UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-24035
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3968008
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
c/o Demeter Management Corporation
Two World Trade Center, 62 Fl., New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
Morgan Stanley Tangible Asset Fund L.P.
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asset Fund L.P.")
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition March 31, 2000
(Unaudited) and December 31, 1999......................... 2
Statements of Operations for the Quarters Ended
March 31, 2000 and 1999 (Unaudited)....................... 3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 2000 and 1999
(Unaudited)............................................... 4
Statements of Cash Flows for the Quarters Ended
March 31, 2000 and 1999 (Unaudited)........................5
Notes to Financial Statements (Unaudited)...............6-
10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......11-15
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ........................................16-25
Part II. OTHER INFORMATION
Item 1. Legal Proceedings..................................... 26
Item 2. Changes in Securities and Use of Proceeds...........26-28
Item 5. Other Information..................................... 28
Item 6. Exhibits and Reports on Form 8-K.......................28
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asset Fund L.P.")
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
2000 1999
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 23,480,160 23,430,137
Net unrealized loss on open contracts (MS & Co.)(461,517) (100,830)
Net unrealized gain (loss) on open contracts (MSIL)
(94,573) 643,258
Total unrealized gain (loss) on open contracts (556,090) 542,428
Total Trading Equity 22,924,070 23,972,565
Interest receivable (MS & Co.) 85,776 76,192
Subscriptions receivable 85,600 -
Total Assets 23,095,446 24,048,757
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 368,850 269,545
Accrued brokerage fees (MS & Co. and MSIL)68,985 70,827
Accrued management fee (MSCM) 47,250 48,511
Service fee payable (Demeter) 18,900 19,404
Total Liabilities 503,985 408,287
Partners' Capital
Limited Partners (2,908,338.656 and
3,062,471.522 Units, respectively)22,259,327 23,310,162
General Partner (43,395.648 Units) 332,134 33
0,308
Total Partners' Capital 22,591,461 23,640,470
Total Liabilities and Partners' Capital 23,095,446 24,0
48,757
NET ASSET VALUE PER UNIT 7.65 7.61
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asset Fund L.P.")
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
2000 1999
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 1,395,164 34,855
Net change in unrealized (1,098,518)
796,011
Total Trading Results 296,646 830,866
Interest Income (MS & Co.) 256,714 208,595
Total Revenues 553,360 1,039,461
EXPENSES
Brokerage fees (MS & Co. and MSIL)213,906 215,094
Management fees (MSCM) 146,511 147,325
Service fees (Demeter) 58,604 58,930
Total Expenses 419,021 421,349
NET INCOME 134,339 618,112
NET INCOME ALLOCATION
Limited Partners 132,513 609,955
General Partner 1,826 8,157
NET INCOME PER UNIT
Limited Partners .04 .19
General Partner .04 .19
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asset Fund L.P.")
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 2000 and 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
Partners' Capital,
December 31, 1998 3,788,464.700 $24,622,999 $285,317
$24,908,316
Net Income - 609,955 8,157 618,112
Redemptions (290,241.586) (1,868,777) -
(1,868,777)
Partners' Capital,
March 31, 1999 3,498,223.114 $23,364,177 $293,474
$23,657,651
Partners' Capital,
December 31, 19993,105,867.170 $23,310,162 $330,308
$23,640,470
Offering of Units 11,189.544 85,600 - 85,600
Net Income - 132,513 1,826
134,339
Redemptions (165,322.410) (1,268,948) -
(1,268,948)
Partners' Capital,
March 31, 2000 2,951,734.304 $22,259,327 $332,134
$22,591,461
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asset Fund L.P.")
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income 134,339 618,112
Noncash item included in net income:
Net change in unrealized 1,098,518 (796,011)
(Increase) decrease in operating assets:
Interest receivable (MS & Co.) (9,584) 8,305
Decrease in operating liabilities:
Accrued brokerage fees (MS & Co. and MSIL) (1,842)
(13,928)
Accrued management fee (MSCM) (1,261) (9,540)
Service fee payable (Demeter) (504) (3,816)
Net cash provided by (used for) operating activities 1,219,666
(196,878)
CASH FLOWS FROM FINANCING ACTIVITIES
Redemptions of Units (1,268,948) (1,868,777)
Increase (decrease) in redemptions payable99,305 (509,401)
Offering of Units 85,600 -
Increase in subscriptions receivable (85,600) -
Net cash used for financing activities (1,169,643) (2
,378,178)
Net increase (decrease) in cash 50,023 (2,575,056)
Balance at beginning of period 23,430,137 26,519,891
Balance at end of period 23,480,160 23,944,835
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asswet Fund L.P.")
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management,
all adjustments necessary for a fair presentation of the results
of operations and financial condition of Morgan Stanley Dean
Witter Spectrum Commodity Fund L.P. (formerly, "Morgan Stanley
Tangible Asset Fund L.P.") (the "Partnership"). The financial
statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 1999 Annual
Report on Form 10-K.
1. Organization
Morgan Stanley Dean Witter Spectrum Commodity Fund L.P. (formerly
Morgan Stanley Tangible Asset Fund) is a Delaware limited
partnership organized to engage primarily in speculative trading
of futures contracts in metals, energy and agricultural markets,
(collectively, "futures interests"). On March 1, 2000, the
Partnership became one of the Morgan Stanley Dean Witter Spectrum
Series of funds, comprised 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. (collectively,
the "Spectrum Series"). The Partnership's general partner is
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asset Fund L.P.")
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Demeter Management Corporation ("Demeter"). The commodity
brokers are Morgan Stanley & Co. Incorporated ("MS & Co.") and
Morgan Stanley & Co. International Limited ("MSIL"),
(collectively, the "Commodity Brokers"). The trading advisor is
Morgan Stanley Commodities Management, Inc. ("MSCM" or the
"Trading Advisor"). MSCM, the Commodity Brokers and Demeter are
all wholly-owned subsidiaries of Morgan Stanley Dean Witter & Co.
2. Related Party Transactions
The Partnership's cash is on deposit with the Commodity Brokers
in futures interests trading accounts to meet margin requirements
as needed. MS & Co. pays interest on these funds based on a
prevailing rate on U.S. Treasury bills. The Partnership pays
brokerage fees to the Commodity Brokers, management fees and
incentive fees (if applicable) to MSCM, and service fees to
Demeter.
3. Financial Instruments
The Partnership trades futures and forward 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
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asset Fund L.P.")
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 ("FASB")
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. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133," which defers the required
implementation of SFAS No. 133 until fiscal years beginning after
June 15, 2000. However, the Partnership had previously elected
to adopt the provisions of SFAS No. 133 beginning with the fiscal
year ended December 31, 1998. SFAS No. 133 supersedes SFAS No.
119 and No. 105, which required the disclosure of average
aggregate fair values and contract/notional values, respectively,
of derivative financial instruments for an entity which carries
its assets at fair value. The application of SFAS No. 133 does
not have a significant effect on the Partnership's financial
statements.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asset Fund L.P.")
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The net unrealized gains (losses) on open contracts are reported
as a component of "Equity in futures interests trading accounts"
on the Statements of Financial Condition and totaled $(556,090)
and $542,428 at March 31, 2000 and December 31, 1999,
respectively.
The $556,090 net unrealized loss on open contracts at March 31,
2000 and the $542,428 net unrealized gain on open contracts at
December 31, 1999 were related to exchange-traded futures
contracts that mature through April 2000.
The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's Statements of Financial Condition.
The Partnership also has credit risk because MS & Co. and MSIL
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 MS &
Co. and MSIL, as a futures commission merchant for the
Partnership's
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY FUND L.P.
(formerly "Morgan Stanley Tangible Asset Fund L.P.")
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
exchange-traded futures contracts, are required, pursuant to
regulations of the Commodity Futures Trading Commission ("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 gain (loss) on all open futures contracts,
which funds, in the aggregate, totaled $22,924,070 and
$23,972,565 at March 31, 2000 and December 31, 1999,
respectively.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with the
Commodity Brokers, in separate futures trading accounts
established for the 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 and forwards, it is expected that the Partnership will
continue to own such liquid assets for margin purposes.
The Partnership's investment in futures and forwards 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 interest has
increased or decreased by an amount equal to the daily limit,
positions in that futures 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
<PAGE>
prevent the Partnership from promptly liquidating its futures
contracts and 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 of limited partnership interest ("Unit(s)") in
the future will affect the amount of funds available for
investments in futures interests in subsequent periods. It is
not possible to estimate the amount, and therefore, the impact of
future redemptions of Units.
Results of Operations
General. The Partnership's results depend on its Trading Advisor
and the ability of the Trading Advisor's trading programs to take
advantage of price movements or other profit opportunities in the
futures and forwards markets. The following presents a summary
of the Partnership's operations for the three months ended March
31, 2000 and 1999, respectively, 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,
<PAGE>
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.
For the Quarter Ended March 31, 2000
For the quarter ended March 31, 2000, the Partnership recorded
trading revenues, including interest income, of $553,360 and
posted an increase in Net Asset Value per Unit. The most
significant gains of approximately 4.3% were recorded primarily
during January and February in the energy markets from long
futures positions in crude oil and its refined products as oil
prices increased on concerns about future output levels from the
world's leading producer countries amid dwindling stockpiles and
increasing demand. In the agricultural markets, gains of
approximately 2.1% were recorded earlier in January from short
positions in corn and soybean futures as prices moved higher on
increasing concerns for dryness in Brazil, subsequent crop damage
and a surprise cut in year-end stocks. During March, gains were
recorded from long futures positions in corn, soybeans and
soybean related products as prices in these markets increased
amid fears of a drought this summer. These gains were partially
offset by losses of approximately 2.8% recorded in the metals
markets from long aluminum and copper futures positions as prices
reversed lower earlier in February due primarily to technically
based selling. Aluminum and copper prices dipped further later
<PAGE>
in February led downward by falling prices of other base metals.
Losses were recorded during March from long gold futures
positions as gold prices fell on fears that the French central
bank could decide to sell some of its reserves. In soft
commodities, losses of approximately 2.3% were recorded primarily
during January and February from long coffee futures positions as
coffee prices declined in the wake of forecasts for a bumper crop
in Brazil. Long positions in sugar futures also incurred losses
during January and February as prices dropped amid sustained
fears of a global supply surplus. Total expenses for the three
months ended March 31, 2000 were $419,021, resulting in net
income of $134,339. The value of a Unit increased from $7.61 at
December 31, 1999 to $7.65 at March 31, 2000.
For the Quarter Ended March 31, 1999
For the quarter ended March 31, 1999, the Partnership recorded
total trading revenues including interest income of $1,039,461
and posted an increase in Net Asset Value per Unit. The
Partnership's long-only trading approach recorded its most
significant gains of approximately 6.5% in the energy markets
primarily during March from long futures positions in crude oil
and its refined products, heating oil and unleaded gasoline, as
oil prices moved considerably higher. The substantial recovery
in oil prices during March was largely attributed to the news
that both OPEC and non-OPEC countries had reached an agreement to
cut total output by approximately two million barrels a day
<PAGE>
beginning April 1, 1999. Additional gains of approximately 0.5%
were recorded in the livestock markets throughout the quarter
from long positions in feeder and live cattle futures as prices
moved higher on plans for government aid programs to help
struggling farmers. A portion of the Partnership's overall gains
for the quarter was offset by losses of approximately 2.0%
experienced in soft commodities largely from long positions in
cocoa, sugar and coffee futures as prices in these markets
declined significantly throughout the quarter amid fears that
economic turmoil in Brazil would lead them to flood the market
with increased exports. Additional losses were recorded from
long positions in orange juice futures during February as prices
plummeted to a 13-month low in response to a USDA report that
unexpectedly raised Florida and U.S. crop estimates. In the
metals markets, losses of approximately 1.0% were recorded mainly
from long copper futures positions during January as prices
declined on reports of a large rise in copper warehouse stocks.
Smaller losses of approximately 0.7% were experienced in the
agricultural markets during January and February primarily from
long positions in soybean and soybean oil futures as prices in
these markets moved lower due to beneficial growing weather in
South America and speculation that Brazil would increase exports
to aid its ailing economy. Total expenses for the three months
ended March 31, 1999 were $421,349, resulting in net income of
$618,112. The value of a Unit increased from $6.57 at December
31, 1998 to $6.76 at March 31, 1999.
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired solely for speculative
trading purposes only and, as a result, all or substantially all
of the Partnership's assets are at risk of trading loss. Unlike
an operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
<PAGE>
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). All quantitative disclosures in this section are
deemed to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and cash
flow. Profits and losses on open positions of exchange-traded
futures interests are settled daily through variation margin.
<PAGE>
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the
Partnership's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
<PAGE>
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following tables indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of March 31, 2000 and 1999. As
of March 31, 2000 and 1999, the Partnership's total
capitalization was approximately $23 million and $24 million,
respectively.
Primary Market March 31, 2000 March 31,
1999
Risk Category Value at Risk Value at Risk
Commodity (2.10)% (1.78)%
The table above represents the VaR of the Partnership's open
positions at March 31, 2000 and 1999 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures interests, the
composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.
<PAGE>
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
Net Assets for the four quarterly reporting periods from April 1,
1999 through March 31, 2000.
Primary Market Risk Category High Low Average
Commodity (2.10)% (1.78)% (1.95)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
typically found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, gives
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
<PAGE>
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
The VaR tables above present the results of the Partnership's VaR
for the Partnership's market risk exposures at March 31, 2000 and
for the end of the four quarterly reporting periods from April 1,
1999 through March 31, 2000. Since VaR is based on historical
data, VaR should not be viewed as predictive of the Partnership's
future financial performance or its ability to manage or monitor
risk. There can be no assurance that the Partnership's actual
losses on a particular day will not exceed the VaR amounts
indicated above or that such losses will not occur more than 1 in
100 trading days.
<PAGE>
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial. The Partnership also
maintains a substantial portion (approximately 93%) of its
available assets in cash at MS & Co. A decline in short-term
interest rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered
material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-
sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures are
<PAGE>
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expro-
priations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation and many other factors could result in
material losses as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.
The following is the primary trading risk exposure of the
Partnership as of March 31, 2000, by market sector. It may be
anticipated however, that market exposures will vary materially
over time.
Commodity
Metals - The Partnership's primary metals market exposure is to
fluctuations in the price of gold and silver. The Partnership
will from time to time trade base metals such as copper, nickel,
aluminum and zinc however, the principal market exposures of the
Partnership have consistently been in precious metals, gold and
silver (and, to a much lesser extent, platinum). A reasonable
amount of exposure was evident in the gold market as gold prices
<PAGE>
were volatile during the quarter. Silver prices have remained
volatile over this period, and the Trading Advisor has, from time
to time, taken positions as market opportunities develop.
Demeter anticipates that gold and silver will remain the primary
metals market exposure for the Partnership.
Soft Commodities and Agriculturals - On March 31, 2000, the
Partnership had a reasonable amount of exposure in the markets
that comprise these sectors. Most of the exposure was in the
coffee, corn, cotton and livestock markets. Supply and demand
inequalities, severe weather disruption and market expectations
affect price movements in these markets.
Energy - On March 31, 2000, the Partnership'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. It is possible that volatility will
remain high and that significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in this market. Natural gas has exhibited volatility
in prices resulting from weather patterns and supply and demand
factors and is expected to continue in this choppy pattern.
<PAGE>
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different market sectors and trading
approaches, and monitoring the performance of the Trading Advisor
daily. In addition, the Trading Advisor establishes
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On March 3, 2000, the plaintiffs in the New York action filed an
appeal of the order dismissing the consolidated complaint.
(Please refer to Legal Proceeding previously disclosed in the
Partnership's Form 10-K for the year ended December 31, 1999 for
a more detailed discussion).
Item 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
The Partnership registered 5,000,000 Units pursuant to a
Registration Statement on Form S-1, which became effective on
November 10, 1997 (the "Registration Statement") (SEC File Number
333-33975). The Partnership, Demeter, MSCW and DWR extended the
offering period for unsold Units until no later than October 16,
1998 pursuant to Post Effective Amendment No. 1 to the
Registration Statement, which became effective on July 10, 1998.
The managing underwriter for the Partnership is DWR.
The offering originally commenced on November 10, 1997 with
4,045,503.483 Units sold through April 1, 1998. The aggregate
price of the offering amount registered was $50,000,000 (based
upon the initial offering price of $10.00 per Unit) for the
initial closing on January 2, 1998 (the "Initial Offering").
After the Initial Offering, Units were sold at three closings
held
<PAGE>
on February 2, March 2 and April 1, 1998, at a price equal to
100% of the Net Asset Value per Unit at the close of business on
the last day of the month immediately preceding the closing. The
aggregate price of the Units sold at the four closings of the
offering was $40,100,218 (based upon the Net Asset Value per Unit
of $10.00 at January 2, 1998, $10.13 at February 2, 1998, $9.53
at March 2, 1998 and $9.54 at April 1, 1998 closings,
respectively).
An additional 149,990.149 Units were sold at subsequent closings;
held on August 3, September 1 and October 1, 1998 at a price
equal to 100% of the Net Asset Value per Unit at the close of
business on the last day of the month immediately preceding the
closing. Subsequent to these closings, remaining unsold Units
were de-registered.
In conjunction with becoming part of the Spectrum Series, the
Partnership registered an additional 7,000,000 Units pursuant to
another Registration Statement on form S-1, which became
effective on March 6, 2000 (SEC File Number 33-90483).
Through March 31, 2000, 4,206,683.176 total Units of the
Partnership have been sold, leaving 6,988,810.456 Units unsold as
of March 31, 2000. The aggregate price of Units sold through
March 31, 2000 is $41,320,822.95.
<PAGE>
Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the "Investment
Program, Use of Proceeds and Trading Policies" section of the
prospectus included as part of the above referenced Registration
Statement.
Item 5. OTHER INFORMATION
Effective January 31, 2000, Mark J. Hawley resigned as Chairman
of the Board and a Director of Demeter and Dean Witter Futures
and Currency Management, Inc. ("DWFCM") and Robert E. Murray
replaced him as Chairman of the Board of Demeter and DWFCM.
Item 6. EXIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Dean Witter Spectrum
Commodity Fund L.P.(Registrant)
By: Demeter Management Corporation
(General Partner)
May 12, 2000 By:/s/ Lewis A. Raibley, III
Lewis A. Raibley, III
Director and Chief
Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Morgan Stanley Dean Witter Spectrum Commodity L.P. (formerly, Morgan
Stanley Dean Witter Tangible Asset Fund L.P.) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 23,480,160
<SECURITIES> 0
<RECEIVABLES> 171,376<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,095,466<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 23,095,466<F3>
<SALES> 0
<TOTAL-REVENUES> 553,360<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 419,021
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 134,339
<INCOME-TAX> 0
<INCOME-CONTINUING> 134,339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134,339
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $85,776, and subscriptions
receivable of $85,600.
<F2>In addition to cash and receivables, total assets include net
unrealized loss on open contracts of $556,090.
<F3>Liabilities include redemptions payable of $368,850, accrued
brokerage fees of $68,985, accrued management fees of $47,250 and
service fees payable of $18,900.
<F4>Total revenues include realized trading revenue of $1,395,164,
net change in unrealized of $(1,098,518) and interest income of $256,714.
</FN>
</TABLE>
