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 September 30, 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. 0-31563
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-4084211
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
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___________
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MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statement of Financial Condition September 30, 2000
(Unaudited)............................................... 2
Statement of Operations for the Quarter Ended
September 30, 2000 (Unaudited)............................ 3
Statement of Changes in Partners' Capital for the
Quarter Ended September 30, 2000
(Unaudited)..............4
Statement of Cash Flows for the Quarter Ended
September 30, 2000 (Unaudited).............................5
Notes to Financial Statements (Unaudited)...............6-16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......17-21
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.........................................21-29
Part II. OTHER INFORMATION
Item 1. Legal Proceedings...................................30-31
Item 2. Changes in Securities and Use of Proceeds..............32
Item 5. Other Information...................................32-33
Item 6. Exhibits and Reports on Form 8-K...................... 34
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
STATEMENT OF FINANCIAL CONDITION
<CAPTION> September 30,
2000
$
(Unaudited)
ASSETS
<S>
<C>
Equity in futures interests trading accounts:
Cash 10,743,691
Net unrealized loss on open contracts (MS&Co.)
(297,862)
Total Trading Equity 10,445,829
Subscriptions receivable 1,049,717
Interest receivable (DWR) 38,103
Total Assets 11,533,649
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued brokerage fee (DWR) 39,385
Accrued management fee
29,826
Redemptions payable 17,541
Accrued incentive fee 2,306
Total Liabilities 89,058
Partners' Capital
Limited Partners (968,307.069 Units)9,914,835
General Partner (149,399.702 Units) 1,529,756
Total Partners' Capital 11,444,591
Total Liabilities and Partners' Capital 11,533,649
NET ASSET VALUE PER UNIT 10.24
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
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<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarter Ended
September 30, 2000
REVENUES
<S>
<C>
Trading profit:
Realized 634,889
Net change in unrealized (297,862)
Total Trading Results 337,027
Interest Income (DWR) 85,942
Total Revenues 422,969
EXPENSES
Brokerage fee (DWR) 98,240
Management fee 74,586
Incentive fee 34,639
Total Expenses 207,465
NET INCOME 215,504
NET INCOME ALLOCATION
Limited Partners 180,393
General Partner 35,111
NET INCOME PER UNIT
Limited Partners 0.24
General Partner 0.24
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
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<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
For the Quarter Ended
September 30, 2000
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital,
Initial Offering 633,154.332 $4,886,898 $1,444,645 $6,33
1,543
Offering of Units 486,265.430 4,865,085 50,0004,915,085
Net Income
- 180,393 35,111 215,504
Redemptions (1,712.991) (17,541)_____-___ (17
,541)
Partners' Capital,
September 30, 2000 1,117,706.771$9,914,835 $1,529,756 $11,444,5
91
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
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<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarter Ended
September 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
<S>
<C>
Net income 215,504
Noncash item included in net income:
Net change in unrealized 297,862
Increase in operating assets:
Interest receivable (DWR) (38,103)
Increase in operating liabilities:
Accrued brokerage fee (DWR) 39,385
Accrued management fee 29,826
Accrued incentive fee 2,306
Net cash provided by operating activities 546,780
CASH FLOWS FROM FINANCING ACTIVITIES
Initial offering 6,331,543
Offering of Units4,915,085
Increase in subscriptions receivable(1,049,717)
Increase in redemptions payable17,541
Redemptions of Units (17,541)
Net cash provided by financing activities 10,196,911
Net increase in cash 10,743,691
Balance at beginning of period _______-___
Balance at end of period 10,743,691
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
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MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited 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 Morgan Stanley Dean Witter Spectrum Currency L.P. (the
"Partnership").
1. Organization
Morgan Stanley Dean Witter Spectrum Currency L.P. is a Delaware
limited partnership organized to engage primarily in speculative
trading of futures, options and forward contracts in global
currency markets (collectively, "futures interests"). The
Partnership commenced operations on July 3, 2000. The
Partnership is one of the Morgan Stanley Dean Witter Spectrum
Series of funds, comprised of the Partnership, Morgan Stanley
Dean Witter Spectrum Commodity L.P., 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 Demeter Management Corporation ("Demeter").
The non-clearing commodity broker is Dean Witter Reynolds Inc.
("DWR"). Morgan Stanley &
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Co., Inc. ("MS & Co.") and Morgan Stanley & Co. International
Limited ("MSIL") provide clearing and execution services.
Demeter, MS & Co., MSIL and DWR are wholly-owned subsidiaries of
Morgan Stanley Dean Witter & Co. ("MSDW"). The trading advisors
to the Partnership are John W. Henry & Company, Inc. ("JWH") and
Sunrise Capital Partners, LLC ("Sunrise") (collectively, the
"Trading Advisors").
Demeter is required to maintain a 1% minimum interest in the
equity of the Partnership and income (losses) are shared by
Demeter and the Limited Partners based upon their proportional
ownership interests.
Use of Estimates - The financial statements are prepared in
accordance with accounting principles generally accepted in the
United States of America which require management to make
estimates and assumptions that affect the reported amounts in the
financial statements and related disclosures. Management
believes that the estimates utilized in the preparation of the
financial statements are prudent and reasonable. Actual results
could differ from those estimates.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 (losses) on open
contracts from one period to the next in the statement of
operations. Monthly, DWR pays the Partnership interest income
based upon 80% of the month's average daily Net Assets. The
interest rate used 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 of
limited partnership interest ("Unit(s)") 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 with DWR, MS & Co. and MSIL 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 and market value, and (C) net
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
option premiums, which represent the net of all monies paid
and/or received for such option premiums.
The Partnership, in the normal course of business, enters into
various contracts with MS & Co. and MSIL acting as its commodity
brokers. Pursuant to brokerage agreements with MS & Co. and
MSIL, to the extent that such trading results in unrealized gains
or losses, the amounts are offset and reported on a net basis in
the Partnership's statement of financial condition.
The Partnership has offset the fair value amounts recognized for
forward contracts executed with the same counterparty as
allowable under terms of the master netting agreement with MS &
Co., the counterparty on such contracts. The Partnership has
consistently applied its right to offset.
Brokerage and Related Transaction Fees and Costs - The
Partnership pays a flat-rate monthly brokerage fee of 1/12 of
4.60% of the Partnership's Net Assets as of the first day of each
month (a 4.60% annual rate). Such fee covers all brokerage
commissions, transaction fees and costs and ordinary
administrative and continuing offering expenses.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Operating Expenses - The Partnership incurs a monthly management
fee and may incur an incentive fee. All common administrative
and continuing offering expenses including legal, auditing,
accounting, filing fees and other related expenses are borne by
DWR through the brokerage fees paid by the Partnership.
Income Taxes - No provision for income taxes has been made in the
accompanying financial statements, as partners are individually
responsible for reporting income or loss based upon their
respective share of the Partnership's revenues and expenses for
income tax purposes.
Distributions - Distributions, other than redemptions 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 the 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 each month. No selling
commissions or charges related to the continuing offering of
Units will be paid by the Limited Partners of the Partnership.
DWR will pay all such costs.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 DWR. 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
the Partnership, and at the end of each month thereafter, Limited
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 - The Partnership will terminate
on December 31, 2035 regardless of financial condition at such
time, or at an earlier date under certain conditions as defined
in the Partnership's Limited Partnership Agreement.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR, MS & Co. and MSIL
in futures interests trading accounts to meet margin requirements
as needed. DWR pays interest on these funds based on a prevailing
rate on U.S. Treasury bills. The Partnership pays brokerage fees
to DWR.
3. Trading Advisors
Compensation to the Trading Advisors by the Partnership consists
of a management fee and an incentive fee as follows:
Management Fee - The Partnership pays the Trading Advisors a
monthly management fee accrued at a rate of 1/12 of 4% of Net
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Assets allocated to JWH on the first day of each month and 1/12
of 3% of Net Assets allocated to Sunrise on the first day of each
month (annual rates of 4% and 3%, respectively).
Incentive Fee - The Partnership pays the Trading Advisors a
monthly incentive fee equal to 15% of the trading profits
experienced with respect to each Trading Advisor's allocated Net
Assets as of the end of each month. Trading profits for the
Partnerships represent the amount by which profits from futures,
forwards and options trading exceed losses after brokerage and
management fees are deducted. When trading losses are incurred,
no incentive fees are 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 month's subscriptions
and redemptions.
4. Financial Instruments
The Partnership trades futures, options and forward contracts in
global currency 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
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
terms of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.
The net 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 $297,862 at
September 30, 2000.
The $297,862 net unrealized loss on open contracts at September
30, 2000 was related to off-exchange-traded forward currency
contracts.
Off-exchange-traded forward currency contracts held by the
Partnership at September 30, 2000 mature through December 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 statement of financial condition.
The Partnership also has credit risk because DWR, MS & Co., and
MSIL act as the futures commission merchants or the
counterparties, with respect to most of the Partnership's assets.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 DWR, MS & Co. and MSIL, as a
futures commission merchant for the Partnership's exchange-traded
futures and futures-styled options 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 and futures-styled
options contracts, including an amount equal to the net
unrealized loss on all open futures contracts, which funds, in
the aggregate, totaled $10,743,691 at September 30, 2000. 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 loss on open forward contracts be segregated. With
respect to those off-exchange-traded forward currency contracts,
the Partnership is at risk to the ability of MS & Co., the sole
counterparty on all of such contracts, to perform. The
Partnership has a netting agreement with MS & Co. This
agreement, which seeks to reduce both the Partnership's and MS &
Co.'s exposure on off-exchange- traded forward currency
contracts, should materially decrease the
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
Partnership's credit risk in the event of MS & Co.'s bankruptcy
or insolvency.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and MS & Co. and MSIL as clearing 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 contract 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
<PAGE>
daily limit for several consecutive days with little or no
trading. These market conditions could prevent the Partnership
from promptly liquidating its futures contracts 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 investment 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
Advisors
<PAGE>
and the ability of each Trading Advisor's trading program 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 quarter from July 3, 2000
(commencement of operations) to September 30, 2000 and a general
discussion of its trading activities. 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.
For the Quarter Ended September 30, 2000
For the period from July 3, 2000 (commencement of operations) to
September 30, 2000, the Partnership recorded total trading
revenues including interest income of $422,969 and posted an
increase in Net Asset Value per Unit. The most significant gains
of approximately 1.5% were recorded primarily during July from
short British pound positions as the value of the pound weakened
relative to the U.S. dollar after June data showed Britain's
manufacturing sector grew at its slowest rate since June 1999.
Additional profits of approximately 1.2% were recorded primarily
<PAGE>
during August from short euro positions as the value of the
European common currency weakened versus the U.S. dollar and
other major currencies amid a cooling economy in Europe and in
the wake of the European Central Bank decision to raise interest
rates. During August and September, additional gains of
approximately 1.1% were experienced from short New Zealand dollar
positions as its value dropped relative to the U.S. dollar on a
worse-than-expected contraction in New Zealand gross domestic
product. Additional gains of approximately 0.9% resulted
primarily during July from short positions in the Thai baht as
its value weakened versus the U.S. dollar. Short Thai baht
positions were also profitable during September as its value fell
sharply versus the U.S. dollar on investor concerns over
political developments in Indonesia. A portion of overall
Partnership gains was offset by losses of approximately 1.3%
recorded primarily during August from short Japanese yen
positions as the value of the yen strengthened versus the U.S.
dollar following comments by a senior Japanese official stating
that the Bank of Japan could raise interest rates further by
December. Long Japanese yen positions incurred losses during
September as the yen's value weakened against the U.S. dollar on
warnings that the Japanese economy may shrink in the fourth
quarter because of lethargic consumer spending. Additional
losses of approximately 1.0% were recorded from long Australian
dollar positions as its value declined versus the U.S. dollar
<PAGE>
during August on weakness in the euro and fading Australian
interest rate expectations. Total expenses for the period from
July 3, 2000 (commencement of operations) to September 30, 2000
were $207,465, resulting in net income of $215,504. The value of
a Unit increased from $10.00 at July 3, 2000 (commencement of
operations) to $10.24 at September 30, 2000.
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 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.
<PAGE>
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.
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.
<PAGE>
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.
The 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 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.
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
historic reporting purposes only and is not utilized by either
<PAGE>
Demeter or the Trading Advisors in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of September 30, 2000. As of
September 30, 2000, the Partnership's total capitalization was
approximately $11 million.
Primary Market September 30, 2000
Risk Category Value at Risk
Currency (2.85)%
The table above represents the VaR of the Partnership's open
positions at September 30, 2000 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.
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
<PAGE>
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 table
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:
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;
<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 factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
The VaR table above presents the results of the Partnership's VaR
for its market risk exposure at September 30, 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.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. The Partnership did not have
foreign currency balances at September 30, 2000. At September
30, 2000 the Partnership's cash balance at DWR was approximately
94% of its total Net Asset Value. 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.
<PAGE>
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 Advisors for managing such exposures are
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
<PAGE>
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 was the primary trading risk exposure of the
Partnership as of September 30, 2000. It may be anticipated
however, that market exposure will vary materially over time.
Currency. The Partnership's currency exposure at September 30,
2000 was 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. For the third quarter of 2000, 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 major and minor currencies. Demeter
does not anticipate that the risk profile of the Partnership's
currency sector will change significantly in the future. 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.
<PAGE>
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisors, 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 Trading Advisors, 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.
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 Advisors.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On September 6, 10, and 20, 1996, and on March 13, 1997,
purported class actions were filed in the Superior Court of the
State of California, County of Los Angeles, on behalf of all
purchasers of interests in limited partnership commodity pools
sold by DWR. Named defendants include DWR, Demeter, Dean Witter
Futures & Currency Management Inc. ("DWFCM"), MSDW, certain
limited partnership commodity pools of which Demeter is the
general partner (all such parties referred to hereafter as the
"Morgan Stanley Dean Witter Parties") 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 complaints
sought unspecified amounts of compensatory and punitive damages
and other relief. 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.
<PAGE>
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 Parties and certain trading advisors on
behalf of all purchasers of interests in various limited
partnership commodity pools sold by DWR. 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. The complaints
sought unspecified amounts of compensatory and punitive damages
and other relief. 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 filed a
motion to dismiss the amended complaint with prejudice on
February 1, 1999. By decision dated December 21, 1999, the New
York Supreme Court dismissed the case with prejudice. However,
in the New York State class action, plaintiffs appealed the trial
court's dismissal of their case on March 3, 2000.
<PAGE>
Item 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
The Partnership registered 12,000,000 Units pursuant to a
Registration Statement on Form S-1, which became effective on
March 6, 2000 (the "Registration Statement") (SEC File Number 333-
90483). As part of the Spectrum Series, Units of the Partnership
are sold monthly on a continuous basis at a price equal to 100%
of the Net Asset Value per Unit at the close of business on the
last day of each month.
The managing underwriter for the Partnership is DWR.
Through September 30, 2000, 1,107,484.530 total Units of the
Partnership have been sold, leaving 10,892,515.470 Units unsold.
The aggregate price of Units sold through September 30, 2000 was
$10,844,742.
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 "Use of
Proceeds" section of the prospectus included as part of the above
referenced Registration Statement.
Item 5. OTHER INFORMATION
The management fee paid by the Partnership will be reduced from a
4% to a 2% annual rate in the case of assets managed by JWH and
from a 3% to a 2% annual rate in the case of assets managed by
<PAGE>
Sunrise. Additionally, the monthly incentive fee paid by the
Partnership to each Trading Advisor will be changed from 15% to
20% of Partnership's trading profits, as determined from the end
of the last period in which an incentive fee was earned. No
incentive fee will be paid to a Trading Advisor unless that
Trading Advisor recoups all prior trading losses on its allocated
assets and has again achieved net new high trading profits for
the period.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
3.01 Form of Amended and Restated Limited Partnership Agreement
of the Partnership, dated as of March 6, 2000, is
incorporated by reference to Exhibit A of the
Partnership's Prospectus, dated March 6, 2000, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended, on
March 9, 2000.
3.02 Certificate of Limited Partnership, dated October 20, 1999,
is incorporated by reference to Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File No. 333-
90485) filed with the Securities and Exchange
Commission on November 5, 1999.
10.01 Management Agreement among the Partnership, Demeter
Management Corporation, and John W. Henry & Company, Inc.
dated as of March 6, 2000.
10.02 Management Agreement among the Partnership, Demeter
Management Corporation, and Sunrise Capital Management, Inc.,
dated as of March 6, 2000.
10.03 Form of Subscription and Exchange Agreement and Power
of Attorney to be executed by each purchaser of Units is
incorporated by reference to Exhibit B of the Partnership's
Prospectus, dated March 6, 2000, filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, as amended, on March 9, 2000.
10.04 Form of Subscription Agreement Update Form to be
executed by each purchaser of Units is incorporated by
reference to Exhibit C of the Partnership's Prospectus, dated
March 6, 2000, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the Securities
Act of 1933, as amended, on March 9, 2000.
10.05 Amended and Restated Escrow Agreement among the
Partnership, 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 Commodity L.P., Demeter
Management Corporation, Dean Witter Reynolds Inc., and The
Chase Manhattan Bank, the escrow agent, dated as of March
10, 2000.
(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
Currency Fund L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
November 14, 2000 By:/s/Raymond E. Koch_____________________
Raymond E. Koch
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.
