P.
Morgan Stanley Dean Witter Spectrum Technical L.P.
We have audited the accompanying statements of financial condition of Morgan
Stanley Dean Witter Spectrum Global Balanced L.P. (formerly, Dean Witter
Spectrum Global Balanced L.P.), Morgan Stanley Dean Witter Spectrum Select L.P.
(formerly, Dean Witter Spectrum Select L.P.), Morgan Stanley Dean Witter
Spectrum Strategic L.P. (formerly, Dean Witter Spectrum Strategic L.P.) and
Morgan Stanley Dean Witter Spectrum Technical L.P. (formerly, Dean Witter
Spectrum Technical L.P.) (collectively, the "Partnerships") as of December 31,
1998 and 1997 and the related statements of operations, changes in partners'
capital, and cash flows for each of the three years in the period ended
December 31, 1998. 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 Morgan Stanley Dean Witter Spectrum Global
Balanced L.P., Morgan Stanley Dean Witter Spectrum Select L.P., Morgan Stanley
Dean Witter Spectrum Strategic L.P., and Morgan Stanley Dean Witter Spectrum
Technical L.P. at December 31, 1998 and 1997 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 15, 1999
(March 4, 1999 and September 24, 1999 as to Note 6)
New York, New York
F-1
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------------
1999 1998 1997
-------------- ----------- -----------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 54,751,160 43,020,361 24,954,956
Net unrealized gain on open contracts 117,115 1,967,187 681,559
Net option premiums -- -- (458,150)
----------- ----------- -----------
Total Trading Equity 54,868,275 44,987,548 25,178,365
Subscriptions receivable 1,224,600 1,163,097 625,710
Interest receivable (Dean Witter) 218,974 167,141 118,949
----------- ----------- -----------
Total Assets 56,311,849 46,317,786 25,923,024
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 379,450 118,190 114,576
Accrued brokerage fees (Dean Witter) 211,186 169,841 99,762
Accrued management fees 57,388 46,153 25,450
Incentive fees payable -- 69,730 --
----------- ----------- -----------
Total Liabilities 648,024 403,914 239,788
----------- ----------- -----------
PARTNERS' CAPITAL
Limited Partners (3,488,043.117, 2,836,946.985, and
1,849,054.344 Units, respectively) 55,068,413 45,399,750 25,418,875
General Partner (37,713.535, 32,126.520, and 19,230.497
Units, respectively) 595,412 514,122 264,361
----------- ----------- -----------
Total Partners' Capital 55,663,825 45,913,872 25,683,236
----------- ----------- -----------
Total Liabilities and Partners' Capital 56,311,849 46,317,786 25,923,024
=========== =========== ===========
NET ASSET VALUE PER UNIT 15.79 16.00 13.75
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------
1999 1998 1997
-------------- ------------ ------------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 205,893,235 187,619,419 158,178,925
Net unrealized gain on open contracts 11,242,606 8,435,054 9,627,161
Net option premiums 119,075 -- --
------------ ------------ ------------
Total Trading Equity 217,254,916 196,054,473 167,806,086
Subscriptions receivable 7,134,632 6,021,707 --
Interest receivable (Dean Witter) 677,146 591,858 638,204
Due from Dean Witter -- -- 1,097,517
------------ ------------ ------------
Total Assets 225,066,694 202,668,038 169,541,807
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (Dean Witter) 1,284,077 1,164,344 --
Redemptions payable 1,133,365 939,381 2,272,314
Accrued management fees 531,342 481,797 423,673
Accrued administrative expenses -- -- 72,499
------------ ------------ ------------
Total Liabilities 2,948,784 2,585,522 2,768,486
------------ ------------ ------------
PARTNERS' CAPITAL
Limited Partners (9,573,810.811, 8,274,690.051 and
7,867,474.900 Units, respectively) 219,072,781 196,915,644 163,999,307
General Partner (133,076.700 Units) 3,045,129 3,166,872 2,774,014
------------ ------------ ------------
Total Partners' Capital 222,117,910 200,082,516 166,773,321
------------ ------------ ------------
Total Liabilities and Partners' Capital 225,066,694 202,668,038 169,541,807
============ ============ ============
NET ASSET VALUE PER UNIT (NOTE 1) 22.88 23.80 20.85
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------------
1999 1998 1997
-------------- ----------- -----------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 86,236,295 63,919,054 57,104,003
Net unrealized gain on open contracts 16,536,849 5,299,335 2,527,613
Net option premiums (394,630) 225,646 322,123
----------- ---------- ----------
Total Trading Equity 102,378,514 69,444,035 59,953,739
Subscriptions receivable 1,326,900 1,796,051 833,259
Interest receivable (Dean Witter) 280,211 205,247 223,045
----------- ---------- ----------
Total Assets 103,985,625 71,445,333 61,010,043
=========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Incentive fees payable 1,286,786 -- --
Redemptions payable 660,294 398,976 1,366,164
Accrued brokerage fees (Dean Witter) 536,197 405,606 360,041
Accrued management fees 286,239 218,976 188,257
----------- ---------- ----------
Total Liabilities 2,769,516 1,023,558 1,914,462
----------- ---------- ----------
PARTNERS' CAPITAL
Limited Partners (6,554,150.884, 6,031,262.407, and
5,460,628.572 Units, respectively) 100,160,172 69,671,636 58,482,349
General Partner (69,097.028, 64,937.294, and 57,258.883
Units, respectively) 1,055,937 750,139 613,232
----------- ---------- ----------
Total Partners' Capital 101,216,109 70,421,775 59,095,581
----------- ---------- ----------
Total Liabilities and Partners' Capital 103,985,625 71,445,333 61,010,043
=========== ========== ==========
NET ASSET VALUE PER UNIT 15.28 11.55 10.71
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------
1999 1998 1997
-------------- ------------ ------------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 267,595,299 235,044,325 168,849,922
Net unrealized gain on open contracts 12,647,582 18,909,268 12,296,712
Net option premiums (1,483,429) -- --
----------- ----------- -----------
Total Trading Equity 278,759,452 253,953,593 181,146,634
Subscriptions receivable 3,927,284 4,002,633 2,965,621
Interest receivable (Dean Witter) 902,182 717,685 657,562
----------- ----------- -----------
Total Assets 283,588,918 258,673,911 184,769,817
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (Dean Witter) 1,699,097 1,439,151 1,097,194
Redemptions payable 1,570,058 1,339,311 1,009,230
Accrued management fees 937,433 794,015 573,696
Incentive fees payable -- -- 139,190
----------- ----------- -----------
Total Liabilities 4,206,588 3,572,477 2,819,310
----------- ----------- -----------
PARTNERS' CAPITAL
Limited Partners (17,651,240.742, 15,660,041.764, and
12,308,185.227 Units, respectively) 276,499,328 252,455,045 180,099,271
General Partner (184,045.888, 164,158.204, and 126,515.511
Units, respectively) 2,883,002 2,646,389 1,851,236
----------- ----------- -----------
Total Partners' Capital 279,382,330 255,101,434 181,950,507
----------- ----------- -----------
Total Liabilities and Partners' Capital 283,588,918 258,673,911 184,769,817
=========== =========== ===========
NET ASSET VALUE PER UNIT 15.66 16.12 14.63
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- ---------------------------------
1999 1998 1998 1997 1996
----------- ----------- --------- --------- ---------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 1,814,125 1,376,863 5,113,920 3,683,460 177,564
Net change in unrealized (1,850,072) 2,422,095 1,285,628 464,966 (175,835)
---------- ---------- --------- --------- ---------
Total Trading Results (35,947) 3,798,958 6,399,548 4,148,426 1,729
Interest income (Dean Witter) 1,682,953 1,168,924 1,642,542 1,145,033 891,897
---------- ---------- --------- --------- ---------
Total Revenues 1,647,006 4,967,882 8,042,090 5,293,459 893,626
---------- ---------- --------- --------- ---------
EXPENSES
Brokerage fees (Dean Witter) 1,746,137 1,105,224 1,591,467 1,124,531 1,030,310
Management fees 474,498 290,828 422,960 269,162 221,282
Incentive fees 215,651 152,442 449,775 300,250 --
---------- ---------- --------- --------- ---------
Total Expenses 2,436,286 1,548,494 2,464,202 1,693,943 1,251,592
---------- ---------- --------- --------- ---------
NET INCOME (LOSS) (789,280) 3,419,388 5,577,888 3,599,516 (357,966)
========== ========== ========= ========= =========
Net Income (Loss) Allocation:
Limited Partners (780,570) 3,382,644 5,518,127 3,561,537 (354,537)
General Partner (8,710) 36,744 59,761 37,979 (3,429)
Net Income (Loss) per Unit:
Limited Partners (0.21) 1.46 2.25 2.12 (.44)
General Partner (0.21) 1.46 2.25 2.12 (.44)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized (537,861) 25,414,460 36,087,729 15,940,851 26,876,393
Net change in unrealized 2,807,552 22,586,491 (1,192,107) 3,149,167 (10,950,217)
---------- ---------- ---------- ---------- -----------
Total Trading Results 2,269,691 48,000,951 34,895,622 19,090,018 15,926,176
Interest income (Dean Witter) 5,571,066 5,105,202 6,883,110 7,405,511 6,120,347
---------- ---------- ---------- ---------- -----------
Total Revenues 7,840,757 53,106,153 41,778,732 26,495,529 22,046,523
---------- ---------- ---------- ---------- -----------
EXPENSES
Brokerage fees (Dean Witter) 11,341,093 7,767,759 11,360,166 9,777,851 10,641,478
Management fees 4,692,864 3,715,645 5,202,158 5,239,533 4,583,197
Incentive fees -- 1,828,624 1,832,021 49,989 175,796
Transaction fees and costs -- 625,328 625,327 1,370,439 1,104,011
Administrative expenses -- 64,000 64,000 114,000 128,000
---------- ---------- ---------- ---------- -----------
Total Expenses 16,033,957 14,001,356 19,083,672 16,551,812 16,632,482
---------- ---------- ---------- ---------- -----------
NET INCOME (LOSS) (8,193,200) 39,104,797 22,695,060 9,943,717 5,414,041
========== ========== ========== ========== ===========
Net Income (Loss) Allocation:
Limited Partners (8,071,457) 38,436,723 22,302,202 9,781,168 5,283,411
General Partner (121,743) 668,074 392,858 162,549 130,630
Net Income (Loss) per Unit:
Limited Partners (0.92) 5.02 2.95 1.22 .98
General Partner (0.92) 5.02 2.95 1.22 .98
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ---------- ----------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 19,657,278 2,125,953 7,945,575 1,297,824 4,980,402
Net change in unrealized 11,237,514 4,475,848 2,771,722 2,387,258 (1,679,048)
---------- ----------- ---------- ---------- ----------
Total Trading Results 30,894,792 6,601,801 10,717,297 3,685,082 3,301,354
Interest income (Dean Witter) 2,025,084 1,732,273 2,379,478 2,304,248 1,604,026
---------- ----------- ---------- ---------- ----------
Total Revenues 32,919,876 8,334,074 13,096,775 5,989,330 4,905,380
---------- ----------- ---------- ---------- ----------
EXPENSES
Brokerage fees (Dean Witter) 4,078,080 3,169,563 4,402,540 4,414,327 3,398,205
Incentive fees 2,451,152 178,428 1,336,693 427,094 726,825
Management fees 2,199,368 1,675,367 2,342,447 2,212,788 1,587,213
---------- ----------- ---------- ---------- ----------
Total Expenses 8,728,600 5,023,358 8,081,680 7,054,209 5,712,243
---------- ----------- ---------- ---------- ----------
NET INCOME (LOSS) 24,191,276 3,310,716 5,015,095 (1,064,879) (806,863)
========== =========== ========== ========== ==========
Net Income (Loss) Allocation:
Limited Partners 23,935,478 3,271,967 4,958,188 (1,054,657) (799,980)
General Partner 255,798 38,749 56,907 (10,222) (6,883)
Net Income (Loss) per Unit:
Limited Partners 3.73 0.55 .84 0.04 (.39)
General Partner 3.73 0.55 .84 0.04 (.39)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 14,704,626 13,007,107 35,224,194 13,777,460 26,334,748
Net change in unrealized (6,261,686) 26,421,207 6,612,556 9,762,823 (1,552,659)
---------- ----------- ---------- ---------- ----------
Total Trading Results 8,442,940 39,428,314 41,836,750 23,540,283 24,782,089
Interest income (Dean Witter) 6,954,549 6,008,143 8,103,423 5,987,304 3,242,977
---------- ----------- ---------- ---------- ----------
Total Revenues 15,397,489 45,436,457 49,940,173 29,527,587 28,025,066
---------- ----------- ---------- ---------- ----------
EXPENSES
Brokerage fees (Dean Witter) 14,393,049 11,107,075 15,543,787 11,617,770 6,997,531
Management fees 7,940,992 5,955,922 8,403,764 5,832,758 3,273,649
Incentive fees 430,097 2,653,466 3,191,252 369,975 1,852,569
---------- ----------- ---------- ---------- ----------
Total Expenses 22,764,138 19,716,463 27,138,803 17,820,503 12,123,749
---------- ----------- ---------- ---------- ----------
NET INCOME (LOSS) (7,366,649) 25,719,994 22,801,370 11,707,084 15,901,317
========== =========== ========== ========== ==========
Net Income (Loss) Allocation:
Limited Partners (7,293,262) 25,458,926 22,571,217 11,589,197 15,737,852
General Partner (73,387) 261,068 230,153 117,887 163,465
Net Income (Loss) per Unit:
Limited Partners (0.46) 1.70 1.49 1.02 2.11
General Partner (0.46) 1.70 1.49 1.02 2.11
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AND FOR THE
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------- ------------ --------- ------------
$ $ $
<S> <C> <C> <C> <C>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL
BALANCED L.P.
Partners' Capital, December 31, 1996 1,609,108.931 18,499,873 206,382 18,706,255
Offering of Units 505,325.179 6,507,261 20,000 6,527,261
Net Income -- 3,561,537 37,979 3,599,516
Redemptions (246,149.269) (3,149,796) -- (3,149,796)
------------- ----------- --------- -----------
Partners' Capital, December 31, 1997 1,868,284.841 25,418,875 264,361 25,683,236
Offering of Units 1,205,176.553 17,447,965 190,000 17,637,965
Net Income -- 5,518,127 59,761 5,577,888
Redemptions (204,387.889) (2,985,217) -- (2,985,217)
------------- ----------- --------- -----------
Partners' Capital, December 31, 1998 2,869,073.505 45,399,750 514,122 45,913,872
Offering of Units 841,624.874 13,410,326 90,000 13,500,326
Net Loss -- (780,570) (8,710) (789,280)
Redemptions (184,941.727) (2,961,093) -- (2,961,093)
------------- ----------- --------- -----------
Partners' Capital, September 30, 1999
(Unaudited) 3,525,756.652 55,068,413 595,412 55,663,825
============= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------- ------------ --------- ------------
NOTE 1 $ $ $
<S> <C> <C> <C> <C>
MORGAN STANLEY DEAN WITTER SPECTRUM
SELECT L.P.
Partners' Capital, December 31, 1996 8,346,327.700 161,174,820 2,611,465 163,786,285
Offering of Units 573,746.700 12,056,614 -- 12,056,614
Net Income -- 9,781,168 162,549 9,943,717
Redemptions (919,522.800) (19,013,295) -- (19,013,295)
------------- ----------- --------- -----------
Partners' Capital, December 31, 1997 8,000,551.600 163,999,307 2,774,014 166,773,321
Offering of Units 1,310,353.729 30,297,590 -- 30,297,590
Net Income -- 22,302,202 392,858 22,695,060
Redemptions (903,138.578) (19,683,455) -- (19,683,455)
------------- ----------- --------- -----------
Partners' Capital, December 31, 1998 8,407,766.751 196,915,644 3,166,872 200,082,516
Offering of Units 1,860,174.413 43,411,765 -- 43,411,765
Net Loss -- (8,071,457) (121,743) (8,193,200)
Redemptions (561,053.653) (13,183,171) -- (13,183,171)
------------- ----------- --------- -----------
Partners' Capital, September 30, 1999
(Unaudited) 9,706,887.511 219,072,781 3,045,129 222,117,910
============= =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (CONCLUDED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AND FOR THE
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ------------ --------- ------------
$ $ $
<S> <C> <C> <C> <C>
MORGAN STANLEY DEAN WITTER SPECTRUM
STRATEGIC L.P.
Partners' Capital, December 31, 1996 4,229,101.851 44,645,423 473,454 45,118,877
Offering of Units 1,956,789.313 22,377,135 150,000 22,527,135
Net Loss -- (1,054,657) (10,222) (1,064,879)
Redemptions (668,003.709) (7,485,552) -- (7,485,552)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 1997 5,517,887.455 58,482,349 613,232 59,095,581
Offering of Units 1,610,245.841 16,662,471 80,000 16,742,471
Net Income -- 4,958,188 56,907 5,015,095
Redemptions (1,031,933.595) (10,431,372) -- (10,431,372)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 1998 6,096,199.701 69,671,636 750,139 70,421,775
Offering of Units 994,405.918 12,368,782 50,000 12,418,782
Net Income -- 23,935,478 255,798 24,191,276
Redemptions (467,357.707) (5,815,724) -- (5,815,724)
-------------- ----------- --------- -----------
Partners' Capital, September 30, 1999
(Unaudited) 6,623,247.912 100,160,172 1,055,937 101,216,109
============== =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ------------ --------- ------------
$ $ $
<S> <C> <C> <C> <C>
MORGAN STANLEY DEAN WITTER SPECTRUM
TECHNICAL L.P.
Partners' Capital, December 31, 1996 8,300,169.234 111,852,280 1,133,349 112,985,629
Offering of Units 5,034,287.188 69,082,458 600,000 69,682,458
Net Income -- 11,589,197 117,887 11,707,084
Redemptions (899,755.684) (12,424,664) -- (12,424,664)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 1997 12,434,700.738 180,099,271 1,851,236 181,950,507
Offering of Units 4,731,996.876 69,886,681 565,000 70,451,681
Net Income -- 22,571,217 230,153 22,801,370
Redemptions (1,342,497.646) (20,102,124) -- (20,102,124)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 1998 15,824,199.968 252,455,045 2,646,389 255,101,434
Offering of Units 3,096,204.722 48,485,453 310,000 48,795,453
Net Loss -- (7,293,262) (73,387) (7,366,649)
Redemptions (1,085,118.060) (17,147,908) -- (17,147,908)
-------------- ----------- --------- -----------
Partners' Capital, September 30, 1999
(Unaudited) 17,835,286.630 276,499,328 2,883,002 279,382,330
============== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------------- ------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) (789,280) 3,419,388 5,577,888 3,599,516 (357,966)
Noncash item included in net
income (loss):
Net change in unrealized
trading profit (loss) 1,850,072 (2,422,095) (1,285,628) (464,966) 175,835
(Increase) decrease in
operating assets:
Interest receivable (Dean
Witter) (51,833) (33,309) (48,192) (33,466) (24,354)
Net option premiums -- (458,150) (458,150) 458,150 --
Increase (decrease) in
operating liabilities:
Accrued brokerage fees (Dean
Witter) 41,345 44,584 70,079 7,615 25,474
Accrued management fees 11,235 13,775 20,703 4,507 7,053
Incentive fees payable (69,730) 124,260 69,730 -- (49,873)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) operating activities 991,809 688,453 3,946,430 3,571,356 (223,831)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units 13,500,326 13,876,040 17,637,965 6,527,261 7,259,621
(Increase) decrease in
subscriptions receivable (61,503) (520,403) (537,387) (434,141) 869,488
Increase (decrease) in
redemptions payable 261,260 157,881 3,614 (686,849) 762,679
Redemptions of Units (2,961,093) (2,519,126) (2,985,217) (3,149,796) (2,949,900)
------------ ------------ ------------ ------------ ------------
Net cash provided by financing
activities 10,738,990 10,994,392 14,118,975 2,256,475 5,941,888
------------ ------------ ------------ ------------ ------------
Net increase in cash 11,730,799 11,682,845 18,065,405 5,827,831 5,718,057
Balance at beginning of period 43,020,361 24,954,956 24,954,956 19,127,125 13,409,068
------------ ------------ ------------ ------------ ------------
Balance at end of period 54,751,160 36,637,801 43,020,361 24,954,956 19,127,125
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------------- ------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) (8,193,200) 39,104,797 22,695,060 9,943,717 5,414,041
Noncash item included in net
income (loss):
Net change in unrealized
trading profit (loss) (2,807,552) (22,586,491) 1,192,107 (3,149,167) 10,950,217
(Increase) decrease in
operating assets:
Net option premiums (119,075) -- -- 18,205 (1,185)
Interest receivable (Dean
Witter) (85,288) 39,438 46,346 (105,144) 59,297
Due from Dean Witter -- 1,097,517 1,097,517 (688,191) (236,577)
Increase (decrease) in
operating liabilities:
Accrued brokerage fees (Dean
Witter) 119,733 1,151,853 1,164,344 (491,315) (173,003)
Accrued management fees 49,545 52,956 58,124 19,815 (42,247)
Accrued administrative
expenses -- (72,499) (72,499) (50,844) (40,924)
Incentive fees payable -- 1,308,547 -- (348,459) 348,459
Accrued transaction fees and
costs -- -- -- (64,595) (6,097)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) operating activities (11,035,837) 20,096,118 26,180,999 5,084,022 16,271,981
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units 43,411,765 15,265,517 30,297,590 12,056,614 10,251,712
(Increase) decrease in
subscriptions receivable (1,112,925) (3,515,676) (6,021,707) 5,365,420 (5,365,420)
Increase (decrease) in
redemptions payable 193,984 (639,648) (1,332,933) (97,843) 818,800
Redemptions of Units (13,183,171) (16,746,747) (19,683,455) (19,013,295) (28,325,728)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) financing activities 29,309,653 (5,636,554) 3,259,495 (1,689,104) (22,620,636)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
cash 18,273,816 14,459,564 29,440,494 3,394,918 (6,348,655)
Balance at beginning of period 187,619,419 158,178,925 158,178,925 154,784,007 161,132,662
------------ ------------ ------------ ------------ ------------
Balance at end of period 205,893,235 172,638,489 187,619,419 158,178,925 154,784,007
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 24,191,276 3,310,716 5,015,095 (1,064,879) (806,863)
Noncash item included in net income
(loss):
Net change in unrealized trading
profit (loss) (11,237,514) (4,475,848) (2,771,722) (2,387,258) 1,679,048
(Increase) decrease in operating
assets:
Net option premiums 620,276 299,724 96,477 (367,448) 25,452
Interest receivable (Dean Witter) (74,964) 30,741 17,798 (59,402) (55,568)
Increase (decrease) in operating
liabilities:
Incentive fees payable 1,286,786 178,429 -- -- (198,924)
Accrued brokerage fees (Dean
Witter) 130,591 (25,516) 45,565 36,599 110,617
Accrued management fees 67,263 (7,982) 30,719 31,436 59,530
----------- ----------- ----------- ---------- ----------
Net cash provided by (used for)
operating activities 14,983,714 (689,736) 2,433,932 (3,810,952) 813,292
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 12,418,782 11,931,056 16,742,471 22,527,135 18,630,024
(Increase) decrease in subscriptions
receivable 469,151 159,220 (962,792) (168) 714,659
Increase (decrease) in redemptions
payable 261,318 (296,022) (967,188) (124,372) 1,413,226
Redemptions of Units (5,815,724) (8,857,730) (10,431,372) (7,485,552) (5,167,216)
----------- ----------- ----------- ---------- ----------
Net cash provided by financing
activities 7,333,527 2,936,524 4,381,119 14,917,043 15,590,693
----------- ----------- ----------- ---------- ----------
Net increase in cash 22,317,241 2,246,788 6,815,051 11,106,091 16,403,985
Balance at beginning of period 63,919,054 57,104,003 57,104,003 45,997,912 29,593,927
----------- ----------- ----------- ---------- ----------
Balance at end of period 86,236,295 59,350,791 63,919,054 57,104,003 45,997,912
=========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------------- ------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) (7,366,649) 25,719,994 22,801,370 11,707,084 15,901,317
Noncash item included in net
income (loss):
Net change in unrealized
trading profit 6,261,686 (26,421,207) (6,612,556) (9,762,823) 1,552,659
(Increase) decrease in operating
assets:
Net option premiums 1,483,429 -- -- 328,955 (328,955)
Interest receivable (Dean
Witter) (184,497) (74,352) (60,123) (275,721) (189,153)
Increase (decrease) in operating
liabilities:
Accrued brokerage fees (Dean
Witter) 259,946 309,743 341,957 320,941 388,414
Accrued management fees 143,418 202,545 220,319 197,331 199,067
Incentive fees payable -- 607,032 (139,190) 139,190 --
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities 597,333 343,755 16,551,777 2,654,957 17,523,349
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units 48,795,453 54,985,215 70,451,681 69,682,458 44,442,998
(Increase) decrease in
subscriptions receivable 75,349 (2,233,770) (1,037,012) 2,151,502 (2,025,927)
Increase in redemptions payable 230,747 606,274 330,081 325,421 499,483
Redemptions of Units (17,147,908) (16,157,325) (20,102,124) (12,424,664) (6,685,065)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities 31,953,641 37,200,394 49,642,626 59,734,717 36,231,489
----------- ----------- ----------- ----------- -----------
Net increase in cash 32,550,974 37,544,149 66,194,403 62,389,674 53,754,838
Balance at beginning of period 235,044,325 168,849,922 168,849,922 106,460,248 52,705,410
----------- ----------- ----------- ----------- -----------
Balance at end of period 267,595,299 206,394,071 235,044,325 168,849,922 106,460,248
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Morgan Stanley Dean Witter Spectrum Global Balanced L.P., Morgan
Stanley Dean Witter Spectrum Select L.P., Morgan Stanley Dean Witter Spectrum
Strategic L.P. and Morgan Stanley Dean Witter Spectrum Technical L.P.
(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
(collectively, "futures interests").
The unaudited interim financial statements contained herein include, in the
opinion of management, all adjustments necessary for a fair presentation of the
results of operations and financial condition of the Partnerships. These
financial statements should be read in conjuction with the Partnerships'
December 31, 1998 Annual Report on Form 10-K.
The general partner for each Partnership is Demeter Management Corporation. The
non-clearing commodity broker is Dean Witter Reynolds, Inc., and an unaffiliated
clearing commodity broker, Carr Futures Inc., provides clearing and execution
services. Both Demeter and Dean Witter are wholly-owned subsidiaries of Morgan
Stanley Dean Witter & Co.
Spectrum Select became one of the Spectrum Series of funds effective June 1,
1998, and each outstanding unit of Dean Witter Select Futures Fund L.P. was
converted into 100 units of Spectrum Select. "Per Unit" amounts for periods
prior to June 1, 1998 have been restated to reflect the conversion.
On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean Witter,
Discover & Co. At that time, DWD changed its corporate name to Morgan Stanley,
Dean Witter, Discover & Co. Effective February 19, 1998, Morgan Stanley, Dean
Witter, Discover & Co. changed its corporate name to Morgan Stanley Dean Witter
& Co.
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by the General Partner and the
Limited Partners based upon their proportional ownership interests.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION--Futures interests are open commitments until settlement
date. They are valued at market on a daily basis and the resulting net change in
unrealized gains and losses are reflected in the change in unrealized profits
(loss) on open contracts from one period to the next in the statement of
operations. Monthly, Dean Witter pays each Partnership interest income based
upon 80% of its average daily "Net Assets" (as defined in the limited
partnership agreements) for the month in the case of Spectrum Select, Spectrum
Strategic and Spectrum Technical and 100% in the case of Spectrum Global
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 futures 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 FUTURES INTERESTS TRADING ACCOUNTS--The Partnerships' asset "Equity in
futures interests trading accounts," reflected in the statement of financial
condition, consists of (A) cash on deposit with Dean Witter and Carr Futures to
be used as margin for trading; (B) net unrealized gains or losses on open
contracts, which are valued at market, and calculated as the difference between
original contract value
F-16
<PAGE>
and market value, and (C) the net option premiums, which represent the net of
all monies paid and/or received for such option premiums. The asset or liability
related to the unrealized gains or losses on forward contracts is presented as a
net amount in each period due to master netting agreements.
The partnerships have elected to offset the fair value amounts recognized for
forwards contracts executed with the same counterparty under master netting
arrangements with Carr Futures. The partnerships have consistently applied their
right to offset.
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS--Prior to September 1, 1996,
brokerage fees for Spectrum Global Balanced were accrued at a monthly rate of
1/2 of 1% of the Net Assets (a 6% annual rate) as of the first day of each
month. From September 1, 1996 to July 31, 1997, brokerage fees were reduced to a
monthly rate of 11/24 of 1% of the Net Assets (a 5.5% annual rate) as of the
first day of the month. From August 1, 1997 to May 31, 1998 brokerage fees were
further reduced to 49/120 of 1% of the Net Assets (a 4.9% annual rate) as of the
first day of the month. Effective June 1, 1998, brokerage fees were reduced to a
flat-rate monthly fee of 1/12 of 4.60% of the Net Assets (a 4.60% annual rate)
as of the first day of each month.
Prior to June 1, 1998, brokerage commissions Spectrum Select were accrued on a
half-turn basis at 80% of Dean Witter's published non-member rates and
transaction fees and costs were accrued on a half-turn basis.
From January 1, 1996 to August 31, 1996, brokerage commissions chargeable to
Spectrum Select were capped at 3/4 of 1% per month (a 9% maximum annual rate) of
to Spectrum Select's month-end Net Assets. Transaction fees and costs exclusive
of "give up" fees were capped at 1/12 of 1% per month (a 1% maximum annual rate)
of month-end Net Assets.
From September 1, 1996 through May 31, 1998 brokerage commissions and
transaction fees and costs were capped at 13/20 of 1% per month (a 7.8% maximum
annual rate) of Spectrum Select's month-end Net Assets.
Effective June 1, 1998 brokerage fees of Spectrum Select are charged at a flat
monthly rate of 1/12 of 7.25% (a 7.25% annual rate) of Net Assets as of the
first day of each month. Such fee covers all brokerage commissions, transaction
fees and costs and ordinary administrative and continuing offering expenses.
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 (an
8.75% annual rate) as of the first day of each month. From September 1, 1996 to
July 31, 1997, brokerage fees were reduced to a monthly rate of 33/48 of 1% of
the Net Assets (an 8.25% annual rate) as of the first day of the month. From
August 1, 1997 to May 31, 1998, brokerage fees were further reduced to 51/80 of
1% of the Net Assets (a 7.65% annual rate) as of the first day of the month.
Effective June 1, 1998, brokerage fees for Spectrum Strategic and Spectrum
Technical were reduced to a flat-rate monthly fee of 1/12 of 7.25% (a 7.25%
annual rate) of the Net Assets as of the first day of each month.
Such fees cover all brokerage fees, 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 Dean Witter through the brokerage fees paid by the Partnerships
(effective June 1, 1998 for Spectrum Select with its change to a flat rate
brokerage fee).
Prior to June 1, 1998, Spectrum Select was charged all operating expenses
related to its trading activities to a maximum of 1/4 of 1% annually of Spectrum
Select's average month end Net Assets. Demeter was responsible for operating
expenses in excess of the cap.
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.
F-17
<PAGE>
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 were paid by the Limited Partners or the Partnership. Dean
Witter 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 of any month that is
at least 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 redeemed on or prior to the last day of the twelfth month
after such Units were purchased will be subject to a redemption charge equal to
2% of the Net Asset Value of a Unit on the date of such redemption. Units
redeemed after the last day of the twelfth month and on or prior to the last day
of the twenty-fourth month after which such Units were purchased will be subject
to a redemption charge equal to 1% of the Net Asset Value of a Unit on the date
of such redemption. Units redeemed after the last day of the twenty-fourth month
after which such Units were purchased will not be subject to a redemption
charge. The foregoing redemption charges will be paid to Dean Witter.
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--Spectrum Global Balanced, Spectrum Strategic and
Spectrum Technical will terminate on December 31, 2035 and Spectrum Select will
terminate on December 31, 2025 regardless of their 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 fees to Dean Witter as described in Note 1. Each
Partnership's cash is on deposit with Dean Witter and Carr Futures in futures
interests trading accounts to meet margin requirements as needed. Dean Witter
pays interest on these funds as described in Note 1.
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:
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
RXR, Inc.
Morgan Stanley Dean Witter Spectrum Select L.P.
EMC Capital Management, Inc.
Rabar Market Research, Inc.
Sunrise Capital Management, Inc.
Morgan Stanley Dean Witter Spectrum Strategic L.P.
Blenheim Investments, Inc.
Allied Irish Capital Management, Ltd.
Willowbridge Associates Inc.
Effective April 30, 1998, A. Gary Shilling & Co., Inc. was terminated as an
advisor to the Partnership. Effective March 4, 1999 Stonebrook Capital
Management Inc. ("Stonebrook") was terminated as an advisor to the Partnership.
The assets of the Partnership previously allocated to Stonebrook were allocated
to Allied Irish Capital Management, Ltd., effective June 1, 1999.
F-18
<PAGE>
Morgan Stanley 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) for Spectrum
Global Balanced.
The management fee is accrued at the rate of 1/4 of 1% per month of the Net
Assets allocated to each trading advisor on the first day of each month (a 3%
annual rate) for Spectrum Select. Prior to June 1, 1998, the management fee was
accrued at the rate of 1/4 of 1% of the Partnership's adjusted Net Assets, as
defined in the Limited Partnership Agreement, as of the last day of each month
(a 3% annual rate.)
The management fee is accrued at the rate of 1/12 of 4% of the Net Assets
allocated to each of Blenheim and Willowbridge on the first day of each month,
and 1/12 of 3% of the Net Assets allocated to AICM on the first day of each
month for Spectrum Strategic (annual rates of 4% and 3%, respectively). Prior to
June 1, 1998, the management fee was 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).
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) for Spectrum Technical.
INCENTIVE FEE--Spectrum Global Balanced, Spectrum Select and Spectrum Strategic
each will pay a monthly incentive fee equal to 15% of trading profits, with
respect to each trading advisor's allocated Net Assets as of the end of each
calendar month. Trading profits represent the amount by which profits from
futures, forwards and options trading exceed losses, after brokerage, management
and incentive fees have been paid. Prior to June 1, 1998, Spectrum Select paid a
quarterly incentive fee to each trading advisor equal to 17.5% of trading
profits.
Spectrum Technical will pay a monthly incentive fee equal to 15% of the "Trading
Profits" with respect to the Net Assets allocated to Campbell and JWH and 19% of
trading profits with respect to the Net Assets allocated to Chesapeake as of the
end of each calendar month. Prior to June 1, 1998, Spectrum Technical paid an
incentive fee equal to 15% of trading profits to all trading advisors.
For all Partnerships when trading losses are incurred, no incentive fee will be
paid in subsequent months until all such losses are recovered. Cumulative
trading losses are adjusted on a pro-rata basis for the net amount of each
months' subscriptions and redemptions.
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.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for fiscal years beginning after
June 15, 1999. The Partnership has elected to adopt the provisions of SFAS No.
133 for the fiscal year ended December 31, 1998. SFAS No. 133 supersedes SFAS
No. 119 and No. 105, which required the disclosure of average aggregate fair
values and contract/notional values, respectively, of derivative financial
instruments for an entity which carriers its assets at fair value. The
application of SFAS No. 133 does not have a significant effect on the
Partnership's financial statements.
F-19
<PAGE>
At December 31, 1997, open contracts were:
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED
---------------------------
CONTRACT OR NOTIONAL AMOUNT
---------------------------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures:
Commitments to Purchase 40,675,000
Commitments to Sell 6,721,000
Commodity Futures:
Commitments to Purchase --
Commitments to Sell 5,168,000
Foreign Futures:
Commitments to Purchase 45,574,000
Commitments to Sell 26,176,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS:
Commitments to Purchase 2,436,000
Commitments to Sell 10,218,000
</TABLE>
<TABLE>
<CAPTION>
SPECTRUM SELECT
---------------------------
CONTRACT OR NOTIONAL AMOUNT
---------------------------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS:
Finacial Futures:
Commitments to Purchase 428,493,000
Commitments to Sell 173,316,000
Commodity Futures:
Commitments to Purchase 23,131,000
Commitments to Sell 135,389,000
Foreign Futures:
Commitments to Purchase 997,389,000
Commitments to Sell 315,676,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS:
Commitments to Purchase 96,671,000
Commitments to Sell 127,065,000
</TABLE>
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC
---------------------------
CONTRACT OR NOTIONAL AMOUNT
---------------------------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures:
Commitments to Purchase 87,114,000
Commitments to Sell 69,871,000
Commodity Futures:
Commitments to Purchase 32,034,000
Commitments to Sell 24,672,000
Foreign Futures:
Commitments to Purchase 119,070,000
Commitments to Sell 5,387,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS:
Commitments to Purchase 748,000
Commitments to Sell 748,000
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL
---------------------------
CONTRACT OR NOTIONAL AMOUNT
---------------------------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures:
Commitments to Purchase 302,165,000
Commitments to Sell 80,696,000
Commodity Futures:
Commitments to Purchase 36,753,000
Commitments to Sell 84,557,000
Foreign Futures:
Commitments to Purchase 283,941,000
Commitments to Sell 379,781,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS:
Commitments to Purchase 116,349,000
Commitments to Sell 203,705,000
</TABLE>
A portion of the amounts indicated as off-exchange-traded 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
futures interests trading accounts"' on the Statements of Financial Condition
and totaled at December 31, 1998 and 1997, respectively, $1,967,187 and $681,559
for Spectrum Global Balanced, $8,435,054 and $9,627,161 for Spectrum Select,
$5,299,335 and $2,527,613 for Spectrum Strategic, $18,909,268 and $12,296,712
for Spectrum Technical.
For Spectrum Global Balanced, of the $1,967,187 net unrealized gain on open
contracts at December 31, 1998, $2,044,752 related to exchange-traded futures
contracts and $(77,565) related to off-exchange-traded forward currency
contracts. Of the $681,559 net unrealized gain on open contracts at
December 31, 1997, $657,913 related to exchange-traded futures contracts and
$23,646 related to off-exchange-traded forward currency contracts.
For Spectrum Select, of the $8,435,054 net unrealized gain on open contracts at
December 31, 1998, $8,982,276 related to exchange-traded futures contracts and
$(547,222) related to off-exchange-traded forward currency contracts. Of the
$9,627,161 net unrealized gain on open contracts at December 31, 1997,
$10,514,844 related to exchange-traded futures contracts and $(887,683) related
to off-exchange-traded forward currency contracts.
For Spectrum Strategic, of the $5,299,335 net unrealized gain on open contracts
at December 31, 1998, all related to exchange-traded futures and contracts. Of
the $2,527,613 net unrealized gain on open contracts at December 31, 1997, all
related to exchange-traded futures contracts.
For Spectrum Technical, of the $18,909,268 net unrealized gain on open contracts
at December 31, 1998, $19,606,697 was related to exchange-traded futures
contracts and $(697,429) related to off-exchange-traded forward currency
contracts. Of the $12,296,712 net unrealized gain on open contracts at December
31, 1997, $11,977,756 related to exchange-traded futures contracts and $318,956
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 the instruments in which the Partnership is involved is limited to the
amounts reflected in the Partnerships' Statements of Financial Condition.
F-21
<PAGE>
Exchange-traded contracts and off-exchange-traded forward currency contracts
held by the Partnerships at December 1998 and 1997 mature as follows:
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
SPECTRUM GLOBAL BALANCED
Exchange-Traded Contracts March 1999 March 1998
Off-Exchange-Traded Forward Currency Contracts March 1999 March 1998
SPECTRUM SELECT
Exchange-Traded Contracts December 1999 December 1998
Off-Exchange-Traded Forward Currency Contracts March 1999 March 1998
SPECTRUM STRATEGIC
Exchange-Traded Contracts March 2000 December 1998
Off-Exchange-Traded Forward Currency Contracts -- January 1998
SPECTRUM TECHNICAL
Exchange-Traded Contracts December 1999 December 1998
Off-Exchange-Traded Forward Currency Contracts March 1999 March 1998
</TABLE>
The Partnerships also have credit risk because either Dean Witter or Carr
Futures act as the futures commission merchants or the counterparties, with
respect to most of the Partnerships' assets. Exchange-traded futures and futures
styled options contracts are marked to market on a daily basis, with variations
in value settled on a daily basis. Each of Dean Witter and Carr Futures, as a
futures commission merchant for each Partnership's exchange-traded futures and
futures styled options contracts, are required, pursuant to regulations of the
Commodity Futures Trading Commission, to segregate from their own assets and for
the sole benefit of their commodity customers, all funds held by them with
respect to exchange-traded futures and futures styled options contracts,
including an amount equal to the net unrealized gain on all open futures and
futures styled options contracts, which funds, in the aggregate, totaled at
December 31, 1998 and December 31, 1997 respectively, $45,065,113 and
$25,612,869 for Spectrum Global Balanced, $196,601,695 and $168,693,769 for
Spectrum Select, $69,218,389 and $59,631,616 for Spectrum Strategic, and
$254,651,022 and $180,827,678 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 Carr Futures, the sole counterparty
on all of such contracts, to perform. Each partnership has a netting agreement
with Carr Futures. These agreements, which seek to reduce both the partnerships'
and Carr Futures' exposure on off-exchange-traded forward currency contracts,
should materially decrease the partnerships' credit risk in the event of Carr
Futures' bankruptcy or insolvency. Carr Futures' parent, Credit Agricole
Indosuez, has guaranteed to the Partnerships payment of the net liquidating
value of the transactions in the Partnerships' account with Carr Futures
(including foreign currency contracts).
For the year ended December 31, 1997, the average fair value of financial
instruments held for trading purposes was as follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------------- ------------
$ $
<S> <C> <C>
SPECTRUM GLOBAL BALANCED
- ------------------------------------------------------------
EXCHANGE-TRADED CONTRACTS:
Financial Futures 39,908,000 11,661,000
Options on Financial Futures 1,206,000 2,398,000
Commodity Futures 4,414,000 3,535,000
Foreign Futures 28,444,000 26,146,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 12,716,000 16,655,000
</TABLE>
F-22
<PAGE>
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------------- ------------
$ $
<S> <C> <C>
SPECTRUM SELECT
- ------------------------------------------------------------
EXCHANGE-TRADED CONTRACTS:
Financial Futures 363,272,000 243,761,000
Options on Financial Futures 3,781,000 --
Commodity Futures 95,455,000 76,233,000
Options on Commodity Futures 2,484,000 1,789,000
Foreign Futures 360,391,000 382,135,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 41,814,000 40,388,000
</TABLE>
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------------- ------------
$ $
<S> <C> <C>
SPECTRUM STRATEGIC
- ------------------------------------------------------------
EXCHANGE-TRADED CONTRACTS:
Financial Futures 30,123,000 70,617,000
Options on Financial Futures 18,562,000 1,261,000
Commodity Futures 80,636,000 24,285,000
Options on Commodity Futures 27,328,000 28,813,000
Foreign Futures 83,507,000 29,983,000
Options on Foreign Futures 4,320,000 479,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 507,000 922,000
</TABLE>
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------------- ------------
$ $
<S> <C> <C>
SPECTRUM TECHNICAL
- ------------------------------------------------------------
EXCHANGE-TRADED CONTRACTS:
Financial Futures 233,922,000 153,604,000
Options on Financial Futures 6,705,000 347,000
Commodity Futures 58,233,000 60,140,000
Options on Commodity Futures 2,181,000 --
Foreign Futures 205,510,000 168,044,000
Options on Foreign Futures 4,070,000 --
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 103,299,000 111,186,000
</TABLE>
5. LEGAL MATTERS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported class
actions were filed in the Superior Court of the State of California, County of
Los Angeles, on behalf of all purchasers of interests in limited partnership
commodity pools sold by Dean Witter. Named defendants include Dean Witter,
Demeter, Dean Witter Futures and Currency Management Inc., Morgan Stanley Dean
Witter & Co. (all such parties referred to hereafter as the "Dean Witter
Parties"), Spectrum Select (under its original name) and certain other limited
partnership commodity pools of which Demeter is the general partner, and certain
trading advisors to these pools. On June 16, 1997, the plaintiffs in the above
actions filed a consolidated amended complaint, alleging, among other things,
that the defendants committed fraud, deceit, negligent misrepresentation,
various violations of the California Corporations Code, intentional and
negligent breach of fiduciary duty, fraudulent and unfair business practices,
unjust enrichment, and conversion in the sale and operation of the various
limited partnerships commodity 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 Dean Witter. A consolidated and
amended complaint in the action pending in the Supreme Court of the State of New
York was filed on August 13, 1997, alleging that the defendants committed fraud,
breach of fiduciary duty, and negligent misrepresentation in the sale and
operation of the various limited partnership commodity pools.
On December 16, 1997, upon motion of the plaintiffs, the action pending in
the Superior Court of the State of Delaware was voluntarily dismissed without
prejudice. The New York Supreme Court dismissed
F-23
<PAGE>
the New York action in November 1998, but granted plaintiffs leave to file an
amended complaint, which they did in early December 1998. The defendants have
filed a motion to dismiss the amended complaint with prejudice on February 1,
1999. 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, including other
Partnerships, could be added as defendants. The Dean Witter Parties believe that
they and Spectrum Select 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 Spectrum
Select or any of the Dean Witter Parties.
6. SUBSEQUENT EVENTS
On March 4, 1999, Stonebrook was removed as a Trading Advisor to Spectrum
Strategic.
On September 24, 1999, the Supreme Court in the State of California, in the case
referred to in Note 5 above, entered an order dismissing the consolidated
amended complaint without prejudice and on consent.
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Limited Partners and the General Partner of
Morgan Stanley Tangible Asset Fund L.P.:
We have audited the accompanying statement of financial condition of Morgan
Stanley Tangible Asset Fund L.P. (the "Partnership") as of December 31, 1998 and
the related statement of operations, changes in partner's capital, and cash
flows for the period from January 2, 1998 through December 31, 1998. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Morgan Stanley Tangible Asset Fund L.P. at
December 31, 1998 and the results of its operations and its cash flows for the
above stated period in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
February 15, 1999
(September 24, 1999 as to Note 5)
F-25
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
$ $
(UNAUDITED)
<S> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 24,365,212 26,519,891
Net unrealized gain (loss) on open contracts 348,578 (635,643)
---------- ----------
Total Trading Equity 24,713,790 25,884,248
Interest receivable (Morgan Stanley) 76,463 78,722
---------- ----------
Total Assets 24,790,253 25,962,970
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 190,111 895,547
Accrued brokerage fees (Morgan Stanley and Morgan Stanley
International) 71,682 81,222
Accrued management fees (Morgan Stanley Dean Witter
Commodities Management) 49,098 55,632
Service fees payable (Demeter) 19,639 22,253
---------- ----------
Total Liabilities 330,530 1,054,654
---------- ----------
PARTNERS' CAPITAL
Limited Partners (3,182,296.716 and 3,745,069.052 Units,
respectively) 24,130,663 24,622,999
General Partner (43,395.648 Units) 329,060 285,317
---------- ----------
Total Partners' Capital 24,459,723 24,908,316
---------- ----------
Total Liabilities and Partners' Capital 24,790,253 25,962,970
========== ==========
NET ASSET VALUE PER UNIT 7.58 6.57
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE NINE MONTHS ENDED JANUARY 2, 1998
SEPTEMBER 30, (COMMENCEMENT OF
----------------------------- OPERATIONS) TO
1999 1998 DECEMBER 31, 1998
----------- ----------- -------------------
$ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUES
Trading profit (loss):
Realized 2,926,692 (7,201,840) (11,870,063)
Net change in unrealized 984,221 (892,798) (635,643)
--------- ---------- -----------
Total Trading Results 3,910,913 (8,094,638) (12,505,706)
Interest Income (Morgan Stanley) 635,611 1,009,087 1,265,793
--------- ---------- -----------
Total Revenues 4,546,524 (7,085,551) (11,239,913)
--------- ---------- -----------
EXPENSES
Brokerage fees (Morgan Stanley and Morgan Stanley
International) 635,674 909,449 1,176,024
Management fees (Morgan Stanley Dean Witter Commodities
Management) 435,393 622,910 805,496
Service fees (Demeter) 174,157 249,164 322,198
--------- ---------- -----------
Total Expenses 1,245,224 1,781,523 2,303,718
--------- ---------- -----------
NET INCOME (LOSS) 3,301,300 (8,867,074) (13,543,631)
========= ========== ===========
Net Income (Loss) Allocation
Limited Partners 3,257,557 (8,773,399) (13,398,948)
General Partner 43,743 (93,675) (144,683)
Net Income (Loss) Per Unit
Limited Partners 1.01 (2.25) (3.43)
General Partner 1.01 (2.25) (3.43)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AND FOR THE PERIOD FROM
JANUARY 2, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------- ----------- -------- -----------
<S> <C> <C> <C> <C>
$ $ $
Partners' Capital, January 2, 1998
(commencement of operations) 200.000 1,000 1,000 2,000
Initial Offering 2,573,486.803 25,475,868 259,000 25,734,868
Offering of Units 1,665,202.477 15,758,355 170,000 15,928,355
Net Loss -- (13,398,948) (144,683) (13,543,631)
Redemptions (450,424.580) (3,213,276) -- (3,213,276)
------------- ----------- -------- -----------
Partners' Capital, December 31, 1998 3,788,464.700 24,622,999 285,317 24,908,316
Net income -- 3,257,557 43,743 3,301,300
Redemptions (562,772.336) (3,749,893) -- (3,749,893)
------------- ----------- -------- -----------
Partners' Capital, September 30, 1999 (Unaudited) 3,225,692.364 24,130,663 329,060 24,459,723
============= =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE NINE MONTHS ENDED JANUARY 2, 1998
SEPTEMBER 30, (COMMENCEMENT OF
-------------------------- OPERATIONS) TO
1999 1998 DECEMBER 31, 1998
----------- ----------- -------------------
$ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 3,301,300 (8,867,074) (13,543,631)
Noncash item included in net income (loss):
Net change in unrealized (984,221) 892,798 635,643
(Increase) decrease in operating assets:
Interest receivable (Dean Witter) 2,259 (101,935) (78,722)
Increase (decrease) in operating liabilities:
Accrued brokerage fees (Morgan Stanley and Morgan
Stanley International) (9,540) 88,228 81,222
Accrued management fees (Morgan Stanley Dean Witter
Commodities Management) (6,534) 60,430 55,632
Service fees payable (Demeter) (2,614) 24,172 22,253
---------- ---------- -----------
Net cash provided by (used for) operating activities 2,300,650 (7,903,381) (12,827,603)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable (705,436) 178,553 895,547
Redemptions of units (3,749,893) (1,619,412) (3,213,276)
Increase in subscriptions receivable -- (267,800) --
Initial offering -- 25,736,868 25,736,868
Offering of units -- 15,928,355 15,928,355
---------- ---------- -----------
Net cash provided by (used for) financing activities (4,455,329) 39,956,564 39,347,494
---------- ---------- -----------
Net increase (decrease) in cash (2,154,679) 32,053,183 26,519,891
Balance at beginning of period 26,519,891 -- --
---------- ---------- -----------
Balance at end of period 24,365,212 32,053,183 26,519,891
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Morgan Stanley Tangible Asset Fund L.P. (the "Partnership") is a
limited partnership organized to engage primarily in the speculative trading of
futures contracts in metals, energy and agricultural markets, (collectively,
"futures interests") and commenced operations on January 2, 1998.
The unaudited interim financial statements contained herein include, in the
opinion of management, all adjustments necessary for a fair presentation of the
results of operations and financial condition of the Partnership. These
financial statements should be read in conjunction with the Partnership's
December 31, 1998 Annual Report on Form 10-K.
The general partner for the Partnership is Demeter Management Corporation. The
commodity brokers are Morgan Stanley & Co. Incorporated and Morgan Stanley & Co.
International Limited, (collectively, the "Commodity Brokers"). The trading
advisor is Morgan Stanley Dean Witter Commodities Management, Inc. (formerly
Morgan Stanley Commodities Management). Morgan Stanley Dean Witter Commodities
Management, the commodity brokers and Demeter are wholly-owned subsidiaries of
Morgan Stanley Dean Witter & Co.
Demeter is required to maintain a 1% minimum interest in the equity of the
Partnership and income (losses) are shared by the General and Limited Partners
based upon their proportional ownership interests.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION--Futures interests are open commitments until settlement
date. They are valued at market on a daily basis and the resulting net change in
unrealized gains and losses is reflected in the change in unrealized profits
(loss) on open contracts from one period to the next in the statement of
operations. Morgan Stanley credits the Partnership at each month-end with
interest income as if 80% of the Partnership's average daily "Net Assets" for
the month, as defined in the Limited Partnership Agreement, were invested at a
rate based on U.S. Treasury bills. For purposes of such interest payments, Net
Assets do not include monies due to the Partnership on or with respect to
futures 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 FUTURES INTERESTS TRADING ACCOUNTS--The Partnership's asset "Equity in
futures interests trading accounts," reflected in the statement of financial
condition, consists of (A) cash on deposit at Morgan Stanley and Morgan Stanley
International to be used as margin for trading and (B) net unrealized gains or
losses on open contracts, which are valued at market, and calculated as the
difference between original contract value and market value.
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS--Brokerage fees are accrued at
a monthly rate of 1/12 of 3.65% of the Net Assets, as defined, as of the first
day of each month (a 3.65% annual rate). Such fees cover all costs of executing
trades by the Partnership, including floor brokerage fees, exchange fees,
clearing house fees, NFA fees, "give-ups" or transfer fees and any costs
associated with taking delivery of commodities.
SERVICE FEE--The Partnership pays Demeter a monthly service fee equal to 1/12 of
1% per month (a 1% annual rate) of the Partnership's Net Assets, as defined, as
of the first day of each month.
F-30
<PAGE>
OPERATING EXPENSES--The Partnership incurs monthly management fees and may incur
incentive fees as described in Note 2. All administrative expenses are borne by
Dean Witter Reynolds Inc.
INCOME TAXES--No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of the Partnership's revenues
and expenses for income tax purposes.
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.
OFFERING OF UNITS--Units of limited partnership interest were offered to the
public at a price equal to 100% of the net asset value as of the close of
business on the last day of the month immediately preceding the four closings
held on January 2, February 2, March 2 and April 1, 1998.
The Partnership, Demeter, MSCM and Dean Witter, the selling agent and an
affiliate of Demeter, extended the Offering Period for those Units already
registered with the SEC but still unsold, until October 16, 1998. The remaining
unsold Units were offered to the public at a price equal to 100% of the Net
Asset Value as of the close of business on the last day of the month;
immediately preceding the three closings held on August 3, September 1, and
October 1, 1998.
REDEMPTIONS--Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value Per Unit effective as of the last day of the sixth month
following the closing at which a person first 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 last day of the twelfth month after such Units were purchased will be
subject to a redemption charge equal to 2% of the Net Asset Value of a Unit on
the date of such redemption. Units redeemed after the last day of the twelfth
month and on or prior to the last day of the twenty-fourth month after which
such Units were purchased will be subject to a redemption charge equal to 1% of
the Net Asset Value per Unit on the date of such redemption. Units redeemed
after the last day of the twenty-fourth month after which such Units were
purchased will not be subject to a redemption charge. Limited Partners who
obtained their Units via an exchange from another Dean Witter-sponsored
commodity pool are not subject to the six month holding period or the redemption
charges.
DISSOLUTION OF THE PARTNERSHIP--The Partnership will terminate on December 31,
2027 or at an earlier date if certain conditions occur as defined in the
Partnership's Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
The Partnership pays brokerage fees to the Commodity Brokers and a service fee
to Demeter as described in Note 1. The Partnership's cash is on deposit with
Morgan Stanley and Morgan Stanley International in futures interests trading
accounts to meet margin requirements as needed. Morgan Stanley pays interest on
these funds as described in Note 1.
Demeter, on behalf of the Partnership and itself entered into a Management
Agreement with Morgan Stanley Dean Witter Commodities Management to make all
trading decisions for the Partnership. Compensation to Morgan Stanley Dean
Witter Commodities Management by the Partnership consists of a management fee
and an incentive fee as follows:
MANAGEMENT FEE--The management fee is accrued at the rate of 5/24 of 1% of the
Net Assets on the first day of each month (a 2.5% annual rate).
INCENTIVE FEE--The Partnership will pay an annual incentive fee equal to 20% of
the "Trading Profits", as defined, as of the end of each calendar year. Such
incentive fee is accrued in each month in which Trading Profits occur. In those
months in which Trading Profits are negative, previous accruals, if any, during
the incentive period will be reduced. Any accrued incentive fees with respect to
Units redeemed at the end of a month that is not the end of a calendar year will
be deducted and paid to Morgan Stanley Commodities Management at the time of
such redemption.
F-31
<PAGE>
3. FINANCIAL INSTRUMENTS
The Partnership trades futures contracts in metals, energy and agricultural
markets. 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.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for fiscal years beginning after
June 15, 1999. The Partnership has elected to adopt the provisions of SFAS No.
133 for the fiscal year ended December 31, 1998. SFAS No. 133 supersedes SFAS
No. 119 and No. 105, which required the disclosure of average aggregate fair
values and contract/notional values, respectively, of derivative financial
instruments for an entity which carries its assets at fair value. The
application of SFAS No. 133 does not have a significant effect on the
Partnership's financial statements.
The unrealized loss on open contracts is reported as a component of "Equity in
futures interests trading accounts" on the Statement of Financial Condition and
totaled $635,643 at December 31, 1998.
The entire $635,643 net unrealized loss on open contracts at December 31, 1998,
was related to exchange-traded futures contracts that mature through June 1999.
The credit risk associated with the instruments in which the Partnership is
involved is limited to the amounts reflected in the Partnership's Statement of
Financial Condition.
The Partnership also has credit risk because Morgan Stanley and Morgan Stanley
International act as the futures commission merchants or the counterparties,
with respect to most of the Partnership's assets. Exchange-traded futures
contracts are marked to market on a daily basis, with variations in value
settled on a daily basis. Each of Morgan Stanley and Morgan Stanley
International, as a futures commission merchant for the Partnership's
exchange-traded futures contracts, are required, pursuant to regulations of the
Commodity Futures Trading Commission, to segregate from their own assets and for
the sole benefit of their commodity customers, all funds held by them with
respect to exchange-traded futures contracts including an amount equal to the
net unrealized loss on all open futures contracts, which funds, in the
aggregate, totaled $25,884,248 at December 31, 1998.
4. LEGAL MATTERS
On September 6, 10, and 20, 1996 and on March 13, 1997, similar purported class
actions were filed in the Superior Court of the State of California, County of
Los Angeles, on behalf of all purchasers of interests in limited partnership
commodity pools sold by Dean Witter. Named defendants include Dean Witter,
Demeter, Dean Witter Futures & Currency Management, Inc., Morgan Stanley Dean
Witter & Co. (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. On June 16,
1997, the plaintiffs in the above actions filed a consolidated amended
complaint, alleging, among other things, that the defendants committed fraud,
deceit, negligent misrepresentation, various violations of the California
Corporations Code, intentional and negligent breach of fiduciary duty,
fraudulent and unfair business practices, unjust enrichment, and conversion in
the sale and operation of the various limited partnership commodity pools.
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 Dean Witter. A consolidated and amended complaint in the action pending in
the Supreme Court of the State of New York was filed on August 13, 1997,
alleging that the defendants committed fraud, breach of fiduciary duty, and
negligent misrepresentation in the sale and operation of the various limited
partnership commodity pools. On December 16, 1997, upon motion of the
plaintiffs, the action pending in the Superior Court of the State of Delaware
was voluntarily dismissed without prejudice. The New York Supreme Court
dismissed the New York action in November 1998, but granted plaintiffs leave to
file an amended complaint, which they did in early December 1998. The defendants
have filed a motion to dismiss the amended complaint with prejudice on
February 1, 1999. The complaints seek unspecified amounts of compensatory and
punitive damages and other relief. It is
F-32
<PAGE>
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.
5. SUBSEQUENT EVENTS
On September 24, 1999, the Superior Court in the State of California, in the
case referred to in Note 4 above, entered an order dismissing the consolidated
amended complaint without prejudice and on consent.
F-33
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Limited Partners and the General Partner of
Morgan Stanley Dean Witter Spectrum Currency L.P.:
We have audited the accompanying statement of financial condition of Morgan
Stanley Dean Witter Spectrum Currency L.P. (the "Partnership") as of
October 26, 1999. This statement of financial condition is the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
this statement of financial condition based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of financial condition is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of financial condition. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement of financial
condition presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such statement of financial condition presents fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Spectrum
Currency L.P. at October 26, 1999 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
October 27, 1999
New York, New York
F-34
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
(LIMITED PARTNERS SHOULD NOTE THAT THEIR OWNERSHIP OF UNITS IN THE PARTNERSHIP
DOES NOT RESULT IN THE OWNERSHIP OF ANY INTEREST IN THE GENERAL PARTNER)
STATEMENT OF FINANCIAL CONDITION
AS OF OCTOBER 26, 1999
<TABLE>
<S> <C>
ASSETS
Equity in Commodity Interest Trading Account:
Cash...................................................... $20
===
PARTNERS' CAPITAL
Limited Partner--1 Unit Outstanding....................... $10
General Partner--1 Unit Outstanding....................... 10
---
$20
===
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-35
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO STATEMENT OF FINANCIAL CONDITION
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Dean Witter Spectrum Currency L.P. (the "Partnership") is a
limited partnership organized under the Delaware Revised Uniform Limited
Partnership Act on October 20, 1999 to engage in the speculative trading of
futures interests in global currency markets. Demeter Management Corporation, as
the general partner of the Partnership (the "General Partner"), and Robert E.
Murray, President of the General Partner, acting as initial Limited Partner,
each made initial capital contributions of $10 to facilitate the filing of a
Certificate of Limited Partnership under the Delaware Revised Uniform Limited
Partnership Act.
The Partnership will offer 12,000,000 Units of Limited Partnership Interest
("Units") for sale to the public at an initial price of $10 per Unit. The
minimum subscription for most subscribers will be $5,000, or $2,000 in the case
of an IRA or in a Non-Series Exchange, as described in the Partnerships'
Prospectus. If at least 600,000 Units of the Partnership are subscribed for
during the "Initial Offering Period" (defined in the Prospectus as the period
ending April 30, 2000, subject to earlier termination or extension to no later
than June 30, 2000) the General Partner may accept such subscriptions at the
"Initial Closing" (currently scheduled for December 31, 1999) and commence
operations of such Partnership. Thereafter, Units of the Partnership will be
sold at Monthly Closings at a price equal to 100% of the Net Asset Value per
Unit (as described in the Partnerships' Prospectus). If it appears that
subscriptions will be received in excess of the Units available for sale, the
General Partner may register additional Units for sale.
The Partnership's cash is on deposit with Dean Witter, an affiliate of the
General Partner, in a futures interest trading account. At each Monthly Closing,
the General Partner will contribute, in $1,000 increments, to the Partnership,
the additional amount in cash that is necessary for it at all times to own, for
its account, Units of General Partnership Interest at least equal to the greater
of $25,000 or 1% of aggregate capital contributions. The General Partner and
each Limited Partner will share in the profits and losses of the Partnership in
proportion to the amount of Partnership interest owned by each.
Both the General Partner and Dean Witter are wholly-owned subsidiaries of Morgan
Stanley Dean Witter & Co.
The Partnership will terminate on December 31, 2035 or at an earlier date if
certain conditions occur as defined in the Partnership's Limited Partnership
Agreement.
2. ORGANIZATION AND OFFERING EXPENSES
The Partnership is not liable for any organizational and offering expenses in
connection with the issuance and distribution of the Units. Dean Witter has
agreed to pay the organizational expenses of the Partnership and the expenses of
offering the Units to the public.
The proceeds from the subscription of Units will be held in escrow and invested
in an interest-bearing money market account. The pro-rata share of interest
earned on accepted or rejected subscription funds while such funds are held in
escrow will be credited to subscribers' customer accounts with Dean Witter.
3. OTHER AGREEMENTS
The proceeds from the the Initial and each Monthly Closing will be used to
establish a futures interests trading account with Dean Witter for each of the
Partnership's Trading Advisors, John W. Henry & Company, Inc.
("JWH-Registered Trademark-") and Sunrise Capital Partners, LLC.
The Partnership will pay a monthly management fee to JWH equal to 1/12 of 4% per
month (a 4% annual rate) and to Sunrise equal to 1/12 of 3% per month (a 3%
annual rate), of the Partnership's Net Assets (as defined in the Prospectus) as
of the first day of each month.
F-36
<PAGE>
The Partnership will also pay a monthly incentive fee to each Trading Advisor
equal to 15% of "Trading profits" as to that Trading Advisor's allocated net
assets as of the end of each calendar month. If the Trading Advisor has losses
with respect to Net Assets at the end of each calendar month, the Trading
Advisor must earn back such losses before the Trading Advisor is eligible for an
incentive fee.
Under the Customer Agreement with Dean Witter, the Partnership will pay Dean
Witter a flat-rate monthly brokerage fee of 1/12 of 4.60% of Net Assets as of
the first day of each month (a 4.60% annual rate).
Under the Customer Agreement with Carr Futures Inc., Dean Witter will pay or
reimburse the Partnership for all fees and costs of Carr Futures for executing
trades by the Partnership.
Dean Witter will credit the Partnership with interest income at month-end at the
rate earned by Dean Witter on its U.S. Treasury bills investments with customer
segregated funds as if 80% of the Partnership's average daily assets for the
month were invested at a prevailing rate on U.S. Treasury bills.
F-37
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Demeter Management Corporation:
We have audited the accompanying statements of financial condition of Demeter
Management Corporation (a wholly-owned subsidiary of Morgan Stanley Dean Witter
& Co.)(the "Company") as of November 30, 1998 and 1997. These statements of
financial condition are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements of financial
condition 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 statement of financial condition is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of financial condition.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement of
financial condition presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such statements of financial condition present fairly, in all
material respects, the financial position of Demeter Management Corporation at
November 30, 1998 and 1997 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
January 11, 1999
New York, New York
(September 24, 1999 as to Note 6)
F-38
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
NOVEMBER 30,
AUGUST 31, ---------------------------
1999 1998 1997
------------ ------------ ------------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Investments in affiliated partnerships (Note 2) 18,403,043 16,959,248 22,016,069
Income taxes receivable 482,302 708,505 429,885
Receivable from affiliated partnerships 19,543 25,716 968
------------ ------------ ------------
Total Assets 18,904,888 17,693,469 22,446,922
============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Payable to Morgan Stanley Dean Witter & Co. (Note 3) 12,739,005 11,648,971 17,995,100
Accrued expenses 36,765 62,198 34,072
------------ ------------ ------------
Total Liabilities 12,775,770 11,711,169 18,029,172
------------ ------------ ------------
STOCKHOLDER'S EQUITY
Common stock, no par value:
Authorized 1,000 shares; Issued and outstanding 100
shares at stated value of $500 per share 50,000 50,000 50,000
Additional paid-in capital 123,170,000 111,170,000 111,170,000
Retained earnings 5,979,118 5,832,300 4,267,750
------------ ------------ ------------
129,199,118 117,052,300 115,487,750
Less: Notes receivable from Morgan Stanley Dean
Witter & Co. (Note 4) (123,070,000) (111,070,000) (111,070,000)
------------ ------------ ------------
Total Stockholder's Equity 6,129,118 5,982,300 4,417,750
------------ ------------ ------------
Total Liabilities and Stockholder's Equity 18,904,888 17,693,469 22,446,922
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements of financial
condition.
F-39
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION
(INFORMATION WITH RESPECT TO 1999 IS UNAUDITED)
1. BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Demeter Management Corporation ("Demeter") is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co.
On May 31, 1997, Morgan Stanley Group Inc. ("Morgan Stanley") was merged with
and into Dean Witter, Discover & Co. At that time Dean Witter, Discover changed
its corporate name to Morgan Stanley, Dean Witter, Discover & Co.. Effective
February 19, 1998 MSDWD changed its corporate name to Morgan Stanley Dean Witter
& Co. Prior to the merger, Dean Witter, Discover's fiscal year ended on December
31. Subsequent to the merger, Morgan Stanley Dean Witter & Co. and Demeter
adopted a fiscal year end of November 30.
Demeter manages the following commodity pools as their sole general partner:
Dean Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III, Dean Witter
Cornerstone Fund IV, Columbia Futures Fund, Dean Witter Diversified Futures Fund
Limited Partnership, Dean Witter Diversified Futures Fund II L.P., Dean Witter
Diversified Futures Fund III L.P., Dean Witter Multi-Market Portfolio L.P.
(formerly, Dean Witter Principal Guaranteed Fund L.P.), Dean Witter Principal
Plus Fund L.P., Dean Witter Principal Plus Fund Management L.P., Dean Witter
Portfolio Strategy Fund L.P. (formerly, Dean Witter Principal Secured Futures
Fund L.P.), Dean Witter Global Perspective Portfolio L.P., Dean Witter World
Currency Fund L.P., Dean Witter Institutional Account II L.P., DWFCM
International Access Fund L.P., Dean Witter Anchor Institutional Balanced
Portfolio Account L.P., Morgan Stanley Dean Witter Spectrum Global
Balanced L.P., Morgan Stanley Dean Witter Spectrum Strategic L.P., Morgan
Stanley Dean Witter Spectrum Technical L.P., Morgan Stanley Dean Witter Spectrum
Select L.P., Morgan Stanley Dean Witter Spectrum Commodity L.P. (formerly,
Morgan Stanley Tangible Asset Fund L.P.), Morgan Stanley Dean
Witter/Chesapeake L.P., DWR Institutional Balanced Portfolio Account III L.P.,
Morgan Stanley Dean Witter/JWH Futures Fund L.P., Morgan Stanley Dean
Witter/Market Street Futures Fund L.P., Morgan Stanley Dean Witter Charter
Graham L.P., Morgan Stanley Dean Witter Charter Millburn L.P., and Morgan
Stanley Dean Witter Charter Welton L.P.
Each of the commodity pools is a limited partnership organized to engage in the
speculative trading of commodity futures contracts, forward contracts on foreign
currencies and other commodity interests.
Demeter reopened Dean Witter Principal Secured Futures Fund for additional
investment and on May 12, 1997, Dean Witter Principal Secured Futures Fund
registered with the SEC 50,000 units which were offered to investors in a public
offering.
On July 31, 1997, Demeter entered into a limited partnership agreement as
general partner in Morgan Stanley Tangible Asset Fund. On November 4, 1997,
Morgan Stanley Tangible Asset Fund registered with the SEC 5,000,000 units and
began trading on January 2, 1998. Units were made available to investors in a
public offering that ended March 12, 1998 ("Offering Period"). Subsequently,
Morgan Stanley Tangible Asset Fund, Demeter, the trading advisor and Dean Witter
Reynolds agreed to extend the Offering Period until no later than October 16,
1998 ("Extended Offering Period"), and offered to the public unsold units
remaining at the end of the Offering Period.
On September 18, 1997, Demeter ceased trading activities in Dean Witter Anchor
Institutional Balanced Portfolio Account and subsequently distributed its net
assets.
In January of 1998, Demeter entered into a limited partnership agreement as
general partner in Morgan Stanley Dean Witter Market Street Futures Fund, which
offers units to investors in a continuing private offering. The fund began
trading on October 1, 1998.
On April 20, 1998, Dean Witter Spectrum Balanced L.P. changed its name to Dean
Witter Spectrum Global Balanced L.P.
F-40
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
On April 20, 1998, Dean Witter Select Futures Fund L.P. changed its name to Dean
Witter Spectrum Select L.P. Effective May 1, 1998 Spectrum Select became part of
the Spectrum family of funds and consequently revised its fee structure,
instituted an exchange provision with other funds in the Spectrum family and is
offered to investors in a continuing public offering.
On April 30, 1998, Demeter ceased trading activities in Dean Witter
Institutional Account II and subsequently distributed its net assets.
On May 11, 1998 Demeter registered with the SEC 5,000,000 additional units of
Dean Witter Spectrum Technical L.P. and 1,500,000 units of Spectrum Select, both
of which are being offered to investors in a continuing public offering with
previously registered units of Dean Witter Spectrum Strategic L.P. and Dean
Witter Spectrum Global Balanced L.P.
On July 15, 1998, Demeter entered into a limited partnership agreement as
general partner in the Morgan Stanley Dean Witter Charter Series. The three
partnerships that comprise the Charter Series are Morgan Stanley Dean Witter
Charter Graham L.P., Morgan Stanley Dean Witter Charter Millburn L.P. and Morgan
Stanley Dean Witter Charter Welton L.P. On July 29, 1998, the Charter Series
individually registered with the SEC 3,000,000 units of Charter Graham,
3,000,000 units of Charter Millburn and 3,000,000 units of Charter Welton to be
offered to investors for a limited time in a public offering.
On September 30, 1998, Demeter ceased trading activities in Dean Witter
Institutional Balanced Portfolio Account III, and subsequently distributed its
net assets.
INCOME TAXES The results of operations of Demeter are included in the
consolidated federal income tax return of Morgan Stanley Dean Witter & Co.,
computed on a separate company basis and due to Morgan Stanley Dean
Witter & Co.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The unaudited interim statement of financial condition contained herein
includes, in the opinion of management, all adjustments necessary for a fair
presentation of the statement of financial condition of Demeter.
2. INVESTMENTS IN AFFILIATED PARTNERSHIPS
The limited partnership agreement of each commodity pool requires Demeter to
maintain a general partnership interest in each partnership, generally in an
amount equal to, but not less than 1 percent of the aggregate capital
contributed to the partnership by all partners.
The total assets, liabilities and partners' capital of all the funds managed by
Demeter at August 31, 1999, November 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
AUGUST 31, -----------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
$ $ $
Total assets................................... 1,419,112,993 1,316,093,947 1,195,307,516
Total liabilities.............................. 20,595,220 21,644,069 19,346,113
Total partners' capital........................ 1,398,517,773 1,294,449,878 1,175,961,403
</TABLE>
Demeter's investments in the above limited partnerships are carried at market
value with changes in such market value reflected currently in operations.
F-41
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION (CONCLUDED)
3. PAYABLE TO MORGAN STANLEY DEAN WITTER & CO.
The payable to Morgan Stanley Dean Witter & Co. is primarily for amounts due for
the purchase of partnership investments, income tax payments made by Morgan
Stanley Dean Witter & Co. on behalf of Demeter and the cumulative results of
operations.
4. NET WORTH REQUIREMENT
At August 31, 1999, Demeter held non-interest bearing notes from Morgan Stanley
Dean Witter & Co. that were payable on demand in the amount of $123,070,000. At
November 30, 1998 and 1997, Demeter held non-interest bearing notes from Morgan
Stanley Dean Witter & Co. that were payable on demand in the amount of
$111,070,000. These notes were received in connection with additional capital
contributions.
The limited partnership agreement of each commodity pool requires Demeter to
maintain its net worth at an amount not less than 10% of the capital
contributions by all partners in each pool in which Demeter is the general
partner (15% if the capital contributions to any partnership are less than
$2,500,000, or $250,000, whichever is less).
In calculating this requirement, Demeter's interests in each limited partnership
and any amounts receivable from or payable to such partnerships are excluded
from net worth. Notes receivable from Morgan Stanley Dean Witter & Co. are
included in net worth for purposes of this calculation.
5. LEGAL MATTERS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported class
actions were filed in the Superior Court of the State of California, County of
Los Angeles, on behalf of all purchasers of interests in limited partnership
commodity pools sold by Dean Witter, an affiliate of Demeter. Named defendants
include Dean Witter, Demeter, Dean Witter Futures and Currency Management Inc.,
Morgan Stanley Dean Witter & Co. (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. On
June 16, 1997, the plaintiffs in the above actions filed a consolidated amended
complaint alleging, among other things, that the defendants committed fraud,
deceit, negligent misrepresentation, various violations of the California
Corporations Code, intentional and negligent breach of fiduciary duty,
fraudulent and unfair business practices, unjust enrichment, and conversion in
the sale and operation of the various limited partnership commodity pools.
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 Dean Witter. A consolidated and amended complaint in the action pending
in the Supreme Court of the State of New York was filed on August 13, 1997,
alleging that the defendants committed fraud, breach of fiduciary duty, and
negligent misrepresentation in the sale and operation of the various limited
partnership commodity pools.
On December 16, 1997, upon motion of the plaintiffs, the action pending in
the Superior Court of the State of Delaware was voluntarily dismissed without
prejudice. The New York Supreme Court dismissed the New York action in November
1998, but granted plaintiffs leave to file an amended complaint, which they did
in early December 1998. The defendants have filed a motion to dismiss the
amended complaint with prejudice on February 1, 1999. 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. On April 12, 1999 the defendants also filed a motion in
the California action to oppose certification by the court of the class in the
California litigation. 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.
6. SUBSEQUENT EVENTS
On September 24, 1999, the Supreme Court in the State of California, in the case
referred to in Note 5 above, entered an order dismissing the consolidated
complaint without prejudice and on consent.
F-42
<PAGE>
EXHIBIT A
TABLE OF CONTENTS TO FORM OF LIMITED PARTNERSHIP AGREEMENT
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C> <C>
1. Formation; Name................................................... A-2
2. Office............................................................ A-2
3. Business.......................................................... A-2
4. Term; Dissolution; Fiscal Year.................................... A-2
(a) Term........................................................ A-2
(b) Dissolution................................................. A-3
(c) Fiscal Year................................................. A-4
5. Net Worth of General Partner...................................... A-4
6. Capital Contributions and Offering of Units of Limited Partnership
Interest.......................................................... A-4
7. Allocation of Profits and Losses; Accounting; Other Matters....... A-6
(a) Capital Accounts............................................ A-6
(b) Monthly Allocations......................................... A-6
(c) Allocation of Profit and Loss for Federal Income Tax
Purposes................................................... A-6
(d) Definitions; Accounting..................................... A-8
(e) Expenses and Limitations Thereof............................ A-8
(f) Limited Liability of Limited Partners....................... A-9
(g) Return of Limited Partner's Capital Contribution............ A-9
(h) Distributions............................................... A-9
(i) Interest on Assets.......................................... A-9
8. Management and Trading Policies................................... A-9
(a) Management of the Partnership............................... A-9
(b) The General Partner......................................... A-10
(c) General Trading Policies.................................... A-11
(d) Changes to Trading Policies................................. A-12
(e) Miscellaneous............................................... A-12
9. Audits; Reports to Limited Partners............................... A-13
10. Transfer; Redemption of Units; Exchange Privilege................. A-14
(a) Transfer.................................................... A-14
(b) Redemption.................................................. A-15
(c) Exchange Privilege.......................................... A-16
11. Special Power of Attorney......................................... A-17
12. Withdrawal of Partners............................................ A-18
13. No Personal Liability for Return of Capital....................... A-18
14. Standard of Liability; Indemnification............................ A-18
(a) Standard of Liability....................................... A-18
(b) Indemnification by the Partnership.......................... A-18
(c) Affiliate................................................... A-19
(d) Indemnification by Partners................................. A-19
15. Amendments; Meetings.............................................. A-19
(a) Amendments with Consent of the General Partner.............. A-19
(b) Meetings.................................................... A-20
(c) Amendments and Actions without Consent of the General
Partner.................................................... A-20
(d) Action Without Meeting...................................... A-20
(e) Amendments to Certificate of Limited Partnership............ A-21
16. Index of Defined Terms............................................ A-21
17. Governing Law..................................................... A-22
18. Miscellaneous..................................................... A-22
(a) Priority among Limited Partners............................. A-22
(b) Notices..................................................... A-22
(c) Binding Effect.............................................. A-22
(d) Captions.................................................... A-22
Annex A--Request for Redemption: Morgan Stanley Dean Witter
Managed Futures Funds...................................... A-24
</TABLE>
A-i
<PAGE>
EXHIBIT A
FORM OF (1) AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT FOR MORGAN
STANLEY DEAN WITTER SPECTRUM SELECT L.P., MORGAN STANLEY DEAN WITTER SPECTRUM
TECHNICAL L.P., MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P., MORGAN
STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P., AND MORGAN STANLEY DEAN
WITTER SPECTRUM COMMODITY L.P.; AND (2) LIMITED PARTNERSHIP AGREEMENT FOR MORGAN
STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
BOLDFACED CAPTIONS AND BRACKETED TEXT REFLECT DIFFERENCES IN LIMITED
PARTNERSHIP AGREEMENTS.
SPECTRUM SELECT ONLY:
This Agreement of Limited Partnership, made as of March 21, 1991, as amended
and restated as of August 31, 1993, as further amended and restated as of
October 17, 1996, and as further amended and restated as of May 31, 1998, by and
among Demeter Management Corporation, a Delaware corporation (the "General
Partner"), and the other parties who shall execute this Agreement, whether in
counterpart, by separate instrument, or otherwise, as limited partners
(collectively "Limited Partners"; the General Partner and Limited Partners may
be collectively referred to herein as "Partners"). The definitions of
capitalized terms used in this Agreement and not defined where used may be found
by reference to the index of defined terms in Section 16.
SPECTRUM TECHNICAL, SPECTRUM STRATEGIC AND SPECTRUM GLOBAL BALANCED ONLY:
This Agreement of Limited Partnership, made as of May 27, 1994, as amended
and restated as of May 31, 1998, by and between Demeter Management Corporation,
a Delaware corporation (the "General Partner"), and the other parties who shall
execute this Agreement, whether in counterpart, by separate instrument, or
otherwise, as limited partners (collectively "Limited Partners"; the General
Partner and Limited Partners may be collectively referred to herein as
"Partners"). The definitions of capitalized terms used in this Agreement and not
defined where used may be found by reference to the index of defined terms in
Section 16.
SPECTRUM COMMODITY ONLY:
This Agreement of Limited Partnership, made as of July 31, 1997, as amended
and restated as of - , 1999 (as so amended, this "Agreement"), by and among
Demeter Management Corporation, a Delaware corporation (the "General Partner"),
and the other parties who shall execute this Agreement, whether in counterpart,
by separate instrument, or otherwise, as limited partners (collectively "Limited
Partners"; the General Partner and Limited Partners may be collectively referred
to herein as "Partners"). The definitions of capitalized terms used in this
Agreement and not defined where used may be found by reference to the index of
defined terms in Section 16.
SPECTRUM CURRENCY ONLY:
This Agreement of Limited Partnership, made as of - , 1999 (as so
amended, this "Agreement"), by and among Demeter Management Corporation, a
Delaware corporation (the "General Partner") , and the other parties who shall
execute this Agreement, whether in counterpart, by separate instrument, or
otherwise, as limited partners (collectively "Limited Partners; the General
Partner and Limited Partners may be collectively referred to herein as
"Partners") The definitions of capitalized terms used in this Agreement and not
defined where used may be found by reference to the index of defined terms in
Section 16.
WITNESSETH:
WHEREAS, the parties hereto desire to form a limited partnership for the
purpose of engaging in the speculative trading of future interests.
A-1
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. FORMATION; NAME.
The parties hereto do hereby form a limited partnership under the Delaware
Revised Uniform Limited Partnership Act, as amended and in effect on the date
hereof (the "Act"). The name of the limited partnership is Morgan Stanley Dean
Witter Spectrum [Select][Technical][Strategic][Global
Balanced][Commodity][Currency] L.P. (the "Partnership"). The General Partner
shall execute and file a Certificate of Limited Partnership of the Partnership
(the "Certificate of Limited Partnership") in accordance with the Act, and shall
execute, file, record, and publish as appropriate such amendments, assumed name
certificates, and other documents as are or become necessary or advisable in
connection with the operation of the Partnership, as determined by the General
Partner, and shall take all steps which the General Partner may deem necessary
or advisable to allow the Partnership to conduct business as a limited
partnership where the Partnership conducts business in any jurisdiction, and to
otherwise provide that Limited Partners will have limited liability with respect
to the activities of the Partnership in all such jurisdictions, and to comply
with the law of any jurisdiction. Each Limited Partner hereby undertakes to
furnish to the General Partner a power of attorney and such additional
information as the General Partner may request to complete such documents and to
execute and cooperate in the filing, recording, or publishing of such documents
as the General Partner determines appropriate.
2. OFFICE.
The principal office of the Partnership shall be Two World Trade Center,
62nd Floor, New York, New York 10048, or such other place as the General Partner
may designate from time to time.
The address of the principal office of the Partnership in the State of
Delaware is c/o The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the name
and address of the registered agent for service of process on the Partnership in
the State of Delaware is The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, or
such other agent as the General Partner shall designate from time to time.
3. BUSINESS.
The Partnership's business and general purpose is to trade, buy, sell,
spread, or otherwise acquire, hold, or dispose of commodities (including, but
not limited to, foreign currencies, mortgage-backed securities, money market
instruments, financial instruments, and any other securities or items which are
now, or may hereafter be, the subject of futures contract trading), domestic and
foreign commodity futures contracts, commodity forward contracts, foreign
exchange commitments, options on physical commodities and on futures contracts,
spot (cash) commodities and currencies, and any rights pertaining thereto
(hereinafter referred to collectively as "Futures Interests") and securities
(such as United States Treasury securities) approved by the Commodity Futures
Trading Commission (the "CFTC") for investment of customer funds and other
securities on a limited basis, and to engage in all activities incident thereto.
The objective of the Partnership's business is appreciation of its assets
through speculative trading. The Partnership may pursue this objective in any
lawful manner consistent with the Partnership's trading policies. The
Partnership may engage in the foregoing activities either directly or through
any lawful transaction or any lawful activity into which a limited partnership
may enter or in which a limited partnership may engage under the laws of the
State of Delaware; provided that such transactions or activities do not subject
the Limited Partners to any liability in excess of the limited liability
provided for herein and contemplated by the Act.
4. TERM; DISSOLUTION; FISCAL YEAR.
SPECTRUM SELECT ONLY:
(a) TERM. The term of the Partnership shall commence upon the filing of
the Certificate of Limited Partnership in the Office of the Secretary of State
of the State of Delaware and shall end upon the first to occur of the following:
(i) December 31, 2025; (ii) withdrawal, insolvency, bankruptcy, dissolution,
liquidation, or termination of the General Partner, unless the business of the
Partnership shall be continued by any remaining or successor general partner(s)
in accordance with the provisions hereof;
A-2
<PAGE>
(iii) receipt by the General Partner of a notice setting forth an election to
terminate and dissolve the Partnership at a specified time by Limited Partners
owning more than 50% of the outstanding Units (as defined in Section 6), which
notice shall be sent by registered mail to the General Partner not less than
90 days prior to the effective date of such termination and dissolution; (iv) a
decline in the Net Asset Value (as defined in Section 7(d)(2)) of a Unit as of
the close of business (as determined by the General Partner) on any day to less
than $2.50; (v) a decline in the Partnership's Net Assets (as defined in
Section 7(d)(1)) as of the close of business (as determined by the General
Partner) on any day to or less than $250,000; (vi) a determination by the
General Partner that the Partnership's Net Assets in relation to the operating
expenses of the Partnership make it unreasonable or imprudent to continue the
business of the Partnership; (vii) the occurrence of any event which shall make
it unlawful for the existence of the Partnership to be continued; or (viii) a
determination by the General Partner to terminate the Partnership following a
Special Redemption Date as described in Section 9.
SPECTRUM TECHNICAL, SPECTRUM STRATEGIC, SPECTRUM GLOBAL BALANCED, AND SPECTRUM
CURRENCY ONLY:
(A) TERM. The term of the Partnership shall commence upon the filing of
the Certificate of Limited Partnership in the Office of the Secretary of State
of the State of Delaware and shall end upon the first to occur of the following:
(i) December 31, 2035; (ii) receipt by the General Partner of a notice setting
forth an election to terminate and dissolve the Partnership at a specified time
by Limited Partners owning more than 50% of the outstanding Units (as defined in
Section 6 below), which notice shall be sent by registered mail to the General
Partner not less than 90 days prior to the effective date of such termination
and dissolution; (iii) the withdrawal, insolvency, bankruptcy, dissolution,
liquidation or termination of the General Partner, unless the business of the
Partnership shall be continued by any remaining or successor general partner(s)
in accordance with the provisions hereof; (iv) the occurrence of any event which
shall make it unlawful for the existence of the Partnership to be continued;
(v) a decline in the Net Asset Value (as defined in Section 7(d)(2)) of a Unit
as of the close of business (as determined by the General Partner) on any day to
less than $2.50; (vi) a decline in the Partnership's Net Assets (as defined in
Section 7(d)(1)) as of the close of business (as determined by the General
Partner) on any day to or below $250,000; (vii) a determination by the General
Partner upon 60 days notice to the Limited Partners to terminate the
Partnership; or (viii) a determination by the General Partner to terminate the
Partnership following a Special Redemption Date as described in Section 9.
SPECTRUM COMMODITY ONLY:
(a) TERM. The term of the Partnership shall commence upon the filing of
the Certificate of Limited Partnership in the Office of the Secretary of State
of the State of Delaware and shall end upon the first to occur of the following:
(i) December 31, 2027; (ii) the insolvency, bankruptcy, dissolution,
liquidation, or termination of any general partner, unless the business of the
Partnership shall be continued by any remaining or successor general partner(s)
in accordance with the provisions hereof; (iii) the occurrence of any event
which shall make it unlawful for the existence of the Partnership to be
continued; (iv) an election to terminate and dissolve the Partnership at a
specified time by Limited Partners owning more than 50% of the Units then
outstanding, notice of which is sent by registered mail to the General Partner
not less than 90 days prior to the effective date of such termination and
dissolution; (v) withdrawal by the General Partner (unless a new general
partner(s) is elected by the Limited Partners as provided in Section 15(c));
(vi) a decline in the Net Asset Value (as determined by the General Partner) of
a Unit as of the close of business on any day to less than $2.50; (vii) a
decline in the Partnership's Net Assets (as determined by the General Partner)
as of the close of business on any day to $250,000 or less; (viii) a
determination by the General Partner that the Partnership's Net Assets in
relation to the operating expenses of the Partnership make it unreasonable or
imprudent to continue the business of the Partnership; or (ix) a determination
by the General Partner to terminate the Partnership following a Special
Redemption Date.
(b) DISSOLUTION. Upon the occurrence of an event causing the termination
of the Partnership, the Partnership shall terminate and be dissolved.
Dissolution, payment of creditors, and distribution of the Partnership's Net
Assets shall be effected as soon as practicable in accordance with the Act,
except that the General Partner and each Limited Partner (and any assignee)
shall share in the Net Assets of the Partnership pro rata in accordance with
such Partner's respective capital account, less any amount owing by such Partner
(or assignee) to the Partnership. The General Partner shall, at its option, be
entitled to supervise the liquidation of the Partnership.
A-3
<PAGE>
Nothing contained in this Agreement shall impair, restrict, or limit the
rights and powers of the Partners under the law of the State of Delaware and any
other jurisdiction in which the Partnership shall be conducting business to
reform and reconstitute themselves as a limited partnership following
dissolution of the Partnership, either under provisions identical to those set
forth herein or any others which they shall deem appropriate.
(c) FISCAL YEAR. The fiscal year of the Partnership shall begin on
January 1 of each year and end on the following December 31.
5. NET WORTH OF GENERAL PARTNER.
The General Partner agrees that at all times, as long as it remains General
Partner of the Partnership, it shall maintain its net worth at an amount not
less than 10% of the total contributions to the Partnership by all Partners and
to any other limited partnership for which it acts as a general partner by all
partners; PROVIDED, HOWEVER, that if the total contributions to the Partnership
by all such partnership's partners, or to any limited partnership for which it
acts as a general partner by all partners, are less than $2,500,000, then with
respect to the Partnership and any such limited partnership, the General Partner
shall maintain its net worth at an amount of at least 15% of the total
contributions to the Partnership by all Partners and of the total contributions
to any such limited partnership for which it acts as a general partner by all
such partnership's partners or $250,000, whichever is the lesser; and, PROVIDED,
FURTHER, that in no event shall the General Partner's net worth be less than
$50,000. For the purposes of this Section 5, "net worth" shall be calculated in
accordance with generally accepted accounting principles, except as otherwise
specified in this Section 5, with all current assets based on their then current
market values. The interests owned by the General Partner in the Partnership and
any other partnerships for which it acts as a general partner and any notes and
accounts receivable from and payable to any limited partnership in which it has
an interest shall not be included as an asset in calculating its net worth, but
any notes receivable from an affiliate (as such term is defined in
Regulation S-X of the rules and regulations of the Securities and Exchange
Commission (the "SEC")) of the General Partner or letters of credit may be
included.
The General Partner agrees that it shall not be a general partner of any
limited partnership other than the Partnership unless, at all times when it is a
general partner of any such additional limited partnership, its net worth is at
least equal to the net worth required by the preceding paragraph of this
Section 5.
The requirements of the preceding two paragraphs of this Section 5 may be
modified by the General Partner at its option, without notice to or the consent
of the Limited Partners, PROVIDED THAT: (a) such modification does not adversely
affect the interests of the Limited Partners, and (b) the General Partner
obtains a written opinion of counsel for the Partnership that such proposed
modification: (i) will not adversely affect the classification of the
Partnership as a partnership for federal income tax purposes, (ii) will not
adversely affect the status of the Limited Partners as limited partners under
the Act, and (iii) will not violate any applicable state securities or Blue Sky
law or any rules, regulations, guidelines, or statements of policy promulgated
or applied thereunder; PROVIDED, HOWEVER, that the General Partner's net worth
may not be reduced below the lesser of (A) the net worth required by
Section II.B of the Guidelines for Registration of Commodity Pool Programs, as
adopted in revised form by the North American Securities Administrators
Association, Inc. in September, 1993 (the "NASAA Guidelines"), and (B) the net
worth required by such Guidelines as in effect on the date of such proposed
modification.
6. CAPITAL CONTRIBUTIONS AND OFFERING OF UNITS OF LIMITED PARTNERSHIP INTEREST.
The General Partner shall contribute to the Partnership, in $1,000
increments, such amount in cash as is necessary to make the General Partner's
capital contribution at least equal to the greater of: (a) 1% of aggregate
capital contributions to the Partnership by all Partners (including the General
Partner's contribution) and (b) $25,000. Such contribution by the General
Partner need not exceed the amount described above and shall be evidenced by
Units of General Partnership Interest ("Unit(s) of General Partnership
Interest"). The General Partner shall maintain its interest in the capital of
the Partnership at no less than the amount stated above. The General Partner,
without notice to or consent of the Limited Partners, may withdraw any portion
of its interest in the Partnership that is in excess of its required interest
described above. Interests in the Partnership, other than the General
Partnership Interest of the General Partner, shall be Units of Limited
Partnership Interest ("Units" or, individually, a "Unit"). The net asset value
of a Unit of General Partnership Interest shall at all times be equivalent to
the Net Asset Value of a Unit of Limited Partnership Interest.
A-4
<PAGE>
The General Partner, for and on behalf of the Partnership, shall issue and
sell Units to persons desiring to become Limited Partners, PROVIDED that such
persons shall be determined by the General Partner to be qualified investors and
their subscriptions for Units shall be accepted by the General Partner, which
acceptance the General Partner may withhold in whole or in part in its sole
discretion. The minimum subscription for Units per subscriber shall be such
amount as the General Partner shall determine from time to time in its sole
discretion.
The Partnership, directly and/or through Dean Witter Reynolds Inc. ("DWR")
or such other selling agent or agents (each, a "Selling Agent") as may be
approved by the General Partner, may at any time and from time to time in the
sole discretion of the General Partner offer for sale Units and fractions of
Units (to the third decimal place) in public and/or private offerings, at prices
per Unit, in such minimum amounts, for such periods of time, and on such terms
and conditions as the General Partner shall determine in its sole discretion.
Units offered during any offering shall be issued and sold by the Partnership as
of the close of business (as determined by the General Partner) on the last
business day of a fiscal quarter or month and a closing for subscriptions
received during such offering shall be held as of such date; PROVIDED, HOWEVER,
that the General Partner may hold closings at such other times and for such
other periods as it shall determine in its sole discretion to effectuate such
offerings. At each such closing, the Partnership shall issue and sell Units to
each subscriber whose subscription shall be accepted by the General Partner at a
price per Unit to be determined by the General Partner in its sole discretion;
PROVIDED, HOWEVER, that the offering price per Unit during any offering of Units
shall not at any time be less than the Net Asset Value of a Unit as of the close
of business on the date of the applicable closing at which such Unit shall be
issued and sold, unless the newly offered Units' participation in the
Partnership's profits and losses is proportionately reduced. During any
offering, Units may be subscribed for by the General Partner, DWR,
Morgan Stanley Dean Witter & Co. ("MSDW"), any trading advisor to the
Partnership (each, a "Trading Advisor"), any commodity broker for the
Partnership (each, a "Commodity Broker"), and such persons' respective
shareholders, directors, officers, partners, employees, principals, and
Affiliates. Subscriptions for Units by such persons shall not preclude them from
receiving compensation from the Partnership for services rendered by them in
their respective capacities as other than Limited Partners. No subscriber for
Units during any offering of Units shall become a Limited partner until the
General Partner shall: (a) accept such subscriber's subscription at a closing
relating to such offering; (b) execute this Agreement on behalf of such
subscriber pursuant to the power of attorney in the subscription agreement
executed by the subscriber in connection with such offering; and (c) make an
entry on the books and records of the Partnership reflecting that such
subscriber has been admitted as a Limited Partner. Accepted subscribers shall be
deemed Limited Partners at such time as their admission shall be reflected on
the books and records of the Partnership. The aggregate of all capital
contributions to the Partnership shall be available to the Partnership to carry
on its business and no interest shall be paid by the Partnership on any such
contribution.
In connection with any offering of Units by the Partnership, the General
Partner, on behalf of the Partnership, shall: (a) cause to be filed one or more
Disclosure Documents and such amendments and supplements thereto as the General
Partner shall deem advisable or as may be required by applicable law with the
CFTC and the National Futures Association ("NFA"), Forms D or other
applications, notices or forms with the SEC and state securities and Blue Sky
administrators, and Registration Statements, Prospectuses (as used hereinafter,
the term "Prospectus" shall mean the most recent version of the Prospectus
issued by the Partnership, or the most recent version of the Disclosure Document
or other offering memorandum prepared, in connection with the particular
offering of Units), and such amendments and supplements thereto as the General
Partner shall deem advisable or as may be required by applicable law, with the
CFTC, the NFA, the SEC, and the National Association of Securities Dealers,
Inc.; (b) qualify by registration or exemption from registration the Units for
sale under the Blue Sky and securities laws of such states of the United States
and such other jurisdictions as the General Partner in its sole discretion shall
deem advisable or as may be required by applicable law; (c) make such
arrangements for the sale of Units as it shall deem advisable, including
engaging DWR or any other firm as Selling Agent and entering into a selling
agreement with DWR or such other Selling Agent; and (d) take such action with
respect to and in order to effectuate the matters described in clauses
(a) through (c) as it shall deem advisable or necessary.
The Partnership shall not pay the costs of any offering or any selling
commissions relating thereto. No Limited Partner shall have any preemptive,
preferential or other rights with respect to the issuance or sale
A-5
<PAGE>
of any additional Units, except as described in the applicable Prospectus. No
Limited Partner shall have the right to consent to the admission of any
additional Limited Partner. There is no maximum aggregate amount of
contributions which may be received by the Partnership.
All Units subscribed for shall be issued subject to the collection of good
funds. If, at any time, good funds representing payment for Units are not made
available to the Partnership because a subscriber has provided bad funds in the
form of a bad check or draft or otherwise to DWR or another Selling Agent which,
in turn, has deposited the subscription amount with the escrow agent, the
Partnership shall cancel the Units issued to such subscriber represented by such
bad funds, and the subscriber's name shall be removed as a Limited Partner from
the books and records of the Partnership. Any losses or profits sustained by the
Partnership as a result thereof in connection with its Futures Interests trading
allocable to such cancelled Units shall be deemed a decrease or increase in Net
Assets and allocated among the remaining Partners as described in Section 7.
Each Limited Partner agrees to reimburse the Partnership for any expense or loss
incurred in connection with the issuance and cancellation of any such Units
issued to such Limited Partner.
7. ALLOCATION OF PROFITS AND LOSSES; ACCOUNTING; OTHER MATTERS.
(a) CAPITAL ACCOUNTS. A capital account shall be established for each
Partner. The initial balance of each Partner's capital account shall be the
amount of a Partner's initial capital contribution to the Partnership.
(b) MONTHLY ALLOCATIONS. As of the close of business (as determined by the
General Partner) on the last day of each calendar month ("Determination Date")
during each fiscal year of the Partnership, the following determinations and
allocations shall be made:
(1) The Net Assets of the Partnership (as defined in Section 7(d)(1)),
before accrual of the monthly management fees and incentive fees payable to
any Trading Advisor, shall be determined.
(2) The accrued monthly management fees shall then be charged against
Net Assets.
(3) The accrued monthly incentive fees, if any, shall then be charged
against Net Assets.
(4) Any increase or decrease in Net Assets (after the adjustments in
subparagraphs (2) and (3) above), over those of the immediately preceding
Determination Date (or, in the case of the first Determination Date, the
first closing of the sale of Units to the public), shall then be credited or
charged to the capital account of each Partner in the ratio that the balance
of each account bears to the balance of all accounts.
(5) The amount of any distribution to a Partner, any amount paid to a
Partner on redemption of Units, any amount deemed received by a Partner on a
Series Exchange of Units pursuant to Section 10(c) hereof, and any amount
paid to the General Partner upon withdrawal of its interest in the
Partnership shall be charged to that Partner's capital account.
(c) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES. As of
the end of each fiscal year of the Partnership, the Partnership's realized
profit or loss shall be allocated among the Partners pursuant to the following
subparagraphs for federal income tax purposes. Such allocations of profit and
loss will be pro rata from net capital gain or loss and net operating income or
loss realized by the Partnership. For United States federal income tax purposes,
a distinction will be made between net short-term gain or loss and net long-term
gain or loss.
(1) Items of ordinary income (such as interest or credits in lieu of
interest) and expense (such as the management fees, incentive fees,
brokerage fees and extraordinary expenses) shall be allocated pro rata among
the Partners based on their respective capital accounts (exclusive of these
items of ordinary income or expense) as of the end of each month in which
the items of ordinary income or expense accrued.
(2) Net realized capital gain or loss from the Partnership's trading
activities shall be allocated as follows:
(aa) For the purpose of allocating the Partnership's net realized
capital gain or loss among the Partners, there shall be established an
allocation account with respect to each outstanding
A-6
<PAGE>
Unit. The initial balance of each allocation account shall be the amount
paid by the Partner to the Partnership for the Unit. Allocation accounts
shall be adjusted as of the end of each fiscal year and as of the date a
Partner completely redeems his Units as follows:
(i) Each allocation account shall be increased by the amount of
income allocated to the holder of the Unit pursuant to
subparagraph (c)(1) above and subparagraph (c)(2)(cc) below.
(ii) Each allocation account shall be decreased by the amount of
expense or loss allocated to the holder of the Unit pursuant to
subparagraph (c)(1) above and subparagraph (c)(2)(ee) below and by the
amount of any distribution the holder of the Unit has received with
respect to the Unit (other than on redemption of the Unit).
(iii) When a Unit is redeemed or exchanged in a Series Exchange,
the allocation account with respect to such Unit shall be eliminated.
(bb) Net realized capital gain shall be allocated first to each
Partner who has partially redeemed his Units or exchanged less than all
his Units in a Series Exchange during the fiscal year up to the excess,
if any, of the amount received upon redemption of the Units or the amount
deemed received on the Series Exchange of the Units over the allocation
account attributable to the redeemed Units or the Units exchanged in the
Series Exchange.
(cc) Net realized capital gain remaining after the allocation
thereof pursuant to subparagraph (c)(2)(bb) above shall be allocated next
among all Partners whose capital accounts are in excess of their Units'
allocation accounts (after the adjustments in subparagraph (c)(2)(bb)
above) in the ratio that each such Partner's excess bears to all such
Partners' excesses. In the event that gain to be allocated pursuant to
this subparagraph (c)(2)(cc) is greater than the excess of all such
Partners' capital accounts over all such allocation accounts, the excess
will be allocated among all Partners in the ratio that each Partner's
capital account bears to all Partners' capital accounts.
(dd) Net realized capital loss shall be allocated first to each
Partner who has partially redeemed his Units or exchanged less than all
his Units in a Series Exchange during the fiscal year up to the excess,
if any, of the allocation account attributable to the redeemed Units or
the Units exchanged in the Series Exchange over the amount received upon
redemption of the Units or the amount deemed received on the Series
Exchange of the Units.
(ee) Net realized capital loss remaining after the allocation
thereof pursuant to subparagraph (c)(2)(dd) above shall be allocated next
among all Partners whose Units' allocation accounts are in excess of
their capital accounts (after the adjustments in subparagraph (c)(2)(dd)
above) in the ratio that each such Partner's excess bears to all such
Partners' excesses. In the event that loss to be allocated pursuant to
this subparagraph (c)(2)(ee) is greater than the excess of all such
allocation accounts over all such Partners' capital accounts, the excess
loss will be allocated among all Partners in the ratio that each
Partner's capital account bears to all Partners' capital accounts.
(3) The tax allocations prescribed by this Section 7(c) shall be made to
each holder of a Unit whether or not the holder is a substituted Limited
Partner. In the event that a Unit has been transferred or assigned pursuant
to Section 10(a), the allocations prescribed by this Section 7(c) shall be
made with respect to such Unit without regard to the transfer or assignment,
except that in the year of transfer or assignment the allocations prescribed
by this Section 7(c) shall be divided between the transferor or assignor and
the transferee or assignee based on the number of months each held the
transferred or assigned Unit. For purposes of this Section 7(c), tax
allocations shall be made to the General Partner's Units of General
Partnership Interest on a Unit-equivalent basis.
(4) The allocation of profit and loss for federal income tax purposes
set forth herein is intended to allocate taxable profits and loss among
Partners generally in the ratio and to the extent that net profit and net
loss are allocated to such Partners under Section 7(b) hereof so as to
eliminate, to the extent possible, any disparity between a Partner's capital
account and his allocation account with respect to each Unit then
outstanding, consistent with the principles set forth in
Section 704(c)(2) of the Internal Revenue Code of 1986, as amended (the
"Code").
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(d) DEFINITIONS; ACCOUNTING.
(1) NET ASSETS. The Partnership's "Net Assets" shall mean the total
assets of the Partnership (including, but not limited to, all cash and cash
equivalents (valued at cost), accrued interest and amortization of original
issue discount, and the market value of all open Futures Interests positions
and other assets of the Partnership) less the total liabilities of the
Partnership (including, but not limited to, all brokerage, management and
incentive fees, and extraordinary expenses) determined in accordance with
generally accepted accounting principles consistently applied under the
accrual basis of accounting. Unless generally accepted accounting principles
require otherwise, the market value of a Futures Interest traded on a United
States exchange shall mean the settlement price on the exchange on which the
particular Futures Interest was traded by the Partnership on the day with
respect to which Net Assets are being determined; PROVIDED, HOWEVER, that if
a Futures Interest could not have been liquidated on such day due to the
operation of daily limits or other rules of the exchange upon which that
Futures Interest shall be traded or otherwise, the settlement price on the
first subsequent day on which the Futures Interest could be liquidated shall
be the market value of such Futures Interest for such day. The market value
of a forward contract or a Futures Interest traded on a foreign exchange or
market shall mean its market value as determined by the General Partner on a
basis consistently applied for each different variety of forward contract or
Futures Interest.
(2) NET ASSET VALUE. The "Net Asset Value" of a Unit shall mean the
Net Assets allocated to capital accounts represented by Units of Limited
Partnership Interest divided by the aggregate number of Units of Limited
Partnership Interest.
(e) EXPENSES AND LIMITATIONS THEREOF. DWR shall pay all of the
organizational, initial and continuing offering expenses of the Partnership
(including, but not limited to, legal, accounting, and auditing fees, printing
costs, filing fees, escrow fees, marketing costs and expenses, and other related
expenses), and shall not be reimbursed therefor.
Subject to the limits set forth below, and except to the extent that DWR or
an affiliate has agreed to pay any such fees, costs or expenses as provided in
the Prospectus, the Partnership shall pay its operational expenses. The General
Partner shall not be reimbursed by the Partnership for any costs incurred by it
relating to office space, equipment, and staff necessary for Partnership
operations and administration of redemptions and Series Exchanges of Units. The
Partnership will be obligated to pay any extraordinary expenses (determined in
accordance with generally accepted accounting principles) it may incur.
The Partnership's assets held by any Commodity Broker, as provided in
Section 7(i), may be used as margin solely for the Partnership's trading. The
Partnership shall bear all commodity brokerage fees and commissions and, except
as otherwise set forth herein or described in the Prospectus, shall be obligated
to pay all liabilities incurred by it, including, without limitation, all fees
and expenses incurred in connection with its trading activities (including, but
not limited to, floor brokerage fees, exchange fees, clearinghouse fees, NFA
fees, "give up" or transfer fees, costs associated with the taking of delivery
of Futures Interests, fees for the execution of forward contract transactions,
fees for the execution of cash transactions relating to the exchange of futures
for physical transactions, and the use of any Commodity Broker's institutional
and overnight execution facilities (collectively, "Transaction Fees and
Costs")), and management and incentive fees payable to any Trading Advisor.
Appropriate reserves may be created, accrued, and charged against Net Assets for
contingent liabilities, if any, as of the date any such contingent liability
becomes known to the General Partner. Such reserves shall reduce the Net Asset
Value of interests in the Partnership for all purposes, including redemptions
and Series Exchanges.
The following special limits shall apply to the Partnership's fees and
expenses, in accordance with Section IV.C of the NASAA Guidelines: (a) the
aggregate of (i) the management fees payable by the Partnership to the Trading
Advisor(s), and (ii) the Partnership's customary and routine administrative
expenses (other than commodity brokerage commissions or fees, Transaction Fees
and Costs, incentive fees, legal and auditing fees and expenses, and
extraordinary expenses), shall not exceed 1/2 of 1% of the Partnership's Net
Assets per month, or 6% of the Partnership's Net Assets annually; (b) the
monthly incentive fees payable by the Partnership shall not exceed 15% of the
Partnership's "Trading Profits" (as defined in the Prospectus) attributable to
such Trading Advisor for the applicable calculation period, PROVIDED that such
incentive fees may be increased by 2% for each 1% by which the aggregate fees
and expenses described in clause (a) of this sentence are below the 6% of Net
Assets annual limit thereon
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(I.E., if such fees and expenses are 4% of Net Assets, the maximum incentive fee
payable may be increased to 19%); (c) any "roundturn" brokerage commissions
(excluding Transaction Fees and Costs) payable by the Partnership to any
Commodity Broker shall not exceed 80% of such Commodity Broker's published
non-member rates for speculative accounts; and (d) the aggregate of (i) the
brokerage commissions or fees payable by the Partnership to any Commodity
Broker, (ii) any Transaction Fees and Costs separately payable by the
Partnership, and (iii) any net excess interest and compensating balance benefits
to any Commodity Broker (after crediting the Partnership with interest), shall
not exceed 14% annually of the Partnership's average monthly Net Assets as at
the last day of each month during each calendar year. The General Partner or an
Affiliate thereof shall pay and shall not be reimbursed for any fees and
expenses in excess of any such limits.
(f) LIMITED LIABILITY OF LIMITED PARTNERS. Each Unit, when purchased by a
Limited Partner in accordance with the terms of this Agreement, shall be fully
paid and nonassessable. No Limited Partner shall be liable for the Partnership's
obligations in excess of such Partner's unredeemed capital contribution,
undistributed profits, if any, and any distributions and amounts received upon
redemption of Units or deemed received on a Series Exchange of Units, together
with interest thereon. The Partnership shall not make a claim against a Limited
Partner with respect to amounts distributed to such Partner or amounts received
by such Partner upon redemption of Units or deemed received upon a Series
Exchange of Units unless the Net Assets of the Partnership (which shall not
include any right of contribution from the General Partner except to the extent
previously made by it pursuant to this Agreement) shall be insufficient to
discharge the liabilities of the Partnership which shall have arisen prior to
the payment of such amounts.
(g) RETURN OF LIMITED PARTNER'S CAPITAL CONTRIBUTION. Except to the extent
that a Limited Partner shall have the right to withdraw capital through
redemption or Series Exchange of Units in accordance with Section 10(b) or (c),
no Limited Partner shall have any right to demand the return of his capital
contribution or any profits added thereto, except upon termination and
dissolution of the Partnership. In no event shall a Limited Partner be entitled
to demand or receive from the Partnership property other than cash.
(h) DISTRIBUTIONS. The General Partner shall have sole discretion in
determining what distributions (other than on redemption or Series Exchange of
Units), if any, the Partnership shall make to its Partners. If made, all
distributions shall be pro rata in accordance with the respective capital
accounts of the Partners and may be made by credit to a Limited Partner's
account with DWR or by check if such account is closed.
(i) INTEREST ON ASSETS. The Partnership shall deposit all of its assets
with such Commodity Broker(s) as the Partnership shall utilize from time to
time, and such assets shall be used by the Partnership to engage in Futures
Interests trading. Unless provided otherwise in the Prospectus, such assets will
be invested in securities approved by the CFTC for investment of customer funds
or held in non-interest-bearing accounts, and such Commodity Broker(s) will
credit the Partnership at month-end with interest income as set forth in the
Prospectus or as otherwise set forth in a notice to Limited Partners.
8. MANAGEMENT AND TRADING POLICIES.
(a) MANAGEMENT OF THE PARTNERSHIP. Except as may be otherwise specifically
provided herein, the General Partner, to the exclusion of all Limited Partners,
shall conduct and manage the business of the Partnership, including, without
limitation, the investment of the funds of the Partnership. No Limited Partner
shall have the power to represent, act for, sign for, or bind the General
Partner or the Partnership. Except as provided herein, no Partner shall be
entitled to any salary, draw, or other compensation from the Partnership. Each
Limited Partner hereby undertakes to furnish to the General Partner such
additional information as may be determined by the General Partner to be
required or appropriate for the Partnership to open and maintain an account or
accounts with the Partnership's Commodity Broker(s) for the purpose of trading
in Futures Interests.
The General Partner shall be under a fiduciary duty to conduct the affairs
of the Partnership in the best interests of the Partnership. The Limited
Partners will under no circumstances be permitted to contract away, or be deemed
to have contracted away, the fiduciary obligations owed them by the General
Partner under statutory or common law. The General Partner shall have fiduciary
responsibility for the
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safekeeping of all of the funds and assets of the Partnership, whether or not in
its immediate possession or control, and the General Partner shall not employ,
or permit another to employ, such funds or assets in any manner except for the
benefit of the Partnership.
(b) THE GENERAL PARTNER. The General Partner, on behalf of the
Partnership, shall retain one or more Trading Advisors to make all trading
decisions for the Partnership, and shall delegate complete trading discretion to
such Trading Advisors; PROVIDED, HOWEVER, that the General Partner may override
any trading instructions: (i) which the General Partner, in its sole discretion,
determines to be in violation of any trading policy of the Partnership, as set
forth in subsection (c) below; (ii) to the extent the General Partner believes
doing so is necessary for the protection of the Partnership; (iii) to terminate
the Futures Interests trading of the Partnership; (iv) to comply with applicable
laws or regulations; or (v) as and to the extent necessary, upon the failure of
a Trading Advisor to comply with a request to make the necessary amount of funds
available to the Partnership, to fund distributions, redemptions, or
reapportionments among Trading Advisors or to pay the expenses of the
Partnership; and PROVIDED, FURTHER, that the General Partner may make trading
decisions at any time at which a Trading Advisor shall become incapacitated or
some other emergency shall arise as a result of which such Trading Advisor shall
be unable or unwilling to act and a successor Trading Advisor has not yet been
retained.
The Partnership shall not enter into any agreement with the General Partner,
DWR, or their respective Affiliates (other than a selling agreement as
contemplated by Section 6) which has a term of more than one year and which does
not provide that it shall be terminable by the Partnership without penalty upon
60 days' prior written notice by the General Partner; PROVIDED, HOWEVER, that
any such agreement may provide for automatic renewal for additional one-year
terms unless either the Partnership or the other party to such agreement, upon
written notice given not less than 60 days prior to the original termination
date or any extended termination date, notifies the other party of its intention
not to renew.
Subject to the foregoing paragraph, the General Partner is hereby
authorized, on behalf of the Partnership, to enter into the form of management
agreement described in the Prospectus (each, a "Management Agreement") with each
Trading Advisor described in the Prospectus, and to cause the Partnership to pay
to each such Trading Advisor the management and incentive fees provided for in
the applicable Management Agreement, as described in the Prospectus.
The General Partner is further authorized: (a) to modify (including changing
the form and amount of compensation and other arrangements and terms) or
terminate any Management Agreement in its sole discretion in accordance with the
terms of such Management Agreement and to employ from time to time other Trading
Advisors pursuant to management agreements having such terms and conditions and
providing for such form and amount of compensation as the General Partner in its
sole discretion shall deem to be in the best interests of the Partnership, which
terms may include provision for the payment of an incentive fee to a new or
replacement Trading Advisor or Advisors which shall be based on any trading
profits which shall be earned by such Trading Advisor(s), irrespective of
whether such profits shall exceed trading losses incurred by any previous or
existing Trading Advisor or Advisors or by the Partnership as a whole; (b) to
enter into the Customer Agreements described in the Prospectus (each, a
"Customer Agreement") with the Commodity Brokers described in the Prospectus,
and to cause the Partnership to pay to such Commodity Brokers brokerage fees or
commissions and Transaction Fees and Costs at the rates provided for in the
Customer Agreements and as described in the Prospectus; and (c) to modify
(including changing the form and amount of compensation and other arrangements
and terms) and terminate the Customer Agreements in its sole discretion in
accordance with the terms of such Agreements and to employ from time to time
other Commodity Brokers pursuant to customer agreements having such terms and
conditions and providing for such form and amount of compensation as the General
Partner in its sole discretion shall deem to be in the best interests of the
Partnership, PROVIDED, HOWEVER, that the General Partner shall review at least
annually the brokerage arrangements with the Partnership to ensure that the
brokerage fees or commissions paid to any Commodity Broker are fair, reasonable,
and competitive, and represent the best price and services available, taking
into consideration: (i) the size of the Partnership; (ii) the Futures Interests
trading activity; (iii) the services provided by the Commodity Broker, the
General Partner or any Affiliate thereof to the Partnership; (iv) the cost
incurred by the Commodity Broker, the General Partner or any Affiliate thereof
in organizing and operating the Partnership and offering Units; (v) the overall
costs to the Partnership; (vi) any excess interest and
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compensating balance benefits to the Commodity Broker from assets held thereby;
and (vii) if the General Partner does not receive any direct compensation from
the Partnership for its services as General Partner, the risks incurred by the
General Partner as such.
The General Partner may subdivide or combine Units in its discretion,
provided that no such subdivision or combination shall affect the Net Asset
Value of any Limited Partner's interest in the Partnership.
(c) GENERAL TRADING POLICIES. The General Partner shall require any
Trading Advisor retained by the Partnership to follow the trading policies set
forth below. The following trading policies are applicable to the Partnership as
a whole and do not apply to the trading of any individual Trading Advisor.
TRADING POLICIES FOR ALL PARTNERSHIPS:
- The Partnership will not employ the trading technique commonly
known as "pyramiding," in which the speculator uses unrealized profits on
existing positions in a given Futures Interest due to favorable price
movement as margin specifically to buy or sell additional positions in the
same or a related Futures Interest. Taking into account the Partnership's
open trade equity on existing positions in determining generally whether to
acquire additional Futures Interest positions on behalf of the Partnership
will not be considered to constitute "pyramiding."
- The Partnership will not under any circumstances lend money to
affiliated entities or otherwise. The Partnership will not utilize
borrowings except if the Partnership purchases or takes delivery of
commodities. If the Partnership borrows money from the General Partner or
any Affiliate thereof, the lending entity in such case (the "Lender") may
not receive interest in excess of its interest costs, nor may the Lender
receive interest in excess of the amounts which would be charged the
Partnership (without reference to the General Partner's financial abilities
or guarantees) by unrelated banks on comparable loans for the same purpose,
nor may the Lender or any Affiliate thereof receive any points or other
financing charges or fees regardless of the amount. Use of lines of credit
in connection with its forward trading does not, however, constitute
borrowing for purposes of this trading limitation.
- The Partnership will not permit "churning" of the Partnership's
assets.
TRADING POLICY FOR ALL PARTNERSHIPS EXCEPT SPECTRUM COMMODITY:
- The Partnership will trade currencies and other commodities in the
interbank and forward contract markets only with banks, brokers, dealers,
and other financial institutions which the General Partner, in conjunction
with DWR, has determined to be creditworthy. In determining the
creditworthiness of a counterparty to a forward contract, the General
Partner and DWR will consult with the Corporate Credit Department of DWR.
TRADING POLICIES FOR ALL PARTNERSHIPS EXCEPT SPECTRUM GLOBAL BALANCED, SPECTRUM
CURRENCY, AND SPECTRUM COMMODITY:
- The Trading Advisors will trade only in those Futures Interests
that have been approved by the General Partner. The Partnership normally
will not establish new positions in a Futures Interest for any one contract
month or option if such additional positions would result in a net long or
short position for that Futures Interest requiring as margin or premium more
than 15% of the Partnership's Net Assets. In addition, the Partnership will,
except under extraordinary circumstances, maintain positions in Futures
Interests in at least two market segments (I.E., agricultural items,
industrial items (including energies), metals, currencies, and financial
instruments (including stock, financial, and economic indexes)) at any one
time.
- The Partnership will not acquire additional positions in any
Futures Interest if such additional positions would result in the aggregate
net long or short positions for all Futures Interests requiring as margin or
premium for all outstanding positions more than 66 2/3% of the Partnership's
Net Assets. Under certain market conditions, such as an abrupt increase in
margins required by a commodity exchange or its clearinghouse or an
inability to liquidate open positions because of daily
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price fluctuation limits, or both, the Partnership may be required to commit
as margin amounts in excess of the foregoing limit. In such event, the
Trading Advisors will reduce their open positions to comply with the
foregoing limit before initiating new positions.
- The Trading Advisors will not generally take a position after the
first notice day in any Futures Interest during the delivery month of that
Futures Interest, except to match trades to close out a position on the
interbank foreign currency or other forward markets or liquidate trades in a
limit market.
TRADING POLICY FOR SPECTRUM SELECT AND COMMODITY ONLY:
- The Partnership will not purchase, sell, or trade securities
(except securities approved by the CFTC for investment of customer funds).
TRADING POLICIES FOR SPECTRUM GLOBAL BALANCED ONLY:
- The Trading Advisor will trade only in those Futures Interests that
have been approved by the General Partner. In addition, the Partnership
will, except under extraordinary circumstances, maintain positions in
Futures Interests in at least two market segments (I.E., agricultural items,
industrial items (including energies), metals, currencies, and financial
instruments (including stock, financial, and economic indexes)) at any one
time.
- The Trading Advisors will not generally take a position after the
first notice day in any Futures Interest during the delivery month of that
Futures Interest, except to match trades to close out a position on the
interbank foreign currency or other forward markets or liquidate trades in a
limit market. The Partnership may, with the General Partner's prior
approval, purchase "cash" stocks and bonds, or options on stock or bond
indices, on a temporary basis under unusual circumstances in which it is not
practicable or economically feasible to establish the Partnership's stock
index or bond portfolios in the futures markets, and may acquire "cash"
instruments in its short-term interest rate futures component.
(d) CHANGES TO TRADING POLICIES. The General Partner shall not make any
material change in the trading policies in Section 8(c) without obtaining the
prior written approval of Limited Partners owning more than 50% of the Units
then outstanding. The General Partner will notify the Limited Partners within
seven business days after any material change in the Partnership's Trading
Policies so approved by the Limited Partners.
(e) MISCELLANEOUS. The General Partner may take such other actions as it
deems necessary or desirable to manage the business of the Partnership,
including, but not limited to, the following: opening bank accounts and paying
or authorizing the payment of distributions to the Partners and the expenses of
the Partnership, such as brokerage fees and commissions, management and
incentive fees, ordinary and extraordinary expenses, and Transaction Fees and
Costs.
The General Partner shall prepare or cause to be prepared and shall file on
or before the due date (or any extension thereof) any federal, state, or local
tax returns which shall be required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by the Partnership;
PROVIDED, HOWEVER, that the General Partner shall not be required to cause the
Partnership to pay any tax so long as the General Partner or the Partnership
shall be in good faith and by appropriate legal proceedings contesting the
validity, applicability, or amount thereof and such contest shall not materially
endanger any right or interest of the Partnership.
The General Partner shall be authorized to perform all duties imposed by
Sections 6221 through 6233 of the Code on the General Partner as "tax matters
partner" of the Partnership, including, but not limited to, the following: (a)
the power to conduct all audits and other administrative proceedings with
respect to Partnership tax items; (b) the power to extend the statute of
limitations for all Limited Partners with respect to Partnership tax items;
(c) the power to file a petition with an appropriate federal court for review of
a final Partnership administrative adjustment; and (d) the power to enter into a
settlement with the Internal Revenue Service on behalf of, and binding upon,
those Limited Partners having less than a 1% interest in the Partnership, unless
a Limited Partner shall have notified the Internal Revenue Service and the
General Partner that the General Partner may not act on such Partner's behalf.
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If the Partnership is required to withhold United States taxes on income
with respect to Units held by Limited Partners who are nonresident alien
individuals, foreign corporations, foreign partnerships, foreign trusts, or
foreign estates, the General Partner may pay such tax out of its own funds and
then be reimbursed out of the proceeds of any distribution or redemption with
respect to such Units.
The General Partner shall keep at the principal office of the Partnership
such books and records relating to the business of the Partnership as it deems
necessary or advisable, as are required by the Commodity Exchange Act, as
amended (the "CEAct"), and the CFTC's rules and regulations thereunder, or as
shall be required by other regulatory bodies, exchanges, boards, and authorities
having jurisdiction. Such books and records shall be retained by the Partnership
for not less than five years.
The Partnership's books and records shall be available to Limited Partners
or their authorized attorneys or agents for inspection and copying during normal
business hours of the Partnership and, upon request, the General Partner shall
send copies of same to any Limited Partner upon payment by him of reasonable
reproduction and distribution costs. Any subscription documentation executed by
a Limited Partner in connection with his purchase of Units, Series Exchange or
Non-Series Exchange, as applicable, shall be retained by the Partnership for not
less than six years.
Except as described herein or in the Prospectus, no person may receive,
directly or indirectly, any advisory, management, or incentive fee for
investment advice who shares or participates in per trade commodity brokerage
commissions paid by the Partnership. No Commodity Broker for the Partnership may
pay, directly or indirectly, rebates or "give-ups" to the General Partner or any
Trading Advisor, and such prohibitions may not be circumvented by any reciprocal
business arrangements. Assets of the Partnership shall not be commingled with
assets of any other person. Margin deposits and deposits of assets with a
Commodity Broker shall not constitute commingling.
The General Partner shall devote such time and resources to the
Partnership's business and affairs as it, in its sole discretion, shall deem
necessary or advisable to effectively manage the Partnership. Subject to
Section 5, the General Partner may engage in other business activities and shall
not be required to refrain from any other activity or disgorge any profits from
any such activity, whether as general partner of additional partnerships formed
for investment in Futures Interests or otherwise. The General Partner may engage
and compensate, on behalf and from funds of the Partnership, such persons,
firms, or corporations, including any Affiliate of the General Partner, as the
General Partner in its sole judgment shall deem advisable for the conduct and
operation of the business of the Partnership; PROVIDED, HOWEVER, that, except as
described herein and in the Prospectus, the General Partner shall not engage any
such Affiliate to perform services for the Partnership without having made a
good faith determination that: (i) the Affiliate which it proposes to engage to
perform such services is qualified to do so (considering the prior experience of
the Affiliate or the individuals employed thereby); (ii) the terms and
conditions of the agreement pursuant to which such Affiliate is to perform
services for the Partnership are no less favorable to the Partnership than could
be obtained from equally-qualified unaffiliated third parties, or are otherwise
determined by the General Partner to be fair and reasonable to the Partnership
and the Limited Partners; and (iii) the maximum period covered by the agreement
pursuant to which such Affiliate is to perform services for the Partnership
shall not exceed one year, and such agreement shall be terminable without
penalty upon 60 days' prior written notice by the Partnership. Nothing contained
in the preceding sentence shall prohibit the General Partner from receiving
reimbursement from the Partnership for expenses advanced on behalf of the
Partnership (other than organizational and offering expenses).
No person dealing with the General Partner shall be required to determine
its authority to make any undertaking on behalf of the Partnership or to
determine any fact or circumstance bearing upon the existence of its authority.
9. AUDITS; REPORTS TO LIMITED PARTNERS.
The Partnership's books shall be audited annually by an independent
certified public accounting firm selected by the General Partner in its sole
discretion. The Partnership shall use its best efforts to cause each Partner to
receive: (a) within 90 days after the close of each fiscal year an annual report
containing audited financial statements (including a statement of income and a
statement of financial condition) of the Partnership for the fiscal year then
ended, prepared in accordance with generally accepted accounting principles and
accompanied by a report of the accounting firm which audited such statements,
and such
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other information as the CFTC and NFA may from time to time require (such annual
reports will provide a detailed statement of any transactions with the General
Partner or its Affiliates and of fees, commissions and any compensation paid or
accrued to the General Partner or its Affiliates for the fiscal year completed,
showing the amount paid or accrued to each recipient and the services
performed); (b) within 75 days after the close of each fiscal year (but in no
event later than March 15 of each year) such tax information relating to the
Partnership as is necessary for such Partner to complete his federal income tax
return; (c) within 30 days after the close of each calendar month, such
financial and other information with respect to the Partnership as the CFTC and
NFA from time to time shall require in monthly reports, together with
information concerning any material change in the brokerage commissions and fees
payable by the Partnership to any Commodity Broker; and (d) at such times as
shall be necessary or advisable in the General Partner's sole discretion, such
other information as the CFTC and NFA from time to time shall require under the
CEAct to be given to participants in commodity pools.
In addition, if any of the following events occurs, notice of such event,
including a description of the redemption and voting rights of Limited Partners,
as set forth in Sections 10(b) and 15, shall be mailed to each Limited Partner
within seven business days after the occurrence of such event: (a) a decrease in
the Net Asset Value of a Unit as of the close of business on any business day to
50% or less of the Net Asset Value for such Unit as of the end of the
immediately preceding month; (b) any material amendment to this Agreement;
(c) any change in Trading Advisors or any material change in the Management
Agreement with a Trading Advisor; (d) any change in Commodity Brokers or any
material change in the compensation arrangements with a Commodity Broker;
(e) any change in general partners or any material change in the compensation
arrangements with a general partner; (f) any change in the Partnership's fiscal
year; (g) any material change in the Partnership's trading policies; or
(h) cessation of Futures Interests trading by the Partnership. In the case of a
notice given in accordance with clause (a) of the immediately preceding
sentence: (i) such notice shall also advise Limited Partners that a "Special
Redemption Date," on a date specified in such notice (but in no event earlier
than 15, nor later than 45, days after the mailing of such notice), will take
place as of which Limited Partners may redeem their Units in the same manner as
provided in Section 10(b) for regular Redemption Dates (a Special Redemption
Date may take place on a regular Redemption Date); and (ii) following the close
of business on the date of the 50% decrease giving rise to such notice, the
Partnership shall liquidate all existing positions as promptly as reasonably
practicable and shall suspend all Futures Interests trading through the Special
Redemption Date. Thereafter, the General Partner shall determine whether to
reinstitute Futures Interests trading or to terminate the Partnership. As used
herein, "material change in the Partnership's trading policies" shall mean any
material change in those trading policies specified in Section 8(c).
The Net Asset Value of a Unit shall be determined daily by the General
Partner, and the most recent Net Asset Value calculation shall be promptly
supplied by the General Partner in writing to any Limited Partner after the
General Partner shall have received a written request from such Partner.
In addition, no increase (subject to the limits in the fourth paragraph of
Section 7(e)) in any of the management, incentive, or brokerage fees payable by
the Partnership, or any caps (other than those described in the fourth paragraph
of Section 7(e)) on management fees, incentive fees, brokerage commissions or
fees, Transaction Fees and Costs, ordinary administrative expenses, or net
excess interest or compensating balance benefits, all as described in the
Prospectus, may take effect until the first business day following a Redemption
Date, PROVIDED that: (i) notice of such increase is mailed to each Limited
Partner at least five business days prior to the last date on which a Request
for Redemption must be received by the General Partner with respect to the
applicable Redemption Date; (ii) such notice shall describe the redemption and
voting rights of Limited Partners, as set forth in Sections 10(b) and 15; and
(iii) Limited Partners redeeming Units at the first Redemption Date following
such notice shall not be subject to the redemption charges described in
Section 10(b).
10. TRANSFER; REDEMPTION OF UNITS; EXCHANGE PRIVILEGE.
(a) TRANSFER. A Limited Partner may transfer or assign his Units only as
provided in this Section 10(a). No transferee or assignee shall become a
substituted Limited Partner unless the General Partner first consents to such
transfer or assignment in writing, which consent may be withheld in its sole
discretion. Any transfer or assignment of Units which is permitted hereunder
shall be effective as of the end of the month in which such transfer or
assignment is made; PROVIDED, HOWEVER, that the Partnership need not recognize
any transfer or assignment until it has received at least 30 days' prior written
notice
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thereof from the Limited Partner, which notice shall set forth the address and
social security or taxpayer identification number of the transferee or assignee
and the number of Units to be transferred or assigned, and which notice shall be
signed by the Limited Partner. No transfer or assignment of Units will be
effective or recognized by the Partnership if the transferee or assignee, or the
transferor or assignor (if fewer than all Units held by the transferor or
assignor are being transferred or assigned), would, by reason of such transfer
or assignment, acquire Units which do not meet the minimum initial subscription
requirements, as described in the Prospectus; PROVIDED, HOWEVER, that the
foregoing restriction shall not apply to transfers or assignment of Units
(i) by the way of gift or inheritance, (ii) to any members of the Limited
Partner's family, (iii) resulting from divorce, annulment, separation or similar
proceedings, or (iv) to any person who would be deemed an Affiliate of the
Limited Partner (for purposes of this clause (iv), the term "Affiliate" also
includes any partnership, corporation, association, or other legal entity for
which such Limited Partner acts as an officer, director or partner). No transfer
or assignment shall be permitted unless the General Partner is satisfied that
(i) such transfer or assignment would not be in violation of the Act or
applicable federal, state, or foreign securities laws, and (ii) notwithstanding
such transfer or assignment, the Partnership shall continue to be classified as
a partnership rather than as an association taxable as a corporation under the
Code. No transfer or assignment of Units shall be effective or recognized by the
Partnership if such transfer or assignment would result in the termination of
the Partnership for federal income tax purposes, and any attempted transfer or
assignment in violation hereof shall be ineffective to transfer or assign any
such Units. Any transferee or assignee of Units who has not been admitted to the
Partnership as a substituted Limited Partner shall not have any of the rights of
a Limited Partner, except that such person shall receive that share of capital
and profits and shall have that right of redemption to which his transferor or
assignor would otherwise have been entitled and shall remain subject to the
other terms of this Agreement binding upon Limited Partners. No Limited Partner
shall have any right to approve of any person becoming a substituted Limited
Partner. The Limited Partner shall bear all costs (including any attorneys' and
accountants' fees) related to such transfer or assignment of his Units.
In the event that the General Partner consents to the admission of a
substituted Limited Partner pursuant to this Section 10(a), the General Partner
is hereby authorized to take such actions as may be necessary to reflect such
substitution of a Limited Partner.
(b) REDEMPTION. Except as set forth below and in accordance with the terms
hereof, a Limited Partner (or any assignee thereof) may withdraw all or part of
his unredeemed capital contribution and undistributed profits, if any, by
requiring the Partnership to redeem all or part of his Units at the Net Asset
Value thereof, reduced as hereinafter described (any such withdrawal being
herein referred to as a "Redemption"). The minimum amount of any redemption is
50 Units, unless a Limited Partner is redeeming his entire interest in the
Partnership.
Units may be redeemed at the option of a Limited Partner as of, but not
before, the sixth month-end following the closing at which the Limited Partner
first becomes a Limited Partner of the Partnership or a limited partner of any
other partnership offering Units pursuant to the Prospectus (all such
partnerships shall be defined collectively as the "Spectrum Series Partnerships"
or individually as a "Spectrum Series Partnership"). Thereafter, Units may be
redeemed as of the end of any month. However, any Unit redeemed at or prior to
the end of the twelfth or twenty-fourth full month following the closing at
which such Unit was issued will be assessed a redemption charge equal to 2% or
1%, respectively, of the Net Asset Value of a Unit on the date of such
redemption. The foregoing charges will be paid to DWR. A Limited Partner who
purchased Units pursuant to a Non-Series Exchange (as defined in the Prospectus)
will not be subject to the foregoing redemption charges with respect to such
Units. The number of Units (determined on a per closing basis), expressed as a
percentage of Units purchased, which is not subject to a redemption charge is
determined by dividing (a) the dollar amount used in a Non-Series Exchange to
purchase Units by (b) the total investment in the Partnership. Limited Partners
who redeem units of limited partnership interest in a Spectrum
Series Partnership and have either paid a redemption charge with respect to such
units of limited partnership, or have held such units of limited partnership for
at least two years and subsequently purchase Units, will not be subject to
redemption charges on the new Units under the following conditions: (a) the
subscriber must subscribe for new Units prior to the one-year anniversary of the
effective date of the redemption of the units of limited partnership, (b) the
subscriber will not be subject to redemption charges with respect to the amount
of the subscription for the new Units up to the amount of the proceeds of the
redemption (net of any redemption charges), and (c) the subscriber must hold the
newly acquired Units for six months from the date of purchase before such Units
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may be redeemed or exchanged pursuant to a Series Exchange. Such subscribers
remain subject to the minimum purchase and suitability requirements. In
addition, redemption charges may not be imposed for certain large purchasers of
units of limited partnership interest in the Spectrum Series Partnerships, as
provided in the Prospectus. A Limited Partner who redeems Units pursuant to a
Series Exchange will not be subject to redemption charges with respect to the
redeemed Units. Units acquired pursuant to a Series Exchange will be deemed as
having the same purchase date as the Units exchanged for purposes of determining
the applicability of any redemption charges. Furthermore, a Limited Partner
redeeming Units at the first Redemption Date following notice of an increase in
certain fees in accordance with the fourth paragraph of Section 9 will not be
subject to the foregoing redemption charges. Redemptions of Units will be deemed
to be in the order in which they are purchased (assuming purchases at more than
one closing), with the Units not subject to a redemption charge being deemed to
be the first Units purchased at a closing.
Redemption of a Limited Partner's Units shall be effective as of the last
day of the first month ending after an irrevocable Request for Redemption in
proper form shall have been received by the General Partner ("Redemption Date");
PROVIDED, that all liabilities, contingent or otherwise, of the Partnership
(except any liability to Partners on account of their capital contributions)
shall have been paid or there shall remain property of the Partnership
sufficient to pay them. As used herein, "Request for Redemption" shall mean a
letter in the form specified by the General Partner and received by the General
Partner by 5:00 p.m. (New York City time) at least five business days prior to
the date on which such Redemption is to be effective. A form of Request for
Redemption is annexed to this Agreement. Additional forms of Request for
Redemption may be obtained by written request to the General Partner.
Upon Redemption, a Limited Partner (or any assignee thereof) shall receive
from the Partnership for each Unit redeemed an amount equal to the Net Asset
Value thereof as of the Redemption Date, less any redemption charges and any
amount owing by such Partner (and his assignee, if any) to the Partnership
pursuant to Section 14(d). If a Redemption is requested by an assignee, all
amounts owed to the Partnership under Section 14(d) by the Partner to whom such
Unit was sold, as well as all amounts owed by all assignees of such Unit, shall
be deducted from the Net Asset Value of such Unit upon Redemption. The General
Partner shall endeavor to pay Redemptions within 10 business days after the
Redemption Date, except that under special circumstances (including, but not
limited to, the inability on the part of the Partnership to liquidate Futures
Interests positions or the default or delay in payments which shall be due the
Partnership from commodity brokers, banks, or other persons), the Partnership
may delay payment to Partners requesting Redemption of Units of the
proportionate part of the Net Asset Value of the Units represented by the sums
which are the subject of such default or delay. Redemptions will be made by
credit to the Limited Partner's customer account with DWR or by check mailed to
the Limited Partner if such account is closed. The General Partner may, in its
absolute discretion, waive any restrictions or charges applicable to
redemptions.
The foregoing terms and conditions in this Section 10(b), other than those
in the second paragraph hereof prohibiting redemptions before the sixth
month-end following the closing at which a person first becomes a Limited
Partner, shall also apply to redemptions effected on "Special Redemption Dates"
held in accordance with Section 9.
The General Partner shall be authorized to execute, file, record, and
publish, on behalf of the Partnership and each Partner, such amendments to this
Agreement and such other documents as shall be necessary or desirable to reflect
any Redemption pursuant to this Section 10(b).
(c) EXCHANGE PRIVILEGE. Except as set forth below, a Limited Partner (or
any assignee thereof) may redeem his Units effective as of the last business day
of any month and authorize the General Partner to use the net proceeds of such
redemption to purchase units of limited partnership interest of another Spectrum
Series Partnership (such a transfer between Spectrum Series Partnerships being
herein referred to as a "Series Exchange"). Series Exchanges shall only be
permitted by a Limited Partner as of, but not before the sixth month-end
following the closing at which a Limited Partner first became a limited partner
of a Spectrum Series Partnership. The minimum amount of any Series Exchange is
50 Units, unless a Limited Partner is liquidating his entire interest in the
Partnership.
A Series Exchange shall be effective as of the last business day of the
month ending after an Exchange Agreement and Power of Attorney in proper form
has been received by the General Partner ("Exchange
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Date"), provided, that the Partnership has assets sufficient to discharge its
liabilities and to redeem Units on the Exchange Date. As used herein, "Exchange
Agreement and Power of Attorney" shall mean the form annexed to the Prospectus
as Exhibit B, sent by a Limited Partner (or any assignee thereof) to a DWR
branch office and received by the General Partner at least 5 business days prior
to the Exchange Date. Additional forms of the Exchange Agreement and Power of
Attorney may be obtained by written request to the General Partner or from a
local DWR branch office. Upon requesting a Series Exchange, a Limited Partner
shall have authorized the General Partner to redeem the number of Units
specified therein and to utilize the net proceeds of such redemption to purchase
an amount of units of limited partnership interest of one or more other Spectrum
Series Partnerships as specified in the Exchange Agreement and Power of
Attorney. The General Partner shall cause the net proceeds of the redemption to
be delivered to the Spectrum Series Partnership(s) issuing and selling units of
limited partnership interest to the redeeming Limited Partner, and shall cause
to be mailed to such Limited Partner, within 20 business days after such
Exchange Date, a written confirmation thereof.
At the next closing on the sale of Units following each Exchange Date, the
Partnership shall issue and sell Units with a total Net Asset Value equal to the
net proceeds of redemptions from limited partners of other Spectrum Series
Partnerships requesting Units on a Series Exchange, PROVIDED, that the General
Partner, in its capacity as the general partner of each of the Spectrum Series
Partnerships, has (i) timely received a properly executed Exchange Agreement and
Power of Attorney verifying that such units of limited partnership interest
subject to such Series Exchange are owned by the person requesting such Series
Exchange and acknowledging that the limited partner remains eligible to purchase
Units, and (ii) caused the net proceeds from units of limited partnership
interest being redeemed to be transferred to the Partnership in payment of such
Units. Each Unit to be purchased with the net proceeds of a redemption of Units
of limited partnership interest from a Spectrum Series Partnership shall be
issued and sold by the Partnership at a price per Unit equal to 100% of the Net
Asset Value of a Unit as of the close of business on the relevant Exchange Date.
Each Limited Partner understands that its ability to effect a
Series Exchange is conditioned upon units of limited partnership interest of
Spectrum Series Partnerships being registered and qualified for sale pursuant to
a current Prospectus immediately prior to each Exchange Date. The General
Partner shall not have any obligation to have units of limited partnership
interest registered. There can be no assurance that any or a sufficient number
of units of limited partnership interest will be available for sale on the
Exchange Date. If units of limited partnership interest are not registered or
qualified for sale under either federal or applicable state securities laws, the
General Partner will not be able to effect a Series Exchange for the Limited
Partner. Furthermore, certain states may impose significant burdens on, or alter
the requirements for, qualifying units of limited partnership interest for sale
and in such cases, the General Partner may elect not to continue to qualify
units of limited partnership interest for sale in such state or states, and a
resident thereof would not be eligible for a Series Exchange. In the event that
not all Exchange Agreements and Powers of Attorney can be processed because an
insufficient number of units of limited partnership interest are available for
sale on an Exchange Date, the General Partner is hereby authorized to allocate
units of limited partnership interest in any manner which it deems is reasonable
under the circumstances and may allocate a substantial portion of such units of
limited partnership interest to new subscribers for Units.
The General Partner, on behalf of the Partnership and each Partner, is
authorized to execute, file, record, and publish such amendments to this
Agreement and such other documents as shall be necessary to reflect any
Series Exchange pursuant to this Section 10(c).
11. SPECIAL POWER OF ATTORNEY.
Each Limited Partner, by the execution of this Agreement, does irrevocably
constitute and appoint the General Partner, with full power of substitution, as
his true and lawful agent and attorney-in-fact, in his name, place, and stead,
(a) to execute, acknowledge, swear to, deliver, file, and record in his behalf
in the appropriate public offices and publish: (i) this Agreement and the
Certificate of Limited Partnership and amendments thereto; (ii) all instruments
that the General Partner deems necessary or appropriate to reflect any
amendment, change, or modification of this Agreement or the Certificate of
Limited Partnership made in accordance with the terms of this Agreement;
(iii) certificates of assumed name; and (iv) all instruments that the General
Partner deems necessary or appropriate to qualify or maintain the qualification
of the Partnership to do business as a foreign limited partnership in other
jurisdictions; and (b) to admit additional Limited Partners and, to the extent
that it is necessary under the laws of any jurisdiction, to
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execute, deliver, and file amended certificates or agreements of limited
partnership or other instruments to reflect such admission. The Power of
Attorney granted herein shall be irrevocable and deemed to be a power coupled
with an interest and shall survive the incapacity, death, dissolution,
liquidation, or termination of a Limited Partner. Each Limited Partner hereby
agrees to be bound by any representation made by the General Partner and by any
successor thereto acting in good faith pursuant to such Power of Attorney. Each
Limited Partner agrees to execute a special Power of Attorney on a document
separate from this Agreement. In the event of any conflict between this
Agreement and any instruments filed by such attorney-in-fact pursuant to the
Power of Attorney granted in this Section 11, this Agreement shall control.
12. WITHDRAWAL OF PARTNERS.
The Partnership shall terminate and be dissolved upon the withdrawal,
insolvency, bankruptcy, dissolution, liquidation, or termination of the General
Partner (unless a new general partner(s) is elected pursuant to
Section 15(c) and such remaining general partner(s) shall have elected to
continue the business of the Partnership, which any remaining general partner(s)
shall have the right to do). The General Partner shall not withdraw or assign
all of its interest at any time without giving the Limited Partners 120 days'
prior written notice of its intention to withdraw or assign, and, if the Limited
Partners thereupon elect a new general partner or partners pursuant to
Section 15(c) which elect to continue the business of the Partnership, the
withdrawing General Partner shall pay all reasonable expenses incurred by the
Partnership in connection with such withdrawal. The General Partner shall be
paid the Net Asset Value of its interests in the Partnership as of the date of
such withdrawal.
The death, incompetency, withdrawal, insolvency, bankruptcy, termination,
liquidation, or dissolution of a Limited Partner shall not terminate or dissolve
the Partnership, and such Limited Partner, his estate, custodian, or personal
representative shall have no right to withdraw or value such Limited Partner's
interest in the Partnership except as provided in Section 10. Each Limited
Partner (and any assignee of such Partner's interest) expressly agrees that in
the event of his death, he waives on behalf of himself and his estate and he
directs the legal representative of his estate and any person interested therein
to waive the furnishing of any inventory, accounting, or appraisal of the assets
of the Partnership and any right to an audit or examination of the books of the
Partnership (except to the extent permissible under the sixth paragraph of
Section 8(e)).
13. NO PERSONAL LIABILITY FOR RETURN OF CAPITAL.
Subject to Section 14, neither the General Partner, DWR, nor any Affiliate
thereof shall be personally liable for the return or repayment of all or any
portion of the capital or profits of any Partner (or assignee), it being
expressly agreed that any such return of capital or profits made pursuant to
this Agreement shall be made solely from the assets (which shall not include any
right of contribution from the General Partner) of the Partnership.
14. STANDARD OF LIABILITY; INDEMNIFICATION.
(a) STANDARD OF LIABILITY. The General Partner and its Affiliates shall
not be liable to the Partnership, the Limited Partners, or its or their
successors or assigns, for any act, omission, conduct or activity undertaken by
or on behalf of the Partnership which the General Partner determines, in good
faith, to be in the best interests of the Partnership, unless such act,
omission, conduct, or activity constituted misconduct or negligence.
(b) INDEMNIFICATION BY THE PARTNERSHIP. The Partnership shall indemnify,
defend, and hold harmless the General Partner and its Affiliates from and
against any loss, liability, damage, cost, or expense (including attorneys' and
accountants' fees and expenses incurred in defense of any demands, claims, or
lawsuits) actually and reasonably incurred arising from any act, omission,
activity, or conduct undertaken by or on behalf of the Partnership, including,
without limitation, any demands, claims, or lawsuits initiated by a Limited
Partner (or assignee thereof), PROVIDED that (1) the General Partner has
determined, in good faith, that the act, omission, activity, or conduct giving
rise to the claim for indemnification was in the best interests of the
Partnership, and (2) the act, omission, activity, or conduct that was the basis
for such loss, liability, damage, cost, or expense was not the result of
misconduct or negligence. Notwithstanding anything to the contrary contained in
the foregoing, neither the General Partner nor any of its Affiliates nor any
person acting as a broker-dealer shall be indemnified by the Partnership for any
losses, liabilities, or expenses arising from or out of an alleged violation of
federal or
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state securities laws unless (1) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee, or (2) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular indemnitee,
or (3) a court of competent jurisdiction approves a settlement of the claims
against the particular indemnitee and finds that indemnification of the
settlement and related costs should be made, PROVIDED, with regard to such court
approval, the indemnitee must apprise the court of the position of the SEC, and
the positions of the respective securities administrators of Massachusetts,
Missouri, Tennessee, and/or those other states and jurisdictions in which the
plaintiffs claim that they were offered or sold Units, with respect to
indemnification for securities laws violations before seeking court approval for
indemnification. Furthermore, in any action or proceeding brought by a Limited
Partner in the right of the Partnership to which the General Partner or any
Affiliate thereof is a party defendant, any such person shall be indemnified
only to the extent and subject to the conditions specified in the Act and this
Section 14(b). The Partnership shall make advances to the General Partner or its
Affiliates hereunder only if: (1) the demand, claim, lawsuit, or legal action
relates to the performance of duties or services by such persons to the
Partnership; (2) such demand, claim, lawsuit, or legal action is not initiated
by a Limited Partner; and (3) such advances are repaid, with interest at the
legal rate under Delaware law, if the person receiving such advance is
ultimately found not to be entitled to indemnification hereunder.
Nothing contained in this Section 14(b) shall increase the liability of any
Limited Partner to the Partnership beyond the amount of his unredeemed capital
contribution, undistributed profits, if any, and any amounts received on
distributions and redemptions and deemed received on Series Exchanges, together
with interest thereon. All rights to indemnification and payment of attorneys'
and accountants' fees and expenses shall not be affected by the termination of
the Partnership or the withdrawal, insolvency, or dissolution of the General
Partner.
The Partnership shall not incur the cost of that portion of liability
insurance which insures the General Partner and its Affiliates for any liability
as to which the General Partner and its Affiliates are prohibited from being
indemnified.
(c) AFFILIATE. As used in this Agreement, the term "Affiliate" of a person
shall mean: (i) any natural person, partnership, corporation, association, or
other legal entity directly or indirectly owning, controlling, or holding with
power to vote 10% or more of the outstanding voting securities of such person;
(ii) any partnership, corporation, association, or other legal entity 10% or
more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by such person; (iii) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly controlling, controlled by, or under common control with, such
person; or (iv) any officer, director or partner of such person. Notwithstanding
the foregoing, solely for purposes of determining eligibility for
indemnification under Section 14(b), the term "Affiliate" shall include only
those persons performing services for the Partnership.
(d) INDEMNIFICATION BY PARTNERS. In the event that the Partnership is made
a party to any claim, demand, dispute, or litigation or otherwise incurs any
loss, liability, damage, cost, or expense as a result of, or in connection with,
any Partner's (or assignee's) obligations or liabilities unrelated to the
Partnership's business, such Partner (or assignees cumulatively) shall
indemnify, defend, hold harmless and reimburse the Partnership for such loss,
liability, damage, cost and expense to which the Partnership shall become
subject (including attorneys' and accountants' fees and expenses).
15. AMENDMENTS; MEETINGS.
(a) AMENDMENTS WITH CONSENT OF THE GENERAL PARTNER. If, at any time during
the term of the Partnership, the General Partner shall deem it necessary or
desirable to amend this Agreement, such amendment shall be effective only if
embodied in an instrument approved by the General Partner and by Limited
Partners owning more than 50% of the Units then outstanding, and if made in
accordance with, and to the extent permissible under, the Act. Any amendment to
this Agreement or actions taken pursuant to this Section 15 that shall have been
approved by the percentage of outstanding Units prescribed above shall be deemed
to have been approved by all Limited Partners. Notwithstanding the foregoing,
the General Partner shall be authorized to amend this Agreement without the
consent of any Limited Partner in order to: (i) change the name of the
Partnership or cause the Partnership to transact business under another name;
(ii) clarify any inaccuracy or any ambiguity, or reconcile any inconsistent
provisions herein; (iii) make any amendment to this Agreement that is not
adverse to the Limited Partners; (iv) effect the
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intent of the allocations proposed herein to the maximum extent possible in the
event of a change in the Code or the interpretations thereof affecting such
allocations; (v) attempt to ensure that the Partnership is not taxed as an
association taxable as a corporation for federal income tax purposes;
(vi) qualify or maintain the qualification of the Partnership as a limited
partnership in any jurisdiction; (vii) delete or add any provision of or to this
Agreement required to be deleted or added by the staff of the SEC, the CFTC, any
other federal agency, any state "Blue Sky" official, or other governmental
official, or in order to opt to be governed by any amendment or successor to the
Act, or to comply with applicable law; (viii) make any modification to this
Agreement to reflect the admission of additional or substitute general partners
and to reflect any modification to the Net Worth requirements applicable to the
General Partner and any other general partner, as contemplated by Section 5
hereof; (ix) make any amendment that is appropriate or necessary, in the opinion
of the General Partner, to prevent the Partnership or the General Partner or its
directors, officers or controlling persons from in any manner being subject to
the provisions of the Investment Company Act of 1940 (the "1940 Act"), the
Investment Advisers Act of 1940, as amended (the "ADVISERS ACT"), or "plan
asset" regulations adopted under the Employee Retirement Income Security Act of
1974, as amended; and (x) to make any amendment that is appropriate or
necessary, in the opinion of the General Partner, to qualify the Partnership
under the 1940 Act, and any persons under the 1940 Act and the Advisers Act, if
the General Partner reasonably believes that doing so is necessary. Any such
supplemental or amendatory agreement shall be adhered to and have the same force
and effect from and after its effective date as if the same had originally been
embodied in, and formed a part of, this Agreement; PROVIDED, HOWEVER, that no
such supplemental or amendatory agreement shall, without the consent of all
Partners affected thereby, change or alter the provisions of this proviso,
reduce the capital account of any Partner, or modify the percentage of profits,
losses or distributions to which any Partner is entitled.
(b) MEETINGS. Any Limited Partner or his authorized attorney or agent,
upon written request to the General Partner, delivered either in person or by
certified mail, and upon payment of reasonable duplicating and postage costs,
shall be entitled to obtain from the General Partner by mail a list of the names
and addresses of record of all Limited Partners and the number of Units owned by
each.
Upon receipt of a written request, signed by Limited Partners owning at
least 10% of the Units then owned by Limited Partners, that a meeting of the
Partnership be called to vote upon any matter upon which all Limited Partners
may vote pursuant to this Agreement, the General Partner, by written notice to
each Limited Partner of record sent by certified mail or delivered in person
within 15 days after such receipt, shall call a meeting of the Partnership. Such
meeting shall be held at least 30 but not more than 60 days after the mailing of
such notice, and such notice shall specify the date, a reasonable place and
time, and the purpose of such meeting.
(c) AMENDMENTS AND ACTIONS WITHOUT CONSENT OF THE GENERAL PARTNER. At any
meeting of the Limited Partners, upon the affirmative vote (which may be in
person or by proxy) of Limited Partners owning more than 50% of the Units then
owned by Limited Partners, the following actions may be taken without the
consent of the General Partner: (i) this Agreement may be amended in accordance
with, and only to the extent permissible under, the Act; PROVIDED, HOWEVER, that
no such amendment shall, without the consent of all Partners affected thereby,
change or alter the provisions of this proviso, reduce the capital account of
any Partner, or modify the percentage of profits, losses, or distributions to
which any Partner is entitled; (ii) the Partnership may be dissolved; (iii) the
General Partner may be removed and replaced; (iv) a new general partner or
general partners may be elected if the General Partner terminates or liquidates
or elects to withdraw from the Partnership pursuant to Section 12, or becomes
insolvent, bankrupt, or is dissolved; (v) any contracts with the General Partner
or any of its Affiliates may be terminated without penalty on not less than 60
days' prior written notice; and (vi) the sale of all or substantially all of the
assets of the Partnership may be approved; PROVIDED, HOWEVER, that no such
action shall adversely affect the status of the Limited Partners as limited
partners under the Act or the classification of the Partnership as a partnership
under the federal income tax laws; and PROVIDED FURTHER, that Units owned by the
General Partner and any Affiliate thereof shall not be voted on the matters
described in clauses (iii) and (v) above. Any action which shall have been
approved by the percentage of outstanding Units prescribed above shall be deemed
to have been approved by all Limited Partners.
(d) ACTION WITHOUT MEETING. Notwithstanding contrary provisions of this
Section 15 covering notices to, meetings of, and voting by Limited Partners, any
action required or permitted to be taken by Limited Partners at a meeting or
otherwise may be taken by Limited Partners without a meeting, without prior
notice, and without a vote if a consent in writing setting forth the action so
taken shall be signed by
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Limited Partners owning Units having not fewer than the minimum number of votes
that would be necessary to authorize or take such action at a meeting of Limited
Partners at which all outstanding Units shall have been present and voted.
Notice of the taking of action by Limited Partners without a meeting by less
than unanimous written consent of the Limited Partners shall be given to those
Limited Partners who shall not have consented in writing within seven business
days after the occurrence thereof.
(e) AMENDMENTS TO CERTIFICATE OF LIMITED PARTNERSHIP. If an amendment to
this Agreement shall be made pursuant to this Section 15, the General Partner
shall be authorized to execute, acknowledge, swear to, deliver, file, record,
and publish, on behalf of the Partnership and each Partner, such amendments to
the Certificate of Limited Partnership as shall be necessary or desirable to
reflect such amendment.
16. INDEX OF DEFINED TERMS.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------ -------
<S> <C>
1940 Act.................................................... 15(a)
Act......................................................... 1
Advisers Act................................................ 15(a)
Affiliate................................................... 14(c)
Agreement................................................... Preamble
CEAct....................................................... 8(e)
Certificate of Limited Partnership.......................... 1
CFTC........................................................ 3
Code........................................................ 7(c)(4)
Commodity Broker............................................ 6
Customer Agreement.......................................... 8(b)
Determination Date.......................................... 7(b)
DWR......................................................... 6
Exchange Agreement and Power of Attorney.................... 10(c)
Exchange Date............................................... 10(c)
Futures Interests........................................... 3
General Partner............................................. Preamble
Limited Partners............................................ Preamble
Management Agreement........................................ 8(b)
MSDW........................................................ 6
NASAA Guidelines............................................ 5
Net Asset Value............................................. 7(d)(2)
Net Assets.................................................. 7(d)(1)
NFA......................................................... 6
Non-Series Exchange......................................... 10(b)
Partners.................................................... Preamble
Partnership................................................. 1
Prospectus.................................................. 6
Pyramiding.................................................. 8(c)(5)
Redemption.................................................. 10(b)
Redemption Date............................................. 10(b)
Request for Redemption...................................... 10(b)
SEC......................................................... 5
Selling Agent............................................... 6
Series Exchange............................................. 10(c)
Special Redemption Date..................................... 9
Spectrum Series Partnership(s).............................. 10(b)
Trading Advisor............................................. 6
Trading Profits............................................. 7(e)
Transaction Fees and Costs.................................. 7(e)
Unit(s) of General Partnership Interest..................... 6
Unit(s)..................................................... 6
</TABLE>
A-21
<PAGE>
17. GOVERNING LAW.
THE VALIDITY AND CONSTRUCTION OF THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF DELAWARE, INCLUDING,
SPECIFICALLY, THE ACT (WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES);
PROVIDED, HOWEVER, THAT CAUSES OF ACTION FOR VIOLATIONS OF FEDERAL OR STATE
SECURITIES LAWS SHALL NOT BE GOVERNED BY THIS SECTION 17.
18. MISCELLANEOUS.
(a) PRIORITY AMONG LIMITED PARTNERS. Except as otherwise specifically set
forth in this Agreement, no Limited Partner shall be entitled to any priority or
preference over any other Limited Partner in regard to the affairs of the
Partnership.
(b) NOTICES. All notices and requests to the General Partner under this
Agreement (other than Requests for Redemption, and notices of assignment or
transfer, of Units) shall be in writing and shall be effective upon personal
delivery or, if sent by registered or certified mail, postage prepaid, addressed
to the General Partner at Two World Trade Center, 62nd Floor, New York, New York
10048 (or such other address as the General Partner shall have notified the
Limited Partners), upon the deposit of such notice in the United States mail.
Requests for Redemption, and notices of assignment or transfer of Units shall be
effective upon timely receipt by the General Partner. Except as otherwise
provided herein, all reports and notices hereunder shall be in writing and shall
be sent by first-class mail to the last known address of the Limited Partner.
(c) BINDING EFFECT. This Agreement shall inure to the benefit of, and be
binding upon, all of the parties, their successors, assigns as permitted herein,
custodians, estates, heirs, and personal representatives. For purposes of
determining the rights of any Partner or assignee hereunder, the Partnership and
the General Partner may rely upon the Partnership's records as to who are
Partners and assignees, and all Partners and assignees agree that their rights
shall be determined and that they shall be bound thereby, including all rights
which they may have under Section 15.
(d) CAPTIONS. Captions in no way define, limit, extend, or describe the
scope of this Agreement nor the effect of any of its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
<TABLE>
<S> <C>
Additional Limited Partners: General Partner:
By: Demeter Management Demeter Management Corporation
Corporation, General
Partner, as Authorized
Agent and Attorney-in-Fact
By: ---------------------------------------- By: ----------------------------------------
Name: Name:
Title: Title:
</TABLE>
A-22
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
A-23
<PAGE>
ANNEX A TO LIMITED PARTNERSHIP AGREEMENT
MFAD USE ONLY:_______________ CLOSING DATE:_______________
REQUEST FOR REDEMPTION: MORGAN STANLEY DEAN WITTER MANAGED FUTURES FUNDS
THIS IRREVOCABLE REQUEST FOR REDEMPTION SHOULD BE DELIVERED TO A LIMITED
PARTNER'S LOCAL DEAN WITTER BRANCH OFFICE AND MUST BE RECEIVED BY THE GENERAL
PARTNER (DEMETER MANAGEMENT CORPORATION, TWO WORLD TRADE CENTER, 62ND FLOOR, NEW
YORK, N.Y., 10048) AT LEAST 5 BUSINESS DAYS PRIOR TO THE LAST DAY OF THE MONTH
IN WHICH THE REDEMPTION IS TO BE EFFECTIVE. THIS FORM CANNOT BE FAXED.
________________________, 19____ _____________________________________________
[DATE] [PRINT OR TYPE DEAN WITTER ACCOUNT NUMBER]
I hereby request redemption (effective as of the next applicable date as of
which redemption is permitted as set forth in the Limited Partnership Agreement
of the Partnership for which redemption is requested, subject to all terms and
conditions set forth therein) of my capital account in an amount equal to the
respective Net Asset Value, as defined in the Limited Partnership Agreement, of
the following Unit(s) of Limited Partnership Interest ("UNITS"), less any
amounts specified in the Limited Partnership Agreement.
COMPLETE ONLY ONE SECTION -- A, B OR C -- PER FORM
SECTION A
SPECTRUM SERIES SHALL ONLY REDEEM UNITS IN A MINIMUM AMOUNT OF 50 UNITS, UNLESS
A LIMITED PARTNER IS REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH
PARTNERSHIP.
[DWSF] Spectrum Select Entire Interest Units
[DWST] Spectrum Technical Entire Interest Units
[DWSS] Spectrum Strategic Entire Interest Units
[DWSB] Spectrum Global Balanced Entire Interest Units
[DWSX] Spectrum Currency Entire Interest Units
[DWSC] Spectrum Commodity Entire Interest Units
SECTION B
CORNERSTONE FUNDS SHALL ONLY REDEEM $1,000 INCREMENTS OR WHOLE UNITS UNLESS
A LIMITED PARTNER IS REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH
PARTNERSHIP.
[CFCFB] Cornerstone Fund II Entire Interest Units $ ,000
[CFCFC] Cornerstone Fund III Entire Interest Units $ ,000
[CFCFD] Cornerstone Fund IV Entire Interest Units $ ,000
SECTION C
CHARTER SERIES SHALL ONLY REDEEM UNITS IN A MINIMUM AMOUNT OF 100 UNITS, UNLESS
A LIMITED PARTNER IS
REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH PARTNERSHIP.
[MSCG] Charter Graham Entire Interest Units
[MSCM] Charter Millburn Entire Interest Units
[MSCW] Charter Welton Entire Interest Units
SECTION D
OTHER MANAGED FUTURES FUNDS SHALL ONLY REDEEM $1,000 INCREMENTS OR WHOLE UNITS
UNLESS A LIMITED PARTNER IS REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH
PARTNERSHIP.
MARK ONE FUND ONLY (USE ONE FORM PER FUND):
<TABLE>
<S> <C> <C>
[CFF] Columbia Futures Fund [IAF] International Access Fund Entire Interest
[DFF] Diversified Futures Fund [PGF] Multi-Market Portfolio
[DFF2] Diversified Futures Fund II [PPF] Principal Plus Fund Units
[DFF3] Diversified Futures Fund III [PSF] Portfolio Strategy Fund
[GPP] Global Perspective Portfolio [WCF] World Currency Fund $ ,000
</TABLE>
A-24
<PAGE>
ACCOUNT INFORMATION AND SIGNATURES
I understand that I may only redeem Units at such times as are specified in the
Limited Partnership Agreement and that, under certain circumstances described
therein, I may be subject to a redemption charge.
I (either in my individual capacity or as an authorized representative of an
entity, if applicable) hereby represent and warrant that I am the true, lawful
and beneficial owner of Units (or fractions thereof) to which this Request for
Redemption relates, with full power and authority to request redemption. The
Units (or fractions thereof) which are the subject of this request are not
subject to any pledge or otherwise encumbered in any fashion. My signature has
been represented by a member of a registered national securities exchange.
SIGNATURES MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED
TYPE OR PRINT ALL INFORMATION BELOW
- --------------------------------------------------------------------------------
1. ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
..................................... ....................................
(Name of Limited Partner) (Dean Witter Account Number)
Address: .......................................................................
(Street)
...............................................................................
City State (Province) (Zip Code or Postal Code)
- --------------------------------------------------------------------------------
2.A. SIGNATURE(S) OF INDIVIDUAL PARTNER(S) OR ASSIGNEE(S) INCLUDING IRAS
- --------------------------------------------------------------------------------
X .................................... ....................................
(Signature) (Date)
X .................................... ....................................
(Signature) (Date)
- --------------------------------------------------------------------------------
2.B. SIGNATURE OF ENTITY PARTNER OR ASSIGNEE
- --------------------------------------------------------------------------------
.................................. By: X ..................................
(Name of Entity) (Authorized officer, partner, trustee, or
custodian. If a corporation,
include certified copy of
authorized resolution.)
- --------------------------------------------------------------------------------
3. BRANCH MANAGER AND ACCOUNT EXECUTIVE USE ONLY
- --------------------------------------------------------------------------------
We, the undersigned Account Executive and Branch Manager, represent that the
above signature(s) is/are true and correct.
X .................................... X ...................................
(Account Executive MUST sign) (Branch Manager MUST sign)
........................................
(Branch Telephone Number) Please enter a SELL order upon receipt of a
completed Request for Redemption.
A-25
<PAGE>
EXHIBIT B
SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
UNITS OF LIMITED PARTNERSHIP INTEREST SUBSCRIPTION AND EXCHANGE INSTRUCTIONS
If you wish to purchase Units of one or more of the Morgan Stanley Dean
Witter Spectrum Series Partnerships, please follow the instructions below.
Instructions relating to "Cash Subscribers" should be followed only if you are
purchasing Units for cash. Instructions relating to "Exchange Subscribers"
should be followed only if you are redeeming units in another commodity pool
which the General Partner serves as the general partner and commodity pool
operator in a Non-Series Exchange, or if you are redeeming Units in a Morgan
Stanley Dean Witter Spectrum Series Partnership pursuant to a Series Exchange.
SUBSCRIPTION INSTRUCTIONS
YOU SHOULD CAREFULLY READ AND REVIEW THE MORGAN STANLEY DEAN WITTER SPECTRUM
SERIES PROSPECTUS DATED - , 1999 (THE "PROSPECTUS") AND THIS SUBSCRIPTION AND
EXCHANGE AGREEMENT AND POWER OF ATTORNEY ("AGREEMENT"). IN READING THE
PROSPECTUS, PAY PARTICULAR ATTENTION TO THE MATTERS DISCUSSED UNDER "RISK
FACTORS," "CONFLICTS OF INTEREST" AND "DESCRIPTION OF CHARGES." BY SIGNING THE
AGREEMENT, YOU WILL BE DEEMED TO MAKE EACH APPLICABLE REPRESENTATION AND
WARRANTY, AND SATISFY ANY APPLICABLE SPECIAL STATE SUITABILITY REQUIREMENT, SET
FORTH IN THIS AGREEMENT ON PAGES B-2-B-4, SO PLEASE MAKE SURE THAT YOU SATISFY
ALL APPLICABLE PROVISIONS IN THOSE SECTIONS BEFORE SIGNING THIS AGREEMENT.
CASH SUBSCRIBERS MUST FILL IN ALL OF THE BOXES AND BLANKS ONLY ON PAGES B-7
AND B-8, AND EXCHANGE SUBSCRIBERS MUST FILL IN ALL OF THE BOXES AND BLANKS ONLY
ON PAGES B-9 AND B-10, USING BLACK INK, AS FOLLOWS:
<TABLE>
<S> <C>
Item 1 FOR CASH SUBSCRIBERS --Enter your Dean Witter Reynolds Inc. ("DWR") Account
(pages B-7--B-8) and Exchange Number.
Subscribers (pages B-9-B-10)
--Enter your Social Security Number or Taxpayer ID Number.
If you are subscribing on behalf of an entity (such as a
trust, partnership or corporation), check the
appropriate box to indicate the type of entity. If the
Units are to be owned by joint tenants, either person's
Social Security Number may be used.
--If you are subject to taxation in the United States,
review the representation relating to backup withholding
tax, and enter your taxable year, if other than calendar
year, under "United States Taxable Investors Only" on
page B-7 (for Cash Subscribers) or page B-9 (for
Exchange Subscribers). If you are a non-United States
person, review the representation relating to your
classification as a non-resident alien for United States
federal income tax purposes under "Non-United States
Investors Only" on page B-7 (for Cash Subscribers) or
page B-9 (for Exchange Subscribers). YOU MUST SIGN BELOW
THE APPLICABLE TAX REPRESENTATION IN ITEM 1 ON PAGE
B-7 OR B-9.
--Enter the exact name in which your Units are to be held
based on ownership type, and enter residency and other
information.
--Check box if you are a non-resident alien that is a dealer
in commodities or is otherwise engaged in a trade or
business within the U.S.
--If there is a co-subscriber, trustee or custodian,
complete applicable information.
Item 1 FOR CASH SUBSCRIBERS (PAGE B-7) --Enter the dollar amount of the subscription for each
Partnership whose Units you wish to purchase.
Item 1 FOR EXCHANGE --Enter the symbol(s) of the limited partnership(s) from
SUBSCRIBERS (PAGE B-9) which you are redeeming units; specify the quantity to
be redeemed (entire interest or number of whole units).
Item 2 FOR CASH SUBSCRIBERS (PAGE B-8) --You must execute the Agreement Signature Page on page B-8
AND EXCHANGE SUBSCRIBERS (for Cash Subscribers) or page B-10 (for Exchange
(PAGE B-10) Subscribers).
Item 3 FOR CASH SUBSCRIBERS (PAGE B-8) --An MSDW Financial Advisor and Branch Manager must complete
AND EXCHANGE SUBSCRIBERS the required information.
(PAGE B-10)
</TABLE>
MSDW FINANCIAL ADVISOR: This Agreement must be mailed to Demeter Management
Corporation at Two World Trade Center, 62nd Floor, New York, New York
10048-0026.
B-1
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
---------------------
SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY
If you are subscribing for Units of Limited Partnership Interest ("Units")
in the Morgan Stanley Dean Witter Spectrum Series, consisting of six commodity
pool limited partnerships, Morgan Stanley Dean Witter Spectrum Select L.P.,
Morgan Stanley Dean Witter Spectrum Technical L.P., Morgan Stanley Dean Witter
Spectrum Strategic L.P., Morgan Stanley Dean Witter Spectrum Global
Balanced L.P., Morgan Stanley Dean Witter Spectrum Currency L.P., and Morgan
Stanley Dean Witter Spectrum Commodity L.P. (each, a "Partnership," and
collectively, the "Partnerships"), you should carefully read and review the
Partnerships' Prospectus dated - , 1999 (the "Prospectus"). Capitalized terms
used below and not defined in this Subscription and Exchange Agreement and Power
of Attorney ("Agreement") are defined (and described in detail) in the
Prospectus.
FOR CASH SUBSCRIBERS: By executing the Cash Subscription Signature Page of
this Agreement, you will irrevocably subscribe for Units of one or more of the
Partnerships at the price per Unit described in the Prospectus.
FOR EXCHANGE SUBSCRIBERS: By executing the Exchange Subscription Signature
Page of this Agreement, you will irrevocably redeem the units of limited
partnership interest of each limited partnership indicated on the signature
page of this Agreement and, with the proceeds of that redemption, irrevocably
subscribe for Units of one or more of the Partnerships at the price per Unit
described in the Prospectus.
NOTWITHSTANDING THE FOREGOING, YOU MAY REVOKE THIS AGREEMENT, AND RECEIVE A
FULL REFUND OF THE SUBSCRIPTION AMOUNT YOU PAID, PLUS ANY ACCRUED INTEREST
THEREON (OR REVOKE THE REDEMPTION OF UNITS IN THE OTHER LIMITED PARTNERSHIP IN
THE CASE OF AN EXCHANGE), WITHIN FIVE BUSINESS DAYS AFTER EXECUTION OF THIS
AGREEMENT OR NO LATER THAN 3:00 P.M., NEW YORK CITY TIME, ON THE DATE OF THE
APPLICABLE MONTHLY CLOSING, WHICHEVER COMES FIRST, BY DELIVERING WRITTEN NOTICE
TO YOUR MSDW FINANCIAL ADVISOR. If this Agreement is accepted, you agree to:
(i) contribute your subscription to each Partnership designated on the Signature
Page of this Agreement; and (ii) be bound by the terms of each such
Partnership's Amended and Restated Limited Partnership Agreement, included as
Exhibit A to the Prospectus (the "Limited Partnership Agreement"). BY EXECUTING
THE SIGNATURE PAGE OF THIS AGREEMENT, YOU SHALL BE DEEMED TO HAVE EXECUTED THIS
AGREEMENT AND THE LIMITED PARTNERSHIP AGREEMENT (INCLUDING THE POWERS OF
ATTORNEY IN BOTH AGREEMENTS).
- --------------------------------------------------------------------------------
PAYMENT INSTRUCTIONS
- --------------------------------------------------------------------------------
FOR CASH SUBSCRIBERS: You must pay your subscription amount by charging
your Customer Account with DWR (the "Customer Account"). In the event that you
do not have a Customer Account or do not have sufficient funds in your existing
Customer Account, you must make appropriate arrangements with your
MSDW financial advisor. If you don't have a financial advisor, contact your
local MSDW branch office. Payment must NOT be mailed to the General Partner at
its offices in New York City. Any such payment will not be accepted by the
General Partner and will be returned to you for proper placement with the
MSDW branch office where your Customer Account is maintained. By executing the
Signature Page of this Agreement, you authorize and direct the General Partner
and DWR to transfer the appropriate amount from your Customer Account to the
Escrow Account.
FOR EXCHANGE SUBSCRIBERS: You must pay your subscription amount by applying
the proceeds from the redemption of your limited partnership units in one of the
Partnerships or another commodity pool which the General Partner serves as the
general partner and commodity pool operator. You may only redeem units at such
times as are specified in the limited partnership agreement for that commodity
pool, and under certain circumstances described in that agreement you may be
subject to a redemption charge.
- --------------------------------------------------------------------------------
REPRESENTATIONS AND WARRANTIES
- --------------------------------------------------------------------------------
By executing the Signature Page of this Agreement, you (for yourself and any
co-subscriber, and, if you are signing on behalf of an entity, on behalf of and
with respect to that entity and its shareholders, partners, beneficiaries or
members), represent and warrant to the General Partner and each Partnership
whose Units you are purchasing, as follows (AS USED BELOW, THE TERMS "YOU" AND
"YOUR" REFER TO YOU AND YOUR CO-SUBSCRIBER, IF ANY, OR IF YOU ARE SIGNING ON
BEHALF OF AN ENTITY, THAT ENTITY):
(1) You have received a copy of the Prospectus, including each Limited
Partnership Agreement.
(2) You are of legal age to execute this Agreement and are legally
competent to do so.
(3) You satisfy the applicable financial suitability and minimum
investment requirements, as set forth below under the caption "State
Suitability Requirements" (or in a special Supplement to the Prospectus) for
residents of
B-2
<PAGE>
the State in which you reside. You agree to provide any additional
documentation requested by the General Partner, as may be required by the
securities administrators of certain states, to confirm that you meet the
applicable minimum financial suitability standards to invest in the
Partnerships.
(4) The address set forth on the Signature Page is your true and correct
residence and you have no present intention of becoming a resident of any
other state or country. All the information that you have provided on the
Signature Page is correct and complete as of the date of this Agreement,
and, if there should be any material change in such information prior to
your admission as a Limited Partner, you will immediately furnish such
revised or corrected information to the General Partner.
(5) If you are representing an employee benefit plan, to the best of
your knowledge, neither the General Partner, DWR, any Additional Seller, any
Trading Advisor, nor any of their respective affiliates: (a) has investment
discretion with respect to the investment of your plan assets; (b) has
authority or responsibility to give or regularly gives investment advice
with respect to such plan assets for a fee and pursuant to an agreement or
understanding that such advice (i) will serve as a primary basis for
investment decisions with respect to such plan assets and (ii) will be based
on the particular investment needs of the plan; or (c) is an employer
maintaining or contributing to that plan. For purposes of this
representation (5), an "employee benefit plan" includes plans and accounts
of various types (including their related trusts) which provide for the
accumulation of a portion of an individual's earnings or compensation, as
well as investment income earned thereon, free from federal income tax until
such time as funds are distributed from the plan, and include corporate
"pension" and profit-sharing plans, "simplified employee pension plans,"
"Keogh" plans for self-employed individuals, and individual retirement
accounts ("IRAs").
(6) Unless representation (7) or (8) below is applicable, your
subscription is made with your funds for your own account and not as
trustee, custodian or nominee for another.
(7) If you are subscribing as custodian for a minor, either (a) the
subscription is a gift you have made to that minor and is not made with that
minor's funds, in which case the representations as to net worth and annual
income below apply only to you, as the custodian; or (b) if the subscription
is not a gift, the representations as to net worth and annual income below
apply only to that minor.
(8) If you are subscribing as a trustee or custodian of an employee
benefit plan or of an IRA at the direction of the beneficiary of that plan
or IRA, the representations herein apply only to the beneficiary of that
plan or IRA.
(9) If you are subscribing in a representative capacity, you have full
power and authority to purchase Units and enter into and be bound by this
Agreement on behalf of the entity for which you are purchasing the Units,
and that entity has full right and power to purchase the Units and enter
into and be bound by this Agreement and become a Limited Partner pursuant to
each applicable Limited Partnership Agreement.
(10) You either: (a) are not required to be registered with the
Commodity Futures Trading Commission ("CFTC") or to be a member of the
National Futures Association ("NFA"); or (b), if so required, you are duly
registered with the CFTC and are a member in good standing of the NFA. It is
an NFA requirement that the General Partner attempt to verify that any
person or entity that seeks to purchase Units be duly registered with the
CFTC and a member of the NFA, if required. You agree to supply the General
Partner with such information as the General Partner may reasonably request
in order to attempt such verification. Certain entities that acquire Units
may, as a result, themselves become "commodity pools" within the intent of
applicable CFTC and NFA rules, and their sponsors, accordingly, may be
required to register as "commodity pool operators."
ADDITIONAL REPRESENTATION AND WARRANTY FOR EXCHANGE SUBSCRIBERS:
(11) You are the true, lawful, and beneficial owner of the units of
limited partnership interest (or fractions thereof) to be redeemed pursuant
to this Agreement, with full power and authority to request redemption and a
subsequent purchase of Units. The units of limited partnership interest (or
fractions thereof) which you are redeeming are not subject to any pledge or
are otherwise encumbered in any fashion.
By making the representations and warranties set forth above, you should be
aware that you have not waived any rights of action which you may have under
applicable federal or state securities laws. Federal and state securities laws
provide that any such waiver would be unenforceable. You should be aware,
however, that the representations and warranties set forth above may be asserted
in the defense of a Partnership, the General Partner, DWR, MS & Co., any
Additional Seller, any Trading Advisor, CFI, MSIL, or others in any subsequent
litigation or other proceeding.
B-3
<PAGE>
- --------------------------------------------------------------------------------
STATE SUITABILITY REQUIREMENTS
- --------------------------------------------------------------------------------
Except as indicated below, you must have a net worth (exclusive of home,
furnishings, and automobiles) of at least $75,000 or, failing that standard,
have both a net worth (same exclusions) of at least $30,000 and an annual gross
income of at least $30,000. If you are subscribing with your spouse as joint
owners, you may count your joint net worth and joint income in satisfying these
requirements, as well as the special requirements described below. You must also
make a minimum aggregate investment of $5,000 or $2,000 in the case of IRAs or,
in the case of a Non-Series Exchange, the lesser of (i) $5,000 ($2,000 in the
case of an IRA); (ii) the proceeds from the redemption of five units (two units
in the case of an IRA) from commodity pools other than any of the Morgan Stanley
Dean Witter Charter Series of partnerships (each, a "Charter Partnership");
(iii) the proceeds from the redemption of 500 units (200 units in the case of an
IRA) from any Charter Partnership; or (iv) the proceeds from the redemption of
your entire interest in any other commodity pool which the General Partner
serves as general partner and commodity pool operator. However, the states
listed below (or, in certain cases, in special Supplements to the Prospectus
attached thereto) have more restrictive suitability or minimum investment
requirements for their residents. Please read the following list to make sure
that you meet the minimum suitability and/or investment requirements for the
state in which you reside. (As used below, "NW" means net worth exclusive of
home, furnishings, and automobiles; "AI" means annual gross income; and "TI"
means annual taxable income for federal income tax purposes.)
<TABLE>
<S> <C>
ALABAMA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
ALASKA: Only if you are purchasing Units of Spectrum Currency or
Spectrum Commodity, (a) $225,000 NW, or (b) $60,000 NW and
$60,000 AI.
ARIZONA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
ARKANSAS: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
CALIFORNIA: $100,000 NW and $50,000 AI.
INDIANA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
IOWA: (1) The minimum initial investment for IRAs is $3,000; and
(2) you have at least (a) $225,000 NW, or (b) $60,000 NW and
$60,000 TI.
KANSAS: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
KENTUCKY: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
MAINE: (a) $200,000 NW, or (b) $50,000 NW and $50,000 AI.
MASSACHUSETTS: (a) $225,000 NW, or (b) $60,000 NW and $60,000 AI.
MICHIGAN: (a) $225,000 NW and investment may not exceed 10% of your
NW, or (b) $60,000 NW and $60,000 AI and investment may not
exceed 10% of your NW.
MISSISSIPPI: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
MISSOURI: (a) $225,000 NW, or (b) $60,000 NW and $60,000 AI.
NEBRASKA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
NEW HAMPSHIRE: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
NEW MEXICO: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
NORTH CAROLINA: (a) $225,000 NW, or (b) $60,000 NW and $60,000 AI.
OHIO: (1) (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI; and
(2) if you are purchasing Units of Spectrum Currency or
Spectrum Commodity, the investment may not exceed 10% of
your NW.
OKLAHOMA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
OREGON: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
PENNSYLVANIA: (1) (a) $175,000 NW, or (b) $100,000 NW and $50,000 TI; and
(2) if you have less than $1,000,000 NW, the investment may
not exceed 10% of your NW.
SOUTH DAKOTA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
TENNESSEE: (a) $225,000 NW, or (b) $60,000 NW and $60,000 AI.
TEXAS: (a) $225,000 NW, or (b) $60,000 NW and $60,000 TI.
VERMONT: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
WASHINGTON: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
</TABLE>
- --------------------------------------------------------------------------------
ACCEPTANCE OF THE LIMITED PARTNERSHIP AGREEMENTS
- --------------------------------------------------------------------------------
You agree that as of the date that your name is entered on the books of a
Partnership, you shall become a Limited Partner of that Partnership. You also
agree to each and every term of the Limited Partnership Agreement of that
Partnership as if you signed that Agreement. You further agree that you will not
be issued a certificate evidencing the Units that you are purchasing, but that
you will receive a confirmation of purchase in DWR's customary form.
B-4
<PAGE>
- --------------------------------------------------------------------------------
POWER OF ATTORNEY AND GOVERNING LAW
- --------------------------------------------------------------------------------
You hereby irrevocably constitute and appoint Demeter Management
Corporation, the General Partner of each Partnership, as your true and lawful
Attorney-in-Fact, with full power of substitution, in your name, place, and
stead: (1) to do all things necessary to admit you as a Limited Partner of each
Partnership requested below, and such other Partnership(s) of the Dean Witter
Spectrum Series as you may request from time to time; (2) to admit others as
additional or substituted Limited Partners to such Partnership(s) so long as
such admission is in accordance with the terms of the applicable Limited
Partnership Agreement or any amendment thereto; (3) to file, prosecute, defend,
settle, or compromise any and all actions at law or suits in equity for or on
behalf of each Partnership in connection with any claim, demand, or liability
asserted or threatened by or against any Partnership; and (4) to execute,
acknowledge, swear to, deliver, file, and record on your behalf and as necessary
in the appropriate public offices, and publish: (a) each Limited Partnership
Agreement and each Certificate of Limited Partnership and all amendments thereto
permitted by the terms thereof; (b) all instruments that the General Partner
deems necessary or appropriate to reflect any amendment, change, or modification
of any Limited Partnership Agreement or any Certificate of Limited Partnership
made in accordance with the terms of such Limited Partnership Agreement;
(c) certificates of assumed name; and (d) all instruments that the General
Partner deems necessary or appropriate to qualify or maintain the qualification
of each Partnership to do business as a foreign limited partnership in other
jurisdictions. You agree to be bound by any representation made by the General
Partner or any successor thereto acting in good faith pursuant to this Power of
Attorney.
The Power of Attorney granted hereby shall be deemed to be coupled with an
interest and shall be irrevocable and survive your death, incapacity,
dissolution, liquidation, or termination.
THIS SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY SHALL BE
GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT BE DEEMED A WAIVER OF ANY
RIGHTS OF ACTION YOU MAY HAVE UNDER APPLICABLE FEDERAL OR STATE SECURITIES LAW.
- --------------------------------------------------------------------------------
RECEIPT OF DOCUMENTATION
- --------------------------------------------------------------------------------
The regulations of the CFTC require that you be given a copy of the
Prospectus (which includes the most current annual report for each of the
Partnerships, other than Spectrum Currency and Spectrum Commodity), as well as
certain additional documentation consisting of: (a) a supplement to the
Prospectus, which must be given to you if the Prospectus is dated more than nine
months prior to the date that you first received the Prospectus, and (b) the
most current monthly account statement (report) for the Partnerships. You hereby
acknowledge receipt of the Prospectus and the additional documentation referred
to above, if any.
B-5
<PAGE>
(This page has been left blank intentionally.)
B-6
<PAGE>
-
---
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
UNITS OF LIMITED PARTNERSHIP INTEREST
CASH SUBSCRIPTION SIGNATURE PAGE
A
PLEASE PRINT OR TYPE (EXCEPT SIGNATURES). USE BLACK INK ONLY.
PAGES B-7 AND B-8, THE CASH SUBSCRIPTION SIGNATURE PAGES, SHOULD BE
DELIVERED TO YOUR LOCAL MSDW BRANCH OFFICE AND MUST BE RECEIVED BY THE GENERAL
PARTNER AT TWO WORLD TRADE CENTER, 62ND FLOOR, NEW YORK, NEW YORK 10048-0026, AT
LEAST FIVE BUSINESS DAYS PRIOR TO THE APPLICABLE CLOSING.
By execution and delivery of this Cash Subscription Signature Page and by
payment of the purchase price for Units of Limited Partnership Interest
("Units") of one or more Partnerships in the Morgan Stanley Dean Witter Spectrum
Series (the "Partnerships"), you hereby subscribe for Units in the
Partnership(s) specified below at a price equal to 100% of the Net Asset Value
per Unit of the applicable Partnership(s) as of the close of business on the
date of the applicable Monthly Closing ($10 per Unit of Spectrum Currency at its
Initial Closing).
BY SUCH EXECUTION AND PAYMENT, YOU ACKNOWLEDGE RECEIPT OF THE PROSPECTUS OF
THE PARTNERSHIPS DATED - , 1999, INCLUDING THE LIMITED PARTNERSHIP AGREEMENT
AND THIS SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY, THE TERMS OF
WHICH GOVERN THE INVESTMENT IN THE UNITS BEING SUBSCRIBED FOR BY YOU, AND THE
CURRENT MONTHLY REPORT FOR THE PARTNERSHIPS.
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
ITEM 1 -- SUBSCRIBER (YOU MUST SIGN THE TAX REPRESENTATION BELOW)
- ----------------------------------------------------------------------------------------------------------------------
SPECTRUM FUND SYMBOL AMOUNT OF SUBSCRIPTION
/ // // /-/ // // // // // / MORGAN STANLEY DEAN WITTER SPECTRUM
DWR ACCOUNT NO. D W S F SELECT L.P. $
MORGAN STANLEY DEAN WITTER SPECTRUM
D W S T TECHNICAL L.P. $
/ // // /-/ // /-/ // // // / MORGAN STANLEY DEAN WITTER SPECTRUM
D W S S STRATEGIC L.P. $
SOCIAL SECURITY NUMBER MORGAN STANLEY DEAN WITTER SPECTRUM
OR D W S B GLOBAL BALANCED L.P. $
/ // /-/ // // // // // // / MORGAN STANLEY DEAN WITTER SPECTRUM
TAXPAYER ID NUMBER D W S X CURRENCY L.P. $
MORGAN STANLEY DEAN WITTER SPECTRUM
D W S C COMMODITY L.P. $
</TABLE>
CHECK THE BOX BELOW WHICH DESCRIBES THE CAPACITY IN WHICH YOU ARE INVESTING:
<TABLE>
<S> <C> <C>
/ / Individual Ownership / / Trust other than Grantor or / / IRA (the MSDW Branch Manager must
/ / Joint Tenants with Rights of Revocable Trust sign below for IRA accounts)
Survivorship / / Estate / / Employee Benefit Plan (Participant-
/ / Tenants in Common / / UGMA/UTMA (Minor) Directed)
/ / Community Property / / Partnership / / Defined Benefit Plan (Other)
/ / Grantor or other Revocable Trust / / Corporation / / Other (specify) ------------------
</TABLE>
YOU (OR BRANCH MANAGER IN THE CASE OF AN IRA) MUST SIGN BELOW:
<TABLE>
<CAPTION>
UNITED STATES TAXABLE INVESTORS ONLY: NON-UNITED STATES INVESTORS ONLY:
- ------------------------------------- ---------------------------------
<S> <C> <C> <C>
/ / Check box if you are subject to backup withholding under the Under penalties of perjury, by signature
provisions of Section 3406(a)(1)(C) of the Internal Revenue Code. OR below, you certify that you are NOT
If your taxable year is other than the calendar year, indicate the date on (a) a citizen or resident of the United
which your taxable year ends: / // /-/ // / MM-DD States; or
Under penalties of perjury, by signing below, I certify that the Social (b) a United States corporation,
Security Number (or Taxpayer ID Number) above to be the true, correct and partnership, estate or trust.
complete Social Security Number (or Taxpayer ID Number) and that all the
information above is true, correct and complete.
</TABLE>
X _______________________________ __________________________
(Your Signature (Indicate your title, if applicable) [or Date
Branch Manager in the case of IRAs])
If you are an Entity: Name of Entity: ...................................
Name of Person Signing for Entity: ..........................
Title: ......................................................
Full Name of Account ..........................................................
(Your Name or Name of Trust or Custodial Account--do
not use initials)
<TABLE>
<S> <C> <C> <C>
You are a resident of .................... and a citizen of ....................
(name of country) (name of country)
</TABLE>
Street Address ................................................................
(MUST be residence address--P.O. Box alone not acceptable)
City ......... State ......... Zip Code ......... Tel. No. ( ........ ) ........
/ / Check here if you are a non-resident alien individual, foreign corporation,
foreign partnership, foreign trust or foreign estate that is a dealer in
commodities or otherwise engaged in a trade or business within the U.S.A. to
which income, gain or loss from a Partnership would be treated as effectively
connected. (You must complete Form W-8, which may be obtained from an MSDW
Financial Advisor.)
B-7
----
-
<PAGE>
-
----
COMPLETE, IF APPLICABLE (MUST BE COMPLETED IF THERE IS A CO-SUBSCRIBER, TRUSTEE
OR CUSTODIAN):
Name .................. Telephone Number ( ................. ) .................
The person or entity above is a/an: (check one)
/ / Co-Subscriber / / Trustee or Custodian / / Authorized Person, if an
Institutional Trustee
Street Address (P.O. Box alone not acceptable) .................................
<TABLE>
<S> <C>
City ................................................... State .................... Zip Code ...................
Co-Subscriber, Trustee or Custodian is a resident of ... and a citizen of .......................................
Minor (if not a gift) is a resident of ................. and a citizen of .......................................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 2 -- SIGNATURE(S) -- YOU MUST SIGN UNDER TAX REPRESENTATION ON PRECEDING
PAGE AND BELOW
- --------------------------------------------------------------------------------
(INDIVIDUAL OR JOINT SUBSCRIPTION, INCLUDING PARTICIPANT-DIRECTED EMPLOYEE
BENEFIT PLAN OR IRA SUBSCRIPTION)
If you are subscribing for a joint or community property account, the
statements, representations, and warranties set forth in this Subscription and
Exchange Agreement and Power of Attorney shall be deemed to have been made by
each owner of the account.
* If the Units will be owned by joint owners, tenants in common, or as
community property, signatures of all owners are required.
* In the case of a participant-directed employee benefit plan or IRA, the
beneficiary must sign immediately below and the trustee or custodian must
sign below under "Entity Subscription."
<TABLE>
<S> <C>
X ________________________________ _____________ X ________________________________ _____________
(Signature of Subscriber) Date (Signature of Co-Subscriber) Date
</TABLE>
(ENTITY SUBSCRIPTION)
ACCEPTANCE OF SUBSCRIPTION ON BEHALF OF EMPLOYEE BENEFIT PLANS (INCLUDING IRAS)
IS IN NO RESPECT A REPRESENTATION BY THE GENERAL PARTNER OR DWR THAT THIS
INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR
PLAN.
The undersigned officer, partner, trustee, manager or other representative
hereby certifies and warrants that: (a) s/he has full power and authority from
or on behalf of the entity named below and its shareholders, partners,
beneficiaries, or members to complete, execute, and deliver this Subscription
and Exchange Agreement and Power of Attorney on their behalf and to make the
statements, representations, and warranties made herein on their behalf; and (b)
the investment in each Partnership specified is authorized under applicable law
and the governing documents of the entity, has been affirmatively authorized by
the governing board or body, if any, of the entity, and is legally permissible.
<TABLE>
<S> <C> <C>
.......................................................... X ....................................... ............
(Name of Entity) (Signature) Date
Print Name ................................................ Title ..................................................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 3 -- BRANCH MANAGER AND FINANCIAL ADVISOR USE ONLY (COMPLETE IN FULL AND IN
INK)
- --------------------------------------------------------------------------------
THE UNDERSIGNED FINANCIAL ADVISOR HEREBY CERTIFIES THAT:
(1) the above signature(s) is/are true and correct;
(2) s/he has informed the Subscriber about the liquidity and marketability of
the Units as set forth in the Prospectus.
(3) based on information obtained from the Subscriber concerning the
Subscriber's investment objectives, other investments, financial situation,
needs and any other relevant information, that s/he reasonably believes
that:
(a) such Subscriber is or will be in a financial position appropriate to
enable such Subscriber to realize the benefits of each Partnership
specified, as described in the Prospectus;
(b) such Subscriber has a net worth sufficient to sustain the risk inherent
in each Partnership specified (including loss of investment and lack of
liquidity); and
(c) each Partnership specified is otherwise a suitable investment for such
Subscriber; and
(4) the Subscriber received the Prospectus at least five business days prior to
the applicable Closing.
THE FINANCIAL ADVISOR MUST SIGN BELOW IN ORDER TO SUBSTANTIATE COMPLIANCE WITH
NASD CONDUCT RULE 2810.
X ______________________________________________________________________________
Financial Advisor's Signature
...............................................................................
Type or Print Full Name of Financial Advisor
Telephone Number ( ............................. ) ............................
THE UNDERSIGNED BRANCH MANAGER HEREBY CERTIFIES THAT:
(1) the above signature(s) is/are true and correct.
(2) the above client(s) is/are suitable.
X _____________________________________________________________________________,
Branch Manager's Signature
...............................................................................
Type or Print Full Name of Branch Manager
B-8
----
-
<PAGE>
-
---
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
EXCHANGE SUBSCRIPTION SIGNATURE PAGE
B
PLEASE PRINT OR TYPE (EXCEPT SIGNATURES). USE BLACK INK ONLY.
PAGES B-9 AND B-10, THE EXCHANGE SUBSCRIPTION SIGNATURE PAGES, SHOULD BE
DELIVERED TO YOUR LOCAL MSDW BRANCH OFFICE AND MUST BE RECEIVED BY THE GENERAL
PARTNER AT TWO WORLD TRADE CENTER, 62ND FLOOR, NEW YORK, NEW YORK 10048-0026, AT
LEAST FIVE BUSINESS DAYS PRIOR TO THE APPLICABLE CLOSING.
By execution and delivery of this Signature Page, you hereby redeem the
units of limited partnership interest of the limited partnership(s) named in
Item 1 below and, by application of the proceeds of such redemption to the
payment of the purchase price for Units of Limited Partnership Interest
("Units") in one or more Partnerships in the Morgan Stanley Dean Witter Spectrum
Series (the "Partnerships"), you hereby subscribe for Units in the
Partnership(s) specified below at a price equal to 100% of the Net Asset Value
per Unit of the applicable Partnership(s) as of the close of business on the
date of the applicable Monthly Closing ($10 per Unit of Spectrum Currency at its
Initial Closing). Redemption of units of any partnership for an exchange must be
in whole units, unless you are redeeming your entire interest in such
partnership.
BY SUCH EXECUTION AND PAYMENT, YOU ACKNOWLEDGE RECEIPT OF THE PROSPECTUS OF
THE PARTNERSHIPS DATED - , 1999, INCLUDING THE LIMITED PARTNERSHIP AGREEMENT
AND THIS SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY, THE TERMS OF
WHICH GOVERN THE INVESTMENT IN THE UNITS BEING SUBSCRIBED FOR BY YOU, AND THE
CURRENT MONTHLY REPORT FOR THE PARTNERSHIPS.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
ITEM 1 -- SUBSCRIBER (YOU MUST SIGN THE TAX REPRESENTATION BELOW )
- --------------------------------------------------------------------------------------------------------------------------
DWR ACCOUNT NO. / // // /-/ // // // // // / / // // /-/ // /-/ // // // / or / // /-/ // // // // // // /
SOCIAL SECURITY NUMBER TAXPAYER ID NUMBER
SYMBOL(S) FOR FUND(S) FROM SPECIFY QUANTITY OF UNITS TO BE REDEEMED SPECTRUM SERIES
WHICH UNITS TO BE REDEEMED (CHECK BOX IF ENTIRE INTEREST; INSERT NUMBER IF WHOLE UNITS) FUND SYMBOL
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
You hereby authorize Demeter Management Corporation to redeem the quantity of units of limited partnership interest set
forth opposite the symbol for each partnership identified on the left above at the "Net Asset Value" thereof, as defined
in the limited partnership agreement of each such partnership, less any redemption charges, and to utilize the net
proceeds of that redemption to purchase Units in the applicable Spectrum Series Partnership as indicated on the right
above. Redemptions for an exchange may only be made in whole units of limited partnership interest, with a minimum
redemption of the lesser of (i) 5 units (2 units in the case of an IRA) from any partnership other than the Spectrum
Series Partnerships or any Morgan Stanley Dean Witter Charter Series partnership (each, a "Charter Partnership"); (ii) 50
Units from any Spectrum Series Partnership; (iii) 500 units (200 units in the case of an IRA) from a Charter Partnership;
or (iv) the Subscriber's entire interest in any partnership.
</TABLE>
<TABLE>
<S> <C> <C>
CHECK THE BOX BELOW WHICH DESCRIBES THE CAPACITY IN WHICH YOU ARE INVESTING:
/ / Individual Ownership / / Trust other than Grantor or / / IRA (the MSDW Branch Manager must sign
/ / Joint Tenants with Rights of Revocable Trust below for IRA accounts)
Survivorship / / Estate / / Employee Benefit Plan (Participant-
/ / Tenants in Common / / UGMA/UTMA (Minor) Directed)
/ / Community Property / / Partnership / / Defined Benefit Plan (Other)
/ / Grantor or other Revocable Trust / / Corporation / / Other (specify)
YOU (OR BRANCH MANAGER IN THE CASE OF AN IRA) MUST SIGN BELOW:
</TABLE>
<TABLE>
<CAPTION>
UNITED STATES TAXABLE INVESTORS ONLY: NON-UNITED STATES INVESTORS ONLY:
- ------------------------------------- ---------------------------------
<S> <C> <C> <C>
/ / Check box if you are subject to backup withholding under the provisions of OR Under penalties of perjury, by
Section 3406(a)(1)(C) of the Internal Revenue Code. signature below, you certify that
you are NOT
If your taxable year is other than the calendar year, indicate the date (a) a citizen or resident of the
on which your taxable year ends: / // /-/ // / MM-DD United States; or
Under penalties of perjury, by signing below, I certify that the Social Security Number (b) a United States corporation,
(or Taxpayer ID Number) above to be the true, correct and complete Social Security partnership, estate or trust.
Number (or Taxpayer ID Number) and that all the information above is true, correct and
complete.
</TABLE>
X _______________________________ __________________________
(Your Signature (Indicate your title, if applicable) Date
[or Branch Manager in the case of IRAs])
If you are an Entity: Name of Entity: ...................................
Name of Person Signing for Entity: ..........................
Title: ......................................................
B-9
----
-
<PAGE>
-
----
Full Name of Account ..........................................................
(Your Name or Name of Trust or Custodial Account--do not use
initials)
You are a resident of .................... and a citizen of ....................
(name of country) (name of county)
Street Address (P.O. Box alone not acceptable) ................................
City ......... State ......... Zip Code ........ Tel. No. ( ........ ) ........
/ / Check here if you are a non-resident alien individual, foreign corporation,
foreign partnership, foreign trust or foreign estate that is a dealer in
commodities or otherwise engaged in a trade or business within the U.S.A. to
which income, gain or loss from a Partnership would be treated as effectively
connected. (You must complete Form W-8, which may be obtained from an
MSDW Financial Advisor.)
COMPLETE, IF APPLICABLE (MUST BE COMPLETED IF THERE IS A CO-SUBSCRIBER, TRUSTEE
OR CUSTODIAN):
Name.......................Telephone Number ( ............. )...................
The person or entity above is a/an: (check one)
/ / Co-Subscriber / / Trustee or Custodian / / Authorized Person, if an
Institutional Trustee
Street Address (P.O. Box alone not acceptable) .................................
<TABLE>
<S> <C>
City ...................................................... State ..................... Zip Code .....................
Co-Subscriber, Trustee or Custodian is a resident of ...... and a citizen of ..........................................
Minor (if not a gift) is a resident of .................... and a citizen of ..........................................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 2 -- SIGNATURE(S) -- YOU MUST SIGN UNDER TAX REPRESENTATION ON PRECEDING
PAGE AND BELOW
- --------------------------------------------------------------------------------
(INDIVIDUAL OR JOINT SUBSCRIPTION, INCLUDING PARTICIPANT-DIRECTED EMPLOYEE
BENEFIT PLAN OR IRA SUBSCRIPTION)
If you are subscribing for a joint or community property account, the
statements, representations, and warranties set forth in this Subscription and
Exchange Agreement and Power of Attorney shall be deemed to have been made by
each owner of the account.
* If the Units will be owned by joint owners, tenants in common, or as
community property, signatures of all owners are required.
* In the case of a participant-directed employee benefit plan or IRA, the
beneficiary must sign immediately below and the trustee or custodian must
sign below under "Entity Subscription."
<TABLE>
<S> <C>
X _________________________________ ______________ X _________________________________ ______________
(Signature of Subscriber) Date (Signature of Co-Subscriber) Date
</TABLE>
(ENTITY SUBSCRIPTION)
ACCEPTANCE OF SUBSCRIPTION ON BEHALF OF EMPLOYEE BENEFIT PLANS (INCLUDING IRAS)
IS IN NO RESPECT A REPRESENTATION BY THE GENERAL PARTNER OR DWR THAT THIS
INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR
PLAN.
The undersigned officer, partner, trustee, manager, or other representative
hereby certifies and warrants that: (a) s/he has full power and authority from
or on behalf of the entity named below and its shareholders, partners,
beneficiaries, or members to (i) complete, execute, and deliver this
Subscription Agreement and Power of Attorney on their behalf; and (ii) to make
the statements, representations, and warranties made herein on their behalf; and
(b) the investment in each Partnership specified is authorized under applicable
law and the governing documents of the entity, and has been affirmatively
authorized by the governing board or body, if any, of the entity, and is legally
permissible.
<TABLE>
<S> <C> <C>
.......................................................... X ....................................... ............
(Type or Print Name of Entity) (Signature) Date
Name of Person Signing for Entity ......................... Title .................................................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 3 -- FINANCIAL ADVISOR AND BRANCH MANAGER USE ONLY (COMPLETE IN FULL AND IN
INK)
- --------------------------------------------------------------------------------
THE UNDERSIGNED FINANCIAL ADVISOR HEREBY CERTIFIES THAT:
(1) the above signature(s) is/are true and correct.
(2) s/he has informed the Subscriber about the liquidity and marketability of
the Units as set forth in the Prospectus.
(3) based on information obtained from the Subscriber concerning the
Subscriber's investment objectives, other investments, financial situation,
needs and any other relevant information, that s/he reasonably believes
that:
(a) such Subscriber is or will be in a financial position appropriate to
enable such Subscriber to realize the benefits of each Partnership
specified, as described in the Prospectus;
(b) such Subscriber has a net worth sufficient to sustain the risk inherent
in each Partnership specified (including loss of investment and lack of
liquidity); and
(c) each Partnership specified is otherwise a suitable investment for such
Subscriber; and
(4) the Subscriber has received the Prospectus at least five business days prior
to the applicable Closing.
THE FINANCIAL ADVISOR MUST SIGN BELOW IN ORDER TO SUBSTANTIATE COMPLIANCE WITH
NASD CONDUCT RULE 2810.
X ______________________________________________________________________________
Financial Advisor's Signature
...............................................................................
Type or Print Full Name of Financial Advisor
Telephone Number ( ............................. ) ............................
THE UNDERSIGNED BRANCH MANAGER HEREBY CERTIFIES THAT:
(1) the above signature(s) is/are the true and correct.
(2) the above client(s) is/are suitable.
X ______________________________________________________________________________
Branch Manager's Signature
...............................................................................
Type or Print Full Name of Branch Manager
B-10
----
-
<PAGE>
EXHIBIT C
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
SUBSCRIPTION AGREEMENT UPDATE FORM
PLEASE PRINT OR TYPE (EXCEPT SIGNATURES). USE BLACK INK ONLY.
DWR Account No. / / / / / / / / / / / / / / / / / / / /
I am an investor in the following Morgan Stanley Dean Witter Spectrum Series
Partnership(s) (mark each applicable box with an "X"):
/ / Morgan Stanley Dean Witter Spectrum Select L.P.
/ / Morgan Stanley Dean Witter Spectrum Technical L.P.
/ / Morgan Stanley Dean Witter Spectrum Strategic L.P.
/ / Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
/ / Morgan Stanley Dean Witter Spectrum Currency L.P.
/ / Morgan Stanley Dean Witter Spectrum Commodity L.P.
I acknowledge receipt of the Morgan Stanley Dean Witter Spectrum Series
Prospectus dated - (the "Prospectus"). I have signed this form, which
updates each Subscription and Exchange Agreement and Power of Attorney (each, a
"Subscription Agreement") I signed when I bought Units of the Morgan Stanley
Dean Witter Spectrum Series Partnership(s) checked above, so that I may purchase
additional Units of such Partnership(s) without the need to execute a new
Subscription Agreement. I understand that if I wish to purchase additional Units
by way of an Exchange, or if I wish to purchase Units of any Morgan Stanley Dean
Witter Spectrum Series Partnership in which I am not currently an investor, I
must first execute a new Subscription Agreement in the form annexed to the
Prospectus as Exhibit B.
I hereby confirm that the representations, warranties and other information
regarding the Subscriber in the Subscription Agreement(s) I previously executed
are still accurate, and that any purchase of additional Units following the date
of this Subscription Agreement Update Form shall be deemed confirmation that
such representations, warranties and other information are still accurate at the
time of that additional purchase. I will notify my Morgan Stanley Dean Witter
Financial Advisor prior to the purchase of additional Units if there is any
material change in the Subscriber's representations, warranties, or other
information contained in the previously executed Subscription Agreement(s).
I understand that I will need to execute a new Subscription Agreement Update
Form when a new Prospectus or Prospectus Supplement is issued.
<TABLE>
<S> <C> <C> <C>
IF SUBSCRIBER IS AN ENTITY INDIVIDUAL SUBSCRIBERS
- ----------------------------------------------------- -----------------------------------------------------
Name of Entity (Print or Type) Name of Subscriber(s) (Print or Type)
By:
---------------------------------------------- -----------------------------------------------------
Name of Signatory
- ----------------------------------------------------- -----------------------------------------------------
Title Signature(s) of Subscriber(s)
- ----------------------------------------------------- -----------------------------------------------------
Signature Address
- ----------------------------------------------------- -----------------------------------------------------
Address City State Zip
- -----------------------------------------------------
City State Zip Date:
----------------------------------------------
Date:
----------------------------------------------
</TABLE>
(PLEASE RETURN THIS FORM TO YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR.
FINANCIAL ADVISORS MUST FORWARD THE EXECUTED COPY OF THIS FORM TO DEMETER
MANAGEMENT CORPORATION.)
C-1
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE MATTERS DESCRIBED
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER BY ANY PERSON WITHIN ANY JURISDICTION IN WHICH SUCH OFFER IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF ITS ISSUE.
UNTIL 90 DAYS FROM THE DATE OF THIS PROSPECTUS, ALL DEALERS THAT EFFECT
TRANSACTIONS IN THESE SECURITIES, OR NOT PARTICIPATING IN THIS OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS OBLIGATION
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
$
--------
<S> <C>
SEC registration fee........................................ 14,614
NASD filing fee............................................. 5,757
Printing and engraving...................................... 58,333*
Legal fees and expenses, excluding Blue Sky legal fees...... 50,000*
Accounting fees and expenses................................ 13,333*
Annual Escrow Agent fees.................................... 166*
Blue Sky fees and expenses, including Blue Sky legal fees... 51,950
Miscellaneous............................................... 50,000*
-------
Total................................................... 244,153
=======
</TABLE>
- ---------
* Represents an estimate of the registrant's portion of the fees and expenses
that are common to this Registration Statement, Post-Effective Amendment
No. 3 to the Registration Statement on Form S-1 for Morgan Stanley Dean
Witter Spectrum Technical L.P. (Registration Statement No. 333-68779), and
Registration Statements on Form S-1 for each of Morgan Stanley Dean Witter
Spectrum Select L.P., Morgan Stanley Dean Witter Spectrum Strategic L.P.,
Morgan Stanley Dean Witter Spectrum Global Balanced L.P., and Morgan Stanley
Dean Witter Spectrum Currency Fund L.P., which are being filed concurrently
with this Registration Statement.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14 of the Amended and Restated Limited Partnership Agreement (a form
of which is annexed to the Prospectus as Exhibit A) provides for indemnification
of the General Partner and its affiliates (as such term is defined therein) by
the Partnership for any loss, liability, damage, cost or expense arising from
any act, omission, activity or conduct undertaken by or on behalf of the
Partnership that is determined by the General Partner in good faith to be in the
best interests of the Partnership and was not the result of misconduct or
negligence. Section 11 of the Amended and Restated Selling Agreement provides
for indemnification of the General Partner and its affiliates and its successors
and assigns by Dean Witter Reynolds Inc. ("DWR") for any loss, claim, damage,
liability, cost and expense incurred for a breach by DWR of a representation or
agreement in the Selling Agreement, or for misleading statements and material
omissions regarding DWR in the Registration Statement or Prospectus. Such
Section also provides for the indemnification by the Partnership of DWR, the
General Partner and their affiliates for any act, omission, conduct, or activity
undertaken by or on behalf of a Partnership that is determined by DWR or the
General Partner, as applicable, in good faith to be in the best interests of the
Partnership and was not the result of misconduct or negligence. Section 8 of the
DWR Customer Agreement provides for indemnification of DWR and its affiliates
for liabilities, losses, damages, costs, or expenses for activities taken by or
on behalf of the Partnership which DWR has determined in good faith are in the
best interests of the Partnership and are not the result of misconduct or
negligence. Section 8 of each Management Agreement provides for indemnification
of the General Partner and its affiliates by the Trading Advisor for losses,
claims, damages, liabilities, costs and expenses incurred as a result of actions
or omissions by the Trading Advisor involving the Partnership's trading which
are the result of a breach of agreement, representation or warranty or the
result of bad faith, misconduct or negligence.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.01(3) Form of Amended and Restated Selling Agreement among the
Registrant, Morgan Stanley Dean Witter Spectrum
Select L.P., Morgan Stanley Dean Witter Spectrum
Technical L.P., Morgan Stanley Dean Witter Spectrum
Strategic L.P., Morgan Stanley Dean Witter Spectrum Global
Balanced L.P., and Morgan Stanley Dean Witter Spectrum
Currency L.P., Demeter Management Corporation, and Dean
Witter Reynolds Inc.
1.02(3) Form of Additional Seller Agreement between Dean Witter
Reynolds Inc. and additional selling agents.
3.01 Form of Amended and Restated Limited Partnership Agreement
of the Registrant (included as Exhibit A to the
prospectus).
3.02(1) Certificate of Limited Partnership of the Registrant.
3.03(3) Form of Amendment of Certificate of Limited Partnership of
the Registrant (changing its name to Morgan Stanley Dean
Witter Spectrum Commodity L.P.).
5.01(3) Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding the legality of Units (including consent).
8.01(3) Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding certain federal income tax matters (including
consent).
10.01(3) Form of Customer Agreement between the Registrant and Dean
Witter Reynolds, Inc.
10.02(3) Form of Amended and Restated Commodity Futures Customer
Agreement among the Registrant and Morgan Stanley & Co.,
Incorporated.
10.03(2) Form of International Customer Agreement among the
Registrant, Morgan Stanley & Co., Incorporated and Morgan
Stanley & Co. International Limited.
10.04(3) Form of Amended and Restated Management Agreement among the
Registrant, Demeter Management Corporation, and Morgan
Stanley Commodities Management, Inc.
10.05 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units
(included as Exhibit B to the prospectus).
10.06(3) Form of Amended and Restated Escrow Agreement among the
Registrant, Morgan Stanley Dean Witter Spectrum
Select L.P., Morgan Stanley Dean Witter Spectrum Technical
L.P., Morgan Stanley Dean Witter Spectrum Strategic L.P.,
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.,
Morgan Stanley Dean Witter Currency L.P., Demeter
Management Corporation, Dean Witter Reynolds Inc., and
Chemical Bank, the escrow agent.
10.07 Form of Subscription Agreement Update Form to be executed by
purchasers of units (included as Exhibit C to the
prospectus).
23.01 Consent of Independent Auditors for the Demeter Management
Corporation and the Registrant.
</TABLE>
- ---------
(1) Incorporated by reference to Registration Statement No. 333-33975.
(2) Incorporated by reference to Exhibit 10.03 filed with the Registrant's Form
10-K for fiscal year ended December 31, 1998 (File No. 0-24035).
(3) Incorporated by reference to Registration Statement No. 333-90483.
(b) Financial Statements.
Included in the Prospectus:
Morgan Stanley Tangible Asset Fund L.P.
Independent Auditors' Report
Statements of Financial Condition
Statements of Operations
Statements of Changes in Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
Demeter Management Corporation
Independent Auditors' Report
Statements of Financial Condition
Notes to Statements of Financial Condition
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (a) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(b) to reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and (c) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense
of any action, suit, or proceeding) is asserted by such director, officer,
or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York and State of New York on the 28th day of December, 1999.
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
<TABLE>
<S> <C> <C>
By: DEMETER MANAGEMENT CORPORATION
General Partner
By: /S/ ROBERT E. MURRAY
--------------------------------------------
Robert E. Murray, PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C> <C>
DEMETER MANAGEMENT CORPORATION General Partner
By: Chairman of the Board and
------------------------------------- Director of the General
Mark J. Hawley Partner
/S/ ROBERT E. MURRAY
------------------------------------- President and Director of the
Robert E. Murray General Partner December 28, 1999
/S/ MITCHELL M. MERIN
------------------------------------- Director of the General Partner
Mitchell M. Merin December 28, 1999
/S/ JOSEPH G. SINISCALCHI
------------------------------------- Director of the General Partner
Joseph G. Siniscalchi December 28, 1999
/S/ EDWARD C. OELSNER, III
------------------------------------- Director of the General Partner
Edward C. Oelsner, III December 28, 1999
------------------------------------- Director of the General Partner
Richard A. Beech
------------------------------------- Director of the General Partner
Ray Harris
/S/ LEWIS A. RAIBLEY, III Vice President, Chief Financial
------------------------------------- and Principal Accounting
Lewis A. Raibley, III Officer, and Director of the
General Partner December 28, 1999
</TABLE>
II-4
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Post-Effective Amendment No. 3 to Registration
Statement No. 333-68779 for Morgan Stanley Dean Witter Spectrum Technical
L.P. (formerly Dean Witter Spectrum Technical L.P.) ("Spectrum Technical") on
Form S-1 of our report dated February 15, 1999 (March 4, 1999 and September
24, 1999 as to Note 6) relating to the statements of financial condition of
Spectrum Technical at December 31, 1998 and 1997 and the related statements
of operations, changes in partners' capital and cash flows for each of the
three years in the period ended December 31, 1998 appearing in the Prospectus
which is a part of such Registration Statement.
We consent to the use in Pre-Effective Amendment No. 1 to Registration
Statement No. 333-90487 for Morgan Stanley Dean Witter Spectrum Strategic
L.P. (formerly Dean Witter Spectrum Strategic L.P.) Pre-Effective Amendment
No. 1 to Registration Statement No. 333-90475 for Morgan Stanley Dean Witter
Spectrum Global Balanced L.P. (formerly Dean Witter Spectrum Global Balanced
L.P.) and Pre-Effective Amendment No. 1 to Registration Statement No.
333-90467 for Morgan Stanley Dean Witter Spectrum Select L.P. (formerly Dean
Witter Spectrum Select L.P.) (collectively the "Partnerships") of our
report dated February 15, 1999 (March 4, 1999 and September 24, 1999 as to
Note 6) relating to the statements of financial condition of such
Partnerships at December 31, 1998 and 1997 and the related statements of
operations, changes in partners' capital and cash flows for each of the three
years in the period ended December 31, 1998 appearing in the Prospectus which
is a part of the aforementioned Registration Statements.
We consent to the use in Pre-Effective Amendment No. 1 to Registration
Statement No. 333-90483 for Morgan Stanley Tangible Asset Fund L.P. ("MSTAF")
of our report dated February 15, 1999 (September 24, 1999 as to Note 5)
relating to the statement of financial condition of MSTAF at December 31,
1998 and the related statements of operations, changes in partners' capital
and cash flows for the period January 2, 1998 through December 31, 1998
appearing in the Prospectus which is a part of such Registration Statement.
We consent to the use in Pre-Effective Amendment No. 1 to Registration
Statement No. 333-90485 of our report dated October 27, 1999 relating to the
statement of financial condition of Morgan Stanley Dean Witter Spectrum
Currency L.P. appearing in the Prospectus which is a part of such
Registration Statement.
We also consent to the use of our report dated January 11, 1999 (September 24,
1999 as to Note 6) relating to the statements of financial condition of
Demeter Management Corporation at November 30, 1998 and 1997 appearing in the
Prospectus and to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
New York, New York
December 23, 1999
