<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
(THIS IS ONE OF TWO PROSPECTUS SUPPLEMENTS FOR THE PARTNERSHIPS IN THE SPECTRUM
SERIES)
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 MARCH 6, 2000
YOU SHOULD READ THIS SUPPLEMENT TOGETHER WITH THE PROSPECTUS DATED MARCH 6,
2000. ALL PAGE AND SECTION REFERENCES IN THIS SUPPLEMENT RELATE TO THE
PROSPECTUS, EXCEPT REFERENCES TO PAGES PRECEDED BY "S-," WHICH RELATE TO THIS
SUPPLEMENT.
------------------------
MORGAN STANLEY DEAN WITTER
DEAN WITTER REYNOLDS INC.
THE DATE OF THIS SUPPLEMENT IS JUNE 22, 2000.
<PAGE>
TABLE OF CONTENTS
PAGE
<TABLE>
<S> <C>
Advisor Change for Spectrum Strategic...................................... S-1
Commodity Broker Change.................................................... S-1
Summary.................................................................... S-1
Risk Factors............................................................... S-3
Conflicts of Interest...................................................... S-3
Description of Charges..................................................... S-3
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-14
The Trading Advisors....................................................... S-21
The Commodity Brokers...................................................... S-28
Litigation................................................................. S-30
Financial Statements....................................................... S-31
</TABLE>
<PAGE>
ADVISOR CHANGE FOR
SPECTRUM STRATEGIC
Effective April 14, 2000, Spectrum Strategic terminated Willowbridge
Associates Inc. as a trading advisor. On June 26, 2000, Spectrum Strategic will
add Eclipse Capital Management Inc. as a trading advisor, and will allocate to
Eclipse the assets previously managed by Willowbridge, approximately $19 million
(approximately 23%) of Spectrum Strategic's net assets. Eclipse will be paid a
monthly management fee at a 3% annual rate (Willowbridge was paid 4%) and a
monthly incentive fee equal to 15% (Willowbridge was also paid 15%) of any
trading profits. In addition, 50% of any subscriptions into Spectrum Strategic
will be allocated to Allied Irish Capital Management, Ltd. and the remaining 50%
will be allocated to Eclipse, while 100% of any redemptions out of Spectrum
Strategic will be allocated to Blenheim Investments, Inc. Accordingly, the
disclosures regarding Willowbridge in the prospectus are no longer relevant. The
description of Eclipse begins on page S-23.
COMMODITY BROKER CHANGE
Commencing in June 2000, the general partner will begin to transfer the
futures and options clearing for each Spectrum Series partnership from Carr
Futures Inc. to Morgan Stanley & Co. Incorporated, an affiliate of the general
partner, with the exception of trades on the London Metal Exchange, which will
be cleared by Morgan Stanley & Co. International Limited, also an affiliate of
the general partner. In addition, Morgan Stanley & Co. Incorporated, rather than
Carr Futures, will act as the counterparty on all of the foreign currency
forward trades for the Spectrum Series partnerships. Dean Witter will continue
to act as the non-clearing commodity broker for the Spectrum Series
partnerships.
THE FOLLOWING REVISIONS TO THE "SUMMARY," "RISK FACTORS," "CONFLICTS OF
INTEREST," "DESCRIPTION OF CHARGES," "THE COMMODITY BROKERS," AND "LITIGATION"
SECTIONS OF THE PROSPECTUS RELATE TO THE COMMODITY BROKER CHANGE DESCRIBED
ABOVE. UNTIL THE CHANGE IS EFFECTED, THE PROSPECTUS DESCRIBES THE CURRENT
ARRANGEMENTS WITH CARR FUTURES.
SUMMARY
THE FOLLOWING UPDATES AND REPLACES THE FIRST BULLET POINT UNDER "MAJOR
CONFLICTS OF INTEREST" ON PAGE 4.
* Because the general partner, Dean Witter, Morgan Stanley, and Morgan Stanley
International are affiliates of each other, the fees payable to those
parties and the other terms relating to the operation of the partnerships
and the sale of units were not negotiated by an independent party.
S-1
<PAGE>
THE FOLLOWING UPDATES AND REPLACES THE INFORMATION UNDER "ORGANIZATIONAL
CHART" ON PAGE 5.
ORGANIZATIONAL CHART
Following is an organizational chart, which shows the relationships among
the various parties involved with this offering. With the exception of the
trading advisors, all parties are affiliates of Morgan Stanley Dean Witter & Co.
<TABLE>
<S> <C> <C> <C> <C>
wholly-owned Morgan Stanley Dean
Witter & Co.
wholly-owned wholly-owned
general 23 other commodity
Dean Witter Demeter partnership pools*
GENERAL PARTNER interest
Selling Agreement
SELLING AGENT AND
NON-CLEARING COMMODITY
BROKER
general partnership
Customer Agreement interest Management Agreements
Spectrum Select
Spectrum Technical
Spectrum Strategic
Customer Agreement Spectrum Global Balanced
Customer Agreement Management Agreements
F/X Agreement
Trading Advisor
Morgan Stanley
and
Morgan Stanley International
CLEARING COMMODITY
BROKERS
</TABLE>
------------------
*Demeter presently serves as general partner for 23 other commodity pools.
Dean Witter acts as the non-clearing commodity broker for all of the pools.
Morgan Stanley acts as clearing commodity broker for all but one of the pools,
and Morgan Stanley International serves as the clearing commodity broker for
trades of such pools that take place on the London Metal Exchange. Dean Witter
also serves as selling agent for all of the pools managed by Demeter. All of the
pools, including the partnerships, are managed and traded independently of one
another.
S-2
<PAGE>
RISK FACTORS
THE RISK FACTOR "TRADING AND PERFORMANCE RISKS -- THE UNREGULATED NATURE OF
THE FORWARDS MARKETS CREATES COUNTERPARTY RISKS THAT DO NOT EXIST IN FUTURES
TRADING ON EXCHANGES," ON PAGES 10-11 OF THE PROSPECTUS, SHOULD NOW BE READ AS
APPLYING TO MORGAN STANLEY, RATHER THAN CARR FUTURES.
CONFLICTS OF INTEREST
THE FOLLOWING CONFLICT IS ADDED TO "CONFLICTS OF INTEREST" ON PAGES 13-15.
THE GENERAL PARTNER HAS A DISINCENTIVE TO REPLACE THE COMMODITY BROKERS.
The general partner has a disincentive to replace Dean Witter, Morgan Stanley,
and Morgan Stanley International because they are affiliates of the general
partner and receive compensation for serving as the partnerships' commodity
brokers. In connection with this conflict of interest, you should understand
that Dean Witter receives a monthly flat-rate brokerage fee from each
partnership for serving as the partnership's non-clearing commodity broker. From
its brokerage fee, Dean Witter pays or reimburses each partnership for the
transaction fees and costs charged by Morgan Stanley and Morgan Stanley
International for acting as the partnership's clearing commodity brokers. Also,
Morgan Stanley, as the counterparty on each partnership's foreign currency
forward trades, will attempt to earn a mark-up, spread, or other profit on each
foreign currency forward contract trade which is separate from the flat-rate
brokerage fees paid by the partnership to Dean Witter. Prior to the transfer
from Carr Futures to Morgan Stanley of each partnership's foreign currency
forward trading, this mark-up, spread, or other profit was earned by a
non-affiliated counterparty on each trade.
The general partner reviews the brokerage arrangements, including foreign
currency forward contracts, annually to ensure that they are fair, reasonable
and competitive, and that they represent the best price and services available,
taking into consideration the size and trading activity of each partnership and
the services provided, and the costs, expenses, and risk borne, by Dean Witter
and the general partner.
DESCRIPTION OF CHARGES
THE FOLLOWING REPLACES THE SECOND PARAGRAPH ON PAGE 20.
COMMODITY BROKERS
From the flat-rate brokerage fees received from the partnerships, Dean
Witter will pay or reimburse the partnerships for all fees and costs of Morgan
Stanley and Morgan Stanley International in executing trades on behalf of the
partnerships, including floor brokerage fees, exchange fees, clearinghouse fees,
National Futures Association fees, "give up" fees, any taxes (other than income
taxes), any third party clearing costs incurred by Morgan Stanley and Morgan
Stanley International, and costs associated with taking delivery on futures
contracts. Morgan Stanley will act as principal for its own account on the
partnerships' foreign currency forward contract trades and it will attempt to
earn a profit on each foreign currency forward contract trade that is not paid
or reimbursed by Dean Witter.
S-3
<PAGE>
THE SPECTRUM SERIES
THE FOLLOWING UPDATES AND REPLACES THE TABLE FOLLOWING THE FOURTH PARAGRAPH
UNDER "THE SPECTRUM SERIES -- GENERAL" ON PAGE 24.
Following is a summary of information relating to the sale of units of the
partnerships through March 31, 2000:
<TABLE>
<CAPTION>
LIMITED GENERAL NUMBER OF
UNITS UNITS AVAILABLE PARTNER PARTNER LIMITED
SOLD FOR SALE CONTRIBUTIONS CONTRIBUTIONS PARTNERS
-------------- --------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
$ $
Spectrum Select*............. 18,679,641.738 6,934,325.362 292,496,684 1,680,000 16,338
Spectrum Technical........... 23,252,422.730 9,747,577.270 311,035,153 2,511,984 25,667
Spectrum Strategic........... 10,202,100.866 8,797,899.134 112,769,129 812,000 11,284
Spectrum Global Balanced..... 4,771,945.468 6,228,054.532 63,807,120 533,234 7,131
</TABLE>
---------------
* The number of units sold has been adjusted to reflect a 100-for-1 unit
conversion that took place on April 30, 1998 when Spectrum Select became part of
the Spectrum Series of partnerships.
THE FOLLOWING UPDATES AND REPLACES THE PERFORMANCE INFORMATION UNDER "THE
SPECTRUM SERIES -- PERFORMANCE RECORDS" ON PAGES 27-29.
PERFORMANCE RECORDS
A summary of performance information for each partnership from its
commencement of trading through March 31, 2000 is set forth in Capsules I
through IV below. All performance information has been calculated on an accrual
basis in accordance with generally accepted accounting principles. You should
read the footnotes on page 30, which are an integral part of the following
capsules.
You are cautioned that the information set forth in each capsule is not
indicative of, and has no bearing on, any trading results that may be attained
by any partnership in the future. Past results are not a guarantee of future
results. We cannot assure you that a partnership will be profitable or will
avoid incurring substantial losses. You should also note that interest income
may constitute a significant portion of a partnership's total income and may
generate profits where there have been realized or unrealized losses from
futures, forwards, and options trading.
S-4
<PAGE>
CAPSULE I
PERFORMANCE OF SPECTRUM SELECT
Type of pool: publicly-offered fund
Inception of trading: August 1991
Aggregate subscriptions: $294,176,684
Current capitalization: $211,718,422
Current net asset value per unit: $21.68
Worst monthly % drawdown in past five years: (12.11)% (February 1996)
Worst monthly % drawdown since inception: (13.72)% (January 1992)
Worst month-end peak-to-valley past five years: (26.78)% (15 months, June
1995-August 1996)
Worst month-end peak-to-valley since inception: (26.78)% (15 months, June
1995-August 1996)
Cumulative return since inception: 116.80%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
-------------------------------------------------------------------------------------------------
MONTH 2000 1999 1998 1997 1996 1995 1994 1993 1992
--------------------- --------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% % % % % % % % %
January.............. 2.86 (2.90) 0.87 3.93 (0.38) (8.13) (11.67) 0.31 (13.72)
February............. (2.17) 5.45 2.16 4.75 (12.11) 9.61 (6.79) 14.84 (6.09)
March................ (2.08) (2.50) 0.23 0.31 (0.22) 20.58 12.57 (0.59) (3.91)
April................ 3.70 (6.72) (5.46) 4.07 9.06 (0.95) 10.35 (1.86)
May.................. (4.38) 1.79 (1.18) (3.65) 11.08 6.84 1.95 (1.42)
June................. 0.34 0.93 0.16 1.37 (1.70) 10.30 0.21 7.19
July................. (4.40) (0.97) 9.74 (1.44) (10.61) (4.91) 13.90 10.72
August............... (0.44) 19.19 (6.22) (0.46) (4.81) (6.95) (0.95) 6.69
September............ 1.69 6.24 0.93 3.34 (7.76) 1.25 (4.13) (5.24)
October.............. (8.39) (5.14) (3.77) 13.30 (3.35) (4.78) (4.97) (3.17)
November............. 3.29 (4.16) 0.62 6.76 1.37 5.68 (1.30) 1.39
December............. 1.62 1.19 3.35 (3.36) 11.19 (2.72) 8.14 (3.58)
Compound Annual/
Period Rate of
Return (1.45) (7.56) 14.15 6.22 5.27 23.63 (5.13) 41.63 (14.45)
(3 months)
<CAPTION>
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>
CAPSULE II
PERFORMANCE OF SPECTRUM TECHNICAL
Type of pool: publicly-offered fund
Inception of trading: November 1994
Aggregate subscriptions: $313,547,137
Current capitalization: $262,794,198
Current net asset value per unit: $14.68
Worst monthly % drawdown in past five years: (9.96)% (October 1999)
Worst monthly % drawdown since inception: (9.96)% (October 1999)
Worst month-end peak-to-valley drawdown past five years: (14.08)% (6 months, May
1999-October 1999)
Worst month-end peak-to-valley drawdown since inception: (14.08)% (6 months, May
1999-October 1999)
Cumulative return since inception: 46.80%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------------
MONTH 2000 1999 1998 1997 1996 1995 1994
-------------------------- --------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
% % % % % % %
January................... 1.21 (4.96) (1.16) 3.67 4.78 (1.84)
February.................. (1.19) 2.48 0.41 1.13 (6.39) 5.10
March..................... (1.54) (2.48) 1.31 (1.82) 1.24 10.21
April..................... 7.18 (4.62) (2.93) 4.82 3.60
May....................... (5.00) 3.28 (3.75) (3.84) 0.69
June...................... 5.13 (1.10) 0.69 3.21 (1.12)
July...................... (3.90) (0.98) 9.33 (4.80) (2.44)
August.................... 0.95 10.29 (5.97) (0.35) (0.63)
September................. (1.51) 4.35 1.85 5.50 (3.33)
October................... (9.96) (0.73) 0.36 9.92 (0.09)
November.................. 1.84 (6.17) 1.01 8.34 0.93 (0.90)
December.................. 3.83 5.98 4.57 (3.88) 6.09 (1.31)
Compound Annual/ Period
Rate of Return.......... (1.54) (7.51) 10.18 7.49 18.35 17.59 (2.20)
(3 months) (2 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
S-5
<PAGE>
CAPSULE III
PERFORMANCE OF SPECTRUM STRATEGIC
Type of pool: publicly-offered fund
Inception of trading: November 1994
Aggregate subscriptions: $113,581,129
Current capitalization: $87,835,285
Current net asset value per unit: $12.41
Worst monthly % drawdown in past five years: (18.47)% (February 2000)
Worst monthly % drawdown since inception: (18.47)% (February 2000)
Worst month-end peak-to-valley drawdown past five years: (32.11)% (16 months,
April 1997-July 1998)
Worst month-end peak-to-valley drawdown since inception: (32.11)% (16 months,
April 1997-July 1998)
Cumulative return since inception: 24.10%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------------
MONTH 2000 1999 1998 1997 1996 1995 1994
-------------------------- --------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
% % % % % % %
January................... (1.96) (3.55) 5.32 (0.66) 3.71 (3.50)
February.................. (18.47) 11.76 (3.37) 10.09 (10.29) 1.45
March..................... (2.05) (3.45) 0.37 6.77 (0.97) 7.86
April..................... 2.00 (11.06) (6.90) 6.08 0.00
May....................... (13.38) (7.40) 0.78 (3.05) (0.66)
June...................... 21.85 (0.89) (1.63) (2.86) (6.38)
July...................... (1.00) (5.26) 7.65 (4.91) (0.81)
August.................... 5.31 11.82 (4.93) 1.14 4.00
September................. 13.27 19.03 (6.03) 5.11 (0.39)
October................... (9.55) 8.44 (6.24) 2.92 0.30
November.................. 4.85 (7.94) (2.22) 3.49 2.76 0.10
December.................. 9.39 2.76 5.62 (2.65) 6.24 0.00
Compound Annual/
Period Rate of Return... (21.70) 37.23 7.84 0.37 (3.53) 10.49 0.10
(3 months) (2 months)
</TABLE>
CAPSULE IV
PERFORMANCE OF SPECTRUM GLOBAL BALANCED
Type of pool: publicly-offered fund
Inception of trading: November 1994
Aggregate subscriptions: $64,340,354
Current capitalization: $58,704,709
Current net asset value per unit: $16.62
Worst monthly % drawdown in past five years: (7.92)% (February 1996)
Worst monthly % drawdown since inception: (7.92)% (February 1996)
Worst month-end peak-to-valley drawdown in past five years: (10.64)% (4 months,
February 1996-May 1996)
Worst month-end peak-to-valley drawdown since inception: (10.64)% (4 months,
February 1996-May 1996)
Cumulative return since inception: 66.20%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------------
MONTH 2000 1999 1998 1997 1996 1995 1994
-------------------------- --------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
% % % % % % %
January................... (0.93) (0.06) 2.25 3.35 0.41 1.32
February.................. 0.94 (0.06) 1.49 3.16 (7.92) 4.62
March..................... 3.10 0.00 2.24 (2.50) (1.08) 2.88
April..................... 4.13 (1.78) (1.65) 1.27 2.15
May....................... (4.99) (0.35) 1.68 (3.13) 4.38
June...................... 2.28 0.00 3.64 0.46 0.79
July...................... (1.67) (1.19) 11.89 0.83 (1.39)
August.................... (0.19) 2.55 (5.92) (0.82) (1.41)
September................. (0.50) 5.11 3.26 2.30 1.61
October................... (1.77) 1.18 (1.69) 3.77 0.26
November.................. 1.93 2.66 (0.37) 4.76 2.72 (0.50)
December.................. 1.96 1.27 3.07 (3.88) 2.99 (1.21)
Compound Annual/
Period Rate of Return... 3.10 0.75 16.36 18.23 (3.65) 22.79 (1.70)
(3 months) (2 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
S-6
<PAGE>
SELECTED FINANCIAL DATA
THE FOLLOWING UPDATES AND REPLACES "SELECTED FINANCIAL DATA" ON PAGES
31-32.
The following are the results of operations for each partnership for the
periods indicated. Per unit results for Spectrum Select have been adjusted to
reflect a 100-for-1 unit conversion that became effective on April 30, 1998.
SPECTRUM SELECT
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
--------------------------- ------------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ $ $ $ $ $ $
REVENUES (UNAUDITED) (UNAUDITED)
Trading Profit (Loss):
Realized.............. 4,910,985 5,798,268 (1,351,849) 36,087,729 15,940,851 26,876,393 65,987,157
Net change in
unrealized............ (4,790,955) (2,656,394) (1,547,990) (1,192,107) 3,149,167 (10,950,217) (4,657,344)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Trading
Results............. 120,030 3,141,874 (2,899,839) 34,895,622 19,090,018 15,926,176 61,329,813
Interest income (Dean
Witter)................. 2,284,949 1,726,568 7,678,789 6,883,110 7,405,511 6,120,347 7,969,749
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Revenues...... 2,404,979 4,868,442 4,778,950 41,778,732 26,495,529 22,046,523 69,299,562
------------ ------------ ------------ ------------ ------------ ------------ ------------
EXPENSES
Brokerage fees (Dean
Witter)................. 3,919,970 3,663,607 15,188,479 11,360,166 9,777,851 10,641,478 14,173,695
Management fees......... 1,622,055 1,515,975 6,284,885 5,202,158 5,239,533 4,583,197 5,626,908
Incentive fees.......... -- -- -- 1,832,021 49,989 175,796 8,707,049
Transaction fees and
costs................... -- -- -- 625,327 1,370,439 1,104,011 1,589,795
Administrative
expenses................ -- -- -- 64,000 114,000 128,000 148,000
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Expenses...... 5,542,025 5,179,582 21,473,364 19,083,672 16,551,812 16,632,482 30,245,447
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)........ (3,137,046) (311,140) (16,694,414) 22,695,060 9,943,717 5,414,041 39,054,115
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)
ALLOCATION:
Limited partners......... (3,094,054) (305,969) (16,455,697) 22,302,202 9,781,168 5,283,411 38,580,172
General partners......... (42,992) (5,171) (238,717) 392,858 162,549 130,630 473,943
NET INCOME (LOSS) PER
UNIT
Limited partners......... (0.32) (0.04) (1.80) 2,95 1.22 .98 3.56
General partners......... (0.32) (0.04) (1.80) 2.95 1.22 .98 3.56
TOTAL ASSETS AT END OF
PERIOD.................. 217,519,658 210,298,857 219,366,812 202,668,038 169,541,807 167,588,012 179,342,999
TOTAL NET ASSETS AT END
OF PERIOD............... 211,718,422 206,764,629 213,805,674 200,082,516 166,773,321 163,786,285 176,446,260
NET ASSET VALUE PER UNIT
AT END OF PERIOD........
Limited partners......... 21.68 23.76 22.00 23.80 20.85 19.62 18.64
General partner.......... 21.68 23.76 22.00 23.80 20.85 19.62 18.64
</TABLE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
--------------------------- ------------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ $ $ $ $ $ $
REVENUES (UNAUDITED) (UNAUDITED)
Trading Profit (Loss):
Realized.............. 7,388,455 (176,028) 726,179 35,224,194 13,777,460 26,334,748 4,446,595
Net change in
unrealized............ (6,776,774) (7,731,117) (872,972) 6,612,556 9,762,823 (1,552,659) 3,362,093
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Trading
Results............. 611,681 (7,907,145) (146,793) 41,836,750 23,540,283 24,782,089 7,808,688
Interest income (Dean
Witter)................. 2,854,265 2,094,771 9,593,178 8,103,423 5,987,304 3,242,977 1,430,845
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Revenues...... 3,465,946 (5,812,374) 9,446,385 49,940,173 29,527,587 28,025,066 9,239,533
------------ ------------ ------------ ------------ ------------ ------------ ------------
EXPENSES
Brokerage fees (Dean
Witter)................. 4,891,913 4,585,319 19,176,380 15,543,787 11,617,770 6,997,531 3,003,934
Management fees......... 2,698,986 2,529,832 10,580,071 8,403,764 5,832,758 3,273,649 1,373,227
Incentive fees.......... 54,486 -- 430,097 3,191,252 369,975 1,852,569 600,504
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Expenses...... 7,645,385 7,115,151 30,186,548 27,138,803 17,820,503 12,123,749 4,977,665
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)........ (4,179,439) (12,927,525) (20,740,163) 22,801,370 11,707,084 15,901,317 4,261,868
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)
ALLOCATION:
Limited partners......... (4,135,156) (12,792,933) (20,531,494) 22,571,217 11,589,197 15,737,852 4,226,249
General partners......... (44,283) (134,592) (208,669) 230,153 117,887 163,465 35,619
NET INCOME (LOSS) PER
UNIT
Limited partners......... (.23) (.81) (1.21) 1.49 1.02 2.11 1.72
General partners......... (.23) (.81) (1.21) 1.49 1.02 2.11 1.72
TOTAL ASSETS AT END OF
PERIOD.................. 269,915,491 257,641,450 274,233,195 258,673,911 184,769,817 114,822,056 60,075,842
TOTAL NET ASSETS AT END
OF PERIOD............... 262,794,198 252,743,952 268,755,718 255,101,434 181,950,507 112,985,629 59,326,379
NET ASSET VALUE PER UNIT
AT END OF PERIOD........
Limited partners......... 14.68 15,31 14.91 16.12 14.63 13.61 11.50
General partner.......... 14.68 15.31 14.91 16.12 14.63 13.61 11.50
</TABLE>
S-7
<PAGE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
--------------------------- ------------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ $ $ $ $ $ $
REVENUES (UNAUDITED) (UNAUDITED)
Trading Profit (Loss):
Realized.............. (15,636,889) 5,490,705 32,274,037 7,945,575 1,297,824 4,980,402 3,408,036
Net change in
unrealized............ (5,709,698) (263,612) 4,264,478 2,771,722 2,387,258 (1,679,048) 1,451,792
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Trading
Results............. (21,346,587) 5,227,093 36,538,515 10,717,297 3,685,082 3,301,354 4,859,828
Interest income (Dean
Witter)................. 1,009,168 621,201 3,017,103 2,379,478 2,304,248 1,604,026 887,226
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Revenues...... (20,337,419) 5,848,294 39,555,618 13,096,775 5,989,330 4,905,380 5,747,054
------------ ------------ ------------ ------------ ------------ ------------ ------------
EXPENSES
Brokerage fees (Dean
Witter)................. 1,842,276 1,265,457 5,837,887 4,402,540 4,414,327 3,398,205 1,802,579
Management fees......... 973,088 686,283 3,137,509 2,342,447 2,212,788 1,587,213 824,036
Incentive fees.......... 662,823 1,012,167 2,451,152 1,336,693 427,094 726,825 437,310
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Expenses...... 3,478,187 2,963,907 11,426,548 8,081,680 7,054,209 5,712,243 3,063,925
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)........ (23,815,606) 2,884,387 28,129,070 5,015,095 (1,064,879) (806,863) 2,683,129
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)
ALLOCATION:
Limited partners......... (23,566,210) 2,854,127 27,829,050 4,958,188 (1,054,657) (799,980) 2,659,882
General partners......... (249,396) 30,260 300,020 56,907 (10,222) (6,883) 23,247
NET INCOME (LOSS) PER
UNIT:
Limited partners......... (3.44) .47 4.30 .84 0.04 (.39) 1.05
General partners......... (3.44) .47 4.30 .84 0.04 (.39) 1.05
TOTAL ASSETS AT END OF
PERIOD.................. 90,007,051 75,974,236 109,444,028 71,445,333 61,010,043 47,089,676 33,049,282
TOTAL NET ASSETS AT END
OF PERIOD............... 87,835,285 74,577,938 107,692,521 70,421,775 59,095,581 45,118,877 32,462,932
NET ASSET VALUE PER UNIT
AT END OF PERIOD
Limited partners......... 12.41 12.02 15.85 11.55 10.71 10.67 11.06
General partner.......... 12.41 12.02 15.85 11.55 10.71 10.67 11.06
</TABLE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
--------------------------- ------------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ $ $ $ $ $ $
REVENUES (UNAUDITED) (UNAUDITED)
Trading Profit (Loss):
Realized.............. (133,121) 1,001,877 2,425,585 5,113,920 3,683,460 177,564 1,508,581
Net change in
unrealized............ 2,006,181 (870,068) (1,157,073) 1,285,628 464,966 (175,835) 373,624
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Trading
Results............. 1,873,060 131,809 1,268,512 6,399,548 4,148,426 1,729 1,882,205
Interest income (Dean
Witter)................. 775,426 498,269 2,385,751 1,642,542 1,145,033 891,897 447,608
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Revenues...... 2,648,486 630,078 3,654,263 8,042,090 5,293,459 893,626 2,329,813
------------ ------------ ------------ ------------ ------------ ------------ ------------
EXPENSES
Brokerage fees (Dean
Witter)................. 665,107 537,128 2,387,515 1,591,467 1,124,531 1,030,310 503,995
Management fees......... 180,737 145,959 648,787 422,960 269,162 221,282 104,999
Incentive fees.......... -- -- 215,651 449,775 300,250 -- 161,155
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Expenses...... 845,844 683,087 3,251,953 2,464,202 1,693,943 1,251,592 770,149
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)........ 1,802,642 (53,009) 402,310 5,577,888 3,599,516 (357,966) 1,559,664
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)
ALLOCATION:
Limited partners......... 1,782,338 (52,414) 397,258 5,518,127 3,561,537 (354,537) 1,536,421
General partners......... 20,304 (595) 5,052 59,761 37,979 (3,429) 23,243
NET INCOME (LOSS) PER
UNIT
Limited partners......... 0.50 (.02) .12 2.25 2.12 (.44) 2.24
General partners......... 0.50 (.02) .12 2.25 2.12 (.44) 2.24
TOTAL ASSETS AT END OF
PERIOD.................. 60,924,570 48,908,487 58,807,588 46,317,786 25,923,024 19,620,770 14,923,682
TOTAL NET ASSETS AT END
OF PERIOD............... 58,704,709 48,357,974 57,864,012 45,913,872 25,683,236 18,706,255 14,754,500
NET ASSET VALUE PER UNIT
AT END OF PERIOD........
Limited partners......... 16.62 15.98 16.12 16.00 13.75 11.63 12.07
General partner.......... 16.62 15.98 16.12 16.00 13.75 11.63 12.07
</TABLE>
S-8
<PAGE>
PERFORMANCE RECORDS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING UPDATES, FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999,
AND SUPPLEMENTS THE INFORMATION FOR EACH PARTNERSHIP UNDER THE CAPTIONS "RESULTS
OF OPERATIONS" ON PAGES 33-34, 36-37, 37-38, AND 39-40.
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
For the Quarter Ended March 31, 2000. For the quarter ended March 31, 2000,
Spectrum Select posted a decrease in net asset value per unit, after expenses.
The most significant losses of approximately 1.8% were recorded in the global
interest rate futures markets from short positions in U.S. Treasury bond
futures, as interest rates at the longer-end of the yield curve declined during
the second half of January, resulting in domestic bond prices being pushed
higher. Losses were also recorded from short positions in short- to mid-term
U.S. Treasury note futures, as prices rose later in February as the U.S. stock
markets fluctuated and investors shifted assets into two-year and five-year
Treasury notes from stocks and 30- year Treasury bonds. In the metals markets,
losses of approximately 1.0% were experienced from long positions in aluminum
and copper futures, as prices reversed lower earlier in February due primarily
to technically based selling and dipped lower again later in February led
downward by falling prices of other base metals. In the global stock index
futures markets, losses of approximately 0.4% were incurred from long positions
in Hang Seng Index futures, as most global equity prices reversed lower earlier
in January amid fears of interest rate hikes. Additional losses were experienced
from short-term volatile price movements in U.S. and European stock index
futures throughout a majority of January. Losses were also experienced during
March from long positions in European stock index futures, as prices declined.
These losses were partially offset by gains of approximately 1.7% recorded
primarily during January and February in the energy markets from long futures
positions in crude oil and its refined products, as oil prices increased on
concerns about future output levels from the world's leading producer countries
amid dwindling stockpiles and increasing demand. In the currency markets, gains
of approximately 1.5% were recorded primarily during January and March from
short positions in the euro, Europe's common currency, and the Swiss franc, as
the values of these currencies weakened versus the U.S. dollar. The euro dropped
below parity with the U.S. dollar late in January, hurt by skepticism about
Europe's economic outlook and lack of public support from European officials.
Offsetting currency losses were recorded during February from long British pound
positions, as the value of the pound weakened versus the U.S. dollar on interest
rate increases by the U.S. Federal Reserve and talks of a merger between two
major telecommunications companies.
For the quarter ended March 31, 2000, Spectrum Select's total trading
revenues, including interest income, were $2,404,979. Total expenses for the
quarter were $5,542,025, resulting in a net loss of $3,137,046. The value of a
unit decreased from $22.00 at December 31, 1999 to $21.68 at March 31, 2000.
For the Quarter Ended March 31, 1999. For the quarter ended March 31, 1999,
Spectrum Select posted a decrease in net asset value per unit, after expenses.
The most significant losses of approximately 1.5% were recorded in the global
interest rate futures markets primarily from short Japanese government bond
futures positions early in the quarter, as prices surged higher in response to
the Bank of Japan's aggressive easing of monetary policy which brought
short-term interest rates down to virtually zero. Additional losses were
experienced late in the quarter from newly established long positions, as prices
retreated following comments by Bank of Japan Governor Masaru Hayami that he
expected interest rates in Japan to rise over time. In the metals markets,
losses of approximately 0.4% were experienced throughout a majority of the
quarter largely from short gold futures positions, as gold prices reached a
2-month high on short-covering by speculative investment funds before selling
off in late March. In the global stock index futures market, losses of
approximately 0.3% were recorded during January and early February mainly
S-9
<PAGE>
from long European stock index futures positions, as European equity prices
moved lower amid rising global bond yields and skepticism regarding the
stability of emerging market economies. These losses were partially offset by
gains of approximately 1.5% recorded primarily during March in the energy
markets from long futures positions in crude oil and its refined products,
unleaded gas and heating oil, as oil prices moved significantly higher. The
substantial recovery in oil prices during March was largely attributed to the
news that both OPEC and non-OPEC countries had reached an agreement to cut total
output by approximately two million barrels a day beginning April 1, 1999. In
the currency markets, gains of approximately 1.1% were recorded mainly during
February and March from short Swiss franc positions, as its value weakened
versus the U.S. dollar as investors reasoned that the U.S. is the safest place
to invest during the crisis in Kosovo (due to the fact that it is geographically
removed from the actual conflict and possesses a powerful military force, and on
lack of economic growth in Europe). In the agricultural markets, gains of
approximately 0.8% were recorded largely during January and February from short
futures positions in soybeans and soybean oil, as prices trended steadily lower
amid a healthy South American crop, weak world demand and fears that Brazil will
flood the market in an effort to aid their ailing economy. In soft commodities,
gains of approximately 0.3% were recorded throughout a majority of the quarter
mostly from short cocoa futures positions, as prices declined amid fears that
Brazil's financial troubles will have an adverse effect on supply and demand.
For the quarter ended March 31, 1999, Spectrum Select's total trading
revenues, including interest income, were $4,868,442. Total expenses for the
quarter were $5,179,582, resulting in a net loss of $311,140. The value of a
unit decreased from $23.80 at December 31, 1998 to $23.76 at March 31, 1999.
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
For the Quarter Ended March 31, 2000. For the quarter ended March 31, 2000,
Spectrum Technical posted a decrease in net asset value per unit. The most
significant net losses of approximately 3.8% were recorded primarily in early
February in the global interest rate futures markets from long positions in
Japanese interest rate futures, as Japanese bond prices declined in reaction to
the yen's weakness and a higher Nikkei 225 Index. Additional losses were
incurred during March from long positions in Japanese government bond futures,
as prices moved lower on firmer-than-expected capital investment figures out of
Japan and fears that the Bank of Japan would scrap its zero-rate policy earlier
than expected. In the metals markets, losses of approximately 2.7% were
experienced from short gold futures positions, as gold prices spiked sharply
higher on February 4, as short covering, rumored producer hedge unwinding, and
fresh buying fueled panicky rallies. Newly established long positions in gold
futures produced additional losses later in February, as gold prices fell under
the weight of palladium and the weakness of the Australian dollar. In the soft
commodities markets, losses of approximately 0.5% were incurred primarily during
January and March from long coffee futures positions, as coffee prices declined
in the wake of forecasts for a bumper crop in Brazil this year. These losses
were partially offset by gains of approximately 4.8% recorded primarily during
January and February in the energy markets from long futures positions in crude
oil and its refined products, as oil prices increased on concerns about future
output levels from the world's leading producer countries amid dwindling
stockpiles and increasing demand. In the global stock index futures markets,
gains of approximately 1.9% were recorded primarily during February from long
positions in DAX and CAC 40 Index futures, as the price of European stock index
futures surged on strength in technology stocks and record highs on the NASDAQ.
Additional gains were recorded during February from long positions in NASDAQ 100
Index futures, as the NASDAQ Index climbed higher on strength in computer-chip
makers and biotechnology companies. In the currency markets, gains of
approximately 0.6% were recorded during January and March from short positions
in the the euro and the Swiss franc, as the values of these currencies weakened
versus the U.S. dollar. The euro dropped below parity with the U.S. dollar late
in January, hurt by skepticism about Europe's economic outlook and lack of
public support from European officials.
S-10
<PAGE>
For the quarter ended March 31, 2000, Spectrum Technical's total trading
revenues, including interest income, were $3,465,946. Total expenses for the
quarter were $7,645,385, resulting in a net loss of $4,179,439. The value of a
unit decreased from $14.91 at December 31, 1999 to $14.68 at March 31, 2000.
For the Quarter Ended March 31, 1999. For the quarter ended March 31, 1999,
Spectrum Technical posted a decrease in net asset value per unit. The most
significant losses of approximately 4.1% were recorded in the global interest
rate futures markets early in the quarter largely from short Japanese government
bond futures positions, as prices surged higher in response to the Bank of
Japan's aggressive easing of monetary policy which brought short-term interest
rates down to virtually zero. Additional losses were experienced later in the
quarter from newly established long positions, as prices retreated following
comments by Bank of Japan Governor Masaru Hayami that he expected interest rates
in Japan to rise over time. In the metals markets, losses of approximately 1.3%
were experienced primarily from long silver futures positions, as prices
declined during mid-March after Berkshire Hathaway's annual report failed to
provide any new information on the company's silver positions. In the livestock
markets, losses of approximately 0.8% were recorded mainly during January from
short cattle and hog futures positions, as prices in both markets moved sharply
higher on concerns that winter storms would hurt supplies and reports of an
increase in demand and plans for government aid programs to help aid struggling
farmers. In soft commodities, losses of approximately 0.6% were experienced
primarily during January from long coffee futures positions, as prices dropped
on fears spurred by the collapse of the Brazilian real. In the global stock
index futures markets, losses of approximately 0.1% were recorded mostly from
long positions in German stock index futures, as European equity prices moved
lower amid rising global bond yields and skepticism regarding the stability of
emerging market economies. These losses were partially offset by gains of
approximately 1.8% recorded in the energy markets mainly during March from long
futures positions in crude oil and its refined products, unleaded gas and
heating oil, as oil prices moved significantly higher. The substantial recovery
in oil prices during March was largely attributed to the news that both OPEC and
non-OPEC countries had reached an agreement to cut total output by approximately
two million barrels a day beginning April 1, 1999. In the currency markets,
gains of approximately 1.4% were recorded primarily during February and March
from short Swiss franc positions, as its value weakened versus the U.S. dollar
as investors reasoned that the U.S. is the safest place to invest during the
crisis in Kosovo (due to the fact that it is geographically removed from the
actual conflict and possesses a powerful military force, and on lack of economic
growth in Europe). Gains were also recorded during January and February from
short positions in the euro, as the value of the euro fell versus the U.S.
dollar. The euro's weakness against the dollar was attributed to fears that the
European Central Bank may cut interest rates amid a recent economic slowdown in
that region. In the agricultural markets, gains of approximately 0.5% were
recorded mostly during January and February from short futures positions in
soybeans and soybean oil, as prices trended steadily lower amid a healthy South
American crop, weak world demand and fears that Brazil will flood the market in
an effort to aid their ailing economy.
For the quarter ended March 31, 1999, Spectrum Technical's total trading
losses, net of interest income, were $5,812,374. Total expenses for the quarter
were $7,115,151, resulting in a net loss of $12,927,525. The value of a unit
decreased from $16.12 at December 31, 1998 to $15.31 at March 31, 1999.
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
For the Quarter Ended March 31, 2000. For the quarter ended March 31, 2000,
Spectrum Strategic posted a decrease in net asset value per unit. The most
significant losses of approximately 9.3% were recorded in the global stock index
futures markets from short positions in U.S. stock index futures, as domestic
equity prices moved higher in early January on fears of an interest rate hike
and reports of a major corporate merger. Additional losses were recorded during
February from short positions in NASDAQ 100 Index futures, as the NASDAQ Index
climbed
S-11
<PAGE>
higher on strength in computer-chip makers and biotechnology companies. In the
currency markets, losses of approximately 8.3% were recorded primarily during
January from long positions in the euro, as the value of the European common
currency weakened versus the U.S. dollar. The euro dropped below parity with the
U.S. dollar late in January, hurt by skepticism about Europe's economic outlook
and lack of public support for the economy from European officials. During
February, losses were also recorded from long positions in the euro, due to
reduced expectations for an interest rate increase. In the metals markets,
losses of approximately 6.5% were experienced from long positions in aluminum
and copper futures, as prices reversed lower earlier in February due primarily
to technically based selling and again in late February and late March, led
downward by falling prices of other base metals and the softening of oil prices.
In the global interest rate futures markets, losses of approximately 5.0% were
experienced from short positions in U.S. Treasury bond futures, as interest
rates at the longer-end of the yield curve declined during the second half of
January, resulting in domestic bond prices being pushed higher. During February,
losses were incurred from short positions in German interest rate futures, as
prices increased following a surge in U.S. bond prices. In soft commodities,
losses of approximately 2.2% were recorded during January and February from long
coffee futures positions, as coffee prices declined in the wake of forecasts for
a bumper crop in Brazil. These losses were partially offset by gains of
approximately 10.4% recorded primarily during January in the energy markets from
long futures positions in crude oil and its refined products, as oil prices
increased on growing speculation that OPEC would extend production cuts beyond
the current deadline of March 2000. Additional gains were recorded during March
from short positions in crude oil futures, as prices declined after OPEC
effectively restored production levels to their year-earlier level. In the
agricultural markets, gains of approximately 0.7% were recorded primarily during
March from long positions in soybean futures, as prices moved higher amid warm,
dry long-term forecasts for U.S. growing areas that fanned fears of a drought
this summer.
For the quarter ended March 31, 2000, Spectrum Strategic's total trading
losses, net of interest income, were $20,337,419. Total expenses for the quarter
were $3,478,187, resulting in a net loss of $23,815,606. The value of a unit
decreased from $15.85 at December 31, 1999 to $12.41 at March 31, 2000.
For the Quarter Ended March 31, 1999. For the quarter ended March 31, 1999,
Spectrum Strategic posted an increase in net asset value per unit. The most
significant gains of approximately 7.3% were recorded primarily during March in
the energy markets from long crude oil positions, as prices climbed to their
highest level since October 1, 1998. This strong upward move in energy prices
was largely attributed to confirmation of OPEC production cuts and supply
concerns caused by an explosion at a U.S. refinery. In the global interest rate
futures markets, gains of approximately 4.1% were recorded mainly during
February from short U.S. interest rate futures positions, as prices dropped in
reaction to Federal Reserve Chairman Alan Greenspan's warnings in Congressional
testimony that a strong economy could reignite inflation, increasing the
prospects of an interest rate hike. In the currency markets, gains of
approximately 1.5% were recorded during January and February largely from short
positions in the euro, as the value of the euro fell versus the U.S. dollar. The
euro's weakness against the dollar was attributed to fears that the European
Central Bank may cut interest rates amid a recent economic slowdown in that
region. A portion of these gains was offset by losses recorded during January
from long Japanese yen positions, after an intervention by the Bank of Japan
boosted the U.S. dollar against the yen and helped ease concerns about the
impact of a strong yen on Japanese exports. Losses were also recorded in March
from newly established short Japanese yen positions, as the value of the yen
increased versus the U.S. dollar amid new signs that Japan's economy may be on
the mend and speculation that Japanese interest rates may soon rise. In the
global stock index futures markets, losses of approximately 3.6% were
experienced primarily during March from short S&P 500 Index futures positions,
as equity prices increased in reaction to Wall Street reaching a major milestone
during mid-March as the Dow Jones Industrial Average hit 10,000 for the first
time. In soft commodities, losses of approximately 1.2% were experienced
throughout a majority of the quarter
S-12
<PAGE>
largely from long cocoa futures positions, as prices hit new contract lows
during mid-February on an overabundance of speculative sales.
For the quarter ended March 31, 1999, Spectrum Strategic's total trading
revenues, including interest income, were $5,848,294. Total expenses for the
quarter were $2,963,907, resulting in net income of $2,884,387. The value of a
unit increased from $11.55 at December 31, 1998 to $12.02 at March 31, 1999.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
For the Quarter Ended March 31, 2000. For the quarter ended March 31, 2000,
Spectrum Global Balanced posted an increase in net asset value per unit. The
most significant gains of approximately 1.8% were recorded in the global stock
index futures markets from long positions in Nikkei Index futures, as Japanese
equity prices increased during February due to weakness in the Japanese yen
versus other major currencies, particularly the U.S. dollar. Later in March, a
surge in Japanese technology issues, linked to rising industrial production in
that nation, and the belief that institutions would add these issues to their
portfolios prior to fiscal year-end, boosted the Nikkei to a 40-month high. In
the global interest rate futures markets, gains of approximately 1.3% were
recorded primarily during March from long positions in U.S. interest rate
futures, as domestic bond prices increased. This upward price move was
attributed to a "flight-to- quality" following sharp gyrations in the U.S. stock
market, the U.S. Treasury's decision to buy back outstanding debt, and concerns
that longer-term debt is becoming scarce. In the currency markets, profits of
approximately 0.4% were recorded primarily during March from long Japanese yen
positions versus the Australian dollar and from cross-rate positions,
specifically in the euro relative to the British pound, as the value of the
European common currency weakened during January versus the pound, hurt by
skepticism about Europe's economic outlook and lack of public support for the
economy from European officials. In the metals markets, gains of approximately
0.4% were recorded primarily in early February from long nickel futures
positions, as nickel prices climbed to their highest level in five years. In the
energy markets, gains of approximately 0.2% were recorded primarily during
February from long positions in crude oil futures and its refined products, as
oil prices powered to nine-year highs on concerns about future output levels
from the world's leading producer countries amid dwindling stockpiles and
increasing demand. These gains were partially offset by losses of approximately
0.4% recorded primarily during February in the livestock markets from short lean
hog futures positions, as prices climbed higher amid expectations of higher
wholesale pork prices due to light slaughter rates. During January, additional
losses were incurred from long positions in live cattle futures, as prices
declined after the USDA raised its forecast for U.S. red meat production in
2000. In the agricultural markets, losses of approximately 0.4% were experienced
from long corn futures positions, as prices declined later in March amid
rainfall in the U.S. Midwest, as well as outlooks for more rain. Early in
February, losses were incurred from long positions in soybean oil, as soybean
prices moved lower following rains in the growing region of South America,
particularly Brazil.
For the quarter ended March 31, 2000, Spectrum Global Balanced's total
trading revenues, including interest income, were $2,648,486. Total expenses for
the quarter were $845,844, resulting in net income of $1,802,642. The value of a
unit increased from $16.12 at December 31, 1999 to $16.62 at March 31, 2000.
For the Quarter Ended March 31, 1999. For the quarter ended March 31, 1999,
Spectrum Global Balanced posted a decrease in net asset value per unit. The most
significant net losses of approximately 1.5% were recorded in the global
interest rate futures markets mainly during January and March from short
Australian interest rate futures positions, as prices moved higher due to
depressed gold prices during late March which weakened the Australian dollar,
and to a lesser extent, Australian stock prices. In the livestock markets,
losses of approximately 0.4% were experienced primarily in January from short
positions in hog and cattle futures, as prices in both markets moved sharply
higher on concerns that winter storms would hurt supplies, on reports of an
increase in demand and plans for government aid programs to help struggling
farmers. In soft
S-13
<PAGE>
commodities, losses of approximately 0.1% were recorded mostly during March from
short cotton futures positions, as prices increased to their highest level since
mid-December on technically motivated speculative buying and rumors that an
influential merchant turned bullish early in March. In the metals markets,
losses of approximately 0.1% were experienced largely from short copper futures
positions, as prices moved significantly higher towards the end of March in
response to a decline in London Metal Exchange warehouse stocks and evidence
that Japanese consumption has stabilized. These losses were partially offset by
gains of approximately 0.8% recorded primarily during January and March in the
global stock index futures component from long Nikkei Index futures positions,
as Japanese equity prices were pushed higher by positive economic factors in
Japan such as low interest rates, an easing credit stance, relatively stable
exchange rates, and an agreement to inject public funds into the indebted
banking sector. In the currency markets, gains of approximately 0.7% were
recorded throughout a majority of the quarter mainly from short euro positions,
as the value of the U.S. dollar hit new highs during March versus the European
common currency on the strength of the U.S. economy, concerns pertaining to the
economic health of Europe and Japan, and growing uncertainty about the military
action in Yugoslavia. In the energy markets, gains of approximately 0.7% were
recorded during March largely from long positions in crude and gas oil futures,
as prices moved significantly higher on news that both OPEC and non-OPEC
countries had reached an agreement to cut total output by approximately two
million barrels a day beginning April 1, 1999. In the agricultural markets,
gains of approximately 0.4% were recorded primarily in January and February from
short soybean oil futures positions, as prices declined to 23-year lows in
reaction to a healthy South American crop outlook, weak world demand and fears
that Brazil will flood the market in an effort to support their ailing economy.
For the quarter ended March 31, 1999, Spectrum Global Balanced's total
trading revenues, including interest income, were $630,078. Total expenses for
the quarter were $683,087, resulting in a net loss of $53,009. The value of a
unit decreased from $16.00 at December 31, 1998 to $15.98 at March 31, 1999.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION FOR EACH PARTNERSHIP
UNDER THE CAPTION "EACH PARTNERSHIP'S VALUE AT RISK IN DIFFERENT MARKET SECTORS"
ON PAGES 42-43.
EACH PARTNERSHIP'S VALUE AT RISK IN DIFFERENT MARKET SECTORS
The following tables indicate the VaR associated with each partnership's
open positions, as a percentage of total net assets, by primary market risk
category as of March 31, 2000 and 1999.
SPECTRUM SELECT:
As of March 31, 2000 and 1999, Spectrum Select's total capitalization was
approximately $212 million and $207 million, respectively.
<TABLE>
<CAPTION>
VAR
MARCH 31,
--------------------
MARKET CATEGORY 2000 1999
---------------------------------------------- -------- --------
<S> <C> <C>
% %
Currency...................................... (1.16) (1.09)
Equity........................................ (0.78) (0.55)
Commodity..................................... (0.78) (0.77)
Interest Rate................................. (0.58) (0.46)
Aggregate Value at Risk....................... (1.88) (1.59)
</TABLE>
S-14
<PAGE>
SPECTRUM TECHNICAL:
As of March 31, 2000 and 1999, Spectrum Technical's total capitalization
was approximately $263 million and $253 million, respectively.
<TABLE>
<CAPTION>
VAR
MARCH 31,
--------------------
MARKET CATEGORY 2000 1999
---------------------------------------------- -------- --------
<S> <C> <C>
% %
Currency...................................... (1.58) (2.58)
Equity........................................ (1.55) (1.15)
Interest Rate................................. (1.42) (1.25)
Commodity..................................... (1.23) (0.83)
Aggregate Value at Risk....................... (3.09) (3.17)
</TABLE>
SPECTRUM STRATEGIC:
As of March 31, 2000 and 1999, Spectrum Strategic's total capitalization
was approximately $88 million and $75 million, respectively.
<TABLE>
<CAPTION>
VAR
MARCH 31,
--------------------
MARKET CATEGORY 2000 1999
---------------------------------------------- -------- --------
<S> <C> <C>
% %
Commodity..................................... (2.11) (0.69)
Interest Rate................................. (1.00) (1.97)
Currency...................................... (0.95) (2.40)
Equity........................................ (0.58) (1.53)
Aggregate Value at Risk....................... (2.49) (2.97)
</TABLE>
SPECTRUM GLOBAL BALANCED:
As of March 31, 2000 and 1999, Spectrum Global Balanced's total
capitalization was approximately $59 million and $48 million, respectively.
<TABLE>
<CAPTION>
VAR
MARCH 31,
--------------------
MARKET CATEGORY 2000 1999
---------------------------------------------- -------- --------
<S> <C> <C>
% %
Equity........................................ (1.28) (1.02)
Interest Rate................................. (0.73) (0.76)
Currency...................................... (0.53) (0.47)
Commodity..................................... (0.29) (0.32)
Aggregate Value at Risk....................... (1.67) (1.38)
</TABLE>
Aggregate Value at Risk, listed above for each partnership, represents the
aggregate VaR of all of a partnership's open positions and not the sum of the
VaR of the individual market categories. Aggregate VaR will be lower as it takes
into account correlation among the different positions and categories.
The tables above represent the VaR of each partnership's open positions at
March 31, 2000 and 1999 only and are not necessarily representative of either
the historic or future risk of an investment in that partnership. Because the
only business of each partnership is the speculative trading of futures,
forwards, and options, the composition of a partnership's trading portfolio can
change significantly over any given time period, or even within a single trading
day. Any changes in open positions could positively or negatively materially
impact market risk as measured by VaR.
S-15
<PAGE>
The tables below supplement the March 31, 2000 VaR (set forth above) by
presenting each partnership's high, low and average VaR, as a percentage of
total net assets, for the four quarterly reporting periods from April 1, 1999
through March 31, 2000.
SPECTRUM SELECT
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
----------------------- ------ ------ -------
<S> <C> <C> <C>
% % %
Interest Rate.......... (1.61) (0.46) (0.79)
Commodity.............. (1.48) (0.77) (0.97)
Currency............... (1.52) (1.09) (1.24)
Equity................. (0.82) (0.31) (0.62)
Aggregate Value at
Risk................. (2.83) (1.59) (2.06)
</TABLE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
----------------------- ------ ------ -------
<S> <C> <C> <C>
% % %
Commodity.............. (3.13) (0.69) (2.18)
Currency............... (2.98) (0.95) (1.98)
Equity................. (2.41) (0.58) (1.58)
Interest Rate.......... (1.97) (0.52) (1.33)
Aggregate Value at
Risk................. (4.88) (2.49) (3.58)
</TABLE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
----------------------- ------ ------ -------
<S> <C> <C> <C>
% % %
Currency............... (2.58) (1.58) (2.09)
Interest Rate.......... (2.11) (1.25) (1.52)
Equity................. (1.55) (0.39) (1.03)
Commodity.............. (1.23) (0.83) (1.00)
Aggregate Value at
Risk................. (3.80) (2.57) (3.16)
</TABLE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
----------------------- ------ ------ -------
<S> <C> <C> <C>
% % %
Equity................. (1.28) (0.51) (0.96)
Interest Rate.......... (0.76) (0.45) (0.63)
Currency............... (0.53) (0.42) (0.49)
Commodity.............. (0.40) (0.26) (0.32)
Aggregate Value at
Risk................. (1.67) (0.90) (1.33)
</TABLE>
THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION FOR EACH PARTNERSHIP
UNDER THE CAPTION "QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK
EXPOSURES" ON PAGES 44-48.
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES
SPECTRUM SELECT
The following were the primary trading risk exposures of Spectrum Select as
of March 31, 2000, by market sector. It may be anticipated however, that these
market exposures will vary materially over time.
Currency. The primary market exposure in Spectrum Select at March 31, 2000
was in the currency sector. Spectrum Select's currency exposure is to exchange
rate fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions influence these
fluctuations. Spectrum Select trades in a large number of currencies, including
cross-rates - i.e., positions between two currencies other than the U.S. dollar.
For the first quarter of 2000, Spectrum Select's major exposures were in the
euro currency crosses and outright U.S. dollar positions. Outright positions
consist of the U.S. dollar vs. other currencies. These other currencies include
the major and minor currencies. The general partner does not anticipate that the
risk profile of Spectrum Select's currency sector will change significantly in
the future. The currency trading VaR figure includes foreign margin amounts
converted into U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based partnership in expressing VaR in
a functional currency other than dollars.
Interest Rate. The second largest market exposure at March 31, 2000 was in
the interest rate complex. Spectrum Select's exposure in the interest rate
market complex was spread across the U.S., European, Australian and Japanese
interest rate sectors. Interest rate movements directly affect the price of the
sovereign bond futures positions held by Spectrum Select and indirectly affect
the value of its stock index and currency positions. Interest rate movements in
one country as well as relative interest rate movements between countries
materially impact Spectrum Select's profitability. Spectrum Select's primary
interest rate exposure is generally to interest rate fluctuations in the U.S.
and the other G-7 countries. The G-7 countries consist of the U.S., Britain,
Canada, France, Germany, Italy, and Japan. However, Spectrum Select also takes
futures positions in the government debt of smaller nations - e.g., Australia
and Spain. The general partner anticipates that G-7 and Australian interest
rates will remain the primary interest rate exposure of
S-16
<PAGE>
Spectrum Select for the foreseeable future. The changes in interest rates which
have the most effect on Spectrum Select are changes in long-term, as opposed to
short-term, rates. Most of the speculative futures positions held by Spectrum
Select are in medium- to long- term instruments. Consequently, even a material
change in short-term rates would have little effect on Spectrum Select, were the
medium- to long-term rates to remain steady.
Equity. The primary equity exposure is to equity price risk in the G-7
countries. The stock index futures traded by Spectrum Select are by law limited
to futures on broadly based indices. As of March 31, 2000, Spectrum Select's
primary exposures were in the S&P 500 (U.S.), NASDAQ 100 (U.S.), Hang Seng
(China) and Nikkei (Japan) stock indices. Spectrum Select is primarily exposed
to the risk of adverse price trends or static markets in the U.S., European and
Japanese indices. Static markets would not cause major market changes but would
make it difficult for Spectrum Select to avoid being "whipsawed" into numerous
small losses.
Commodity.
Metals. Spectrum Select's primary metals market exposure is to fluctuations
in the price of gold and silver. Although certain trading advisors will, from
time to time, trade base metals such as aluminum, copper, zinc, nickel, tin and
lead, the principal market exposures of Spectrum Select have consistently been
in precious metals, gold and silver. Exposure was evident in the gold market as
gold prices were volatile during the quarter. Silver prices have also remained
volatile over this period, and the trading advisors have, from time to time,
taken 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 Spectrum Select.
Soft Commodities and Agriculturals. On March 31, 2000, Spectrum Select had
exposure in the markets that comprise these sectors. Most of the exposure,
however, was in the soybeans and soybean related products, corn, and cotton
markets. Supply and demand inequalities, severe weather disruption and market
expectations affect price movements in these markets.
Energy. On March 31, 2000, Spectrum Select's energy exposure was shared by
futures contracts in the oil and natural gas markets. Price movements in these
markets result from political developments in the Middle East, weather patterns,
and other economic fundamentals. It is possible that volatility will remain
high. Significant profits and losses, which have been experienced in the past,
are expected to continue to be experienced in this market. Natural gas has
exhibited volatility in prices resulting from weather patterns and supply and
demand factors. Fluctuation in natural gas prices is expected to continue in
this choppy pattern.
SPECTRUM TECHNICAL
The following were the primary trading risk exposures of Spectrum Technical
at March 31, 2000, by market sector. It may be anticipated however, that these
market exposures will vary materially over time.
Interest Rate. The primary market exposure in Spectrum Technical was in the
global interest rate sector. Exposure was primarily spread across the U.S.,
German, Japanese and European interest rate sectors. Interest rate movements
directly affect the price of the sovereign bond futures positions held by
Spectrum Technical and indirectly affect the value of its stock index and
currency positions. Interest rate movements in one country as well as relative
interest rate movements between countries materially impact Spectrum Technical's
profitability. Spectrum Technical's primary interest rate exposure is generally
to interest rate fluctuations in the U.S. and the other G-7 countries. Spectrum
Technical also takes futures positions in the government debt of smaller nations
-e.g., Australia. The general partner anticipates that G-7 and Australian
interest rates will remain the primary interest rate exposure of Spectrum
Technical for the foreseeable future. The changes in interest rates which have
the most effect on Spectrum Technical are changes in long-term, as opposed to
short-term rates. Most of the speculative futures positions held by Spectrum
Technical are in medium- to long-term instruments. Consequently, even a
S-17
<PAGE>
material change in short-term rates would have little effect on Spectrum
Technical, were the medium-to long- term rates to remain steady.
Currency. The second largest market exposure at March 31, 2000 was in the
currency sector. Spectrum Technical's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions influence these
fluctuations. Spectrum Technical trades in a large number of currencies,
including cross-rates. For the first quarter of 2000, Spectrum Technical's major
exposures were in the euro currency crosses and outright U.S. dollar positions.
The general partner does not anticipate that the risk profile of Spectrum
Technical's currency sector will change significantly in the future. The
currency trading VaR figure includes foreign margin amounts converted into U.S.
dollars with an incremental adjustment to reflect the exchange rate risk
inherent to the dollar-based partnership in expressing VaR in a functional
currency other than dollars.
Equity. The primary equity exposure is to equity price risk in the G-7
countries. The stock index futures traded by Spectrum Technical are by law
limited to futures on broadly based indices. As of March 31, 2000, Spectrum
Technical's primary exposures were in the Nikkei (Japan), S&P 500 (U.S.) and All
Ordinaries (Australia) stock indices. Spectrum Technical is primarily exposed to
the risk of adverse price trends or static markets in the U.S., European and
Japanese indices. Static markets would not cause major market changes but would
make it difficult for Spectrum Technical to avoid being "whipsawed" into
numerous small losses.
Commodity.
Energy. On March 31, 2000, Spectrum Technical's energy exposure was shared
by futures contracts in the oil and natural gas markets. Price movements in
these markets result from political developments in the Middle East, weather
patterns, and other economic fundamentals. It is possible that volatility will
remain high. Significant profits and losses, which have been experienced in the
past, are expected to continue to be experienced in this market. Natural gas has
exhibited volatility in prices resulting from weather patterns and supply and
demand factors. Fluctuation in natural gas prices is expected to continue in
this choppy pattern.
Metals. Spectrum Technical's primary metals market exposure is to
fluctuations in the price of gold and silver. Although certain trading advisors
will, from time to time, trade base metals such as aluminum, copper, zinc,
nickel, tin and lead, the principal market exposures of Spectrum Technical have
consistently been in precious metals, such as gold and silver and, to a much
lesser extent, platinum. Exposure was evident in the gold market as gold prices
were volatile during the quarter ended March 31, 2000. Silver prices have also
remained volatile over this period, and the trading advisors have, from time to
time, taken 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 Spectrum Technical.
Soft Commodities and Agriculturals. On March 31, 2000, Spectrum Technical
had exposure in the markets that comprise these sectors. Most of the exposure,
however, was in the soybeans and soybean related products, coffee, corn, and
livestock markets. Supply and demand inequalities, severe weather disruption and
market expectations affect price movements in these markets.
SPECTRUM STRATEGIC
The following were the primary trading risk exposures of Spectrum Strategic
as of March 31, 2000, by market sector. It may be anticipated however, that
these market exposures will vary materially over time.
Interest Rate. Spectrum Strategic's exposure in the interest rate market
complex was spread across the Japanese, U.S. and European interest rate sectors.
Interest rate movements directly affect the price of the sovereign bond futures
positions held by Spectrum Strategic and indirectly affect the value of its
stock index and currency positions. Interest rate movements in one country as
well as relative interest rate movements between countries materially impact
Spectrum
S-18
<PAGE>
Strategic's profitability. Spectrum Strategic's primary interest rate exposure
is generally to interest rate fluctuations in the U.S. and the other G-7
countries. The general partner anticipates that G-7 interest rates will remain
the primary interest rate exposure of Spectrum Strategic for the foreseeable
future. The changes in interest rates which have the most effect on Spectrum
Strategic are changes in long-term, as opposed to short-term, rates. Most of the
speculative futures positions held by Spectrum Strategic are in medium- to long-
term instruments. Consequently, even a material change in short-term rates would
have little effect on Spectrum Strategic, were the medium- to long-term rates to
remain steady.
Currency. Spectrum Strategic's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions influence these
fluctuations. Spectrum Strategic trades in a large number of currencies,
including cross-rates. For the first quarter of 2000, Spectrum Strategic's major
exposures were in outright U.S. dollar positions. The general partner does not
anticipate that the risk profile of Spectrum Strategic's currency sector will
change significantly in the future. The currency trading VaR figure includes
foreign margin amounts converted into U.S. dollars with an incremental
adjustment to reflect the exchange rate risk inherent to the dollar-based
partnership in expressing VaR in a functional currency other than dollars.
Equity. The primary equity exposure is to equity price risk in the G-7
countries. The stock index futures traded by Spectrum Strategic are by law
limited to futures on broadly based indices. As of March 31, 2000, Spectrum
Strategic's primary exposure was in the Nikkei (Japan) stock index. Spectrum
Strategic is primarily exposed to the risk of adverse price trends or static
markets in the U.S., European and Japanese indices. Static markets would not
cause major market changes but would make it difficult for Spectrum Strategic to
avoid being "whipsawed" into numerous small losses.
Commodity.
Energy. The primary market exposure in Spectrum Strategic is in the energy
sector. On March 31, 2000, Spectrum Strategic's energy exposure was shared by
futures contracts in the oil and natural gas markets. Price movements in these
markets result from political developments in the Middle East, weather patterns,
and other economic fundamentals. It is possible that volatility will remain
high. Significant profits and losses, which have been experienced in the past,
are expected to continue to be experienced in this market. Natural gas has
exhibited volatility in prices resulting from weather patterns and supply and
demand factors. Fluctuation in natural gas prices is expected to continue in
this choppy pattern.
Metals. The second largest market exposure at March 31, 2000 was in the
metals sector. Spectrum Strategic's metals market exposure is to fluctuations in
the price of base metals. During periods of volatility, base metals will affect
performance dramatically. The general partner anticipates that the base metals
will remain the primary metals market exposure of Spectrum Strategic.
Soft Commodities and Agriculturals. On March 31, 2000, Spectrum Strategic
had a reasonable amount of exposure in the markets that comprise these sectors.
Most of the exposure, however, was in the coffee, soybeans and soybean related
products, and wheat markets. Supply and demand inequalities, severe weather
disruption and market expectations affect price movements in these markets.
SPECTRUM GLOBAL BALANCED
The following were the primary trading risk exposures of Spectrum Global
Balanced as of March 31, 2000, by market sector. It may be anticipated however,
that these market exposures will vary materially over time.
Equity. The primary market exposure in Spectrum Global Balanced is in the
global stock index sector. The primary equity exposure is to equity price risk
in the G-7 countries. The stock
S-19
<PAGE>
index futures traded by Spectrum Global Balanced are by law limited to futures
on broadly based indices. As of March 31, 2000, Spectrum Global Balanced's
primary exposures were in the Nikkei (Japan), FTSE (Britain), S&P 500 (U.S.) and
DAX (German) stock indices. Spectrum Global Balanced is primarily exposed to the
risk of adverse price trends or static markets in the U.S., European and
Japanese indices. Static markets would not cause major market changes but would
make it difficult for Spectrum Global Balanced to avoid being "whipsawed" into
numerous small losses.
Interest Rate. The second largest market exposure this quarter was in the
global interest rate sector. Exposure was spread across the U.S., European,
Japanese and Australian interest rate sectors. Interest rate movements directly
affect the price of the sovereign bond futures positions held by Spectrum Global
Balanced and indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country as well as relative interest
rate movements between countries materially impact Spectrum Global Balanced's
profitability. Spectrum Global Balanced's primary interest rate exposure is
generally to interest rate fluctuations in the United States and the other G-7
countries. However, Spectrum Global Balanced also takes futures positions in the
government debt of smaller nations - e.g., Australia and Spain. The general
partner anticipates that G-7 and Australian interest rates will remain the
primary interest rate exposure of Spectrum Global Balanced for the foreseeable
future. The changes in interest rates, which have the most effect on Spectrum
Global Balanced, are changes in long-term, as opposed to short-term, rates. Most
of the speculative futures positions held by Spectrum Global Balanced are in
medium- to long-term instruments. Consequently, even a material change in
short-term rates would have little effect on Spectrum Global Balanced, were the
medium- to long-term rates to remain steady.
Currency. Spectrum Global Balanced's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions influence these
fluctuations. Spectrum Global Balanced trades in a large number of currencies,
including cross-rates. For the first quarter of 2000, Spectrum Global Balanced's
major exposures were in the euro currency crosses and outright U.S. dollar
positions. The general partner does not anticipate that the risk profile of
Spectrum Global Balanced's currency sector will change significantly in the
future. The currency trading VaR figure includes foreign margin amounts
converted into U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based partnership in expressing VaR in
a functional currency other than dollars.
Commodity.
Soft Commodities and Agriculturals. On March 31, 2000, Spectrum Global
Balanced had exposure in the markets that comprise these sectors. Most of the
exposure, however, was in the soybean oil, lean hogs and corn markets. Supply
and demand inequalities, severe weather disruption and market expectations
affect price movements in these markets.
Energy. On March 31, 2000, Spectrum Global Balanced's energy exposure was
shared by futures contracts in the oil and natural gas markets. Price movements
in these markets result from political developments in the Middle East, weather
patterns, and other economic fundamentals. It is possible that volatility will
remain high. Significant profits and losses, which have been experienced in the
past, are expected to continue to be experienced in this market. Natural gas has
exhibited volatility in prices resulting from weather patterns and supply and
demand factors. Fluctuation in natural gas prices is expected to continue in
this choppy pattern.
Metals. Spectrum Global Balanced's metals market exposure is to
fluctuations in the price of base metals. During periods of volatility, base
metals will affect performance dramatically. The general partner anticipates
that the base metals will remain the primary metals market exposure of Spectrum
Global Balanced.
S-20
<PAGE>
QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE
The following was the only non-trading risk exposure of each partnership at
March 31, 2000:
FOREIGN CURRENCY BALANCES. The partnerships have primary foreign currency
balances in British pounds, euros, Swedish kronas, Hong Kong dollars, Australian
dollars, Swiss francs and Canadian dollars. Each partnership controls the
non-trading risk of these balances by regularly converting these balances back
into U.S. dollars at varying intervals, depending upon size and volatility
factors.
THE TRADING ADVISORS
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
THE FOLLOWING UPDATES THE INFORMATION RELATING TO ASSETS UNDER MANAGEMENT
BY EMC CAPITAL MANAGEMENT, INC., RABAR MARKET RESEARCH, INC., AND SUNRISE
CAPITAL MANAGEMENT, INC., THE TRADING ADVISORS TO SPECTRUM SELECT, UNDER "THE
TRADING ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P." ON PAGES 52,
54, AND 57 RESPECTIVELY.
As of March 31, 2000, EMC managed approximately $43.8 million of client
assets pursuant to its Classic Program and approximately $47.7 million in all of
its programs (notional funds included).
As of March 31, 2000, Rabar was managing approximately $238 million of
client assets pursuant to its trading program (notional funds included).
As of March 31, 2000, Sunrise was managing approximately $87.9 million of
client assets pursuant to the CIMCO Program and approximately $523.9 million of
client assets in all of its programs.
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
THE FOLLOWING UPDATES THE INFORMATION RELATING TO ASSETS UNDER MANAGEMENT
BY CAMPBELL & COMPANY, INC., CHESAPEAKE CAPITAL CORPORATION, AND JOHN W. HENRY &
COMPANY, INC., THE TRADING ADVISORS TO SPECTRUM TECHNICAL, UNDER "THE TRADING
ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P." ON PAGES 60, 62,
AND 68 RESPECTIVELY.
As of March 31, 2000, Campbell was managing approximately $1.5 billion of
client assets pursuant to the Financial Metals & Energy Large Portfolio and
approximately $1.9 billion in all of its programs.
As of March 31, 2000, Chesapeake was managing approximately $129 million of
customer funds in the Diversified 2XL Program and approximately $1 billion of
client assets in all of the Chesapeake trading programs.
As of March 31, 2000, JWH was managing approximately $178 million of client
assets pursuant to its Original Investment Program, approximately $567 million
of client assets pursuant to its Financial and Metals Portfolio and
approximately $1.6 billion in all of its programs.
THE FOLLOWING SUPPLEMENTS THE INFORMATION RELATING TO JOHN W. HENRY &
COMPANY, INC. UNDER "THE TRADING ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM
TECHNICAL L.P.--3. JOHN W. HENRY & COMPANY, INC. (JWH REGISTERED)--OTHER
INVESTMENT PROGRAMS OPERATED BY JWH" ON PAGES 71-72.
Multiple Style Programs. Multiple Style Programs involve the selection and
allocation of assets among the other types of JWH investment programs on a
discretionary basis. The Strategic Allocation Program is the only program
offered in this category.
The Strategic Allocation Program's objective is capital appreciation with
the reduction of the volatility and risk of loss that typically would be
associated with an investment in any one JWH investment program. JWH currently
operates 11 investment programs; any and all of them may be included in the
Strategic Allocation Program. JWH, through its Investment Policy Committee,
allocates assets among different combinations of its investment programs which
each have distinctive style, timing and market characteristics. The allocation
of the Strategic Allocation
S-21
<PAGE>
Program's assets among the investment programs, as well as the selection of the
programs used for the Strategic Allocation Program, is dynamic, changing at the
discretion of the Investment Policy Committee. While JWH's individual investment
programs are technical, trend-following programs, the selection of programs as
well as the allocation of assets among the programs in the Strategic Allocation
Program are entirely discretionary. JWH is under no obligation to include any
particular investment program in the Strategic Allocation Program. Generally,
the maximum allocation to an individual program will not exceed 25% of an
account's assets.
The Investment Policy Committee also monitors and adjusts on an ongoing
basis the position size in relation to account equity at which the Strategic
Allocation Program trades. Factors which may affect the decision to adjust
position size include: ongoing program and portfolio research, portfolio
volatility, recent market volatility, perceived risk exposure and subjective
evaluation of general market conditions. Position size can range from 50% to
150% of standard trading levels. The Strategic Allocation Program has been
trading client capital since July 1996.
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION UNDER "THE TRADING
ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.--1. ALLIED IRISH
CAPITAL MANAGEMENT, LTD." ON PAGES 73-74.
Tony Gannon is a non-executive director of Allied Irish.
Chris Johns is no longer a principal of Allied Irish.
THE FOLLOWING UPDATES THE CAPSULE PERFORMANCE SUMMARIES ON PAGES 77-78. THE
TEXT PRECEEDING THE CAPSULES ON PAGE 77 AND THE FOOTNOTES ON PAGES 77-79 ARE AN
INTEGRAL PART OF THE FOLLOWING CAPSULE PERFORMANCE SUMMARIES.
CAPSULE A
ALLIED IRISH CAPITAL MANAGEMENT, LTD.
WORLDWIDE FINANCIAL FUTURES PROGRAM
Name of commodity trading advisor: Allied Irish Capital
Management, Ltd.
Name of program: Worldwide Financial Futures Program
Inception of trading by commodity trading advisor: November
1993
Inception of trading in program: November 1993
Number of open accounts: 51
Aggregate assets overall: $1,109,380,000
Aggregate assets in program: $851,680,000
Largest monthly drawdown: (1.05)% - (November 1998)
Worst peak-to-valley drawdown: (1.25)% - (2 months, October
1998-November 1998)
2000 year-to-date return: (0.60)% (3 months)
1999 annual return: 4.39%
1998 annual return: 5.06%
1997 annual return: 8.86%
1996 annual return: 12.39%
1995 annual return: 12.57%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
S-22
<PAGE>
CAPSULE A-1
ALLIED IRISH CAPITAL MANAGEMENT, LTD.
PRO FORMA OF AN ACCOUNT FROM CAPSULE A
WORLDWIDE FINANCIAL FUTURES PROGRAM
Largest monthly drawdown: (6.11)% - (February 2000)
Worst peak-to-valley drawdown: (18.66)% - (October 1998 -
March 2000)
2000 year-to-date return: (8.05)% (3 months)
1999 annual return: (3.57)%
1998 annual return: (0.93)%
1997 annual return: 15.05%
1996 annual return: 32.42%
1995 annual return: 23.35%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE FOLLOWING IS ADDED TO THE END OF THE THIRD PARAGRAPH UNDER "THE TRADING
ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.--2. BLENHEIM
INVESTMENTS INC.--PRINCIPALS" ON PAGE 79.
Derivatives Portfolio Management, L.L.C. is registered with the CFTC as a
commodity pool operator, effective January 26, 1994, and is a member of the
National Futures Association in that capacity. Derivatives Portfolio Management,
L.L.C. is not currently managing any commodity pools. Derivatives Portfolio
Management, L.L.C. has a wholly-owned subsidiary named DPM Brokerage, LLC, a
Delaware limited liability company formed in 1999 to provide introduction and
execution services to individual clients and private investors. DPM Brokerage,
LLC is registered with the CFTC as an introducing broker, effective August
16, 1999 and is a member of the National Futures Association in that capacity.
THE FOLLOWING UPDATES THE INFORMATION RELATING TO ASSETS UNDER MANAGEMENT
BY BLENHEIM, A TRADING ADVISOR TO SPECTRUM STRATEGIC, UNDER "THE TRADING
ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P." ON PAGE 80.
As of March 31, 2000, Blenheim was managing approximately $55 million of
client assets pursuant to its trading program.
THE DISCLOSURE PERTAINING TO WILLOWBRIDGE ASSOCIATES INC. ON PAGES 81-84 IS
HEREBY DELETED AND REPLACED BY THE FOLLOWING INFORMATION RELATING TO ECLIPSE
CAPITAL MANAGEMENT, INC.
3. ECLIPSE CAPITAL MANAGEMENT, INC.
Eclipse is a Delaware corporation organized in July 1983. Eclipse's main
business address is 7700 Bonhomme, Suite 500, St. Louis, Missouri 63105. Eclipse
also has offices at 101 Park Avenue, 26th Floor, New York, New York 10178.
Eclipse has been registered with the CFTC as a commodity trading advisor since
August 1986 and is a member of the National Futures Association in such
capacity.
Principals
Thomas W. Moller, the sole shareholder of Eclipse, has served as its
President, CEO and sole director since founding the firm. Mr. Moller received an
undergraduate degree in Business and Economics from Vanderbilt University and a
graduate degree in Accounting from the University of Kentucky. He was a
Certified Public Accountant and has a background in financial planning and
investment management. In 1980, as chief financial officer of a privately held
company, he designed and implemented one of the first variable rate loan hedge
programs using interest rate futures contracts. In 1982, he formed Interest Rate
Management, Inc., another commodity trading advisor which provided
interest-rate-hedging advisory and management services. Since 1986, Mr.
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<PAGE>
Moller has devoted his time exclusively to Eclipse and is primarily involved in
the areas of trading, research, and product development.
Gregg H. Byers is Executive Vice President with primary responsibility for
corporate, administrative, and business development operations within the firm.
He holds a BS degree in Finance from Northern Illinois University and an MBA in
Finance from Roosevelt University in Chicago. Following eight years with
Continental Illinois National Bank, Mr. Byers joined Bank of America, where he
served from 1977 to 1988 in a progression of senior-level posts: Vice President
and Regional Office Manager in Chicago; Executive Director - Securities Sales
and Eurobond New Issue Syndicate Manager, based in London; and Vice President
and National Sales Manager, based in San Francisco. From 1988 to 1990, he was
Vice President and Regional Office Manager for Chemical Securities, Inc. in
Chicago. From May 1990 to December 1998, he served as President of BA Futures,
Inc., the global futures brokerage subsidiary of BankAmerica. Mr. Byers joined
Eclipse in April 2000.
James R. Klingler, JD is Senior Vice President, Corporate Secretary and
General Counsel. Mr. Klingler has a BA in Economics from Vanderbilt University
and a JD from Vanderbilt University School of Law. He previously worked as an
associate with the St. Louis law firm of Thompson Coburn (formerly Coburn &
Croft) and as a staff attorney with Mercantile Bancorporation, also in St.
Louis. From January 1991 to December 1997, he was Compliance Counsel and,
subsequently, Associate Vice President with A.G. Edwards & Sons, Inc. Mr.
Klingler joined Eclipse in January 1998.
Ronald R. Breitigam is Vice President -- Trading with primary
responsibility for the implementation of the firm's trading strategies. After
graduating from Pacific Union College in 1982, Mr. Breitigam became an
independent floor trader at the Mid-America Commodity Exchange. He served as an
institutional broker with Thomson McKinnon (1984-1985) and PaineWebber (1986)
and, in 1986, formed his own trading company to work full time implementing
various proprietary futures and options trading strategies. Mr. Breitigam joined
Eclipse in May 1989.
James W. Dille, PhD is Vice President -- Research and Technology with
responsibility for computer-based research, development and operations. Dr.
Dille has undergraduate and graduate engineering degrees from the University of
Virginia. He also received a master's and doctorate from Harvard University in
Applied Sciences, specializing in the areas of Decision and Control Theory and
Computer Science. From 1987 through 1993, he worked for the Boeing Company
(formerly McDonnell Douglas) in the Training Systems and Flight Simulation
divisions, where he was responsible for research in the areas of computer
architectures and networking. He is an affiliate professor at Washington
University in St. Louis, teaching courses in numerical analysis and the
simulation and analysis of complex systems. Dr. Dille joined Eclipse in January
1994.
Eric S. Goodbar is Director -- Risk Management with responsibility for risk
and performance monitoring and evaluation. Goodbar has a BS degree with a dual
major in Financial Administration and Management of Information Systems from the
University of Nevada at Las Vegas and an Executive MBA degree from the
University of Chicago Graduate School of Business. From 1984 to 1995, he was
employed by NationsBanc-CRT in several different capacities, the last of which
was as Vice President -- Financial Engineering. From 1995 to 1997 he served as
Executive Vice President of New Century Investment Research and Management,
Inc., a trading manager and fund management consultant. Mr. Goodbar joined
Eclipse in January 1998.
Trading Programs
Eclipse currently offers two trading programs, the Global Monetary Program
and the Diversified Strategies Program. These programs are designed primarily
for institutions, commodity pools and certain other qualified investors. The
Global Monetary Program employs a systematic trading approach, using multiple
trend-following and fundamentally driven models. The Diversified Strategies
Program also employs a systematic trading approach, but uses
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<PAGE>
predominantly non-trend-following models. The following two paragraphs describe
these programs:
Global Monetary Program: This "financial, metals and energy" program
requires a minimum investment of $5 million and trades a global portfolio of
futures and options on futures on interest rate instruments, currencies, stock
indices, precious and base metals, and energy products, as well as interbank
spot and forward currency markets. A key characteristic of this program is the
extensive diversification achieved by applying multiple trading models to a wide
variety of financial markets located throughout the world.
Diversified Strategies Program: Also with a minimum investment requirement
of $5 million, this program employs fundamental and other trading models
designed to produce returns that are not correlated with those generated by
traditional, technical trend-following strategies. Although the program is
systematic, the strategies used in it are under continual review and subject to
change, enhancement or replacement. As a result, the program's trading models
and their respective investment allocations within the portfolio change over
time. Futures and options on futures are traded, typically, on interest rates,
currencies, stock indices, energy, metals and agricultural commodities, as well
as interbank spot and forward currency markets.
Trading Approach
The two trading programs of Eclipse are systematic and their strategies are
either fundamental or trend-following in nature, with the objective of
capitalizing on intermediate- and long-term price trends. Eclipse makes all
trading decisions pursuant to its proprietary trading, capital allocation and
risk management models. The Eclipse programs make use of multiple models to
accentuate overall diversification. Fundamental models generate trading signals
through the quantitative analysis of environmental, macroeconomic and
intermarket data. Trend identification models use various technical and
statistical analysis techniques to identify and evaluate price trends. Capital
allocation models determine the percentage of trading capital allocated to
various markets and trading models.
Eclipse's risk management models were developed with the objective of
limiting losses, capturing profits and conserving capital in choppy, sideways
markets. The risk management principles which Eclipse employs include:
* using stop orders to exit trades when markets are moving against an
established position (although, depending on market circumstances, such
"stop-loss" orders may be difficult or impossible to execute);
* diversifying positions among several different markets, futures, and/or
futures groups to limit exposure in any one area;
* using multiple entry and exit points;
* limiting the assets committed as margin, generally within a range of 5%
to 20% of assets managed, at minimum exchange margin requirements, but
possibly above or below that range at certain times; and
* prohibiting the use of unrealized profits in a particular futures
contract as margin for additional contracts in the same or a related
futures contract.
Decisions whether to trade a particular futures contract are based upon
various factors, including liquidity, significance in terms of desired degrees
of concentration, diversification and profit potential, both historical and at a
given time. These decisions are based upon output generated by a proprietary
risk management program, but require the exercise of judgment by principals of
Eclipse. The decision not to trade specific contracts for certain periods or to
reduce the number of contracts traded may result at times in missing significant
profit opportunities which otherwise would be captured by technical strategies.
The specific contracts traded in each portfolio have been selected based on
liquidity, historical volatility, and the degree of past directional movement.
The actual number of contracts held at any particular point in time depends on a
number of factors, including evaluation of market volatility and potential risk
versus
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<PAGE>
return. There are occasions when a trading model may indicate that no position
is appropriate in a particular contract or contract group.
In addition to technical trading in futures contracts, Eclipse may also
employ trading techniques such as spreads and straddles and may buy or sell
futures options. Eclipse may alter its trading programs, including, without
limitation, its trading strategies, commodity interests, and markets traded and
trading principles if Eclipse determines that such change is in the best
interest of the accounts which it manages.
Past Performance of Eclipse
The past performance information for Eclipse's Global Monetary Program, the
program to be traded by Eclipse for Spectrum Strategic, is set forth in Capsule
A below. Eclipse will trade the net assets of Spectrum Strategic allocated to it
pursuant to the Global Monetary Program at 1.5 times the leverage normally
employed by that program. Capsule A-1 is a pro forma of the composite
performance presented in Capsule A, adjusted for the increased leverage to be
employed by Eclipse for Spectrum Strategic, and also adjusted for the brokerage,
management, and incentive fees applied to Spectrum Strategic. The footnotes
following Capsules A and A-1 are an integral part of those Capsules.
You are cautioned that the performance information set forth in the
following capsule performance summaries is not indicative of, and may have no
bearing on, any trading results which may be attained by Eclipse or Spectrum
Strategic in the future, since past performance is not a guarantee of future
results. In addition, Eclipse trades the net assets allocated to it at 1.5 the
leverage it normally applies to the Global Monetary Program, which will
significantly increase volatility as well as profits and losses. Spectrum
Strategic cannot assure you that Eclipse or Spectrum Strategic will make any
profit or will be able to avoid incurring substantial losses. You should also
note that interest income may constitute a significant portion of a commodity
pool's total income and may generate profits where there have been realized or
unrealized losses from futures, forwards, and options trading.
CAPSULE A
ECLIPSE CAPITAL MANAGEMENT, INC.
GLOBAL MONETARY PROGRAM
Name of commodity trading advisor: Eclipse Capital Management,
Inc.
Name of program: Global Monetary Program
Inception of trading by commodity trading advisor: April 1986
Inception of trading in program: August 1990
Number of open accounts: 26
Aggregate assets overall (excluding notional): $470,189,305
Aggregate assets overall (including notional): $495,850,805
Aggregate assets in program (excluding notional): $468,424,353
Aggregate assets in program (including notional): $494,085,853
Largest monthly drawdown: (11.95)%--(April 1998)
Worst peak-to-valley drawdown: (20.26)%--(February 1998 - July
1998)
2000 year-to-date return: (2.16)% (3 months)
1999 annual return: 12.30%
1998 annual return: 5.03%
1997 annual return: 15.93%
1996 annual return: 30.68%
1995 annual return: 20.21%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
S-26
<PAGE>
FOOTNOTES TO ECLIPSE CAPSULE A PERFORMANCE SUMMARY
"Inception of trading by commodity trading advisor" is the date on which
Eclipse began trading client accounts.
"Inception of trading in program" is the date on which Eclipse began
trading client accounts pursuant to the program shown.
"Number of open accounts" is the number of accounts directed by Eclipse
pursuant to the program shown as of March 31, 2000.
"Aggregate assets overall" is the total actual equity, including cash and
cash equivalents, deposited in the accounts at the carrying futures commission
merchant plus committed funds shown with and without notional equity as of March
31, 2000. Notional equity represents the additional amount of equity that
exceeds the amount of equity actually committed to Eclipse for management.
"Aggregate assets in program" is the aggregate amount of assets in the
program specified as of March 31, 2000 and includes notional equity.
"Largest monthly drawdown" is the largest monthly loss experienced by any
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-end to
calendar-month-end loss experienced by any single account in the program during
the most recent five calendar years and year-to-date expressed as a percentage
of total equity in the account and includes the months and years in which it
occurred. For example, a worst peak-to-valley drawdown in an account of
"(10)%-(1/95-8/95)" means that the peak-to-valley drawdown was 10% and lasted
from January 1995 to August 1995.
"Annual and year-to-date return" is computed on a compounded monthly basis
assuming reinvestment of accrued profits. The rate of return is computed by
reference to total equity in the program. These numbers represent the composite
performance of all accounts in the program, not the performance of any specific
account.
CAPSULE A-1
ECLIPSE CAPITAL MANAGEMENT, INC.
PRO FORMA OF CAPSULE A
GLOBAL MONETARY PROGRAM AT 150% LEVERAGE
Largest monthly drawdown: (16.38)% - (April 1998)
Worst peak-to-valley drawdown: (32.80)% - (10 months, April 1994 -
January 1995)
2000 year-to-date return: (5.01)% (3 months)
1999 annual return: 14.98%
1998 annual return: 2.88%
1997 annual return: 21.50%
1996 annual return: 44.63%
1995 annual return: 29.17%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FOOTNOTES TO ECLIPSE 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 Eclipse making pro forma adjustments to the actual
past performance record of client accounts managed pursuant to the Global
Monetary Program, the trading program employed for Spectrum Strategic by
Eclipse. The pro forma adjustments are an attempt to reflect the current
brokerage, management and incentive fees, and historical interest income, and
the degree of
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<PAGE>
leverage applied for the portion of Spectrum Strategic's net assets traded by
Eclipse, 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 Eclipse and
its trading programs above. Furthermore, you must be aware that pro forma rates
of return have inherent limitations: (A) pro forma adjustments are only an
approximate means of modifying historical records to reflect aspects of the
economic terms of a commodity pool, constitute no more than mathematical
adjustments to actual performance numbers, and give no effect whatsoever to such
factors as possible changes in trading approach that might have resulted from
the different fee structure, interest income, leverage, and other factors
applicable to Spectrum Strategic as compared to Eclipse's actual trading; and
(B) there are different means by which the pro forma adjustments could have been
made.
While the general partner believes that the information set forth in
Capsule A-1 is relevant to evaluating an investment in Spectrum Strategic, no
representation is or could be made that the capsule presents what the
performance results of the portion of Spectrum Strategic's net assets traded by
Eclipse would have been in the past or are likely to be in the future. Past
results are not a guarantee of future results.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
THE FOLLOWING UPDATES THE INFORMATION RELATING TO ASSETS UNDER MANAGEMENT
BY RXR, THE TRADING ADVISOR TO SPECTRUM GLOBAL BALANCED, UNDER "THE TRADING
ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P." ON PAGE 85.
As of March 31, 2000, RXR was managing approximately $319.8 million of
client assets pursuant to its Balanced Portfolio Program and approximately
$325.2 million in all of its programs.
THE COMMODITY BROKERS
THE FOLLOWING REPLACES THE INFORMATION CONTAINED UNDER "THE COMMODITY
BROKERS" ON PAGES 88-89.
DEAN WITTER REYNOLDS INC., MORGAN STANLEY & CO. INCORPORATED, AND MORGAN STANLEY
& CO. INTERNATIONAL LIMITED
Dean Witter Reynolds Inc., a Delaware corporation, acts as the
partnerships' non-clearing commodity broker. Dean Witter, as the non-clearing
commodity broker, holds each partnership's funds in customer segregated or
secured accounts, and provides all required margin funds to the clearing
commodity brokers. Morgan Stanley & Co. Incorporated, a Delaware corporation,
acts as the partnerships' clearing commodity broker and foreign currency forward
counterparty, and Morgan Stanley & Co. International Limited serves as the
clearing commodity broker for trades that take place on the London Metal
Exchange. Dean Witter monitors each partnership's futures positions that Morgan
Stanley reports it is carrying for any errors in trade prices or trade fill.
Dean Witter also serves as the non-clearing commodity broker for all, and Morgan
Stanley serves as the clearing commodity broker and foreign exchange
counterparty and Morgan Stanley International serves as the clearing commodity
broker with regard to any trading on the London Metal Exchange for all but one,
of the other commodity pools for which Demeter serves as general partner and
commodity pool operator.
Dean Witter is a financial services company which provides to its
individual, corporate and institutional clients services as a broker in
securities, futures, and options, a dealer in corporate, municipal and
government securities, an investment adviser, and an agent in the sale of life
insurance and various other products and services. Dean Witter has its main
business office at Two World Trade Center, New York, New York 10048. Dean Witter
is a member firm of the New York Stock Exchange, the American Stock Exchange,
the Chicago Board Options Exchange, and other major securities exchanges. Dean
Witter is registered with the CFTC as a futures commission merchant and is a
member of the National Futures Association in such capacity. Dean Witter is
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<PAGE>
also registered with the SEC as a broker-dealer and is a member of the NASD.
Dean Witter is currently servicing its clients through a network of
approximately 450 offices nationwide with 12,000 financial advisors servicing
individual and institutional client accounts.
Morgan Stanley & Co. Incorporated is the clearing commodity broker for all
trades for the partnerships, other than those on the London Metal Exchange.
Morgan Stanley has its main business office at 1585 Broadway, New York, New York
10036. Morgan Stanley is registered as a futures commission merchant, is a
member of the National Futures Association and is a member of most major U.S.
and foreign commodity exchanges. Morgan Stanley is registered with the SEC as a
broker-dealer and is a member of the NASD.
Morgan Stanley International, a United Kingdom corporation, acts as the
partnerships' clearing commodity broker solely with regard to any trading on the
London Metal Exchange. Morgan Stanley International has its main business office
at 25 Cabot Square, Canary Wharf, London E14 4QA, England, is regulated by the
United Kingdom Securities and Futures Authority as a member firm, and is a
member of the London Metal Exchange and other securities and commodities
exchanges worldwide.
Morgan Stanley Dean Witter & Co., the parent company of Dean Witter, Morgan
Stanley, and Morgan Stanley International, is a worldwide financial services
firm, employing, directly and through its subsidiaries, more than 45,000 people
worldwide in offices throughout the United States and 20 foreign countries.
Morgan Stanley Dean Witter & Co. is a publicly-traded company listed on the New
York Stock Exchange; its common stock had a market value of approximately $79.9
billion at February 29, 2000. At that date, Morgan Stanley Dean Witter & Co. had
leading market positions in its three primary businesses (securities, asset
management and credit services), and it ranked among the top five asset managers
globally, with over $455 billion in assets under management.
BROKERAGE ARRANGEMENTS
The partnerships' brokerage arrangements are discussed under "Conflicts of
Interest" on pages 13-15 and S-3 and "Description of Charges -- Commodity
Brokers" on pages 19-20 and S-3.
The general partner will review at least annually the brokerage
arrangements of each partnership to ensure that those arrangements are fair,
reasonable, and competitive, and represent the best price and services
available, taking into consideration:
* the size of the partnership;
* the futures, forwards, and options trading activity;
* the services provided by the commodity brokers or any affiliate thereof
to the partnership;
* the cost incurred by the commodity brokers or any affiliate thereof in
organizing and operating the partnership and offering units;
* the overall costs to the partnership;
* any excess interest and compensating balance benefits to the commodity
brokers from assets held thereby; and
* if the general partner does not receive any direct compensation from
the partnership for its services as general partner, the risks incurred
by the general partner as general partner of the partnership;
Each customer agreement sets forth a standard of liability for the
commodity broker and provides for indemnities of the commodity broker. See
"Fiduciary Responsibility and Liability" on page 15.
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<PAGE>
LITIGATION
THE FOLLOWING SUPPLEMENTS THE INFORMATION UNDER "LITIGATION" ON PAGES
89-90.
On October 25, 1996, the Market Surveillance Committee of the NASD filed a
formal complaint against Morgan Stanley and seven current and former traders,
alleging violations of certain NASD rules relating to manipulative and deceptive
practices, locked and crossed markets, and failure to supervise. Hearings were
held in June and July 1997. On April 13, 1998 the Committee ruled that Morgan
Stanley and the seven traders had engaged in manipulative and deceptive
practices and improperly locked or crossed markets, but not that Morgan Stanley
had failed to supervise its traders. The Committee levied a fine of $1,000,000
on Morgan Stanley, a fine of $100,000 and a 90-day suspension on one of its
former traders, and fines of $25,000 and 30-day suspensions on each of the
remaining current and former traders. On January 18, 2000 the National
Adjudicatory Council, which heard the appeal, issued a ruling which upheld the
Market Surveillance Committee's April 1998 decision, however, the National
Adjudicatory Council reduced the firm's fine to $495,000, reversed all
previously imposed suspensions against the traders, reduced the fine for each of
six traders to $2,500 and dismissed all charges against the seventh trader.
On January 11, 1999, the SEC brought an action against 28 NASDAQ market
makers, including Morgan Stanley, and 51 individuals, including one current and
one former trader employed by Morgan Stanley, for certain conduct during 1994.
The core of the charges against Morgan Stanley concerns improper or undisclosed
coordination of price quotes with other broker-dealers and related reporting,
recordkeeping and supervisory deficiencies in violation of Sections 15(b)(4)(E),
15(c)(1) and (2) and 17(a) of the Securities Exchange Act and Rules 15c1-2,
15c2-7 and 17a-3 promulgated thereunder. Without admitting or denying the
charges, Morgan Stanley consented to the entry of a cease and desist order and
to the payment of a civil penalty of $350,000, disgorgement of $4,170 and to
submit certain of its procedures to an independent consultant for review. In
addition, one current and one former trader employed by Morgan Stanley accepted
suspensions of less than two months each and were fined $25,000 and $30,000
respectively.
During the five years preceding the date of this prospectus, other than as
described above, there have been no material criminal, civil, or administrative
actions pending, on appeal, or concluded against the commodity brokers, the
general partner, or any of their principals, which the general partner believes
would be material to an investor's decision to invest in the partnerships.
S-30
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Limited Partners and the General Partner of
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
Morgan Stanley Dean Witter Spectrum Select L.P.
Morgan Stanley Dean Witter Specrtum Strategic L.P.:
Morgan Stanley Dean Witter Spectrum Technical L.P.:
We have audited the accompanying statements of financial condition of Morgan
Stanley Dean Witter Spectrum Global Balanced L.P., Morgan Stanley Dean Witter
Spectrum Select L.P., Morgan Stanley Dean Witter Spectrum Strategic L.P. and
Morgan Stanley Dean Witter Spectrum Technical L.P. (collectively, the
"Partnerships") as of December 31, 1999 and 1998 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, 1999. These financial statements are the
responsibility of the Partnerships' management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Morgan Stanley Dean Witter Spectrum Global
Balanced L.P., Morgan Stanley Dean Witter Spectrum Select L.P., Morgan Stanley
Dean Witter Spectrum Strategic L.P. and Morgan Stanley Dean Witter Spectrum
Technical L.P. at December 31, 1999 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
February 7, 2000
New York, New York
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<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
$ $ $
(UNAUDITED)
ASSETS
Equity in futures interests trading accounts:
Cash........................................... 56,964,275 56,904,921 43,020,361
Net unrealized gain on open contracts.......... 2,816,295 810,114 1,967,187
---------- ---------- ----------
Total Trading Equity........................ 59,780,570 57,715,035 44,987,548
Subscriptions receivable......................... 869,770 847,954 1,163,097
Interest receivable (Dean Witter)................ 274,230 244,599 167,141
---------- ---------- ----------
Total Assets................................ 60,924,570 58,807,588 46,317,786
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable............................ 1,937,233 667,741 118,190
Accrued brokerage fees (Dean Witter)........... 222,237 216,895 169,841
Accrued management fees........................ 60,391 58,940 46,153
Incentive fees payable......................... -- -- 69,730
---------- ---------- ----------
Total Liabilities........................... 2,219,861 943,576 403,914
---------- ---------- ----------
PARTNERS' CAPITAL
Limited Partners (3,491,763.111, 3,549,239.387
and 2,836,946.985 Units, respectively)......... 58,030,231 57,209,838 45,399,750
General Partner (40,584.304, 40,584.304 and
32,126.520 Units, respectively)................ 674,478 654,174 514,122
---------- ---------- ----------
Total Partners' Capital........................ 58,704,709 57,864,012 45,913,872
---------- ---------- ----------
Total Liabilities and Partners' Capital........ 60,924,570 58,807,588 46,317,786
---------- ---------- ----------
---------- ---------- ----------
NET ASSET VALUE PER UNIT......................... 16.62 16.12 16.00
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-32
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
$ $ $
(UNAUDITED)
ASSETS
Equity in futures interests trading accounts:
Cash.......................................... 209,219,096 207,251,012 187,619,419
Net unrealized gain on open contracts......... 2,096,109 6,887,064 8,435,054
Net option premiums........................... 273,274 776,380 --
------------ ------------ ------------
Total Trading Equity....................... 211,588,479 214,914,456 196,054,473
Subscriptions receivable........................ 5,138,043 3,730,051 6,021,707
Interest receivable (Dean Witter)............... 793,136 722,305 591,858
------------ ------------ ------------
Total Assets............................... 217,519,658 219,366,812 202,668,038
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable........................... 3,964,374 3,764,242 939,381
Accrued brokerage fees (Dean Witter).......... 1,299,244 1,270,975 1,164,344
Accrued management fees....................... 537,618 525,921 481,797
------------ ------------ ------------
Total Liabilities.......................... 5,801,236 5,561,138 2,585,522
------------ ------------ ------------
PARTNERS' CAPITAL
Limited Partners (9,632,323.307, 9,583,810.732
and 8,274,690.051 Units, respectively)........ 208,833,259 210,877,519 196,915,644
General Partner (133,076.700 Units)........... 2,885,163 2,928,155 3,166,872
------------ ------------ ------------
Total Partners' Capital....................... 211,718,422 213,805,674 200,082,516
------------ ------------ ------------
Total Liabilities and Partners' Capital....... 217,519,658 219,366,812 202,668,038
------------ ------------ ------------
------------ ------------ ------------
NET ASSET VALUE PER UNIT........................ 21.68 22.00 23.80
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-33
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------
2000 1999 1998
----------- ------------ ------------
<S> <C> <C> <C>
$ $ $
(UNAUDITED)
ASSETS
Equity in futures interests trading accounts:
Cash.......................................... 84,075,566 97,808,328 63,919,054
Net unrealized gain on open contracts......... 3,854,115 9,563,813 5,299,335
Net option premiums........................... 108,928 (11,653) 225,646
----------- ------------ ------------
Total Trading Equity....................... 88,038,609 107,360,488 69,444,035
Subscriptions receivable........................ 1,648,663 1,743,958 1,796,051
Interest receivable (Dean Witter)............... 319,779 339,582 205,247
----------- ------------ ------------
Total Assets............................... 90,007,051 109,444,028 71,445,333
----------- ------------ ------------
----------- ------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable........................... 1,349,921 847,860 398,976
Accrued brokerage fees (Dean Witter).......... 539,748 590,001 405,606
Accrued management fees....................... 282,097 313,646 218,976
----------- ------------ ------------
Total Liabilities.......................... 2,171,766 1,751,507 1,023,558
----------- ------------ ------------
PARTNERS' CAPITAL
Limited Partners (7,001,397.561, 6,723,390.378
and 6,031,262.407 Units, respectively)........ 86,909,522 106,542,362 69,671,636
General Partner (74,579.110, 72,581.141 and
64,937.294 Units, respectively)............... 925,763 1,150,159 750,139
----------- ------------ ------------
Total Partners' Capital....................... 87,835,285 107,692,521 70,421,775
----------- ------------ ------------
Total Liabilities and Partners' Capital....... 90,007,051 109,444,028 71,445,333
----------- ------------ ------------
----------- ------------ ------------
NET ASSET VALUE PER UNIT........................ 12.41 15.85 11.55
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-34
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
$ $ $
(UNAUDITED)
ASSETS
Equity in futures interests trading accounts:
Cash........................................ 254,883,907 251,443,755 235,044,325
Net unrealized gain on open contracts....... 11,259,522 18,036,296 18,909,268
Net option premiums......................... -- (74,725) --
------------ ------------ ------------
Total Trading Equity..................... 266,143,429 269,405,326 253,953,593
Subscriptions receivable...................... 2,777,934 3,926,914 4,002,633
Interest receivable (Dean Witter)............. 994,128 900,955 717,685
------------ ------------ ------------
Total Assets............................. 269,915,491 274,233,195 258,673,911
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable......................... 4,601,160 3,057,593 1,339,311
Accrued brokerage fees (Dean Witter)........ 1,624,086 1,559,481 1,439,151
Accrued management fees..................... 896,047 860,403 794,015
------------ ------------ ------------
Total Liabilities........................ 7,121,293 5,477,477 3,572,477
------------ ------------ ------------
PARTNERS' CAPITAL
Limited Partners (17,715,433.242,
17,836,873.576 and 15,660,041.764 Units,
respectively)............................... 259,990,761 265,907,998 252,455,045
General Partner (191,022.517, 191,022.517
and 164,158.204 Units, respectively)........ 2,803,437 2,847,720 2,646,389
------------ ------------ ------------
Total Partners' Capital..................... 262,794,198 268,755,718 255,101,434
------------ ------------ ------------
Total Liabilities and Partners' Capital..... 269,915,491 274,233,195 258,673,911
------------ ------------ ------------
------------ ------------ ------------
NET ASSET VALUE PER UNIT...................... 14.68 14.91 16.12
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-35
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
--------------------------- ------------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
REVENUES
Trading Profit (Loss):
Realized................... (133,121) 1,001,877 2,425,585 5,113,920 3,683,460
Net change in unrealized... 2,006,181 (870,068) (1,157,073) 1,285,628 464,966
---------- ---------- ---------- ---------- ----------
Total Trading Results.... 1,873,060 131,809 1,268,512 6,399,548 4,148,426
Interest income (Dean
Witter)....................... 775,426 498,269 2,385,751 1,642,542 1,145,033
---------- ---------- ---------- ---------- ----------
Total Revenues........... 2,648,486 630,078 3,654,263 8,042,090 5,293,459
---------- ---------- ---------- ---------- ----------
EXPENSES
Brokerage fees (Dean
Witter)....................... 665,107 537,128 2,387,515 1,591,467 1,124,531
Management fees............... 180,737 145,959 648,787 422,960 269,162
Incentive fees................ -- -- 215,651 449,775 300,250
---------- ---------- ---------- ---------- ----------
Total Expenses........... 845,844 683,087 3,251,953 2,464,202 1,693,943
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS)............... 1,802,642 (53,009) 402,310 5,577,888 3,599,516
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) ALLOCATION:
Limited Partners.............. 1,782,338 (52,414) 397,258 5,518,127 3,561,537
General Partner............... 20,304 (595) 5,052 59,761 37,979
NET INCOME (LOSS) PER UNIT:
Limited Partners.............. 0.50 (.02) 0.12 2.25 2.12
General Partner............... 0.50 (.02) 0.12 2.25 2.12
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-36
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
--------------------------- ------------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
REVENUES
Trading Profit (Loss):
Realized................... 4,910,985 5,798,268 (1,351,849) 36,087,729 15,940,851
Net change in unrealized... (4,790,955) (2,656,394) (1,547,990) (1,192,107) 3,149,167
------------ ------------ ------------ ------------ ------------
Total Trading Results.... 120,030 3,141,874 (2,899,839) 34,895,622 19,090,018
Interest income (Dean
Witter)....................... 2,284,949 1,726,568 7,678,789 6,883,110 7,405,511
------------ ------------ ------------ ------------ ------------
Total Revenues........... 2,404,979 4,868,442 4,778,950 41,778,732 26,495,529
------------ ------------ ------------ ------------ ------------
EXPENSES
Brokerage fees (Dean
Witter)....................... 3,919,970 3,663,607 15,188,479 11,360,166 9,777,851
Management fees............... 1,622,055 1,515,975 6,284,885 5,202,158 5,239,533
Incentive fees................ -- -- -- 1,832,021 49,989
Transaction fees and costs.... -- -- -- 625,327 1,370,439
Administrative expenses -- -- -- 64,000 114,000
------------ ------------ ------------ ------------ ------------
Total Expenses........... 5,542,025 5,179,582 21,473,364 19,083,672 16,551,812
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)............... (3,137,046) (311,140) (16,694,414) 22,695,060 9,943,717
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners.............. (3,094,054) (305,969) (16,455,697) 22,302,202 9,781,168
General Partner............... (42,992) (5,171) (238,717) 392,858 162,549
NET INCOME (LOSS) PER UNIT:
Limited Partners.............. (0.32) (0.04) (1.80) 2.95 1.22
General Partner............... (0.32) (0.04) (1.80) 2.95 1.22
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-37
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
--------------------------- ------------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
REVENUES
Trading Profit (Loss):
Realized................... (15,636,889) 5,490,705 32,274,037 7,945,575 1,297,824
Net change in unrealized... (5,709,698) (263,612) 4,264,478 2,771,722 2,387,258
------------ ------------ ------------ ------------ ------------
Total Trading Results.... (21,346,587) 5,227,093 36,538,515 10,717,297 3,685,082
Interest income (Dean
Witter)....................... 1,009,168 621,201 3,017,103 2,379,478 2,304,248
------------ ------------ ------------ ------------ ------------
Total Revenues........... (20,337,419) 5,848,294 39,555,618 13,096,775 5,989,330
------------ ------------ ------------ ------------ ------------
EXPENSES
Brokerage fees (Dean
Witter)....................... 1,842,276 1,265,457 5,837,887 4,402,540 4,414,327
Management fees............... 973,088 686,283 3,137,509 2,342,447 2,212,788
Incentive fees................ 662,823 1,012,167 2,451,152 1,336,693 427,094
------------ ------------ ------------ ------------ ------------
Total Expenses........... 3,478,187 2,963,907 11,426,548 8,081,680 7,054,209
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)............... (23,815,606) 2,884,387 28,129,070 5,015,095 (1,064,879)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners.............. (23,566,210) 2,854,127 27,829,050 4,958,188 (1,054,657)
General Partner............... (249,396) 30,260 300,020 56,907 (10,222)
NET INCOME (LOSS) PER UNIT:
Limited Partners.............. (3.44) .47 4.30 .84 .04
General Partner............... (3.44) .47 4.30 .84 .04
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-38
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH FOR THE YEARS ENDED
31, DECEMBER 31,
--------------------------- ------------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
REVENUES
Trading Profit (Loss):
Realized................... 7,388,455 (176,028) 726,179 35,224,194 13,777,460
Net change in unrealized... (6,776,774) (7,731,117) (872,972) 6,612,556 9,762,823
------------ ------------ ------------ ------------ ------------
Total Trading Results.... 611,681 (7,907,145) (146,793) 41,836,750 23,540,283
Interest income (Dean
Witter)....................... 2,854,265 2,094,771 9,593,178 8,103,423 5,987,304
------------ ------------ ------------ ------------ ------------
Total Revenues........... 3,465,946 (5,812,374) 9,446,385 49,940,173 29,527,587
------------ ------------ ------------ ------------ ------------
EXPENSES
Brokerage fees (Dean
Witter)....................... 4,891,913 4,585,319 19,176,380 15,543,787 11,617,770
Management fees............... 2,698,986 2,529,832 10,580,071 8,403,764 5,832,758
Incentive fees................ 54,486 -- 430,097 3,191,252 369,975
------------ ------------ ------------ ------------ ------------
Total Expenses........... 7,645,385 7,115,151 30,186,548 27,138,803 17,820,503
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS)............... (4,179,439) (12,927,525) (20,740,163) 22,801,370 11,707,084
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) ALLOCATION:
Limited Partners.............. (4,135,156) (12,792,933) (20,531,494) 22,571,217 11,589,197
General Partner............... (44,283) (134,592) (208,669) 230,153 117,887
NET INCOME (LOSS) PER UNIT:
Limited Partners.............. (.23) (.81) (1.21) 1.49 1.02
General Partner............... (.23) (.81) (1.21) 1.49 1.02
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-39
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE QUARTER ENDED MARCH 31, 2000 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL
BALANCED L.P.
Partners' Capital, December 31, 1996........... 1,609,108.931 18,499,873 206,382 18,706,255
Offering of Units.............................. 505,325.179 6,507,261 20,000 6,527,261
Net Income..................................... -- 3,561,537 37,979 3,599,516
Redemptions.................................... (246,149.269) (3,149,796) -- (3,149,796)
------------- -------------- ------------ ------------
Partners' Capital, December 31, 1997........... 1,868,284.841 25,418,875 264,361 25,683,236
Offering of Units.............................. 1,205,176.553 17,447,965 190,000 17,637,965
Net Income..................................... -- 5,518,127 59,761 5,577,888
Redemptions.................................... (204,387.889) (2,985,217) -- (2,985,217)
------------- -------------- ------------ ------------
Partners' Capital, December 31, 1998........... 2,869,073.505 45,399,750 514,122 45,913,872
Offering of Units.............................. 1,019,759.235 16,184,278 135,000 16,319,278
Net Loss....................................... -- 397,258 5,052 402,310
Redemptions.................................... (299,009.049) (4,771,448) -- (4,771,448)
------------- -------------- ------------ ------------
Partners' Capital, December 31, 1999........... 3,589,823.691 57,209,838 654,174 57,864,012
Offering of Units.............................. 191,780.967 3,106,698 -- 3,106,698
Net Income..................................... -- 1,782,338 20,304 1,802,642
Redemptions.................................... (249,257.243) (4,068,643) -- (4,068,643)
------------- -------------- ------------ ------------
Partners' Capital, March 31, 2000.............. 3,532,347.415 $ 58,030,231 $ 674,478 $ 58,704,709
------------- -------------- ------------ ------------
------------- -------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
NOTE 1 $ $ $
MORGAN STANLEY DEAN WITTER SPECTRUM
SELECT L.P.
Partners' Capital, December 31, 1996........... 8,346,327.700 161,174,820 2,611,465 163,786,285
Offering of Units.............................. 573,746.700 12,056,614 -- 12,056,614
Net Income..................................... -- 9,781,168 162,549 9,943,717
Redemptions.................................... (919,522.800) (19,013,295) -- (19,013,295)
------------- -------------- ------------ ------------
Partners' Capital, December 31, 1997........... 8,000,551.600 163,999,307 2,774,014 166,773,321
Offering of Units.............................. 1,310,353.729 30,297,590 -- 30,297,590
Net Income..................................... -- 22,302,202 392,858 22,695,060
Redemptions.................................... (903,138.578) (19,683,455) -- (19,683,455)
------------- -------------- ------------ ------------
Partners' Capital, December 31, 1998........... 8,407,766.751 196,915,644 3,166,872 200,082,516
Offering of Units.............................. 2,238,093.744 51,589,367 -- 51,589,367
Net Loss....................................... -- (16,455,697) (238,717) (16,694,414)
Redemptions.................................... (928,973.063) (21,171,795) -- (21,171,795)
------------- -------------- ------------ ------------
Partners' Capital, December 31, 1999........... 9,716,887.432 210,877,519 2,928,155 213,805,674
Offering of Units.............................. 517,227.165 11,415,053 -- 11,415,053
Net Loss....................................... -- (3,094,054) (42,992) (3,137,046)
Redemptions.................................... (468,714.690) (10,365,259) -- (10,365,259)
------------- -------------- ------------ ------------
Partners' Capital, March 31, 2000.............. 9,765,399.907 $ 208,833,259 $ 2,885,163 $211,718,422
------------- -------------- ------------ ------------
------------- -------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-40
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE QUARTER ENDED MARCH 31, 2000 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
--------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC
L.P.
Partners' Capital, December 31, 1996......... 4,229,101.851 44,645,423 473,454 45,118,877
Offering of Units............................ 1,956,789.313 22,377,135 150,000 22,527,135
Net Loss..................................... -- (1,054,657) (10,222) (1,064,879)
Redemptions.................................. (668,003.709) (7,485,552) -- (7,485,552)
--------------- -------------- ------------ ------------
Partners' Capital, December 31, 1997......... 5,517,887.455 58,482,349 613,232 59,095,581
Offering of Units............................ 1,610,245.841 16,662,471 80,000 16,742,471
Net Income................................... -- 4,958,188 56,907 5,015,095
Redemptions.................................. (1,031,933.595) (10,431,372) -- (10,431,372)
--------------- -------------- ------------ ------------
Partners' Capital, December 31, 1998......... 6,096,199.701 69,671,636 750,139 70,421,775
Offering of Units............................ 1,300,877.987 16,846,544 100,000 16,946,544
Net Income................................... -- 27,829,050 300,020 28,129,070
Redemptions.................................. (601,106.169) (7,804,868) -- (7,804,868)
--------------- -------------- ------------ ------------
Partners' Capital, December 31, 1999......... 6,795,971.519 106,542,362 1,150,159 107,692,521
Offering of Units............................ 552,786.769 7,543,441 25,000 7,568,441
Net Loss..................................... -- (23,566,210) (249,396) (23,815,606)
Redemptions.................................. (272,781.617) (3,610,071) -- (3,610,071)
--------------- -------------- ------------ ------------
Partners' Capital, March 31, 2000............ 7,075,976.671 $ 86,909,522 $ 925,763 $ 87,835,285
--------------- -------------- ------------ ------------
--------------- -------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
--------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL
L.P.
Partners' Capital, December 31, 1996......... 8,300,169.234 111,852,280 1,133,349 112,985,629
Offering of Units............................ 5,034,287.188 69,082,458 600,000 69,682,458
Net Income................................... -- 11,589,197 117,887 11,707,084
Redemptions.................................. (899,755.684) (12,424,664) -- (12,424,664)
--------------- -------------- ------------ ------------
Partners' Capital, December 31, 1997......... 12,434,700.738 180,099,271 1,851,236 181,950,507
Offering of Units............................ 4,731,996.876 69,886,681 565,000 70,451,681
Net Income................................... -- 22,571,217 230,153 22,801,370
Redemptions.................................. (1,342,497.646) (20,102,124) -- (20,102,124)
--------------- -------------- ------------ ------------
Partners' Capital, December 31, 1998......... 15,824,199.968 252,455,045 2,646,389 255,101,434
Offering of Units............................ 3,976,153.731 61,073,132 410,000 61,483,132
Net Loss..................................... -- (20,531,494) (208,669) (20,740,163)
Redemptions.................................. (1,772,457.606) (27,088,685) -- (27,088,685)
--------------- -------------- ------------ ------------
Partners' Capital, December 31, 1999......... 18,027,896.093 265,907,998 2,847,720 268,755,718
Offering of Units............................ 691,109.928 10,310,260 -- 10,310,260
Net Loss..................................... -- (4,135,156) (44,283) (4,179,439)
Redemptions.................................. (812,550.262) (12,092,341) -- (12,092,341)
--------------- -------------- ------------ ------------
Partners' Capital, March 31, 2000............ 17,906,455.759 $ 259,990,761 $ 2,803,437 $262,794,198
--------------- -------------- ------------ ------------
--------------- -------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-41
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
---------------------------- --------------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss)......... 1,802,642 (53,009) 402,310 5,577,888 3,599,516
Noncash item included in
net income (loss):
Net change in unrealized
trading profit (loss)... (2,006,181) 870,068 1,157,073 (1,285,628) (464,966)
(Increase) decrease in
operating assets:
Interest receivable
(Dean Witter)........... (29,631) (5,691) (77,458) (48,192) (33,466)
Net option premiums..... -- -- -- (458,150) 458,150
Increase (decrease) in
operating liabilities:
Accrued brokerage fees
(Dean Witter)........... 5,342 11,971 47,054 70,079 7,615
Accrued management
fees.................... 1,451 3,253 12,787 20,703 4,507
Incentive fees
payable................. -- (69,730) (69,730) 69,730 --
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) operating
activities................ (226,377) 756,862 1,472,036 3,946,430 3,571,356
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units......... 3,106,698 3,507,842 16,319,278 17,637,965 6,527,261
(Increase) decrease in
subscriptions
receivable................ (21,816) (63,899) 315,143 (537,387) (434,141)
Increase (decrease) in
redemptions payable....... 1,269,492 201,105 549,551 3,614 (686,849)
Redemptions of Units...... (4,068,643) (1,010,731) (4,771,448) (2,985,217) (3,149,796)
------------ ------------ ------------ ------------ ------------
Net cash provided by
financing activities...... 285,731 2,634,317 12,412,524 14,118,975 2,256,475
------------ ------------ ------------ ------------ ------------
Net increase in cash...... 59,354 3,391,179 13,884,560 18,065,405 5,827,831
Balance at beginning of
period.................... 56,904,921 43,020,361 43,020,361 24,954,956 19,127,125
------------ ------------ ------------ ------------ ------------
Balance at end of
period.................... 56,964,275 46,411,540 56,904,921 43,020,361 24,954,956
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-42
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
---------------------------- --------------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss)......... (3,137,046) (311,140) (16,694,414) 22,695,060 9,943,717
Noncash item included in
net income (loss):
Net change in unrealized
trading profit (loss)... 4,790,955 2,656,394 1,547,990 1,192,107 (3,149,167)
(Increase) decrease in
operating assets:
Net option premiums..... 503,106 -- (776,380) -- 18,205
Interest receivable
(Dean Witter)........... (70,831) (9,022) (130,447) 46,346 (105,144)
Due from Dean Witter.... -- -- -- 1,097,517 (688,191)
Increase (decrease) in
operating liabilities:
Accrued brokerage fees
(Dean Witter)........... 28,269 101,643 106,631 1,164,344 (491,315)
Accrued management
fees.................... 11,697 42,060 44,124 58,124 19,815
Accrued administrative
expenses................ -- -- -- (72,499) (50,844)
Incentive fees
payable................. -- -- -- -- (348,459)
Accrued transaction fees
and costs............... -- -- -- -- (64,595)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) operating
activities................ 2,126,150 2,479,935 (15,902,496) 26,180,999 5,084,022
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units....... 11,415,053 11,547,488 51,589,367 30,297,590 12,056,614
(Increase) decrease in
subscriptions
receivable.............. (1,407,992) 1,837,918 2,291,656 (6,021,707) 5,365,420
Increase (decrease) in
redemptions payable..... 200,132 805,003 2,824,861 (1,332,933) (97,843)
Redemptions of Units.... (10,365,259) (4,554,235) (21,171,795) (19,683,455) (19,013,295)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) financing
activities................ (158,066) 9,636,174 35,534,089 3,259,495 (1,689,104)
------------ ------------ ------------ ------------ ------------
Net increase in cash...... 1,968,084 12,116,109 19,631,593 29,440,494 3,394,918
Balance at beginning of
period.................... 207,251,012 187,619,419 187,619,419 158,178,925 154,784,007
------------ ------------ ------------ ------------ ------------
Balance at end of
period.................... 209,219,096 199,735,528 207,251,012 187,619,419 158,178,925
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-43
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
---------------------------- --------------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss)......... (23,815,606) 2,884,387 28,129,070 5,015,095 (1,064,879)
Noncash item included in
net income (loss):
Net change in unrealized
trading profit (loss)... 5,709,698 263,612 (4,264,478) (2,771,722) (2,387,258)
(Increase) decrease in
operating assets:
Net option premiums..... (120,581) 705,904 237,299 96,477 (367,448)
Interest receivable
(Dean Witter)........... 19,803 (21,262) (134,335) 17,798 (59,402)
Increase (decrease) in
operating liabilities:
Accrued brokerage fees
(Dean Witter)........... (50,253) 20,529 184,395 45,565 36,599
Accrued management
fees.................... (31,549) 15,375 94,670 30,719 31,436
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) operating
activities................ (18,288,488) 3,868,545 24,246,621 2,433,932 (3,810,952)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units....... 7,568,441 3,205,264 16,946,544 16,742,471 22,527,135
(Increase) decrease in
subscriptions
receivable.............. 95,295 442,658 52,093 (962,792) (168)
Increase (decrease) in
redemptions payable..... 502,061 336,836 448,884 (967,188) (124,372)
Redemptions of Units.... (3,610,071) (1,933,488) (7,804,868) (10,431,372) (7,485,552)
------------ ------------ ------------ ------------ ------------
Net cash provided by
financing activities...... 4,555,726 2,051,270 9,642,653 4,381,119 14,917,043
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
cash...................... (13,732,762) 5,919,815 33,889,274 6,815,051 11,106,091
Balance at beginning of
period.................... 97,808,328 63,919,054 63,919,054 57,104,003 45,997,912
------------ ------------ ------------ ------------ ------------
Balance at end of
period.................... 84,075,566 69,838,869 97,808,328 63,919,054 57,104,003
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-44
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
---------------------------- --------------------------------------------
2000 1999 1999 1998 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss)......... (4,179,439) (12,927,525) (20,740,163) 22,801,370 11,707,084
Noncash item included in
net income (loss):
Net change in unrealized
trading profit (loss)... 6,776,774 7,731,117 872,972 (6,612,556) (9,762,823)
(Increase) decrease in
operating assets:
Net option premiums..... (74,725) -- 74,725 -- 328,955
Interest receivable
(Dean Witter)........... (93,173) (3,389) (183,270) (60,123) (275,721)
Increase (decrease) in
operating liabilities:
Accrued brokerage fees
(Dean Witter)........... 64,605 110,494 120,330 341,957 320,941
Accrued management
fees.................... 35,644 60,961 66,388 220,319 197,331
Incentive fees
payable................. -- -- -- (139,190) 139,190
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) operating
activities................ 2,529,686 (5,028,342) (19,789,018) 16,551,777 2,654,957
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units......... 10,310,260 16,416,999 61,483,132 70,451,681 69,682,458
(Increase) decrease in
subscriptions
receivable................ 1,148,980 (1,188,949) 75,719 (1,037,012) 2,151,502
Increase in redemptions
payable................... 1,543,567 1,153,566 1,718,282 330,081 325,421
Redemptions of Units...... (12,092,341) (5,846,956) (27,088,685) (20,102,124) (12,424,664)
------------ ------------ ------------ ------------ ------------
Net cash provided by
financing activities...... 910,466 10,534,660 36,188,448 49,642,626 59,734,717
------------ ------------ ------------ ------------ ------------
Net increase in cash...... 3,440,152 5,506,318 16,399,430 66,194,403 62,389,674
Balance at beginning of
period.................... 251,443,755 235,044,325 235,044,325 168,849,922 106,460,248
------------ ------------ ------------ ------------ ------------
Balance at end of
period.................... 254,883,907 240,550,643 251,443,755 235,044,325 168,849,922
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-45
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO 2000 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- Morgan Stanley Dean Witter Spectrum Global Balanced L.P.,
Morgan Stanley Dean Witter Spectrum Select L.P., Morgan Stanley Dean Witter
Spectrum Strategic L.P. and Morgan Stanley Dean Witter Spectrum Technical L.P.
(individually, a "Partnership," or collectively, the "Partnerships") are limited
partnerships organized to engage in the speculative trading of futures and
forward contracts, options on futures contracts and on physical commodities, and
other commodities interests, including foreign currencies, financial
instruments, metals, energy and agricultural products (collectively, "futures
interests").
The general partner for each Partnership is Demeter Management Corporation
("Demeter" or the "General Partner"). The non-clearing commodity broker is Dean
Witter Reynolds, Inc. ("Dean Witter"), and an unaffiliated clearing commodity
broker, Carr Futures Inc., provides clearing and execution services. Both
Demeter and Dean Witter are wholly-owned subsidiaries of Morgan Stanley Dean
Witter & Co.
Spectrum Select became one of the Spectrum Series of funds effective June
1, 1998. Each outstanding unit of limited partnership interest in Dean Witter
Select Futures Fund L.P. was converted into 100 units of Spectrum Select. The
number of Units outstanding, net income or loss per Unit and Net Asset Value per
Unit have been adjusted for all reporting periods to reflect this conversion.
On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean
Witter, Discover & Co. At that time, Dean Witter, Discover & Co. changed its
corporate name to Morgan Stanley, Dean Witter, Discover & Co. Effective February
19, 1998, Morgan Stanley, Dean Witter, Discover & Co. changed its corporate name
to Morgan Stanley Dean Witter & Co.
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by the General Partner and the
Limited Partners based upon their proportional ownership interests.
USE OF ESTIMATES -- The 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.
The unaudited interim financial statements contained herein include, in the
opinion of management, all of the adjustments necessary for a fair presentation
of the results of operations and financial condition of the Partnerships. These
financial statements should be read in conjunction with the Partnerships'
December 31, 1999 annual report on Form 10-K.
REVENUE RECOGNITION -- Futures interests are open commitments until
settlement date. They are valued at market on a daily basis and the resulting
net changes in unrealized gains and losses are reflected in the change in
unrealized profit (loss) on open contracts from one period to the next in the
statements of operations. Monthly, Dean Witter pays each Partnership interest
income based upon 80% of its average daily "Net Assets" (as defined in the
limited partnership agreements) for the month in the case of Spectrum Select,
Spectrum Strategic and Spectrum Technical and 100% in the case of Spectrum
Global Balanced. The interest rate is equal to a prevailing rate on U.S.
Treasury bills. For purposes of such interest payments, Net Assets do not
include monies due the Partnership on futures interests, but not actually
received.
NET INCOME (LOSS) PER UNIT -- Net income (loss) per Unit is computed using
the weighted average number of units outstanding during the period.
S-46
<PAGE>
EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS -- The Partnerships' asset
"Equity in futures interests trading accounts," reflected in the statement of
financial condition, consists of (A) cash on deposit with Dean Witter and Carr
Futures to be used as margin for trading; (B) net unrealized gains or losses on
open contracts, which are valued at market, and calculated as the difference
between original contract value and market value, and (C) the net option
premiums, which represent the net of all monies paid and/or received for such
option premiums. The asset or liability related to the unrealized gains or
losses on forward contracts is presented as a net amount in each period due to
master netting agreements.
The Partnerships have offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under terms of the
master netting agreements with Carr Futures, the sole counterparty on such
contracts. The Partnerships have consistently applied their right to offset.
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS -- Prior to July 31, 1997,
brokerage fees for Spectrum Global Balanced were accrued at a monthly rate of
11/24 of 1% of the Net Assets (a 5.5% annual rate) as of the first day of each
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 for Spectrum Select were
accrued on a half-turn basis at 80% of Dean Witter's published non-member rates
and transaction fees and costs were accrued on a half-turn basis. Brokerage
commissions and transaction fees and costs were capped at 13/20 of 1% per month
(a 7.8% maximum annual rate) of Spectrum Select's month-end Net Assets.
Effective June 1, 1998 brokerage fees for Spectrum Select were reduced to a
monthly rate of 1/12 of 7.25% (a 7.25% annual rate) of Net Assets as of the
first day of each month.
Prior to July 31, 1997, brokerage fees for Spectrum Strategic and Spectrum
Technical were accrued at a monthly rate of 33/48 of 1% of Net Assets (an 8.25%
annual rate) as of the first day of each month. From August 1, 1997 to May 31,
1998, brokerage fees were accrued at 51/80 of 1% of the Net Assets (a 7.65%
annual rate) as of the first day of each month. Effective June 1, 1998,
brokerage fees for Spectrum Strategic and Spectrum Technical were reduced to a
flat-rate monthly fee of 1/12 of 7.25% (a 7.25% annual rate) of the Net Assets
as of the first day of each month.
Such fees cover all brokerage fees, transaction fees and costs and ordinary
administrative and continuing offering expenses.
OPERATING EXPENSES -- The Partnerships incur monthly management fees, and
may incur incentive fees. All common administrative and continuing offering
expenses including legal, auditing, accounting, filing fees and other related
expenses, are borne by Dean Witter through the brokerage fees paid by the
Partnerships (effective June 1, 1998 for Spectrum Select with its change to a
flat rate brokerage fee).
Prior to June 1, 1998, Spectrum Select was charged all operating expenses
related to its trading activities to a maximum of 1/4 of 1% annually of Spectrum
Select's average month end Net Assets. Demeter was responsible for operating
expenses in excess of the cap.
INCOME TAXES -- No provision for income taxes has been made in the
accompanying financial statements, as partners are individually responsible for
reporting income or loss based upon their respective share of each Partnership's
revenues and expenses for income tax purposes.
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 were paid by the Limited Partners or the
Partnership. Dean Witter will pay all such costs.
S-47
<PAGE>
REDEMPTIONS -- Limited Partners may redeem some or all of their Units at
100% of the Net Asset Value per Unit as of the end of the last day of any month
that is at least six months after the closing at which a person becomes a
Limited Partner, upon five business days advance notice by redemption form to
Demeter. Thereafter, Units redeemed on or prior to the last day of the twelfth
month after such Units were purchased will be subject to a redemption charge
equal to 2% of the Net Asset Value of a Unit on the date of such redemption.
Units redeemed after the last day of the twelfth month and on or prior to the
last day of the twenty-fourth month after which such Units were purchased will
be subject to a redemption charge equal to 1% of the Net Asset Value of a Unit
on the date of such redemption. Units redeemed after the last day of the
twenty-fourth month after which such Units were purchased will not be subject to
a redemption charge. The foregoing redemption charges will be paid to Dean
Witter. Redemptions must be made in whole Units, in a minimum amount of 50
Units, unless a Limited Partner is redeeming his entire interest in a
Partnership.
EXCHANGES -- On the last day of the first month which occurs more than six
months after a person first becomes a Limited Partner in any of the
Partnerships, and the end of each month thereafter, Limited Partners may
exchange their investment among the Partnerships (subject to certain
restrictions outlined in the Limited Partnership Agreement) without paying
additional charges.
DISSOLUTION OF THE PARTNERSHIP -- Spectrum Global Balanced, Spectrum
Strategic and Spectrum Technical will terminate on December 31, 2035 and
Spectrum Select will terminate on December 31, 2025 regardless of their
financial condition at such time, or at an earlier date if certain conditions
occur as defined in each Partnership's Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
Each Partnership pays brokerage fees to Dean Witter as described in Note 1.
Each Partnership's cash is on deposit with Dean Witter and Carr Futures in
futures interests trading accounts to meet margin requirements as needed. Dean
Witter pays interest on these funds as described in Note 1.
3. TRADING ADVISORS
Demeter, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership are as follows:
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
RXR, Inc.
Morgan Stanley Dean Witter Spectrum Select L.P.
EMC Capital Management, Inc.
Rabar Market Research, Inc.
Sunrise Capital Management, Inc.
Morgan Stanley Dean Witter Spectrum Strategic L.P.
Blenheim Investments, Inc.
Allied Irish Capital Management, Ltd.
Willowbridge Associates Inc.
Effective April 30, 1998, A. Gary Shilling & Co., Inc. ("Shilling") was
terminated as an advisor to Spectrum Strategic. The assets of the Partnership
previously allocated to Shilling were allocated to Stonebrook Capital Management
Inc., ("Stonebrook"), effective June 1, 1998.
Effective March 4, 1999 Stonebrook was terminated as an advisor to Spectrum
Strategic. The assets of the Partnership previously allocated to Stonebrook were
allocated to Allied Irish Capital Management, Ltd. ("AICM"), effective June 1,
1999.
Morgan Stanley Dean Witter Spectrum Technical L.P.
Campbell & Company, Inc. ("Campbell")
S-48
<PAGE>
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 is accrued at the rate of 5/48 of 1%
of the Net Assets on the first day of each month (a 1.25% annual rate) for
Spectrum Global Balanced.
The management fee is accrued at the rate of 1/4 of 1% per month of the Net
Assets allocated to each trading advisor on the first day of each month (a 3%
annual rate) for Spectrum Select. Prior to June 1, 1998, the management fee was
accrued at the rate of 1/4 of 1% of the Partnership's adjusted Net Assets, as
defined in the Limited Partnership Agreement, as of the last day of each month
(a 3% annual rate.)
The management fee is accrued at the rate of 1/12 of 4% of the Net Assets
allocated to each of Blenheim and Willowbridge on the first day of each month,
and 1/12 of 3% of the Net Assets allocated to AICM on the first day of each
month for Spectrum Strategic (annual rates of 4% and 3%, respectively). Prior to
June 1, 1998, the management fee was accrued at the rate of 1/3 of 1% per month
of the Net Assets allocated to each trading advisor on the first day of each
month (a 4% annual rate).
The management fee is accrued at the rate of 1/3 of 1% per month of the Net
Assets allocated to each trading advisor on the first day of each month (a 4%
annual rate) for Spectrum Technical.
INCENTIVE FEE -- Spectrum Global Balanced, Spectrum Select and Spectrum
Strategic each will pay a monthly incentive fee equal to 15% of trading profits
experienced with respect to each trading advisor's allocated Net Assets as of
the end of each calendar month. Trading profits represent the amount by which
profits from futures, forwards and options trading exceed losses, after
brokerage, management and incentive fees have been deducted. Prior to June 1,
1998, trading profits for Spectrum Select represented the amount by which
profits from futures, forwards and options trading exceed losses, after
brokerage, management, incentive, administrative and transaction fees and costs
were deducted and prior to June 1, 1998, Spectrum Select paid a quarterly
incentive fee to each trading advisor equal to 17.5% of trading profits.
Spectrum Technical pays a monthly incentive fee equal to 15% of trading
profits experienced with respect to the Net Assets allocated to Campbell and JWH
and 19% of trading profits with respect to the Net Assets allocated to
Chesapeake as of the end of each calendar month. Trading profits represent the
amount by which profits from futures, forwards and options trading exceed
losses, after brokerage, management and incentive fees have been paid. Prior to
June 1, 1998, trading profits represented the amount by which profits from
futures, forwards and options trading exceed losses, after brokerage,
management, incentive, administrative and transaction fees and costs were paid.
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 month's subscriptions and redemptions.
4. FINANCIAL INSTRUMENTS
The Partnerships trade futures and forward contracts and options on futures
contracts and on physical commodities, in interest rates, stock indices,
commodities, currencies, precious and industrial metals and energy products.
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.
S-49
<PAGE>
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 issuance of SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No.
133," defers the required implementation of SFAS No. 133 until fiscal years
beginning after June 15, 2000. However, the Partnerships elected to adopt the
provisions of SFAS No. 133 for the fiscal year ended December 31, 1998. SFAS No.
133 supersedes SFAS No. 119 and No. 105, which required the disclosure of
average aggregate fair values and contract/notional values, respectively, of
derivative financial instruments for an entity which carries its assets at fair
value. The application of SFAS No. 133 did not have a significant effect on the
Partnerships' financial statements.
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 March 31, 2000, December 31, 1999, and December 31,
1998, respectively, $2,816,295, $810,114, and $1,967,187 for Spectrum Global
Balanced, $2,096,109, $6,887,064, and $8,435,054 for Spectrum Select,
$3,854,115, $9,563,813, and $5,299,335 for Spectrum Strategic, and $11,259,522,
$18,036,296 and $18,909,268 for Spectrum Technical.
For Spectrum Global Balanced, of the $2,816,295 net unrealized gain on open
contracts at March 31, 2000, $2,908,912 related to exchange-traded futures
contracts and $(92,617) related to off-exchange-traded forward currency
contracts. Of the $810,114 net unrealized gain on open contracts at December 31,
1999, $669,640 related to exchange-traded futures contracts and $140,474 related
to off-exchange-traded forward currency contracts. 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.
For Spectrum Select, of the $2,096,109 net unrealized gain on open
contracts at March 31, 2000, $2,133,905 related to exchange-traded futures and
futures-styled options contracts and $(37,796) related to off-exchange-traded
forward currency contracts. Of the $6,887,064 net unrealized gain on open
contracts at December 31, 1999, $6,935,040 related to exchange-traded futures
and futures-styled options contracts and $(47,976) related to
off-exchange-traded forward currency contracts. 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.
For Spectrum Strategic, of the $3,854,115 net unrealized gain on open
contracts at March 31, 2000, $3,854,344 related to exchange-traded futures and
futures-styled options contracts and $(229) related to off-exchange-traded
forward currency contracts. The $9,563,813 net unrealized gain on open contracts
at December 31, 1999 and the $5,299,335 net unrealized gain on open contracts at
December 31, 1998 all related to exchange-traded futures and futures-styled
options contracts.
For Spectrum Technical, of the $11,259,522 net unrealized gain on open
contracts at March 31, 2000, $10,335,301 related to exchange-traded futures and
futures-styled options contracts and $924,221 related to off-exchange-traded
forward currency contracts. Of the $18,036,296 net unrealized gain on open
contracts at December 31, 1999, $17,006,044 related to exchange-traded futures
and future-styled options contracts and $1,030,252 related to
off-exchange-traded forward currency contracts. Of the $18,909,268 net
unrealized gain on open contracts at December 31, 1998, $19,606,697 related to
exchange-traded futures contracts and $(697,429) related to off-exchange-traded
forward currency contracts.
S-50
<PAGE>
Exchange-traded contracts and off-exchange-traded forward currency
contracts held by the Partnerships at March 31, 2000, and December 31, 1999 and
1998 mature as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------------- -------------- --------------
<S> <C> <C> <C>
SPECTRUM GLOBAL BALANCED
Exchange-Traded Contracts June 2000 June 2000 March 1999
Off-Exchange-Traded Forward Currency
Contracts June 2000 March 2000 March 1999
SPECTRUM SELECT
Exchange-Traded Contracts March 2001 December 2000 December 1999
Off-Exchange-Traded Forward Currency
Contracts June 2000 March 2000 March 1999
SPECTRUM STRATEGIC
Exchange-Traded Contracts December 2001 December 2001 March 2000
Off-Exchange-Traded Forward Currency
Contracts April 2000 -- --
SPECTRUM TECHNICAL
Exchange-Traded Contracts March 2001 December 2000 December 1999
Off-Exchange-Traded Forward Currency
Contracts June 2000 March 2000 March 1999
</TABLE>
The Partnerships also have credit risk because either Dean Witter or Carr
Futures act as the futures commission merchants or the counterparties, with
respect to most of the Partnerships' assets. Exchange-traded futures and
futures-styled options contracts are marked to market on a daily basis, with
variations in value settled on a daily basis. Each of Dean Witter and Carr
Futures, as a futures commission merchant for each Partnership's exchange-traded
futures and futures-styled options contracts, are required, pursuant to
regulations of the Commodity Futures Trading Commission, to segregate from their
own assets and for the sole benefit of their commodity customers, all funds held
by them with respect to exchange-traded futures and futures-styled options
contracts, including an amount equal to the net unrealized gain on all open
futures and futures-styled options contracts, which funds, in the aggregate,
totaled at March 31, 2000, December 31, 1999, and December 31, 1998
respectively, $59,873,187, $57,574,561, and $45,065,113 for Spectrum Global
Balanced, $211,353,001, $214,186,052, and $196,601,695 for Spectrum Select,
$87,929,910, $107,372,141, and $69,218,389 for Spectrum Strategic and
$265,219,208, $268,449,799, and $254,651,022 for Spectrum Technical. With
respect to the Partnerships' off-exchange-traded forward currency contracts,
there are no daily settlements of variations in value nor is there any
requirement that an amount equal to the net unrealized gain on open forward
contracts be segregated. With respect to those off-exchange-traded forward
currency contracts, the Partnerships are at risk to the ability of Carr Futures,
the sole counterparty on all of such contracts, to perform. Each partnership has
a netting agreement with Carr Futures. These agreements, which seek to reduce
both the partnerships' and Carr Futures' exposure on off-exchange-traded forward
currency contracts, should materially decrease the partnerships' credit risk in
the event of Carr Futures' bankruptcy or insolvency. Carr Futures' parent,
Credit Agricole Indosuez, has guaranteed to the Partnerships payment of the net
liquidating value of the transactions in the Partnerships' account with Carr
Futures (including foreign currency contracts).
5. LEGAL MATTERS
The class actions first filed in 1996 in California and in New York State
courts were each dismissed in 1999. On September 6, 10, and 20, 1996, and on
March 13, 1997, similar purported class actions were filed in the Superior Court
of the State of California, County of Los Angeles, on behalf of all purchasers
of interests in limited partnership commodity pools sold by Dean Witter. Named
defendants include Dean Witter, Demeter, Dean Witter Futures and Currency
Management Inc., Morgan Stanley Dean Witter & Co. (all such parties referred to
hereafter as the "Dean Witter
S-51
<PAGE>
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. The court entered an order denying class
certification on August 24, 1999. On September 24, 1999, the court entered an
order dismissing the case without prejudice on consent. Similar purported class
actions were also filed on September 18 and 20, 1996 in the Supreme Court of the
State of New York, New York County, and on November 14, 1996 in the Superior
Court of the State of Delaware, New Castle County, against the Dean Witter
Parties and certain trading advisors on behalf of all purchasers of interests in
various limited partnership commodity pools sold by Dean Witter. A consolidated
and amended complaint in the action pending in the Supreme Court of the State of
New York was filed on August 13, 1997, alleging that the defendants committed
fraud, breach of fiduciary duty, and negligent misrepresentation in the sale and
operation of the various limited partnership commodity pools. The New York
Supreme Court dismissed the New York action in November 1998, but granted
plaintiffs leave to file an amended complaint, which they did in early December
1998. The defendants filed a motion to dismiss the amended complaint with
prejudice on February 1, 1999. By decision dated December 21, 1999, the New York
Supreme Court dismissed the case with prejudice.
In addition, 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.
6. SUBSEQUENT EVENTS (UNAUDITED)
On March 3, 2000, the plaintiffs in the New York action referred to in Note
5 above filed an appeal of the order dismissing the consolidated complaint.
Effective April 14, 2000, Spectrum Strategic terminated Willowbridge
Associates Inc. as a trading advisor. In June 2000, Eclipse Capital Management,
Inc. will be added as a trading advisor for Spectrum Strategic.
Commencing in June 2000, the General Partner will transfer the futures and
options clearing for each Spectrum Series partnership from Carr Futures Inc. to
Morgan Stanley & Co. Incorporated, an affiliate of the general partner, with the
exception of trades on the London Metal Exchange, which will be cleared by
Morgan Stanley & Co. International Limited, also an affiliate of the general
partner.
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<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 (the "Company"), a wholly-owned subsidiary of Morgan
Stanley Dean Witter & Co., as of November 30, 1999 and 1998. These financial
statements are the responsibility of the Company's 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 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 of the statements
of financial condition provide a reasonable basis for our opinion.
In our opinion, such statements of financial condition present fairly, in all
material respects, the financial position of Demeter Management Corporation at
November 30, 1999 and 1998 in conformity with generally accepted accounting
principles.
January 21, 2000
New York, New York
S-53
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
NOVEMBER 30,
FEBRUARY 29, -----------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
$ $ $
(UNAUDITED)
ASSETS
Investments in affiliated partnerships (Note
2) 17,997,295 17,825,316 16,959,248
Income taxes receivable 337,254 803,778 708,505
Receivable from affiliated partnerships 20,798 20,428 25,716
------------ ------------ ------------
Total Assets 18,355,347 18,649,522 17,693,469
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Payable to Morgan Stanley Dean Witter & Co. 12,676,196 13,033,208 11,648,971
Accrued expenses 9,117 29,293 62,198
------------ ------------ ------------
Total Liabilities 12,685,313 13,062,501 11,711,169
------------ ------------ ------------
STOCKHOLDER'S EQUITY:
Common stock, no par value:
Authorized 1,000 shares; Issued and
outstanding 100 shares at stated value
of $500 per share 50,000 50,000 50,000
Additional paid-in capital 123,170,000 123,170,000 111,170,000
Retained earnings 5,520,034 5,437,021 5,832,300
------------ ------------ ------------
128,740,034 128,657,021 117,052,300
Less: Notes receivable from Morgan
Stanley Dean Witter & Co. (123,070,000) (123,070,000) (111,070,000)
------------ ------------ ------------
Total Stockholder's Equity 5,670,034 5,587,021 5,982,300
------------ ------------ ------------
Total Liabilities and Stockholder's
Equity 18,355,347 18,649,522 17,693,469
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
S-54
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION
(INFORMATION WITH RESPECT TO 2000 IS UNAUDITED)
1. INTRODUCTION AND BASIS OF PRESENTATION
Demeter Management Corporation ("Demeter") is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co. Effective February 19, 1998 Morgan Stanley,
Dean Witter, Discover & Co. changed its corporate name to Morgan Stanley Dean
Witter & Co.
Demeter manages the following commodity pools as 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., Dean
Witter Principal Plus Fund L.P., Dean Witter Principal Plus Fund Management
L.P., Dean Witter Portfolio Strategy Fund L.P., Dean Witter Global Perspective
Portfolio L.P., Dean Witter World Currency Fund L.P., Dean Witter Institutional
Account II L.P., DWFCM International Access Fund L.P., Morgan Stanley Dean
Witter Spectrum Global Balanced L.P., Morgan Stanley Dean Witter Spectrum
Strategic L.P., Morgan Stanley Dean Witter Spectrum Technical L.P., Morgan
Stanley Dean Witter Spectrum Select L.P., Morgan Stanley Tangible Asset Fund
L.P. (to be renamed Morgan Stanley Dean Witter Spectrum Commodity L.P.), Morgan
Stanley Dean Witter/Chesapeake L.P., DWR Institutional Balanced Portfolio
Account III L.P., Morgan Stanley Dean Witter/JWH Futures Fund L.P., Morgan
Stanley Dean Witter/Market Street Futures Fund L.P., Morgan Stanley Dean Witter
Charter Graham L.P., Morgan Stanley Dean Witter Charter Millburn L.P., and
Morgan Stanley Dean Witter Charter Welton L.P.
Each of the commodity pools is a limited partnership organized to engage in
the speculative trading of commodity futures contracts, forward contracts on
foreign currencies and other commodity interests.
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 these estimates.
The unaudited interim statement of financial condition contained herein
includes, in the opinion of management, all adjustments necessary for a fair
presentation of the statement of financial condition of Demeter.
On July 31, 1997, Demeter entered into a limited partnership agreement as
general partner in Morgan Stanley Tangible Asset Fund. On November 4, 1997,
Morgan Stanley Tangible Asset Fund registered with the Securities and Exchange
Commission 5,000,000 units and began trading on January 2, 1998. Units were made
available to investors in a public offering that ended March 12, 1998 ("Offering
Period"). Subsequently, Morgan Stanley Tangible Asset Fund, Demeter, the trading
advisor and Dean Witter Reynolds agreed to extend the Offering Period until no
later than October 16, 1998 ("Extended Offering Period"), and offered to the
public unsold units remaining at the end of the Offering Period.
In January of 1998, Demeter entered into a limited partnership agreement as
general partner in Morgan Stanley Dean Witter/Market Street Futures Fund, which
offers units to investors in a continuing private offering. The fund began
trading on October 1, 1998.
On April 20, 1998, Dean Witter Spectrum Balanced L.P. changed its name to
Dean Witter Spectrum Global Balanced L.P. and subsequently on April 30, 1999,
changed it to Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
S-55
<PAGE>
On April 20, 1998, Dean Witter Select Futures Fund L.P. ("DWSF") changed
its name to Dean Witter Spectrum Select L.P. Effective May 1, 1998 Spectrum
Select became part of the Spectrum family of funds and consequently revised its
fee structure, instituted an exchange provision with other funds in the Spectrum
family and is offered to investors in a continuing public offering. On April 30,
1999, DWSF changed its name to Morgan Stanley Dean Witter Spectrum Select L.P.
On April 30, 1998, Demeter ceased trading activities in Dean Witter
Institutional Account II and subsequently distributed its net assets.
On May 11, 1998, Demeter registered with the SEC 5,000,000 additional units
of Dean Witter Spectrum Technical L.P. ("DWST") and 1,500,000 units of Spectrum
Select, both of which are being offered to investors in a continuing public
offering with previously registered units of the other Spectrum funds. On April
30, 1999, DWST changed its name to Morgan Stanley Dean Witter Spectrum
Technical, L.P.
On July 15, 1998, Demeter entered into a limited partnership agreement as
general partner in the Morgan Stanley Dean Witter Charter Series. The three
partnerships that comprise the Charter Series are Morgan Stanley Dean Witter
Charter Graham L.P., Morgan Stanley Dean Witter Charter Millburn L.P. and Morgan
Stanley Dean Witter Charter Welton L.P. On July 29, 1998, the Charter Series
individually registered with the SEC 3,000,000 units of Charter Graham,
3,000,000 units of Charter Millburn and 3,000,000 units of Charter Welton to be
offered to investors for a limited time in a public offering. Charter Graham,
Charter Millburn and Charter Welton each commenced trading on March 1, 1999.
On September 30, 1998, Demeter ceased trading activities in Dean Witter
Institutional Balanced Portfolio Account III, and subsequently distributed its
net assets.
On February 3, 1999, DWR Chesapeake L.P. changed its name to Morgan Stanley
Dean Witter/ Chesapeake L.P.
On February 3, 1999, DWR/JWH Futures Fund L.P. changed its name to Morgan
Stanley Dean Witter/JWH Futures Fund L.P.
On April 30, 1999, Dean Witter Spectrum Strategic L.P. changed its name to
Morgan Stanley Dean Witter Spectrum Strategic L.P.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES -- The results of operations of Demeter are included in the
consolidated federal income tax return of Morgan Stanley Dean Witter & Co.,
computed on a separate company basis and due to Morgan Stanley Dean Witter & Co.
3. INVESTMENTS IN AFFILIATED PARTNERSHIPS
The limited partnership agreement of each commodity pool requires Demeter
to maintain a general partnership interest in each partnership, generally in an
amount equal to, but not less than 1 percent of the aggregate capital
contributed to the partnership by all partners.
The total assets, liabilities and partners' capital of all the funds
managed by Demeter at February 29, 2000, and November 30, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
FEBRUARY 29, ----------------------------------
2000 1999 1998
-------------- -------------- --------------
<S> <C> <C> <C>
$ $ $
Total assets.......................... 1,348,402,633 1,355,594,817 1,316,093,947
Total liabilities..................... 33,756,305 28,406,267 21,644,069
Total partners' capital............... 1,314,646,328 1,327,188,550 1,294,449,878
</TABLE>
Demeter's investments in such limited partnerships are carried at market
value.
S-56
<PAGE>
4. PAYABLE TO MORGAN STANLEY DEAN WITTER & CO.
The payable to Morgan Stanley Dean Witter & Co. is primarily for amounts
due for the purchase of partnership investments, income tax payments made by
Morgan Stanley Dean Witter & Co. on behalf of Demeter and the cumulative results
of operations.
5. NET WORTH REQUIREMENT
At February 29, 2000, November 30, 1999, and November 30, 1998, Demeter
held non-interest bearing notes from Morgan Stanley Dean Witter & Co. that were
payable on demand. These notes were received in connection with additional
capital contributions aggregating $123,070,000 at February 29, 2000,
$123,070,000 at November 30, 1999, and $111,070,000 at November 30, 1998.
The limited partnership agreement of each commodity pool requires Demeter
to maintain its net worth at an amount not less than 10% of the capital
contributions by all partners in each pool in which Demeter is the general
partner (15% if the capital contributions to any partnership are less than
$2,500,000, or $250,000, whichever is less).
In calculating this requirement, Demeter's interests in each limited
partnership and any amounts receivable from or payable to such partnerships are
excluded from net worth. Notes receivable from Morgan Stanley Dean Witter & Co.
are included in net worth for purposes of this calculation.
6. LITIGATION
The class actions first filed in 1996 in California and in New York State
courts were each dismissed in 1999. On September 6, 10, and 20, 1996, and on
March 13, 1997, similar purported class actions were filed in the Superior Court
of the State of California, County of Los Angeles, on behalf of all purchasers
of interests in limited partnership commodity pools sold by Dean Witter. Named
defendants include Dean Witter, Demeter, Dean Witter Futures & Currency
Management Inc., Morgan Stanley Dean Witter & Co. (all such parties referred to
hereafter as the "Morgan Stanley 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. The court entered an order denying class
certification on August 24, 1999. On September 24, 1999, the court entered an
order dismissing the case without prejudice on consent. Similar purported class
actions were also filed on September 18 and 20, 1996 in the Supreme Court of the
State of New York, New York County, and on November 14, 1996 in the Superior
Court of the State of Delaware, New Castle County, against the Morgan Stanley
Dean Witter Parties and certain trading advisors on behalf of all purchasers of
interests in various limited partnership commodity pools sold by Dean Witter. A
consolidated and amended complaint in the action pending in the Supreme Court of
the State of New York was filed on August 13, 1997, alleging that the defendants
committed fraud, breach of fiduciary duty, and negligent misrepresentation in
the sale and operation of the various limited partnership commodity pools. The
New York Supreme Court dismissed the New York action in November 1998, but
granted plaintiffs leave to file an amended complaint, which they did in early
December 1998. The defendants filed a motion to dismiss the amended complaint
with prejudice on February 1, 1999. By decision dated December 21, 1999, the New
York Supreme Court dismissed the case with prejudice.
In addition 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.
7. SUBSEQUENT EVENT (UNAUDITED)
On March 3, 2000, the plaintiffs in the New York action referred to in
Note 6 above filed an appeal of the order dismissing the consolidated complaint.
S-57
<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 MARCH 6, 2000
The Prospectus dated March 6, 2000 is supplemented by a supplement dated
June 22, 2000. You should read the supplement together with the prospectus.
June 22, 2000
