Morgan Stanley Dean Witter Spectrum Series
Monthly Report
October 2000
Dear Limited Partner:
The Net Asset Value per Unit for each of the six Morgan Stanley Dean Witter
Spectrum Funds as of October 31, 2000 was as follows:
Funds N.A.V. % change for month
Spectrum Commodity $ 7.48 -2.96%
Spectrum Currency $10.99 7.31%
Spectrum Global Balanced $15.45 2.22%
Spectrum Select $20.40 0.44%
Spectrum Strategic $ 8.99 -6.75%
Spectrum Technical $12.78 2.87%
In general, the performance disparity between the Funds in the Spectrum
Series is due to the portfolio structure and trading approaches unique to
each Fund. Spectrum Currency, a fund that participates exclusively in the
currency markets, recorded profits primarily from short positions in the
South African rand, the euro and Australian dollar. Spectrum Technical, a
technically-based multi-manager fund, recorded gains primarily in the
currency markets while experiencing the most difficulty in metals and soft
commodities. Spectrum Global Balanced, a balanced portfolio of stocks,
bonds and managed futures, recorded profits primarily in the currency
markets and in agricultural and global stock index futures. Spectrum
Select, the other technically-based multi-manager fund, produced gains
primarily in the currency markets, but also suffered nearly offsetting
losses in energy and metals futures. Spectrum Strategic, a fund managed by
multiple trading advisors who employ fundamental trading methodologies,
experienced difficulty in a wide variety of markets, including energy,
agricultural, currency and metal futures. For additional information
regarding Spectrum Strategic, please see the Special Performance Commentary
that follows this letter. Spectrum Commodity, a fund that participates in
the tangible commodity markets from the long side, experienced losses
primarily in metals and soft commodities markets.
Spectrum Commodity
The Fund decreased in value during October primarily as a result of losses
recorded in the metals markets from long positions in copper and aluminum
futures as prices declined after concerns mounted that demand would weaken
amid a cooling of the U.S. economy. In the soft commodities markets,
losses were experienced from long coffee futures positions as prices moved
lower during the second half of the month on forecasts for rain in
Brazilian growing regions and ample supplies ahead of the winter demand
season. In the energy markets, losses were incurred from long natural gas
futures positions as prices decreased after the American Gas Association
reported larger-than-expected inventories and on forecasts for warmer
temperatures, which are keeping heating demand down. A portion of these
losses was offset by gains recorded in the livestock markets from long
positions in cattle futures as prices increased on technical factors. In
the agricultural markets, profits were recorded from long positions in corn
futures as prices climbed higher after the USDA reduced its forecast for
the U.S. crop.
Spectrum Currency
The Fund increased in value during October primarily due to gains recorded
from short South African rand positions as its value weakened versus the
U.S. dollar due to a bomb blast in Cape Town, a weaker euro, instability in
the Middle East and Zimbabwe and higher oil prices. Additional gains were
recorded from short euro positions as the value of the European common
currency fell to lifetime lows relative to the U.S. dollar amid continued
skepticism regarding the European economy. Smaller gains were experienced
from short Australian dollar positions as its value weakened versus the
U.S. dollar amid the euro's fall to new lows against the U.S. dollar during
month-end. A portion of overall Fund gains was offset by losses recorded
from long British pound positions early in the month as the pound's value
weakened versus the U.S. dollar on technically based factors. Additional
losses were incurred from short Mexican peso positions as
<PAGE>
its value strengthened versus the U.S. dollar as Mexican markets were seen
as stable, with the IPC stock index gaining momentum during month-end.
Spectrum Global Balanced
The Fund increased in value during October primarily as a result of gains
recorded in the currency markets from short South African rand positions as
its value trended lower due to a bomb blast in Cape Town, a weaker euro,
instability in the Middle East and Zimbabwe and higher oil prices.
Additional gains were recorded from short positions in the Singapore dollar
as its value weakened relative to the U.S. dollar following weakness in the
Pacific Rim currencies. In the agricultural markets, profits were recorded
from short positions in soybean oil futures as prices declined on reports
that tight supplies could ease soon as the new crop becomes available. In
the global stock index futures markets, profits were recorded from long
positions in FTSE 100 and DAX Index futures as prices increased as the
scramble for European telecom shares continued, bolstering stock markets
across Europe late in the month as earnings-driven gains on Wall Street
lent support. A portion of these gains was offset by losses recorded in
the soft commodities markets from short cotton futures positions as prices
increased earlier in the month amid declining supplies. In the metals
markets, losses were incurred from long positions in copper futures as
prices declined after concerns mounted that demand would weaken amid a
cooling of the U.S. economy.
Spectrum Select
The Fund increased in value during October primarily as a result of gains
recorded in the currency markets from short positions in the euro and Swiss
franc as the value of these European currencies declined versus the U.S.
dollar amid continued skepticism regarding the European economy.
Additional gains were recorded from short South African rand positions as
its value trended lower due to a bomb blast in Cape Town, a weaker euro,
instability in the Middle East and Zimbabwe and higher oil prices. In the
global stock index futures markets, gains were recorded from short
positions in Nikkei Index futures as the Tokyo stock market's benchmark
declined after uninspiring earnings results from high-tech firms soured
investor sentiment. A portion of these gains was offset by losses recorded
in the energy markets from long positions in natural gas futures as prices
were pressured lower by mild weather in key consumption areas and American
Gas Association announcements of increased storage levels. Additional
losses were experienced from long futures positions in crude oil as prices
dropped during mid-month, after Saudi Arabia said OPEC could boost output
again if prices remained high. Diminished concerns regarding the effect
that tensions between Israel and Palestine would have on supplies from the
Middle East also pushed prices lower. In the metals markets, losses were
incurred from long positions in copper and aluminum futures as prices
declined after concerns mounted that demand would weaken amid a cooling of
the U.S. economy.
Spectrum Strategic
The Fund decreased in value during October primarily as a result of losses
recorded in the energy markets from short futures positions in crude oil
and its refined products as oil prices climbed higher early in the month
amid fears of war in the Middle East. In the agricultural markets, losses
were recorded early in the month from long positions in soybean futures as
prices dropped on reports that tight supplies could ease soon as the new
crop becomes available. In the currency markets, losses were experienced
from long positions in the euro and Swiss franc as the value of these
European currencies declined versus the U.S. dollar amid continued
skepticism regarding the European economy. In the metals markets, losses
were incurred from long positions in copper and aluminum futures as prices
declined after concerns mounted that demand would weaken amid a cooling of
the U.S. economy. In soft commodities, losses were experienced from long
positions in lumber futures as prices declined amid weak demand and
abundant supplies. A portion of these losses was offset by gains recorded
in the global stock index futures markets from short positions in Nikkei
Index futures as the Tokyo stock market's benchmark declined after
uninspiring earnings results from high-tech firms soured investor
sentiment. Additional gains were recorded from long NASDAQ 100 Index
futures positions as domestic stock prices, despite experiencing some
volatility, moved higher during mid-month, amid increasing confidence in
earnings reports and the subsequent "value hunting" that followed. In the
global interest rate futures markets, gains were recorded during mid-month
from long positions in U.S. interest rate futures as U.S. Treasury bond and
Treasury note prices rose amid investors flocking to the relative safety of
fixed income in response to the stock market's volatility and the political
uncertainty in the Middle East.
<PAGE>
For additional information regarding Spectrum Strategic, please see the
Special Performance Commentary that follows this letter.
Spectrum Technical
The Fund increased in value during October primarily as a result of gains
recorded in the currency markets from short positions in the euro as the
value of the European common currency declined versus the U.S. dollar amid
continued skepticism regarding the European economy. Additional gains were
recorded early in the month from short positions in the British pound as
its value weakened versus the U.S. dollar on technically based factors. In
the global stock index futures markets, gains were recorded from short
positions in Nikkei Index futures as the Tokyo stock market's benchmark
declined after uninspiring earnings results from high-tech firms soured
investor sentiment. In the energy markets, gains were recorded from long
futures positions in crude oil and its refined products as oil prices
climbed higher early in the month amid fears of war in the Middle East.
Offsetting losses were recorded from long positions in natural gas futures
as prices were pressured lower by mild weather in key consumption areas and
American Gas Association announcements of increased storage levels. Losses
were recorded in the soft commodities markets from long positions in sugar
futures as prices moved lower later in the month on reports of a world
production surplus in 2000-2001. In the metals markets, losses were
incurred from long positions in copper and aluminum futures as prices
declined after concerns mounted that demand would weaken amid a cooling of
the U.S. economy. In the global interest rate futures markets, losses were
incurred later in the month from long positions in long-term U.S. interest
rate futures as U.S. bond prices moved lower on renewed strength in blue-
chip stocks as investors moved to take profits in government bonds ahead of
key labor market and growth data.
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation at Two World Trade Center, 62nd
Floor, New York , NY 10048, or your Morgan Stanley Dean Witter Financial
Advisor.
I hereby affirm, that to the best of my knowledge and belief, the
information contained in this report is accurate and complete. Past
performance is not a guarantee of future results.
Sincerely,
Robert E. Murray
Chairman
Demeter Management Corporation
General Partner
<PAGE>
SPECIAL PERFORMANCE COMMENTARY:
SPECTRUM STRATEGIC
One of our philosophies in Managed Futures is to offer a wide range of
products that provide investors with the ability to participate in this
alternative investment in different ways. Among other benefits, this
allows for improved diversification within the asset class and better
positions an investor's managed futures exposure to have an improved chance
of handling a wide variety of market conditions. For instance, within the
Spectrum Series each of the six funds approach the markets differently
through some combination of trading style, market sector weightings within
a portfolio, leverage and so forth. This is largely responsible for one of
the most significant strengths of the Series: each fund has a chance to
perform at certain times when the other funds may be experiencing some
difficulty. And, in fact, this has been evident in the marketplace, as
each of the Spectrum funds has taken its turn as the #1 or #2 best yearly
performer over the six-year life of the series.
Of course, during other times in its history, each of the Spectrum funds
has experienced difficulty. And, as with many investments, difficulty in
managed futures can often follow a strong period of performance with the
most severe contractions coming on the heels of the strongest performance
environments (witness the contrasting experience of a huge number of
internet related equities in the 1999 and YTD 2000 period). Spectrum
Strategic, and for that matter all managed futures funds, is not immune
from these cycles. In 1999, Spectrum Strategic was the Spectrum Series
leader - as well as the best performing public fund in the entire managed
futures industry - by producing a return of 37.2%. So far in 2000,
however, the Fund has been experiencing difficulty with a return of -43%
through October 31.
The unique trading philosophy of Spectrum Strategic sets it apart from the
other funds within the Spectrum Series. Specifically, these other funds
tend to depend heavily on long-term technical price trends. Spectrum
Strategic, on the other hand, analyzes markets from a fundamental or
discretionary perspective. As a result, the Fund will do well when the
views the managers have taken and the subsequent positions they have
established are consistent with market movements. This was clearly the
case in 1999. This year, however, the markets have not moved in a pattern
that is consistent with the views held by the Fund's money managers and, as
a result, has produced disappointing performance. Additionally, while each
of the money managers in the Fund applies their trading methodologies and
fundamentally based market views independently, occasionally more than one
of them will encounter performance in the same direction as the others at
the same time, whether it be positive or negative. In certain instances
this year that has been the case and the negative performance experienced
by each of the individual managers has resulted in overall losses for the
Fund.
A significant percentage of Spectrum Strategic's losses this year occurred
during the first four months largely due to the views and subsequent
positions established by Willowbridge Associates, one of the Fund's three
Trading Advisors. Ultimately, Willowbridge's losses in the Fund led to
their removal as a Trading Advisor to the Fund in April 2000. To put this
action in perspective, consider that through December 1999, Willowbridge
had been the best performing money manager in the entire Spectrum Series
since the Series was first introduced in November 1994. However, during
the first three and a half months of this year, Willowbridge incurred
significant losses due to price moves that were inconsistent with the
fundamental market views and positions held by the manager. Specifically,
Willowbridge, during various points in time from January to April, held
short futures positions in U.S. stock indices and U.S. Treasury bonds and
long positions in base metals and coffee futures. Unfortunately, prices in
these markets moved in an opposite direction to the positions held (U.S.
stock and bond prices moved higher, while base metal and coffee prices
moved lower), and losses were incurred. By way of contrast, Willowbridge's
views of the markets in the summer of 1998 were largely responsible for
Spectrum Strategic's gains of approximately 26% during the third quarter of
that year.
Willowbridge was not the only Trading Advisor in the Fund to encounter a
challenging market environment in 2000. Blenheim Investments, who was the
best performing Advisor in the Spectrum Series during 1999 and first half
of 2000 due primarily to strong performance in the energy markets, has
experienced difficult performance over the past five months, with the
exception of July. Specifically, prior to June 2000, Blenheim held a
bullish opinion on the energy markets, particularly crude oil, and as a
result profited from long positions in these products as oil prices reached
10-year highs. Since June, Blenheim has developed a bearish view of the
oil markets and, subsequently, has established short positions in these
markets. Unfortunately, oil prices, though choppy, have continued higher
and have moved counter to these bearish views held by Blenheim. This has
resulted in the money manager giving back a portion of the profits they
recorded from December 1998 to May 2000. Blenheim has also recorded losses
in other futures markets such as lumber,
<PAGE>
which has moved lower contrary to the long positions held by the manager,
as well as in base metals, global interest rate futures and currencies.
Together, each of the losses experienced by Blenheim has added to the
Trading Advisor's current drawdown from previous highs.
In addition, the two Advisors most recently added to the Fund, Allied Irish
Capital Management, who began trading in the Fund in May 1999, and Eclipse
Capital Management, who began trading in the Fund in June 2000, have also
been confronted with difficult market conditions in 2000. The portfolio
used by Allied Irish in Spectrum Strategic is the Worldwide Financial
Program, which employs discretionary market analysis primarily in global
interest rate and foreign exchange markets. There is also occasional
participation in global stock index futures. Allied Irish's discretionary
views at certain times in these markets over the past eighteen months have
resulted in losses within the Fund. More specifically, the Trading
Advisor's positions in Japanese and German government bond futures, S&P 500
Index futures, the euro and Japanese yen have all contributed to this
difficulty.
Eclipse, the third Advisor to Spectrum Strategic who was added earlier this
year to replace Willowbridge, possesses a unique approach that utilizes
fundamental inputs into a systematic trading model. Besides allowing
Eclipse to have a successful, long-term track record, their approach to
trading also enabled the firm to post positive performance in 1999, a year
that was difficult for most other managed futures managers. Since being
added to Spectrum Strategic, Eclipse has experienced losses, particularly
in the major currencies during the third quarter. Additionally, the
program trading in the Fund, Eclipse's Global Monetary Program, is 1.5
times the normal leverage utilized by the manager in this program. Because
of this, it is likely that Eclipse will experience greater downside
volatility in difficult times, such as the past few months. However, it is
also just as likely that they will produce more upside volatility during
strong performance cycles. Despite their recent losses, each of these
money managers, like Blenheim, have successful long-term performance track
records and offer low correlation to the other Advisors in the Fund.
As an investor in the Fund (in the form of General Partner units held by
Demeter Management Corporation), Morgan Stanley Dean Witter realizes the
same performance and volatility experienced as do Limited Partners. And,
like all of our managed futures funds, the Managed Futures Department
closely monitors the Fund and its Advisors on a daily basis. This is done
to ensure that the Fund's objectives of long-term capital appreciation
potential and portfolio diversification are maintained and that the
fundamental trading approaches employed by the money managers are
consistent with their historical profiles. In addition, we are in regular
contact with the Trading Advisors in an effort to gain a better
understanding of their current fundamental market views and opinions and to
stay abreast of any research and development they may be working on.
In summary, while we are disappointed with the results of Spectrum
Strategic during 2000, we are confident that the current management team of
the Fund is made up of strong long-term performers who provide the
potential for strong results in the future. Of course, we will continue to
monitor the performance of the Fund and each underlying manager and not
hesitate to take action to reallocate assets or terminate/replace any of
the managers if we believe it is in the best interests of the Fund's future
potential for improved performance.
<PAGE>
<TABLE>
Historical Fund Performance
Presented below is the percentage change in Net Asset Value per Unit from
the start of each calendar each the Fund has traded. Also provided is the
inception-to-date return and the annualized return since inception for each
Fund. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<CAPTION>
Funds Year Return
<S> <C> <C>
Spectrum Commodity
1998 -34.3%
1998 15.8%
2000 (10 months) -1.7%
Inception-to-Date Return: -25.2%
Annualized Return: -9.8%
___________________________________________________________________________
__________
Spectrum Currency 2000 (4 months) 9.9%
Inception-to-Date Return: 9.9%
___________________________________________________________________________
___________
Spectrum Global Balanced
1994 (2 months) -1.7%
1995 22.8%
1996 -3.6%
1997 18.2%
1999 16.4%
1999 0.8%
2000 (10 months) -4.2%
Inception-to-Date Return: 54.5%
Annualized Return: 7.5%
___________________________________________________________________________
__________
Spectrum Select
1991 (5 months) 31.2%
1992 -14.4%
1993 41.6%
1994 -5.1%
1995 23.6%
1996 5.3%
1997 6.2%
1998 14.2%
1999
-7.6%
2000 (10 months) -7.3%
Inception-to-Date Return: 104.0%
Annualized Return 8.0%
___________________________________________________________________________
__________
Spectrum Strategic
1994 (2 months) 0.1%
1995 10.5%
1996 -3.5%
1997 0.4%
1998 7.8%
1999
37.2%
2000 (10 months) -43.3%
Inception-to-Date Return: -10.1%
Annualized Return: -1.8%
</TABLE>
<PAGE>
<TABLE>
Spectrum Technical
<CAPTION>
<S> <C>
<C>
1994 (2 months) -2.2%
1995 17.6%
1996 18.3%
1997 7.5%
1998 10.2%
1999
-7.5%
2000 (10 months) -14.3%
Inception-to-Date Return: 27.8%
Annualized Return: 4.2%
</TABLE>
<PAGE>
<TABLE>
Morgan Stanley Dean Witter Spectrum Series
Statements of Operations
For the Month Ended October 31, 2000
(Unaudited)
<CAPTION>
Morgan Stanley Dean Witter Morgan Stanley Dean
Witter Morgan Stanley Dean Witter
Spectrum Commodity Spectrum Currency
_ Spectrum Global Balanced
Percent of Percent of
Percent of
October 1, 2000 October 1, 2000
October 1, 2000
Beginning Beginning
Beginning
Amount Net Asset Value Amount Net Asset
Value Amount Net Asset Value
$ % $ %
$ %
REVENUES
<S> <C> <C> <C> <C>
<C> <C>
Trading profit (loss):
Realized 22,045 0.10 - -
(682,026) (1.29)
Net change in unrealized (617,594) (2.89) 988,573 8.64
1,829,444 3.46
Total Trading Results (595,549) (2.79) 988,573 8.64
1,147,418 2.17
Interest Income (DWR) 90,076 0.42 45,893 0.40
282,298 0.53
Total Revenues (505,473) (2.37) 1,034,466 9.04
1,429,716 2.70
EXPENSES
Brokerage fees (DWR) 81,780 0.38 43,871 0.38
202,695 0.38
Management fees 44,446 0.21 33,270
0.29 55,081 0.10
Incentive fees - - 120,908
1.06 - -.
Total Expenses 126,226 0.59 198,049 1.73
257,776 0.48
NET INCOME (LOSS) (631,699) (2.96) 836,417 7.31
1,171,940 2.22
Morgan Stanley Dean Witter Spectrum Series
Statements of Changes in Net Asset Value
For the Month Ended October 31, 2000
(Unaudited)
Morgan Stanley Dean Witter Morgan Stanley Dean
Witter Morgan Stanley Dean Witter
Spectrum Commodity Spectrum Currency
Spectrum Global Balanced .
Units Amount Per Unit Units Amount
Per Unit Units Amount Per Unit
$ $ $ $
$ $
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Net Asset Value,
October 1, 2000 2,768,892.373 21,334,104 7.70 1,117,706.771
11,444,591 10.24 3,498,681.949 52,877,612 15.11
Net Income (Loss) - (631,699) (0.22) -
836,417 0.75 - 1,171,940 0.34
Redemptions (47,601.585) (356,060) 7.48 (3,315.000)
(36,432) 10.99 (63,251.174) (977,231) 15.45
Subscriptions 31,295.987 234,094 7.48 125,255.873
1,376,562 10.99 24,957,834 385,598 15.45
Net Asset Value,
October 31, 2000 2,752,586.775 20,580,439 7.48 1,239,647.644
13,621,138 10.99 3,460,388.609 53,457,919 15.45
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Morgan Stanley Dean Witter Spectrum Series
Statements of Operations
For the Month Ended October 31, 2000
(Unaudited)
<CAPTION>
Morgan Stanley Dean Witter Morgan Stanley Dean
Witter Morgan Stanley Dean Witter
Spectrum Select Spectrum Strategic
_ Spectrum Technical
Percent of Percent of
Percent of
October 1, 2000 October 1, 2000
October 1, 2000
Beginning Beginning
Beginning
Amount Net Asset Value Amount Net Asset
Value Amount Net Asset Value
$ % $ %
$ %
REVENUES
<S> <C> <C> <C> <C>
<C> <C>
Trading profit (loss):
Realized (3,436,920) (1.79) (5,156,366)
(7.43) (6,487,643) (3.03)
Net change in unrealized 5,098,471 2.66 807,323 1.16
13,683,005 6.39
Total Trading Results 1,661,551 0.87 (4,349,043) (6.27)
7,195,362 3.36
Interest Income (DWR) 828,119 0.43 279,681
0.40 947,498 0.44
Total Revenues 2,489,670 1.30 (4,069,362) (5.87)
8,142,860 3.80
EXPENSES
Brokerage fees (DWR) 1,159,369 0.61 419,228 0.60
1,293,392 0.60
Management fees 479,739 0.25 196,334
0.28 713,596 0.33
Total Expenses 1,639,108 0.86 615,562 0.88
2,006,988 0.93
NET INCOME (LOSS) 850,562 0.44 (4,684,924) (6.75)
6,135,872 2.87
Morgan Stanley Dean Witter Spectrum Series
Statements of Changes in Net Asset Value
For the Month Ended October 31, 2000
(Unaudited)
Morgan Stanley Dean Witter Morgan Stanley Dean
Witter Morgan Stanley Dean Witter
Spectrum Select Spectrum Strategic
Spectrum Technical .
Units Amount Per Unit Units Amount
Per Unit Units Amount Per Unit
$ $ $ $
$ $
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Net Asset Value,
October 1, 2000 9,449,831.916 191,895,418 20.31 7,194,209.711
69,389,528 9.65 17,237,506.059 214,078,652 12.42
Net Income (Loss) - 850,562 0.09 -
(4,684,924) (0.66) - 6,135,872 0.36
Redemptions (104,147.404) (2,124,607) 20.40 (101,614.976)
(913,519) 8.99 (299,911.803) (3,832,873) 12.78
Subscriptions 70,247.147 1,433,042 20.40 74,696.413
671,521 8.99 133,286.899 1,703,407 12.78
Net Asset Value,
October 31, 2000 9,415,931.659 192,054,415 20.40 7,167,291.148
64,462,606 8.99 17,070,881.155 218,085,058 12.78
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
Organization - Morgan Stanley Dean Witter Spectrum Commodity
L.P. ("Spectrum Commodity," formerly Morgan Stanley Tangible
Asset Fund L.P.), Morgan Stanley Dean Witter Spectrum Currency
L.P. ("Spectrum Currency"), Morgan Stanley Dean Witter Spectrum
Global Balanced L.P. ("Spectrum Global Balanced"), Morgan
Stanley Dean Witter Spectrum Select L.P. ("Spectrum Select"),
Morgan Stanley Dean Witter Spectrum Strategic L.P. ("Spectrum
Strategic") and Morgan Stanley Dean Witter Spectrum Technical
L.P. ("Spectrum Technical"), (individually, a "Partnership", or
collectively, the "Partnerships"), are limited partnerships
organized to engage primarily in the speculative trading of
futures, forwards, and options contracts on physical
commodities and other commodity interests, including, but not
limited to foreign currencies, financial instruments, metals,
energy and agricultural products (collectively, "futures
interests").
The general partner for each Partnership is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker for
the Partnerships is Dean Witter Reynolds, Inc. ("DWR"). The
clearing commodity brokers for the Partnerships are Morgan
Stanley & Co. Incorporated ("MS & Co.") and Morgan Stanley &
Co. International ("MSIL") which provide clearing and execution
services. Morgan Stanley Dean Witter Commodities Management,
Inc. ("MSCM") is the trading advisor to Spectrum Commodity.
Demeter, DWR, MS & Co., MSCM and MSIL are wholly-owned
subsidiaries of 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
Demeter and the Limited Partners based upon their proportional
ownership interests.
Use of Estimates - The financial statements are prepared in
accordance with generally accepted accounting principles, which
require management to make estimates and assumptions that
affect the reported amounts in the financial statements and
related disclosures. Management believes that the estimates
utilized in the preparation of the financial statements are
prudent and reasonable. Actual results could differ from those
estimates.
Revenue Recognition - Futures interests are open commitments
until settlement date. They are valued at market on a daily
basis and the resulting net change in unrealized gains and
losses is reflected in the changes in unrealized profits
(losses) on open contracts from one period to the next in the
statements of operations. Monthly, DWR pays interest income on
80% of the month's average daily "Net Assets" (as defined in
the limited partnership agreements) of
Spectrum Commodity, Spectrum Currency, Spectrum Select,
Spectrum Strategic and Spectrum Technical, and 100% in the case
of Spectrum Global Balanced. The interest rates used are equal
to a prevailing rate on U.S. Treasury bills. For purposes of
such interest payments, Net Assets do not include monies due
the Partnerships on futures interests, but not actually
received.
Net Income (Loss) per Unit - Net income (loss) per unit of
limited partnership interest ("Unit(s)") is computed using the
weighted average number of Units outstanding during the period.
Brokerage and Related Transaction Fees and Costs - The
brokerage fees for Spectrum Commodity, Spectrum Currency, and
Spectrum Global Balanced are accrued at a flat monthly rate of
1/12 of 4.6% (a 4.6% annual rate) of Net Assets as of the first
day of each month.
<PAGE>
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements
(Continued)
Brokerage fees for Spectrum Select, Spectrum Strategic and
Spectrum Technical are accrued 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 fees currently cover all brokerage commissions,
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 each Partnership.
Income Taxes - No provision for income taxes has been made in
the accompanying financial statements, as partners are
individually responsible for reporting income or loss based
upon their respective share of each Partnership's revenues and
expenses for income tax purposes.
Distributions - Distributions, other than redemptions of Units,
are made on a pro-rata basis at the sole discretion of Demeter.
No distributions have been made to date.
Continuing Offering - Units of 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 are borne by the Limited Partners or the Partnership.
DWR will pays 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 redemptions 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 at the end of each
month thereafter, Limited Partners may exchange their
investment among the Partnerships (subject to certain
restrictions outlined in the Limited Partnership Agreements)
without paying additional charges.
Dissolution of the Partnership - Spectrum Commodity will
terminate on December 31, 2027, Spectrum Currency, 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 financial
condition at such time, or at an earlier date under certain
conditions as defined in each Partnership's Limited Partnership
Agreement.
<PAGE>
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements
(Continued)
2. Related Party Transactions
Spectrum Commodity and Spectrum Currency pay brokerage fees to
MS & Co. and MSIL. Spectrum Global Balanced, Spectrum Select,
Spectrum Strategic and Spectrum Technical each pay brokerage
fees to DWR as described in Note 1. The Partnerships' cash is
on deposit with DWR, MS & Co. and MSIL in futures interests
trading accounts to meet margin requirements as needed. DWR
and MS & Co. pay interest on these funds as described in Note
1.
3. Trading Advisors
Demeter, on behalf of each Partnership, retains certain
commodity trading advisors to make all trading decisions for
the Partnerships. The trading advisors for each Partnership
are as follows:
Morgan Stanley Dean Witter Spectrum Commodity L.P.
Morgan Stanley Dean Witter Commodities Management Inc.
Morgan Stanley Dean Witter Spectrum Currency L.P.
John W. Henry & Company, Inc. ("JWH")
Sunrise Capital Partners, LLC ("Sunrise")
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
RXR, Inc.
Morgan Stanley Dean Witter Spectrum Select L.P.
EMC Capital Management, Inc.
Rabar Market Research, Inc.
Sunrise Capital Management, Inc.
Morgan Stanley Dean Witter Spectrum Strategic L.P.
Allied Irish Capital Management, Ltd. ("AICM")
Blenheim Investments, Inc. ("Blenheim")
Eclipse Capital Management, Inc. ("Eclipse")
Morgan Stanley Dean Witter Spectrum Technical L.P.
Campbell & Company, Inc.) ("Campbell")
Chesapeake Capital Corporation ("Chesapeake")
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 for Spectrum Commodity is
accrued at a rate of 5/24 of 1% of Net Assets on the first day
of each month (a 2.5% annual rate).
The management fee for Spectrum Global Balanced is accrued at a
rate of 5/48 of 1% of Net Assets on the first day of each month
(a 1.25% annual rate).
The management fees for Spectrum Currency are accrued at a rate
of 1/12 of 4% of Net Assets allocated to JWH on the first day
of each month, and 1/12 of 3% of Net Assets allocated to
Sunrise on the first day of each month (annual rates of 4% and
3%, respectively).
<PAGE>
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements
(Concluded)
The management fee for Spectrum Select is accrued at a rate of
1/4 of 1% of Net Assets on the first day of each month (a 3%
annual rate).
The management fees for Spectrum Strategic are accrued at a
rate of 1/12 of 4% of Net Assets allocated to Blenheim on the
first day of each month, and 1/12 of 3% of Net Assets allocated
to AICM and Eclipse on the first day of each month (annual
rates of 4% and 3%, respectively).
The management fee for Spectrum Technical is accrued at a rate
of 1/3 of 1% of Net Assets on the first day of each month (a 4%
annual rate).
Incentive Fee - Spectrum Commodity pays an annual incentive fee
equal to 20% of the trading profits as of the end of each
calendar year.
Spectrum Currency, Spectrum Global Balanced, Spectrum Select
and Spectrum Strategic each pay a monthly incentive fee equal
to 15% of the trading profits experienced with respect to each
trading advisor's allocated Net Assets as of the end of each
calendar month.
Spectrum Technical pays 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.
Trading profits for the Partnership's represent the amount by
which profits from futures, forward and options trading exceed
losses after brokerage and management fees are deducted.
For all Partnerships, when trading losses are incurred, no
incentive fees will be paid in subsequent months until all such
losses are received. Cumulative trading losses are adjusted on
a pro-rata basis for the net amount of each months
subscriptions and redemptions.
Commencing December 1, 2000, the following changes will be
made:
The management fee paid by Spectrum Currency will be
reduced from a 4% to a 2% annual rate in the case of JWH and
from a 3% to a 2% annual rate in the case of Sunrise.
Additionally, the monthly incentive fee paid by Spectrum
Currency to each Trading Advisor will be changed from 15% to
20% of Partnership trading profits, as determined from the end
of the last period in which an incentive fee was earned.
The management fee paid by Spectrum Technical will be
reduced from a 4% to a 2% annual rate in the case of JWH and
from a 4% to a 3% annual rate in the case of Campbell.
Additionally, the monthly incentive fee paid by Spectrum
Technical to both JWH and Campbell will be changed from 15% to
20% of Partnership trading profits, as determined from the end
of the last period in which an incentive fee was earned.
The annual incentive fee paid by Spectrum Commodity to
MSCM will be reduced from 20% to 17.5% of Partnership trading
profits, as determined from the end of the last period in which
an incentive fee was earned.
