UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-19511
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3619290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
c/o Demeter Management Corporation
Two World Trade Center, 62 Fl., New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
March 31, 2000 (Unaudited) and December 31, 1999........ 2
Statements of Operations for the Quarters Ended
March 31, 2000 and 1999 (Unaudited)......................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 2000 and 1999
(Unaudited)............................................. 4
Statements of Cash Flows for the Quarters Ended
March 31, 2000 and 1999 (Unaudited)......................5
Notes to Financial Statements (Unaudited).............6-
11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....12-18
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.......................................19-31
Part II. OTHER INFORMATION
Item 1. Legal Proceedings................................... 32
Item 2. Changes in Securities and Use of Proceeds.........32-34
Item 5. Other Information................................... 35
Item 6. Exhibits and Reports on Form 8-K.....................35
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
2000 1999
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 209,219,096 207,251,012
Net unrealized gain on open contracts2,096,109 6,887,064
Net option premiums 273,274 776,380
Total Trading Equity 211,588,479 214,914,456
Subscriptions receivable 5,138,043 3,730,051
Interest receivable (DWR) 793,136 722,305
Total Assets 217,519,658 219,366,812
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 3,964,374 3,764,242
Accrued brokerage fees (DWR) 1,299,244 1,270,975
Accrued management fees 537,618 525,921
Total Liabilities 5,801,236 5,561,138
Partners' Capital
Limited Partners (9,632,323.307 and
9,583,810.832 Units, respectively) 208,833,259 210,877,519
General Partner (133,076.600 Units) 2,885,163 2,92
8,155
Total Partners' Capital 211,718,422 213,805,674
Total Liabilities and Partners' Capital 217,519,658 219,
366,812
NET ASSET VALUE PER UNIT 21.68 22.00
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
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<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
2000 1999
$ $
<S> <C> <C>
REVENUES
Trading profit (loss):
Realized 4,910,985 5,798,268
Net change in unrealized (4,790,955) (2,656,394)
Total Trading Results 120,030 3,141,874
Interest Income (DWR) 2,284,949 1,726,568
Total Revenues 2,404,979 4,868,442
EXPENSES
Brokerage fees (DWR) 3,919,970 3,663,607
Management fees 1,622,055 1,515,975
Total Expenses 5,542,025 5,179,582
NET LOSS (3,137,046) (311,140)
NET LOSS ALLOCATION
Limited Partners (3,094,054)
(305,969)
General Partner (42,992)
(5,171)
NET LOSS PER UNIT
Limited Partners
(0.32) (0.04)
General Partner
(0.32) (0.04)
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 2000 and 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
Partners' Capital,
December 31, 19988,407,766.751 $196,915,644 $3,166,872
$200,082,516
Offering of Units 486,445.792 11,547,488 -
11,547,488
Net Loss - (305,969) (5,171) (311,140)
Redemptions (191,443.393) (4,554,235) -
(4,554,235)
Partners' Capital,
March 31, 1999 8,702,769.150 $203,602,928 $3,161,701
$206,764,629
Partners' Capital,
December 31, 19999,716,887.432 $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
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss (3,137,046)
(311,140)
Noncash item included in net loss:
Net change in unrealized 4,790,955
2,656,394
(Increase) decrease in operating assets:
Net option premiums 503,106 -
Interest receivable (DWR) (70,831) (9,022)
Increase in operating liabilities:
Accrued brokerage fees (DWR) 28,269 101,643
Accrued management fees 11,697
42,060
Net cash provided by operating activities 2,126,150 2
,479,935
CASH FLOWS FROM FINANCING ACTIVITIES
Redemptions of Units (10,365,259) (
4,554,235)
Increase in redemptions payable 200,132 805,003
Offering of Units 11,415,053 1
1,547,488
(Increase) decrease in subscriptions receivable (1,407,992)
1,837,918
Net cash provided by (used for) financing activities
(158,066) 9,636,174
Net increase in cash 1,968,084 1
2,116,109
Balance at beginning of period 207,251,012
187,619,419
Balance at end of period 209,219,096
199,735,528
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>-
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management,
all adjustments necessary for a fair presentation of the results
of operations and financial condition of Morgan Stanley Dean
Witter Spectrum Select L.P. (the "Partnership"). The financial
statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 1999 Annual
Report on Form 10-K.
1. Organization
Morgan Stanley Dean Witter Spectrum Select L.P. is a Delaware
limited partnership organized to engage primarily in the
speculative trading of futures and forward contracts, options on
futures contracts, physical commodities and other commodity
interests, including, but not limited to foreign currencies,
financial instruments, metals, energy and agricultural products
(collectively, "futures interests"). The Partnership is one of
the Morgan Stanley Dean Witter Spectrum Series of funds,
comprised of the Partnership, Morgan Stanley Dean Witter Spectrum
Commodity L.P. (formerly, Morgan Stanley Tangible Asset Fund
L.P.), Morgan Stanley Dean Witter Spectrum Global Balanced L.P.,
Morgan Stanley Dean Witter Spectrum Strategic L.P. and Morgan
Stanley Dean Witter Spectrum Technical L.P.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds, Inc. ("DWR") and an unaffiliated clearing commodity
broker, Carr Futures Inc. ("Carr"), provides clearing and
execution services. Both Demeter and DWR are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co. The trading
advisors to the Partnership are EMC Capital Management, Inc.,
Rabar Market Research, Inc. and Sunrise Capital Management, Inc.
(collectively, the "Trading Advisors").
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interests trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on a prevailing rate on
U.S. Treasury bills. Brokerage expenses incurred by the
Partnership are paid to DWR.
3. Financial Instruments
The Partnership trades futures and forward contracts, options on
futures contracts, physical commodities and other commodity
interests, including, but not limited to foreign currencies,
financial instruments, metals, energy and agricultural products.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Futures and forwards represent contracts for delayed delivery of
an instrument at a specified date and price. Risk arises from
changes in the value of these contracts and the potential
inability of counterparties to perform under the terms of the
contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest
rate volatility.
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities" effective for fiscal years beginning after June 15,
1999. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133," which defers the required
implementation of SFAS No. 133 until fiscal years beginning after
June 15, 2000. However, the Partnership had previously elected
to adopt the provisions of SFAS No. 133 beginning with the fiscal
year ended December 31, 1998. SFAS No. 133 supersedes SFAS No.
119 and No. 105, which required the disclosure of average
aggregate fair values and contract/notional values, respectively,
of derivative financial instruments for an entity which carries
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
its assets at fair value. The application of SFAS No. 133 does
not have a significant effect on the Partnership's financial
statements.
The net unrealized gain on open contracts is reported as a
component of "Equity in futures interests trading accounts" on
the statements of financial condition and totaled $2,096,109 and
$6,887,064 at March 31, 2000 and December 31, 1999, respectively.
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 option 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.
Exchange-traded futures and futures-styled options contracts held
by the Partnership at March 31, 2000 and December 31, 1999 mature
through March 2001 and December 2000, respectively. Off-exchange-
traded forward currency contracts held by the Partnership at
March
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
31, 2000 and December 31, 1999 mature through June 2000 and March
2000, respectively.
The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.
The Partnership also has credit risk because DWR and Carr act as
the futures commission merchants or the counterparties, with
respect to most of the Partnership's assets. Exchange-traded
futures and futures-styled options contracts are marked to
market on a daily basis, with variations in value settled on a
daily basis. Each of DWR and Carr, as a futures commission
merchant for the Partnership's exchange-traded futures and
futures-styled options contracts, are required, pursuant to
regulations of the Commodity Futures Trading Commission ("CFTC"),
to segregate from their own assets, and for the sole benefit of
their commodity customers, all funds held by them with respect to
exchange-traded futures and futures-styled options contracts,
including an amount equal to the net unrealized gain on all open
futures and futures-styled options contracts, which funds, in the
aggregate, totaled
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
$211,353,001 and $214,186,052 at March 31, 2000 and December 31,
1999, respectively. With respect to the Partnership's off-
exchange-traded forward currency contracts, there are no daily
settlements of variations in value nor is there any requirement
that an amount equal to the net unrealized gain on open forward
contracts be segregated. With respect to those off-exchange-
traded forward currency contracts, the Partnership is at risk to
the ability of Carr, the sole counterparty on all of such
contracts, to perform. The Partnership has a netting agreement
with Carr. This agreement, which seeks to reduce both the
Partnership's and Carr's exposure on off-exchange-traded forward
currency contracts, should materially decrease the Partnership's
credit risk in the event of Carr's bankruptcy or insolvency.
Carr's parent, Credit Agricole Indosuez, has guaranteed to the
Partnership payment of the net liquidating value of the
transactions in the Partnership's account with Carr (including
foreign currency contracts).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker in separate futures
trading accounts established for each Trading Advisor, which
assets are used as margin to engage in trading. The assets are
held in either non-interest-bearing bank accounts or in
securities and instruments permitted by the CFTC for investment
of customer segregated or secured funds. The Partnership's
assets held by the commodity brokers may be used as margin solely
for the Partnership's trading. Since the Partnership's sole
purpose is to trade in futures, forwards and options, it is
expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership's investment in futures, forwards and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be
taken nor liquidated unless traders are willing to effect trades
at or within the limit. Futures prices have occasionally moved
the daily limit for several consecutive days with little or no
<PAGE>
trading. These market conditions could prevent the Partnership
from promptly liquidating its futures or options contracts and
result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources - The Partnership does not have, or expect to
have, any capital assets. Redemptions, exchanges and sales of
additional units of limited partnership interest ("Unit(s)") in
the future will affect the amount of funds available for
investment in futures interests in subsequent periods. It is not
possible to estimate the amount and therefore, the impact of
future redemptions of Units.
<PAGE>
Results of Operations
General. The Partnership's results depend on its Trading
Advisors and the ability of each Trading Advisor's trading
programs to take
advantage of price movements or other profit opportunities in the
futures, forwards and options markets. The following presents a
summary of the Partnership's operations for the three months
ended March 31, 2000 and 1999, respectively and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Advisors trade in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Advisors or will be profitable in the
future. Consequently, the results of operations of the
Partnership is difficult to discuss other than in the context of
its Trading Advisors' trading activities on behalf of the
Partnership as a whole and how the Partnership has performed in
the past.
For the Quarter Ended March 31, 2000
For the quarter ended March 31, 2000, the Partnership recorded
trading revenues, including interest income, of $2,404,979 and
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,
thus resulting in domestic bond prices being pushed higher.
<PAGE>
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
<PAGE>
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. Total expenses
for the three months ended March 31, 2000 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, the Partnership recorded
total trading revenues, including interest income, of $4,868,442
and 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 the expected interest rates in Japan
<PAGE>
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 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
United States 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
<PAGE>
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. Total
expenses for the three months ended March 31, 1999 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.
Risks Associated With the Euro. On January 1, 1999, eleven
countries in the European Union established fixed conversion
rates on their existing sovereign currencies and converted to a
common single currency (the euro). During a three-year
transition period, the sovereign currencies will continue to
exist but only as a fixed denomination of the euro. Conversion
to the euro prevents the Trading Advisors from trading those
sovereign currencies and thereby limits their ability to take
advantage of potential market opportunities that might otherwise
have existed had separate currencies been available to trade.
This could adversely affect the performance results of the
Partnership.
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
<PAGE>
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). All quantitative disclosures in this section are
deemed to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and cash
flow. Profits and losses on open positions of exchange-traded
futures interests are settled daily through variation margin.
<PAGE>
The Partnership's risk exposure in the market sectors traded by
the Trading Advisors is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the
Partnership's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
<PAGE>
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisors in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following tables indicate the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of March 31, 2000 and 1999.
At March 31, 2000 and 1999, the Partnership's total
capitalization was approximately $212 million and $207 million,
respectively.
Primary Market March 31, 2000 March 31, 1999
Risk Category Value at Risk Value at Risk
Currency (1.16)% (1.09)%
Interest Rate (0.58) (0.46)
Equity (0.78) (0.55)
Commodity (0.78) (0.77)
Aggregate Value at Risk (1.88)% (1.59)%
Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual Market Categories listed above. Aggregate VaR will be
lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open
positions at March 31, 2000 and 1999 only and is not necessarily
<PAGE>
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures interests, the
composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
Net Assets for the four quarterly reporting periods from April 1,
1999 through March 31, 2000.
Primary Market Risk Category High Low Average
Currency (1.52)% (1.09)% (1.24)%
Interest Rate (1.61) (0.46) (0.79)
Equity (0.82) (0.31) (0.62)
Commodity (1.48) (0.77) (0.97)
Aggregate Value at Risk (2.83)% (1.59)% (2.06)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
<PAGE>
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
typically found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, gives
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
<PAGE>
The VaR tables above present the results of the Partnership's VaR
for each of the Partnership's market risk exposures and on an
aggregate basis at March 31, 2000 and for the end of the four
quarterly reporting periods from April 1, 1999 through March 31,
2000. Since VaR is based on historical data, VaR should not be
viewed as predictive of the Partnership's future financial
performance or its ability to manage or monitor risk. There can
be no assurance that the Partnership's actual losses on a
particular day will not exceed the VaR amounts indicated above or
that such losses will not occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial. The Partnership also
maintains a substantial portion (approximately 86%) of its
available assets in cash at DWR. A decline in short-term
interest rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered
material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-
sensitive instruments.
<PAGE>
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisors for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expropria-
tions, illiquid markets, the emergence of dominant fundamental
factors, political upheavals, changes in historical price
relationships, an influx of new market participants, increased
regulation and many other factors could result in material losses
as well as in material changes to the risk exposures and the risk
management strategies of the Partnership. Investors must be
prepared to lose all or substantially all of their investment in
the Partnership.
The following were the primary trading risk exposures of the
Partnership as of March 31, 2000, by market sector. It may be
<PAGE>
anticipated however, that these market exposures will vary
materially over time.
Currency - The primary market exposure in the Partnership at
March 31, 2000 was in the currency sector. The Partnership'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. The Partnership 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, the Partnership'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). Demeter does not anticipate that the risk profile
of the Partnership's currency sector will change significantly in
the future. The currency trading VaR figure includes foreign
margin amounts converted into U.S. dollars with an incremental
adjustment to reflect the exchange rate risk inherent to the
dollar-based Partnership in expressing VaR in a functional
currency other than dollars.
<PAGE>
Interest Rate - The second largest market exposure at March 31,
2000 was in the interest rate complex. The Partnership'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 the Partnership 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 the Partnership's profitability. The Partnership's
primary interest rate exposure is generally to interest rate
fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions in the
government debt of smaller nations - e.g. Australia and Spain.
Demeter anticipates that G-7 and Australian interest rates will
remain the primary interest rate exposure of the Partnership for
the foreseeable future. The changes in interest rates which have
the most effect on the Partnership are changes in long-term, as
opposed to short-term, rates. Most of the speculative futures
positions held by the Partnership are in medium- to long- term
instruments. Consequently, even a material change in short-term
rates would have little effect on the Partnership, were the
medium- to long-term rates to remain steady.
Equity - The primary equity exposure is to equity price risk in
the G-7 countries. The stock index futures traded by the
<PAGE>
Partnership are by law limited to futures on broadly based
indices. As of March 31, 2000, the Partnership's primary
exposures were in the S&P 500 (U.S.), NASDAQ 100 (U.S.), Hang
Seng (China) and Nikkei (Japan) stock indices. The Partnership
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 the Partnership to avoid being "whipsawed"
into numerous small losses).
Commodity
Metals - The Partnership's primary metals market exposure is to
fluctuations in the price of gold and silver. Although certain
Trading Advisors will, from time to time, trade base metals such
as aluminum, copper, zinc, nickel, tin and lead, the principal
market exposures of the Partnership have consistently been in
precious metals, gold and silver. A reasonable amount of
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. Demeter anticipates that gold and
silver will remain the primary metals market exposure for the
Partnership.
<PAGE>
Soft Commodities and Agriculturals - On March 31, 2000, the
Partnership 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, the Partnership's energy exposure was
shared by futures contracts in the oil and natural gas markets.
Price movements in these markets result from political
developments in the Middle East, weather patterns, and other
economic fundamentals. It is possible that volatility will
remain high and that significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in this market. Natural gas has exhibited volatility
in prices resulting from weather patterns and supply and demand
factors and is expected to continue in this choppy pattern.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of March 31, 2000:
Foreign Currency Balances - The Partnership's primary foreign
currency balances are in euros and Hong Kong and Australian
<PAGE>
dollars. The Partnership controls the non-trading risk of these
balances by regularly converting these balances back into dollars
upon liquidation of the respective position.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisors, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different Trading Advisors, each of
whose strategies focus on different market sectors and trading
approaches, and monitoring the performance of the Trading
Advisors daily. In addition, the Trading Advisors establish
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisors.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On March 3, 2000, the plaintiffs in the New York action filed an
appeal of the order dismissing the consolidated complaint.
(Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-K for the year ended December 31, 1999 for a
more detailed discussion).
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership initially registered 60,000 Units (prior to the
100 for one Unit conversion on April 30, 1998) pursuant to a
Registration Statement on Form S-1, which became effective on May
17, 1991 (SEC File Number 33-39667), and 10,000 (pre-conversion)
Units at a supplemental closing pursuant to a new Registration
Statement on Form S-1, which became effective on August 23, 1991
(SEC File No. 33-42380). The offering commenced on May 17, 1991
and terminated as of August 31, 1991, with 60,853.334 Units sold.
The aggregate price of the offering amount registered was
$69,380,300, based upon the initial offering price of $1,000 per
Unit and $938.03 per Unit at the supplemental closing (the
initial closing and supplemental closing, hereinafter, the
"Initial Offering"). The aggregate offering price of the Units
sold during the Initial Offering was $60,268,482.
<PAGE>
The Partnership registered an additional 75,000 Units (pre-
conversion) pursuant to a new Registration Statement of Form S-1,
which became effective on August 31, 1993 (SEC File Number 33-
65072) (the "Second Offering"). The Second Offering commenced on
August 31, 1993 and terminated as of September 30, 1993, with
74,408.337 Units sold. The aggregate price of the Second
Offering amount registered was $102,744,000, based upon an
initial offering price of $1,369.92. The aggregate price of the
Units sold during the Second Offering was $116,617,866.
The Partnership registered an additional 60,000 Units (pre-con-
version) pursuant to another Registration Statement on Form S-1,
which became effective on October 17, 1996 (SEC File Number 333-
1918), (the "Third Offering"). The Third Offering commenced on
October 17, 1996 and terminated as of March 3, 1997, with
10,878.000 Units sold. The aggregate price of the Third Offering
amount registered was $98,247,000, based upon an initial offering
price of $1,637.45. The aggregate price of the Units sold during
the Third Offering was $22,308,326.
The Partnership registered an additional 1,500,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on May 11, 1998 (SEC File Number 333-47829).
Commencing with the April 30, 1998 monthly closing, each
previously outstanding Unit was converted into 100 Units.
<PAGE>
The Partnership registered an additional 5,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on January 21, 1999 (File No. 333-68773).
The Partnership registered an additional 4,500,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on February 28, 2000 (SEC File Number 333-90467).
The managing underwriter for the Partnership is DWR.
Units are being sold at monthly closings as of the last day of
each month at a price equal to 100% of the Net Asset Value of a
Unit as of the date of such monthly closing.
Through March 31, 2000, 4,065,674.638 Units of the Partnership
were sold, leaving 6,934,325.362 Units unsold as of March 31,
2000. The aggregate price of the Units sold through March 31,
2000 is $292,496,684.
Since DWR has paid all offering expenses and no expenses are
chargeable against proceeds, 100% of the proceeds of the offering
have been applied to the working capital of the Partnership for
use in accordance with the "Use of Proceeds" section of the
Prospectus included as part of each Registration Statement.
<PAGE>
Item 5. OTHER INFORMATION
Effective January 31, 2000, Mark J. Hawley resigned as Chairman
of the Board and a Director of Demeter and Dean Witter Futures
and Currency Management Inc. ("DWFCM") and Robert E. Murray
replaced him as Chairman of the Board of Demeter and DWFCM.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Dean Witter Spectrum
Select L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
May 12, 2000 By: /s/ Lewis A. Raibley, III
Lewis A. Raibley, III
Director and Chief Financial
Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Morgan Stanley Dean Witter Spectrum Select L.P. and is qualified in
its entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 209,219,096
<SECURITIES> 0
<RECEIVABLES> 5,931,179<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 217,519,658<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 217,519,658<F3>
<SALES> 0
<TOTAL-REVENUES> 2,404,979<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,542,025
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,137,046)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,137,046)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,137,046)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $793,136 and
subscriptions receivable of $5,138,043.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $2,096,109 and net option premiums
of $273,274.
<F3>Liabilities include redemptions payable of $3,964,374, accrued
brokerage fees of $1,299,244 and accrued management fees
of $537,618.
<F4>Total revenue includes realized trading revenue of $4,910,985,
net change in unrealized of $(4,790,955) and interest income of
$2,284,949.
</FN>
</TABLE>
