<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration Nos. 333-68773, 333-68779
and 333-3222
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
TOTAL UNITS OF LIMITED PARTNERSHIP INTERESTS OFFERED:
4,879,285.894 UNITS OF MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
13,668,151.591 UNITS OF MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
3,983,923.179 UNITS OF MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
4,288,448.553 UNITS OF MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
------------------------
SUPPLEMENT
TO PROSPECTUS
DATED JANUARY 21, 1999
YOU SHOULD READ THIS SUPPLEMENT TOGETHER WITH THE PROSPECTUS DATED JANUARY 21,
1999. ALL CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED IN THIS SUPPLEMENT
HAVE THE SAME MEANINGS AS USED IN THE PROSPECTUS. ALL PAGE AND SECTION
REFERENCES IN THIS SUPPLEMENT RELATE TO THE PROSPECTUS, EXCEPT REFERENCES TO
PAGES PRECEDED BY AN "S-," WHICH RELATE TO THIS SUPPLEMENT.
PURCHASE PRICE
You may purchase Units as of the last day of each month. The price you pay will
equal 100% of the Net Asset Value per Unit on the date of purchase. Following
are the offering prices per Unit for each Partnership at February 28, 1999:
<TABLE>
<S> <C>
Spectrum Select......................................................... $ 24.37
Spectrum Technical...................................................... $ 15.70
Spectrum Strategic...................................................... $ 12.45
Spectrum Global Balanced................................................ $ 15.98
</TABLE>
THE RISKS
THESE ARE SPECULATIVE SECURITIES. YOU COULD LOSE ALL OR SUBSTANTIALLY ALL OF
YOUR INVESTMENT IN THE PARTNERSHIPS. READ THE PROSPECTUS AND THIS SUPPLEMENT
BEFORE YOU DECIDE TO INVEST. SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THE
PROSPECTUS.
- The performance of each Partnership has been volatile and the Net Asset
Value per Unit for each Partnership may fluctuate significantly.
- There is no secondary market for Units and you may not redeem your Units
until you have been an investor for at least six months.
- If you redeem any of your Units within twenty-four months after they are
purchased, you may have to pay a redemption charge.
- In order for each Partnership to cover its expenses, each Partnership must
earn annual net Trading Profits (after taking into account estimated
interest income, based on current rates of 4.25%) 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............................................. 6.85% 8.90%
Spectrum Technical.......................................... 7.90% 9.94%
Spectrum Strategic.......................................... 7.87% 9.88%
Spectrum Global Balanced.................................... 1.63% 3.69%
</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.
<PAGE>
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.
THE DATE OF THIS SUPPLEMENT IS APRIL 30, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Partnership Name Changes.................................................................................. S-1
Advisor Change for Spectrum Strategic..................................................................... S-1
Summary................................................................................................... S-1
Description of Charges.................................................................................... S-3
Investment Programs, Use of Proceeds and Trading Policies................................................. S-4
The Spectrum Series....................................................................................... S-4
Selected Financial Data................................................................................... S-7
Management's Discussion and Analysis of Financial Condition and Results of Operations..................... S-9
Quantitative and Qualitative Disclosures About Market Risk................................................ S-11
The General Partner....................................................................................... S-20
The Trading Advisors...................................................................................... S-21
Certain Litigation........................................................................................ S-32
Potential Advantages...................................................................................... S-33
Experts................................................................................................... S-35
Independent Auditors' Report to the Limited Partners and the General Partner.............................. S-36
Statements of Financial Condition....................................................................... S-37
Statements of Operations................................................................................ S-41
Statements of Changes in Partners' Capital.............................................................. S-45
Statements of Cash Flows................................................................................ S-47
Notes to Financial Statements for Dean Witter Spectrum Series........................................... S-51
Independent Auditors' Report to the Board of Directors of the General Partner............................. S-60
Statements of Financial Condition for Demeter Management Corporation.................................... S-61
Notes to Statements of Financial Condition for Demeter Management Corporation........................... S-62
</TABLE>
S-ii
<PAGE>
YOU SHOULD REVIEW THE FOLLOWING INFORMATION WITH THE PROSPECTUS BECAUSE THE
INFORMATION CONTAINED IN THIS SUPPLEMENT UPDATES AND REPLACES PORTIONS OF THE
PROSPECTUS.
PARTNERSHIP NAME CHANGES
Effective April 6, 1999, each Partnership changed its name as follows:
Dean Witter Spectrum Select L.P. became Morgan Stanley Dean Witter Spectrum
Select L.P.
Dean Witter Spectrum Technical L.P. became Morgan Stanley Dean Witter Spectrum
Technical L.P.
Dean Witter Spectrum Strategic L.P. became Morgan Stanley Dean Witter Spectrum
Strategic L.P.
Dean Witter Spectrum Global Balanced L.P. became Morgan Stanley Dean Witter
Spectrum Global Balanced L.P.
ADVISOR CHANGE FOR
SPECTRUM STRATEGIC
Spectrum Strategic terminated Stonebrook Capital Management, Inc. as a
Trading Advisor on March 4, 1999. On May 1, 1999, Spectrum Strategic will add
Allied Irish Capital Management, Ltd. ("AICM") as a Trading Advisor, and will
allocate to AICM the assets previously managed by Stonebrook, approximately $6.8
million. AICM will be paid the same management and incentive fees as Stonebrook.
The disclosures regarding Stonebrook in the Prospectus are no longer relevant.
The description of AICM begins on page S-22. All other information in the
Prospectus relating to the fees payable and Net Assets allocated to Stonebrook
should now be read as applying to AICM.
SUMMARY
THE FOLLOWING INFORMATION UPDATES THE SUMMARY OF CERTAIN STATISTICAL
INFORMATION AS OF FEBRUARY 28, 1999 FOR EACH PARTNERSHIP UNDER "SUMMARY--THE
DEAN WITTER SPECTRUM SERIES" ON PAGES 1-2.
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
<TABLE>
<S> <C>
Performance Information:
Break-Even Information:
Inception to date return (since
8/1/91) Percentage of estimated annual
net 143.7%
Compound annualized return trading
profits (after interest income) needed 12.5%
to cover expenses 6.85%
Net Assets Allocated to:
Percentage of estimated annual net
EMC trading profits (after interest
income) 26.52%
Rabar needed to cover expenses and the
2% 44.33%
Sunrise redemption charge if Units are
redeemed within twelve months after 29.15%
they are purchased 8.90%
</TABLE>
S-1
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
<TABLE>
<S> <C>
Performance Information:
Break-Even Information:
Inception to date return (since
11/2/94) Percentage of estimated annual
net 57.0%
Compound annualized return trading
profits (after interest income) needed 11.0%
to cover expenses 7.90%
Net Assets Allocated to:
Percentage of estimated annual net
Campbell trading profits (after
interest income) 29.56%
Chesapeake needed to cover expenses
and the 2% 23.99%
JWH-Registered Trademark- redemption
charge if Units are redeemed within 46.45%
twelve months after they are purchased 9.94%
</TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
<TABLE>
<S> <C>
Performance Information:
Break-Even Information:
Inception to date return (since
11/2/94) Percentage of estimated annual
net 24.5%
Compound annualized return trading
profits (after interest income) needed 5.2%
to cover expenses 7.87%
Net Assets Allocated to:
Percentage of estimated annual net
Blenheim trading profits (after
interest income) 23.46%
Stonebrook (terminated 3/4/99) needed
to cover expenses and the 2% 9.11%
Willowbridge redemption charge if
Units are redeemed within twelve 67.43%
months after they are purchased 9.88%
</TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
<TABLE>
<S> <C>
Performance Information:
Break-Even Information:
Inception to date return (since
11/2/94) Percentage of estimated annual
net 59.8%
Compound annualized return trading
profits (after interest income) needed 11.4%
to cover expenses 1.63%
Net Assets Allocated to RXR: 100%
Percentage of estimated annual net
trading profits (after interest
income) needed to cover expenses and
the 2% redemption charge if Units are
redeemed within twelve months after
they are purchased 3.69%
</TABLE>
S-2
<PAGE>
DESCRIPTION OF CHARGES
THE FOLLOWING INFORMATION UPDATES THE BREAK EVEN TABLE UNDER "DESCRIPTION OF
CHARGES-- BREAK EVEN ANALYSIS" ON PAGE 19.
<TABLE>
<CAPTION>
SPECTRUM
SPECTRUM SPECTRUM SPECTRUM GLOBAL
SELECT TECHNICAL STRATEGIC BALANCED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$ $ $ $
Selling Price per Unit(1).......................................... 24.37 15.70 12.45 15.98
Management Fee(2).................................................. .73 .63 .50 .20
Brokerage Fee(3)................................................... 1.77 1.14 .90 .74
Less: Interest Income(4)........................................... (.83) (.53) (.42) (.68)
Redemption Fee(5).................................................. .50 .32 .25 .33
Incentive Fee(6)................................................... -- -- -- --
Amount of Trading Income Required for a Limited Partner to Recoup
its Investment at the End of One Year............................ 2.17 1.56 1.23 .59
Percentage of Selling Price per Unit............................... 8.90% 9.94% 9.88% 3.69%
</TABLE>
- ------------------------
NOTES
(1) Units are offered for sale at Monthly Closings held as of the last day of
each month at a purchase price equal to 100% of the Net Asset Value of the
Unit at the close of business as of the date of the Closing. The selling
price per Unit is based on the Net Asset Value per Unit as of February 28,
1999.
(2) Spectrum Select pays a monthly management fee of 1/12 of 3% (a 3% annual
rate) of the Net Assets allocated to each Trading Advisor on the first day
of each month. Spectrum Technical and Spectrum Strategic each pays a monthly
management fee of 1/12 of 4% (a 4% annual rate), except Spectrum Strategic
will pay AICM 1/12 of 3% (a 3% annual rate), of the Net Assets allocated to
each Trading Advisor on the first day of each month. Spectrum Global
Balanced pays a monthly management fee of 1/12 of 1.25% (a 1.25% annual
rate) of the Partnership's Net Assets on the first day of each month.
(3) The monthly flat-rate brokerage fee paid to DWR is 1/12 of 7.25% (a 7.25%
annual rate) of Net Assets as of the first day of the month with respect to
Spectrum Select, Spectrum Technical, and Spectrum Strategic, and 1/12 of
4.60% (a 4.60% annual rate) of Net Assets as of the first day of the month
with respect to Spectrum Global Balanced.
(4) DWR credits each Partnership at month-end with interest income as if 80%, in
the case of Spectrum Select, Spectrum Technical, and Spectrum Strategic, and
100%, in the case of Spectrum Global Balanced, of such Partnership's average
daily Net Assets for the month were invested at a prevailing rate on U.S.
Treasury bills. Interest income was estimated based upon current rates of
approximately 4.25%.
(5) Units redeemed at the end of one year from the date of purchase are
generally subject to a 2% redemption charge.
(6) Incentive fees are assumed to be zero because (i) interest income is greater
than the redemption fee and (ii) each Trading Advisor's trading profits are
assumed to equal expenses.
S-3
<PAGE>
INVESTMENT PROGRAM, USE OF PROCEEDS AND TRADING POLICIES
THE FOLLOWING INFORMATION UPDATES THE INFORMATION RELATING TO SPECTRUM
STRATEGIC AT THE TOP OF
PAGE 21:
Currently all redemptions from Spectrum Strategic are allocated to
Willowbridge in an effort to more evenly distribute the Net Assets of the
Partnership among each of the Trading Advisors. However, each Trading Advisor to
Spectrum Strategic will still be allocated 33 1/3% of any net proceeds received
by Spectrum Strategic at each monthly closing.
THE SPECTRUM SERIES
THE FOLLOWING UPDATES AND REPLACES THE INFORMATION CONTAINED IN THIRD
PARAGRAPH UNDER 'THE SPECTRUM SERIES" ON PAGE 25.
Following is a summary of certain information relating to the sale of Units
in each Partnership since its commencement of operations through February 28,
1999:
<TABLE>
<CAPTION>
SPECTRUM SPECTRUM SPECTRUM SPECTRUM
SELECT TECHNICAL STRATEGIC GLOBAL BALANCED
------------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Units Sold..................... 16,234,681.206* 19,331,848.409 8,516,076.821 3,711,551.447
Units Unsold................... 4,879,285.894 13,668,151.591 3,983,923.179 4,288,448.553
Proceeds received.............. $ 236,855,963 $ 250,797,166 $ 90,229,004 $ 46,796,981
General Partner
Contributions................ $ 1,680,000 $ 2,181,974 $ 686,990 $ 398,224
Number of Limited Partners..... 13,061 22,909 9,953 5,621
</TABLE>
- --------------------------
* 146,139,671 Units sold prior to the date Spectrum Select joined the Spectrum
Series have been adjusted to reflect the 100-for-1 Unit conversion that took
place on April 30, 1998. 1,620,714.106 Units of Spectrum Select have been
sold since that date.
THE FOLLOWING INFORMATION UPDATES AND REPLACES THE PERFORMANCE INFORMATION
UNDER "THE SPECTRUM SERIES--PERFORMANCE RECORDS" ON PAGES 25-27.
PERFORMANCE RECORDS
A summary of performance information for each Partnership from its
commencement of trading through February 28, 1999 is set forth in Tables I
through IV below. All performance information has been calculated on an accrual
basis in accordance with generally accepted accounting principles. The footnotes
on page 28 are an integral part of the following tables.
------------------------
Investors are cautioned that the information set forth in each capsule
performance summary is not indicative of, and has no bearing on, any trading
results which may be attained by the Partnerships in the future. Past results
are not a guarantee of future results. The Partnerships cannot assure investors
that a Partnership will make any profits or will be able to avoid incurring
substantial losses. Investors 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 futures interest trading.
S-4
<PAGE>
TABLE I
PERFORMANCE OF SPECTRUM SELECT
Type of Pool: Publicly-Offered Pool
Inception of Trading: August 1991
Aggregate Subscriptions: $238,535,963
Current Capitalization: $209,542,583
Current Net Asset Value Per Unit: $24.37
Worst Monthly % Drawdown (Month/Year): (13.72)% (January 1992)
Worst Month-End Peak-to-Valley: (26.78)% (15 months, June 1995-August 1996)
Cumulative Return Since Inception: 143.70%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONTH 1999 1998 1997 1996 1995 1994 1993 1992
- --------------------------------- ------------ --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
% % % % % % % %
<S> <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............................ 0.23 0.31 (0.22) 20.58 12.57 (0.59) (3.91)
April............................ (6.72) (5.46) 4.07 9.06 (0.95) 10.35 (1.86)
May.............................. 1.79 (1.18) (3.65) 11.08 6.84 1.95 (1.42)
June............................. 0.93 0.16 1.37 (1.70) 10.30 0.21 7.19
July............................. (0.97) 9.74 (1.44) (10.61) (4.91) 13.90 10.72
August........................... 19.19 (6.22) (0.46) (4.81) (6.95) (0.95) 6.69
September........................ 6.24 0.93 3.34 (7.76) 1.25 (4.13) (5.24)
October.......................... (5.14) (3.77) 13.30 (3.35) (4.78) (4.97) (3.17)
November......................... (4.16) 0.62 6.76 1.37 5.68 (1.30) 1.39
December......................... 1.19 3.35 (3.36) 11.19 (2.72) 8.14 (3.58)
Compound Annual/Period Rate of
Return.......................... 2.39 14.15 6.22 5.27 23.63 (5.13) 41.63 (14.45)
(2 months)
<CAPTION>
<S> <C>
MONTH 1991
- --------------------------------- ------------
%
<S> <C>
January..........................
February.........................
March............................
April............................
May..............................
June.............................
July.............................
August........................... (6.20)
September........................ 6.32
October.......................... (2.28)
November......................... (2.93)
December......................... 38.67
Compound Annual/Period Rate of
Return.......................... 31.18
(5 months)
</TABLE>
TABLE II
PERFORMANCE OF SPECTRUM TECHNICAL
Type of Pool: Publicly-Offered Pool
Inception of Trading: November 1994
Aggregate Subscriptions: $252,979,140
Current Capitalization: $256,492,887
Current Net Asset Value per Unit: $15.70
Worst Monthly % Drawdown (Month/Year): (6.39)% (February 1996)
Worst Month-End Peak-to-Valley Drawdown: (8.27)% (3 months, March 1997-May 1997)
Cumulative Return Since Inception: 57.0%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MONTH 1999 1998 1997 1996 1995 1994
- --------------------------------------------------- ------------ --------- --------- --------- --------- ------------
<CAPTION>
% % % % % %
<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.............................................. 1.31 (1.82) 1.24 10.21
April.............................................. (4.62) (2.93) 4.82 3.60
May................................................ 3.28 (3.75) (3.84) 0.69
June............................................... (1.10) 0.69 3.21 (1.12)
July............................................... (0.98) 9.33 (4.80) (2.44)
August............................................. 10.29 (5.97) (0.35) (0.63)
September.......................................... 4.35 1.85 5.50 (3.33)
October............................................ (0.73) 0.36 9.92 (0.09)
November........................................... (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.............. (2.61) 10.18 7.49 18.35 17.59 (2.20)
(2 months) (2 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
S-5
<PAGE>
TABLE III
PERFORMANCE OF SPECTRUM STRATEGIC
Type of Pool: Publicly-Offered Pool
Inception of Trading: November 1994
Aggregate Subscriptions: $90,915,994
Current Capitalization: $76,600,837
Current Net Asset Value per Unit: $12.45
Worst Monthly % Drawdown (Month/Year): (11.06)% (April 1998)
Worst Month-End Peak-to-Valley Drawdown: (32.11)% (16 months, April 1997-July
1998)
Cumulative Return Since Inception: 24.50%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
----------------------------------------------------------------------
1998 1997 1996 1995 1994
MONTH --------- --------- --------- --------- ------------
- -------------------------------------------------- 1999 % % % % %
------------
%
<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............................................. 0.37 6.77 (0.97) 7.86
April............................................. (11.06) (6.90) 6.08 0.00
May............................................... (7.40) 0.78 (3.05) (0.66)
June.............................................. (0.89) (1.63) (2.86) (6.38)
July.............................................. (5.26) 7.65 (4.91) (0.81)
August............................................ 11.82 (4.93) 1.14 4.00
September......................................... 19.03 (6.03) 5.11 (0.39)
October........................................... 8.44 (6.24) 2.92 0.30
November.......................................... (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............. 7.79 7.84 0.37 (3.53) 10.49 0.10
(2 months) (2 months)
</TABLE>
TABLE IV
PERFORMANCE OF SPECTRUM GLOBAL BALANCED
Type of Pool: Publicly-Offered Pool
Inception of Trading: November 1994
Aggregate Subscriptions: $47,195,205
Current Capitalization: $47,429,666
Current Net Asset Value per Unit: $15.98
Worst Monthly % Drawdown (Month/Year): (7.92)% (February 1996)
Worst Month-End Peak-to-Valley Drawdown: (10.64)% (4 months, February 1996-May
1996)
Cumulative Return Since Inception: 59.80%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
----------------------------------------------------------------------
1998 1997 1996 1995 1994
MONTH --------- --------- --------- --------- ------------
- -------------------------------------------------- 1999 % % % % %
------------
%
<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............................................. 2.24 (2.50) (1.08) 2.88
April............................................. (1.78) (1.65) 1.27 2.15
May............................................... (0.35) 1.68 (3.13) 4.38
June.............................................. 0.00 3.64 0.46 0.79
July.............................................. (1.19) 11.89 0.83 (1.39)
August............................................ 2.55 (5.92) (0.82) (1.41)
September......................................... 5.11 3.26 2.30 1.61
October........................................... 1.18 (1.69) 3.77 0.26
November.......................................... 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............. (0.12) 16.36 18.23 (3.65) 22.79 (1.70)
(2 months) (2 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
S-6
<PAGE>
SELECTED FINANCIAL DATA
THE FOLLOWING UPDATES AND REPLACES THE FINANCIAL INFORMATION CONTAINED ON
PAGES 29-30.
The following is the results of operations for each Partnership for the
preceding five years. Per Unit results for Spectrum Select have been adjusted to
reflect the 100-for-1 Unit conversion that became effective on April 30, 1998.
For the complete financial statements for all the Partnerships, see pages
S-35-S-58. For performance information with respect to each Partnership, see
"The Spectrum Series-- Performance Records" on pages S-5 - S-6.
SPECTRUM SELECT
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
1998 1997 1996
------------- ------------- -------------
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized.................................................................. 36,087,729 15,940,851 26,876,393
Net change in unrealized.................................................. (1,192,107) 3,149,167 (10,950,217)
------------- ------------- -------------
Total Trading Results................................................... 34,895,622 19,090,018 15,926,176
Interest income (DWR)....................................................... 6,883,110 7,405,511 6,120,347
------------- ------------- -------------
Total Revenues.......................................................... 41,778,732 26,495,529 22,046,523
------------- ------------- -------------
EXPENSES
Brokerage fees (DWR)........................................................ 11,360,166 9,777,851 10,641,478
Management fees............................................................. 5,202,158 5,239,533 4,583,197
Incentive fees.............................................................. 1,832,021 49,989 175,796
Transaction fees and costs.................................................. 625,327 1,370,439 1,104,011
Administrative expenses..................................................... 64,000 114,000 128,000
------------- ------------- -------------
Total Expenses.......................................................... 19,083,672 16,551,812 16,632,482
------------- ------------- -------------
NET INCOME (LOSS)........................................................... 22,695,060 9,943,717 5,414,041
------------- ------------- -------------
------------- ------------- -------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners............................................................ 22,302,202 9,781,168 5,283,411
General Partner............................................................. 392,858 162,549 130,630
NET INCOME (LOSS) PER UNIT:
Limited Partners............................................................ 2.95 1.22 .98
General Partner............................................................. 2.95 1.22 .98
TOTAL ASSETS AT END OF PERIOD............................................... 202,668,038 169,541,807 167,588,012
TOTAL NET ASSETS AT END OF PERIOD........................................... 200,082,516 166,773,321 163,786,285
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited Partners............................................................ 23.80 20.85 19.62
General Partners............................................................ 23.80 20.85 19.62
<CAPTION>
1995 1994
------------- -------------
$ $
<S> <C> <C>
REVENUES
Trading Profit (Loss):
Realized.................................................................. 65,987,157 19,134,352
Net change in unrealized.................................................. (4,657,344) (7,758,820)
------------- -------------
Total Trading Results................................................... 61,329,813 11,375,532
Interest income (DWR)....................................................... 7,969,749 6,044,870
------------- -------------
Total Revenues.......................................................... 69,299,562 17,420,402
------------- -------------
EXPENSES
Brokerage fees (DWR)........................................................ 14,173,695 15,551,182
Management fees............................................................. 5,626,908 5,452,353
Incentive fees.............................................................. 8,707,049 4,441,510
Transaction fees and costs.................................................. 1,589,795 1,652,264
Administrative expenses..................................................... 148,000 126,000
------------- -------------
Total Expenses.......................................................... 30,245,447 27,223,309
------------- -------------
NET INCOME (LOSS)........................................................... 39,054,115 (9,802,907)
------------- -------------
------------- -------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners............................................................ 38,580,172 (9,695,068)
General Partner............................................................. 473,943 (107,839)
NET INCOME (LOSS) PER UNIT:
Limited Partners............................................................ 3.56 (.82)
General Partner............................................................. 3.56 (.82)
TOTAL ASSETS AT END OF PERIOD............................................... 179,342,999 171,613,080
TOTAL NET ASSETS AT END OF PERIOD........................................... 176,446,260 168,189,328
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited Partners............................................................ 18.64 15.08
General Partners............................................................ 18.64 15.08
</TABLE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1998 1997 1996 1995
------------- ------------- ------------- -------------
$ $ $ $
<S> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized............................................................ 35,224,194 13,777,460 26,334,748 4,446,595
Net change in unrealized............................................ 6,612,556 9,762,823 (1,552,659) 3,362,093
------------- ------------- ------------- -------------
Total Trading Results............................................. 41,836,750 23,540,283 24,782,089 7,808,688
Interest income (DWR)................................................. 8,103,423 5,987,304 3,242,977 1,430,845
------------- ------------- ------------- -------------
Total Revenues.................................................... 49,940,173 29,527,587 28,025,066 9,239,533
------------- ------------- ------------- -------------
EXPENSES
Brokerage fees (DWR).................................................. 15,543,787 11,617,770 6,997,531 3,003,934
Management fees....................................................... 8,403,764 5,832,758 3,273,649 1,373,227
Incentive fees........................................................ 3,191,252 369,975 1,852,569 600,504
------------- ------------- ------------- -------------
Total Expenses.................................................... 27,138,803 17,820,503 12,123,749 4,977,665
------------- ------------- ------------- -------------
NET INCOME (LOSS)..................................................... 22,801,370 11,707,084 15,901,317 4,261,868
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners...................................................... 22,571,217 11,589,197 15,737,852 4,226,249
General Partner....................................................... 230,153 117,887 163,465 35,619
NET INCOME (LOSS) PER UNIT:
Limited Partners...................................................... 1.49 1.02 2.11 1.72
General Partner....................................................... 1.49 1.02 2.11 1.72
TOTAL ASSETS AT END OF PERIOD......................................... 258,673,911 184,769,817 114,822,056 60,075,842
TOTAL NET ASSETS AT END OF PERIOD..................................... 255,101,434 181,950,507 112,985,629 59,326,379
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited Partners...................................................... 16.12 14.63 13.61 11.50
General Partner....................................................... 16.12 14.63 13.61 11.50
<CAPTION>
FOR THE PERIOD FROM
NOVEMBER 2, 1994
(COMMENCEMENT OF
OPERATIONS) TO
--------------------
<S> <C>
REVENUES
Trading Profit (Loss):
Realized............................................................ (786,137)
Net change in unrealized............................................ 724,455
--------------------
Total Trading Results............................................. (61,682)
Interest income (DWR)................................................. 67,617
--------------------
Total Revenues.................................................... 5,935
--------------------
EXPENSES
Brokerage fees (DWR).................................................. 149,907
Management fees....................................................... 68,529
Incentive fees........................................................ 19,678
--------------------
Total Expenses.................................................... 238,114
--------------------
NET INCOME (LOSS)..................................................... (232,179)
--------------------
--------------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners...................................................... (229,460)
General Partner....................................................... (2,719)
NET INCOME (LOSS) PER UNIT:
Limited Partners...................................................... (.22)
General Partner....................................................... (.22)
TOTAL ASSETS AT END OF PERIOD......................................... 15,084,678
TOTAL NET ASSETS AT END OF PERIOD..................................... 14,931,054
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited Partners...................................................... 9.78
General Partner....................................................... 9.78
</TABLE>
S-7
<PAGE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
1998 $ $ $
--------------
$
<S> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized.......................................................... 7,945,575 1,297,824 4,980,402 3,408,036
Net change in unrealized.......................................... 2,771,722 2,387,258 (1,679,048) 1,451,792
-------------- -------------- -------------- --------------
Total Trading Results......................................... 10,717,297 3,685,082 3,301,354 4,859,828
Interest income (DWR)............................................... 2,379,478 2,304,248 1,604,026 887,226
-------------- -------------- -------------- --------------
Total Revenues................................................ 13,096,775 5,989,330 4,905,380 5,747,054
-------------- -------------- -------------- --------------
EXPENSES
Brokerage Fees (DWR)................................................ 4,402,540 4,414,327 3,398,205 1,802,579
Management fees..................................................... 2,342,447 2,212,788 1,587,213 824,036
Incentive fees...................................................... 1,336,693 427,094 726,825 437,310
-------------- -------------- -------------- --------------
Total Expenses................................................ 8,081,680 7,054,209 5,712,243 3,063,925
-------------- -------------- -------------- --------------
NET INCOME (LOSS)................................................... 5,015,095 (1,064,879) (806,863) 2,683,129
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners.................................................... 4,958,188 (1,054,657) (799,980) 2,659,882
General Partner..................................................... 56,907 (10,222) (6,883) 23,247
NET INCOME (LOSS) PER UNIT:
Limited Partners.................................................... .84 0.04 (.39) 1.05
General Partner..................................................... .84 0.04 (.39) 1.05
TOTAL ASSETS AT END OF PERIOD....................................... 71,445,333 61,010,043 47,089,676 33,049,282
TOTAL NET ASSETS AT END OF PERIOD................................... 70,421,775 59,095,581 45,118,877 32,462,932
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited Partners.................................................... 11.55 10.71 10.67 11.06
General Partner..................................................... 11.55 10.71 10.67 11.06
<CAPTION>
FOR THE PERIOD FROM
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31, 1994
$
<S> <C>
REVENUES
Trading Profit (Loss):
Realized.......................................................... (221,731)
Net change in unrealized.......................................... 367,611
--------------------
Total Trading Results......................................... 145,880
Interest income (DWR)............................................... 55,127
--------------------
Total Revenues................................................ 201,007
--------------------
EXPENSES
Brokerage Fees (DWR)................................................ 121,039
Management fees..................................................... 55,333
Incentive fees...................................................... 18,841
--------------------
Total Expenses................................................ 195,213
--------------------
NET INCOME (LOSS)................................................... 5,794
--------------------
--------------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners.................................................... 5,704
General Partner..................................................... 90
NET INCOME (LOSS) PER UNIT:
Limited Partners.................................................... .01
General Partner..................................................... .01
TOTAL ASSETS AT END OF PERIOD....................................... 12,042,772
TOTAL NET ASSETS AT END OF PERIOD................................... 11,918,929
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited Partners.................................................... 10.01
General Partner..................................................... 10.01
</TABLE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
1998 $ $ $
--------------
$
<S> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized......................................................... 5,113,920 3,683,460 177,564 1,508,581
Net change in unrealized......................................... 1,285,628 464,966 (175,835) 373,624
-------------- -------------- -------------- --------------
Total Trading Results........................................ 6,399,548 4,148,426 1,729 1,882,205
Interest income (DWR).............................................. 1,642,542 1,145,033 891,897 447,608
-------------- -------------- -------------- --------------
Total Revenues............................................... 8,042,090 5,293,459 893,626 2,329,813
-------------- -------------- -------------- --------------
EXPENSES
Brokerage Fees (DWR)............................................... 1,591,467 1,124,531 1,030,310 503,995
Incentive fees..................................................... 449,775 300,250 -- 161,155
Management fees.................................................... 422,960 269,162 221,282 104,999
-------------- -------------- -------------- --------------
Total Expenses............................................... 2,464,202 1,693,943 1,251,592 770,149
-------------- -------------- -------------- --------------
NET INCOME (LOSS).................................................. 5,577,888 3,599,516 (357,966) 1,559,664
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners................................................... 5,518,127 3,561,537 (354,537) 1,536,421
General Partner.................................................... 59,761 37,979 (3,429) 23,243
NET INCOME (LOSS) PER UNIT:
Limited Partners................................................... 2.25 2.12 (.44) 2.24
General Partner.................................................... 2.25 2.12 (.44) 2.24
TOTAL ASSETS AT END OF PERIOD...................................... 46,317,786 25,923,024 19,620,770 14,923,682
TOTAL NET ASSETS AT END OF PERIOD.................................. 45,913,872 25,683,236 18,706,255 14,754,500
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited Partners................................................... 16.00 13.75 11.63 12.07
General Partner.................................................... 16.00 13.75 11.63 12.07
<CAPTION>
FOR THE PERIOD FROM
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31, 1994
$
<S> <C>
REVENUES
Trading Profit (Loss):
Realized......................................................... (61,916)
Net change in unrealized......................................... 18,804
---------------------
Total Trading Results........................................ (43,112)
Interest income (DWR).............................................. 25,896
---------------------
Total Revenues............................................... (17,216)
---------------------
EXPENSES
Brokerage Fees (DWR)............................................... 29,040
Incentive fees..................................................... --
Management fees.................................................... 6,050
---------------------
Total Expenses............................................... 35,090
---------------------
NET INCOME (LOSS).................................................. (52,306)
---------------------
---------------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners................................................... (50,640)
General Partner.................................................... (1,666)
NET INCOME (LOSS) PER UNIT:
Limited Partners................................................... (.17)
General Partner.................................................... (.17)
TOTAL ASSETS AT END OF PERIOD...................................... 3,817,871
TOTAL NET ASSETS AT END OF PERIOD.................................. 3,797,845
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited Partners................................................... 9.83
General Partner.................................................... 9.83
</TABLE>
S-8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS THE INFORMATION FOR EACH
PARTNERSHIP UNDER THE CAPTIONS "RESULTS OF OPERATIONS" ON PAGES 31-33, 36-37,
39-41, AND 43-44.
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
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.
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 value of an individual
Unit in Spectrum Select increased from $20.85 at December 31, 1997 to $23.80 at
December 31, 1998.
From inception of trading in August 1991 through December 1998, the Net
Asset Value per Unit of Spectrum Select has increased by 138.0% (a compound
annualized return of 12.4%).
To enhance the preceding comparison of operations from year to year, you can
examine, line by line, the Partnership's Statement of Operations and Statement
of Financial Condition.
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
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 value of an
individual Unit in Spectrum Technical increased from $14.63 at December 31, 1997
to $16.12 at December 31, 1998.
From inception of trading in November 1994 through December 1998, the Net
Asset Value per Unit of Spectrum Technical has increased by 61.2% (a compound
annualized return of 12.2%).
To enhance the preceding comparison of operations from year to year, you can
examine, line by line, the Partnership's Statement of Operations and Statement
of Financial Condition.
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
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,
S-9
<PAGE>
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 value of an
individual Unit in Spectrum Strategic increased from $10.71 at December 31, 1997
to $11.55 at December 31, 1998.
From inception of trading in November 1994 through December 1998, the Net
Asset Value per Unit of Spectrum Strategic has increased by 15.5% ( a compound
annualized return of 3.5%).
To enhance the preceding comparison of operations from year to year, you can
examine, line by line, the Partnership's Statement of Operations and Statement
of Financial Condition.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
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 value of an
individual Unit in Spectrum Strategic increased from $13.75 at December 31, 1997
to $16.00 at December 31, 1998.
From inception of trading in November 1994 through December 1998, the Net
Asset Value per Unit of Spectrum Global Balanced has increased by 60.0% (a
compound annualized return of 12.0%).
To enhance the preceding comparison of operations from year to year, you can
examine, line by line, the Partnership's Statement of Operations and Statement
of Financial Condition.
S-10
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
INTRODUCTION
Each Partnership is a commodity pool engaged primarily in the speculative
trading of futures interests. The market sensitive instruments held by each
Partnership are acquired solely for speculative trading purposes and, as a
result, all or substantially all of each Partnership's assets are subject to the
risk of trading loss. Unlike an operating company, the risk of market sensitive
instruments is integral, not incidental, to each Partnership's primary business
activities.
The futures interests traded by each Partnership involve varying degrees of
related market risk. Such market risk is often dependent upon changes in the
level or volatility of interest rates, exchange rates, and/or market values of
financial instruments and commodities. Fluctuations in related market risk based
upon the aforementioned 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 effects among each Partnership's existing
open positions, the volatility present within the market(s), and the liquidity
of the market(s). At varying times, each of these factors may act to exacerbate
or mute the market risk associated with each Partnership.
Each Partnership's past performance is not necessarily indicative of its
future results. Any attempt at quantifying a Partnership's market risk must be
qualified by the inherent uncertainty of its speculative trading, which may
cause future losses and volatility (i.e. "risk of ruin") far in excess of such
Partnership's experience to date and/or any reasonable expectation premised upon
historical changes in the fair value of its market sensitive instruments.
QUANTIFYING THE PARTNERSHIP'S 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 on the basis of mark-to-market
accounting principles. As such, any loss in the fair value of a Partnership's
open positions is directly reflected in such Partnership's earnings, whether
realized or unrealized, and such Partnership's cash flow, as profits and losses
on open positions of exchange-traded futures interests are settled daily through
variation margin.
Each Partnership's risk exposure in the various market sectors traded by the
Trading Advisors is estimated below in terms of Value at Risk ("VaR"). The VaR
model employed by each Partnership incorporates numerous variables that could
impact the fair value of such Partnership's trading portfolio. Each Partnership
estimates VaR using a model based on historical simulation with a confidence
level of 99%. Historical simulation involves constructing a distribution of
hypothetical daily changes in trading portfolio value. The VaR model generally
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, as well as correlation that
exists among these variables. The hypothetical changes in portfolio value are
based on daily observed percentage changes in key market indices or other market
factors ("market risk factors") to which the portfolio is sensitive. In the case
of each Partnership's VaR, the historical observation
S-11
<PAGE>
period is approximately four years. Each Partnership's one-day 99% VaR
corresponds to the negative change in portfolio value that, based on observed
market risk factor moves, would have been exceeded once in 100 trading days.
VaR models such as each Partnership's are continually evolving as trading
portfolios become more diverse and modeling techniques and systems capabilities
improve. It must also be noted that the VaR model is used to 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 indicates the VaR associated with each Partnership's
open positions, as a percentage of total net assets, by primary market risk
category as of December 31, 1998.
SPECTRUM SELECT:
As of December 31, 1998, the Partnership's total capitalization was
approximately $200 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- ---------------------------------------------------------------------------- ---------
<S> <C>
Interest Rate............................................................... (1.06)%
Currency.................................................................... (.51)
Equity...................................................................... (.37)
Commodity................................................................... (.91)
Aggregate Value at Risk..................................................... (1.28)%
</TABLE>
SPECTRUM TECHNICAL:
As of December 31, 1998, the Partnership's total capitalization was
approximately $255 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- ---------------------------------------------------------------------------- ---------
<S> <C>
Interest Rate............................................................... (1.25)%
Currency.................................................................... (.68)
Equity...................................................................... (.43)
Commodity................................................................... (.60)
Aggregate Value at Risk..................................................... (1.60)%
</TABLE>
SPECTRUM STRATEGIC:
As of December 31, 1998, the Partnership's total capitalization was
approximately $70 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- ---------------------------------------------------------------------------- ---------
<S> <C>
Interest Rate............................................................... (.58)%
Currency.................................................................... (.26)
Equity...................................................................... (1.74)
Commodity................................................................... (.29)
Aggregate Value at Risk..................................................... (1.70)%
</TABLE>
S-12
<PAGE>
SPECTRUM GLOBAL BALANCED:
As of December 31, 1998, the Partnership's total capitalization was
approximately $46 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- ----------------------------------------------------------------------------- ---------
<S> <C>
Interest Rate................................................................ (.31)%
Currency..................................................................... (.07)
Equity....................................................................... (.23)
Commodity.................................................................... (.46)
Aggregate Value at Risk...................................................... (.58)%
</TABLE>
Aggregate value at risk represents the aggregate VaR of each Partnership's
open positions and not the sum of the VaR of the individual categories listed
above. Aggregate VaR will be lower as it takes into account correlation among
different positions and categories.
The tables above represent the VaR of each Partnership's open positions at
December 31, 1998 only and are not necessarily representative of either the
historic or future risk of an investment in such Partnerships. As each
Partnership's sole business is the speculative trading of primarily futures
interests, the composition of its portfolio of open positions can change
significantly over any given time period or even within a single trading day.
Such changes in open positions could materially impact market risk as measured
by VaR either positively or negatively.
The tables below supplement the year end VaR by presenting each
Partnership's high, low and average VaR, as a percentage of total net assets,
for the four quarterly reporting periods from January 1, 1998 through December
31, 1998.
SPECTRUM SELECT
<TABLE>
<CAPTION>
PRIMARY MARKET RISK
CATEGORY HIGH LOW AVERAGE
- ---------------------- --------- --------- -----------
<S> <C> <C> <C>
Interest Rate......... (2.27)% (.40)% (1.47 )%
Currency.............. (1.70) (.51) (0.99 )
Equity................ (.85) (.21) (.45 )
Commodity............. (.92) (.51) (.79 )
Aggregate Value at
Risk................ (2.68)% (1.28)% (2.18 )%
</TABLE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
PRIMARY MARKET RISK
CATEGORY HIGH LOW AVERAGE
- ----------------------- --------- --------- -----------
<S> <C> <C> <C>
Interest Rate.......... (2.08)% (.89)% (1.56 )%
Currency............... (1.92) (.68) (1.51 )
Equity................. (.61) (.43) (.51 )
Commodity.............. (.69) (.46) (.57 )
Aggregate Value at
Risk................. (3.02)% (1.60)% (2.43 )%
</TABLE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
PRIMARY MARKET RISK
CATEGORY HIGH LOW AVERAGE
- ---------------------- --------- --------- -----------
<S> <C> <C> <C>
Interest Rate......... (3.75)% (.31)% (2.46 )%
Currency.............. (2.11) (.07) (1.16 )
Equity................ (1.62) (.20) (.72 )
Commodity............. (1.52) (.46) (1.19 )
Aggregate Value at
Risk................ (5.04)% (.58)% (3.21 )%
</TABLE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
PRIMARY MARKET RISK
CATEGORY HIGH LOW AVERAGE
- ---------------------- --------- --------- -----------
<S> <C> <C> <C>
Interest Rate......... (1.36)% (.29)% (.87 )%
Currency.............. (.67) (.18) (.39 )
Equity................ (1.74) (.59) (1.11 )
Commodity............. (.29) (.19) (.23 )
Aggregate Value at
Risk................ (1.70)% (1.42)% (1.57 )%
</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, as such margin
requirements generally range between 2% and 15% of contract face value.
Additionally, due to the use of leverage, the face value of the market sector
instruments held by each Partnership is typically many times the total
capitalization of each such Partnership. The financial magnitude of a
Partnership's open positions thus creates a
S-13
<PAGE>
"risk of ruin" not typically found in other investment vehicles. Due to the
relative size of the positions held, certain market conditions may cause a
Partnership to incur losses greatly in excess of VaR within a short period of
time. The foregoing VaR tables, as well as the past performance of each
Partnership, gives no indication of such "risk of ruin". In addition, VaR risk
measures should be interpreted in light of the methodology's limitations, which
include the following: past changes in market risk factors will not always yield
accurate predictions of the distributions and correlations of future market
movements; changes in portfolio value in response to market movements may differ
from the responses implicit in a VaR model; published 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 foregoing VaR tables present the results of each Partnership's VaR for
each such Partnership's market risk exposures and on an aggregate basis at
December 31, 1998 and for the end of quarter periods during calendar year 1998.
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 and
monitor risk and 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 such
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. However, such balances, as well as any market risk they
may represent, are immaterial. Each Partnership also maintains a substantial
portion (approximately 87-92%) of its available assets in cash at DWR. 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 material.
Materiality, as used throughout this section, is based on an assessment of
reasonably possible market movements and the potential losses caused by such
movements, 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 (I) THOSE DISCLOSURES THAT ARE STATEMENTS OF
HISTORICAL FACT AND (II) 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.
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SPECTRUM SELECT
The following were the primary trading risk exposures of the Partnership as
of December 31, 1998, 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 the
Partnership. 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 primary interest rate exposure is
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. 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 rates would
have little effect on the Partnership were the medium-to-long term rates to
remain steady.
CURRENCY. The Partnership'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. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound 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.
EQUITY. The Partnership'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 December 31, 1998, the
Partnership's primary exposures were in the S&P 500, Financial Times (England),
Nikkei (Japan) and DAX (Germany) stock indices. The General Partner anticipates
little, if any, trading in non-G-7 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. The Partnership's primary metals market exposure is to fluctuations
in the price of gold and silver. Although certain of the Trading Advisors will
from time to time trade base metals such as aluminum, copper, lead, tin, nickel
and zinc, the principal market exposures of the Partnership have consistently
been in the precious metals, gold and silver. The Trading Advisors' gold trading
has been increasingly limited due to the long-lasting and mainly non-volatile
decline in the price of gold over the last 10-15 years. However, 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.
SOFT COMMODITIES. One of the Partnership's primary commodities exposure is
to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected
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<PAGE>
weather conditions. Soybeans, grains, coffee, cotton, orange juice, cocoa and
sugar accounted for the substantial bulk of the Partnership's commodities
exposure as of December 31, 1998. The Partnership has had market exposure to
lean hogs.
ENERGY. The Partnership's primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle East.
Although the Trading Advisors trade natural gas to a limited extent, oil is by
far the dominant energy market exposure of the Partnership. Oil prices are
currently depressed, but they can be volatile and substantial profits and losses
have been and are expected to continue to be experienced in this market.
SPECTRUM TECHNICAL
The following were the primary trading risk exposures of the Partnership as
of December 31, 1998, 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 the
Partnership. 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 primary interest rate exposure is
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. 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 rates would
have little effect on the Partnership were the medium-to-long term rates to
remain steady.
CURRENCY. The Partnership'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. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound 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.
EQUITY. The Partnership'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 December 31, 1998, the
Partnership's primary exposures were in the ASE (Australia), S&P 500, Financial
Times (England), Nikkei (Japan) and DAX (Germany) stock indices. The General
Partner anticipates little, if any, trading in non-G-7 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. The Partnership's primary metals market exposure is to fluctuations
in the price of gold and silver. Although some of the Trading Advisors will from
time to time trade base metals
S-16
<PAGE>
such as aluminum, copper, nickel, lead, tin and zinc, the principal market
exposures of the Partnership have consistently been in the precious metals, gold
and silver. The Trading Advisors' gold trading has been increasingly limited due
to the long-lasting and mainly non-volatile decline in the price of gold over
the last 10-15 years. However, 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.
SOFT COMMODITIES. One of the Partnership's primary commodities exposure is
to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions. Soybeans, grains, and
coffee accounted for the substantial bulk of the Partnership's commodities
exposure at December 31, 1998. The Partnership has had market exposure to live
cattle and lean hogs. However, the General Partner anticipates that the Trading
Advisors will maintain an emphasis on soybeans, grains, and coffee, in which the
Partnership has historically taken its largest positions.
ENERGY. The Partnership's primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle East.
Although the Trading Advisors trade natural gas to a limited extent, oil is by
far the dominant energy market exposure of the Partnership. Oil prices are
currently depressed, but they can be volatile and substantial profits and losses
have been and are expected to continue to be experienced in this market.
SPECTRUM STRATEGIC
The following were the primary trading exposures of the Partnership as of
December 31, 1998. 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 the
Partnership. 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 primary interest rate exposure is
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. 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. The Partnership'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. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound 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 Euro on the Trading Advisors' currency
trading strategies.
EQUITY. The Partnership'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
S-17
<PAGE>
indices. As of December 31, 1998, the Partnership's primary exposures were in
the S&P 500, Financial Times (England), Nikkei (Japan) and DAX (Germany) 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. The Partnership's primary metals exposure is to fluctuations in the
price of gold and silver. Although certain of 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. The Trading Advisors' gold trading has been
increasingly limited due to the long-lasting and mainly non-volatile decline in
the price of gold over the last 10-15 years. However, 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.
SOFT COMMODITIES. One of the Partnership's primary commodities exposure is
to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions. Soybeans, grains, cocoa and
sugar accounted for the substantial bulk of the Partnership's commodities
exposure as of December 31, 1998. The Partnership has market exposure to live
cattle and lean hogs. However, the General Partner anticipates that the Trading
Advisors will maintain an emphasis on soybeans, grains, cocoa and sugar, in
which the Partnership has historically taken its largest positions.
ENERGY. The Partnership's primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle East.
Although the Trading Advisors trade natural gas to a limited extent, oil is by
far the dominant energy market exposure of the Partnership. Oil prices are
currently depressed, but they can be volatile and substantial profits and losses
have been and are expected to continue to be experienced in this market.
SPECTRUM GLOBAL BALANCED
The following were the primary trading risk exposures of the Partnership as
of December 31, 1998, 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 the
Partnership. 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 primary interest rate exposure is
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. 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 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.
S-18
<PAGE>
CURRENCY. The Partnership'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. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound 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
Advisor's currency trading strategies.
EQUITY. The Partnership'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 December 31, 1998, the
Partnership's primary exposures were in the S&P 500, Financial Times (England),
Nikkei (Japan) and DAX (Germany) stock indices. The General Partner anticipates
little, if any, trading in non-G-7 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. The Partnership's primary metals market exposure is to fluctuations
in the price of gold and silver. Although the Trading Advisor 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. The Trading Advisor's gold trading has been
increasingly limited due to the long-lasting and mainly non-volatile decline in
the price of gold over the last 10-15 years. However, silver prices have
remained volatile over this period, and the Trading Advisor has 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. One of the Partnership's commodities market exposure is
to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions. Soybean oil, grains, and
cotton accounted for the substantial bulk of the Partnership's commodities
exposure at December 31, 1998. The Partnership has had market exposure to live
cattle and lean hogs. However, the General Partner anticipates that the Trading
Advisor will maintain an emphasis on soybean oil, grains, and cotton, in which
the Partnership has historically taken its largest positions.
ENERGY. The Partnership's primary energy market exposure is to gas and oil
price movements, often resulting from political developments in the Middle East.
Although the Trading Advisor trades natural gas to a limited extent, oil is by
far the dominant energy market exposure of the Partnership. Oil prices are
currently depressed, but they can be volatile and substantial profits and losses
have been and are expected to continue to be experienced in this market.
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following was the only non-trading risk exposure of each Partnership at
December 31, 1998:
FOREIGN CURRENCY BALANCES. Each Partnership's primary foreign currency
balances are in Japanese yen, German marks, British pounds, French francs and
euros. Each Partnership controls the
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<PAGE>
non-trading risk of these balances by regularly converting these balances back
into U.S. dollars at varying intervals, depending upon such factors as size,
volatility, etc.
QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE
The means by which each Partnership and the Trading Advisors, severally,
attempt to manage the risk of the Partnership's open positions are essentially
the same in all market categories traded. The General Partner attempts to manage
each Partnership's market exposure by (i) 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 (ii),
monitoring the performance of the Trading Advisor(s) on a daily basis. In
addition, the Trading Advisor(s) 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. One should be aware that certain Trading
Advisors treat their risk control policies as strict rules, whereas others treat
such policies as general guidelines.
The General Partner monitors and controls the risk of each Partnership's
non-trading instrument, cash, which is the only Partnership investment directed
by the General Partner, rather than the Trading Advisors.
THE GENERAL PARTNER
THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS THE INFORMATION UNDER "THE
GENERAL PARTNER--DIRECTORS AND OFFICERS OF THE GENERAL PARTNER" ON PAGES 47-48.
The following individuals have become directors of the General Partner:
Mitchell M. Merin, age 45, is a Director of the General Partner. Mr. Merin
was appointed the chief operating officer of asset management for MSDW 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 DWR since 1990, during which time he has been director of DWR'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.
Richard A. Beech, age 47, is a Director of the General Partner. Mr. Beech
has been associated with the futures industry for over 23 years. He has been at
DWR 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 DWR, Mr. Beech also had worked at two
investment banking firms in operations, research, managed futures and sales
management.
Ray Harris, age 42, 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 DWR or its affiliates since July
1982, serving in both financial and administrative capacities. From August 1994
to January 1999, he worked in two separate DWR 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.
S-20
<PAGE>
THE TRADING ADVISORS
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
THE FOLLOWING INFORMATION UPDATES THE INFORMATION RELATING TO ASSETS UNDER
MANAGEMENT BY EACH TRADING ADVISOR TO SPECTRUM SELECT UNDER "THE TRADING
ADVISORS--DEAN WITTER SPECTRUM SELECT L.P." ON PAGES 50, 52, AND 55.
As of February 28, 1999, EMC was managing approximately $73 million of
client assets pursuant to its Classic Program and approximately $82 million in
all of its programs (notional funds included); Rabar was managing approximately
$226 million of client assets pursuant to its trading program (notional funds
included); and Sunrise was managing approximately $69 million of client assets
pursuant to its CIMCO portfolio and approximately $528 million of client assets
in all of its programs (notional funds included).
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
THE FOLLOWING INFORMATION UPDATES THE INFORMATION RELATING TO ASSETS UNDER
MANAGEMENT BY EACH TRADING ADVISOR TO SPECTRUM TECHNICAL UNDER "THE TRADING
ADVISORS--DEAN WITTER SPECTRUM TECHNICAL L.P." ON PAGES 58, 60, AND 66.
As of February 28, 1999, Campbell was managing approximately $1.2 billion of
client assets pursuant to its Financial, Metal & Energy Large Portfolio and
approximately $1.4 billion pursuant to all of its programs; Chesapeake was
managing approximately $174 million of customer funds pursuant to its
Diversified 2XL Program and approximately $1.02 billion of client assets
pursuant to all of its programs ("notional funds" excluded); and JWH was
managing approximately $403 million of client assets pursuant to its Original
Investment Program, approximately $1.1 billion of client assets pursuant to its
Financial and Metals Portfolio, and approximately $2.2 billion pursuant to all
of its portfolios collectively.
THE FOLLOWING INFORMATION REPLACES THE FIRST FULL PARAGRAPH RELATING TO
CHESAPEAKE ON PAGE 60.
The investment programs currently offered by Chesapeake are the "Diversified
Program," the "Diversified 2XL Program," and the "Diversified 3XL Program" (the
"Trading Programs"). The Diversified 2XL Program, which Chesapeake trades for
the Partnership, 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 equal to
approximately two times the leverage typically 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 Diversified
Program is Chesapeake's longest operating investment portfolio, with a
performance record beginning in February 1988. While all of the Trading Programs
employ the same general trading methodology, as described below, the various
past and present 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 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.
S-21
<PAGE>
THE FOLLOWING INFORMATION REPLACES THE SIXTH FULL PARAGRAPH RELATING TO
CHESAPEAKE ON PAGE 61.
Programs that exclude or emphasize certain markets will, of course, perform
differently than programs utilizing different markets. In the case of programs
that differ in terms of leverage only (E.G., 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 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, sometimes 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.
THE FOLLOWING IS ADDED AS THE LAST FULL PARAGRAPH UNDER "2. CHESAPEAKE
CAPITAL CORPORATION" ON PAGE 61.
ADDITIONS AND REDEMPTIONS IN POOL ACCOUNT
Investors in pool accounts generally make additions or redeem pool interests
at net asset value per interest as of the opening of business on the first
business day of each month. In order to provide the appropriate market exposure
commensurate with a pool's equity after giving effect to net
additions/redemptions, Chesapeake's general practice is to adjust positions as
soon as possible after the close of business on the last trading date of the
month. Market conditions may dictate the time period over which these trades can
be effected. The performance of a pool account relative to the performance of
other accounts trading in the same program or to accounts trading within
programs that should perform at a level proportionately higher or lower than
such account may be significantly different as a result of these adjustment
trades. Furthermore, there may be changes in net asset value per interest as a
result of such adjustment trades. Based on the level of net
additions/redemptions and Chesapeake's determination of liquidity or other
market conditions. Chesapeake may also decide to make adjusting trades before
the close of business on the last business day of the month. No assurance is
given that Chesapeake will be able to avoid the performance discrepancies and
the changes described above in connection with pool equity level changes. The
use of discretion by Chesapeake in the application of this procedure may affect
performance positively or negatively. Further, effecting trades prior to the
close of business on the last business day of the month may cause brokerage
commissions to be incurred and allocated in the month prior to the month in
which the investors making additions participate in pool profits and losses.
THE FOLLOWING INFORMATION UPDATES AND SUPPLEMENTS THE INFORMATION RELATING
TO THE INDIVIDUAL PRINCIPALS OF JWH ON PAGE 64.
Effective April 16, 1999, Mr. Kevin J. Treacy is no longer a principal of
JWH.
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<PAGE>
THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION RELATING TO
JWH-REGISTERED TRADEMARK- LEGAL CONCERNS ON PAGE 68.
In November 1998, the New York Supreme Court dismissed the complaint, and
gave plaintiffs leave to replead, which plaintiffs failed to do against JWH.
Accordingly, the complaint was dismissed with prejudice as against JWH. In the
California actions, JWH was dismissed as a defendant without prejudice pursuant
to a tolling agreement with plaintiffs that was executed in January, 1999.
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
THE FOLLOWING INFORMATION UPDATES THE INFORMATION RELATING TO ASSETS UNDER
MANAGEMENT BY BLENHEIM AND WILLOWBRIDGE, TRADING ADVISORS TO SPECTRUM STRATEGIC,
UNDER "THE TRADING ADVISORS--DEAN WITTER SPECTRUM STRATEGIC L.P." ON PAGES 69
AND 76.
As of February 28, 1999, Blenheim was managing approximately $30 million of
client assets pursuant to the trading strategies described in the Prospectus
("notional funds" excluded), while Willowbridge was managing approximately $389
million of client assets pursuant to its XLIM Trading Approach and approximately
$764 million of client assets pursuant to its other programs ("notional funds"
excluded).
SPECTRUM STRATEGIC TERMINATED STONEBROOK AS A TRADING ADVISOR ON MARCH 4,
1999. ALLIED IRISH CAPITAL MANAGEMENT, LTD. WILL BECOME A TRADING ADVISOR TO
SPECTRUM STRATEGIC EFFECTIVE MAY 1, 1999. THEREFORE, THE INFORMATION RELATING TO
STONEBROOK ON PAGES 71-74 IS NO LONGER RELEVANT AND IS REPLACED WITH THE
FOLLOWING INFORMATION REGARDING AICM.
2. ALLIED IRISH CAPITAL MANAGEMENT, LTD.
Allied Irish Capital Management, Ltd. is an Irish corporation registered
with the CFTC as a CTA since January 1994 and is a member of the NFA in that
capacity. AICM's business office is located at 85 Pembroke Road, Ballsbridge,
Dublin 4. AICM is not affiliated with the General Partner, DWR, or any other
Trading Advisor for the Partnerships.
As a CTA, AICM 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 AICM'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.
The principals of AICM are as follows:
Michael Buckley became a Director and principal of AICM in August 1997. He
had previously been a Director of AICM from September 1993 to August 1994. He
joined Allied Irish Banks Plc. in February 1991 as Head of Investment Banking of
AIB Group (Ireland's largest banking and financial services group). In January
1994 he became Group General Manager of AIB Capital Markets. He is a Director of
the AIB Group and is responsible for AIB's investment banking, international
treasury and corporate lending businesses. Mr. Buckley was formerly Managing
Director of NCB Group Stockbrokers, a securities brokerage firm, until February
1991 when he joined AIB; and prior to that he had a career in the public service
in Ireland and for the European Community.
Colm Doherty became a Director of AICM 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. He is responsible for AIB's funds management,
corporate finance, venture capital, stockbroking, and for its activities
conducted through Dublin's International Financial Services Centre,
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in the areas of tax-efficient cross border investment, agency treasury
management and the provision of a range of sophisticated back office services to
international clients. 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.
Tony Gannon is a Director of AICM and is an associated person. He became
registered as an associated person of AICM 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 AICM that month. Mr. Gannon was a
founding member of AICM 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 AICM.
Dr. Eileen Fitzpatrick became a Director of AICM 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
(March 1995 to September 1996), and in the same capacity at NCB stockbrokers, a
securities brokerage firm (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 AICM, an associated person of AICM and
a member of the Institute of Bankers. He became registered as an associated
person of AICM 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 AICM that month. Mr. Grimes was a founding member of AICM and is now
responsible for the overall management, development and control of AICM's
activities.
Chris Johns is Director of Investment Strategy at AICM. He became a Director
of AICM 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
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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 AICM in August 1997. He is a member of
the Institute of Chartered Accountants of Ireland. He is a full-time employee of
AICM and is responsible for financial control, compliance and the back-office
operations of the company. He joined AICM in August 1997. Prior to joining AICM,
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 Director of AICM in August 1997. Mr.
O'hOgartaigh is a member of the Institute of Chartered Accountants Ireland and
is currently Financial Controller of AIB Capital Markets Plc., a position he has
held since March 1995. He became a principal of AICM in May 1995 when he was
appointed Company Secretary to AICM, 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 AICM 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 AICM, 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 AICM.
Neil Ramsey became a Director of AICM 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. ("RFI"), 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 NFA. RFI 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 AICM in August 1998 and is a Director of AICM. 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 trades a portion of the Worldwide
Financial Futures Program.
David Tease is a Director of AICM and an associated person. He became
registered as an associated person of AICM 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
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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 AICM that month. Mr. Tease was a
founding member of AICM and trades a portion of the Worldwide Financial Futures
Program.
AICM and its principals may, from time to time, trade futures interests
contracts for their own proprietary accounts.
AICM'S TRADING STRATEGIES
AICM 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 AICM normally applies for the Worldwide
Financial Futures Program. The two other trading programs offered by AICM are:
(i) Foreign Exchange Program, and (ii) Equity Index 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 whose trading styles are
described below. The allocation of capital to the individual traders may be
altered at the discretion of AICM. A discretionary approach is applied to all
trading within the program. 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. There are three separate traders in this
program.
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. The full range of interest rate and bond futures are utilized. At times
the trading opportunity may be best expressed in terms of intermarket spreads or
yield curve adjustments. 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 and he therefore makes regular visits to the
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Deutsche Bundesbank to formulate his own view on German monetary policy. He uses
his views on short-term interest rates, together with an analysis of debt
ownership, debt issuance, fiscal and exchange rate policy to formulate a view.
Having compiled a set of expectations, Mr. Parsons then looks for significant
levels of divergence relative to the market's expectations as a signal to enter
a particular position. His trades tend to be evenly distributed between
directional trades, curve trades and cross-market trades. 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.
Mr. Swift's approach to trading is primarily fundamental in focus but uses
technical analysis to assist in the critical aspects of trade timing and
objective and stop setting. Mr. Swift combines a mixture of short and long-term
trading. Momentum and sentiment indicators are utilized to assist in short-term
trading while fundamental economic and political analysis are used as the basis
for longer term trading. Mr. Swift has extensive experience in trading both
short-term and long-term interest rates and currency markets. He has developed
strong risk management practices through his career and these are utilized in
his trading.
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, AICM may convert spot transactions to futures contracts using
the EFP mechanism.
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.
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 AICM'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
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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--the production of good returns with acceptable drawdowns--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 AICM
The past performance information for the various programs traded by AICM is
set forth below. AICM will trade 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 (four times) to be
employed by AICM for Spectrum Strategic, and also adjusted for the brokerage,
management, and incentive fees to be applied to Spectrum Strategic. Performance
history is also shown for the other programs managed by AICM. The footnotes
following Capsule C are an integral part of each Capsule.
Investors 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 AICM 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, AICM will be trading the Net Assets allocated to it at
four times the leverage it normally applies to the World Financial Futures
Program, which will significantly increase volatility as well as profits and
losses. Spectrum Strategic cannot assure investors that AICM or the Partnership
will make any profit or will be able to avoid incurring substantial losses.
Investors 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
futures interest trading.
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CAPSULE A
ALLIED IRISH CAPITAL MANAGEMENT, LTD.
WORLDWIDE FINANCIAL FUTURES PROGRAM
Name of CTA: Allied Irish Capital Management, Ltd.
Name of program: Worldwide Financial Futures Program
Inception of trading by CTA: November 1993
Inception of trading in program: November 1993
Number of open accounts: 59
Aggregate assets overall: $1,397,600,000
Aggregate assets in program: $1,066,600,000
Largest monthly drawdown*: (2.11)%--(5/94)
Worst peak-to-valley drawdown: (2.11)%--(5/94)
1999 year-to-date return (2 months): 1.01%
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
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 (2 months): 0.96%
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 AICM 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 AICM making certain pro forma adjustments to the
actual past performance record of a client account managed pursuant to the
Worldwide Financial Futures Program, the trading program to be employed for
Spectrum Strategic by AICM. The pro forma adjustments are an attempt to reflect
Spectrum Stragegic's current brokerage, management and incentive fees, and
historical interest income, and the degree of leverage (four times) to be
applied for the portion of Spectrum Stragegic's Net Assets traded by AICM, 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 AICM and its
trading programs above. Futhermore, prospective investors must be aware that pro
forma rates of return have certain 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
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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 Stragegic as compared to AICM'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 Specturn Strategic's Net Assets traded by
AICM would have been in the past or are likely to be in the future. Past results
are not a guarantee of future results.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
CAPSULE B
ALLIED IRISH CAPITAL MANAGEMENT, LTD.
FOREIGN EXCHANGE PROGRAM
Name of CTA: Allied Irish Capital Management, Ltd.
Name of program: Foreign Exchange Program
Inception of trading by CTA: November 1993
Inception of trading in program: January 1994
Number of open accounts:14
Aggregate assets overall: $1,397,600,000
Aggregate assets in program: $327,000,000
Largest monthly drawdown: (2.16)%--(3/94)
Worst peak-to-valley drawdown: (6.93)%--(1/94-8/94)
1999 year-to-date return (2 months): 1.11%
1998 annual return: 5.16%
1997 annual return: 14.72%
1996 annual return: 9.72%
1995 annual return: 8.76%
1994 annual return: (3.80)%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
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CAPSULE C
ALLIED IRISH CAPITAL MANAGEMENT, LTD.
EQUITY INDEX PROGRAM
Name of CTA: Allied Irish Capital Management, Ltd.
Name of program: Equity Index Program
Inception of trading by CTA: November 1993
Inception of trading in program: March 1994
Number of open accounts: 2
Aggregate assets overall: $1,397,600,000
Aggregate assets in program: $4,000,000
Largest monthly drawdown: (2.84)%--(7/97)
Worst peak-to-valley drawdown: (3.82)%--(6/97-7/97)
1999 year-to-date return (2 months): 0.23%
1998 annual return: 10.12%
1997 annual return: 6.42%
1996 annual return: 8.25%
1995 annual return: 3.37%
1994 annual return (10 months): 0.20%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
FOOTNOTES TO AICM CAPSULES A, B AND C PERFORMANCE SUMMARIES
"Inception of trading by CTA" is the date on which AICM began trading client
accounts.
"Inception of trading in program" is the date on which AICM began trading
client accounts pursuant to the program shown.
"Number of open accounts" is the number of accounts directed by AICM
pursuant to the program shown as of February 28, 1999.
"Aggregate assets overall" is the aggregate amount of assets in
non-proprietary accounts under the management of AICM as of February 28, 1999
and includes notional equity. Notional equity represents the additional amount
of equity that exceeds the amount of equity actually committed to AICM for
management.
"Aggregate assets in program" is the aggregate amount of assets in the
program specified as of February 28, 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. Rate of Return is computed by
reference to total equity in the
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program. These numbers represent the composite performance of all accounts in
the program, not the performance of any specific account.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION RELATING TO THE
INDIVIDUAL PRINCIPALS OF RXR ON PAGE 78.
Mr. Rutherford R. Romaine is no longer a principal of RXR.
THE FOLLOWING INFORMATION UPDATES THE INFORMATION RELATING TO ASSETS UNDER
MANAGEMENT BY RXR UNDER "THE TRADING ADVISORS--DEAN WITTER SPECTRUM GLOBAL
BALANCED L.P." ON PAGE 79.
As of February 28, 1999, RXR was managing approximately $289 million of
client assets pursuant to its Balanced Portfolio Program, and approximately $296
million pursuant to all of its programs ("notional funds" excluded).
CERTAIN LITIGATION
THE FOLLOWING SENTENCE IS ADDED TO THE SECOND FULL PARAGRAPH UNDER "CERTAIN
LITIGATION" ON PAGE 83.
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.
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POTENTIAL ADVANTAGES
THE FOLLOWING TABLE UPDATES AND REPLACES THE TABLE UNDER "POTENTIAL
ADVANTAGES--ANNUAL RETURNS OF VARIOUS ASSET CLASSES OVER TIME" ON PAGE 104. THE
NOTES ON PAGES 104-105 ARE AN INTEGRAL PART OF THE FOLLOWING TABLE.
ANNUAL RETURNS OF VARIOUS ASSET CLASSES OVER TIME
<TABLE>
<CAPTION>
U.S. TREASURY PUBLIC
BONDS (LEHMAN U.S. CORPORATE MANAGED
BROTHERS BONDS INT'L STOCKS MANAGED FUTURES FUNDS
STOCKS TREASURY (SALOMON CORP. (MSCI EAFE FUTURES (BARCLAY (MAR PUBLIC
(S&P 500) BOND INDEX) BOND INDEX) INDEX) CTA INDEX) FUND INDEX)
------------- ----------------- ----------------- ------------- --------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
% % % % % %
1981............. (5.0) 1.1 (1.2) (1.0) 23.9 N/A
1982............. 21.6 41.1 42.5 (0.9) 16.7 N/A
1983............. 22.5 1.8 6.3 24.6 23.8 N/A
1984............. 6.2 14.7 16.8 7.9 8.7 1.4
1985............. 31.7 32.0 30.1 56.7 25.5 21.9
1986............. 18.6 24.2 19.9 70.0 3.8 (14.4)
1987............. 5.2 (2.7) (0.2) 24.9 57.3 43.1
1988............. 16.5 9.1 10.7 28.6 21.8 7.3
1989............. 31.6 18.9 16.2 10.8 1.8 4.7
1990............. (3.1) 4.6 6.8 (23.2) 21.0 14.2
1991............. 30.4 17.9 19.9 12.5 3.7 10.0
1992............. 7.6 7.8 9.4 (11.8) (0.9) (1.4)
1993............. 10.1 16.4 13.2 32.9 10.4 10.7
1994............. 1.3 (6.9) (5.8) 8.1 (0.7) (7.7)
1995............. 37.5 30.7 27.2 11.5 13.7 13.9
1996............. 23.0 (0.4) 1.3 6.4 9.1 9.8
1997............. 33.4 14.9 11.6 2.1 10.9 7.6
1998............. 28.6 13.5 12.5 20.3 7.0 (0.3)
1999*............ 0.9 (4.1) (2.8) (2.6) 1.5 7.9
</TABLE>
- ------------------------
* 1999 returns are as of February 28, 1999.
S-33
<PAGE>
THE FOLLOWING CHART UPDATES AND REPLACES THE CHART UNDER "POTENTIAL
ADVANTAGES--MANAGED FUTURES VS. STOCKS" ON PAGE 106.
The following chart was prepared by the General Partner to illustrate the
performance of managed futures against that of stocks from January 1982 through
February 1999, using the recognized market indices of each asset. The Notes on
page 107 are an integral part of the following chart.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MANAGED FUTURES VS. STOCKS
<S> <C> <C> <C> <C> <C>
12-Month Holding Period erformance
S&P 500 Index BARCLAY'S CTA INDEX
(STOCKS) (MANAGED FUTURES)
Dec-81 -4.93% 23.90%
Jan-82 -2.05% 19.68%
Feb-82 -9.17% 22.38%
Mar-82 -13.10% 36.81%
Apr-82 -7.44% 34.16%
May-82 -10.76% 33.64%
Jun-82 -11.57% 22.58%
Jul-82 -13.25% 14.52%
Aug-82 3.33% 15.91%
Sep-82 9.96% 30.14%
Oct-82 16.32% 29.02%
Nov-82 16.21% 14.97%
Dec-82 21.45% 16.68%
Jan-83 27.61% 35.84%
Feb-83 38.28% 19.89%
Mar-83 44.12% 13.97%
Apr-83 48.81% 13.88%
May-83 52.66% 21.23%
Jun-83 61.03% 3.85%
Jul-83 59.06% 17.83%
Aug-83 43.89% 23.21%
Sep-83 44.04% 12.85%
Oct-83 27.76% 18.58%
Nov-83 25.43% 19.50%
Dec-83 22.47% 23.75%
Jan-84 17.39% 6.22%
Feb-84 10.74% 15.67%
Mar-84 8.71% 15.59%
Apr-84 1.66% 13.59%
May-84 -3.16% 7.70%
Jun-84 -4.84% 6.16%
Jul-84 -3.08% 24.90%
Aug-84 5.99% 5.36%
Sep-84 4.63% 9.35%
Oct-84 6.22% 2.87%
Nov-84 2.89% 4.15%
Dec-84 6.10% 8.74%
Jan-85 15.06% 9.78%
Feb-85 20.67% 16.02%
Mar-85 18.65% 12.57%
Apr-85 17.48% 13.21%
May-85 31.66% 10.18%
Jun-85 31.02% 16.27%
Jul-85 32.48% 9.21%
Aug-85 18.28% 16.78%
Sep-85 14.61% 3.67%
Oct-85 19.40% 15.37%
Nov-85 29.06% 24.49%
Dec-85 31.83% 25.50%
Jan-86 22.90% 24.64%
Feb-86 30.55% 35.92%
Mar-86 37.73% 45.10%
Apr-86 36.35% 38.81%
May-86 35.70% 31.60%
Jun-86 35.84% 36.26%
Jul-86 28.36% 23.46%
Aug-86 39.11% 31.90%
Sep-86 31.64% 34.95%
Oct-86 33.15% 21.01%
Nov-86 27.55% 13.05%
Dec-86 18.54% 3.82%
Jan-87 33.88% 12.63%
Feb-87 29.39% -0.72%
Mar-87 26.08% -2.84%
Apr-87 26.34% 26.48%
May-87 20.94% 29.26%
Jun-87 24.86% 26.93%
Jul-87 39.02% 28.75%
Aug-87 34.23% 20.42%
Sep-87 43.16% 28.42%
Oct-87 6.22% 34.78%
Nov-87 -4.78% 49.66%
Dec-87 5.20% 57.27%
Jan-88 -3.33% 39.63%
Feb-88 -2.77% 39.76%
Mar-88 -8.35% 30.57%
Apr-88 -6.41% 2.74%
May-88 -6.59% 13.99%
Jun-88 -6.95% 50.09%
Jul-88 -11.73% 31.52%
Aug-88 -17.94% 34.50%
Sep-88 -12.49% 34.61%
Oct-88 14.71% 36.00%
Nov-88 22.96% 28.51%
Dec-88 16.33% 21.76%
Jan-89 19.79% 25.93%
Feb-89 11.65% 20.71%
Mar-89 17.87% 29.56%
Apr-89 22.64% 31.52%
May-89 26.54% 35.10%
Jun-89 20.37% 7.40%
Jul-89 31.72% 15.00%
Aug-89 39.10% 7.71%
Sep-89 32.83% 3.61%
Oct-89 26.12% -3.91%
Nov-89 30.61% -4.21%
Dec-89 31.37% 1.80%
Jan-90 14.25% 1.86%
Feb-90 18.59% 6.36%
Mar-90 18.94% 5.71%
Apr-90 10.24% 13.34%
May-90 16.29% -4.29%
Jun-90 16.18% -4.34%
Jul-90 6.27% 2.83%
Aug-90 -5.11% 16.50%
Sep-90 -9.30% 23.49%
Oct-90 -7.44% 32.87%
Nov-90 -3.44% 29.27%
Dec-90 -3.07% 21.02%
Jan-91 8.45% 13.35%
Feb-91 14.78% 11.53%
Mar-91 14.56% 12.89%
Apr-91 17.73% 5.95%
May-91 11.92% 10.30%
Jun-91 7.53% 11.85%
Jul-91 12.92% 2.34%
Aug-91 26.95% -5.91%
Sep-91 31.09% -5.97%
Oct-91 33.32% -7.88%
Nov-91 20.28% -7.21%
Dec-91 30.34% 3.73%
Jan-92 22.61% 4.13%
Feb-92 15.96% 2.26%
Mar-92 10.99% -3.71%
Apr-92 13.97% -2.64%
May-92 9.81% -1.77%
Jun-92 13.26% -0.07%
Jul-92 12.61% 7.86%
Aug-92 7.77% 12.50%
Sep-92 10.94% 7.76%
Oct-92 9.96% 8.96%
Nov-92 18.44% 9.97%
Dec-92 7.71% -0.91%
Jan-93 10.55% 1.91%
Feb-93 10.66% 10.36%
Mar-93 15.18% 11.84%
Apr-93 9.25% 16.34%
May-93 11.65% 17.93%
Jun-93 13.69% 14.02%
Jul-93 8.78% 13.36%
Aug-93 15.34% 7.37%
Sep-93 13.06% 8.20%
Oct-93 14.97% 7.37%
Nov-93 10.07% 6.26%
Dec-93 9.97% 10.37%
Jan-94 12.80% 8.69%
Feb-94 8.23% 1.57%
Mar-94 1.45% 4.16%
Apr-94 5.29% -0.86%
May-94 4.26% 1.27%
Jun-94 1.46% 2.79%
Jul-94 5.22% -1.92%
Aug-94 5.53% -1.92%
Sep-94 3.72% 0.59%
Oct-94 3.82% 1.25%
Nov-94 1.09% 2.80%
Dec-94 1.39% -0.65%
Jan-95 0.61% 0.90%
Feb-95 7.44% 5.85%
Mar-95 15.63% 10.41%
Apr-95 17.46% 13.71%
May-95 20.24% 11.20%
Jun-95 26.03% 7.09%
Jul-95 26.03% 6.88%
Aug-95 21.42% 12.88%
Sep-95 29.76% 10.86%
Oct-95 26.47% 10.74%
Nov-95 36.97% 10.05%
Dec-95 37.51% 13.64%
Jan-96 38.58% 18.77%
Feb-96 34.71% 9.38%
Mar-96 32.10% 3.39%
Apr-96 30.17% 8.28%
May-96 28.42% 5.62%
Jun-96 26.03% 6.63%
Jul-96 16.53% 6.19%
Aug-96 18.74% 2.92%
Sep-96 20.33% 5.35%
Oct-96 24.07% 11.17%
Nov-96 27.88% 13.84%
Dec-96 22.98% 9.12%
Jan-97 26.19% 10.42%
Feb-97 26.07% 20.00%
Mar-97 19.70% 18.59%
Apr-97 25.01% 10.37%
May-97 29.40% 12.94%
Jun-97 34.68% 13.43%
Jul-97 52.15% 21.88%
Aug-97 40.68% 17.97%
Sep-97 40.55% 16.58%
Oct-97 32.21% 8.74%
Nov-97 28.64% 6.59%
Dec-97 33.50% 10.89%
Jan-98 27.09% 7.40%
Feb-98 35.15% 2.73%
Mar-98 48.12% 3.90%
Apr-98 41.13% 1.77%
May-98 30.76% 2.26%
Jun-98 30.26% 2.54%
Jul-98 19.28% -3.21%
Aug-98 8.04% 6.76%
Sep-98 8.97% 9.05%
Oct-98 21.85% 10.04%
Nov-98 23.60% 7.29%
Dec 98 28.58% 7.01%
Jan 99 32.52% 4.87%
Feb 99 19.79% 9.03%
DATA: DECEMBER 1981 - FEBRUARY 1999
(See accompanying Notes on page 107 of the Prospectus)
</TABLE>
S-34
<PAGE>
THE FOLLOWING CHART UPDATES AND REPLACES THE CHART UNDER "POTENTIAL
ADVANTAGES--IMPROVED PORTFOLIO EFFICIENCY ON PAGE 107.
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 equitios and/or managed
futures, based on the performance of recognized market indices of each asset
over the period January 1981--February 28, 1999. The Notes on page 108 are an
integral part of the following chart.
IMPROVED PORTFOLIO EFFICIENCY
JANUARY 1981 THROUGH FEBRUARY 1999
STOCKS/BONDS/INTERNATIONAL EQUITIES/MANAGED FUTURES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD DEVIIATION AVERAGE MONTHLY ROR
<S> <C> <C>
100% Stocks (S&P 500 INDEX) 4.2955% 1.3947%
100% Bonds (Salomon Corp. Bond Index) 2.6774% 1.0073%
100% InternationalStocks (MSCI EAFE INDEX) 5.0799% 1.1741%
100% Managed Futures (Barclay CTA Index) 5.0860% 1.1864%
50% Stocks/50% Bonds 2.9469% 1.2010%
50% Stocks/30% Bonds/10%Int'l Eqs./10% Mgd. Futures 2.8981% 1.2356%
Standard Deviation of Monthly Returns
</TABLE>
EXPERTS
THE FOLLOWING INFORMATION REPLACES THE INFORMATION UNDER "EXPERTS" ON PAGE
111.
The financial statements of Dean Witter Spectrum Global Balanced L.P., Dean
Witter Spectrum Strategic L.P., Dean Witter Spectrum Technical L.P., and 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 the General Partner as of November 30, 1998 and 1997 included in
this Prospectus, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein, and have been so included
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing. Deloitte & Touche LLP also acts as independent
auditors for DWR.
S-35
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Limited Partners and the General Partner of
Dean Witter Spectrum Global Balanced L.P.,
Dean Witter Spectrum Select L.P.
Dean Witter Spectrum Strategic L.P.,
Dean Witter Spectrum Technical L.P.,
We have audited the accompanying statements of financial condition of Dean
Witter Spectrum Global Balanced L.P., Dean Witter Spectrum Select L.P., Dean
Witter Spectrum Strategic L.P. and 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 Dean Witter Spectrum Global Balanced L.P.,
Dean Witter Spectrum Select L.P., Dean Witter Spectrum Strategic L.P., and 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 as to Note 6)
New York, New York
S-36
<PAGE>
DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
------------- -------------
$ $
<S> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 43,020,361 24,954,956
Net unrealized gain on open contracts 1,967,187 681,559
Net option premiums -- (458,150)
------------- -------------
Total Trading Equity 44,987,548 25,178,365
Subscriptions receivable 1,163,097 625,710
Interest receivable (DWR) 167,141 118,949
------------- -------------
Total Assets 46,317,786 25,923,024
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (DWR) 169,841 99,762
Redemptions payable 118,190 114,576
Incentive fees payable 69,730 --
Accrued management fee 46,153 25,450
------------- -------------
Total Liabilities 403,914 239,788
------------- -------------
PARTNERS' CAPITAL
Limited Partners (2,836,946.985 and 1,849,054.344 Units, respectively) 45,399,750 25,418,875
General Partner (32,126.520 and 19,230.497 Units, respectively) 514,122 264,361
------------- -------------
Total Partners' Capital 45,913,872 25,683,236
------------- -------------
Total Liabilities and Partners' Capital 46,317,786 25,923,024
------------- -------------
------------- -------------
NET ASSET VALUE PER UNIT 16.00 13.75
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-37
<PAGE>
DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997
-------------- --------------
$ $
<S> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 187,619,419 158,178,925
Net unrealized gain on open contracts 8,435,054 9,627,161
-------------- --------------
Total Trading Equity 196,054,473 167,806,086
Subscriptions receivable 6,021,707 --
Interest receivable (DWR) 591,858 638,204
Due from DWR -- 1,097,517
-------------- --------------
Total Assets 202,668,038 169,541,807
-------------- --------------
-------------- --------------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (DWR) 1,164,344 --
Redemptions payable 939,381 2,272,314
Accrued management fees 481,797 423,673
Accrued administrative expenses -- 72,499
-------------- --------------
Total Liabilities 2,585,522 2,768,486
-------------- --------------
PARTNERS' CAPITAL
Limited Partners (8,274,690.051 and 7,867,474.900 Units, respectively) 196,915,644 163,999,307
General Partner (133,076.700 Units) 3,166,872 2,774,014
-------------- --------------
Total Partners' Capital 200,082,516 166,773,321
-------------- --------------
Total Liabilities and Partners' Capital 202,668,038 169,541,807
-------------- --------------
-------------- --------------
NET ASSET VALUE PER UNIT 23.80 20.85
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-38
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
------------- -------------
$ $
<S> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 63,919,054 57,104,003
Net unrealized gain on open contracts 5,299,335 2,527,613
Net option premiums 225,646 322,123
------------- -------------
Total Trading Equity 69,444,035 59,953,739
Subscriptions receivable 1,796,051 833,259
Interest receivable (DWR) 205,247 223,045
------------- -------------
Total Assets 71,445,333 61,010,043
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (DWR) 405,606 360,041
Redemptions payable 398,976 1,366,164
Accrued management fees 218,976 188,257
------------- -------------
Total Liabilities 1,023,558 1,914,462
------------- -------------
PARTNERS' CAPITAL
Limited Partners (6,031,262.407 and 5,460,628.572 Units, respectively) 69,671,636 58,482,349
General Partner (64,937.294 and 57,258.883 Units, respectively) 750,139 613,232
------------- -------------
Total Partners' Capital 70,421,775 59,095,581
------------- -------------
Total Liabilities and Partners' Capital 71,445,333 61,010,043
------------- -------------
------------- -------------
NET ASSET VALUE PER UNIT 11.55 10.71
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-39
<PAGE>
DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997
-------------- --------------
$ $
<S> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 235,044,325 168,849,922
Net unrealized gain on open contracts 18,909,268 12,296,712
-------------- --------------
Total Trading Equity 253,953,593 181,146,634
Subscriptions receivable 4,002,633 2,965,621
Interest receivable (DWR) 717,685 657,562
-------------- --------------
Total Assets 258,673,911 184,769,817
-------------- --------------
-------------- --------------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (DWR) 1,439,151 1,097,194
Redemptions payable 1,339,311 1,009,230
Accrued management fees 794,015 573,696
Incentive fees payable -- 139,190
-------------- --------------
Total Liabilities 3,572,477 2,819,310
-------------- --------------
PARTNERS' CAPITAL
Limited Partners (15,660,041.764 and 12,308,185.227 Units, respectively) 252,455,045 180,099,271
General Partner (164,158.204 and 126,515.511 Units, respectively) 2,646,389 1,851,236
-------------- --------------
Total Partners' Capital 255,101,434 181,950,507
-------------- --------------
Total Liabilities and Partners' Capital 258,673,911 184,769,817
-------------- --------------
-------------- --------------
NET ASSET VALUE PER UNIT 16.12 14.63
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-40
<PAGE>
DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
<S> <C> <C> <C>
1998 1997 1996
----------- ----------- -----------
<CAPTION>
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 5,113,920 3,683,460 177,564
Net change in unrealized 1,285,628 464,966 (175,835)
----------- ----------- -----------
Total Trading Results 6,399,548 4,148,426 1,729
Interest income (DWR) 1,642,542 1,145,033 891,897
----------- ----------- -----------
Total Revenues 8,042,090 5,293,459 893,626
----------- ----------- -----------
EXPENSES
Brokerage fees (DWR) 1,591,467 1,124,531 1,030,310
Incentive fees 449,775 300,250 --
Management fees 422,960 269,162 221,282
----------- ----------- -----------
Total Expenses 2,464,202 1,693,943 1,251,592
----------- ----------- -----------
NET INCOME (LOSS) 5,577,888 3,599,516 (357,966)
----------- ----------- -----------
----------- ----------- -----------
Net Income (Loss) Allocation:
Limited Partners 5,518,127 3,561,537 (354,537)
General Partner 59,761 37,979 (3,429)
Net Income (Loss) per Unit:
Limited Partners 2.25 2.12 (.44)
General Partner 2.25 2.12 (.44)
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-41
<PAGE>
DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------
1998 1997 1996
---------- ---------- -----------
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 36,087,729 15,940,851 26,876,393
Net change in unrealized (1,192,107) 3,149,167 (10,950,217)
---------- ---------- -----------
Total Trading Results 34,895,622 19,090,018 15,926,176
Interest income (DWR) 6,883,110 7,405,511 6,120,347
---------- ---------- -----------
Total Revenues 41,778,732 26,495,529 22,046,523
---------- ---------- -----------
EXPENSES
Brokerage fees (DWR) 11,360,166 9,777,851 10,641,478
Management fees 5,202,158 5,239,533 4,583,197
Incentive fees 1,832,021 49,989 175,796
Transaction fees and costs 625,327 1,370,439 1,104,011
Administrative expenses 64,000 114,000 128,000
---------- ---------- -----------
Total Expenses 19,083,672 16,551,812 16,632,482
---------- ---------- -----------
NET INCOME 22,695,060 9,943,717 5,414,041
---------- ---------- -----------
---------- ---------- -----------
Net Income Allocation:
Limited Partners 22,302,202 9,781,168 5,283,411
General Partner 392,858 162,549 130,630
Net Income per Unit:
Limited Partners 2.95 1.22 .98
General Partner 2.95 1.22 .98
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-42
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------
<S> <C> <C> <C>
1998 1997 1996
------------- ------------ ------------
<CAPTION>
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 7,945,575 1,297,824 4,980,402
Net change in unrealized 2,771,722 2,387,258 (1,679,048)
------------- ------------ ------------
Total Trading Results 10,717,297 3,685,082 3,301,354
Interest income (DWR) 2,379,478 2,304,248 1,604,026
------------- ------------ ------------
Total Revenues 13,096,775 5,989,330 4,905,380
------------- ------------ ------------
EXPENSES
Brokerage fees (DWR) 4,402,540 4,414,327 3,398,205
Management fees 2,342,447 2,212,788 1,587,213
Incentive fees 1,336,693 427,094 726,825
------------- ------------ ------------
Total Expenses 8,081,680 7,054,209 5,712,243
------------- ------------ ------------
NET INCOME (LOSS) 5,015,095 (1,064,879) (806,863)
------------- ------------ ------------
------------- ------------ ------------
Net Income (Loss) Allocation:
Limited Partners 4,958,188 (1,054,657) (799,980)
General Partner 56,907 (10,222) (6,883)
Net Income (Loss) per Unit:
Limited Partners .84 0.04 (.39)
General Partner .84 0.04 (.39)
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-43
<PAGE>
DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------------
<S> <C> <C> <C>
1998 1997 1996
------------- ------------- -------------
<CAPTION>
$ $ $
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 35,224,194 13,777,460 26,334,748
Net change in unrealized 6,612,556 9,762,823 (1,552,659)
------------- ------------- -------------
Total Trading Results 41,836,750 23,540,283 24,782,089
Interest income (DWR) 8,103,423 5,987,304 3,242,977
------------- ------------- -------------
Total Revenues 49,940,173 29,527,587 28,025,066
------------- ------------- -------------
EXPENSES
Brokerage fees (DWR) 15,543,787 11,617,770 6,997,531
Management fees 8,403,764 5,832,758 3,273,649
Incentive fees 3,191,252 369,975 1,852,569
------------- ------------- -------------
Total Expenses 27,138,803 17,820,503 12,123,749
------------- ------------- -------------
NET INCOME 22,801,370 11,707,084 15,901,317
------------- ------------- -------------
------------- ------------- -------------
Net Income Allocation:
Limited Partners 22,571,217 11,589,197 15,737,852
General Partner 230,153 117,887 163,465
Net Income per Unit:
Limited Partners 1.49 1.02 2.11
General Partner 1.49 1.02 2.11
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-44
<PAGE>
DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
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>
DEAN WITTER SPECTRUM GLOBAL
BALANCED L.P.
Partners' Capital, December 31,
1995 1,222,168.050 14,604,689 149,811 14,754,500
Offering of Units 647,218.304 7,199,621 60,000 7,259,621
Net Loss -- (354,537) (3,429) (357,966)
Redemptions (260,277.423) (2,949,900) -- (2,949,900)
--------------- ------------ ---------- ------------
Partners' Capital, December 31,
1996 1,609,108.931 18,499,873 206,382 18,706,255
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
--------------- ------------ ---------- ------------
--------------- ------------ ---------- ------------
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
--------------- ------------ ---------- ------------
$ $ $
<S> <C> <C> <C> <C>
DEAN WITTER SPECTRUM SELECT L.P.
Partners' Capital, December 31,
1995 9,464,913.400 173,965,425 2,480,835 176,446,260
Offering of Units 514,057.500 10,251,712 -- 10,251,712
Net Income -- 5,283,411 130,630 5,414,041
Redemptions (1,632,643.200) (28,325,728) -- (28,325,728)
--------------- ------------ ---------- ------------
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
--------------- ------------ ---------- ------------
--------------- ------------ ---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-45
<PAGE>
DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL--(CONCLUDED)
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>
DEAN WITTER SPECTRUM STRATEGIC L.P.
Partners' Capital, December 31, 1995 2,935,591.820 32,132,595 330,337 32,462,932
Offering of Units 1,784,521.074 18,480,024 150,000 18,630,024
Net Loss -- (799,980) (6,883) (806,863)
Redemptions (491,011.043) (5,167,216) -- (5,167,216)
--------------- ----------- --------- -----------
Partners' Capital, December 31, 1996 4,229,101.851 44,645,423 473,454 45,118,877
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
--------------- ----------- --------- -----------
--------------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------------ -------------- --------- --------------
<S> <C> <C> <C> <C>
$ $ $
DEAN WITTER SPECTRUM TECHNICAL L.P.
Partners' Capital, December 31, 1995 5,157,457.408 58,726,495 599,884 59,326,379
Offering of Units 3,684,340.110 44,072,998 370,000 44,442,998
Net Income -- 15,737,852 163,465 15,901,317
Redemptions (541,628.284) (6,685,065) -- (6,685,065)
------------------ -------------- --------- --------------
Partners' Capital, December 31, 1996 8,300,169.234 111,852,280 1,133,349 112,985,629
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
------------------ -------------- --------- --------------
------------------ -------------- --------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-46
<PAGE>
DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------------- --------------- ---------------
<CAPTION>
$ $ $
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 5,577,888 3,599,516 (357,966)
Noncash item included in net income (loss):
Net change in unrealized trading profit (1,285,628) (464,966) 175,835
(Increase) decrease in operating assets:
Net option premiums (458,150) 458,150 --
Interest receivable (DWR) (48,192) (33,466) (24,354)
Increase (decrease) in operating liabilities:
Accrued brokerage fees (DWR) 70,079 7,615 25,474
Incentive fees payable 69,730 -- (49,873)
Accrued management fees 20,703 4,507 7,053
--------------- --------------- ---------------
Net cash provided by (used for) operating activities 3,946,430 3,571,356 (223,831)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 17,637,965 6,527,261 7,259,621
(Increase) decrease in subscriptions receivable (537,387) (434,141) 869,488
Increase (decrease) in redemptions payable 3,614 (686,849) 762,679
Redemptions of Units (2,985,217) (3,149,796) (2,949,900)
--------------- --------------- ---------------
Net cash provided by financing activities 14,118,975 2,256,475 5,941,888
--------------- --------------- ---------------
Net increase in cash 18,065,405 5,827,831 5,718,057
Balance at beginning of period 24,954,956 19,127,125 13,409,068
--------------- --------------- ---------------
Balance at end of period 43,020,361 24,954,956 19,127,125
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-47
<PAGE>
DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------------- --------------- ---------------
<CAPTION>
$ $ $
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 22,695,060 9,943,717 5,414,041
Noncash item included in net income:
Net change in unrealized trading profit 1,192,107 (3,149,167) 10,950,217
(Increase) decrease in operating assets:
Net option premiums -- 18,205 (1,185)
Interest receivable (DWR) 46,346 (105,144) 59,297
Due from DWR 1,097,517 (688,191) (236,577)
Increase (decrease) in operating liabilities:
Accrued brokerage fees (DWR) 1,164,344 (491,315) (173,003)
Accrued management fees 58,124 19,815 (42,247)
Accrued administrative expenses (72,499) (50,844) (40,924)
Incentive fees payable -- (348,459) 348,459
Accrued transaction fees and costs -- (64,595) (6,097)
--------------- --------------- ---------------
Net cash provided by operating activities 26,180,999 5,084,022 16,271,981
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 30,297,590 12,056,614 10,251,712
(Increase) decrease in subscriptions receivable (6,021,707) 5,365,420 (5,365,420)
Increase (decrease) in redemptions payable (1,332,933) (97,843) 818,800
Redemptions of Units (19,683,455) (19,013,295) (28,325,728)
--------------- --------------- ---------------
Net cash provided by (used for) financing activities 3,259,495 (1,689,104) (22,620,636)
--------------- --------------- ---------------
Net increase (decrease) in cash 29,440,494 3,394,918 (6,348,655)
Balance at beginning of period 158,178,925 154,784,007 161,132,662
--------------- --------------- ---------------
Balance at end of period 187,619,419 158,178,925 154,784,007
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-48
<PAGE>
DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------------------
<S> <C> <C> <C>
1998 1997 1996
-------------- ------------- -------------
<CAPTION>
$ $ $
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 5,015,095 (1,064,879) (806,863)
Noncash item included in net income (loss):
Net change in unrealized trading profit (2,771,722) (2,387,258) 1,679,048
(Increase) decrease in operating assets:
Net option premiums 96,477 (367,448) 25,452
Interest receivable (DWR) 17,798 (59,402) (55,568)
Increase (decrease) in operating liabilities:
Accrued brokerage fees (DWR) 45,565 36,599 110,617
Accrued management fee 30,719 31,436 59,530
Incentive fees payable -- -- (198,924)
-------------- ------------- -------------
Net cash provided by (used for) operating activities 2,433,932 (3,810,952) 813,292
-------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 16,742,471 22,527,135 18,630,024
(Increase) decrease in subscriptions receivable (962,792) (168) 714,659
Increase (decrease) in redemptions payable (967,188) (124,372) 1,413,226
Redemptions of Units (10,431,372) (7,485,552) (5,167,216)
-------------- ------------- -------------
Net cash provided by financing activities 4,381,119 14,917,043 15,590,693
-------------- ------------- -------------
Net increase in cash 6,815,051 11,106,091 16,403,985
Balance at beginning of period 57,104,003 45,997,912 29,593,927
-------------- ------------- -------------
Balance at end of period 63,919,054 57,104,003 45,997,912
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-49
<PAGE>
DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------------
<S> <C> <C> <C>
1998 1997 1996
-------------- -------------- --------------
<CAPTION>
$ $ $
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 22,801,370 11,707,084 15,901,317
Noncash item included in net income:
Net change in unrealized trading profit (6,612,556) (9,762,823) 1,552,659
(Increase) decrease in operating assets:
Interest receivable (DWR) (60,123) (275,721) (189,153)
Net option premiums -- 328,955 (328,955)
Increase (decrease) in operating liabilities:
Accrued brokerage fees (DWR) 341,957 320,941 388,414
Accrued management fees 220,319 197,331 199,067
Incentive fees payable (139,190) 139,190 --
-------------- -------------- --------------
Net cash provided by operating activities 16,551,777 2,654,957 17,523,349
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 70,451,681 69,682,458 44,442,998
(Increase) decrease in subscriptions receivable (1,037,012) 2,151,502 (2,025,927)
Increase (decrease) in redemptions payable 330,081 325,421 499,483
Redemptions of Units (20,102,124) (12,424,664) (6,685,065)
-------------- -------------- --------------
Net cash provided by financing activities 49,642,626 59,734,717 36,231,489
-------------- -------------- --------------
Net increase in cash 66,194,403 62,389,674 53,754,838
Balance at beginning of period 168,849,922 106,460,248 52,705,410
-------------- -------------- --------------
Balance at end of period 235,044,325 168,849,922 106,460,248
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-50
<PAGE>
DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Dean Witter Spectrum Global Balanced L.P. (formerly known as Dean
Witter Spectrum Balanced L.P.) ("Spectrum Global Balanced"), Dean Witter
Spectrum Select L.P. (formerly known as Dean Witter Select Futures Fund L.P.)
("Spectrum Select"), Dean Witter Spectrum Strategic L.P. ("Spectrum Strategic")
and Dean Witter Spectrum Technical L.P. ("Spectrum Technical") (individually, a
"Partnership," or collectively, the "Partnerships") are limited partnerships
organized to engage in the speculative trading of futures and forward contracts,
options on futures contracts and on physical commodities, and other commodities
interests, including foreign currencies, financial instruments, precious and
industrial metals, energy products, and agriculturals (collectively, "futures
interests"). The general partner for each Partnership is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds, Inc. ("DWR"), and an unaffiliated clearing commodity broker, Carr
Futures Inc. ("Carr"), provides clearing and execution services. Both Demeter
and DWR are wholly-owned subsidiaries of Morgan Stanley Dean Witter & Co.
("MSDW").
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. ("DWD"). At that time, DWD changed its corporate name to Morgan
Stanley, Dean Witter, Discover & Co. ("MSDWD"). Effective February 19, 1998,
MSDWD 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 and the resulting unrealized gains and losses
are reflected in income. Monthly, DWR pays each Partnership interest income
based upon 80% of its average daily "Net Assets" (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" consist of cash on deposit with DWR and Carr
to be used as margin for trading and the net asset or liability related to
unrealized gains or losses on open contracts and the net option premiums paid
and/or received. The asset or liability related to the unrealized gains or
S-51
<PAGE>
losses on forward contracts is presented as a net amount in each period due to
master netting agreements.
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 DWR'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 the
Partnership were capped at 3/4 of 1% per month (a 9% maximum annual rate) of the
Partnership'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 the Partnership's month-end Net Assets.
Effective June 1, 1998 brokerage fees of the Partnership 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 DWR 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 the
Partnership's average month end Net Assets. Demeter was responsible for
operating expenses in excess of the cap.
S-52
<PAGE>
INCOME TAXES--No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of each Partnership's revenues
and expenses for income tax purposes.
DISTRIBUTIONS--Distributions, other than on redemption of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
CONTINUING OFFERING--Units of each Partnership are offered at a price equal to
100% of the Net Asset Value per Unit as of the close of business on the last day
of the month. No selling commissions or charges related to the continuing
offering of Units were paid by the Limited Partners or the Partnership. DWR will
pay all such costs.
REDEMPTIONS--Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the end of the last day 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 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 DWR as described in Note 1. Each
Partnership's cash is on deposit with DWR and Carr in futures interests trading
accounts to meet margin requirements as needed. DWR 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:
Dean Witter Spectrum Global Balanced L.P.
RXR, Inc.
Dean Witter Spectrum Select L.P.
EMC Capital Management, Inc.
Rabar Market Research, Inc.
Sunrise Capital Management, Inc.
S-53
<PAGE>
Dean Witter Spectrum Strategic L.P.
Blenheim Investments, Inc.
Stonebrook Capital Management, Inc.
Willowbridge Associates Inc.
Effective April 30, 1998, A. Gary Shilling & Co., Inc ("Shilling") was
terminated as an advisor to the Partnership. The assets of the Partnership
previously allocated to Shilling were allocated to Stonebrook Capital Management
Inc., ("Stonebrook"), effective June 1, 1998.
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 Stonebrook 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 the "Trading Profits" as
defined in the Limited Partnership Agreement, experienced with respect to each
trading advisor's allocated Net Assets as of the end of each calendar month.
Prior to June 1, 1998, Spectrum Select paid a quarterly incentive fee to each
trading advisor equal to 17.5% of the "Trading Profits" as defined.
Spectrum Technical will pay a monthly incentive fee equal to 15% of the "Trading
Profits" experienced with respect to the Net Assets allocated to Campbell and
JWH and 19% of the "Trading Profits" experienced 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.
S-54
<PAGE>
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.
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>
S-55
<PAGE>
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL
AMOUNT
-------------------------
SPECTRUM STRATEGIC
-------------------------
<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>
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL
AMOUNT
-------------------------
SPECTRUM TECHNICAL
-------------------------
<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.
S-56
<PAGE>
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.
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 DWR or Carr 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 DWR and Carr, 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
S-57
<PAGE>
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, the sole counterparty on all of
such contracts, to perform. Carr's parent, Credit Agricole Indosuez, has
guaranteed to the Partnerships payment of the net liquidating value of the
transactions in the Partnerships' account with Carr (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>
<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>
S-58
<PAGE>
<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 DWR. Named defendants include DWR, Demeter, Dean Witter
Futures and Currency Management Inc., MSDW (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 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.
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, including other Partnerships, 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 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. The assets previously allocated to Stonebrook will not be traded
until a new Trading Advisor is selected. These assets will continue to earn
interest on 100% of the assets but will not accrue any brokerage, incentive or
management fees.
S-59
<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 as
of November 30, 1998 and 1997 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
January 11, 1999
New York, New York
S-60
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO. ("MSDW"))
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
NOVEMBER 30,
FEBRUARY 28, --------------------------------
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS $ $
Investments in affiliated partnerships (Note 2) 17,793,747 16,959,248 22,016,069
Income taxes receivable 305,150 708,505 429,885
Receivable from affiliated partnerships 20,632 25,716 968
--------------- --------------- ---------------
Total Assets 18,119,529 17,693,469 22,446,922
--------------- --------------- ---------------
--------------- --------------- ---------------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Payable to MSDW (Note 3) 11,824,302 11,648,971 17,995,100
Accrued expenses 54,341 62,198 34,072
--------------- --------------- ---------------
Total Liabilities 11,878,643 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 111,170,000 111,170,000 111,170,000
Retained earnings 6,090,886 5,832,300 4,267,750
--------------- --------------- ---------------
117,310,886 117,052,300 115,487,750
Less: Notes receivable from MSDW (Note 4) (111,070,000) (111,070,000) (111,070,000)
--------------- --------------- ---------------
Total Stockholder's Equity 6,240,886 5,982,300 4,417,750
--------------- --------------- ---------------
Total Liabilities and Stockholder's Equity 18,119,529 17,693,469 22,446,922
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of these statements of financial
condition.
S-61
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION
1. BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Demeter Management Corporation ("Demeter") is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co. ("MSDW").
On May 31, 1997, Morgan Stanley Group Inc. ("Morgan Stanley") was merged with
and into Dean Witter, Discover & Co. ("DWD"). At that time DWD changed its
corporate name to Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD").
Effective February 19, 1998 MSDWD changed its corporate name to Morgan Stanley
Dean Witter & Co. Prior to the merger, DWD's fiscal year ended on December 31.
Subsequent to the merger, MSDW 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.) ("DWPSF"), Dean Witter Global Perspective Portfolio L.P., Dean Witter
World Currency Fund L.P., Dean Witter Institutional Account II L.P. ("DWIA II"),
DWFCM International Access Fund L.P., Dean Witter Anchor Institutional Balanced
Portfolio Account L.P., ("Anchor"), Dean Witter Spectrum Global Balanced L.P.
(formerly, Dean Witter Spectrum Balanced L.P.), Dean Witter Spectrum Strategic
L.P., Dean Witter Spectrum Technical L.P., Dean Witter Spectrum Select L.P.
(formerly, Dean Witter Select Futures Fund L.P., DWR Chesapeake L.P., DWR
Institutional Balanced Portfolio Account III L.P. ("DWIBP III"), DWR/ JWH
Futures Fund L.P., Morgan Stanley Tangible Asset Fund L.P. ("MSTAF"), DWR/Market
Street Futures Fund L.P. ("MKTST"), Morgan Stanley Dean Witter Charter Graham
L.P. ("Charter Graham"), Morgan Stanley Dean Witter Charter Millburn L.P.
("Charter Millburn"), and Morgan Stanley Dean Witter Charter Welton L.P.
("Charter Welton").
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 DWPSF for additional investment and on May 12, 1997, DWPSF
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 MSTAF. On November 4, 1997, MSTAF 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, MSTAF, 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 Anchor and
subsequently distributed its net assets.
S-62
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
In January of 1998, Demeter entered into a limited partnership agreement as
general partner in MKTST, which offers units to investors in a continuing
private offering. MKTST 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.
On April 20, 1998, Dean Witter Select Futures Fund L.P. changed its name to Dean
Witter Spectrum Select L.P. ("DWSF"). Effective May 1, 1998 DWSF 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 DWIA 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 DWSF, 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. ("Charter Graham"), Morgan Stanley Dean Witter Charter
Millburn L.P. ("Charter Millburn") and Morgan Stanley Dean Witter Charter Welton
L.P. ("Charter Welton"). 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 DWIBP 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 MSDW, computed on a separate company
basis and due to MSDW.
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.
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.
S-63
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
The total assets, liabilities and partners' capital of all the funds managed by
Demeter at November 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
$ $
<S> <C> <C>
Total assets.......................................... 1,316,093,947 1,195,307,516
Total liabilities..................................... 21,644,069 19,346,113
Total partners' capital............................... 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.
3. PAYABLE TO MSDW
The payable to MSDW is primarily for amounts due for the purchase of partnership
investments, income tax payments made by MSDW on behalf of Demeter and the
cumulative results of operations.
4. NET WORTH REQUIREMENT
At November 30, 1998 and 1997, Demeter held non-interest bearing notes from MSDW
that were payable on demand. These notes were received in connection with
additional capital contributions aggregating $111,070,000.
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 MSDW 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 DWR, an affiliate of Demeter. Named defendants include
DWR, Demeter, Dean Witter Futures and Currency Management Inc., MSDW (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
S-64
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
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.
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.
S-65
<PAGE>
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.
SUPPLEMENT TO PROSPECTUS DATED JANUARY 21, 1999
The Prospectus dated January 21, 1999 is supplemented by a Supplement dated
April 30, 1999. You should read the Supplement together with the Prospectus.
April 30, 1999
