<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
(Exact name of registrant as specified in charter document)
<TABLE>
<S> <C> <C>
DELAWARE 6799
(State of Organization (Primary Standard Industrial 13-3782232
of Issuer) Classification Code Number) (I.R.S. Employer
Identification Number)
</TABLE>
---------------------
Two World Trade Center, 62nd Floor
New York, New York 10048
(212) 392-8899
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Robert E. Murray
DEMETER MANAGEMENT CORPORATION
Two World Trade Center, 62nd Floor
New York, New York 10048
(212) 392-8899
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
Edwin L. Lyon, Esq. Michael T. Gregg, Esq.
Cadwalader, Wickersham & Taft Dean Witter Reynolds Inc.
1333 New Hampshire Avenue, N.W. Two World Trade Center, 66th Floor
Washington, D.C. 20036 New York, New York 10048
(202) 862-2200 (212) 392-5530
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Pursuant to Rule 429 of the Securities Act of 1933, the prospectus which is
a part of this Registration Statement is a combined prospectus and includes all
the information currently required in a prospectus relating to the securities
covered by Registration Statement Nos. 33-80146, 333-00494, and 333-3222
previously filed by the Registrant. This Registration Statement, which relates
to 3,595,099.091 unsold Units of Limited Partnership Interest of the Registrant
as of September 30, 1999, also constitutes a Post-Effective Amendment to
Registration Statement Nos. 33-80146, 333-00494, and 333-3222.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)
<S> <C> <C> <C> <C>
Units of Limited Partnership
Interest 3,000,000 Units $15.52 $46,560,000 $12,944
</TABLE>
(1) Offering price and registration fee based upon the approximate Net Asset
Value per Unit of the Registrant on October 25, 1999, in accordance with
Rule 457(d).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NO. REGISTRATION ITEM LOCATION IN PROSPECTUS
- -------- ---------------------------------------------- ----------------------------------------
<C> <S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Facing Page; Front Cover Pages.
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page; Table of
Contents.
3. Summary Information, Risk Factors, and Ratio
of Earnings to Fixed Charges................. Summary; Risk Factors; Description of
Charges; Use of Proceeds; The General
Partner; The Commodity Brokers.
4. Use of Proceeds............................... Use of Proceeds.
5. Determination of Offering Price............... Plan of Distribution.
6. Dilution...................................... Not Applicable.
7. Selling Security Holders...................... Not Applicable.
8. Plan of Distribution.......................... Plan of Distribution.
9. Description of Securities to be Registered.... The Limited Partnership Agreements.
10. Interests of Named Experts and Counsel........ Not Applicable.
11. Information with Respect to the Registrant
(a) Description of Business................. Summary; Risk Factors; Use of Proceeds;
The Trading Advisors; The Futures,
Options and Forwards Markets; The
Limited Partnership Agreements.
(b) Description of Property................. Not Applicable.
(c) Legal Proceedings....................... Certain Litigation; The Trading
Advisors.
(d) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters.................... Risk Factors.
(e) Financial Statements.................... Independent Auditors' Reports.
(f) Selected Financial Data................. Selected Financial Data.
(g) Supplementary Financial Information..... Selected Financial Data.
(h) Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.
(i) Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure............................. Not Applicable.
(j) Quantitative and Qualitative Disclosures
About Market Risk...................... Quantitative and Qualitative Disclosures
About Market Risk.
(k) Directors and Executive Officers........ The General Partner.
(l) Executive Compensation.................. Summary; Conflicts of Interest;
Fiduciary Responsibility; Description of
Charges; Risk Factors; The Trading
Advisors; The General Partner; The
Commodity Brokers.
(m) Security Ownership of Certain Beneficial
Owners and Management.................. Capitalization; The General Partner;
Independent Auditors' Reports.
(n) Certain Relationships and Related
Transactions........................... Summary; Conflicts of Interest;
Fiduciary Responsibility; Description of
Charges; Risk Factors; The Trading
Advisors; The General Partner; The
Commodity Brokers.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Fiduciary Responsibility.
</TABLE>
<PAGE>
EXPLANATORY STATEMENT
The Prospectus contained in this Registration Statement relates not only to
3,595,099.091 Units of Limited Partnership Interest of Morgan Stanley Dean
Witter Spectrum Global Balanced L.P. remaining unsold as of September 30, 1999
from Registration Statement Nos. 33-80146, 333-00494, and 333-3222, and
3,000,000 Units of Limited Partnership Interest covered by this Registration
Statement, but to:
(i) 3,329,471.858 Units of Limited Partnership Interest of Morgan Stanley
Dean Witter Spectrum Select L.P. remaining unsold as of September 30, 1999 from
Registration Statement Nos. 333-47829 and 333-68773, and 4,500,000 Units of
Limited Partnership Interest covered by a new Registration Statement on Form S-1
filed simultaneously herewith;
(ii) 11,311,659.578 Units of Limited Partnership Interest of Morgan Stanley
Dean Witter Spectrum Technical L.P. remaining unsold as of September 30, 1999
from Registration Statement Nos. 33-80146, 333-00494, 333-3222, 333-47831, and
333-68779;
(iii) 3,151,833.743 Units of Limited Partnership Interest of Morgan Stanley
Dean Witter Spectrum Strategic L.P. remaining unsold as of September 30, 1999
from Registration Statement Nos. 33-80146, 333-00494, and 333-3222, and
6,500,000 Units of Limited Partnership Interest covered by a new Registration
Statement on Form S-1 filed simultaneously herewith;
(iv) 15,000,000 Units of Limited Partnership Interest of Morgan Stanley Dean
Witter Spectrum Currency L.P. covered by a Registration Statement on Form S-1
filed simultaneously herewith; and
(v) 7,000,000 Units of Limited Partnership Interest of Morgan Stanley
Tangible Asset Fund L.P. ("MSTAF") covered by a new Registration Statement on
Form S-1 filed simultaneously herewith. MSTAF will change its name to Morgan
Stanley Dean Witter Spectrum Commodity L.P. on or before the date its
Registration Statement is declared effective.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION: NOVEMBER 5, 1999
PART ONE
DISCLOSURE DOCUMENT
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
<TABLE>
<CAPTION>
TOTAL UNITS OF
LIMITED PARTNERSHIP
INTEREST OFFERED
-------------------
<S> <C>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P. 8,141,300.161
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P. 11,557,974.013
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P. 9,738,672.748
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P. 6,672,654.480
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P. 15,000,000.000
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P. 7,000,000.000
</TABLE>
THE PARTNERSHIPS
Each Partnership trades futures, options and forwards contracts pursuant to
trading programs employed by the Trading Advisor(s) for each Partnership.
PURCHASE PRICE
You may purchase Units as of the last day of each month. Except for Spectrum
Currency at its Initial Closing, the price you pay for each Unit will equal 100%
of the Net Asset Value per Unit on the date of purchase. Following were the Net
Asset Values per Unit for each Partnership (other than Spectrum Currency) as of
August 31, 1999:
<TABLE>
<S> <C>
Spectrum Select................ $22.50
Spectrum Technical............. $15.90
Spectrum Strategic............. $13.49
Spectrum Global Balanced....... $15.87
Spectrum Commodity............. $ 7.25
</TABLE>
REQUIRED MINIMUM INVESTMENT FOR MOST INVESTORS
- $5,000 for first time investors - $2,000 for IRA investors - $500 for
existing investors
Before you invest you will be required to make certain representations and
warranties, including that you meet applicable State minimum financial
suitability standards. You are encouraged to discuss your investment with your
financial, legal, and tax advisor before you invest.
SPECTRUM CURRENCY
Spectrum Currency is a new fund that has been added to the Spectrum Series of
continuously offered funds. Units of Spectrum Currency initially are being
offered at $10 per Unit. Thereafter, the price you pay for each Unit will equal
100% of the Net Asset Value per Unit on the date of purchase. If you subscribe
for Units of Spectrum Currency during the Initial Offering Period, and investors
do not subscribe for at least 500,000 Units of Spectrum Currency before the
Initial Offering Period ends (which is currently scheduled to end on
December 31, 1999), the Spectrum Currency offering will terminate and your
customer account will be credited for your full subscription amount with
interest.
SPECTRUM COMMODITY
Spectrum Commodity is an existing long-only commodity fund that has been added
to the Spectrum Series. Spectrum Commodity, formerly named Morgan Stanley
Tangible Asset Fund L.P., was previously closed to new investment. There is no
minimum amount of Units of Spectrum Commodity that must be sold.
THE RISKS
THESE ARE SPECULATIVE SECURITIES. YOU COULD LOSE ALL OR SUBSTANTIALLY ALL OF
YOUR INVESTMENT IN THE PARTNERSHIPS. READ THIS PROSPECTUS BEFORE YOU DECIDE TO
INVEST. SEE "RISK FACTORS" BEGINNING ON PAGE - .
- - The performance of each Partnership has been and is expected to be volatile,
and the Net Asset Value per Unit for each Partnership may fluctuate
significantly.
- - There is no secondary market for Units and you may not redeem your Units until
you have been an investor for at least six months.
- - If you redeem any of your Units within twenty-four months after they are
purchased, you may have to pay a redemption charge.
- - In order for each Partnership to cover its expenses, each Partnership must
earn annual net Trading Profits (after taking into account estimated interest
income, based on current rates of 4.70%) of the following percentages of
average annual Net Assets:
<TABLE>
<CAPTION>
WITHOUT A WITH A 2%
REDEMPTION CHARGE REDEMPTION CHARGE
------------------ ------------------
<S> <C> <C>
% %
Spectrum Select........................................... 6.49 8.53
Spectrum Technical........................................ 7.49 9.53
Spectrum Strategic........................................ 7.39 9.43
Spectrum Global Balanced.................................. 1.15 3.19
Spectrum Currency......................................... 4.34 6.38
Spectrum Commodity........................................ 3.34 5.38
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN ANY ONE OF THESE POOLS NOR HAS THE COMMISSION PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
MORGAN STANLEY DEAN WITTER
DEAN WITTER REYNOLDS INC.
- , 1999
<PAGE>
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU
TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT
FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS.
SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND
CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS
ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE
POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS
THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID
DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A
COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED TO EACH POOL BEGINNING AT
PAGE - AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT
IS TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE - .
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS
NECESSARY TO EVALUATE YOUR PARTICIPATION IN EACH COMMODITY POOL. THEREFORE,
BEFORE YOU DECIDE TO PARTICIPATE IN ANY COMMODITY POOL, YOU SHOULD CAREFULLY
STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK
FACTORS OF THIS INVESTMENT BEGINNING AT PAGE - .
YOU SHOULD ALSO BE AWARE THAT EACH COMMODITY POOL MAY TRADE FOREIGN FUTURES
OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES,
INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO
REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS
PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO
COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN
NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR EACH POOL MAY BE
EFFECTED.
(i)
<PAGE>
TABLE OF CONTENTS
PART ONE
DISCLOSURE DOCUMENT
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary................................... 1
Risk Factors.............................. 11
Risks relating to futures interests
trading and the futures interests
markets............................... 11
The Partnerships' futures interests
trading is speculative and
volatile............................ 11
The Partnerships' futures interests
trading is highly leveraged......... 11
The Partnerships' futures interests
trading may be illiquid............. 11
The Partnerships' forward trading is
not protected by exchange or
clearinghouse guarantees or
government regulation............... 11
Trading on foreign exchanges presents
greater risks to each Partnership
than trading on domestic
exchanges........................... 12
Options trading can be more volatile
than futures trading................ 12
The Partnerships are subject to
speculative position limits......... 12
The Partnerships could lose assets and
have their trading disrupted if a
Commodity Broker or others become
bankrupt............................ 12
Risks relating to the Partnerships and
the offering of Units................. 12
You should not rely on the past
performance of a Partnership in
deciding to purchase Units.......... 12
Each Partnership incurs substantial
charges............................. 13
Restricted investment liquidity in the
Units............................... 13
Conflicts of interest in each
Partnership's structure............. 13
No assurance that Units of Spectrum
Currency will be sold............... 13
Spectrum Currency is a new fund and
will be subject to special risks
during its start-up period.......... 13
Spectrum Currency does not have an
operating history................... 13
Spectrum Commodity is subject to
greater risk during periods of low
inflation........................... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Potential inability to trade or report
results because of year 2000
problems............................ 13
Risks relating to the Trading
Advisors.............................. 14
Reliance on the Trading Advisors to
trade successfully.................. 14
Market factors may adversely influence
the trading programs................ 14
Possible consequences of using
multiple Trading Advisors for
Spectrum Select, Spectrum Technical,
Spectrum Strategic, and Spectrum
Currency............................ 14
Spectrum Global Balanced and Spectrum
Commodity are single-advisor funds
and lack the diversity of a
multi-advisor fund.................. 14
Increasing the assets managed by a
Trading Advisor may adversely affect
performance......................... 14
Limited term of management agreements
may limit access to a Trading
Advisor............................. 14
Adverse consequences of unequal
apportionment of a Partnership's
assets among Trading Advisors....... 15
Euro conversion limits a Trading
Advisor's ability to trade certain
individual currencies and could
result in trading losses............ 15
Taxation risks.......................... 15
Your tax liability could exceed
distributions....................... 15
The Partnerships' tax returns could be
audited............................. 15
Conflicts of Interest..................... 15
Fiduciary Responsibility and Liability.... 17
Description of Charges.................... 18
Use of Proceeds........................... 24
The Spectrum Series....................... 27
Selected Financial Data................... 36
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 39
Quantitative and Qualitative Disclosures
About Market Risk....................... 50
Capitalization............................ 59
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
The General Partner....................... 60
The Trading Advisors...................... 65
Exchange Privilege........................ 113
Redemptions............................... 114
The Commodity Brokers..................... 115
Certain Litigation........................ 117
The Limited Partnership Agreements........ 118
Plan of Distribution...................... 121
Subscription Procedure.................... 123
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Purchases by Employee Benefit Plans--
ERISA Considerations.................... 125
Material Federal Income Tax
Considerations.......................... 126
State and Local Income Tax Aspects........ 132
Legal Matters............................. 132
Experts................................... 132
Where You Can Find More Information....... 133
Financial Statements...................... F-1
</TABLE>
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
The Futures, Options, and Forwards
Markets............................. II-1
Potential Advantages.................. II-5
Supplemental Performance
Information......................... II-14
Exhibit A - Form of Amended and
Restated Limited Partnership
Agreements.......................... A-1
Annex - Request for Redemption........ A-24
Exhibit B - Specimen Form of
Subscription and Exchange Agreement
and Power of Attorney............... B-1
Exhibit C - Subscription Agreement
Update Form......................... C-1
</TABLE>
(iii)
<PAGE>
SUMMARY
THE DATE OF THIS PROSPECTUS IS - , 1999.
Because this is a summary, it does not contain all of the information that
may be important to you. You should read the entire prospectus and its exhibits
carefully before you decide to invest.
THE MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
The Morgan Stanley Dean Witter Spectrum Series consists of six continuously
offered limited partnerships, each organized in the State of Delaware. Spectrum
Select was organized in the State of Delaware on March 21, 1991. Spectrum
Technical, Spectrum Strategic and Spectrum Global Balanced were each organized
on April 29, 1994. Spectrum Currency was organized on October 20, 1999. Spectrum
Commodity, formerly named Morgan Stanley Tangible Asset Fund L.P., was organized
on July 31, 1997.
The Spectrum Series offers you the choice of investing in managed futures
funds with different investment objectives and Trading Advisors employing a
variety of trading programs, as well as the opportunity to shift investments
among the Partnerships. The Partnerships engage in the following activities: the
speculative trading of futures, forwards, and options on futures contracts,
including contracts on foreign currencies, financial instruments, precious and
industrial metals, energy products, and agriculturals (collectively, "FUTURES
INTERESTS"). The offices of each Partnership are located at Two World Trade
Center, 62nd Floor, New York, New York 10048, telephone (212) 392-8899.
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
Spectrum Select seeks as its investment objective to achieve substantial
capital appreciation and to provide investors with diversification from
traditional investments, such as stocks and bonds, in their portfolio, through
the speculative trading of a diverse mix of futures interests. Spectrum Select
employs multiple Trading Advisors: EMC Capital Management, Inc., Rabar Market
Research, Inc., and Sunrise Capital Management, Inc. Following is a summary of
certain statistical information relating to Spectrum Select as of August 31,
1999 and a summary description of the Trading Advisors' respective strategies.
<TABLE>
<S> <C>
Performance information: %
-------
Inception to date return (since 125.0
8/1/91)
Compound annualized return 10.6
1999 year-to-date (8 months) (5.46)
1998 annual return 14.15
1997 annual return 6.22
1996 annual return 5.27
1995 annual return 23.63
1994 annual return (5.13)
1993 annual return 41.63
1992 annual return (14.45)
1991 annual return (5 months) 31.18
Net Assets allocated to %
-------
EMC 21.3
Rabar 43.5
Sunrise Capital Management 35.2
</TABLE>
<TABLE>
<S> <C>
Break-even information: %
----
Percentage of estimated annual net 6.49
trading profits (after interest income)
needed to cover expenses
Percentage of estimated annual net
trading profits (after interest income)
needed to cover expenses and the 2%
redemption charge if Units are redeemed
within twelve months after they are 8.53
purchased
</TABLE>
EMC CAPITAL MANAGEMENT, INC.--EMC trades The Classic Program for Spectrum
Select. The Classic Program utilizes a strategy that is developed from an
analysis of patterns of actual monthly, weekly, and daily price movements and is
not based on analysis of fundamental supply and demand factors, general economic
factors or anticipated world events. In the near future, EMC may trade a portion
of the assets under management for Spectrum Select pursuant to its New Program.
The New Program differs from the Classic Program in that it is less aggressive,
utilizes less leverage and places more of an emphasis on countertrend elements.
1
<PAGE>
RABAR MARKET RESEARCH, INC.--Rabar utilizes an internally developed trading
strategy for Spectrum Select that analyzes patterns of monthly, weekly, and
daily price movements, and of such indicators as volume and open interest.
SUNRISE CAPITAL MANAGEMENT, INC.--Sunrise Capital Management, Inc. ("SUNRISE
CAPITAL MANAGEMENT") trades its CIMCO~Diversified Financial Program for Spectrum
Select, which trades the major currencies as outrights against the U.S. dollar
and selectively against each other. The program also trades interest rate
futures, both long and short term (including U.S. and foreign bonds, notes and
euro products), stock indices (including the S&P 500), precious and industrial
metals (including aluminum, gold, silver and copper), natural gas and crude oil.
These futures interests are traded on futures exchanges but may be traded in the
interbank or cash markets when appropriate.
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
Spectrum Technical seeks as its investment objective to achieve capital
appreciation and to provide investors with diversification from traditional
investments, such as stocks and bonds, in their portfolio, through the
speculative trading of a diverse mix of futures interests using trend following
technical trading methods. Spectrum Technical employs multiple Trading Advisors:
Campbell & Company, Inc., Chesapeake Capital Corporation, and John W. Henry &
Company, Inc. ("JWH-REGISTERED TRADEMARK-"). Following is a summary of certain
statistical information relating to Spectrum Technical as of August 31, 1999 and
a summary description of the Trading Advisors' respective strategies.
<TABLE>
<S> <C>
Performance Information: %
------
Inception to date return (since 59.0
11/2/94)
Compound annualized return 10.1
1999 year-to-date (8 months) (1.36)
1998 annual return 10.18
1997 annual return 7.49
1996 annual return 18.35
1995 annual return 17.59
1994 annual return (2 months) (2.20)
Net Assets allocated to: %
------
Campbell 31.4
Chesapeake 23.0
JWH-Registered Trademark- 45.6
</TABLE>
<TABLE>
<S> <C>
Break-even information: %
----
Percentage of estimated annual net 7.49
trading profits (after interest income)
needed to cover expenses
Percentage of estimated annual net
trading profits (after interest income)
needed to cover expenses and the 2%
redemption charge if Units are redeemed
within twelve months after they are 9.53
purchased
</TABLE>
CAMPBELL & COMPANY, INC.--Campbell trades its Financial, Metal & Energy
Large Portfolio for Spectrum Technical, which utilizes computerized technical
trend-following systems to profit from major and sustained futures price trends.
CHESAPEAKE CAPITAL CORPORATION--Chesapeake trades its Diversified 2XL
Program for Spectrum Technical. The Diversified 2XL Program applies a
trend-following system to a global portfolio of futures and forward markets,
including agricultural products, precious and industrial metals, currencies,
financial instruments, and stock, financial and economic indices at
approximately twice the leverage of the Diversified Program.
JOHN W. HENRY & COMPANY, INC.--JWH-Registered Trademark- trades its Original
Investment Program and its Financial and Metals Portfolio for Spectrum
Technical. The Original Investment Program seeks to capitalize on long-term
trends in a broad spectrum of worldwide financial and non-financial futures
markets. The program always maintains a position--long or short--in every market
traded. The Financial and Metals Portfolio seeks to identify and capitalize on
intermediate-term price movements in four worldwide market sectors: interest
rates, currencies, non-U.S. stock indices, and metals. If a trend is identified,
the Financial and Metals Portfolio attempts to take a position; in nontrending
market environments the program may remain neutral or liquidate open positions.
2
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
Spectrum Strategic seeks as its investment objective to achieve capital
appreciation and to provide investors with diversification from traditional
investments, such as stock and bonds, in their portfolio, through the
speculative trading of a diverse mix of futures interests using primarily
discretionary fundamental trading methods. Spectrum Strategic employs multiple
Trading Advisors: Allied Irish Capital Management, Ltd. ("AICM"), Blenheim
Investments, Inc. and Willowbridge Associates Inc. Following is a summary of
certain statistical information relating to Spectrum Strategic as of August 31,
1999 and a summary description of the Trading Advisors' respective strategies.
<TABLE>
<S> <C>
Performance information: %
------
Inception to date return (since 34.9
11/2/94)
Compound annualized return 6.4
1999 year-to-date (8 months) 16.80
1998 annual return 7.84
1997 annual return 0.37
1996 annual return (3.53)
1995 annual return 10.49
1994 annual return (2 months) 0.10
Net Assets allocated to: %
------
AICM 13.0
Blenheim 45.4
Willowbridge 41.6
</TABLE>
<TABLE>
<S> <C>
Break-even information: %
----
Percentage of estimated annual net 7.39
trading profits (after interest income)
needed to cover expenses
Percentage of estimated annual net
trading profits (after interest income)
needed to cover expenses and the 2%
redemption charge if Units are redeemed
within twelve months after they are 9.43
purchased
</TABLE>
ALLIED IRISH CAPITAL MANAGEMENT, LTD.--AICM trades its Worldwide Financial
Futures Program for Spectrum Strategic. The Worldwide Financial Futures Program
utilizes a multi-trader trading approach on a broad range of futures interests
in financial instruments.
BLENHEIM INVESTMENTS, INC.--The trading program employed by Blenheim for
Spectrum Strategic relies primarily on Blenheim's experience in trading, and
utilizes fundamental, geopolitical and technical factors in the analysis and
evaluation of futures markets.
WILLOWBRIDGE ASSOCIATES INC.--Willowbridge trades the XLIM program for
Spectrum Strategic, which is part of the Select Investment Program. XLIM is
traded on a discretionary basis by Mr. Philip Yang (Willowbridge's Director and
President), with trading decisions based primarily on Mr. Yang's analysis of
technical factors, fundamentals, and market action. XLIM trades are selected
from a wide variety of futures interests on U.S. and international markets,
including, but not limited to, financial instruments, currencies, precious and
base metals, and agricultural commodities.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
Spectrum Global Balanced seeks as its investment objective to achieve
capital appreciation through the construction of a multi-strategy portfolio of
futures interests, consisting of world equity, fixed income, currency, and
commodity markets. Spectrum Global Balanced combines a trend-following approach
with a hedged--long biased--equity and fixed income overlay. The trend-following
strategy uses technical analysis, while the hedged equity and fixed income
approach uses fundamental macro-economic data to systematically adjust portfolio
exposure. The sole Trading Advisor for Spectrum Global Balanced is RXR, Inc.
Following is a summary of certain statistical information relating to Spectrum
Global Balanced as of August 31, 1999 and a summary description of the Trading
Advisor's strategy.
3
<PAGE>
<TABLE>
<S> <C>
Performance information: %
------
Inception to date return (since 58.7
11/2/94)
Compound annualized return 10.0
1999 year-to-date (8 months) (0.81)
1998 annual return 16.36
1997 annual return 18.23
1996 annual return (3.65)
1995 annual return 22.79
1994 annual return (2 months) (1.70)
Net Assets allocated to: %
------
RXR 100
</TABLE>
<TABLE>
<S> <C>
Break-even information: %
----
Percentage of estimated annual net 1.15
trading profits (after interest income)
needed to cover expenses
Percentage of estimated annual net
trading profits (after interest income)
needed to cover expenses and the 2%
redemption charge if Units are redeemed
within twelve months after they are 3.19
purchased
</TABLE>
RXR, INC.--RXR uses a trading approach that utilizes both technical analysis
and fundamental information with an emphasis on a balanced portfolio of world
equity, fixed income and commodity markets. RXR utilizes both U.S. and non-U.S.
stock indices and bond futures in applying its trading approach, thereby
providing a global perspective to the Spectrum Global Balanced portfolio.
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
Spectrum Currency is a newly created fund that has been added to the
Spectrum Series. Spectrum Currency seeks as its investment objective to achieve
capital appreciation and to provide investors with diversification from
traditional investments, such as stocks and bonds, in their portfolio, through
the speculative trading of futures interests in global currency markets.
Spectrum Currency employs multiple Trading Advisors: JWH-Registered Trademark-
and Sunrise Capital Partners, LLC ("SUNRISE CAPITAL PARTNERS"). Following is a
summary of certain statistical information relating to the Trading Advisors for
Spectrum Currency, and a summary description of their trading strategies.
The Trading Advisors for Spectrum Currency will use the same currency-only
trading strategies they have employed for Dean Witter Cornerstone Fund IV, which
is another currency-only fund operated by the General Partner and traded by
principals of JWH and Sunrise Capital Partners, the same Trading Advisors that
will trade for Spectrum Currency. The actual annual and year-to-date performance
information and rates of return set forth below represent the past performance
of Cornerstone IV. The pro forma annual and year-to-date rates of return set
forth below were calculated by the General Partner using the actual rates of
return achieved by Cornerstone IV for the past five years, adjusted for the fees
to be paid by Spectrum Currency. The performance results provided below are not
necessarily indications of, and may have no bearing on, any trading results that
may be attained by Spectrum Currency.
CORNERSTONE IV
--------------------
PRO
ACTUAL FORMA
------- -------
Performance Information (as of 8/31/99): % %
Inception to date return (since 5/1/87) 364.97 373.10
Compound annualized return 13.27 13.47
1999 year-to-date (8 months) (4.29) (5.26)
1998 annual return 6.80 3.09
1997 annual return 38.41 34.63
1996 annual return 12.97 13.14
1995 annual return 22.96 21.34
1994 annual return (14.27) (13.78)
Net Assets initially allocated to: %
-------
JWH-Registered Trademark- 50
Sunrise 50
<TABLE>
<S> <C>
Break-even information: %
----
Percentage of estimated annual net trading 4.34
profits (after interest income) needed to
cover expenses
Percentage of estimated annual net trading
profits (after interest income) needed to
cover expenses and the 2% redemption charge
if Units are redeemed within twelve months 6.38
after they are purchased
</TABLE>
4
<PAGE>
JOHN W. HENRY & COMPANY, INC.--JWH-Registered Trademark- trades its
International Foreign Exchange Program, which seeks to identify and capitalize
on intermediate-term price movements in a broad range of both major and minor
currencies primarily trading in the interbank market.
SUNRISE CAPITAL PARTNERS, LLC--Sunrise Capital Partners trades its Currency
Program, which is a diverse portfolio of world currencies applying principles of
spread trading. Sunrise may add additional currencies to its portfolio and
periodically reweight the emphasis given to certain markets, in an attempt to
adjust the potentially higher volatility of a portfolio that trades in a less
diversified group of markets.
15,000,000 Units of Spectrum Currency are being offered for sale at $10 per
Unit at the initial closing, which is currently scheduled to be held as of
December 31, 1999 (the "INITIAL CLOSING"). After the Initial Closing, unsold
Units will be sold at subsequent monthly closings held on the last day of each
month (each, a "MONTHLY CLOSING"), at a price equal to 100% of the Net Asset
Value per Unit on the date of purchase.
The period from the date of this Prospectus through April 30, 2000 is the
"INITIAL OFFERING PERIOD" for Spectrum Currency Units. The Initial Offering
Period, however, may be extended to June 30, 2000 in the sole discretion of the
General Partner. In order for Spectrum Currency to commence trading operations,
the General Partner must receive and accept subscriptions for at least 500,000
Units during the Initial Offering Period. If you subscribe for Units in Spectrum
Currency during the Initial Offering Period, and investors do not subscribe for
at least 500,000 Units of Spectrum Currency, the offering will terminate and
your customer account will be credited for your full subscription amount, with
interest, within five business days. The General Partner, Dean Witter Reynolds
Inc. ("DWR"), any other firms selling the Units, and the Trading Advisors, and
their respective affiliates may, but are not required to, subscribe for Units of
Spectrum Currency. Units subscribed for by those persons will be counted for
purposes of determining whether the 500,000 Unit minimum subscription
requirement has been satisfied. However, Units subscribed for by those persons
during the Initial Offering Period may not be redeemed for a period of two years
after the Initial Closing if Spectrum Currency would not have the minimum
$5,000,000 in Net Assets remaining immediately following the redemption.
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
Spectrum Commodity, formerly named Morgan Stanley Tangible Asset Fund L.P.,
is an existing commodity-only fund that was previously closed to new investment,
but is now part of the Spectrum Series. Spectrum Commodity seeks as its
investment objective to achieve capital appreciation and to provide investors
with diversification from traditional investments, such as stocks and bonds, in
their portfolio, through the long-only speculative trading of a diverse mix of
tangible commodity futures interests, including metals, energy, food, fiber, and
agricultural markets. The sole Trading Advisor for Spectrum Commodity is Morgan
Stanley Dean Witter Commodities Management Inc. ("MSDWCM"). Following is a
summary of certain statistical information relating to Spectrum Commodity as of
August 31, 1999 and a summary description of the Trading Advisor's strategy.
The actual annual and year-to-date performance information and rates of
return set forth below represent the past performance of Spectrum Commodity and
the MS Commodity Investment Portfolio Strategy, which is the same program
employed for Spectrum Commodity on an unleveraged basis. Spectrum Commodity
trades the program at 1.5 times leverage. The annual and year-to-date rates of
return set forth below for the MS Commodity Investment Portfolio Strategy, are
based on lower fees than those paid by Spectrum Commodity. The performance
results provided below are not necessarily indications of, and may have no
bearing on, any trading results that may be attained by Spectrum Commodity.
5
<PAGE>
<TABLE>
<S> <C> <C>
MS
COMMODITY
INVESTMENT
SPECTRUM PORTFOLIO
COMMODITY STRATEGY
Performance Information: % %
-------- ---------
Inception to date return (27.50)
(since 1/2/98)
Compound annualized return (17.57)
1999 year-to-date (8 months): 10.35 11.31
1998 annual return: (34.30) (28.12)
1997 annual return: -- 1.09
1996 annual return: -- 14.92
1995 annual return: -- 12.09
1994 annual return: -- 18.61
Net Assets Allocated to: %
-------
MSDWCM 100
</TABLE>
<TABLE>
<S> <C>
Break-Even Information: %
----
Percentage of estimated annual net 3.34
trading profits (after interest
income) needed to cover expenses
Percentage of estimated annual net trading
profits (after interest income) needed to
cover expenses and the 2% redemption charge
if Units are redeemed within twelve months 5.38
after they are purchased
</TABLE>
MORGAN STANLEY DEAN WITTER COMMODITIES MANAGEMENT INC.--MSDWCM attempts to
capture the overall rate of commodity price inflation by maintaining long
positions in certain commodity futures interests, including metals, energy,
food, fiber, and agricultural markets.
7,000,000 Units of Spectrum Commodity are being offered for sale at 100% of
the Net Asset Value per Unit at Monthly Closings held as of the last day of each
month. There is no minimum amount of Units that must be sold.
INVESTMENT REQUIREMENTS
If you are a new investor in the Spectrum Series Partnerships, you must
invest at least $5,000, unless you are investing through an IRA, in which case
your minimum investment is $2,000. You may allocate your investment among any
one or more of the Partnerships in the Spectrum Series, but you must invest at
least $1,000 in a Partnership. Once you become an investor in any Partnership
you may increase that investment with an additional contribution of at least
$500.
If you are an investor in another limited partnership for which Demeter
Management Corporation serves as the general partner and commodity pool
operator, you may redeem your interest in that other partnership and use the
proceeds to invest in any one or more of the Spectrum Series Partnerships.
Unless otherwise specified in the Subscription Agreement under "State
Suitability Requirements," you must have either: a net worth of at least
$75,000, exclusive of home, furnishings, and automobiles; or both a net worth of
at least $30,000, exclusive of home, furnishings, and automobiles, and an annual
income of at least $30,000. You should be aware, however, that certain States
impose more restrictive suitability and/or higher minimum investment
requirements. Before you invest you will be required to represent and warrant
that you meet the applicable State minimum financial suitability standard set
forth in the Subscription Agreement, which may also require a greater minimum
investment.
EXCHANGE PRIVILEGE
As an investor in the Spectrum Series, you may redeem Units in any Spectrum
Series Partnership and use the proceeds to purchase Units in one or more other
Spectrum Series Partnerships at a price equal to 100% of the Net Asset Value per
Unit.
THE GENERAL PARTNER
The general partner and commodity pool operator of each Partnership is
Demeter Management Corporation. The General Partner is or has been the general
partner and commodity pool operator of 35 commodity pools and currently operates
21 other commodity pools in addition to those in the Spectrum
6
<PAGE>
Series. As of August 31, 1999, the General Partner managed $1.4 billion of
client assets. The General Partner's main business office is located at
Two World Trade Center, 62nd Floor, New York, New York 10048, telephone
(212) 392-8899.
THE COMMODITY BROKERS
DWR is the non-clearing commodity broker for each Partnership. Except for
Spectrum Commodity, Carr Futures, Inc. ("CFI") is the clearing commodity broker
for each such Partnership's futures interests trades and the counterparty on
each such Partnership's foreign currency forward contracts.
In the case of Spectrum Commodity, Morgan Stanley & Co. Incorporated
("MS & CO.") is the clearing commodity broker, while Morgan Stanley & Co.
International Limited ("MSIL") serves as the clearing commodity broker for any
trades by that Partnership on the London Metals Exchange. DWR, CFI, MS & Co. and
MSIL are collectively referred to herein as the "COMMODITY BROKERS."
7
<PAGE>
ORGANIZATIONAL CHART
Following is an organizational chart for each Partnership, showing the
relationships among the various parties involved with this offering. As you will
see, with the exception of CFI and all of the Trading Advisors except MSDWCM,
all parties are affiliates of Morgan Stanley Dean Witter & Co.
[CHART]
- ---------
* Demeter presently serves as general partner for 21 other commodity pools, DWR
acts as the non-clearing commodity broker for all of the pools and CFI acts
as the clearing commodity broker for all of the pools except Spectrum
Commodity. MS & Co. acts as the clearing commodity broker for Spectrum
Commodity, and MSIL serves as the clearing commodity broker for that pool's
trades that take place on the London Metals Exchange. DWR has also served as
selling agent for all but one of the pools managed by Demeter. All of the
pools, including the Partnerships, are managed and traded independently of
one another.
8
<PAGE>
MAJOR RISKS
- You could lose all or substantially all of your investment in the
Partnerships.
- The performance of each Partnership has been and is expected to be
volatile, and the Net Asset Value per Unit of each Partnership may
fluctuate significantly.
- Past performance is not necessarily indicative of future results.
- There is no secondary market for Units, and you may not redeem your Units
until you have been an investor in the Spectrum Series for at least six
months.
- If you redeem any of your Units within twenty-four months after they are
purchased, you may have to pay a redemption charge.
- The Partnerships are subject to substantial charges. In order to cover its
expenses, each Partnership must earn annual net Trading Profits (after
taking into account estimated interest income, based on current rates of
4.70%) of the following percentages of average annual Net Assets:
<TABLE>
<CAPTION>
WITHOUT A WITH A 2%
REDEMPTION CHARGE REDEMPTION CHARGE
----------------- -----------------
<S> <C> <C>
% %
Spectrum Select 6.49 8.53
Spectrum Technical 7.49 9.53
Spectrum Strategic 7.39 9.43
Spectrum Global Balanced 1.15 3.19
Spectrum Currency 4.34 6.38
Spectrum Commodity 3.34 5.38
</TABLE>
MAJOR CONFLICTS OF INTEREST
- Because the General Partner, DWR, MS & Co., MSIL, and MSDWCM are
affiliates, 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.
- Because the employees of DWR receive a portion of the futures brokerage
fees paid by the Partnerships, they have a conflict of interest in
advising you in the purchase or redemption of Units.
FEES INCURRED BY THE PARTNERSHIPS
The Partnerships pay the following fees:
<TABLE>
<CAPTION>
MANAGEMENT FEE BROKERAGE FEE
(ANNUAL RATE) INCENTIVE FEE(1) (ANNUAL RATE)
-------------- ---------------- -------------
<S> <C> <C> <C>
% % %
Spectrum Select 3 15 7.25
Spectrum Technical 4 15 or 19(2) 7.25
Spectrum Strategic 3 or 4(3) 15 7.25
Spectrum Global Balanced 1.25 15 4.60
Spectrum Currency 3 or 4(4) 15 4.60
Spectrum Commodity 2.5 20 4.60
</TABLE>
- ---------
(1) Each Trading Advisor is eligible to receive a monthly incentive fee, except
MSDWCM, which is eligible to receive an annual incentive fee.
(2) Campbell and JWH-Registered Trademark- each receive a monthly incentive fee
equal to 15% of any Trading Profits. Chesapeake receives a monthly incentive
fee equal to 19% of any Trading Profits.
(3) Blenheim and Willowbridge each receive a monthly management fee at a 4%
annual rate. AICM receives a monthly management fee at a 3% annual rate.
(4) JWH-Registered Trademark- will receive a monthly management fee at a 4%
annual rate. Sunrise Capital Partners will receive a monthly management fee
at a 3% annual rate.
9
<PAGE>
The management fee payable to each Trading Advisor and the brokerage fee
payable to DWR or MS & Co. are each based on a percentage of Net Assets and will
be paid monthly regardless of a Partnership's performance. The Partnerships pay
each Trading Advisor an incentive fee if Trading Profits are earned on the Net
Assets managed by the Trading Advisor. You should understand that, except in the
case of Spectrum Global Balanced and Spectrum Commodity, which each have only
one Trading Advisor, a Trading Advisor may receive an incentive fee even though
the Partnership as a whole is not profitable.
Neither you nor the Partnerships will pay any selling commissions, or
organizational, initial, or continuing offering expenses in connection with the
offering of Units by the Partnerships. DWR will pay all costs incurred in
connection with the organization of Spectrum Currency and its initial offering
of Units. DWR will continue to pay all of the costs incurred in connection with
the continuing offering of Units by each Partnership.
REDEMPTION CHARGES INCURRED BY YOU
You may be subject to a redemption charge of 2% of the Net Asset Value of
the Units redeemed if you redeem within the first twelve months after the Units
were purchased, and 1% if you redeem Units within the thirteenth to
twenty-fourth month after the Units were purchased. Units are not subject to a
redemption charge after you have owned them for more than twenty-four months.
REDEMPTIONS
Once you have been an investor in the Spectrum Series for more than six
months, you are permitted to redeem any part of your investment, even if
subsequent purchases have been held for less than six months. However, you may
have to pay a redemption charge if your redeemed Units were purchased within
twenty-four months of the date of redemption. If you are redeeming Units
acquired with the proceeds from the redemption of units in another partnership
for which Demeter served as the general partner and commodity pool operator, you
may not be subject to a redemption charge on all or part of your investment.
TAX CONSIDERATIONS
You will be allocated your distributive share of the taxable income or loss
recognized by a Partnership during the portion of the Partnership's taxable year
that you owned Units in the Partnership, whether or not you receive any
distribution from that Partnership.
The trading activities of each Partnership, in general, generate capital
gains and loss and ordinary income. 40% of any trading profits on U.S.
exchange-traded contracts are taxed as short-term capital gains at your ordinary
income tax rate, while 60% of such gains are taxed at your long-term capital
gain tax rate. We expect that each Partnership's trading gains from other
contracts will be primarily short-term capital gains. This tax treatment applies
regardless of how long you hold your Units.
You may deduct losses on Units against capital gains income. You may deduct
losses in excess of capital gains against ordinary income only to the extent of
$3,000 per year. Consequently, you could pay tax on a Partnership's interest
income even though you have lost money on your Units.
10
<PAGE>
RISK FACTORS
This section includes all of the principal risks that you will face with an
investment in the Partnerships.
RISKS RELATING TO FUTURES INTERESTS TRADING AND THE FUTURES INTERESTS MARKETS
THE PARTNERSHIPS' FUTURES INTERESTS TRADING IS SPECULATIVE AND
VOLATILE. The rapid fluctuations in the market prices of futures interests
makes an investment in the Partnerships volatile. Volatility is caused by
changes in supply and demand relationships; weather; agricultural, trade,
fiscal, monetary and exchange control programs; domestic and foreign political
and economic events and policies; and changes in interest rates. If a Trading
Advisor incorrectly predicts the direction of the price in a futures interest,
large losses may occur.
THE PARTNERSHIPS' FUTURES INTERESTS TRADING IS HIGHLY LEVERAGED. The
Trading Advisor(s) for each Partnership use substantial leverage when trading
futures interests, which could result in immediate and substantial losses. For
example, if 10% of the face value of a contract is deposited as margin for that
contract, a 10% decrease in the value of the contract would cause a total loss
of the margin deposit. A decrease of more than 10% in the value of the contract
would cause a loss greater than the amount of the margin deposit.
The leverage employed by the Partnerships in their trading can vary
substantially from month to month and can be significantly higher or lower than
the averages set forth below. As an example of the leverage employed by the
Partnerships (except Spectrum Currency, which is a new fund and does not have a
trading history), set forth below is the average of the underlying value of each
Partnership's month-end positions for the period September, 1998 to August,
1999, as compared to the average month-end Net Assets of the Partnership during
that period.
<TABLE>
<S> <C>
Spectrum Select 12.1 times Net Assets
Spectrum Technical 10.8 times Net Assets
Spectrum Strategic 7.5 times Net Assets
Spectrum Global Balanced 6.6 times Net Assets
Spectrum Commodity 1.4 times Net Assets
</TABLE>
THE PARTNERSHIPS' FUTURES INTERESTS TRADING MAY BE ILLIQUID. Daily price
fluctuation limits are established by most U.S. futures exchanges and approved
by the CFTC. When the market price of a futures contract reaches its daily price
fluctuation limit, the Partnerships cannot execute trades at prices outside that
limit. The Partnerships could therefore have to maintain a losing position for
several days, or longer, and could lose considerably more than the initial
margin put up to establish the position. The Partnerships also could experience
difficult or impossible execution in thinly traded or illiquid markets, or where
an exchange or the CFTC finds it necessary to suspend or restrict trading in a
futures interest in order to protect the markets or investors.
THE PARTNERSHIPS' FORWARD TRADING IS NOT PROTECTED BY EXCHANGE OR
CLEARINGHOUSE GUARANTEES OR GOVERNMENT REGULATION. Each Partnership, except
Spectrum Commodity, trades currency forward contracts. Unlike futures contracts,
the performance of forward contracts is not guaranteed by an exchange or
clearinghouse. Because there is no exchange or clearinghouse guarantee, a
Partnership may incur substantial losses if the banks and dealers acting as
principals on the forward transactions are unable to perform. Because the
Partnerships are trading forward contracts only with CFI, they are subject to
the creditworthiness of CFI on its forward contract trades. Also, while U.S.
futures contract trading is regulated by the CFTC, no U.S. governmental agency
regulates the forward markets.
Set forth below for each Partnership that trades currency forward contracts
is the average percentage of month-end total margin requirements for the period
September, 1998 to August, 1999 that relate to
11
<PAGE>
forward contracts. The percentage of each Partnership's margin requirements that
relate to forward contracts varies from month to month and can be significantly
higher or lower than the percentages set forth below.
<TABLE>
<CAPTION>
%
---------
<S> <C>
Spectrum Select 6.8
Spectrum Technical 12.4
Spectrum Strategic 0.0
Spectrum Global Balanced 5.8
</TABLE>
TRADING ON FOREIGN EXCHANGES PRESENTS GREATER RISKS TO EACH PARTNERSHIP THAN
TRADING ON DOMESTIC EXCHANGES. Each Partnership trades on exchanges located
outside the U.S., where CFTC regulations do not apply. On some foreign
exchanges, the clearinghouses and exchanges are not responsible for the
performance of a transaction, which means that the Partnerships are at risk of
the creditworthiness of the exchange member executing the trade for the
Partnership. Trading on foreign exchanges also presents the added risks of less
regulation, exchange controls, expropriation, excessive taxation, or government
disruptions. Furthermore, a Partnership could incur losses when determining the
value of its foreign futures interests positions in U.S. dollars because of
fluctuations in exchange rates.
Set forth below for each Partnership is the average percentage of month-end
total margin requirements for the period September, 1998 to August, 1999 that
relate to futures interests on foreign exchanges (except Spectrum Currency,
which is a new fund and does not have a trading history). The percentage of each
Partnership's margin requirements that relate to futures interests on foreign
exchanges varies from month to month and can be significantly higher or lower
than the percentages set forth below.
<TABLE>
<CAPTION>
%
---------
<S> <C>
Spectrum Select 35.8
Spectrum Technical 39.2
Spectrum Strategic 22.3
Spectrum Global Balanced 47.9
Spectrum Commodity 17.1
</TABLE>
OPTIONS TRADING CAN BE MORE VOLATILE THAN FUTURES TRADING. Each Partnership
may trade options on futures. Although successful options trading requires many
of the same skills as successful futures trading, the risks are different.
Successful options trading requires a trader to accurately assess near-term
market volatility because that volatility is immediately reflected in the price
of outstanding options. Correct assessment of market volatility can therefore be
of much greater significance in trading options than it is in many long-term
futures strategies where volatility does not have as great an effect on the
price of a futures contract.
THE PARTNERSHIPS ARE SUBJECT TO SPECULATIVE POSITION LIMITS. The CFTC and
U.S. futures exchanges have established speculative position limits ("POSITION
LIMITS") on the maximum futures interests that may be held or controlled by any
one person or group. Therefore, a Trading Advisor may have to reduce the size of
its futures position in order to avoid exceeding position limits, which could
adversely affect the profitability of a Partnership.
THE PARTNERSHIPS COULD LOSE ASSETS AND HAVE THEIR TRADING DISRUPTED IF A
COMMODITY BROKER OR OTHERS BECOME BANKRUPT. The Partnerships' assets could be
lost or impounded and trading suspended if a Commodity Broker, an exchange or a
clearinghouse becomes insolvent or involved in lengthy bankruptcy proceedings.
RISKS RELATING TO THE PARTNERSHIPS AND THE OFFERING OF UNITS
YOU SHOULD NOT RELY ON THE PAST PERFORMANCE OF A PARTNERSHIP IN DECIDING TO
PURCHASE UNITS. Since the future performance of a Partnership is unpredictable,
each Partnership's past performance is not necessarily indicative of future
results.
12
<PAGE>
EACH PARTNERSHIP INCURS SUBSTANTIAL CHARGES. Each Partnership incurs
substantial charges each month. All such fees and charges are described under
"Description of Charges."
RESTRICTED INVESTMENT LIQUIDITY IN THE UNITS. There is no secondary market
for Units and you are not permitted to redeem your Units until you have been an
investor in the Spectrum Series for at least six months. After the initial six
month period, you may redeem your Units at any month-end, but you may have to
pay a redemption charge if you redeem Units during the first twenty-four months
after they were purchased. Your right to receive payment on a redemption is not
absolute and is dependent upon (a) the Partnership having sufficient assets to
pay its liabilities on the redemption date, and (b) the General Partner
receiving your request for redemption at least five business days before the
redemption date.
CONFLICTS OF INTEREST IN EACH PARTNERSHIP'S STRUCTURE.
- The General Partner, DWR, MS & Co., MSIL, and MSDWCM are affiliates. As a
result, the brokerage fees and other terms relating to the operation of
the Partnerships have not been independently negotiated. In addition, the
management fee paid by Spectrum Commodity to MSDWCM and the terms of its
management agreement have not been independently negotiated.
- Employees of DWR receive a portion of the brokerage fees paid by the
Partnerships. Therefore, those employees have a conflict of interest in
advising you in the purchase or redemption of Units.
- The Trading Advisors, Commodity Brokers, and General Partner may trade
futures interests for their own accounts. Thus, they may compete with a
Partnership for positions.
- The other commodity pools managed by the General Partner and the Trading
Advisors also compete with the Partnerships for futures interests
positions.
NO ASSURANCE THAT UNITS OF SPECTRUM CURRENCY WILL BE SOLD. Spectrum
Currency will not commence trading operations unless 500,000 Units are
subscribed for during the Initial Offering Period and accepted by the General
Partner. Because DWR, as selling agent, will only use its best efforts to offer
and sell the Units, neither the General Partner nor DWR can assure you that DWR
will raise the minimum amount required to commence trading. Further, while the
General Partner, DWR, any other firm selling Units, and the Trading Advisors,
and their respective affiliates may subscribe for Units in Spectrum Currency, so
that the 500,000 Unit minimum is met, they are not required to do so.
SPECTRUM CURRENCY IS A NEW FUND AND WILL BE SUBJECT TO SPECIAL RISKS DURING
ITS START-UP PERIOD. The start-up period presents special risks; for example,
the level of diversification of Spectrum Currency may initially be lower than a
fully-committed portfolio.
SPECTRUM CURRENCY DOES NOT HAVE AN OPERATING HISTORY. The CFTC requires a
commodity pool operator to disclose to prospective pool participants the actual
performance record of the pool for which the operator is soliciting
participants. YOU SHOULD NOTE THAT SPECTRUM CURRENCY HAS NOT COMMENCED TRADING
AND DOES NOT HAVE ANY PERFORMANCE HISTORY.
SPECTRUM COMMODITY IS SUBJECT TO GREATER RISK DURING PERIODS OF LOW
INFLATION. During periods of low or no commodity price inflation, Spectrum
Commodity is likely to experience losses because it is a long-only commodity
fund. Since Spectrum Commodity is a long-only commodity fund, if commodity
prices do not increase, the Partnership will not be profitable.
POTENTIAL INABILITY TO TRADE OR REPORT RESULTS BECAUSE OF YEAR 2000
PROBLEMS. Commodity pools, like financial and business organizations and
individuals around the world, depend on the smooth functioning of computer
systems. Many computer systems in use today cannot recognize the computer code
for the year 2000, but revert to 1900 or some other date. This is commonly known
as the "Year 2000 Problem." The Partnerships could be adversely affected if
computer systems used by them or any third party with whom they have a material
relationship do not properly process and calculate data concerning dates on or
after January 1, 2000. Such a failure could adversely affect the handling or
determination of futures trades and prices and other services.
Morgan Stanley Dean Witter & Co. ("MSDW"), the parent company of DWR, the
General Partner, MS & Co., MSIL, and MSDWCM, began its planning for the Year
2000 Problem in 1995, and currently has several hundred employees working on the
matter. It has developed its own Year 2000 compliance plan to
13
<PAGE>
deal with the problem and had the plan approved by the company's executive
management, Board of Directors and Information Technology Department. The
General Partner is coordinating with MSDW to address the Year 2000 Problem with
respect to the General Partner's computer systems. This includes hardware and
software upgrades, systems consulting and computer maintenance.
Beyond the challenge facing internal computer systems, the systems failure
of any of the third parties with whom the Partnerships have a material
relationship--the futures exchanges and clearing organizations through which
they trade, CFI and the Trading Advisors--could result in a material financial
risk to the Partnerships. The General Partner, the Commodity Brokers, the
Trading Advisors and all U.S. futures exchanges are subject to monitoring by the
CFTC for their Year 2000 preparedness, and the major foreign futures exchanges
are also expected to be subject to market-wide testing of their Year 2000
compliance during 1999. The General Partner intends to monitor the progress of
CFI and each Trading Advisor throughout 1999 in their Year 2000 compliance and,
where applicable, to test its external interface with CFI and the Trading
Advisors.
A worst case scenario would be one in which trading of contracts on behalf
of the Partnerships becomes impossible as a result of the Year 2000 Problem
encountered by any third parties. MSDW has begun developing various "contingency
plans" in the event that the systems of such third parties fail. The General
Partner intends to consult closely with MSDW in implementing those plans.
Despite the best efforts of both the General Partner and MSDW, however, it is
possible that these steps will not be sufficient to avoid any adverse impact to
the Partnerships.
RISKS RELATING TO THE TRADING ADVISORS
RELIANCE ON THE TRADING ADVISORS TO TRADE SUCCESSFULLY. The Trading
Advisors are responsible for making all futures interests trading decisions for
the Partnerships. The General Partner cannot assure you that the trading
programs employed by the Trading Advisors will be successful.
MARKET FACTORS MAY ADVERSELY INFLUENCE THE TRADING PROGRAMS. Often, the
most unprofitable market conditions for the Partnerships are those in which
prices "whipsaw," moving quickly upward, then reversing, then moving upward
again, then reversing again. In such conditions, the Trading Advisors may
establish positions based on incorrectly identifying both the brief upward or
downward price movements as trends, whereas in fact no trends sufficient to
generate profits develop.
POSSIBLE CONSEQUENCES OF USING MULTIPLE TRADING ADVISORS FOR SPECTRUM
SELECT, SPECTRUM TECHNICAL, SPECTRUM STRATEGIC, AND SPECTRUM CURRENCY. Each of
Spectrum Select, Spectrum Technical, Spectrum Strategic and Spectrum Currency
has more than one Trading Advisor, and each Trading Advisor will make trading
decisions independent of the other Trading Advisor(s). As a result, it is
possible that the Trading Advisors for a Partnership could hold opposite
positions in the same or similar futures interests, thereby offsetting any
potential for profit from these positions for the Partnership.
SPECTRUM GLOBAL BALANCED AND SPECTRUM COMMODITY ARE SINGLE-ADVISOR FUNDS AND
LACK THE DIVERSITY OF A MULTI-ADVISOR FUND. Spectrum Global Balanced and
Spectrum Commodity are each managed by a single Trading Advisor. Therefore,
these Partnerships lack the benefit of Trading Advisor diversification employed
by each of the other Spectrum Series Partnerships.
INCREASING THE ASSETS MANAGED BY A TRADING ADVISOR MAY ADVERSELY AFFECT
PERFORMANCE. The rates of return achieved by trading advisors often diminish as
the equity under their management increases. You should know that the Trading
Advisors have not agreed to limit the amount of additional equity that they will
manage.
LIMITED TERM OF MANAGEMENT AGREEMENTS MAY LIMIT ACCESS TO A TRADING
ADVISOR. When the Management Agreement with a Trading Advisor expires, the
General Partner may not be able to enter into arrangements with that Trading
Advisor or another trading advisor on terms substantially similar to the
Management Agreements described in this Prospectus. Currently, most of the
Management Agreements have one-year terms, which renew annually unless
terminated by the General Partner or the Trading Advisor.
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<PAGE>
ADVERSE CONSEQUENCES OF UNEQUAL APPORTIONMENT OF A PARTNERSHIP'S ASSETS
AMONG TRADING ADVISORS. The General Partner may allocate a Partnership's assets
among its Trading Advisors, or the trading systems of a Trading Advisor, in
different proportions. Unequal apportionment of a Partnership's assets among its
Trading Advisors or their programs could result in the performance of a Trading
Advisor having a greater or lesser influence, as the case may be, in the
performance of the Partnership as a whole.
EURO CONVERSION LIMITS A TRADING ADVISOR'S ABILITY TO TRADE CERTAIN
INDIVIDUAL CURRENCIES AND COULD RESULT IN TRADING LOSSES. 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 existing sovereign
currencies will continue to exist but only as a fixed denomination of the euro.
Conversion to the euro prevents each Trading Advisor from trading in certain
currencies and thereby limits its ability to take advantage of potential market
opportunities that might otherwise have existed had separate currencies been
available to trade, except Spectrum Commodity, which does not trade currencies.
This could adversely affect the performance results of the Partnerships,
particularly Spectrum Currency, which is a currency-only fund.
TAXATION RISKS
YOUR TAX LIABILITY COULD EXCEED DISTRIBUTIONS. If a Partnership has profit
for a taxable year, the profit may be taxable to the Partners, whether or not
the profit is actually distributed. Accordingly, your federal income taxes may
exceed the amount of your distribution, if any, for a taxable year.
THE PARTNERSHIPS' TAX RETURNS COULD BE AUDITED. The IRS could audit a
Partnership's tax return. If an audit results in an adjustment to a
Partnership's tax return, you could be required to file an amended tax return.
CONFLICTS OF INTEREST
RELATIONSHIP OF THE GENERAL PARTNER TO DWR AS COMMODITY BROKER AND SELLING AGENT
AND TO MS & CO. AND MSIL AS COMMODITY BROKERS
The General Partner, DWR, MS & Co. and MSIL are wholly-owned subsidiaries of
MSDW. DWR is the non-clearing commodity broker for each Partnership and receives
a monthly brokerage fee for futures interests transactions effected for each
Partnership. MS & Co. is the clearing commodity broker for Spectrum Commodity
and receives a portion of the monthly brokerage fee payable to DWR for futures
interests transactions effected for that Partnership. MSIL is the commodity
broker for Spectrum Commodity's trades on the London Metals Exchange; however,
MSIL's fees are paid by MS & Co., and not by the Partnership. Because the
General Partner is an affiliate of DWR and MS & Co., the flat-rate brokerage
fees charged to each Partnership have not been negotiated at arm's-length.
Moreover, the General Partner has a conflict of interest in managing the
Partnerships for your benefit, and in obtaining favorable brokerage fees for DWR
and retaining DWR, MS & Co. and MSIL as commodity brokers. In addition, DWR, as
selling agent, may compensate and pay bonuses to certain officers and directors
of the General Partner, who are also employees of and are compensated by DWR,
based on various factors, including the amount of brokerage fees generated by
the Partnerships. Customers of DWR who maintain commodity trading accounts with
over $1,000,000 pay commissions at negotiated rates that may be substantially
less than the rate paid by each Partnership.
The General Partner is responsible for selecting and replacing, if
necessary, each Trading Advisor. However, since selecting Trading Advisors who
engage in a high volume of trades will increase costs, without an offsetting
increase in revenue, the General Partner has an incentive to select Trading
Advisors who execute trades less frequently.
While each Partnership has the right to seek lower commission rates from
other commodity brokers at any time, the General Partner believes that the
customer agreements and other arrangements between each Partnership and the
Commodity Brokers are fair, reasonable and competitive, and represent the best
price and services available, considering the following factors. DWR pays the
expenses of organizing the Partnerships, offering the Units, and the
Partnerships' ordinary administrative expenses. Further, the General Partner
provides ongoing services to the Partnerships, including administering the
redemption and Exchanges of Units, and the General Partner has financial
obligations as the general partner of the Partnerships.
15
<PAGE>
The General Partner reviews the brokerage arrangements 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 DWR and the General Partner.
DWR pays a significant portion of the brokerage fees it receives from each
Partnership to its employees for providing continuing assistance to Limited
Partners. Therefore, DWR employees have a conflict of interest when providing
investment and redemption advice to you.
Further, certain pools may generate larger brokerage commissions, resulting
in increased payments to DWR employees.
The Partnerships, DWR, and the General Partner are represented by a single
counsel. Therefore, certain terms of this offering were not negotiated at
arm's-length. In addition, no independent due diligence has been conducted with
respect to this offering.
RELATIONSHIP OF THE GENERAL PARTNER TO MSDWCM AS TRADING ADVISOR FOR SPECTRUM
COMMODITY
MSDWCM is the Trading Advisor for Spectrum Commodity and receives a monthly
management fee and a possible annual incentive fee. Because the General Partner
and MSDWCM are both wholly-owned subsidiaries of MSDW, they are affiliates and,
as such, the terms of the management agreement, including the management and
incentive fees, have not been negotiated at arm's-length. Further, the General
Partner has a disincentive to remove and replace MSDWCM as Trading Advisor.
ACCOUNTS OF AFFILIATES OF THE GENERAL PARTNER, THE TRADING ADVISORS, AND THE
COMMODITY BROKERS
The General Partner does not trade futures interests for its own account,
but certain officers, directors and employees of the General Partner, the
Commodity Brokers, and the Trading Advisors and their affiliates, principals,
officers, directors and employees, may trade futures interests for their own
proprietary accounts. Their trading records will not be available to you.
CFI and MS & Co. are large futures commission merchants, handling
substantial customer business in physical commodities and futures interests.
Thus, CFI and MS & Co. may effect transactions for the account of a Partnership
in which the other parties to such transactions are employees or affiliates of
the General Partner, a Trading Advisor, CFI or MS & Co., or customers or
correspondents of CFI or MS & Co. These persons might also compete with a
Partnership in bidding on purchases or sales of futures interests without
knowing that the Partnership is also bidding. It is possible that transactions
for these other persons might be effected when similar trades for one or more
Partnerships are not executed or are executed at less favorable prices.
MANAGEMENT OF OTHER ACCOUNTS BY THE TRADING ADVISORS
Each Trading Advisor may manage futures interests accounts in addition to
the Partnership's accounts. Each Trading Advisor must aggregate futures
interests positions in other accounts managed by it with futures interests
positions in the applicable Partnership's account for speculative position limit
purposes. This may require a Trading Advisor to liquidate or modify positions
for all of its accounts, which could adversely affect the Partnership's
performance. A Trading Advisor may have a conflict of interest in rendering
advice to a Partnership because the compensation it receives for managing other
accounts may exceed the compensation it receives for managing a Partnership's
account. Moreover, if a Trading Advisor makes trading decisions for other
accounts and a Partnership's account at or about the same time, the Partnership
may be competing with such other accounts for the same or similar positions. A
Trading Advisor's records will not be made available to you. However, each
Management Agreement does permit the General Partner access to records relating
to the accounts managed by a Trading Advisor in order to determine that the
Partnership's account is treated fairly. Each Management Agreement also provides
that the Trading Advisor will deal with the Partnership in a fiduciary capacity
to the extent recognized by applicable law and will not enter into transactions
where it knowingly or deliberately favors itself or another client over the
Partnership.
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<PAGE>
CUSTOMER AGREEMENTS WITH THE COMMODITY BROKERS
Under each Customer Agreement for a Partnership, all funds, futures
interests and securities positions and credits carried for the Partnership are
held as security for such Partnership's obligations to the Commodity Broker; the
margins necessary to initiate or maintain open positions will be established by
the Commodity Broker from time to time; and the Commodity Broker may close out
positions, purchase futures interests, or cancel orders at any time it deems
necessary for its protection, without the consent of the Partnership.
Each Commodity Broker or the General Partner, or the investors in each
Partnership by majority vote, may terminate the brokerage relationship and close
the Partnership's futures interests account at a Commodity Broker upon 60 days'
prior written notice and under certain other circumstances.
FIDUCIARY RESPONSIBILITY AND LIABILITY
You should be aware that the General Partner has a fiduciary duty under the
Limited Partnership Agreements and the Partnership Act to exercise good faith
and fairness in all dealings affecting the Partnerships. The Limited Partnership
Agreements do not permit the General Partner to limit, by any means, the
fiduciary duty it owes to investors. In the event that you believe the General
Partner has violated its responsibilities, you may seek legal relief under the
Partnership Act, the Commodity Exchange Act, as amended (the "CEACT"),
applicable federal and state securities laws and other applicable laws. Each
Trading Advisor also has a fiduciary duty under applicable law to each
Partnership it advises.
The Limited Partnership Agreements, the Customer Agreements, and the Selling
Agreement provide that the General Partner, the Commodity Brokers, DWR (as
selling agent), any other firm selling Units (an "ADDITIONAL SELLER"), and their
affiliates shall not be liable to a Partnership or its investors for any act or
omission by or on behalf of the Partnership which the General Partner, the
Commodity Brokers, DWR (as selling agent), or any Additional Seller, as
applicable, determines in good faith to be in the best interests of the
Partnership, unless the act or omission constituted misconduct or negligence.
Under the Limited Partnership Agreements, the Customer Agreements, and the
Selling Agreement, each Partnership has agreed to indemnify and defend the
General Partner, the Commodity Brokers, DWR (as selling agent), any Additional
Seller, and their affiliates, against any loss, liability, damage, cost or
expense (including attorneys' and accountants' fees and expenses) they incur
which arise from acts or omissions undertaken by or on behalf of the
Partnership, including claims by investors. These indemnities apply where the
General Partner, the Commodity Brokers, DWR (as selling agent), or any
Additional Seller, as applicable, has determined, in good faith, that the act or
omission was in the best interests of the Partnership, and the act or omission
was not the result of misconduct or negligence. Payment of any indemnity by a
Partnership would reduce the Net Assets of that Partnership. The Partnerships do
not carry liability insurance covering such potential losses or indemnification
exposure.
No indemnification of the General Partner, the Commodity Brokers, DWR (as
selling agent), any Additional Seller, or their affiliates by a Partnership is
permitted for losses, liabilities, or expenses arising out of alleged violations
of federal or state securities laws unless a court has found in favor of the
indemnitee on the merits of the claim, or a court has dismissed the claim with
prejudice on the merits, or a court has approved a settlement on the claim and
found that the indemnification should be made by the Partnership. Where court
approval for indemnification is sought, the person claiming indemnification must
advise the court of the views on indemnification of the SEC and the relevant
state securities administrators. It is the opinion of the SEC that
indemnification for liabilities arising under the 1933 Act for directors,
officers or controlling persons of a Partnership or the General Partner is
against public policy and is therefore unenforceable. The CFTC has issued a
statement of policy relating to indemnification of officers and directors of a
futures commission merchant, such as the Commodity Brokers, and its controlling
persons under which the CFTC has taken the position that whether such an
indemnification is consistent with the policies expressed in the CEAct will be
determined by the CFTC on a case-by-case basis.
Each Management Agreement provides that the Trading Advisor and its
affiliates will not be liable to the Partnership or the General Partner or their
partners, officers, shareholders, directors or controlling persons. However, the
Trading Advisor is liable for acts or omissions of these persons if the act or
omission constitutes a breach of the Management Agreement or a representation,
warranty or covenant in
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the Management Agreement, constitutes misconduct or negligence, or is the result
of such persons not having acted in good faith and in the reasonable belief that
such actions or omissions were in, or not opposed to, the best interests of the
Partnership. Each Partnership has agreed to indemnify and defend its Trading
Advisor(s) and their affiliates against any loss, claim, damage, liability, cost
and expense resulting from a demand, claim, lawsuit, action, or proceeding
(other than those incurred as a result of claims brought by or in the right of
such an indemnified party), relating to the trading activities of the
Partnership, if a court finds, or independent counsel renders an opinion, that
the action or inaction giving rise to the claim did not constitute negligence,
misconduct or a breach of the Management Agreement or a representation, warranty
or covenant of the Trading Advisor in that agreement, and was done in good faith
and in a manner the indemnified party reasonably believed to be in, or not
opposed to, the best interests of the Partnership.
Each Partnership will also indemnify its Trading Advisor(s) and their
affiliates against any loss, claim, damage, liability, cost and expense, arising
under certain federal securities laws, the CEAct, or the securities or Blue Sky
law of any jurisdiction, in respect of the offer or sale of Units. This
indemnification will be made for liabilities resulting from a breach by the
Partnership or the General Partner of any representation, warranty or agreement
in the Management Agreement relating to the offering, or an actual or alleged
misleading or untrue statement of a material fact, or an actual or alleged
omission of a material fact, made in the Registration Statement, Prospectus or
related selling material, so long as the statement or omission does not relate
to the Trading Advisor or its principals, was not made in reliance upon, and in
conformity with, information or instructions furnished by the Trading Advisor,
and does not result from a breach by the Trading Advisor of any representation,
warranty or agreement relating to the offering.
The foregoing involves a rapidly developing and changing area of the law and
if you have questions concerning the duties of the Partnerships, the General
Partner, the Commodity Brokers, any Additional Seller or the Trading Advisors
you should consult with your attorney.
DESCRIPTION OF CHARGES
CHARGES TO EACH PARTNERSHIP
Each Partnership is subject to substantial charges, all of which are
described below.
SPECTRUM SELECT
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading Advisors.......................... Monthly Management Fee. 1/12 of 3% of the Net Assets allocated to
each Trading Advisor.
Monthly Incentive Fee. 15% of the Trading Profits experienced
with respect to each Trading Advisor's
allocated Net Assets.
DWR....................................... Monthly Brokerage Fee. 1/12 of 7.25% of Net Assets.
Financial benefit to DWR from interest The aggregate of (i) the brokerage fee
earned on the Partnership's assets in payable by the Partnership and (ii) net
excess of the interest paid to the excess interest and compensating balance
Partnership and from compensating bal- benefits to DWR (after crediting the
ance treatment in connection with its Partnership with interest) will not exceed
designation of a bank or banks in which 14% annually of the Partnership's average
the Partnership's assets are deposited. month-end Net Assets during a calendar
year.
</TABLE>
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<PAGE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading Advisors.......................... Monthly Management Fee. 1/12 of 4% of the Net Assets allocated to
each Trading Advisor.
Monthly Incentive Fee. 15% of the Trading Profits experienced
with respect to the Net Assets allocated
to each of Campbell and JWH, and 19% with
respect to Chesapeake.
DWR....................................... Monthly Brokerage Fee. 1/12 of 7.25% of Net Assets.
Financial benefit to DWR from interest The aggregate of (i) the brokerage fee
earned on the Partnership's assets in payable by the Partnership and (ii) net
excess of the interest paid to the excess interest and compensating balance
Partnership and from compensating bal- benefits to DWR (after crediting the
ance treatment in connection with its Partnership with interest) will not exceed
designation of a bank or banks in which 14% annually of the Partnership's average
the Partnership's assets are deposited. month-end Net Assets during a calendar
year.
</TABLE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading Advisors.......................... Monthly Management Fee. 1/12 of 4% of the Net Assets allocated to
each of Blenheim and Willowbridge, and
1/12 of 3% with respect to AICM.
Monthly Incentive Fee. 15% of the Trading Profits experienced
with respect to each Trading Advisor's
allocated Net Assets.
DWR....................................... Monthly Brokerage Fee. 1/12 of 7.25% of Net Assets.
Financial benefit to DWR from interest The aggregate of (i) the brokerage fee
earned on the Partnership's assets in payable by the Partnership and (ii) net
excess of the interest paid to the excess interest and compensating balance
Partnership and from compensating bal- benefits to DWR (after crediting the
ance treatment in connection with its Partnership with interest) will not exceed
designation of a bank or banks in which 14% annually of the Partnership's average
the Partnership's assets are deposited. month-end Net Assets during a calendar
year.
</TABLE>
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<PAGE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading Advisor........................... Monthly Management Fee. 1/12 of 1.25% of Net Assets.
Monthly Incentive Fee. 15% of the Trading Profits.
DWR....................................... Monthly Brokerage Fee. 1/12 of 4.60% of Net Assets.
Financial benefit to DWR from interest The aggregate of (i) the brokerage fee
earned on the Partnership's assets in payable by the Partnership and (ii) net
excess of the interest paid to the excess interest and compensating balance
Partnership and from compensating bal- benefits to DWR (after crediting the
ance treatment in connection with its Partnership with interest) will not exceed
designation of a bank or banks in which 14% annually of the Partnership's average
the Partnership's assets are deposited. month-end Net Assets during a calendar
year.
</TABLE>
SPECTRUM CURRENCY
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
Trading Advisors.......................... Monthly Management Fee. 1/12 of 4% of the Net Assets allocated to
JWH, and 1/12 of 3% with respect to
Sunrise Capital Partners.
Monthly Incentive Fee. 15% of the Trading Profits experienced
with respect to each Trading Advisor's
allocated Net Assets.
DWR....................................... Monthly Brokerage Fee. 1/12 of 4.60% of Net Assets.
Financial benefit to DWR from interest The aggregate of (i) the brokerage fee
earned on the Partnership's assets in payable by the Partnership and (ii) net
excess of the interest paid to the excess interest and compensating balance
Partnership and from compensating bal- benefits to DWR (after crediting the
ance treatment in connection with its Partnership with interest) will not exceed
designation of a bank or banks in which 14% annually of the Partnership's average
the Partnership's assets are deposited. month-end Net Assets during a calendar
year.
</TABLE>
SPECTRUM COMMODITY
<TABLE>
<CAPTION>
ENTITY FORM OF COMPENSATION AMOUNT OF COMPENSATION
- ------------------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C>
The Trading Advisor....................... Monthly Management Fee. 1/12 of 2.5% of Net Assets.
Annual Incentive Fee. 20% of Trading Profits.
DWR....................................... Monthly Brokerage Fee. 1/12 of 4.60% of Net Assets.
Financial benefit to DWR from interest The aggregate of (i) brokerage fees
earned on the Partnership's assets in payable by the Partnership, and (ii) net
excess of the interest paid to the excess interest and compensating balance
Partnership and from compensating bal- benefits to DWR (after crediting the
ance treatment in connection with its Partnership with interest) will not exceed
designation of a bank or banks in which 14% annually of the Partnership's average
the Partnership's assets are deposited. month-end Net Assets during a calendar
year.
</TABLE>
20
<PAGE>
TRADING ADVISORS
Each Partnership pays each of its Trading Advisors a monthly management fee,
whether or not the assets of the Partnership as a whole or the assets allocated
to such Trading Advisor are profitable. In addition, each Partnership pays each
of its Trading Advisors an incentive fee if Trading Profits are earned on the
Net Assets allocated to such Trading Advisor.
MONTHLY MANAGEMENT FEE. Each Partnership pays each of its Trading Advisors
a monthly management fee based on the Net Assets under management as of the
first day of each month, at the rate set forth in the above chart. The monthly
management fee compensates the Trading Advisor for the services performed in
connection with the Net Assets under management.
Following is an example of the management fee payable to a Partnership. If
the Net Assets of Spectrum Select equaled $200,000,000 as of the first day of
each month during the fiscal year, the Trading Advisors would receive an
aggregate monthly management fee for the year of $6,000,000 ( 1/12 of 3% of
$200,000,000 per month, or $500,000 times 12). The management fee payable to the
Trading Advisors in the foregoing example would be divided among them based on
the portion of the $200,000,000 in Net Assets allocated to each such Trading
Advisor at the beginning of each month.
INCENTIVE FEE. Each Partnership pays an incentive fee to each of its
Trading Advisors if Trading Profits are experienced with respect to allocated
Net Assets, at the rate set forth in the above chart. "Trading Profits" is
defined as the net futures interests trading profits (realized and unrealized)
earned on the Trading Advisor's allocated Net Assets, decreased by monthly
management fees and brokerage fees that are chargeable to the Trading Advisor's
allocated Net Assets, with such Trading Profits and items of decrease determined
from the end of the last period for which an incentive fee was earned by the
Trading Advisor. Extraordinary expenses of the Partnership, if any, are not
deducted in determining Trading Profits. No incentive fee is paid on interest
earned by any Partnership.
In the case of Spectrum Commodity, which is eligible to receive an annual
incentive fee, any accrued incentive fees with respect to Units of Spectrum
Commodity that are redeemed will be deducted and paid to the Trading Advisor at
the time of redemption.
If an incentive fee is paid to a Trading Advisor and the Trading Advisor
thereafter experiences losses, the Trading Advisor will retain any incentive
fees previously paid. However, no subsequent incentive fees will be paid to the
Trading Advisor until the Trading Advisor has again earned Trading Profits. If a
Trading Advisor's allocated Net Assets are reduced or increased because of
redemptions, additions or reallocations that occur at the end of or subsequent
to an incentive period in which the Trading Advisor experiences a trading loss,
the trading loss which must be recovered will be adjusted pro rata.
Following is an example of the incentive fee payable to a Partnership. If a
Trading Advisor for Spectrum Select earns Trading Profits of $1,000,000 for the
period ended January 31, 2000, the Trading Advisor will receive an incentive fee
of $150,000 for that period (15% of $1,000,000). If, however, the Trading
Advisor experiences realized and/or unrealized trading losses, or fees offset
trading profits, so as to result in a $250,000 loss for the period ended
February 29, 2000, an incentive fee will not be paid to the Trading Advisor for
that period. In order for the Trading Advisor to earn an incentive fee in the
following period ending March 31, 2000, the Trading Advisor will have to earn
Trading Profits exceeding $250,000 for that period, since the incentive fee is
payable based upon Trading Profits measured from the last period for which an
incentive fee was paid (I.E., January 31), and not from the immediately
preceding period. The foregoing example assumes no redemptions or reallocations
or additional purchases of Units during the periods in question, which would
require adjustments as described above.
COMMODITY BROKERS
BROKERAGE FEES. Commodity brokerage fees for futures interests trades are
typically paid on the completion or liquidation of a trade and are referred to
as "roundturn commissions," which cover both the initial purchase (or sale) of a
futures interest and the subsequent offsetting sale (or purchase). However,
pursuant to the customer agreements with the Commodity Brokers, the Partnerships
pay a monthly flat-rate brokerage fee based on their Net Assets as of the first
day of each month, at the rate set forth in the above chart, irrespective of the
number of trades executed on a Partnership's behalf.
21
<PAGE>
Following is an example of the brokerage fee payable to a Partnership. If
the Net Assets of Spectrum Select equaled $200,000,000 as of the first day of
each month during the fiscal year, DWR would receive an aggregate monthly
brokerage fee for the year of $14,500,000 ( 1/12 of 7.25% of $200,000,000 per
month, or $1,208,333, times 12).
From the flat-rate brokerage fees received from the Partnerships, DWR pays
or reimburses the Partnerships for all fees and costs incurred by CFI,
MS & Co., and MSIL in executing trades on behalf of the Partnerships, including
floor brokerage fees, exchange fees, clearinghouse fees, NFA fees, "give up"
fees, any taxes (other than income taxes), any third party clearing costs
incurred by CFI, MS & Co., and MSIL, costs associated with taking delivery of
futures interests, and fees for execution of forward contract transactions.
DWR also pays from the brokerage fees and trailing commissions it receives
the ordinary administrative expenses of each Partnership, the organizational
costs of Spectrum Currency and the initial offering of its Units (estimated to
be approximately $600,000 in the aggregate), and the continuing offering
expenses of each Partnership. Ordinary administrative expenses include legal,
accounting and auditing expenses, printing and mailing expenses, and filing fees
incurred in preparing reports, notices and tax information to Limited Partners
and regulatory bodies. The organizational and initial offering costs of Spectrum
Currency include legal, accounting and auditing fees, printing costs, filing
fees, escrow fees, marketing costs (which include costs relating to sales
seminars and the preparation of customer sales kits and brochures), and other
related fees and expenses. Continuing offering expenses include the cost of
legal, accounting and auditing fees, printing costs, solicitation and marketing
costs and other related fees and expenses.
While each Partnership pays a flat-rate brokerage fee, rather than
"roundturn commissions" on each trade, it is estimated, based upon the Trading
Advisors' historical trading, that such flat-rate brokerage fee would
approximate roundturn commissions ranging from approximately:
$35-45 for Spectrum Select
$35-45 for Spectrum Technical
$20-30 for Spectrum Strategic
$35-45 for Spectrum Global Balanced
$35-45 for Spectrum Currency
$50-60 for Spectrum Commodity
You should note that the roundturn commissions set forth above exclude
expenses, such as administrative expenses, organizational expenses, offering
expenses, "trail" commissions and other related expenses, which are paid from
the Partnerships' flat-rate brokerage fees, but are typically paid separately
from roundturn commissions. No representation or warranty is made as to the
accuracy of the foregoing estimates, as they are totally dependent on the number
of transactions effected by the Trading Advisors for the respective
Partnerships.
FINANCIAL BENEFITS. DWR benefits from the interest crediting arrangements
and possible compensating balance treatment in connection with its designation
of a bank or banks in which the Partnerships' assets are deposited.
EXTRAORDINARY EXPENSES
Each Partnership is obligated to pay any extraordinary expenses it may
incur. Extraordinary expenses will be determined in accordance with generally
accepted accounting principles, which generally include events that are both
unusual in nature and occur infrequently.
EXPENSE LIMITATIONS
The General Partner may permit an increase, subject to state limits
described below, in the management, incentive and brokerage fees payable by a
Partnership only on the first business day following a Redemption Date. Prior to
any such increase, the following conditions must be satisfied:
- notice of the increase must be mailed to investors at least five business
days prior to the last date on which a "Request for Redemption" must be
received by the General Partner
22
<PAGE>
- the notice must describe investors' redemption and voting rights
- investors must not be subject to any redemption charges if they redeem
Units at the first Redemption Date following the notice.
Each Partnership's fees and expenses are subject to limits imposed under
guidelines applied by certain state securities regulators, as set forth in
Section 7(e) of the Limited Partnership Agreement, including the limitation that
the aggregate of the brokerage fees payable by the Partnership to any Commodity
Broker and the net excess interest and compensating balance benefits to any
Commodity Broker, after crediting the Partnership with interest, shall not
exceed 14% annually of the Partnership's average month-end Net Assets during the
calendar year. The General Partner will pay any fees and expenses in excess of
any such limits.
REDEMPTION CHARGES
You may redeem all or part of your investment in any Spectrum Series
Partnership at any month-end once you have been an investor in that Partnership
for at least six months, regardless of when your Units were actually purchased.
Subject to certain exceptions, if you redeem Units on or before the last day
of the twelfth month after they were purchased, you will be subject to a
redemption charge equal to 2% of the Net Asset Value of a Unit on the Redemption
Date. If you redeem Units after the last day of the twelfth month and on or
before the last day of the twenty-fourth month after they were purchased, you
will be subject to a redemption charge equal to 1% of the Net Asset Value of a
Unit on the Redemption Date. If you redeem Units after the last day of the
twenty-fourth month after they were purchased, you will not be subject to a
redemption charge. Any redemption charges will be paid to DWR.
The following is an example of a redemption charge that may be payable by
you to DWR. If you redeem $5,000 worth of Units in Spectrum Select after the
sixth month and prior to the last day of the twelfth month after the Units were
purchased, you will be subject to the full 2% redemption charge. In that case,
you would be required to pay DWR an aggregate redemption charge equal to $100
(2% of $5,000).
23
<PAGE>
BREAK EVEN ANALYSIS
Following is a table that sets forth the fees and expenses that you would
incur on an initial investment of $5,000 in each Partnership and the amount that
your investment must earn (after taking into account estimated interest income,
based on current rates of 4.70%) in order to break even after one year and two
years. The fees and expenses applicable to each Partnership are set forth in the
chart under "Description of Charges" on page - .
<TABLE>
<CAPTION>
SPECTRUM
SPECTRUM SPECTRUM SPECTRUM GLOBAL SPECTRUM SPECTRUM
SELECT TECHNICAL STRATEGIC BALANCED CURRENCY COMMODITY
-------- --------- --------- -------- -------- ---------
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
Management Fee............................ 150.00 200.00 195.00 62.50 175.00 125.00
Brokerage Fee............................. 362.50 362.50 362.50 230.00 230.00 230.00
Less: Interest Income(1).................. (188.00) (188.00) (188.00) (235.00) (188.00) (188.00)
Incentive Fee(2).......................... -- -- -- -- -- --
Redemption Charge(3)...................... 102.04 102.04 102.04 102.04 102.04 102.04
Amount of trading profits required for you
to recoup your initial investment at the
end of one year......................... 426.54 426.54 471.54 159.54 319.04 269.04
Percentage of Net Assets that a
Partnership must earn in order for you
to recoup your initial investment with a
2% redemption charge at the end of one
year.................................... 8.53% 9.53% 9.43% 3.19% 6.38% 5.38%
Amount of trading profits required each
year for you to recoup your initial
investment after two years.............. 324.50 324.50 369.50 57.50 217.00 167.00
Percentage of Net Assets that a
Partnership must earn each year in order
for you to recoup your initial
investment without incurring a
redemption charge....................... 6.49% 7.49% 7.39% 1.15% 4.34% 3.34%
</TABLE>
- ---------
(1) The Partnerships will receive interest at the rate earned by DWR on its
U.S. Treasury bill investments with customer segregated funds as if 80%
(100% in the case of Spectrum Global Balanced) of their respective average
daily Net Assets for the month were held and invested at that rate. The
rate is estimated based upon current rates of approximately 4.70%.
(2) Incentive fees are assumed to be zero because (i) interest income is
greater than the redemption fee and (ii) each Trading Advisor's trading
profits are assumed to equal expenses.
(3) Units redeemed at the end of one year from the date of purchase are
generally subject to a 2% redemption charge.
USE OF PROCEEDS
The Partnerships engage in the following activities: the speculative trading
of futures, forwards, and options on futures contracts, including contracts on
foreign currencies, financial instruments, precious and industrial metals,
energy products, and agriculturals (collectively, "FUTURES INTERESTS"). The
proceeds received by each Partnership from the sale of its Units and the
continuing capital contributions made by the General Partner to each Partnership
will be deposited in separate commodity trading accounts established by the
Commodity Brokers for each of the Trading Advisors. All of the funds in a
Partnership's trading accounts will be used to engage in futures interests
trading.
The Partnerships' assets held by the Commodity Brokers will be segregated or
secured in accordance with the CEAct and CFTC regulations. The Partnerships'
trading on various U.S. futures exchanges is subject to CFTC regulation and the
rules of the exchanges. The Partnerships' trading on foreign futures exchanges
is subject to regulation by foreign regulatory authorities and the rules of the
exchanges.
Each Partnership's margin commitments with respect to its U.S. commodity
futures positions have ranged, and are anticipated to range, between 10% and 40%
of Net Assets (except Spectrum Select, which
24
<PAGE>
has ranged, and is anticipated to range, between 25% and 35%, and Spectrum
Commodity, which has ranged, and is anticipated to range, between 5% and 15%).
However, a Partnership's margin levels could deviate substantially from that
range in the future.
The Partnerships may trade on one or more of the following foreign futures
exchanges and, from time to time, may trade on other foreign exchanges:
- Deutsche Terminborse/Eurex
- Hong Kong Futures Exchange Ltd.
- International Petroleum Exchange of London Ltd.
- Italian Derivatives Market
- London International Financial Futures Exchange Ltd.
- London Commodity Exchange
- London Metals Exchange
- London Securities and Derivatives Exchange
- Marche a Terme International de France
- MEFF Renta Fija
- MEFF Renta Variable
- Montreal Exchange
- New Zealand Futures and Options Exchange
- Osaka Securities Exchange
- Singapore International Monetary Exchange
- Swiss Options and Financial Futures Exchange AG
- Sydney Futures Exchange
- Tokyo Grain Exchange
- Tokyo International Financial Futures Exchange
- Tokyo Stock Exchange
- Winnipeg Commodity Exchange
In connection with foreign futures and options contracts, the Partnerships'
assets may be deposited by the Commodity Brokers in accounts with non-U.S. banks
and foreign brokers that are segregated on the books of such banks or brokers
for the benefit of their customers. All such non-U.S. banks and foreign brokers
will be qualified depositories pursuant to relevant CFTC Advisories. Such
non-U.S. banks will be subject to the local bank regulatory authorities, and the
foreign brokers will be members of the exchanges on which the futures and option
trades are to be executed and will be subject to the regulatory authorities in
the jurisdictions in which they operate.
At each Monthly Closing, the Trading Advisors for each Partnership are
currently allocated the net proceeds from additional investments received by
that Partnership, and redemptions from that Partnership are allocated to them,
in the following proportions:
<TABLE>
<CAPTION>
PERCENTAGE OF
NET ASSETS
ALLOCATED TO
EACH TRADING
ADVISER AS OF
AUGUST 31,
SPECTRUM SELECT ADDITIONS REDEMPTIONS 1999
- --------------- --------- --------------- -------------
% % %
<S> <C> <C> <C>
EMC Capital Management, Inc.......... 0 33 1/3 21.3
Rabar Market Research, Inc........... 50 33 1/3 43.5
Sunrise Capital Management, Inc...... 50 33 1/3 35.2
SPECTRUM TECHNICAL
- ---------------------------------------
Campbell & Company, Inc.............. 33 1/3 33 1/3 31.4
Chesapeake Capital Corporation....... 33 1/3 33 1/3 23.0
John W. Henry & Company, Inc.
Original Investment Program........ 16 2/3 16 2/3 22.7
Financial and Metals Portfolio..... 16 2/3 16 2/3 22.9
SPECTRUM STRATEGIC
- ---------------------------------------
Allied Irish Capital Management,
Ltd................................ 75 0 13.0
Blenheim Investments, Inc............ 0 100 45.4
Willowbridge Associates Inc.......... 25 0 41.6
SPECTRUM GLOBAL BALANCED
- ---------------------------------------
RXR, Inc............................. 100 100 100
</TABLE>
25
<PAGE>
<TABLE>
<S> <C> <C> <C>
PERCENTAGE OF
NET ASSETS
ALLOCATED TO
EACH TRADING
ADVISER AS OF
AUGUST 31,
SPECTRUM CURRENCY ADDITIONS REDEMPTIONS 1999
- --------------------------------------- ---- ----- ----
% % %
John W. Henry & Company, Inc......... 50 50 N/A
Sunrise Capital Partners, LLC........ 50 50 N/A
SPECTRUM COMMODITY
- ---------------------------------------
Morgan Stanley Dean Witter
Commodities Management Inc......... 100 100 100
</TABLE>
In the future, the proceeds from each Monthly Closing and redemptions may be
allocated in different proportions. Further, the General Partner may adjust the
portion of a Partnership's assets traded by a Trading Advisor through
reallocations of assets among the Partnership's Trading Advisors. With respect
to Spectrum Currency, after Net Assets allocated to JWH reach $30 million, JWH
has the right to reject any additional monthly allocations that exceed 10% of
its allocated Net Assests.
The assets of the Partnerships are not commingled with the assets of one
another or any other entity. Margin deposits and deposits of assets with a
Commodity Broker do not constitute commingling.
INTEREST CREDITS
The Partnerships' funds held by the Commodity Brokers will either be held
and invested together with other customer segregated or secured funds of the
Commodity Brokers, or will be held in non-interest-bearing bank accounts. In
either case, the Partnerships will receive interest at the rate earned by DWR on
its U.S. Treasury bill investments with customer segregated funds as if 80%
(100% in the case of Spectrum Global Balanced) of their respective average daily
Net Assets for the month were invested at that rate. For purposes of these
interest credits, Net Assets do not include monies due a Partnership on or with
respect to forward contracts and other futures interests which have not been
received. DWR retains any interest earned in excess of the interest credited by
DWR to the Partnerships.
To the extent the Partnerships' funds are held by the Commodity Brokers in
customer segregated accounts relating to trading in U.S. exchange-traded futures
interests, such funds, along with segregated funds of other customers in the
accounts, may be invested by the Commodity Brokers, under applicable CFTC
regulations, only in instruments that are obligations of the U.S., general
obligations of any State or any political subdivision thereof, or obligations
fully guaranteed as to principal and interest by the U.S., or in certain reverse
repurchase agreements with respect to such instruments. To the extent the
Partnerships' funds are held by the Commodity Brokers in secured accounts
relating to trading in futures interests on non-U.S. exchanges or in forward
contracts, such funds may be invested by the Commodity Brokers, under applicable
CFTC regulations, only in the instruments described above for customer
segregated funds, in equity and debt securities traded on established securities
markets in the U.S., and in commercial paper and other debt instruments that are
rated in one of the top two rating categories by Moody's Investor Service, Inc.
or Standard & Poor's, a Division of The McGraw Hill Companies, Inc. A
significant portion of the Partnerships' funds held by DWR will be held in
secured accounts and will be invested in short-term commercial paper rated AAA
or the equivalent or in other permitted debt instruments rated AAA or the
equivalent.
To the extent that the assets of the Partnerships are held in
non-interest-bearing bank accounts, DWR or its affiliates will benefit from
compensating balance treatment in connection with DWR's designation of a bank or
banks in which the Partnership's assets are deposited, meaning that DWR or its
affiliates will receive favorable loan rates from such bank or banks by reason
of such deposits. While it is anticipated that these compensating balance
benefits will exceed the interest payable to each Partnership, it is estimated
that they should not exceed 4% of each Partnership's annual average Net Assets
after such credits. To the extent that any excess interest and compensating
balance benefits to DWR or its affiliates exceed the interest DWR is obligated
to credit to the Partnerships, they will not be shared with the Partnerships.
26
<PAGE>
THE SPECTRUM SERIES
GENERAL
Each Partnership is a limited partnership formed under the laws of Delaware.
<TABLE>
<CAPTION>
DATE PARTNERSHIP
DATE PARTNERSHIP BEGAN OR IS EXPECTED
WAS FORMED TO BEGIN OPERATIONS
---------------- --------------------
<S> <C> <C>
Spectrum Select............................. March 21, 1991 August 1, 1991
Spectrum Technical.......................... April 29, 1994 November 2, 1994
Spectrum Strategic.......................... April 29, 1994 November 2, 1994
Spectrum Global Balanced.................... April 29, 1994 November 2, 1994
Spectrum Commodity.......................... July 31, 1997 January 2, 1998
Spectrum Currency........................... October 20, 1999 Initial Closing
</TABLE>
Each Partnership calculates its Net Asset Value per Unit independently of
the other Partnerships. Each Partnership's performance depends solely on the
performance of its Trading Advisor(s).
Each Spectrum Series Partnership is continuously offering its Units for sale
at Monthly Closings held as of the last day of each month. Except for its
Initial Closing, where Spectrum Currency will offer Units at a price of $10 per
Unit, the purchase price per Unit is equal to 100% of the Net Asset Value of a
Unit as of the date of the Monthly Closing at which the General Partner accepts
a subscription. Following is a summary of certain information relating to the
sale of Units of all Partnerships that have commenced operations through
August 31, 1999:
<TABLE>
<CAPTION>
NUMBER
TOTAL GENERAL OF
UNITS UNITS AVAILABLE PROCEEDS PARTNER LIMITED
SOLD FOR SALE RECEIVED CONTRIBUTIONS PARTNERS
-------------- --------------- ------------ ------------- --------
$ $
<S> <C> <C> <C> <C> <C>
Spectrum Select*................... 17,472,666.939 3,641,300.161 265,769,397 1,680,000 17,925
Spectrum Technical................. 21,442,025.987 11,557,974.013 284,279,930 2,341,984 30,139
Spectrum Strategic................. 9,261,327.252 3,238,672.748 99,419,026 737,000 14,016
Spectrum Global Balanced........... 4,327,345.520 3,672,654.480 56,701,869 488,234 8,031
Spectrum Commodity................. 4,195,493.632 0 41,235,223 430,000 3,762
</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.
INVESTMENT OBJECTIVES
The Spectrum Series consists of six continuously offered limited
partnerships. Each Partnership offers you the choice of investing in managed
futures funds with different investment objectives and different Trading
Advisors employing a variety of trading programs, as well as the opportunity to
shift investments among the Partnerships. Following is a description of the
investment objective for each Partnership.
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
Spectrum Select seeks as its investment objective to achieve substantial
capital appreciation and to provide investors with diversification from
traditional investments, such as stocks and bonds, in their portfolios, through
the speculative trading of a diverse mix of futures interests. Spectrum Select
utilizes multiple Trading Advisors, each of whom employs proprietary trading
models that seek to identify trends through the analysis of technical market
information. For a more detailed discussion of each Spectrum Select Trading
Advisor and their various programs see "The Trading Advisors--Morgan Stanley
Dean Witter Spectrum Select L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
Spectrum Technical seeks as its investment objective to achieve capital
appreciation and to provide investors with diversification from traditional
investments, such as stocks and bonds, in their portfolios, through the
speculative trading of a diverse mix of futures interests using trend-following
technical
27
<PAGE>
trading methods. Spectrum Technical utilizes multiple Trading Advisors, each of
which employs proprietary trading models that seek to identify long-term trends
through the disciplined analysis of technical market information. For a more
detailed discussion of each Spectrum Technical Trading Advisor and their various
programs, see "The Trading Advisors--Morgan Stanley Dean Witter Spectrum
Technical L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
Spectrum Strategic seeks as its investment objective to achieve capital
appreciation and to provide investors with diversification from traditional
investments, such as stocks and bonds, in their portfolios, through the
speculative trading of a diverse mix of futures interests. Spectrum Strategic
utilizes multiple Trading Advisors, each of which employs primarily
discretionary trading approaches that seek to profit through the analysis of
fundamental market information, such as supply and demand levels and economic
and geopolitical indicators, and, to a lesser extent, technical market
information. For a more detailed discussion of each Spectrum Strategic Trading
Advisor and their various programs, see "The Trading Advisors--Morgan Stanley
Dean Witter Spectrum Strategic L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
Spectrum Global Balanced seeks as its investment objective to achieve
capital appreciation through the construction of a multi-strategy portfolio of
futures interests, consisting of world equity, fixed income, currency, and
commodity markets. Spectrum Global Balanced combines a trend-following approach
with a hedged--long-biased--equity and fixed income overlay. The trend-following
strategy uses technical analysis, while the hedged equity and fixed income
approach uses fundamental macro-economic data to systematically adjust portfolio
exposure. Spectrum Global Balanced utilizes a single Trading Advisor, which
employs a proprietary trading approach that seeks to profit through the analysis
of primarily technical market information. For a more detailed discussion of
RXR, the sole Trading Advisor for Spectrum Global Balanced, and its trading
program, see "The Trading Advisors--Morgan Stanley Dean Witter Spectrum Global
Balanced L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
Spectrum Currency seeks as its investment objective to achieve capital
appreciation and to provide investors with diversification from traditional
investments, such as stocks and bonds, in their portfolios, through the
speculative trading of futures interests in global currency markets. Spectrum
Currency utilizes multiple Trading Advisors, each of which employs proprietary
trading models that seek to identify favorable price relationships between and
among various global currency markets through the disciplined analysis of
technical market information. For a more detailed discussion of each Spectrum
Currency Trading Advisor and their various programs, see "The Trading
Advisors--Morgan Stanley Dean Witter Spectrum Currency L.P." on page - .
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
Spectrum Commodity seeks as its investment objective to achieve capital
appreciation and to provide investors with diversification from traditional
investments, such as stocks and bonds, in their portfolio, through the long-only
speculative trading of a diverse mix of tangible commodity futures interests,
including metals, energy, food, fiber and agricultural markets. As its primary
focus is tangible commodities, Spectrum Commodity does not participate in
financial markets, such as interest rate, stock index, or currency futures
interests. Spectrum Commodity utilizes a single Trading Advisor, which employs a
proprietary trading approach that seeks to identify long-only trends through the
disciplined analysis of technical market information. For a more detailed
discussion of MSDWCM, the sole Trading Advisor for Spectrum Commodity, and its
trading program, see "The Trading Advisors--Morgan Stanley Dean Witter Spectrum
Global Balanced L.P." on page - .
TRADING POLICIES
The Trading Advisors will manage the funds allocated to them in accordance
with the following trading policies. Note: [Bracketed language is not applicable
to Spectrum Global Balanced]; ITALICIZED LANGUAGE IS APPLICABLE ONLY TO SPECTRUM
GLOBAL BALANCED; Trading Policy 8 is applicable only to Spectrum Select and
Spectrum Commodity; and only Trading Policies 5-8 are applicable to Spectrum
Commodity.
28
<PAGE>
1. The Trading Advisors will trade only in those futures interests
contracts that have been approved by the General Partner. [The Partnership
normally will not establish new positions in a futures interest for any one
contract month or option if such additional positions would result in a net
long or short position for that futures interest requiring as margin or
premium more than 15% of the Partnership's Net Assets.] In addition, the
Partnership will, except under extraordinary circumstances, maintain
positions in futures interests in at least two market segments (I.E.,
agricultural items, industrial items (including energies), metals,
currencies, and financial instruments (including stock, financial, and
economic indices)) at any one time.
2. [The Partnership will not acquire additional positions in any
futures interest if such additional positions would result in the aggregate
net long or short positions for all futures interests requiring as margin or
premium for all outstanding positions more than 66- 2/3% of the
Partnership's Net Assets. Under certain market conditions, such as an abrupt
increase in margins required by a commodity exchange or its clearinghouse or
an inability to liquidate open positions because of daily price fluctuation
limits, or both, the Partnership may be required to commit as margin amounts
in excess of the foregoing limit. In such event, the Trading Advisors will
reduce their open positions to comply with the foregoing limit before
initiating new positions.]
3. The Partnership will trade currencies and other commodities in the
interbank and forward contract markets only with banks, brokers, dealers,
and other financial institutions which the General Partner, in conjunction
with DWR, has determined to be creditworthy. In determining the
creditworthiness of a counterparty to a forward contract, the General
Partner and DWR will consult with the Corporate Credit Department of DWR.
4. The Trading Advisors will not generally take a position after the
first notice day in any futures interest during the delivery month of that
futures interest, except to match trades to close out a position on the
interbank foreign currency or other forward markets or liquidate trades in a
limit market. SPECTRUM GLOBAL BALANCED MAY, WITH THE GENERAL PARTNER'S PRIOR
APPROVAL, PURCHASE "CASH" STOCKS AND BONDS, OR OPTIONS ON STOCK OR BOND
INDICES, ON A TEMPORARY BASIS UNDER UNUSUAL CIRCUMSTANCES IN WHICH IT IS NOT
PRACTICABLE OR ECONOMICALLY FEASIBLE TO ESTABLISH SPECTRUM GLOBAL BALANCED'S
STOCK INDEX OR BOND PORTFOLIOS IN THE FUTURES MARKETS, AND MAY ACQUIRE
"CASH" INSTRUMENTS IN ITS SHORT-TERM INTEREST RATE FUTURES COMPONENT.
5. The Partnership will not employ the trading technique commonly known
as "pyramiding," in which the speculator uses unrealized profits on existing
positions in a given futures interests due to favorable price movement as
margin specifically to buy or sell additional positions in the same or a
related futures interest. Taking into account the Partnership's open trade
equity (I.E., the profit or loss on an open futures interest position) on
existing positions in determining generally whether to acquire additional
futures interest positions on behalf of the Partnership will not be
considered to constitute "pyramiding."
6. The Partnership will not under any circumstances lend money to
affiliated entities or otherwise. The Partnership will not utilize
borrowings except if the Partnership purchases or takes delivery of
commodities. If the Partnership borrows money from the General Partner or
any "affiliate" thereof (as defined in Section 14(c) of the Limited
Partnership Agreement), the lending entity in such case (the "Lender") may
not receive interest in excess of its interest costs, nor may the Lender
receive interest in excess of the amounts which would be charged the
Partnership (without reference to the General Partner's financial abilities
or guarantees) by unrelated banks on comparable loans for the same purpose,
nor may the Lender or any affiliate thereof receive any points or other
financing charges or fees regardless of the amount. Use of lines of credit
in connection with its forward trading does not, however, constitute
borrowing for purposes of this trading limitation.
7. The Partnership will not permit "churning" of the Partnership's
assets.
8. The Partnership will not purchase, sell, or trade securities (except
securities approved by the CFTC for investment of customer funds).
PERFORMANCE RECORDS
A summary of performance information for each Partnership, except for
Spectrum Currency, which does not have an operating history, from its
commencement of trading through August 31, 1999 is set
29
<PAGE>
forth in Capsules I through VI 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 -, which are an integral part
of the following capsules.
-------------------
You are cautioned that the information set forth in the following capsules
is not indicative of, and has no bearing on, any trading results that may be
attained by the Partnerships in the future. Past results are not a guarantee of
future results. The Partnerships can not assure you that they will be profitable
or able to avoid incurring substantial losses. You should also note that
interest income may constitute a significant portion of a Partnership's total
income and, in certain instances, may generate profits where there have been
realized or unrealized losses from futures interest trading.
CAPSULE I
PERFORMANCE OF SPECTRUM SELECT
Type of Pool: Publicly-Offered Fund
Inception of Trading: August 1991
Aggregate Subscriptions: $267,449,397
Current Capitalization: $212,536,776
Current Net Asset Value Per Unit: $22.50
Worst Monthly % Drawdown in Past Five Years (Month/Year): (12.11)% (February
1996)
Worst Monthly % Drawdown Since Inception (Month/Year): (13.72)% (January 1992)
Worst Month-End Peak-to-Valley: (26.78)% (15 months, June 1995-August 1996)
Cumulative Return Since Inception: 125.00%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
----------------------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994 1993 1992 1991
- ----- ---- ---- ---- ---- ---- ---- ---- ---- ----
% % % % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January................................. (2.90) 0.87 3.93 (0.38) (8.13) (11.67) 0.31 (13.72)
February................................ 5.45 2.16 4.75 (12.11) 9.61 (6.79) 14.84 (6.09)
March................................... (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 (6.20)
September............................... 6.24 0.93 3.34 (7.76) 1.25 (4.13) (5.24) 6.32
October................................. (5.14) (3.77) 13.30 (3.35) (4.78) (4.97) (3.17) (2.28)
November................................ (4.16) 0.62 6.76 1.37 5.68 (1.30) 1.39 (2.93)
December................................ 1.19 3.35 (3.36) 11.19 (2.72) 8.14 (3.58) 38.67
Compound Annual/Period
Rate of Return........................ (5.46) 14.15 6.22 5.27 23.63 (5.13) 41.63 (14.45) 31.18
(8 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
30
<PAGE>
CAPSULE II
PERFORMANCE OF SPECTRUM TECHNICAL
Type of Pool: Publicly-Offered Fund
Inception of Trading: November 1994
Aggregate Subscriptions: $286,621,914
Current Capitalization: $281,229,919
Current Net Asset Value per Unit: $15.90
Worst Monthly % Drawdown (Month/Year): (6.39)% (February 1996)
Worst Month-End Peak-to-Valley Drawdown: (8.27)% (3 months, March 1997-May 1997)
Cumulative Return Since Inception: 59.00%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
- ----- ---- ---- ---- ---- ---- ----
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
January............................... (4.96) (1.16) 3.67 4.78 (1.84)
February.............................. 2.48 0.41 1.13 (6.39) 5.10
March................................. (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............................. 4.35 1.85 5.50 (3.33)
October............................... (0.73) 0.36 9.92 (0.09)
November.............................. (6.17) 1.01 8.34 0.93 (0.90)
December.............................. 5.98 4.57 (3.88) 6.09 (1.31)
Compound Annual/Period
Rate of Return...................... (1.36) 10.18 7.49 18.35 17.59 (2.20)
(8 months) (2 months)
</TABLE>
CAPSULE III
PERFORMANCE OF SPECTRUM STRATEGIC
Type of Pool: Publicly-Offered Fund
Inception of Trading: November 1994
Aggregate Subscriptions: $100,156,026
Current Capitalization: $88,749,898
Current Net Asset Value per Unit: $13.49
Worst Monthly % Drawdown (Month/Year): (13.38)% (May 1999)
Worst Month-End Peak-to-Valley Drawdown: (32.11)% (16 months, April 1997-July
1998)
Cumulative Return Since Inception: 34.90%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
- ----- ---- ---- ---- ---- ---- ----
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
January................................. (3.55) 5.32 (0.66) 3.71 (3.50)
February................................ 11.76 (3.37) 10.09 (10.29) 1.45
March................................... (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............................... 19.03 (6.03) 5.11 (0.39)
October................................. 8.44 (6.24) 2.92 0.30
November................................ (7.94) (2.22) 3.49 2.76 0.10
December................................ 2.76 5.62 (2.65) 6.24 0.00
Compound Annual/Period
Rate of Return........................ 16.80 7.84 0.37 (3.53) 10.49 0.10
(8 months) (2 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
31
<PAGE>
CAPSULE IV
PERFORMANCE OF SPECTRUM GLOBAL BALANCED
Type of Pool: Publicly-Offered Fund
Inception of Trading: November 1994
Aggregate Subscriptions: $57,190,103
Current Capitalization: $55,092,521
Current Net Asset Value per Unit: $15.87
Worst Monthly % Drawdown (Month/Year): (7.92)% (February 1996)
Worst Month-End Peak-to-Valley Drawdown: (10.64)% (4 months,
February 1996-May 1996)
Cumulative Return Since Inception: 58.70%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
---------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994
- ----- ---- ---- ---- ---- ---- ----
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
January.................................. (0.06) 2.25 3.35 0.41 1.32
February................................. (0.06) 1.49 3.16 (7.92) 4.62
March.................................... 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................................ 5.11 3.26 2.30 1.61
October.................................. 1.18 (1.69) 3.77 0.26
November................................. 2.66 (0.37) 4.76 2.72 (0.50)
December................................. 1.27 3.07 (3.88) 2.99 (1.21)
Compound Annual/Period
Rate of Return......................... (0.81) 16.36 18.23 (3.65) 22.79 (1.70)
(8 months) (2 months)
</TABLE>
CAPSULE V
PERFORMANCE OF SPECTRUM COMMODITY
Type of Pool: Publicly-Offered Fund
Inception of Trading: January 2, 1998
Aggregate Subscriptions: $41,665,223
Current Capitalization: $23,566,849
Current Net Asset Value per Unit: $7.25
Worst Monthly % Drawdown (Month/Year): (9.09)% (November 1998)
Worst Month-End Peak-to-Valley Drawdown: (38.60)% (13 Months, February
1998-February 1999)
Cumulative Return Since Inception: (27.50)%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
-----------------------
MONTH 1999 1998
- ----- ---- ----
% %
<S> <C> <C>
January........................................... (1.52) 1.30
February.......................................... (3.86) (5.92)
March............................................. 8.68 0.10
April............................................. 2.37 (2.41)
May............................................... (5.92) (6.87)
June.............................................. 4.45 (3.23)
July.............................................. 0.44 (6.44)
August............................................ 6.15 (7.90)
September......................................... 7.19
October........................................... (3.48)
November.......................................... (9.09)
December.......................................... (3.38)
Compound Annual/Period
Rate of Return.................................. 10.35 (34.30)
(8 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
32
<PAGE>
Capsule VI below provides the actual annual and year-to-date performance
information for Dean Witter Cornerstone IV, which is another currency-only fund
operated by the General Partner and traded by JWH and Sunrise Capital Partners,
the same Trading Advisors that will trade for Spectrum Currency. JWH and Sunrise
Capital Partners will trade for Spectrum Currency using the same trading
strategies that they employ for Cornerstone IV.
CAPSULE VI
PERFORMANCE OF CORNERSTONE IV
Type of Pool: Publicly-Offered Fund
Inception of Trading: May 1987
Aggregate Subscriptions: $168,090,005
Current Capitalization: $103,633,498
Current Net Asset Value per Unit: $4,533.46
Worst Monthly % Drawdown (Month/Year): (21.04)% (September 1989)
Worst Month-end Peak-to-Valley Drawdown: (45.21)% (3 months, July
1989-September 1989)
Cumulative Return Since Inception: 364.97%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
--------------------------------------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994 1993 1992 1991
- ----- ---- ---- ---- ---- ---- ---- ---- ---- ----
% % % % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January......................... (2.37) (1.58) 5.34 3.19 (7.65) (1.12) (5.29) (9.64) (10.12)
February........................ 0.84 (3.16) 6.55 (5.78) 6.27 (2.75) 12.92 (7.40) (6.91)
March........................... 2.23 2.51 1.45 2.80 27.02 0.29 (2.55) 1.60 26.00
April........................... 1.19 (3.44) 1.23 2.97 2.39 (3.19) 0.03 (6.40) 1.83
May............................. (1.37) 4.89 (5.54) 1.19 (4.83) (3.65) 3.95 2.71 1.24
June............................ (0.67) 11.31 1.36 (0.23) (0.62) 6.72 0.92 15.10 9.45
July............................ (5.28) 0.37 8.45 (3.51) (1.06) (4.21) 5.87 7.47 (9.47)
August.......................... 1.27 0.78 2.68 (2.69) 5.49 (3.57) (5.57) 17.26 (8.50)
September....................... (3.11) 0.45 0.32 (0.06) 1.66 (2.10) (4.21) 6.69
October......................... 4.86 3.12 8.80 0.74 4.93 (7.48) (0.99) (5.29)
November........................ (4.24) 4.15 4.25 (2.57) (6.82) (7.50) 0.60 5.26
December........................ (1.49) 4.38 1.76 (0.52) (2.73) (0.78) (2.40) 27.40
Compound Annual/Period Rate of
Return........................ (4.29) 6.80 38.41 12.97 22.96 (14.27) (9.12) 10.37 33.52
(8 Months)
<CAPTION>
MONTHLY PERFORMANCE
-----------------------------------------
MONTH 1990 1989 1988 1987
- ----- ---- ---- ---- ----
% % % %
<S> <C> <C> <C> <C>
January......................... 3.15 15.72 (18.14)
February........................ 1.37 (14.64) 0.93
March........................... 6.09 3.44 5.06
April........................... 3.01 1.84 3.41
May............................. (8.53) 12.56 25.38 (9.60)
June............................ 12.26 0.01 12.95 (0.75)
July............................ 23.25 (14.85) 6.93 (2.23)
August.......................... 8.65 (18.51) 3.96 (12.61)
September....................... (3.02) (21.04) (4.46) 0.00
October......................... 11.07 4.47 1.56 13.82
November........................ (1.11) 11.40 8.77 11.80
December........................ (5.74) 14.97 (7.80) 13.39
Compound Annual/Period Rate of
Return........................ 57.77 (14.12) 37.51 10.61
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Capsule VI-A below is a pro forma of Capsule VI, adjusted to reflect the
actual brokerage, management and incentive fees to be paid by Spectrum Currency,
rather than those which were paid by Cornerstone IV. The footnotes following
Capsule VI-A are an integral part of Capsule VI-A.
You are cautioned that the performance information set forth in the
following capsule performance summary is not indicative of, and may have no
bearing on, the performance results that may be attained by Spectrum Currency in
the future, since past performance is not a guarantee of future results. The
General Partner cannot assure you that Spectrum Currency will be profitable or
will be able to avoid incurring substantial losses. You should also note that
interest income may constitute a significant portion of Spectrum Currency's
performance and, in certain instances, may generate positive performance results
where there have been realized or unrealized losses from futures interest
trading.
33
<PAGE>
CAPSULE VI-A
PRO FORMA PERFORMANCE OF CORNERSTONE IV
Worst Monthly % Drawdown Month/Year: (20.32)% (January 1998)
Worst Month-end Peak-to-Valley Drawdown: (43.60)% (3 months, July 1989-September
1989)
Cumulative Return Since Inception: 373.10%
<TABLE>
<CAPTION>
MONTHLY PERFORMANCE
-------------------------------------------------------------------------------------
MONTH 1999 1998 1997 1996 1995 1994 1993 1992
- ----- ---- ---- ---- ---- ---- ---- ---- ----
% % % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January................................ (3.02) (1.85) 5.33 3.18 (7.45) (1.16) (6.08) (11.25)
February............................... 0.73 (4.07) 6.33 (5.81) 6.33 (2.63) 14.75 (8.58)
March.................................. 2.55 2.76 1.15 2.70 27.16 0.46 (2.73) 2.06
April.................................. 1.18 (4.25) 0.89 3.08 2.12 (3.23) 0.28 (6.42)
May.................................... (1.83) 5.30 (5.58) 1.13 (4.99) (3.71) 4.47 3.14
June................................... (0.59) 11.66 1.35 (0.17) (0.83) 6.99 1.27 17.70
July................................... (5.30) 0.03 8.32 (3.53) (1.26) (4.25) 6.19 8.05
August................................. 1.14 0.53 2.03 (2.73) 5.43 (3.54) (6.67) 17.37
September.............................. (3.85) 0.18 0.52 (0.19) 1.72 (1.99) (4.68)
October................................ 5.45 2.57 8.89 0.49 4.93 (7.26) (1.32)
November............................... (5.30) 3.98 4.17 (2.79) (6.73) (7.19) 0.55
December............................... (1.98) 4.24 1.81 (0.71) (2.71) (0.57) (2.70)
Compound Annual/Period
Rate of Return........................ (5.26) 3.09 34.63 13.14 21.34 (13.78) (7.54) 9.78
(8 Months)
<CAPTION>
MONTHLY PERFORMANCE
----------------------------------------------------
MONTH 1991 1990 1989 1988 1987
- ----- ---- ---- ---- ---- ----
% % % % %
<S> <C> <C> <C> <C> <C>
January................................ (10.94) 3.64 17.65 (20.32)
February............................... (6.68) 1.36 (17.29) 1.00
March.................................. 28.71 6.08 4.14 5.83
April.................................. 1.80 3.05 1.94 3.80
May.................................... 1.30 (7.89) 14.32 27.74 (10.64)
June................................... 10.08 13.16 0.18 13.33 (0.31)
July................................... (10.89) 22.06 (14.37) 6.91 (2.05)
August................................. (8.29) 9.71 (17.75) 3.94 (12.21)
September.............................. 7.05 (3.22) (19.92) (5.26) (0.22)
October................................ (5.01) 11.73 4.92 1.99 13.83
November............................... 5.39 (1.33) 11.66 9.55 11.17
December............................... 28.91 (6.51) 15.74 (9.00) 13.95
Compound Annual/Period
Rate of Return........................ 37.10 59.88 (9.52) 36.99 10.22
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FOOTNOTES TO CAPSULES I THROUGH V
"Drawdown" is the decline in the Net Asset Value per Unit.
"Worst Month-End Peak-to-Valley Drawdown" is equivalent to the "drawdown"
experienced by a Partnership, determined in accordance with CFTC Rule 4.10(1)
and represents the greatest cumulative percentage decline from any month-end Net
Asset Value per Unit that occurs without such month-end Net Asset Value per Unit
being equaled or exceeded by a subsequent month-end Net Asset Value per Unit.
For example, if the Net Asset Value per Unit of a Partnership was $15 and
declined by $1 in each of January and February, increased by $1 in March and
declined again by $2 in April, a "peak-to-valley drawdown" analysis conducted as
of the end of April would consider that "drawdown" to be still continuing and to
be $3 in amount because the $15 initial month-end Net Asset Value per Unit had
not been equaled or exceeded by a subsequent month-end Net Asset Value per Unit,
whereas if the Net Asset Value of a Unit had increased by $2 in March, the
January-February drawdown would have ended as of the end of February at the $2
level because the $15 initial Net Asset Value per Unit would have been equaled
in March. Such "drawdowns" are measured on the basis of month-end Net Asset
Values only, and do not reflect intra-month figures.
"Monthly Rate of Return" is the percentage change in Net Asset Value per
Unit from one month to another.
"Compound Annual/Period Rate of Return" is calculated by multiplying on a
compound basis each of the monthly rates of return and not by adding or
averaging such monthly rates of return. For periods of less than one year, the
results are year-to-date.
FOOTNOTES TO CAPSULE VI-A PRO FORMA PERFORMANCE SUMMARY
Capsule VI-A above reflects pro forma rates of return for Spectrum Currency
as if it were in operation during the same periods as Cornerstone IV. These
rates of return are the result of the General Partner making certain pro forma
adjustments to the actual past performance record of Cornerstone IV. The pro
forma adjustments are an attempt to reflect the actual brokerage, management and
incentive fees, and historical interest income, which would have been paid or
received by Spectrum Currency, as opposed to the actual fees, expenses and
interest income applicable to Cornerstone IV.
Furthermore, you must be aware that pro forma rates of return have certain
inherent limitations: (A) pro forma adjustments are only an approximate means of
modifying historical records to reflect certain
34
<PAGE>
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, and other
factors; 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
VI-A is relevant to evaluating an investment in Spectrum Currency, no
representation is or could be made that the capsule presents what the
performance results would have been in the past or are likely to be in the
future. Past results are not a guarantee of future results. The results
presented in Capsule VI-A are hypothetical because no trades were actually made
under the terms set forth in the Capsule.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
ADDITIONAL PARTNERSHIPS
In the future, additional partnerships may be added to the Spectrum
Series and units of limited partnership interest of such partnerships may be
offered pursuant to an updated version of, or supplement to, this Prospectus.
Such partnerships will generally have different Trading Advisors and may have
substantially different trading approaches or fee structures. You should
carefully review any updated version of, or supplement to, this Prospectus
before making the decision to purchase units in any partnership.
AVAILABILITY OF EXCHANGE ACT REPORTS
The Partnerships are required to file annual and quarterly reports, proxy
statements and certain other information required by the Securities Exchange Act
of 1934, as amended, with the SEC. You may read any of these filed documents, or
obtain copies by paying prescribed charges, at the SEC's public reference rooms
located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 7 World
Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference rooms. The
Partnerships' SEC filings are also available to the public from the SEC's Web
site at "http://www.sec.gov."
35
<PAGE>
SELECTED FINANCIAL DATA
The following are the results of operations for each Partnership (except
Spectrum Currency, which does not have an operating history) 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 SIX MONTHS ENDED
JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ $ $ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 3,393,720 6,761,724 36,087,729 15,940,851 26,876,393 65,987,157 19,134,352
Net change in unrealized 2,189,977 (3,968,065) (1,192,107) 3,149,167 (10,950,217) (4,657,344) (7,758,820)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Trading Results 5,583,697 2,793,659 34,895,622 19,090,018 15,926,176 61,329,813 11,375,532
Interest income (DWR) 3,581,033 3,402,988 6,883,110 7,405,511 6,120,347 7,969,749 6,044,870
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Revenues 9,164,730 6,196,647 41,778,732 26,495,529 22,046,523 69,299,562 17,420,402
----------- ----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
Brokerage fees (DWR) 7,497,645 4,707,505 11,360,166 9,777,851 10,641,478 14,173,695 15,551,182
Management fees 3,102,472 2,447,663 5,202,158 5,239,533 4,583,197 5,626,908 5,452,353
Incentive fees -- -- 1,832,021 49,989 175,796 8,707,049 4,441,510
Transaction fees and costs -- 625,328 625,327 1,370,439 1,104,011 1,589,795 1,652,264
Administrative expenses -- 64,000 64,000 114,000 128,000 148,000 126,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses 10,600,117 7,844,496 19,083,672 16,551,812 16,632,482 30,245,447 27,223,309
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) (1,435,387) (1,647,849) 22,695,060 9,943,717 5,414,041 39,054,115 (9,802,907)
=========== =========== =========== =========== =========== =========== ===========
NET INCOME (LOSS) ALLOCATION:
Limited Partners (1,414,495) (1,619,335) 22,302,202 9,781,168 5,283,411 38,580,172 (9,695,068)
General Partner (20,892) (28,514) 392,858 162,549 130,630 473,943 (107,839)
NET INCOME (LOSS) PER UNIT:
Limited Partners (.16) (.22) 2.95 1.22 .98 3.56 (.82)
General Partner (.16) (.22) 2.95 1.22 .98 3.56 (.82)
TOTAL ASSETS AT END OF PERIOD 217,452,195 161,593,991 202,668,038 169,541,807 167,588,012 179,342,999 171,613,080
TOTAL NET ASSETS AT END OF
PERIOD 214,654,685 157,944,257 200,082,516 166,773,321 163,786,285 176,446,260 168,189,328
NET ASSET VALUE PER UNIT AT
END OF PERIOD
Limited Partners 23.64 20.63 23.80 20.85 19.62 18.64 15.08
General Partner 23.64 20.63 23.80 20.85 19.62 18.64 15.08
</TABLE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE SIX MONTHS ENDED NOVEMBER 2, 1994
JUNE 30, FOR THE YEARS ENDED DECEMBER 31, (COMMENCEMENT OF
------------------------ ------------------------------------------------- OPERATIONS) TO
1999 1998 1998 1997 1996 1995 DECEMBER 31, 1994
----------- ----------- ----------- ----------- ----------- ---------- -------------------
$ $ $ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 13,840,196 17,820,196 35,224,194 13,777,460 26,334,748 4,446,595 (786,137)
Net change in
unrealized 1,749,845 (14,343,353) 6,612,556 9,762,823 (1,552,659) 3,362,093 724,455
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total Trading Results 15,590,041 3,476,843 41,836,750 23,540,283 24,782,089 7,808,688 (61,682)
Interest income (DWR) 4,380,011 3,842,512 8,103,423 5,987,304 3,242,977 1,430,845 67,617
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total Revenues 19,970,052 7,319,355 49,940,173 29,527,587 28,025,066 9,239,533 5,935
----------- ----------- ----------- ----------- ----------- ---------- ----------
EXPENSES
Brokerage fees (DWR) 9,351,466 7,196,245 15,543,787 11,617,770 6,997,531 3,003,934 149,907
Management fees 5,159,430 3,798,223 8,403,764 5,832,758 3,273,649 1,373,227 68,529
Incentive fees 430,097 209,494 3,191,252 369,975 1,852,569 600,504 19,678
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total Expenses 14,940,993 11,203,962 27,138,803 17,820,503 12,123,749 4,977,665 238,114
----------- ----------- ----------- ----------- ----------- ---------- ----------
NET INCOME (LOSS) 5,029,059 (3,884,607) 22,801,370 11,707,084 15,901,317 4,261,868 (232,179)
=========== =========== =========== =========== =========== ========== ==========
NET INCOME (LOSS)
ALLOCATION:
Limited Partners 4,975,541 (3,844,633) 22,571,217 11,589,197 15,737,852 4,226,249 (229,460)
General Partner 53,518 (39,974) 230,153 117,887 163,465 35,619 (2,719)
NET INCOME (LOSS) PER
UNIT:
Limited Partners .27 (.30) 1.49 1.02 2.11 1.72 (.22)
General Partner .27 (.30) 1.49 1.02 2.11 1.72 (.22)
TOTAL ASSETS AT END OF
PERIOD 283,820,409 209,877,035 258,673,911 184,769,817 114,822,056 60,075,842 15,084,678
TOTAL NET ASSETS AT END
OF PERIOD 279,100,864 205,823,916 255,101,434 181,950,507 112,985,629 59,326,379 14,931,054
NET ASSET VALUE PER UNIT
AT END OF PERIOD
Limited Partners 16.39 14.33 16.12 14.63 13.61 11.50 9.78
General Partner 16.39 14.33 16.12 14.63 13.61 11.50 9.78
</TABLE>
36
<PAGE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE SIX MONTHS ENDED NOVEMBER 2, 1994
JUNE 30, FOR THE YEARS ENDED DECEMBER 31, (COMMENCEMENT OF
------------------------- ----------------------------------------------------- OPERATIONS) TO
1999 1998 1998 1997 1996 1995 DECEMBER 31, 1994
----------- ----------- ----------- ----------- ----------- ----------- -------------------
$ $ $ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 7,222,069 (5,956,766) 7,945,575 1,297,824 4,980,402 3,408,036 (221,731)
Net change in
unrealized 5,284,592 (2,224,767) 2,771,722 2,387,258 (1,679,048) 1,451,792 367,611
---------- ----------- ---------- ---------- ---------- ---------- ----------
Total Trading
Results 12,506,661 (8,181,533) 10,717,297 3,685,082 3,301,354 4,859,828 145,880
Interest income (DWR) 1,255,241 1,196,530 2,379,478 2,304,248 1,604,026 887,226 55,127
---------- ----------- ---------- ---------- ---------- ---------- ----------
Total Revenues 13,761,902 (6,985,003) 13,096,775 5,989,330 4,905,380 5,747,054 201,007
---------- ----------- ---------- ---------- ---------- ---------- ----------
EXPENSES
Brokerage fees (DWR) 2,540,783 2,211,493 4,402,540 4,414,327 3,398,205 1,802,579 121,039
Management fees 1,376,970 1,160,531 2,342,447 2,212,788 1,587,213 824,036 55,333
Incentive fees 1,019,759 -- 1,336,693 427,094 726,825 437,310 18,841
---------- ----------- ---------- ---------- ---------- ---------- ----------
Total Expenses 4,937,512 3,372,024 8,081,680 7,054,209 5,712,243 3,063,925 195,213
---------- ----------- ---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) 8,824,390 (10,357,027) 5,015,095 (1,064,879) (806,863) 2,683,129 5,794
========== =========== ========== ========== ========== ========== ==========
NET INCOME (LOSS)
ALLOCATION:
Limited Partners 8,730,234 (10,250,589) 4,958,188 (1,054,657) (799,980) 2,659,882 5,704
General Partner 94,156 (106,438) 56,907 (10,222) (6,883) 23,247 90
NET INCOME (LOSS) PER
UNIT:
Limited Partners 1.39 (1.78) .84 0.04 (.39) 1.05 .01
General Partner 1.39 (1.78) .84 0.04 (.39) 1.05 .01
TOTAL ASSETS AT END OF
PERIOD 83,580,122 54,751,699 71,445,333 61,010,043 47,089,676 33,049,282 12,042,772
TOTAL NET ASSETS AT END
OF PERIOD 82,444,359 52,991,763 70,421,775 59,095,581 45,118,877 32,462,932 11,918,929
NET ASSET VALUE PER
UNIT AT END OF PERIOD
Limited Partners 12.94 8.93 11.55 10.71 10.67 11.06 10.01
General Partner 12.94 8.93 11.55 10.71 10.67 11.06 10.01
</TABLE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE SIX MONTHS ENDED NOVEMBER 2, 1994
JUNE 30, FOR THE YEARS ENDED DECEMBER 31, (COMMENCEMENT OF
------------------------- ----------------------------------------------------- OPERATIONS) TO
1999 1998 1998 1997 1996 1995 DECEMBER 31, 1994
----------- ----------- ----------- ----------- ----------- ----------- -------------------
$ $ $ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 2,609,767 1,820,696 5,113,920 3,683,460 177,564 1,508,581 (61,916)
Net change in
unrealized (1,510,952) (654,063) 1,285,628 464,966 (175,835) 373,624 18,804
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total Trading
Results 1,098,815 1,166,633 6,399,548 4,148,426 1,729 1,882,205 (43,112)
Interest income (DWR) 1,045,338 727,142 1,642,542 1,145,033 891,897 447,608 25,896
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total Revenues 2,144,153 1,893,775 8,042,090 5,293,459 893,626 2,329,813 (17,216)
---------- ---------- ---------- ---------- ---------- ---------- ---------
EXPENSES
Brokerage fees (DWR) 1,119,956 692,751 1,591,467 1,124,531 1,030,310 503,995 29,040
Management fee 304,338 178,742 422,960 269,162 221,282 104,999 6,050
Incentive fees 215,651 28,182 449,775 300,250 -- 161,155 --
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total Expenses 1,639,945 899,675 2,464,202 1,693,943 1,251,592 770,149 35,090
---------- ---------- ---------- ---------- ---------- ---------- ---------
NET INCOME (LOSS) 504,208 994,100 5,577,888 3,599,516 (357,966) 1,559,664 (52,306)
========== ========== ========== ========== ========== ========== =========
NET INCOME (LOSS)
ALLOCATION:
Limited Partners 499,137 983,818 5,518,127 3,561,537 (354,537) 1,536,421 (50,640)
General Partner 5,071 10,282 59,761 37,979 (3,429) 23,243 (1,666)
NET INCOME (LOSS) PER
UNIT:
Limited Partners .17 .53 2.25 2.12 (.44) 2.24 (.17)
General Partner .17 .53 2.25 2.12 (.44) 2.24 (.17)
TOTAL ASSETS AT END OF
PERIOD 54,474,366 34,675,067 46,317,786 25,923,024 19,620,770 14,923,682 3,817,871
TOTAL NET ASSETS AT END
OF PERIOD 53,971,201 34,359,524 45,913,872 25,683,236 18,706,255 14,754,500 3,797,845
NET ASSET VALUE PER
UNIT AT END OF PERIOD
Limited Partners 16.17 14.28 16.00 13.75 11.63 12.07 9.83
General Partner 16.17 14.28 16.00 13.75 11.63 12.07 9.83
</TABLE>
37
<PAGE>
SPECTRUM COMMODITY
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE SIX MONTHS ENDED JANUARY 2, 1998
JUNE 30, (COMMENCEMENT OF
------------------------- OPERATIONS) TO
1999 1998 DECEMBER 31, 1998
----------- ----------- -------------------
$ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized (29,303) (4,123,450) (11,870,063)
Net change in unrealized 1,198,761 (1,569,180) (635,643)
---------- ---------- ----------
Total Trading Results 1,169,458 (5,692,630) (12,505,706)
Interest income (MS & Co.) 414,095 686,806 1,265,793
---------- ---------- ----------
Total Revenues 1,583,553 (5,005,824) (11,239,913)
---------- ---------- ----------
EXPENSES
Brokerage fees (MS & Co. and MSIL) 426,601 619,807 1,176,024
Management fees (MSDWCM) 292,192 424,525 805,496
Service fee (Demeter) 116,877 169,810 322,198
---------- ---------- ----------
Total Expenses 835,670 1,214,142 2,303,718
---------- ---------- ----------
NET INCOME (LOSS) 747,883 (6,219,966) (13,543,631)
========== ========== ==========
NET INCOME (LOSS) ALLOCATION:
Limited Partners 738,006 (6,154,083) (13,398,948)
General Partner 9,877 (65,883) (144,683)
NET INCOME (LOSS) PER UNIT:
Limited Partners .23 (1.61) (3.43)
General Partner .23 (1.61) (3.43)
TOTAL ASSETS AT END OF PERIOD 23,184,977 34,488,126 25,962,970
TOTAL NET ASSETS AT END OF PERIOD 22,722,858 34,086,922 24,908,316
NET ASSET VALUE PER UNIT AT END OF PERIOD
Limited Partners 6.80 8.39 6.57
General Partner 6.80 8.39 6.57
</TABLE>
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
LIQUIDITY
The Partnership deposits its assets with the Commodity Brokers in separate
futures interests trading accounts established for each Trading Advisor and used
as margin to engage in trading. The assets are held in either non-interest
bearing bank accounts or in 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 interests, it is
expected that the Partnership will continue to own such liquid assets for margin
purposes.
The Partnership's investment in futures interests may, from time to time, be
illiquid. Most U.S. futures exchanges limit fluctuations in certain futures
interest 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 interest has
increased or decreased by an amount equal to the daily limit, positions in such
futures interest can neither be taken nor liquidated unless traders are willing
to effect trades at or within the limit. Futures interests prices have
occasionally moved the daily limit for several consecutive days with little or
no trading. Such market conditions could prevent the Partnership from promptly
liquidating its futures interests and result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward contracts on
foreign currency. The markets for some world currencies have low trading volume
and are illiquid, which may prevent the Partnership from trading in potentially
profitable markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to substantial losses.
Either of these market conditions could result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material portion of its
assets.
CAPITAL RESOURCES
The Partnership does not have, or expect to have, any capital assets.
Redemptions, exchanges and sales of additional Units in the future will affect
the amount of funds available for investments in futures interests in subsequent
periods. It is not possible to estimate the amount and therefore the impact of
future redemptions.
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 interests markets. The
following presents a summary of the Partnership's operations for the three years
ended December 31, 1998, and the six months ended June 30, 1998 and 1999 and a
general discussion of its trading activities in certain markets during each
period. Spectrum Select has restated all per Unit amounts to reflect the
100-for-1 Unit conversion that took place on April 30, 1998. It is important to
note, however, that the Trading Advisors trade in various markets at different
times and that prior activity in a particular market does not mean that such
market will be actively traded by the Trading Advisors or will be profitable in
the future. Consequently, the results of operations of the Partnership are
difficult to discuss other than in the context of its Trading Advisors' trading
activities on behalf of the Partnership as a whole and how the Partnership has
performed in the past.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1999. During the first six months
of the year Spectrum Select posted a decrease in Net Asset Value per Unit. The
most significant losses were recorded in metals futures, as long silver futures
positions experienced declining prices due to speculation on the holdings of
Berkshire Hathaway. Losses were also recorded from long positions in the global
stock index futures markets amid skepticism regarding the stability of emerging
market economies and fears of higher U.S. interest rates. However, a majority of
these losses was offset by gains recorded from short positions in the global
interest rate futures markets, as prices declined due to dampened sentiment
regarding the European Monetary Union and strong U.S. economic data. Gains were
also recorded in the energy
39
<PAGE>
markets, as oil prices recovered due to a decline in inventory levels caused by
a reduction in output. Additional gains were recorded in the currency markets,
as fears of a widening global interest rate disparity and the conflict in Kosovo
strengthened the U.S. dollar. Smaller gains were recorded in the agricultural
markets, as prices trended lower amid reports of a healthy crop.
For the six months ended June 30, 1999, Spectrum Select's total trading
revenues, including interest income, were $9,164,730. Total expenses for the six
months were $10,600,117, resulting in a net loss of $1,435,387. The value of an
individual Unit in Spectrum Select decreased from $23.80 at December 31, 1998 to
$23.64 at June 30, 1999.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998. During the first six months
of the year Spectrum Select posted a decrease in Net Asset Value per Unit. The
most significant losses were recorded in the metals markets, as copper, gold,
and silver futures experienced choppy price movements. Losses were also recorded
in currency trading, as the British pound lacked consistent market direction and
the Swiss franc experienced a trend reversal. However, small gains were recorded
from short positions in the South African rand and the Canadian dollar. Losses
recorded during June from soybean and soybean oil futures more than offset gains
from short positions in soybean meal futures during the first quarter. Smaller
gains recorded during the first quarter from long positions in European interest
rate futures were more than offset by losses from long Australian bond futures
positions. Gains were recorded from short energy futures positions, as crude oil
continued to trend lower, and from short sugar futures positions, as prices
declined during the first quarter.
For the six months ended June 30, 1998, Spectrum Select's total trading
revenues, including interest income were $6,196,647. Total expenses for the six
months were $7,844,496, resulting in a net loss of $1,647,849. The value of an
individual Unit in Spectrum Select decreased from $20.85 at December 31, 1997 to
$20.63 at June 30, 1998.
1998 RESULTS. Spectrum Select recorded net profits during 1998. The
Partnership experienced the majority of the gains in the global interest rate
futures markets, particularly from long positions in German, U.S. and Japanese
bond futures. Bond prices rallied in late August, as global stock prices
plunged, especially after Russia's decision to halt trading in foreign
currencies paralyzed that country's banking system and set off a
"flight-to-quality" into the global fixed income markets. The subsequent
volatility in the global financial markets and worldwide economic deterioration
continued to drive these profitable trades through September.
For the year ended December 31, 1998, Spectrum Select's total revenues,
including interest income, were $41,778,732. Total expenses for the year were
$19,083,672, resulting in net income of $22,695,060. The value of an individual
Unit in Spectrum Select increased from $20.85 at December 31, 1997 to $23.80 at
December 31, 1998.
1997 RESULTS. Spectrum Select recorded net profits during 1997 primarily as
a result of a strengthening in the value of the U.S. dollar versus the Japanese
yen and most major world currencies throughout the year. Additional gains were
recorded from long global interest rate futures positions as U.S., Australian
and European interest rate futures trended higher in July. A portion of these
gains was offset by losses experienced from sharp trend reversals and short-term
volatile price movement in global bond futures during April and August. Overall,
the Partnership's ability to capture profits in the currency and financial
futures complexes more than offset smaller losses incurred from trendless
pricing patterns and choppy price movement experienced in trading most
traditional commodities.
For the year ended December 31, 1997, Spectrum Select's total trading
revenues, including interest income, were $26,495,529. Total expenses for the
year were $16,551,812, resulting in net income of $9,943,717. The value of an
individual Unit in Spectrum Select increased from $19.62 at December 31, 1996 to
$20.85 at December 31, 1997.
1996 RESULTS. Spectrum Select recorded net profits for the year, due
primarily to trading in global financial futures as prices trended higher during
the period of September through November. Additional gains recorded in the
currency markets, primarily from long British pound positions during the fourth
quarter, contributed to offset losses recorded from trend reversals and choppy
price movement earlier in the year. Spectrum Select's exposure to domestic
commodities partially hindered performance in 1996, as agricultural and soft
commodities failed to provide sustained price trends during much of the year.
40
<PAGE>
For the year ended December 31, 1996, Spectrum Select's total trading
revenues, including interest income, were $22,046,523. Total expenses for the
year were $16,632,482, resulting in net income of $5,414,041. The value of an
individual Unit in Spectrum Select increased from $18.64 at December 31, 1995 to
$19.62 at December 31, 1996.
To enhance the foregoing comparison of operations from year to year, you
should examine, line by line, the Partnership's Statements of Operations and
Statements of Financial Condition.
FINANCIAL INSTRUMENTS
The Partnership is a party to financial instruments with elements of
off-balance sheet market and credit risk. The Partnership may trade futures
interests in interest rates, stock indices, commodities, currencies, petroleum
and precious metals. In entering into these contracts, the Partnership is
subject to the market risk that such contracts may be significantly influenced
by market conditions, such as interest rate volatility, resulting in such
contracts being less valuable. If the markets should move against all of the
futures interests positions held by the Partnership at the same time, and if the
Trading Advisors were unable to offset futures interests positions of the
Partnership, the Partnership could lose all of its assets and investors would
realize a 100% loss. In addition to the Trading Advisors' internal controls,
each Trading Advisor must comply with the trading policies of the Partnership.
These trading policies include standards for liquidity and leverage with which
the Partnership must comply. The Trading Advisors and the General Partner
monitor the Partnership's trading activities to ensure compliance with the
trading policies. The General Partner may require a Trading Advisor to modify
positions of the Partnership if the General Partner believes they violate the
Partnership's trading policies.
In addition to market risk, in entering into futures interests there is a
credit risk to the Partnership that the counterparty on a contract will not be
able to meet its obligations to the Partnership. The ultimate counterparty of
the Partnership for futures contracts traded in the U.S. and most foreign
exchanges on which the Partnership trades is the clearinghouse associated with
such exchange. In general, a clearinghouse is backed by the membership of the
exchange and will act in the event of non-performance by one of its members or
one of its member's customers, which should significantly reduce this credit
risk. For example, a clearinghouse may cover a default by (i) drawing upon a
defaulting member's mandatory contributions and/or non-defaulting members'
contributions to a clearinghouse guarantee fund, established lines or letters of
credit with banks, and/or the clearinghouse's surplus capital and other
available assets of the exchange and clearinghouse, or (ii) assessing its
members. In cases where the Partnership trades on a foreign exchange where the
clearinghouse is not funded or guaranteed by the membership or where the
exchange is a "principals' market" in which performance is the responsibility of
the exchange member and not the exchange or a clearinghouse, or when the
Partnership enters into off-exchange contracts with a counterparty, the sole
recourse of the Partnership will be the clearinghouse, the exchange member or
the off-exchange contract counterparty. For a list of the foreign exchanges on
which the Partnership trades, see "Use of Proceeds" on page - . FOR AN
ADDITIONAL DISCUSSION OF THE CREDIT RISKS RELATING TO TRADING ON FOREIGN
EXCHANGES SEE "RISK FACTORS--RISK RELATING TO FUTURES INTERESTS TRADING AND THE
FUTURES INTERESTS MARKETS--TRADING ON FOREIGN EXCHANGES PRESENTS GREATER RISKS
TO EACH PARTNERSHIP THAN TRADING ON DOMESTIC EXCHANGES" ON PAGE - .
There is no assurance that a clearinghouse, exchange or other exchange
member will meet its obligations to the Partnership, and the General Partner and
Commodity Brokers will not indemnify the Partnership against a default by such
parties. Further, the law is unclear as to whether a commodity broker has any
obligation to protect its customers from loss in the event of an exchange,
clearinghouse or other exchange member defaulting on trades effected for the
broker's customers. Any such obligation on the part of a broker appears even
less clear where the default occurs in a non-U.S. jurisdiction.
The General Partner deals with these credit risks of the Partnership in
several ways. First, it monitors the Partnership's credit exposure to each
exchange on a daily basis, calculating not only the amount of margin required
for it but also the amount of its unrealized gains at each exchange, if any. The
Commodity Brokers inform the Partnership, as with all their customers, of its
net margin requirements for all its existing open positions, but do not break
that net figure down, exchange by exchange. The General Partner, however, has
installed a system which permits it to monitor the Partnership's potential
margin
41
<PAGE>
liability, exchange by exchange. As a result, the General Partner is able to
monitor the Partnership's potential net credit exposure to each exchange by
adding the unrealized trading gains on that exchange, if any, to the
Partnership's margin liability thereon.
Second, the Partnership's trading policies limit the amount of its Net
Assets that can be committed at any given time to futures contracts and require,
in addition, a certain minimum amount of diversification in the Partnership's
trading, usually over several different products. One of the aims of such
trading policies has been to reduce the credit exposure of the Partnership to a
single exchange and, historically, the Partnership's exposure has typically
amounted to only a small percentage of its total Net Assets. On those relatively
few occasions where the Partnership's credit exposure may climb above that
level, the General Partner deals with the situation on a case by case basis,
carefully weighing whether the increased level of credit exposure remains
appropriate.
Third, the General Partner has secured, with respect to CFI acting as the
clearing broker for the Partnership, a guarantee by Credit Agricole Indosuez,
CFI's parent, of the payment of the "net liquidating value" of the transactions
(futures, options and forward contracts) in the Partnership's account. As of
December 31, 1998, Credit Agricole Indosuez' total equity was $3.301 billion,
and its senior unsecured debt is currently rated Aa2 by Moody's.
With respect to forward contract trading, the Partnership trades with only
those counterparties which the General Partner, together with DWR, have
determined to be creditworthy. At the date of the Prospectus, the Partnership
deals only with CFI as its counterparty on forward contracts. The guarantee by
CFI's parent, discussed above, covers these forward contracts.
Inflation has not been a major factor in the Partnership's operations.
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Technical.
CAPITAL RESOURCES
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Capital Resources" on page - , which discussion is equally applicable
to Spectrum Technical.
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 interests markets. The
following presents a summary of the Partnership's operations for the three years
ended December 31, 1998, and the six months ended June 30, 1998 and 1999 and a
general discussion of its trading activities in certain markets 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 are difficult to discuss other than in the context
of its Trading Advisors' trading activities on behalf of the Partnership as a
whole and how the Partnership has performed in the past.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1999. During the first six months
of the year Spectrum Technical posted an increase in Net Asset Value per Unit.
The most significant gains were recorded in the currency markets, as fears of a
widening global interest rate differential and the conflict in Kosovo
strengthened the U.S. dollar. In the energy markets, gains were recorded from
long positions in crude oil futures, as prices recovered due to a decline in
inventory levels caused by a reduction in output. Additional gains were recorded
from short positions in U.S. bond futures, as prices declined on strong economic
data, inflationary fears and the possibility of interest rate hikes. Gains were
also recorded in the global stock index futures markets from long positions in
the Nikkei Index, as optimism returned to the Japanese economy. In the
agricultural markets, gains were recorded as prices trended lower amid reports
of a healthy crop. A portion of the overall gains was offset by losses
experienced in the metals markets, as
42
<PAGE>
long silver futures positions experienced declining prices. Additional losses
were experienced in the soft commodities markets from long coffee futures
positions, as prices declined due to an abundant supply and favorable exchange
rate fluctuations. Smaller losses were recorded in the livestock markets from
short positions in live cattle futures.
For the six months ended June 30, 1999, Spectrum Technical's total trading
revenues, including interest income, were $19,970,052. Total expenses for the
six months were $14,940,993, resulting in net income of $5,029,059. The value of
an individual Unit in Spectrum Technical increased from $16.12 at December 31,
1998 to $16.39 at June 30, 1999.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998. During the first six months
of the year Spectrum Technical posted a decrease in Net Asset Value per Unit.
The most significant losses were experienced in the metals markets from long
gold futures positions, as prices moved lower, and from subsequent short gold
futures positions, as prices then moved higher. Smaller losses were recorded
from long copper futures positions. In the currency markets, losses were
experienced in the British pound and the German mark, as both lacked consistent
market direction caused by short-term volatility. These losses were partially
offset by gains from short energy futures positions, as oil prices continued to
decline due to an easing of tensions in the Middle East and supply
considerations. Additional gains were recorded from long positions in German and
French bond and stock index futures, as prices trended higher. Gains were also
recorded in soft commodities, as short coffee futures positions were profitable.
For the six months ended June 30, 1998, Spectrum Technical's total trading
revenues, including interest income, were $7,319,355. Total expenses for the six
months were $11,203,962, resulting in a net loss of $3,884,607. The value of an
individual Unit in Spectrum Technical decreased from $14.63 at December 31, 1997
to $14.33 at June 30, 1998.
1998 RESULTS. Spectrum Technical experienced a profitable year in 1998. The
Partnership recorded net gains during the year due primarily to long positions
in global interest rate futures positions. The most significant gains were
experienced from long German, U.S. and Japanese bond futures positions during
August and September, as investors flocked to "safe haven" investments amid the
political and economic turmoil in Russia, Asia and Latin America. Short
positions in crude oil futures also contributed profits, as oil prices fell
throughout a majority of the year on reports of a supply surplus, despite
tensions in the Middle East. These gains were partially offset by losses
experienced from short-term price volatility in the metals markets, as investors
shifted investment capital from market to market amid global economic
uncertainty.
For the year ended December 31, 1998, Spectrum Technical's total trading
revenues, including interest income, were $49,940,173. Total expenses for the
year were $27,138,803, resulting in net income of $22,801,370. The value of an
individual Unit in Spectrum Technical increased from $14.63 at December 31, 1997
to $16.12 at December 31, 1998.
1997 RESULTS. Spectrum Technical experienced a profitable year in 1997, as
long positions in global interest rate futures resulted in gains during the
second half of the year. Additional profits from trading in foreign currencies
also contributed to the overall gains experienced for the year, primarily due to
a strengthening in the value of the U.S. dollar relative to the German mark
during January and February and of the U.S. dollar relative to the Japanese yen
and Australian dollar during the final quarter. These gains were partially
offset by losses from the trading of most tangible commodities, resulting from
trendless pricing patterns and choppy price movements, with the exception of a
profitable downward trend in gold prices.
For the year ended December 31, 1997, Spectrum Technical's total trading
revenues, including interest income, were $29,527,587. Total expenses for the
year were $17,820,503, resulting in net income of $11,707,084. The value of an
individual Unit in Spectrum Technical increased from $13.61 at December 31, 1996
to $14.63 at December 31, 1997.
1996 RESULTS. Spectrum Technical recorded significant profits during 1996
due primarily to the Partnership's participation in global interest rate futures
and currencies during September, October and November. Gains were experienced
during the last quarter from long positions in global interest rate futures and
short positions in foreign currencies. The majority of the first three quarters
was characterized by profitable periods followed by losing periods resulting
from sharp trend reversals. The fourth quarter gains easily offset any losses
experienced during such periods of trendless pricing patterns and choppy price
movements earlier in the year.
43
<PAGE>
For the year ended December 31, 1996, Spectrum Technical's total trading
revenues, including interest income, were $28,025,066. Total expenses for the
year were $12,123,749, resulting in net income of $15,901,317. The value of an
individual Unit in Spectrum Technical increased from $11.50 at December 31, 1995
to $13.61 at December 31, 1996.
To enhance the foregoing comparison of operations from year to year, you
should examine, line by line, the Partnership's Statements of Operations and
Statements of Financial Condition. See "Selected Financial Data" and
"Independent Auditors' Report and Financial Statements of Morgan Stanley Dean
Witter Spectrum Series" contained in this Prospectus.
FINANCIAL INSTRUMENTS
See discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Financial Instruments" on page - , which discussion is equally
applicable to Spectrum Technical.
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Strategic.
CAPITAL RESOURCES
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Capital Resources" on page - , which discussion is equally applicable
to Spectrum Strategic.
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 interests markets. The
following presents a summary of the Partnership's operations for the three years
ended December 31, 1998, and the six months ended June 30, 1998 and 1999 and a
general discussion of its trading activities in certain markets 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 are difficult to discuss other than in the context
of its Trading Advisors' trading activities on behalf of the Partnership as a
whole and how the Partnership has performed in the past.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1999. During the first six months
of the year Spectrum Strategic posted an increase in Net Asset Value per Unit.
The most significant gains were recorded in the energy markets from long crude
oil positions, as prices climbed higher on supply concerns. In the global
interest rate futures markets, gains were recorded from short U.S. interest rate
futures positions, as prices dropped on rising inflationary fears amid strong
U.S. economic data. In the metals markets, gains were recorded from long copper
futures positions, as prices soared during the second quarter on supply
concerns. These gains were partially offset by losses recorded in the global
stock index futures markets from short S&P 500 Index futures positions, as the
market reached record highs. In the currency markets, losses were experienced
from long Japanese yen positions, as the Bank of Japan intervened in the foreign
exchange markets. Subsequent short Japanese yen positions also experienced
losses, as the yen strengthened versus the U.S. dollar amid growing optimism
regarding the Japanese economy. In the agricultural markets, losses were
recorded from long positions as prices declined on favorable supply reports.
For the six months ended June 30, 1999, Spectrum Strategic's total trading
revenues, including interest income, were $13,761,902. Total expenses for the
six months were $4,937,512, resulting in net income of $8,824,390. The value of
an individual Unit in Spectrum Strategic increased from $11.55 at December 31,
1998 to $12.94 at June 30, 1999.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998. During the first six months
of the year Spectrum Strategic posted a decrease in Net Asset Value per Unit.
The most significant losses were recorded in the currency markets, as the German
mark moved without consistent direction and the Japanese yen reversed
44
<PAGE>
higher on news of a proposed economic stimulus plan. In soft commodities, losses
were experienced from long sugar futures positions, as prices moved lower during
the first quarter. Smaller losses were recorded in the metals markets, as silver
prices declined sharply. A portion of these losses was offset by gains recorded
from European bond and stock index futures positions, as prices trended higher.
Additional gains were recorded in agricultural futures, as favorable price
trends persisted during February.
For the six months ended June 30, 1998, Spectrum Strategic's total trading
loss, net of interest income, was $6,985,003. Total expenses for the six months
were $3,372,024, resulting in a net loss of $10,357,027. The value of an
individual Unit in Spectrum Strategic decreased from $10.71 at December 31, 1997
to $8.93 at June 30, 1998.
1998 RESULTS. Spectrum Strategic posted a net gain in 1998. The Partnership
recorded profits primarily from long positions in global interest rate futures,
as the increased volatility in the global financial markets and worldwide
economic deterioration drove investors to a variety of "safe haven" investments
throughout August and September. Long positions in U.S., German, British, and
Japanese bond futures were the key contributors to these gains. Additional gains
were recorded in the currency markets in early October from long German mark
positions, as the mark's value increased relative to the U.S. dollar. This
weakness in the U.S. dollar was mainly caused by an unanticipated interest rate
cut by the Federal Reserve and the continuing possibility, and subsequent
reality, of presidential impeachment hearings. A portion of these gains was
offset by losses in the energy and soft commodities markets, primarily during
the fourth quarter from long positions in crude oil and cocoa futures.
For the year ended December 31, 1998, Spectrum Strategic's total trading
revenues, including interest income, were $13,096,775. Total expenses for the
year were $8,081,680, resulting in net income of $5,015,095. The value of an
individual Unit in Spectrum Strategic increased from $10.71 at December 31, 1997
to $11.55 at December 31, 1998.
1997 RESULTS. Spectrum Strategic posted a small net gain in 1997, as profits
were recorded by the Partnership's discretionary managers during the first
quarter primarily from commodities trading and during the year's final months
from a strengthening in the value of the U.S. dollar. A majority of these gains
were offset by losses experienced during the second quarter, as the volatility
in global stock index and bond futures that began in March did not develop in
line with the discretionary managers' points of view. In much of the second half
of the year, small losses were also recorded from a significant pattern of
short-term volatility underlying many future markets.
For the year ended December 31, 1997, Spectrum Strategic's total trading
revenues, including interest income, were $5,989,330. Total expenses for the
year were $7,054,209, resulting in a net loss of $1,064,879. The value of an
individual Unit in Spectrum Strategic increased from $10.67 at December 31, 1996
to $10.71 at December 31, 1997.
1996 RESULTS. Spectrum Strategic posted negative performance for 1996, due
primarily to losses resulting from sharp trend reversals in financial futures
and currency markets during February. During the latter half of the year,
increased volatility in energies and domestic commodities resulted in additional
losses to the Partnership. A majority of the losses experienced earlier in the
year, however, were offset by gains during the last three quarters, particularly
in April from long positions in the agricultural markets and in September from
long positions in global interest rate futures and short positions in foreign
currencies.
For the year ended December 31, 1996, Spectrum Strategic's total trading
revenues, including interest income, were $4,905,380. Total expenses for the
year were $5,712,243, resulting in a net loss of $806,863. The value of an
individual Unit in Spectrum Strategic decreased from $11.06 at December 31, 1995
to $10.67 at December 31, 1996.
To enhance the foregoing comparison of operations from year to year, you
should examine, line by line, the Partnership's Statements of Operations and
Statements of Financial Condition.
45
<PAGE>
FINANCIAL INSTRUMENTS
See discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Financial Instruments" on page - , which discussion is equally
applicable to Spectrum Strategic.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Global Balanced.
CAPITAL RESOURCES
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Capital Resources" on page - , which discussion is equally applicable
to Spectrum Global Balanced.
RESULTS OF OPERATIONS
GENERAL. The Partnership's results depend on its Trading Advisor and the
ability of such Trading Advisor's trading programs to take advantage of price
movements or other profit opportunities in the futures interests markets. The
following presents a summary of the Partnership's operations for the three years
ended December 31, 1998, and the six months ended June 30, 1998 and 1999, and a
general discussion of its trading activities in certain markets during each
period. It is important to note, however, that the Trading Advisor trades 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
Advisor or will be profitable in the future. Consequently, the results of
operations of the Partnership are difficult to discuss other than in the context
of its Trading Advisor's trading activities on behalf of the Partnership as a
whole and how the Partnership has performed in the past.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1999. During the first six months
of the year Spectrum Global Balanced posted an increase in Net Asset Value per
Unit. The most significant gains were recorded in the stock index component from
long S&P 500 Index futures positions, as the market reached record highs. In the
energy markets, gains were recorded from long positions in crude oil and gas oil
futures, as prices moved significantly higher on supply concerns. In the
currency markets, gains were recorded from short positions in the Swiss franc
and the European common currency, as the U.S. dollar strengthened in response to
tame U.S. inflation data and the conflict in Kosovo. These gains were partially
offset by losses experienced in the metals markets from short copper futures
positions, as prices moved higher on supply concerns. Additional losses were
recorded from subsequent long positions in copper and nickel futures, as base
metals fell amid a technical sell-off. In the fixed income component, losses
were recorded from long U.S. interest rate futures positions, as prices dropped
on sporadic fears of higher U.S. interest rates.
For the six months ended June 30, 1999, Spectrum Global Balanced's total
trading revenues, including interest income, were $2,144,153. Total expenses for
the six months were $1,639,945, resulting in net income of $504,208. The value
of an individual Unit in Spectrum Global Balanced increased from $16.00 at
December 31, 1998 to $16.17 at June 30, 1999.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998. During the first six months
of the year Spectrum Global Balanced posted an increase in Net Asset Value per
Unit. The most significant gains were recorded from long S&P 500 Index futures
positions in the stock index portion of the balanced portfolio, as domestic
stock prices climbed to record highs during the first quarter. Additional gains
were recorded in the managed futures component from short crude oil futures
positions, as prices declined on news of a tentative agreement between the
United Nations and Iraq. Smaller gains were recorded from short nickel futures
positions and from favorable price trends in livestock futures. A portion of the
overall gains was offset by losses experienced in the global bond futures
component of the balanced portfolio from long positions in Australian bond
futures. Losses were also experienced in the currency markets from cross-rate
trading of the Japanese yen against the Australian dollar. Smaller currency
losses were recorded from short Singapore dollar positions, as its value
relative to the U.S. dollar strengthened.
46
<PAGE>
For the six months ended June 30, 1998, Spectrum Global Balanced's total
trading revenues, including interest income were $1,893,775. Total expenses for
the six months were $899,675 resulting in net income of $994,100. The value of
an individual Unit in Spectrum Global Balanced increased from $13.75 at
December 31, 1997 to $14.28 at June 30, 1998.
1998 RESULTS. Spectrum Global Balanced experienced a profitable year in
1998. The Partnership profited during the year primarily from long positions in
the global stock index futures component of the balanced portfolio. The most
significant gains were recorded from long S&P 500 Index futures positions, as
equity prices reached record levels during the first half and final quarter of
the year. Additional gains were recorded from long positions in European stock
index futures, with a majority of the gains experienced during the fourth
quarter amid the recovery of the U.S. stock markets. The global interest rate
futures markets were also key contributors to overall gains, as long global bond
futures positions benefited from a "flight-to-quality," given the global
economic uncertainty prevalent during the third quarter.
For the year ended December 31, 1998, Spectrum Global Balanced's total
trading revenues, including interest income, were $8,042,090. Total expenses for
the year were $2,464,202, resulting in net income of $5,577,888. The value of an
individual Unit in Spectrum Global Balanced increased from $13.75 at
December 31, 1997 to $16.00 at December 31, 1998.
1997 RESULTS. Spectrum Global Balanced had a successful year in 1997 due
primarily to a strengthening in the value of the U.S. dollar relative to most
foreign currencies during the first quarter, as well as during December.
Additional gains were recorded from long positions in S&P 500 Index futures, as
U.S. equity prices continued to trend higher throughout a majority of the year,
and in Australian bond futures, as Australian bond prices trended higher during
the second and third quarters. The fixed income component of Spectrum Global
Balanced was also profitable, as U.S. Treasury note and Treasury bond futures
prices finished the year higher despite trendless pricing patterns and choppy
price movements throughout the first half of the year.
For the year ended December 31, 1997, Spectrum Global Balanced's total
trading revenues, including interest income, were $5,293,459. Total expenses for
the year were $1,693,943, resulting in net income of $3,599,516. The value of an
individual Unit in Spectrum Global Balanced increased from $11.63 at
December 31, 1996 to $13.75 at December 31, 1997.
1996 RESULTS. Spectrum Global Balanced experienced negative performance in
1996, primarily due to losses experienced in the managed futures portion of the
balanced portfolio early in the year. Such losses resulted from sharp trend
reversals in U.S. bond futures, interest rate futures, and currencies. In the
second half of the year, the Partnership offset some of those losses by
recording profits in the managed futures portion of the balanced portfolio. Such
profits resulted from gains in long positions in U.S. bond futures, global bond
futures, and stock index futures. Despite positive performance from U.S. stock
index futures during a majority of the year, a relatively light exposure to this
area relative to bond futures resulted in losses for the year.
For the year ended December 31, 1996, Spectrum Global Balanced's total
trading revenues, including interest income, were $893,626. Total expenses for
the year were $1,251,592, resulting in a net loss of $357,966. The value of an
individual Unit in Spectrum Global Balanced decreased from $12.07 at
December 31, 1995 to $11.63 at December 31, 1996.
To enhance the foregoing comparison of operations from year to year, you
should examine, line by line, the Partnership's Statements of Operations and
Statements of Financial Condition.
FINANCIAL INSTRUMENTS
See discussion under "Morgan Stanley Dean Witter Spectrum Select
L.P.--Financial Instruments" on page - , which discussion is equally
applicable to Spectrum Global Balanced.
47
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Currency.
CAPITAL RESOURCES
See the discussion under "Morgan Stanley Dean Witter Spectrum
Select--Capital Resources" on page - , which discussion is equally applicable
to Spectrum Currency.
RESULTS OF OPERATIONS
Spectrum Currency is a new commodity pool and as a result it does not have
an operating history.
FINANCIAL INSTRUMENTS
See discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Financial Instruments" on page - , which discussion is equally
applicable to Spectrum Currency.
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
LIQUIDITY
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Liquidity" on page - , which discussion is equally applicable to
Spectrum Commodity.
CAPITAL RESOURCES
See the discussion under "--Morgan Stanley Dean Witter Spectrum Select
L.P.--Capital Resources" on page - , which discussion is equally applicable
to Spectrum Commodity.
RESULTS OF OPERATIONS
GENERAL. The Partnership's results depend on its Trading Advisor and the
ability of its Trading Advisor's trading program to take advantage of price
movements or other profit opportunities in the futures interests markets. The
following presents a summary of the Partnership's operations for the year 1998,
and the six months ended June 30, 1998 and 1999 and a general discussion of its
trading activities in certain markets during each period. It is important to
note, however, that the Trading Advisor trades 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 Advisor or will be profitable in
the future. Consequently, the results of operations of the Partnership are
difficult to discuss other than in the context of its Trading Advisor's trading
activities on behalf of the Partnership as a whole and how the Partnership has
performed in the past.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1999. During the first six months
of the year Spectrum Commodity posted an increase in Net Asset Value per Unit.
The most significant gains were recorded in the energy markets from long futures
positions in crude oil and its refined products, as prices moved considerably
higher due to a decline in inventory levels caused by a reduction in output.
Additional gains were recorded in the metals markets during the second quarter
from long positions in nickel, copper, and aluminum futures, as base metal
prices increased due to strong producer demand and tightening supply. A portion
of the overall gains was offset by losses experienced in the soft commodities
markets from long positions in cocoa and coffee futures, as prices declined amid
fears of an abundant supply and favorable exchange rate fluctuations. Losses
were also recorded in the agricultural markets from long positions, as grain
prices moved lower on higher-than-expected supply levels.
For the six months ended June 30, 1999, Spectrum Commodity's total trading
revenues, including interest income were $1,583,553. Total expenses for the six
months ended June 30, 1999 were $835,670, resulting in net income of $747,883.
The value of an individual Unit increased from $6.57 at December 31, 1998 to
$6.80 at June 30, 1999.
48
<PAGE>
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1998. During the first six months
of the year Spectrum Commodity posted a decrease in Net Asset Value per Unit.
The most significant losses were recorded in the energy markets, as long
positions in oil and gas futures resulted in losses despite a brief spike higher
during March. In the metals markets, losses recorded during the second quarter
from long positions in precious and base metals futures more than offset profits
recorded during the first quarter from long silver, gold and platinum futures.
Additional losses were recorded from long positions in corn and wheat futures,
as grain prices moved lower. Smaller losses were recorded from long positions in
livestock futures. In soft commodities, losses were recorded from long positions
in coffee futures. A portion of these losses was offset by gains recorded during
the second quarter from long positions in cotton and orange juice futures.
For the first six months ended June 30, 1998, Spectrum Commodity's total
trading loss net of interest income was $5,005,824. Total expenses for the six
months ended June 30, 1998 were $1,214,142, resulting in a net loss of
$6,219,966. The value of an individual Unit decreased from $10.00 at the
inception of trading on January 2, 1998 to $8.39 at June 30, 1998.
1998 RESULTS. Spectrum Commodity recorded net losses during 1998. Spectrum
Commodity adheres to a long-only approach to trading traditional commodity
markets. This approach encountered significant difficulty during the entire
year, given the magnitude and unrelenting nature of declines in a broad-based
majority of commodities markets. The major factors impacting the commodity
markets in 1998 were the emerging market economies, global economic instability,
and unusual weather patterns. Demand for almost every commodity was negatively
impacted by the downturn in virtually all of the world's emerging economies, as
currency woes quickly spread worldwide. The ultimate contractions in demand for
commodities (from affected economies) had a severe negative impact in the supply
increases being provided by the world's producers, particularly within the
energy and metals markets.
For the year ended December 31, 1998, Spectrum Commodity's total trading
loss, net of interest income, was $11,239,913. Spectrum Commodity's total
expenses for the year were $2,303,718, resulting in a net loss of $13,543,631.
The value of an individual Unit in Spectrum Commodity decreased from $10.00 at
inception of trading on January 2, 1998 to $6.57 at December 31, 1998.
To enhance the foregoing comparison of operations, you should examine, line
by line, the Partnership's Statements of Operations and Statements of Financial
Condition.
FINANCIAL INSTRUMENTS
Spectrum Commodity trades futures interests in metals, energy and
agricultural markets. Futures and forwards represent contracts for delayed
delivery of an instrument at a specified date and price. Risk arises from
changes in the value of these contracts and the potential inability of
counterparties to perform under the terms of the contracts. There are numerous
factors which may significantly influence the market value of these contracts,
including interest rate volatility.
The credit risk associated with the instruments in which the Partnership is
involved is limited to the amounts reflected in the Partnership's Statement of
Financial Condition.
Spectrum Commodity also has credit risk because MS & Co. and MSIL act as the
futures commission merchants or the counterparties, with respect to some of
Spectrum Commodity's assets. Exchange-traded futures contracts are marked to
market on a daily basis, with variations in value settled on a daily basis. Each
of MS & Co. and MSIL, as a futures commission merchant for Spectrum Commodity's
exchange-traded futures contracts, are required, pursuant to regulations of the
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 contracts including an amount equal to the net unrealized loss on all
open futures contracts.
The discussion of credit risks relating to foreign exchanges under "--Morgan
Stanley Dean Witter Spectrum Select L.P.--Financial Instruments" on page - is
equally applicable to Spectrum Commodity.
49
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
INTRODUCTION
Each Partnership is a commodity pool involved in the speculative trading of
futures interests. The market sensitive instruments held by each Partnership are
acquired for speculative trading purposes only and, as a result, all or
substantially all of each Partnership's assets are at risk of trading loss.
Unlike an operating company, the risk of market sensitive instruments is
central, not incidental, to each Partnership's main business activities.
The futures interests traded by each 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 each Partnership's open
positions, and, consequently, in its earnings and cash flow.
Each Partnership's total market risk is influenced by a wide variety of
factors, including the diversification among each 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 each Partnership.
Each Partnership's past performance is not necessarily indicative of its
future results. Any attempt to numerically quantify a 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 PARTNERSHIPS' TRADING VALUE AT RISK
THE FOLLOWING QUANTITATIVE DISCLOSURES REGARDING EACH PARTNERSHIP'S MARKET
RISK EXPOSURES CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
SAFE HARBOR FROM CIVIL LIABILITY PROVIDED FOR SUCH STATEMENTS BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 (SET FORTH IN SECTION 27A OF THE
SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934).
ALL QUANTITATIVE DISCLOSURES IN THIS SECTION ARE DEEMED TO BE FORWARD-LOOKING
STATEMENTS FOR PURPOSES OF THE SAFE HARBOR, EXCEPT FOR STATEMENTS OF HISTORICAL
FACT.
Each Partnership accounts for open positions using mark-to-market accounting
principles. Any loss in the market value of a 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.
Each 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 each Partnership includes many variables that could change the market
value of a Partnership's trading portfolio. Each 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 each
Partnership's VaR is approximately four years. The one-day 99% confidence level
of each 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.
50
<PAGE>
VaR models, including the Partnerships', are continuously evolving as
trading portfolios become more diverse and modeling techniques and systems
capabilities improve. Please note that the VaR model is used to numerically
quantify market risk for historic reporting purposes only and is not utilized by
either the General Partner or the Trading Advisors in their daily risk
management activities.
EACH PARTNERSHIP'S VALUE AT RISK IN DIFFERENT MARKET SECTORS
The following tables indicate the VaR associated with each Partnership's
open positions, as a percentage of total Net Assets, by primary market risk
category as of June 30, 1999.
SPECTRUM SELECT:
As of June 30, 1999, Spectrum Select's total capitalization was
approximately $215 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Interest Rate............................................... (1.61)
Currency.................................................... (1.52)
Equity...................................................... (0.82)
Commodity................................................... (0.86)
Aggregate Value at Risk..................................... (2.83)
</TABLE>
SPECTRUM TECHNICAL:
As of June 30, 1999, Spectrum Technical's total capitalization was
approximately $279 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Interest Rate............................................... (2.11)
Currency.................................................... (2.36)
Equity...................................................... (1.02)
Commodity................................................... (0.86)
Aggregate Value at Risk..................................... (3.80)
</TABLE>
SPECTRUM STRATEGIC:
As of June 30, 1999, Spectrum Strategic's total capitalization was
approximately $82 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Interest Rate............................................... (1.83)
Currency.................................................... (2.98)
Equity...................................................... (2.41)
Commodity................................................... (2.79)
Aggregate Value at Risk..................................... (4.88)
</TABLE>
SPECTRUM GLOBAL BALANCED:
As of June 30, 1999, Spectrum Global Balanced's total capitalization was
approximately $54 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Interest Rate............................................... (0.59)
Currency.................................................... (0.53)
Equity...................................................... (1.03)
Commodity................................................... (0.26)
Aggregate Value at Risk..................................... (1.38)
</TABLE>
51
<PAGE>
SPECTRUM COMMODITY:
As of June 30, 1999, Spectrum Commodity's total capitalization was
approximately $23 million.
<TABLE>
<CAPTION>
MARKET CATEGORY VAR
- --------------- --------
%
<S> <C>
Commodity................................................... (1.87)
Aggregate Value at Risk..................................... (1.87)
</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
June 30, 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 mainly futures interests, 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.
The tables below supplement the June 30, 1999 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 July 1, 1998
through June 30, 1999.
SPECTRUM SELECT
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Interest Rate........ (2.17) (0.46) (1.33)
Currency............. (1.52) (0.51) (0.98)
Equity............... (0.82) (0.21) (0.49)
Commodity............ (0.91) (0.51) (0.76)
Aggregate Value at
Risk............... (2.83) (1.28) (2.03)
</TABLE>
SPECTRUM TECHNICAL
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Interest Rate......... (2.11) (1.25) (1.67)
Currency.............. (2.58) (0.68) (1.86)
Equity................ (1.15) (0.43) (0.77)
Commodity............. (0.86) (0.54) (0.71)
Aggregate Value at
Risk................ (3.80) (1.60) (2.81)
</TABLE>
SPECTRUM STRATEGIC
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Interest Rate........ (3.75) (0.31) (1.97)
Currency............. (2.98) (0.07) (1.89)
Equity............... (2.41) (0.23) (1.25)
Commodity............ (2.79) (0.46) (1.32)
Aggregate Value at
Risk............... (4.88) (0.58) (3.11)
</TABLE>
SPECTRUM GLOBAL BALANCED
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Interest Rate........ (1.36) (0.58) (0.82)
Currency............. (0.53) (0.26) (0.43)
Equity............... (1.74) (0.80) (1.15)
Commodity............ (0.32) (0.19) (0.26)
Aggregate Value at
Risk............... (1.70) (1.38) (1.49)
</TABLE>
SPECTRUM COMMODITY
<TABLE>
<CAPTION>
MARKET CATEGORY HIGH LOW AVERAGE
- --------------- -------- -------- --------
% % %
<S> <C> <C> <C>
Commodity............................................ (1.89) (1.78) (1.85)
Aggregate Value at Risk.............................. (1.89) (1.78) (1.85)
</TABLE>
LIMITATIONS ON VALUE AT RISK AS AN ASSESSMENT OF MARKET RISK
The face value of the market sector instruments held by each Partnership is
typically many times the applicable margin requirements. 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 each
Partnership to typically be many times the total capitalization of a
Partnership. The value of a Partnership's open positions thus creates a "risk of
ruin" not usually found in other investments. The relative size of the positions
held may cause a Partnership to incur losses greatly in excess of VaR within
52
<PAGE>
a short period of time, given certain market conditions. The VaR tables above,
as well as the past performance of the Partnerships, give no indication of this
"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 caused
by 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
data used for VaR estimation may provide only limited insight into losses that
could be incurred under unusual market movements.
The VaR tables above present the results of each Partnership's VaR for each
Partnership's market risk exposures and on an aggregate basis at June 30, 1999
and for the end of the quarter periods from July 1, 1998 through June 30, 1999.
Since VaR is based on historical data, VaR should not be viewed as predictive of
a Partnership's future financial performance or its ability to manage or monitor
risk. There can be no assurance that a Partnership's actual losses on a
particular day will not exceed the VaR amounts indicated above or that losses
will not occur more than once in 100 trading days.
NON-TRADING RISK
Each Partnership has non-trading market risk on its foreign cash balances
not needed for margin. These balances and any market risk they may represent are
immaterial. Each Partnership also maintains a substantial portion (approximately
72-90%) of its available assets in cash at DWR. A decline in short-term interest
rates will result in a decline in a Partnership's cash management income. This
cash flow risk is not considered to be 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 a
Partnership's market sensitive instruments.
QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES
THE FOLLOWING QUALITATIVE DISCLOSURES REGARDING EACH PARTNERSHIP'S MARKET
RISK EXPOSURES--EXCEPT FOR (i) THOSE DISCLOSURES THAT ARE STATEMENTS OF
HISTORICAL FACT AND (ii) THE DESCRIPTIONS OF HOW A PARTNERSHIP MANAGES ITS
PRIMARY MARKET RISK EXPOSURES--CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT. EACH PARTNERSHIP'S PRIMARY MARKET RISK EXPOSURES AS WELL AS THE
STRATEGIES USED AND TO BE USED BY THE GENERAL PARTNER AND THE TRADING ADVISORS
FOR MANAGING SUCH EXPOSURES ARE SUBJECT TO NUMEROUS UNCERTAINTIES, CONTINGENCIES
AND RISKS, ANY ONE OF WHICH COULD CAUSE THE ACTUAL RESULTS OF EACH PARTNERSHIP'S
RISK CONTROLS TO DIFFER MATERIALLY FROM THE OBJECTIVES OF SUCH STRATEGIES.
GOVERNMENT INTERVENTIONS, DEFAULTS AND EXPROPRIATIONS, ILLIQUID MARKETS, THE
EMERGENCE OF DOMINANT FUNDAMENTAL FACTORS, POLITICAL UPHEAVALS, CHANGES IN
HISTORICAL PRICE RELATIONSHIPS, AN INFLUX OF NEW MARKET PARTICIPANTS, INCREASED
REGULATION AND MANY OTHER FACTORS COULD RESULT IN MATERIAL LOSSES AS WELL AS IN
MATERIAL CHANGES TO THE RISK EXPOSURES AND THE RISK MANAGEMENT STRATEGIES OF
EACH PARTNERSHIP. INVESTORS MUST BE PREPARED TO LOSE ALL OR SUBSTANTIALLY ALL OF
THEIR INVESTMENT IN A PARTNERSHIP.
SPECTRUM SELECT
The following were the primary trading risk exposures of Spectrum Select as
of June 30, 1999, by market sector. It may be anticipated, however, that these
market exposures will vary materially over time.
INTEREST RATE. Interest rate risk is the principal market exposure of
Spectrum Select. Interest rate movements directly affect the price of the
sovereign bond futures positions held by the Partnership and indirectly the
value of its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's primary interest rate
exposure is to interest rate fluctuations in the U.S. and the other G-7
countries. However, the Partnership also takes futures positions in the
government debt of smaller nations--E.G. Australia and Spain. The General
Partner anticipates that G-7 and Australian interest rates will remain the
primary market exposure of the Partnership for the foreseeable future. The
changes in interest rates which have the most effect on the Partnership are
changes in long-term, as
53
<PAGE>
opposed to short-term, rates. Most of the speculative futures positions held by
the Partnership are in medium-to-long term instruments. Consequently, even a
material change in short-term rates would have little effect on the Partnership
were the medium-to-long term rates to remain steady.
CURRENCY. Spectrum Select's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates--I.E., positions between two currencies other
than the U.S. dollar. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound positions. The General
Partner does not anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future, although it is difficult at this
point to predict the effect of the introduction of the euro on the Trading
Advisors' currency trading strategies. 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 experiencing VaR in functional currency other than dollars.
EQUITY. Spectrum Select's primary equity exposure is to equity price risk
in the G-7 countries. The stock index futures traded by the Partnership are by
law limited to futures on broadly based indices. As of June 30, 1999, the
Partnership's primary exposures were in the S&P 500, Nikkei (Japan) and Hang
Seng (China) stock indices. The Partnership is primarily exposed to the risk of
adverse price trends or static markets in the major U.S., European and Japanese
indices. (Static markets would not cause major market changes but would make it
difficult for the Partnership to avoid being "whipsawed" into numerous small
losses).
COMMODITY.
METALS. Spectrum Select's primary metals market exposure is to fluctuations
in the price of gold and silver. Although certain of the Trading Advisors will
from time to time, trade base metals such as aluminum, copper, tin, nickel and
zinc, the principal market exposures of the Partnership have consistently been
in the precious metals, gold and silver. The Trading Advisors' gold trading has
been increasingly limited due to the long-lasting and mainly non-volatile
decline in the price of gold over the last 10-15 years. However, silver prices
have remained volatile over this period, and the Trading Advisors have from time
to time taken substantial positions as they have perceived market opportunities
to develop. The General Partner anticipates that gold and silver will remain the
primary metals market exposure for the Partnership.
SOFT COMMODITIES. One of Spectrum Select's primary commodities exposure is
to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions, supply and demand
inequalities and market expectation. Soybeans, coffee, and cotton accounted for
the substantial bulk of the Partnership's commodities exposure as of June 30,
1999.
ENERGY. Spectrum Select's primary energy market exposure is to natural gas
and oil price movements, often resulting from political developments in the
Middle East, weather patterns, and other economic fundamentals. As oil prices
have broken out of the low price ranges of 1999, it is possible that volatility
will increase as well. Substantial profits and losses have been and are expected
to continue to be experienced in this market. Natural gas has exhibited more
volatility than the oil markets on an intra-day and daily basis and is expected
to continue in this choppy pattern.
SPECTRUM TECHNICAL
The following were the primary trading risk exposures of Spectrum Technical
as of June 30, 1999, by market sector. It may be anticipated however, that these
market exposures will vary materially over time.
INTEREST RATE. Interest rate risk is the principal market exposure of
Spectrum Technical. Interest rate movements directly affect the price of the
sovereign bond futures positions held by the Partnership and indirectly the
value of its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's primary interest rate
exposure is to interest rate fluctuations in the U.S. and the other G-7
countries. However, the Partnership also takes futures positions in the
government debt of smaller nations--E.G. Australia. The General Partner
anticipates that G-7 and Australian interest rates
54
<PAGE>
will remain the primary market exposure of the Partnership for the foreseeable
future. The changes in interest rates which have the most effect on the
Partnership are changes in long-term, as opposed to short-term, rates. Most of
the speculative futures positions held by the Partnership are in medium-to-long
term instruments. Consequently, even a material change in short-term rates would
have little effect on the Partnership were the medium-to-long term rates to
remain steady.
CURRENCY. Spectrum Technical's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates--I.E., positions between two currencies other
than the U.S. dollar. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound positions. The General
Partner does not anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future, although it is difficult at this
point to predict the effect of the introduction of the Euro on the Trading
Advisors' currency trading strategies. 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. Spectrum Technical's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Partnership are
by law limited to futures on broadly based indices. As of June 30, 1999, the
Partnership's primary exposures were in the S&P 500, Nikkei (Japan) and DAX
(Germany) stock indices. The Partnership is primarily exposed to the risk of
adverse price trends or static markets in the major U.S., European and Japanese
indices. (Static markets would not cause major market changes but would make it
difficult for the Partnership to avoid being "whipsawed" into numerous small
losses).
COMMODITY.
METALS. Spectrum Technical's primary metals market exposure is to
fluctuations in the price of gold and silver. Although some of the Trading
Advisors will from time to time trade base metals such as aluminum, copper,
nickel, lead, tin and zinc, the principal market exposures of the Partnership
have consistently been in the precious metals, gold and silver (and, to a much
lesser extent, platinum). The Trading Advisors' gold trading has been
increasingly limited due to the long-lasting and mainly non-volatile decline in
the price of gold over the last 10-15 years. However, silver prices have
remained volatile over this period, and the Trading Advisors have from time to
time taken substantial positions as they have perceived market opportunities to
develop. The General Partner anticipates that gold and silver will remain the
primary metals market exposure for the Partnership.
SOFT COMMODITIES. One of Spectrum Technical's primary commodities exposure
is to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions, supply and demand
inequalities and market expectations. Soybeans, sugar, corn, and coffee
accounted for the substantial bulk of the Partnership's commodities exposure at
June 30, 1999. The Partnership has had market exposure to live cattle and lean
hogs.
ENERGY. Spectrum Technical's primary energy market exposure is to natural
gas and oil price movements, often resulting from political developments in the
Middle East, weather patterns, and other economic fundamentals. As oil prices
have broken out of low price ranges in 1999, it is possible that volatility will
increase as well. Substantial profits and losses have been and are expected to
continue to be experienced in this market. Natural gas has exhibited more
volatility than the oil markets on an intra-day and daily basis and is expected
to continue in this choppy pattern.
SPECTRUM STRATEGIC
The following were the primary trading exposures of Spectrum Strategic as of
June 30, 1999. It may be anticipated however, that these market exposures will
vary materially over time.
INTEREST RATE. Interest rate risk is the principal market exposure of
Spectrum Strategic. Interest rate movements directly affect the price of the
sovereign bond futures positions held by the Partnership and indirectly the
value of its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the Partnership's
55
<PAGE>
profitability. The Partnership's primary interest rate exposure is to interest
rate fluctuations in the U.S. and the other G-7 countries. However, the
Partnership also takes futures positions in the government debt of smaller
nations--E.G. Australia. The General Partner anticipates that G-7 interest rates
will remain the primary market exposure of the Partnership for the foreseeable
future. The changes in interest rates which have the most effect on the
Partnership are changes in long-term, as opposed to short-term, rates. Most of
the speculative futures positions held by the Partnership are in medium-to-long
term instruments. Consequently, even a material change in short-term interest
rates would have little effect on the Partnership were the medium-to-long term
rates to remain steady.
CURRENCY. Spectrum Strategic's currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates--I.E., positions between two currencies other
than the U.S. dollar. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound positions. The General
Partner does not anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future, although it is difficult at this
point to predict the effect of the Euro on the Trading Advisors' currency
trading strategies. The currency 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. Spectrum Strategic's primary equity exposure is to equity price
risk in the G-7 countries. The stock index futures traded by the Partnership are
by law limited to futures on broadly based indices. As of June 30, 1999, the
Partnership's primary exposures were in the Financial Times (England), Nikkei
(Japan) and CAC 40 (France) stock indices. The Partnership is primarily exposed
to the risk of adverse price trends or static markets in the major U.S.,
European and Japanese indices. (Static markets would not cause major market
changes but would make it difficult for the Partnership to avoid being
"whipsawed" into numerous small losses).
COMMODITY.
METALS. Spectrum Strategic's primary metals exposure is to fluctuations in
the price of gold and silver. Although certain of the Trading Advisors will from
time to time trade base metals such as aluminum, copper, nickel and zinc, the
principal market exposures of the Partnership have consistently been in the
precious metals, gold and silver. The Trading Advisors' gold trading has been
increasingly limited due to the long-lasting and mainly non-volatile decline in
the price of gold over the last 10-15 years. However, silver prices have
remained volatile over this period, and the Trading Advisors have from time to
time taken substantial positions as they have perceived market opportunities to
develop. The General Partner anticipates that gold and silver will remain the
primary metals market exposure for the Partnership.
SOFT COMMODITIES. One of Spectrum Strategic's primary commodities exposure
is to fluctuations in the price of soft commodities, which are often directly
affected by severe or unexpected weather conditions, supply and demand
inequalities, and market expectation. Soybeans, corn, and wheat accounted for
the substantial bulk of the Partnership's commodities exposure as of June 30,
1999. The Partnership had market exposure to live cattle and lean hogs.
ENERGY. Spectrum Strategic's primary energy market exposure is to natural
gas and oil price movements, often resulting from political developments in the
Middle East, weather patterns, and other economic fundamentals. As oil prices
have broken out of low price ranges in 1999, it is possible that volatility will
increase as well. Substantial profits and losses have been and are expected to
continue to be experienced in this market. Natural gas has exhibited more
volatility than the oil markets on an intra-day and daily basis and is expected
to continue in this choppy pattern.
SPECTRUM GLOBAL BALANCED
The following were the primary trading risk exposures of Spectrum Global
Balanced as of June 30, 1999, by market sector. It may be anticipated however,
that these market exposures will vary materially over time.
56
<PAGE>
INTEREST RATE. Interest rate risk is the principal market exposure of
Spectrum Global Balanced. Interest rate movements directly affect the price of
the sovereign bond futures positions held by the Partnership and indirectly the
value of its stock index and currency positions. Interest rate movements in one
country as well as relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's primary interest rate
exposure is to interest rate fluctuations in the U.S. and the other G-7
countries. However, the Partnership also takes futures positions in the
government debt of smaller nations--E.G. Australia and Spain. The General
Partner anticipates that G-7 and Australian interest rates will remain the
primary market exposure of the Partnership for the foreseeable future. The
changes in interest rates which have the most effect on the Partnership are
changes in long-term, as opposed to short-term, rates. Most of the speculative
future positions held by the Partnership are in medium-to-long term instruments.
Consequently, even a material change in short-term rates would have little
effect on the Partnership were the medium-to-long term rates to remain steady.
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. These
fluctuations are influenced by interest rate changes as well as political and
general economic conditions. The Partnership trades in a large number of
currencies, including cross-rates--I.E., positions between two currencies other
than the U.S. dollar. However, the Partnership's major exposures have typically
been in the dollar/yen, dollar/mark and dollar/pound positions. The General
Partner does not anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future, although it is difficult at this
point to predict the effect of the introduction of the Euro on RXR's currency
trading strategies. 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. Spectrum Global Balanced's primary equity exposure is to equity
price risk in the G-7 countries. The stock index futures traded by the
Partnership are by law limited to futures on broadly based indices. As of
June 30, 1999, the Partnership's primary exposures were in the S&P 500, Nikkei
(Japan) and DAX (Germany) stock indices. The Partnership is primarily exposed to
the risk of adverse price trends or static markets in the major U.S., European
and Japanese indices. (Static markets would not cause major market changes but
would make it difficult for the Partnership to avoid being "whipsawed" into
numerous small losses).
COMMODITY.
METALS. Spectrum Global Balanced's primary metals market exposure is to
fluctuations in the price of base and precious metals. The Partnership aims to
equally weight market exposure in metals as much as possible, however, base
metals during periods of volatility will affect performance more dramatically
than the precious metals markets. The General Partner anticipates that the base
metals will remain the primary metals market exposure for the Partnership.
SOFT COMMODITIES. One of Spectrum Global Balanced's commodities market
exposure is to fluctuations in the price of soft commodities, which are often
directly affected by severe or unexpected weather conditions, supply and demand
inequalities and market expectations. Soybean, sugar, and corn accounted for the
substantial bulk of the Partnership's commodities exposure at June 30, 1999. The
Partnership has had market exposure to live cattle and lean hogs.
ENERGY. Spectrum Global Balanced's primary energy market exposure is to
natural gas and oil price movements, often resulting from political developments
in the Middle East, weather patterns, and other economic fundamentals. As oil
prices have broken out of low price ranges in 1999, it is possible that
volatility will increase as well. Substantial profits and losses have been and
are expected to continue to be experienced in this market. Natural gas has
exhibited more volatility than the oil markets on an intra-day and daily basis
and is expected to continue in this choppy pattern.
SPECTRUM COMMODITY
The following were the primary trading risk exposures of Spectrum Commodity
as of June 30, 1999, by market sector. It may be anticipated however, that these
market exposures will vary materially over time.
57
<PAGE>
COMMODITY.
METALS. Spectrum Commodity's primary metals market exposure is to
fluctuations in the price of gold and silver. Although MSDWCM will, from time to
time, trade base metals such as aluminum, copper, nickel and zinc, the principal
market exposures of Spectrum Commodity have consistently been in the precious
metals, gold and silver. MSDWCM's gold trading has been increasingly limited due
to the long-lasting and mainly non-volatile decline in the price of gold over
the last 10-15 years. However, silver prices have remained volatile over this
period, and MSDWCM has from time to time taken substantial positions as they
have perceived market opportunities to develop. The General Partner anticipates
that gold and silver will remain the primary metals market exposure for the
Partnership.
SOFT COMMODITIES. One of Spectrum Commodity's primary commodities exposure
is to fluctuations in the price of soft commodities and agriculturals, which are
often directly affected by severe or unexpected weather conditions, supply and
demand inequalities, and market expectations. Sugar, coffee, corn, wheat, and
livestock accounted for the substantial bulk of the Partnership's commodities
exposure at June 30, 1999.
ENERGY. Spectrum Commodity's primary energy market exposure is to natural
gas and oil price movements, often resulting from political developments in the
Middle East, weather patterns, and other economic fundamentals. As oil prices
have broken out of low price ranges in 1999, it is possible that volatility will
increase as well. Substantial profits and losses have been and are expected to
continue to be experienced in this market. Natural gas has exhibited more
volatility than the oil market on an intra-day and daily basis 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 each Partnership at
June 30, 1999:
FOREIGN CURRENCY BALANCES. Each Partnership's primary foreign currency
balances are in Japanese yen, German marks, British pounds, French francs,
Australian dollars, Swiss francs, Mexican pesos, Singapore dollars, and euros.
Each Partnership controls the non-trading risk of these balances by regularly
converting these balances back into U.S. dollars at varying intervals, depending
on certain factors, including size, volatility, etc.
QUALITATIVE DISCLOSURES REGARDING MEANS OF MANAGING RISK EXPOSURE
Each Partnership and the Trading Advisors, separately, attempt to manage the
risk of a Partnership's open positions in essentially the same manner in all
market categories traded. The General Partner attempts to manage market exposure
by (i) diversifying a Partnership's assets among different Trading Advisors (in
a multi-advisor Partnership), each of whose strategies focus on different market
sectors and trading approaches, and (ii) monitoring the performance of the
Trading Advisor(s) daily. In addition, the Trading Advisor(s) establish
diversification guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market sensitive instrument.
You should be aware that certain Trading Advisors treat their risk control
policies as strict rules, while others treat their policies as general
guidelines.
The General Partner monitors and controls the risk of each Partnership's
non-trading instrument, cash. Cash is the only Partnership investment directed
by the General Partner, rather than the Trading Advisors.
The General Partner monitors and controls the risk of each Partnership's
non-trading instrument, cash, which is the only Partnership investment directed
by the General Partner, rather than the Trading Advisor(s).
58
<PAGE>
CAPITALIZATION
The capitalization of each Partnership as of August 31, 1999 (October 26,
1999 in the case of Spectrum Currency) is set forth in the following table. The
table also reflects the pro forma capitalization of each Partnership adjusted to
reflect (i) the proceeds (at the respective Net Asset Values of $22.50, $15.90,
$13.49, $15.87 and $7.25 per Unit as of August 31, 1999) to Spectrum Select,
Spectrum Technical, Spectrum Strategic, Spectrum Global Balanced and Spectrum
Commodity from the sale during the next 12 months of the approximately
8,141,300.161, 11,557,974.013, 9,738,672.748, 6,672,654.480 and 7,000,000 unsold
and newly registered Units, respectively, and (ii) the proceeds (at the initial
offering price of $10 per Unit) from the sale during the next 12 months
(including the Initial Offering Period) of the 15,000,000 Units of Spectrum
Currency offered by this Prospectus, and (iii) the capital contribution required
of the General Partner based on such capitalization of each Partnership. There
will be no difference insofar as sharing of profits and losses are concerned
between Units of Limited Partnership Interest and Units of General Partnership
Interest.
<TABLE>
<CAPTION>
AMOUNT PRO FORMA
OUTSTANDING --------------
AS OF AMOUNT TO BE
AUGUST 31 OUTSTANDING IF
OR OCTOBER 26, ADDITIONAL
1999 UNITS ARE SOLD
--------------- --------------
<S> <C> <C>
$ $
(UNAUDITED)
Spectrum Select
Limited Partnership Interest (1).......................... 209,542,079 392,721,333
General Partnership Interest (2).......................... 2,994,697 3,966,882
Spectrum Technical
Limited Partnership Interest (1).......................... 278,374,234 462,146,021
General Partnership Interest (2).......................... 2,855,685 4,668,142
Spectrum Strategic
Limited Partnership Interest (1).......................... 87,817,876 219,192,571
General Partnership Interest (2).......................... 932,022 2,214,066
Spectrum Global Balanced
Limited Partnership Interest (1).......................... 54,494,136 160,389,163
General Partnership Interest (2).......................... 598,385 1,620,093
Spectrum Currency
Limited Partnership Interest (1).......................... 10 150,000,010
General Partnership Interest (2).......................... 10 1,515,152
Spectrum Commodity
Limited Partnership Interest (1).......................... 23,252,247 74,002,247
General Partnership Interest (2).......................... 314,602 747,497
</TABLE>
- ---------
(1) Units are offered on a continuing basis at Monthly Closings for sale at a
price based on the Net Asset Value of a Unit as of the close of business on
the date of such Monthly Closing. The actual proceeds from such sales will
depend upon the Net Asset Value per Unit at the time of sale.
(2) The General Partner has agreed to contribute an additional amount in cash as
is necessary to make the General Partner's capital contribution at least
equal to the greater of (a) 1% of aggregate capital contributions to the
Partnership by all Partners (including the General Partner's contribution)
and (b) $25,000. Such additional contributions by the General Partner need
not exceed the amount described above and shall be evidenced by Units of
General Partnership Interest. Under certain conditions and where
modification will not adversely affect the interests of Limited Partners,
the General Partner's minimum investment requirements may be modified by the
General Partner at its option without notice to or the consent of the
Limited Partners.
59
<PAGE>
THE GENERAL PARTNER
The general partner and commodity pool operator of each Partnership is
Demeter Management Corporation, a Delaware corporation formed on August 18, 1977
to act as a commodity pool operator. Effective in 1977, the General Partner
became registered with the CFTC as a CPO and is currently a member of the NFA in
such capacity. The General Partner's main business office is located at Two
World Trade Center, 62nd Floor, New York, New York 10048, telephone (212)
392-8899. The General Partner is an affiliate of DWR, MS & Co., MSIL, and MSDWCM
in that all such companies are wholly-owned subsidiaries of MSDW, which is a
publicly-owned company. MSDW, DWR and the General Partner each may be deemed to
be a "parent" and "promoter" of the Partnerships within the meaning of the
federal securities laws.
The General Partner is or has been the general partner and CPO for 35
commodity pools, including five other commodity pools which are exempt from
certain disclosure requirements pursuant to CFTC Rule 4.7. As of August 31,
1999, the General Partner had approximately $1.4 billion in aggregate net assets
under management, making it one of the largest operators of commodity pools in
the U.S. As of August 31, 1999, there were over 100,000 investors in the
commodity pools managed by Demeter.
The General Partner is required to maintain its net worth at an amount equal
to at least 10% of the total contributions to each limited partnership for which
it acts as a general partner. MSDW has contributed to the General Partner the
capital necessary to permit the General Partner to meet its net worth
obligations as General Partner of each Partnership and intends to continue to do
so. Under certain conditions and where modifications will not adversely affect
the interests of Limited Partners, the General Partner's minimum net worth
requirements may be modified by the General Partner at its option without notice
to or the consent of the Limited Partners. The General Partner and its
principals are not obligated to purchase Units but may do so.
According to MSDW's 1998 Annual Report and Form 10-Q for the quarter ended
August 31, 1999, MSDW had total shareholders' equity of $14,119 million and
total assets of $317,590 million as of November 30, 1998 (audited), and total
shareholders' equity of $15,445 million and total assets of $340,870 million as
of August 31, 1999 (unaudited). Additional financial information regarding MSDW
is included in the financial statements filed as part of that Annual Report and
Form 10-Q. MSDW will provide to you, upon request, copies of its most recent
Forms 10-K, 10-Q and 8-K, as filed from time to time with the SEC. These reports
will be available from the SEC, in the same manner described under "The Spectrum
Series--Availability of Exchange Act Reports" on page - , or will be
available at no charge to you by writing to MSDW at 1585 Broadway, New York, New
York 10036 (Attn: Investor Relations).
DIRECTORS AND OFFICERS OF THE GENERAL PARTNER
Mark J. Hawley, age 56, is Chairman of the Board and a Director of the
General Partner. Mr. Hawley is also Chairman of the Board and a Director of Dean
Witter Futures & Currency Management Inc. ("DWFCM"). Mr. Hawley joined DWR in
February 1989 as Senior Vice President and is currently the Executive Vice
President and Director of DWR's Product Management for Individual Asset
Management. In this capacity, Mr. Hawley is responsible for directing the
activities of the firm's Managed Futures, Insurance, and Unit Investment Trust
Business. From 1978 to 1989, Mr. Hawley was a member of the senior management
team at Heinold Asset Management, Inc., a CPO, and was responsible for a variety
of projects in public futures funds. From 1972 to 1978, Mr. Hawley was a Vice
President in charge of institutional block trading for the Mid-West at Kuhn Loeb
& Company.
Robert E. Murray, age 38, is President and a Director of the General
Partner. Mr. Murray is also President and a Director of DWFCM. Mr. Murray is
currently a Senior Vice President of DWR's Managed Futures Department. Mr.
Murray began his career at DWR in 1984 and is currently the Director of the
Managed Futures Department. In this capacity, Mr. Murray is responsible for
overseeing all aspects of the firm's Managed Futures Department. Mr. Murray
currently serves as Vice Chairman and a Director of the Managed Funds
Association, an industry association for investment professionals in futures,
hedge funds and other alternative investments. Mr. Murray graduated from Geneseo
State University in May 1983 with a B.A. degree in Finance.
60
<PAGE>
Mitchell M. Merin, age 45, is a Director of the General Partner. Mr. Merin
is also a Director of DWFCM. Mr. Merin was appointed the chief operating officer
of asset management for MSDW in December 1998 and the President and chief
executive officer of Morgan Stanley Dean Witter Advisors in February 1998. He
has been an Executive Vice President of DWR since 1990, during which time he has
been director of DWR's Taxable Fixed Income and Futures divisions, managing
director in Corporate Finance and corporate treasurer. Mr. Merin received his
Bachelor's degree from Trinity College in Connecticut and his M.B.A. degree in
finance and accounting from the Kellogg Graduate School of Management of
Northwestern University in 1977.
Joseph G. Siniscalchi, age 54, is a Director of the General Partner.
Mr. Siniscalchi joined DWR in July 1984 as a First Vice President, Director of
General Accounting and served as Senior Vice President and Controller for DWR'S
Securities Division through 1997. He is currently Executive Vice President and
Director of the Operations Division of DWR. From February 1980 to July 1984, Mr.
Siniscalchi was Director of Internal Audit at Lehman Brothers Kuhn Loeb, Inc.
Edward C. Oelsner III, age 57, is a Director of the General Partner. Mr.
Oelsner is currently an Executive Vice President and head of the Product
Development Group at Morgan Stanley Dean Witter Advisors, an affiliate of DWR.
Mr. Oelsner joined DWR in 1981 as a Managing Director in DWR's Investment
Banking Department specializing in coverage of regulated industries and,
subsequently, served as head of the DWR Retail Products Group. Prior to joining
DWR, Mr. Oelsner held positions at The First Boston Corporation as a member of
the Research and Investment Banking Departments from 1967 to 1981. Mr. Oelsner
received his M.B.A. in Finance from the Columbia University Graduate School of
Business in 1966 and an A.B. in Politics from Princeton University in 1964.
Lewis A. Raibley, III, age 37, is Vice President, Chief Financial Officer,
and a Director of the General Partner. Mr. Raibley is also a Director of DWFCM.
Mr. Raibley is currently Senior Vice President and Controller in the Individual
Asset Management Group of MSDW. From July 1997 to May 1998, Mr. Raibley served
as Senior Vice President and Director in the Internal Reporting Department of
MSDW and prior to that, from 1992 to 1997, he served as Senior Vice President
and Director in the Financial Reporting and Policy Division of Dean Witter
Discover & Co. He has been with MSDW and its affiliates since June 1986.
Richard A. Beech, age 48, is a Director of the General Partner. Mr. Beech
has been associated with the futures industry for over 23 years. He has been at
DWR since August 1984, where he is presently Senior Vice President and head of
Branch Futures. Mr. Beech began his career at the Chicago Mercantile Exchange,
where he became the Chief Agricultural Economist doing market analysis,
marketing and compliance. Prior to joining DWR, Mr. Beech also had worked at two
investment banking firms in operations, research, managed futures and sales
management.
Ray Harris, age 43, is a Director of the General Partner. Mr. Harris is
currently Senior Vice President, Planning and Administration for Morgan Stanley
Dean Witter Asset Management and has worked at DWR or its affiliates since July
1982, serving in both financial and administrative capacities. From August 1994
to January 1999, he worked in two separate DWR affiliates, Discover Financial
Services and Novus Financial Corp., culminating as Senior Vice President. Mr.
Harris received his B.A. degree from Boston College and his M.B.A. in finance
from the University of Chicago.
The General Partner and its officers and directors may, from time to time,
trade commodity interest contracts for their own proprietary accounts. The
records of trading in such accounts will not be made available to you for
inspection.
As of the date of this Prospectus, Mark J. Hawley, Chairman of the Board and
a Director of the General Partner and Robert E. Murray, President and a Director
of the General Partner, own 2,000 and 81.169 Units of Spectrum Select,
respectively, which amounts are less than 1% of the outstanding Units of that
Partnership. In addition, Mr. Murray owns 209.644 Units of Spectrum Commodity,
which amount is less than 1% of the outstanding Units of that Partnership. As of
the date of this Prospectus, Mr. Hawley and Mr. Murray did not beneficially own
Units of any other Partnership, and none of the other directors or executive
officers of the General Partner beneficially owned Units of any Partnership.
61
<PAGE>
DESCRIPTION AND PERFORMANCE INFORMATION OF COMMODITY POOLS OPERATED BY THE
GENERAL PARTNER
The following table summarizes information relating to certain other
commodity pools operated by the General Partner.
While each of these commodity pools has essentially the same
objective--appreciation of assets through speculative trading--the structure,
including fees, interest income arrangements, and Trading Advisors, and
performance of these pools varies widely.
All summary performance information is current as of August 31, 1999. In
reviewing the following summary performance information, you should understand
that (i) such performance is calculated on an accrual basis in accordance with
generally accepted accounting principles and is "net" of all fees and charges,
and (ii) a more complete presentation of the performance of the futures funds
operated or managed by the General Partner and/or its affiliates is available
without charge upon request to the General Partner.
Past performance is not necessarily indicative of future results and
material differences exist between the commodity pools described in the chart
and the Partnerships. There is no assurance that the Partnerships will perform
in a manner comparable to any of the commodity pools described below. You should
also note that interest income may constitute a significant portion of a
commodity pool's total income and, in certain instances, may generate profits
where there have been realized or unrealized losses from futures interests
trading.
62
<PAGE>
DEMETER MANAGEMENT CORPORATION
CAPSULE SUMMARY OF PERFORMANCE INFORMATION REGARDING COMMODITY POOLS OPERATED
(EXCEPT AS OTHERWISE INDICATED, BEGINNING JANUARY 1, 1994 THROUGH AUGUST 31,
1999)
<TABLE>
<CAPTION>
CURRENT CURRENT CUMULATIVE
TOTAL NET ASSET RETURN
START CLOSE AGGREGATE NET ASSET VALUE PER SINCE
FUND TYPE/FUND(1) DATE(2) DATE(3) SUBSCRIPTION(4) VALUE(5) UNIT(6) INCEPTION(7)
- ----------------- ------- ------- --------------- ----------- --------- ------------
$ $ $ %
<S> <C> <C> <C> <C> <C> <C>
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
DWR Commodity Partners Jan-81 Dec-88 9,648,397 739,757 488.29 (51.37)
Columbia Futures Fund(11) Jul-83 N/A 29,276,299 9,110,461 3,108.56 217.20
DW Diversified Futures Fund L.P.(12) Apr-88 N/A 206,815,107 105,152,563 1,030.18 308.46
DW Multi-Market Portfolio L.P.(13) Sep-88 N/A 252,526,000 8,800,164 1,160.94 16.09
DW Diversified Futures Fund II L.P. Jan-89 N/A 13,210,576 9,306,147 2,721.02 172.10
DW Diversified Futures Fund III L.P. Nov-90 N/A 126,815,755 54,660,006 1,697.95 69.80
DW Portfolio Strategy Fund L.P.(14) Feb-91 N/A 143,522,564 125,801,366 2,668.53 166.85
DWFCM International Access Fund L.P. Mar-94 N/A 68,115,440 39,696,631 1,491.96 49.20
Morgan Stanley Dean Witter Charter Graham L.P. Mar-99 N/A 16,201,305 16,575,331 9.81 (1.90)
Morgan Stanley Dean Witter Charter Millburn L.P. Mar-99 N/A 20,935,885 21,134,238 10.30 3.00
Morgan Stanley Dean Witter Charter Welton L.P. Mar-99 N/A 20,365,870 18,729,198 8.55 (14.50)
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
DW Cornerstone Fund I Jan-85 Dec-91 19,122,276 281,303 456.80 (53.15)
DW Cornerstone Fund II(15) Jan-85 N/A 65,653,270 29,875,666 4,236.93 334.56
DW Cornerstone Fund III(15) Jan-85 N/A 137,132,762 34,825,226 3,026.17 210.38
DW Cornerstone Fund IV(15) May-87 N/A 168,090,005 103,633,498 4,533.46 364.97
DW Global Perspective Portfolio L.P. Mar-92 N/A 67,424,535 17,244,962 1,072.75 7.28
DW World Currency Fund L.P. Apr-93 N/A 114,945,830 21,781,421 992.12 (0.79)
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund III L.P. Jul-89 Sep-95 126,263,000 7,022,437 1,000.00 0.00
DW Principal Plus Fund L.P.(16) Feb-90 N/A 109,013,535 47,351,772 1,833.56 83.36
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund II L.P. Mar-89 Mar-96 162,203,303 4,966,449 1,056.55 5.66
PRIVATELY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/ Chesapeake L.P. Nov-94 N/A 33,109,539 28,768,448 1,836.36 83.64
Morgan Stanley Dean Witter/JWH Futures Fund L.P. Feb-96 N/A 30,479,508 25,700,618 1,391.16 39.12
PRIVATELY-OFFERED FUND WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/Market Street Futures Oct-98 N/A 19,360,334 16,474,076 945.22 (5.48)
Fund L.P.
<CAPTION>
WORST WORST PEAK-
MONTHLY % TO-VALLEY
FUND TYPE/FUND(1) DRAWDOWN(8) DRAWDOWN(9)
- ----------------- ----------- -----------
% %
<S> <C> <C>
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
DWR Commodity Partners (34.48) (64.23)
7/88 4/86-12/88
Columbia Futures Fund(11) (17.54) (42.58)
4/86 7/83-9/85
DW Diversified Futures Fund L.P.(12) (12.85) (24.86)
5/90 5/95-6/96
DW Multi-Market Portfolio L.P.(13) (13.26) (29.84)
2/96 5/95-6/96
DW Diversified Futures Fund II L.P. (13.41) (25.62)
8/89 5/95-6/96
DW Diversified Futures Fund III L.P. (13.62) (27.00)
1/92 5/95-6/96
DW Portfolio Strategy Fund L.P.(14) (14.40) (25.65)
1/92 1/92-4/92
DWFCM International Access Fund L.P. (12.87) (22.84)
1/95 8/94-1/95
Morgan Stanley Dean Witter Charter Graham L.P. (8.00) (9.80)
3/99 3/99-5/99
Morgan Stanley Dean Witter Charter Millburn L.P. (3.77) (3.77)
7/99 7/99
Morgan Stanley Dean Witter Charter Welton L.P. (7.70) (14.50)
3/99 3/99-8/99
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
DW Cornerstone Fund I (20.88) (64.47)
8/91 4/86-8/91
DW Cornerstone Fund II(15) (11.74) (32.70)
9/89 7/88-10/89
DW Cornerstone Fund III(15) (18.28) (32.35)
2/89 2/89-10/89
DW Cornerstone Fund IV(15) (21.04) (45.21)
9/89 7/89-9/89
DW Global Perspective Portfolio L.P. (8.55) (40.90)
2/96 8/93-1/95
DW World Currency Fund L.P. (9.68) (46.04)
5/95 8/93-1/95
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund III L.P. (13.98) (30.93)
1/92 5/90-4/92
DW Principal Plus Fund L.P.(16) (7.48) (13.08)
2/96 2/96-5/96
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund II L.P. (5.62) (14.69)
1/91 8/89-4/92
PRIVATELY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/ Chesapeake L.P. (17.34) (25.36)
5/99 9/98-7/99
Morgan Stanley Dean Witter/JWH Futures Fund L.P. (8.49) (19.66)
5/97 1/98-7/98
PRIVATELY-OFFERED FUND WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/Market Street Futures (8.59) (13.03)
Fund L.P. 3/99 3/99-7/99
<CAPTION>
COMPOUND ANNUAL RATES OF RETURN(10)
-------------------------------------------------------------------
FUND TYPE/FUND(1) 1999 1998 1997 1996 1995 1994
- ----------------- ---------- --------- --------- ---------- --------- ----------
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
DWR Commodity Partners
Columbia Futures Fund(11) (1.97) 12.01 22.60 19.09 28.21 (5.75)
(8 months)
DW Diversified Futures Fund L.P.(12) (4.97) 6.22 11.96 (2.66) (4.56) 7.68
(8 months)
DW Multi-Market Portfolio L.P.(13) (3.73) 5.63 13.28 (6.76) (6.37) 2.66
(8 months)
DW Diversified Futures Fund II L.P. (3.66) 5.22 11.28 (4.83) (2.90) 5.41
(8 months)
DW Diversified Futures Fund III L.P. (4.79) 5.39 12.29 (4.73) (4.02) 5.89
(8 months)
DW Portfolio Strategy Fund L.P.(14) 2.72 9.46 11.28 25.50 25.37 (5.41)
(8 months)
DWFCM International Access Fund L.P. (4.20) 5.07 26.22 3.97 21.88 (7.32)
(8 months) (10 months)
Morgan Stanley Dean Witter Charter Graham L.P. (1.90)
(6 months)
Morgan Stanley Dean Witter Charter Millburn L.P. 3.00
(6 months)
Morgan Stanley Dean Witter Charter Welton L.P. (14.50)
(6 months)
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
DW Cornerstone Fund I
DW Cornerstone Fund II(15) 1.07 12.54 18.05 11.47 26.50 (8.93)
(8 months)
DW Cornerstone Fund III(15) (7.37) 9.13 10.24 8.24 27.50 (10.04)
(8 months)
DW Cornerstone Fund IV(15) (4.29) 6.80 38.41 12.97 22.96 (14.27)
(8 months)
DW Global Perspective Portfolio L.P. (0.30) 11.25 11.16 9.26 16.76 (31.62)
(8 months)
DW World Currency Fund L.P. 2.50 (2.61) 39.35 12.97 2.02 (25.13)
(8 months)
PUBLICLY-OFFERED FUNDS WITH ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund III L.P. 5.21 1.08
(9 months)
DW Principal Plus Fund L.P.(16) (2.86) 10.54 15.39 (5.28) 17.98 (8.61)
(8 months)
PUBLICLY-OFFERED FUNDS WITH MORE THAN ONE ADVISOR
WITH "PRINCIPAL PROTECTION"
DW Principal Guaranteed Fund II L.P. 1.00 7.30 (8.12)
(3 months)
PRIVATELY-OFFERED FUNDS WITH ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/ Chesapeake L.P. (10.86) 19.93 15.38 15.23 15.80 11.57
(8 months) (2 months)
Morgan Stanley Dean Witter/JWH Futures Fund L.P. (0.45) 4.04 13.66 18.17
(8 months) (11 months)
PRIVATELY-OFFERED FUND WITH MORE THAN ONE ADVISOR
WITHOUT "PRINCIPAL PROTECTION"
Morgan Stanley Dean Witter/Market Street Futures (5.72) 0.26
Fund L.P. (8 months) (3 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
63
<PAGE>
FOOTNOTES TO DEMETER MANAGEMENT CORPORATION PERFORMANCE INFORMATION
1. "Publicly-offered" funds are pools offered to the public.
"Privately-offered" funds are pools offered in private placements exempt
from registration. Funds with "principal protection" are pools with an
investment feature that guarantees the return of the amount originally
invested, generally within 5 to 7 years. Funds without "principal
protection" do not guarantee the return of an investor's investment.
2. "Start Date" is the month and year that the pool began trading.
3. "Close Date" is the month and year that the pool liquidated its assets and
stopped doing business.
4. "Aggregate Subscriptions" is the aggregate of all amounts contributed to the
pool, including investments that were later redeemed by investors.
5. "Current Total Net Asset Value" is the net asset value of the pool as of
August 31, 1999, or, in the case of liquidated pools, the net asset value of
the pool on the date of liquidation.
6. "Current Net Asset Value Per Unit" is calculated by dividing the current
total net asset value by the total number of units outstanding as of
August 31, 1999, or, in the case of liquidated pools, the date of
liquidation.
7. "Cumulative Return Since Inception" is the percentage change in the net
asset value of a unit from its Start Date through August 31, 1999, or, in
the case of liquidated pools, from its Start Date through the date of
liquidation.
8. "Drawdown" means losses experienced by the pool over the specified period
and is calculated by dividing net performance by beginning equity.
"Drawdown" is measured on the basis of monthly returns only, and does not
reflect intra-month figures. The month in which the worst monthly drawdown
occurred during the history of the pool is set forth under "Worst Monthly %
Drawdown."
9. "Peak-to-Valley Drawdown" is the largest percentage decline in the net asset
value per unit over the history of the fund. This need not be a continuous
decline, but can be a series of positive and negative returns where the
negative returns are larger than the positive ones. The months during which
the worst peak-to-valley drawdown occurred are set forth under "Worst
Peak-to-Valley Drawdown."
10. "Compound Annual Rates of Return" are calculated annually by multiplying on
a compound basis each of the monthly rates of return during the year (not
shown), and not by adding or averaging such monthly rates of return. For the
year in which a pool commenced operations and for 1999, "Compound Annual
Rates of Return" reflect the compounded monthly rates of return (not shown)
from the Start Date for, or the beginning of, such partial year.
11. Columbia was a publicly-offered fund with more than one advisor from its
inception in July 1983 through January 1988, at which point it became a
publicly-offered fund with one advisor.
12. Diversified's net asset value per unit was revalued from $3,964.23 to
$1,000.00 after the close of business on August 31, 1995. All investors in
Diversified prior to August 31, 1995 had their units increased by a
corresponding amount to reflect this revaluation, and all return
calculations in the table have been adjusted accordingly.
13. Multi-Market was a publicly-offered fund with more than one advisor with
principal protection from its inception in September 1988 through September
30, 1993, at which point it was changed to a publicly-offered fund with one
advisor without principal protection.
14. Portfolio Strategy was a publicly-offered fund with one advisor with
principal protection from its inception in February 1991 through July 31,
1996, at which point it was changed to a publicly-offered fund with one
advisor without principal protection.
15. Subscriptions for interests in Cornerstone II, Cornerstone III, and
Cornerstone IV included an up-front 7.625% of net asset value selling
commission and continuing offering expense charge until sales to new
investors were terminated on September 30, 1994. Because sales occurred
throughout the year and, therefore, the amount of the net asset value-based
charge varied among investors, it was not practicable to include the
up-front charge in determining the Cornerstone Funds' annual return for
1994.
16. The performance record of Principal Plus includes the performance of Dean
Witter Principal Plus Fund Management L.P., an affiliated pool.
64
<PAGE>
THE TRADING ADVISORS
MANAGEMENT AGREEMENTS
Each Trading Advisor has entered into a Management Agreement with a
Partnership and the General Partner. The Trading Advisor is responsible for
directing the investment and reinvestment in futures interests of the
Partnership's assets allocated to such Trading Advisor. Each Management
Agreement will terminate if the Partnership terminates, and may be terminated by
the Partnership at any time without penalty. In addition, each Management
Agreement may be terminated by the Partnership or the Trading Advisor at any
time without penalty under certain other circumstances specified in the
Management Agreement.
INTRODUCTION TO TRADING ADVISOR DESCRIPTIONS
The biographies of the principals and brief summaries of the trading
programs of the Trading Advisors for each Partnership are set forth below. The
success of each Partnership is dependent upon the collective success of its
Trading Advisors in their trading for the Partnership. However, in evaluating
these descriptions, an investor should be aware that the Trading Advisors'
trading methods are proprietary and confidential, the Trading Advisors selected
for a Partnership may change over time, and even if the same Trading Advisors
continue to trade for a Partnership, they may make substantial modifications to
their trading programs.
The descriptions of the Trading Advisors, their trading programs and their
principals are general and are not intended to be exhaustive. No attempt has
been or could be made to provide a precise description of any Trading Advisor's
trading program. Furthermore, certain Trading Advisors may have chosen to refer
to specific aspects of their trading programs, which aspects may also be
applicable to other Trading Advisors that did not choose to make specific
reference to these aspects of their own trading programs. As a consequence,
contrasts in the following descriptions may not, in fact, indicate a substantive
difference between the different programs involved. The General Partner believes
that the following descriptions may be of interest to you. However, you must be
aware of the inherent limitations of the descriptions.
MSDWCM is the only Trading Advisor affiliated with the General Partner, DWR,
MS & Co., MSIL, or any of their affiliates.
A Trading Advisor's registration with the CFTC or its membership in the NFA
should not be taken as an indication that any such agency has recommended or
approved the Trading Advisor.
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
1. EMC CAPITAL MANAGEMENT, INC.
EMC is an Illinois corporation, registered with the CFTC as a CTA and CPO.
EMC was incorporated in January 1988 for the purpose of acting as a CTA, and was
registered with the CFTC as a CTA in May of 1988 and as a CPO in February 1991.
Ms. Elizabeth A. Cheval is EMC's Chairman, sole principal, sole director and
beneficial owner. EMC and Ms. Cheval are also members of the NFA. EMC's business
address is 2201 Waukegan Road, Suite West 240, Bannockburn, Illinois 60015.
PRINCIPAL
Ms. Elizabeth A. Cheval is the Chairman, sole principal, and sole Director
of EMC. In 1984, Ms. Cheval was selected with a select group of other
individuals by Richard J. Dennis, Jr., a speculative investor in futures and
options, to invest for his personal account. As his employee, Ms. Cheval
received extensive training from Mr. Dennis, who personally supervised her
investment activities. In 1986, she became self-employed and continued to invest
for accounts of family members of Mr. Dennis until May of 1988 when Mr. Dennis
elected to discontinue his trading program. Prior to working with Mr. Dennis,
Ms. Cheval worked with A.G. Becker, a Chicago-based brokerage firm, on the floor
of the Chicago Board of Trade. Ms. Cheval has invested in futures since 1983,
when she began trading financial futures for her own account. Ms. Cheval
received a B.A. in Mathematics from Lawrence University in 1978.
At this time, neither EMC nor Ms. Cheval trades for its or her own account,
but each reserves the right to do so in the future. If either EMC or Ms. Cheval
engage in such trading, you will not be able to
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inspect such records. You should also be aware that EMC is currently the CPO and
CTA of the EMC Premier Fund, L.P., a commodity pool for which EMC acts as the
general partner. Ms. Cheval is currently a limited partner in a commodity pool
for which EMC is a trading advisor.
THE EMC TRADING PROGRAMS
EMC currently trades its Classic Program for Spectrum Select. In the near
future, EMC may trade a portion of its allocated Spectrum Select assets pursuant
to EMC's New Program. The exact nature of EMC's investment programs is
proprietary and confidential. The following descriptions of the Classic Program
and New Program are, by necessity, general and not exhaustive.
EMC's investment strategies are technical rather than fundamental in nature.
In other words, they are developed from analysis of patterns of actual monthly,
weekly, and daily price movements and are not based on analysis of fundamental
supply and demand factors, general economic factors or anticipated world events.
EMC relies on historical analysis of these price patterns to interpret current
market behavior and to evaluate technical indicators for trade initiations and
liquidations.
EMC's investment strategies used in each program are trend-following. This
means that initiation and liquidation of positions in a particular market are
generally in the direction of the price trend in that market, although under
certain circumstances counter-trend elements also may be employed.
In both programs EMC employs an investment strategy which utilizes a blend
of systems (or, stated another way, a number of systems simultaneously). The
strategies are diversified in that each program follows a number of futures
interests and often invests in more than ten different interests at one time.
The specific types of futures interests to be traded through both programs
will vary over time. These may include futures contracts, options on futures
contracts and cash commodities. Examples of futures interests traded by EMC
include precious and base metals, U.S. and foreign financial instruments, stock
indices, foreign currencies, grains and grain products, energy products such as
crude oil, and soft commodities such as cocoa, orange juice, sugar, and coffee.
EMC may invest in other futures interests in the future.
EMC also may trade in currency forward contracts on the foreign exchange
markets and engage in transactions in physical commodities, commonly known as an
"exchange for physical" or "EFP."
As of August 31, 1999, EMC managed approximately $56.9 million of client
assets pursuant to its Classic Program and approximately $67.5 million in all of
its programs. These figures include notional funds.
The futures interest contracts in both programs typically have been chosen
for reasons which include their historical performance and for their customary
liquidity. EMC may frequently invest, however, in less liquid markets. EMC
generally commits approximately 15% to 35% of an account's equity as margin on
open positions although this percentage can vary.
EMC believes that the development of a futures investment strategy is a
continual process. As a result of on-going research and development, EMC has
made enhancements and modifications in the specifics of its trading method. It
is likely that EMC will make similar enhancements and modifications in the
future. This means that the methods that EMC may use in the future might differ
from those presently used. Because EMC's methods are proprietary and
confidential, the General Partner may not be aware of such changes in EMC's
investment methods.
EMC's risk management largely will be dictated by the amount of EMC's
allocated share of Spectrum Select's Net Assets. However, as profits are
generated or losses are incurred, the risk management techniques that EMC
employs for Spectrum Select will be modified.
If possible within existing market conditions, EMC adheres to the
requirements of a money management system which determines and limits the equity
committed to each position and sets optimal stop-losses for each position and
each account. The level of liquidation determined by this money management
system can override liquidations determined by technical indicators, especially
when an account has not generated profits or is experiencing losses.
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Under EMC's investment method, profits, if any, are generated by only a
small percentage of the total number of trades placed. As a result, Spectrum
Select's Net Assets allocated to EMC will experience times of substantial
drawdowns. These drawdowns may be as high as 50% or more of the amount of funds
initially allocated to EMC. In addition, EMC may experience drawdowns well in
excess of 50% from peak levels of account performance. Substantial drawdowns do
not, however, necessarily indicate a failure in the investment strategies, but
rather are to be expected under the EMC programs. Prospective investors must,
therefore, be prepared to withstand these periods of unprofitable trading.
COMPARISON OF PROGRAMS
As noted above, the Classic Program and the New Program share some common
elements. Each program utilizes a diversified technical trend-following approach
and invests in a number of global markets. Each program also utilizes a blend of
systems and employs proprietary money management principles designed to control
risk within the portfolio.
The programs do, however, differ from one another in a number of significant
respects. First, the blend of systems utilized in the Classic Program generally
invests more aggressively than the blend utilized in the New Program. Second,
the New Program may make use of countertrend elements more frequently than the
Classic Program. Also of significance is the fact that the degree of leverage
utilized in the Classic Program is typically higher than in the New Program.
Finally, the specific money management principles employed also may differ.
The Classic Program is designed to achieve a higher potential return and is
likely to experience greater drawdowns and higher volatility over the long run.
The New Program is likely to have a lower return, smaller drawdowns and lower
volatility over the long run. Since past performance is not necessarily
indicative of future results, there can be no assurance that the programs will
perform in this manner either on a relative or absolute basis.
2. RABAR MARKET RESEARCH, INC.
Rabar is an Illinois corporation and is registered with the CFTC as a CTA
and a CPO. It is a member of the NFA in such capacities. Rabar, originally named
Rainbow Market Research, Inc. when it was incorporated in November 1986, adopted
its present name in January 1989. It was registered as a CTA and a CPO in June
1988. Rabar has managed accounts continuously since July 1988. The business
address of Rabar is 10 Bank Street, Suite 830, White Plains, New York
10606-1933.
PRINCIPALS
Paul Rabar, President of Rabar, first traded commodity futures in 1980. He
worked as an account executive at E.F. Hutton from 1981 to 1983 and then at
Clayton Brokerage until 1984. In 1985, Mr. Rabar was selected by Richard J.
Dennis, Jr., a speculative trader of futures and options, to participate in
Mr. Dennis' commodity futures trading program. Mr. Rabar participated in that
program in 1985 and 1986, managing an account for Mr. Dennis, and in 1987 and
1988 managed an account for another speculative trader of futures and options.
He traded his own account from May 1988 until January 1989, when he invested in
a futures fund to which Rabar is one of the advisors. Mr. Rabar is a graduate of
the New England Conservatory of Music. He did additional work--primarily in
science and mathematics--at Harvard University, and in 1979 and 1980 was an
assistant instructor of physics there.
Jeffrey Izenman is the Executive Vice President of Rabar, having joined the
firm in that capacity in November 1998. Prior to that, from September 1994
through October 1998, he was the President of EMC where he was responsible for
business development, client relations and various administrative and
operational aspects of the firm. From January 1995 through December 1998, Mr.
Izenman was also a member of the Board of Directors of the Managed Funds
Association and was a member of the Association's executive committee for three
years from 1996 through 1998. Mr. Izenman is also a member of the Business
Conduct Committee of the National Futures Association. Prior to joining EMC,
Mr. Izenman was a partner in the law firm of Katten Muchin & Zavis from October
1988 through August 1994, and an associate with that firm from September 1982
through September 1988. There he specialized in the representation of commodity
trading advisors (including Rabar) and commodity pool operators, as well as
securities investment advisers and hedge fund operators. Mr. Izenman received
his JD degree from the University of Michigan Law School in May 1982 and a B.S.
in Accountancy from the University of Illinois in May 1979.
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Rabar is the CPO and trading advisor to Rabar Futures Fund, L.P., a private
commodity pool. Rabar is also the trading advisor to Rabar International Futures
Fund, Ltd., a commodity pool organized in the Cayman Islands, which is not open
to U.S. investors.
It should be noted that Rabar and/or Mr. Rabar currently, and Rabar,
Mr. Rabar, and Mr. Izenman may in the future, invest in commodity pools that are
advised by Rabar. Certain of these pools may be beneficially owned solely or
primarily by Mr. Rabar.
Rabar does not currently trade an account for itself, and Mr. Izenman does
not currently trade an account for himself, but either may do so in the future.
Mr. Rabar, however, currently trades a personal account. Such trading occurs
only in markets which are considered too illiquid to trade on behalf of clients,
although Mr. Rabar may trade in other markets in the future. Records of Rabar's,
Mr. Rabar's and Mr. Izenman's personal trading will not be open to inspection by
you.
THE RABAR TRADING PROGRAM
Rabar's objective is to achieve appreciation of Spectrum Select's assets
which it is allocated through speculative trading of futures interests,
including but not limited to domestic and foreign future contracts and options
on future contracts, forward contracts and spot contracts, and cash commodities.
Rabar primarily trades future contracts for its existing clients. The specific
future interests will be selected from time to time by Rabar on the basis
discussed below. Examples of future contracts now traded by Rabar include, but
are not necessarily limited to, future contracts on currencies, U.S. and
non-U.S. financial instruments, precious and base metals, U.S. and non-U.S.
stock indices, energy products, grains, and soft commodities. Rabar may also
engage in EFP transactions. Under certain circumstances, Rabar may trade certain
futures interests for some clients which it does not trade for Spectrum Select.
As of August 31, 1999 Rabar was managing approximately $252 million of client
assets pursuant to its trading program (notional funds included).
Rabar's trading strategies have been internally researched and developed.
They are technical rather than fundamental in nature, I.E., they are developed
from the research and analysis of patterns of monthly, weekly, and daily price
movements, and of such indicators as volume and open interest. Rabar does,
however, consider the effects of some key fundamental factors in certain
situations, especially for the purpose of controlling risk.
Rabar's risk management techniques include diversification, I.E., Rabar
commits equity to many markets and to a number of trading strategies. Also, the
trading program at all times adheres to the requirements of a money management
system which determines and limits the equity committed to each trade, each
market, each commodity complex, and each account. Furthermore, the risk assumed
and, consequently, the potential for profit experienced by a particular account
at different times, and by different accounts at the same time, vary
significantly according to market conditions, the size of a given account, the
percentage gained or lost in that account, and the perceived risk aversion of
that account's owner. Consequently, you should not expect the same performance
as any other account traded previously, simultaneously, or subsequently by Rabar
or Mr. Rabar.
Rabar's trading program also emphasizes current and ongoing research and
analysis of market behavior in order to continue to develop strategies for
profiting from the changing character of that behavior. Rabar believes that the
development of a commodity trading strategy is a continual process. As a result
of further analysis and research into the performance of Rabar's methods,
changes have been made from time to time in the specific manner in which these
trading methods evaluate price movements in various commodities. It is likely
that similar revisions will be made in the future. As a result of such
modifications, the future trading methods that may be used by Rabar might differ
from those presently being used. The General Partner may not be aware of such
changes in Rabar's trading methods.
The markets typically traded by Rabar have been chosen for their historical
performance, and for their customary liquidity. However, from time to time Rabar
may trade in newer or less liquid markets. There can be no assurance of
liquidity.
Rabar's methods are proprietary and confidential. The foregoing description
is general and is not intended to be exhaustive. As stated, trading decisions
require the exercise of judgment by Rabar. The decision not to trade certain
commodities or not to make certain trades may result at times in missing
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price moves and hence profits of great magnitude, which other trading advisors
who are willing to trade these commodities may be able to capture. There is no
assurance that the performance of Rabar will result in profitable trading.
You should anticipate substantial losses of the portion of Spectrum Select's
assets allocated to Rabar over long periods of time since profits, if any, are
usually generated by only a few trades. Even more substantial losses of profits
may occur because all profits are subjected to ever-increasing risk by Rabar and
because large portions of unrealized profits in particular are usually given
back before Rabar determines that trend reversals against its positions have
occurred.
3. SUNRISE CAPITAL MANAGEMENT, INC.
Sunrise Capital Management is a California corporation with offices at 990
Highland Drive, Suite 303, Solana Beach, California 92075-2472. Sunrise Capital
Management (formerly known as Sunrise Commodities, Inc.) was organized in 1983
and continues the business of Sunrise Commodities, a California sole
proprietorship organized in 1982. Sunrise Capital Management was registered in
February 1983 as a CTA and in April 1990 as a CPO with the CFTC and is a member
of the NFA in such capacities. In January 1995, Sunrise and Commodity Monitors,
Inc. ("CMI") organized Sunrise Capital Partners, LLC ("SUNRISE CAPITAL
PARTNERS"), a California limited liability company. Sunrise Capital Partners is
wholly-owned by Sunrise Capital Management and CMI and was registered in
February 1995 as a CTA and CPO with the CFTC and is a member of the NFA in such
capacities. CMI is a California corporation organized in October 1977, and is
the successor to the partnership of Harris & Slaughter. CMI was registered in
November 1977 with the CFTC as a CTA and is a member of the NFA in such
capacity. Sunrise Capital Partners and CMI are also located at the address of
Sunrise Capital Management set forth above. Sunrise Capital Management and
Sunrise Capital Partners currently operate five commodity pools.
PRINCIPALS
Mr. Martin P. Klitzner is President, Secretary and a Director of Sunrise
Capital Management, and a Managing Director of Sunrise Capital Partners. In 1967
and 1968, Mr. Klitzner received a B.A. and an M.B.A, respectively, from the
University of Michigan. He did post graduate work in economics at the University
of California, Los Angeles, from 1968 to 1971. Mr. Klitzner joined Sunrise
Capital Management in December 1982, and has exclusive operational control of
day-to-day activities, which include the supervision of trading procedures.
Mr. Richard C. Slaughter is a Managing Director of Sunrise Capital Partners.
Mr. Slaughter is responsible for research and trading systems development. In
1974, he received a B.S. in finance from San Diego State University. He has
pursued graduate studies in finance at the State University and in systems
management at the University of Southern California. Mr. Slaughter has been a
Professor of Finance, instructing M.B.A. candidates in securities analysis and
portfolio management. Mr. Slaughter, a co-founder of CMI in 1977, serves as its
President. He was responsible, along with Dr. Forrest, for the development of
CMI's current trading systems. Mr. Slaughter began trading commodities on a
full-time basis in 1975 for his own account and as a commodity trading advisor.
Dr. Gary B. Davis is the Chairman of the Board and Chief Financial Officer
of Sunrise Capital Management. In 1968 and 1970, Dr. Davis received a B.S. and
Medical degree, respectively, from the University of Michigan. From 1980 to
1990, Dr. Davis served on the faculty of the University of California, San Diego
as an Associate Professor of Radiology. Dr. Davis has studied and traded the
commodity futures markets since 1979. Dr. Davis currently concentrates his
efforts in the research and trading systems development activities of Sunrise
and Sunrise Capital Partners.
Dr. John V. Forrest engages in research and trading systems development on
behalf of Sunrise Capital Partners. In 1962, he received a B.A. from Notre Dame
and in 1966 received a Medical Degree from the State University of New
York--Downstate Medical Center. Dr. Forrest retired in September 1997 as a
Professor of Radiology at the University of California, San Diego, where he has
served on the faculty since 1976. Dr. Forrest joined CMI in September 1991 and
is a co-developer, with Mr. Slaughter, of CMI's current trading systems. He was
President and sole shareholder of Cresta Commodities, a commodity trading
advisor, from September 1981 to August 1989. Dr. Forrest began trading the
commodity markets in 1975.
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Mr. Martin M. Ehrlich is Vice President and a Director of Sunrise Capital
Management, and Vice President-Marketing of Sunrise Capital Partners. His
academic background includes studies at the University of Cincinnati where he
majored in business administration. Mr. Ehrlich joined Sunrise Capital
Management in 1986 after having been a long-time investor with Sunrise Capital
Management. Prior to assuming responsibilities for marketing and public
relations for Sunrise Capital Management, Mr. Ehrlich was an independent
businessman and investor.
Ms. Marie Laufik is Vice President and a Director of Sunrise Capital
Management and Vice President-Trading of Sunrise Capital Partners. Ms. Laufik is
head trader and is responsible for supervising trading and back-office
operations. In 1979, Ms. Laufik received a Master's degree in Economics from the
University of Prague. Ms. Laufik worked for a Czechoslovakian import/export
company for nine years before immigrating to the United States. Mrs. Laufik was
a commodity trader for Cresta Commodities. Mrs. Laufik joined Sunrise Capital
Management in August 1988.
Elissa Davis is a principal of Sunrise Capital Management and Sunrise
Capital Partners by virtue of her role as a Trustee of the Davis Family Trust.
Mrs. Davis is not active in the management of either Sunrise Capital Management
or Sunrise Capital Partners and has not been involved in any other business
activities during the past five years.
The Davis Family Trust, dated October 12, 1989, is a director and the sole
shareholder of Sunrise Capital Management; Gary B. Davis and his wife, Elissa
Davis, are trustees and the sole beneficiaries of this Trust.
Sunrise Capital Management, Sunrise Capital Partners, their principals and
their affiliates intend to trade or to continue to trade commodity interests for
their own accounts. You will not be permitted to inspect the personal trading
records of Sunrise Capital Management, Sunrise Capital Partners, their
principals, or their affiliates, or the written policies relating to such
trading.
DESCRIPTION OF TRADING PROGRAMS
Sunrise Capital Management and Sunrise Capital Partners utilize technical
trend-following systems, trading a wide continuum of time windows. Most of these
time frames are decidedly long term by industry standards. Pro-active money
management strategies are designed to protect open profits and to minimize
exposure to non-directional markets.
In providing commodity trading advice, Sunrise Capital Management trades the
CIMCO Program for Spectrum Select and Sunrise Capital Partners trades the
Currency Program with minor modifications for Spectrum Currency.
The Sunrise CIMCO--Diversified Financial Program was designed by Sunrise
Capital Management to participate exclusively in the highly liquid financial
markets. This program trades the major currencies as outrights against the U.S.
dollar and selectively against each other. Interest rate futures, both long and
short term (including U.S. and foreign bonds, notes and euro products), stock
indices, including S&P 500, precious and industrial metals, including aluminum,
gold, silver and copper, natural gas and crude oil are also traded in this
program. These commodity interests are traded on futures exchanges but may also
be traded in the interbank or cash markets when appropriate.
The Currency Program follows approximately ten different major and minor
currency markets, which may include, but are not limited to, the Japanese yen,
British pound, euro currency, Swiss franc, Canadian dollar, Australian dollar,
Swedish krona, New Zealand dollar, Singapore dollar, and South African rand. The
Currency Program trades currency futures contracts on the International Monetary
Market Division of the Chicago Mercantile Exchange and forward currency
contracts in the interbank markets. In order to achieve adequate diversification
for the Currency Program, major and minor currencies are traded as crossrates
selectively against each other and/or as outrights against the U.S. dollar.
As of August 31, 1999 Sunrise Capital Management and Sunrise Capital
Partners were managing approximately $82.6 million of client assets pursuant to
the CIMCO Program, approximately $71.5 million of client assets pursuant to the
Currency Program, and approximately $661 million of client assets in all of
their programs.
Relying on technical analysis, Sunrise Capital Management and Sunrise
Capital Partners believe that future price movements in all markets may be more
accurately anticipated by analyzing historical price movements within a
quantitative framework rather than attempting to predict or forecast changes in
price through fundamental economic analysis. The trading methodologies employed
by Sunrise Capital Management and Sunrise Capital Partners are based on programs
analyzing a large number of interrelated mathematical and statistical formulas
and techniques which are quantitative, proprietary in nature and which have been
either learned or developed by Dr. Davis, Dr. Forrest and/or Mr. Slaughter. The
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profitability of the trading programs, traded pursuant to technical analysis
emphasizing mathematical and charting approaches, will depend upon the
occurrence in the future, as in the past, of major trends in some markets. If
there are no trends, the trading programs are likely to be unprofitable.
Sunrise's trading systems attempt to detect a trend, or lack of a trend,
with respect to a particular futures interest in a program by analyzing price
movement and volatility over time. Sunrise's trading system consists of
multiple, independent and parallel systems, each designed and tested to seek out
and extract different market inefficiencies on different time horizons. These
systems will generate a signal to sell a "short" contract or purchase a "long"
contract based upon their identification of a price trend in the particular
futures interest. If the systems do not detect a price trend, a "neutral"
trading signal will be generated. While this neutral signal is designed to
filter out high-risk "whipsaw" markets, it is successful on only a limited
basis. Successful speculative futures interests trading employing
trend-following techniques, such as Sunrise's system, depends to a large degree
upon not trading non-directional, volatile markets. Accordingly, to the extent
that this neutral trading signal is not generated during a non-trending market,
trading would likely be unsuccessful because an account would trade such
markets.
Trend-following trading systems, such as those employed by Sunrise Capital
Management and Sunrise Capital Partners, will seldom effect market entry or exit
at the most favorable price in the particular market trend. Rather, this type of
trading system seeks to close out losing positions quickly and to hold portions
of profitable positions for as long as the trading system determines that the
particular market trend continues to offer reasonable profit potential. The
number of losing transactions may exceed substantially the number of profitable
transactions. However, if the approach is successful, these losses should be
more than offset by gains.
While Sunrise Capital Management and Sunrise Capital Partners rely primarily
on mechanical technical trading systems in making investment decisions, the
strategy does include the latitude to depart from this approach if market
conditions are such that, in the opinion of Sunrise Capital Management or
Sunrise Capital Partners, as the case may be, execution of trades recommended by
the mechanical systems would be difficult or unusually risky. There may occur
the rare instance in which Sunrise Capital Management or Sunrise Capital
Partners, as the case may be, will override the system to decrease market
exposure. Any modification of trading instructions could adversely affect the
profitability of an account. Among the possible consequences of such a
modification would be (1) the entrance of a trade at a price significantly worse
than a system's signal price, (2) the complete negation of a signal which
subsequently would have produced a profitable trade, or (3) the premature
termination of an existing trade. Neither Sunrise Capital Management nor Sunrise
Capital Partners is under any obligation to notify clients, the General Partner,
or you of this type of deviation from its mechanical systems, since it is an
integral part of its overall trading method.
A technical trading system consists of a series of fixed rules applied
systematically. However, the system still requires Sunrise Capital Management
and Sunrise Capital Partners to make certain subjective judgments. For example,
the Trading Advisor must select the markets it will follow and futures interests
it will actively trade, along with the contract months in which it will maintain
positions. Sunrise Capital Management and Sunrise Capital Partners must also
subjectively determine when to liquidate positions in a contract month which is
about to expire and initiate a position in a more distant contract month.
Sunrise Capital Management and Sunrise Capital Partners engage in ongoing
research that may lead to significant modifications from time to time. Sunrise
Capital Management or Sunrise Capital Partners (as the case may be) will notify
the General Partner if modifications to its trading systems or portfolio
structure are material.
Sunrise Capital Management and Sunrise Capital Partners believe that the
development of a commodity trading strategy is a continual process. As a result
of further analysis and research into the performance of Sunrise Capital
Management and Sunrise Capital Partners' methods, changes have been made from
time to time in the specific manner in which these trading methods evaluate
price movements in various futures interests, and it is likely that similar
revisions will be made in the future. As a result of such modifications, the
trading methods that may be used by Sunrise Capital Management and Sunrise
Capital Partners in the future might differ from those presently being used.
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Each of Sunrise Capital Management and Sunrise Capital Partners has
discretionary authority to make all trading decisions, including upgrading or
downgrading the trading size of the Spectrum account it manages to reflect
additions, withdrawals, trading profits, and/or trading losses, without prior
consultation or notice. In addition, each advisor may from time to time adjust
the leverage applicable to the assets allocated to it; PROVIDED, HOWEVER, any
such adjustments will be consistent with the leverage parameters described
herein and in the overall investment objectives and trading policies of the
accounts they manage for Spectrum Select and Spectrum Currency. Such adjustments
may be in respect of certain markets or in respect of the overall CIMCO
investment portfolio or Currency Program. Factors which may affect the decision
to adjust leverage include: inflows and outflows of capital, trading levels
below $3,000,000, ongoing research, volatility of individual markets, risk
considerations, and Sunrise Capital Management and Sunrise Capital Partners'
subjective judgement and evaluation of general market conditions. Adjustments to
leverage may result in greater profits or losses and increased brokerage costs.
No assurance can be given that any leverage adjustment will be to your financial
advantage.
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
1. CAMPBELL & COMPANY, INC.
Campbell is a Maryland corporation organized in April, 1978 as a successor
to a partnership originally organized in January, 1974. Campbell has been
registered with the CFTC as a CTA since May 1978 and is a member of the NFA in
such capacity. Campbell's principal place of business is located at 210 W.
Pennsylvania Ave., Suite 770, Towson, MD 21204.
PRINCIPALS
Mr. Richard M. Bell serves as a Senior Vice-President--Trading. Mr. Bell
began his employment with Campbell in May, 1990. His duties include managing
daily trade execution of the assets under Campbell's management. From September,
1986 through May, 1990 Mr. Bell was the managing general partner of several
partnerships registered as broker-dealers involved in market making on the floor
of the Philadelphia Stock Exchange ("PHLX") and Philadelphia Board of Trade
("PBOT"). From July, 1975 through September, 1986 Mr. Bell was a stockholder and
Executive Vice-President of Tague Securities, Inc., a registered broker-dealer.
Mr. Bell owns seats on the PHLX and a Philadelphia Currency Participation, all
of which are leased out. Mr. Bell graduated from Lehigh University with a B.S.
in Finance.
Mr. D. Keith Campbell has served as Chairman of the Board since it began
operations and was President until January 1994, and Chief Executive Officer
until January 1, 1998. Mr. Campbell is the majority voting stockholder. From
1971 through June, 1978 he was a registered representative of a futures
commission merchant. Mr. Campbell has acted as a CTA since January, 1972 when,
as general partner of Campbell Fund, a limited partnership engaged in commodity
futures trading, he assumed sole responsibility for trading decisions made on
behalf of Campbell Fund. Since then he has applied various technical trading
systems to numerous discretionary commodity trading accounts. Mr. Campbell is
registered with the CFTC as a CPO and is a member of the NFA in such capacity.
He is also registered as an associated person of Campbell.
Mr. William C. Clarke, III joined Campbell in June, 1977. He is an Executive
Vice-President and a Director. Mr. Clarke holds a B.S. in Finance from Lehigh
University where he graduated in 1973. Mr. Clarke currently oversees all aspects
of research which involves the development of proprietary trading models and
portfolio management methods. Mr. Clarke is registered as an associated person
of Campbell.
Mr. Bruce L. Cleland joined Campbell in January, 1993. Mr. Cleland serves as
President, Chief Executive Officer and a Director. From May, 1986 through
December, 1992 Mr. Cleland served in various principal roles with the following
firms; President, Institutional Brokerage Corp., a floor broker; President,
Institutional Advisory Corp., a CTA and CPO; President, F&G Management, Inc., a
CTA; President, Hewlett Trading Corporation, a CPO. In January, 1983
Mr. Cleland was employed by Rudolf Wolff Futures, Inc., a futures commission
merchant, where he served as President until April, 1986. Mr. Cleland graduated
in 1969 from Victoria University in Wellington, New Zealand where he received a
Bachelor of Commerce and Administration degree. Mr. Cleland is registered as an
associated person of Campbell.
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Xiaohua Hu serves as a Vice President--Research. Mr. Hu has been employed by
Campbell since 1994 in the Research Department, where he has a major role in the
ongoing research and development of Campbell's trading systems. From 1992 to
1994 Mr. Hu was employed in Japan by Line System as a software engineer, where
he participated in the research and development of computer software, including
programs for production systems control and software development. Mr. Hu
received his B.A. in Manufacturing Engineering from Changsha University of
Technology in China in 1982. He went on to receive an M.A. and Ph.D. in Systems
and Information Engineering from the Toyohashi University of Technology, in
Japan, in 1987 and 1992 respectively. During his studies at Toyohashi, Mr. Hu
was also a Visiting Researcher in Computer Science and Operations Research and
published several research papers.
Phil Lindner, serves as Vice President--Information Technology. Mr. Lindner
has been employed by Campbell since October, 1994, became the IT Director in
March, 1996, and Vice President in January, 1998. Mr. Lindner oversees
Campbell's computer and telecommunications systems, including a staff of
programmers that program proprietary applications for Campbell's trading, fund
administration, and accounting functions, and provide complete computer systems
support to all Campbell employees. Prior to joining Campbell, Mr. Lindner worked
as a programmer and manager for Amtote, a provider of race-track computer
systems.
Mr. James M. Little serves as Executive Vice-President/Marketing and as a
Director. Mr. Little holds a B.S. in Economics and Psychology from Purdue
University. Mr. Little joined Campbell in April, 1990. From March, 1989 through
April, 1990 Mr. Little was a registered representative of A.G. Edwards &
Sons, Inc. Prior to that, from January, 1984 through March, 1989 he was the
Chief Executive Officer of James Little & Associates, Inc., a registered CPO and
registered broker-dealer. Mr. Little has extensive experience in the futures
industry having worked in the areas of hedging, floor trading and managed
futures. He is the co-author of THE HANDBOOK OF FINANCIAL FUTURES, and is a
frequent contributor to investment industry publications. Mr. Little is
registered as an associated person of Campbell.
Ms. Theresa D. Livesey serves as the Chief Financial Officer, Treasurer,
Secretary and a Director. Ms. Livesey is registered as an associated person of
Campbell. Ms. Livesey joined Campbell in June, 1991. In addition to her role as
CFO, Ms. Livesey also oversees administration and compliance at Campbell. From
December, 1987 to June, 1991 she was employed by Bank Maryland Corp, a publicly
held company. When she left she was Vice-President and CFO. Prior to that time,
she worked with Ernst & Young. Ms. Livesey is a C.P.A. and has a B.S. in
Accounting from the University of Delaware. Ms. Livesey is registered as an
associated person of Campbell.
V. Todd Miller serves as a Vice President--Research. Mr. Miller has been
employed by Campbell since 1994 in the Research Department, where he has a major
role in the ongoing research and development of Campbell's trading systems. From
1993 to 1994, Mr. Miller was an assistant professor in the department of
Computer Information Science at the University of Florida, where he taught
classes in object oriented programming, numerical analysis, and programming in
C, C++ and LISP. Mr. Miller holds a variety of degrees from the University of
Florida, beginning with an Associates degree in architecture. He followed that
in 1986 with a B.A. in Business with a concentration in computer science. In
1988 he received his M.A. in Engineering with a concentration in artificial
intelligence. He completed his education in 1993 with a Ph.D. in Engineering
with a concentration in computer simulation.
Albert Nigrin serves as a Vice President--Research. Mr. Nigrin has been
employed by Campbell since 1995 in the Research Department, where he has a major
role in the ongoing research and development of Campbell's trading systems. From
1991-1995 Mr. Nigrin was an assistant professor in the department of Computer
Science and Information Systems at American University in Washington D.C., where
he taught classes in artificial intelligence, computer programming and
algorithms to both graduate and undergraduate students. While teaching, he also
wrote and published a book with MIT Press, NEURAL NETWORKS FOR PATTERN
RECOGNITION. Mr. Nigrin received a B.A. in Electrical Engineering in 1984 from
Drexel University. He then proceeded directly to a Ph.D. program and received
his degree in Computer Science in 1990 from Duke University, where his doctoral
studies concentrated in the areas of artificial intelligence and neural
networks.
Markus Rutishauser serves as Vice President--Trading, and has been employed
by Campbell since October, 1993, with responsibility for day-to-day foreign
exchange trading. Prior to joining Campbell, Mr. Rutishauser worked two years at
Maryland National Bank in Baltimore as an Assistant Vice President
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in foreign exchange trading. Prior to that, Mr. Rutishauser was employed by
Union Bank of Switzerland, spending four years in their Zurich office and
another four years in their New York office, in the Foreign Exchange Department.
Mr. Rutishauser graduated from the University of Fairfield with a degree in
Finance. He subsequently completed his MBA at the University of Baltimore in
January, 1996.
Mr. C. Douglas York has been employed by Campbell since November 1992. He is
a Senior Vice President--Trading. His duties include managing daily trade
execution for foreign exchange markets. From January 1991 through October 1992,
Mr. York worked for Black & Decker as Global Foreign Exchange Manager. He holds
a B.A. in Government from Franklin and Marshall College. Mr. York is an
associated person of Campbell.
Any principal of Campbell may trade futures interests for his or her own
accounts. In addition, Campbell manages proprietary accounts for its deferred
compensation plan and principals. Campbell has written procedures that govern
proprietary trading by principals. Trading records for proprietary trading
accounts are available for review by clients upon reasonable notice. Such trades
may or may not be in accordance with the Campbell trading program described
below.
THE CAMPBELL TRADING PROGRAM
Campbell trades the assets allocated to it by the Partnership pursuant to
its Financial, Metal & Energy Large Portfolio, which trades exclusively in
futures, options and forward contracts, including foreign currencies, precious
and base metals, crude oil and petroleum products, energy products, stock market
indices, and interest rate futures. As of August 31, 1999, Campbell was managing
approximately $1.3 billion of client assets pursuant to the Financial Metals &
Energy Large Portfolio and approximately $1.7 billion in all of its programs.
Campbell makes trading decisions using proprietary technical trading models,
which analyze market statistics. There can be no assurance that the trading
models currently being used will produce results similar to those produced in
the past. Campbell's trading models are designed to detect and exploit
medium-term to long-term price changes, while also applying proven risk
management and portfolio management principles.
Campbell believes that utilizing multiple trading models for the same client
account provides an important level of diversification, and is most beneficial
when multiple contracts of each market are traded. More or fewer trading models
than are currently used may be used in the future. Every trading model may not
trade every market. It is possible that one trading model may establish a long
position while another trading model establishes a short position in the same
market. Since it is unlikely that both positions would prove profitable, in
retrospect one or both trades will appear to have been unnecessary. It is
Campbell's policy to follow trades signaled by each trading model independent of
what the other models may be recommending.
Over the course of a long-term trend, there are times when the risk of the
market may not appear to be justified by the potential reward. In such
circumstances some of Campbell's trading models may exit a winning position
prior to the end of a price trend. While there is some risk to this method (for
example, being out of the market during a significant portion of a price trend),
our research indicates that this is well compensated for by the decreased
volatility of performance which may result.
Campbell's trading models may include trend-following trading models,
counter-trend trading models, and trading models that do not seek to identify or
follow price trends at all. Campbell expects to develop additional trading
models and to modify models currently in use and may or may not employ all such
models for all clients' accounts. The trading models currently used by Campbell
may be eliminated from use if Campbell ever believes such action is warranted.
While Campbell normally follows a disciplined systematic approach to
trading, on occasion it may override the signals generated by the trading
models. Such action may not be beneficial to the results achieved.
Campbell applies risk management and portfolio management strategies to
measure and manage overall portfolio risk. These strategies include portfolio
structure, risk balance, capital allocation, and risk limitation. One objective
of risk and portfolio management is to determine periods of relatively high and
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low portfolio risk, and when such points are reached, Campbell may reduce or
increase position size accordingly. It is possible, however, that during periods
of reduction in position size the return that would have been realized had the
account been fully invested would be reduced.
Campbell may, from time to time, increase or decrease the total number of
contracts held based on increases or decreases in an account's assets, changes
in market conditions, perceived changes in portfolio-wide risk factors, or other
factors which may be deemed relevant.
Campbell estimates that, based on the amount of margin required to maintain
positions in the markets currently traded, aggregate margin for all positions
held in a client's account will range between 20% and 40% of the account's net
assets. From time to time, margin commitments may be above or below these
ranges.
The number of contracts that Campbell believes can be bought or sold in a
particular market without undue adverse price movement may at times be limited
because of illiquidity. In such cases a client's portfolio would be influenced
by liquidity factors because its positions in such markets might be
substantially smaller than its positions in other markets which offer greater
liquidity.
2. CHESAPEAKE CAPITAL CORPORATION
Chesapeake was incorporated under the laws of the Commonwealth of Virginia
in February 1988 for the purpose of offering advisory and investment portfolio
management services to both retail and institutional investors in trading
futures interest contracts. On August 19, 1991, Chesapeake was merged into
Chesapeake Capital Corporation, an Illinois corporation formed on August 13,
1991. References herein to "Chesapeake" refer to the Virginia corporation prior
to August 19, 1991 and the Illinois corporation on and after August 19, 1991.
Chesapeake has been registered with the CFTC as a CTA and as a CPO since
June 20, 1988 and May 8, 1991, respectively, and has also been a member of the
NFA since June 20,1988. Chesapeake's principal place of business is located at
500 Forest Avenue, Richmond, Virginia 23229. All business records will be kept
at Chesapeake's principal place of business.
PRINCIPALS
Mr. R. Jerry Parker, Jr., received a Bachelor of Science degree in Commerce,
with an emphasis in Accounting, from the University of Virginia in
January 1980. Mr. Parker worked in the accounting field for four years after
graduating from college and became a licensed Certified Public Accountant in
Virginia in 1982. From November 1983 until January 1987, Mr. Parker was employed
as an exempt CTA by Mr. Richard J. Dennis, a principal and shareholder of
Richard J. Dennis & Company, a Chicago-based CTA and CPO registered with the
CFTC, in his "Turtle" training program. From January 1987 until February 1988,
Mr. Parker traded for Mr. Thomas Dennis as an exempt CTA. From November 1983
through February 1988, Mr. Parker had complete discretionary trading authority
over a futures portfolio of $1 million to $1.5 million. In February 1988,
Mr. Parker ceased trading for Mr. Thomas Dennis and formed Chesapeake, where he
serves as the Chairman of the Board of Directors, Chief Executive Officer and a
Principal.
Mr. John M. Hoade received a Bachelor of Science degree in Business
Administration from Lynchburg College in 1978. From September 1976 through
December 1990, Mr. Hoade was employed by Thurston Metals, Inc., a distributor
and processor of specialty metals, located in Lynchburg, Virginia, in sales,
marketing and general management. Mr. Hoade joined Chesapeake in December 1990
to direct the operations and marketing efforts of the company. Mr. Hoade is
President, Secretary, and a Principal.
Braxton Glasgow, III received a Bachelor of Science degree in Accounting
from the University of North Carolina - Chapel Hill in 1975 and is a Certified
Public Accountant. Prior to joining Chesapeake in May 1995, Mr. Glasgow was
President of Shoe Factory, Inc. in Richmond, Virginia from January 1992 through
May 1995, Executive Vice President of Intershoe, Inc. in Millersburg
Pennsylvania from November 1989 through January 1992 and Managing Director of
Signet Investment Banking Company in Richmond, Virginia from September 1986
through November 1989 where he specialized in merger and acquisition taxation.
Mr. Glasgow is a member of Chesapeake's Executive Committee and is registered as
an Associated Person and Principal of Chesapeake with the National Futures
Association. Mr. Glasgow is Director of Marketing and Executive Vice President
of Chesapeake where he is responsible for marketing, sales and new product
development.
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Robert S. Parker, Jr. received his Bachelor of Science degree in Commerce,
with an emphasis in Accounting, from the University of Virginia in 1965.
Mr. Parker worked in the accounting field for two years and became a Certified
Public Accountant in Virginia. He then attended law school at the College of
William and Mary where he received a Juris Doctor degree in 1970. Mr. Parker has
been engaged in the practice of law since then, with an emphasis in tax and
business matters. Mr. Parker is a member of Chesapeake's Executive Committee and
is registered as a Principal of Chesapeake with the National Futures
Association. Mr. Parker has been General Counsel of Chesapeake since February
1996.
Chesapeake and its principals may, from time to time, trade futures
interests contracts and securities for their own proprietary accounts. Such
trades may or may not be in accordance with the Chesapeake trading program
described below.
THE CHESAPEAKE TRADING PROGRAMS
Prior to June 1, 1998, the assets allocated to Chesapeake by Spectrum
Technical were traded pursuant to its Diversified Program and its Financial and
Metals Program. Since June 1, 1998, the assets of Spectrum Technical allocated
to Chesapeake have been traded pursuant to its Diversified 2XL Program. The
Diversified 2XL Program emphasizes a maximum range of diversification with a
global portfolio of futures interests contracts, including, but not limited to,
agricultural products, precious and industrial metals, currencies, financial
instruments, and stock, financial and economic indices. Chesapeake tracks
commodities, futures contracts, options on futures contracts and commodities,
spot and forward currency contracts and swap contracts. Chesapeake will not
trade cash commodities or swap contracts for the Partnership without the General
Partner's consent. Chesapeake may trade on U.S. and non-U.S. exchanges and
markets. The decision to add or subtract markets from this program periodically
shall be at the sole discretion of Chesapeake.
The investment programs generally offered by Chesapeake are the "Diversified
Program," the "Diversified 2XL Program," and the "Diversified 3XL Program"
(collectively, the "TRADING PROGRAMS"). The Diversified Program is Chesapeake's
longest operating investment portfolio, with a performance record beginning in
February 1988. While all of the Chesapeake Trading Programs employ the same
general trading methodology, as described below, the various past and present
Chesapeake Trading Programs differ and have differed in their emphasis on
certain markets or market sectors and the exclusion of others and/ or their use
of leverage. The Diversified 2XL Program, which Chesapeake trades for Spectrum
Technical, began trading in April 1994. The Diversified 2XL Program utilizes the
same trading system as the Diversified Program, except that the Diversified 2XL
Program is generally traded on an upleveraged basis generally equal to
approximately two times the leverage applied to a fully-funded Diversified
Program account (although at times a different level may be used and the
Partnership's returns may vary significantly from a 2:1 relationship from the
returns of Diversified Program accounts). Ultimately, the appropriate leverage
to be employed by the Partnership in its trading, as determined at the sole
discretion of Chesapeake, will be determined by the performance factors
associated with the Partnership and the Partnership only, regardless of the
intended performance relationship of the Partnership to other accounts trading
in other programs that may utilize more or less leverage. The following overview
is not intended as a detailed and exhaustive review of the trading methodology
or programs, or systems employed by Chesapeake, as their exact nature is
proprietary and confidential.
As of August 31, 1999, Chesapeake was managing approximately $165 million of
customer funds in the Diversified 2XL Program ("notional funds" excluded) and
approximately $944 million of client assets in all of its programs ("notional
funds" excluded).
Chesapeake believes that future price movements in all markets may be more
accurately anticipated by historical price movements within a quantitative or
technical analysis than through fundamental economic analysis. The trading
methodologies employed by Chesapeake are based on the analysis of a large number
of interrelated mathematical and statistical formulas and techniques which are
quantitative in nature and are proprietary and confidential.
In addition to such mathematical evaluations, Chesapeake employs a technique
of technical analysis generally known as "charting" to attempt to determine
optimal support and resistance levels and entry and exit points in the various
markets. To determine the overall technical condition of the market and to
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be used as a timing mechanism for all trades, Chesapeake also makes extensive
use of internally-generated market information, which includes, but is not
limited to, price volatility, open interest, daily price action and volume.
The results of the Trading Programs, traded pursuant to technical analysis
emphasizing mathematical and charting approaches, will depend upon the
occurrence in the future, as in the past, of major trends in some markets. If
there are no trends, the Diversified 2XL Program is likely to be unprofitable.
There have been trendless periods in the past which can be expected to recur,
and any factor which lessens the prospect of trends in the future, such as
increased governmental control, regulation, or participation as a purchaser or
seller in futures markets (including joint governmental control or regulation
of, or participation in, international currency markets), lessens the prospect
that programs utilizing technical analysis, including the Diversified 2XL
Program, will be profitable in the future. In addition, the future profitability
of the Diversified 2XL Program would also be adversely affected by factors which
increase the number of signals leading to unprofitable trades. For example, a
significant increase in technically-oriented trading (trend-following or
otherwise) in a particular commodity might cause a change in the pattern of
price movements in a manner which might be unfavorable.
Trend-following trading systems, such as those employed by Chesapeake, will
seldom effect market entry or exit at the most favorable price in the particular
market trend. Rather, a trend following trading system seeks to close out losing
positions quickly and to hold portions of profitable positions for as long as
the trading system determines that the particular market trend continues to
exist. There can be no assurance, however, that profitable positions can be
liquidated at the most favorable price in a particular trend. As a result, the
number of losing transactions may exceed substantially the number of profitable
transactions.
The Trading Programs are oriented toward the preservation of original
equity. The commencement of trading or a drawdown from starting equity are
considered the situations of highest risk, and risk management techniques at
this point are emphasized over those which invite greater risk in the interest
of enhancing performance. These risk management techniques include
diversification, I.E., commitment of equity to multiple markets and to a number
of trading strategies. Also, the Trading Programs adhere to the requirements of
a money management system which determines and limits the equity committed to
each trade, each market, each commodity complex (in Trading Programs which trade
in more than one commodity complex) and each account.
Chesapeake believes that a long-term commitment to its Trading Programs is
necessary for profitable trading. Chesapeake will attempt to take a limited
number of positions over the long-term to capture major price movements while
limiting downside risk on open positions. Clients, such as Spectrum Technical,
must give the markets ample time to develop the type of trends on which
Chesapeake's systems can capitalize in order to have a reasonable chance for
their investment to be successful.
Exchanges on which transactions will take place will include, but are not
limited to, all exchanges in the U.S., as well as non-U.S. exchanges which
include but are not limited to the Belgian Futures and Options Exchange, the
London International Financial Futures and Options Exchange Ltd., the
International Petroleum Exchange of London Ltd., the London Metal Exchange, the
London Commodity Exchange, the Italian Derivatives Market, the Marche a Terme
International de France, the Mercado Espanol de Futuros Financieros, the Eurex
Deutschland, the Hong Kong Futures Exchange Ltd., the Montreal Exchange, the
Tokyo Commodity Exchange, the Tokyo International Financial Futures Exchange,
the Tokyo Stock Exchange, the Singapore International Monetary Exchange, the
Sydney Futures Exchange Ltd., and the Winnipeg Commodity Exchange. In addition,
Chesapeake continually monitors numerous markets, both U.S. and non-U.S., and
may initiate trades at any point it determines that a market is sufficiently
liquid and tradeable using the methods employed by Chesapeake.
Chesapeake renders advice regarding transactions in physical commodities,
including exchange of futures for physicals transactions ("EFP"). An EFP is a
transaction permitted under the rules of many futures exchanges in which two
parties exchange a cash market position for a futures market position (or vice
versa) without making an open, competitive trade on the exchange. The prices at
which such transactions are executed are negotiated between the parties.
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Chesapeake has generally used between 10% and 30% of the equity in a
fully-funded Diversified Program account as original margin for trading, but at
times the margin-to-equity ratio can be higher. The Diversified 2XL Program
generally trades at approximately double the Diversified Program level.
The risk assumed and, consequently, the potential for profit experienced by
a particular account at different times, and by different accounts at the same
time, vary significantly according to the Trading Program(s) used, the market
conditions, the percentage gained or lost in the account, the size of the
account, the brokerage commissions charged to the account, the management and
incentive fees charged to the account, the contracts, if any, excluded from the
account by the client, and when the account commenced trading. Accordingly, no
client should expect to achieve the same performance as that of any other
account traded previously, simultaneously, or subsequently by Chesapeake.
Programs that exclude or emphasize certain markets will, of course, perform
differently than programs utilizing different markets. For programs that differ
in terms of leverage only (I.E., Diversified Program, Diversified 2XL Program
and Diversified 3XL Program), Chesapeake generally attempts to manage accounts
in such programs such that the gross returns (before fees), positive or
negative, are a multiple of each other based on the leverage differential (E.G.,
the Diversified 3XL Program gross returns, positive or negative, are generally
intended to be approximately triple those of the Diversified Program on an
annual or year to date basis, while the Diversified 2XL Program returns,
positive or negative, are generally intended to be approximately double those of
the Diversified Program, on an annual or year to date basis). However, many
factors can significantly impact account performance and these performance
relationships, including but not limited to differences in the timing of
additions and withdrawals and the resulting adjustment trades; varying fills;
changes in position size to reduce risk during losing periods by Chesapeake that
impact an account in one program but not other account(s) in other programs that
use proportionately higher or lower leverage; differences in brokerage
commissions; and other factors. Accordingly, every program will underperform or
overperform the anticipated multiple or fraction of a differently leveraged
program.
Decisions concerning the liquidation of positions, the futures interests
contracts to be traded and the size of positions to be taken or maintained will
require to some degree the exercise of judgment by Chesapeake. A decision not to
trade certain futures interests contracts due to lack of liquidity, excess
volatility or for any other reason may result at times in clients, such as
Spectrum Technical, missing significant profit opportunities which might
otherwise have been captured by Chesapeake.
The trading strategies and systems utilized by Chesapeake's Trading
Programs, including the Diversified 2XL Program, may be revised from time to
time by Chesapeake, as a result of ongoing research and development that seeks
to devise new trading strategies and systems, as well as test methods currently
employed. The trading strategies and systems used by Chesapeake in the future
may differ significantly from those presently used, due to the changes which may
result from this research.
3. JOHN W. HENRY & COMPANY, INC. (JWH-REGISTERED TRADEMARK-)
John W. Henry & Company began managing assets in 1981 as a sole
proprietorship and was later incorporated in the state of California as John W.
Henry & Co., Inc. to conduct business as a commodity trading advisor. In 1997,
JWH reincorporated in the state of Florida. JWH's offices are at One Glendinning
Place, Westport Connecticut, 06880, 203-221-0431 and 301 Yamato Road, Suite
2200, Boca Raton, Florida. The Westport office is the contact location for
investor inquiries. JWH's registration as a Commodity Trading Advisor became
effective in November 1980. JWH is a member of the NFA in this capacity. "JWH"
is the registered trademark of John W. Henry & Company, Inc.
PRINCIPALS
Mr. John W. Henry is chairman of the JWH Board of Directors and is trustee
and sole beneficiary of the John W. Henry Trust dated July 27, 1990. He is also
a member of the JWH Investment Policy Committee. In addition, he is a principal
of Westport Capital Management Corporation, Global Capital Management Limited,
JWH Asset Management, Inc., and JWH Financial Products, Inc., all affiliates of
JWH. Mr. Henry currently concentrates his activities at JWH on portfolio
management, research and new system development, day-to-day decisions involving
the strategic direction and business of the firm and frequent dialogue with
trading supervisors. He is the exclusive owner of certain trading systems
licensed
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to Elysian Licensing Corporation, a corporation wholly owned by Mr. Henry, and
sublicensed by Elysian Licensing Corporation to JWH and utilized by JWH in
managing investor accounts. Over the last sixteen years, Mr. Henry has developed
many innovative investment programs which have enabled JWH to become one of the
most successful money managers in the foreign exchange, futures and fixed income
markets.
Mr. Henry has served on the Board of Directors of the Futures Industry
Association (FIA), the National Association of Futures Trading Advisors (NAFTA),
and the Managed Futures Trade Association, and has served on the Nominating
Committee of the National Futures Association (NFA). He has also served on a
panel created by the Chicago Mercantile Exchange and the Chicago Board of Trade
to study cooperative efforts related to electronic trading, common clearing, and
issues regarding a potential merger. In 1989, Mr. Henry established residency in
Florida, and since that time has performed services from that location as well
as from the offices of JWH in Westport, Connecticut. Since the beginning of
1987, he has devoted, and will continue to devote, considerable time to
activities in businesses other than JWH and its affiliates, including acting as
chairman of the Florida Marlins Baseball Club LLC, which continues to be
operated by professional baseball staff.
Mr. Mark H. Mitchell is vice chairman, counsel to the firm and a member of
the JWH Board of Directors. His duties include the coordination and allocation
of responsibilities among JWH and its affiliates. He is also vice chairman and a
director of JWH Asset Management, Inc. and JWH Financial Products, Inc. Prior to
joining JWH in January 1994, he was a partner at Chapman and Cutler in Chicago,
where he headed the law firm's futures law practice from August 1983 to
December 1993. He also served as general counsel of the MFA and general counsel
of NAFTA. Mr. Mitchell is currently a member of the NFA CPO/CTA Advisory
Committee. In addition, he has served as a member of the NFA Special Committee
for the Review of a Multi-tiered Regulatory Approach to NFA Rules, the MFA
Government Relations Committee, and the Executive Committee of the FIA Law and
Compliance Division. In 1985, Mr. Mitchell received the Richard P. Donchian
Award for Outstanding Contributions to the Field of Commodity Money Management.
He received an A.B. with honors from Dartmouth College and a J.D. from the
University of California at Los Angeles, where he was named to the Order of the
Coif, the national legal honorary society.
Mr. Verne O. Sedlacek is the president and chief operating officer and a
member of the JWH Investment Policy Committee. He is responsible for the
day-to-day management of the firm. Mr. Sedlacek is also president and director
of Westport Capital Management Corporation and Global Capital Management Limited
and vice president of JWH Financial Products, Inc. Prior to joining JWH in July
1998, he was the executive vice president and chief financial officer of Harvard
Management Company, Inc., a wholly owned subsidiary of Harvard University which,
at the time of his departure, managed approximately $14 billion of
University-related funds. At Harvard Management Company, he was responsible for
managing the areas of personnel, budgets, systems, performance analysis,
contracts, credit, compliance, custody, operations, cash management, securities
lending and market risk evaluation; he joined Harvard Management in March 1983.
Mr. Sedlacek currently serves on the Boards of Directors of the FIA and the
Chicago Mercantile Exchange, and is a member of the Global Markets Advisory
Committee of the CFTC. He received an A.B. in Economics from Princeton
University, and an M.B.A. in Accounting from New York University and was
certified as a C.P.A. by the State of New York in 1978.
Dr. Mark S. Rzepczynski is a senior vice president, research and trading and
a member of the JWH Investment Policy Committee. He is also a vice president of
JWH Financial Products, Inc. Prior to joining JWH in May 1998, he was vice
president and director of taxable credit and quantitative research in the fixed
income division of Fidelity Management and Research from May 1995 to
April 1998, where he oversaw credit and quantitative research recommendations
for all Fidelity taxable fixed income funds. From April 1993 to April 1995, he
was a portfolio manager and director of research for CSI Asset Management, Inc.,
a fixed-income money management subsidiary of Prudential Insurance. Dr.
Rzepczynski has a B.A. CUM LAUDE, Honors in Economics from Loyola University of
Chicago, and an A.M. and Ph.D. in Economics from Brown University.
Mr. E. Lyndon Tefft is a senior vice president and the chief financial
officer. He is also the treasurer of Westport Capital Management Corporation and
JWH Asset Management, Inc., vice president of JWH
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Financial Products, Inc., and director, secretary, and treasurer of JWH
Securities, Inc. Prior to joining JWH in October 1998, Mr. Tefft was the
Director of MIS and a vice president at Harvard Management Company, Inc. where
he was responsible for directing the design, development, and operation of
global equity, bond, and derivative trading, accounting, and settlement systems
beginning in May 1994. Mr. Tefft received a B.S. in Industrial Management from
Purdue University, and an M.B.A. from Wharton School of Business at the
University of Pennsylvania.
Ms. Elizabeth A.M. Kenton is a senior vice president, compliance. She is
responsible for the
day-to-day management of compliance, as well as overall issues pertaining to
administration and human resources. Ms. Kenton is also a vice president of JWH
Asset Management, Inc. and JWH Financial Products, Inc., and a director of
Westport Capital Management Corporation and Global Capital Management Limited.
Since joining JWH in March 1989, Ms. Kenton has held positions of increasing
responsibility in research and development, administration and regulatory
compliance. Ms. Kenton received a B.S. in Finance from Ithaca College.
Mr. David M. Kozak is a senior vice president, general counsel and secretary
to the corporation. He is also secretary of JWH Asset Management, Inc. and JWH
Financial Products, Inc., and director and secretary of Westport Capital
Management Corporation. Prior to joining JWH in September 1995, he had been a
partner at the law firm of Chapman and Cutler from 1989 and an associate from
September 1983. In his practice there, he concentrated in commodity futures law
with an emphasis on commodity money management.
Mr. Kozak is currently the secretary and a director of the MFA and is a
member of that organization's Executive Committee and chairman of its Government
Relations Committee. He is also a member of the Special Committee on CPO/CTA
Disclosure Issues and the Special Committee for the Review of Multi-tiered
Regulatory Approach to NFA Rules, both of the NFA. He is chairman of the
subcommittee on CTA and CPO issues of the Futures Regulation Committee of the
Association of the Bar of the City of New York. He received a B.A. from Lake
Forest College, an M.A. from The University of Chicago, and a J.D. from Loyola
University of Chicago.
Mr. David I. Ginsberg is a member of the JWH Board of Directors and special
advisor to the chairman. Mr. Ginsberg joined JWH in October 1999. He served as
the managing director of the Multi-Manager Group at Global Asset Management from
its inception in September 1989 until July 1995. This GAM group was, and
continues to be, one of the largest multi-advisor groups specializing in hedge
funds. Since leaving GAM, Mr. Ginsberg has been a private investor. Mr. Ginsberg
received a M.B.A. with a concentration in Finance from Boston University and a
B.A. from Kenyon College. Mr. Ginsberg is a member of the board of directors of
GAM Diversity, Inc., a global multi-advisor hedge fund with assets in excess of
$1 billion that specializes in hedge funds, and a director of the Adelphi Europe
Fund, a hedge fund specializing in European equities.
Mr. Kevin S. Koshi is a senior vice president, proprietary trading, and a
member of the JWH Investment Policy Committee. He is responsible for the
implementation and oversight of the firm's proprietary strategies and
investments. Mr. Koshi joined JWH in August 1988 as a professional in the
finance department, and since 1990 has held positions of increasing
responsibility in the trading department. He received a B.S. in Finance from
California State University at Long Beach.
Mr. Matthew J. Driscoll is a vice president, trading, and chief trader and a
member of the JWH Investment Policy Committee. He is responsible for the
supervision and administration of all aspects of order execution strategies and
implementation of trading policies and procedures. Mr. Driscoll joined JWH in
March 1991 as a member of the trading department. Since joining the firm, he has
held positions of increasing responsibility as they relate to the development
and implementation of JWH's trading strategies and procedures; he has played a
major role in the development of JWH's 24-hour trading operation. He attended
Pace University.
Mr. Christopher E. Deakins is a vice president, investor services,
responsible for general business development and management of the investor
services department. He is also director and vice president of JWH Securities,
Inc. Prior to joining JWH in August 1995, he was a vice president, national
sales, and a member of the management team at RXR Capital Management, Inc.,
where he was responsible for business
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development, institutional sales, and broker-dealer support from August 1986 to
July 1995. Currently he serves on the Institutional Money Management Advisory
Committee of the New York Mercantile Exchange. Mr. Deakins received a BA in
Economics from Hartwick College.
Mr. Edwin B. Twist is a director of JWH. He is also a director of JWH Asset
Management, Inc. and JWH Financial Products, Inc. Mr. Twist joined JWH as
internal projects manager in September 1991 and has been a director since August
1993. His responsibilities include assisting with the day-to-day administration
and internal projects of JWH's Florida office.
Mr. Julius A. Staniewicz is a vice president, senior strategist and a member
of the JWH Investment Policy Committee. He is also president of JWH Asset
Management, Inc. and JWH Financial Products, Inc. He joined JWH in March of
1992. Mr. Staniewicz received a B.A. in Economics from Cornell University.
The following is a list of additional principals of JWH: Ms. Nancy O. Fox,
C.P.A., vice president, investment support; Mr. Andrew D. Willard, vice
president, information technology; Mr. Paul D. Braica, C.P.A., vice president,
analytics; Ms. Florence Y. Sofer, vice president, marketing; Mr. Robert B.
Lendrim, vice president, investor services; and Ms. Wendy B. Goodyear, vice
president, investor services.
THE JWH-REGISTERED TRADEMARK- INVESTMENT PROGRAMS
JWH specializes in managing institutional and individual capital in the
global futures, financial futures, and foreign exchange markets. Since 1981, JWH
has developed and implemented proprietary trend-following trading techniques
that focus on intermediate- and long-term trends. JWH currently operates 11
investment programs.
JWH utilizes the Original Investment Program and the Financial and Metals
Portfolio for Spectrum Technical.
THE ORIGINAL INVESTMENT PROGRAM. The Original Investment Program began
trading client capital in October 1982 and was the first program offered by JWH.
The Original Investment Program seeks to capitalize on long-term trends in a
broad spectrum of worldwide financial and non-financial futures markets
including interest rates, non-U.S. stock indices, currencies, metals, energies,
and agricultural commodity markets. This program always maintains a
position--long or short--in every market traded.
In 1992, a broad research effort was initiated to enhance the risk/reward
ratios of the Original Investment Program without changing its trading
philosophy. Global markets were added; sector allocations were shifted, with
increased weighting given to financial markets; and some contracts were
eliminated. The quantitative model underlying the program was not changed.
Beginning in October 1995 the position size in relation to account equity in
this program was reduced 25%. Today, the Original Investment Program is one of
JWH's largest and historically best-performing programs, manifesting lower
volatility since the above changes were implemented in 1992.
THE FINANCIAL AND METALS PORTFOLIO. The Financial and Metals Portfolio,
which began trading client capital in October 1994, is both JWH's largest and
second longest running program. The program seeks to identify and capitalize on
intermediate-term price movements in four worldwide market sectors: interest
rates, currencies, non-U.S. stock indices, and metals. This program takes a
position when trends are identified but may take a neutral stance or liquidate
open positions in nontrending markets. Beginning in August 1992 the position
size in relation to account equity in this program was reduced 50%. The
quantitative model underlying the program was not changed. Since the changes
were implemented in 1992 the Financial and Metals Portfolio has experienced
lower volatility.
As of August 31, 1999, JWH was managing approximately $290 million of client
assets pursuant to its Original Investment Program, approximately $967 million
of client assets pursuant to its Financial and Metals Portfolio, approximately
$80 million of client assets pursuant to its International Foreign Exchange
Program, and approximately $2.2 billion in all of its programs.
INVESTMENT PHILOSOPHY AND METHODOLOGY.
The JWH investment philosophy is based on the premise that market prices,
rather than market fundamentals, are the key aggregator of information necessary
to make investment decisions. The firm maintains that changes in market prices
initially reflect human reactions to new or emerging information
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or events that will cause trends, but that prices eventually reflect all
relevant information. The price adjustments process takes time, however, since
reactions of market participants to changing market dynamics initially may be
inefficient; that is, investors may not react immediately to information because
of differing abilities to process and evaluate data, differing levels of risk
tolerance, or uncertainty. Gradual price adjustments manifest themselves in
long-term trends, which themselves can influence the course of events and from
which profit opportunities can arise. JWH believes that such market
inefficiencies can be exploited through a combination of trend detection and
risk management. Systematic risk taking may be rewarded, as markets adjust to a
new price.
There is strong economic and statistical evidence to suggest that trends do
exist in most markets although they may be difficult to identify. Since the
firm's founding, JWH has employed analytical methods to identify short to
long-term trends. Comprehensive research undertaken by the firm's founder,
John W. Henry, led to the development of disciplined systematic quantitative
models. JWH's computer models examine market data for systematic price behavior
or relationships which will characterize a trend. When price trends are
identified, the JWH trading system generates buy and sell signals for
implementing trades. The strict application of these signals is one of the most
important aspects of JWH's investment process.
JWH attempts to control risk throughout the investment process. This
includes the confirmation of a trend, determining the optimal exposure in a
given market, and money management issues such as the startup or upgrade of an
account. JWH's research on these and other issues has resulted in investment
program modifications from time to time that have decreased from previous levels
the overall volatility of its investment programs while maintaining the
potential for generating attractive performance returns.
DURATION OF POSITIONS HELD.
JWH's historical performance demonstrates that, because trends often last
longer than most market participants expect, significant returns can be
generated from positions held over a long period of time. Therefore, market
exposure to profitable positions is not changed based on the time horizon of the
trade; positions held for two to four months are not unusual, and positions have
been held for more than one year. Losing positions are generally pared
relatively quickly, with most closing within a few days or weeks. However, if
the JWH system detects a profitable underlying trend, a position trading at a
loss may be retained in order to capture the potential benefits of participating
in that trend. Throughout the investment process, risk controls designed to
reduce the possibility of an extraordinary loss in any one market are
maintained.
DISCRETIONARY ASPECTS.
JWH at its sole discretion may override computer-generated signals and may
at times use discretion in the application of its quantitative models, which may
affect performance positively or negatively. This could occur, for example, when
JWH determines that markets are illiquid or erratic, such as may occur
cyclically during holiday seasons, or on the basis of irregularly occurring
market events. Subjective aspects in JWH's application of its quantitative
models also include the determination of position size in relation to account
equity, timing of commencement of trading an account, the investment of assets
associated with additions, redemptions, and reallocations, contracts and
contract months traded, and effective trade execution.
PROGRAM MODIFICATIONS.
Proprietary research is conducted on an ongoing basis to refine the JWH
investment strategies. While the basic philosophy underlying the firm's
investment methodology has remained intact throughout its history, the potential
benefits of employing more than one investment methodology, or in varying
combinations, is a subject of continual testing, review and evaluation.
Extensive research may suggest substitution of alternative investment
methodologies with respect to particular contracts; this may occur, for example,
when the testing of a different methodology has indicated that its use might
have resulted in different historical performance. In addition, risk management
research and analysis may suggest modifications regarding the relative weighting
among various contracts, the addition or deletion of particular contracts for an
investment program, or a change in position size in relation to account equity.
However, most investment programs maintain a consistent portfolio composition to
allow opportunities in as many major market trends as possible.
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All cash in a JWH investment program is available to be used to trade in a
JWH program, although the amounts committed to margin will vary from time to
time. As capital in each JWH investment program increases, additional emphasis
and weighting may be placed on certain markets which historically have
demonstrated the greatest liquidity and profitability. Furthermore, the
weighting of capital committed to various markets in the investment programs is
dynamic, and JWH may vary the weighting at its discretion as market conditions,
liquidity, position limit considerations and other factors warrant. You
will generally not be informed of such changes.
OVERSIGHT OF TRADING POLICIES.
The JWH Investment Policy Committee (IPC) is a senior-level advisory group,
broadly responsible for evaluating and overseeing trading policies. The IPC
provides a forum for shared responsibility, meeting periodically to discuss
issues relating to implementation of JWH's investment process and its
application to markets, including research on new markets and strategies in
relation to JWH trading models. Typical issues analyzed by the IPC include
liquidity, position size, capacity, performance cycles, and new product and
market strategies. The IPC also makes the discretionary decisions concerning
investment program selection, asset allocation, and leverage levels for the
Strategic Allocation Program, a multi-program asset allocation methodology.
Composition of the IPC, and participation in its discussions and decisions by
non-members, may vary over time. All recommendations of the IPC require approval
by the chairman. The IPC does not make day-to-day trading decisions.
ADJUSTING THE SIZE OF POSITIONS TAKEN.
Adjustments in position size in relation to account equity have been and
continue to be an integral part of JWH's investment strategy. At its discretion,
JWH may adjust the size of a position in relation to equity in the account that
is taken in certain markets or entire investment programs. Such adjustments may
be made at certain times for some investment programs but not for others.
Factors which may affect the decision to adjust the size of a position in
relation to account equity include ongoing research, program volatility, current
market volatility, risk exposure, subjective judgment and evaluation of these
and other general market conditions. Such decisions to change the size of a
position may positively or negatively affect performance and will alter risk
exposure for an account. Adjustments in position size relative to account equity
may lead to greater profits or losses, more frequent and larger margin calls,
and greater brokerage expense. No assurance is or can be given that such
adjustments will result in profits for client accounts. JWH reserves the right
to alter, at its sole discretion and without notification to you, its policy
regarding adjustments in position size relative to account equity.
ADDITION, REDEMPTION AND REALLOCATION OF CAPITAL FOR COMMODITY POOL OR FUND
ACCOUNTS.
Investors purchase or redeem units at net asset value on the close of
business on the last business day of the month. In order to provide market
exposure commensurate with the fund's equity on the date of these transactions,
JWH's general practice is to adjust positions as near as possible to the close
of business on the last trading date of the month. The intention is to provide
for additions and redemptions at a net asset value that will be the same for
each of these transactions, and to eliminate possible variations in net asset
values that could occur as a result of inter-day price changes if, for example,
additions were calculated on the first day of the subsequent month. Therefore,
JWH may, at its sole discretion, adjust its investment of the assets associated
with the addition or redemption as near as possible to the close of business on
the last business day of the month to reflect the amount then available for
trading. Based on JWH's determination of liquidity or other market conditions,
JWH may decide to commence trading earlier in the day on, or before, the last
business day of the month, or at its sole discretion, delay adjustments to
trading for an account to a date or time after the close of business on the last
day of the month. No assurance is given that JWH will be able to achieve the
objectives described above in connection with fund equity level changes. The use
of discretion by JWH in the application of this procedure may affect performance
positively or negatively.
PHYSICAL AND CASH COMMODITIES.
JWH may trade in physical or cash commodities for immediate or deferred
delivery, including specifically gold bullion, as well as futures, options, and
forward contracts when it believes that cash markets offer comparable or
superior market liquidity or ability to execute transactions at a single price.
In
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addition, the CFTC does not comprehensively regulate cash transactions, which
are subject to the risk of counterparty failure, inability or refusal to perform
with respect to such contracts. JWH will not trade physical or cash commodities
for Spectrum Technical without the General Partner's consent.
EQUITY DRAWDOWNS.
Historically, only thirty to forty percent of all trades made pursuant to
JWH's programs have been profitable. Large profits on a few trades in positions
that typically exist for several months have produced favorable results overall.
The greatest cumulative percentage decline in daily net asset value that JWH has
experienced since inception in any single program on a composite basis was
nearly sixty percent. You should understand that similar or greater drawdowns
are possible in the future.
LEGAL CONCERNS.
There neither now exists nor has there previously ever been any material
administrative, civil or criminal action against JWH or its principals.
JWH and Mr. Henry may engage in discretionary trading for their own
accounts, and may trade for the purpose of testing new investment programs and
concepts, as long as such trading does not amount to a breach of fiduciary duty.
In the course of such trading, JWH and Mr. Henry may take positions in their own
accounts which are the same or opposite from investor positions, due to testing
a new quantitative model or program, a neutral allocation system, and/or trading
pursuant to individual discretionary methods; on occasion, their orders may
receive better fills than investor accounts. Records for these accounts will not
be made available to you.
Employees and principals of JWH (other than Mr. Henry) are not permitted to
trade in futures, options on futures or forward contracts. However, such
principals and employees may invest in investment vehicles that trade futures,
options on futures, or forward contracts, when an independent trader manages
trading in that vehicle, and in the JWH Employee Fund, L.P., for which JWH is
the trading advisor. Records for these accounts will not be made available to
you.
Principals of JWH serve on the boards of directors and committees of various
organizations, both in and outside of the managed futures industry. In such
capacities, these individuals have a fiduciary duty to the other organizations
they serve, and they are required to act in the best interests of those
organizations, even if those actions were to be adverse to the interest of JWH
and its clients.
OTHER INVESTMENT PROGRAMS OPERATED BY JWH.
In addition to the Original Investment Program and the Financial and Metals
Portfolio, JWH currently operates nine other investment programs in three
categories for U.S. and non-U.S. investors, none of which are used by JWH for
Spectrum Technical. Each program is operated separately and independently.
- BROADLY DIVERSIFIED programs invest in a broad spectrum of worldwide
financial and nonfinancial futures and forward markets including
currencies, interest rates, non-U.S. stock indices, metals, energies, and
agricultural commodities. Investment choices include a program that always
maintains a position--long or short--in a market (two-phase investment
style), a program that takes a position when trends are identified but may
take a neutral stance or liquidate open positions in nontrending markets
(three-phase investment style), and a program that uses a combination of
the two-phase and three-phase investment styles (five-phase investment
style) to invest in both long- and short-term price trends.
- FINANCIAL programs invest in worldwide financial futures and forward
markets including currencies, interest rates, and stock indices in
addition to the metals and energies markets. The range of investment
choices includes diversified financial programs, sector-focused programs,
and a program that takes positions from several currency perspectives.
Some programs use a two-phase investment style while others use a
three-phase investment style. Another program uses a combination of the
three-phase investment style and the three-phase forex investment style
described below.
- FOREIGN EXCHANGE programs invest in a wide range of world currencies
primarily traded on the interbank market. Investment choices include a
program that trades a range of major and minor
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currencies, a program focused on major currencies only, and a program that
trades major currencies against the U.S. dollar. Programs use either the
three-phase investment style or a slight variation called three-phase
forex which incorporates specialized intra-day volatility filters.
THE GLOBAL DIVERSIFIED PORTFOLIO. The Global Diversified Portfolio, which
began trading client capital in June 1988, seeks to capitalize on
intermediate-term price movements in a broad spectrum of worldwide financial and
non-financial markets including interest rates, stock indices, currencies,
metals, energies, and agricultural commodity markets. This program uses the
three-phase investment style.
JWH GLOBALANALYTICS. Introduced in June 1997 as the firm's most broadly
diversified investment program, JWH GlobalAnalytics-Registered Trademark- Family
of Programs is the result of extensive research and testing by the firm. Unlike
other JWH programs, which invest in intermediate or long-term price movements,
JWH GlobalAnalytics-Registered Trademark- invests in both long- and short-term
price movements. The program invests in a broad spectrum of worldwide financial
and non-financial markets including interest rates, non-U.S. stock indices,
currencies, metals, energies, and agricultural commodity markets. JWH modified
this program in January 1993 by adding new markets to enhance overall
diversification. The quantitative model underlying the program was not changed.
This program uses the five-phase investment style.
THE WORLD FINANCIAL PERSPECTIVE. The World Financial Perspective, which
began trading client capital in April 1987, seeks to capitalize on long-term
price movements in five worldwide market sectors: interest rates, stock indices,
currencies, metals, and energies. Rather than concentrating on the profit
potential available solely from the point of view of one country, the program
trades from different vantage points. The program holds positions from several
currency perspectives, including the British pound, Canadian dollar, euro,
Japanese yen, Swiss franc and U.S. dollar. This program uses the two-phase
investment style. JWH modified The World Financial Perspective in January 1993
by adding new markets to enhance overall diversification. The quantitative model
underlying the program was not changed.
THE GLOBAL FINANCIAL PORTFOLIO. The Global Financial Portfolio, which began
trading client capital in June 1994, seeks to identify and capitalize on
long-term price movements in five worldwide market sectors: interest rates,
non-U.S. stock indices, currencies, metals, and energies. This program uses the
two-phase investment style. Beginning in April 1995 the position size in
relation to account equity in this program was reduced 50%. Since the change was
implemented in 1995 the Global Financial Portfolio has experienced lower
volatility. In 1997 the sector allocation for the program was expanded to
include metals. The quantitative model underlying the program was not changed.
THE INTERNATIONAL CURRENCY AND BOND PORTFOLIO. The International Currency
and Bond Portfolio, which began trading client capital in January 1993, seeks to
identify and capitalize on intermediate-term price movements in the currency and
interest rate markets. The International Currency and Bond Portfolio targets
currencies and the long-term portion of interest rate markets of major
industrialized nations. Currency positions are held both as outrights--positions
taken in foreign currencies versus the U.S. dollar--and cross rates--foreign
currencies traded against each other. This program uses both types of the
three-phase investment styles. Beginning in May 1998 the position size in
relation to account equity in this program was increased 20%.
THE INTERNATIONAL FOREIGN EXCHANGE PROGRAM. The International Foreign
Exchange Program, which began trading client capital in August 1986, seeks to
identify and capitalize on intermediate-term movements in a broad range of both
major and minor currencies primarily trading on the interbank market. Positions
are taken as outrights against the U.S. dollar, or non-dollar cross rates. This
program uses the three-phase forex investment style.
THE WORLDWIDE BOND PROGRAM. The Worldwide Bond Program, which began trading
client capital in July 1996, seeks to capitalize on intermediate-term trends by
investing in the long-term portion of the worldwide interest rate markets.
Although the Worldwide Bond Program concentrates in one sector, diversification
is achieved by trading the interest rate markets of major industrialized
countries. This program uses the three-phase investment style. Due to the
limited number of markets traded, the Worldwide Bond Program may be less
diversified than other JWH financial programs.
THE G-7 CURRENCY PORTFOLIO. The G-7 Currency Portfolio, which began trading
client capital in February 1991, seeks to identify and capitalize on
intermediate-term price movements in the highly liquid currencies of major
industrialized nations. These currencies allow for trading outrights against the
U.S. dollar or non-dollar cross rates. With the advent of the European Union
single currency of 11 countries,
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the currency exposures formerly traded for Germany, France, and Italy are now
executed in the euro. This program uses the three-phase forex investment style.
Beginning in May 1998 the position size in relation to account equity in this
program was increased 50%. The quantitative model underlying the program was not
changed.
THE DOLLAR PROGRAM. The Dollar Program, which began trading client capital
in July 1996, seeks to identify and capitalize on intermediate-term price
movements in the foreign exchange sector, trading major currencies against the
U.S. dollar. This program uses the three-phase investment style. Due to the
limited number of markets traded in the Dollar Program, the program may be less
diversified than other JWH foreign exchange programs.
InterRate-TM- began trading client capital in 1988 and closed in 1996. This
program was designed to enhance returns available in U.S. treasury bills to
provide both secure income and collateral for a portfolio of interbank forward
and exchange-traded futures contracts. The Yen Financial Portfolio, which began
trading client capital in 1992 and closed in 1997, offered investors access to a
select group of Japanese financial futures markets. The program was designed to
capitalize on intermediate and long-term price movements and attempted to exit
the markets during periods when sustained trends were not identified. The
Delevered Yen Financial and Metals Profile, which began trading client capital
in 1995 and closed in 1996, was opened at the request of a client. This program
was traded at approximately one half of the position size in relation to account
equity of the traditional Financial and Metals Portfolio and was traded from the
perspective of the Japanese yen.
1. ALLIED IRISH CAPITAL MANAGEMENT, LTD.
Allied Irish Capital Management, Ltd. ("AICM") is an Irish corporation
registered with the CFTC as a CTA since January 1994 and is a member of the NFA
in that capacity. AICM's business office is located at 85 Pembroke Road,
Ballsbridge, Dublin 4. AICM is not affiliated with the General Partner, DWR, or
any other Trading Advisor for the Partnerships.
As a CTA, AICM specializes in trading interest rate, currency and equity
index futures contracts as well as foreign exchange on the interbank cash
market. The primary focus of AICM's futures trading is on the U.S., European and
Japanese futures exchanges with some participation in other markets. Foreign
exchange trading covers the major currencies.
AICM began trading for Spectrum Strategic on May 1, 1999.
PRINCIPALS
Colm Doherty became a non-executive Director of AICM in January 1994. He
joined AIB Group in September 1989 and in January 1994 he became Head of
Investment Banking in the Capital Markets Division. In August 1999, he became
Group General Manager of AIB Capital Markets. He is responsible for AIB's
investment banking, international treasury and corporate lending businesses.
Mr. Doherty formerly worked with First Chicago, a commercial bank, from
July 1984 as Vice President and General Manager and prior to that he had a
career in Industrial Credit Corporation as a senior lending executive.
Tony Gannon is a Director of AICM and is an associated person. He became
registered as an associated person of AICM in January 1994. He graduated from
University College, Dublin with a Bachelor of Commerce degree in 1987 and during
1987-1988 obtained a first class honors Master of Business Studies (Finance)
degree. He joined Gandon Securities Ltd., a securities house, in July 1988, and
traded and researched firstly short-term interest rates and then international
bonds. He was an associated person with Gandon Fund Management Ltd., a trading
advisor wholly-owned by Gandon Securities Ltd., from July 1991 to
September 1993. From November 1991 he traded client funds by combining strict
money management and risk management skills with a pattern recognition trading
style. Mr. Gannon was the sole trader for the Gandon Fund Management Breakout
Program from June 1992 to September 1993. He left Gandon Securities and Gandon
Fund Management in September 1993 and joined AICM that month. Mr. Gannon was a
founding member of AICM and traded a portion of the Worldwide Financial Futures
Program using a discretionary trend following approach up to August 1998. He is
now responsible for trading system research and product development within AICM.
Dr. Eileen Fitzpatrick became a non-executive Director of AICM in
August 1997. She is the Investment Director of AIB Investment Managers Limited,
an investment advisor, a position she has held since
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September 1996. She had previously worked as Head of International Equity Sales
in Goodbody Stockbrokers, a securities brokerage firm, from March 1995 to
September 1996, and in the same capacity at NCB stockbrokers, a securities
brokerage firm, from November 1993 to February 1995. Before that she had worked
with AIB Investment Managers as Head of International Equity Management from
October 1988 to October 1993.
Gerry Grimes is Managing Director of AICM, an associated person of AICM and
a member of the Institute of Bankers. He became registered as an associated
person of AICM in January 1994. For 10 years up to March 1988, Mr. Grimes was
employed by the Central Bank of Ireland in the following investment management
positions: Chief Dealer, Money Market Division; Chief Dealer, Management of
Official External Reserves; and Chief Forex Dealer. He represented Ireland on
sub-committees of the European Central Bank Governors Committee in Basle. He has
experience in liquidity and interest rate management, investment of external
reserves ($5 billion) and their currency allocation and the management of the
Irish pound in the European Exchange Rate Mechanism. Mr. Grimes joined Gandon
Securities as a trader in March 1988 where he traded a range of interest rate
contracts, and was appointed a Director in October 1990. He was an associated
person with Gandon Fund Management from July 1991 to September 1993. From mid
1991, he was responsible for the development of Gandon Fund Management's
activities including the marketing and development of managed futures programs.
He left Gandon Securities and Gandon Fund Management in September 1993 and
joined AICM that month. Mr. Grimes was a founding member of AICM and is now
responsible for the overall management, development and control of AICM's
activities.
Chris Johns is Director of Investment Strategy at AICM. He became a Director
of AICM in August 1997. After receiving his B.A. (first class honors) in
Business Studies in 1980 he went on to complete his M.Sc. in economics at Queen
Mary College, University of London. Post-graduate research and teaching at
London and Cambridge Universities was followed by a two-year posting at the
National Institute of Economic and Social Research, producing forecasts and
analysis for the U.K. and world economies. In 1985 Mr. Johns moved to the U.K.
Treasury, working as a member of a team responsible for advising the U.K.
government on all matters relating to monetary and fiscal policy. In 1986 he
joined UBS Phillips & Drew, initially as a U.K. economist, subsequently becoming
head of foreign exchange research and strategy. In 1989 he joined the Investment
Bank of Ireland, an investment bank, beginning a six-year period with Bank of
Ireland group, progressing to Chief Economist. In June 1995, he joined ABN Amro
Hoare Govett, an investment bank, in London as Chief European Strategist.
Ian Kelly became Company Secretary of AICM in August 1997. He is a member of
the Institute of Chartered Accountants of Ireland. He is Chief Operating Officer
of AICM and is responsible for financial control, compliance and the back-office
operations of the company. He joined AICM in August 1997. Prior to joining AICM,
he worked from July 1994 to August 1997 in Financial Control in AIB Capital
Markets Plc., an investment bank, and before that he worked with Coopers &
Lybrand, an accountancy firm, from 1987 to June 1994.
Maeliosa O'hOgartaigh became a non-executive Director of AICM in
August 1997. Mr. O'hOgartaigh is a member of the Institute of Chartered
Accountants Ireland and is currently Financial Controller of AIB Capital Markets
Plc., a position he has held since March 1995. He became a principal of AICM in
May 1995 when he was appointed Company Secretary to AICM, a position now held by
Mr. Ian Kelly. Prior to joining AIB in November 1989, Mr. O'hOgartaigh worked
with Arthur Andersen & Co., an accountancy firm.
John Parsons became a Director of AICM in January 1995. He graduated from
Queen's University, Belfast with a B.Sc. in Computer Science and Statistics in
1986, and went on to obtain a Master of Business Administration degree from
Cardiff University, in 1987. Before joining AICM, Mr. Parsons worked for SBC
Warburg in London as a proprietary trader in the Fixed Interest & Treasury
Division. Prior to that, he worked with the Bank of Ireland Group from
January 1989 to March 1993, initially as a Portfolio Manager with the Bank's
fund management group and ultimately as Head of European Government Bonds with
the Bank's Treasury operation. Mr. Parsons trades a portion of the worldwide
Financial Futures Program and he is the sole trader of the Equity Program
offered by AICM.
Neil Ramsey became a non-executive Director of AICM in November 1997. He is
Chairman and Chief Executive Officer of Ramsey Quantitative Systems Inc., an
investment adviser based in Kentucky, where
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he is responsible for the leadership of quantitative strategies development and
directing the investments of all outside client capital allocated to the
company. He is also the founder and President of Ramsey Financial Inc. ("RFI"),
a Kentucky corporation which is registered with the CFTC as a commodity pool
operator, commodity trading advisor and introducing broker, and is a member of
the NFA. RFI is engaged in the management of proprietary and client investment
capital through the allocation of funds to independent money managers as well as
managing a portion of the funds on a discretionary basis. Prior to joining RFI
he was a consultant with Boston Consulting Group where he worked with domestic
and foreign multinationals in developing corporate strategies.
Michael Swift joined AICM in August 1998 and is a Director of AICM. Mr.
Swift is involved in product and market research. In 1984 he graduated from
University College, Galway, with a Bachelor of Commerce degree and joined the
Bank of Ireland Group in July 1984 where he worked in a number of investment
positions until July 1998. From June 1997 to July 1998 he held the position of
Head of Foreign Exchange and Euro Interest Rate Trading. Between September 1994
and May 1997 he was Treasurer in the Bank's New York office, where he was
responsible for trading foreign exchange and US interest rate markets. Prior to
this he was Head of the Bank's Irish pound interest rate trading desk from
May 1993. Mr. Swift traded a portion of the Worldwide Financial Futures Program
between August 1998 and August 1999.
David Tease is a Director of AICM and an associated person. He became
registered as an associated person of AICM in January 1994. In 1975 he obtained
a masters degree in agricultural economics from Queen's University, Belfast.
Initially, Mr. Tease worked as an Economist with the Northern Ireland Department
of Agriculture and then joined the Agricultural Credit Corporation (now known as
ACC Bank) a semi-state financial institution. He became Treasury Manager there
in 1984. In September 1985, Mr. Tease obtained a Master of Business
Administration degree from University College, Dublin. From October 1986, he was
employed by Citicorp Investment Bank, Dublin and was Vice President in charge of
trading Irish pound, UK pound and US dollar government bonds. In June 1988 he
was appointed Director of International Bond Trading with Bank of Ireland Group
Treasury where he was in control of the international bond desk trading a range
of international interest rate markets. In April 1989, he joined Gandon
Securities as Executive Director involved with securities trading. Subsequently,
Mr. Tease was made responsible for trading in international fixed interest rate
markets and strategic positioning in short-term interest rates and currencies.
He acted as an associated person with Gandon Fund Management from July 1991 to
September 1993. He was responsible for a team of interest rate traders and
during his last two years he was the major trader in Gandon Fund Management's
Global Financial program. He left Gandon Securities and Gandon Fund Management
in September 1993 and joined AICM that month. Mr. Tease was a founding member of
AICM and trades a portion of the Worldwide Financial Futures Program.
AICM and its principals may, from time to time, trade futures interests
contracts for their own proprietary accounts.
AICM'S TRADING STRATEGIES
AICM offers three trading programs, but will only trade the Worldwide
Financial Futures Program for Spectrum Strategic. Trading for Spectrum Strategic
will be at four times the leverage AICM normally applies for the Worldwide
Financial Futures Program. The two other trading programs offered by AICM are:
(i) Foreign Exchange Program, and (ii) Equity Index Program.
WORLDWIDE FINANCIAL FUTURES PROGRAM
The Worldwide Financial Futures Program is designed to provide returns using
a multi-trader trading approach on a broad range of financial instruments. The
capital is sub-allocated to a range of traders' trading styles, including a
portion traded by two individual traders, Mr. Tease and Mr. Parsons. The
allocation of capital to the individual traders may be altered at the discretion
of AICM. A portion of the program is allocated and traded on a consensus basis
by the trading team. A further portion is traded using a systematic approach.
Diversification is enhanced because no overall house view is imposed on the
traders in the program, and this independence of operation is viewed as a key
strength.
Over several years Mr. Tease has established a knowledge of the main
industrial economies and their financial markets. This has been achieved by a
process of studying these economies through an ongoing
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review of relevant research and by building up a substantial network of contacts
with market economists and opinion formers. Against this background
understanding of the main economies, Mr. Tease looks for trading opportunities
which fit with his fundamental view of where interest rates should be headed
versus their current levels. Account is taken of market technicals, especially
momentum as expressed in stochastic analysis, for the timing of trade execution,
while resistance and support levels as defined by congestion patterns help with
appropriate entry and exit points. Mr. Tease prefers to establish trades that
prevail over a 1-3 week time-frame, but this can depend on market conditions.
Trades that produce a substantial proportion of the expected return in a short
time are usually exited.
Mr. Parsons' approach to trading markets is based on a fundamental analysis
of economic, fiscal and monetary developments in the world's major economies.
The majority of his trading activity is European-based. He believes that the key
to successful trading in Europe is a clear understanding of German monetary
developments. Having compiled a set of expectations for the major interest rate,
equity, and foreign exchange markets, Mr. Parsons then looks for significant
levels of divergence relative to the market's expectations as a signal to enter
a particular position. He uses technical analysis to help identify trends and
trend changes as well as to seek to improve entry and exit levels. Mr. Parsons
sets profit/loss parameters for each trade on entry and adopts a two week view
to positioning in normal market conditions.
Since July 1999 a portion of the Worldwide Financial Futures Program is
traded on a strategic fundamental basis, which aims to seek out longer term
strategic moves in the foreign exchange, interest rate and equity markets. Given
that the objective of each trade is more long term than the other fundamental
elements of the program, this element can be subject to greater overall
volatility. This is traded on a committee basis by the trading team.
Since September 1999 a portion of the Worldwide Financial Futures Program is
traded on a technical basis. The system has been developed to be consistent with
AICM's investment approach to financial markets. The system differs from most
trend following trading systems in that a profit objective is built into the
trade from inception and this has created a historical return profile similar to
AICM's. The system utilizes a break-out oriented approach that attempts to
initiate trading at low risk entry points where the market has a higher
probability than average of participating in a medium to long term trend. The
concept of the system is to allow for participation in a market when the
volatility conditions of the market allow for the highest pre-conditional
probability of trend persistence.
The futures contracts currently traded in the Worldwide Financial Futures
Program include U.S., European and Asian interest rate, currency and stock index
contracts. For most contracts, options may also be used from time to time.
Options may be either bought or sold in this program.
It should be noted that in relation to currency futures on both the Chicago
Mercantile Exchange and the financial derivatives division of the New York
Cotton Exchange, AICM may convert spot transactions to futures contracts using
the EFP mechanism.
FOREIGN EXCHANGE PROGRAM
The Foreign Exchange Program specializes in trading the inter-bank foreign
exchange market. A fundamental assessment of market information is the main
factor underlying the trading approach. To this end an assessment of the
fundamental economic policy forces at work in different countries is first made.
This is related to socio-political factors in play. A judgment is then made on
how much of the economic and political influences are priced in following a
review of international capital flows. In this regard consultation is made with
a network of experts in the world's currency markets. Finally the price levels
are examined in detail to determine appropriate trade parameters.
EQUITY INDEX PROGRAM
The objective of the Equity Index Program is to achieve value added of 10%
and to maintain a Sharpe ratio of greater than one. This low-risk approach is
designed to minimize correlations with major global equity returns. The
underlying investment approach is broadly similar to that taken in AICM's other
two programs in that the main inputs are an analysis of macroeconomic and global
political trends. For the Equity Index Program additional analysis is conducted
in terms of an extended equity valuation framework. That framework involves a
number of distinct steps.
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RISK MANAGEMENT
The management of risk positions takes place at two levels within the
programs--at the overall program level by the trading controller and at the
position taking level where each trader uses his individual money management
skills.
Given that the programs involve a multi-trader approach, a program
controller role is adopted. Mr. Grimes is the trading controller for all three
programs. This role involves the following: assessing the performance and risk
of the programs from an overall level as distinct from a trader level;
monitoring the traders' adherence to the risk parameters for each program as set
out below; allocating equity between the individual traders of a program;
ensuring that the programs' overall objectives and those of individual traders
are compatible; controlling the operations of the order desk and ensuring the
positions are agreed between traders, order desk, back office and counterparty;
and liaising with clients and conveying their views, wishes and concerns to the
trading team.
To control the levels of exposure a daily end-of-day position report
including contract open positions, margin utilized by contract and margin
utilized by trader is produced for the Worldwide Financial Futures and Equity
Index Programs. The report for the Foreign Exchange Program looks at positions
in equivalent U.S. dollar amount versus underlying U.S. dollar equity invested.
For the Worldwide Financial Futures and Equity Index Programs, margin to
equity is used to control position size while in the Foreign Exchange Program a
gearing of equity is used to limit position size. Given the nature of the
programs offered and the experience of the trading team, a limit of 6% margin to
equity is normally applied for the Worldwide Financial Futures and Equity Index
Programs and a gearing of 3 times equity for the Foreign Exchange Program.
PAST PERFORMANCE OF AICM
The past performance information for the program traded by AICM for Spectrum
Strategic is set forth below. AICM trades the Net Assets of Spectrum Strategic
allocated to it pursuant to its Worldwide Financial Futures Program at four
times the leverage normally employed by that program. Capsule A-1 is a pro forma
of an account from Capsule A, adjusted for the increased leverage employed by
AICM for Spectrum Strategic, and also adjusted for the brokerage, management,
and incentive fees applied to Spectrum Strategic. The footnotes following
Capsule A are an integral part of the Capsule.
You are cautioned that the performance information set forth in the
following capsule performance summary is not indicative of, and may have no
bearing on, any trading results which may be attained by AICM or Spectrum
Strategic in the future, since past performance is not a guarantee of future
results and other Trading Advisors will be investing funds of Spectrum
Strategic. In addition, AICM trades the Net Assets allocated to it at four times
the leverage it normally applies to the Worldwide Financial Futures Program,
which will significantly increase volatility as well as profits and losses.
Spectrum Strategic cannot assure you that AICM or the Partnership 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, in certain instances, may generate profits where there
have been realized or unrealized losses from futures interests trading.
CAPSULE A
ALLIED IRISH CAPITAL MANAGEMENT, LTD.
WORLDWIDE FINANCIAL FUTURES PROGRAM
Name of CTA: Allied Irish Capital Management, Ltd.
Name of program: Worldwide Financial Futures Program
Inception of trading by CTA: November 1993
Inception of trading in program: November 1993
Number of open accounts: 46
Aggregate assets overall: $1,472,300,000
Aggregate assets in program: $1,090,600,000
Largest monthly drawdown*: (2.11)%--(5/94)
Worst peak-to-valley drawdown: (2.11)%--(5/94)
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1999 year-to-date return (8 months): 3.53%
1998 annual return: 5.06%
1997 annual return: 8.86%
1996 annual return: 12.39%
1995 annual return: 12.57%
1994 annual return: 3.47%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
FOOTNOTES TO AICM CAPSULE A PERFORMANCE SUMMARY
"Inception of trading by CTA" is the date on which AICM began trading client
accounts.
"Inception of trading in program" is the date on which AICM began trading
client accounts pursuant to the program shown.
"Number of open accounts" is the number of accounts directed by AICM
pursuant to the program shown as of August 31, 1999.
"Aggregate assets overall" is the aggregate amount of assets in
non-proprietary accounts under the management of AICM as of August 31, 1999 and
includes notional equity. Notional equity represents the additional amount of
equity that exceeds the amount of equity actually committed to AICM for
management.
"Aggregate assets in program" is the aggregate amount of assets in the
program specified as of August 31, 1999 and includes notional equity.
"Largest monthly drawdown" is the largest loss experienced by a single
account in the program in any calendar month during the most recent five
calendar years and year-to-date expressed as a percentage of the total equity in
the account and includes the month and year of such drawdown.
"Worst peak-to-valley drawdown" is the largest calendar month to calendar
month loss experienced by a single account in the program during the most recent
five calendar years and year-to-date expressed as a percentage of total equity
in the account and includes the months and years in which it occurred. For
example, a worst peak-to-valley drawdown in an account of "(10)%-(1/95-8/95)"
means that the peak-to-valley drawdown was 10% and lasted from January 1995 to
August 1995.
"Annual and year-to-date return" is computed on a compounded monthly basis
assuming reinvestment of accrued profits. 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
ALLIED IRISH CAPITAL MANAGEMENT, LTD.
PRO FORMA OF AN ACCOUNT FROM CAPSULE A
WORLDWIDE FINANCIAL FUTURES PROGRAM
Largest monthly drawdown: (5.74)% - (11/98)
Worst peak-to-valley drawdown: (8.47)% - (10/98-1/99)
1999 year-to-date return (8 months): 0.42%
1998 annual return: (0.93)%
1997 annual return: 15.05%
1996 annual return: 32.42%
1995 annual return: 23.35%
1994 annual return (2 months): (0.53)%
FOOTNOTES TO AICM CAPSULE A-1 PRO FORMA PERFORMANCE SUMMARY
Capsule A-1 above reflects pro forma rates of return, which are the result
of the General Partner and AICM making certain pro forma adjustments to the
actual past performance record of a client account
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managed pursuant to the Worldwide Financial Futures Program, the trading program
employed for Spectrum Strategic by AICM. The pro forma adjustments are an
attempt to reflect the current brokerage, management and incentive fees, and
historical interest income, and the degree of leverage applied for the portion
of Spectrum Strategic's Net Assets traded by AICM, as opposed to the actual
fees, expenses and interest income and leverage applicable to the account.
Capsule A-1 must be read in conjunction with the description of AICM and its
trading programs above. Furthermore, you must be aware that pro forma rates of
return have certain inherent limitations: (A) pro forma adjustments are only an
approximate means of modifying historical records to reflect certain aspects of
the economic terms of a commodity pool, constitute no more than mathematical
adjustments to actual performance numbers, and give no effect 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 AICM's actual trading; and
(B) there are different means by which the pro forma adjustments could have been
made.
While the General Partner believes that the information set forth in
Capsule A-1 is relevant to evaluating an investment in Spectrum Strategic, no
representation is or could be made that the capsule presents what the
performance results of the portion of Spectrum Strategic's Net Assets traded by
AICM would have been in the past or are likely to be in the future. Past results
are not a guarantee of future results.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL
OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND
THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR
EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY
AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE
MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING
RESULTS.
2. BLENHEIM INVESTMENTS, INC.
Blenheim is a New Jersey corporation which was formed in 1988 to provide
commodity trading advisory services to clients. Blenheim has been registered
with the CFTC as a CTA and CPO since March 1989, and is a member of the NFA in
such capacities. Blenheim's address is Post Office Box 7242, Two Worlds Fair
Drive, Somerset, New Jersey 08875-7242.
PRINCIPALS
Mr. Willem Kooyker is the Chief Executive Officer, Chairman and sole
shareholder of Blenheim. He is registered with the CFTC as an associated person
of Blenheim and a member of the NFA in that capacity. He is a former member of
the Board of Directors of the NY Coffee, Sugar and Cocoa Exchange, a former
president of the NY Cocoa Clearing Association, and a former member of the NY
Mercantile Exchange. He received a BA CUM LAUDE in Economics from Baruch College
in New York and an MBA in International Finance and Economics from New York
University.
Mr. Kooyker began his trading career in the international commodities
business in 1964 with Internatio-Muller in Rotterdam, The Netherlands, where
eventually he became managing director of the International Trading Group. He
stayed in this position until 1981, when he joined Commodities Corporation,
Princeton, New Jersey, where he became President. At the time, Commodities
Corporation
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was an active fund management company, operating predominantly in the futures
markets. In October 1984, Mr. Kooyker started a new company, Tricon Holding
Company, Ltd., a joint venture between Commodities Corporation and a group of
Middle Eastern investors, which was a trading and consulting company in the
futures as well as the physicals markets predominantly directed towards energy
and industrial commodities. Tricon currently remains only active in the forest
products industry, where it operates two sawmills in the western states of the
United States. In January 1989, Mr. Kooyker started Blenheim, an independent
fund management company and an advisor to several investment funds.
Concurrent, but separate from Blenheim, Mr. Kooyker is a majority owner, but
not an officer, of Derivatives Portfolio Management, L.L.C., a Delaware limited
liability company formed in 1993 to provide administrative, risk management, and
consulting services to institutions, commodity pool operators, and individual
fund managers engaged in the financial instruments, securities, and futures
markets as well as the cash trading business.
Mr. Kooyker is also sole shareholder and President of Gauss Mathematica
Corporation, a New Jersey corporation that develops and leases futures trading
systems. Blenheim and Gauss have entered into a license agreement that allows
Blenheim to use Gauss computerized trading systems for its clients.
In 1996, Mr. Kooyker became a 50% shareholder in The Thornton Group, L.L.C.,
a consulting company to entrepreneurial startup enterprises. Thornton performs
various investment banking functions.
Guy J. Castranova, has been the Secretary of Blenheim and Gauss since their
inceptions. Mr. Castranova is an Executive Vice President and Chief Operating
Officer of DPM, as well as a Vice President and Controller of Tricon.
Mr. Castranova has been with Tricon since October 1986 and is responsible for
the risk management of all physicals trading as well as the administration of
all general and consolidation accounting. Prior to joining Tricon,
Mr. Castranova was an accountant with two energy firms.
In 1980 Mr. Castranova graduated from Saint Joseph's University, with a BS
degree in Accounting. He is registered as an associated person and Principal of
Blenheim, Tricon and DPM and is a member of the NFA in those capacities.
Blenheim and its principals may, from time to time, trade futures interests
contracts for their own proprietary accounts. Such trades may or may not be in
accordance with the Blenheim trading program described below.
THE BLENHEIM TRADING PROGRAM
Blenheim's trading program was developed by Mr. Kooyker. The objective of
Blenheim's Global Markets Strategy, which is employed on behalf of Spectrum
Strategic, is to capture substantial profits through the establishment of
strategic primary investment positions in a variety of markets, with an emphasis
in global fixed income, currency, stock indices, energy and other commodity
markets. These investment positions are typically in derivative instruments such
as futures, options, forwards and over-the-counter transactions. Blenheim
concentrates in those markets which, in its judgment and discretion, have a high
degree of liquidity and a wide spectrum of historical price movement relative to
other markets. Blenheim may, however, trade to a limited extent in illiquid
instruments for which market quotations are not readily available.
Diversification in an account's portfolio is a major consideration in Blenheim's
trading program. While many of its trades are made on a short-term basis,
Blenheim's basic strategy is to attempt to participate in long-term major price
movements.
As of August 31, 1999, Blenheim was managing approximately $48 million of
client assets pursuant to its trading program ("notional funds" excluded).
Blenheim relies primarily on its experience in trading, and utilizes
fundamental, geopolitical, and technical factors in its analysis and evaluation
of the markets. Blenheim has a team of economists, financial analysts and
traders that regularly monitor world-wide economic and political trends in order
to identify and evaluate possible market and price imbalances. Operating within
a global framework, long-term macroeconomic indicators are assessed on a
multinational, country-by-country and market specific basis. Factors such as
fiscal/monetary policies and cross-border capital flows are evaluated for their
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potential impact on the equity, fixed income, currency and commodity markets.
Additionally, Blenheim's trading group utilizes the econometric signals as well
as numerous other market sentiment factors in an effort to take advantage of
short-term trading opportunities.
Within the realm of technical analysis, Blenheim has developed and will
continue to develop a series of systematic processes of investing that will
supplement the discretionary trading efforts. In the future, Blenheim may place
a greater emphasis on its non-discretionary technical analysis than on its
discretionary trading efforts. The goal of the system's strategy is to achieve
maximum risk adjusted profit potential. The strategy is driven not by one, but a
series of trading systems, that are traded in conjunction with one another.
These systems tend to employ robust statistics that limit the sensitivity to
small deviations from assumptions which, in turn, facilitates a systematic
adaptation to changing market relationships. Several processes are applied in
both short-term and long-term market trend analyses. Price level breakout from a
trend is determined through volatility analysis. The system's goal is investing
only in true breakouts. Volatility and probability analysis is also used to
determine trade entry and exit points with the goal price and stop loss prices
continuously determined. Generally, if the probability of achieving the goal
price is greater than the stop loss, a trade signal is entered. Consistent with
the objective of trading at optimal points, a digital filtering process is
employed to screen the trend from the "noise" in the market.
Various techniques are employed in managing the portfolio and position
volatility. Blenheim generally initiates medium size positions at a market entry
level determined by it, rather than initially taking a larger position while
waiting to see the direction in which the market actually moves. This initial
position, generally considered the core strategic position, is typically
initiated upon Blenheim's determination of an unsustainable level of market
disequilibrium that has not been reflected in the current market price.
In addition to managing the individual positions, Blenheim will also
evaluate the positions within the context of an account's portfolio. Separate
strategic positions are evaluated for direct and indirect correlation
characteristics in order to further anticipate and manage portfolio volatility.
Despite these precautions, Blenheim's trading program may be extremely volatile
at times.
The trading strategy of Blenheim has evolved and will continue to do so
based on on-going research, testing of data and trading experience. Prior to
1991, Blenheim traded almost exclusively in the commodity markets, with a
particular emphasis on energy products. Since then, Blenheim has become quite
active in the global fixed income and currency markets. Blenheim may in its sole
discretion add to the portfolio additional commodity interests or cease trading
particular items. On rare occasions, Blenheim may withdraw from all markets.
Blenheim's diversified portfolio of approximately thirty-five markets are
actively traded on domestic and foreign markets through the use of futures,
forwards, options on futures, and over-the-counter transactions. Through
mid-1995, approximately 30% to 45% of equity, including notional funds, was
generally committed to margin. Recently the percentage has been between 25% and
30%. In the future the percentage committed may, from time to time, be
substantially higher or lower.
Blenheim may leverage the account of Spectrum Strategic differently than the
standard account using the Global Market Strategy, but will not leverage the
account at more than 50% above the leverage of a standard account.
3. WILLOWBRIDGE ASSOCIATES INC.
Willowbridge is a Delaware corporation organized in January 1988.
Willowbridge's main business address is 101 Morgan Lane, Suite 180, Plainsboro,
New Jersey 08536. Willowbridge has been registered with the CFTC as a CPO and
CTA since May 1988 and is a member of the NFA in such capacities. In addition,
Doublewood, Inc., Union Spring Asset Management, Inc. and Limerick Financial
Corporation are registered CPOs and CTAs.
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PRINCIPALS
Mr. Philip L. Yang has been the sole shareholder, Director and President
since September 1, 1992, and also held those positions from the time he formed
Willowbridge in January 1988 through September 1989. Mr. Yang is registered as
an associated person of Willowbridge. He is individually registered with the
CFTC as a CPO and a CTA and is a member of the NFA in such capacities. He is
also a Principal and an associated person of Doublewood, Union Spring and
Limerick. From 1983 through August 1988 and from October 1989 through
August 1992, Mr. Yang was a Senior Vice President at Caxton Corporation, a
commodity trading advisory firm, serving initially as Director of Research,
where his research concentration was in the development and application of
computerized trading models for a broad range of financial markets, and later as
Director of Commodity Trading. Mr. Yang obtained a bachelor's degree with honors
from the University of California at Berkeley, where he was inducted into Phi
Beta Kappa. He received his master's degree from the Wharton School of the
University of Pennsylvania. He co-authored with Richard G. Faux, Jr. "Managed
Futures: The Convergence with Hedge Funds," a chapter in EVALUATING AND
IMPLEMENTING HEDGE FUND STRATEGIES, a book published in 1996 by Euromoney
Publications.
Mr. Michael Y. Gan has been the Executive Vice-President since September 1,
1992. Mr. Gan is registered as an associated person of Willowbridge. He is
individually registered with the CFTC as a CPO and a CTA and is a member of the
NFA in such capacities. He is also a Principal and an associated person of
Doublewood and Union Spring. Mr. Gan was the sole shareholder, Director and
President of Willowbridge from October 1989 through August 1992. From 1983 to
1989, he worked in the foreign exchange trading group at Marine Midland Bank in
New York. In this capacity, Mr. Gan was responsible for research into technical
analysis, as well as proprietary trading for the firm in both currency futures
and options. He had been promoted to Assistant Vice President prior to his
resignation. Mr. Gan graduated SUMMA CUM LAUDE from the University of the
Philippines with a B.S. in Chemical Engineering and subsequently graduated with
honors from the Wharton School of the University of Pennsylvania with an M.B.A.
in Finance.
Ms. Theresa C. Morris is the Senior Vice President. Ms. Morris has been
employed by Willowbridge since its inception in August 1988, and is registered
as an associated person of Willowbridge. Ms. Morris is also a Principal and an
associated person of Doublewood, Union Spring and Limerick. Ms. Morris oversees
administration, operations and compliance at Willowbridge. Prior to her current
duties, Ms. Morris was responsible for analyzing and trading the technical
signals generated by the computerized trading models. Ms. Morris has over twenty
years of experience in the futures and financial industry. She attended
Brookdale College, majoring in international business.
Mr. Richard G. Faux, Jr. has been Executive Director since April 1995. He is
registered as an associated person and a Principal of Willowbridge. He is also
an associated person of Doublewood, and President, Principal, and an associated
person of Union Spring. Mr. Faux co-founded MC Baldwin Financial Company in 1989
and served as its Co-Chief Executive until April 1995, at which time MC Baldwin
was an international trading manager which developed futures funds for its
partner, Mitsubishi Corporation, and other institutional clients. Prior to
forming MC Baldwin, Mr. Faux was President of Merrill Lynch Options/Futures
Management Inc., a futures fund subsidiary of Merrill Lynch. Before Mr. Faux's
joining Merrill Lynch in 1985, it had raised only $13 million in futures funds.
When he left, the company had raised $930 million, including one of the first
multi-advisor futures funds. Previously, he spent four years at Thomas McKinnon
Securities, Inc. where he helped develop futures funds, including one of the
first financial futures funds. Earlier, Mr. Faux spent ten years at Kuhn Loeb &
Co. (now Lehman Brothers). He is a graduate of Brown University and the Columbia
University Graduate School of Business.
Mr. John C. Plimpton is Director of Investment Services. He joined
Willowbridge Associates Inc. in February 1995 and is responsible for marketing
the firm's various investment strategies as well as maintaining client service.
Mr. Plimpton is registered as an associated person and a Principal of
Willowbridge. His prior futures industry experience was with Beacon Management
Corporation (USA), a CTA and CPO, where he held a marketing position
specializing in the Japanese institutional market from January 1989 to
December 1990. From January 1991 to August 1994, as a representative of
Prudential Life Insurance, and from August 1994 to present, as sole shareholder
and President of Plimpton Financial
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Group, a financial services company, Mr. Plimpton concentrated on insurance and
benefit services for wealthy families and venture businesses. Since 1985,
Mr. Plimpton has been involved in a number of privately held businesses, as well
as serving as director of Inolex Chemical Company, a speciality chemical company
owned by his family. He earned his B.A. degree in Economics from the University
of Chicago and his M.B.A. in Corporate Finance and Corporate Accounting from the
William E. Simon School of Management at the University of Rochester.
Mr. James J. O'Donnell is a Vice President. He oversees Willowbridge's
computer and information needs, including trading information systems,
accounting information systems and support for ongoing research of new
computerized trading systems and effectiveness testing of existing trading
systems. Mr. O'Donnell has been employed by Willowbridge since September 1,
1992. From June 1987 through August 1992, Mr. O'Donnell was Manager of Computer
Information Systems at Caxton Corporation. From April 1979 through May 1987,
Mr. O'Donnell was manager of Research Information Systems at Commodities
Corporation. Prior to that, he was employed by Penn Mutual from September 1973
through March 1979 as Senior Programmer Analyst. He is a graduate of LaSalle
University with a B.A. in mathematics.
Mr. Steven R. Crane is a Vice President. He oversees the accounting and
financial reporting for Willowbridge. Mr. Crane has been employed by
Willowbridge since April 1993. Prior to that, he was employed by Caxton
Corporation from April 1992 to April 1993 as a Senior Accountant. From
September 1989 through April 1992, Mr. Crane worked as a Senior Auditor for
Deloitte & Touche LLP. Mr. Crane is a Certified Public Accountant and a member
of the AICPA. He graduated MAGNA CUM LAUDE from North Carolina State University
with a B.A. in accounting.
Willowbridge, its principals and their families, its employees, and its
affiliates, have traded, and may continue to trade, futures interests contracts
for their own accounts. Such trades may or may not be in accordance with the
Willowbridge trading strategies described below.
THE WILLOWBRIDGE TRADING PROGRAM
Willowbridge's trading strategies are available only through one of its five
"investment programs." An investment program consists of one or more trading
strategies or a combination thereof. Willowbridge currently offers five
Investment Programs: the Select Investment Program; the Currency Investment
Program; the Primary Investment Program; the Currency, Financials and Metals
Investment Program; and the VAT Investment Program. Set forth below is a brief
description of the Select Investment Program which is utilized by Willowbridge
for Spectrum Strategic. The Select Investment Program allows the General Partner
to determine the allocation of its funds among one or more of seven trading
strategies. As of the date of this Prospectus, of the Spectrum Strategic assets
allocated to Willowbridge, all have been allocated to the XLIM Trading Approach
("XLIM").
XLIM, which was first applied in February 1988, is traded on a discretionary
basis by Mr. Yang. Trading decisions are based primarily on Mr. Yang's analysis
of technical factors, fundamentals and market action. XLIM trades are selected
from a wide variety of futures contracts, forwards, spots and options on U.S.
and international markets, including but not limited to, financial instruments,
currencies, precious and base metals and agricultural commodities. Mr. Yang
reserves the right to change the portfolio composition of XLIM. While trading
decisions are based on fundamental and technical market analysis, of equal
importance is the anecdotal information Mr. Yang pieces together about specific
market opportunities. He then develops expectations and formulates
reward-to-risk judgments about the markets. Mr. Yang emphasizes only a small
number of core positions at any time, selecting those for which he believes the
reward-to-risk is the most favorable and for which he believes he has an
advantage over conventional market expectations. Only a small amount of capital
is initially risked; incremental positions are then added as open equity profits
are built up. Likewise the additional positions are liquidated if the market
moves against them. It is intended that approximately 15-40% of the assets under
management pursuant to the XLIM Trading Approach will normally be committed as
margin for trading, but from time to time the percentage of assets committed may
be substantially more or less. XLIM's historical rates of return and drawdown
information accompany its performance capsules.
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<PAGE>
As of August 31, 1999, Willowbridge was managing approximately $306 million
of client assets pursuant to the XLIM Trading Approach ("notional funds"
excluded) and approximately $388 million of client assets in its other programs
("notional funds" excluded).
The other strategies which in the future may be available to Spectrum
Strategic under the Select Investment Program include the five Willowbridge
Trading Systems ("SYSTEMS") and the MTech discretionary trading approach of
Mr. Gan.
The Vulcan system is a computerized version of a systematic, technical
charting system. The model uses the concepts of pattern recognition,
support/resistance levels and counter-trend liquidations in making trading
decisions. Positions are generally held for 10 to 15 trading days.
The Argo system, like Vulcan, is a computerized version of an experienced
chartist trader. However, Argo has a relatively slower time horizon than Vulcan
and its focus is primarily on major, long-term price moves. It is intended that
Argo's positions will generally be held from 20 to 30 trading days.
The Titan system is a technical trend-following system coupled with a
counter-trend mechanism for adjusting position size. Unlike Vulcan, Titan
applies various technical factors in an effort to monitor the overall market
environment in order to recognize major trends. The number of days the system
will hold a position, based on an average of the number of days the initial base
position would be held combined with the number of days any additional positions
would be held, is generally 15 days.
The Rex system is an options trading system which uses proprietary
statistical analyses to determine whether an option for a particular market is
intrinsically cheap or expensive. The Rex model attempts to purchase underpriced
options and sell overpriced options. For risk control, the Rex model uses a
variety of proprietary rules based on volatility, price direction, time decay
and net-delta levels.
The Siren system incorporates real-time price information to determine
situations when price is moving away from market value. Siren can best be
characterized as a top and bottom picking model which attempts to determine
patterns of market activity that often signal a major change in price direction.
Siren's time frame is generally 18 to 25 trading days.
As the trading programs used by Willowbridge are proprietary and
confidential, the discussion above is necessarily of a general nature and is not
intended to be exhaustive. Willowbridge reserves the right to alter its trading
programs without the prior approval of the General Partner.
Pursuant to a licensing agreement between Caxton Corporation and
Willowbridge, Willowbridge has been granted the sole and exclusive right to use
the five Systems described above. The licensing agreement will be continued
until December 31, 2001 and will be renewed for successive one year terms unless
either Willowbridge or Caxton has given 90 days' notice to the other prior to
such date of its intention not to renew. The licensing agreement may also be
terminated in the case of an uncured material breach or in extraordinary
situations. Willowbridge pays royalties to Caxton based on fees generated by
Willowbridge's trading.
If Willowbridge's five Systems discussed above are no longer available to
Willowbridge (because of licensing arrangements), Willowbridge may offer only
the XLIM and the MTech Trading Approaches in its Select Investment Program.
The MTech Trading Approach, which commenced trading January 1991, is a
highly discretionary and judgmental trading approach relying primarily on
Mr. Gan's subjective analysis of the markets. Trading decisions are made on the
basis of technical as well as fundamental analysis. MTech currently trades in
the U.S. and international futures, forward, spot and options markets. Mr. Gan
reserves the right to change the portfolio composition of MTech.
For each of the five Systems, risk is managed on a market by market level as
well as on an overall portfolio level. On the market level, risk is managed
primarily by utilizing proprietary volatility filters. When these filters detect
a certain excessive level of volatility in the markets traded, they will signal
that the Systems should no longer be trading in the markets in which the filters
have detected excessive
97
<PAGE>
volatility. In this way, the Systems do not participate in markets in which
there are extremes in market action. On the portfolio level, risk is managed by
utilizing a proprietary portfolio cutback rule. When cumulative profits have
reached a certain level, this rule determines that positions should be halved
across the entire portfolio. In this way, risk is reduced while allowing the
Systems to continue to participate in the markets, albeit at a reduced level.
After the portfolio has been traded at half, the rule will then determine when
to increase positions to again trade at the full level.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
RXR, INC.
RXR, a New York corporation, was organized in June, 1983. RXR's address is
Financial Centre, 695 East Main Street, Suite 102, Stamford, Connecticut 06901.
RXR has been registered as a CTA since July 1984 and as a CPO since 1983, and is
a member of the NFA in such capacities.
RXR is a wholly-owned subsidiary of The RXR Group Inc., a Delaware
corporation (the "RXR GROUP"), which acts as a holding company, also holding all
of the stock of RXR Securities Inc. ("RXR SECURITIES") and RXR Capital
Management Inc. ("RXR CAPITAL"). RXR Securities is registered with the CFTC as
an introducing broker and is also registered as a securities broker/dealer with
the SEC. RXR Securities is a member of the NASD and of the NFA. RXR Capital is
registered with the CFTC as a CTA and CPO, is a member of the NFA in such
capacities, and is registered as an investment adviser with the SEC.
PRINCIPALS
Mr. Mark Rosenberg is the founder and Chief Executive Officer of RXR. He is
also Chairman of the Investment Policy Committee, and a Director of each of RXR,
RXR Capital, RXR Group and RXR Securities.
RXR and RXR Capital were founded in 1983 and 1985, respectively, with the
goal of establishing a money management company that would utilize futures,
options and derivatives in the development of innovative investment and risk
management programs for both institutional and fund clients.
Mr. Rosenberg serves as a member of the Board of Directors of the Futures
Industry Association. He is an arbitrator for the NFA and a member of the
Financial Advisory Boards of both the Chicago Mercantile Exchange and New York's
Commodity Exchange, Inc.. Mr. Rosenberg is also a Director of the Foundation of
Finance and Banking Research. Prior to forming RXR in 1983, Mr. Rosenberg spent
14 years in the securities and futures industry, most of those years with
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and later at
Prudential-Bache Securities, Inc., where he headed a group that specialized in
institutional hedging and alternative asset management.
Mr. Peter A. Hinrichs is the Chief Financial Officer, Treasurer and a
Director of RXR, RXR Capital, RXR Group and RXR Securities. He has been with RXR
since its founding in 1983. Mr. Hinrichs is a member of the Investment Policy
Committee and has responsibilities for Administration, Operations, Information
Technology, Human Resources and Facilities Management for RXR and its
affiliates. Prior to joining RXR, Mr. Hinrichs spent several years in trading,
operations, and administration at Merrill Lynch Futures Inc. and later at
Prudential Bache Securities.
Mr. Hinrichs graduated from Curry College in 1981 with a Bachelor of Science
degree in business management. He is a member of the Board of Directors of
Fountain House Inc., a non-profit rehabilitation center for the mentally ill and
is an active fund raiser for a number of charitable organizations.
Mr. James F. Tomeo is Executive Vice President and is a Director of the RXR
Group and of RXR. He has been with the firm since 1986. Mr. Tomeo is a member of
the Investment Policy Committee and is responsible for the firm's strategic
planning and project development. He is the former Chairman of the International
Committee of the Managed Funds Association and is the U.S. representative to the
Education and Research Committee of the Alternative Investment Management
Association based in Europe. Before joining RXR, Mr. Tomeo worked for Donaldson,
Lufkin and Jenrette as an alternative investment consultant and for the LTV
Corporation in New York. Mr. Tomeo graduated from Bucknell University in
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1980 with a Bachelor of Science degree in business administration, the
University of Hartford in 1987 with a Master of Business Administration degree,
and the Institute of International Studies and Training (Japanese business study
program) in 1988. He also studied international finance and corporate markets at
New York University.
Principals and employees of RXR are not permitted to trade futures, options
on futures or forward contracts for their own accounts. Principals and employees
are, however, permitted to invest in funds traded by RXR.
RXR'S INVESTMENT PHILOSOPHY
RXR uses a global macro investment philosophy which has its roots in Modern
Portfolio Theory and the design of efficiently allocated portfolios. In the
global equity and fixed income areas, RXR analyzes various fundamental
information from the world economies such as growth data, labor wage rates,
central bank interest rate policy and inflation, to determine its approach to
the markets. In the foreign exchange and commodity components, RXR analyzes
price data to determine profit and risk potential. A proprietary asset
allocation model is used to adjust exposure among approximately 40 markets so
that no one market or sector can dominate performance. The trading program
utilized for Spectrum Global Balanced was designed to provide investors with a
global investment alternative. Through the controlled use of futures and forward
contracts, RXR manages both U.S. and non-U.S. capital markets, currency, and
commodity exposure in a single, integrated portfolio.
As of August 31, 1999, RXR was managing approximately $265 million of client
assets pursuant to its Balanced Portfolio Program and approximately
$338 million in all of its programs (notional funds excluded).
RESEARCH AND DEVELOPMENT
Research and development calls on the talents of personnel from several
areas within the company. Under the leadership of its Board of Directors, the
process begins with research. RXR has developed macro-economic and technical
models that can detect price dislocations resulting from daily market activity
and major changes in global business cycles. Using this information, portfolio
managers construct investment portfolios that address the specific actuarial
assumptions of their clients.
The development of the trading program utilized for Spectrum Global Balanced
stems from RXR's work managing multi-asset portfolios for its institutional
clients. In 1986, RXR began managing a portfolio called the Institutional
Balanced Portfolio ("IBP") Program, composed of US stock, bond, and non-US
financial and commodity interests. Its objective was capital appreciation with
controlled volatility, a concept pioneered by Professor John Lintner of Harvard
University, who conducted research on the addition of managed futures to
portfolios of U.S. stocks and bonds. Effective June 1, 1998, RXR broadened the
hedged equity and fixed income components to include participation in the
world's major developed capital markets.
No representation is made and no guarantee is given that Spectrum Global
Balanced's objective will be realized or that RXR will achieve any particular
level of performance or amount of profits in its trading for Spectrum Global
Balanced's account. Losses incurred in the global and tangible assets component
could cause Spectrum Global Balanced's account to substantially underperform
accounts managed by asset allocation systems which do not include a managed
futures component. In addition, because the General Partner has instructed RXR
to manage Spectrum Global Balanced's account at 1.4 times the amount of leverage
it would normally apply in managing the actively managed component of an IBP
Program account, the performance results achieved for Spectrum Global Balanced
by RXR may be more volatile than an IBP Program account concurrently managed by
RXR and its affiliates.
Prospective investors must recognize not only that the foregoing discussion
attempts to present only the most basic framework describing the trading program
employed for Spectrum Global Balanced, but also due to the proprietary and
confidential nature of all trading approaches, any description will inevitably
be general in nature. Furthermore, RXR's trading methods are continually
evolving, as are the markets themselves.
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<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
1. JOHN W. HENRY & COMPANY, INC.
JWH makes trading decisions for Spectrum Currency pursuant to the
International Foreign Exchange Program. The International Foreign Exchange
Program, which began trading client capital in August 1986, seeks to identify
and capitalize on intermediate-term movements in a broad range of both major and
minor currencies primarily trading on the interbank market. Positions are taken
as outrights against the U.S. dollar, or non-dollar cross rates. This program
uses the three-phase forex investment style. For a detailed description of JWH,
its principals, and trading systems, including the International Foreign
Currency Program, see "The Trading Advisors--Morgan Stanley Dean Witter Spectrum
Technical--3. John W. Henry & Company, Inc." on page - .
PAST PERFORMANCE OF JWH
The following are the capsule performance records of all accounts managed by
JWH and JWH Investments, Inc. ("JWHII"), an affiliate of JWH which has ceased
operations. All performance information is current as of August 31, 1999. The
notes on page - are an integral part of these capsules.
PERFORMANCE OF THE EXCLUSIVE FUND ACCOUNTS
Pursuant to JWH's Strategic Allocation program, which is currently subject
to an exclusivity arrangement with one client operating two funds (the
"Exclusive Fund Accounts"), JWH makes various discretionary trading adjustments
for the accounts of those funds, including selection of programs, ongoing
allocations and reallocations of fund assets among the investment programs and
periodic adjustments to the position size in relation to account equity. As a
result of a change made to these accounts on May 8, 1998, these accounts have
traded differently from the other accounts in the respective JWH investment
programs. For details concerning the Exclusive Fund Account capsule performance
records for these programs, see page - . JWH believes that because these
modified programs have been employed as part of the Strategic Allocation
Program, which is now available on a limited basis, the capsule performance
records are the most representative performance record of these programs as they
have been traded in the Strategic Allocation Program. The capsule performance
records reflect the performance of these accounts from May 8, 1998.
You are cautioned that the performance information set forth in the
following capsule performance summaries are not indicative of, and may have no
bearing on, any trading results which may be attained by JWH or Spectrum
Currency in the future, since past performance is not a guarantee of future
results and another Trading Advisor will be investing funds of Spectrum
Currency. In addition, Spectrum Currency cannot assure you that JWH or the
Partnership 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, in certain instances, may
generate profits where there have been realized or unrealized losses from
futures interests trading.
JOHN W. HENRY & COMPANY, INC.
INTERNATIONAL FOREIGN EXCHANGE PROGRAM
Name of CTA: John W. Henry & Company, Inc.
Name of program: International Foreign Exchange Program
Inception of trading by CTA: October 1982
Inception of trading in program: August 1986
Number of open accounts: 4
Aggregate assets overall: $2.2 billion
Aggregate assets in program: $79.7 million
Largest monthly drawdown: (8.3)%--(5/97)
Worst peak-to-valley drawdown: (35.9)%--(9/92 - 1/95)
1999 year-to-date return (8 months): (6.5)%
1998 annual return: 13.9%
1997 annual return: 71.1%
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1996 annual return: 3.7%
1995 annual return: 16.9%
1994 annual return: (6.3)%
101
<PAGE>
JOHN W. HENRY & COMPANY, INC. PROGRAMS
JANUARY 1, 1994 - AUGUST 31, 1999
JWH BEGAN TRADING CLIENT CAPITAL IN OCTOBER 1982.
<TABLE>
<CAPTION>
GLOBAL
FINANCIAL AND ORIGINAL INVESTMENT DIVERSIFIED GLOBAL FINANCIAL G-7 CURRENCY
METALS PORTFOLIO PROGRAM PORTFOLIO PORTFOLIO PORTFOLIO
NAME OF PROGRAM: ---------------- ------------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Inception of Client Account Trading in
Program: October 1984 October 1982 June 1988 June 1994 February 1991
Number of Open Accounts: 26 18 8 4 4
Assets Managed in Program: $966,577,764 $290,410,457 $141,971,357 $82,715,866 $37,454,194
Assets Managed in JWH: $2.2 billion $2.2 billion $2.2 billion $2.2 billion $2.2 billion
Worst Monthly Decline on an Individual
Account Basis: (10.1)% (2/96) (16.3)% (10/94) (11.2)% (2/96) (19.5)% (11/94) (12.3)% (11/94)
Worst Peak-to-Valley Decline on an (30.5)% (31.0)% (24.1)% (48.9)% (31.4)%
Individual Account Basis: (6/94-1/95) (7/94-10/94) (6/95-10/95) (7/94-1/95) (10/92-1/95)
% % % % %
--------------- --------------- --------------- --------------- ---------------
1999 Compound Annual Rate of Return
(8 months): 1.1 2.1 3.1 10.1 8.6
1998 Compound Annual Rate of Return: 7.2 10.8 23.5 9.9 (4.8)
1997 Compound Annual Rate of Return: 15.2 5.7 3.3 4.9 21.0
1996 Compound Annual Rate of Return: 29.7 22.6 26.9 32.4 14.5
1995 Compound Annual Rate of Return: 38.5 53.2 19.6 86.2 32.2
1994 Compound Annual Rate of Return: (5.3) (5.7) 10.1 (37.7) (4.9)
(7 mos.)
<CAPTION>
JWH GLOBAL- JWH
ANALYTICS-REGISTERED TRADEMARK- GLOBAL
FAMILY OF ANALYTICS-REGISTERED TRADEMARK- INTERNATIONAL CURRENCY
PROGRAMS* 99 AND BOND PORTFOLIO
NAME OF PROGRAM: ------------------------------- ------------------------------- ----------------------
<S> <C> <C> <C>
Inception of Client Account Trading in
Program: June 1997 March 1999 January 1993
Number of Open Accounts: 0 1 1
Assets Managed in Program: $ 0 $8,019,151 $26,064,140
Assets Managed in JWH: 2.2$billion $2.2 billion $2.2 billion
Worst Monthly Decline on an Individual
Account Basis: (5.0)% (4/98) (4.7)% (3/99) (7.8)% (7/94)
Worst Peak-to-Valley Decline on an (5.3)% (4.7)% (23.6)%
Individual Account Basis: (4/98-5/98) (3/99) (7/94-1/95)
% % %
-------------- --------------- ---------------
1999 Compound Annual Rate of Return (1.6)
(8 months): N/A (6 mos.) 1.4
1998 Compound Annual Rate of Return: (3.6) N/A 16.1
(5 mos.)
1997 Compound Annual Rate of Return: 17.6 N/A 17.0
(7 mos.)
1996 Compound Annual Rate of Return: N/A N/A 19.9
1995 Compound Annual Rate of Return: N/A N/A 36.5
1994 Compound Annual Rate of Return: N/A N/A (2.3)
<CAPTION>
STRATEGIC
ALLOCATION
PROGRAMS
NAME OF PROGRAM: ---------------
<S> <C>
Inception of Client Account Trading in
Program: July 1996
Number of Open Accounts: 2
Assets Managed in Program: $578,046,234
Assets Managed in JWH: $2.2 billion
Worst Monthly Decline on an Individual
Account Basis: (7.8)% (11/98)
Worst Peak-to-Valley Decline on an (7.8)%
Individual Account Basis: (11/98)
%
---------------
1999 Compound Annual Rate of Return
(8 months): 6.3
1998 Compound Annual Rate of Return: 17.6
1997 Compound Annual Rate of Return: 13.3
1996 Compound Annual Rate of Return: 25.5
(6 mos.)
1995 Compound Annual Rate of Return: N/A
1994 Compound Annual Rate of Return: N/A
</TABLE>
- -------------
*This performance data is only through May 7, 1998. The program continues to
operate, but only as a portion of a special JWH multi-program trading strategy
that is currently the subject of an exclusivity agreement. For performance
information subsequent to May 7, 1998, see page - for the Exclusive Fund
Accounts.
The Notes to JWH's Programs on page - are an integral part of this table.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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<PAGE>
JOHN W. HENRY & COMPANY, INC. PROGRAMS
JANUARY 1, 1994 - AUGUST 31, 1999 (CONT'D)
JWH BEGAN TRADING CLIENT CAPITAL IN OCTOBER 1982.
<TABLE>
<CAPTION>
DELEVERED YEN
DENOMINATED
THE WORLD FINANCIAL WORLDWIDE BOND FINANCIAL AND
PERSPECTIVE DOLLAR PROGRAM* PROGRAM* METALS PROFILE INTERRATE-TM-
NAME OF PROGRAM: ------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
October 1995; December 1988;
Inception of Client Account Trading in ceased trading ceased trading
Program: April 1987 July 1996 July 1996 12/96 7/96
Number of Open Accounts: 2 0 0 0 0
Assets Managed in Program: $28,083,645 $0 $0 $0 $0
Assets Managed in JWH: $2.2 billion $2.2 billion $2.2 billion $2.2 billion $2.2 billion
Worst Monthly Decline on an Individual
Account Basis: (11.7)% (2/94) (8.4)% (5/97) (3.8)% (4/97) (3.2)% (2/96) (3.1)% (11/94)
Worst Peak-to-Valley Decline on an (25.9)% (11.6)% (6.2)% (5.1)% (19.7)%
Individual Account Basis: (7/94-1/95) (5/97-9/97) (12/96-5/97) (2/96-8/96) (9/92-11/93)
% % % % %
--------------- --------------- --------------- --------------- ---------------
1999 Compound Annual Rate of Return
(8 months): 1.0 N/A N/A N/A N/A
1998 Compound Annual Rate of Return: 7.2 (4.9) (0.4) N/A N/A
(5 mos.) (5 mos.)
1997 Compound Annual Rate of Return: 10.4 6.8 9.5 N/A N/A
1996 Compound Annual Rate of Return: 40.9 10.6 17.8 9.4 5.79
(6 mos.) (6 mos.) (7 mos.)
1995 Compound Annual Rate of Return: 32.2 N/A N/A 0.2 5.19
(3 mos.)
1994 Compound Annual Rate of Return: (15.2) N/A N/A N/A 3.42
<CAPTION>
JWHII
KT DIVERSIFIED FINANCIAL AND METALS
PROGRAM PORTFOLIO
NAME OF PROGRAM: --------------- --------------------
<S> <C> <C>
January 1984;
Inception of Client Account Trading in ceased trading September 1991;
Program: 2/94 ceased trading 7/95
Number of Open Accounts: 0 0
Assets Managed in Program: $0 $0
Assets Managed in JWH: $2.2 billion $2.2 billion
Worst Monthly Decline on an Individual
Account Basis: (19.6)% (8/93) (4.8)% (7/94)
Worst Peak-to-Valley Decline on an (33.9)% (12.2)%
Individual Account Basis: (8/93-2/94) (7/94-12/94)
% %
--------------- ---------------
1999 Compound Annual Rate of Return
(8 months): N/A N/A
1998 Compound Annual Rate of Return: N/A N/A
1997 Compound Annual Rate of Return: N/A N/A
1996 Compound Annual Rate of Return: N/A N/A
1995 Compound Annual Rate of Return: N/A 30.3
(7 mos.)
1994 Compound Annual Rate of Return: (14.0) (0.8)
(2 mos.)
</TABLE>
- -------------
*This performance data is only through May 7, 1998. The program continues to
operate, but only as a portion of a special JWH multi-program trading strategy
that is currently the subject of an exclusivity agreement. For performance
information subsequent to May 7, 1998, see page - for the Exclusive Fund
Accounts.
The Notes to JWH's Programs on page - are an integral part of this table.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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<PAGE>
JOHN W. HENRY & COMPANY, INC. PROGRAMS
EXCLUSIVE FUND ACCOUNTS
MAY 8, 1998 - AUGUST 31, 1999
JWH BEGAN TRADING CLIENT CAPITAL IN OCTOBER 1982.
<TABLE>
<CAPTION>
GLOBAL
DIVERSIFIED
FINANCIAL AND METALS ORIGINAL INVESTMENT PORTFOLIO GLOBAL FINANCIAL
PORTFOLIO EXCLUSIVE PROGRAM EXCLUSIVE EXCLUSIVE PORTFOLIO EXCLUSIVE
NAME OF PROGRAM: -------------------- ------------------- --------------- -------------------
<S> <C> <C> <C> <C>
Inception of Client Account Trading in
Program: May 1998 May 1998 May 1998 May 1998
Number of Open Accounts: 2 2 2 2
Assets Managed in Program: $74,652,336 $114,005,637 $58,426,475 $90,398,217
Assets Managed in JWH: $2.2 billion $2.2 billion $2.2 billion $2.2 billion
Worst Monthly Decline on an Individual
Account Basis: (8.6)% (11/98) (12.0)% (11/98) (9.3)% (10/98) (8.7)% (11/98)
Worst Peak-to-Valley Decline on an (11.7)% (12.0)% (12.2)% (8.7)%
Individual Account Basis: (10/98-11/98) (11/98) (10/98-11/98) (11/98)
% % % %
--------------- --------------- --------------- ---------------
1999 Compound Annual Rate of Return
(8 months): 2.4 6.6 9.4 13.2
1998 Compound Annual Rate of Return: 33.5 20.2 39.7 18.4
(8 mos.) (8 mos.) (8 mos.) (8 mos.)
1997 Compound Annual Rate of Return: N/A N/A N/A N/A
1996 Compound Annual Rate of Return: N/A N/A N/A N/A
1995 Compound Annual Rate of Return: N/A N/A N/A N/A
1994 Compound Annual Rate of Return: N/A N/A N/A N/A
<CAPTION>
JWH GLOBAL-
ANALYTICS-TM-
G-7 CURRENCY WORLDWIDE BOND FAMILY OF DOLLAR PROGRAM
PORTFOLIO EXCLUSIVE PROGRAM EXCLUSIVE PROGRAMS EXCLUSIVE EXCLUSIVE
NAME OF PROGRAM: ------------------- ----------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Inception of Client Account Trading in
Program: May 1998 May 1998 May 1998 May 1998
Number of Open Accounts: 2 2 2 2
Assets Managed in Program: $55,621,241 $29,239,221 $100,801,215 $28,788,511
Assets Managed in JWH: $2.2 billion $2.2 billion $2.2 billion $2.2 billion
Worst Monthly Decline on an Individual
Account Basis: (8.6)% (11/98) (7.0)% (10/98) (5.8)% (11/98) (7.2)% (11/98)
Worst Peak-to-Valley Decline on an (11.9)% (7.4)% (6.1)% (7.7)%
Individual Account Basis: (11/98-1/99) (10/98-11/98) (10/98-11/98) (11/98-1/99)
% % % %
--------------- --------------- --------------- ---------------
1999 Compound Annual Rate of Return
(8 months): 8.5 (1.4) 3.9 5.5
1998 Compound Annual Rate of Return: 0.7 25.9 25.5 2.7
(8 mos.) (8 mos.) (8 mos.) (8 mos.)
1997 Compound Annual Rate of Return: N/A N/A N/A N/A
1996 Compound Annual Rate of Return: N/A N/A N/A N/A
1995 Compound Annual Rate of Return: N/A N/A N/A N/A
1994 Compound Annual Rate of Return: N/A N/A N/A N/A
<CAPTION>
INTERNATIONAL
FOREIGN EXCHANGE
PROGRAM
EXCLUSIVE
NAME OF PROGRAM: ----------------
<S> <C>
Inception of Client Account Trading in
Program: April 1999
Number of Open Accounts: 2
Assets Managed in Program: $26,113,380
Assets Managed in JWH: $2.2 billion
Worst Monthly Decline on an Individual
Account Basis: (6.3)% (7/99)
Worst Peak-to-Valley Decline on an (10.0)%
Individual Account Basis: (4/99-7/99)
%
---------------
1999 Compound Annual Rate of Return (7.9)
(8 months): (5 mos.)
1998 Compound Annual Rate of Return: N/A
1997 Compound Annual Rate of Return: N/A
1996 Compound Annual Rate of Return: N/A
1995 Compound Annual Rate of Return: N/A
1994 Compound Annual Rate of Return: N/A
</TABLE>
The Notes to JWH's Programs on page - are an integral part of this table.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
For an explanation of the Exclusive Fund Accounts, please see "Performance of
the Exclusive Fund Accounts" on page - .
104
<PAGE>
JOHN W. HENRY & COMPANY, INC. PROGRAMS
JANUARY 1, 1994 - AUGUST 31, 1999
JWH BEGAN TRADING CLIENT CAPITAL IN OCTOBER 1982
YEN FINANCIAL PORTFOLIO
INCEPTION OF CLIENT ACCOUNT TRADING IN PROGRAM: JANUARY 1992
NUMBER OF OPEN ACCOUNTS: 0
ASSETS MANAGED IN PROGRAM: $0
ASSETS MANAGED BY JWH: $2.2 BILLION
<TABLE>
<CAPTION>
AGGREGATE COMPOUND WORST WORST
INCEPTION OF ASSETS ANNUAL RATE MONTHLY PEAK-TO-VALLEY
ACCOUNT NO. TRADING AUGUST 31, 1999 OF RETURN DECLINE DECLINE
- --------------------- ------------ --------------- ----------------- ------------- -----------------------
% % %
<C> <C> <C> <S> <C> <C> <C> <C>
1 1/92 closed - 3/97 1997: (3.3) (3 mos.) (7.3) - 7/95 (30.5) - 4/95 - 7/96
1996: (8.5)
1995: 20.6
1994: (13.0)
2 1/93 closed - 1/97 1997: (0.1) (1 mo.) (6.9) - 7/95 (29.0) - 4/95 - 7/96
1996: (9.9)
1995: 21.0
1994: (8.8)
3 1/94 closed - 1/97 1997: (2.4) (1 mo.) (6.0) - 7/95 (26.6) - 4/95 - 7/96
1996: (10.9)
1995: 22.4
1994: (7.5)
4 6/94 closed - 3/97 1997: 1.4 (3 mos.) (6.5) - 7/95 (22.3) - 4/95 - 7/96
1996: (0.6)
1995: 24.2
1994: (1.6) (7 mos.)
5 8/94 closed - 3/97 1997: (2.4) (3 mos.) (7.1) - 7/95 (30.4) - 4/95 - 7/96
1996: (6.0)
1995: 21.1
1994: (4.3) (5 mos.)
6 1/95 closed - 3/97 1997: (3.7) (3 mos.) (7.5) - 7/95 (35.5) - 4/95 - 7/96
1996: (13.5)
1995: 13.2
7 3/94 closed - 3/97 1997: 4.0 (3 mos.) (6.7) - 7/96 (15.9) - 2/96 - 7/96
1996: 7.8
1995: 28.1
1994: (11.2) (10 mos.)
10 3/94 closed - 12/94 1994: (7.4) (10 mos.) (5.4) - 5/94 (10.5) - 4/94 - 12/94
11 11/93 closed - 8/95 1995: 20.0 (8 mos.) (9.0) - 8/95 (18.8) - 4/95 - 8/95
1994: (13.4)
12 11/93 closed - 1/95 1995: (0.6) (1 mo.) (6.3) - 5/94 (16.5) - 4/94 - 1/95
1994: (15.0)
13 12/92 closed - 3/96 1996: (4.1) (3 mos.) (4.9) - 7/95 (15.8) - 12/93 - 1/95
1995: 31.4
1994: (14.1)
14 1/93 closed - 12/95 1995: 10.9 (6.2) - 7/95 (15.8) - 4/95 - 12/95
1994: (4.1)
15 4/93 closed - 9/94 1994: (19.0) (9 mos.) (5.8) - 5/94 (19.9) - 11/93 - 9/94
16 1/94 closed - 8/94 1994: (6.7) (8 mos.) (5.5) - 5/94 (11.0) - 4/94 - 8/94
17 12/92 closed - 1/96 1996: 0.3 (1 mo.) (6.0) - 7/95 (12.4) - 4/95 - 10/95
1995: 26.6
1994: (5.1)
18 3/94 closed - 4/96 1996: (6.3) (4 mos.) (6.2) - 7/95 (18.5) - 4/95 - 4/96
1995: 18.5
1994: (10.1) (10 mos.)
19 12/94 closed - 4/96 1996: (7.8) (4 mos.) (6.6) - 7/95 (21.1) - 4/95 - 4/96
1995: 18.3
1994: 0.2 (1 mo.)
20 6/94 closed - 12/94 1994: (7.9) (7 mos.) (5.1) - 7/94 (10.4) - 6/94 - 11/94
21 6/94 closed - 3/95 1995: 48.1 (3 mos.) (3.6) - 7/94 (9.9) - 6/94 - 1/95
1994: (6.6) (7 mos.)
22 4/94 closed - 9/94 1994: (4.6) (6 mos.) (4.7) - 5/94 (7.0) - 4/94 - 9/94
23 3/94 closed - 9/94 1994: (9.7) (7 mos.) (6.3) - 5/94 (11.0) - 4/94 - 9/94
24 4/94 closed - 9/94 1994: (9.8) (6 mos.) (9.1) - 5/94 (12.9) - 4/94 - 9/94
25 4/93 closed - 12/94 1994: (16.6) (6.1) - 5/94 (17.9) - 11/93 - 12/94
26 9/93 closed - 12/94 1994: (12.4) (6.0) - 5/94 (14.1) - 4/94 - 12/94
</TABLE>
The Yen Financial Portfolio closed in March 1997.
The Notes to JWH's programs on page - are an integral part of this table.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
105
<PAGE>
NOTES TO JWH PROGRAMS' CAPSULE PERFORMANCE SUMMARIES
An investor should note that the composite capsule performance presentations
include individual accounts which, even though traded according to the same
investment program, have materially different rates of return. The reasons for
this are numerous material differences among accounts: a) procedures governing
timing for the commencement of trading and means of moving toward full portfolio
commitment of new accounts; b) the period during which accounts are active;
c) client trading restrictions, including futures vs. forward contracts and
contract months; d) trading size to equity ratio resulting from JWH procedures
for the commencement of trading and full portfolio commitment for new accounts
and new capital; e) the size of the account, which can influence the size of
positions taken and restrict the account from participating in all markets
available to an investment program; f) the amount of interest income earned by
an account, which will depend on the rates paid by an FCM on equity deposits
and/or on the portion of an account invested in interest-bearing obligations
such as U.S. Treasury bills; g) the amount of management and incentive fees paid
to JWH and the amount of brokerage commissions paid, which will vary and will
depend on the fees negotiated by the client with the broker; h) the timing of
orders to open or close positions; i) the market conditions, which in part
determine the quality of trade executions; j) variations in fill prices; and
k) the timing of additions and withdrawals. Notwithstanding these material
differences among accounts, the composite remains a valid representation of the
accounts included therein.
For the purpose of determining whether material differences exist among
accounts traded pursuant to the same investment program, JWH utilizes the
following method. The gross trading performance of each JWH investment program
and each individual JWH account within the relevant program is reviewed and the
following parameters established by interpretations of the Division of Trading
and Markets of the CFTC are calculated: (i) if the arithmetic average of two
percentages is greater than 10 percentage points and the difference between the
two is less than 10% of their average; (ii) if the arithmetic average of the two
percentages is greater than 5 points but less than 10 points and the difference
between the two is 1.5 percentage points or less; and (iii) if the arithmetic
average of the two percentages is less than 5 points and the difference between
the two is 1.0 percentage point or less. If one of the parameters (i) - (iii) is
satisfied in the review, then the results within the designated range are deemed
"materially the same" or "not materially different." The parameters (i) - (iii)
determine if differences between accounts are materially different. The gross
trading performance of each JWH investment program and each individual JWH
account within the relevant program not satisfying the above parameters (i) -
(iii) is then reviewed to determine whether any material differences detected
could produce misleading composite performance results. With the exception of
accounts that were established at levels below JWH's current minimum account
size, JWH's policy is to provide separate performance capsules when an account
is consistently performing differently on a gross trading basis from the other
JWH accounts traded pursuant to the same investment program and the continued
inclusion of that account in the composite would create a distortion in the
composite rate of return.
The composite rates of return indicated should not be taken as
representative of any rate of return actually achieved by any single account
represented in the records. You are further cautioned that the data set forth in
the performance capsule records is not indicative of any results which may be
attained by JWH in the future since past performance is not necessarily
indicative of future results.
During the periods covered by the preceding capsule performance records, and
particularly since 1989, JWH has increased and decreased position size in
relation to account equity in certain markets and entire investment programs,
and also altered the composition of the markets and contracts for certain
programs. In general since 1992, JWH began implementing certain position size
adjustments that were of a more permanent nature. While historical returns
represent actual performance achieved, you should be aware that the position
size relative to account equity currently utilized may be significantly
different from that used during previous time periods. You should be aware of
the following position size adjustments relative to account equity:
Original Investment Program - reduced 25% commencing in October 1995
Financial and Metals Portfolio - reduced 50% commencing in August 1992
Global Financial Portfolio - reduced 50% commencing in April 1995
International Currency and Bond Portfolio - increased 20% commencing in May
1998
G-7 Currency Portfolio - increased 50% commencing in May 1998
106
<PAGE>
From the beginning of the performance records shown, JWH and JWHII accrued
incentive fees. Interest income, management fees, commissions, and other
expenses were reflected on a cash basis (with the exception of the programs
specifically noted below) until August, 1998, when the accrual method was fully
adopted for all programs not already utilizing that method. The recording of
specified items on a cash basis before August, 1998, should not, for most
months, be materially different from presenting rates of return on an accrual
basis; any differences in rates of return are immaterial to the overall
performance record. JWH reflected all items of net performance on an accrual
basis for the G-7 Currency program and International Currency and Bond Portfolio
for the entire period shown, and for the Worldwide Bond Program, Dollar Program,
and JWH Global Analytics-Registered Trademark- Family of Programs from the
inception of client trading. Beginning September 1, 1998, all JWH programs
utilized the full accrual basis.
The calculation of management and incentive fees are subject to variation
due to the agreed upon definitions contained in each account's advisory
agreement. Management fees range historically from 0% to 6% of assets under
management; incentive fees range from 0% to 25% of trading profits. From time to
time, such variations in advisory fees may have a material impact on the
performance of an account.
"Number of Open Accounts" is the number of accounts directed by JWH (or
JWHII) pursuant to the investment program shown as of August 31, 1999.
"Assets Managed in Program" is the aggregate amount of total equity,
excluding "notional" equity under management of JWH (or JWHII) in the investment
program shown as of August 31, 1999.
"Worst Monthly Decline on an Individual Account Basis" is the largest
monthly loss experienced by any single account in the relevant investment
program in any calendar month covered by the capsule. "Loss" for these purposes
is calculated on the basis of the loss experienced by the individual account,
expressed as a percentage of total equity (including "notional" equity) in the
account. Worst monthly decline information includes the month and year of such
decline.
"Worst Peak-to-Valley Decline on an Individual Account Basis" is the largest
percentage decline by any single account in the relevant investment program
(after eliminating the effect of additions and withdrawals) during the period
covered by the capsule from any month-end net asset value, without such month
end net asset value being equaled or exceeded as of a subsequent month-end by
the individual account, expressed as a percentage of the total equity in the
account. The worst peak-to-valley decline since inception is the worst
peak-to-valley decline by the program as a composite.
"Compound Annual Rate of Return" is calculated by compounding the monthly
rates of return over the number of periods in a given year. For example, each
month's monthly rate of return in hundredths is added to one (1) and the result
is multiplied by the previous month's compounded monthly rate of return
similarly expressed. One (1) is then subtracted from the product. For periods
less than one year, the results are year to date.
Proprietary capital is included in the rates of return for the Original
Investment Program, the Global Diversified Portfolio, the Global Financial
Portfolio, and the G-7 Currency Portfolio pursuant to an investment in a fund.
These proprietary accounts have been traded in exactly the same manner as client
funds, and have been subject to all of the same fees and expenses charged to a
client investment in the fund; therefore there is no material impact on the
rates of return presented. The International Currency and Bond Portfolio also
had proprietary capital as an investment in a fund. This proprietary account was
traded in the exact same manner that client funds would be traded, and was
subject to all of the same fees and expenses that would be charged to a client
investment in a fund, had there been other client accounts traded; therefore
there is no material impact to the rates of return presented. In addition,
during the period from May 1991 through August 1995, the Financial and Metals
Portfolio included two proprietary accounts which had no material impact on the
rates of return.
ADDITIONAL NOTE TO THE GLOBAL FINANCIAL PORTFOLIO CAPSULE PERFORMANCE RECORD
The timing of individual account openings has had a material impact on
compound rates of return. Based on the account startup methodology used by JWH,
the performance of individual accounts composing the Global Financial Portfolio
composite performance summary has varied. In 1994, the two accounts that were
open generated separate rates of return of negative 44% and negative 17%,
respectively. For the period January 1995 through June 1995, the three open
accounts achieved separate
107
<PAGE>
rates of return of 101%, 75% and 67%. By June 1995, these accounts maintained
mature positions and were performing consistently with each other. Due to the
six month period in 1995 of varied performance, the three accounts achieved
annual rates of return for 1995 of 122%, 92%, and 78%.
ADDITIONAL NOTE TO THE JWH GLOBALANALYTICS-REGISTERED TRADEMARK- 99 CAPSULE
PERFORMANCE RECORD
In March 1999, an additional account began trading pursuant to the JWH
GlobalAnalytics Family of Programs methodology. Due to the size of the account,
it may have different results than other accounts using this same methodology.
As a result, performance is shown separately.
ADDITIONAL NOTE TO THE YEN FINANCIAL PORTFOLIO CAPSULE PERFORMANCE RECORD
The Yen Financial Portfolio was traded from the Japanese yen perspective. As
the equity mix between U.S. dollars and Japanese yen varied, performance from
each perspective also varied.
The performance of the Yen Financial Portfolio is presented on an individual
account basis due to material differences among accounts' historical
performance. Account performance varied historically due to a number of factors
unique to this portfolio, including whether the portfolio was denominated in
U.S. dollars or yen, the extent of hedging currency conversions, the amounts and
frequency of currency conversions and account size. Several of these factors
that materially influenced performance depended on clients' specific choices
that effectively resulted in customized client portfolios.
ADDITIONAL NOTE TO THE PERFORMANCE SUMMARIES OF THE DISCONTINUED PROGRAMS
Performance summaries are included for InterRate-TM-, the Delevered Yen
Denominated Financial and Metals Profile, the KT Diversified Program and the Yen
Financial Portfolio. All of these programs have been discontinued.
2. SUNRISE CAPITAL PARTNERS, LLC
The principals and senior officers of Sunrise Capital Partners are as
follows:
<TABLE>
<S> <C>
Martin P. Klitzner.......................................... Principal, Managing Director
Richard C. Slaughter........................................ Principal, Managing Director
Dr. Gary B. Davis........................................... Principal
Dr. John V. Forrest......................................... Principal
Martin M. Ehrlich........................................... Principal, Vice President
Marie Laufik................................................ Principal, Vice President
Elissa Davis................................................ Principal
</TABLE>
The principals of Sunrise Capital Partners will make trading decisions for
Spectrum Currency pursuant to the Sunrise trading system described previously,
but with minor modifications to the system to account for the trading of an
exclusive portfolio of diverse world currencies. Such modifications have
consisted principally of applying the principles of spread trading, including
multiple additional currencies to a portfolio and reweighting the emphasis given
the different markets traded, all in an attempt to adjust to the potentially
higher volatility of a portfolio which trades in a less diversified group of
markets. Sunrise Capital Partners has utilized the modified trading system to
trade currency portfolios since October 1985. Sunrise Capital Partners normally
commits between 40 and 60% of an accounts equity as margin on open positions
pursuant to the trading system. For a detailed description of Sunrise Capital
Partners, its principals and trading systems, including the Currency Program,
see "The Trading Advisors--Morgan Stanley Dean Witter Spectrum Select--Sunrise
Capital Management, Inc." on page - .
SUNRISE CAPITAL PARTNERS PERFORMANCE
The following is the composite performance of all accounts managed by
Sunrise Capital Partners. All performance information is current as of
August 31, 1999. Not all of these programs are presently used by Spectrum
Currency.
You are cautioned that the performance information set forth in the
following capsule performance summaries are not indicative of, and may have no
bearing on, any trading results which may be attained by Sunrise Capital
Partners or Spectrum Currency in the future, since past performance is not a
guarantee of future results and another Trading Advisor will be investing funds
of Spectrum Currency. In addition,
108
<PAGE>
Spectrum Currency cannot assure you that Sunrise Capital Partners or the
Partnership 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, in certain instances, may
generate profits where there have been realized or unrealized losses from
futures interests trading.
SUNRISE CURRENCY PROGRAM
(Calculations based on Fully-Funded Subset Method)
Name of CTA: Sunrise Capital Partners
Name of program: Sunrise Currency Program
Inception of trading by CTA: June 1980
Inception of trading in program: October 1985
Number of open accounts: 9
Aggregate assets overall: $584.5 million
Aggregate assets in program: $58.9 million
Largest monthly drawdown: (11.22)%--(1/95)
Worst peak-to-valley drawdown: (58.60)%--(7/93 - 1/95)
1999 year-to-date return (8 months): (0.3)%
1998 annual return: (1.9)%
1997 annual return: 10.9%
1996 annual return: 20.2%
1995 annual return: 34.0%
1994 annual return: (22.1)%
SUNRISE CIMCO~DIVERSIFIED FINANCIAL PROGRAM
Name of CTA: Sunrise Capital Partners
Name of program: Sunrise CIMCO~Diversified Financial Program
Inception of trading by CTA: June 1980
Inception of trading in program: October 1990
Number of open accounts: 2
Aggregate assets overall: $584.5 million
Aggregate assets in program: $82.6 million
Largest monthly drawdown: (12.04)%--(1/94)
Worst peak-to-valley drawdown: (44.47)%--(7/93 - 1/95)
1999 year-to-date return (8 months): 0.2%
1998 annual return: 7.7%
1997 annual return: (2.8)%
1996 annual return: 26.1%
1995 annual return: 50.9%
1994 annual return: (28.8)%
SUNRISE DIVERSIFIED PROGRAM
(Calculations based on Fully-Funded Subset Method)
Name of CTA: Sunrise Capital Partners
Name of program: Sunrise Diversified Program
Inception of trading by CTA: June 1980
Inception of trading in program: June 1980
Number of open accounts: 25
Aggregate assets overall: $584.5 million
Aggregate assets in program: $63.2 million
Largest monthly drawdown: (14.97)%--(1/94)
Worst peak-to-valley drawdown: (36.02)%--(12/91 - 2/94)
1999 year-to-date return (8 months): 8.5%
1998 annual return: 17.0%
1997 annual return: 11.3%
1996 annual return: 21.7%
1995 annual return: 40.0%
1994 annual return: (5.5)%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
109
<PAGE>
SUNRISE EXPANDED DIVERSIFIED PROGRAM
(Calculations based on Fully-Funded Subset Method)
Name of CTA: Sunrise Capital Partners
Name of program: Sunrise Expanded Diversified Program
Inception of trading by CTA: June 1980
Inception of trading in program: January 1989
Number of open accounts: 25
Aggregate assets overall: $584.5 million
Aggregate assets in program: $379.8 million
Largest monthly drawdown: (10.99)%--(8/94)
Worst peak-to-valley drawdown: (29.82)%--(7/93 - 4/94)
1999 year-to-date return (8 months): 6.1%
1998 annual return: 25.8%
1997 annual return: 20.7%
1996 annual return: 19.3%
1995 annual return: 11.5%
1994 annual return: 1.6%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
NOTES TO SUNRISE CAPITAL PARTNERS CAPSULE PERFORMANCE SUMMARIES
In reviewing Sunrise Capital Partners' performance, prospective investors
should understand that such performance is calculated on the accrual basis in
accordance with generally accepted accounting principles and is "net" of all
fees and charges and includes interest income applicable to the accounts
comprising each composite performance record. Such a composite performance is
not necessarily indicative of the performance of any individual investor
account. All accounting activity and balances, for the purposes of calculating
performance, are US dollar denominated.
The following terms used in describing Sunrise Capital Partners' performance
are defined as follows:
"Drawdown" means losses experienced by an account traded pursuant to the
identified trading program over a specified period. Drawdowns are measured on
the basis of month-end net asset values only.
"Worst peak-to-valley drawdown" means the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by an account
within a trading program during any period in which the initial month-end net
asset value is not equaled or exceeded by a subsequent month-end net asset
value.
"Monthly Rates of Return" are calculated by dividing the net performance by
the sum total of the beginning net asset value plus time-weighted additions
minus time-weighted withdrawals made during the month. Time weight is calculated
by multiplying an addition by the number of days in the month it was available
for trading and/or a withdrawal by the number of days in the month it was not
available for trading divided by the total number of days in the month. In
accordance with CFTC rules, monthly rates of return are shown only for programs
currently offered by Sunrise Capital Partners. The Fully Funded Subset is used
to calculate the monthly rates of return for Sunrise's Diversified Program
(starting December 1996), Sunrise's Expanded Diversified Program (starting March
1997), and Sunrise's Currency Program (starting April 1997). Sunrise's
CIMCO~Diversified Financial Program (from inception), as well as Sunrise's
Diversified Program prior to December 1996, Sunrise's Expanded Diversified
Program prior to March 1997, and Sunrise's Currency Program prior to April 1997
calculate the monthly rates of return as described above.
"Annual return" is the product of the monthly rates of return; i.e.,
(1 + the Monthly Rate of Return for the first month of the year or
period) x (1 + the Monthly Rate of Return for the next succeeding month), etc.
110
<PAGE>
"Aggregate assets overall" includes all assets under management, in programs
both open and closed to investment, for Sunrise Capital Management, Inc.,
Commodity Monitors, Inc. and Sunrise Capital Partners; these assets are
estimated through the date indicated and may be subject to adjustment.
"Aggregate assets in program" are estimated through the date indicated and
may be subject to adjustment.
The Fully-Funded Subset Summaries include notional funds in excess of the
10% disclosure threshold established by the CFTC and reflect the adoption of a
method of presenting rate-of-return and performance disclosure authorized by the
CFTC, referred to as the Fully-Funded Subset method. This method permits
notional and fully-funded accounts to be included in a single performance
summary. Starting December 1996, this Fully Funded Subset is used to calculate
the monthly rates of return for the Sunrise Diversified Program only. All other
Sunrise programs, including the Sunrise Diversified Program prior to December
1996, calculate the monthly rates of return as described above.
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
MORGAN STANLEY DEAN WITTER COMMODITIES MANAGEMENT INC.
MSDWCM is a Delaware corporation and a wholly owned subsidiary of Morgan
Stanley Dean Witter. MSDWCM became registered as a commodity pool operator and a
commodity trading advisor on June 4, 1992, and is a member of the NFA in such
capacities. MSDWCM currently acts as the general partner and/or trading advisor
for several U.S. and offshore funds. MSDWCM's offices are located at
1221 Avenue of the Americas, New York, New York 10020.
PRINCIPALS
Wayne D. Peterson is a Director and the President of MSDWCM. Prior to
heading MSDWCM, Mr. Peterson worked in MS & Co.'s Structured Products Group,
having previously worked for eight years in MS & Co.'s Commodities Department.
Mr. Peterson joined MS & Co. in 1982, was named a Vice President in 1987 and a
Principal in 1988. Mr. Peterson received a B.A. degree in mathematics and
economics from Cornell University in 1980 and an M.B.A. from the University of
Chicago in 1982.
Jeffrey S. Alvino is a Director and Vice President of MSDWCM. Mr. Alvino
joined MS & Co. in 1990, was named a Vice President in 1996 and Principal in
1998. Prior to joining MS & Co., Mr. Alvino worked at Deloitte & Touche. Mr.
Alvino received a B.S. degree in accounting from Lehigh University in 1988, is a
Certified Public Accountant and a Chartered Financial Analyst.
Messrs. Peterson and Alvino will be responsible for making trading decisions
for the Partnership.
MSDWCM'S TRADING PROGRAM
The trading program employed by MSDWCM on behalf of Spectrum Commodity,
which is generally technical in nature, is designed to capture the overall rate
of commodity price inflation by maintaining long positions in commodity futures
interests. The portfolio is maintained in a diversified manner and looks to
overweight and underweight individual commodities based on their relative
strength. The liquidity of each commodity also will influence its level of
inclusion in Spectrum Commodity's portfolio. The trading program will be
continuously evaluated over time and may be refined and modified in the future,
including the possibility, upon prior notice to investors, that MSDWCM may
maintain short positions in commodity futures interests for Spectrum Commodity's
account.
The trading program encompasses a broad range of commodities, including
commodity futures interests on metals, energy products, agriculturals, and other
commodities selected by MSDWCM from time to time. At present, MSDWCM invests
Spectrum Commodity's assets in the following types of commodity futures
interests on the futures markets indicated: Chicago Board of Trade (corn, wheat,
soybeans, soybean oil, soybean meal, oats); Commodity Exchange, Inc. (platinum,
silver, copper, gold); Chicago Mercantile Exchange (live cattle, feeder cattle,
lean hogs, pork bellies, lumber); Coffee, Sugar & Cocoa Exchange, Inc. (coffee,
sugar, cocoa); London Metals Exchange (aluminum, lead, copper, nickel, tin,
zinc); New York Cotton Exchange (cotton, orange juice); and New York Mercantile
Exchange (crude oil, heating oil, gasoline, natural gas).
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MSDWCM currently limits its trading program in the following manner
(although MSDWCM may change these policies in the future with prior approval of
the General Partner):
(a) Spectrum Commodity will maintain only long positions in commodity
futures interests.
(b) Spectrum Commodity trades only commodity futures interests that are now,
or may hereafter be, traded on U.S. or non-U.S. commodity exchanges.
(c) Spectrum Commodity will not trade commodity futures interests on
financial instruments (including stock indices) and foreign currencies.
(d) The underlying value of the positions entered into in the commodity
futures interest markets (the "Portfolio Value") will be targeted at 1.0 to 2.0
times the assets of Spectrum Commodity with an expected average of 1.5 times the
assets of Spectrum Commodity.
(e) Upon every portfolio reweighting:
- A minimum of 10% of the assets of Spectrum Commodity will be exposed to
each of the following commodities sectors: energy, precious metals and
base metals.
- A maximum of 20% of the Portfolio Value will be exposed to any one
particular commodity.
- A maximum of 40% of the Portfolio Value will be exposed to any one of the
following commodities sectors: energy, precious metals and base metals. A
maximum of 30% of the Portfolio Value will be exposed to any one of the
other commodities sectors.
MSDWCM'S PERFORMANCE RECORD
Capsule I sets forth the actual performance record of a commodity pool that
has been traded solely by MSDWCM since the pool commenced trading in April 1994,
and that employs the same trading program on an unleveraged basis that is
employed for the Partnership on a leveraged basis. Capsule II sets forth the
actual performance record of a commodity pool that had been traded by MSDWCM
since the pool commenced trading in February 1993 through August 1999. The
commodity pool in Capsule II did not employ the trading program that is employed
for the Partnership; therefore, performance information set forth in Capsule II
has less significance to a prospective investor than the performance information
set forth in Capsule I. The commodity pools in both Capsule I and Capsule II are
privately offered pursuant to Regulation D of the Securities Act of 1933, as
amended. MSDWCM also acts as commodity pool operator and trading advisor for
several other funds that are operated pursuant to an exemption under CFTC Rule
4.7. The performance of these funds has not been included herein. The notes
following Capsule I and Capsule II are an integral part thereof.
You should note that the fees and expenses paid by the Partnership and the
leverage employed in trading for the Partnership are higher than that applicable
to the account in Capsule I (which required a $250,000 minimum investment). The
account included in Capsule I was traded in a manner such that the underlying
value of its futures interest positions was targeted at 1.0 times the assets of
the account. The assets of the Partnership are traded in a manner such that the
underlying value of its futures interest positions are targeted at 1.0 to 2.0
times the assets of the Partnership, with an expected average of 1.5 times the
assets of the Partnership. As a result, the volatility of the Partnership's
account is greater than that of the account in Capsule I. In addition, while the
expenses paid by the Partnership are higher than those paid by the account in
Capsule I, the General Partner and MSDWCM believe that if the account in
Capsule I had employed leverage at a constant 1.5 times its assets, the increase
in performance returns during years of positive returns would have more than
compensated for the higher expenses; during periods of negative returns, losses
would have been greater. However, while the Partnership targets its leverage, on
average, at 1.5 times its assets, the Partnership is not traded at a constant
leverage of 1.5 times its assets. Therefore, the Partnership's performance
returns have been higher and lower than the account in Capsule I.
You are cautioned that the performance information set forth in the
performance tables and the footnotes that follow is not indicative of, and has
no bearing on, any trading results that may be attained by Spectrum Commodity in
the future since past results are not necessarily indicative of future results.
There can be no assurance that Spectrum Commodity will make any profits at all
or will be able to avoid
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incurring substantial losses. You should also note that interest income may
constitute a significant portion of a commodity pool's total income and, in
certain instances, may generate profits where there have been realized or
unrealized losses from commodity trading.
MORGAN STANLEY DEAN WITTER COMMODITIES MANAGEMENT INC.
MS COMMODITY INVESTMENT PORTFOLIO STRATEGY
CAPSULE I
Name of CTA: Morgan Stanley Dean Witter Commodities Management Inc.
Name of Program: MS Commodity Investment Portfolio Strategy
Inception of Client Trading by CTA: February 1993
Inception of Client Trading in Program: May 1994
Number of Open Accounts: 4
Aggregate Assets Overall: $180,000,000
Aggregate Assets in Program: $157,000,000
Largest Monthly % Drawdown: (7.65)%--(11/98)
Largest Peak-to-Valley Drawdown: (34.63)%--(8/97-present)
<TABLE>
<CAPTION>
MONTHLY RATES OF RETURN 1999 1998 1997 1996 1995 1994
- ----------------------- ---- -------- -------- -------- -------- ----
% % % % % %
<S> <C> <C> <C> <C> <C> <C>
January................... (0.82) (1.68) 1.35 (0.70) (0.82)
February.................. (3.09) (5.48) 2.26 2.45 0.21
March..................... 7.72 0.43 1.30 3.93 1.69
April..................... 1.97 (1.73) 0.29 1.64 0.34
May....................... (3.39) (5.86) 0.58 (0.99) (1.17) 7.32
June...................... 4.08 (1.54) (2.24) 0.13 (0.36) 4.83
July...................... 0.57 (5.57) 3.19 (0.12) 1.40 2.06
August.................... 4.26 (6.42) (1.59) 4.91 1.86 (0.82)
September................. 8.02 0.86 (0.95) 1.01 0.50
October................... (2.03) 0.49 (0.90) 0.46 0.38
November.................. (7.65) (1.67) 2.36 1.49 1.88
December.................. (2.10) (3.53) 2.45 5.53 1.35
Compound (period)
Rate of Return.......... 11.31 (28.12) 1.09 14.92 12.09 18.61
(8 months) (8 months)
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
CAPSULE II
MORGAN STANLEY DEAN WITTER COMMODITIES MANAGEMENT INC.
MS COMMODITY YIELD FUND STRATEGY
Name of CTA: Morgan Stanley Dean Witter Commodities Management Inc.
Name of Program: MS Commodity Yield Fund Strategy
Inception of Client Trading by CTA: February 1993
Inception of Client Trading in Program: February 1993
Number of Open Accounts: 0
Aggregate Assets Overall: $180,000,000
Aggregate Assets in Program: None
Largest Monthly % Drawdown: (8.07)%--(5/94)
Largest Peak-to-Valley Drawdown: (16.58)%--(11/93-8/94)
1998 annual return: (2.98)%
1997 annual return: (6.07)%
1996 annual return: 16.33%
1995 annual return: (3.26)%
1994 annual return: (9.25)%
1993 annual return (11 months): 16.20%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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FOOTNOTES TO MSDWCM'S CAPSULES I AND II
All rates of return are net of fees and expenses and include all interest
income earned by the Partnership.
"Largest Monthly % Drawdown" represents the greatest cumulative percentage
decline in month-end net asset value due to losses sustained by the Partnership
during any one month period.
"Largest Peak-to-Valley Drawdown" represents the greatest cumulative
percentage decline in month-end net asset value due to losses sustained by the
Partnership during any period in which a month-end net asset value is not
equaled or exceeded by a subsequent net asset value.
Capsules I and II have been prepared in accordance with generally accepted
accounting principles consistently applied under the accrual basis of
accounting. Table information is current as of August 31, 1999.
"Number of Open Accounts" and "Aggregate Assets in Program" in Capsule I
include three accounts which, pursuant to CFTC Rule 4.7, are not included in the
performance results.
EXCHANGE PRIVILEGE
If the conditions described below are satisfied, you may redeem your Units
in any Partnership as of the last day of any calendar month and use the proceeds
to purchase Units of one or more other Partnerships (a "Series Exchange").
However, a Series Exchange will only be permitted as of the sixth month-end
after you first became an investor in any Spectrum Series Partnership, and as of
the last day of each month thereafter (an "Exchange Date"). Each Unit you
purchase in a Series Exchange will be issued and sold at a price per Unit equal
to 100% of the Net Asset Value of a Unit as of the close of business on the
Exchange Date. Any Units you redeem in a Series Exchange will not be subject to
a redemption charge. Units you acquire in a Series Exchange will be subject to
redemption charges, but will be deemed to have the same purchase date as the
Units you exchanged for purposes of determining the applicability of any
redemption charges. Thus, for example if you hold Units of Spectrum Strategic
for 12 months, exchange those Units for Units of Spectrum Technical, then redeem
any of those Units 15 months later, you will not have to pay a redemption
charge, because those Units will be deemed to have been held for 27 months.
When you request a Series Exchange, certain additional conditions must be
satisfied. First, the Partnership from which you are redeeming must have assets
sufficient to discharge its liabilities and redeem Units. In order to effect a
Series Exchange, you must send a Subscription Agreement to a DWR branch office,
and that Agreement must be received by the General Partner at least five
business days prior to the applicable Exchange Date. In that Agreement you must
acknowledge that you are still eligible to purchase Units on the Exchange Date.
You must redeem a minimum of 50 Units in a Series Exchange, unless you are
liquidating your entire interest in a Partnership. A form of Subscription
Agreement is annexed hereto as Exhibit B, and additional copies of the
Subscription Agreement may be obtained by written request to the General Partner
or from a local DWR branch office.
In order to effect a Series Exchange, each Partnership must have a
sufficient number of Units registered and qualified for sale under federal and
applicable state securities laws pursuant to a current Prospectus. While the
General Partner intends to maintain a sufficient number of registered Units to
effect Series Exchanges, it is under no obligation to do so. Therefore, the
General Partner cannot assure you that any Units will be available for sale on
an Exchange Date. Furthermore, certain states may impose significant burdens on,
or alter the requirements for, qualifying Units for sale. In that event, the
General Partner may not continue qualifying Units for sale in those states, and
residents of those states would not be eligible for a Series Exchange. In
addition, certain states may impose more restrictive suitability and/or
investment requirements than those set forth in the form of Subscription
Agreement. Any such restrictions may limit the ability of residents of those
states to effect a Series Exchange. In the event that not all Subscription
Agreements can be processed because an insufficient number of Units are
available for sale on an Exchange Date, the General Partner will allocate Units
in a manner that it deems reasonable under the circumstances.
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Units of any new partnership in the Spectrum Series may be offered to
investors pursuant to exercise of the Series Exchange privilege. Before
purchasing units in a new Partnership, you will be required to receive a copy of
a Prospectus or a supplement to this Prospectus describing the units and the
partnership, and you will be required to execute a new Subscription Agreement to
purchase units of that partnership.
Since a Series Exchange is equivalent to a redemption and an immediate
reinvestment of the proceeds of the redemption, you should carefully review the
portions of this Prospectus describing redemptions and the tax consequences
before effecting a Series Exchange.
REDEMPTIONS
Once you are an investor in a Spectrum Series Partnership for at least six
months, you may redeem all or part of your Units, regardless of when such Units
were purchased. Redemptions may only be made in whole Units, with a minimum of
50 Units required for each redemption, unless you are redeeming your entire
interest in a Partnership. The General Partner will deem Units to be redeemed in
the order in which they were purchased.
Redemptions will only be effective as of the last day of the month in which
a Request for Redemption in proper form has been timely received by the General
Partner ("REDEMPTION DATE"). A "Request for Redemption" is a letter in the form
specified by the General Partner that must be sent by you to a local MSDW branch
office and received by the General Partner at least 5 business days prior to the
Redemption Date. A form of Request for Redemption is annexed to the Limited
Partnership Agreement, which Agreement is annexed to this Prospectus as Exhibit
A. Additional copies of the Request for Redemption may be obtained by written
request to the General Partner or a local MSDW branch office.
If you redeem Units, you will receive 100% of the Net Asset Value of each
Unit redeemed as of the Redemption Date, less any applicable redemption charges.
The "Net Asset Value" of a Unit is an amount equal to the Partnership's Net
Assets allocated to capital accounts represented by Units, divided by the number
of Units outstanding. "Net Assets" means the total assets of a Partnership,
including all cash and cash equivalents (valued at cost), accrued interest and
amortization of original issue discount, and the market value of all open
futures interests positions and other assets of the Partnership, less the total
liabilities of the Partnership, including, but not limited to, all brokerage,
incentive and management fees, and extraordinary expenses, as determined in
accordance with generally accepted accounting principles consistently applied
under the accrual basis of accounting. The market value of a futures interest
traded on a U.S. exchange means the settlement price on the exchange on which
that futures interest is traded on the day Net Assets are being determined.
However, if a futures interest could not have been liquidated on that day
because of the operation of daily limits or other rules of the exchange or
otherwise, the settlement price on the first subsequent day on which the futures
interest could be liquidated will be the market value of that futures interest
for that day. The market value of a forward contract or futures interest traded
on a foreign exchange or market means its market value as determined by the
General Partner on a basis consistently applied for each different variety of
forward contract or futures interest.
If you redeem Units on or prior to the last day of the twelfth month from
the date of their purchase, those Units will be subject to a redemption charge
equal to 2% of their Net Asset Value on the Redemption Date. If you redeem Units
after the last day of the twelfth month and on or prior to the last day of the
twenty-fourth month from the date of their purchase, those Units will be subject
to a redemption charge equal to 1% of their Net Asset Value on the Redemption
Date. If you redeem Units after the last day of the twenty-fourth month from the
date of their purchase, those Units will not be subject to a redemption charge.
All redemption charges will be paid to DWR.
Your Units will be exempt from redemption charges under the following
circumstances:
- If you purchase $500,000 or more of Units, those Units will not be subject
to redemption charges, but will be subject to the other restrictions on
redemptions.
- If you redeem Units at the first Redemption Date following notice of an
increase in certain fees, those Units will not be subject to redemption
charges.
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- If you redeem Units in a Series Exchange, the Units you redeem will not be
subject to redemption charges and, for purposes of determining the
applicability of future redemption charges, the Units you acquire will be
deemed to have the same purchase date as the Units you exchanged.
- If you redeem Units in any other partnership which Demeter serves as the
General Partner, the Units you redeem from the other limited partnership
will be subject to any applicable redemption charges, but the Spectrum
Series Units you purchase will not be subject to redemption charges.
- If you redeem Units and have either paid a redemption charge with respect
to the Units or held the Units for at least two years, you will not be
subject to redemption charges with respect to any newly purchased Units,
provided the new Units are purchased within twelve months of and in an
amount no greater than the net proceeds of the prior redemption, and are
held for at least six months from the date of purchase. In that event, you
will still be subject to the minimum purchase and suitability
requirements.
The General Partner will endeavor to pay redemptions within 10 business days
after the Redemption Date. A Partnership may be forced to liquidate open futures
interests positions to satisfy redemptions in the event it does not have
sufficient cash on hand. SEE "RISK FACTORS--RISKS RELATING TO THE PARTNERSHIPS
AND THE OFFERING OF UNITS--RESTRICTED INVESTMENT LIQUIDITY IN THE UNITS" ON PAGE
- . When you redeem Units, payment will be made by credit to your customer
account with DWR, or by check mailed to you if your account is closed. Your
right to redeem Units is contingent upon the redeeming Partnership having assets
sufficient to discharge its liabilities on the Redemption Date, and timely
receipt by the General Partner of your Request for Redemption as described
above.
The terms and conditions applicable to redemptions in general, other than
those prohibiting redemptions before the sixth month-end following the closing
at which you first become an investor in a Spectrum Series Partnership, and
providing that redemptions may only be made as of the end of a calendar month,
will also apply to redemptions effected on "Special Redemption Dates." See "The
Limited Partnership Agreements--Reports to Limited Partners" on page - .
THE COMMODITY BROKERS
DEAN WITTER REYNOLDS INC., CARR FUTURES, INC., MORGAN STANLEY & CO. INCORPORATED
AND MORGAN STANLEY & CO. INTERNATIONAL LIMITED
Dean Witter Reynolds Inc., a Delaware corporation ("DWR"), acts as the
non-clearing commodity broker for the Partnerships. DWR, as the non-clearing
commodity broker, will hold each Partnership's funds in customer segregated or
secured accounts, and will provide all required margin funds to the clearing
commodity brokers. Carr Futures, Inc., a Delaware corporation ("CFI"), acts as
the clearing commodity broker and foreign currency forward counterparty for all
of the Partnerships other than Spectrum Commodity. Morgan Stanley & Co.
Incorporated, a Delaware corporation ("MS & CO."), acts as the clearing
commodity broker for Spectrum Commodity. DWR monitors each Partnership's futures
positions that either CFI or MS & Co. report they are carrying for any errors in
trade prices or trade fill. DWR also serves as the non-clearing commodity broker
for all of the other commodity pools for which Demeter serves as general partner
and commodity pool operator.
DWR is a principal operating subsidiary of MSDW, which is a publicly-owned
company. DWR is a financial services company which provides to its individual,
corporate and institutional clients services as a broker in securities and
futures interests, 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. DWR is a member firm of the New York Stock
Exchange, the American Stock Exchange, the Chicago Board Options Exchange, other
major securities exchanges, and the National Association of Securities Dealers,
Inc. DWR is registered with the CFTC as a futures commission merchant and is a
member of the NFA in such capacity. DWR is currently servicing its clients
through a network of 450 offices nationwide with 12,000 financial advisors
servicing individual and institutional client accounts.
CFI is the broker directly accountable to the futures exchange or
clearinghouse for the trades of all Partnerships other than Spectrum Commodity.
All payments, including margin payments, to and from the futures exchanges
resulting from those Partnerships' trades, will flow through CFI. In addition,
CFI also acts as the counterparty on each Partnership's foreign currency forward
contracts. CFI is a subsidiary of
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Credit Agricole Indosuez, which had total equity of approximately
$3.301 billion at December 31, 1998 and which is itself a subsidiary of Caisse
Nationale de Credit Agricole, one of the ten largest banks in the world. CFI's
parent has guaranteed to the payment of the net liquidating value of the
transactions in the Partnership's account with CFI. CFI has been registered
under the CEAct as a futures commission merchant and has been a member of the
NFA in such capacity since August 1987. CFI's global headquarters is located at
10 South Wacker Drive, Suite 1100, Chicago, Illinois 60606. CFI acts as a
commodity broker to individuals, corporate and institutional clients and is a
clearing member of the Chicago Board of Trade, the Chicago Mercantile Exchange,
the Commodity Exchange Inc., and other major commodities exchanges.
MS & Co. is the clearing commodity broker for Spectrum Commodity for all
U.S. futures interests. MS & Co. has its main business office located at
1585 Broadway, New York, New York 10036. MS & Co. is registered as a futures
commission merchant, is a member of the NFA and is a member of most major U.S.
and foreign commodity exchanges. MS & Co. is registered with the SEC as a
broker-dealer and is a member of the NASD.
Morgan Stanley & Co. International Limited, a United Kingdom corporation
("MSIL"), acts as Spectrum Commodity's clearing commodity broker solely with
regard to any trading on the London Metals Exchange. MSIL has its main business
office located at 25 Cabot Square, Canary Wharf, London E14 4QA, England, is
regulated by the United Kingdom Securities and Futures Authority (the "SFA") as
a member firm, and is a member of the London Metals Exchange and other
securities and commodities exchanges worldwide.
MSDW, the parent company of MS & Co., MSIL, and DWR, is a worldwide
financial services firm, employing, directly and through its subsidiaries, more
than 45,000 people worldwide in 409 offices throughout the United States and 20
foreign countries. MSDW is a publicly-traded company whose shares are listed on
the New York Stock Exchange; its common stock had a market value of
approximately $48 billion at August 31, 1999. At that date, MSDW 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 $415 billion in assets under management.
BROKERAGE ARRANGEMENTS
The Partnerships' brokerage arrangements with DWR, CFI, MS & Co. and MSIL
have been discussed previously. See "Conflicts of Interest--Relationship of the
General Partner to DWR as Commodity Broker and Selling Agent and to MS & Co. and
MSIL as Commodity Brokers" and "--Customer Agreements with the Commodity
Brokers," and "Description of Charges--Commodity Brokers" on pages - , -
and - , respectively.
The General Partner will review at least annually the brokerage arrangements
with 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 interests trading activity;
- the services provided by the Commodity Broker or any affiliate thereof to
the Partnership;
- the cost incurred by the Commodity Broker 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
Broker from assets held thereby; and
- the risks incurred by and the obligations of 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 certain indemnities of the Commodity Broker. See
"Fiduciary Responsibility" on page - .
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CERTAIN LITIGATION
At any given time, the Commodity Brokers are involved in numerous legal
actions, some of which seek significant damages.
On May 16, 1996, an NASD arbitration panel awarded damages and costs against
DWR and one of its financial advisors in the amount of approximately $1.1
million, including punitive damages, to three customers who alleged, among other
things, fraud and misrepresentation in connection with their individually
managed futures accounts (not commodity pools).
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported
class actions were filed in the Superior Court of the State of California,
County of Los Angeles, on behalf of all purchasers of interests in limited
partnership commodity pools sold by DWR. Named defendants include DWR, Demeter,
Dean Witter Futures and Currency Management Inc., MSDW (all such parties
referred to hereafter as the "Dean Witter Parties"), Spectrum Select (under its
original name) and certain other limited partnership commodity pools of which
Demeter is the general partner, and certain trading advisors to 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 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 DWR. A consolidated and amended complaint in the action pending in the
Supreme Court of the State of New York was filed on August 13, 1997, alleging
that the defendants committed fraud, breach of fiduciary duty, and negligent
misrepresentation in the sale and operation of the various limited partnership
commodity pools. On December 16, 1997, upon motion of the plaintiffs, the action
pending in the Superior Court of the State of Delaware was voluntarily dismissed
without prejudice. The New York Supreme Court dismissed the New York action in
November 1998, but granted plaintiffs leave to file an amended complaint, which
they did in early December 1998. The defendants filed a motion to dismiss the
amended complaint with prejudice on February 1, 1999. The motion has been fully
briefed and argued and the Dean Witter Parties are awaiting the court's
decision. The complaints seek unspecified amounts of compensatory and punitive
damages and other relief. It is possible that additional similar actions may be
filed and that, in the course of these actions, other parties, including the
other Partnerships, could be added as defendants. The Dean Witter Parties
believe that they have strong defenses to, and they will vigorously contest, the
actions. Although the ultimate outcome of legal proceedings cannot be predicted
with certainty, it is the opinion of management of the Dean Witter Parties that
the resolution of the actions will not have a material adverse effect on the
financial condition or the results of operations of any of the Dean Witter
Parties.
On May 30, 1995 the United Kingdom Securities and Futures Authority (the
"SFA") announced that it had reached a settlement with MSIL in a disciplinary
proceeding against the firm. The proceeding involved the conduct of foreign
exchange business by a former employee for five private client accounts in 1991.
In accordance with the settlement, MSIL paid the SFA a fine of L240,000 and made
a contribution towards the SFA's costs. In reaching its settlement with MSIL,
the SFA took into account the following factors: MSIL reported the matter to the
SFA and cooperated fully in the investigation; MSIL took over the clients'
positions promptly and offered to restore the clients to their original
positions; and MSIL conducted its own internal review and promptly took steps to
improve its procedure.
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 Demeter believes would be
material to an investor's decision to invest in the Partnerships.
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THE LIMITED PARTNERSHIP AGREEMENTS
This section of the Prospectus summarizes some of the more significant
provisions of the Amended and Restated Limited Partnership Agreement of each
Partnership. A form of the Limited Partnership Agreements is attached as Exhibit
A. Each Limited Partnership Agreement is identical, except as noted otherwise
below or in Exhibit A.
NATURE OF THE PARTNERSHIPS
Spectrum Select was formed on March 21, 1991; Spectrum Technical, Spectrum
Strategic and Spectrum Global Balanced were each formed on April 29, 1994;
Spectrum Commodity was formed on July 31, 1997; and Spectrum Currency was formed
on October 20, 1999. Each Partnership was formed under Delaware law. The fiscal
year of each Partnership begins on January 1 of each year and ends on the
following December 31.
The Units that you purchase and pay for in this offering will be fully paid
and nonassessable. You may be liable to a Partnership for liabilities that arose
before the date of a redemption or Series Exchange. Your liability, however,
will not exceed the sum of your unredeemed capital contribution, undistributed
profits, if any, any distributions and amounts received upon a redemption or
deemed received on a Series Exchange, together with interest on any such amount.
However, a Partnership will not make a claim against you for any amounts
received in connection with a redemption of Units or a Series Exchange unless
the Net Assets of the Partnership are insufficient to discharge the liabilities
of the Partnership that arose before any distributions were made to you. The
General Partner will be liable for all obligations of a Partnership to the
extent that the assets of the Partnership are insufficient to pay those
obligations.
MANAGEMENT OF PARTNERSHIP AFFAIRS
You will not participate in the management or operations of a Partnership.
Under each Limited Partnership Agreement, the General Partner is solely
responsible for managing the Partnership.
The General Partner may use a Partnership's funds only to operate the
business of that Partnership. The General Partner may hire an affiliate to
perform services for the Partnership if the General Partner determines that the
affiliate (i) is qualified to perform the services, and (ii) can perform those
services under competitive terms that are fair and reasonable. Any agreement
with an affiliate must be for a term not in excess of one year and be terminable
by the Partnership without penalty upon 60 days' written notice.
Other responsibilities of the General Partner include:
- determining whether a Partnership will make a distribution;
- administering redemptions and Series Exchanges;
- preparing monthly and annual reports;
- preparing and filing tax returns for each Partnership;
- signing documents on behalf of each Partnership and its Limited Partners
pursuant to powers of attorney; and
- supervising the liquidation of a Partnership, if necessary.
SHARING OF PROFITS AND LOSSES
You will have a capital account in each Partnership in which you invest,
with an initial balance equal to the amount you paid for Units of the
Partnership. The General Partner also has a capital account. Each Partnership's
Net Assets will be calculated monthly, and your capital account will be adjusted
as necessary to reflect any increases or decreases that may have occurred since
the preceding month. For a description of the federal tax allocations, see
"Material Federal Income Tax Considerations" on page -.
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RESTRICTIONS ON TRANSFERS OR ASSIGNMENTS
While you may transfer or assign your Units, the transferee or assignee may
not become a Limited Partner without the written consent of the General Partner.
You may only withdraw capital or profits from a Partnership by redeeming Units.
The General Partner may withdraw any portion of its interest in a Partnership
that exceeds the amount required under the Limited Partnership Agreement without
prior notice to or consent of the Limited Partners. In addition, the General
Partner is permitted to withdraw or assign its entire interest in a Partnership
if it gives 120 days' prior written notice to the Limited Partners. If a
majority of the Limited Partners elect a new general partner or partners to
continue the business of the Partnership, the withdrawing General Partner must
pay all reasonable expenses incurred by the Partnership in connection with its
withdrawal.
Any transfer or assignment of Units by you will take effect at the end of
the month in which the transfer or assignment is made, subject to the following
conditions. A Partnership is not required to recognize a transfer or assignment
until it has received at least 30 days' prior written notice from the Limited
Partner. The notice must be signed by the Limited Partner and include the
address and social security or taxpayer identification number of the transferee
or assignee and the number of Units transferred or assigned. A transfer or
assignment of less than all Units held by you cannot occur if as a result either
party to the transfer or assignment would own fewer than the minimum number of
Units required for an investment in the Partnership (subject to certain
exceptions relating to gifts, death, divorce, or transfers to family members or
affiliates). The General Partner will not permit a transfer or assignment of
Units unless it is satisfied that (i) the transfer or assignment would not be in
violation of the Partnership Act or applicable federal, state or foreign
securities laws, and (ii) notwithstanding the transfer or assignment, the
Partnership will continue to be classified as a partnership rather than as an
association taxable as a corporation under the Internal Revenue Code of 1986, as
amended. No transfer or assignment of Units will be effective or recognized by a
Partnership if the transfer or assignment would result in the termination of
that Partnership for federal income tax purposes, and any attempt to transfer or
assign Units in violation of the Limited Partnership Agreement will be
ineffective. The Limited Partner will be responsible for all costs (including
any attorneys' and accountants' fees) related to a transfer or assignment.
AMENDMENTS; MEETINGS
Each Limited Partnership Agreement may be amended by the General Partner and
by Limited Partners owning more than 50% of the Units of that Partnership. In
addition, the General Partner may make certain amendments to a Limited
Partnership Agreement without the consent of the Limited Partners, including any
amendment that is not adverse to the Limited Partners or required by the staff
of the SEC, the CFTC, any other federal agency, any state "Blue Sky" official,
or other governmental official, or to comply with applicable law. However, no
amendment may be made to a Limited Partnership Agreement without the consent of
all Partners affected if that amendment would reduce the capital account of any
Partner, modify the percentage of profits, losses, or distributions to which any
Partner is entitled, or change or alter the provisions of the Limited
Partnership Agreement relating to amendments requiring the consent of all
Partners.
Upon written request to the General Partner delivered either in person or by
certified mail, you may obtain a list of the names and addresses of, and Units
owned by, all Limited Partners in your Partnership, provided that you pay
reasonable duplicating and postage costs. Limited Partners owning at least 10%
of the Units of a Partnership may request a meeting to consider any matter upon
which Limited Partners may vote. Thereafter, the General Partner must call a
meeting of the Partnership, by written notice sent by certified mail or
delivered in person within 15 days of such request. The meeting must be held at
least 30 but not more than 60 days after the mailing by the General Partner of
notice of the mailing, and which notice must specify the date, a reasonable
place and time, and the purpose of the meeting.
At any meeting of the Limited Partners, the following actions may be taken
upon the affirmative vote of Limited Partners owning more than 50% of the Units:
- amend the Limited Partnership Agreement;
- dissolve the Partnership;
- remove and replace the General Partner;
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- elect a new General Partner in the event that the General Partner
terminates or liquidates or elects to withdraw from the Partnership, or
becomes insolvent, bankrupt or is dissolved;
- terminate any contract with the General Partner or any of its
affiliates on 60 days' prior written notice; and
- approve the sale of all or substantially all of the assets of the
Partnership.
Any of the foregoing actions may also be taken by Limited Partners without a
meeting, without prior notice, and without a vote, by means of written consents
signed by Limited Partners owning the required number of Units. Notice of any
actions taken by written consent must be given to non-consenting Limited
Partners within seven business days.
BOOKS AND RECORDS; REPORTS TO LIMITED PARTNERS
The books and records of each Partnership are maintained at its principal
office for at least five years. You have the right during normal business hours
to inspect and copy the books and records of each Partnership of which you are a
Limited Partner. Alternatively, you may request that copies of the books and
records be sent to you, provided that you pay all reasonable reproduction and
distribution costs. The Partnership will retain copies of subscription
documentation in connection with purchases and exchanges of Units for at least
six years.
Within 30 days after the close of each calendar month, the General Partner
will provide such financial and other information with respect to each
Partnership as the CFTC and NFA, from time to time, may require, together with
information concerning any material change in the brokerage commissions or fees
payable by the Partnerships to any commodity broker. You will also receive
within 90 days after the close of each fiscal year an annual report containing
audited financial statements for the Partnerships. Annual reports will provide a
detailed statement of any transactions with the General Partner or its
affiliates and of fees, commissions and any compensation paid or accrued to the
General Partner or its affiliates. By March 15 of each year, the Partnerships
will provide you with the tax information necessary for you to prepare your
federal income tax return. The most recent Net Asset Value calculation for a
Partnership will be promptly supplied to you upon written request.
A written notice, including a description of Limited Partners' redemption
and voting rights, will be mailed to the Limited Partners of a Partnership
within seven business days if any of the following events occur:
- Net Asset Value of a Unit decreases by at least 50% from the Net Asset
Value of that Unit as of the end of the immediately preceding month;
- the Limited Partnership Agreement is materially amended;
- any change in Trading Advisors or any material change in a management
agreement;
- any change in commodity brokers or any material change in the
compensation arrangements with a commodity broker;
- any change in general partners or any material change in the
compensation arrangements with a general partner;
- any change in the Partnership's fiscal year;
- any material change in the Partnership's trading policies as specified
in the Limited Partnership Agreement; or
- cessation of futures interests trading by the Partnership.
If you receive a notice as to a 50% decrease in Net Asset Value per Unit,
that notice will also advise you that a "Special Redemption Date" will take
place when Limited Partners may redeem their Units in the same manner as
described under "Redemptions" on page - for regular Redemption Dates.
Further, following the close of business on the date of the 50% decrease giving
rise to that notice, the Partnership will liquidate all existing positions as
promptly as reasonably practicable, and will suspend all futures interests
trading through the Special Redemption Date. The General Partner will then
determine whether to reinstitute futures interests trading or to terminate the
Partnership.
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In addition, subject to limits imposed under certain state guidelines
incorporated in the Limited Partnership Agreements, no increase in any of the
management, incentive or brokerage fees payable by the Partnerships, or any of
the caps on fees, may take effect until the first business day following a
Redemption Date. In the event of such an increase:
- notice of the increase will be mailed to Limited Partners at least five
business days prior to the last date on which a "Request for Redemption"
must be received by the General Partner with respect to the applicable
Redemption Date;
- the notice will describe the redemption and voting rights of Limited
Partners; and
- Units redeemed at the first Redemption Date following the notice will not
be subject to any redemption charges.
Each Limited Partner expressly agrees that in the event of his death, he
waives on behalf of himself and his estate the furnishing of any inventory,
accounting, or appraisal of the assets of the Partnership and any right to an
audit or examination of the books of the Partnership.
PLAN OF DISTRIBUTION
GENERAL
DWR is offering Units pursuant to a Selling Agreement with the Partnerships
and the General Partner. With the approval of the General Partner, DWR may
appoint certain agents to make offers and sales of the Units (collectively,
"ADDITIONAL SELLERS"). These Additional Sellers may include any securities
broker which is a member in good standing of the NASD, as well as any foreign
bank, dealer, institution or person ineligible for membership in the NASD that
agrees not to make any offers or sales of Units within the U.S. or its
territories, possessions or areas subject to its jurisdiction, or to U.S.
citizens or residents. Any such non-NASD member must also agree to comply with
certain provisions of the Conduct Rules of the NASD in making offers and sales
of Units.
DWR is offering the Units on a "best efforts" basis without any agreement by
DWR to purchase Units. The General Partner may in the future register additional
Units of any Partnership with the SEC. There is no maximum amount of funds which
may be contributed to a Partnership. The General Partner may in the future
subdivide or combine outstanding Units of any Partnership, in its discretion,
provided that any subdivision or combination will not affect the Net Asset Value
of any Limited Partner's interest in the Partnership.
Each Partnership has agreed to indemnify its Trading Advisors in connection
with the offer and sale of Units with respect to any misleading or untrue
statement or alleged misleading or untrue statement of a material fact or
material omission or alleged omission unrelated to its Trading Advisor(s). Each
Partnership has also agreed to indemnify DWR, the General Partner and any
Additional Sellers in connection with the offer and sale of Units. See
"Fiduciary Responsibility" on page - .
INITIAL OFFERING OF SPECTRUM CURRENCY
Units of Spectrum Currency are being offered for sale at $10 per Unit at its
initial closing, which is currently scheduled to be held as of December 31, 1999
(the "INITIAL CLOSING"). After the Initial Closing, unsold Units will be sold in
the Continuing Offering with Units of the other Partnerships as described below.
The period from the date of this Prospectus through April 30, 2000 is the
"Initial Offering Period" for Spectrum Currency. The Initial Offering Period,
however, may be extended to June 30, 2000, in the sole discretion of the General
Partner. In order for Spectrum Currency to commence trading operations, the
General Partner must receive and accept subscriptions for at least
500,000 Units during the Initial Offering Period. If less than 500,000 Units of
Spectrum Currency are subscribed for during the Initial Offering Period, the
offering will terminate and each subscriber's DWR customer account will be
credited for the full subscription amount, with interest, within five business
days. The General Partner, DWR, any Additional Sellers, and the Trading
Advisors, and their respective affiliates may, but are not required to,
subscribe for Units in Spectrum Currency. Units subscribed for by such entities
will be counted for purposes of determining whether the 500,000 Unit minimum
subscription requirement has been satisfied.
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However, Units subscribed for by such entities during the Initial Offering
Period may not be redeemed for a period of two years after the Initial Closing
if the Partnership would not have the minimum $5,000,000 in Net Assets remaining
immediately following the redemption.
CONTINUING OFFERING
Units of each Partnership are being offered for sale at Monthly Closings
held on the last day of each month, beginning the first month following its
Initial Closing in the case of Spectrum Currency, and beginning December 31,
1999 in the case of Spectrum Commodity. Units will be offered and sold at the
Net Asset Value of a Unit of the Partnership on the date of the Monthly Closing.
The sale amount will be delivered to the Partnership that sold the Unit.
ESCROW ARRANGEMENTS
During Spectrum Currency's Initial Offering Period and during the Continuing
Offering, funds from a subscription received for Units of any Partnership and
not immediately rejected by the General Partner will be transferred to, and held
in escrow by, The Chase Manhattan Bank, New York, New York (the "ESCROW AGENT"),
and invested in the Escrow Agent's interest-bearing money market account. If the
General Partner accepts a subscription, the Escrow Agent will pay the
subscription funds to the appropriate Partnership(s) and pay any interest earned
on the subscription funds to DWR. DWR in turn will credit the subscriber's DWR
customer account with the interest. If the General Partner rejects a
subscription, the Escrow Agent will promptly pay the rejected subscription funds
and any interest earned to DWR. DWR will credit the subscriber's DWR customer
account with those amounts, and the funds will be immediately available for
investment or withdrawal. If a subscriber has closed his DWR customer account,
any subscription returned and interest earned will be paid by check. Interest
will be earned on subscription funds from the day of deposit with the Escrow
Agent to the day that funds are either paid to the appropriate Partnership(s) in
the case of accepted subscriptions or paid to DWR in the case of rejected
subscriptions. At all times during Spectrum Currency's Initial Offering Period
and during the Continuing Offering, and prior to Spectrum Currency's Initial
Closing and each Monthly Closing (any such closing, a "Closing"), subscription
funds will be in the possession of the Escrow Agent, and at no time will the
General Partner hold or take possession of the funds.
COMPENSATION TO DWR EMPLOYEES AND ADDITIONAL SELLERS
Except as described below, employees of DWR will receive from DWR (payable
solely from its own funds) a gross sales credit equal to 3% of the Net Asset
Value per Unit as of the Closing for each Unit sold by them and issued at the
Closing. In addition, DWR will continue to compensate those employees who
participated in this offering and continue to render certain services to Limited
Partners by paying them up to 86% of the brokerage fees attributable to
outstanding Units sold by them and received by DWR as commodity broker for each
Partnership. This compensation will begin:
- in the case of Spectrum Select, Spectrum Technical, and Spectrum
Strategic, with the seventh month following the Closing at which a Unit
was issued;
- in the case of Spectrum Global Balanced, Spectrum Commodity, and Spectrum
Currency, with the tenth month after the Closing at which a Unit was
issued;
- the first month after a Unit is issued pursuant to a Non-Series Exchange;
or
- the month as of which such continuous compensation is first payable with
respect to Units purchased in a Series Exchange, but with the seventh or
tenth month measured from the date the subscriber first became a Limited
Partner in a Spectrum Series Partnership.
This compensation will continue until the applicable Partnership terminates
or the Unit is redeemed, whichever comes first. DWR employees who sell $500,000
or more of Units to any single investor will not receive an initial payment
equal to 3% of the Net Asset Value per Unit. Those employees will only be
entitled to receive the continuing compensation payments described above
attributable to the outstanding Units, starting with the first month after the
Units are issued. No part of this compensation will be paid by any Partnership.
Accordingly, Net Assets will not be reduced as a result of such compensation.
Each person receiving continuing compensation must be a DWR employee at the
time of receipt of payment and must be registered as an associated person with
the CFTC and be a member of the NFA in
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such capacity only after either having passed the Series 3 or Series 31
examination or having been "grandfathered" as an associated person qualified to
do commodity brokerage under the CEAct and the CFTC's regulations. These
employees must also perform additional services, including: (a) inquiring of the
General Partner from time to time, at the request of Limited Partners, as to the
Net Asset Value of each Partnership's Units; (b) inquiring of the General
Partner, at the request of Limited Partners, regarding the futures interests
markets and the activities of the Partnerships; (c) responding to questions of
Limited Partners with respect to the monthly account statements, annual reports,
financial statements and annual tax information furnished periodically to
Limited Partners; (d) providing advice to Limited Partners as to when and
whether to make additional investments or to redeem or Exchange Units;
(e) assisting Limited Partners in the redemption or Exchange of Units; and
(f) providing such other services as Limited Partners from time to time may
reasonably request. Such additional compensation paid by DWR may be deemed to be
underwriting compensation. In addition, certain officers and directors of the
General Partner may receive compensation as employees of DWR based, in part, on
the amount of brokerage fees paid by the Partnerships to DWR. The Selling
Agreement among DWR, the General Partner and the Partnerships provides that this
compensation may only be paid by DWR as long as continuing services are
provided. Any Limited Partner may telephone, write or visit a financial advisor
at the MSDW branch office to avail himself of such services.
DWR will not pay its employees the 3% initial gross sales credit described
above with respect to Units purchased pursuant to a Series Exchange or
Non-Series Exchange. Such employees will, however, receive continuing gross
sales credits with respect to brokerage fees received by DWR from a Partnership
at the applicable rate.
DWR may at any time implement cash sales incentive and/or promotional
programs for its employees who sell Units. These programs will provide for DWR,
and not any Partnership or the General Partner, to pay DWR's employees bonus
compensation based on sales of Units. Any such program will be approved by the
NASD prior to its start.
The aggregate of all compensation paid to employees of DWR from the initial
3% gross sales credit, the redemption charges received by DWR, and any sales
incentives will not exceed 10% of the proceeds of the sale of Units.
DWR may compensate any qualified Additional Seller for each Unit sold by it
by paying a selling commission, from DWR's own funds, as determined by DWR and
the Additional Seller, but not to exceed 3% of the Net Asset Value of the Unit
sold. Additional Sellers who are properly registered as futures commission
merchants or introducing brokers with the CFTC and are members of the NFA in
such capacity may also receive from DWR, payable from DWR's own funds,
continuing compensation for providing to Limited Partners the continuing
services described above. Additional Sellers that are affiliates of DWR may
receive additional compensation from DWR of up to 85% of the brokerage fees
generated by outstanding Units sold by such Additional Seller and received by
DWR as Commodity Broker for each Partnership. Additional Sellers that are not
affiliates of DWR may receive additional compensation paid by DWR of up to 35%
of the brokerage fees generated by outstanding Units sold by such Additional
Sellers and received by DWR as commodity broker for each Partnership. Additional
Sellers may pay all or a portion of such additional compensation to their
employees who have sold Units and provide continuing services to Limited
Partners if those employees are properly registered with the CFTC and are
members of the NFA. Additional compensation paid by DWR may be deemed to be
underwriting compensation.
SUBSCRIPTION PROCEDURE
The minimum subscription for most subscribers is $5,000, except that the
minimum investment is:
- $2,000 in the case of an IRA; or
- for eligible subscribers purchasing Units pursuant to a
Non-Series Exchange, the lesser of
-- $5,000,
-- the proceeds from the redemption of five units, or two units in the
case of an IRA, from commodity pools other than any of the Morgan
Stanley Dean Witter Charter Series of partnerships (each, a "CHARTER
PARTNERSHIP"),
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-- the proceeds from the redemption of 500 units, or 200 units in the
case of an IRA, from any Charter Partnership, or
-- the proceeds from the redemption of such subscriber's entire interest
in any other commodity pool which the General Partner serves as
general partner and commodity pool operator.
A subscription may be for Units of one Partnership, or may be divided among
two or more Partnerships, provided that:
- in the case of a new subscription, the minimum subscription for any one
Partnership is $1,000; and
- in the case of a Non-Series Exchange, the minimum subscription for any one
Partnership is the proceeds of the redemption of one unit of the other
commodity pool, or 100 units in the case of any Charter Partnership.
If you are an investor in a Partnership and you wish to make an additional
investment in the same Partnership, you may subscribe for Units at a Monthly
Closing with a minimum investment in that Partnership of $500.
In order to make your first purchase of Units of a Partnership, other than
by means of an Exchange, you must complete, sign, and deliver to DWR a
Subscription Agreement which will authorize the General Partner and DWR to
transfer the full subscription amount from your DWR customer account to the
Partnerships' Escrow Account. If your Subscription Agreement is received by DWR
and not immediately rejected, you must have the appropriate amount in your DWR
customer account on the first business day following the date that your
Subscription Agreement is received by DWR. DWR will deduct the subscription
amount from your customer account and transfer funds into escrow with the Escrow
Agent on that date. If you do not have a DWR customer account or an account with
an affiliate of DWR, or do not have sufficient funds in your existing DWR
customer account, you should make appropriate arrangements with your MSDW
financial advisor, or contact your local MSDW branch office. Do not mail any
payment to the General Partner, as it will be returned to you for proper
placement with the MSDW branch office where your account is maintained.
In the case of a Series Exchange or a Non-Series Exchange, you must
complete, sign, and deliver to your MSDW financial advisor a Subscription
Agreement, which will authorize the General Partner to redeem all or a portion
of your interest in a Partnership or another commodity pool which the General
Partner serves as general partner and commodity pool operator, subject to terms
of the applicable limited partnership agreement, and to use the proceeds, after
deducting any applicable redemption charges, to purchase Units in one or more of
the Partnerships.
In accordance with an NASD rule, DWR will not subscribe for Units on your
behalf if it has discretionary authority over your customer account, unless it
gets prior written approval from you.
If you subscribe by check, Units will be issued subject to the collection of
the funds represented by the check. If your check is returned unpaid, DWR will
notify the General Partner, and the relevant Partnership will cancel the Units
issued to you represented by the check. Any losses or profits sustained by the
Partnership allocable to the cancelled Units will be allocated among the
remaining Partners. In the Limited Partnership Agreements, each Limited Partner
agrees to reimburse a Partnership for any expense or loss (including any trading
loss) incurred in connection with the issuance and cancellation of any Units
issued to the Limited Partner.
Subscriptions for Units are generally irrevocable by subscribers. However,
you may revoke your Subscription Agreement and receive a full refund of the
subscription amount and any accrued interest, or revoke the redemption of units
in the other commodity pool in the case of an Exchange, within five business
days after execution of the Subscription Agreement or no later than 3:00 P.M.,
New York City time, on the date of the applicable Monthly Closing, whichever
comes first, by delivering written notice to your MSDW financial advisor. There
may be other rescission rights under applicable federal and state securities
laws. The General Partner may reject any subscription, in whole or in part, in
its sole discretion.
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A sample form of the Subscription Agreement is attached as Exhibit B. A
separate copy of the Subscription Agreement accompanies this Prospectus or you
may obtain one, after delivery of this Prospectus, from a local MSDW branch
office. You will not receive any certificate evidencing Units, but you will be
sent confirmations of purchases in DWR's customary form.
Once you are an investor in a Partnership, you may make additional cash
purchases of Units of that Partnership without executing a new Subscription
Agreement, by contacting your MSDW financial advisor and authorizing your
financial advisor to deduct the additional amount you want to invest from your
DWR customer account. Those amounts will be held in escrow, and applied towards
the purchase of Units, in the same manner as initial purchases described above.
However, before you make any additional purchase of Units in this manner, you
will be required to complete a Subscription Agreement Update Form, a sample of
which is annexed to this Prospectus as Exhibit C, if a new Prospectus has been
issued since the date of your original Subscription Agreement. Further, your
MSDW financial advisor will be required to confirm to the General Partner that
the information you provided, and the representations and warranties you made,
in your original Subscription Agreement, including, in particular, that you
satisfy applicable minimum financial suitability requirements, are still true
and correct. You may not use the subscription procedure described in this
paragraph to purchase additional Units in a Partnership by way of an Exchange,
or to purchase Units of a Partnership in which you are not currently an
investor; in either of those cases, you must execute a new Subscription
Agreement.
PURCHASES BY EMPLOYEE BENEFIT PLANS--ERISA CONSIDERATIONS
Units might or might not be a suitable investment for an employee benefit
plan. If you are a person with investment discretion on behalf of an employee
benefit plan, before proceeding with a purchase of Units, you should determine
whether the purchase of Units is permitted under the governing instruments of
the plan, and appropriate for that particular plan in view of its overall
investment policy, the composition and diversification of its portfolio, and the
other considerations discussed below.
As used in this section, the term "employee benefit plans" refers to plans
and accounts of various types (including their related trusts) which provide for
the accumulation of a portion of an individual's earnings or compensation, as
well as investment income earned thereon, free from federal income tax until
such time as funds are distributed from the plan. These plans include corporate
pension and profit-sharing plans (such as "401(k)" plans), "simplified employee
pension plans," "Keogh" plans for self-employed individuals (including
partners), and, for purposes of this discussion, individual retirement accounts
("IRAs"), as described in Section 408 of the Internal Revenue Code of 1986, as
amended (the "CODE").
Notwithstanding the general requirement that investors in one or more
Partnerships must invest a minimum of $5,000, a minimum purchase requirement of
$2,000 has been set for IRAs. The minimum subscription for any one of the
Partnerships must be at least $1,000, with certain exceptions. See "Investment
Requirements" on page - . Greater minimum purchases may be mandated by the
securities laws and regulations of certain states, and each investor should
consult the Subscription Agreement to determine the applicable investment
requirements.
If the assets of an investing employee benefit plan were to be treated, for
purposes of the reporting and disclosure provisions and certain other of the
fiduciary responsibility provisions of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Code, as
including an undivided interest in each of the underlying assets of a
Partnership, an investment in Units would in general be an inappropriate
investment for the plan. A U.S. Department of Labor regulation (the
"REGULATION") defines "plan assets" in situations where employee benefit plans
purchase equity securities in investment entities such as a Partnership. The
Regulation provides that the assets of an entity will not be deemed to be "plan
assets" of an employee benefit plan which purchases an equity security of the
entity if the equity security is a "publicly-offered security." A
"publicly-offered security" is one which is:
- freely transferable;
- held by more than 100 investors independent of the issuer and of each
other; and
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- either registered under Section 12(b) or Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), or sold to the plan as
part of a public offering of such securities pursuant to an effective
registration statement under the 1933 Act, where the security is then
timely registered under Section 12(b) or Section 12(g) of the 1934 Act.
The Units currently meet, and it is expected that the Units will continue to
meet, the criteria of the Regulation.
The General Partner believes, based upon the advice of its legal counsel,
that income earned by the Partnerships will not constitute "unrelated business
taxable income" under Section 512 of the Code to employee benefit plans and
other tax-exempt entities. Although the Internal Revenue Service has issued
favorable private letter rulings to taxpayers in somewhat similar circumstances,
other taxpayers may not use or cite such rulings as precedent. If you have
investment discretion on behalf of an employee benefit plan, you should consult
a professional tax adviser regarding the application of the foregoing matters to
the purchase of Units.
Units may not be purchased with the assets of an employee benefit plan if
the General Partner, DWR, any Additional Seller, any Trading Advisor or any of
their respective affiliates either:
- has investment discretion with respect to the investment of such plan
assets;
- has authority or responsibility to give or regularly gives investment
advice with respect to such plan assets for a fee and pursuant to an
agreement or understanding that such advice will serve as a primary basis
for investment decisions with respect to the plan assets and that such
advice will be based on the particular investment needs of the plan; or
- is an employer maintaining or contributing to such plan.
Subscribing for Units does not create an IRA or other employee benefit plan.
If you are considering the purchase of Units on behalf of an IRA or other
employee benefit plan, you must first ensure that the plan has been properly
established in accordance with the Code and the regulations and administrative
rulings thereunder, and that the plan has been adequately funded. Then, after
all of the considerations discussed above have been taken into account, the
trustee or custodian of a plan who decides to or who is instructed to do so may
subscribe for Units in one or more of the Partnerships, subject to the
applicable minimum subscription requirement per Partnership.
Acceptance of subscriptions on behalf of IRAs or other employee benefit
plans is in no respect a representation by the General Partner, DWR, any
Additional Seller, any Partnership, or any Trading Advisor that the investment
meets all relevant legal requirements with respect to investments by plans
generally or any particular plan, or that the investment is appropriate for
plans generally or any particular plan.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The General Partner has been advised by counsel, Cadwalader, Wickersham &
Taft, that in its opinion, the following summary correctly describes the
material federal income tax consequences to a U.S. taxpayer who invests in a
Partnership. The opinions appearing in this section are the opinions of
Cadwalader, Wickersham & Taft, except as otherwise specifically noted. The
following summary is based upon the Code rulings thereon, regulations
promulgated thereunder and existing interpretations thereof, any of which could
be changed at any time and which changes could be retroactive. The federal
income tax summary and the state and local income tax summary that follow, in
general, relate only to the tax implications of an investment in the
Partnerships by individuals who are citizens or residents of the U.S. Except as
indicated below or under "Purchases by Employee Benefit Plans-ERISA
Considerations," the summaries do not address the tax implications of an
investment in the Partnerships by corporations, partnerships, trusts and other
non-individuals. Moreover, the summaries are not intended as a substitute for
careful tax planning, particularly since certain of the tax consequences of
owning an interest in the Partnerships may not be the same for all taxpayers,
such as non-individuals or foreign persons, or in light
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of an investor's personal investment circumstances. A complete discussion of all
federal, state and local tax aspects of an investment in each Partnership is
beyond the scope of the following summary, and prospective investors must
consult their own tax advisors on such matters.
PARTNERSHIP STATUS
The General Partner has been advised by its legal counsel, Cadwalader,
Wickersham & Taft, that in its opinion under current federal income tax law,
each Partnership will be classified as a partnership and not as an association
(or a publicly traded partnership) taxable as a corporation. This opinion is
based upon the facts set forth in this Prospectus, including that a principal
activity of each Partnership consists of buying and selling futures, options,
and forward contracts, and at least 90% of the Partnership's gross income during
each year consists of gains from such trading and interest income. No ruling has
been requested from the Internal Revenue Service with respect to classification
of each Partnership and the General Partner does not intend to request such a
ruling.
If a Partnership were treated as an association (or a publicly traded
partnership) taxable as a corporation, income or loss of the Partnership would
not be passed through to its Partners, and the Partnership would be subject to
tax on its income at the rates applicable to corporations without deduction for
any distributions to its Partners. In addition, all or a portion of any
distributions by the Partnership to its Partners could be taxable to the
Partners as dividends or capital gains. The discussion that follows assumes that
each Partnership will be treated as a partnership for federal income tax
purposes.
PARTNERSHIP TAXATION
PARTNERS, RATHER THAN PARTNERSHIP, SUBJECT TO FEDERAL INCOME TAX. None of
the Partnerships will pay federal income tax. Except as provided below with
respect to certain nonresident aliens, each Limited Partner will report his
distributive share of all items of Partnership income, gain, loss, deduction,
and credit for the Partnership's taxable year ending within or with the
Partner's taxable year. A Limited Partner must report and pay tax on his share
of Partnership income for a particular year whether or not he has received any
distributions from the Partnership in that year. The characterization of an item
of profit or loss will usually be determined at the Partnership level.
SYNDICATION EXPENSES. None of the Partnerships nor any Partner thereof will
be entitled to any deduction for syndication expenses (I.E., those amounts paid
or incurred in connection with issuing and marketing Units). There is a risk
that some of the brokerage fees paid to DWR could be treated as a nondeductible
payment by the Partnerships of syndication expenses.
ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES. In general, each Limited
Partnership Agreement allocates items of ordinary income and expense pro rata
among the Partners based upon their respective capital accounts as of the end of
the month in which such items are accrued. Net recognized capital gain or loss
is generally allocated among all Partners based upon their respective capital
accounts. However, net recognized capital gain or loss is allocated first to
Partners who have redeemed Units in the Partnership during a taxable year to the
extent of the difference between the amount received on the redemption and the
allocation account as of the date of redemption attributable to the redeemed
Units. Net recognized capital gain for each year is allocated next among all
Partners whose capital accounts are in excess of their Units' allocation
accounts to the extent of such excess in the ratio that each Partner's excess
bears to all Partners' excesses. Net recognized loss for each year is allocated
next among all Partners whose Units' allocation accounts are in excess of their
capital accounts to the extent of such excess in the ratio that each Partner's
excess bears to all Partners' excesses.
The special allocation of each Partnership's net gain or loss upon a
redemption of Units, which retains the same character as in the hands of the
Partnership, may alter the character of a redeeming Limited Partner's income (by
reducing the amount of long-term capital gain recognized upon receipt of
redemption proceeds) and may accelerate the recognition of income by the Limited
Partner.
These allocation provisions are designed to reconcile tax allocations to
economic allocations. However, the General Partner cannot assure you that the
Internal Revenue Service will not challenge the allocations, including each
Partnership's tax allocations in respect of redeemed Units.
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If the allocation provided by each Limited Partnership Agreement is not
respected by the Internal Revenue Service for federal income tax purposes, the
amount of income or loss allocated to the Partners for federal income tax
purposes may be increased or reduced or the character of the income or loss may
be modified.
CASH DISTRIBUTIONS AND REDEMPTIONS
Because of the special allocation of Partnership gain or loss upon a
redemption of Units, the amounts received upon the partial or complete
redemption of a Limited Partner's Units normally will not result in additional
taxable income or loss to the Limited Partner. However, distributions by a
Partnership and amounts received upon the partial or complete redemption of a
Limited Partner's Units will be taxable to the Limited Partners to the extent
cash distributions by a Partnership or amounts received upon redemption by a
Limited Partner exceed the Partner's adjusted tax basis in his Units. Such
excess will be taxable to him as though it were a gain from a sale of the Units.
A loss will be recognized upon a redemption of Units only if, following the
redemption of all of a Limited Partner's Units, the Partner has any tax basis in
his Units remaining. In such case, the Limited Partner will recognize loss to
the extent of the remaining basis. See "Redemptions." Generally, if a Limited
Partner is not a "dealer" with respect to his interest in the Partnership and he
has held his interest in the Partnership for more than one year, the gain or
loss would be long-term capital gain or loss.
GAIN OR LOSS ON TRADING ACTIVITY
NATURE OF PARTNERSHIP INCOME. Each Partnership does not expect to hold its
futures interests for sale to customers. For federal income tax purposes
substantially all of the profit and loss generated by each Partnership from its
trading activities is expected to be capital gain and loss, which in turn may be
either short-term, long-term or a combination thereof. Nevertheless, certain
foreign currency transactions could result in ordinary gain or loss, as
discussed below. Further, interest paid to a Partnership will be taxable
currently to the limited partners as ordinary income. Thus, during taxable years
in which little or no profit is generated from trading activities, a Limited
Partner may still have interest income.
MARK-TO-MARKET. Section 1256 contracts held at the end of a Partnership's
taxable year will be treated as having been sold for the fair market value on
the last day of the taxable year, and gain or loss will be taken into account
for the year. Gain or loss with respect to a Section 1256 contract is generally
treated as short-term capital gain or loss to the extent of 40% of the gain or
loss, and long-term capital gain or loss to the extent of 60% of the gain and
loss. Section 1256 contracts include (i) regulated futures contracts ("RFCs")
which are futures contracts traded on regulated U.S. and certain foreign
exchanges; (ii) foreign currency contracts that are traded in the interbank
market and relate to currencies for which positions are also traded through
RFCs; and (iii) U.S. and certain foreign exchange-traded options on commodities,
including options on RFCs, debt securities and stock indices. While the
Partnerships expect that a majority of their trading activities will be
conducted in Section 1256 contracts, the Partnerships also expect that a portion
of their trading activities will be conducted in contracts that do not presently
qualify as Section 1256 contracts ("NON-SECTION 1256 CONTRACTS"), such as
positions in futures contracts on most foreign exchanges and foreign currency
forward contracts that do not relate to currencies for which positions are also
traded through RFCs.
SECTION 988. Currency gain or loss with respect to foreign currency forward
contracts that do not relate to currencies for which positions are also traded
through RFCs and futures contracts traded on most foreign exchanges may be
treated as ordinary income or loss under Code Section 988. Each Partnership has
elected to treat these contracts as Section 1256 contracts (I.E.,
marked-to-market at year end). Pursuant to this election, gain or loss with
respect to these contracts is treated as entirely short-term capital gain or
loss.
Subject to certain limitations, a Limited Partner, other than a corporation,
estate or trust, may elect to carry back net Section 1256 contract losses to
each of the three preceding years. Net Section 1256 contract losses carried back
to prior years may only be used to offset net Section 1256 contract gains.
Generally, such losses are carried back as 40% short-term capital losses and 60%
long-term capital losses. Capital assets not marked to market under
Section 1256, such as any non-currency forward contracts, are not subject to the
60/40 tax regime for Section 1256 contracts, and gain or loss on sale generally
will be long-term only if such property has been held for more than one year.
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STRADDLES. If a Partnership incurs a loss upon the disposition of any
position which is part of a "straddle" (I.E., two or more offsetting positions),
recognition of that loss for tax purposes will be deferred until the Partnership
recognizes the gain in the offsetting position of the straddle (or successor
position, or offsetting position to the successor position). Interest and other
carrying charges allocable to positions which are part of a straddle must be
capitalized, rather than deducted currently. Certain modified "short sale" rules
may apply to positions held by a Partnership so that what might otherwise be
characterized as long-term capital gain would be characterized as short-term
capital gain or potential short-term capital loss as long-term capital loss.
For purposes of applying the above rules restricting the deductibility of
losses with respect to offsetting positions, if a Limited Partner takes into
account gain or loss with respect to a position held by the Partnership, the
Limited Partner will be treated as holding the Partnership's position, except to
the extent otherwise provided in regulations. Accordingly, positions held by a
Partnership may limit the deductibility of realized losses sustained by a
Limited Partner with respect to positions held for his own account, and
positions held by a Limited Partner for his own account may limit his ability to
deduct realized losses sustained by a Partnership. Thus, straddles may not be
used to defer gain from one taxable year to the next. Reporting requirements
generally require taxpayers to disclose all unrecognized gains with respect to
positions held at the end of the taxable year. The above principle, whereby a
Limited Partner may be treated as holding Partnership positions, may also apply
to require a Limited Partner to capitalize (rather than deduct) interest and
carrying charges allocable to property held by him.
Where the positions of a straddle are comprised of both Section 1256 and
non-Section 1256 contracts, a Partnership will be subject to the mixed straddle
rules of the Code and the regulations promulgated thereunder. The appropriate
tax treatment of any gains and losses from trading in mixed straddles will
depend on what elections a Partnership makes. Each Partnership has elected to
place all of its positions in a "mixed straddle" account which is
marked-to-market daily. Under a special account cap, not more than 50% of net
capital gain may be long-term capital gain, and not more than 40% of net capital
loss may be short-term capital loss.
TAXATION OF LIMITED PARTNERS
LIMITATIONS ON DEDUCTIBILITY OF PARTNERSHIP LOSSES. The amount of
Partnership loss, including capital loss, which a Limited Partner will be
entitled to take into account for federal income tax purposes is limited to the
tax basis of his Units, except in the case of certain Limited Partners including
individuals and closely-held C corporations, for which he is "at risk" with
respect to the Units as of the end of the Partnership's taxable year in which
such loss occurred.
Generally, a Limited Partner's initial tax basis will be the amount paid for
each Unit. A Limited Partner's adjusted tax basis will be his initial tax basis
reduced by the Limited Partner's share of Partnership distributions, losses and
expenses and increased by his share of Partnership income and gains. The amount
for which a Limited Partner is "at risk" with respect to his Units in a
Partnership is generally equal to his tax basis for the Units, less: (i) any
amounts borrowed in connection with his acquisition of the Units for which he is
not personally liable and for which he has pledged no property other than his
Units; (ii) any amounts borrowed from persons who have a proprietary interest in
the Partnership; and (iii) any amounts borrowed for which the Limited Partner is
protected against loss through guarantees or similar arrangements.
Because of the limitations imposed upon the deductibility of capital losses
referred to below, a Limited Partner's share of a Partnership's net capital
losses, if any, will not materially reduce his federal income tax on his
ordinary income. In addition, certain expenses of a Partnership might be
deductible by a Limited Partner only as itemized deductions and, therefore, will
not reduce the federal taxable income of a Limited Partner who does not itemize
his deductions. Furthermore, an individual who is subject to the alternative
minimum tax for a taxable year may not realize any tax benefit from such
itemized deductions.
LIMITATIONS ON DEDUCTIBILITY OF PASSIVE LOSSES. The Partnerships' income
will not be treated as a "passive activity" for purposes of the limitation on
the deduction of passive activity losses.
LIMITED DEDUCTION OF CERTAIN EXPENSES. Certain miscellaneous itemized
deductions, such as expenses incurred to maintain property held for investment,
are deductible only to the extent that they
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exceed 2% of the adjusted gross income of an individual, trust or estate. The
amount of certain itemized deductions allowable to individuals is further
reduced by an amount equal to the lesser of (i) 3% of the individual's adjusted
gross income in excess of a certain threshold amount and (ii) 80% of the
itemized deductions. Moreover, such investment expenses are miscellaneous
itemized deductions that are not deductible by a non-corporate taxpayer in
calculating its alternative minimum tax liability. Based upon the current and
contemplated activities of the Partnerships, the General Partner has been
advised by its legal counsel that, in such counsel's opinion, the expenses
incurred by the Partnerships in their futures interests trading businesses
should not be subject to the 2% "floor" or the 3% phaseout, except to the extent
that the Internal Revenue Service promulgates regulations that so provide.
However, that advice is not binding on a court or the Internal Revenue Service,
and the Internal Revenue Service could assert, and a court could agree, that
such expenses of the Partnerships (including incentive fees) are investment
expenses which are subject to these limitations.
TAX ON CAPITAL GAINS AND LOSSES. For individuals, trusts and estates,
"long-term capital gains" are currently taxed at a maximum marginal tax rate of
20% and "short-term capital gains" and other income are taxed at a maximum
marginal tax rate of 39.6%. Corporate taxpayers are currently subject to a
maximum marginal tax rate of 35% on all capital gains and income.
The excess of capital losses over capital gains is deductible by an
individual against ordinary income on a one-for-one basis, subject to an annual
limitation of $3,000 ($1,500 in the case of married individuals filing a
separate return). Excess capital losses may be carried forward.
Net losses from Section 1256 contracts are treated as 60% long-term capital
loss and 40% short-term capital loss. Such losses may, at the individual
taxpayer's election, be carried back to each of the preceding three years and
applied against gains from Section 1256 contracts.
ALTERNATIVE MINIMUM TAX. The alternative minimum tax for individuals is
imposed on "alternative minimum taxable income" ("AMTI") in excess of certain
exemption amounts. AMTI consists of taxable income determined with certain
adjustments and increased by the amount of items of tax preference. AMTI may not
be offset by certain interest deductions, including (in certain circumstances)
interest incurred to purchase or carry Units in the Partnerships. Corporations
are also subject to an alternative minimum tax. The extent to which the
alternative minimum tax will be imposed will depend on the overall tax situation
of each Limited Partner at the end of such taxable year.
LIMITATION ON DEDUCTIBILITY OF INTEREST ON INVESTMENT
INDEBTEDNESS. Interest paid or accrued on indebtedness properly allocable to
property held for investment is investment interest. Such interest is generally
deductible by non-corporate taxpayers only to the extent it does not exceed net
investment income. A Limited Partner's distributive share of net Partnership
income and any gain from the disposition of Units will be treated as investment
income, except that a Limited Partner's net capital gain from the disposition of
Units is investment income only if the Limited Partner waives the benefit of the
preferential tax rate on the gain. It is not clear whether a Limited Partner's
distributive share of Partnership net capital gain constitutes investment income
where the gain is taxed at the maximum rate for capital gains. Interest expense
incurred by a Limited Partner to acquire his Units generally will be investment
interest. Any investment interest disallowed as a deduction in a taxable year
solely by reason of the limitation above is treated as investment interest paid
or accrued in the succeeding taxable year.
TAXATION OF FOREIGN LIMITED PARTNERS. A non-resident alien individual,
foreign corporation or foreign partnership not otherwise engaged in a United
States trade or business or acting as a dealer in commodities should not be
deemed to be engaged in a United States trade or business solely by virtue of an
investment as a limited partner in the Partnerships. Capital gains earned by the
Partnerships and allocated to such a foreign limited partner will, as a general
rule, not be subject to United States federal income taxation or withholding,
but may be subject to taxation by the jurisdiction in which the foreign limited
partner is resident, organized or operating. Interest income earned by the
Partnerships will, as a general rule, likewise not be subject to United States
federal income tax or withholding, but may be subject to tax in other
jurisdictions to which the foreign limited partner is connected. Prospective
foreign limited partners who are engaged in a United States trade or business or
who act as dealers in commodities may be subject to United States income tax and
should consult their tax advisors before investing in a Partnership.
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The estate of a deceased foreign limited partner may be liable for U.S.
estate tax and may be required to obtain an estate tax release from the Internal
Revenue Service in order to transfer the Units of such foreign limited partner.
FOREIGN PERSONS SHOULD CONSULT THEIR OWN TAX ADVISERS BEFORE DECIDING
WHETHER TO INVEST IN THE PARTNERSHIPS.
TAX ELECTIONS. The Code provides for optional adjustments to the basis of
Partnership property upon distributions of Partnership property to a Partner
(Section 734) and transfers of Units, including transfers by reason of death
(Section 743), provided that a Partnership election has been made pursuant to
Section 754. As a result of the complexities and added expense of the tax
accounting required to implement such an election, the General Partner does not
presently intend to make such an election for any of the Partnerships.
Therefore, any benefits which might be available to the Partners by reason of
such an election will be foreclosed.
TAX RETURNS AND INFORMATION. The Partnerships will file their information
returns using the accrual method of accounting. Within 75 days after the close
of each Partnership's taxable year, the Partnership will furnish each Limited
Partner, and any assignee of the Units of a Limited Partner, copies of (i) the
Partnership's Schedule K-1 indicating the Limited Partner's distributive share
of tax items and (ii) such additional information as is reasonably necessary to
permit the Limited Partner to prepare his own federal and state tax returns.
PARTNERSHIP'S TAXABLE YEAR. Each Partnership has the calendar year as its
taxable year.
UNRELATED BUSINESS TAXABLE INCOME OF EMPLOYEE BENEFIT PLAN LIMITED PARTNERS
AND OTHER TAX-EXEMPT INVESTORS. Income allocated to a Limited Partner which is
an employee benefit plan or other tax-exempt entity should not be subject to tax
under Section 511 of the Code, provided that the Units purchased by such plans
and entities are not "debt-financed."
However, if a Partnership were to purchase physical commodities with
borrowed funds (whether upon delivery under a futures or forward contract or
otherwise) and to sell those commodities at a gain, the gain would likely
constitute unrelated business income. The Partnerships are entitled to engage in
such leveraged purchases of physical commodities. Tax exempt investors should
see "Purchases by Employee Benefit Plans--ERISA Considerations."
TAX AUDITS
All Partners are required under the Code to report all the Partnership items
on their own returns consistently with the treatment by the Partnership, unless
they file a statement with the Internal Revenue Service disclosing the
inconsistencies. Adjustments in tax liability with respect to Partnership items
will be made at the Partnership level. The General Partner will represent each
Partnership during any audit and in any dispute with the Internal Revenue
Service. Each Limited Partner will be informed by the General Partner of the
commencement of an audit of a Partnership. In general, the General Partner may
enter into a settlement agreement with the Internal Revenue Service on behalf
of, and binding upon, Limited Partners owning less than a 1% profits interest if
the Partnership has more than 100 Partners. However, prior to settlement, such a
Limited Partner may file a statement with the Internal Revenue Service stating
that the General Partner does not have the authority to settle on behalf of the
Limited Partner.
The period for assessing a deficiency against a Partner in a Partnership
with respect to a Partnership item is the later of three years after the
Partnership files its return or, if the name and address of the partner does not
appear on the Partnership return, one year after the Internal Revenue Service is
furnished with the name and address of the Partner. In addition, the General
Partner may consent on behalf of each
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Partnership to the extension of the period for assessing a deficiency with
respect to a Partnership item. As a result, a Limited Partner's federal income
tax return may be subject to examination and adjustment by the Internal Revenue
Service for a Partnership item more than three years after it has been filed.
-------------------
All of the foregoing statements are based upon the existing provisions of
the Code and the regulations promulgated thereunder and the existing
administrative and judicial interpretations thereof. The General Partner cannot
assure you that legislative, administrative, or judicial changes will not occur
which will modify such statements.
The foregoing statements are not intended as a substitute for careful tax
planning, particularly since certain of the federal income tax consequences of
purchasing Units may not be the same for all taxpayers. The Partnerships' tax
returns could be audited by the Internal Revenue Service and adjustments to the
returns could be made as a result of such audits. If an audit results in
adjustment, Limited Partners may be required to file amended returns and their
returns may be audited. Accordingly, prospective purchasers of Units are urged
to consult their tax advisers with specific reference to their own tax situation
under federal law and the provisions of applicable state, local and foreign laws
before subscribing for Units.
STATE AND LOCAL INCOME TAX ASPECTS
In addition to the federal income tax consequences for individuals described
under "Material Federal Income Tax Considerations" above, the Partnerships and
their Limited Partners may be subject to various state and local taxes. Certain
of these taxes could, if applicable, have a significant effect on the amount of
tax payable in respect of an investment in the Partnerships. A Limited Partner's
distributive share of the realized profits of a Partnership may be required to
be included in determining his reportable income for state or local tax
purposes. Furthermore, state and local tax laws may not reflect recent changes
made to the federal income tax law and, therefore, may be inconsistent with the
federal income treatment of gains and losses arising from the Partnerships'
transactions in Section 1256 contracts. Accordingly, prospective Limited
Partners should consult with their own tax advisers concerning the applicability
of state and local taxes to an investment in the Partnerships.
The General Partner has been advised by its legal counsel, Cadwalader,
Wickersham & Taft, that in such counsel's opinion, the Partnerships should not
be liable for New York City unincorporated business tax. Limited Partners who
are nonresidents of New York State will not be liable for New York State
personal income tax on such Partners' income from the Partnerships, but may be
liable for such tax to the extent such Limited Partners' allocable share of
income attributable to the Partnerships' transactions involves tangible personal
property. Likewise, Limited Partners who are nonresidents of New York City will
not be liable for New York City earnings tax on the Partners' income from the
Partnerships. New York City residents may be subject to New York City personal
income tax on the Partners' income from the Partnerships. No ruling from the New
York State Department of Taxation and Finance or the New York City Department of
Finance has been, or will be, requested regarding such matters.
LEGAL MATTERS
Legal matters in connection with the Units being offered hereby, including
the discussion of the material federal income tax considerations relating to the
acquisition, ownership and disposition of Units, have been passed upon for each
Partnership and the General Partner by Cadwalader, Wickersham & Taft, 100 Maiden
Lane, New York, New York 10038. Cadwalader, Wickersham & Taft also has acted as
counsel for DWR in connection with the offering of Units. Cadwalader,
Wickersham & Taft may advise the General Partner with respect to its
responsibilities as general partner of, and with respect to matters relating to,
the Partnerships.
EXPERTS
The financial statements of 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., and Morgan Stanley Dean Witter
Spectrum Select L.P. as of December 31, 1998 and 1997, and for the years ended
December 31, 1998, 1997 and 1996, and the statements of financial condition of
Demeter as of November 30, 1998 and 1997 included in this Prospectus, have been
audited by Deloitte & Touche LLP,
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independent auditors, as stated in their reports appearing herein, and are
included in reliance upon such reports of such firm given upon their authority
as experts in accounting and auditing. Deloitte & Touche also acts as
independent auditors for MSDW.
The statement of financial condition included herein of Morgan Stanley Dean
Witter Spectrum Commodity L.P. (formerly named Morgan Stanley Tangible Asset
Fund L.P.) as of December 31, 1998 and for the period from January 2, 1998
through December 31, 1998, have been audited by Deloitte & Touche LLP.
The statements of financial condition included herein of Morgan Stanley Dean
Witter Spectrum Currency L.P. as of October 26, 1999, has been audited by
Deloitte & Touche LLP.
WHERE YOU CAN FIND MORE INFORMATION
The Partnerships filed registration statements (collectively, the
"REGISTRATION STATEMENTS") relating to the Units registered with SEC. This
Prospectus is part of the Registration Statements, but the Registration
Statements include additional information.
You may read any of the Registration Statements, or obtain copies by paying
prescribed charges, at the SEC's public reference rooms located at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549; 7 World Trade Center, Suite
1300, New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. For further information on the public
reference rooms, please call the SEC at 1-800-SEC-0330. The Registration
Statements are also available to the public from the SEC's Web site at
"http://www.sec.gov."
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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 Spectrum 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. (formerly, Dean Witter
Spectrum Global Balanced L.P.), Morgan Stanley Dean Witter Spectrum Select L.P.
(formerly, Dean Witter Spectrum Select L.P.), Morgan Stanley Dean Witter
Spectrum Strategic L.P. (formerly, Dean Witter Spectrum Strategic L.P.) and
Morgan Stanley Dean Witter Spectrum Technical L.P. (formerly, Dean Witter
Spectrum Technical L.P.) (collectively, the "Partnerships") as of December 31,
1998 and 1997 and the related statements of operations, changes in partners'
capital, and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Partnerships' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of 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, 1998 and 1997 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 15, 1999
(March 4, 1999 and September 24, 1999 as to Note 6)
New York, New York
F-1
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MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------
1999 1998 1997
----------- ----------- -----------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 52,301,335 43,020,361 24,954,956
Net unrealized gain on open contracts 456,235 1,967,187 681,559
Net option premiums -- -- (458,150)
----------- ----------- -----------
Total Trading Equity 52,757,570 44,987,548 25,178,365
Subscriptions receivable 1,530,130 1,163,097 625,710
Interest receivable (DWR) 186,666 167,141 118,949
----------- ----------- -----------
Total Assets 54,474,366 46,317,786 25,923,024
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (DWR) 197,452 169,841 99,762
Redemptions payable 252,057 118,190 114,576
Incentive fees payable -- 69,730 --
Accrued management fees 53,656 46,153 25,450
----------- ----------- -----------
Total Liabilities 503,165 403,914 239,788
----------- ----------- -----------
PARTNERS' CAPITAL
Limited Partners (3,302,275.499, 2,836,946.985, and
1,849,054.344 Units, respectively) 53,402,008 45,399,750 25,418,875
General Partner (35,197.812, 32,126.520, and 19,230.497
Units, respectively) 569,193 514,122 264,361
----------- ----------- -----------
Total Partners' Capital 53,971,201 45,913,872 25,683,236
----------- ----------- -----------
Total Liabilities and Partners' Capital 54,474,366 46,317,786 25,923,024
=========== =========== ===========
NET ASSET VALUE PER UNIT 16.17 16.00 13.75
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------
1999 1998 1997
------------ ------------ ------------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 201,633,502 187,619,419 158,178,925
Net unrealized gain on open contracts 10,625,031 8,435,054 9,627,161
Net option premiums 406,376 -- --
------------ ------------ ------------
Total Trading Equity 212,664,909 196,054,473 167,806,086
Subscriptions receivable 4,172,561 6,021,707 --
Interest receivable (DWR) 614,725 591,858 638,204
Due from DWR -- -- 1,097,517
------------ ------------ ------------
Total Assets 217,452,195 202,668,038 169,541,807
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (DWR) 1,273,562 1,164,344 --
Redemptions payable 996,957 939,381 2,272,314
Accrued management fees 526,991 481,797 423,673
Accrued administrative expenses -- -- 72,499
------------ ------------ ------------
Total Liabilities 2,797,510 2,585,522 2,768,486
------------ ------------ ------------
PARTNERS' CAPITAL
Limited Partners (8,946,936.109, 8,274,690.051 and
7,867,474.900 Units, respectively) 211,508,705 196,915,644 163,999,307
General Partner (133,076.700 Units) 3,145,980 3,166,872 2,774,014
------------ ------------ ------------
Total Partners' Capital 214,654,685 200,082,516 166,773,321
------------ ------------ ------------
Total Liabilities and Partners' Capital 217,452,195 202,668,038 169,541,807
============ ============ ============
NET ASSET VALUE PER UNIT (NOTE 1) 23.64 23.80 20.85
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------
1999 1998 1997
----------- ----------- -----------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 70,737,978 63,919,054 57,104,003
Net unrealized gain on open contracts 10,583,927 5,299,335 2,527,613
Net option premiums 795,037 225,646 322,123
---------- ---------- ----------
Total Trading Equity 82,116,942 69,444,035 59,953,739
Subscriptions receivable 1,251,434 1,796,051 833,259
Interest receivable (DWR) 211,746 205,247 223,045
---------- ---------- ----------
Total Assets 83,580,122 71,445,333 61,010,043
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (DWR) 405,118 405,606 360,041
Redemptions payable 513,825 398,976 1,366,164
Accrued management fees 216,820 218,976 188,257
---------- ---------- ----------
Total Liabilities 1,135,763 1,023,558 1,914,462
---------- ---------- ----------
PARTNERS' CAPITAL
Limited Partners (6,300,903.918, 6,031,262.407, and
5,460,628.572 Units, respectively) 81,550,064 69,671,636 58,482,349
General Partner (69,097.028, 64,937.294, and 57,258.883
Units, respectively) 894,295 750,139 613,232
---------- ---------- ----------
Total Partners' Capital 82,444,359 70,421,775 59,095,581
---------- ---------- ----------
Total Liabilities and Partners' Capital 83,580,122 71,445,333 61,010,043
========== ========== ==========
NET ASSET VALUE PER UNIT 12.94 11.55 10.71
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------
1999 1998 1997
------------ ------------ ------------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 257,770,535 235,044,325 168,849,922
Net unrealized gain on open contracts 20,659,113 18,909,268 12,296,712
----------- ----------- -----------
Total Trading Equity 278,429,648 253,953,593 181,146,634
Subscriptions receivable 4,610,252 4,002,633 2,965,621
Interest receivable (DWR) 780,509 717,685 657,562
----------- ----------- -----------
Total Assets 283,820,409 258,673,911 184,769,817
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accrued brokerage fees (DWR) 1,587,941 1,439,151 1,097,194
Redemptions payable 1,825,402 1,339,311 1,009,230
Accrued management fees 876,105 794,015 573,696
Incentive fees payable 430,097 -- 139,190
----------- ----------- -----------
Total Liabilities 4,719,545 3,572,477 2,819,310
----------- ----------- -----------
PARTNERS' CAPITAL
Limited Partners (16,857,669.916, 15,660,041.764, and
12,308,185.227 Units, respectively) 276,240,957 252,455,045 180,099,271
General Partner (174,526.485, 164,158.204, and 126,515.511
Units, respectively) 2,859,907 2,646,389 1,851,236
----------- ----------- -----------
Total Partners' Capital 279,100,864 255,101,434 181,950,507
----------- ----------- -----------
Total Liabilities and Partners' Capital 283,820,409 258,673,911 184,769,817
=========== =========== ===========
NET ASSET VALUE PER UNIT 16.39 16.12 14.63
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
------------------------- ---------------------------------
1999 1998 1998 1997 1996
----------- ----------- --------- --------- ---------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 2,609,767 1,820,696 5,113,920 3,683,460 177,564
Net change in unrealized (1,510,952) (654,063) 1,285,628 464,966 (175,835)
---------- ---------- --------- --------- ---------
Total Trading Results 1,098,815 1,166,633 6,399,548 4,148,426 1,729
Interest income (DWR) 1,045,338 727,142 1,642,542 1,145,033 891,897
---------- ---------- --------- --------- ---------
Total Revenues 2,144,153 1,893,775 8,042,090 5,293,459 893,626
---------- ---------- --------- --------- ---------
EXPENSES
Brokerage fees (DWR) 1,119,956 692,751 1,591,467 1,124,531 1,030,310
Incentive fees 215,651 28,182 449,775 300,250 --
Management fees 304,338 178,742 422,960 269,162 221,282
---------- ---------- --------- --------- ---------
Total Expenses 1,639,945 899,675 2,464,202 1,693,943 1,251,592
---------- ---------- --------- --------- ---------
NET INCOME (LOSS) 504,208 994,100 5,577,888 3,599,516 (357,966)
========== ========== ========= ========= =========
Net Income (Loss) Allocation:
Limited Partners 499,137 983,818 5,518,127 3,561,537 (354,537)
General Partner 5,071 10,282 59,761 37,979 (3,429)
Net Income (Loss) per Unit:
Limited Partners .17 .53 2.25 2.12 (.44)
General Partner .17 .53 2.25 2.12 (.44)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 3,393,720 6,761,724 36,087,729 15,940,851 26,876,393
Net change in unrealized 2,189,977 (3,968,065) (1,192,107) 3,149,167 (10,950,217)
---------- ---------- ---------- ---------- -----------
Total Trading Results 5,583,697 2,793,659 34,895,622 19,090,018 15,926,176
Interest income (DWR) 3,581,033 3,402,988 6,883,110 7,405,511 6,120,347
---------- ---------- ---------- ---------- -----------
Total Revenues 9,164,730 6,196,647 41,778,732 26,495,529 22,046,523
---------- ---------- ---------- ---------- -----------
EXPENSES
Brokerage fees (DWR) 7,497,645 4,707,505 11,360,166 9,777,851 10,641,478
Management fees 3,102,472 2,447,663 5,202,158 5,239,533 4,583,197
Incentive fees -- -- 1,832,021 49,989 175,796
Transaction fees and costs -- 625,328 625,327 1,370,439 1,104,011
Administrative expenses -- 64,000 64,000 114,000 128,000
---------- ---------- ---------- ---------- -----------
Total Expenses 10,600,117 7,844,496 19,083,672 16,551,812 16,632,482
---------- ---------- ---------- ---------- -----------
NET INCOME (LOSS) (1,435,387) (1,647,849) 22,695,060 9,943,717 5,414,041
========== ========== ========== ========== ===========
Net Income (Loss) Allocation:
Limited Partners (1,414,495) (1,619,335) 22,302,202 9,781,168 5,283,411
General Partner (20,892) (28,514) 392,858 162,549 130,630
Net Income (Loss) per Unit:
Limited Partners (.16) (.22) 2.95 1.22 .98
General Partner (.16) (.22) 2.95 1.22 .98
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
------------------------- -------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ---------- ----------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 7,222,069 (5,956,766) 7,945,575 1,297,824 4,980,402
Net change in unrealized 5,284,592 (2,224,767) 2,771,722 2,387,258 (1,679,048)
---------- ----------- ---------- ---------- ----------
Total Trading Results 12,506,661 (8,181,533) 10,717,297 3,685,082 3,301,354
Interest income (DWR) 1,255,241 1,196,530 2,379,478 2,304,248 1,604,026
---------- ----------- ---------- ---------- ----------
Total Revenues 13,761,902 (6,985,003) 13,096,775 5,989,330 4,905,380
---------- ----------- ---------- ---------- ----------
EXPENSES
Brokerage fees (DWR) 2,540,783 2,211,493 4,402,540 4,414,327 3,398,205
Management fees 1,376,970 1,160,531 2,342,447 2,212,788 1,587,213
Incentive fees 1,019,759 -- 1,336,693 427,094 726,825
---------- ----------- ---------- ---------- ----------
Total Expenses 4,937,512 3,372,024 8,081,680 7,054,209 5,712,243
---------- ----------- ---------- ---------- ----------
NET INCOME (LOSS) 8,824,390 (10,357,027) 5,015,095 (1,064,879) (806,863)
========== =========== ========== ========== ==========
Net Income (Loss) Allocation:
Limited Partners 8,730,234 (10,250,589) 4,958,188 (1,054,657) (799,980)
General Partner 94,156 (106,438) 56,907 (10,222) (6,883)
Net Income (Loss) per Unit:
Limited Partners 1.39 (1.78) .84 0.04 (.39)
General Partner 1.39 (1.78) .84 0.04 (.39)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Trading Profit (Loss):
Realized 13,840,196 17,820,196 35,224,194 13,777,460 26,334,748
Net change in unrealized 1,749,845 (14,343,353) 6,612,556 9,762,823 (1,552,659)
---------- ----------- ---------- ---------- ----------
Total Trading Results 15,590,041 3,476,843 41,836,750 23,540,283 24,782,089
Interest income (DWR) 4,380,011 3,842,512 8,103,423 5,987,304 3,242,977
---------- ----------- ---------- ---------- ----------
Total Revenues 19,970,052 7,319,355 49,940,173 29,527,587 28,025,066
---------- ----------- ---------- ---------- ----------
EXPENSES
Brokerage fees (DWR) 9,351,466 7,196,245 15,543,787 11,617,770 6,997,531
Management fees 5,159,430 3,798,223 8,403,764 5,832,758 3,273,649
Incentive fees 430,097 209,494 3,191,252 369,975 1,852,569
---------- ----------- ---------- ---------- ----------
Total Expenses 14,940,993 11,203,962 27,138,803 17,820,503 12,123,749
---------- ----------- ---------- ---------- ----------
NET INCOME (LOSS) 5,029,059 (3,884,607) 22,801,370 11,707,084 15,901,317
========== =========== ========== ========== ==========
Net Income (Loss) Allocation:
Limited Partners 4,975,541 (3,844,633) 22,571,217 11,589,197 15,737,852
General Partner 53,518 (39,974) 230,153 117,887 163,465
Net Income (Loss) per Unit:
Limited Partners .27 (.30) 1.49 1.02 2.11
General Partner .27 (.30) 1.49 1.02 2.11
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND FOR THE
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ------------ --------- ------------
$ $ $
<S> <C> <C> <C> <C>
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 585,087.342 9,382,234 50,000 9,432,234
Net Income -- 499,137 5,071 504,208
Redemptions (116,687.536) (1,879,113) -- (1,879,113)
-------------- ----------- --------- -----------
Partners' Capital, June 30, 1999 (Unaudited) 3,337,473.311 53,402,008 569,193 53,971,201
============== =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ------------ --------- ------------
NOTE 1 $ $ $
<S> <C> <C> <C> <C>
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 1,055,346.328 25,160,601 -- 25,160,601
Net Loss -- (1,414,495) (20,892) (1,435,387)
Redemptions (383,100.270) (9,153,045) -- (9,153,045)
-------------- ----------- --------- -----------
Partners' Capital, June 30, 1999 (Unaudited) 9,080,012.809 211,508,705 3,145,980 214,654,685
============== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL--(CONCLUDED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND FOR THE
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ------------ --------- -----------
$ $ $
<S> <C> <C> <C> <C>
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 625,437.180 7,351,975 50,000 7,401,975
Net Income -- 8,730,234 94,156 8,824,390
Redemptions (351,635.935) (4,203,781) -- (4,203,781)
-------------- ----------- --------- -----------
Partners' Capital, June 30, 1999 (Unaudited) 6,370,000.946 81,550,064 894,295 82,444,359
============== =========== ========= ===========
</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 1,984,286.976 31,086,987 160,000 31,246,987
Net Income -- 4,975,541 53,518 5,029,059
Redemptions (776,290.543) (12,276,616) -- (12,276,616)
--------------- ----------- --------- -----------
Partners' Capital, June 30, 1999 (Unaudited) 17,032,196.401 276,240,957 2,859,907 279,100,864
=============== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
--------------------------- ------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) 504,208 994,100 5,577,888 3,599,516 (357,966)
Noncash item included in net
income (loss):
Net change in unrealized
trading profit 1,510,952 654,063 (1,285,628) (464,966) 175,835
(Increase) decrease in
operating assets:
Net option premiums -- (458,150) (458,150) 458,150 --
Interest receivable (DWR) (19,525) (16,868) (48,192) (33,466) (24,354)
Increase (decrease) in
operating liabilities:
Accrued brokerage fees (DWR) 27,611 21,645 70,079 7,615 25,474
Incentive fees payable (69,730) -- 69,730 -- (49,873)
Accrued management fees 7,503 7,541 20,703 4,507 7,053
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) operating activities 1,961,019 1,202,331 3,946,430 3,571,356 (223,831)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units 9,432,234 9,366,567 17,637,965 6,527,261 7,259,621
(Increase) decrease in
subscriptions receivable (367,033) (2,215,477) (537,387) (434,141) 869,488
Increase (decrease) in
redemptions payable 133,867 46,569 3,614 (686,849) 762,679
Redemptions of Units (1,879,113) (1,684,379) (2,985,217) (3,149,796) (2,949,900)
------------ ------------ ------------ ------------ ------------
Net cash provided by financing
activities 7,319,955 5,513,280 14,118,975 2,256,475 5,941,888
------------ ------------ ------------ ------------ ------------
Net increase in cash 9,280,974 6,715,611 18,065,405 5,827,831 5,718,057
Balance at beginning of period 43,020,361 24,954,956 24,954,956 19,127,125 13,409,068
------------ ------------ ------------ ------------ ------------
Balance at end of period 52,301,335 31,670,567 43,020,361 24,954,956 19,127,125
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
--------------------------- ------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) (1,435,387) (1,647,849) 22,695,060 9,943,717 5,414,041
Noncash item included in net
income:
Net change in unrealized
trading profit (2,189,977) 3,968,065 1,192,107 (3,149,167) 10,950,217
(Increase) decrease in
operating assets:
Net option premiums (406,376) -- -- 18,205 (1,185)
Interest receivable (DWR) (22,867) 76,478 46,346 (105,144) 59,297
Due from DWR -- 1,097,517 1,097,517 (688,191) (236,577)
Increase (decrease) in
operating liabilities:
Accrued brokerage fees (DWR) 109,218 938,360 1,164,344 (491,315) (173,003)
Accrued management fees 45,194 (35,386) 58,124 19,815 (42,247)
Accrued administrative
expenses -- (72,499) (72,499) (50,844) (40,924)
Incentive fees payable -- -- -- (348,459) 348,459
Accrued transaction fees and
costs -- -- -- (64,595) (6,097)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) operating activities (3,900,195) 4,324,686 26,180,999 5,084,022 16,271,981
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units 25,160,601 3,751,903 30,297,590 12,056,614 10,251,712
(Increase) decrease in
subscriptions receivable 1,849,146 (3,488,888) (6,021,707) 5,365,420 (5,365,420)
Increase (decrease) in
redemptions payable 57,576 50,773 (1,332,933) (97,843) 818,800
Redemptions of Units (9,153,045) (10,933,118) (19,683,455) (19,013,295) (28,325,728)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used
for) financing activities 17,194,278 (10,619,330) 3,259,495 (1,689,104) (22,620,636)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
cash 14,014,083 (6,294,644) 29,440,494 3,394,918 (6,348,655)
Balance at beginning of period 187,619,419 158,178,925 158,178,925 154,784,007 161,132,662
------------ ------------ ------------ ------------ ------------
Balance at end of period 201,633,502 151,884,281 187,619,419 158,178,925 154,784,007
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
------------------------- ---------------------------------------
1999 1998 1998 1997 1996
----------- ----------- ----------- ----------- -----------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 8,824,390 (10,357,027) 5,015,095 (1,064,879) (806,863)
Noncash item included in net income
(loss):
Net change in unrealized trading
profit (5,284,592) 2,224,767 (2,771,722) (2,387,258) 1,679,048
(Increase) decrease in operating
assets:
Net option premiums (569,391) 258,057 96,477 (367,448) 25,452
Interest receivable (DWR) (6,499) 35,276 17,798 (59,402) (55,568)
Increase (decrease) in operating
liabilities:
Accrued brokerage fees (DWR) (488) (37,477) 45,565 36,599 110,617
Accrued management fees (2,156) (15,401) 30,719 31,436 59,530
Incentive fees payable -- -- -- -- (198,924)
----------- ----------- ----------- ---------- ----------
Net cash provided by (used for)
operating activities 2,961,264 (7,891,805) 2,433,932 (3,810,952) 813,292
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 7,401,975 9,645,412 16,742,471 22,527,135 18,630,024
(Increase) decrease in subscriptions
receivable 544,617 (476,674) (962,792) (168) 714,659
Increase (decrease) in redemptions
payable 114,849 (101,648) (967,188) (124,372) 1,413,226
Redemptions of Units (4,203,781) (5,392,203) (10,431,372) (7,485,552) (5,167,216)
----------- ----------- ----------- ---------- ----------
Net cash provided by financing
activities 3,857,660 3,674,887 4,381,119 14,917,043 15,590,693
----------- ----------- ----------- ---------- ----------
Net increase (decrease) in cash 6,818,924 (4,216,918) 6,815,051 11,106,091 16,403,985
Balance at beginning of period 63,919,054 57,104,003 57,104,003 45,997,912 29,593,927
----------- ----------- ----------- ---------- ----------
Balance at end of period 70,737,978 52,887,085 63,919,054 57,104,003 45,997,912
=========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
--------------------------- ------------------------------------------
1999 1998 1998 1997 1996
------------ ------------ ------------ ------------ ------------
$ $ $ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) 5,029,059 (3,884,607) 22,801,370 11,707,084 15,901,317
Noncash item included in net
income:
Net change in unrealized
trading profit (1,749,845) 14,343,353 (6,612,556) (9,762,823) 1,552,659
(Increase) decrease in operating
assets:
Interest receivable (DWR) (62,824) (64,035) (60,123) (275,721) (189,153)
Net option premiums -- (119,830) -- 328,955 (328,955)
Increase (decrease) in operating
liabilities:
Accrued brokerage fees (DWR) 148,790 132,819 341,957 320,941 388,414
Accrued management fees 82,090 104,877 220,319 197,331 199,067
Incentive fees payable 430,097 (139,190) (139,190) 139,190 --
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities 3,877,367 10,373,387 16,551,777 2,654,957 17,523,349
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Offering of Units 31,246,987 38,392,664 70,451,681 69,682,458 44,442,998
(Increase) decrease in
subscriptions receivable (607,619) (3,780,532) (1,037,012) 2,151,502 (2,025,927)
Increase (decrease) in
redemptions payable 486,091 1,135,303 330,081 325,421 499,483
Redemptions of Units (12,276,616) (10,634,648) (20,102,124) (12,424,664) (6,685,065)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities 18,848,843 25,112,787 49,642,626 59,734,717 36,231,489
----------- ----------- ----------- ----------- -----------
Net increase in cash 22,726,210 35,486,174 66,194,403 62,389,674 53,754,838
Balance at beginning of period 235,044,325 168,849,922 168,849,922 106,460,248 52,705,410
----------- ----------- ----------- ----------- -----------
Balance at end of period 257,770,535 204,336,096 235,044,325 168,849,922 106,460,248
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
("Spectrum Global Balanced"), Morgan Stanley Dean Witter Spectrum Select L.P.
("Spectrum Select"), Morgan Stanley Dean Witter Spectrum Strategic L.P.
("Spectrum Strategic") and Morgan Stanley Dean Witter Spectrum Technical L.P.
("Spectrum Technical") (individually, a "Partnership," or collectively, the
"Partnerships") are limited partnerships organized to engage in the speculative
trading of futures and forward contracts, options on futures contracts and on
physical commodities, and other commodities interests, including foreign
currencies, financial instruments, precious and industrial metals, energy
products, and agriculturals (collectively, "futures interests"). The general
partner for each Partnership is Demeter Management Corporation ("Demeter"). The
non-clearing commodity broker is Dean Witter Reynolds, Inc. ("DWR"), and an
unaffiliated clearing commodity broker, Carr Futures Inc. ("Carr"), provides
clearing and execution services. Both Demeter and DWR are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW").
Spectrum Select became one of the Spectrum Series of funds effective June 1,
1998, and each outstanding unit of Dean Witter Select Futures Fund L.P. was
converted into 100 units of Spectrum Select. "Per Unit" amounts for periods
prior to June 1, 1998 have been restated to reflect the conversion.
On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean Witter,
Discover & Co. ("DWD"). At that time, DWD changed its corporate name to Morgan
Stanley, Dean Witter, Discover & Co. ("MSDWD"). Effective February 19, 1998,
MSDWD changed its corporate name to Morgan Stanley Dean Witter & Co.
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by the General Partner and the
Limited Partners based upon their proportional ownership interests.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION--Futures interests are open commitments until settlement
date. They are valued at market and the resulting unrealized gains and losses
are reflected in income. Monthly, DWR pays each Partnership interest income
based upon 80% of its average daily "Net Assets" (as defined in the limited
partnership agreements) for the month in the case of Spectrum Select, Spectrum
Strategic and Spectrum Technical and 100% in the case of Spectrum Global
Balanced. The interest rate is equal to a prevailing rate on U.S. Treasury
bills. For purposes of such interest payments, Net Assets do not include monies
due the Partnership on futures interests, but not actually received.
NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using the
weighted average number of units outstanding during the period.
EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS--The Partnerships' asset "Equity in
futures interests trading accounts" consist of cash on deposit with DWR and Carr
to be used as margin for trading and the net asset or liability related to
unrealized gains or losses on open contracts and the net option premiums paid
and/or received. The asset or liability related to the unrealized gains or
losses on forward contracts is presented as a net amount in each period due to
master netting agreements.
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS--Prior to September 1, 1996,
brokerage fees for Spectrum Global Balanced were accrued at a monthly rate of
1/2 of 1% of the Net Assets (a 6% annual rate) as of the first day of each
month. From September 1, 1996 to July 31, 1997, brokerage fees were reduced to a
monthly rate of 11/24 of 1% of the Net Assets (a 5.5% annual rate) as of the
first day of the month.
F-16
<PAGE>
From August 1, 1997 to May 31, 1998 brokerage fees were further reduced to
49/120 of 1% of the Net Assets (a 4.9% annual rate) as of the first day of the
month. Effective June 1, 1998, brokerage fees were reduced to a flat-rate
monthly fee of 1/12 of 4.60% of the Net Assets (a 4.60% annual rate) as of the
first day of each month.
Prior to June 1, 1998, brokerage commissions Spectrum Select were accrued on a
half-turn basis at 80% of DWR's published non-member rates and transaction fees
and costs were accrued on a half-turn basis.
From January 1, 1996 to August 31, 1996, brokerage commissions chargeable to
Spectrum Select were capped at 3/4 of 1% per month (a 9% maximum annual rate) of
to Spectrum Select's month-end Net Assets. Transaction fees and costs exclusive
of "give up" fees were capped at 1/12 of 1% per month (a 1% maximum annual rate)
of month-end Net Assets.
From September 1, 1996 through May 31, 1998 brokerage commissions and
transaction fees and costs were capped at 13/20 of 1% per month (a 7.8% maximum
annual rate) of Spectrum Select's month-end Net Assets.
Effective June 1, 1998 brokerage fees of Spectrum Select are charged at a flat
monthly rate of 1/12 of 7.25% (a 7.25% annual rate) of Net Assets as of the
first day of each month. Such fee covers all brokerage commissions, transaction
fees and costs and ordinary administrative and continuing offering expenses.
Prior to September 1, 1996, brokerage fees for Spectrum Strategic and Spectrum
Technical were accrued at a monthly rate of 35/48 of 1% of the Net Assets (an
8.75% annual rate) as of the first day of each month. From September 1, 1996 to
July 31, 1997, brokerage fees were reduced to a monthly rate of 33/48 of 1% of
the Net Assets (an 8.25% annual rate) as of the first day of the month. From
August 1, 1997 to May 31, 1998, brokerage fees were further reduced to 51/80 of
1% of the Net Assets (a 7.65% annual rate) as of the first day of the month.
Effective June 1, 1998, brokerage fees for Spectrum Strategic and Spectrum
Technical were reduced to a flat-rate monthly fee of 1/12 of 7.25% (a 7.25%
annual rate) of the Net Assets as of the first day of each month.
Such fees cover all brokerage fees, transaction fees and costs and ordinary
administrative and continuing offering expenses.
OPERATING EXPENSES--The Partnerships incur monthly management fees, and may
incur incentive fees. All common administrative and continuing offering expenses
including legal, auditing, accounting, filing fees and other related expenses,
are borne by DWR through the brokerage fees paid by the Partnerships (effective
June 1, 1998 for Spectrum Select with its change to a flat rate brokerage fee).
Prior to June 1, 1998, Spectrum Select was charged all operating expenses
related to its trading activities to a maximum of 1/4 of 1% annually of 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 on redemption of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
CONTINUING OFFERING--Units of each Partnership are offered at a price equal to
100% of the Net Asset Value per Unit as of the close of business on the last day
of the month. No selling commissions or charges related to the continuing
offering of Units were paid by the Limited Partners or the Partnership. DWR will
pay all such costs.
REDEMPTIONS--Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the end of the last day of any month that is
at least six months after the closing at which a person becomes a Limited
Partner, upon five business days advance notice by redemption form to Demeter.
Thereafter, Units redeemed on or prior to the last day of the twelfth month
after such Units were
F-17
<PAGE>
purchased will be subject to a redemption charge equal to 2% of the Net Asset
Value of a Unit on the date of such redemption. Units redeemed after the last
day of the twelfth month and on or prior to the last day of the twenty-fourth
month after which such Units were purchased will be subject to a redemption
charge equal to 1% of the Net Asset Value of a Unit on the date of such
redemption. Units redeemed after the last day of the twenty-fourth month after
which such Units were purchased will not be subject to a redemption charge. The
foregoing redemption charges will be paid to DWR. Redemptions must be made in
whole Units, in a minimum amount of 50 Units, unless a Limited Partner is
redeeming his entire interest in a Partnership.
EXCHANGES--On the last day of the first month which occurs more than six months
after a person first becomes a Limited Partner in any of the Partnerships, and
the end of each month thereafter, Limited Partners may exchange their investment
among the Partnerships (subject to certain restrictions outlined in the Limited
Partnership Agreement) without paying additional charges.
DISSOLUTION OF THE PARTNERSHIP--Spectrum Global Balanced, Spectrum Strategic and
Spectrum Technical will terminate on December 31, 2035 and Spectrum Select will
terminate on December 31, 2025 regardless of their financial condition at such
time, or at an earlier date if certain conditions occur as defined in each
Partnership's Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
Each Partnership pays brokerage fees to DWR as described in Note 1. Each
Partnership's cash is on deposit with DWR and Carr in futures interests trading
accounts to meet margin requirements as needed. DWR pays interest on these funds
as described in Note 1.
3. TRADING ADVISORS
Demeter, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership are as follows:
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. was terminated as an
advisor to the Partnership. Effective March 4, 1999 Stonebrook Capital
Management Inc. ("Stonebrook") was terminated as an advisor to the Partnership.
The assets of the Partnership previously allocated to Stonebrook were allocated
to Allied Irish Capital Management, Ltd., effective June 1, 1999.
Morgan Stanley Dean Witter Spectrum Technical L.P.
Campbell & Company, Inc.
Chesapeake Capital Corporation
John W. Henry & Company, Inc. ("JWH")
Compensation to the trading advisors by the Partnerships consists of a
management fee and an incentive fee as follows:
MANAGEMENT FEE--The management fee is accrued at the rate of 5/48 of 1% of the
Net Assets on the first day of each month (a 1.25% annual rate) for Spectrum
Global Balanced.
F-18
<PAGE>
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 the "Trading Profits" as
defined in the Limited Partnership Agreement, experienced with respect to each
trading advisor's allocated Net Assets as of the end of each calendar month.
Prior to June 1, 1998, Spectrum Select paid a quarterly incentive fee to each
trading advisor equal to 17.5% of the "Trading Profits" as defined.
Spectrum Technical will pay a monthly incentive fee equal to 15% of the "Trading
Profits" experienced with respect to the Net Assets allocated to Campbell and
JWH and 19% of the "Trading Profits" experienced with respect to the Net Assets
allocated to Chesapeake as of the end of each calendar month. Prior to June 1,
1998, Spectrum Technical paid an incentive fee equal to 15% of "Trading Profits"
to all trading advisors.
For all Partnerships when trading losses are incurred, no incentive fee will be
paid in subsequent months until all such losses are recovered. Cumulative
trading losses are adjusted on a pro-rata basis for the net amount of each
months subscriptions and redemptions.
4. FINANCIAL INSTRUMENTS
The Partnerships trade futures and forward contracts in interest rates, stock
indices, commodities, currencies, petroleum and precious metals. Futures and
forwards represent contracts for delayed delivery of an instrument at a
specified date and price. Risk arises from changes in the value of these
contracts and the potential inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest rate
volatility.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for fiscal years beginning after
June 15, 1999. The Partnership has elected to adopt the provisions of SFAS No.
133 for the fiscal year ended December 31, 1998. SFAS No. 133 supersedes SFAS
No. 119 and No. 105, which required the disclosure of average aggregate fair
values and contract/notional values, respectively, of derivative financial
instruments for an entity which carriers its assets at fair value. The
application of SFAS No. 133 does not have a significant effect on the
Partnership's financial statements.
F-19
<PAGE>
At December 31, 1997, open contracts were:
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED
---------------------------
CONTRACT OR NOTIONAL AMOUNT
---------------------------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures:
Commitments to Purchase 40,675,000
Commitments to Sell 6,721,000
Commodity Futures:
Commitments to Purchase --
Commitments to Sell 5,168,000
Foreign Futures:
Commitments to Purchase 45,574,000
Commitments to Sell 26,176,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS:
Commitments to Purchase 2,436,000
Commitments to Sell 10,218,000
</TABLE>
<TABLE>
<CAPTION>
SPECTRUM SELECT
---------------------------
CONTRACT OR NOTIONAL AMOUNT
---------------------------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS:
Finacial Futures:
Commitments to Purchase 428,493,000
Commitments to Sell 173,316,000
Commodity Futures:
Commitments to Purchase 23,131,000
Commitments to Sell 135,389,000
Foreign Futures:
Commitments to Purchase 997,389,000
Commitments to Sell 315,676,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS:
Commitments to Purchase 96,671,000
Commitments to Sell 127,065,000
</TABLE>
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC
---------------------------
CONTRACT OR NOTIONAL AMOUNT
---------------------------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures:
Commitments to Purchase 87,114,000
Commitments to Sell 69,871,000
Commodity Futures:
Commitments to Purchase 32,034,000
Commitments to Sell 24,672,000
Foreign Futures:
Commitments to Purchase 119,070,000
Commitments to Sell 5,387,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS:
Commitments to Purchase 748,000
Commitments to Sell 748,000
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL
---------------------------
CONTRACT OR NOTIONAL AMOUNT
---------------------------
$
<S> <C>
EXCHANGE-TRADED CONTRACTS:
Financial Futures:
Commitments to Purchase 302,165,000
Commitments to Sell 80,696,000
Commodity Futures:
Commitments to Purchase 36,753,000
Commitments to Sell 84,557,000
Foreign Futures:
Commitments to Purchase 283,941,000
Commitments to Sell 379,781,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS:
Commitments to Purchase 116,349,000
Commitments to Sell 203,705,000
</TABLE>
A portion of the amounts indicated as off-exchange-traded forward currency
contracts is due to offsetting forward commitments to purchase and to sell the
same currency on the same date in the future. These commitments are economically
offsetting, but are not offset in the forward market until the settlement date.
The unrealized gains on open contracts are reported as a component of "Equity in
futures interests trading accounts" on the Statements of Financial Condition and
totaled at December 31, 1998 and 1997, respectively, $1,967,187 and $681,559 for
Spectrum Global Balanced, $8,435,054 and $9,627,161 for Spectrum Select,
$5,299,335 and $2,527,613 for Spectrum Strategic, $18,909,268 and $12,296,712
for Spectrum Technical.
For Spectrum Global Balanced, of the $1,967,187 net unrealized gain on open
contracts at December 31, 1998, $2,044,752 related to exchange-traded futures
contracts and $(77,565) related to off-exchange-traded forward currency
contracts. Of the $681,559 net unrealized gain on open contracts at
December 31, 1997, $657,913 related to exchange-traded futures contracts and
$23,646 related to off-exchange-traded forward currency contracts.
For Spectrum Select, of the $8,435,054 net unrealized gain on open contracts at
December 31, 1998, $8,982,276 related to exchange-traded futures contracts and
$(547,222) related to off-exchange-traded forward currency contracts. Of the
$9,627,161 net unrealized gain on open contracts at December 31, 1997,
$10,514,844 related to exchange-traded futures contracts and $(887,683) related
to off-exchange-traded forward currency contracts.
For Spectrum Strategic, of the $5,299,335 net unrealized gain on open contracts
at December 31, 1998, all related to exchange-traded futures and contracts. Of
the $2,527,613 net unrealized gain on open contracts at December 31, 1997, all
related to exchange-traded futures contracts.
For Spectrum Technical, of the $18,909,268 net unrealized gain on open contracts
at December 31, 1998, $19,606,697 was related to exchange-traded futures
contracts and $(697,429) related to off-exchange-traded forward currency
contracts. Of the $12,296,712 net unrealized gain on open contracts at December
31, 1997, $11,977,756 related to exchange-traded futures contracts and $318,956
related to off-exchange-traded forward currency contracts.
The contract amounts in the above table represent the Partnerships' extent of
involvement in the particular class of financial instrument, but not the credit
risk associated with counterparty nonperformance. The credit risk associated
with the instruments in which the Partnership is involved is limited to the
amounts reflected in the Partnerships' Statements of Financial Condition.
F-21
<PAGE>
Exchange-traded contracts and off-exchange-traded forward currency contracts
held by the Partnerships at December 1998 and 1997 mature as follows:
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
SPECTRUM GLOBAL BALANCED
Exchange-Traded Contracts March 1999 March 1998
Off-Exchange-Traded Forward Currency Contracts March 1999 March 1998
SPECTRUM SELECT
Exchange-Traded Contracts December 1999 December 1998
Off-Exchange-Traded Forward Currency Contracts March 1999 March 1998
SPECTRUM STRATEGIC
Exchange-Traded Contracts March 2000 December 1998
Off-Exchange-Traded Forward Currency Contracts -- January 1998
SPECTRUM TECHNICAL
Exchange-Traded Contracts December 1999 December 1998
Off-Exchange-Traded Forward Currency Contracts March 1999 March 1998
</TABLE>
The Partnerships also have credit risk because either DWR or Carr act as the
futures commission merchants or the counterparties, with respect to most of the
Partnerships' assets. Exchange-traded futures and futures styled options
contracts are marked to market on a daily basis, with variations in value
settled on a daily basis. Each of DWR and Carr, as a futures commission merchant
for each Partnership's exchange-traded futures and futures styled options
contracts, are required, pursuant to regulations of the Commodity Futures
Trading Commission, to segregate from their own assets and for the sole benefit
of their commodity customers, all funds held by them with respect to
exchange-traded futures and futures styled options contracts, including an
amount equal to the net unrealized gain on all open futures and futures styled
options contracts, which funds, in the aggregate, totaled at December 31, 1998
and December 31, 1997 respectively, $45,065,113 and $25,612,869 for Spectrum
Global Balanced, $196,601,695 and $168,693,769 for Spectrum Select, $69,218,389
and $59,631,616 for Spectrum Strategic, and $254,651,022 and $180,827,678 for
Spectrum Technical. With respect to the Partnership's off-exchange-traded
forward currency contracts, there are no daily settlements of variations in
value nor is there any requirement that an amount equal to the net unrealized
gain on open forward contracts be segregated. With respect to those
off-exchange-traded forward currency contracts, the Partnerships are at risk to
the ability of Carr, the sole counterparty on all of such contracts, to perform.
Carr's parent, Credit Agricole Indosuez, has guaranteed to the Partnerships
payment of the net liquidating value of the transactions in the Partnerships'
account with Carr (including foreign currency contracts).
For the year ended December 31, 1997, the average fair value of financial
instruments held for trading purposes was as follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------------- ------------
$ $
<S> <C> <C>
SPECTRUM GLOBAL BALANCED
- ------------------------------------------------------------
EXCHANGE-TRADED CONTRACTS:
Financial Futures 39,908,000 11,661,000
Options on Financial Futures 1,206,000 2,398,000
Commodity Futures 4,414,000 3,535,000
Foreign Futures 28,444,000 26,146,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 12,716,000 16,655,000
</TABLE>
F-22
<PAGE>
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------------- ------------
$ $
<S> <C> <C>
SPECTRUM SELECT
- ------------------------------------------------------------
EXCHANGE-TRADED CONTRACTS:
Financial Futures 363,272,000 243,761,000
Options on Financial Futures 3,781,000 --
Commodity Futures 95,455,000 76,233,000
Options on Commodity Futures 2,484,000 1,789,000
Foreign Futures 360,391,000 382,135,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 41,814,000 40,388,000
</TABLE>
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------------- ------------
$ $
<S> <C> <C>
SPECTRUM STRATEGIC
- ------------------------------------------------------------
EXCHANGE-TRADED CONTRACTS:
Financial Futures 30,123,000 70,617,000
Options on Financial Futures 18,562,000 1,261,000
Commodity Futures 80,636,000 24,285,000
Options on Commodity Futures 27,328,000 28,813,000
Foreign Futures 83,507,000 29,983,000
Options on Foreign Futures 4,320,000 479,000
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 507,000 922,000
</TABLE>
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------------- ------------
$ $
<S> <C> <C>
SPECTRUM TECHNICAL
- ------------------------------------------------------------
EXCHANGE-TRADED CONTRACTS:
Financial Futures 233,922,000 153,604,000
Options on Financial Futures 6,705,000 347,000
Commodity Futures 58,233,000 60,140,000
Options on Commodity Futures 2,181,000 --
Foreign Futures 205,510,000 168,044,000
Options on Foreign Futures 4,070,000 --
OFF-EXCHANGE-TRADED FORWARD CURRENCY CONTRACTS 103,299,000 111,186,000
</TABLE>
5. LEGAL MATTERS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported class
actions were filed in the Superior Court of the State of California, County of
Los Angeles, on behalf of all purchasers of interests in limited partnership
commodity pools sold by DWR. Named defendants include DWR, Demeter, Dean Witter
Futures and Currency Management Inc., MSDW (all such parties referred to
hereafter as the "Dean Witter Parties"), Spectrum Select (under its original
name) and certain other limited partnership commodity pools of which Demeter is
the general partner, and certain trading advisors to these pools. On June 16,
1997, the plaintiffs in the above actions filed a consolidated amended
complaint, alleging, among other things, that the defendants committed fraud,
deceit, negligent misrepresentation, various violations of the California
Corporations Code, intentional and negligent breach of fiduciary duty,
fraudulent and unfair business practices, unjust enrichment, and conversion in
the sale and operation of the various limited partnerships commodity pools.
Similar purported class actions were also filed on September 18 and 20, 1996 in
the Supreme Court of the State of New York, New York County, and on
November 14, 1996 in the Superior Court of the State of Delaware, New Castle
County, against the Dean Witter Parties and certain trading advisors on behalf
of all purchasers of interests in various limited partnership commodity pools
sold by DWR. A consolidated and amended complaint in the action pending in the
Supreme Court of the State of New York was filed on August 13, 1997, alleging
that the defendants committed fraud, breach of fiduciary duty, and negligent
misrepresentation in the sale and operation of the various limited partnership
commodity pools.
On December 16, 1997, upon motion of the plaintiffs, the action pending in
the Superior Court of the State of Delaware was voluntarily dismissed without
prejudice. The New York Supreme Court dismissed
F-23
<PAGE>
the New York action in November 1998, but granted plaintiffs leave to file an
amended complaint, which they did in early December 1998. The defendants have
filed a motion to dismiss the amended complaint with prejudice on February 1,
1999. The complaints seek unspecified amounts of compensatory and punitive
damages and other relief. It is possible that additional similar actions may be
filed and that, in the course of these actions, other parties, including other
Partnerships, could be added as defendants. The Dean Witter Parties believe that
they have strong defenses to, and they will vigorously contest, the actions. On
April 12, 1999 the defendants also filed a motion in the California action to
oppose certification by the court of the class in the California litigation.
Although the ultimate outcome of legal proceedings cannot be predicted with
certainty, it is the opinion of management of the Dean Witter Parties that the
resolution of the actions will not have a material adverse effect on the
financial condition or the results of operations of Spectrum Select or any of
the Dean Witter Parties.
6. SUBSEQUENT EVENTS
On March 4, 1999, Stonebrook was removed as a Trading Advisor to Spectrum
Strategic.
On September 24, 1999, the Supreme Court in the State of California entered an
order dismissing the consolidated amended complaint without prejudice and on
consent.
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Limited Partners and the General Partner of
Morgan Stanley Tangible Asset Fund L.P.:
We have audited the accompanying statement of financial condition of Morgan
Stanley Tangible Asset Fund L.P. (the "Partnership") as of December 31, 1998 and
the related statement of operations, changes in partner's capital, and cash
flows for the period from January 2, 1998 through December 31, 1998. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Morgan Stanley Tangible Asset Fund L.P. at
December 31, 1998 and the results of its operations and its cash flows for the
above stated period in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
February 15, 1999
(September 24, 1999 as to Note 5)
F-25
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
$ $
(UNAUDITED)
<S> <C> <C>
ASSETS
Equity in futures interests trading accounts:
Cash 22,555,490 26,519,891
Net unrealized gain (loss) on open contracts 563,118 (635,643)
---------- ----------
Total Trading Equity 23,118,608 25,884,248
Interest receivable (MS & Co.) 66,369 78,722
---------- ----------
Total Assets 23,184,977 25,962,970
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 330,750 895,547
Accrued brokerage fees (MS & Co. and MSIL) 67,063 81,222
Accrued management fees (MSCM) 45,933 55,632
Service fees payable (Demeter) 18,373 22,253
---------- ----------
Total Liabilities 462,119 1,054,654
---------- ----------
PARTNERS' CAPITAL
Limited Partners (3,297,031.187 and 3,745,069.052 Units,
respectively) 22,427,664 24,622,999
General Partner (43,395.648 Units) 295,194 285,317
---------- ----------
Total Partners' Capital 22,722,858 24,908,316
---------- ----------
Total Liabilities and Partners' Capital 23,184,977 25,962,970
========== ==========
NET ASSET VALUE PER UNIT 6.80 6.57
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE SIX MONTHS ENDED JANUARY 2, 1998
JUNE 30, (COMMENCEMENT OF
----------------------------- OPERATIONS) TO
1999 1998 DECEMBER 31, 1998
----------- ----------- -------------------
$ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUES
Trading profit (loss):
Realized (29,303) (4,123,450) (11,870,063)
Net change in unrealized 1,198,761 (1,569,180) (635,643)
--------- ---------- -----------
Total Trading Results 1,169,458 (5,692,630) (12,505,706)
Interest Income (MS & Co.) 414,095 686,806 1,265,793
--------- ---------- -----------
Total Revenues 1,583,553 (5,005,824) (11,239,913)
--------- ---------- -----------
EXPENSES
Brokerage fees (MS & Co. and MSIL) 426,601 619,807 1,176,024
Management fees (MSDWCM) 292,192 424,525 805,496
Service fees (Demeter) 116,877 169,810 322,198
--------- ---------- -----------
Total Expenses 835,670 1,214,142 2,303,718
--------- ---------- -----------
NET INCOME (LOSS) 747,883 (6,219,966) (13,543,631)
========= ========== ===========
Net Income (Loss) Allocation
Limited Partners 738,006 (6,154,083) (13,398,948)
General Partner 9,877 (65,883) (144,683)
Net Income (Loss) Per Unit
Limited Partners .23 (1.61) (3.43)
General Partner .23 (1.61) (3.43)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AND FOR THE PERIOD FROM
JANUARY 2, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
------------- ----------- -------- -----------
<S> <C> <C> <C> <C>
$ $ $
Partners' Capital, January 2, 1998
(commencement of operations) 200.000 1,000 1,000 2,000
Initial Offering 2,573,486.803 25,475,868 259,000 25,734,868
Offering of Units 1,665,202.477 15,758,355 170,000 15,928,355
Net Loss -- (13,398,948) (144,683) (13,543,631)
Redemptions (450,424.580) (3,213,276) -- (3,213,276)
------------- ----------- -------- -----------
Partners' Capital, December 31, 1998 3,788,464.700 24,622,999 285,317 24,908,316
Net income -- 738,006 9,877 747,883
Redemptions (448,037.865) (2,933,341) -- (2,933,341)
------------- ----------- -------- -----------
Partners' Capital, June 30, 1999 (Unaudited) 3,340,426.835 22,427,664 295,194 22,722,858
============= =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE SIX MONTHS ENDED JANUARY 2, 1998
JUNE 30, (COMMENCEMENT OF
-------------------------- OPERATIONS) TO
1999 1998 DECEMBER 31, 1998
----------- ----------- -------------------
$ $ $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 747,883 (6,219,966) (13,543,631)
Noncash item included in net income (loss):
Net change in unrealized (1,198,761) 1,569,180 635,643
(Increase) decrease in operating assets:
Interest receivable (DWR) 12,353 (102,859) (78,722)
Investment in U.S. Treasury Bills -- (3,090,088) --
Increase (decrease) in operating liabilities:
Accrued brokerage fees (MS & Co. and MSIL) (14,159) 107,741 81,222
Accrued management fees (MSDWCM) (9,699) 73,795 55,632
Service fees payable (Demeter) (3,880) 29,518 22,253
---------- ---------- -----------
Net cash used for operating activities (466,263) (7,632,679) (12,827,603)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions payable (564,797) 190,150 895,547
Redemptions of units (2,933,341) (223,330) (3,213,276)
Initial offering -- 25,736,868 25,736,868
Offering of units -- 14,793,350 15,928,355
---------- ---------- -----------
Net cash provided by (used for) financing activities (3,498,138) 40,497,038 39,347,494
---------- ---------- -----------
Net increase (decrease) in cash (3,964,401) 32,864,359 26,519,891
Balance at beginning of period 26,519,891 -- --
---------- ---------- -----------
Balance at end of period 22,555,490 32,864,359 26,519,891
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
MORGAN STANLEY TANGIBLE ASSET FUND L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Morgan Stanley Tangible Asset Fund L.P. (the "Partnership") is a
limited partnership organized to engage primarily in the speculative trading of
futures contracts in metals, energy and agricultural markets, (collectively,
"futures interests") and commenced operations on January 2, 1998. The general
partner for the Partnership is Demeter Management Corporation ("Demeter"). The
commodity brokers are Morgan Stanley & Co. Incorporated ("MS & Co.") and Morgan
Stanley & Co. International Limited ("MSIL"), (collectively, the "Commodity
Brokers"). The trading advisor is Morgan Stanley Commodities Management, Inc.
("MSCM"). MSCM, the Commodity Brokers and Demeter are wholly-owned subsidiaries
of Morgan Stanley Dean Witter & Co. ("MSDW").
Demeter is required to maintain a 1% minimum interest in the equity of the
Partnership and income (losses) are shared by the General and Limited Partners
based upon their proportional ownership interests.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION--Futures interests are open commitments until settlement
date. They are valued at market and the resulting unrealized gains and losses
are reflected in income. MS & Co. credits the Partnership at each month-end with
interest income as if 80% of the Partnership's average daily "Net Assets" for
the month, as defined in the Limited Partnership Agreement, were invested at a
rate based on U.S. Treasury bills. For purposes of such interest payments, Net
Assets do not include monies due to the Partnership on or with respect to
futures interests but not actually received.
NET INCOME (LOSS) PER UNIT--Net income (loss) per Unit is computed using the
weighted average number of Units outstanding during the period.
EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS--The Partnership's asset "Equity in
futures interests trading accounts" consists of cash on deposit at MS&Co. and
MSIL to be used as margin for trading and the net asset or liability related to
unrealized gains or losses on open contracts.
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS--Brokerage fees are accrued at
a monthly rate of 1/12 of 3.65% of the Net Assets, as defined, as of the first
day of each month (a 3.65% annual rate). Such fees cover all costs of executing
trades by the Partnership, including floor brokerage fees, exchange fees,
clearing house fees, NFA fees, "give-ups" or transfer fees and any costs
associated with taking delivery of commodities.
SERVICE FEE--The Partnership pays Demeter a monthly service fee equal to 1/12 of
1% per month (a 1% annual rate) of the Partnership's Net Assets, as defined, as
of the first day of each month.
OPERATING EXPENSES--The Partnership incurs monthly management fees and may incur
incentive fees as described in Note 2. All administrative expenses are borne by
Dean Witter Reynolds Inc. ("DWR").
INCOME TAXES--No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of the Partnership's revenues
and expenses for income tax purposes.
DISTRIBUTIONS--Distributions, other than on redemption of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
OFFERING OF UNITS--Units of limited partnership interest were offered to the
public at a price equal to 100% of the net asset value as of the close of
business on the last day of the month immediately preceding the four closings
held on January 2, February 2, March 2 and April 1, 1998.
F-30
<PAGE>
The Partnership, Demeter, MSCM and DWR, the selling agent and an affiliate of
Demeter, extended the Offering Period for those Units already registered with
the SEC but still unsold, until October 16, 1998. The remaining unsold Units
were offered to the public at a price equal to 100% of the Net Asset Value as of
the close of business on the last day of the month; immediately preceding the
three closings held on August 3, September 1, and October 1, 1998.
REDEMPTIONS--Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value Per Unit effective as of the last day of the sixth month
following the closing at which a person first becomes a Limited Partner, upon
five business days advance notice by redemption form to Demeter. Thereafter,
Units may be redeemed as of the end of any month upon five business days advance
notice by redemption form to Demeter. However, any Units redeemed at 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 per 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. Limited Partners who
obtained their Units via an exchange from another DWR-sponsored commodity pool
are not subject to the six month holding period or the redemption charges.
DISSOLUTION OF THE PARTNERSHIP--The Partnership will terminate on December 31,
2027 or at an earlier date if certain conditions occur as defined in the
Partnership's Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
The Partnership pays brokerage fees to the Commodity Brokers and a service fee
to Demeter as described in Note 1. The Partnership's cash is on deposit with
MS & Co. and MSIL in futures interests trading accounts to meet margin
requirements as needed. MS & Co. pays interest on these funds as described in
Note 1.
Demeter, on behalf of the Partnership and itself entered into a Management
Agreement with MSDWCM (formerly MSCM) to make all trading decisions for the
Partnership. Compensation to MSDWCM (formerly MSCM) by the Partnership consists
of a management fee and an incentive fee as follows:
MANAGEMENT FEE--The management fee is accrued at the rate of 5/24 of 1% of the
Net Assets on the first day of each month (a 2.5% annual rate).
INCENTIVE FEE--The Partnership will pay an annual incentive fee equal to 20% of
the "Trading Profits", as defined, as of the end of each calendar year. Such
incentive fee is accrued in each month in which Trading Profits occur. In those
months in which Trading Profits are negative, previous accruals, if any, during
the incentive period will be reduced. Any accrued incentive fees with respect to
Units redeemed at the end of a month that is not the end of a calendar year will
be deducted and paid to MSCM at the time of such redemption.
3. FINANCIAL INSTRUMENTS
The Partnership trades futures contracts in metals, energy and agricultural
markets. Futures and forwards represent contracts for delayed delivery of an
instrument at a specified date and price. Risk arises from changes in the value
of these contracts and the potential inability of counterparties to perform
under the terms of the contracts. There are numerous factors which may
significantly influence the market value of these contracts, including interest
rate volatility.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for fiscal years beginning after
June 15, 1999. The Partnership has elected to adopt the provisions of SFAS No.
133 for the fiscal year ended December 31, 1998. SFAS No. 133 supersedes SFAS
No. 119 and No. 105, which required the disclosure of average aggregate fair
values and contract/notional values, respectively, of derivative financial
instruments for an entity which carries its assets at fair value. The
application of SFAS No. 133 does not have a significant effect on the
Partnership's financial statements.
F-31
<PAGE>
The unrealized loss on open contracts is reported as a component of "Equity in
futures interests trading accounts" on the Statement of Financial Condition and
totaled $635,643 at December 31, 1998.
The entire $635,643 net unrealized loss on open contracts at December 31, 1998,
was related to exchange-traded futures contracts that mature through June 1999.
The credit risk associated with the instruments in which the Partnership is
involved is limited to the amounts reflected in the Partnership's Statement of
Financial Condition.
The Partnership also has credit risk because MS & Co. and MSIL act as the
futures commission merchants or the counterparties, with respect to most of the
Partnership's assets. Exchange-traded futures contracts are marked to market on
a daily basis, with variations in value settled on a daily basis. Each of MS &
Co. and MSIL, as a futures commission merchant for the Partnership's
exchange-traded futures 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 contracts including an amount equal to the
net unrealized loss on all open futures contracts, which funds, in the
aggregate, totaled $25,884,248 at December 31, 1998.
4. LEGAL MATTERS
On September 6, 10, and 20, 1996 and on March 13, 1997, similar purported class
actions were filed in the Superior Court of the State of California, County of
Los Angeles, on behalf of all purchasers of interests in limited partnership
commodity pools sold by DWR. Named defendants include DWR, Demeter, Dean Witter
Futures & Currency Management, Inc., MSDW (all such parties referred to
hereafter as the "Dean Witter Parties"), certain other limited partnership
commodity pools of which Demeter is the general partner, and certain trading
advisors to those pools. On June 16, 1997, the plaintiffs in the above actions
filed a consolidated amended complaint, alleging, among other things, that the
defendants committed fraud, deceit, negligent misrepresentation, various
violations of the California Corporations Code, intentional and negligent breach
of fiduciary duty, fraudulent and unfair business practices, unjust enrichment,
and conversion in the sale and operation of the various limited partnership
commodity pools. Similar purported class actions were also filed on
September 18 and 20, 1996, in the Supreme Court of the State of New York, New
York County, and on November 14, 1996 in the Superior Court of the State of
Delaware, New Castle County against the Dean Witter Parties and certain trading
advisors on behalf of all purchasers of interests in various limited partnership
commodity pools sold by DWR. A consolidated and amended complaint in the action
pending in the Supreme Court of the State of New York was filed on August 13,
1997, alleging that the defendants committed fraud, breach of fiduciary duty,
and negligent misrepresentation in the sale and operation of the various limited
partnership commodity pools. On December 16, 1997, upon motion of the
plaintiffs, the action pending in the Superior Court of the State of Delaware
was voluntarily dismissed without prejudice. The New York Supreme Court
dismissed the New York action in November 1998, but granted plaintiffs leave to
file an amended complaint, which they did in early December 1998. The defendants
have filed a motion to dismiss the amended complaint with prejudice on
February 1, 1999. The complaints seek unspecified amounts of compensatory and
punitive damages and other relief. It is possible that additional similar
actions may be filed and that, in the course of these actions, other parties
could be added as defendants. The Dean Witter Parties believe that they have
strong defenses to, and they will vigorously contest, the actions. Although the
ultimate outcome of legal proceedings cannot be predicted with certainty, it is
the opinion of management of the Dean Witter Parties that the resolution of the
actions will not have a material adverse effect on the financial condition or
the results of operations of any of the Dean Witter Parties.
5. SUBSEQUENT EVENTS
On September 24, 1999, the Superior Court in the State of California entered an
order dismissing the consolidated amended complaint without prejudice and on
consent.
F-32
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Limited Partners and the General Partner of
Morgan Stanley Dean Witter Spectrum Currency L.P.:
We have audited the accompanying statement of financial condition of Morgan
Stanley Dean Witter Spectrum Currency L.P. (the "Partnership") as of
October 26, 1999. This statement of financial condition is the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
this statement of financial condition based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such statement of financial condition presents fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter Spectrum
Currency L.P. as of October 26, 1999 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
October 27, 1999
New York, New York
F-33
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
(LIMITED PARTNERS SHOULD NOTE THAT THEIR OWNERSHIP OF UNITS IN THE PARTNERSHIP
DOES NOT RESULT IN THE OWNERSHIP OF ANY INTEREST IN THE GENERAL PARTNER)
STATEMENT OF FINANCIAL CONDITION
AS OF OCTOBER 26, 1999
<TABLE>
<S> <C>
ASSETS
Equity in Commodity Interest Trading Account:
Cash...................................................... $20
===
PARTNERS' CAPITAL
Limited Partner--1 Unit Outstanding....................... 10
General Partner--1 Unit Outstanding....................... 10
---
20
===
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-34
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
NOTES TO STATEMENT OF FINANCIAL CONDITION
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Dean Witter Spectrum Currency L.P. (the "Partnership") is a
limited partnership organized under the Delaware Revised Uniform Limited
Partnership Act on October 20, 1999 to engage in the speculative trading of
futures interests in global currency markets. Demeter Management Corporation, as
the general partner of the Partnership (the "General Partner"), and Robert E.
Murray, President of the General Partner, acting as initial Limited Partner,
each made initial capital contributions of $10 to facilitate the filing of a
Certificate of Limited Partnership under the Delaware Revised Uniform Limited
Partnership Act.
The Partnership will offer 15,000,000 Units of Limited Partnership Interest
("Units") for sale to the public at an initial price of $10 per Unit. The
minimum subscription for most subscribers will be $5,000, or $2,000 in the case
of an IRA or in a Non-Series Exchange, as described in the Partnerships'
Prospectus. If at least 500,000 Units of the Partnership are subscribed for
during the "Initial Offering Period" (defined in the Prospectus as the period
ending April 30, 2000, subject to earlier termination or extension to no later
than June 30, 2000) the General Partner may accept such subscriptions at the
"Initial Closing" (currently scheduled for December 31, 1999) and commence
operations of such Partnership. Thereafter, Units of the Partnership will be
sold at Monthly Closings at a price equal to 100% of the Net Asset Value per
Unit (as described in the Partnerships' Prospectus). If it appears that
subscriptions will be received in excess of the Units available for sale, the
General Partner may register additional Units for sale.
The Partnership's cash is on deposit with DWR, an affiliate of the General
Partner, in a futures interest trading account. At each Monthly Closing, the
General Partner will contribute, in $1,000 increments, to the Partnership, the
additional amount in cash that is necessary for it at all times to own, for its
account, Units of General Partnership Interest at least equal to the greater of
$25,000 or 1% of aggregate capital contributions. The General Partner and each
Limited Partner will share in the profits and losses of the Partnership in
proportion to the amount of Partnership interest owned by each.
Both the General Partner and DWR are wholly-owned subsidiaries of Morgan Stanley
Dean Witter & Co. ("MSDW").
The Partnership will terminate on - or at an earlier date if certain
conditions occur as defined in the Partnership's Limited Partnership Agreement.
2. ORGANIZATION AND OFFERING EXPENSES
The Partnership is not liable for any organizational and offering expenses in
connection with the issuance and distribution of the Units. DWR has agreed to
pay the organizational expenses of the Partnership and the expenses of offering
the Units to the public.
The proceeds from the subscription of Units will be held in escrow and invested
in an interest-bearing money market account. The pro-rata share of interest
earned on accepted or rejected subscription funds while such funds are held in
escrow will be credited to subscribers' customer accounts with DWR.
3. OTHER AGREEMENTS
The proceeds from the the Initial and each Monthly Closing will be used to
establish a futures interests trading account with DWR for each of the
Partnership's Trading Advisors, John W. Henry & Company, Inc.
("JWH-Registered Trademark-") and Sunrise Capital Partners, LLC ("Sunrise").
The Partnership will pay a monthly management fee to JWH equal to 1/12 of 4% per
month (a 4% annual rate) and to Sunrise equal to 1/12 of 3% per month (a 3%
annual rate), of the Partnership's Net Assets (as defined in the Prospectus) as
of the first day of each month.
The Partnership will also pay a monthly incentive fee to each Trading Advisor
equal to 15% of "Trading Profits" experienced as to that Trading Advisor's
allocated net assets as of the end of each calendar month.
F-35
<PAGE>
If the Trading Advisor has experienced losses with respect to Net Assets at the
end of each calendar month, the Trading Advisor must earn back such losses
before the Trading Advisor is eligible for an incentive fee.
Under the Customer Agreement with DWR, the Partnership will pay DWR a flat-rate
monthly brokerage fee of 1/12 of 4.60% of Net Assets as of the first day of each
month (a 4.60% annual rate).
Under the Customer Agreement with Carr Futures Inc. ("CFI"), DWR will pay or
reimburse the Partnership for all fees and costs of CFI for executing trades by
the Partnership.
DWR will credit the Partnership with interest income at month-end at the rate
earned by DWR on its U.S. Treasury bills investments with customer segregated
funds as if 80% of the Partnership's average daily assets for the month were
invested at a prevailing rate on U.S. Treasury bills.
F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Demeter Management Corporation:
We have audited the accompanying statements of financial condition of Demeter
Management Corporation (a wholly-owned subsidiary of Morgan Stanley Dean Witter
& Co.)(the "Company") as of November 30, 1998 and 1997. These statements of
financial condition are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements of financial
condition based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of financial condition is free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of financial condition.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement of
financial condition presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such statements of financial condition present fairly, in all
material respects, the financial position of Demeter Management Corporation as
of November 30, 1998 and 1997 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
January 11, 1999
New York, New York
(September 24, 1999 as to Note 6)
F-37
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO. ("MSDW"))
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
NOVEMBER 30,
AUGUST 31, ---------------------------
1999 1998 1997
------------ ------------ ------------
$ $ $
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Investments in affiliated partnerships (Note 2) 18,403,043 16,959,248 22,016,069
Income taxes receivable 482,302 708,505 429,885
Receivable from affiliated partnerships 19,543 25,716 968
------------ ------------ ------------
Total Assets 18,904,888 17,693,469 22,446,922
============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Payable to MSDW (Note 3) 12,739,005 11,648,971 17,995,100
Accrued expenses 36,765 62,198 34,072
------------ ------------ ------------
Total Liabilities 12,775,770 11,711,169 18,029,172
------------ ------------ ------------
STOCKHOLDER'S EQUITY
Common stock, no par value:
Authorized 1,000 shares; Issued and outstanding 100
shares at stated value of $500 per share 50,000 50,000 50,000
Additional paid-in capital 123,170,000 111,170,000 111,170,000
Retained earnings 5,979,118 5,832,300 4,267,750
------------ ------------ ------------
129,199,118 117,052,300 115,487,750
Less: Notes receivable from MSDW (Note 4) (123,070,000) (111,070,000) (111,070,000)
------------ ------------ ------------
Total Stockholder's Equity 6,129,118 5,982,300 4,417,750
------------ ------------ ------------
Total Liabilities and Stockholder's Equity 18,904,888 17,693,469 22,446,922
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements of financial
condition.
F-38
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION
1. BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Demeter Management Corporation ("Demeter") is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co. ("MSDW").
On May 31, 1997, Morgan Stanley Group Inc. ("Morgan Stanley") was merged with
and into Dean Witter, Discover & Co. ("DWD"). At that time DWD changed its
corporate name to Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD").
Effective February 19, 1998 MSDWD changed its corporate name to Morgan Stanley
Dean Witter & Co. Prior to the merger, DWD's fiscal year ended on December 31.
Subsequent to the merger, MSDW and Demeter adopted a fiscal year end of
November 30.
Demeter manages the following commodity pools as their sole general partner:
Dean Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III, Dean Witter
Cornerstone Fund IV, Columbia Futures Fund, Dean Witter Diversified Futures Fund
Limited Partnership, Dean Witter Diversified Futures Fund II L.P., Dean Witter
Diversified Futures Fund III L.P., Dean Witter Multi-Market Portfolio L.P.
(formerly, Dean Witter Principal Guaranteed Fund L.P.), Dean Witter Principal
Plus Fund L.P., Dean Witter Principal Plus Fund Management L.P., Dean Witter
Portfolio Strategy Fund L.P. (formerly, Dean Witter Principal Secured Futures
Fund L.P.) ("DWPSF"), Dean Witter Global Perspective Portfolio L.P., Dean Witter
World Currency Fund L.P., Dean Witter Institutional Account II L.P.
("DWIA II"), DWFCM International Access Fund L.P., Dean Witter Anchor
Institutional Balanced Portfolio Account L.P., ("Anchor"), 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 Dean Witter Spectrum
Commodity L.P. (formerly, Morgan Stanley Tangible Asset Fund L.P.) ("MSTAF"),
Morgan Stanley Dean Witter/Chesapeake L.P., DWR Institutional Balanced Portfolio
Account III L.P. ("DWIBP III"), Morgan Stanley Dean Witter/JWH Futures Fund
L.P., Morgan Stanley Dean Witter/ Market Street Futures Fund L.P. ("MKTST"),
Morgan Stanley Dean Witter Charter Graham L.P. ("Charter Graham"), Morgan
Stanley Dean Witter Charter Millburn L.P. ("Charter Millburn"), and Morgan
Stanley Dean Witter Charter Welton L.P. ("Charter Welton").
Each of the commodity pools is a limited partnership organized to engage in the
speculative trading of commodity futures contracts, forward contracts on foreign
currencies and other commodity interests.
Demeter reopened DWPSF for additional investment and on May 12, 1997, DWPSF
registered with the SEC 50,000 units which were offered to investors in a public
offering.
On July 31, 1997, Demeter entered into a limited partnership agreement as
general partner in MSTAF. On November 4, 1997, MSTAF registered with the
SEC 5,000,000 units and began trading on January 2, 1998. Units were made
available to investors in a public offering that ended March 12, 1998 ("Offering
Period"). Subsequently, MSTAF, Demeter, the trading advisor and Dean Witter
Reynolds agreed to extend the Offering Period until no later than October 16,
1998 ("Extended Offering Period"), and offered to the public unsold units
remaining at the end of the Offering Period.
On September 18, 1997, Demeter ceased trading activities in Anchor and
subsequently distributed its net assets.
In January of 1998, Demeter entered into a limited partnership agreement as
general partner in MKTST, which offers units to investors in a continuing
private offering. MKTST began trading on October 1, 1998.
On April 20, 1998, Dean Witter Spectrum Balanced L.P. changed its name to Dean
Witter Spectrum Global Balanced L.P.
On April 20, 1998, Dean Witter Select Futures Fund L.P. changed its name to Dean
Witter Spectrum Select L.P. ("DWSF"). Effective May 1, 1998 DWSF became part of
the Spectrum family of funds and consequently revised its fee structure,
instituted an exchange provision with other funds in the Spectrum family and is
offered to investors in a continuing public offering.
F-39
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
On April 30, 1998, Demeter ceased trading activities in DWIA II and subsequently
distributed its net assets.
On May 11, 1998 Demeter registered with the SEC 5,000,000 additional units of
Dean Witter Spectrum Technical L.P. and 1,500,000 units of DWSF, both of which
are being offered to investors in a continuing public offering with previously
registered units of Dean Witter Spectrum Strategic L.P. and Dean Witter Spectrum
Global Balanced L.P.
On July 15, 1998, Demeter entered into a limited partnership agreement as
general partner in the Morgan Stanley Dean Witter Charter Series. The three
partnerships that comprise the Charter Series are Morgan Stanley Dean Witter
Charter Graham L.P. ("Charter Graham"), Morgan Stanley Dean Witter Charter
Millburn L.P. ("Charter Millburn") and Morgan Stanley Dean Witter Charter Welton
L.P. ("Charter Welton"). On July 29, 1998, the Charter Series individually
registered with the SEC 3,000,000 units of Charter Graham, 3,000,000 units of
Charter Millburn and 3,000,000 units of Charter Welton to be offered to
investors for a limited time in a public offering.
On September 30, 1998, Demeter ceased trading activities in DWIBP III, and
subsequently distributed its net assets.
INCOME TAXES The results of operations of Demeter are included in the
consolidated federal income tax return of MSDW, computed on a separate company
basis and due to MSDW.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. INVESTMENTS IN AFFILIATED PARTNERSHIPS
The limited partnership agreement of each commodity pool requires Demeter to
maintain a general partnership interest in each partnership, generally in an
amount equal to, but not less than 1 percent of the aggregate capital
contributed to the partnership by all partners.
The total assets, liabilities and partners' capital of all the funds managed by
Demeter at August 31, 1999, November 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
AUGUST 31, -----------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
$ $ $
Total assets................................... 1,419,112,993 1,316,093,947 1,195,307,516
Total liabilities.............................. 20,595,220 21,644,069 19,346,113
Total partners' capital........................ 1,398,517,773 1,294,449,878 1,175,961,403
</TABLE>
Demeter's investments in the above limited partnerships are carried at market
value with changes in such market value reflected currently in operations.
3. PAYABLE TO MSDW
The payable to MSDW is primarily for amounts due for the purchase of partnership
investments, income tax payments made by MSDW on behalf of Demeter and the
cumulative results of operations.
4. NET WORTH REQUIREMENT
At August 31, 1999, Demeter held non-interest bearing notes from MSDW that were
payable on demand in the amount of $123,070,000. At November 30, 1998 and 1997,
Demeter held non-interest bearing notes from MSDW that were payable on demand in
the amount of $111,070,000. These notes were received in connection with
additional capital contributions.
F-40
<PAGE>
DEMETER MANAGEMENT CORPORATION
(WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.)
NOTES TO STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
The limited partnership agreement of each commodity pool requires Demeter to
maintain its net worth at an amount not less than 10% of the capital
contributions by all partners in each pool in which Demeter is the general
partner (15% if the capital contributions to any partnership are less than
$2,500,000, or $250,000, whichever is less).
In calculating this requirement, Demeter's interests in each limited partnership
and any amounts receivable from or payable to such partnerships are excluded
from net worth. Notes receivable from MSDW are included in net worth for
purposes of this calculation.
5. LEGAL MATTERS
On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported class
actions were filed in the Superior Court of the State of California, County of
Los Angeles, on behalf of all purchasers of interests in limited partnership
commodity pools sold by DWR, an affiliate of Demeter. Named defendants include
DWR, Demeter, Dean Witter Futures and Currency Management Inc., MSDW (all such
parties referred to hereafter as the "Dean Witter Parties"), certain limited
partnership commodity pools of which Demeter is the general partner, and certain
trading advisors to those pools. On June 16, 1997, the plaintiffs in the above
actions filed a consolidated amended complaint alleging, among other things,
that the defendants committed fraud, deceit, negligent misrepresentation,
various violations of the California Corporations Code, intentional and
negligent breach of fiduciary duty, fraudulent and unfair business practices,
unjust enrichment, and conversion in the sale and operation of the various
limited partnership commodity pools. Similar purported class actions were also
filed on September 18 and 20, 1996 in the Supreme Court of the State of New
York, New York County, and on November 14, 1996 in the Superior Court of the
State of Delaware, New Castle County, against the Dean Witter Parties and
certain trading advisors on behalf of all purchasers of interests in various
limited partnership commodity pools sold by DWR. A consolidated and amended
complaint in the action pending in the Supreme Court of the State of New York
was filed on August 13, 1997, alleging that the defendants committed fraud,
breach of fiduciary duty, and negligent misrepresentation in the sale and
operation of the various limited partnership commodity pools.
On December 16, 1997, upon motion of the plaintiffs, the action pending in
the Superior Court of the State of Delaware was voluntarily dismissed without
prejudice. The New York Supreme Court dismissed the New York action in November
1998, but granted plaintiffs leave to file an amended complaint, which they did
in early December 1998. The defendants have filed a motion to dismiss the
amended complaint with prejudice on February 1, 1999. The complaints seek
unspecified amounts of compensatory and punitive damages and other relief. It is
possible that additional similar actions may be filed and that, in the course of
these actions, other parties could be added as defendants. The Dean Witter
Parties believe that they have strong defenses to, and they will vigorously
contest, the actions. On April 12, 1999 the defendants also filed a motion in
the California action to oppose certification by the court of the class in the
California litigation. Although the ultimate outcome of legal proceedings cannot
be predicted with certainty, it is the opinion of management of the Dean Witter
Parties that the resolution of the actions will not have a material adverse
effect on the financial condition or the results of operations of any of the
Dean Witter Parties.
6. SUBSEQUENT EVENTS
On September 24, 1999, the Supreme Court in the State of California entered an
order dismissing the consolidated complaint without prejudice and on consent.
F-41
<PAGE>
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
<TABLE>
<CAPTION>
TOTAL UNITS OF
LIMITED PARTNERSHIP
INTEREST OFFERED:
-------------------
<S> <C>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P. 8,141,300.161
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P. 11,557,974.013
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P. 9,738,672.748
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P. 6,672,654.480
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P. 15,000,000.000
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P. 7,000,000.000
</TABLE>
-------------------
THESE ARE SPECULATIVE, LEVERAGED INVESTMENTS THAT INVOLVE THE RISK OF LOSS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
SEE "RISK FACTORS" BEGINNING AT PAGE - IN PART ONE OF THIS DISCLOSURE
DOCUMENT
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE
DOCUMENT AND A STATEMENT OF ADDITIONAL
INFORMATION. THESE PARTS ARE BOUND
TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION.
MORGAN STANLEY DEAN WITTER
DEAN WITTER REYNOLDS INC.
-----------------
- ,
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
The Futures, Options, and Forwards Markets.................. II-1
Futures Contracts......................................... II-1
Options on Futures........................................ II-1
Forward Contracts......................................... II-2
Hedgers and Speculators................................... II-2
Futures Exchanges......................................... II-2
Speculative Position Limits............................... II-3
Daily Limits.............................................. II-3
Regulations............................................... II-3
Margins................................................... II-4
Potential Advantages........................................ II-5
Investment Diversification................................ II-5
Professional Management................................... II-11
The Trading Advisor Selection Process..................... II-11
Futures Interests Traded.................................. II-12
Exchange Privilege........................................ II-13
Diversified Professional Trading Management............... II-13
Limited Liability......................................... II-14
Interest Income........................................... II-14
Administrative Convenience................................ II-14
Supplemental Performance Information........................ II-14
Exhibit A--Form of Amended and Restated Limited Partnership
Agreement................................................. A-1
Annex--Request for Redemption............................. A-24
Exhibit B--Specimen Form of Subscription and Exchange
Agreement and Power of Attorney........................... B-1
Exhibit C--Subscription Agreement Update Form............... C-1
</TABLE>
II-i
<PAGE>
THE FUTURES, OPTIONS, AND FORWARDS MARKETS
FUTURES CONTRACTS
Futures contracts are standardized contracts made on an domestic or foreign
exchange that call for the future delivery of specified quantities of various
commodities at a specified price, time, and place. The following are some of the
commodities traded on an exchange:
<TABLE>
<CAPTION>
<S> <C> <C>
- - agricultural and tropical goods - currencies - metals
- - industrial goods - financial instruments - energy
</TABLE>
The market in futures interests has undergone dramatic changes in the past
25 years. According to statistics provided by the Futures Industry Association,
in 1974 and 1997 activity in futures markets was divided as follows:
<TABLE>
<CAPTION>
IN 1974 1997
------- ----
% %
<S> <C> <C> <C>
Agricultural Products 82 Interest Rates 58
Metals 15 Agricultural Products 12
Currencies 2 Stock Indices 10
Lumber and Energy Products 1 Metals 8
Currencies 6
Energy Products 6
</TABLE>
By December 31, 1998, over $ - billion was invested in managed futures
interests.
A market participant can make a futures contract to buy or sell a commodity.
The contractual obligations may be satisfied either by taking or making, as the
case may be, physical delivery of an approved grade of the commodity or by
making an offsetting sale or purchase of an equivalent but opposite futures
contract on the same, or a mutually offsetting, exchange prior to the designated
date of delivery.
For example, if we sell one contract of December 1999 wheat on a commodity
exchange, we may fulfill the contract at any time prior to the December 1999
delivery date by purchasing one contract of December 1999 wheat on the same
exchange.
The difference between the price at which the futures contract is sold or
purchased and the price paid for the offsetting purchase or sale, after
allowance for brokerage commissions, constitutes the profit or loss to the
trader. Certain futures contracts, such as those for stock or other financial or
economic indices approved by the CFTC or Eurodollar contracts settle in cash
(irrespective of whether any attempt is made to offset such contracts) rather
than delivery of any physical commodity.
OPTIONS ON FUTURES
An option on a futures contract or on a physical commodity gives the buyer
of the option the right to take a position of a specified amount at a specified
price of a specific commodity (the "striking," "strike," or "exercise" price) in
the underlying futures contract or commodity.
The buyer of a "call" option acquires the right to take a long position
(I.E., the obligation to take delivery of a specified amount at a specified
price of a specific commodity) in the underlying futures contract or commodity.
The buyer of a "put" option acquires the right to take a short position
(I.E., the obligation to make delivery of a specified amount at a specified
price of a specified commodity) in the underlying futures contract or commodity.
The purchase price of an option is referred to as its "premium." The seller
(or "writer") of an option is obligated to take a futures position at a
specified price opposite to the option buyer if the option is exercised. Thus,
the seller of a call option must stand ready to sell (take a short position in
the underlying
II-1
<PAGE>
futures contract) at the striking price if the buyer should exercise the option.
The seller of a put option, on the other hand, must stand ready to buy (take a
long position in the underlying futures contract) at the striking price.
A call option on a futures contract is said to be "in-the-money" if the
striking price is below current market levels, and "out-of-the-money" if the
striking price is above current market levels. Conversely, a put option on a
futures contract is said to be "in-the-money" if the striking price is above
current market levels, and "out-of-the-money" if the striking price is below
current market levels.
Options have limited life spans, usually tied to the delivery or settlement
date of the underlying futures contract. An option that is out-of-the-money and
not offset by the time it expires becomes worthless. Options usually trade at a
premium above their intrinsic value (I.E., the difference between the market
price for the underlying futures contract and the striking price), because the
option trader is speculating on (or hedging against) future movements in the
price of the underlying contract. As an option nears its expiration date, the
market and intrinsic value typically move into parity. The difference between an
option's intrinsic and market values is referred to as the "time value" of the
option.
FORWARD CONTRACTS
Contracts for the future delivery of certain commodities may also be made
through banks or dealers pursuant to what are commonly referred to as "forward
contracts." A forward contract is a contractual right to purchase or sell a
specified quantity of a commodity at or before a specified date in the future at
a specified price and, therefore, it is similar to a futures contract. In
forward contract trading, a bank or dealer generally acts as principal in the
transaction and includes its anticipated profit (the "spread" between the "bid"
and the "asked" prices), and in some instances a mark-up, in the prices it
quotes for forward contracts. Unlike futures contracts, forward contracts are
not standardized contracts; rather, they are the subject of individual
negotiation between the parties involved. Because there is no clearinghouse
system applicable to forward contracts, forward contracts are not fungible, and
there is no direct means of "offsetting" a forward contract by purchase of an
offsetting position on the same exchange as one can a futures contract. In
recent years, the terms of forward contracts have become more standardized and
in some instances such contracts now provide a right of offset or cash
settlement as an alternative to making delivery on the contract.
HEDGERS AND SPECULATORS
The two broad classes of persons who trade futures interests contracts are
"hedgers" and "speculators." Commercial interests, including farmers, that
market or process commodities and financial institutions that market or deal in
commodities, including interest rate sensitive instruments, foreign currencies
and stocks, which are exposed to currency, interest rate and stock market risks,
may use the futures markets for hedging. Hedging is a protective procedure
designed to minimize losses that may occur because of price fluctuations
occurring, for example, between the time a processor makes a contract to buy or
sell a raw or processed commodity at a certain price and the time he must
perform the contract. The futures markets enable the hedger to shift the risk of
price fluctuations to the speculator. The speculator risks his capital with the
hope of making profits from price fluctuations in futures interests contracts.
Speculators rarely take delivery of commodities, but rather close out their
positions by entering into offsetting purchases or sales of futures interests
contracts. Since the speculator may take either a long or short position in the
futures markets, it is possible for him to make profits or incur losses
regardless of whether prices go up or down. The Partnerships will trade for
speculative rather than for hedging purposes.
FUTURES EXCHANGES
Futures exchanges provide centralized market facilities for trading futures
contracts and options (but not forward contracts). Members of, and trades
executed on, a particular exchange are subject to the rules of that exchange.
Among the principal exchanges in the United States are the Chicago Board of
Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, and
the New York Board of Trade.
Each futures exchange in the United States has an associated
"clearinghouse." Once trades between members of an exchange have been confirmed,
the clearinghouse becomes substituted for each buyer and
II-2
<PAGE>
each seller of contracts traded on the exchange and, in effect, becomes the
other party to each trader's open position in the market. Thereafter, each party
to a trade looks only to the clearinghouse for performance. The clearinghouse
generally establishes some sort of security or guarantee fund to which all
clearing members of the exchange must contribute; this fund acts as an emergency
buffer that enables the clearinghouse to meet its obligations with regard to the
"other side" of an insolvent clearing member's contracts. Clearinghouses require
margin deposits and continuously mark positions to market to provide some
assurance that their members will be able to fulfill their contractual
obligations. Thus, a central function of the clearinghouses is to ensure the
integrity of trades, and members effecting futures transactions on an organized
exchange need not worry about the solvency of the party on the opposite side of
the trade; their only remaining concerns are the respective solvencies of their
commodity broker and the clearinghouse.
Foreign futures exchanges differ in certain respects from their U.S.
counterparts. In contrast to United States exchanges, certain foreign exchanges
are "principals' markets," where trades remain the liability of the traders
involved, and the exchange does not become substituted for any party. SEE
"REGULATIONS" BELOW AND "RISK FACTORS--RISKS RELATING TO FUTURES INTERESTS
TRADING AND THE FUTURES INTERESTS MARKETS--TRADING ON FOREIGN EXCHANGES PRESENTS
GREATER RISKS TO EACH PARTNERSHIP THAN TRADING ON DOMESTIC EXCHANGES."
SPECULATIVE POSITION LIMITS
The CFTC and U.S. futures exchanges have established limits, referred to as
"speculative position limits" or "position limits," on the maximum net long or
net short speculative position that any person or group of persons (other than a
hedger, which the Partnerships are not) may hold, own or control in certain
futures interests contracts. Among the purposes of speculative position limits
is to prevent a "corner" on a market or undue influence on prices by any single
trader or group of traders. The CFTC has jurisdiction to establish position
limits with respect to all commodities and has established position limits for
all agricultural commodities. In addition, the CFTC requires each United States
exchange to submit position limits for all commodities traded on such exchange
for approval by the CFTC. However, position limits do not apply to many currency
futures contracts. Position limits do not apply to forward contract trading or
generally to trading on foreign exchanges. SEE "RISK FACTORS--RISKS RELATING TO
FUTURES INTERESTS TRADING AND THE FUTURES INTERESTS MARKETS--THE PARTNERSHIPS
ARE SUBJECT TO SPECULATIVE POSITION LIMITS."
DAILY LIMITS
Most United States futures exchanges (but generally not foreign exchanges or
banks or dealers in the case of forward contracts) limit the amount of
fluctuation in futures interests contract prices during a single trading day by
regulation. These regulations specify what are referred to as "daily price
fluctuation limits" or more commonly "daily limits." The daily limits establish
the maximum amount that the price of a futures interests contract may vary
either up or down from the previous day's settlement price. Once the daily limit
has been reached in a particular futures interest, no trades may be made at a
price beyond the limit. SEE "RISK FACTORS--RISKS RELATING TO FUTURES INTERESTS
TRADING AND THE FUTURES INTERESTS MARKETS--THE PARTNERSHIPS' FUTURES INTERESTS
TRADING MAY BE ILLIQUID."
REGULATIONS
Futures exchanges in the United States are subject to regulation under the
CEAct by the CFTC, the governmental agency having responsibility for regulation
of futures exchanges and trading on those exchanges.
The CFTC also regulates the activities of "commodity trading advisors" and
"commodity pool operators" and has adopted regulations with respect to certain
of such persons' activities. The CFTC requires a commodity pool operator (such
as the General Partner) to keep accurate, current and orderly records with
respect to each pool it operates. The CFTC may suspend the registration of a
commodity pool operator if the CFTC finds that the operator has violated the
CEAct or regulations thereunder and in certain other circumstances. Suspension,
restriction or termination of the General Partner's registration as a commodity
pool operator would prevent it, until such time (if any) as such registration
were to be reinstated, from managing, and might result in the termination of,
the Partnerships. The CEAct gives the CFTC similar authority with respect to the
activities of commodity trading advisors, such as the Trading Advisors. If the
registration of a Trading Advisor as a commodity trading advisor were to be
terminated,
II-3
<PAGE>
restricted or suspended, the Trading Advisor would be unable, until such time
(if any) as such registration were to be reinstated, to render trading advice to
the relevant Partnership. The Partnerships themselves are not registered with
the CFTC in any capacity.
The CEAct requires all "futures commission merchants," such as DWR, MS &
Co., and CFI, to meet and maintain specified fitness and financial requirements,
segregate customer funds from proprietary funds and account separately for all
customers' funds and positions, and to maintain specified books and records open
to inspection by the staff of the CFTC. The Partnerships have no present
intention of using any introducing brokers in their trading.
The CEAct also gives the states certain powers to enforce its provisions and
the regulations of the CFTC.
You are afforded certain rights for reparations under the CEAct. You may
also be able to maintain a private right of action for certain violations of the
CEAct. The CFTC has adopted rules implementing the reparation provisions of the
CEAct which provide that any person may file a complaint for a reparations award
with the CFTC for violation of the CEAct against a floor broker, futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, and their respective associated persons.
Pursuant to authority in the CEAct, the NFA has been formed and registered
with the CFTC as a "registered futures association." At the present time, the
NFA is the only non-exchange self-regulatory organization for commodities
professionals. NFA members are subject to NFA standards relating to fair trade
practices, financial condition, and consumer protection. As the self-regulatory
body of the commodities industry, the NFA promulgates rules governing the
conduct of commodity professionals and disciplines those professionals who do
not comply with such standards. The CFTC has delegated to the NFA responsibility
for the registration of commodity trading advisors, commodity pool operators,
futures commission merchants, introducing brokers and their respective
associated persons and floor brokers. DWR, the General Partner, MS & Co., CFI,
and the Trading Advisors are all members of the NFA (the Partnerships themselves
are not required to become members of the NFA).
The CFTC has no authority to regulate trading on foreign commodity exchanges
and markets. SEE "RISK FACTORS--RISKS RELATING TO FUTURES INTERESTS TRADING AND
THE FUTURES INTERESTS MARKETS--TRADING ON FOREIGN EXCHANGES PRESENTS GREATER
RISKS TO EACH PARTNERSHIP THAN TRADING ON DOMESTIC EXCHANGES."
MARGINS
"Initial" or "original" margin is the minimum amount of funds that a futures
trader must deposit with his commodity broker in order to initiate futures
trading or to maintain an open position in futures contracts. "Maintenance"
margin is the amount (generally less than initial margin) to which a trader's
account may decline before he must deliver additional margin. A margin deposit
is like a cash performance bond. It helps assure the futures trader's
performance of the futures interests contracts he purchases or sells. Futures
interests are customarily bought and sold on margins that represent a very small
percentage (ranging upward from less than 2%) of the purchase price of the
underlying commodity being traded. Because of such low margins, price
fluctuations occurring in the futures markets may create profits and losses that
are greater, in relation to the amount invested, than are customary in other
forms of investment or speculation. The minimum amount of margin required in
connection with a particular futures interests contract is set by the exchange
on which such contract is traded, and may be modified from time to time by the
exchange during the term of the contract. SEE "RISK FACTORS--RISKS RELATING TO
FUTURES INTERESTS TRADING AND THE FUTURES INTERESTS MARKETS--THE PARTNERSHIPS'
FUTURES INTERESTS TRADING IS HIGHLY LEVERAGED."
Brokerage firms, such as DWR, MS & Co., and CFI, carrying accounts for
traders in futures interests contracts may not accept lower, and generally
require higher, amounts of margin as a matter of policy in order to afford
further protection for themselves. DWR, MS & Co., and CFI presently intend to
require each Partnership to make margin deposits equal to the exchange minimum
levels for all futures interests contracts.
Trading in the currency forward contract market does not require margin, but
generally does require the extension of credit by a bank or dealer to those with
whom the bank or dealer trades. Since each
II-4
<PAGE>
Partnership's trading will be conducted through CFI (Spectrum Commodity does not
trade such currency forwards), each Partnership will be able to take advantage
of CFI's credit lines with several participants in the interbank market. CFI
will require margin with respect to a Partnership's trading of currency forward
contracts.
Margin requirements are computed each day by a trader's commodity broker.
When the market value of a particular open futures interests contract position
changes to a point where the margin on deposit does not satisfy maintenance
margin requirements, a margin call is made by the commodity broker. If the
margin call is not met within a reasonable time, the broker may close out the
trader's position. With respect to a Partnership's trading, that Partnership,
and not its Limited Partners personally or any other Partnership, will be
subject to margin calls.
POTENTIAL ADVANTAGES
Developing a comprehensive financial plan entails evaluating options and
acting upon those options. In this fast-paced and ever-changing financial
environment, selecting from the broad array of investments available can be
difficult and time-consuming. Astute investors often turn to professional money
managers for the expertise and guidance needed to map out a successful
investment strategy. MSDW, a global leader in financial management, has
developed the Spectrum Series to provide professional money management in the
futures and forward markets.
An investment in a Partnership is speculative and involves a high degree of
risk. The General Partner and DWR believe that managed futures investments (such
as the Partnerships) can provide you with the potential for long-term capital
appreciation (with commensurate risk), but are appropriate only for the
aggressive growth portion of your comprehensive financial plan. SEE "RISK
FACTORS." Taking the risks into consideration, this investment does offer the
following potential advantages.
INVESTMENT DIVERSIFICATION
If you are not prepared to make a significant investment or spend
substantial time trading various futures interests, you may still participate in
these markets through an investment in a Spectrum Series Partnership, obtaining
diversification from more traditional investments in stocks, bonds, and real
estate. The General Partner believes, on the basis of the past experience of the
Partnerships, that the profit potential of a Partnership does not depend upon
favorable general economic conditions, and that a Partnership is as likely to be
profitable during periods of declining stock, bond, and real estate markets as
at any other time; conversely, a Partnership may be unprofitable during periods
of generally favorable economic conditions.
Managed futures investments can serve to diversify your portfolio and smooth
overall portfolio volatility. Modern Portfolio Theory ("MPT") is the academic
affirmation of the value of diversification. MPT was developed in the 1950s by
Nobel Laureates William Sharpe and Harold Markowitz. These two pioneers
developed a framework for efficiently diversifying assets within a portfolio.
They suggested that investing in any asset class with positive returns and low
correlation to other assets improves the overall risk/reward characteristics of
the entire portfolio. In 1983, Dr. John H. Lintner of Harvard University focused
on the concepts of MPT in a ground-breaking study about portfolio
diversification. The results of Lintner's work demonstrated that by including a
variety of assets, such as commodities, in a hypothetical portfolio, an investor
may lower the portfolio's overall volatility or risk. In 1996, Dr. Thomas
Schneeweis of the University of Massachusetts at Amherst completed a study
titled "The Benefits of Managed Futures" which furthered Lintner's original
premise that a managed futures component can benefit an overall portfolio.
The Partnerships' combined benefits of growth potential (with commensurate
risk) and diversification can potentially reduce the overall volatility of your
portfolio, while increasing profits. By combining asset classes, you may create
a portfolio mix that provides the potential to offer the greatest possible
return within acceptable levels of volatility. While past performance is no
guarantee of future results, managed futures investments, such as the
Partnerships, may profit (with commensurate risk) from futures interests market
moves, with the potential to enhance your overall portfolio.
The Trading Advisors' speculative trading techniques will be the primary
factor in the Partnerships' success or failure. You should note that there are
always two parties to a futures interests contract;
II-5
<PAGE>
consequently, for any gain achieved by one party on a contract, a corresponding
loss is suffered. Therefore, due to the nature of futures interests trading,
only 50% of futures interests held by all market participants can experience
gain at any one time. Brokerage commissions and other costs of trading may
reduce or eliminate any gain that would otherwise be achieved.
The first step toward a sound financial future is to establish your
investment objectives. Based on your financial goals, requirements, and
investment preferences, your DWR financial advisor can help you determine the
combination of asset classes as well as the type of Trading Advisor that most
suits your investment profile.
Asset allocation is the next critical step to help you achieve your
investment objectives. Asset allocation refers to the division of investment
dollars over a variety of asset classes in order to reduce overall volatility
through portfolio diversification, while increasing the long-term performance
potential of an investment portfolio. A fully diversified portfolio should
contain cash, income, growth and aggressive growth investments.
Managed futures investments are designed to fit into a total financial plan
as aggressive growth vehicles with the potential for long-term capital
appreciation (with commensurate risk). As part of a well-balanced and fully
diversified portfolio, managed futures can offer significant benefits.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Stocks 60%
Managed Futures 10%
Cash 5%
Bonds 25%
II-6
<PAGE>
The table below is an empirical example of how different assets can react to
business cycles. In each case, the asset class is represented by a recognized
industry index for that asset.
ANNUAL RETURNS OF VARIOUS ASSET CLASSES OVER TIME
<TABLE>
<CAPTION>
U.S. TREASURY PUBLIC
U.S. BONDS (LEHMAN U.S. CORPORATE NON-U.S. MANAGED MANAGED
STOCKS BROTHERS BONDS STOCKS GLOBAL STOCKS FUTURES FUTURES FUNDS
(S&P 500 TREASURY (SALOMON CORP. (MSCI EAFE (MSCI WORLD (BARCLAY (MAR PUBLIC
INDEX) BOND INDEX) BOND INDEX) INDEX) INDEX) CTA INDEX) FUND INDEX)
------------- ------------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
% % % % % % %
1981...... (5.0) 1.1 (1.2) (1.0) (3.3) 23.9 N/A
1982...... 21.6 41.1 42.5 (0.8) 11.3 16.7 N/A
1983...... 22.5 1.8 6.3 24.6 23.3 23.8 N/A
1984...... 6.2 14.7 16.9 7.9 5.8 8.7 1.4
1985...... 31.7 32.0 30.1 56.7 41.8 25.5 21.9
1986...... 18.6 24.2 19.9 69.9 42.8 3.8 (14.4)
1987...... 5.2 (2.7) (0.3) 24.9 16.8 57.3 43.1
1988...... 16.5 9.1 10.7 28.6 23.9 21.8 7.3
1989...... 31.6 18.9 16.2 10.8 17.2 1.8 4.7
1990...... (3.1) 4.6 6.8 (23.2) (16.5) 21.0 14.2
1991...... 30.4 17.9 19.9 12.5 19.0 3.7 10.0
1992...... 7.6 7.8 9.4 (11.8) (4.7) (0.9) (1.4)
1993...... 10.1 16.4 13.2 32.9 23.1 10.4 10.7
1994...... 1.3 (6.9) (5.8) 8.1 5.6 (0.7) (7.7)
1995...... 37.5 30.7 27.2 11.6 21.3 13.7 13.9
1996...... 22.8 (0.4) 1.3 6.4 14.0 9.1 9.8
1997...... 33.4 14.9 11.6 2.1 16.2 10.9 7.6
1998...... 28.6 13.5 12.5 20.3 24.8 7.0 7.9
1999*..... 8.3 (7.5) (7.6) (7.6) 8.2 0.7 0.1
</TABLE>
- ---------
* 1999 returns are as of August 31, 1999.
NOTES TO "ANNUAL RETURNS OF VARIOUS ASSET CLASSES OVER TIME" TABLE
For the analyses used in this table, the performance of independent indices
has been used to represent seven asset classes: U.S. stocks, U.S. Treasury
bonds, U.S. corporate bonds, international stocks, global stocks, managed
futures, and public managed futures funds. The respective indices used are the
Standard and Poor's 500 Stock Index ("S&P 500 INDEX"), the Lehman Brothers
Treasury Bond Index, the Salomon Corporate Bond Index, the Morgan Stanley
Capital International ("MSCI") EAFE Index, the MSCI World Index, the Barclay CTA
Index, and the Managed Account Reports Public Fund Index ("MAR INDEX").
The S&P 500 Index and the Salomon Corporate Bond Index are compiled assuming
dividends and interest are re-invested.
The S&P 500 Index is based on a portfolio of 500 stocks (consisting of 400
industrials, 40 utilities, 20 transportations, and 40 financials). The weights
of the stocks in the portfolio at a given time reflect the stocks' total market
capitalization. The S&P 500 Index accounts for approximately 80% of the market
capitalization of all stocks listed on the New York Stock Exchange.
The Lehman Brothers Treasury Bond Index consists of all existing U.S.
Treasury bond issues.
The Salomon Corporate Bond Index is a benchmark of investment grade fixed
rate corporate issues with maturities of at least one year and in minimum
outstanding amounts of $100 million. The corporate issues encompass such
industry sectors as Manufacturing, Service, Energy, Consumer, Transportation,
Industrial-Other, Utility, and Finance.
The MSCI EAFE Index is comprised of 1,098 companies, representing a market
structure of 21 European and Pacific based countries covering 38 industries. The
index is used to represent international equities.
II-7
<PAGE>
The MSCI World Index is comprised of 1,456 companies, representing a market
structure of 22 countries around the world. The index is used to represent
global equities, including U.S. and Canadian markets.
The Barclay CTA Index provides a benchmark of performance of CTAs. In order
to qualify for inclusion in the Barclay CTA Index, a CTA must meet the following
criteria: (1) the CTA must have four years of prior performance history; and
(2) in cases where a CTA who is in the Barclay CTA Index introduces an
additional program, this additional program is added to the Index only after its
second year of trading. In 1998, there were 327 CTA programs which were included
in the calculation of the Barclay CTA Index.
The MAR Index averages managed futures fund performance for public funds.
MAR indices are dollar, or equity, weighted to reflect performance. To qualify
for inclusion in MAR's fund indices, an investment product must appear in MAR's
fund performance tables. MAR imposes no minimum size restriction on the funds
and/or pools that it tracks. As of August 31, 1999, there were 91 public funds
included in the calculation of the MAR Index.
The S&P 500 Index, Salomon Corporate Bond Index, and MSCI EAFE Index
performance data for stocks, corporate bonds, and international stocks,
respectively, are provided by Thomson Financial Software Solutions, Boston, MA.
The MSCI World Index performance data for global stocks are provided by Morgan
Stanley Capital International Inc., New York, NY. The Lehman Brothers Treasury
Bond Index and the Barclay CTA Index performance data for U.S. Treasury bonds
and managed futures, respectively, are provided by the Barclay Trading Group
Ltd., Fairfield, IA. The MAR Index performance data for public managed futures
funds was provided by Managed Account Reports, Inc., New York, NY. Performance
of any of these indices (which by definition, are averages of many individual
investments) may not be representative of any specific investment within that
index's asset class.
The performance information of the asset classes above does not reflect the
effect of fees identical to those to be paid by the Partnerships, including
management, incentive, and brokerage fees. Past performance is no guarantee of
future results. Note that while the Barclay CTA Index and the MAR Index reflect
results net of actual fees and expenses, the Barclay CTA Index includes accounts
with trading advisors and fee structures that differ from public managed futures
funds (such as the Partnerships), and the MAR Index includes funds with trading
advisors and fee structures that differ from the Partnerships. Also, the
Partnerships' trading strategies may be different from the trading strategies
employed by the trading advisors included in the Barclay CTA Index and the
public managed futures funds included in the MAR Index. Accordingly, while the
Barclay CTA Index is believed to be representative of managed futures in
general, and the MAR Index is believed to be representative of public managed
futures funds in general, the performance of the Partnerships may differ from
the performance reflected in such indices.
CORRELATION TO TRADITIONAL INVESTMENTS
Managed futures have historically performed independently of traditional
investments, such as stocks and bonds. This is referred to as non-correlation,
or the potential for managed futures to perform when traditional markets such as
stocks and bonds may experience difficulty performing. Of course, managed
futures funds will not automatically be profitable during unfavorable periods
for these traditional investments, and vice versa. The degree of non-correlation
of any given managed futures fund will vary, particularly as a result of market
conditions, and some funds will have a significantly lesser degree of
non-correlation (I.E., greater correlation) with stocks and bonds than others.
Spectrum Global Balanced, a fund whose trading strategy is to offer a balanced
portfolio through exposure to the stock and bond markets in addition to the
futures markets, should be distinguished from other managed futures funds. Since
the Spectrum Global Balanced trading strategy is in part to gain exposure to the
stock and bond markets, it does not result in the same degree of non-correlation
to the stock and bond indices and in that way differs from the other managed
futures funds that DWR offers.
The factors that influence the stock and bond markets can affect the futures
markets in different ways and to varying degrees. In this connection, an article
in the June 8, 1998 issue of BUSINESS WEEK, "Commodities are Cheap--Time to
Leap?" discusses the risks and potential rewards of investing in managed futures
funds, noting the low correlation of their performance to stocks and bonds.
II-8
<PAGE>
The following chart was prepared by the General Partner to illustrate the
performance of managed futures against that of stocks from January 1982 through
August 31, 1999, using the recognized market indices of each asset. The Notes on
the next page are an integral part of the following chart.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MANAGED FUTURES VS. STOCKS MANAGED FUTURES STOCKS
12-MONTH HOLDING PERIOD PERFORMANCE BARCLAY'S CTA INDEX S&P 500 INDEX
RATES OF RETURN
<S> <C> <C>
(BARCLAY TRADING (THOMPSON FINANCIAL SOFTWARE
GROUP, FAIRFIELD, IA) SOLUTIONS, BOSTON, MA
12/81 23.90% -5.03%
1/82 19.68% -2.15%
2/82 22.38% -9.18%
3/82 36.81% -13.11%
4/82 34.16% -7.44%
5/82 33.64% -10.76%
6/82 22.58% -11.57%
7/82 14.52% -13.34%
8/82 15.91% 3.13%
9/82 30.14% 9.75%
10/82 29.02% 16.10%
11/82 14.97% 15.99%
12/82 16.68% 21.34%
1/83 35.84% 27.49%
2/83 19.89% 38.16%
3/83 13.97% 43.99%
4/83 13.88% 48.68%
5/83 21.23% 52.53%
6/83 3.85% 60.89%
7/83 17.83% 58.92%
8/83 23.21% 43.89%
9/83 12.85% 44.18%
10/83 18.58% 27.76%
11/83 19.50% 25.42%
12/83 23.75% 22.47%
1/84 6.22% 17.39%
2/84 15.67% 10.73%
3/84 15.59% 8.60%
4/84 13.59% 1.55%
5/84 7.70% -3.26%
6/84 6.16% -4.94%
7/84 24.90% -3.17%
8/84 5.36% 5.89%
9/84 9.35% 4.43%
10/84 2.87% 6.12%
11/84 4.15% 2.79%
12/84 8.74% 5.99%
1/85 9.78% 14.95%
2/85 16.02% 20.55%
3/85 12.57% 18.65%
4/85 13.21% 17.48%
5/85 10.18% 31.66%
6/85 16.27% 31.02%
7/85 9.21% 32.48%
8/85 16.78% 18.28%
9/85 3.67% 14.61%
10/85 15.37% 19.40%
11/85 24.49% 29.06%
12/85 25.50% 31.83%
1/86 24.64% 23.02%
2/86 35.92% 30.68%
3/86 45.10% 37.86%
4/86 38.81% 36.48%
5/86 31.60% 35.84%
6/86 36.26% 35.97%
7/86 23.46% 28.49%
8/86 31.90% 39.25%
9/86 34.95% 31.77%
10/86 21.01% 33.29%
11/86 13.05% 27.68%
12/86 3.82% 18.66%
1/87 12.63% 33.88%
2/87 -0.72% 29.39%
3/87 -2.84% 26.08%
4/87 26.48% 26.34%
5/87 29.26% 21.06%
6/87 26.93% 24.99%
7/87 28.75% 39.16%
8/87 20.42% 34.36%
9/87 28.42% 43.30%
10/87 34.78% 6.32%
11/87 49.66% -4.68%
12/87 57.27% 5.30%
1/88 39.63% -3.14%
2/88 39.76% -2.58%
3/88 30.57% -8.17%
4/88 2.74% -6.22%
5/88 13.99% -6.50%
6/88 50.09% -6.86%
7/88 31.52% -11.56%
8/88 34.50% -17.78%
9/88 34.61% -12.32%
10/88 36.00% 14.94%
11/88 28.51% 23.20%
12/88 21.76% 16.56%
1/89 25.93% 19.91%
2/89 20.71% 11.76%
3/89 29.56% 17.98%
4/89 31.52% 22.76%
5/89 35.10% 26.67%
6/89 7.40% 20.49%
7/89 15.00% 31.72%
8/89 7.71% 39.10%
9/89 3.61% 32.83%
10/89 -3.91% 26.12%
11/89 -4.21% 30.61%
12/89 1.80% 31.37%
1/90 1.86% 14.25%
2/90 6.36% 18.59%
3/90 5.71% 18.94%
4/90 13.34% 10.24%
5/90 -4.29% 16.29%
6/90 -4.34% 16.18%
7/90 2.83% 6.27%
8/90 16.50% -5.11%
9/90 23.49% -9.30%
10/90 32.87% -7.44%
11/90 29.27% -3.44%
12/90 21.02% -3.07%
1/91 13.35% 8.45%
2/91 11.53% 14.78%
3/91 12.89% 14.56%
4/91 5.95% 17.73%
5/91 10.30% 11.92%
6/91 11.85% 7.53%
7/91 2.34% 12.92%
8/91 -5.91% 26.95%
9/91 -5.97% 31.09%
10/91 -7.88% 33.32%
11/91 -7.21% 20.28%
12/91 3.73% 30.34%
1/92 4.13% 22.61%
2/92 2.26% 15.96%
3/92 -3.71% 10.99%
4/92 -2.64% 13.97%
5/92 -1.77% 9.81%
6/92 -0.07% 13.26%
7/92 7.86% 12.61%
8/92 12.50% 7.77%
9/92 7.76% 10.94%
10/92 8.96% 9.96%
11/92 9.97% 18.44%
12/92 -0.91% 7.71%
1/93 1.91% 10.55%
2/93 10.36% 10.66%
3/93 11.84% 15.18%
4/93 16.34% 9.25%
5/93 17.93% 11.65%
6/93 14.02% 13.69%
7/93 13.36% 8.78%
8/93 7.37% 15.34%
9/93 8.20% 13.06%
10/93 7.37% 14.97%
11/93 6.26% 10.07%
12/93 10.37% 9.97%
1/94 8.69% 12.80%
2/94 1.57% 8.23%
3/94 4.16% 1.45%
4/94 -0.86% 5.29%
5/94 1.27% 4.26%
6/94 2.79% 1.46%
7/94 -1.92% 5.22%
8/94 -1.92% 5.53%
9/94 0.59% 3.72%
10/94 1.25% 3.82%
11/94 2.80% 1.09%
12/94 -0.65% 1.39%
1/95 0.90% 0.61%
2/95 5.85% 7.44%
3/95 10.41% 15.63%
4/95 13.71% 17.46%
5/95 11.20% 20.24%
6/95 7.09% 26.03%
7/95 6.88% 26.03%
8/95 12.88% 21.42%
9/95 10.86% 29.76%
10/95 10.74% 26.47%
11/95 10.05% 36.97%
12/95 13.64% 37.51%
1/96 18.77% 38.58%
2/96 9.38% 34.71%
3/96 3.39% 32.10%
4/96 8.28% 30.17%
5/96 5.62% 28.42%
6/96 6.63% 26.03%
7/96 6.19% 16.53%
8/96 2.92% 18.74%
9/96 5.35% 20.33%
10/96 11.17% 24.07%
11/96 13.84% 27.88%
12/96 9.12% 22.98%
1/97 10.42% 26.19%
2/97 20.00% 26.07%
3/97 18.59% 19.70%
4/97 10.37% 25.01%
5/97 12.94% 29.40%
6/97 13.43% 34.68%
7/97 21.88% 52.15%
8/97 17.97% 40.68%
9/97 16.58% 40.55%
10/97 8.74% 32.21%
11/97 6.59% 28.64%
12/97 10.89% 33.50%
1/98 7.39% 27.09%
2/98 2.74% 35.15%
3/98 3.91% 48.12%
4/98 1.79% 41.13%
5/98 2.24% 30.76%
6/98 2.52% 30.26%
7/98 -3.28% 19.28%
8/98 6.72% 8.04%
9/98 8.99% 8.97%
10/98 9.93% 21.85%
11/98 7.38% 23.60%
12/98 7.01% 28.58%
1/99 4.79% 32.52%
2/99 8.58% 19.79%
3/99 6.67% 18.53%
4/99 12.39% 21.94%
5/99 9.95% 21.07%
6/99 11.25% 22.70%
7/99 10.83% 20.19%
8/99 4.35% 39.87%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS.
</TABLE>
II-9
<PAGE>
NOTES TO "MANAGED FUTURES VS. STOCKS" TABLE:
Stocks are represented by the S&P 500 Index, provided by Thomson Financial
Software Solutions, Boston, MA; managed futures are represented by the Barclay
CTA Index, provided by Barclay Trading Group Ltd., Fairfield, IA. Each bar
represents the asset class performance derived from successive 12-month
hypothetical holding periods or windows. (A 12-month holding period is defined
as a period of 12 consecutive months, I.E., from January 1989 to December 1989;
the next would be from February 1989 to January 1990, etc.) Performance of any
of these indices (which, by definition, are averages of many individual
investments) may not be representative of any specific investment within that
index's asset class.
By overlaying returns, investors can see the potential benefits of a
diversified portfolio that includes both traditional asset classes as well as
assets that are non-traditional and non-correlated. There are many times when
both the managed futures and stock indices showed positive performance.
Obviously, though, there is no investment that only appreciates. There are 18
periods when managed futures showed negative returns, while stocks experienced
26 periods of negative returns during the studied time frame. While not a
guarantee of future results, this chart provides a clear indication of the
non-correlated aspect of managed futures. This non-correlation enables investors
with managed futures to potentially lower the overall volatility of their
portfolios.
The performance information of the asset classes above does not reflect the
effect of fees identical to those to be paid by the Partnerships, including
management, incentive and brokerage fees. Past performance is no guarantee of
future results. Note that while the Barclay CTA Index reflects results net of
actual fees and expenses, it includes accounts with trading advisors and fee
structures that differ from public managed futures funds (such as the
Partnerships). Also, the Partnerships' trading strategies may be different from
the trading strategies employed by the trading advisors included in the Barclay
CTA Index. Accordingly, while the Barclay CTA Index is believed to be
representative of managed futures in general, the performance of public managed
futures funds as a subclass, or individually (in particular, the Partnerships),
may differ.
-------------------
The following chart was prepared by the General Partner to illustrate the
risk/return characteristics of a portfolio consisting of different combinations
of domestic stocks, corporate bonds, international equities and/or managed
futures, based on the performance of recognized market indices of each asset
over the period January 1981--August 31, 1999. The Notes on the next page are an
integral part of the following chart.
IMPROVED PORTFOLIO EFFICIENCY
JANUARY 1981 THROUGH AUGUST 1999
STOCKS/BONDS/INTERNATIONAL EQUITIES/MANAGED FUTURES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STANDARD DEVIATION OF MONTHLY RETURNS AVERAGE MONTHLY RETURN
<S> <C> <C>
100% Stocks (S&P 500 Index) 4.2727% 1.3907%
100% Bonds (Salomon Corporate Bond Index) 2.6618% 0.9594%
100% Int'l Eqs. (MSCI EAFE Index) 5.0408% 1.1864%
100% Mgd Futures (Barclay CTA Index) 5.0251% 1.1516%
50% Stocks/50% Bonds 2.9273% 1.1750%
50% Stocks/30% Bonds/10% Int'l Eqs./10% Mgd. Futures 2.8817% 1.2170%
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS.
</TABLE>
II-10
<PAGE>
NOTES TO "IMPROVED PORTFOLIO EFFICIENCY" TABLE ON PRIOR PAGE:
Stocks are represented by the S&P 500 Index, corporate bonds are represented
by the Salomon Corporate Bond Index, and international equities are represented
by the MSCI EAFE Index, each provided by Thomson Financial Software Solutions,
Boston, MA; managed futures are represented by the Barclay CTA Index, provided
by the Barclay Trading Group Ltd., Fairfield, IA. Performance of any of these
indices (which, by definition, are averages of many individual investments) may
not be representative of any specific investment within that index's asset
class.
The performance information of the asset classes above does not reflect the
effect of fees identical to those to be paid by the Partnerships, including
management, incentive, and brokerage fees. Past performance is no guarantee of
future results. Note that while the Barclay CTA Index reflects results net of
actual fees and expenses, it includes accounts with trading advisors and fee
structures that differ from public managed futures funds (such as the
Partnerships). Also, the Partnerships' trading strategies may be different from
the trading strategies employed by the trading advisors included in the Barclay
CTA Index. Accordingly, while the Barclay CTA Index is believed to be
representative of managed futures in general, the performance of public managed
futures funds as a subclass, or individually (in particular, the Partnerships),
may differ.
-------------------
PROFESSIONAL MANAGEMENT
Professional money management is one of the most significant benefits a
managed futures investment can offer. A professional Trading Advisor has several
advantages over an individual investor.
- CAPITALIZATION --A professional Trading Advisor is well capitalized, and
capable of managing market volatility.
- DISCIPLINE --A professional Trading Advisor applies an established,
disciplined approach to futures trading, with strict money management
policies and techniques.
- PLANNED STRATEGY --A professional Trading Advisor utilizes a researched
trading strategy designed to reduce risk while seeking long-term profit
opportunities.
- RISK CONTROL --Professional Trading Advisors offer a full time commitment
to risk control, applying risk management strategies and years of research
and experience.
- RESEARCH AND DEVELOPMENT --A professional Trading Advisor is committed to
ongoing research and development, in an effort to continuously improve
upon existing systems and technology in order to keep pace with industry
developments and potentially capitalize on market opportunities as they
occur.
THE TRADING ADVISOR SELECTION PROCESS
In order for a Trading Advisor to be selected by the General Partner, a
qualitative and quantitative due diligence process is undertaken, considering
the factors described below. The General Partner's primary objective in the
selection process is to allocate assets to Trading Advisors with
well-established performance histories and whom it believes have the potential
to continue to be successful in the future.
Monitoring is an important second phase in the due diligence process. The
General Partner has invested significant resources into its proprietary Fund
Management System, making it one of the most comprehensive computerized
management systems in the industry. This sophisticated system produces daily
control reports generated from actual trading data and enables the General
Partner to closely monitor the activity and performance of Trading Advisors
relative to their historical profile.
Monitoring also occurs on a periodic basis by discussing with the Trading
Advisors their performance relative to profile and peer Trading Advisors, recent
market conditions and trading opportunities. Ongoing research and development,
and continued on-site due diligence visits are conducted. While the due
diligence process cannot guarantee future success, the General Partner believes
the process can provide the basis for sound decision making and can increase the
potential for future success.
II-11
<PAGE>
TRADING ADVISOR EVALUATION AND SELECTION
<TABLE>
<S> <C>
Screening Trading Advisors are screened from a pool of approximately
400.
Evaluation Trading Advisors are categorized and evaluated based on
quantitative and qualitative factors.
Selection Trading Advisors are selected based on quantitative and
qualitative analysis.
Monitoring Daily and periodic monitoring and reporting takes place on
an ongoing basis.
</TABLE>
Trading Advisors are analyzed by a combination of qualitative and
quantitative factors, including:
QUALITATIVE FACTORS
- Experience of staff responsible for development and management of trading
approach
- Development of Trading Advisor's profile
- Consistency of trading approach
- On-site office visit to Trading Advisor headquarters
- Ongoing commitment to research and development
- Flexibility to expand in order to meet demands of growth in assets
QUANTITATIVE MEASURES
- Review of historic performance returns
- Review of performance versus managed futures industry
- Review of risk including standard deviation of monthly returns and worst
decline periods
- Scrutiny of performance in key periods
- Leverage policies of Trading Advisors
- Correlation analysis of Trading Advisor returns versus managed futures
industry indices, and other asset class indices
FUTURES INTERESTS TRADED
Adding managed futures investments to a traditional portfolio of stocks and
bonds can provide qualified investors with access to major world economic
markets. At any given time, managed futures investments can participate in a
broad array of markets, selected from among approximately 75 global futures and
forward markets on approximately 20 exchanges worldwide.
<TABLE>
<CAPTION>
PARTICIPATION IN OVER 75 MARKETS WORLDWIDE
PLUS ENERGIES, AGRICULTURALS, AND METALS
UNITED STATES UNITED KINGDOM FRANCE GERMANY
- ------------- -------------- ------ -------
<S> <C> <C> <C>
Bonds, Bills, & Notes Long Gilt Notional Bond Bund
Dollar Short Sterling Pibor Mark
S&P 500 Pound Franc DAX
FT-SE 100 CAC 40
</TABLE>
<TABLE>
<CAPTION>
RUSSIA CHINA JAPAN AUSTRALIA
- ------ ----- ----- ---------
<S> <C> <C> <C>
Ruble Hang Seng Index Government Bonds 3-year & 10-year bonds
Yen Dollar
Nikkei 225 All Ordinaries Index
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
MAJOR FUTURES MARKETS TRADED
AGRICULTURALS FOREIGN EXCHANGE STOCK INDICES INTEREST RATES
- ------------- ---------------- ------------- --------------
<S> <C> <C> <C>
Azuki (R. Beans) Australian dollar All Ordinaries Australian bonds
Corn Brazilian real CAC 40 British bonds
Feeder cattle British pound DAX Canadian bonds
Live cattle Canadian dollar Dow Jones Euro bonds
Lean hogs Czech krona Industrial French bonds
Pork bellies European common FTSE 100 German bonds
Soybean meal currency Hang Seng Italian bonds
Soybean oil French franc IBEX-35 PLUS Japanese bonds
Soybeans German mark Mexican IPC Mexican bonds
Wheat Greek drachma MIB 30 New Zealand bonds
Hong Kong dollar NASDAQ 100 Spanish bonds
Indonesian rupiah Nikkei 225 Swiss bonds
Japanese yen S&P 500 U.S. bonds
Mexican peso Swedish U.S. notes
New Zealand dollar Taiwan
Norwegian kroner Toronto
Singapore dollar
South African rand
Spanish peseta
Swedish kroner
Swiss franc
Thai baht
</TABLE>
<TABLE>
<CAPTION>
METALS SOFTS ENERGIES
- ------ ----- --------
<S> <C> <C> <C>
Aluminum Cocoa Crude oil
Copper Coffee Gas oil
Lead Cotton Heating oil
Gold Lumber Natural gas
Nickel Orange juice Unleaded gas
Palladium Rubber
Platinum Sugar
Silver
Tin
Zinc
</TABLE>
Each Partnership normally trades a portfolio of diverse futures interests,
but may trade a greater or lesser number of futures interests from time to time.
Each Limited Partner will obtain greater diversification in futures interests
traded than would be possible trading individually, unless substantially more
than the minimum investment described herein were committed to the futures
interests markets.
EXCHANGE PRIVILEGE
At the sixth month-end after a person first becomes a Limited Partner in any
Spectrum Series Partnership, and each calendar month thereafter, a Limited
Partner may shift his investment among the Partnerships (a "SERIES EXCHANGE").
This permits a Limited Partner to select one or more Partnerships which best
suit his investment needs and objectives, which may change from time to time. A
Limited Partner is not required to pay any redemption charges in connection with
a Series Exchange.
DIVERSIFIED PROFESSIONAL TRADING MANAGEMENT
Trading decisions for each Partnership will be made by Trading Advisors
retained by the General Partner. The trading approaches employed on behalf of
each Partnership by its Trading Advisors are not available for investments as
small as the required minimum investment in each Partnership. A Limited
Partner's investment in each Partnership is allocated among the Trading Advisors
for such Partnership.
II-13
<PAGE>
This permits a Limited Partner to receive the benefits from different trading
systems being employed by such Partnership. A Limited Partner can further
diversify his professional trading management by dividing his investment among
one or more of the Partnerships. For example, an investor owning Units of all
six Partnerships would have the benefit of having his investment managed by 11
Trading Advisors.
LIMITED LIABILITY
Unlike an individual who invests directly in futures interests, an investor
in a Partnership cannot be individually subject to margin calls and cannot lose
more than the amount of his unredeemed capital contribution, his share of
undistributed profits, if any, and, under certain circumstances, any
distributions and amounts received upon redemption, or deemed received on an
Exchange of Units, and interest thereon.
INTEREST INCOME
Many commodity brokers permit accounts above a certain size to deposit
margin for futures interests in the form of interest-bearing obligations, such
as U.S. Treasury bills, rather than cash, thus enabling the account to earn
interest on funds being used for futures trading, or such brokers pay interest
at U.S. Treasury bill rates on a portion of the cash deposited in the account.
Each Partnership deposits its assets in separate commodity trading accounts with
the Commodity Brokers. DWR credits each Partnership at each month-end with
interest income as if 80% (100%, in the case of Spectrum Global Balanced), of
each Partnership's average daily Net Assets for the month were invested at a
prevailing rate on U.S. Treasury bills. Generally, an individual trader would
not receive any interest on the funds in his commodity account unless he
committed substantially more than the minimum investment required for the
Partnerships. While the Partnerships are credited with interest by DWR on the
respective percentage of their assets deposited as margin as described above,
the form of margin posted, whether cash or interest-bearing obligations (such as
U.S. Treasury bills), does not reduce the risks inherent in the trading of
futures interests.
ADMINISTRATIVE CONVENIENCE
The Partnerships are structured so as to provide Limited Partners with
numerous services designed to alleviate the administrative details involved in
engaging directly in futures interests trading, including monthly and annual
financial reports (showing, among other things, the Net Asset Value of a Unit,
trading profits or losses, and expenses), and all tax information relating to
the Partnerships necessary for Limited Partners to complete their federal income
tax returns.
SUPPLEMENTAL PERFORMANCE INFORMATION
The tables on the following pages contain summary performance information
and certain other data for each Partnership, supplementing the information in
Part I of this Prospectus.
II-14
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM SELECT STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisors: EMC Capital Management, Inc.
Rabar Market Research, Inc.
Sunrise Capital Management, Inc.
Began Trading: August 1, 1991
Total Assets in Fund: $212.5 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 12.3x
Monthly Management Fee: 1/12 of 3.00% of Beg. Net Assets
Monthly Brokerage Fee: 1/12 of 7.25% of Beg. Net Assets
Monthly Incentive Fee: 15.00% of Monthly Trading
Profits
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 10.55%
Standard Deviation of Monthly Returns: 7.66%
Annualized Standard Deviation: 26.49%
Sharpe Ratio: 0.23
Sortino Ratio: 0.55
Largest Decline Period (6/95 - 8/96): -26.78%
Average Recovery (No. of months): 8.80
Average Monthly Loss: -4.23%
Standard Deviation of Monthly Loss: 3.16%
% of Losing Months: 50.52%
Average Monthly Gain: 6.56%
Standard Deviation of Monthly Gain: 7.03%
% of Winning Months: 49.48%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Energies 12%
Agriculturals 6%
Stock Indices 13%
Interest Rates 28%
Foreign Exchange 23%
Metals 14%
Softs 4%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Select seeks long-term capital appreciation and portfolio
diversification through participation in a broad array of futures and foreign
currency markets. Spectrum Select utilizes the technically-based, aggressive,
trend-following trading systems of three notable Trading Advisors: EMC Capital
Management, Inc., Rabar Market Research, Inc. and Sunrise Capital Management,
Inc.
The combined trading philosophies of these three Trading Advisors are designed
to capture sustained price movements by identifying emerging trends and
following existing trends; adhere to a money management system which seeks to
limit the risks associated with each trade, market, and sector; and utilize
diverse entry and exit points to potentially profit from a variety of market
conditions.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C> <C>
AGRICULTURALS FOREIGN ENERGIES
Corn EXCHANGE Crude oil
Lean hogs Australian dollar Heating oil
Soybeans British pound Natural gas
Soybean meal Canadian dollar Unleaded gas
Soybean oil European common currency SOFTS
Wheat Hong Kong dollar Cocoa
STOCK Japanese yen Coffee
INDICES Singapore dollar Cotton
ASE All Ordinaries Spanish peseta Orange juice
CAC 40 Index Swedish kroner Sugar
DAX Index Swiss franc INTEREST
Dow Jones Industrial Index METALS RATES
FTSE Index Aluminum Australian bonds
Hang Seng Index Copper British bonds
IBEX 35 Index Gold Canadian bonds
NASDAQ 100 Index Lead Eurodollar
Nikkei Index Nickel German bonds
S&P 500 Index Platinum Italian bonds
Silver Japanese bonds
Tin Spanish bonds
Zinc U.S. Treasury bonds
U.S. Treasury notes
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-15
<PAGE>
SPECTRUM SELECT PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
31.18% -14.45% 41.63% -5.13% 23.63% 5.27% 6.22% 14.15% -5.46%
</TABLE>
(5 MONTHS) (8 MONTHS)
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR INDEX
SELECT
<S> <C> <C>
07/31/92 17.29% 10.82%
08/31/92 33.40% 20.71%
09/30/92 18.89% 13.91%
10/31/92 17.81% 14.62%
11/30/92 23.04% 15.01%
12/31/92 -14.45% -1.40%
01/31/93 -0.54% 5.66%
02/28/93 21.64% 15.85%
03/31/93 25.83% 15.98%
04/30/93 41.48% 22.42%
05/31/93 46.32% 22.74%
06/30/93 36.79% 17.48%
07/31/93 40.71% 14.79%
08/31/93 30.64% 8.84%
09/30/93 32.17% 9.38%
10/31/93 29.72% 8.75%
11/30/93 26.28% 6.98%
12/31/93 41.62% 10.74%
01/31/94 24.70% 7.66%
02/28/94 1.21% -1.18%
03/31/94 14.61% 1.65%
04/30/94 2.88% -3.13%
05/31/94 7.81% -1.70%
06/30/94 18.66% 0.13%
07/31/94 -0.93% -6.92%
08/31/94 -6.93% -8.75%
09/30/94 -1.70% -6.98%
10/31/94 -1.50% -5.24%
11/30/94 5.47% -3.91%
12/31/94 -5.12% -7.72%
01/31/95 -1.32% -8.09%
02/28/95 16.04% -0.20%
03/31/95 24.30% 7.71%
04/30/95 36.86% 13.02%
05/31/95 42.28% 13.48%
06/30/95 26.81% 8.31%
07/31/95 19.20% 7.93%
08/31/95 21.93% 12.11%
09/30/95 11.08% 8.67%
10/31/95 12.75% 7.38%
11/30/95 8.15% 7.98%
12/31/95 23.62% 13.89%
01/31/96 34.05% 22.29%
02/29/96 7.49% 7.63%
03/31/96 -11.05% -2.00%
04/30/96 -15.11% -0.53%
05/31/96 -26.37% -5.68%
06/30/96 -24.07% -3.39%
07/31/96 -16.27% -1.85%
08/31/96 -12.44% -2.71%
09/30/96 -1.90% 3.01%
10/31/96 15.00% 11.68%
11/30/96 21.11% 17.01%
12/31/96 5.27% 9.76%
01/31/97 9.82% 10.59%
02/28/97 30.88% 22.30%
03/31/97 31.58% 20.87%
04/30/97 19.53% 13.80%
05/31/97 22.60% 15.63%
06/30/97 21.13% 15.44%
07/31/97 34.86% 24.78%
08/31/97 27.06% 20.31%
09/30/97 24.09% 17.36%
10/31/97 5.40% 7.78%
11/30/97 -0.66% 3.00%
12/31/97 6.22% 7.62%
01/31/98 3.10% 4.09%
02/28/98 0.55% 0.69%
03/31/98 0.46% 1.49%
04/30/98 -0.88% -0.72%
05/31/98 2.08% 4.29%
06/30/98 2.87% 3.85%
07/31/98 -7.17% -3.46%
08/31/98 17.98% 8.24%
09/30/98 24.19% 11.53%
10/31/98 22.42% 12.61%
11/30/98 16.61% 8.10%
12/31/98 14.17% 7.92%
01/31/99 9.91% 5.55%
02/28/99 13.45% 8.33%
03/31/99 10.36% 7.04%
04/30/99 22.70% 16.27%
05/31/99 15.26% 8.96%
06/30/99 14.59% 11.26%
07/31/99 10.62% 9.55%
08/31/99 -7.60% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (7/31/91 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DATE SPECTRUM SELECT MAR S&P 500 INDEX SALOMON CORP. MSCI EAFE INDEX
INDEX BOND INDEX
<S> <C> <C> <C> <C> <C>
07/31/91 10.0000 10.0000 10.0000 10.0000 10.0000
08/31/91 9.3803 9.5650 10.2200 10.2700 9.8000
09/30/91 9.9733 9.9926 10.0463 10.5473 10.3586
10/31/91 9.7459 9.8097 10.1869 10.5895 10.5036
11/30/91 9.4608 9.8293 9.7692 10.7060 10.0204
12/31/91 13.1191 11.3745 10.8829 11.1771 10.5415
01/31/92 11.3197 10.4987 10.6979 10.9871 10.3201
02/29/92 10.6301 10.1123 10.8263 11.0970 9.9486
03/31/92 10.2145 10.0456 10.6206 11.0193 9.2920
04/30/92 10.0248 9.7704 10.9392 11.0303 9.3385
05/31/92 9.8825 9.7684 10.9720 11.4870 9.9642
06/30/92 10.5932 10.3486 10.8074 11.4870 9.4959
07/31/92 11.7290 11.0823 11.2613 11.8431 9.2585
08/31/92 12.5134 11.5455 11.0136 11.9497 9.8418
09/30/92 11.8575 11.3827 11.1458 12.0692 9.6548
10/31/92 11.4812 11.2438 11.2015 11.8761 9.1528
11/30/92 11.6406 11.3045 11.5711 11.9592 9.2443
12/31/92 11.2239 11.2152 11.7215 12.2343 9.2998
01/31/93 11.2587 11.0930 11.8270 12.5402 9.1045
02/28/93 12.9301 11.7153 11.9808 12.8662 8.7767
03/31/93 12.8531 11.6509 12.2324 12.9048 8.1974
04/30/93 14.1831 11.9608 11.9511 12.9693 8.2384
05/31/93 14.4599 11.9895 12.2499 12.9952 8.7904
06/30/93 14.4903 12.1574 12.2866 13.3721 8.3773
07/31/93 16.5044 12.7215 12.2497 13.5058 8.1679
08/31/93 16.3478 12.5663 12.7029 13.8975 8.6825
09/30/93 15.6726 12.4507 12.6013 13.9531 8.5175
10/31/93 14.8930 12.2278 12.8785 14.0229 8.0746
11/30/93 14.6995 12.0933 12.7368 13.7565 8.1553
12/31/93 15.8953 12.4198 12.8896 13.8528 8.2042
01/31/94 14.0396 11.9429 13.3407 14.1299 8.2042
02/28/94 13.0863 11.5774 12.9672 13.7201 8.4503
03/31/94 14.7308 11.8437 12.4096 13.1987 9.1939
04/30/94 14.5911 11.5867 12.5833 13.0667 10.0673
05/31/94 15.5894 11.7860 12.7720 12.9883 10.2787
06/30/94 17.1948 12.1738 12.4655 12.8844 10.1245
07/31/94 16.3510 11.8415 12.8893 13.2838 10.4789
08/31/94 15.2154 11.4673 13.4049 13.2439 11.0448
09/30/94 15.4054 11.5820 13.0698 12.8863 10.8018
10/31/94 14.6694 11.5866 13.3704 12.8219 11.1367
11/30/94 15.5030 11.6202 12.8757 12.8475 10.1678
12/31/94 15.0807 11.4610 13.0688 13.0531 10.8999
01/31/95 13.8543 10.9762 13.4217 13.3925 10.4857
02/28/95 15.1857 11.5546 13.9317 13.7809 10.4542
03/31/95 18.3108 12.7574 14.3497 13.9187 11.1128
04/30/95 19.9689 13.0955 14.7802 14.1553 11.5351
05/31/95 22.1808 13.3744 15.3566 15.0471 11.3967
06/30/95 21.8039 13.1858 15.7098 15.1675 11.2030
07/31/95 19.4896 12.7810 16.2439 15.0158 11.9088
08/31/95 18.5519 12.8564 16.2764 15.3311 11.4563
09/30/95 17.1124 12.5864 16.9600 15.5611 11.6854
10/31/95 16.5391 12.4417 16.9091 15.8412 11.3699
11/30/95 16.7660 12.5475 17.6362 16.2214 11.6883
12/31/95 18.6421 13.0532 17.9713 16.5945 12.1675
01/31/96 18.5719 13.4226 18.6003 16.6177 12.2162
02/29/96 16.3231 12.4360 18.7677 15.9979 12.2651
03/31/96 16.2873 12.5019 18.9554 15.7899 12.5227
04/30/96 16.9509 13.0257 19.2397 15.5373 12.8859
05/31/96 16.3321 12.6154 19.7207 15.5373 12.6540
06/30/96 16.5566 12.7390 19.7996 15.8014 12.7299
07/31/96 16.3186 12.5441 18.9284 15.8172 12.3607
08/31/96 16.2440 12.5077 19.3259 15.7065 12.3854
09/30/96 16.7868 12.9655 20.4082 16.1149 12.7198
10/31/96 19.0195 13.8951 20.9796 16.6950 12.5926
11/30/96 20.3051 14.6816 22.5531 17.1124 13.0963
12/31/96 19.6238 14.3278 22.1020 16.7873 12.9260
01/31/97 20.3951 14.8436 23.4723 16.7369 12.4736
02/28/97 21.3639 15.2088 23.6601 16.7871 12.6857
03/31/97 21.4307 15.1115 22.6900 16.4178 12.7364
04/30/97 20.2609 14.8229 24.0514 16.7133 12.8128
05/31/97 20.0226 14.5872 25.5185 16.9306 13.6456
06/30/97 20.0545 14.7054 26.6668 17.2523 14.3961
07/31/97 22.0071 15.6524 28.8001 18.1667 14.6264
08/31/97 20.6390 15.0482 27.1873 17.7307 13.5440
09/30/97 20.8314 15.2167 28.6826 18.1385 14.3025
10/31/97 20.0457 14.9763 27.7361 18.3743 13.2012
11/30/97 20.1704 15.1216 29.0120 18.5580 13.0692
12/31/97 20.8452 15.4195 29.5052 18.7436 13.1868
01/31/98 21.0270 15.4503 29.8298 19.0060 13.7934
02/28/98 21.4809 15.3143 31.9775 18.9870 14.6762
03/31/98 21.5295 15.3373 33.6084 19.0629 15.1312
04/30/98 20.0820 14.7161 33.9445 19.1582 15.2522
05/31/98 20.4400 15.2135 33.3674 19.4839 15.1759
06/30/98 20.6300 15.2713 34.7355 19.7177 15.2973
07/31/98 20.4300 15.1110 34.3534 19.9149 15.4503
08/31/98 24.3500 16.2881 29.3722 20.0941 13.5345
09/30/98 25.8700 16.9706 31.2550 20.9180 13.1231
10/31/98 24.5400 16.8654 33.7960 20.5206 14.5010
11/30/98 23.5200 16.3459 35.8576 21.0747 15.2406
12/31/98 23.8000 16.6401 37.9373 21.0958 15.8502
01/31/99 23.1100 16.3073 39.5307 21.3489 15.8026
02/28/99 24.3700 16.5894 38.3052 20.4949 15.4233
03/31/99 23.7600 16.4169 39.8374 20.4949 16.0711
04/30/99 24.6400 17.1097 41.3911 20.4539 16.7300
05/31/99 23.5600 16.5759 40.3977 20.0857 15.8768
06/30/99 23.6400 16.9903 42.6196 19.7643 16.4960
07/31/99 22.6000 16.5536 41.2899 19.5469 16.9909
08/31/99 22.5000 16.6595 41.0835 19.4883 17.0589
</TABLE>
CORRELATION ANALYSIS (7/91 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum Select MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Spectrum Select 1.00 0.92 0.06 0.33 0.05
MAR Index 1.00 0.15 0.37 0.06
S & P 500 Index 1.00 0.42 0.50
Salomon Corporate Bond Index 1.00 -0.01
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts Reports,
Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
Partnership and in order to make an informed decision, you should read the
Spectrum Series Prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-16
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM TECHNICAL STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisors: Campbell & Company, Inc.
Chesapeake Capital Corporation
John W. Henry & Company, Inc.
Began Trading: November 1, 1994
Total Assets in Fund: $281.2 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 8.0x
Monthly Management Fee: 1/12 of 4% of Beg. Net Assets
Monthly Brokerage Fee: 1/12 of 7.25% of Beg. Net Assets
Monthly Incentive Fee: 15% of Monthly Trading Profits to
Campbell and JWH, 19% to Chesapeake
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 10.08%
Standard Deviation of Monthly Returns: 4.38%
Annualized Standard Deviation: 15.14%
Sharpe Ratio: 0.37
Sortino Ratio: 0.83
Largest Decline Period (3/97 - 5/97): -8.27%
Average Recovery (No. of months): 2.69
Average Monthly Loss: -2.83%
Standard Deviation of Monthly Loss: 1.94%
% of Losing Months: 46.55%
Average Monthly Gain: 4.14%
Standard Deviation of Monthly Gain: 3.12%
% of Winning Months: 53.45%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Foreign Exchange 26%
Interest Rates 33%
Stock Indices 11%
Agriculturals 4%
Energies 10%
Metals 12%
Softs 4%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Technical seeks long-term capital appreciation and portfolio
diversification through participation in a broad array of global futures and
forward markets. Its assets are allocated to three professional Trading Advisors
whose trading programs utilize various technical long-term trend-following
systems.
Spectrum Technical's Trading Advisors (Campbell & Company, Inc., Chesapeake
Capital Corporation and John W. Henry & Company, Inc.) employ a combination of
investment approaches. This includes the use of multiple trading models to
identify and react to price trends in the global futures and forward markets.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C> <C>
AGRICULTURALS ENERGIES STOCK
Corn Crude oil INDICES
Feeder cattle Gas oil ASE All Ordinaries
Lean hogs Heating oil CAC 40 Index
Live cattle Natural gas DAX Index
Porkbelly Unleaded gas Dow Jones Industrial Index
Soybeans METALS FTSE Index
Soybean meal Aluminum Hang Seng Index
Soybean oil Copper IBEX 35 Index
Wheat Gold NASDAQ 100 Index
FOREIGN Lead Nikkei Index
EXCHANGE Nickel S&P 500 Index
Australian dollar Platinum Swedish Index
British pound Silver Taiwan Index
Canadian dollar Tin Toronto Index
European common currency Zinc INTEREST
Hong Kong dollar SOFTS RATES
Indonesian rupiah Cocoa Australian bonds
Japanese yen Coffee British bonds
Mexican peso Cotton Canadian bonds
New Zealand dollar Orange juice Eurodollar
Norwegian kroner Sugar German bonds
Singapore dollar Japanese bonds
South African rand Spanish bonds
Spanish peseta Swiss bonds
Swedish kroner U.S. Treasury bonds
Swiss franc U.S. Treasury notes
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-17
<PAGE>
SPECTRUM TECHNICAL PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
-2.20% 17.59% 18.35% 7.49% 10.18% -1.36%
</TABLE>
(2 MONTHS) (8 MONTHS)
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL MAR INDEX
<S> <C> <C>
Oct-95 7.40% 7.38%
Nov-95 9.38% 7.98%
Dec-95 17.59% 13.89%
Jan-96 25.52% 22.29%
Feb-96 11.79% 7.63%
Mar-96 2.70% -2.00%
Apr-96 3.91% -0.53%
May-96 -0.78% -5.68%
Jun-96 3.57% -3.39%
Jul-96 1.07% -1.85%
Aug-96 1.35% -2.71%
Sep-96 10.60% 3.01%
Oct-96 21.69% 11.68%
Nov-96 30.63% 17.01%
Dec-96 18.35% 9.77%
Jan-97 17.10% 10.59%
Feb-97 26.51% 22.30%
Mar-97 22.68% 20.87%
Apr-97 13.62% 13.80%
May-97 13.73% 15.63%
Jun-97 10.94% 15.44%
Jul-97 27.41% 24.78%
Aug-97 20.23% 20.31%
Sep-97 16.06% 17.36%
Oct-97 5.97% 7.78%
Nov-97 -1.20% 3.00%
Dec-97 7.49% 7.62%
Jan-98 2.48% 4.09%
Feb-98 1.75% 0.69%
Mar-98 5.00% 1.50%
Apr-98 3.16% -0.72%
May-98 10.70% 4.29%
Jun-98 8.73% 3.85%
Jul-98 -1.53% -3.46%
Aug-98 15.50% 8.24%
Sep-98 18.33% 11.53%
Oct-98 17.04% 12.61%
Nov-98 8.72% 8.10%
Dec-98 10.18% 7.92%
Jan-99 5.95% 5.55%
Feb-99 8.13% 8.33%
Mar-99 4.08% 7.04%
Apr-99 16.96% 16.27%
May-99 7.59% 8.96%
Jun-99 14.38% 11.26%
Jul-99 10.99% 9.55%
Aug-99 1.60% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (10/31/94 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM S&P 500 INDEX SALOMON MAR MSCI EAFE
<S> <C> <C> <C> <C> <C>
Technical Corp. Bond Index Index
Index
Nov-94 10.00 10.0000 10.0000 10.0000 10.0000
Nov-94 9.91 9.63 10.02 10.029 9.13
Dec-94 9.7800 9.7745 10.1803 9.8916 9.7874
Jan-95 9.6000 10.0384 10.445 9.4732 9.4155
Feb-95 10.0900 10.4199 10.7479 9.9724 9.3873
Mar-95 11.1200 10.7325 10.8554 11.0105 9.9787
Apr-95 11.5200 11.0545 11.0399 11.3023 10.3579
May-95 11.6000 11.4856 11.7354 11.543 10.2336
Jun-95 11.4700 11.7498 11.8293 11.3802 10.0596
Jul-95 11.1900 12.1493 11.711 11.0308 10.6934
Aug-95 11.1200 12.1736 11.9569 11.0959 10.2871
Sep-95 10.7500 12.6849 12.1363 10.8629 10.4928
Oct-95 10.7400 12.6468 12.3548 10.738 10.2095
Nov-95 10.8400 13.1906 12.6513 10.8293 10.4954
Dec-95 11.5000 13.4412 12.9423 11.2657 10.9257
Jan-96 12.0500 13.9116 12.9604 11.5845 10.9694
Feb-96 11.2800 14.0368 12.477 10.733 11.0133
Mar-96 11.4200 14.1772 12.3148 10.7899 11.2446
Apr-96 11.9700 14.3899 12.1178 11.242 11.5707
May-96 11.5100 14.7496 12.1178 10.8879 11.3624
Jun-96 11.8800 14.8086 12.3238 10.9946 11.4306
Jul-96 11.3100 14.1570 12.3361 10.8264 11.0991
Aug-96 11.2700 14.4543 12.2497 10.795 11.1213
Sep-96 11.8900 15.2637 12.5682 11.1901 11.4216
Oct-96 13.0700 15.6911 13.0207 11.9924 11.3074
Nov-96 14.1600 16.8679 13.3462 12.6712 11.7597
Dec-96 13.6100 16.5305 13.0926 12.3658 11.6068
Jan-97 14.1100 17.5554 13.0533 12.811 11.2006
Feb-97 14.2700 17.6958 13.0925 13.1262 11.391
Mar-97 14.0100 16.9703 12.8045 13.0422 11.4366
Apr-97 13.6000 17.9885 13.035 12.7931 11.5052
May-97 13.0900 19.0858 13.2045 12.5897 12.253
Jun-97 13.1800 19.9447 13.4554 12.6917 12.9269
Jul-97 14.4100 21.5403 14.1685 13.509 13.1337
Aug-97 13.5500 20.3340 13.8285 12.9876 12.1618
Sep-97 13.8000 21.4524 14.1466 13.1331 12.8429
Oct-97 13.8500 20.7445 14.3305 12.9256 11.854
Nov-97 13.9900 21.6987 14.4738 13.051 11.7355
Dec-97 14.6300 22.0676 14.6185 13.3081 11.8411
Jan-98 14.4600 22.3103 14.8232 13.3347 12.3858
Feb-98 14.5200 23.9166 14.8084 13.2174 13.1785
Mar-98 14.7100 25.1363 14.8676 13.2372 13.587
Apr-98 14.0300 25.3877 14.9419 12.7011 13.6957
May-98 14.4900 24.9561 15.1959 13.1304 13.6272
Jun-98 14.3300 25.9793 15.3783 13.1803 13.7362
Jul-98 14.1900 25.6935 15.5321 13.0419 13.8736
Aug-98 15.6500 21.9679 15.6719 14.0579 12.1533
Sep-98 16.3300 23.3760 16.3144 14.6469 11.7838
Oct-98 16.2100 25.2765 16.0044 14.5561 13.0211
Nov-98 15.2100 26.8184 16.4365 14.1078 13.6852
Dec-98 16.1200 28.3739 16.4529 14.3617 14.2326
Jan-99 15.3200 29.5656 16.6503 14.0745 14.1899
Feb-99 15.7000 28.6491 15.9843 14.318 13.8493
Mar-99 15.3100 29.7951 15.9843 14.1691 14.431
Apr-99 16.4100 30.9571 15.9523 14.767 15.0227
May-99 15.5900 30.2141 15.6652 14.3063 14.2565
Jun-99 16.3900 31.8759 15.4146 14.664 14.8125
Jul-99 15.7500 30.8814 15.245 14.2871 15.2569
Aug-99 15.9000 30.7270 15.1993 14.3785 15.3179
</TABLE>
CORRELATION ANALYSIS (11/94 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum Technical MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Spectrum Technical 1.00 0.94 0.13 0.34 0.05
MAR Index 1.00 0.10 0.39 0.03
S & P 500 Index 1.00 0.36 0.67
Salomon Corporate Bond Index 1.00 0.02
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts Reports,
Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
Partnership and in order to make an informed decision, you should read the
Spectrum Series Prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-18
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM STRATEGIC STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisors: Allied Irish Capital Management,
Ltd.
Blenheim Investments Inc.
Willowbridge Associates Inc.
Began Trading: November 1, 1994
Total Assets in Fund: $88.7 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 7.2x
Monthly Management Fee: 1/12 of 4.00% of Beg. Net Assets
to Blenhiem and Willowbridge,
and 1/12 of 3.00% to AICM
Monthly Brokerage Fee: 1/12 of 7.25% of Beg. Net Assets
Monthly Incentive Fee: 15.00% of Monthly Trading
Profits
Investment Style: Fundamental
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 6.39%
Standard Deviation of Monthly Returns: 6.67%
Annualized Standard Deviation: 23.09%
Sharpe Ratio: 0.08
Sortino Ratio: 0.16
Largest Decline Period (4/97 - 7/98): -32.11%
Average Recovery (No. of months): 6.43
Average Monthly Loss: -4.37%
Standard Deviation of Monthly Loss: 3.41%
% of Losing Months: 48.28%
Average Monthly Gain: 5.49%
Standard Deviation of Monthly Gain: 5.31%
% of Winning Months: 51.72%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Foreign Exchange 11%
Interest Rates 13%
Stock Indices 16%
Agriculturals 3%
Energies 43%
Metals 11%
Softs 3%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Strategic seeks long-term capital appreciation and portfolio
diversification through participation in a broad array of global futures and
forward markets. Spectrum Strategic is managed by three professional Trading
Advisors. Allied Irish Capital Management, Ltd., Blenheim Investments Inc. and
Willowbridge Associates Inc.
Spectrum Strategic's Trading Advisors employ a fundamental investment approach
that evaluates key economic indicators such as supply and demand levels and
geopolitical conditions. Fundamental analysis is used to anticipate policy
trends, supply/demand imbalances, and events that lead to profitable trading
opportunities. Thus, positions can be set before trends in global futures
markets begin. This provides an opportunity to generate substantial profits from
early price movements.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C> <C>
AGRICULTURALS METALS STOCK
Corn Aluminum INDICES
Lean Hogs Copper CAC 40 Index
Live cattle Gold DAX Index
Soybean Nickel FTSE Index
Soybean meal Silver NASDAQ 100 Index
Soybean oil Zinc Nikkei Index
Wheat ENERGIES S&P 500 Index
SOFTS Crude oil INTEREST
Cocoa Heating oil RATES
Coffee Natural gas British bonds
Lumber Unleaded gas Eurodollar
Sugar French bonds
FOREIGN German bonds
EXCHANGE Italian bonds
Australian dollar Japanese bonds
British pound U.S. Treasury bonds
Canadian dollar U.S. Treasury notes
European common currency
Japanese yen
Swiss franc
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-19
<PAGE>
SPECTRUM STRATEGIC PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
0.10% 10.49% -3.53% 0.37% 7.84% 16.80%
</TABLE>
(2 MONTHS) (8 MONTHS)
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC MAR INDEX
<S> <C> <C>
Oct-95 1.30% 7.38%
Nov-95 4.00% 7.98%
Dec-95 10.49% 13.89%
Jan-96 18.74% 22.29%
Feb-96 5.00% 7.63%
Mar-96 -3.60% -2.00%
Apr-96 2.27% -0.53%
May-96 -0.19% -5.68%
Jun-96 3.56% -3.39%
Jul-96 -0.72% -1.85%
Aug-96 -3.45% -2.71%
Sep-96 1.88% 3.01%
Oct-96 4.54% 11.68%
Nov-96 5.28% 17.01%
Dec-96 -3.53% 9.77%
Jan-97 -7.59% 10.59%
Feb-97 13.41% 22.30%
Mar-97 22.28% 20.87%
Apr-97 7.31% 13.80%
May-97 11.55% 15.63%
Jun-97 12.97% 15.44%
Jul-97 27.89% 24.78%
Aug-97 20.22% 20.31%
Sep-97 7.48% 17.36%
Oct-97 -2.08% 7.78%
Nov-97 -7.48% 3.00%
Dec-97 0.37% 7.62%
Jan-98 6.42% 4.09%
Feb-98 -6.60% 0.69%
Mar-98 -12.20% 1.50%
Apr-98 -16.12% -0.72%
May-98 -22.93% 4.29%
Jun-98 -22.35% 3.85%
Jul-98 -31.66% -3.46%
Aug-98 -19.63% 8.24%
Sep-98 1.81% 11.53%
Oct-98 17.74% 12.61%
Nov-98 10.85% 8.10%
Dec-98 7.84% 7.92%
Jan-99 -1.24% 5.55%
Feb-99 14.22% 8.33%
Mar-99 9.87% 7.04%
Apr-99 26.00% 16.27%
May-99 17.87% 8.96%
Jun-99 44.90% 11.26%
Jul-99 51.42% 9.55%
Aug-99 42.60% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (10/31/94 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR INDEX S&P 500 SALOMON CORP. MSCI EAFE
STRATEGIC INDEX BOND INDEX INDEX
<S> <C> <C> <C> <C> <C>
Nov-94 10.0100 10.0290 9.6300 10.0200 9.1300
Dec-94 10.0100 9.8916 9.7745 10.1803 9.7874
Jan-95 9.6600 9.4732 10.0384 10.445 9.4155
Feb-95 9.8000 9.9724 10.4199 10.7479 9.3873
Mar-95 10.5700 11.0105 10.7325 10.8554 9.9787
Apr-95 10.5700 11.3023 11.0545 11.0399 10.3579
May-95 10.5000 11.5430 11.4856 11.7354 10.2336
Jun-95 9.8300 11.3802 11.7498 11.8293 10.0596
Jul-95 9.7500 11.0308 12.1493 11.711 10.6934
Aug-95 10.1400 11.0959 12.1736 11.9569 10.2871
Sep-95 10.1000 10.8629 12.6849 12.1363 10.4928
Oct-95 10.1300 10.7380 12.6468 12.3548 10.2095
Nov-95 10.4100 10.8293 13.1906 12.6513 10.4954
Dec-95 11.0600 11.2657 13.4412 12.9423 10.9257
Jan-96 11.4700 11.5845 13.9116 12.9604 10.9694
Feb-96 10.2900 10.7330 14.0368 12.477 11.0133
Mar-96 10.1900 10.7899 14.1772 12.3148 11.2446
Apr-96 10.8100 11.2420 14.3899 12.1178 11.5707
May-96 10.4800 10.8879 14.7496 12.1178 11.3624
Jun-96 10.1800 10.9946 14.8086 12.3238 11.4306
Jul-96 9.6800 10.8264 14.1570 12.3361 11.0991
Aug-96 9.7900 10.7950 14.4543 12.2497 11.1213
Sep-96 10.2900 11.1901 15.2637 12.5682 11.4216
Oct-96 10.5900 11.9924 15.6911 13.0207 11.3074
Nov-96 10.9600 12.6712 16.8679 13.3462 11.7597
Dec-96 10.6700 12.3658 16.5305 13.0926 11.6068
Jan-97 10.6000 12.8110 17.5554 13.0533 11.2006
Feb-97 11.6700 13.1262 17.6958 13.0925 11.391
Mar-97 12.4600 13.0422 16.9703 12.8045 11.4366
Apr-97 11.6000 12.7931 17.9885 13.035 11.5052
May-97 11.6900 12.5897 19.0858 13.2045 12.253
Jun-97 11.5000 12.6917 19.9447 13.4554 12.9269
Jul-97 12.3800 13.5090 21.5403 14.1685 13.1337
Aug-97 11.7700 12.9876 20.3340 13.8285 12.1618
Sep-97 11.0600 13.1331 21.4524 14.1466 12.8429
Oct-97 10.3700 12.9256 20.7445 14.3305 11.854
Nov-97 10.1400 13.0510 21.6987 14.4738 11.7355
Dec-97 10.7100 13.3081 22.0676 14.6185 11.8411
Jan-98 11.2800 13.3347 22.3103 14.8232 12.3858
Feb-98 10.9000 13.2174 23.9166 14.8084 13.1785
Mar-98 10.9400 13.2372 25.1363 14.8676 13.587
Apr-98 9.7300 12.7011 25.3877 14.9419 13.6957
May-98 9.0100 13.1304 24.9561 15.1959 13.6272
Jun-98 8.9300 13.1803 25.9793 15.3783 13.7362
Jul-98 8.4600 13.0419 25.6935 15.5321 13.8736
Aug-98 9.4600 14.0579 21.9679 15.6719 12.1533
Sep-98 11.2600 14.6469 23.3760 16.3144 11.7838
Oct-98 12.2100 14.5561 25.2765 16.0044 13.0211
Nov-98 11.2400 14.1078 26.8184 16.4365 13.6852
Dec-98 11.5500 14.3617 28.3739 16.4529 14.2326
Jan-99 11.1400 14.0745 29.5656 16.6503 14.1899
Feb-99 12.4500 14.3180 28.6491 15.9843 13.8493
Mar-99 12.0200 14.1691 29.7951 15.9843 14.431
Apr-99 12.2600 14.7670 30.9571 15.9523 15.0227
May-99 10.6200 14.3063 30.2141 15.6652 14.2565
Jun-99 12.9400 14.6640 31.8759 15.4146 14.8125
Jul-99 12.8100 14.2871 30.8814 15.245 15.2569
Aug-99 13.4900 14.3785 30.7270 15.1993 15.3179
</TABLE>
CORRELATION ANALYSIS (11/94 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum
Strategic MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Spectrum Strategic 1.00 0.62 0.07 0.05 0.10
MAR Index 1.00 0.10 0.39 0.03
S & P 500 Index 1.00 0.36 0.67
Salomon Corporate Bond Index 1.00 0.02
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts
Reports, Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
Partnership and in order to make an informed decision, you should read the
Spectrum Series Prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-20
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM GLOBAL BALANCED STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisor: RXR, Inc.
Began Trading: November 1, 1994
Total Assets in Fund: $55.1 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 5.8x
Monthly Management Fee: 1/12 of 1.25% of Beg. Net Assets
Monthly Brokerage Fee: 1/12 of 4.60% of Beg. Net Assets
Monthly Incentive Fee: 15.00% of Monthly Trading
Profits
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 10.04%
Standard Deviation of Monthly Returns: 3.05%
Annualized Standard Deviation: 10.54%
Sharpe Ratio: 0.53
Sortino Ratio: 0.78
Largest Decline Period (2/96 - 5/96): -10.64%
Average Recovery (No. of months): 3.18
Average Monthly Loss: -1.99%
Standard Deviation of Monthly Loss: 2.04%
% of Losing Months: 37.93%
Average Monthly Gain: 2.58%
Standard Deviation of Monthly Gain: 2.12%
% of Winning Months: 62.07%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Foreign Exchange 16%
Interest Rates 30%
Stock Indices 35%
Agriculturals 6%
Energies 7%
Metals 4%
Softs 2%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Global Balanced seeks long-term capital appreciation utilizing a
multi-strategy program which emphasizes U.S. and international capital markets,
currency, and commodity exposure through the use of futures and forward
contracts.
Its Trading Advisor, RXR, Inc. ("RXR"), uses an investment philosophy which has
its roots in Modern Portfolio Theory and the design of efficiently allocated
portfolios. In the global and fixed income areas, RXR analyzes various
fundamental information, such as growth data, labor wage rates, central bank
interest rate policies, and inflation, to determine its approaches to markets.
In foreign exchange and commodity components, RXR analyzes price data to
determine profit and risk potential. Spectrum Global Balanced uses a
computer-based model to reallocate assets among various market sectors within
each of the independent strategies.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C> <C>
AGRICULTURALS STOCK INTEREST
Corn INDICES RATES
Lean hogs DAX Index Australian bonds
Live cattle FTSE Index British bonds
Soybean oil S&P 500 Index Euro bonds
Wheat Nikkei Index Eurodollar
SOFTS FOREIGN French bonds
Cotton EXCHANGE German bonds
Sugar Australian dollar Italian bonds
ENERGIES British pound Japanese bonds
Crude oil Canadian dollar Spanish bonds
Gas oil European common currency U.S. Treasury
Natural gas Japanese yen bonds
METALS Mexican peso U.S. Treasury
Copper New Zealand dollar notes
Nickel Singapore dollar
Zinc Spanish peseta
Swiss franc
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-21
<PAGE>
SPECTRUM GLOBAL BALANCED PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
- -1.70% 22.79% -3.65% 18.23% 16.36% -0.81%
</TABLE>
(2 MONTHS) (8 MONTHS)
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM GLOBAL MAR PUBLIC
BALANCED FUND INDEX
<S> <C> <C>
10/31/95 14.10% 7.38%
11/30/95 17.79% 7.98%
12/31/95 22.79% 13.89%
01/31/96 21.69% 22.29%
02/29/96 7.10% 7.63%
03/31/96 2.99% -2.00%
04/30/96 2.10% -0.53%
05/31/96 -5.25% -5.68%
06/30/96 -5.56% -3.39%
07/31/96 -3.43% -1.85%
08/31/96 -2.86% -2.71%
09/30/96 -2.20% 3.01%
10/31/96 1.23% 11.68%
11/30/96 3.24% 17.01%
12/31/96 -3.65% 9.77%
01/31/97 -0.83% 10.59%
02/28/97 11.11% 22.30%
03/31/97 9.51% 20.87%
04/30/97 6.35% 13.80%
05/31/97 11.63% 15.63%
06/30/97 15.17% 15.44%
07/31/97 27.80% 24.78%
08/31/97 21.23% 20.31%
09/30/97 22.37% 17.36%
10/31/97 15.93% 7.78%
11/30/97 10.25% 3.00%
12/31/97 18.23% 7.62%
01/31/98 16.97% 4.09%
02/28/98 15.08% 0.69%
03/31/98 20.68% 1.50%
04/30/98 20.52% -0.72%
05/31/98 18.11% 4.29%
06/30/98 13.97% 3.85%
07/31/98 0.64% -3.46%
08/31/98 9.70% 8.24%
09/30/98 11.67% 11.53%
10/31/98 14.94% 12.61%
11/30/98 18.44% 8.10%
12/31/98 16.36% 7.92%
01/31/99 13.73% 5.55%
02/28/99 11.98% 8.33%
03/31/99 9.53% 7.04%
04/30/99 16.12% 16.27%
05/31/99 10.71% 8.96%
06/30/99 13.24% 11.26%
07/31/99 12.69% 9.55%
08/31/99 9.68% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (10/31/94 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED MAR PUBLIC FUND INDEX S&P 500 INDEX SALOMON CORP. BOND INDEX MSCI EAFE INDEX
<S> <C> <C> <C> <C> <C>
11/1/94 10.00 10.0000 10.0000 10.0000 10.0000
11/30/94 9.95 10.029 9.63 10.02 9.13
12/31/94 9.83 9.8916 9.7745 10.1803 9.7874
01/31/95 9.96 9.4732 10.0384 10.445 9.4155
02/28/95 10.42 9.9724 10.4199 10.7479 9.3873
03/31/95 10.72 11.0105 10.7325 10.8554 9.9787
04/30/95 10.95 11.3023 11.0545 11.0399 10.3579
05/31/95 11.43 11.543 11.4856 11.7354 10.2336
06/30/95 11.52 11.3802 11.7498 11.8293 10.0596
07/31/95 11.36 11.0308 12.1493 11.711 10.6934
08/31/95 11.20 11.0959 12.1736 11.9569 10.2871
09/30/95 11.38 10.8629 12.6849 12.1363 10.4928
10/31/95 11.41 10.738 12.6468 12.3548 10.2095
11/30/95 11.72 10.8293 13.1906 12.6513 10.4954
12/31/95 12.07 11.2657 13.4412 12.9423 10.9257
01/31/96 12.12 11.5845 13.9116 12.9604 10.9694
02/29/96 11.16 10.733 14.0368 12.477 11.0133
03/31/96 11.04 10.7899 14.1772 12.3148 11.2446
04/30/96 11.18 11.242 14.3899 12.1178 11.5707
05/31/96 10.83 10.8879 14.7496 12.1178 11.3624
06/30/96 10.88 10.9946 14.8086 12.3238 11.4306
07/31/96 10.97 10.8264 14.1570 12.3361 11.0991
08/31/96 10.88 10.795 14.4543 12.2497 11.1213
09/30/96 11.13 11.1901 15.2637 12.5682 11.4216
10/31/96 11.55 11.9924 15.6911 13.0207 11.3074
11/30/96 12.10 12.6712 16.8679 13.3462 11.7597
12/31/96 11.63 12.3658 16.5305 13.0926 11.6068
01/31/97 12.02 12.811 17.5554 13.0533 11.2006
02/28/97 12.40 13.1262 17.6958 13.0925 11.391
03/31/97 12.09 13.0422 16.9703 12.8045 11.4366
04/30/97 11.89 12.7931 17.9885 13.035 11.5052
05/31/97 12.09 12.5897 19.0858 13.2045 12.253
06/30/97 12.53 12.6917 19.9447 13.4554 12.9269
07/31/97 14.02 13.509 21.5403 14.1685 13.1337
08/31/97 13.19 12.9876 20.3340 13.8285 12.1618
09/30/97 13.62 13.1331 21.4524 14.1466 12.8429
10/31/97 13.39 12.9256 20.7445 14.3305 11.854
11/30/97 13.34 13.051 21.6987 14.4738 11.7355
12/31/97 13.75 13.3081 22.0676 14.6185 11.8411
01/31/98 14.06 13.3347 22.3103 14.8232 12.3858
02/28/98 14.27 13.2174 23.9166 14.8084 13.1785
03/31/98 14.59 13.2372 25.1363 14.8676 13.587
04/30/98 14.33 12.7011 25.3877 14.9419 13.6957
05/31/98 14.28 13.1304 24.9561 15.1959 13.6272
06/30/98 14.28 13.1803 25.9793 15.3783 13.7362
07/31/98 14.11 13.0419 25.6935 15.5321 13.8736
08/31/98 14.47 14.0579 21.9679 15.6719 12.1533
09/30/98 15.21 14.6469 23.3760 16.3144 11.7838
10/31/98 15.39 14.5561 25.2765 16.0044 13.0211
11/30/98 15.80 14.1078 26.8184 16.4365 13.6852
12/31/98 16.00 14.3617 28.3739 16.4529 14.2326
01/31/99 15.99 14.0745 29.5656 16.6503 14.1899
02/28/99 15.98 14.318 28.6491 15.9843 13.8493
03/31/99 15.98 14.1691 29.7951 15.9843 14.431
04/30/99 16.64 14.767 30.9571 15.9523 15.0227
05/31/99 15.81 14.3063 30.2141 15.6652 14.2565
06/30/99 16.17 14.664 31.8759 15.4146 14.8125
07/31/99 15.90 14.2871 30.8814 15.245 15.2569
08/31/99 15.87 14.3785 30.7270 15.1993 15.3179
</TABLE>
CORRELATION ANALYSIS (11/94 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum
Global
Balanced MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Spectrum Global Balanced 1.00 0.71 0.47 0.67 0.26
MAR Index 1.00 0.10 0.39 0.03
S & P 500 Index 1.00 0.36 0.67
Salomon Corporate Bond Index 1.00 0.02
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts
Reports, Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
Partnership and in order to make an informed decision, you should read the
Spectrum Series Prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-22
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
- --------------------------------------------------------------------------------
All of the performance data below is a proforma of DW Cornerstone IV for the
Spectrum Currency fee structure and is through August 31, 1999.
SPECTRUM CURRENCY STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisors: John W. Henry & Company, Inc.
Sunrise Capital Partners LLC
Began Trading: May 1, 1987
Total Assets in Fund: $ 103.6 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 2.7
Monthly Management Fee: 1/12 of 4.00% of Beg. Net Assets
to John W. Henry & Company, Inc.
and 1/12 of 3.00% to Sunrise
Capital Partners, LLC
Monthly Brokerage Fee: 1/12 of 4.60% of Beg. Net Assets
Monthly Incentive Fee: 15.00% of Monthly Trading Profits
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: 13.43%
Standard Deviation of Monthly Returns: 8.61%
Annualized Standard Deviation: 29.78%
Sharpe Ratio: 0.30
Sortino Ratio: 0.54
Largest Decline Period (6/95 - 8/96): -43.60%
Average Recovery (No. of months): 7.84
Average Monthly Loss: -5.52%
Standard Deviation of Monthly Loss: 4.77%
% of Losing Months: 43.24%
Average Monthly Gain: 6.69%
Standard Deviation of Monthly Gain: 6.97%
% of Winning Months: 56.76%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Foreign Exchange 100%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Currency, a specialty fund, is structured to exclusively trade a
portfolio of diverse world currencies primarily in an effort to profit from the
change in the value of one currency versus another. Traditionally, most foreign
currency trading is concentrated in the major currencies, such as the Japanese
Yen and the Euro versus the U.S. dollar. However, in addition to trading these
currencies, Spectrum Currency trades other minor world currencies such as the
Australian dollar and South African Rand, among others.
Spectrum Currency will be managed by two professional Trading Advisors: John W.
Henry & Company, Inc. and Sunrise Capital Partners LLC. Each Trading Advisor
implements a technical, trend-following program to participate in international
currencies via the interbank market (a network of major world banks and
financial institutions) and futures contracts. The Trading Advisors to the Fund
may also trade in spot (cash) currency markets.
FUTURES MARKETS TRADED
- ------------------------------------------------
FOREIGN
EXCHANGE
Australian dollar
British pound
Czech krona
European common currency
Greek drachma
Japanese yen
Mexican peso
New Zealand dollar
Norwegian kroner
Singapore dollar
South African rand
Swedish kroner
Swiss franc
Thai baht
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-23
<PAGE>
SPECTRUM CURRENCY PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.22% 36.99% -9.52% 59.88% 37.10% 9.78% -7.54% -13.78% 21.34% 13.14% 34.63% 3.09% -5.26%
(8 MONTHS) (8 MONTHS)
</TABLE>
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM CURRENCY MAR INDEX
<S> <C> <C>
4/30/88 -2.56% -1.22%
5/31/88 39.28% 7.84%
6/30/88 58.34% 26.45%
7/31/88 72.83% 15.67%
8/31/88 104.62% 21.13%
9/30/88 94.29% 23.80%
10/31/88 74.08% 25.14%
11/30/88 71.54% 17.59%
12/31/88 36.99% 7.26%
1/31/89 102.27% 19.88%
2/28/89 65.64% 11.23%
3/31/89 63.00% 16.74%
4/30/89 60.08% 17.87%
5/31/89 43.26% 22.71%
6/30/89 26.64% 6.35%
7/31/89 1.43% 13.47%
8/31/89 -19.74% 6.40%
9/30/89 -32.16% 3.32%
10/31/89 -30.21% -3.07%
11/30/89 -28.86% -2.00%
12/31/89 -9.52% 4.68%
1/31/90 -20.30% 0.71%
2/28/90 -2.32% 7.36%
3/31/90 -0.50% 7.69%
4/30/90 0.58% 12.99%
5/31/90 -18.96% -3.66%
6/30/90 -8.46% -2.20%
7/31/90 30.48% 1.07%
8/31/90 74.04% 11.28%
9/30/90 110.34% 16.17%
10/31/90 123.99% 22.75%
11/30/90 97.93% 20.62%
12/31/90 59.88% 14.23%
1/31/91 37.39% 7.28%
2/28/91 26.49% 6.80%
3/31/91 53.48% 9.85%
4/30/91 51.62% 5.39%
5/31/91 66.74% 10.61%
6/30/91 62.20% 9.53%
7/31/91 18.42% 2.06%
8/31/91 -1.01% -6.24%
9/30/91 9.49% -3.79%
10/31/91 -6.91% -6.22%
11/30/91 -0.57% -6.50%
12/31/91 37.10% 10.01%
1/31/92 36.62% 6.45%
2/29/92 33.84% 2.77%
3/31/92 6.13% -3.03%
4/30/92 -2.44% -5.17%
5/31/92 -0.67% -4.35%
6/30/92 6.20% 0.74%
7/31/92 28.78% 10.82%
8/31/92 64.81% 20.71%
9/30/92 46.75% 13.91%
10/31/92 52.45% 14.62%
11/30/92 45.45% 15.01%
12/31/92 9.78% -1.40%
1/31/93 16.18% 5.66%
2/28/93 45.83% 15.85%
3/31/93 38.98% 15.98%
4/30/93 48.94% 22.42%
5/31/93 50.86% 22.74%
6/30/93 29.80% 17.48%
7/31/93 27.56% 14.79%
8/31/93 1.44% 8.84%
9/30/93 4.30% 9.38%
10/31/93 -1.98% 8.75%
11/30/93 -9.53% 6.98%
12/31/93 -7.54% 10.74%
1/31/94 -2.70% 7.66%
2/28/94 -17.44% -1.18%
3/31/94 -14.73% 1.65%
4/30/94 -17.72% -3.13%
5/31/94 -24.16% -1.70%
6/30/94 -19.87% 0.14%
7/31/94 -27.75% -6.92%
8/31/94 -25.33% -8.75%
9/30/94 -22.50% -6.98%
10/31/94 -12.32% -5.24%
11/30/94 -11.88% -3.91%
12/31/94 -13.78% -7.72%
1/31/95 -19.27% -8.09%
2/28/95 -11.84% -0.20%
3/31/95 11.60% 7.72%
4/30/95 17.77% 13.02%
5/31/95 16.20% 13.48%
6/30/95 7.71% 8.31%
7/31/95 11.07% 7.93%
8/31/95 21.40% 12.11%
9/30/95 19.12% 8.67%
10/31/95 14.08% 7.38%
11/30/95 18.90% 7.98%
12/31/95 21.34% 13.89%
1/31/96 35.28% 22.29%
2/29/96 19.83% 7.63%
3/31/96 -3.22% -2.00%
4/30/96 -2.31% -0.53%
5/31/96 3.99% -5.67%
6/30/96 4.68% -3.39%
7/31/96 2.27% -1.85%
8/31/96 -5.64% -2.71%
9/30/96 -4.97% 3.01%
10/31/96 2.97% 11.68%
11/30/96 10.34% 17.01%
12/31/96 13.14% 9.77%
1/31/97 15.50% 10.59%
2/28/97 30.39% 22.30%
3/31/97 28.42% 20.87%
4/30/97 25.69% 13.80%
5/31/97 17.35% 15.63%
6/30/97 19.14% 15.43%
7/31/97 33.77% 24.78%
8/31/97 40.32% 20.31%
9/30/97 39.85% 17.36%
10/31/97 31.73% 7.78%
11/30/97 31.49% 3.00%
12/31/97 34.63% 7.62%
1/31/98 25.45% 4.09%
2/28/98 13.18% 0.69%
3/31/98 14.98% 1.49%
4/30/98 9.12% -0.72%
5/31/98 21.70% 4.29%
6/30/98 34.08% 3.85%
7/31/98 23.82% -3.46%
8/31/98 22.00% 8.24%
9/30/98 17.09% 11.53%
10/31/98 20.38% 12.61%
11/30/98 9.63% 8.10%
12/31/98 3.09% 7.92%
1/31/99 1.86% 5.55%
2/28/99 6.96% 8.33%
3/31/99 6.74% 7.04%
4/30/99 12.79% 16.26%
5/31/99 5.16% 8.95%
6/30/99 -6.38% 11.26%
7/31/99 -11.37% 9.55%
8/31/99 -10.83% 2.28%
9/30/99 -4.97% -1.34%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (4/30/87 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR S&P 500 SALOMON CORP. MSCI EAFE
CURRENCY INDEX INDEX BOND INDEX INDEX
<S> <C> <C> <C> <C> <C>
5/1/87 10.0000 10.0000 10.0000 10.0000 10.0000
5/31/87 8.9360 9.7460 10.0900 9.9500 10.0000
6/30/87 8.9083 9.5959 10.5945 10.0993 9.6800
7/31/87 8.7257 9.9404 11.1348 9.9781 9.6606
8/31/87 7.6603 9.5706 11.5468 9.8983 10.3851
9/30/87 7.6434 9.4060 11.2928 9.4826 10.2189
10/31/87 8.7005 9.4540 8.8648 9.9662 8.7883
11/30/87 9.6723 10.1763 8.1379 10.0958 8.8762
12/31/87 11.0216 10.8490 8.7564 10.3078 9.1425
1/31/88 8.7820 10.2469 9.1417 10.8438 9.3071
2/29/88 8.8698 10.3811 9.5531 10.9956 9.9307
3/31/88 9.3869 10.0946 9.2665 10.7867 10.5464
4/30/88 9.7436 9.8776 9.3777 10.6249 10.7046
5/31/88 12.4465 10.5098 9.4340 10.5612 10.3621
6/30/88 14.1056 12.1336 9.8680 10.9625 10.0927
7/31/88 15.0803 11.4978 9.8483 10.8419 10.4157
8/31/88 15.6745 11.5932 9.4938 10.8961 9.7387
9/30/88 14.8500 11.6442 9.9020 11.2557 10.1672
10/31/88 15.1455 11.8305 10.1892 11.5709 11.0416
11/30/88 16.5919 11.9666 10.0262 11.3742 11.7041
12/31/88 15.0986 11.6363 10.2067 11.4197 11.7743
1/31/89 17.7635 12.2844 10.9620 11.6481 11.9862
2/28/89 14.6922 11.5473 10.6770 11.4967 12.0461
3/31/89 15.3005 11.7840 10.9332 11.5657 11.8172
4/30/89 15.5973 11.6426 11.5127 11.8086 11.9236
5/31/89 17.8308 12.8965 11.9502 12.2573 11.2797
6/30/89 17.8629 12.9042 11.8904 12.7353 11.0879
7/31/89 15.2960 13.0461 12.9724 12.9645 12.4850
8/31/89 12.5810 12.3351 13.2059 12.7571 11.9232
9/30/89 10.0749 12.0304 13.1531 12.8081 12.4717
10/31/89 10.5706 11.4674 12.8506 13.1667 11.9728
11/30/89 11.8031 11.7277 13.0948 13.2589 12.5714
12/31/89 13.6609 12.1804 13.4091 13.2722 13.0365
1/31/90 14.1582 12.3716 12.5241 13.0200 12.5541
2/28/90 14.3508 12.3976 12.6619 13.0070 11.6753
3/31/90 15.2233 12.6902 13.0038 12.9940 10.4611
4/30/90 15.6876 13.1547 12.6917 12.7471 10.3774
5/31/90 14.4498 12.4246 13.8974 13.2442 11.5604
6/30/90 16.3514 12.6197 13.8140 13.5356 11.4564
7/31/90 19.9585 13.1851 13.7864 13.6710 11.6168
8/31/90 21.8965 13.7270 12.5318 13.2745 10.4900
9/30/90 21.1914 13.9755 11.9303 13.3940 9.0319
10/31/90 23.6772 14.0761 11.8945 13.5681 10.4409
11/30/90 23.3623 14.1465 12.6439 13.9480 9.8249
12/31/90 21.8414 13.9131 12.9979 14.1851 9.9919
1/31/91 19.4520 13.2717 13.5828 14.3979 10.3216
2/28/91 18.1526 13.2412 14.5336 14.5707 11.4260
3/31/91 23.3642 13.9403 14.8969 14.7310 10.7404
4/30/91 23.7848 13.8636 14.9416 14.9372 10.8478
5/31/91 24.0940 13.7430 15.5542 14.9969 10.9671
6/30/91 26.5227 13.8227 14.8543 14.9669 10.1665
7/31/91 23.6344 13.4564 15.5673 15.2213 10.6647
8/31/91 21.6751 12.8710 15.9098 15.6323 10.4514
9/30/91 23.2032 13.4463 15.6393 16.0544 11.0471
10/31/91 22.0407 13.2002 15.8583 16.1186 11.2018
11/30/91 23.2287 13.2266 15.2081 16.2959 10.6865
12/31/91 29.9441 15.3058 16.9418 17.0129 11.2422
1/31/92 26.5754 14.1273 16.6538 16.7237 11.0061
2/29/92 24.2952 13.6074 16.8536 16.8909 10.6099
3/31/92 24.7957 13.5176 16.5334 16.7727 9.9096
4/30/92 23.2038 13.1472 17.0294 16.8062 9.9591
5/31/92 23.9324 13.1446 17.0805 17.2264 10.6264
6/30/92 28.1684 13.9254 16.8243 17.5020 10.1270
7/31/92 30.4360 14.9127 17.5309 18.0446 9.8738
8/31/92 35.7227 15.5361 17.1452 18.2070 10.4958
9/30/92 34.0509 15.3170 17.3509 18.3891 10.2964
10/31/92 33.6014 15.1301 17.4377 18.0949 9.7610
11/30/92 33.7862 15.2118 18.0131 18.2216 9.8586
12/31/92 32.8740 15.0916 18.2473 18.6407 9.9079
1/31/93 30.8753 14.9271 18.4115 19.1067 9.9079
2/28/93 35.4294 15.7645 18.6508 19.6035 10.2150
3/31/93 34.4622 15.6778 19.0425 19.6427 11.1037
4/30/93 34.5587 16.0948 18.6045 19.7409 12.1586
5/31/93 36.1035 16.1334 19.0696 19.7804 12.4139
6/30/93 36.5620 16.3593 19.1268 20.3540 12.2277
7/31/93 38.8252 17.1184 19.0694 20.5575 12.6557
8/31/93 36.2356 16.9096 19.7750 21.1537 13.3391
9/30/93 35.5145 16.7540 19.6168 21.2383 13.0456
10/31/93 32.9361 16.4541 20.0484 21.3445 13.4500
11/30/93 30.5680 16.2731 19.8279 20.9390 12.2799
12/31/93 30.3938 16.7125 20.0658 21.0856 13.1641
1/31/94 30.0412 16.0707 20.7681 21.5073 14.2830
2/28/94 29.2511 15.5789 20.1866 20.8836 14.2402
3/31/94 29.3857 15.9372 19.3186 20.0900 13.6279
4/30/94 28.4365 15.5914 19.5891 19.8891 14.2139
5/31/94 27.3815 15.8596 19.8829 19.7698 14.1286
6/30/94 29.2955 16.3814 19.4057 19.6116 14.3264
7/31/94 28.0504 15.9342 20.0655 20.2196 14.4697
8/31/94 27.0574 15.4307 20.8681 20.1589 14.8170
9/30/94 27.5228 15.5850 20.3464 19.6146 14.3577
10/31/94 28.8797 15.5912 20.8144 19.5165 14.8459
11/30/94 26.9361 15.6364 20.0443 19.5555 14.1333
12/31/94 26.2061 15.4222 20.3450 19.8684 14.2181
1/31/95 24.2537 14.7698 20.8943 20.3850 13.6778
2/28/95 25.7890 15.5482 21.6883 20.9762 13.6368
3/31/95 32.7933 17.1668 22.3389 21.1860 14.4959
4/30/95 33.4885 17.6217 23.0091 21.5462 15.0467
5/31/95 31.8174 17.9970 23.9065 22.9036 14.8661
6/30/95 31.5533 17.7432 24.4563 23.0868 14.6134
7/31/95 31.1557 17.1985 25.2878 22.8559 15.5340
8/31/95 32.8475 17.3000 25.3384 23.3359 14.9437
9/30/95 32.7851 16.9367 26.4026 23.6859 15.2426
10/31/95 32.9457 16.7419 26.3234 24.1122 14.8310
11/30/95 32.0265 16.8842 27.4553 24.6909 15.2463
12/31/95 31.7991 17.5646 27.9770 25.2588 15.8714
1/31/96 32.8103 18.0617 28.9562 25.2841 15.9349
2/29/96 30.9040 16.7342 29.2168 24.3486 15.9986
3/31/96 31.7384 16.8229 29.5090 24.0321 16.3346
4/30/96 32.7159 17.5278 29.9516 23.6476 16.8083
5/31/96 33.0856 16.9757 30.7004 23.6712 16.5058
6/30/96 33.0294 17.1421 30.8232 24.0736 16.6048
7/31/96 31.8635 16.8798 29.4670 24.0977 16.1233
8/31/96 30.9936 16.8308 30.0858 23.9290 16.1555
9/30/96 31.1548 17.4468 31.7706 24.5512 16.5917
10/31/96 33.9245 18.6977 32.6602 25.4350 16.4258
11/30/96 35.3392 19.7560 35.1097 26.0709 17.0828
12/31/96 35.9788 19.2799 34.4075 25.5756 16.8607
1/31/97 37.8965 19.9740 36.5408 25.4989 16.2706
2/28/97 40.2953 20.4654 36.8331 25.5754 16.5472
3/31/97 40.7587 20.3344 35.3229 25.0127 16.6134
4/30/97 41.1215 19.9460 37.4423 25.4629 16.7131
5/31/97 38.8269 19.6289 39.7263 25.7939 17.7995
6/30/97 39.3511 19.7879 41.5140 26.2840 18.7785
7/31/97 42.6251 21.0622 44.8351 27.6771 19.0790
8/31/97 43.4904 20.2492 42.3243 27.0128 17.6672
9/30/97 43.5687 20.4760 44.6521 27.6341 18.6566
10/31/97 44.6884 20.1525 43.1786 27.9933 17.2200
11/30/97 46.4670 20.3480 45.1648 28.2732 17.0478
12/31/97 48.4372 20.7489 45.9326 28.5559 17.2012
1/31/98 47.5411 20.7904 46.4379 28.9557 17.9925
2/28/98 45.6062 20.6074 49.7814 28.9267 19.1440
3/31/98 46.8649 20.6383 52.3203 29.0424 19.7375
4/30/98 44.8731 19.8024 52.8435 29.1876 19.8954
5/31/98 47.2514 20.4717 51.9452 29.6838 19.7959
6/30/98 52.7609 20.5495 54.0750 30.0400 19.9543
7/31/98 52.7767 20.3337 53.4802 30.3404 20.1538
8/31/98 53.0564 21.9177 45.7256 30.6135 17.6547
9/30/98 51.0137 22.8361 48.6566 31.8687 17.1180
10/31/98 53.7939 22.6945 52.6124 31.2632 18.9154
11/30/98 50.9428 21.9955 55.8218 32.1073 19.8801
12/31/98 49.9341 22.3914 59.0595 32.1394 20.6753
1/31/99 48.4261 21.9436 61.5400 32.5251 20.6133
2/28/99 48.7796 22.3232 59.6323 31.2241 20.1186
3/31/99 50.0235 22.0910 62.0176 31.2241 20.9636
4/30/99 50.6138 23.0232 64.4363 31.1617 21.8231
5/31/99 49.6876 22.3049 62.8898 30.6008 20.7101
6/30/99 49.3944 22.8625 66.3487 30.1112 21.5178
7/31/99 46.7765 22.2749 64.2786 29.7800 22.1633
8/31/99 47.3098 22.4175 63.9572 29.6907 22.2520
9/30/99 48.4784 22.5296 62.2041 29.6907 22.4812
</TABLE>
CORRELATION ANALYSIS (5/87 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum
Currency MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Spectrum Currency 1.00 0.71 -0.09 0.10 -0.09
MAR Index 1.00 0.07 0.28 -0.05
S & P 500 Index 1.00 0.32 0.53
Salomon Corporate Bond Index 1.00 0.11
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Public
Fund Index performance data for managed futures is provided by Managed Accounts
Reports, Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
Partnership and in order to make an informed decision, you should read the
Spectrum Series Prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-24
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
- --------------------------------------------------------------------------------
All of the performance data below is through August 31, 1999.
SPECTRUM COMMODITY STATISTICS
- ------------------------------------------------
<TABLE>
<S> <C>
Trading Advisor: Morgan Stanley Dean Witter
Commodity Management, Inc.
Began Trading: January 2, 1998
Total Assets in Fund: $23.6 Million
Minimum Investment: $5,000 ($2,000/IRA)
Average Leverage Employed: 1.5x
Monthly Management Fee: 1/12 of 2.5% of Beg. Net Assets
Monthly Brokerage Fee: 1/12 of 4.60% of Beg. Net Assets
Annual Incentive Fee: 20.00% of Trading Profits
Investment Style: Technical
</TABLE>
RISK ANALYSIS
- ------------------------------------------------
<TABLE>
<S> <C>
Compounded Annual Rate of Return: (17.57)%
Standard Deviation of Monthly Returns: 5.18%
Annualized Standard Deviation: 17.92%
Sharpe Ratio: -1.23
Sortino Ratio: -2.72
Largest Decline Period (2/98 - 2/99): -38.60%
Average Recovery (No. of months): N/A
Average Monthly Loss: -5.00%
Standard Deviation of Monthly Loss: 2.35%
% of Losing Months: 60.00%
Average Monthly Gain: 3.84%
Standard Deviation of Monthly Gain: 3.26%
% of Winning Months: 40.00%
</TABLE>
CURRENT SECTOR PARTICIPATION
- ------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Metals 33%
Energies 31%
Agriculturals 20%
Softs 16%
</TABLE>
TRADING STRATEGY
- ------------------------------------------------
Spectrum Commodity is a long-only, broadly-diversified, actively-managed
portfolio of traditional commodities. The Fund is designed with the objective of
offering participation in the traditional commodity markets, namely: precious
metals, base metals, energy products, grains, softs, and livestock.
Its Trading Advisor, Morgan Stanley Dean Witter Commodities Management Inc.
("MSDWCM") uses a technical approach to investing that is unique in the
marketplace. MSDWCM does not establish any positions in financial instruments,
stock indices, or foreign currencies, but instead only invests in those
commodities that fall into traditional commodity sectors. The trading strategy
seeks to benefit from supply and demand dynamics (based on consumer and producer
reactions to price movements) by over-weighting exposure to commodities that are
historically undervalued and showing signs of strengthening, and under-
weighting exposure to those markets that are historically overvalued and showing
signs of weakening.
FUTURES MARKETS TRADED
- ------------------------------------------------
<TABLE>
<S> <C>
AGRICULTURALS METALS
Corn Aluminum
Feeder cattle Copper
Lean hogs Gold
Live cattle Nickel
Soybeans Platinum
Soybean meal Silver
Soybean oil Zinc
Wheat
SOFTS
Cocoa
Coffee
Cotton
Orange juice
Sugar
ENERGIES
Crude oil
Heating oil
Natural gas
Unleaded gas
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
II-25
<PAGE>
SPECTRUM COMMODITY PERFORMANCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1999
<S> <C>
- -34.30% 10.35%
(8 MONTHS)
</TABLE>
ROLLING 12-MONTH PERFORMANCE VS. MAR INDEX
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR INDEX
COMMODITY
<S> <C> <C>
12/31/98 -34.30% 7.92%
1/31/99 -36.13% 5.55%
2/28/99 -34.73% 8.33%
3/31/99 -29.14% 7.04%
4/30/99 -25.67% 16.27%
5/31/99 -24.91% 8.96%
6/30/99 -18.95% 11.26%
7/31/99 -12.99% 9.55%
8/31/99 0.28% 2.28%
</TABLE>
HISTORICAL PERFORMANCE COMPARISON (12/31/97 = $10)
- --------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM MAR INDEX S & P 500 INDEX SALOMON CORP. MSCI EAFE INDEX
COMMODITY BOND INDEX
<S> <C> <C> <C> <C> <C>
12/31/97 10.00 10.00 10.00 10.00 10.00
1/31/98 10.13 10.02 10.11 10.14 10.46
2/28/98 9.53 9.9318 10.8379 10.1299 11.1294
3/31/98 9.54 9.9467 11.3906 10.1704 11.4744
4/30/98 9.31 9.5439 11.5045 10.2213 11.5662
5/31/98 8.67 9.8665 11.3089 10.3951 11.5084
6/30/98 8.39 9.904 11.7726 10.5198 11.6005
7/31/98 7.85 9.8 11.6431 10.625 11.7165
8/31/98 7.23 10.5634 9.9549 10.7206 10.2637
9/30/98 7.75 11.006 10.593 11.1601 9.9517
10/31/98 7.48 10.9378 11.4542 10.9481 10.9966
11/30/98 6.8 10.6009 12.1529 11.2437 11.5574
12/31/98 6.57 10.7917 12.8578 11.2549 12.0197
1/31/99 6.47 10.5759 13.3978 11.39 11.9836
2/28/99 6.22 10.7589 12.9825 10.9344 11.696
3/31/99 6.76 10.647 13.5018 10.9344 12.1872
4/30/99 6.92 11.0963 14.0284 10.9125 12.6869
5/31/99 6.51 10.7501 13.6917 10.7161 12.0399
6/30/99 6.8 11.0189 14.4447 10.5446 12.5095
7/31/99 6.83 10.7357 13.994 10.4286 12.8848
8/31/99 7.25 10.8044 13.924 10.3973 12.9363
</TABLE>
CORRELATION ANALYSIS (1/98 - 8/99)
- --------------------------------------------------------------------------------
Note: The closer the value to zero, the lower the correlation to the indexes
compared.
<TABLE>
<CAPTION>
Spectrum
Commodity MAR S&P SAL EAFE
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Spectrum Commodity 1.00 0.11 0.30 0.02 0.19
MAR Index 1.00 -0.34 0.13 -0.44
S & P 500 Index 1.00 0.15 0.79
Salomon Corporate Bond Index 1.00 -0.12
MSCI EAFE Index 1.00
</TABLE>
The S&P 500 Index, Salomon Corporate Bond Index and MSCI EAFE Index performance
data for stocks, corporate bonds and international stocks, respectively, are
provided by Thomson Financial Software Solutions, Boston, MA. The MAR Index
performance data for managed futures is provided by Managed Accounts
Reports, Inc., New York, N.Y.
Risk Considerations: Typically, managed futures investments are speculative,
involve a high degree of risk, have substantial charges, and are suitable only
for the risk capital portion of an investor's portfolio. Before investing in any
Partnership and in order to make an informed decision, you should read the
Spectrum Series Prospectus carefully for complete information, including
charges, expenses and risks. Financial Advisors should also read the prospectus
before discussing managed futures with clients.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
II-26
<PAGE>
The following charts were prepared by the General Partner to illustrate the
change in fund assets from the inception of trading in each Partnership (other
than Spectrum Currency) through August 31, 1999, to reflect each Partnership's
performance and net additions of capital.
SPECTRUM SELECT
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM SELECT
<S> <C>
Aug-91 $52.0
Dec-91* $80.7
Dec-92 $60.9
Dec-93** $199.2
Dec-94 $168.2
Dec-95 $176.4
Dec-96** $163.8
Dec-97 $166.8
Dec-98*** $200.1
Aug-99 $212.5
</TABLE>
Year-End Net Assets (millions)
* Spectrum Select had multiple closings during initial offering
** Re-opening of fund in September 1993 and November 1996
*** Effective May 1998, Spectrum Select became part of the Spectrum Series.
SPECTRUM TECHNICAL
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM TECHNICAL
<S> <C>
Nov-94 $8.0
Dec-94 $14.9
Dec-95 $59.3
Dec-96 $113.0
Dec-97 $182.0
Dec-98 $255.1
Aug-99 $281.2
</TABLE>
Year-End Net Assets (millions)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-27
<PAGE>
SPECTRUM STRATEGIC
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM STRATEGIC
<S> <C>
Nov-94 $6.7
Dec-94 $11.9
Dec-95 $32.5
Dec-96 $45.1
Dec-97 $59.1
Dec-98 $70.4
Aug-99 $88.7
</TABLE>
Year-End Net Assets (millions)
SPECTRUM GLOBAL BALANCED
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM GLOBAL BALANCED
<S> <C>
Nov-94 $2.5
Dec-94 $3.8
Dec-95 $14.8
Dec-96 $18.7
Dec-97 $25.7
Dec-98 $45.9
Aug-99 $55.1
</TABLE>
Year-End Net Assets (millions)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-28
<PAGE>
SPECTRUM COMMODITY
FUND ASSET HISTORY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MILLIONS SPECTRUM COMMODITY
<S> <C>
12/1/1997* $25.7
Dec-98 $24.9
Aug-99 $23.6
</TABLE>
Year-End Net Assets (millions)
* Fund had multiple closings during initial offering
-------------------
The following charts were prepared by the General Partner to illustrate the
monthly performance, on a Net Asset Value basis, of each Partnership (other than
Spectrum Currency) versus that of the MAR Index, from the inception of trading
through August 31, 1999. The MAR Index represents the dollar-weighted average
performance of public managed futures funds. To qualify for inclusion in the MAR
Index, an investment product must appear in MAR's fund performance tables. MAR
imposes no minimum size restrictions on the public managed futures funds that it
tracks. As of August 31, 1999, there were 91 public managed futures funds
included in the calculation of the MAR Index.
SPECTRUM SELECT VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM SELECT
<S> <C> <C>
Aug-91 9.57 9.38
Sep-91 9.99 9.97
Oct-91 9.81 9.75
Nov-91 9.83 9.46
Dec-91 11.37 13.12
Jan-92 10.50 11.32
Feb-92 10.11 10.63
Mar-92 10.05 10.21
Apr-92 9.77 10.02
May-92 9.77 9.88
Jun-92 10.35 10.59
Jul-92 11.08 11.73
Aug-92 11.55 12.51
Sep-92 11.38 11.86
Oct-92 11.24 11.48
Nov-92 11.30 11.64
Dec-92 11.22 11.22
Jan-93 11.09 11.26
Feb-93 11.72 12.93
Mar-93 11.65 12.85
Apr-93 11.96 14.18
May-93 11.99 14.46
Jun-93 12.16 14.49
Jul-93 12.72 16.50
Aug-93 12.57 16.35
Sep-93 12.45 15.67
Oct-93 12.23 14.89
Nov-93 12.09 14.70
Dec-93 12.42 15.90
Jan-94 11.94 14.04
Feb-94 11.58 13.09
Mar-94 11.84 14.73
Apr-94 11.59 14.59
May-94 11.79 15.59
Jun-94 12.17 17.19
Jul-94 11.84 16.35
Aug-94 11.47 15.22
Sep-94 11.58 15.41
Oct-94 11.59 14.67
Nov-94 11.62 15.50
Dec-94 11.46 15.08
Jan-95 10.98 13.85
Feb-95 11.55 15.19
Mar-95 12.76 18.31
Apr-95 13.10 19.97
May-95 13.37 22.18
Jun-95 13.19 21.80
Jul-95 12.78 19.49
Aug-95 12.86 18.55
Sep-95 12.59 17.11
Oct-95 12.44 16.54
Nov-95 12.55 16.77
Dec-95 13.05 18.64
Jan-96 13.42 18.57
Feb-96 12.44 16.32
Mar-96 12.50 16.29
Apr-96 13.03 16.95
May-96 12.62 16.33
Jun-96 12.74 16.56
Jul-96 12.54 16.32
Aug-96 12.51 16.24
Sep-96 12.97 16.79
Oct-96 13.90 19.02
Nov-96 14.68 20.31
Dec-96 14.33 19.62
Jan-97 14.84 20.40
Feb-97 15.21 21.36
Mar-97 15.11 21.43
Apr-97 14.82 20.26
May-97 14.59 20.02
Jun-97 14.71 20.05
Jul-97 15.65 22.01
Aug-97 15.05 20.64
Sep-97 15.22 20.83
Oct-97 14.98 20.05
Nov-97 15.12 20.17
Dec-97 15.42 20.85
Jan-98 15.45 21.03
Feb-98 15.31 21.48
Mar-98 15.34 21.53
Apr-98 14.72 20.08
May-98 15.21 20.44
Jun-98 15.27 20.63
Jul-98 15.11 20.43
Aug-98 16.29 24.35
Sep-98 16.97 25.87
Oct-98 16.87 24.54
Nov-98 16.35 23.52
Dec-98 16.64 23.80
Jan-99 16.31 23.11
Feb-99 16.59 24.37
Mar-99 16.42 23.76
Apr-99 17.11 24.64
May-99 16.58 23.56
Jun-99 16.99 23.64
Jul-99 16.55 22.60
Aug-99 16.66 22.50
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-29
<PAGE>
SPECTRUM TECHNICAL VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM TECHNICAL
<S> <C> <C>
Oct-94 $10.00 $10.00
Nov-94 $10.03 $9.91
Dec-94 $9.89 $9.78
Jan-95 $9.47 $9.60
Feb-95 $9.97 $10.09
Mar-95 $11.01 $11.12
Apr-95 $11.30 $11.52
May-95 $11.54 $11.60
Jun-95 $11.38 $11.47
Jul-95 $11.03 $11.19
Aug-95 $11.10 $11.12
Sep-95 $10.86 $10.75
Oct-95 $10.74 $10.74
Nov-95 $10.83 $10.84
Dec-95 $11.27 $11.50
Jan-96 $11.58 $12.05
Feb-96 $10.73 $11.28
Mar-96 $10.79 $11.42
Apr-96 $11.24 $11.97
May-96 $10.89 $11.51
Jun-96 $10.99 $11.88
Jul-96 $10.83 $11.31
Aug-96 $10.80 $11.27
Sep-96 $11.19 $11.89
Oct-96 $11.99 $13.07
Nov-96 $12.67 $14.16
Dec-96 $12.37 $13.61
Jan-97 $12.81 $14.11
Feb-97 $13.13 $14.27
Mar-97 $13.04 $14.01
Apr-97 $12.79 $13.60
May-97 $12.59 $13.09
Jun-97 $12.69 $13.18
Jul-97 $13.51 $14.41
Aug-97 $12.99 $13.55
Sep-97 $13.13 $13.80
Oct-97 $12.93 $13.85
Nov-97 $13.05 $13.99
Dec-97 $13.31 $14.63
Jan-98 $13.33 $14.46
Feb-98 $13.22 $14.52
Mar-98 $13.24 $14.71
Apr-98 $12.70 $14.03
May-98 $13.13 $14.49
Jun-98 $13.18 $14.33
Jul-98 $13.04 $14.19
Aug-98 $14.06 $15.65
Sep-98 $14.65 $16.33
Oct-98 $14.56 $16.21
Nov-98 $14.11 $15.21
Dec-98 $14.36 $16.12
Jan-99 $14.07 $15.32
Feb-99 $14.32 $15.70
Mar-99 $14.17 $15.31
Apr-99 $14.77 $16.41
May-99 $14.31 $15.59
Jun-99 $14.66 $16.39
Jul-99 $14.29 $15.75
Aug-99 $14.38 $15.90
</TABLE>
SPECTRUM STRATEGIC VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM STRATEGIC
<S> <C> <C>
Oct-94 $10.03 $10.01
Dec-94 $9.89 $10.01
Jan-95 $9.47 $9.66
Feb-95 $9.97 $9.80
Mar-95 $11.01 $10.57
Apr-95 $11.30 $10.57
May-95 $11.54 $10.50
Jun-95 $11.38 $9.83
Jul-95 $11.03 $9.75
Aug-95 $11.10 $10.14
Sep-95 $10.86 $10.10
Oct-95 $10.74 $10.13
Nov-95 $10.83 $10.41
Dec-95 $11.27 $11.06
Jan-96 $11.58 $11.47
Feb-96 $10.73 $10.29
Mar-96 $10.79 $10.19
Apr-96 $11.24 $10.81
May-96 $10.89 $10.48
Jun-96 $10.99 $10.18
Jul-96 $10.83 $9.68
Aug-96 $10.80 $9.79
Sep-96 $11.19 $10.29
Oct-96 $11.99 $10.59
Nov-96 $12.67 $10.96
Dec-96 $12.37 $10.67
Jan-97 $12.81 $10.60
Feb-97 $13.13 $11.67
Mar-97 $13.04 $12.46
Apr-97 $12.79 $11.60
May-97 $12.59 $11.69
Jun-97 $12.69 $11.50
Jul-97 $13.51 $12.38
Aug-97 $12.99 $11.77
Sep-97 $13.13 $11.06
Oct-97 $12.93 $10.37
Nov-97 $13.05 $10.14
Dec-97 $13.31 $10.71
Jan-98 $13.33 $11.28
Feb-98 $13.22 $10.90
Mar-98 $13.24 $10.94
Apr-98 $12.70 $9.73
May-98 $13.13 $9.01
Jun-98 $13.18 $8.93
Jul-98 $13.04 $8.46
Aug-98 $14.06 $9.46
Sep-98 $14.65 $11.26
Oct-98 $14.56 $12.21
Nov-98 $14.11 $11.24
Dec-98 $14.36 $11.55
Jan-99 $14.07 $11.14
Feb-99 $14.32 $12.45
Mar-99 $14.17 $12.02
Apr-99 $14.77 $12.26
May-99 $14.31 $10.62
Jun-99 $14.66 $12.94
Jul-99 $14.29 $12.81
Aug-99 $14.38 $13.49
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-30
<PAGE>
SPECTRUM GLOBAL BALANCED VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM GLOBAL BALANCED
<S> <C> <C>
Oct-94 $10.03 $9.95
Dec-94 $9.89 $9.83
Jan-95 $9.47 $9.96
Feb-95 $9.97 $10.42
Mar-95 $11.01 $10.72
Apr-95 $11.30 $10.95
May-95 $11.54 $11.43
Jun-95 $11.38 $11.52
Jul-95 $11.03 $11.36
Aug-95 $11.10 $11.20
Sep-95 $10.86 $11.38
Oct-95 $10.74 $11.41
Nov-95 $10.83 $11.72
Dec-95 $11.27 $12.07
Jan-96 $11.58 $12.12
Feb-96 $10.73 $11.16
Mar-96 $10.79 $11.04
Apr-96 $11.24 $11.18
May-96 $10.89 $10.83
Jun-96 $10.99 $10.88
Jul-96 $10.83 $10.97
Aug-96 $10.80 $10.88
Sep-96 $11.19 $11.13
Oct-96 $11.99 $11.55
Nov-96 $12.67 $12.10
Dec-96 $12.37 $11.63
Jan-97 $12.81 $12.02
Feb-97 $13.13 $12.40
Mar-97 $13.04 $12.09
Apr-97 $12.79 $11.89
May-97 $12.59 $12.09
Jun-97 $12.69 $12.53
Jul-97 $13.51 $14.02
Aug-97 $12.99 $13.19
Sep-97 $13.13 $13.62
Oct-97 $12.93 $13.39
Nov-97 $13.05 $13.34
Dec-97 $13.31 $13.75
Jan-98 $13.33 $14.06
Feb-98 $13.22 $14.27
Mar-98 $13.24 $14.59
Apr-98 $12.70 $14.33
May-98 $13.13 $14.28
Jun-98 $13.18 $14.28
Jul-98 $13.04 $14.11
Aug-98 $14.06 $14.47
Sep-98 $14.65 $15.21
Oct-98 $14.56 $15.39
Nov-98 $14.11 $15.80
Dec-98 $14.36 $16.00
Jan-99 $14.07 $15.99
Feb-99 $14.32 $15.98
Mar-99 $14.17 $15.98
Apr-99 $14.77 $16.64
May-99 $14.31 $15.81
Jun-99 $14.66 $16.17
Jul-99 $14.29 $15.90
Aug-99 $14.38 $15.87
</TABLE>
SPECTRUM COMMODITY VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NET ASSET VALUE PER UNIT MAR INDEX SPECTRUM COMMODITY
<S> <C> <C>
Dec-97
Jan-98 $10.02 $10.13
Feb-98 $9.93 $9.53
Mar-98 $9.95 $9.54
Apr-98 $9.54 $9.31
May-98 $9.87 $8.67
Jun-98 $9.90 $8.39
Jul-98 $9.80 $7.85
Aug-98 $10.56 $7.23
Sep-98 $11.01 $7.75
Oct-98 $10.94 $7.48
Nov-98 $10.60 $6.80
Dec-98 $10.79 $6.57
Jan-99 $10.58 $6.47
Feb-99 $10.76 $6.22
Mar-99 $10.65 $6.76
Apr-99 $11.10 $6.92
May-99 $10.75 $6.51
Jun-99 $11.02 $6.80
Jul-99 $10.74 $6.83
Aug-99 $10.80 $7.25
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-31
<PAGE>
-------------------
The following charts were prepared by the General Partner to illustrate the
performance, on a rate of return basis, of each Partnership (other than Spectrum
Currency) versus that of the MAR Index, from the inception of trading through
August 31, 1999.
SPECTRUM SELECT VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM SELECT MAR INDEX
<S> <C> <C>
YTD -5.46% 0.12%
1 YR. -7.60% 2.28%
2 YR. 4.41% 5.22%
3 YR. 11.48% 10.03%
5 YR. 8.13% 7.75%
Inception-to-Date 10.55% 6.51%
</TABLE>
Data: August 1, 1991 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
SPECTRUM TECHNICAL VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL MAR INDEX
<S> <C> <C>
YTD -1.36% 0.12%
1 YR. 1.60% 2.28%
2 YR. 8.33% 5.22%
3 YR. 12.16% 10.03%
Inception-to-Date 10.08% 7.81%
</TABLE>
Data: November 1, 1994 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-32
<PAGE>
SPECTRUM STRATEGIC VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC MAR INDEX
<S> <C> <C>
YTD 16.80% 0.12%
1 YR. 42.60% 2.28%
2 YR. 7.06% 5.22%
3 YR. 11.28% 10.03%
ITD 6.39% 7.81%
</TABLE>
Data: November 1, 1994 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
SPECTRUM GLOBAL BALANCED VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED MAR INDEX
<S> <C> <C>
YTD -0.81% 0.12%
1 YR. 9.68% 2.28%
2 YR. 9.69% 5.22%
3 YR. 13.41% 10.03%
Inception-to-Date 10.04% 7.81%
</TABLE>
Data: November 1, 1994 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-33
<PAGE>
SPECTRUM COMMODITY VS. MAR INDEX
HISTORICAL PERFORMANCE COMPARISON (RATE OF RETURN)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SPECTRUM COMMODITY MAR INDEX
<S> <C> <C>
YTD 10.35% 0.12%
1 YR. 0.28% 2.28%
Inception-to-Date -17.56% 4.75%
</TABLE>
Data: January 1, 1998 through August 31, 1999
All returns, with the exception of year-to-date returns, are annualized.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-34
<PAGE>
The following chart was prepared to illustrate certain period performance
and statistical information relating to Spectrum Select, from the inception of
trading in August 1991 through August 1999. The "Restated NAV/Unit" column
reflects the April 1998 100-to-1 unit conversion that took place when Spectrum
Select became part of the Spectrum Series.
<TABLE>
<CAPTION>
SPECTRUM SELECT
HISTORICAL PERFORMANCE
- -------------------------------------------------------------------------------------------------------------
MONTH-END RESTATED 12 MO. 24 MO.
MONTHLY NAV/ NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- -------- --------
% $ $ % % % %
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning NAV per
Unit 1,000.00 10.00
Aug-91 (6.20) 938.03 9.38
Sep-91 6.32 997.33 9.97 (0.27)
Oct-91 (2.28) 974.59 9.75
Nov-91 (2.93) 946.08 9.46
Dec-91 38.67 1,311.91 13.12 31.54 31.19
Jan-92 (13.72) 1,131.97 11.32
Feb-92 (6.09) 1,063.01 10.63
Mar-92 (3.91) 1,021.45 10.21 (22.14)
Apr-92 (1.86) 1,002.48 10.02
May-92 (1.42) 988.25 9.88
Jun-92 7.19 1,059.32 10.59 3.71
Jul-92 10.72 1,172.90 11.73 17.29
Aug-92 6.69 1,251.34 12.51 33.40
Sep-92 (5.24) 1,185.75 11.86 11.94 18.89
Oct-92 (3.17) 1,148.12 11.48 17.81
Nov-92 1.39 1,164.06 11.64 23.04
Dec-92 (3.58) 1,122.39 11.22 (5.34) (14.45) (14.45)
Jan-93 0.31 1,125.87 11.26 (0.54)
Feb-93 14.85 1,293.01 12.93 21.64
Mar-93 (0.60) 1,285.31 12.85 14.52 25.83
Apr-93 10.35 1,418.31 14.18 41.48
May-93 1.95 1,445.99 14.46 46.32
Jun-93 0.21 1,449.03 14.49 12.74 36.79
Jul-93 13.90 1,650.44 16.50 40.71 65.04
Aug-93 (0.95) 1,634.78 16.35 30.64 74.28
Sep-93 (4.13) 1,567.26 15.67 8.16 32.17 57.15
Oct-93 (4.97) 1,489.30 14.89 29.72 52.81
Nov-93 (1.30) 1,469.95 14.70 26.28 55.37
Dec-93 8.13 1,589.53 15.90 1.42 41.62 41.62 21.16
Jan-94 (11.67) 1,403.96 14.04 24.70 24.03
Feb-94 (6.79) 1,308.63 13.09 1.21 23.11
Mar-94 12.57 1,473.08 14.73 (7.33) 14.61 44.21
Apr-94 (0.95) 1,459.11 14.59 2.88 45.55
May-94 6.84 1,558.94 15.59 7.81 57.75
Jun-94 10.30 1,719.48 17.19 16.73 18.66 62.32
Jul-94 (4.91) 1,635.10 16.35 (0.93) 39.41
Aug-94 (6.95) 1,521.54 15.22 (6.93) 21.59
Sep-94 1.25 1,540.54 15.41 (10.41) (1.70) 29.92
Oct-94 (4.78) 1,466.94 14.67 (1.50) 27.77
Nov-94 5.68 1,550.30 15.50 5.47 33.18
Dec-94 (2.72) 1,508.07 15.08 (2.11) (5.12) (5.12) 34.36
Jan-95 (8.13) 1,385.43 13.85 (1.32) 23.05
Feb-95 9.61 1,518.57 15.19 16.04 17.44
Mar-95 20.58 1,831.08 18.31 21.42 24.30 42.46
Apr-95 9.06 1,996.89 19.97 36.86 40.79
May-95 11.08 2,218.08 22.18 42.28 53.40
Jun-95 (1.70) 2,180.39 21.80 19.08 26.81 50.47
Jul-95 (10.61) 1,948.96 19.49 19.20 18.09
Aug-95 (4.81) 1,855.19 18.55 21.93 13.48
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-35
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM SELECT
HISTORICAL PERFORMANCE
- -------------------------------------------------------------------------------------------------------------
MONTH-END RESTATED 12 MO. 24 MO.
MONTHLY NAV/ NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- -------- --------
% $ $ % % % %
<S> <C> <C> <C> <C> <C> <C> <C>
Sep-95 (7.76) 1,711.24 17.11 (21.52) 11.08 9.19
Oct-95 (3.35) 1,653.91 16.54 12.75 11.05
Nov-95 1.37 1,676.60 16.77 8.15 14.06
Dec-95 11.19 1,864.21 18.64 8.94 23.62 23.62 17.28
Jan-96 (0.38) 1,857.19 18.57 34.05 32.28
Feb-96 (12.11) 1,632.31 16.32 7.49 24.73
Mar-96 (0.22) 1,628.73 16.29 (12.63) (11.05) 10.57
Apr-96 4.07 1,695.09 16.95 (15.11) 16.17
May-96 (3.65) 1,633.21 16.33 (26.37) 4.76
Jun-96 1.37 1,655.66 16.56 1.65 (24.07) (3.71)
Jul-96 (1.44) 1,631.86 16.32 (16.27) (0.20)
Aug-96 (0.46) 1,624.40 16.24 (12.44) 6.76
Sep-96 3.34 1,678.68 16.79 1.39 (1.90) 8.97
Oct-96 13.30 1,901.95 19.02 15.00 29.65
Nov-96 6.76 2,030.51 20.31 21.11 30.98
Dec-96 (3.36) 1,962.38 19.62 16.90 5.27 5.27 30.13
Jan-97 3.93 2,039.51 20.40 9.82 47.21
Feb-97 4.75 2,136.39 21.36 30.88 40.68
Mar-97 0.31 2,143.07 21.43 9.21 31.58 17.04
Apr-97 (5.46) 2,026.09 20.26 19.53 1.46
May-97 (1.18) 2,002.26 20.02 22.60 (9.73)
Jun-97 0.16 2,005.45 20.05 (6.42) 21.13 (8.02)
Jul-97 9.74 2,200.71 22.01 34.86 12.92
Aug-97 (6.22) 2,063.90 20.64 27.06 11.25
Sep-97 0.93 2,083.14 20.83 3.87 24.09 21.73
Oct-97 (3.77) 2,004.57 20.05 5.40 21.20
Nov-97 0.62 2,017.04 20.17 (0.66) 20.31
Dec-97 3.35 2,084.52 20.85 0.07 6.22 6.22 11.82
Jan-98 0.87 2,102.70 21.03 3.10 13.22
Feb-98 2.16 2,148.09 21.48 0.55 31.60
Mar-98 0.23 2,152.95 21.53 3.28 0.46 32.19
Apr-98 (6.72) 2,008.20 20.08 (0.88) 18.47
May-98 1.78 2,044.00 20.44 2.08 25.15
Jun-98 0.93 2,063.00 20.63 (4.18) 2.87 24.60
Jul-98 (0.97) 2,043.00 20.43 (7.17) 25.19
Aug-98 19.19 2,435.00 24.35 17.98 49.90
Sep-98 6.24 2,587.00 25.87 25.40 24.19 54.11
Oct-98 (5.14) 2,454.00 24.54 22.42 29.03
Nov-98 (4.16) 2,352.00 23.52 16.61 15.83
Dec-98 1.19 2,380.00 23.80 (8.00) 14.17 14.17 21.28
Jan-99 (2.90) 2,311.00 23.11 9.91 13.31
Feb-99 5.45 2,437.00 24.37 13.45 14.07
Mar-99 (2.50) 2,376.00 23.76 (0.17) 10.36 10.87
Apr-99 3.70 2,464.00 24.64 22.70 21.61
May-99 (4.38) 2,356.00 23.56 15.26 17.67
Jun-99 0.34 2,364.00 23.64 (0.51) 14.59 17.88
Jul-99 (4.40) 2,260.00 22.60 10.62 2.69
Aug-99 (0.44) 2,250.00 22.50 (4.82) (5.46) (7.60) 9.02
Compounded annual rate of return: 10.55
Standard Deviation of Monthly Returns: 7.66
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-36
<PAGE>
The following chart was prepared to illustrate certain period peformance and
statistical information relating to Spectrum Technical, from the inception of
trading in November 1994 through August 1999.
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Beginning NAV per
Unit 10.00
Nov-94 (0.90) 9.91
Dec-94 (1.31) 9.78 (2.20) (2.20)
Jan-95 (1.84) 9.60
Feb-95 5.10 10.09
Mar-95 10.21 11.12 13.70
Apr-95 3.60 11.52
May-95 0.69 11.60
Jun-95 (1.12) 11.47 3.15
Jul-95 (2.44) 11.19
Aug-95 (0.63) 11.12
Sep-95 (3.33) 10.75 (6.28)
Oct-95 (0.09) 10.74 7.40
Nov-95 0.93 10.84 9.38
Dec-95 6.09 11.50 6.98 17.59 17.59
Jan-96 4.78 12.05 25.52
Feb-96 (6.39) 11.28 11.79
Mar-96 1.24 11.42 (0.70) 2.70
Apr-96 4.82 11.97 3.91
May-96 (3.84) 11.51 (0.78)
Jun-96 3.21 11.88 4.03 3.57
Jul-96 (4.80) 11.31 1.07
Aug-96 (0.35) 11.27 1.35
Sep-96 5.50 11.89 0.08 10.60
Oct-96 9.92 13.07 21.69 30.70
Nov-96 8.34 14.16 30.63 42.89
Dec-96 (3.88) 13.61 14.47 18.35 18.35 39.16
Jan-97 3.67 14.11 17.10 46.98
Feb-97 1.13 14.27 26.51 41.43
Mar-97 (1.82) 14.01 2.94 22.68 25.99
Apr-97 (2.93) 13.60 13.62 18.06
May-97 (3.75) 13.09 13.73 12.84
Jun-97 0.69 13.18 (5.92) 10.94 14.91
Jul-97 9.33 14.41 27.41 28.78
Aug-97 (5.97) 13.55 20.23 21.85
Sep-97 1.85 13.80 4.70 16.06 28.37
Oct-97 0.36 13.85 5.97 28.96
Nov-97 1.01 13.99 (1.20) 29.06
Dec-97 4.57 14.63 6.01 7.49 7.49 27.22
Jan-98 (1.16) 14.46 2.48 20.00
Feb-98 0.41 14.52 1.75 28.72
Mar-98 1.31 14.71 0.55 5.00 28.81
Apr-98 (4.62) 14.03 3.16 17.21
May-98 3.28 14.49 10.70 25.89
Jun-98 (1.10) 14.33 (2.58) 8.73 20.62
Jul-98 (0.98) 14.19 (1.53) 25.46
Aug-98 10.29 15.65 15.50 38.86
Sep-98 4.35 16.33 13.96 18.33 37.34
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-37
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM TECHNICAL
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Oct-98 (0.73) 16.21 17.04 24.02
Nov-98 (6.17) 15.21 8.72 7.42
Dec-98 5.98 16.12 (1.29) 10.18 10.18 18.44
Jan-99 (4.96) 15.32 5.95 8.58
Feb-99 2.48 15.70 8.13 10.02
Mar-99 (2.48) 15.31 (5.02) 4.08 9.28
Apr-99 7.18 16.41 16.96 20.66
May-99 (5.00) 15.59 7.59 19.10
Jun-99 5.13 16.39 7.05 14.38 24.36
Jul-99 (3.90) 15.75 10.99 9.30
Aug-99 0.95 15.90 (2.99) (1.36) 1.60 17.34
Compounded annual rate of return: 10.08
Standard deviation of monthly returns: 4.38
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-38
<PAGE>
The following chart was prepared to illustrate certain period peformance and
statistical information relating to Spectrum Strategic, from the inception of
trading in November 1994 through August 1999.
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Beginning NAV per
Unit 10.00
Nov-94 0.10 10.01
Dec-94 0.00 10.01 0.10 0.10
Jan-95 (3.50) 9.66
Feb-95 1.45 9.80
Mar-95 7.86 10.57 5.59
Apr-95 0.00 10.57
May-95 (0.66) 10.50
Jun-95 (6.38) 9.83 (7.00)
Jul-95 (0.81) 9.75
Aug-95 4.00 10.14
Sep-95 (0.39) 10.10 2.75
Oct-95 0.30 10.13 1.30
Nov-95 2.76 10.41 4.00
Dec-95 6.24 11.06 9.50 10.49 10.49
Jan-96 3.71 11.47 18.74
Feb-96 (10.29) 10.29 5.00
Mar-96 (0.97) 10.19 (7.87) (3.60)
Apr-96 6.08 10.81 2.27
May-96 (3.05) 10.48 (0.19)
Jun-96 (2.86) 10.18 (0.10) 3.56
Jul-96 (4.91) 9.68 (0.72)
Aug-96 1.14 9.79 (3.45)
Sep-96 5.11 10.29 1.08 1.88
Oct-96 2.92 10.59 4.54 5.90
Nov-96 3.49 10.96 5.28 9.49
Dec-96 (2.65) 10.67 3.69 (3.53) (3.53) 6.59
Jan-97 (0.66) 10.60 (7.59) 9.73
Feb-97 10.09 11.67 13.41 19.08
Mar-97 6.77 12.46 16.78 22.28 17.88
Apr-97 (6.90) 11.60 7.31 9.74
May-97 0.78 11.69 11.55 11.33
Jun-97 (1.63) 11.50 (7.70) 12.97 16.99
Jul-97 7.65 12.38 27.89 26.97
Aug-97 (4.93) 11.77 20.22 16.07
Sep-97 (6.03) 11.06 (3.83) 7.48 9.50
Oct-97 (6.24) 10.37 (2.08) 2.37
Nov-97 (2.22) 10.14 (7.48) (2.59)
Dec-97 5.62 10.71 (3.16) 0.37 0.37 (3.16)
Jan-98 5.32 11.28 6.42 (1.66)
Feb-98 (3.37) 10.90 (6.60) 5.93
Mar-98 0.37 10.94 2.15 (12.20) 7.36
Apr-98 (11.06) 9.73 (16.12) (9.99)
May-98 (7.40) 9.01 (22.93) (14.03)
Jun-98 (0.89) 8.93 (18.37) (22.35) (12.28)
Jul-98 (5.26) 8.46 (31.66) (12.60)
Aug-98 11.82 9.46 (19.63) (3.37)
Sep-98 19.03 11.26 26.09 1.81 9.43
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-39
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM STRATEGIC
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Oct-98 8.44 12.21 17.74 15.30
Nov-98 (7.94) 11.24 10.85 2.55
Dec-98 2.76 11.55 2.58 7.84 7.84 8.25
Jan-99 (3.55) 11.14 (1.24) 5.09
Feb-99 11.76 12.45 14.22 6.68
Mar-99 (3.45) 12.02 4.07 9.87 (3.53)
Apr-99 2.00 12.26 26.00 5.69
May-99 (13.38) 10.62 17.87 (9.15)
Jun-99 21.85 12.94 7.65 44.90 12.52
Jul-99 (1.00) 12.81 51.42 3.47
Aug-99 5.31 13.49 4.25 16.80 42.60 14.61
Compounded annual rate of return: 6.39
Standard deviation of monthly returns: 6.67
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-40
<PAGE>
The following chart was prepared to illustrate certain period peformance and
statistical information relating to Spectrum Global Balanced, from the inception
of trading in November 1994 through August, 1999.
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Beginning NAV per
Unit 10.00
Nov-94 (0.50) 9.95
Dec-94 (1.21) 9.83 (1.70) (1.70)
Jan-95 1.32 9.96
Feb-95 4.62 10.42
Mar-95 2.88 10.72 9.05
Apr-95 2.15 10.95
May-95 4.38 11.43
Jun-95 0.79 11.52 7.46
Jul-95 (1.39) 11.36
Aug-95 (1.41) 11.20
Sep-95 1.61 11.38 (1.22)
Oct-95 0.26 11.41 14.10
Nov-95 2.72 11.72 17.79
Dec-95 2.99 12.07 6.06 22.79 22.79
Jan-96 0.41 12.12 21.69
Feb-96 (7.92) 11.16 7.10
Mar-96 (1.08) 11.04 (8.53) 2.99
Apr-96 1.27 11.18 2.10
May-96 (3.13) 10.83 (5.25)
Jun-96 0.46 10.88 (1.45) (5.56)
Jul-96 0.83 10.97 (3.43)
Aug-96 (0.82) 10.88 (2.86)
Sep-96 2.30 11.13 2.30 (2.20)
Oct-96 3.77 11.55 1.23 15.50
Nov-96 4.76 12.10 3.24 21.61
Dec-96 (3.88) 11.63 4.49 (3.65) (3.65) 18.31
Jan-97 3.35 12.02 (0.83) 20.68
Feb-97 3.16 12.40 11.11 19.00
Mar-97 (2.50) 12.09 3.96 9.51 12.78
Apr-97 (1.65) 11.89 6.35 8.58
May-97 1.68 12.09 11.63 5.77
Jun-97 3.64 12.53 3.64 15.17 8.77
Jul-97 11.89 14.02 27.80 23.42
Aug-97 (5.92) 13.19 21.23 17.77
Sep-97 3.26 13.62 8.70 22.37 19.68
Oct-97 (1.69) 13.39 15.93 17.35
Nov-97 (0.37) 13.34 10.25 13.82
Dec-97 3.07 13.75 0.95 18.23 18.23 13.92
Jan-98 2.25 14.06 16.97 16.01
Feb-98 1.49 14.27 15.08 27.87
Mar-98 2.24 14.59 6.11 20.68 32.16
Apr-98 (1.78) 14.33 20.52 28.18
May-98 (0.35) 14.28 18.11 31.86
Jun-98 0.00 14.28 (2.12) 13.97 31.25
Jul-98 (1.19) 14.11 0.64 28.62
Aug-98 2.55 14.47 9.70 33.00
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-41
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM GLOBAL BALANCED
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Sep-98 5.11 15.21 6.51 11.67 36.66
Oct-98 1.18 15.39 14.94 33.25
Nov-98 2.66 15.80 18.44 30.58
Dec-98 1.27 16.00 5.19 16.36 16.36 37.58
Jan-99 (0.06) 15.99 13.73 33.03
Feb-99 (0.06) 15.98 11.98 28.87
Mar-99 0.00 15.98 (0.12) 9.53 32.18
Apr-99 4.13 16.64 16.12 39.95
May-99 (4.99) 15.81 10.71 30.77
Jun-99 2.28 16.17 1.19 13.24 29.05
Jul-99 (1.67) 15.90 12.69 13.41
Aug-99 (0.19) 15.87 (1.86) (0.81) 9.68 20.32
Compounded annual rate of return: 10.04
Standard deviation of monthly returns: 3.05
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-42
<PAGE>
The following chart was prepared to illustrate certain period peformance and
statistical information relating to Spectrum Commodity, from the inception of
trading in January 1998 through August 1999.
<TABLE>
<CAPTION>
SPECTRUM COMMODITY
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------------------------------------
MONTH-END 12 MO. 24 MO.
MONTHLY NAV/ QRTLY ANNUAL HOLDING HOLDING
MONTH RETURN UNIT RETURN RETURN PERIOD PERIOD
----- -------- --------- -------- -------- -------- --------
% $ % % % %
<S> <C> <C> <C> <C> <C> <C>
Beginning NAV per
Unit 10.00
Jan-98 1.30 10.13
Feb-98 (5.92) 9.53
Mar-98 0.10 9.54 (4.60)
Apr-98 (2.41) 9.31
May-98 (6.87) 8.67
Jun-98 (3.23) 8.39 (12.05)
Jul-98 (6.44) 7.85
Aug-98 (7.90) 7.23
Sep-98 7.19 7.75 (7.63)
Oct-98 (3.48) 7.48
Nov-98 (9.09) 6.80
Dec-98 (3.38) 6.57 (15.23) (34.30) (34.30)
Jan-99 (1.52) 6.47 (36.13)
Feb-99 (3.86) 6.22 (34.73)
Mar-99 8.68 6.76 2.89 (29.14)
Apr-99 2.37 6.92 (25.67)
May-99 (5.92) 6.51 (24.91)
Jun-99 4.45 6.80 0.59 (18.95)
Jul-99 0.44 6.83 (12.99)
Aug-99 6.15 7.25 6.62 10.35 0.28
Compounded annual rate of return: (17.56)
Standard deviation of monthly returns: 5.18
</TABLE>
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
II-43
<PAGE>
EXHIBIT A
TABLE OF CONTENTS TO FORM OF (1) AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT FOR 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., AND
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P; AND (2) LIMITED PARTNERSHIP
AGREEMENT FOR MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C> <C>
1. Formation; Name................................................... A-2
2. Office............................................................ A-2
3. Business.......................................................... A-2
4. Term; Dissolution; Fiscal Year.................................... A-2
(a) Term........................................................ A-2
(b) Dissolution................................................. A-3
(c) Fiscal Year................................................. A-4
5. Net Worth of General Partner...................................... A-4
6. Capital Contributions and Offering of Units of Limited Partnership
Interest.......................................................... A-4
7. Allocation of Profits and Losses; Accounting; Other Matters....... A-6
(a) Capital Accounts............................................ A-6
(b) Monthly Allocations......................................... A-6
(c) Allocation of Profit and Loss for Federal Income Tax
Purposes................................................... A-6
(d) Definitions; Accounting..................................... A-8
(e) Expenses and Limitations Thereof............................ A-8
(f) Limited Liability of Limited Partners....................... A-9
(g) Return of Limited Partner's Capital Contribution............ A-9
(h) Distributions............................................... A-9
(i) Interest on Assets.......................................... A-9
8. Management and Trading Policies................................... A-10
(a) Management of the Partnership............................... A-10
(b) The General Partner......................................... A-10
(c) General Trading Policies.................................... A-11
(d) Changes to Trading Policies................................. A-12
(e) Miscellaneous............................................... A-12
9. Audits; Reports to Limited Partners............................... A-13
10. Transfer; Redemption of Units; Exchange Privilege................. A-14
(a) Transfer.................................................... A-14
(b) Redemption.................................................. A-15
(c) Exchange Privilege.......................................... A-16
11. Special Power of Attorney......................................... A-17
12. Withdrawal of Partners............................................ A-18
13. No Personal Liability for Return of Capital....................... A-18
14. Standard of Liability; Indemnification............................ A-18
(a) Standard of Liability....................................... A-18
(b) Indemnification by the Partnership.......................... A-18
(c) Affiliate................................................... A-19
(d) Indemnification by Partners................................. A-19
15. Amendments; Meetings.............................................. A-19
(a) Amendments with Consent of the General Partner.............. A-19
(b) Meetings.................................................... A-20
(c) Amendments and Actions without Consent of the General
Partner.................................................... A-20
(d) Action Without Meeting...................................... A-21
(e) Amendments to Certificate of Limited Partnership............ A-21
16. Index of Defined Terms............................................ A-22
17. Governing Law..................................................... A-22
18. Miscellaneous..................................................... A-22
(a) Priority among Limited Partners............................. A-22
(b) Notices..................................................... A-23
(c) Binding Effect.............................................. A-23
(d) Captions.................................................... A-23
Annex A--Request for Redemption: Morgan Stanley Dean Witter
Managed Futures Funds...................................... A-24
</TABLE>
A-i
<PAGE>
EXHIBIT A
FORM OF (1) AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT FOR 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., AND MORGAN STANLEY DEAN
WITTER SPECTRUM COMMODITY L.P.; AND (2) LIMITED PARTNERSHIP AGREEMENT FOR MORGAN
STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
BOLDFACED CAPTIONS AND BRACKETED TEXT REFLECT DIFFERENCES IN LIMITED
PARTNERSHIP AGREEMENTS.
SPECTRUM SELECT ONLY:
This Agreement of Limited Partnership, made as of March 21, 1991, as amended
and restated as of August 31, 1993, as further amended and restated as of
October 17, 1996, and as further amended and restated as of May 31, 1998, by and
among Demeter Management Corporation, a Delaware corporation (the "General
Partner"), and the other parties who shall execute this Agreement, whether in
counterpart, by separate instrument, or otherwise, as limited partners
(collectively "Limited Partners"; the General Partner and Limited Partners may
be collectively referred to herein as "Partners"). The definitions of
capitalized terms used in this Agreement and not defined where used may be found
by reference to the index of defined terms in Section 16.
SPECTRUM TECHNICAL, SPECTRUM STRATEGIC AND SPECTRUM GLOBAL BALANCED ONLY:
This Agreement of Limited Partnership, made as of May 27, 1994, as amended
and restated as of May 31, 1998, by and between Demeter Management Corporation,
a Delaware corporation (the "General Partner"), and the other parties who shall
execute this Agreement, whether in counterpart, by separate instrument, or
otherwise, as limited partners (collectively "Limited Partners"; the General
Partner and Limited Partners may be collectively referred to herein as
"Partners"). The definitions of capitalized terms used in this Agreement and not
defined where used may be found by reference to the index of defined terms in
Section 16.
SPECTRUM COMMODITY ONLY:
This Agreement of Limited Partnership, made as of July 31, 1997, as amended
and restated as of - , 1999 (as so amended, this "Agreement"), by and among
Demeter Management Corporation, a Delaware corporation (the "General Partner"),
and the other parties who shall execute this Agreement, whether in counterpart,
by separate instrument, or otherwise, as limited partners (collectively "Limited
Partners"; the General Partner and Limited Partners may be collectively referred
to herein as "Partners"). The definitions of capitalized terms used in this
Agreement and not defined where used may be found by reference to the index of
defined terms in Section 16.
SPECTRUM CURRENCY ONLY:
This Agreement of Limited Partnership, made as of - , 1999 (as so
amended, this "Agreement"), by and among Demeter Management Corporation, a
Delaware corporation (the "General Partner") , and the other parties who shall
execute this Agreement, whether in counterpart, by separate instrument, or
otherwise, as limited partners (collectively "Limited Partners; the General
Partner and Limited Partners may be collectively referred to herein as
"Partners") The definitions of capitalized terms used in this Agreement and not
defined where used may be found by reference to the index of defined terms in
Section 16.
WITNESSETH:
WHEREAS, the parties hereto desire to form a limited partnership for the
purpose of engaging in the speculative trading of future interests.
A-1
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. FORMATION; NAME.
The parties hereto do hereby form a limited partnership under the Delaware
Revised Uniform Limited Partnership Act, as amended and in effect on the date
hereof (the "Act"). The name of the limited partnership is Morgan Stanley Dean
Witter Spectrum [Select][Technical][Strategic][Global
Balanced][Commodity][Currency] L.P. (the "Partnership"). The General Partner
shall execute and file a Certificate of Limited Partnership of the Partnership
(the "Certificate of Limited Partnership") in accordance with the Act, and shall
execute, file, record, and publish as appropriate such amendments, assumed name
certificates, and other documents as are or become necessary or advisable in
connection with the operation of the Partnership, as determined by the General
Partner, and shall take all steps which the General Partner may deem necessary
or advisable to allow the Partnership to conduct business as a limited
partnership where the Partnership conducts business in any jurisdiction, and to
otherwise provide that Limited Partners will have limited liability with respect
to the activities of the Partnership in all such jurisdictions, and to comply
with the law of any jurisdiction. Each Limited Partner hereby undertakes to
furnish to the General Partner a power of attorney and such additional
information as the General Partner may request to complete such documents and to
execute and cooperate in the filing, recording, or publishing of such documents
as the General Partner determines appropriate.
2. OFFICE.
The principal office of the Partnership shall be Two World Trade Center,
62nd Floor, New York, New York 10048, or such other place as the General Partner
may designate from time to time.
The address of the principal office of the Partnership in the State of
Delaware is c/o The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the name
and address of the registered agent for service of process on the Partnership in
the State of Delaware is The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, or
such other agent as the General Partner shall designate from time to time.
3. BUSINESS.
The Partnership's business and general purpose is to trade, buy, sell,
spread, or otherwise acquire, hold, or dispose of commodities (including, but
not limited to, foreign currencies, mortgage-backed securities, money market
instruments, financial instruments, and any other securities or items which are
now, or may hereafter be, the subject of futures contract trading), domestic and
foreign commodity futures contracts, commodity forward contracts, foreign
exchange commitments, options on physical commodities and on futures contracts,
spot (cash) commodities and currencies, and any rights pertaining thereto
(hereinafter referred to collectively as "Futures Interests") and securities
(such as United States Treasury securities) approved by the Commodity Futures
Trading Commission (the "CFTC") for investment of customer funds and other
securities on a limited basis, and to engage in all activities incident thereto.
The objective of the Partnership's business is appreciation of its assets
through speculative trading. The Partnership may pursue this objective in any
lawful manner consistent with the Partnership's trading policies. The
Partnership may engage in the foregoing activities either directly or through
any lawful transaction or any lawful activity into which a limited partnership
may enter or in which a limited partnership may engage under the laws of the
State of Delaware; provided that such transactions or activities do not subject
the Limited Partners to any liability in excess of the limited liability
provided for herein and contemplated by the Act.
4. TERM; DISSOLUTION; FISCAL YEAR.
SPECTRUM SELECT ONLY:
(a) TERM. The term of the Partnership shall commence upon the filing of
the Certificate of Limited Partnership in the Office of the Secretary of State
of the State of Delaware and shall end upon the first to occur of the following:
(i) December 31, 2025; (ii) withdrawal, insolvency, bankruptcy, dissolution,
liquidation, or termination of the General Partner, unless the business of the
Partnership shall be continued by any remaining or successor general partner(s)
in accordance with the provisions hereof;
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(iii) receipt by the General Partner of a notice setting forth an election to
terminate and dissolve the Partnership at a specified time by Limited Partners
owning more than 50% of the outstanding Units (as defined in Section 6), which
notice shall be sent by registered mail to the General Partner not less than
90 days prior to the effective date of such termination and dissolution; (iv) a
decline in the Net Asset Value (as defined in Section 7(d)(2)) of a Unit as of
the close of business (as determined by the General Partner) on any day to less
than $2.50; (v) a decline in the Partnership's Net Assets (as defined in
Section 7(d)(1)) as of the close of business (as determined by the General
Partner) on any day to or less than $250,000; (vi) a determination by the
General Partner that the Partnership's Net Assets in relation to the operating
expenses of the Partnership make it unreasonable or imprudent to continue the
business of the Partnership; (vii) the occurrence of any event which shall make
it unlawful for the existence of the Partnership to be continued; or (viii) a
determination by the General Partner to terminate the Partnership following a
Special Redemption Date as described in Section 9.
SPECTRUM TECHNICAL, SPECTRUM STRATEGIC, SPECTRUM GLOBAL BALANCED, AND SPECTRUM
CURRENCY ONLY:
(A) TERM. The term of the Partnership shall commence upon the filing of
the Certificate of Limited Partnership in the Office of the Secretary of State
of the State of Delaware and shall end upon the first to occur of the following:
(i) December 31, 2035; (ii) receipt by the General Partner of a notice setting
forth an election to terminate and dissolve the Partnership at a specified time
by Limited Partners owning more than 50% of the outstanding Units (as defined in
Section 6 below), which notice shall be sent by registered mail to the General
Partner not less than 90 days prior to the effective date of such termination
and dissolution; (iii) the withdrawal, insolvency, bankruptcy, dissolution,
liquidation or termination of the General Partner, unless the business of the
Partnership shall be continued by any remaining or successor general partner(s)
in accordance with the provisions hereof; (iv) the occurrence of any event which
shall make it unlawful for the existence of the Partnership to be continued;
(v) a decline in the Net Asset Value (as defined in Section 7(d)(2)) of a Unit
as of the close of business (as determined by the General Partner) on any day to
less than $2.50; (vi) a decline in the Partnership's Net Assets (as defined in
Section 7(d)(1)) as of the close of business (as determined by the General
Partner) on any day to or below $250,000; (vii) a determination by the General
Partner upon 60 days notice to the Limited Partners to terminate the
Partnership; or (viii) a determination by the General Partner to terminate the
Partnership following a Special Redemption Date as described in Section 9.
SPECTRUM COMMODITY ONLY:
(a) TERM. The term of the Partnership shall commence upon the filing of
the Certificate of Limited Partnership in the Office of the Secretary of State
of the State of Delaware and shall end upon the first to occur of the following:
(i) December 31, 2027; (ii) the insolvency, bankruptcy, dissolution,
liquidation, or termination of any general partner, unless the business of the
Partnership shall be continued by any remaining or successor general partner(s)
in accordance with the provisions hereof; (iii) the occurrence of any event
which shall make it unlawful for the existence of the Partnership to be
continued; (iv) an election to terminate and dissolve the Partnership at a
specified time by Limited Partners owning more than 50% of the Units then
outstanding, notice of which is sent by registered mail to the General Partner
not less than 90 days prior to the effective date of such termination and
dissolution; (v) withdrawal by the General Partner (unless a new general
partner(s) is elected by the Limited Partners as provided in Section 15(c));
(vi) a decline in the Net Asset Value (as determined by the General Partner) of
a Unit as of the close of business on any day to less than $2.50; (vii) a
decline in the Partnership's Net Assets (as determined by the General Partner)
as of the close of business on any day to $250,000 or less; (viii) a
determination by the General Partner that the Partnership's Net Assets in
relation to the operating expenses of the Partnership make it unreasonable or
imprudent to continue the business of the Partnership; or (ix) a determination
by the General Partner to terminate the Partnership following a Special
Redemption Date.
(b) DISSOLUTION. Upon the occurrence of an event causing the termination
of the Partnership, the Partnership shall terminate and be dissolved.
Dissolution, payment of creditors, and distribution of the Partnership's Net
Assets shall be effected as soon as practicable in accordance with the Act,
except that the General Partner and each Limited Partner (and any assignee)
shall share in the Net Assets of the Partnership pro rata in accordance with
such Partner's respective capital account, less any amount owing by such Partner
(or assignee) to the Partnership. The General Partner shall, at its option, be
entitled to supervise the liquidation of the Partnership.
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Nothing contained in this Agreement shall impair, restrict, or limit the
rights and powers of the Partners under the law of the State of Delaware and any
other jurisdiction in which the Partnership shall be conducting business to
reform and reconstitute themselves as a limited partnership following
dissolution of the Partnership, either under provisions identical to those set
forth herein or any others which they shall deem appropriate.
(c) FISCAL YEAR. The fiscal year of the Partnership shall begin on
January 1 of each year and end on the following December 31.
5. NET WORTH OF GENERAL PARTNER.
The General Partner agrees that at all times, as long as it remains General
Partner of the Partnership, it shall maintain its net worth at an amount not
less than 10% of the total contributions to the Partnership by all Partners and
to any other limited partnership for which it acts as a general partner by all
partners; PROVIDED, HOWEVER, that if the total contributions to the Partnership
by all such partnership's partners, or to any limited partnership for which it
acts as a general partner by all partners, are less than $2,500,000, then with
respect to the Partnership and any such limited partnership, the General Partner
shall maintain its net worth at an amount of at least 15% of the total
contributions to the Partnership by all Partners and of the total contributions
to any such limited partnership for which it acts as a general partner by all
such partnership's partners or $250,000, whichever is the lesser; and, PROVIDED,
FURTHER, that in no event shall the General Partner's net worth be less than
$50,000. For the purposes of this Section 5, "net worth" shall be calculated in
accordance with generally accepted accounting principles, except as otherwise
specified in this Section 5, with all current assets based on their then current
market values. The interests owned by the General Partner in the Partnership and
any other partnerships for which it acts as a general partner and any notes and
accounts receivable from and payable to any limited partnership in which it has
an interest shall not be included as an asset in calculating its net worth, but
any notes receivable from an affiliate (as such term is defined in
Regulation S-X of the rules and regulations of the Securities and Exchange
Commission (the "SEC")) of the General Partner or letters of credit may be
included.
The General Partner agrees that it shall not be a general partner of any
limited partnership other than the Partnership unless, at all times when it is a
general partner of any such additional limited partnership, its net worth is at
least equal to the net worth required by the preceding paragraph of this
Section 5.
The requirements of the preceding two paragraphs of this Section 5 may be
modified by the General Partner at its option, without notice to or the consent
of the Limited Partners, PROVIDED THAT: (a) such modification does not adversely
affect the interests of the Limited Partners, and (b) the General Partner
obtains a written opinion of counsel for the Partnership that such proposed
modification: (i) will not adversely affect the classification of the
Partnership as a partnership for federal income tax purposes, (ii) will not
adversely affect the status of the Limited Partners as limited partners under
the Act, and (iii) will not violate any applicable state securities or Blue Sky
law or any rules, regulations, guidelines, or statements of policy promulgated
or applied thereunder; PROVIDED, HOWEVER, that the General Partner's net worth
may not be reduced below the lesser of (A) the net worth required by
Section II.B of the Guidelines for Registration of Commodity Pool Programs, as
adopted in revised form by the North American Securities Administrators
Association, Inc. in September, 1993 (the "NASAA Guidelines"), and (B) the net
worth required by such Guidelines as in effect on the date of such proposed
modification.
6. CAPITAL CONTRIBUTIONS AND OFFERING OF UNITS OF LIMITED PARTNERSHIP INTEREST.
The General Partner shall contribute to the Partnership, in $1,000
increments, such amount in cash as is necessary to make the General Partner's
capital contribution at least equal to the greater of: (a) 1% of aggregate
capital contributions to the Partnership by all Partners (including the General
Partner's contribution) and (b) $25,000. Such contribution by the General
Partner need not exceed the amount described above and shall be evidenced by
Units of General Partnership Interest ("Unit(s) of General Partnership
Interest"). The General Partner shall maintain its interest in the capital of
the Partnership at no less than the amount stated above. The General Partner,
without notice to or consent of the Limited Partners, may withdraw any portion
of its interest in the Partnership that is in excess of its required interest
described above. Interests in the Partnership, other than the General
Partnership Interest of the General Partner, shall be Units of Limited
Partnership Interest ("Units" or, individually, a "Unit"). The net asset value
of a Unit of General Partnership Interest shall at all times be equivalent to
the Net Asset Value of a Unit of Limited Partnership Interest.
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The General Partner, for and on behalf of the Partnership, shall issue and
sell Units to persons desiring to become Limited Partners, PROVIDED that such
persons shall be determined by the General Partner to be qualified investors and
their subscriptions for Units shall be accepted by the General Partner, which
acceptance the General Partner may withhold in whole or in part in its sole
discretion. The minimum subscription for Units per subscriber shall be such
amount as the General Partner shall determine from time to time in its sole
discretion.
The Partnership, directly and/or through Dean Witter Reynolds Inc. ("DWR")
or such other selling agent or agents (each, a "Selling Agent") as may be
approved by the General Partner, may at any time and from time to time in the
sole discretion of the General Partner offer for sale Units and fractions of
Units (to the third decimal place) in public and/or private offerings, at prices
per Unit, in such minimum amounts, for such periods of time, and on such terms
and conditions as the General Partner shall determine in its sole discretion.
Units offered during any offering shall be issued and sold by the Partnership as
of the close of business (as determined by the General Partner) on the last
business day of a fiscal quarter or month and a closing for subscriptions
received during such offering shall be held as of such date; PROVIDED, HOWEVER,
that the General Partner may hold closings at such other times and for such
other periods as it shall determine in its sole discretion to effectuate such
offerings. At each such closing, the Partnership shall issue and sell Units to
each subscriber whose subscription shall be accepted by the General Partner at a
price per Unit to be determined by the General Partner in its sole discretion;
PROVIDED, HOWEVER, that the offering price per Unit during any offering of Units
shall not at any time be less than the Net Asset Value of a Unit as of the close
of business on the date of the applicable closing at which such Unit shall be
issued and sold, unless the newly offered Units' participation in the
Partnership's profits and losses is proportionately reduced. During any
offering, Units may be subscribed for by the General Partner, DWR,
Morgan Stanley Dean Witter & Co. ("MSDW"), any trading advisor to the
Partnership (each, a "Trading Advisor"), any commodity broker for the
Partnership (each, a "Commodity Broker"), and such persons' respective
shareholders, directors, officers, partners, employees, principals, and
Affiliates. Subscriptions for Units by such persons shall not preclude them from
receiving compensation from the Partnership for services rendered by them in
their respective capacities as other than Limited Partners. No subscriber for
Units during any offering of Units shall become a Limited partner until the
General Partner shall: (a) accept such subscriber's subscription at a closing
relating to such offering; (b) execute this Agreement on behalf of such
subscriber pursuant to the power of attorney in the subscription agreement
executed by the subscriber in connection with such offering; and (c) make an
entry on the books and records of the Partnership reflecting that such
subscriber has been admitted as a Limited Partner. Accepted subscribers shall be
deemed Limited Partners at such time as their admission shall be reflected on
the books and records of the Partnership. The aggregate of all capital
contributions to the Partnership shall be available to the Partnership to carry
on its business and no interest shall be paid by the Partnership on any such
contribution.
In connection with any offering of Units by the Partnership, the General
Partner, on behalf of the Partnership, shall: (a) cause to be filed one or more
Disclosure Documents and such amendments and supplements thereto as the General
Partner shall deem advisable or as may be required by applicable law with the
CFTC and the National Futures Association ("NFA"), Forms D or other
applications, notices or forms with the SEC and state securities and Blue Sky
administrators, and Registration Statements, Prospectuses (as used hereinafter,
the term "Prospectus" shall mean the most recent version of the Prospectus
issued by the Partnership, or the most recent version of the Disclosure Document
or other offering memorandum prepared, in connection with the particular
offering of Units), and such amendments and supplements thereto as the General
Partner shall deem advisable or as may be required by applicable law, with the
CFTC, the NFA, the SEC, and the National Association of Securities Dealers,
Inc.; (b) qualify by registration or exemption from registration the Units for
sale under the Blue Sky and securities laws of such states of the United States
and such other jurisdictions as the General Partner in its sole discretion shall
deem advisable or as may be required by applicable law; (c) make such
arrangements for the sale of Units as it shall deem advisable, including
engaging DWR or any other firm as Selling Agent and entering into a selling
agreement with DWR or such other Selling Agent; and (d) take such action with
respect to and in order to effectuate the matters described in clauses
(a) through (c) as it shall deem advisable or necessary.
The Partnership shall not pay the costs of any offering or any selling
commissions relating thereto. No Limited Partner shall have any preemptive,
preferential or other rights with respect to the issuance or sale
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of any additional Units, except as described in the applicable Prospectus. No
Limited Partner shall have the right to consent to the admission of any
additional Limited Partner. There is no maximum aggregate amount of
contributions which may be received by the Partnership.
All Units subscribed for shall be issued subject to the collection of good
funds. If, at any time, good funds representing payment for Units are not made
available to the Partnership because a subscriber has provided bad funds in the
form of a bad check or draft or otherwise to DWR or another Selling Agent which,
in turn, has deposited the subscription amount with the escrow agent, the
Partnership shall cancel the Units issued to such subscriber represented by such
bad funds, and the subscriber's name shall be removed as a Limited Partner from
the books and records of the Partnership. Any losses or profits sustained by the
Partnership as a result thereof in connection with its Futures Interests trading
allocable to such cancelled Units shall be deemed a decrease or increase in Net
Assets and allocated among the remaining Partners as described in Section 7.
Each Limited Partner agrees to reimburse the Partnership for any expense or loss
incurred in connection with the issuance and cancellation of any such Units
issued to such Limited Partner.
7. ALLOCATION OF PROFITS AND LOSSES; ACCOUNTING; OTHER MATTERS.
(a) CAPITAL ACCOUNTS. A capital account shall be established for each
Partner. The initial balance of each Partner's capital account shall be the
amount of a Partner's initial capital contribution to the Partnership.
(b) MONTHLY ALLOCATIONS. As of the close of business (as determined by the
General Partner) on the last day of each calendar month ("Determination Date")
during each fiscal year of the Partnership, the following determinations and
allocations shall be made:
(1) The Net Assets of the Partnership (as defined in Section 7(d)(1)),
before accrual of the monthly management fees and incentive fees payable to
any Trading Advisor, shall be determined.
(2) The accrued monthly management fees shall then be charged against
Net Assets.
(3) The accrued monthly incentive fees, if any, shall then be charged
against Net Assets.
(4) Any increase or decrease in Net Assets (after the adjustments in
subparagraphs (2) and (3) above), over those of the immediately preceding
Determination Date (or, in the case of the first Determination Date, the
first closing of the sale of Units to the public), shall then be credited or
charged to the capital account of each Partner in the ratio that the balance
of each account bears to the balance of all accounts.
(5) The amount of any distribution to a Partner, any amount paid to a
Partner on redemption of Units, any amount deemed received by a Partner on a
Series Exchange of Units pursuant to Section 10(c) hereof, and any amount
paid to the General Partner upon withdrawal of its interest in the
Partnership shall be charged to that Partner's capital account.
(c) ALLOCATION OF PROFIT AND LOSS FOR FEDERAL INCOME TAX PURPOSES. As of
the end of each fiscal year of the Partnership, the Partnership's realized
profit or loss shall be allocated among the Partners pursuant to the following
subparagraphs for federal income tax purposes. Such allocations of profit and
loss will be pro rata from net capital gain or loss and net operating income or
loss realized by the Partnership. For United States federal income tax purposes,
a distinction will be made between net short-term gain or loss and net long-term
gain or loss.
(1) Items of ordinary income (such as interest or credits in lieu of
interest) and expense (such as the management fees, incentive fees,
brokerage fees and extraordinary expenses) shall be allocated pro rata among
the Partners based on their respective capital accounts (exclusive of these
items of ordinary income or expense) as of the end of each month in which
the items of ordinary income or expense accrued.
(2) Net realized capital gain or loss from the Partnership's trading
activities shall be allocated as follows:
(aa) For the purpose of allocating the Partnership's net realized
capital gain or loss among the Partners, there shall be established an
allocation account with respect to each outstanding
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Unit. The initial balance of each allocation account shall be the amount
paid by the Partner to the Partnership for the Unit. Allocation accounts
shall be adjusted as of the end of each fiscal year and as of the date a
Partner completely redeems his Units as follows:
(i) Each allocation account shall be increased by the amount of
income allocated to the holder of the Unit pursuant to
subparagraph (c)(1) above and subparagraph (c)(2)(cc) below.
(ii) Each allocation account shall be decreased by the amount of
expense or loss allocated to the holder of the Unit pursuant to
subparagraph (c)(1) above and subparagraph (c)(2)(ee) below and by the
amount of any distribution the holder of the Unit has received with
respect to the Unit (other than on redemption of the Unit).
(iii) When a Unit is redeemed or exchanged in a Series Exchange,
the allocation account with respect to such Unit shall be eliminated.
(bb) Net realized capital gain shall be allocated first to each
Partner who has partially redeemed his Units or exchanged less than all
his Units in a Series Exchange during the fiscal year up to the excess,
if any, of the amount received upon redemption of the Units or the amount
deemed received on the Series Exchange of the Units over the allocation
account attributable to the redeemed Units or the Units exchanged in the
Series Exchange.
(cc) Net realized capital gain remaining after the allocation
thereof pursuant to subparagraph (c)(2)(bb) above shall be allocated next
among all Partners whose capital accounts are in excess of their Units'
allocation accounts (after the adjustments in subparagraph (c)(2)(bb)
above) in the ratio that each such Partner's excess bears to all such
Partners' excesses. In the event that gain to be allocated pursuant to
this subparagraph (c)(2)(cc) is greater than the excess of all such
Partners' capital accounts over all such allocation accounts, the excess
will be allocated among all Partners in the ratio that each Partner's
capital account bears to all Partners' capital accounts.
(dd) Net realized capital loss shall be allocated first to each
Partner who has partially redeemed his Units or exchanged less than all
his Units in a Series Exchange during the fiscal year up to the excess,
if any, of the allocation account attributable to the redeemed Units or
the Units exchanged in the Series Exchange over the amount received upon
redemption of the Units or the amount deemed received on the Series
Exchange of the Units.
(ee) Net realized capital loss remaining after the allocation
thereof pursuant to subparagraph (c)(2)(dd) above shall be allocated next
among all Partners whose Units' allocation accounts are in excess of
their capital accounts (after the adjustments in subparagraph (c)(2)(dd)
above) in the ratio that each such Partner's excess bears to all such
Partners' excesses. In the event that loss to be allocated pursuant to
this subparagraph (c)(2)(ee) is greater than the excess of all such
allocation accounts over all such Partners' capital accounts, the excess
loss will be allocated among all Partners in the ratio that each
Partner's capital account bears to all Partners' capital accounts.
(3) The tax allocations prescribed by this Section 7(c) shall be made to
each holder of a Unit whether or not the holder is a substituted Limited
Partner. In the event that a Unit has been transferred or assigned pursuant
to Section 10(a), the allocations prescribed by this Section 7(c) shall be
made with respect to such Unit without regard to the transfer or assignment,
except that in the year of transfer or assignment the allocations prescribed
by this Section 7(c) shall be divided between the transferor or assignor and
the transferee or assignee based on the number of months each held the
transferred or assigned Unit. For purposes of this Section 7(c), tax
allocations shall be made to the General Partner's Units of General
Partnership Interest on a Unit-equivalent basis.
(4) The allocation of profit and loss for federal income tax purposes
set forth herein is intended to allocate taxable profits and loss among
Partners generally in the ratio and to the extent that net profit and net
loss are allocated to such Partners under Section 7(b) hereof so as to
eliminate, to the extent possible, any disparity between a Partner's capital
account and his allocation account with respect to each Unit then
outstanding, consistent with the principles set forth in
Section 704(c)(2) of the Internal Revenue Code of 1986, as amended (the
"Code").
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(d) DEFINITIONS; ACCOUNTING.
(1) NET ASSETS. The Partnership's "Net Assets" shall mean the total
assets of the Partnership (including, but not limited to, all cash and cash
equivalents (valued at cost), accrued interest and amortization of original
issue discount, and the market value of all open Futures Interests positions
and other assets of the Partnership) less the total liabilities of the
Partnership (including, but not limited to, all brokerage, management and
incentive fees, and extraordinary expenses) determined in accordance with
generally accepted accounting principles consistently applied under the
accrual basis of accounting. Unless generally accepted accounting principles
require otherwise, the market value of a Futures Interest traded on a United
States exchange shall mean the settlement price on the exchange on which the
particular Futures Interest was traded by the Partnership on the day with
respect to which Net Assets are being determined; PROVIDED, HOWEVER, that if
a Futures Interest could not have been liquidated on such day due to the
operation of daily limits or other rules of the exchange upon which that
Futures Interest shall be traded or otherwise, the settlement price on the
first subsequent day on which the Futures Interest could be liquidated shall
be the market value of such Futures Interest for such day. The market value
of a forward contract or a Futures Interest traded on a foreign exchange or
market shall mean its market value as determined by the General Partner on a
basis consistently applied for each different variety of forward contract or
Futures Interest.
(2) NET ASSET VALUE. The "Net Asset Value" of a Unit shall mean the
Net Assets allocated to capital accounts represented by Units of Limited
Partnership Interest divided by the aggregate number of Units of Limited
Partnership Interest.
(e) EXPENSES AND LIMITATIONS THEREOF. DWR shall pay all of the
organizational, initial and continuing offering expenses of the Partnership
(including, but not limited to, legal, accounting, and auditing fees, printing
costs, filing fees, escrow fees, marketing costs and expenses, and other related
expenses), and shall not be reimbursed therefor.
Subject to the limits set forth below, and except to the extent that DWR or
an affiliate has agreed to pay any such fees, costs or expenses as provided in
the Prospectus, the Partnership shall pay its operational expenses. The General
Partner shall not be reimbursed by the Partnership for any costs incurred by it
relating to office space, equipment, and staff necessary for Partnership
operations and administration of redemptions and Series Exchanges of Units. The
Partnership will be obligated to pay any extraordinary expenses (determined in
accordance with generally accepted accounting principles) it may incur.
The Partnership's assets held by any Commodity Broker, as provided in
Section 7(i), may be used as margin solely for the Partnership's trading. The
Partnership shall bear all commodity brokerage fees and commissions and, except
as otherwise set forth herein or described in the Prospectus, shall be obligated
to pay all liabilities incurred by it, including, without limitation, all fees
and expenses incurred in connection with its trading activities (including, but
not limited to, floor brokerage fees, exchange fees, clearinghouse fees, NFA
fees, "give up" or transfer fees, costs associated with the taking of delivery
of Futures Interests, fees for the execution of forward contract transactions,
fees for the execution of cash transactions relating to the exchange of futures
for physical transactions, and the use of any Commodity Broker's institutional
and overnight execution facilities (collectively, "Transaction Fees and
Costs")), and management and incentive fees payable to any Trading Advisor.
Appropriate reserves may be created, accrued, and charged against Net Assets for
contingent liabilities, if any, as of the date any such contingent liability
becomes known to the General Partner. Such reserves shall reduce the Net Asset
Value of interests in the Partnership for all purposes, including redemptions
and Series Exchanges.
The following special limits shall apply to the Partnership's fees and
expenses, in accordance with Section IV.C of the NASAA Guidelines: (a) the
aggregate of (i) the management fees payable by the Partnership to the Trading
Advisor(s), and (ii) the Partnership's customary and routine administrative
expenses (other than commodity brokerage commissions or fees, Transaction Fees
and Costs, incentive fees, legal and auditing fees and expenses, and
extraordinary expenses), shall not exceed 1/2 of 1% of the Partnership's Net
Assets per month, or 6% of the Partnership's Net Assets annually; (b) the
monthly incentive fees payable by the Partnership shall not exceed 15% of the
Partnership's "Trading Profits" (as defined in the Prospectus) attributable to
such Trading Advisor for the applicable calculation period, PROVIDED that such
incentive fees may be increased by 2% for each 1% by which the aggregate fees
and expenses described in clause (a) of this sentence are below the 6% of Net
Assets annual limit thereon
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(I.E., if such fees and expenses are 4% of Net Assets, the maximum incentive fee
payable may be increased to 19%); (c) any "roundturn" brokerage commissions
(excluding Transaction Fees and Costs) payable by the Partnership to any
Commodity Broker shall not exceed 80% of such Commodity Broker's published
non-member rates for speculative accounts; and (d) the aggregate of (i) the
brokerage commissions or fees payable by the Partnership to any Commodity
Broker, (ii) any Transaction Fees and Costs separately payable by the
Partnership, and (iii) any net excess interest and compensating balance benefits
to any Commodity Broker (after crediting the Partnership with interest), shall
not exceed 14% annually of the Partnership's average monthly Net Assets as at
the last day of each month during each calendar year. The General Partner or an
Affiliate thereof shall pay and shall not be reimbursed for any fees and
expenses in excess of any such limits.
(f) LIMITED LIABILITY OF LIMITED PARTNERS. Each Unit, when purchased by a
Limited Partner in accordance with the terms of this Agreement, shall be fully
paid and nonassessable. No Limited Partner shall be liable for the Partnership's
obligations in excess of such Partner's unredeemed capital contribution,
undistributed profits, if any, and any distributions and amounts received upon
redemption of Units or deemed received on a Series Exchange of Units, together
with interest thereon. The Partnership shall not make a claim against a Limited
Partner with respect to amounts distributed to such Partner or amounts received
by such Partner upon redemption of Units or deemed received upon a Series
Exchange of Units unless the Net Assets of the Partnership (which shall not
include any right of contribution from the General Partner except to the extent
previously made by it pursuant to this Agreement) shall be insufficient to
discharge the liabilities of the Partnership which shall have arisen prior to
the payment of such amounts.
(g) RETURN OF LIMITED PARTNER'S CAPITAL CONTRIBUTION. Except to the extent
that a Limited Partner shall have the right to withdraw capital through
redemption or Series Exchange of Units in accordance with Section 10(b) or (c),
no Limited Partner shall have any right to demand the return of his capital
contribution or any profits added thereto, except upon termination and
dissolution of the Partnership. In no event shall a Limited Partner be entitled
to demand or receive from the Partnership property other than cash.
(h) DISTRIBUTIONS. The General Partner shall have sole discretion in
determining what distributions (other than on redemption or Series Exchange of
Units), if any, the Partnership shall make to its Partners. If made, all
distributions shall be pro rata in accordance with the respective capital
accounts of the Partners and may be made by credit to a Limited Partner's
account with DWR or by check if such account is closed.
(i) INTEREST ON ASSETS. The Partnership shall deposit all of its assets
with such Commodity Broker(s) as the Partnership shall utilize from time to
time, and such assets shall be used by the Partnership to engage in Futures
Interests trading. Unless provided otherwise in the Prospectus, such assets will
be invested in securities approved by the CFTC for investment of customer funds
or held in non-interest-bearing accounts, and such Commodity Broker(s) will
credit the Partnership at month-end with interest income as set forth in the
Prospectus or as otherwise set forth in a notice to Limited Partners.
8. MANAGEMENT AND TRADING POLICIES.
(a) MANAGEMENT OF THE PARTNERSHIP. Except as may be otherwise specifically
provided herein, the General Partner, to the exclusion of all Limited Partners,
shall conduct and manage the business of the Partnership, including, without
limitation, the investment of the funds of the Partnership. No Limited Partner
shall have the power to represent, act for, sign for, or bind the General
Partner or the Partnership. Except as provided herein, no Partner shall be
entitled to any salary, draw, or other compensation from the Partnership. Each
Limited Partner hereby undertakes to furnish to the General Partner such
additional information as may be determined by the General Partner to be
required or appropriate for the Partnership to open and maintain an account or
accounts with the Partnership's Commodity Broker(s) for the purpose of trading
in Futures Interests.
The General Partner shall be under a fiduciary duty to conduct the affairs
of the Partnership in the best interests of the Partnership. The Limited
Partners will under no circumstances be permitted to contract away, or be deemed
to have contracted away, the fiduciary obligations owed them by the General
Partner under statutory or common law. The General Partner shall have fiduciary
responsibility for the
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safekeeping of all of the funds and assets of the Partnership, whether or not in
its immediate possession or control, and the General Partner shall not employ,
or permit another to employ, such funds or assets in any manner except for the
benefit of the Partnership.
(b) THE GENERAL PARTNER. The General Partner, on behalf of the
Partnership, shall retain one or more Trading Advisors to make all trading
decisions for the Partnership, and shall delegate complete trading discretion to
such Trading Advisors; PROVIDED, HOWEVER, that the General Partner may override
any trading instructions: (i) which the General Partner, in its sole discretion,
determines to be in violation of any trading policy of the Partnership, as set
forth in subsection (c) below; (ii) to the extent the General Partner believes
doing so is necessary for the protection of the Partnership; (iii) to terminate
the Futures Interests trading of the Partnership; (iv) to comply with applicable
laws or regulations; or (v) as and to the extent necessary, upon the failure of
a Trading Advisor to comply with a request to make the necessary amount of funds
available to the Partnership, to fund distributions, redemptions, or
reapportionments among Trading Advisors or to pay the expenses of the
Partnership; and PROVIDED, FURTHER, that the General Partner may make trading
decisions at any time at which a Trading Advisor shall become incapacitated or
some other emergency shall arise as a result of which such Trading Advisor shall
be unable or unwilling to act and a successor Trading Advisor has not yet been
retained.
The Partnership shall not enter into any agreement with the General Partner,
DWR, or their respective Affiliates (other than a selling agreement as
contemplated by Section 6) which has a term of more than one year and which does
not provide that it shall be terminable by the Partnership without penalty upon
60 days' prior written notice by the General Partner; PROVIDED, HOWEVER, that
any such agreement may provide for automatic renewal for additional one-year
terms unless either the Partnership or the other party to such agreement, upon
written notice given not less than 60 days prior to the original termination
date or any extended termination date, notifies the other party of its intention
not to renew.
Subject to the foregoing paragraph, the General Partner is hereby
authorized, on behalf of the Partnership, to enter into the form of management
agreement described in the Prospectus (each, a "Management Agreement") with each
Trading Advisor described in the Prospectus, and to cause the Partnership to pay
to each such Trading Advisor the management and incentive fees provided for in
the applicable Management Agreement, as described in the Prospectus.
The General Partner is further authorized: (a) to modify (including changing
the form and amount of compensation and other arrangements and terms) or
terminate any Management Agreement in its sole discretion in accordance with the
terms of such Management Agreement and to employ from time to time other Trading
Advisors pursuant to management agreements having such terms and conditions and
providing for such form and amount of compensation as the General Partner in its
sole discretion shall deem to be in the best interests of the Partnership, which
terms may include provision for the payment of an incentive fee to a new or
replacement Trading Advisor or Advisors which shall be based on any trading
profits which shall be earned by such Trading Advisor(s), irrespective of
whether such profits shall exceed trading losses incurred by any previous or
existing Trading Advisor or Advisors or by the Partnership as a whole; (b) to
enter into the Customer Agreements described in the Prospectus (each, a
"Customer Agreement") with the Commodity Brokers described in the Prospectus,
and to cause the Partnership to pay to such Commodity Brokers brokerage fees or
commissions and Transaction Fees and Costs at the rates provided for in the
Customer Agreements and as described in the Prospectus; and (c) to modify
(including changing the form and amount of compensation and other arrangements
and terms) and terminate the Customer Agreements in its sole discretion in
accordance with the terms of such Agreements and to employ from time to time
other Commodity Brokers pursuant to customer agreements having such terms and
conditions and providing for such form and amount of compensation as the General
Partner in its sole discretion shall deem to be in the best interests of the
Partnership, PROVIDED, HOWEVER, that the General Partner shall review at least
annually the brokerage arrangements with the Partnership to ensure that the
brokerage fees or commissions paid to any Commodity Broker are fair, reasonable,
and competitive, and represent the best price and services available, taking
into consideration: (i) the size of the Partnership; (ii) the Futures Interests
trading activity; (iii) the services provided by the Commodity Broker, the
General Partner or any Affiliate thereof to the Partnership; (iv) the cost
incurred by the Commodity Broker, the General Partner or any Affiliate thereof
in organizing and operating the Partnership and offering Units; (v) the overall
costs to the Partnership; (vi) any excess interest and
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compensating balance benefits to the Commodity Broker from assets held thereby;
and (vii) 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 such.
The General Partner may subdivide or combine Units in its discretion,
provided that no such subdivision or combination shall affect the Net Asset
Value of any Limited Partner's interest in the Partnership.
(c) GENERAL TRADING POLICIES. The General Partner shall require any
Trading Advisor retained by the Partnership to follow the trading policies set
forth below. The following trading policies are applicable to the Partnership as
a whole and do not apply to the trading of any individual Trading Advisor.
TRADING POLICIES FOR ALL PARTNERSHIPS EXCEPT SPECTRUM GLOBAL BALANCED AND
SPECTRUM COMMODITY:
- The Trading Advisors will trade only in those Futures Interests
that have been approved by the General Partner. The Partnership normally
will not establish new positions in a Futures Interest for any one contract
month or option if such additional positions would result in a net long or
short position for that Futures Interest requiring as margin or premium more
than 15% of the Partnership's Net Assets. In addition, the Partnership will,
except under extraordinary circumstances, maintain positions in Futures
Interests in at least two market segments (I.E., agricultural items,
industrial items (including energies), metals, currencies, and financial
instruments (including stock, financial, and economic indexes)) at any one
time.
- The Partnership will not acquire additional positions in any
Futures Interest if such additional positions would result in the aggregate
net long or short positions for all Futures Interests requiring as margin or
premium for all outstanding positions more than 66 2/3% of the Partnership's
Net Assets. Under certain market conditions, such as an abrupt increase in
margins required by a commodity exchange or its clearinghouse or an
inability to liquidate open positions because of daily price fluctuation
limits, or both, the Partnership may be required to commit as margin amounts
in excess of the foregoing limit. In such event, the Trading Advisors will
reduce their open positions to comply with the foregoing limit before
initiating new positions.
- The Trading Advisors will not generally take a position after the
first notice day in any Futures Interest during the delivery month of that
Futures Interest, except to match trades to close out a position on the
interbank foreign currency or other forward markets or liquidate trades in a
limit market.
TRADING POLICIES FOR SPECTRUM GLOBAL BALANCED ONLY:
- The Trading Advisor will trade only in those Futures Interests that
have been approved by the General Partner. In addition, the Partnership
will, except under extraordinary circumstances, maintain positions in
Futures Interests in at least two market segments (I.E., agricultural items,
industrial items (including energies), metals, currencies, and financial
instruments (including stock, financial, and economic indexes)) at any one
time.
- The Trading Advisors will not generally take a position after the
first notice day in any Futures Interest during the delivery month of that
Futures Interest, except to match trades to close out a position on the
interbank foreign currency or other forward markets or liquidate trades in a
limit market. The Partnership may, with the General Partner's prior
approval, purchase "cash" stocks and bonds, or options on stock or bond
indices, on a temporary basis under unusual circumstances in which it is not
practicable or economically feasible to establish the Partnership's stock
index or bond portfolios in the futures markets, and may acquire "cash"
instruments in its short-term interest rate futures component.
TRADING POLICY FOR ALL PARTNERSHIPS EXCEPT SPECTRUM COMMODITY:
- The Partnership will trade currencies and other commodities in the
interbank and forward contract markets only with banks, brokers, dealers,
and other financial institutions which the General Partner, in conjunction
with DWR, has determined to be creditworthy. In determining the
creditworthiness of a counterparty to a forward contract, the General
Partner and DWR will consult with the Corporate Credit Department of DWR.
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TRADING POLICY FOR SPECTRUM SELECT ONLY:
- The Partnership will not purchase, sell, or trade securities
(except securities approved by the CFTC for investment of customer funds).
The Partnership may, however, trade in futures contracts on securities and
securities indexes, options on such futures contracts, and other commodity
options.
TRADING POLICY FOR SPECTRUM COMMODITY ONLY:
- The Partnership will not purchase, sell, or trade securities
(except securities approved by the CFTC or investment of customer funds).
TRADING POLICIES FOR ALL PARTNERSHIPS:
- The Partnership will not employ the trading technique commonly
known as "pyramiding," in which the speculator uses unrealized profits on
existing positions in a given Futures Interest due to favorable price
movement as margin specifically to buy or sell additional positions in the
same or a related Futures Interest. Taking into account the Partnership's
open trade equity on existing positions in determining generally whether to
acquire additional Futures Interest positions on behalf of the Partnership
will not be considered to constitute "pyramiding."
- The Partnership will not under any circumstances lend money to
affiliated entities or otherwise. The Partnership will not utilize
borrowings except if the Partnership purchases or takes delivery of
commodities. If the Partnership borrows money from the General Partner or
any Affiliate thereof, the lending entity in such case (the "Lender") may
not receive interest in excess of its interest costs, nor may the Lender
receive interest in excess of the amounts which would be charged the
Partnership (without reference to the General Partner's financial abilities
or guarantees) by unrelated banks on comparable loans for the same purpose,
nor may the Lender or any Affiliate thereof receive any points or other
financing charges or fees regardless of the amount. Use of lines of credit
in connection with its forward trading does not, however, constitute
borrowing for purposes of this trading limitation.
- The Partnership will not permit "churning" of the Partnership's
assets.
(d) CHANGES TO TRADING POLICIES. The General Partner shall not make any
material change in the trading policies in Section 8(c) without obtaining the
prior written approval of Limited Partners owning more than 50% of the Units
then outstanding. The General Partner will notify the Limited Partners within
seven business days after any material change in the Partnership's Trading
Policies so approved by the Limited Partners.
(e) MISCELLANEOUS. The General Partner may take such other actions as it
deems necessary or desirable to manage the business of the Partnership,
including, but not limited to, the following: opening bank accounts and paying
or authorizing the payment of distributions to the Partners and the expenses of
the Partnership, such as brokerage fees and commissions, management and
incentive fees, ordinary and extraordinary expenses, and Transaction Fees and
Costs.
The General Partner shall prepare or cause to be prepared and shall file on
or before the due date (or any extension thereof) any federal, state, or local
tax returns which shall be required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by the Partnership;
PROVIDED, HOWEVER, that the General Partner shall not be required to cause the
Partnership to pay any tax so long as the General Partner or the Partnership
shall be in good faith and by appropriate legal proceedings contesting the
validity, applicability, or amount thereof and such contest shall not materially
endanger any right or interest of the Partnership.
The General Partner shall be authorized to perform all duties imposed by
Sections 6221 through 6233 of the Code on the General Partner as "tax matters
partner" of the Partnership, including, but not limited to, the following: (a)
the power to conduct all audits and other administrative proceedings with
respect to Partnership tax items; (b) the power to extend the statute of
limitations for all Limited Partners with respect to Partnership tax items;
(c) the power to file a petition with an appropriate federal court for review of
a final Partnership administrative adjustment; and (d) the power to enter into a
settlement with
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the Internal Revenue Service on behalf of, and binding upon, those Limited
Partners having less than a 1% interest in the Partnership, unless a Limited
Partner shall have notified the Internal Revenue Service and the General Partner
that the General Partner may not act on such Partner's behalf.
If the Partnership is required to withhold United States taxes on income
with respect to Units held by Limited Partners who are nonresident alien
individuals, foreign corporations, foreign partnerships, foreign trusts, or
foreign estates, the General Partner may pay such tax out of its own funds and
then be reimbursed out of the proceeds of any distribution or redemption with
respect to such Units.
The General Partner shall keep at the principal office of the Partnership
such books and records relating to the business of the Partnership as it deems
necessary or advisable, as are required by the Commodity Exchange Act, as
amended (the "CEAct"), and the CFTC's rules and regulations thereunder, or as
shall be required by other regulatory bodies, exchanges, boards, and authorities
having jurisdiction. Such books and records shall be retained by the Partnership
for not less than five years.
The Partnership's books and records shall be available to Limited Partners
or their authorized attorneys or agents for inspection and copying during normal
business hours of the Partnership and, upon request, the General Partner shall
send copies of same to any Limited Partner upon payment by him of reasonable
reproduction and distribution costs. Any subscription documentation executed by
a Limited Partner in connection with his purchase of Units, Series Exchange or
Non-Series Exchange, as applicable, shall be retained by the Partnership for not
less than six years.
Except as described herein or in the Prospectus, no person may receive,
directly or indirectly, any advisory, management, or incentive fee for
investment advice who shares or participates in per trade commodity brokerage
commissions paid by the Partnership. No Commodity Broker for the Partnership may
pay, directly or indirectly, rebates or "give-ups" to the General Partner or any
Trading Advisor, and such prohibitions may not be circumvented by any reciprocal
business arrangements. Assets of the Partnership shall not be commingled with
assets of any other person. Margin deposits and deposits of assets with a
Commodity Broker shall not constitute commingling.
The General Partner shall devote such time and resources to the
Partnership's business and affairs as it, in its sole discretion, shall deem
necessary or advisable to effectively manage the Partnership. Subject to
Section 5, the General Partner may engage in other business activities and shall
not be required to refrain from any other activity or disgorge any profits from
any such activity, whether as general partner of additional partnerships formed
for investment in Futures Interests or otherwise. The General Partner may engage
and compensate, on behalf and from funds of the Partnership, such persons,
firms, or corporations, including any Affiliate of the General Partner, as the
General Partner in its sole judgment shall deem advisable for the conduct and
operation of the business of the Partnership; PROVIDED, HOWEVER, that, except as
described herein and in the Prospectus, the General Partner shall not engage any
such Affiliate to perform services for the Partnership without having made a
good faith determination that: (i) the Affiliate which it proposes to engage to
perform such services is qualified to do so (considering the prior experience of
the Affiliate or the individuals employed thereby); (ii) the terms and
conditions of the agreement pursuant to which such Affiliate is to perform
services for the Partnership are no less favorable to the Partnership than could
be obtained from equally-qualified unaffiliated third parties, or are otherwise
determined by the General Partner to be fair and reasonable to the Partnership
and the Limited Partners; and (iii) the maximum period covered by the agreement
pursuant to which such Affiliate is to perform services for the Partnership
shall not exceed one year, and such agreement shall be terminable without
penalty upon 60 days' prior written notice by the Partnership. Nothing contained
in the preceding sentence shall prohibit the General Partner from receiving
reimbursement from the Partnership for expenses advanced on behalf of the
Partnership (other than organizational and offering expenses).
No person dealing with the General Partner shall be required to determine
its authority to make any undertaking on behalf of the Partnership or to
determine any fact or circumstance bearing upon the existence of its authority.
9. AUDITS; REPORTS TO LIMITED PARTNERS.
The Partnership's books shall be audited annually by an independent
certified public accounting firm selected by the General Partner in its sole
discretion. The Partnership shall use its best efforts to cause
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each Partner to receive: (a) within 90 days after the close of each fiscal year
an annual report containing audited financial statements (including a statement
of income and a statement of financial condition) of the Partnership for the
fiscal year then ended, prepared in accordance with generally accepted
accounting principles and accompanied by a report of the accounting firm which
audited such statements, and such other information as the CFTC and NFA may from
time to time require (such annual reports will provide a detailed statement of
any transactions with the General Partner or its Affiliates and of fees,
commissions and any compensation paid or accrued to the General Partner or its
Affiliates for the fiscal year completed, showing the amount paid or accrued to
each recipient and the services performed); (b) within 75 days after the close
of each fiscal year (but in no event later than March 15 of each year) such tax
information relating to the Partnership as is necessary for such Partner to
complete his federal income tax return; (c) within 30 days after the close of
each calendar month, such financial and other information with respect to the
Partnership as the CFTC and NFA from time to time shall require in monthly
reports, together with information concerning any material change in the
brokerage commissions and fees payable by the Partnership to any Commodity
Broker; and (d) at such times as shall be necessary or advisable in the General
Partner's sole discretion, such other information as the CFTC and NFA from time
to time shall require under the CEAct to be given to participants in commodity
pools.
In addition, if any of the following events occurs, notice of such event,
including a description of the redemption and voting rights of Limited Partners,
as set forth in Sections 10(b) and 15, shall be mailed to each Limited Partner
within seven business days after the occurrence of such event: (a) a decrease in
the Net Asset Value of a Unit as of the close of business on any business day to
50% or less of the Net Asset Value for such Unit as of the end of the
immediately preceding month; (b) any material amendment to this Agreement;
(c) any change in Trading Advisors or any material change in the Management
Agreement with a Trading Advisor; (d) any change in Commodity Brokers or any
material change in the compensation arrangements with a Commodity Broker;
(e) any change in general partners or any material change in the compensation
arrangements with a general partner; (f) any change in the Partnership's fiscal
year; (g) any material change in the Partnership's trading policies; or
(h) cessation of Futures Interests trading by the Partnership. In the case of a
notice given in accordance with clause (a) of the immediately preceding
sentence: (i) such notice shall also advise Limited Partners that a "Special
Redemption Date," on a date specified in such notice (but in no event earlier
than 15, nor later than 45, days after the mailing of such notice), will take
place as of which Limited Partners may redeem their Units in the same manner as
provided in Section 10(b) for regular Redemption Dates (a Special Redemption
Date may take place on a regular Redemption Date); and (ii) following the close
of business on the date of the 50% decrease giving rise to such notice, the
Partnership shall liquidate all existing positions as promptly as reasonably
practicable and shall suspend all Futures Interests trading through the Special
Redemption Date. Thereafter, the General Partner shall determine whether to
reinstitute Futures Interests trading or to terminate the Partnership. As used
herein, "material change in the Partnership's trading policies" shall mean any
material change in those trading policies specified in Section 8(c).
The Net Asset Value of a Unit shall be determined daily by the General
Partner, and the most recent Net Asset Value calculation shall be promptly
supplied by the General Partner in writing to any Limited Partner after the
General Partner shall have received a written request from such Partner.
In addition, no increase (subject to the limits in the fourth paragraph of
Section 7(e)) in any of the management, incentive, or brokerage fees payable by
the Partnership, or any caps (other than those described in the fourth paragraph
of Section 7(e)) on management fees, incentive fees, brokerage commissions or
fees, Transaction Fees and Costs, ordinary administrative expenses, or net
excess interest or compensating balance benefits, all as described in the
Prospectus, may take effect until the first business day following a Redemption
Date, PROVIDED that: (i) notice of such increase is mailed to each Limited
Partner at least five business days prior to the last date on which a Request
for Redemption must be received by the General Partner with respect to the
applicable Redemption Date; (ii) such notice shall describe the redemption and
voting rights of Limited Partners, as set forth in Sections 10(b) and 15; and
(iii) Limited Partners redeeming Units at the first Redemption Date following
such notice shall not be subject to the redemption charges described in
Section 10(b).
10. TRANSFER; REDEMPTION OF UNITS; EXCHANGE PRIVILEGE.
(a) TRANSFER. A Limited Partner may transfer or assign his Units only as
provided in this Section 10(a). No transferee or assignee shall become a
substituted Limited Partner unless the General
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Partner first consents to such transfer or assignment in writing, which consent
may be withheld in its sole discretion. Any transfer or assignment of Units
which is permitted hereunder shall be effective as of the end of the month in
which such transfer or assignment is made; PROVIDED, HOWEVER, that the
Partnership need not recognize any transfer or assignment until it has received
at least 30 days' prior written notice thereof from the Limited Partner, which
notice shall set forth the address and social security or taxpayer
identification number of the transferee or assignee and the number of Units to
be transferred or assigned, and which notice shall be signed by the Limited
Partner. No transfer or assignment of Units will be effective or recognized by
the Partnership if the transferee or assignee, or the transferor or assignor (if
fewer than all Units held by the transferor or assignor are being transferred or
assigned), would, by reason of such transfer or assignment, acquire Units which
do not meet the minimum initial subscription requirements, as described in the
Prospectus; PROVIDED, HOWEVER, that the foregoing restriction shall not apply to
transfers or assignment of Units (i) by the way of gift or inheritance, (ii) to
any members of the Limited Partner's family, (iii) resulting from divorce,
annulment, separation or similar proceedings, or (iv) to any person who would be
deemed an Affiliate of the Limited Partner (for purposes of this clause
(iv), the term "Affiliate" also includes any partnership, corporation,
association, or other legal entity for which such Limited Partner acts as an
officer, director or partner). No transfer or assignment shall be permitted
unless the General Partner is satisfied that (i) such transfer or assignment
would not be in violation of the Act or applicable federal, state, or foreign
securities laws, and (ii) notwithstanding such transfer or assignment, the
Partnership shall continue to be classified as a partnership rather than as an
association taxable as a corporation under the Code. No transfer or assignment
of Units shall be effective or recognized by the Partnership if such transfer or
assignment would result in the termination of the Partnership for federal income
tax purposes, and any attempted transfer or assignment in violation hereof shall
be ineffective to transfer or assign any such Units. Any transferee or assignee
of Units who has not been admitted to the Partnership as a substituted Limited
Partner shall not have any of the rights of a Limited Partner, except that such
person shall receive that share of capital and profits and shall have that right
of redemption to which his transferor or assignor would otherwise have been
entitled and shall remain subject to the other terms of this Agreement binding
upon Limited Partners. No Limited Partner shall have any right to approve of any
person becoming a substituted Limited Partner. The Limited Partner shall bear
all costs (including any attorneys' and accountants' fees) related to such
transfer or assignment of his Units.
In the event that the General Partner consents to the admission of a
substituted Limited Partner pursuant to this Section 10(a), the General Partner
is hereby authorized to take such actions as may be necessary to reflect such
substitution of a Limited Partner.
(b) REDEMPTION. Except as set forth below and in accordance with the terms
hereof, a Limited Partner (or any assignee thereof) may withdraw all or part of
his unredeemed capital contribution and undistributed profits, if any, by
requiring the Partnership to redeem all or part of his Units at the Net Asset
Value thereof, reduced as hereinafter described (any such withdrawal being
herein referred to as a "Redemption"). The minimum amount of any redemption is
50 Units, unless a Limited Partner is redeeming his entire interest in the
Partnership.
Units may be redeemed at the option of a Limited Partner as of, but not
before, the sixth month-end following the closing at which the Limited Partner
first becomes a Limited Partner of the Partnership or a limited partner of any
other partnership offering Units pursuant to the Prospectus (all such
partnerships shall be defined collectively as the "Spectrum Series Partnerships"
or individually as a "Spectrum Series Partnership"). Thereafter, Units may be
redeemed as of the end of any month. However, any Unit redeemed at or prior to
the end of the twelfth or twenty-fourth full month following the closing at
which such Unit was issued will be assessed a redemption charge equal to 2% or
1%, respectively, of the Net Asset Value of a Unit on the date of such
redemption. The foregoing charges will be paid to DWR. A Limited Partner who
purchased Units pursuant to a Non-Series Exchange (as defined in the Prospectus)
will not be subject to the foregoing redemption charges with respect to such
Units. The number of Units (determined on a per closing basis), expressed as a
percentage of Units purchased, which is not subject to a redemption charge is
determined by dividing (a) the dollar amount used in a Non-Series Exchange to
purchase Units by (b) the total investment in the Partnership. Limited Partners
who redeem units of limited partnership interest in a Spectrum
Series Partnership and have either paid a redemption charge with respect to such
units of limited partnership, or have held such units of limited partnership for
at least two years and subsequently purchase Units, will not be subject to
redemption charges on the new Units under the following conditions: (a) the
subscriber must subscribe for new Units prior to the one-year
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anniversary of the effective date of the redemption of the units of limited
partnership, (b) the subscriber will not be subject to redemption charges with
respect to the amount of the subscription for the new Units up to the amount of
the proceeds of the redemption (net of any redemption charges), and (c) the
subscriber must hold the newly acquired Units for six months from the date of
purchase before such Units may be redeemed or exchanged pursuant to a Series
Exchange. Such subscribers remain subject to the minimum purchase and
suitability requirements. In addition, redemption charges may not be imposed for
certain large purchasers of units of limited partnership interest in the
Spectrum Series Partnerships, as provided in the Prospectus. A Limited Partner
who redeems Units pursuant to a Series Exchange will not be subject to
redemption charges with respect to the redeemed Units. Units acquired pursuant
to a Series Exchange will be deemed as having the same purchase date as the
Units exchanged for purposes of determining the applicability of any redemption
charges. Furthermore, a Limited Partner redeeming Units at the first Redemption
Date following notice of an increase in certain fees in accordance with the
fourth paragraph of Section 9 will not be subject to the foregoing redemption
charges. Redemptions of Units will be deemed to be in the order in which they
are purchased (assuming purchases at more than one closing), with the Units not
subject to a redemption charge being deemed to be the first Units purchased at a
closing.
Redemption of a Limited Partner's Units shall be effective as of the last
day of the first month ending after an irrevocable Request for Redemption in
proper form shall have been received by the General Partner ("Redemption Date");
PROVIDED, that all liabilities, contingent or otherwise, of the Partnership
(except any liability to Partners on account of their capital contributions)
shall have been paid or there shall remain property of the Partnership
sufficient to pay them. As used herein, "Request for Redemption" shall mean a
letter in the form specified by the General Partner and received by the General
Partner by 5:00 p.m. (New York City time) at least five business days prior to
the date on which such Redemption is to be effective. A form of Request for
Redemption is annexed to this Agreement. Additional forms of Request for
Redemption may be obtained by written request to the General Partner.
Upon Redemption, a Limited Partner (or any assignee thereof) shall receive
from the Partnership for each Unit redeemed an amount equal to the Net Asset
Value thereof as of the Redemption Date, less any redemption charges and any
amount owing by such Partner (and his assignee, if any) to the Partnership
pursuant to Section 14(d). If a Redemption is requested by an assignee, all
amounts owed to the Partnership under Section 14(d) by the Partner to whom such
Unit was sold, as well as all amounts owed by all assignees of such Unit, shall
be deducted from the Net Asset Value of such Unit upon Redemption. The General
Partner shall endeavor to pay Redemptions within 10 business days after the
Redemption Date, except that under special circumstances (including, but not
limited to, the inability on the part of the Partnership to liquidate Futures
Interests positions or the default or delay in payments which shall be due the
Partnership from commodity brokers, banks, or other persons), the Partnership
may delay payment to Partners requesting Redemption of Units of the
proportionate part of the Net Asset Value of the Units represented by the sums
which are the subject of such default or delay. Redemptions will be made by
credit to the Limited Partner's customer account with DWR or by check mailed to
the Limited Partner if such account is closed. The General Partner may, in its
absolute discretion, waive any restrictions or charges applicable to
redemptions.
The foregoing terms and conditions in this Section 10(b), other than those
in the second paragraph hereof prohibiting redemptions before the sixth
month-end following the closing at which a person first becomes a Limited
Partner, shall also apply to redemptions effected on "Special Redemption Dates"
held in accordance with Section 9.
The General Partner shall be authorized to execute, file, record, and
publish, on behalf of the Partnership and each Partner, such amendments to this
Agreement and such other documents as shall be necessary or desirable to reflect
any Redemption pursuant to this Section 10(b).
(c) EXCHANGE PRIVILEGE. Except as set forth below, a Limited Partner (or
any assignee thereof) may redeem his Units effective as of the last business day
of any month and authorize the General Partner to use the net proceeds of such
redemption to purchase units of limited partnership interest of another Spectrum
Series Partnership (such a transfer between Spectrum Series Partnerships being
herein referred to as a "Series Exchange"). Series Exchanges shall only be
permitted by a Limited Partner as of, but not
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before the sixth month-end following the closing at which a Limited Partner
first became a limited partner of a Spectrum Series Partnership. The minimum
amount of any Series Exchange is 50 Units, unless a Limited Partner is
liquidating his entire interest in the Partnership.
A Series Exchange shall be effective as of the last business day of the
month ending after an Exchange Agreement and Power of Attorney in proper form
has been received by the General Partner ("Exchange Date"), provided, that the
Partnership has assets sufficient to discharge its liabilities and to redeem
Units on the Exchange Date. As used herein, "Exchange Agreement and Power of
Attorney" shall mean the form annexed to the Prospectus as Exhibit B, sent by a
Limited Partner (or any assignee thereof) to a DWR branch office and received by
the General Partner at least 5 business days prior to the Exchange Date.
Additional forms of the Exchange Agreement and Power of Attorney may be obtained
by written request to the General Partner or from a local DWR branch office.
Upon requesting a Series Exchange, a Limited Partner shall have authorized the
General Partner to redeem the number of Units specified therein and to utilize
the net proceeds of such redemption to purchase an amount of units of limited
partnership interest of one or more other Spectrum Series Partnerships as
specified in the Exchange Agreement and Power of Attorney. The General Partner
shall cause the net proceeds of the redemption to be delivered to the Spectrum
Series Partnership(s) issuing and selling units of limited partnership interest
to the redeeming Limited Partner, and shall cause to be mailed to such Limited
Partner, within 20 business days after such Exchange Date, a written
confirmation thereof.
At the next closing on the sale of Units following each Exchange Date, the
Partnership shall issue and sell Units with a total Net Asset Value equal to the
net proceeds of redemptions from limited partners of other Spectrum Series
Partnerships requesting Units on a Series Exchange, PROVIDED, that the General
Partner, in its capacity as the general partner of each of the Spectrum Series
Partnerships, has (i) timely received a properly executed Exchange Agreement and
Power of Attorney verifying that such units of limited partnership interest
subject to such Series Exchange are owned by the person requesting such Series
Exchange and acknowledging that the limited partner remains eligible to purchase
Units, and (ii) caused the net proceeds from units of limited partnership
interest being redeemed to be transferred to the Partnership in payment of such
Units. Each Unit to be purchased with the net proceeds of a redemption of Units
of limited partnership interest from a Spectrum Series Partnership shall be
issued and sold by the Partnership at a price per Unit equal to 100% of the Net
Asset Value of a Unit as of the close of business on the relevant Exchange Date.
Each Limited Partner understands that its ability to effect a
Series Exchange is conditioned upon units of limited partnership interest of
Spectrum Series Partnerships being registered and qualified for sale pursuant to
a current Prospectus immediately prior to each Exchange Date. The General
Partner shall not have any obligation to have units of limited partnership
interest registered. There can be no assurance that any or a sufficient number
of units of limited partnership interest will be available for sale on the
Exchange Date. If units of limited partnership interest are not registered or
qualified for sale under either federal or applicable state securities laws, the
General Partner will not be able to effect a Series Exchange for the Limited
Partner. Furthermore, certain states may impose significant burdens on, or alter
the requirements for, qualifying units of limited partnership interest for sale
and in such cases, the General Partner may elect not to continue to qualify
units of limited partnership interest for sale in such state or states, and a
resident thereof would not be eligible for a Series Exchange. In the event that
not all Exchange Agreements and Powers of Attorney can be processed because an
insufficient number of units of limited partnership interest are available for
sale on an Exchange Date, the General Partner is hereby authorized to allocate
units of limited partnership interest in any manner which it deems is reasonable
under the circumstances and may allocate a substantial portion of such units of
limited partnership interest to new subscribers for Units.
The General Partner, on behalf of the Partnership and each Partner, is
authorized to execute, file, record, and publish such amendments to this
Agreement and such other documents as shall be necessary to reflect any
Series Exchange pursuant to this Section 10(c).
11. SPECIAL POWER OF ATTORNEY.
Each Limited Partner, by the execution of this Agreement, does irrevocably
constitute and appoint the General Partner, with full power of substitution, as
his true and lawful agent and attorney-in-fact, in his name, place, and stead,
(a) to execute, acknowledge, swear to, deliver, file, and record in his behalf
in the
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<PAGE>
appropriate public offices and publish: (i) this Agreement and the Certificate
of Limited Partnership and amendments thereto; (ii) all instruments that the
General Partner deems necessary or appropriate to reflect any amendment, change,
or modification of this Agreement or the Certificate of Limited Partnership made
in accordance with the terms of this Agreement; (iii) certificates of assumed
name; and (iv) all instruments that the General Partner deems necessary or
appropriate to qualify or maintain the qualification of the Partnership to do
business as a foreign limited partnership in other jurisdictions; and (b) to
admit additional Limited Partners and, to the extent that it is necessary under
the laws of any jurisdiction, to execute, deliver, and file amended certificates
or agreements of limited partnership or other instruments to reflect such
admission. The Power of Attorney granted herein shall be irrevocable and deemed
to be a power coupled with an interest and shall survive the incapacity, death,
dissolution, liquidation, or termination of a Limited Partner. Each Limited
Partner hereby agrees to be bound by any representation made by the General
Partner and by any successor thereto acting in good faith pursuant to such Power
of Attorney. Each Limited Partner agrees to execute a special Power of Attorney
on a document separate from this Agreement. In the event of any conflict between
this Agreement and any instruments filed by such attorney-in-fact pursuant to
the Power of Attorney granted in this Section 11, this Agreement shall control.
12. WITHDRAWAL OF PARTNERS.
The Partnership shall terminate and be dissolved upon the withdrawal,
insolvency, bankruptcy, dissolution, liquidation, or termination of the General
Partner (unless a new general partner(s) is elected pursuant to
Section 15(c) and such remaining general partner(s) shall have elected to
continue the business of the Partnership, which any remaining general partner(s)
shall have the right to do). The General Partner shall not withdraw or assign
all of its interest at any time without giving the Limited Partners 120 days'
prior written notice of its intention to withdraw or assign, and, if the Limited
Partners thereupon elect a new general partner or partners pursuant to
Section 15(c) which elect to continue the business of the Partnership, the
withdrawing General Partner shall pay all reasonable expenses incurred by the
Partnership in connection with such withdrawal. The General Partner shall be
paid the Net Asset Value of its interests in the Partnership as of the date of
such withdrawal.
The death, incompetency, withdrawal, insolvency, bankruptcy, termination,
liquidation, or dissolution of a Limited Partner shall not terminate or dissolve
the Partnership, and such Limited Partner, his estate, custodian, or personal
representative shall have no right to withdraw or value such Limited Partner's
interest in the Partnership except as provided in Section 10. Each Limited
Partner (and any assignee of such Partner's interest) expressly agrees that in
the event of his death, he waives on behalf of himself and his estate and he
directs the legal representative of his estate and any person interested therein
to waive the furnishing of any inventory, accounting, or appraisal of the assets
of the Partnership and any right to an audit or examination of the books of the
Partnership (except to the extent permissible under the sixth paragraph of
Section 8(e)).
13. NO PERSONAL LIABILITY FOR RETURN OF CAPITAL.
Subject to Section 14, neither the General Partner, DWR, nor any Affiliate
thereof shall be personally liable for the return or repayment of all or any
portion of the capital or profits of any Partner (or assignee), it being
expressly agreed that any such return of capital or profits made pursuant to
this Agreement shall be made solely from the assets (which shall not include any
right of contribution from the General Partner) of the Partnership.
14. STANDARD OF LIABILITY; INDEMNIFICATION.
(a) STANDARD OF LIABILITY. The General Partner and its Affiliates shall
not be liable to the Partnership, the Limited Partners, or its or their
successors or assigns, for any act, omission, conduct or activity undertaken by
or on behalf of the Partnership which the General Partner determines, in good
faith, to be in the best interests of the Partnership, unless such act,
omission, conduct, or activity constituted misconduct or negligence.
(b) INDEMNIFICATION BY THE PARTNERSHIP. The Partnership shall indemnify,
defend, and hold harmless the General Partner and its Affiliates from and
against any loss, liability, damage, cost, or expense (including attorneys' and
accountants' fees and expenses incurred in defense of any demands, claims, or
lawsuits) actually and reasonably incurred arising from any act, omission,
activity, or conduct undertaken by or on behalf of the Partnership, including,
without limitation, any demands, claims, or
A-18
<PAGE>
lawsuits initiated by a Limited Partner (or assignee thereof), PROVIDED that
(1) the General Partner has determined, in good faith, that the act, omission,
activity, or conduct giving rise to the claim for indemnification was in the
best interests of the Partnership, and (2) the act, omission, activity, or
conduct that was the basis for such loss, liability, damage, cost, or expense
was not the result of misconduct or negligence. Notwithstanding anything to the
contrary contained in the foregoing, neither the General Partner nor any of its
Affiliates nor any person acting as a broker-dealer shall be indemnified by the
Partnership for any losses, liabilities, or expenses arising from or out of an
alleged violation of federal or state securities laws unless (1) there has been
a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee, or (2) such claims
have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee, or (3) a court of competent
jurisdiction approves a settlement of the claims against the particular
indemnitee and finds that indemnification of the settlement and related costs
should be made, PROVIDED, with regard to such court approval, the indemnitee
must apprise the court of the position of the SEC, and the positions of the
respective securities administrators of Massachusetts, Missouri, Tennessee,
and/or those other states and jurisdictions in which the plaintiffs claim that
they were offered or sold Units, with respect to indemnification for securities
laws violations before seeking court approval for indemnification. Furthermore,
in any action or proceeding brought by a Limited Partner in the right of the
Partnership to which the General Partner or any Affiliate thereof is a party
defendant, any such person shall be indemnified only to the extent and subject
to the conditions specified in the Act and this Section 14(b). The Partnership
shall make advances to the General Partner or its Affiliates hereunder only if:
(1) the demand, claim, lawsuit, or legal action relates to the performance of
duties or services by such persons to the Partnership; (2) such demand, claim,
lawsuit, or legal action is not initiated by a Limited Partner; and (3) such
advances are repaid, with interest at the legal rate under Delaware law, if the
person receiving such advance is ultimately found not to be entitled to
indemnification hereunder.
Nothing contained in this Section 14(b) shall increase the liability of any
Limited Partner to the Partnership beyond the amount of his unredeemed capital
contribution, undistributed profits, if any, and any amounts received on
distributions and redemptions and deemed received on Series Exchanges, together
with interest thereon. All rights to indemnification and payment of attorneys'
and accountants' fees and expenses shall not be affected by the termination of
the Partnership or the withdrawal, insolvency, or dissolution of the General
Partner.
The Partnership shall not incur the cost of that portion of liability
insurance which insures the General Partner and its Affiliates for any liability
as to which the General Partner and its Affiliates are prohibited from being
indemnified.
(c) AFFILIATE. As used in this Agreement, the term "Affiliate" of a person
shall mean: (i) any natural person, partnership, corporation, association, or
other legal entity directly or indirectly owning, controlling, or holding with
power to vote 10% or more of the outstanding voting securities of such person;
(ii) any partnership, corporation, association, or other legal entity 10% or
more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by such person; (iii) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly controlling, controlled by, or under common control with, such
person; or (iv) any officer, director or partner of such person. Notwithstanding
the foregoing, solely for purposes of determining eligibility for
indemnification under Section 14(b), the term "Affiliate" shall include only
those persons performing services for the Partnership.
(d) INDEMNIFICATION BY PARTNERS. In the event that the Partnership is made
a party to any claim, demand, dispute, or litigation or otherwise incurs any
loss, liability, damage, cost, or expense as a result of, or in connection with,
any Partner's (or assignee's) obligations or liabilities unrelated to the
Partnership's business, such Partner (or assignees cumulatively) shall
indemnify, defend, hold harmless and reimburse the Partnership for such loss,
liability, damage, cost and expense to which the Partnership shall become
subject (including attorneys' and accountants' fees and expenses).
15. AMENDMENTS; MEETINGS.
(a) AMENDMENTS WITH CONSENT OF THE GENERAL PARTNER. If, at any time during
the term of the Partnership, the General Partner shall deem it necessary or
desirable to amend this Agreement, such amendment shall be effective only if
embodied in an instrument approved by the General Partner and by Limited
Partners owning more than 50% of the Units then outstanding, and if made in
accordance with,
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<PAGE>
and to the extent permissible under, the Act. Any amendment to this Agreement or
actions taken pursuant to this Section 15 that shall have been approved by the
percentage of outstanding Units prescribed above shall be deemed to have been
approved by all Limited Partners. Notwithstanding the foregoing, the General
Partner shall be authorized to amend this Agreement without the consent of any
Limited Partner in order to: (i) change the name of the Partnership or cause the
Partnership to transact business under another name; (ii) clarify any inaccuracy
or any ambiguity, or reconcile any inconsistent provisions herein; (iii) make
any amendment to this Agreement that is not adverse to the Limited Partners;
(iv) effect the intent of the allocations proposed herein to the maximum extent
possible in the event of a change in the Code or the interpretations thereof
affecting such allocations; (v) attempt to ensure that the Partnership is not
taxed as an association taxable as a corporation for federal income tax
purposes; (vi) qualify or maintain the qualification of the Partnership as a
limited partnership in any jurisdiction; (vii) delete or add any provision of or
to this Agreement required to be deleted or added by the staff of the SEC, the
CFTC, any other federal agency, any state "Blue Sky" official, or other
governmental official, or in order to opt to be governed by any amendment or
successor to the Act, or to comply with applicable law; (viii) make any
modification to this Agreement to reflect the admission of additional or
substitute general partners and to reflect any modification to the Net Worth
requirements applicable to the General Partner and any other general partner, as
contemplated by Section 5 hereof; (ix) make any amendment that is appropriate or
necessary, in the opinion of the General Partner, to prevent the Partnership or
the General Partner or its directors, officers or controlling persons from in
any manner being subject to the provisions of the Investment Company Act of 1940
(the "1940 Act"), the Investment Advisers Act of 1940, as amended (the "ADVISERS
ACT"), or "plan asset" regulations adopted under the Employee Retirement Income
Security Act of 1974, as amended; and (x) to make any amendment that is
appropriate or necessary, in the opinion of the General Partner, to qualify the
Partnership under the 1940 Act, and any persons under the 1940 Act and the
Advisers Act, if the General Partner reasonably believes that doing so is
necessary. Any such supplemental or amendatory agreement shall be adhered to and
have the same force and effect from and after its effective date as if the same
had originally been embodied in, and formed a part of, this Agreement; PROVIDED,
HOWEVER, that no such supplemental or amendatory agreement shall, without the
consent of all Partners affected thereby, change or alter the provisions of this
proviso, reduce the capital account of any Partner, or modify the percentage of
profits, losses or distributions to which any Partner is entitled.
(b) MEETINGS. Any Limited Partner or his authorized attorney or agent,
upon written request to the General Partner, delivered either in person or by
certified mail, and upon payment of reasonable duplicating and postage costs,
shall be entitled to obtain from the General Partner by mail a list of the names
and addresses of record of all Limited Partners and the number of Units owned by
each.
Upon receipt of a written request, signed by Limited Partners owning at
least 10% of the Units then owned by Limited Partners, that a meeting of the
Partnership be called to vote upon any matter upon which all Limited Partners
may vote pursuant to this Agreement, the General Partner, by written notice to
each Limited Partner of record sent by certified mail or delivered in person
within 15 days after such receipt, shall call a meeting of the Partnership. Such
meeting shall be held at least 30 but not more than 60 days after the mailing of
such notice, and such notice shall specify the date, a reasonable place and
time, and the purpose of such meeting.
(c) AMENDMENTS AND ACTIONS WITHOUT CONSENT OF THE GENERAL PARTNER. At any
meeting of the Limited Partners, upon the affirmative vote (which may be in
person or by proxy) of Limited Partners owning more than 50% of the Units then
owned by Limited Partners, the following actions may be taken without the
consent of the General Partner: (i) this Agreement may be amended in accordance
with, and only to the extent permissible under, the Act; PROVIDED, HOWEVER, that
no such amendment shall, without the consent of all Partners affected thereby,
change or alter the provisions of this proviso, reduce the capital account of
any Partner, or modify the percentage of profits, losses, or distributions to
which any Partner is entitled; (ii) the Partnership may be dissolved; (iii) the
General Partner may be removed and replaced; (iv) a new general partner or
general partners may be elected if the General Partner terminates or liquidates
or elects to withdraw from the Partnership pursuant to Section 12, or becomes
insolvent, bankrupt, or is dissolved; (v) any contracts with the General Partner
or any of its Affiliates may be terminated without penalty on not less than 60
days' prior written notice; and (vi) the sale of all or substantially all of the
assets of the Partnership may be approved; PROVIDED, HOWEVER, that no such
action shall adversely affect the status of the Limited Partners as limited
partners under the Act or the classification of the Partnership as a partnership
under the federal income tax laws; and PROVIDED FURTHER,
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<PAGE>
that Units owned by the General Partner and any Affiliate thereof shall not be
voted on the matters described in clauses (iii) and (v) above. Any action which
shall have been approved by the percentage of outstanding Units prescribed above
shall be deemed to have been approved by all Limited Partners.
(d) ACTION WITHOUT MEETING. Notwithstanding contrary provisions of this
Section 15 covering notices to, meetings of, and voting by Limited Partners, any
action required or permitted to be taken by Limited Partners at a meeting or
otherwise may be taken by Limited Partners without a meeting, without prior
notice, and without a vote if a consent in writing setting forth the action so
taken shall be signed by Limited Partners owning Units having not fewer than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting of Limited Partners at which all outstanding Units shall have been
present and voted. Notice of the taking of action by Limited Partners without a
meeting by less than unanimous written consent of the Limited Partners shall be
given to those Limited Partners who shall not have consented in writing within
seven business days after the occurrence thereof.
(e) AMENDMENTS TO CERTIFICATE OF LIMITED PARTNERSHIP. If an amendment to
this Agreement shall be made pursuant to this Section 15, the General Partner
shall be authorized to execute, acknowledge, swear to, deliver, file, record,
and publish, on behalf of the Partnership and each Partner, such amendments to
the Certificate of Limited Partnership as shall be necessary or desirable to
reflect such amendment.
A-21
<PAGE>
16. INDEX OF DEFINED TERMS.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------ -------
<S> <C>
1940 Act.................................................... 15(a)
Act......................................................... 1
Advisers Act................................................ 15(a)
Affiliate................................................... 14(c)
Agreement................................................... Preamble
CEAct....................................................... 8(e)
Certificate of Limited Partnership.......................... 1
CFTC........................................................ 3
Code........................................................ 7(c)(4)
Commodity Broker............................................ 6
Customer Agreement.......................................... 8(b)
Determination Date.......................................... 7(b)
DWR......................................................... 6
Exchange Agreement and Power of Attorney.................... 10(c)
Exchange Date............................................... 10(c)
Futures Interests........................................... 3
General Partner............................................. Preamble
Limited Partners............................................ Preamble
Management Agreement........................................ 8(b)
MSDW........................................................ 6
NASAA Guidelines............................................ 5
Net Asset Value............................................. 7(d)(2)
Net Assets.................................................. 7(d)(1)
NFA......................................................... 6
Non-Series Exchange......................................... 10(b)
Partners.................................................... Preamble
Partnership................................................. 1
Prospectus.................................................. 6
Pyramiding.................................................. 8(c)(5)
Redemption.................................................. 10(b)
Redemption Date............................................. 10(b)
Request for Redemption...................................... 10(b)
SEC......................................................... 5
Selling Agent............................................... 6
Series Exchange............................................. 10(c)
Special Redemption Date..................................... 9
Spectrum Series Partnership(s).............................. 10(b)
Trading Advisor............................................. 6
Trading Profits............................................. 7(e)
Transaction Fees and Costs.................................. 7(e)
Unit(s) of General Partnership Interest..................... 6
Unit(s)..................................................... 6
</TABLE>
17. GOVERNING LAW.
THE VALIDITY AND CONSTRUCTION OF THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF DELAWARE, INCLUDING,
SPECIFICALLY, THE ACT (WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES);
PROVIDED, HOWEVER, THAT CAUSES OF ACTION FOR VIOLATIONS OF FEDERAL OR STATE
SECURITIES LAWS SHALL NOT BE GOVERNED BY THIS SECTION 17.
18. MISCELLANEOUS.
(a) PRIORITY AMONG LIMITED PARTNERS. Except as otherwise specifically set
forth in this Agreement, no Limited Partner shall be entitled to any priority or
preference over any other Limited Partner in regard to the affairs of the
Partnership.
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<PAGE>
(b) NOTICES. All notices and requests to the General Partner under this
Agreement (other than Requests for Redemption, and notices of assignment or
transfer, of Units) shall be in writing and shall be effective upon personal
delivery or, if sent by registered or certified mail, postage prepaid, addressed
to the General Partner at Two World Trade Center, 62nd Floor, New York, New York
10048 (or such other address as the General Partner shall have notified the
Limited Partners), upon the deposit of such notice in the United States mail.
Requests for Redemption, and notices of assignment or transfer of Units shall be
effective upon timely receipt by the General Partner. Except as otherwise
provided herein, all reports and notices hereunder shall be in writing and shall
be sent by first-class mail to the last known address of the Limited Partner.
(c) BINDING EFFECT. This Agreement shall inure to the benefit of, and be
binding upon, all of the parties, their successors, assigns as permitted herein,
custodians, estates, heirs, and personal representatives. For purposes of
determining the rights of any Partner or assignee hereunder, the Partnership and
the General Partner may rely upon the Partnership's records as to who are
Partners and assignees, and all Partners and assignees agree that their rights
shall be determined and that they shall be bound thereby, including all rights
which they may have under Section 15.
(d) CAPTIONS. Captions in no way define, limit, extend, or describe the
scope of this Agreement nor the effect of any of its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
<TABLE>
<S> <C>
Additional Limited Partners: General Partner:
By: Demeter Management Demeter Management Corporation
Corporation, General
Partner, as Authorized
Agent and Attorney-in-Fact
By: ---------------------------------------- By: ---------------------------------------------------
Name: Name:
Title: Title:
</TABLE>
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<PAGE>
ANNEX A TO LIMITED PARTNERSHIP AGREEMENT
MFAD USE ONLY:_______________ CLOSING DATE:_______________
REQUEST FOR REDEMPTION: MORGAN STANLEY DEAN WITTER MANAGED FUTURES FUNDS
THIS IRREVOCABLE REQUEST FOR REDEMPTION SHOULD BE DELIVERED TO A LIMITED
PARTNER'S LOCAL DEAN WITTER BRANCH OFFICE AND MUST BE RECEIVED BY THE GENERAL
PARTNER (DEMETER MANAGEMENT CORPORATION, TWO WORLD TRADE CENTER, 62ND FLOOR, NEW
YORK, N.Y., 10048) AT LEAST 5 BUSINESS DAYS PRIOR TO THE LAST DAY OF THE MONTH
IN WHICH THE REDEMPTION IS TO BE EFFECTIVE. THIS FORM CANNOT BE FAXED.
________________________, 19____ _____________________________________________
[DATE] [PRINT OR TYPE DEAN WITTER ACCOUNT NUMBER]
I hereby request redemption (effective as of the next applicable date as of
which redemption is permitted as set forth in the Limited Partnership Agreement
of the Partnership for which redemption is requested, subject to all terms and
conditions set forth therein) of my capital account in an amount equal to the
respective Net Asset Value, as defined in the Limited Partnership Agreement, of
the following Unit(s) of Limited Partnership Interest ("UNITS"), less any
amounts specified in the Limited Partnership Agreement.
COMPLETE ONLY ONE SECTION -- A, B OR C -- PER FORM
SECTION A
SPECTRUM SERIES SHALL ONLY REDEEM UNITS IN A MINIMUM AMOUNT OF 50 UNITS, UNLESS
A LIMITED PARTNER IS REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH
PARTNERSHIP.
[DWSF] Spectrum Select Entire Interest Units
[DWST] Spectrum Technical Entire Interest Units
[DWSS] Spectrum Strategic Entire Interest Units
[DWSB] Spectrum Global Balanced Entire Interest Units
[DWSX] Spectrum Currency Entire Interest Units
[DWSC] Spectrum Commodity Entire Interest Units
SECTION B
CORNERSTONE FUNDS SHALL ONLY REDEEM $1,000 INCREMENTS OR WHOLE UNITS UNLESS
A LIMITED PARTNER IS REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH
PARTNERSHIP.
[CFCFB] Cornerstone Fund II Entire Interest Units $ ,000
[CFCFC] Cornerstone Fund III Entire Interest Units $ ,000
[CFCFD] Cornerstone Fund IV Entire Interest Units $ ,000
SECTION C
CHARTER SERIES SHALL ONLY REDEEM UNITS IN A MINIMUM AMOUNT OF 100 UNITS, UNLESS
A LIMITED PARTNER IS
REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH PARTNERSHIP.
[MSCG] Charter Graham Entire Interest Units
[MSCM] Charter Millburn Entire Interest Units
[MSCW] Charter Welton Entire Interest Units
SECTION D
OTHER MANAGED FUTURES FUNDS SHALL ONLY REDEEM $1,000 INCREMENTS OR WHOLE UNITS
UNLESS A LIMITED PARTNER IS REDEEMING HIS/HER ENTIRE INTEREST (ALL) IN SUCH
PARTNERSHIP.
MARK ONE FUND ONLY (USE ONE FORM PER FUND):
<TABLE>
<S> <C> <C>
[CFF] Columbia Futures Fund [IAF] International Access Fund Entire Interest
[DFF] Diversified Futures Fund [PGF] Multi-Market Portfolio
[DFF2] Diversified Futures Fund II [PPF] Principal Plus Fund Units
[DFF3] Diversified Futures Fund III [PSF] Portfolio Strategy Fund
[GPP] Global Perspective Portfolio [WCF] World Currency Fund $ ,000
</TABLE>
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<PAGE>
ACCOUNT INFORMATION AND SIGNATURES
I understand that I may only redeem Units at such times as are specified in the
Limited Partnership Agreement and that, under certain circumstances described
therein, I may be subject to a redemption charge.
I (either in my individual capacity or as an authorized representative of an
entity, if applicable) hereby represent and warrant that I am the true, lawful
and beneficial owner of Units (or fractions thereof) to which this Request for
Redemption relates, with full power and authority to request redemption. The
Units (or fractions thereof) which are the subject of this request are not
subject to any pledge or otherwise encumbered in any fashion. My signature has
been represented by a member of a registered national securities exchange.
SIGNATURES MUST BE IDENTICAL TO NAME(S) IN WHICH UNITS ARE REGISTERED
TYPE OR PRINT ALL INFORMATION BELOW
- --------------------------------------------------------------------------------
1. ACCOUNT INFORMATION
- --------------------------------------------------------------------------------
..................................... ....................................
(Name of Limited Partner) (Dean Witter Account Number)
Address: .......................................................................
(Street)
...............................................................................
City State (Province) (Zip Code or Postal Code)
- --------------------------------------------------------------------------------
2.A. SIGNATURE(S) OF INDIVIDUAL PARTNER(S) OR ASSIGNEE(S) INCLUDING IRAS
- --------------------------------------------------------------------------------
X .................................... ....................................
(Signature) (Date)
X .................................... ....................................
(Signature) (Date)
- --------------------------------------------------------------------------------
2.B. SIGNATURE OF ENTITY PARTNER OR ASSIGNEE
- --------------------------------------------------------------------------------
.................................. By: X ..................................
(Name of Entity) (Authorized officer, partner, trustee, or
custodian. If a corporation,
include certified copy of
authorized resolution.)
- --------------------------------------------------------------------------------
3. BRANCH MANAGER AND ACCOUNT EXECUTIVE USE ONLY
- --------------------------------------------------------------------------------
We, the undersigned Account Executive and Branch Manager, represent that the
above signature(s) is/are true and correct.
X .................................... X ...................................
(Account Executive MUST sign) (Branch Manager MUST sign)
........................................
(Branch Telephone Number) Please enter a SELL order upon receipt of a
completed Request for Redemption.
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<PAGE>
EXHIBIT B
SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
UNITS OF LIMITED PARTNERSHIP INTEREST SUBSCRIPTION AND EXCHANGE INSTRUCTIONS
If you wish to purchase Units of one or more of the Morgan Stanley Dean
Witter Spectrum Series Partnerships, please follow the instructions below.
Instructions relating to "Cash Subscribers" should be followed only if you are
purchasing Units for cash. Instructions relating to "Exchange Subscribers"
should be followed only if you are redeeming units in another commodity pool
which the General Partner serves as the general partner and commodity pool
operator in a Non-Series Exchange, or you are redeeming Units in a Morgan
Stanley Dean Witter Spectrum Series Partnership pursuant to a Series Exchange.
SUBSCRIPTION INSTRUCTIONS
YOU SHOULD CAREFULLY READ AND REVIEW THE MORGAN STANLEY DEAN WITTER SPECTRUM
SERIES PROSPECTUS DATED - , 1999 (THE "PROSPECTUS") AND THIS SUBSCRIPTION AND
EXCHANGE AGREEMENT AND POWER OF ATTORNEY ("AGREEMENT"). IN READING THE
PROSPECTUS, PAY PARTICULAR ATTENTION TO THE MATTERS DISCUSSED UNDER "RISK
FACTORS," "CONFLICTS OF INTEREST" AND "DESCRIPTION OF CHARGES." BY SIGNING THE
AGREEMENT, YOU WILL BE DEEMED TO MAKE EACH APPLICABLE REPRESENTATION AND
WARRANTY, AND SATISFY ANY APPLICABLE SPECIAL STATE SUITABILITY REQUIREMENT, SET
FORTH IN THIS AGREEMENT ON PAGES B-2-B-4, SO PLEASE MAKE SURE THAT YOU SATISFY
ALL APPLICABLE PROVISIONS IN THOSE SECTIONS BEFORE SIGNING THIS AGREEMENT.
CASH SUBSCRIBERS MUST FILL IN ALL OF THE BOXES AND BLANKS ONLY ON PAGES B-7
AND B-8, AND EXCHANGE SUBSCRIBERS MUST FILL IN ALL OF THE BOXES AND BLANKS ONLY
ON PAGES B-9 AND B-10, USING BLACK INK, AS FOLLOWS:
<TABLE>
<S> <C>
Item 1 FOR CASH SUBSCRIBERS --Enter your Dean Witter Reynolds Inc. ("DWR") Account
(pages B-7--B-8) and Exchange Number.
Subscribers (pages B-9-B-10)
--Enter your Social Security Number or Taxpayer ID Number.
If you are subscribing on behalf of an entity (such as a
trust, partnership or corporation), check the
appropriate box to indicate the type of entity. If the
Units are to be owned by joint tenants, either person's
Social Security Number may be used.
--If you are subject to taxation in the United States,
review the representation relating to backup withholding
tax, and enter your taxable year, if other than calendar
year, under "United States Taxable Investors Only" on
page B-7 (for Cash Subscribers) or page B-9 (for
Exchange Subscribers). If you are a non-United States
person, review the representation relating to your
classification as a non-resident alien for United States
federal income tax purposes under "Non-United States
Investors Only" on page B-7 (for Cash Subscribers) or
page B-9 (for Exchange Subscribers). YOU MUST SIGN BELOW
THE APPLICABLE TAX REPRESENTATION IN ITEM 1 ON PAGE
B-7 OR B-9.
--Enter the exact name in which your Units are to be held
based on ownership type, and enter residency and other
information.
--Check box if you are a non-resident alien that is a dealer
in commodities or is otherwise engaged in a trade or
business within the U.S.
--If there is a co-subscriber, trustee or custodian,
complete applicable information.
Item 1 FOR CASH SUBSCRIBERS (PAGE B-7) --Enter the dollar amount of the subscription for each
Partnership whose Units you wish to purchase.
Item 1 FOR EXCHANGE --Enter the symbol(s) of the limited partnership(s) from
SUBSCRIBERS (PAGE B-9) which you are redeeming units; specify the quantity to
be redeemed (entire interest or number of whole units).
Item 2 FOR CASH SUBSCRIBERS (PAGE B-8) --You must execute the Agreement Signature Page on page B-8
AND EXCHANGE SUBSCRIBERS (for Cash Subscribers) or page B-10 (for Exchange
(PAGE B-10) Subscribers).
Item 3 FOR CASH SUBSCRIBERS (PAGE B-8) --An MSDW Financial Advisor and Branch Manager must complete
AND EXCHANGE SUBSCRIBERS the required information.
(PAGE B-10)
</TABLE>
MSDW Financial Advisor: This Agreement must be mailed to Demeter Management
Corporation at Two World Trade Center, 62nd Floor, New York, New York
10048-0026.
B-1
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
---------------------
SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY
If you are subscribing for Units of Limited Partnership Interest ("Units")
in the Morgan Stanley Dean Witter Spectrum Series, consisting of six commodity
pool limited partnerships, Morgan Stanley Dean Witter Spectrum Select L.P.,
Morgan Stanley Dean Witter Spectrum Technical L.P., Morgan Stanley Dean Witter
Spectrum Strategic L.P., Morgan Stanley Dean Witter Spectrum Global
Balanced L.P., Morgan Stanley Dean Witter Spectrum Currency L.P., and Morgan
Stanley Dean Witter Spectrum Commodity L.P. (each, a "Partnership," and
collectively, the "Partnerships"), you should carefully read and review the
Partnerships' Prospectus dated - , 1999 (the "Prospectus"). Capitalized terms
used below and not defined in this Subscription and Exchange Agreement and Power
of Attorney ("Agreement") are defined (and described in detail) in the
Prospectus.
FOR CASH SUBSCRIBERS: By executing the Cash Subscription Signature Page of
this Agreement, you will irrevocably subscribe for Units in one or more of the
Partnerships at the price per Unit described in the Prospectus.
FOR EXCHANGE SUBSCRIBERS: By executing the Exchange Subscription Signature
Page of this Agreement, you will irrevocably redeem the units of limited
partnership interest of each limited partnership indicated on the signature
page of this Agreement and, with the proceeds of that redemption, irrevocably
subscribe for Units in one or more of the Partnerships at the price per Unit
described in the Prospectus.
NOTWITHSTANDING THE FOREGOING, YOU MAY REVOKE THIS AGREEMENT, AND RECEIVE A
FULL REFUND OF THE SUBSCRIPTION AMOUNT YOU PAID, PLUS ANY ACCRUED INTEREST
THEREON (OR REVOKE THE REDEMPTION OF UNITS IN THE OTHER LIMITED PARTNERSHIP IN
THE CASE OF AN EXCHANGE), WITHIN FIVE BUSINESS DAYS AFTER EXECUTION OF THIS
AGREEMENT OR NO LATER THAN 3:00 P.M., NEW YORK CITY TIME, ON THE DATE OF THE
APPLICABLE MONTHLY CLOSING, WHICHEVER COMES FIRST, BY DELIVERING WRITTEN NOTICE
TO YOUR MSDW FINANCIAL ADVISOR. If this Agreement is accepted, you agree to:
(i) contribute your subscription to each Partnership designated on the Signature
Page of this Agreement; and (ii) be bound by the terms of each such
Partnership's Amended and Restated Limited Partnership Agreement, included as
Exhibit A to the Prospectus (the "Limited Partnership Agreement"). BY EXECUTING
THE SIGNATURE PAGE OF THIS AGREEMENT, YOU SHALL BE DEEMED TO HAVE EXECUTED THIS
AGREEMENT AND THE LIMITED PARTNERSHIP AGREEMENT (INCLUDING THE POWERS OF
ATTORNEY IN BOTH AGREEMENTS).
- --------------------------------------------------------------------------------
PAYMENT INSTRUCTIONS
- --------------------------------------------------------------------------------
FOR CASH SUBSCRIBERS: You must pay your subscription amount by charging
your Customer Account with DWR (the "Customer Account"). In the event that you
do not have a Customer Account or do not have sufficient funds in your existing
Customer Account, you must make appropriate arrangements with your
MSDW financial advisor. If you don't have a financial advisor, contact your
local MSDW branch office. Payment must NOT be mailed to the General Partner at
its offices in New York City. Any such payment will not be accepted by the
General Partner and will be returned to you for proper placement with the
MSDW branch office where your Customer Account is maintained. By executing the
Signature Page of this Agreement, you authorize and direct the General Partner
and DWR to transfer the appropriate amount from your Customer Account to the
Escrow Account.
FOR EXCHANGE SUBSCRIBERS: You must pay your subscription amount by applying
the proceeds from the redemption of your limited partnership units in one of the
Partnerships or another commodity pool which the General Partner serves as the
general partner and commodity pool operator. You may only redeem units at such
times as are specified in the limited partnership agreement for that commodity
pool, and under certain circumstances described in the agreement you may be
subject to a redemption charge.
- --------------------------------------------------------------------------------
REPRESENTATIONS AND WARRANTIES
- --------------------------------------------------------------------------------
By executing the Signature Page of this Agreement, you (for yourself and any
co-subscriber, and, if you are signing on behalf of an entity, on behalf of and
with respect to that entity and its shareholders, partners, beneficiaries or
members), represent and warrant to the General Partner and each Partnership
whose Units you are purchasing, as follows (AS USED BELOW, THE TERMS "YOU" AND
"YOUR" REFER TO YOU AND YOUR CO-SUBSCRIBER, IF ANY, OR IF YOU ARE SIGNING ON
BEHALF OF AN ENTITY, THAT ENTITY):
(1) You have received a copy of the Prospectus, including each Limited
Partnership Agreement.
(2) You are of legal age to execute this Agreement and are legally
competent to do so.
(3) You satisfy the applicable financial suitability and minimum
investment requirements, as set forth below under the caption "State
Suitability Requirements" (or in the special Supplement to the Prospectus
for residents
B-2
<PAGE>
of the State in which you reside). You agree to provide any additional
documentation requested by the General Partner, as may be required by the
securities administrators of certain states, to confirm that you meet the
applicable minimum financial suitability standards to invest in the
Partnerships.
(4) The address set forth on the Signature Page is your true and correct
residence and you have no present intention of becoming a resident of any
other state or country. All the information that you have provided on the
Signature Page is correct and complete as of the date of this Agreement,
and, if there should be any material change in such information prior to
your admission as a Limited Partner, you will immediately furnish such
revised or corrected information to the General Partner.
(5) If you are representing an employee benefit plan, to the best of
your knowledge, neither the General Partner, DWR, any Additional Seller, any
Trading Advisor, nor any of their respective affiliates: (a) has investment
discretion with respect to the investment of your plan assets; (b) has
authority or responsibility to or regularly gives investment advice with
respect to such plan assets for a fee and pursuant to an agreement or
understanding that such advice (i) will serve as a primary basis for
investment decisions with respect to such plan assets and (ii) will be based
on the particular investment needs of the plan; or (c) is an employer
maintaining or contributing to that plan. For purposes of this
representation (5), an "employee benefit plan" includes plans and accounts
of various types (including their related trusts) which provide for the
accumulation of a portion of an individual's earnings or compensation, as
well as investment income earned thereon, free from federal income tax until
such time as funds are distributed from the plan, and include corporate
"pension" and profit-sharing plans, "simplified employee pension plans,"
"Keogh" plans for self-employed individuals, and individual retirement
accounts ("IRAs").
(6) Unless representation (7) or (8) below is applicable, your
subscription is made with your funds for your own account and not as
trustee, custodian or nominee for another.
(7) If you are subscribing as custodian for a minor, either (a) the
subscription is a gift you have made to that minor and is not made with that
minor's funds, in which case the representations as to net worth and annual
income below apply only to you, as the custodian; or (b) if the subscription
is not a gift, the representations as to net worth and annual income below
apply only to that minor.
(8) If you are subscribing as a trustee or custodian of an employee
benefit plan or of an IRA at the direction of the beneficiary of that plan
or IRA, the representations herein apply only to the beneficiary of that
plan or IRA.
(9) If you are subscribing in a representative capacity, you have full
power and authority to purchase Units and enter into and be bound by this
Agreement on behalf of the entity for which you are purchasing the Units,
and that entity has full right and power to purchase the Units and enter
into and be bound by this Agreement and become a Limited Partner pursuant to
each applicable Limited Partnership Agreement.
(10) You either: (a) are not required to be registered with the
Commodity Futures Trading Commission ("CFTC") or to be a member of the
National Futures Association ("NFA"); or (b), if so required, you are duly
registered with the CFTC and are a member in good standing of the NFA. It is
an NFA requirement that the General Partner attempt to verify that any
person or entity that seeks to purchase Units be duly registered with the
CFTC and a member of the NFA, if required. You agree to supply the General
Partner with such information as the General Partner may reasonably request
in order to attempt such verification. Certain entities that acquire Units
may, as a result, themselves become "commodity pools" within the intent of
applicable CFTC and NFA rules, and their sponsors, accordingly, may be
required to register as "commodity pool operators."
ADDITIONAL REPRESENTATION AND WARRANTY FOR EXCHANGE SUBSCRIBERS:
(11) You are the true, lawful, and beneficial owner of the units of
limited partnership interest (or fractions thereof) to be redeemed pursuant
to this Agreement, with full power and authority to request redemption and a
subsequent purchase of Units. The units of limited partnership interest (or
fractions thereof) which you are redeeming are not subject to any pledge or
are otherwise encumbered in any fashion.
By making the representations and warranties set forth above, you should be
aware that you have not waived any rights of action which you may have under
applicable federal or state securities laws. Federal and state securities laws
provide that any such waiver would be unenforceable. You should be aware,
however, that the representations and warranties set forth above may be asserted
in the defense of a Partnership, the General Partner, DWR, MS & Co., any
Additional Seller, any Trading Advisor, CFI, MSIL, or others in any subsequent
litigation or other proceeding.
B-3
<PAGE>
- --------------------------------------------------------------------------------
STATE SUITABILITY REQUIREMENTS
- --------------------------------------------------------------------------------
Except as indicated below, you must have a net worth (exclusive of home,
furnishings, and automobiles) of at least $75,000 or, failing that standard,
have both a net worth (same exclusions) of at least $30,000 and an annual gross
income of at least $30,000. If you are subscribing with your spouse as joint
owners, you may count your joint net worth and joint income in satisfying these
requirements, as well as the special requirements described below. You must also
make a minimum aggregate investment of $5,000 or $2,000 in the case of IRAs or,
in the case of a Non-Series Exchange, the lesser of (i) $5,000 ($2,000 in the
case of an IRA); (ii) the proceeds from the redemption of five units (two units
in the case of an IRA) from commodity pools other than any of the Morgan Stanley
Dean Witter Charter Series of partnerships (each, a "Charter Partnership");
(iii) the proceeds from the redemption of 500 units (200 units in the case of an
IRA) from any Charter Partnership; or (iv) the proceeds from the redemption of
your entire interest in any other commodity pool which the General Partner
serves as general partner and commodity pool operator. However, the states
listed below (or, in certain cases, in special Supplements to the Prospectus
attached thereto) have more restrictive suitability or minimum investment
requirements for their residents. Please read the following list to make sure
that you meet the minimum suitability and/or investment requirements for the
state in which you reside. (As used below, "NW" means net worth exclusive of
home, furnishings, and automobiles; "AI" means annual gross income; and "TI"
means annual taxable income for federal income tax purposes.)
<TABLE>
<S> <C>
ALABAMA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
ARIZONA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
ARKANSAS: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
CALIFORNIA: $100,000 NW and $50,000 AI.
INDIANA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
IOWA: (1) The minimum initial investment for IRAs is $3,000; and
(2) the Subscriber has at least (a) $225,000 NW, or
(b) $60,000 NW and $60,000 TI.
KANSAS: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
KENTUCKY: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
MAINE: (a) $200,000 NW, or (b) $50,000 NW and $50,000 AI.
MASSACHUSETTS: (a) $225,000 NW, or (b) $60,000 NW and $60,000 AI.
MICHIGAN: (a) $225,000 NW and investment may not exceed 10% of NW, or
(b) $60,000 NW and $60,000 AI and investment may not exceed
10% of NW.
MISSISSIPPI: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
MISSOURI: (a) $225,000 NW, or (b) $60,000 NW and $60,000 AI.
NEBRASKA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
NEW HAMPSHIRE: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
NEW MEXICO: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
NORTH CAROLINA: (a) $225,000 NW, or (b) $60,000 NW and $60,000 AI.
OHIO: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
OKLAHOMA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
OREGON: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
PENNSYLVANIA: (1) (a) $175,000 NW, or (b) $100,000 NW and $50,000 TI; and
(2) if Subscriber has less than $1,000,000 NW, the
investment may not exceed 10% of NW.
SOUTH DAKOTA: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
TENNESSEE: (a) $225,000 NW, or (b) $60,000 NW and $60,000 AI.
TEXAS: (a) $225,000 NW, or (b) $60,000 NW and $60,000 TI.
VERMONT: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
WASHINGTON: (a) $150,000 NW, or (b) $45,000 NW and $45,000 AI.
</TABLE>
- --------------------------------------------------------------------------------
ACCEPTANCE OF THE LIMITED PARTNERSHIP AGREEMENTS
- --------------------------------------------------------------------------------
You agree that as of the date that your name is entered on the books of a
Partnership, you shall become a Limited Partner of that Partnership. You also
agree to each and every term of the Limited Partnership Agreement of that
Partnership as if you signed that Agreement. You further agree that you will not
be issued a certificate evidencing the Units that you are purchasing, but that
you will receive a confirmation of purchase in DWR's customary form.
B-4
<PAGE>
- --------------------------------------------------------------------------------
POWER OF ATTORNEY AND GOVERNING LAW
- --------------------------------------------------------------------------------
You hereby irrevocably constitute and appoint Demeter Management
Corporation, the General Partner of each Partnership, as your true and lawful
Attorney-in-Fact, with full power of substitution, in your name, place, and
stead: (1) to do all things necessary to admit you as a Limited Partner of each
Partnership requested below, and such other Partnership(s) of the Dean Witter
Spectrum Series as you may request from time to time; (2) to admit others as
additional or substituted Limited Partners to such Partnership(s) so long as
such admission is in accordance with the terms of the applicable Limited
Partnership Agreement or any amendment thereto; (3) to file, prosecute, defend,
settle, or compromise any and all actions at law or suits in equity for or on
behalf of each Partnership in connection with any claim, demand, or liability
asserted or threatened by or against any Partnership; and (4) to execute,
acknowledge, swear to, deliver, file, and record on your behalf and as necessary
in the appropriate public offices, and publish: (a) each Limited Partnership
Agreement and each Certificate of Limited Partnership and all amendments thereto
permitted by the terms thereof; (b) all instruments that the General Partner
deems necessary or appropriate to reflect any amendment, change, or modification
of any Limited Partnership Agreement or any Certificate of Limited Partnership
made in accordance with the terms of such Limited Partnership Agreement;
(c) certificates of assumed name; and (d) all instruments that the General
Partner deems necessary or appropriate to qualify or maintain the qualification
of each Partnership to do business as a foreign limited partnership in other
jurisdictions. You agree to be bound by any representation made by the General
Partner or any successor thereto acting in good faith pursuant to this Power of
Attorney.
The Power of Attorney granted hereby shall be deemed to be coupled with an
interest and shall be irrevocable and survive your death, incapacity,
dissolution, liquidation, or termination.
THIS SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY SHALL BE
GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT BE DEEMED A WAIVER OF ANY
RIGHTS OF ACTION YOU MAY HAVE UNDER APPLICABLE FEDERAL OR STATE SECURITIES LAW.
- --------------------------------------------------------------------------------
RECEIPT OF DOCUMENTATION
- --------------------------------------------------------------------------------
The regulations of the CFTC require that you be given a copy of the
Prospectus (which includes the most current annual report for each of the
Partnerships, other than Spectrum Currency and Spectrum Commodity), as well as
certain additional documentation consisting of: (a) a supplement to the
Prospectus, which must be given to you if the Prospectus is dated more than nine
months prior to the date that you first received the Prospectus, and (b) the
most current monthly account statement (report) for the Partnerships. You hereby
acknowledge receipt of the Prospectus and the additional documentation referred
to above, if any.
B-5
<PAGE>
(This page has been left blank intentionally.)
B-6
<PAGE>
-
---
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
UNITS OF LIMITED PARTNERSHIP INTEREST
CASH SUBSCRIPTION SIGNATURE PAGE
A
PLEASE PRINT OR TYPE. USE BLACK INK ONLY.
PAGES B-7 AND B-8, THE CASH SUBSCRIPTION SIGNATURE PAGES, SHOULD BE
DELIVERED TO THE LOCAL DEAN WITTER BRANCH OFFICE AND MUST BE RECEIVED BY THE
GENERAL PARTNER AT TWO WORLD TRADE CENTER, 62ND FLOOR, NEW YORK, NEW YORK
10048-0026, AT LEAST FIVE BUSINESS DAYS PRIOR TO THE APPLICABLE MONTHLY CLOSING.
By execution and delivery of this Cash Subscription Signature Page and by
payment of the purchase price for Units of Limited Partnership Interest
("Units") in one or more Partnerships in the Morgan Stanley Dean Witter Spectrum
Series (the "Partnerships"), you hereby subscribe for Units in the
Partnership(s) specified below at a price equal to 100% of the Net Asset Value
per Unit of the applicable Partnership(s) as of the close of business on the
date of the applicable Monthly Closing ($10 per Unit of Spectrum Currency at its
Initial Closing).
BY SUCH EXECUTION AND PAYMENT, YOU ACKNOWLEDGE RECEIPT OF THE PROSPECTUS OF
THE PARTNERSHIPS DATED - , 1999, INCLUDING THE LIMITED PARTNERSHIP AGREEMENT
AND THIS SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY, THE TERMS OF
WHICH GOVERN THE INVESTMENT IN THE UNITS BEING SUBSCRIBED FOR BY YOU, AND THE
CURRENT MONTHLY REPORT FOR THE PARTNERSHIPS.
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
ITEM 1 -- SUBSCRIBER (YOU MUST SIGN THE TAX REPRESENTATION BELOW)
- ----------------------------------------------------------------------------------------------------------------------
SPECTRUM FUND SYMBOL AMOUNT OF SUBSCRIPTION
/ // // //--/ / // // // // // / MORGAN STANLEY DEAN WITTER SPECTRUM
D W S F SELECT L.P. $
DWR ACCOUNT NO.
MORGAN STANLEY DEAN WITTER SPECTRUM
D W S T TECHNICAL L.P. $
/ // // /-/ // /-/ // // // / MORGAN STANLEY DEAN WITTER SPECTRUM
D W S S STRATEGIC L.P. $
SOCIAL SECURITY NUMBER MORGAN STANLEY DEAN WITTER SPECTRUM
OR D W S B GLOBAL BALANCED L.P. $
/ // /-/ // // // // // // / MORGAN STANLEY DEAN WITTER SPECTRUM
TAXPAYER ID NUMBER D W S X CURRENCY L.P. $
MORGAN STANLEY DEAN WITTER SPECTRUM
D W S C COMMODITY L.P. $
</TABLE>
CHECK THE BOX BELOW WHICH DESCRIBES THE CAPACITY IN WHICH YOU ARE INVESTING:
<TABLE>
<S> <C> <C>
/ / Individual Ownership / / Trust other than Grantor or / / IRA (the DWR Branch Manager must
/ / Joint Tenants with Rights of Revocable Trust sign below for IRA accounts)
Survivorship / / Estate / / Employee Benefit Plan (Participant-
/ / Tenants in Common / / UGMA/UTMA (Minor) Directed)
/ / Community Property / / Partnership / / Defined Benefit Plan (Other)
/ / Grantor or other Revocable Trust / / Corporation / / Other (specify) ------------------
</TABLE>
YOU (OR BRANCH MANAGER IN THE CASE OF AN IRA) MUST SIGN BELOW:
<TABLE>
<CAPTION>
UNITED STATES TAXABLE INVESTORS ONLY: NON-UNITED STATES INVESTORS ONLY:
- ------------------------------------- ---------------------------------
<S> <C> <C> <C>
/ / Check box if you are is subject to backup withholding under the Under penalties of perjury, by signature
provisions of Section 3406(a)(1)(C) of the Internal Revenue Code. OR below, you certify that you are NOT
If your taxable year is other than the calendar year, indicate the date on (a) a citizen or resident of the United
which your taxable year ends: / // /-/ // / MM-DD States; or
Under penalties of perjury, by signing below, I certify that the Social (b) a United States corporation,
Security Number (or Taxpayer ID Number) above to be the true, correct and partnership, estate or trust.
complete Social Security Number (or Taxpayer ID Number) and that all the
information above is true, correct and complete.
</TABLE>
X _______________________________ __________________________
(Your Signature (Indicate your title, if applicable) [or Date
Branch Manager in the case of IRAs])
If you are an Entity: Type or Print Name of Entity: .....................
Name: ............... . ............... Date: ...............
Title: ......................................................
Full Name of Account ..........................................................
(Your Name or Name of Trust or Custodial Account--do
not use initials)
<TABLE>
<S> <C> <C> <C>
You are a resident of .................... and a citizen of ....................
(name of country) (name of country)
</TABLE>
Street Address ................................................................
(MUST be residence address--P.O. Box alone not acceptable)
City ......... State ......... Zip Code ......... Tel. No. ( ........ ) ........
/ / Check here if you are a non-resident alien individual, foreign corporation,
foreign partnership, foreign trust or foreign estate that is a dealer in
commodities or otherwise engaged in a trade or business within the U.S.A. to
which income, gain or loss from a Partnership would be treated as effectively
connected. (You must complete Form W-8, which may be obtained from an MSDW
Financial Advisor.)
B-7
----
-
<PAGE>
-
----
COMPLETE, IF APPLICABLE (MUST BE COMPLETED IF THERE IS A CO-SUBSCRIBER, TRUSTEE
OR CUSTODIAN):
Name .................. Telephone Number ( ................. ) .................
The person or entity above is a/an: (check one)
/ / Co-Subscriber / / Trustee or Custodian / / Authorized Person, if an
Institutional Trustee
Street Address (P.O. Box alone not acceptable) .................................
<TABLE>
<S> <C>
City ................................................... State .................... Zip Code ...................
Co-Subscriber, Trustee or Custodian is a resident of ... and a citizen of .......................................
Minor (if not a gift) is a resident of ................. and a citizen of .......................................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 2 -- SIGNATURE(S) -- YOU MUST SIGN UNDER TAX REPRESENTATION ON PRECEDING
PAGE AND BELOW
- --------------------------------------------------------------------------------
(INDIVIDUAL OR JOINT SUBSCRIPTION, INCLUDING PARTICIPANT-DIRECTED EMPLOYEE
BENEFIT PLAN OR IRA SUBSCRIPTION)
If you are subscribing for a joint or community property account, the
statements, representations, and warranties set forth in this Subscription and
Exchange Agreement and Power of Attorney shall be deemed to have been made by
each owner of the account.
* If the Units will be owned by joint owners, tenants in common, or as
community property, signatures of all owners are required.
* In the case of a participant-directed employee benefit plan or IRA, the
beneficiary must sign immediately below and the trustee or custodian must
sign below under "Entity Subscription."
<TABLE>
<S> <C>
X ________________________________ _____________ X ________________________________ _____________
(Signature of Subscriber) Date (Signature of Co-Subscriber) Date
</TABLE>
(ENTITY SUBSCRIPTION)
ACCEPTANCE OF SUBSCRIPTION ON BEHALF OF EMPLOYEE BENEFIT PLANS (INCLUDING IRAS)
IS IN NO RESPECT A REPRESENTATION BY THE GENERAL PARTNER OR DWR THAT THIS
INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR
PLAN.
The undersigned officer, partner, trustee, manager or other representative
hereby certifies and warrants that: (a) s/he has full power and authority from
or on behalf of the entity named below and its shareholders, partners,
beneficiaries, or members to complete, execute, and deliver this Subscription
and Exchange Agreement and Power of Attorney on their behalf and to make the
statements, representations, and warranties made herein on their behalf; and (b)
the investment in each Partnership specified is authorized under applicable law
and the governing documents of the entity, has been affirmatively authorized by
the governing board or body, if any, of the entity, and is legally permissible.
<TABLE>
<S> <C> <C>
.......................................................... X ....................................... ............
(Type or Print Name of Entity) (Signature) Date
Print Name ................................................ Title ..................................................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 3 -- BRANCH MANAGER AND FINANCIAL ADVISOR USE ONLY (COMPLETE IN FULL AND IN
INK)
- --------------------------------------------------------------------------------
THE UNDERSIGNED FINANCIAL ADVISOR HEREBY CERTIFIES THAT:
(1) the above signature(s) is/are true and correct;
(2) s/he has informed the Subscriber about the liquidity and marketability of
the Units as set forth in the Prospectus.
(3) based on information obtained from the Subscriber concerning the
Subscriber's investment objectives, other investments, financial situation,
needs and any other relevant information, that s/he reasonably believes
that:
(a) such Subscriber is or will be in a financial position appropriate to
enable such Subscriber to realize the benefits of each Partnership
specified, as described in the Prospectus;
(b) such Subscriber has a net worth sufficient to sustain the risk inherent
in each Partnership specified (including loss of investment and lack of
liquidity); and
(c) each Partnership specified is otherwise a suitable investment for such
Subscriber; and
(4) the Subscriber received the Prospectus at least five business days prior to
the applicable Closing.
THE FINANCIAL ADVISOR MUST SIGN BELOW IN ORDER TO SUBSTANTIATE COMPLIANCE WITH
NASD CONDUCT RULE 2810.
X ______________________________________________________________________________
Financial Advisor's Signature
...............................................................................
Type or Print Full Name of Financial Advisor
Telephone Number ( ............................. ) ............................
THE UNDERSIGNED BRANCH MANAGER HEREBY CERTIFIES THAT:
(1) the above signature(s) is/are true and correct.
(2) the above client(s) is/are suitable.
X _____________________________________________________________________________,
Branch Manager's Signature
...............................................................................
Type or Print Full Name of Branch Manager
B-8
----
-
<PAGE>
-
---
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
EXCHANGE SUBSCRIPTION SIGNATURE PAGE
B
PLEASE PRINT OR TYPE. USE BLACK INK ONLY.
PAGES B-9 AND B-10, THE EXCHANGE SUBSCRIPTION SIGNATURE PAGES, SHOULD BE
DELIVERED TO THE LOCAL MSDW BRANCH OFFICE AND MUST BE RECEIVED BY THE GENERAL
PARTNER AT TWO WORLD TRADE CENTER, 62ND FLOOR, NEW YORK, NEW YORK 10048-0026, AT
LEAST FIVE BUSINESS DAYS PRIOR TO THE APPLICABLE MONTHLY CLOSING.
By execution and delivery of this Signature Page, you hereby redeem the
units of limited partnership interest of the limited partnership(s) named in
Item 1 below and, by application of the proceeds of such redemption to the
payment of the purchase price for Units of Limited Partnership Interest
("Units") in one or more Partnerships in the Morgan Stanley Dean Witter Spectrum
Series (the "Partnerships"), you hereby subscribe for Units in the
Partnership(s) specified below at a price equal to 100% of the Net Asset Value
per Unit of the applicable Partnership(s) as of the close of business on the
date of the applicable Monthly Closing ($10 per Unit of Spectrum Currency at its
Initial Closing). Redemption of units of any partnership for an exchange must be
in whole units, unless you are redeeming your entire interest in such
partnership.
BY SUCH EXECUTION AND PAYMENT, YOU ACKNOWLEDGE RECEIPT OF THE PROSPECTUS OF
THE PARTNERSHIPS DATED - , 1999, INCLUDING THE LIMITED PARTNERSHIP AGREEMENT
AND THIS SUBSCRIPTION AND EXCHANGE AGREEMENT AND POWER OF ATTORNEY, THE TERMS OF
WHICH GOVERN THE INVESTMENT IN THE UNITS BEING SUBSCRIBED FOR BY YOU, AND THE
CURRENT MONTHLY REPORT FOR THE PARTNERSHIPS.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
ITEM 1 -- SUBSCRIBER (YOU MUST SIGN THE TAX REPRESENTATION BELOW )
- --------------------------------------------------------------------------------------------------------------------------
DWR ACCOUNT NO. / // // /-/ // // // // // / / // // /-/ // /-/ // // // / or / // /-/ // // // // // // /
SOCIAL SECURITY NUMBER TAXPAYER ID NUMBER
SYMBOL(S) FOR FUND(S) FROM SPECIFY QUANTITY OF UNITS TO BE REDEEMED SPECTRUM SERIES
WHICH UNITS TO BE REDEEMED (CHECK BOX IF ENTIRE INTEREST; INSERT NUMBER IF WHOLE UNITS) FUND SYMBOL
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
/ // // // // / / / Entire Interest OR Whole Units TO / // // // // /
You hereby authorize Demeter Management Corporation to redeem the quantity of units of limited partnership interest set
forth opposite the symbol for each partnership identified on the left above at the "Net Asset Value" thereof, as defined
in the limited partnership agreement of each such partnership, less any redemption charges, and to utilize the net
proceeds of that redemption to purchase Units in the applicable Spectrum Series Partnership as indicated on the right
above. Redemptions for an exchange may only be made in whole units of limited partnership interest, with a minimum
redemption of the lesser of (i) 5 units (2 units in the case of an IRA) from any partnership other than the Spectrum
Series Partnerships or any Morgan Stanley Dean Witter Charter Series partnership (each, a "Charter Partnership"); (ii) 50
Units from any Spectrum Series Partnership; (iii) 500 units (200 units in the case of an IRA) from a Charter Partnership;
or (iv) the Subscriber's entire interest in any partnership.
</TABLE>
<TABLE>
<S> <C> <C>
CHECK THE BOX BELOW WHICH DESCRIBES THE CAPACITY IN WHICH YOU ARE INVESTING:
/ / Individual Ownership / / Trust other than Grantor or / / IRA (the DWR Branch Manager must sign
/ / Joint Tenants with Rights of Revocable Trust below for IRA accounts)
Survivorship / / Estate / / Employee Benefit Plan (Participant-
/ / Tenants in Common / / UGMA/UTMA (Minor) Directed)
/ / Community Property / / Partnership / / Defined Benefit Plan (Other)
/ / Grantor or other Revocable Trust / / Corporation / / Other (specify)
YOU (OR BRANCH MANAGER IN THE CASE OF AN IRA) MUST SIGN BELOW:
</TABLE>
<TABLE>
<CAPTION>
UNITED STATES TAXABLE INVESTORS ONLY: NON-UNITED STATES INVESTORS ONLY:
- ------------------------------------- ---------------------------------
<S> <C> <C> <C>
/ / Check box if you are subject to backup withholding under the provisions of OR Under penalties of perjury, by
Section 3406(a)(1)(C) of the Internal Revenue Code. signature below, you certify that
you are NOT
If your taxable year is other than the calendar year, indicate the date (a) a citizen or resident of the
on which your taxable year ends: / // /-/ // / MM-DD United States; or
Under penalties of perjury, by signing below, I certify that the Social Security Number (b) a United States corporation,
(or Taxpayer ID Number) above to be the true, correct and complete Social Security partnership, estate or trust.
Number (or Taxpayer ID Number) and that all the information above is true, correct and
complete.
</TABLE>
X _______________________________ __________________________
(Your Signature (Indicate your title, if applicable) Date
[or Branch Manager in the case of IRAs])
If you are an Entity: Type or Print Name of Entity: .....................
Name: ........................ Date: ........................
Title: ......................................................
B-9
----
-
<PAGE>
-
----
Full Name of Account ..........................................................
(Your Name or Name of Trust or Custodial Account--do not use
initials)
You are a resident of .................... and a citizen of ....................
(name of country) (name of county)
Street Address (P.O. Box alone not acceptable) ................................
City ......... State ......... Zip Code ........ Tel. No. ( ........ ) ........
/ / Check here if you are a non-resident alien individual, foreign corporation,
foreign partnership, foreign trust or foreign estate that is a dealer in
commodities or otherwise engaged in a trade or business within the U.S.A. to
which income, gain or loss from a Partnership would be treated as effectively
connected. (You must complete Form W-8, which may be obtained from an
MSDW Financial Advisor.)
COMPLETE, IF APPLICABLE (MUST BE COMPLETED IF THERE IS A CO-SUBSCRIBER, TRUSTEE
OR CUSTODIAN):
Name.......................Telephone Number ( ............. )...................
The person or entity above is a/an: (check one)
/ / Co-Subscriber / / Trustee or Custodian / / Authorized Person, if an
Institutional Trustee
Street Address (P.O. Box alone not acceptable) .................................
<TABLE>
<S> <C>
City ...................................................... State ..................... Zip Code .....................
Co-Subscriber, Trustee or Custodian is a resident of ...... and a citizen of ..........................................
Minor (if not a gift) is a resident of .................... and a citizen of ..........................................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 2 -- SIGNATURE(S) -- YOU MUST SIGN UNDER TAX REPRESENTATION ON PRECEDING
PAGE AND BELOW
- --------------------------------------------------------------------------------
(INDIVIDUAL OR JOINT SUBSCRIPTION, INCLUDING PARTICIPANT-DIRECTED EMPLOYEE
BENEFIT PLAN OR IRA SUBSCRIPTION)
If you are subscribing for a joint or community property account, the
statements, representations, and warranties set forth in this Subscription and
Exchange Agreement and Power of Attorney shall be deemed to have been made by
each owner of the account.
* If the Units will be owned by joint owners, tenants in common, or as
community property, signatures of all owners are required.
* In the case of a participant-directed employee benefit plan or IRA, the
beneficiary must sign immediately below and the trustee or custodian must
sign below under "Entity Subscription."
<TABLE>
<S> <C>
X _________________________________ ______________ X _________________________________ ______________
(Signature of Subscriber) Date (Signature of Co-Subscriber) Date
</TABLE>
(ENTITY SUBSCRIPTION)
ACCEPTANCE OF SUBSCRIPTION ON BEHALF OF EMPLOYEE BENEFIT PLANS (INCLUDING IRAS)
IS IN NO RESPECT A REPRESENTATION BY THE GENERAL PARTNER OR DWR THAT THIS
INVESTMENT MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR
PLAN.
The undersigned officer, partner, trustee, manager, or other representative
hereby certifies and warrants that: (a) s/he has full power and authority from
or on behalf of the entity named below and its shareholders, partners,
beneficiaries, or members to (i) complete, execute, and deliver this
Subscription Agreement and Power of Attorney on their behalf; and (ii) to make
the statements, representations, and warranties made herein on their behalf; and
(b) the investment in each Partnership specified is authorized under applicable
law and the governing documents of the entity, and has been affirmatively
authorized by the governing board or body, if any, of the entity, and is legally
permissible.
<TABLE>
<S> <C> <C>
.......................................................... X ....................................... ............
(Type or Print Name of Entity) (Signature) Date
Print Name ............................................... Title .................................................
</TABLE>
- --------------------------------------------------------------------------------
ITEM 3 -- BRANCH MANAGER AND FINANCIAL ADVISOR USE ONLY (COMPLETE IN FULL AND IN
INK)
- --------------------------------------------------------------------------------
THE UNDERSIGNED FINANCIAL ADVISOR HEREBY CERTIFIES THAT:
(1) the above signature(s) is/are true and correct.
(2) s/he has informed the Subscriber about the liquidity and marketability of
the Units as set forth in the Prospectus.
(3) based on information obtained from the Subscriber concerning the
Subscriber's investment objectives, other investments, financial situation,
needs and any other relevant information, that s/he reasonably believes
that:
(a) such Subscriber is or will be in a financial position appropriate to
enable such Subscriber to realize the benefits of each Partnership
specified, as described in the Prospectus;
(b) such Subscriber has a net worth sufficient to sustain the risk inherent
in each Partnership specified (including loss of investment and lack of
liquidity); and
(c) each Partnership specified is otherwise a suitable investment for such
Subscriber; and
(4) the Subscriber has received the Prospectus at least five business days prior
to the applicable Closing.
THE FINANCIAL ADVISOR MUST SIGN BELOW IN ORDER TO SUBSTANTIATE COMPLIANCE WITH
NASD CONDUCT RULE 2810.
X ______________________________________________________________________________
Financial Advisor's Signature
...............................................................................
Type or Print Full Name of Financial Advisor
Telephone Number ( ............................. ) ............................
THE UNDERSIGNED BRANCH MANAGER HEREBY CERTIFIES THAT:
(1) the above signature(s) is/are the true and correct.
(2) the above client(s) is/are suitable.
X ______________________________________________________________________________
Branch Manager's Signature
...............................................................................
Type or Print Full Name of Branch Manager
B-10
----
-
<PAGE>
EXHIBIT C
MORGAN STANLEY DEAN WITTER SPECTRUM SERIES
SUBSCRIPTION AGREEMENT UPDATE FORM
PLEASE PRINT OR TYPE. USE BLACK INK ONLY.
DWR Account No. / / / / / / / / / / / / / / / / / / / /
I am an investor in the following Morgan Stanley Dean Witter Spectrum Series
Partnership(s) (mark each applicable box with an "X"):
/ / Morgan Stanley Dean Witter Spectrum Select L.P.
/ / Morgan Stanley Dean Witter Spectrum Technical L.P.
/ / Morgan Stanley Dean Witter Spectrum Strategic L.P.
/ / Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
/ / Morgan Stanley Dean Witter Spectrum Currency L.P.
/ / Morgan Stanley Dean Witter Spectrum Commodity L.P.
I acknowledge receipt of the Morgan Stanley Dean Witter Spectrum Series
Prospectus dated - (the "Prospectus"). I have signed this form, which
updates each Subscription and Exchange Agreement and Power of Attorney (each, a
"Subscription Agreement") I signed when I bought Units in the Morgan Stanley
Dean Witter Spectrum Series Partnership(s) checked above, so that I may purchase
additional Units in such Partnership(s) without the need to execute a new
Subscription Agreement. I understand that if I wish to purchase additional Units
by way of an Exchange, or if I wish to purchase Units in any Morgan Stanley Dean
Witter Spectrum Series Partnership in which I am not currently an investor, I
must first execute a new Subscription Agreement in the form annexed to the
Prospectus as Exhibit B.
I hereby confirm that the representations, warranties and other information
regarding the Subscriber in the Subscription Agreement(s) I previously executed
are still accurate, and that any purchase of additional Units following the date
of this Subscription Agreement Update Form shall be deemed confirmation that
such representations, warranties and other information are still accurate at the
time of that additional purchase. I will notify my Morgan Stanley Dean Witter
Financial Advisor prior to the purchase of additional Units if there is any
material change in the Subscriber's representations, warranties, or other
information contained in the previously executed Subscription Agreement(s).
I understand that I will need to execute a new Subscription Agreement Update
Form when a new Prospectus or Prospectus Supplement is issued.
<TABLE>
<S> <C> <C> <C>
IF SUBSCRIBER IS AN ENTITY INDIVIDUAL SUBSCRIBERS
- ----------------------------------------------------- -----------------------------------------------------
Name of Entity (Print or Type) Name of Subscriber(s) (Print or Type)
By:
---------------------------------------------- -----------------------------------------------------
Name of Signatory
- ----------------------------------------------------- -----------------------------------------------------
Title Signature(s) of Subscriber(s)
- ----------------------------------------------------- -----------------------------------------------------
Signature Address
- ----------------------------------------------------- -----------------------------------------------------
Address City State Zip
- -----------------------------------------------------
City State Zip Date:
----------------------------------------------
Date:
----------------------------------------------
</TABLE>
(PLEASE RETURN THIS FORM TO YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR.
FINANCIAL ADVISORS MUST FORWARD THE EXECUTED COPY OF THIS FORM TO DEMETER
MANAGEMENT CORPORATION.)
C-1
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE MATTERS DESCRIBED
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER BY ANY PERSON WITHIN ANY JURISDICTION IN WHICH SUCH OFFER IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF ITS ISSUE.
UNTIL 40 DAYS FROM THE DATE OF THIS PROSPECTUS, ALL DEALERS THAT EFFECT
TRANSACTIONS IN THESE SECURITIES, OR NOT PARTICIPATING IN THIS OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS OBLIGATION
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
$
--------
<S> <C>
SEC registration fee........................................ 12,944
NASD filing fee............................................. 5,156
Printing and engraving...................................... 58,333*
Legal fees and expenses, excluding Blue Sky legal fees...... 50,000*
Accounting fees and expenses................................ 13,333*
Annual Escrow Agent fee..................................... 167*
Blue Sky fees and expenses, including Blue Sky legal fees... 12,860
Miscellaneous............................................... 50,000*
-------
Total................................................... 202,793
=======
</TABLE>
- ---------
* Represents an estimate of the registrant's portion of the fees and expenses
that are common to this Registration Statement, Post-Effective Amendment
No. 2 to the Registration Statement on Form S-1 for Morgan Stanley Dean
Witter Spectrum Technical L.P. (Registration Statement No. 333-68779), and
the Registration Statements on Form S-1 for each of Morgan Stanley Dean
Witter Spectrum Select L.P., Morgan Stanley Dean Witter Spectrum Strategic
L.P., Morgan Stanley Dean Witter Spectrum Currency L.P., and Morgan Stanley
Tangible Asset Fund L.P., which are being filed concurrently with this
Registration Statement.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14 of each of the Amended and Restated Limited Partnership
Agreements (a form of which is annexed to the Prospectus as Exhibit A) provides
for indemnification of the General Partner and its affiliates (as such term is
defined therein) by the Partnership for any loss, liability, damage, cost or
expense arising from any act, omission, activity or conduct undertaken by or on
behalf of the Partnership that is determined by the General Partner in good
faith to be in the best interests of the Partnership and was not the result of
misconduct or negligence. Section 11 of the Amended and Restated Selling
Agreement provides for indemnification of the General Partner and its affiliates
and its successors and assigns by Dean Witter Reynolds Inc. ("DWR") for any
loss, claim, damage, liability, cost and expense incurred for a breach by DWR of
a representation or agreement in the Selling Agreement, or for misleading
statements and material omissions regarding DWR in the Registration Statement or
Prospectus. Such Section also provides for the indemnification by the
Partnership of DWR, the General Partner and their affiliates for any act,
omission, conduct, or activity undertaken by or on behalf of a Partnership that
is determined by DWR or the General Partner, as applicable, in good faith to be
in the best interests of the Partnership and was not the result of misconduct or
negligence. Section 8 of each DWR Customer Agreement provides for
indemnification of DWR and its affiliates for liabilities, losses, damages,
costs, or expenses for activities taken by or on behalf of the Partnership which
DWR has determined in good faith are in the best interests of the Partnership
and are not the result of misconduct or negligence. Section 8 of each Management
Agreement provides for indemnification of the General Partner and its affiliates
by the Trading Advisor for losses, claims, damages, liabilities, costs and
expenses incurred as a result of actions or omissions by the Trading Advisor
involving the Partnership's trading which are the result of a breach of
agreement, representation or warranty or the result of bad faith, misconduct or
negligence.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.01 Form of Amended and Restated Selling Agreement among the
Registrant, 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
Currency L.P., Morgan Stanley Dean Witter Spectrum
Commodity L.P., Demeter Management Corporation, and Dean
Witter Reynolds Inc.
1.02 Form of Additional Seller Agreement between Dean Witter
Reynolds Inc. and additional selling agents.
3.01 Form of Amended and Restated Limited Partnership Agreement
of the Registrant (included as Exhibit A to the
Prospectus).
3.02(1) Certificate of Limited Partnership of the Registrant.
3.03(3) Certificate of Amendment of Certificate of Limited
Partnership of Dean Witter Spectrum Global Balanced L.P.
(changing its name to Morgan Stanley Dean Witter Spectrum
Global Balanced L.P.).
5.01(1) Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding the legality of Units (including consent).
5.02(2) Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding the legality of Units (including consent).
5.03(3) Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding the legality of Units (including consent).
5.04 Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding the legality of Units (including consent).
8.01(1) Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding certain federal income tax matters (including
consent).
8.02(2) Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding certain federal income tax matters (including
consent).
8.03(3) Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding certain federal income tax matters (including
consent).
8.04 Opinion of Cadwalader, Wickersham & Taft to the Registrant
regarding certain federal income tax matters (including
consent).
10.01(4) Management Agreement, dated as of November 1, 1994, among
Dean Witter Spectrum Global Balanced L.P., Demeter
Management Corporation, and RXR, Inc.
10.05(4) Amended and Restated Customer Agreement, dated as of
December 1, 1997, between Dean Witter Spectrum Global
Balanced L.P. and Dean Witter Reynolds Inc.
10.06(4) Customer Agreement, dated as of December 1, 1997, among Dean
Witter Spectrum Global Balanced L.P., Carr Futures, Inc.,
and Dean Witter Reynolds Inc.
10.07(4) International Foreign Exchange Master Agreement, dated as of
August 1, 1997, between Dean Witter Spectrum Global
Balanced L.P. and Carr Futures, Inc.
10.11 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units
(included as Exhibit B to the Prospectus).
10.13 Form of Amended and Restated Escrow Agreement among the
Registrant, 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 Currency L.P., Morgan Stanley
Dean Witter Spectrum Commodity L.P., Demeter Management
Corporation, Dean Witter Reynolds Inc., and Chemical Bank,
the escrow agent.
23.01 Consent of Independent Auditors for Demeter Management
Corporation and the Registrant.
</TABLE>
- ---------
(1) Incorporated by reference to Registration Statement No. 33-80146.
(2) Incorporated by reference to Registration Statement No. 333-00494.
(3) Incorporated by reference to Registration Statement No. 333-3222.
(4) Incorporated by reference to the exhibits filed with the Registrant's Form
10-K for fiscal year ended December 31, 1998 (File No. 0-26340).
II-2
<PAGE>
(b) Financial Statements.
Included in the Prospectus:
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
Independent Auditors' Report
Statements of Financial Condition
Statements of Operations
Statements of Changes in Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
Demeter Management Corporation
Independent Auditors' Report
Statements of Financial Condition
Notes to Statements of Financial Condition
ITEM 17. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (a) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(b) to reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and (c) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the Registrants pursuant to the foregoing provisions,
or otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrants of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense
of any action, suit, or proceeding) is asserted by such director, officer,
or controlling person in connection with the securities being registered,
the Registrants will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York on the 5th day of November , 1999.
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
<TABLE>
<S> <C> <C>
By: DEMETER MANAGEMENT CORPORATION
General Partner
By: /s/ ROBERT E. MURRAY
--------------------------------------------
Robert E. Murray, PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C> <C>
General Partner
DEMETER MANAGEMENT CORPORATION
By: /s/ MARK J. HAWLEY Chairman of the Board and November 5, 1999
------------------------------------ Director of the General
Mark J. Hawley Partner
/s/ ROBERT E. MURRAY
------------------------------------ President and Director of the
Robert E. Murray General Partner
November 5, 1999
------------------------------------ Director of the General Partner
Mitchell M. Merin
/s/ JOSEPH G. SINISCALCHI
------------------------------------ Director of the General Partner
Joseph G. Siniscalchi
November 5, 1999
/s/ EDWARD C. OELSNER, III
------------------------------------ Director of the General Partner
Edward C. Oelsner, III
November 5, 1999
------------------------------------ Director of the General Partner
Richard A. Beech
------------------------------------ Director of the General Partner
Ray Harris
/s/ LEWIS A. RAIBLEY, III Vice President, Chief Financial
------------------------------------ and
Lewis A. Raibley, III Principal Accounting Officer,
and Director of the General
Partner
November 5, 1999
</TABLE>
II-4
<PAGE>
Exhibit 1.01
AMENDED AND RESTATED SELLING AGREEMENT
Dated as of o
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Dear Sirs:
Morgan Stanley Dean Witter Spectrum Select L.P. ("Select"), a
limited partnership organized pursuant to a certificate of limited partnership
filed on March 21, 1991, as amended by certificates of amendment thereto filed
on April 20, 1998 and April 6, 1999, respectively, and an amended and restated
limited partnership agreement dated as of o, under the Delaware Revised Uniform
Limited Partnership Act ("DRULPA"); Morgan Stanley Dean Witter Spectrum
Technical L.P. ("Technical"), a limited partnership organized pursuant to a
certificate of limited partnership filed on April 29, 1994, as amended by a
certificate of amendment thereto filed on April 6, 1999, and an amended and
restated limited partnership agreement dated as of o, under DRULPA; Morgan
Stanley Dean Witter Spectrum Strategic L.P. ("Strategic"), a limited partnership
organized pursuant to a certificate of limited partnership filed on April 29,
1994, as amended by a certificate of amendment thereto filed on April 6, 1999,
and an amended and restated limited partnership agreement dated as of o, under
DRULPA; Morgan Stanley Dean Witter Spectrum Global Balanced L.P. ("Global
Balanced"), a limited partnership organized pursuant to a certificate of limited
partnership filed on April 29, 1994, as amended by certificates of amendment
thereto filed on April 20, 1998 and April 6, 1999, respectively, and an amended
and restated limited partnership agreement dated as of o, under DRULPA; Morgan
Stanley Dean Witter Spectrum Currency L.P. ("Currency"), a limited partnership
organized pursuant to a certificate of limited partnership filed on October 20,
1999, and a limited partnership agreement dated as of o, under DRULPA; and
Morgan Stanley Dean Witter Spectrum Commodity L.P. ("Commodity"), a limited
partnership organized pursuant to a certificate of limited partnership filed on
July 31, 1997, as amended by a certificate of amendment thereto filed on o, and
an amended and restated limited partnership agreement dated as of o, under
DRULPA (collectively, the "Partnerships," and individually, a "Partnership"),
propose, subject to the terms and conditions set forth in this Agreement, to
concurrently offer, sell, and issue up to 11,000,000, 33,000,000, 19,000,000,
11,000,000, 15,000,000, and 7,000,000 Units of Limited Partnership Interest (the
"Units"), respectively.
Demeter Management Corporation, a Delaware corporation, is the sole
general partner of each Partnership (the "General Partner"). Certain registered
commodity trading advisors (each, a "Trading Advisor" and collectively, the
"Trading Advisors") are acting as the trading advisors with respect to the
management of the Partnerships' trading activities pursuant to the respective
management agreements among the applicable Trading Advisor(s), the applicable
Partnership, and the General Partner (each, a "Management Agreement" and
collectively, the "Management Agreements").
<PAGE>
Dean Witter Reynolds Inc., a Delaware corporation ("DWR"), acts as
selling agent pursuant to this Agreement and acts as the non-clearing commodity
broker (in such capacity, the "Non-Clearing Broker") pursuant to the respective
customer agreements between the Non-Clearing Broker and each Partnership
(collectively, the "DWR Customer Agreements"). Carr Futures, Inc., a Delaware
corporation ("CFI"), acts as the clearing commodity broker pursuant to the
respective customer agreements among CFI, the Non-Clearing Broker, and each of
Select, Technical, Strategic, Global Balanced, and Currency (collectively, the
"CFI Customer Agreements"). Morgan Stanley & Co. Incorporated, a Delaware
corporation ("MS & Co." and, together with CFI, the "Clearing Brokers"), acts as
the clearing commodity broker pursuant to the customer agreement among MS & Co.,
the Non-Clearing Broker, and Commodity (the "MS & Co. Customer Agreement" and,
together with the CFI Customer Agreements, the "Clearing Broker Customer
Agreements"). The Non-Clearing Broker and the Clearing Brokers are collectively
referred to herein as the "Commodity Brokers." Subscriptions for Units will be
held by The Chase Manhattan Bank (in such capacity, the "Escrow Agent") pursuant
to an amended and restated escrow agreement among the Partnerships, the Escrow
Agent, and DWR (the "Escrow Agreement").
This Agreement amends and restates: (i) the Selling Agreement dated
as of September 1, 1994, as amended by Amendment Nos. 1 and 2 dated January 31,
April 30, 1996, respectively, among Technical, Strategic, and Global Balanced,
the General Partner and DWR; and (ii) the Amended and Restated Selling Agreement
dated as of May 11, 1999, among Select, Technical, Strategic, Global Balanced,
the General Partner and DWR.
1. Representations and Warranties of the General Partner and the
Partnerships. The General Partner represents and warrants to each of the other
parties hereto as to each Partnership and itself, and, severally and not
jointly, represents and warrants to DWR as to itself with respect to the
agreements to which it is a party and with respect to the other applicable
documents, as follows:
(a) The Partnerships have provided to DWR, and filed with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act") and the rules and regulations promulgated by the SEC
thereunder (the "SEC Regulations"):
(i) on June 10, 1994, a registration statement on Form S-1 (SEC File
No. 33-80146), for the registration of an aggregate of 10,000,000 Units
(subsequently allocated 4,000,000, 4,000,000 and 2,000,000 Units to
Technical, Strategic, and Global Balanced, respectively), and on August
25, 1994, Amendment No. 1 to such registration statement, which
registration statement was declared effective by the SEC on September 15,
1994 (collectively, the "1994 Registration Statement");
(ii) on June 30, 1995, Post-Effective Amendment No. 1 to the 1994
Registration Statement, which Post-Effective Amendment was declared
effective by the SEC on June 30, 1995;
(iii) on January 19, 1996, a registration statement on Form S-1 (SEC
File No. 333-00494), for the registration of 9,000,000, 6,000,000 and
5,000,000 Units of
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Technical, Strategic, and Global Balanced, respectively, and on January 29
and 31, 1996, Amendment Nos. 1 and 2, respectively, to such registration
statement, which registration statement was declared effective by the SEC
on January 31, 1996 (collectively, the "1996A Registration Statement");
(iv) on April 4, 1996, a registration statement on Form S-1 (SEC
File No. 333-3222), for the registration of 5,000,000, 2,500,000 and
1,000,000 Units of Technical, Strategic, and Global Balanced,
respectively, and on April 29, 1996, Amendment No. 1 to such registration
statement, which registration statement was declared effective by the SEC
on April 30, 1996 (collectively, the "1996B Registration Statement");
(v) on August 30, 1996, Post-Effective Amendment No. 1 to the 1996B
Registration Statement, which Post-Effective Amendment was declared
effective by the SEC on September 9, 1996;
(vi) on October 9, 1996, Post-Effective Amendment No. 2 to the 1996B
Registration Statement, which Post-Effective Amendment was declared
effective by the SEC on October 11, 1996;
(vii) on April 16, 1997, Post-Effective Amendment No. 3 to the 1996B
Registration Statement, which Post-Effective Amendment was declared
effective by the SEC on April 25, 1997;
(viii) on March 12, 1998 (A) Post-Effective Amendment No. 4 to the
1996B Registration Statement, relating solely to the continuing offering
of unsold Units of Strategic and Global Balanced, as amended by
Post-Effective Amendment No. 5 to the 1996B Registration Statement filed
on May 7, 1998; (B) a registration statement on Form S-1 (SEC File No.
333-47831), relating to the continuing offering of unsold Units, as well
as the registration of 5,000,000 additional Units, of Technical, as
amended by Amendment No. 1 thereto filed on May 7, 1998 (as amended, the
"Technical 1998A Registration Statement"); and (C) a registration
statement on Form S-1 (SEC File No. 333-47829), relating to the
registration of 1,500,000 Units of Select, as amended by Amendment No. 1
thereto filed on May 7, 1998 (as amended, the "Select 1998A Registration
Statement"), each of which registration statements were declared effective
by the SEC on May 11, 1998;
(ix) on December 11, 1998 (A) Post-Effective Amendment No. 6 to the
1996B Registration Statement, relating solely to the continuing offering
of unsold Units of Strategic and Global Balanced; (B) a registration
statement on Form S-1 (SEC File No. 333-68779) relating to the continuing
offering of unsold Units, as well as the registration of 10,000,000
additional Units, of Technical (the "Technical 1998B Registration
Statement"); and (C) a registration statement on Form S-1 (SEC File No.
333-68773) relating to the continuing offering of unsold Units, as well as
the registration of 5,000,000 additional Units, of Select (the "Select
1998B Registration Statement"), each of which registration statements were
declared effective by the SEC on January 21, 1999;
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<PAGE>
(x) on April 12, 1999 Post-Effective Amendment No. 1 to the Select
1998B Registration Statement, Post-Effective Amendment No. 1 to the
Technical 1998B Registration Statement, and Post-Effective Amendment No. 7
to the 1996B Registration Statement, which Post-Effective Amendments were
each declared effective by the SEC on April 30, 1999; and
(xi) On November o, 1999 (A) a registration statement on Form S-1
(SEC File No. 333-o), relating to the continuing offering of unsold Units,
as well as the registration of 4,500,000 additional Units of Select; (B)
Post-Effective Amendment No. 2 to the Technical 1998B Registration
Statement; (C) a registration statement on Form S-1 (SEC File No. 333-o),
relating to the continuing offering of unsold Units, as well as the
registration of 6,500,000 additional Units, of Strategic; (D) a
registration statement on Form S-1 (SEC File No. 333-o), relating to the
continuing offering of unsold Units, as well as the registration of
3,000,000 additional Units, of Global Balanced; (E) a registration
statement on Form S-1 (SEC File No. 333-o), relating to the registration
of 15,000,000 Units of Currency; and (F) a registration statement on Form
S-1 (SEC File No. 333-o), relating to the registration of 7,000,000 Units
of Commodity, each of which registration statements were declared
effective by the SEC on o (the registration statements referenced in this
Section 1(b)(xi) are collectively referred to herein as the "1999
Registration Statements" and individually as a "1999 Registration
Statement"; each of the 1999 Registration Statements includes the same
preliminary prospectus (the "Prospectus"), which has not been distributed
to the public).
(b) Copies of each of the 1994, 1996A, 1996B, Technical 1998A,
Select 1998A, Technical 1998B, Select 1998B, and 1999 Registration Statements
have also been filed with (i) the Commodity Futures Trading Commission (the
"CFTC") under the Commodity Exchange Act (the "CEAct") and the rules and
regulations promulgated thereunder by the CFTC (the "CFTC Rules"); (ii) NASD
Regulation, Inc. (the "NASD") pursuant to its Conduct Rules; and (iii) the
National Futures Association (the "NFA") in accordance with NFA Compliance Rule
2-13.
(c) Notwithstanding Sections 1(a) and 1(b) hereof, if a Partnership
files an amendment or amendments to its 1999 Registration Statement, then the
term "1999 Registration Statement" shall, from and after the filing of such
amendment(s), refer to the applicable 1999 Registration Statements, as amended
by such amendment(s), and the term "Prospectus" shall refer to the amended
prospectus then on file with the SEC as part of the applicable 1999 Registration
Statement; and if a prospectus as first issued in compliance with the SEC
Regulations shall differ from the prospectus on file at the time the applicable
1999 Registration Statement or any amendment thereto shall have become
effective, the term "Prospectus" shall refer to the prospectus most recently so
issued from and after the date on which it shall have been issued, including any
amendment or supplement thereto. The Partnerships will not file any amendment to
the 1999 Registration Statements or any amendment or supplement to the
Prospectus unless DWR has received reasonable prior notice of and a copy of such
amendments or supplements and has not reasonably objected thereto in writing.
(d) The Limited Partnership Agreements provide for the subscription
for and sale of the Units; all action required to be taken by the General
Partner and the Partnerships as a
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<PAGE>
condition to the sale of the Units to qualified subscribers therefor has been,
or prior to each Monthly Closing (as defined in Section 5(b) hereof) will have
been, taken; and, upon payment of the consideration therefor specified in each
accepted Subscription and Exchange Agreement and Power of Attorney, in the form
included in the Prospectus (the "Subscription Agreement"), the Units will
constitute valid limited partnership interests in the Partnership for which
Units were subscribed.
(e) Each Partnership is a limited partnership duly organized
pursuant to a Certificate of Limited Partnership, a Limited Partnership
Agreement and DRULPA, and is validly existing under the laws of the State of
Delaware with full power and authority to engage in the trading of futures
interests (as defined in the Prospectus) and to engage in its other contemplated
activities as described in the Prospectus; each Partnership has received a
certificate of authority to do business in the State of New York as provided by
Section 121-902 of the New York Revised Limited Partnership Act and is qualified
to do business in each jurisdiction in which the nature or conduct of its
business requires such qualification and where the failure to be so qualified
could materially adversely affect the Partnership's ability to perform its
obligations hereunder or under its Limited Partnership Agreement, its Management
Agreement(s), its DWR Customer Agreement, the Clearing Broker Customer
Agreements, or the Escrow Agreement, as applicable.
(f) The General Partner is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and is
qualified to do business and is in good standing as a foreign corporation under
the laws of the State of New York and in each other jurisdiction in which the
nature or conduct of its business requires such qualification and where the
failure to be so qualified could materially adversely affect the General
Partner's ability to perform its obligations hereunder or under the Limited
Partnership Agreements, the Management Agreements, or as described in the
Prospectus.
(g) Each of the Partnerships and the General Partner has full
partnership and corporate power and authority, as applicable, under applicable
law to conduct its business and perform its respective obligations, as
applicable, under the Limited Partnership Agreements, the Management Agreements,
the DWR Customer Agreements, the Clearing Broker Customer Agreements, the Escrow
Agreement, and this Agreement.
(h) The 1999 Registration Statements and the Prospectus contain all
statements and information required to be included therein by the CEAct and the
CFTC Rules. When each of the 1999 Registration Statements becomes effective
under the 1933 Act and at all times subsequent thereto, up to and including
Currency's "Initial Closing" and each "Monthly Closing," as defined in Section
5(b) below (the Initial Closing or any Monthly Closing, a "Closing") the 1999
Registration Statements and the Prospectus will comply in all material respects
with the requirements of the 1933 Act, the SEC Regulations, the CEAct, the CFTC
Rules, and the rules of the NASD and the NFA. As of their respective effective
dates, the 1999 Registration Statements will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus, as
of its date of issue and as of each Closing, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not
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<PAGE>
misleading. Any supplemental sales literature employed in offering the Units
("Sales Literature"), when read in conjunction with the Prospectus, as of its
date of issue and as of each Closing, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which such statements were made,
not misleading. The Sales Literature will comply with the 1933 Act, the SEC
Regulations, the CEAct, the CFTC Rules, and the rules of the NASD and the NFA.
This representation and warranty shall not, however, apply to any statement or
omission in the 1999 Registration Statements, Prospectus or Sales Literature
relating to DWR or any Trading Advisor or made in reliance upon and in
conformity with information furnished by DWR or any Trading Advisor.
(i) The accountants who certified the financial statements filed
with the SEC as part of the 1999 Registration Statements are, with respect to
the General Partner and the Partnerships, independent public accountants as
required by the 1933 Act and the SEC Regulations.
(j) The financial statements filed as part of the 1999 Registration
Statements and those included in the Prospectus present fairly the financial
position of each Partnership and of the General Partner as of the dates
indicated; and said financial statements have been prepared in conformity with
generally accepted accounting principles (as described therein).
(k) Since the respective dates as of which information is given in
the 1999 Registration Statements and the Prospectus, except as may otherwise be
stated in or contemplated by the 1999 Registration Statements and the
Prospectus, there has not been any material adverse change in the condition,
financial or otherwise, business or prospects of the General Partner or any
Partnership, whether or not arising in any ordinary course of business.
(l) The General Partner will have a net worth at each Closing
sufficient in amount and satisfactory in form to meet the net worth requirements
set forth in each of the Limited Partnership Agreements.
(m) The Limited Partnership Agreements, the Management Agreements
and this Agreement have each been duly and validly authorized, executed, and
delivered by the General Partner on behalf of the Partnerships and the General
Partner, and each constitutes a valid and binding agreement of the Partnerships
and of the General Partner, enforceable in accordance with its terms. The DWR
Customer Agreements, the Clearing Broker Customer Agreements and the Escrow
Agreement have each been duly and validly authorized, executed, and delivered by
the General Partner on behalf of the Partnerships, and each constitutes a valid
and binding agreement of the Partnerships, enforceable in accordance with its
terms.
(n) The execution and delivery of the Limited Partnership
Agreements, the Management Agreements, the DWR Customer Agreements, the Clearing
Broker Customer Agreements, the Escrow Agreement, and this Agreement, the
incurrence of the obligations set forth in each of such agreements, and the
consummation of the transactions contemplated therein and in the 1999
Registration Statements and the Prospectus, will not violate, or constitute a
breach of, or default under, the certificate of incorporation or bylaws of the
General Partner, the Certificates of Limited Partnership or the Limited
Partnership Agreements of the Partnerships, or
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<PAGE>
any other agreement or instrument by which either the General Partner or the
Partnerships, as the case may be, is bound or any law, order, rule, or
regulation applicable to the General Partner or the Partnerships of any court,
governmental body, administrative agency, panel, or self-regulatory organization
having jurisdiction over the General Partner or the Partnerships.
(o) Except as set forth in the 1999 Registration Statements or the
Prospectus, there has not been in the five years preceding the date of the
Prospectus and there is not pending or, to the best of the General Partner's
knowledge, threatened, any action, suit, or proceeding at law or in equity
before or by any court, governmental body, administrative agency, panel, or
self-regulatory organization to which the General Partner, any of the
"principals" of the General Partner, as defined in CFTC Rule 4.10(e) ("General
Partner Principals"), or any of the Partnerships is or was a party, or to which
any of the assets of the General Partner or any of the Partnerships is or was
subject; and neither the General Partner nor any General Partner Principal has
received any notice of an investigation by the SEC, CFTC, NASD, or NFA regarding
noncompliance by the General Partner, the General Partner Principals, or the
Partnerships with the 1933 Act, the SEC Regulations, the Securities Exchange Act
of 1934, as amended (the "1934 Act"), any other federal securities laws, rules
or regulations, the CEAct, the CFTC Rules, or the rules of the NASD or the NFA,
which action, suit, proceeding, or investigation resulted or might reasonably be
expected to result in any material adverse change in the condition, financial or
otherwise, business or prospects of the General Partner or any of the
Partnerships, or which could be material to an investor's decision to invest in
any of the Partnerships.
(p) The General Partner and each "principal" of the General Partner,
as defined in CFTC Rule 3.1(a), have all federal, state, and foreign
governmental, regulatory, self-regulatory, and exchange approvals, licenses,
registrations, and memberships, and have effected all filings with federal,
state, and foreign governmental regulators, self-regulatory organizations, and
exchanges required to conduct their business and to act as described in the 1999
Registration Statements and the Prospectus, or required to perform their
obligations under the Limited Partnership Agreements, the DWR Customer
Agreements, the Clearing Broker Customer Agreements, the Escrow Agreement, the
Management Agreements and this Agreement. The General Partner is registered as a
commodity pool operator under the CEAct and is a member of the NFA as a
commodity pool operator. The General Partner's principals identified in the
Prospectus are all of the General Partner Principals.
(q) To the extent required under CFTC Rules and applicable CFTC
staff no-action letters, the actual performance of all pools "operated" within
the meaning of the CEAct by the General Partner and of the General Partner
Principals is disclosed in the Prospectus.
2. Covenants of the Partnerships and the General Partner. Each
Partnership as to itself, severally and not jointly, and the General Partner as
to itself and each Partnership covenants and agrees as follows:
(a) The Partnerships will prepare and file with the SEC, CFTC, NASD,
and NFA, promptly upon DWR's request, any amendments to the applicable 1999
Registration Statement(s), and any amendments and supplements to the Prospectus,
which may be necessary or advisable in connection with the offering and sale of
Units, and will use its best efforts to cause the same to become effective as
promptly as possible.
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<PAGE>
(b) As soon as any Partnership is advised or obtains knowledge
thereof, such Partnership will advise DWR of any requests made by the SEC, CFTC,
NASD, or NFA to amend the applicable 1999 Registration Statement, to amend or
supplement the Prospectus, or for additional information, or of the issuance by
the SEC of any stop order suspending the effectiveness of any 1999 Registration
Statement, of any order by the SEC, CFTC, NASD or NFA preventing or suspending
the use of the Prospectus, or of the institution of any proceedings for any such
purpose, and will use its best efforts to prevent the issuance of any such order
and, if any such order is issued, to obtain the lifting thereof as promptly as
possible.
(c) If, at any time after the effective date of any 1999
Registration Statement and any amendment thereto, any event occurs involving any
of the Partnerships, the General Partner, or any General Partner Principal, or
of which any of the Partnerships, the General Partner, or any General Partner
Principal is aware, as a result of which any 1999 Registration Statement or the
Prospectus, as then amended and supplemented, would include any untrue statement
of a material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements therein (and, with respect to
the Prospectus, in light of the circumstances under which they were made) not
misleading, or if it becomes necessary or desirable at any time to amend or
supplement any 1999 Registration Statement or the Prospectus to comply with the
1933 Act, the SEC Regulations, the CEAct, the CFTC Rules, or the rules of the
NASD or the NFA, the Partnerships will promptly notify DWR thereof and will
prepare and file with the SEC, CFTC, NASD, and NFA an amendment or supplement
that will correct such statement or omission or that will effect such
compliance.
(d) The Partnerships will furnish to DWR copies of the 1999
Registration Statements, the Prospectus, and all amendments and supplements
thereto, in each case as soon as available and, in the case of the Prospectus,
in such quantities as DWR may reasonably request for delivery to it.
3. Representations and Warranties of the Non-Clearing Broker. The
Non-Clearing Broker represents and warrants to each of the other parties hereto,
as follows:
(a) The Non-Clearing Broker is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and is
qualified to do business and is in good standing as a foreign corporation in the
State of New York and in each other jurisdiction in which the nature or conduct
of its business requires such qualification and where the failure to be so
qualified could materially adversely affect the Non-Clearing Broker's ability to
perform its obligations hereunder or under the DWR Customer Agreements, or as
described in the Prospectus. The Non-Clearing Broker has full corporate power
and authority to perform its obligations under each of the DWR Customer
Agreements and this Agreement, and to conduct its business as described in the
1999 Registration Statements and the Prospectus.
(b) As to the Non-Clearing Broker, the 1999 Registration Statements
and the Prospectus are accurate and complete in all material respects and
contain all statements and information required to be included therein under the
1933 Act, the SEC Regulations, the CEAct, the CFTC Rules, and the rules of the
NFA; as of their effective dates, the 1999 Registration Statements will not
contain any untrue statement of a material fact or omit to state a material fact
which is required to be stated therein or necessary to make the statements
therein not misleading;
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<PAGE>
and the Prospectus, as of its date of issue and as of each Closing, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
(c) The Non-Clearing Broker and each "principal" of the Non-Clearing
Broker, as defined in CFTC Rule 3.1(a), have all federal, state, and foreign
governmental, regulatory self-regulatory, and exchange approvals, licenses,
registrations, and memberships, and have effected all filings with federal,
state, and foreign governmental regulators, self-regulatory organizations, and
exchanges required to conduct their business and to act as described in the 1999
Registration Statements and the Prospectus, or required to perform their
obligations under each DWR Customer Agreement and this Agreement, as applicable.
The Non-Clearing Broker is registered as a futures commission merchant under the
CEAct and is a member of the NFA as a futures commission merchant.
(d) The DWR Customer Agreements and this Agreement have each been
duly and validly authorized, executed, and delivered by the Non-Clearing Broker,
and each constitutes a valid and binding agreement of the Non-Clearing Broker,
enforceable in accordance with its terms.
(e) Since the respective dates as of which information is given in
the 1999 Registration Statements and the Prospectus, except as may otherwise be
stated in or contemplated by the 1999 Registration Statements and the
Prospectus, there has not been any material adverse change in the condition,
financial or otherwise, business or prospects of the Non-Clearing Broker,
whether or not arising in the ordinary course of business.
(f) Except as set forth in the 1999 Registration Statements or the
Prospectus, there has not been in the five years preceding the date of the
Prospectus and there is not pending or, to the best of the Non-Clearing Broker's
knowledge, threatened, any action, suit, or proceeding at law or in equity
before or by any court, governmental body, administrative agency, panel, or
self-regulatory organization to which the Non-Clearing Broker is or was a party,
or to which any of the assets of the Non-Clearing Broker is or was subject; and
the Non-Clearing Broker has not received any notice of an investigation by the
NFA or the CFTC regarding noncompliance by the Non-Clearing Broker with the
CEAct, the CFTC Rules, or the rules of the NFA, which action, suit, proceeding
or investigation resulted in or might reasonably be expected to result in any
material adverse change in the condition, financial or otherwise, business or
prospects of the Non-Clearing Broker or which would be material to an investor's
decision to invest in any of the Partnerships.
(g) The execution and delivery of each DWR Customer Agreement and
this Agreement, the incurrence of the obligations set forth herein and in each
DWR Customer Agreement, and the consummation of the transactions contemplated
therein and in the 1999 Registration Statements and in the Prospectus, will not
violate, or constitute a breach of, or default under, the certificate of
incorporation or bylaws of the Non-Clearing Broker or any other agreement or
instrument by which it is bound, or any law, order, rule, or regulation
applicable to the Non-Clearing Broker of any court, governmental body,
administrative agency, panel, or self-regulatory organization having
jurisdiction over the Non-Clearing Broker.
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<PAGE>
4. Covenants of the Non-Clearing Broker. The Non-Clearing Broker
covenants and agrees as follows:
(a) The Non-Clearing Broker agrees reasonably to cooperate by
providing information regarding itself in the preparation of any amendments or
supplements to the 1999 Registration Statements and the Prospectus.
(b) The Non-Clearing Broker agrees to notify the General Partner
immediately upon discovery of any untrue statement of a material fact in the
1999 Registration Statements or the Prospectus relating to the Non-Clearing
Broker, or an omission to state a material fact relating to the Non-Clearing
Broker, required to be stated therein or necessary to make the statements
therein (and, with respect to the Prospectus, in light of the circumstances
under which they were made) not misleading, or of the occurrence of any event or
change in circumstances which would result in there being any material untrue or
misleading statement or a material omission in the Prospectus or the 1999
Registration Statements regarding the Non-Clearing Broker, or which would result
in the Prospectus not including all material information relating to the
Non-Clearing Broker, required pursuant to the CEAct, the CFTC Rules, or the
rules of the NFA.
5. Appointment of the Selling Agent.
(a) Subject to the terms and conditions set forth in this Agreement,
each Partnership hereby appoints DWR as its selling agent to offer and sell
Units on a best efforts basis, without any firm commitment on the part of DWR to
purchase any Units. DWR shall offer for sale up to 11,000,000, 33,0000,000,
19,000,000, 11,000,000, 15,000,000, and 7,000,000 Units of Select, Technical,
Strategic, Global Balanced, Currency, and Commodity, respectively, and such
additional Units as the General Partner may, in its discretion, register and
offer for sale from time to time.
(b) The term "Initial Offering Period" used in this section only
relates to Currency and is the period commencing on the date of the Prospectus
and ending on April 30, 2000, unless all of the registered Units of Currency
have previously been subscribed for or the General Partner has sooner terminated
the Initial Offering Period, or the General Partner extends the Initial Offering
Period as described below. During the Initial Offering Period, DWR will offer
Units of Currency for sale at an "Initial Closing," which currently is scheduled
to be held on o, at a price equal to $10.00 per Unit. However, the General
Partner may at its discretion hold such Initial Closing at any time during the
Initial Offering Period, and may extend the Initial Offering Period until o,
2000. The Initial Closing for Currency shall not take place unless subscriptions
have been accepted for at least 500,000 Units of Currency. If the minimum number
of Units of Currency are not sold during the Initial Offering Period, the
offering of Units of Currency shall terminate, and all subscription amounts
(together with any interest earned thereon) shall be refunded to subscribers, as
described in the Prospectus. Units of Currency which remain unsold following the
Initial Closing shall be offered for sale in the Partnerships' Continuing
Offering described below. Except as otherwise provided above, commencing the
date of the Prospectus, the Units of Select, Technical, Strategic, Global
Balanced, Currency, and Commodity shall be offered, in the sole discretion of
the General Partner, for sale in a continuing offering (the "Continuing
Offering") at monthly closings ("Monthly Closings"), to be held as of
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the last day of each month, at a price per Unit equal to 100% of the "Net Asset
Value per Unit" (as defined in each Limited Partnership Agreement) as of the
close of business on the date of such Monthly Closing. The minimum subscription
for most subscribers shall be $5,000, except that the minimum subscription is
(i) $2,000 in the case of an Individual Retirement Account ("IRA"); (ii) $500
per Partnership if the subscriber presently owns Units in any Partnership; or
(iii) for eligible subscribers who redeem units of limited partnership interest
in any other commodity pool for which the General Partner is the general partner
and commodity pool operator, and, pursuant to a Subscription Agreement, use the
proceeds of such redemption (less any applicable redemption charges) to purchase
Units (each of such purchases is hereinafter referred to as a "Non-Series
Exchange"), the lesser of (A) $5,000 (or $2,000 in the case of IRAs), (B) the
proceeds from the redemption of (x) five units (or two units in the case of
IRAs) from commodity pools other than the Morgan Stanley Dean Witter Charter
Series (the "Charter Series"), or (y) 500 Units from one or any combination of
the Charter Series partnerships, or (C) the proceeds from the redemption of such
subscriber's entire interest in such other commodity pool. In order to be
eligible to purchase Units pursuant to a Non-Series Exchange, a subscriber must
purchase Units at a Monthly Closing held as of the date on which the redemption
from the other commodity pool becomes effective. The initial investment (other
than in the case of a Non-Series Exchange) may be for Units of any one of the
Partnerships or may be divided among two or more Partnerships, except that the
minimum subscription for any Partnership is $1,000. In the case of a Non-Series
Exchange, however, the minimum subscription for any Partnership is the proceeds
of the redemption of one unit of the other commodity pool, or 100 Units in the
case of the Charter Series. The number of Units received by a subscriber will be
rounded to the third decimal place.
(c) Notwithstanding any provision to the contrary herein, the
General Partner will have the sole discretion to accept or reject any
subscription for Units in whole or in part at any time prior to acceptance.
(d) No selling commissions will be charged with respect to the sale
of Units. The Partnerships understand, however, that DWR may compensate its
employees and certain "Additional Sellers," solely from DWR's own funds, in the
manner described in Sections 5(e)-(i).
(e) Except as provided below, employees of DWR will receive from DWR
(payable solely from its own funds) gross sales credit equal to three percent
(3%) of the Net Asset Value per Unit as of the date of the applicable Monthly
Closing for each Unit sold by them and issued at such Monthly Closing (such
compensation, along with any other underwriting compensation, will not exceed
10% of the proceeds received in connection with the issuance of the Units).
Commencing (i) the seventh month after the Monthly Closing at which a Unit of
Strategic, Technical, or Select is issued, (ii) the tenth month after the
Monthly Closing at which a Unit of Global Balanced, Currency, or Commodity is
issued, or (iii) in the case of a Unit purchased pursuant to a Series Exchange
(as defined in the Prospectus) or a Non-Series Exchange, the first month as of
which such continuous compensation is payable under (i) or (ii), as applicable,
but with the seven or ten month period measured from the date at which the unit
redeemed was issued, and continuing until the applicable Partnership terminates
or the Unit is redeemed (whichever comes first), employees of DWR who are
properly registered with the CFTC and are members of the NFA, as set forth in
Section 5(g), will also receive from DWR
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(payable solely from its own funds) monthly gross sales credits of up to 86% of
the brokerage fees which are received by the Non-Clearing Broker from the
Partnership each month that are attributable to outstanding Units sold by them.
Such continuing compensation is to be paid in recognition of employees'
continuing services to Limited Partners of the Partnerships, as set forth in
Section 5(i). No person will receive the continuing compensation described above
who is not an employee of DWR at the time of receipt of payment.
(f) DWR ill not pay to an employee the 3% initial gross sales credit
described above with respect to Units purchased pursuant to a Series Exchange or
a Non-Series Exchange. Such employee will, however, receive continuing gross
sales credits with respect to brokerage fees received by the Non-Clearing Broker
from a Partnership which are comparable to the gross sales credit which was
received by such employee with respect to such other commodity pool.
(g) Notwithstanding the foregoing, DWR will not pay any such
continuing compensation to any of its employees who is not legally qualified or
permitted to receive such continuing compensation. In that regard, each of DWR's
employees who receives any such continuing compensation must have become
registered as an "associated person" of DWR with the CFTC and with the NFA in
such capacity only after either having passed the National Commodity Futures
Examination (NASD Test Series #3), the Futures Managed Funds Examination (NASD
Test Series #31), or having been "grandfathered" as an associated person under
the CEAct and the Bylaws and rules of the NFA. Also, such compensation may be
paid by DWR to its employees only in respect of outstanding Units sold by such
persons and only so long as the additional services described in Section 5(i)
are provided by such persons to Limited Partners; provided, however, that DWR
may not pay any portion of such compensation to any individual no longer
employed by it, and provided, further, that such compensation may be paid to its
employees who, although not responsible for the sale of an outstanding Unit,
provide the services described below in place of the individual who was
responsible for such sale.
(h) DWR may appoint as its agent to make offers and sales of Units,
one or more securities brokers or dealers which are members in good standing of
the NASD, or any foreign bank, dealer, institution or person ineligible for
membership in the NASD which agrees to make no offers or sales of Units within
the United States or its territories, possessions or areas subject to its
jurisdiction or to persons who are citizens thereof or residents therein, as
additional selling agents (each, an "Additional Seller" and collectively, the
"Additional Sellers"), provided that each Additional Seller shall execute an
Additional Seller's Agreement substantially in the form attached hereto as
Exhibit A. DWR may compensate any Additional Seller by paying such Additional
Seller, solely from DWR's own funds, a commission, not to exceed three percent
(3%) of the Net Asset Value per Unit as of the date of the applicable Monthly
Closing, for each Unit sold by such Additional Seller and issued at such Monthly
Closing. In addition, commencing with (i) the seventh month after the Monthly
Closing at which a Unit of Select, Technical, and Strategic is issued, (ii) the
tenth month after the Monthly Closing at which a Unit of Global Balanced,
Currency, and Commodity is issued, and (iii) in the case of a Unit purchased
pursuant to a Series Exchange or a Non-Series Exchange, the first month as of
which such continuing compensation is payable under (i) or (ii), as applicable,
but with the seven or ten month period measured from the date at which the unit
redeemed was issued, and continuing until the applicable Partnership terminates
or the Unit is redeemed (whichever comes first), DWR may pay any Additional
Seller continuing compensation of up to 35% of the brokerage
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fees which are received by the Non-Clearing Broker from the Partnerships each
month that are attributable to outstanding Units sold by such Additional Seller,
in recognition of such Additional Seller's continuing services to Limited
Partners of the Partnerships, as set forth in Section 5(i); provided, however,
that: (A) no continuing compensation shall be paid to an Additional Seller
unless it is properly registered with the CFTC as a "futures commission
merchant" or "introducing broker," and is a member of the NFA in one of such
capacities, and (B) no Additional Seller which is registered as a futures
commission merchant or introducing broker may pay any portion of such continuing
compensation to an employee thereof unless such employee meets the same
qualifications as DWR's employees, as set forth in Section 5(g).
(i) The additional services that employees of DWR and Additional
Sellers will provide on an ongoing basis to Limited Partners at no charge will
include, but not be limited to: (i) inquiring of the General Partner from time
to time, at the request of Limited Partners, as to the Net Asset Value of a
Unit; (ii) inquiring of the General Partner from time to time, at the request of
Limited Partners, as to the futures interests markets and the activities of the
Partnerships; (iii) responding to questions of Limited Partners from time to
time with respect to monthly account statements, annual reports, financial
statements, and annual tax information furnished periodically to Limited
Partners; (iv) providing advice to Limited Partners from time to time as to when
and whether to make additional investments or to redeem or exchange Units; (v)
assisting Limited Partners from time to time in the redemption or exchange of
Units; and (vi) providing such other services as Limited Partners from time to
time may reasonably request.
(j) The Partnerships and DWR acknowledge that: (i) the Partnerships
shall have no liability to DWR, its employees, any Additional Seller, or any
employee of an Additional Seller with regard to any selling compensation
described above; and (ii) DWR will be paid any and all redemption charges
imposed on Limited Partners in accordance with Section 10(b) of the Limited
Partnership Agreement.
6. Undertakings of DWR.
(a) DWR agrees to use its best efforts to offer and sell Units on
the terms set forth in this Agreement, the 1999 Registration Statements, and the
Prospectus. It is understood that DWR has no commitment to offer and sell Units
or to purchase Units, other than to use its best efforts to offer and sell
Units.
(b) DWR will make the public offering of Units at the offering price
and on the other terms and conditions set forth in the 1999 Registration
Statements, the Prospectus, and this Agreement. DWR will offer and sell Units
only to persons who satisfy the suitability and/or minimum investment
requirements set forth in the Prospectus and the Subscription Agreement and who,
to the General Partner's satisfaction, complete a Subscription Agreement. DWR
will conduct a thorough review of the suitability of each subscriber for Units,
of each Subscription Agreement authorizing the General Partner and DWR to
transfer the full subscription price from the subscriber's customer account with
DWR to the escrow account established with the Escrow Agent pursuant to the
Escrow Agreement (the "Escrow Account"), and of each Subscription Agreement
requesting a Series Exchange or a Non-Series Exchange as described under
"Summary-Investment Requirements" and "Exchange Privilege" in the Prospectus.
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<PAGE>
(c) All of DWR's branch offices will be required to forward
subscriptions to DWR's New York, New York branch office no later than noon of
the first business day following their receipt of an acceptable Subscription
Agreement from a subscriber for Units. Subsequent to its review of each
Subscription Agreement, the General Partner will notify DWR, and DWR shall
notify each subscriber by the business day following its receipt of notice from
the General Partner, of the General Partner's acceptance of all, a portion, or
none of the subscriber's subscription.
(d) All funds from subscriptions received by DWR during the Initial
Offering of Spectrum Currency and the Continuing Offering of the Partnerships
and not rejected by the General Partner will be promptly deposited by DWR in the
Escrow Account as described below. A subscriber whose Subscription Agreement is
received by DWR and whose subscription is not immediately rejected must have the
full subscription amount in his customer account with DWR on the first business
day following the date that his Subscription Agreement is received by DWR, and
DWR will transfer such subscription funds to the Escrow Agent on that date. DWR
will notify the General Partner of the subscription amount deposited with the
Escrow Agent on behalf of each subscriber for Units and the name and residence
address of each such subscriber.
(e) DWR will offer and sell Units in compliance with the
requirements set forth in the 1999 Registration Statements, the Prospectus
(particularly under the captions "Summary of the Prospectus - Investment
Requirements," "Plan of Distribution," "Subscription Procedure," and "Purchases
by Employee Benefit Plans--ERISA Considerations"), the Subscription Agreement,
and this Agreement. In connection with DWR's acting as selling agent, DWR will
comply fully at all times with all applicable federal, state, and foreign
securities and commodities laws (including, without limitation, the 1933 Act,
the 1934 Act, the CEAct, and the securities ("Blue Sky") laws of the
jurisdictions in which DWR solicits subscriptions), and all requirements of the
NASD (particularly Conduct Rule 2810), the Board of Governors of the Federal
Reserve System, and the securities and commodities exchanges and other
governmental regulators and self-regulatory authorities and organizations having
jurisdiction over DWR. Specifically, (i) DWR will not permit the purchase of any
Units by a customer account over which DWR has discretionary authority without
the prior written approval by the customer owning such account; (ii) DWR
confirms that it has reasonable grounds to believe that all material facts are
adequately and accurately disclosed in the Prospectus, which provides a basis
for evaluating the Partnerships; (iii) DWR confirms that in determining the
adequacy of disclosed facts pursuant to clause (ii), it has obtained information
on material facts relating to: (A) items of compensation, (B) tax aspects, (C)
financial stability and experience of the General Partner, and (D) the
Partnerships' conflicts and risk factors; (iv) in recommending to a subscriber
the purchase or redemption of Units, a Series Exchange or a Non-Series Exchange,
DWR shall take such measures as are reasonably necessary to assure itself that
(A) its financial advisors have informed such subscriber of all pertinent facts
relating to the liquidity and marketability of the Units, and (B) its financial
advisors have reasonable grounds to believe, on the basis of information
obtained from such subscriber concerning his investment objectives, other
investments, financial situation and needs, and any other information known by
such financial advisors, that: (1) such subscriber is or will be in a financial
position appropriate to enable him to realize to a significant extent the
benefits described in the Prospectus, (2) such subscriber has a fair market net
worth sufficient to sustain the risks inherent in the purchase of Units,
including
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<PAGE>
loss of investment and lack of liquidity, and (3) the purchase of Units is
otherwise suitable for such subscriber.
(f) DWR shall take such measures as are reasonably necessary to
assure itself that each subscriber has received a Prospectus at least five
business days prior to the applicable Closing; and (vi) the General Partner will
maintain in its files, located c/o Dean Witter Reynolds Inc., Two World Trade
Center, New York, New York 10048, each subscriber's Subscription Agreement for
not less than six years, and DWR will maintain, at its respective branch
offices, any other documents disclosing the basis upon which the determination
of suitability was reached for each such subscriber.
(g) All subscriptions received and accepted by the General Partner
will, upon the satisfaction at each Closing of the conditions set forth in
Sections 10 and 11 hereof, be delivered to the respective Partnerships at each
Closing, and any interest earned on a subscriber's subscription funds while held
in escrow will be promptly returned to DWR in accordance with the Escrow
Agreement for prompt credit to the subscriber's customer account with DWR.
Interest earned on any subscriptions deposited into the Escrow Account and
thereafter rejected by the General Partner will be credited to the subscriber's
customer account with DWR.
(h) Any amounts credited to a subscriber's customer account with DWR
for a returned subscription and/or for interest earned will be immediately
available for investment or withdrawal from such account. In the event a
subscriber's customer account with DWR has been closed, any subscription
returned and/or interest earned will be paid by check.
7. Blue Sky Filings. The Partnerships will use their best efforts to
qualify Units for offer and sale under the Blue Sky laws of such jurisdictions
as DWR may reasonably request, to make applications, file documents, and furnish
information as may be reasonably required for that purpose, and to comply with
such laws so as to permit the continuance of sales and dealings in such
jurisdictions for as long as may be necessary to complete the offer and sale of
Units; provided, however, that neither the Partnerships nor the General Partner
will be required to qualify as or be subject to taxation as a foreign
partnership or corporation or to execute a general consent to service of process
in any jurisdiction. The Partnerships further agree that their counsel will
prepare and deliver to DWR Blue Sky surveys which will set forth, for DWR's
guidance, in what manner, at what time, in what amounts, and by whom Units may
be offered and sold in jurisdictions requested by DWR as provided above.
8. Organizational and Offering Expenses. DWR shall pay all of the
costs incurred in connection with the organization and Initial Offering of
Spectrum Currency. DWR will also pay all of the costs incurred in connection
with the offering of Units during the Continuing Offering (collectively, the
"Offering Expenses"), including all legal, accounting, and auditing fees and
expenses of outside firms and all costs, disbursements, filing fees, fees and
expenses of the Escrow Agent, printing and duplication costs, marketing costs
and expenses, and other related costs and expenses. Legal, accounting, and
auditing fees and expenses of outside firms shall include the legal, accounting,
and auditing expenses of DWR, the Partnerships and the General Partner relating
to the offering of Units. Marketing costs and expenses shall include, but not be
limited to, the printing and preparation of Sales Literature, the production of
audio and video tapes for use in sales presentations, and the staging of sales
seminars and the travel of
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DWR and General Partner personnel associated therewith. DWR shall not be
reimbursed for such expenses by the Partnerships. Such expenses will not include
the travel, legal, and other expenses of the Trading Advisors, including such
expenses incurred in connection with the marketing of Units, which expenses
shall be borne by the respective Trading Advisors (unless DWR agrees to pay same
from its own funds).
9. Closings.
(a) The Initial Closing, if any, for the acceptance of subscriptions
for Units of Currency is currently scheduled to be held on o. Monthly Closings
in the Continuing Offering for Units of Select, Technical, Strategic, Global
Balanced, and Commodity, and after its Initial Closing, Currency, shall be held
as of the last day of each month. Each Monthly Closing will be held at such
time, and at such location or locations as the General Partner and DWR may
mutually agree upon.
(b) Subject to its right to reject any subscription in its sole
discretion in whole or in part at any time prior to acceptance, the General
Partner, on behalf of each Partnership, will accept subscriptions for Units
properly made and cause proper entry to be made in the Unit register to be
maintained by the General Partner. No certificate evidencing Units shall be
issued to any subscriber; rather, DWR will deliver confirmations in its
customary form to subscribers whose subscriptions have been accepted by the
General Partner at each Closing.
(c) At each Closing, the delivery, receipt, and acceptance of
subscriptions for Units will be subject to the terms and conditions set forth in
this Agreement, including the following: (i) payment of the full subscription
price for Units and delivery of a properly completed Subscription Agreement by
each subscriber; and (ii) compliance with Section 10 hereof.
(d) Upon the satisfaction of such terms and conditions, the
aggregate subscription price for Units (exclusive of any interest earned on such
subscriptions while held in escrow and payable to the subscribers in accordance
with the Escrow Agreement) will be paid and delivered to the applicable
Partnership at each Closing.
10. Conditions of DWR's Obligations.
(a) DWR's obligations to proceed with the offering and sale of Units
and each Closing will be subject to: (i) the accuracy of the representations and
warranties by the Partnerships and the General Partner in this Agreement as of
the date hereof and as of the date of such Closing as if such representations
and warranties had been made on and as of the date thereof; (ii) the performance
by the Partnerships and the General Partner of their respective covenants and
agreements herein; and (iii) the additional conditions precedent set forth
below.
(b) At each Closing, the additional conditions precedent are as
follows:
(i) The 1999 Registration Statements will have become effective. No
stop order suspending the effectiveness of any of the 1999 Registration
Statements will have been issued and no proceedings for that purpose will
have been instituted or are pending or, to the knowledge of the
Partnerships or DWR, are contemplated or threatened by the
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SEC. No order preventing or suspending the use of the Prospectus will have
been issued and no proceedings for that purpose will have been instituted
or are pending or, to the knowledge of the Partnerships or DWR, are
contemplated or threatened by the SEC, CFTC, NASD, or NFA. Any requests of
the SEC, CFTC, NASD, or NFA for additional information (to be included in
any of the 1999 Registration Statements or the Prospectus or otherwise)
will have been complied with to DWR's satisfaction.
(ii) Neither DWR nor any Trading Advisor will have advised the
Partnerships or the General Partner that, in its opinion, any of the 1999
Registration Statements or the Prospectus contains any untrue statement of
a material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made)
not misleading.
(iii) At the request of DWR, the General Partner will have furnished
to DWR a certificate, dated the date of the Closing and in form and
substance satisfactory to DWR, to the effect that:
(A) The representations and warranties by the Partnerships and
the General Partner in this Agreement are true, accurate, and
complete on and as of the date of the Closing as if made on the date
of the Closing.
(B) No stop order suspending the effectiveness of any of the
1999 Registration Statements has been issued by the SEC and no
proceedings for that purpose have been instituted or are pending or,
to the knowledge of the General Partner, are contemplated or
threatened under the 1933 Act. No order preventing or suspending the
use of the Prospectus has been issued by the SEC, CFTC, NASD, or NFA
and no proceedings for that purpose have been instituted or are
pending or, to the knowledge of the General Partner, are
contemplated or threatened under the 1933 Act or the CEAct.
(C) The Partnerships and the General Partner have performed
all of their obligations and satisfied all of the conditions on
their part to be performed or satisfied under this Agreement, the
Management Agreements, the Escrow Agreement, the DWR Customer
Agreements, and the Clearing Broker Customer Agreements at or prior
to the date of the Closing.
(D) The General Partner has made its capital contribution to
each Partnership and has met the net worth standard required of it
by each Limited Partnership Agreement.
(iv) Cadwalader, Wickersham & Taft, counsel to the General Partner
and the Partnerships, shall deliver its opinion to the parties hereto at
such Closing as requested by DWR, in form and substance satisfactory to
the parties hereto, to the effect that:
(A) Each Limited Partnership Agreement provides for the
subscription for and sale of the Units; all action required to be
taken by the General Partner and each Partnership as a condition to
the subscription for and sale of the Units to
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qualified subscribers therefor has been taken; and, upon payment of
the consideration therefor specified in the accepted Subscription
Agreements, the Units will constitute valid limited partnership
interests in the applicable Partnership and each subscriber who
purchases Units will become a Limited Partner, subject to the
requirements that each such purchaser shall have duly completed,
executed, and delivered to the applicable Partnership a Subscription
Agreement relating to the Units purchased by such purchaser, that
such purchaser meets all applicable suitability standards, and that
the representations and warranties of such purchaser in the
Subscription Agreement are true and correct and that such purchaser
is included as a Limited Partner in the applicable Partnership's
records. Such counsel need not independently verify compliance with
such requirements.
(B) Each Partnership is a limited partnership duly formed
pursuant to its Certificate of Limited Partnership, its Limited
Partnership Agreement and the DRULPA and is validly existing under
the laws of the State of Delaware with full partnership power and
authority to conduct the business in which it proposes to engage as
described in the applicable 1999 Registration Statement and the
Prospectus and to perform its obligations under its Limited
Partnership Agreement, its Management Agreement(s), its DWR Customer
Agreement, its Clearing Broker Customer Agreement, the Escrow
Agreement, and this Agreement; and each Partnership has received a
Certificate of Authority to do business in the State of New York as
contemplated under Article 8-A of the New York Revised Limited
Partnership Act and need not effect any other filings or
qualifications under the laws of any other jurisdictions to conduct
its business as described in the applicable 1999 Registration
Statement and the Prospectus.
(C) The General Partner is a corporation duly organized,
validly existing, and in good standing under the laws of the State
of Delaware and is qualified to do business and is in good standing
as a foreign corporation in the State of New York and in each other
jurisdiction in which the nature or conduct of its business requires
such qualification and where the failure to be so qualified might
reasonably be expected to result in material adverse consequences to
any Partnership or might materially adversely affect the General
Partner's ability to perform its obligations as described in the
1999 Registration Statements and the Prospectus. The General Partner
has full corporate power and authority to conduct its business as
described in the 1999 Registration Statements and the Prospectus and
to perform its obligations under each Limited Partnership Agreement,
each Management Agreement, each DWR Customer Agreement, each
Clearing Broker Customer Agreement, the Escrow Agreement, and this
Agreement, as applicable.
(D) The General Partner and its "principals," as defined in
CFTC Rule 3.1(a), and each Partnership have all federal and state
governmental, regulatory, self-regulatory and exchange approvals,
licenses, registrations, and memberships, and have effected all
filings with federal and state governmental regulators,
self-regulatory organizations and exchanges required to conduct
their business and to
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act as described in the 1999 Registration Statements and the
Prospectus, or required to perform their obligations under each
Limited Partnership Agreement, each Management Agreement, each DWR
Customer Agreement, each Clearing Broker Customer Agreement, the
Escrow Agreement, and this Agreement, except for such approvals,
licenses, registrations, memberships, and filings the absence of
which would not have a material adverse effect on their ability to
act as described in the 1999 Registration Statements and the
Prospectus, or to perform their obligations under such agreements,
and, to the best of such counsel's knowledge, after due
investigation, none of such approvals, licenses, registrations,
memberships, or filings has been rescinded, revoked, or suspended.
(E) Each Limited Partnership Agreement, each Management
Agreement, each DWR Customer Agreement, each Clearing Broker
Customer Agreement, the Escrow Agreement, and this Agreement has
been duly and validly authorized, executed, and delivered by or on
behalf of the General Partner and/or each Partnership, as the case
may be, and each Limited Partnership Agreement constitutes a valid
and binding agreement of the General Partner, each Management
Agreement constitutes a valid and binding agreement of the General
Partner and the applicable Partnership, the Escrow Agreement
constitutes a valid and binding agreement of each Partnership and
DWR, and this Agreement constitutes a valid and binding agreement of
each Partnership, the General Partner and DWR, and, in the case of
each valid and binding agreement above, the agreement is enforceable
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, or similar laws at the time in effect
affecting the enforceability generally of rights of creditors and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law),
and except as enforceability of indemnification, exculpation, and
contribution provisions may be limited by applicable law or public
policy.
(F) The execution and delivery of the respective Limited
Partnership Agreements, the respective Management Agreements, the
respective DWR Customer Agreements, the respective Clearing Broker
Customer Agreements, the Escrow Agreement, and this Agreement, as
applicable, the offer and sale of the Units by each Partnership, the
incurrence of the obligations herein and therein set forth, and the
consummation of the transactions contemplated herein, therein, and
in the Prospectus, will not be in contravention of the General
Partner's certificate of incorporation or bylaws, any Certificate of
Limited Partnership, or any Limited Partnership Agreement, or the
certificate of incorporation or bylaws of DWR, and, to the best of
such counsel's knowledge, based upon due inquiry of certain officers
of the General Partner, will not violate, or constitute a breach of,
or default under, any other agreement or instrument known to such
counsel by which the General Partner or any Partnership is bound,
and will not violate any order known to such counsel, or any law,
rule, or regulation applicable to the General Partner or any
Partnership of any court, governmental body, administrative agency,
panel, or self-regulatory organization having jurisdiction over the
General Partner or any Partnership.
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(G) To such counsel's knowledge, based upon due inquiry of
certain officers of the General Partner, except as disclosed in the
Prospectus, there are no actions, suits, or proceedings at law or in
equity pending or threatened before or by any court, governmental
body, administrative agency, panel, or self-regulatory organization,
nor have there been any such actions, suits, or proceedings within
the five years preceding the date of the Prospectus, to which the
General Partner or any Partnership is or was a party, or to which
any of the assets of the General Partner or any of the Partnerships
is or was subject, which would be material to an investor's decision
to invest in the Partnership, or which resulted or might reasonably
be expected to result in a materially adverse change in the
condition, financial or otherwise, business or prospects of the
General Partner or any Partnership, whether or not arising in the
ordinary course of business.
(H) The information in the Prospectus under the captions
"Summary--Tax Considerations," "Risk Factors--Taxation Risks,"
"Purchases by Employee Benefit Plans--ERISA Considerations,"
"Material Federal Income Tax Considerations," "State and Local
Income Tax Aspects," and "The Limited Partnership Agreements," to
the extent that such information constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is correct.
(I) The 1999 Registration Statements are effective under the
1933 Act and, to the best of such counsel's knowledge, no
proceedings for a stop order are pending or threatened under Section
8(d) of the 1933 Act or any Blue Sky laws.
(J) At the time the 1999 Registration Statements became
effective, the 1999 Registration Statements, and at the time the
Prospectus was issued and as of the Closing, the Prospectus,
complied as to form in all material respects with the requirements
of the 1933 Act, the SEC Regulations, the CEAct, the CFTC Rules, and
the rules of the NASD and NFA. Nothing has come to such counsel's
attention that would lead them to believe that the 1999 Registration
Statements at the time they became effective contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus at the time it was
issued or at the Closing contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that such counsel need
express no opinion or belief (a) as to the information in the 1999
Registration Statements or the Prospectus regarding the Trading
Advisors, the Commodity Brokers, or their respective principals, (b)
as to the financial statements, notes thereto and other financial or
statistical data set forth in the 1999 Registration Statements and
the Prospectus, or (c) as to the performance data and notes or
descriptions thereto set forth in the 1999 Registration Statements
and the Prospectus.
(K) Based upon reliance on certain SEC "no-action" letters, as
of the Closing, none of the Partnerships needs register as an
"investment company" under the Investment Company Act of 1940, as
amended.
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In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the General Partner, and
other sources believed by it to be responsible, and may assume that
signatures on all documents examined by it are genuine, and that a
Subscription Agreement in the form referred to in the Prospectus,
has been duly authorized, completed, dated, executed, and delivered
and funds representing the full subscription price for the Units
purchased have been delivered by each purchaser of Units in
accordance with the requirements set forth in the Prospectus.
(v) Cadwalader, Wickersham & Taft, counsel to the Non-Clearing
Broker, shall deliver an opinion to the parties hereto at such Closing as
requested by DWR, in form and substance satisfactory to the parties
hereto, to the effect that:
(A) The Non-Clearing Broker is a corporation duly organized,
validly existing, and in good standing under the laws of the State
of Delaware and is qualified to do business and is in good standing
as a foreign corporation in the State of New York and in each other
jurisdiction in which the nature or conduct of its business requires
such qualification and where the failure to be so qualified might
reasonably be expected to result in material adverse consequences to
the Partnership or might materially adversely affect the
Non-Clearing Broker's ability to perform its obligations as
described in the 1999 Registration Statements and the Prospectus.
The Non-Clearing Broker has full corporate power and authority to
perform its obligations as described in the 1999 Registration
Statements and the Prospectus and to perform its obligations under
the DWR Customer Agreements, the Clearing Broker Customer Agreements
and this Agreement.
(B) The DWR Customer Agreements, the Clearing Broker Customer
Agreements and this Agreement have been duly and validly authorized,
executed, and delivered by the Non-Clearing Broker, and the DWR
Customer Agreements, the Clearing Broker Customer Agreements and
this Agreement constitute valid and binding agreements of the
Non-Clearing Broker, enforceable in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization,
moratorium, or similar laws at the time in effect affecting the
enforceability generally of rights of creditors and by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and except as
enforceability of indemnification, exculpation, and contribution
provisions may be limited by applicable law or public policy.
(C) The Non-Clearing Broker has all federal and state
governmental, regulatory, self-regulatory and exchange approvals,
licenses, registrations, and memberships, and has effected all
filings with federal and state governmental regulators,
self-regulatory organizations and exchanges required to conduct its
business and to act as described in the 1999 Registration Statements
and the Prospectus, or required to perform its obligations under the
DWR Customer Agreements, the Clearing Broker Customer Agreements and
this Agreement, except for such approvals, licenses, registrations,
memberships, and filings the absence of which would not have a
material adverse effect on its ability to act as
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described in the 1999 Registration Statements and the Prospectus, or
to perform its obligations under such agreements, and, to the best
of such counsel's knowledge, after due investigation, none of such
approvals, licenses, registrations, memberships, or filings has been
rescinded, revoked or suspended.
(D) The execution and delivery of the DWR Customer Agreements,
the Clearing Broker Customer Agreements and this Agreement, the
incurrence of the obligations herein and therein set forth, and the
consummation of the transactions contemplated herein, therein, and
in the Prospectus, will not be in contravention of the Non-Clearing
Broker's certificate of incorporation or bylaws, and to the best of
such counsel's knowledge, based upon due inquiry of certain officers
of the Non-Clearing Broker, will not violate, or constitute a breach
of, or default under, any other agreement or instrument known to
such counsel by which the Non-Clearing Broker is bound, and will not
violate any order known to such counsel or any law, rule, or
regulation applicable to the Non-Clearing Broker of any court,
governmental body, administrative agency, panel, or self-regulatory
organization having jurisdiction over the Non-Clearing Broker.
(E) To the best of such counsel's knowledge, based upon due
inquiry of certain officers of the Non-Clearing Broker, except as
disclosed in the Prospectus, there are no actions, suits, or
proceedings at law or in equity pending or threatened before or by
any court, governmental body, administrative agency, panel, or
self-regulatory organization, nor have there been any such actions,
suits, or proceedings within the five years preceding the date of
the Prospectus, to which the Non-Clearing Broker is or was a party,
or to which any of its assets is or was subject, which would be
material to an investor's decision to invest in the Partnership, or
which resulted or might reasonably be expected to result in a
materially adverse change in the condition, financial or otherwise,
business or prospects of the Non-Clearing Broker, whether or not
arising in the ordinary course of business.
(F) Nothing has come to such counsel's attention to lead such
counsel to believe that, as to the Non-Clearing Broker, (a) the 1999
Registration Statements at the time they became effective contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (b) the Prospectus at the time
it was issued or at the Closing contained an untrue statement of a
material fact or omitted to state a material fact necessary in order
to make the statements therein relating to the Non-Clearing Broker,
in light of the circumstances under which they were made, not
misleading.
In rendering its opinion, such counsel may rely on information
obtained from public officials, officers of the Non-Clearing Broker,
and other sources believed by it to be responsible and may assume
that signatures on all documents examined by it are genuine.
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(vi) Deloitte & Touche L.L.P., independent certified public
accountants for the Partnerships and the General Partner, will have
furnished to DWR a letter, at such Closing as requested by DWR, dated the
date of the Closing and in form and substance satisfactory to DWR, to the
effect that:
(A) Such accountant is an independent certified public
accountant within the meaning of the 1933 Act, the CEAct, and the
SEC Regulations with respect to the Partnerships and the General
Partner.
(B) In such accountant's opinion, the statements of financial
condition of the Partnerships and the General Partner and the notes
thereto included in the Prospectus and examined by it comply as to
form in all material respects with the applicable accounting
requirements of the 1933 Act, the CEAct, and the SEC Regulations.
(C) On the basis of limited procedures not constituting an
audit, including inquiries of officials of the General Partner
having responsibility for financial and accounting matters
pertaining to the Partnerships and such other inquiries and
procedures as may be specified in such letter, nothing has come to
such accountant's attention which causes it to believe that, as of a
specified date not more than five business days prior to the date of
the Closing, there has been any decrease in the Net Assets of any
Partnership as compared to the Net Assets set forth in the
respective statements of financial condition of the Partnerships
included in the Prospectus, except as may be disclosed in such
letter.
(D) On the basis of limited procedures, not constituting an
audit, including a reading of the latest available financial
statements of the General Partner, inspection of the minute book of
the General Partner since the date of the latest audited financial
statements of the General Partner, inquiries of officials of the
General Partner having responsibility for financial and accounting
matters, and such other inquiries and procedures as may be specified
in such letter, nothing has come to such accountant's attention that
causes it to believe that, as of a specified date not more than five
business days prior to the date of the Closing, there has been any
decrease in the General Partner's net worth as compared to net worth
set forth in the statement of financial condition of the General
Partner included in the Prospectus, except as may be disclosed in
such letter.
(vii) The Non-Clearing Broker shall deliver a certificate to the
parties hereto, in form and substance satisfactory to such parties, at
such Closing as requested by DWR, to the effect that the representations
and warranties of the Non-Clearing Broker contained herein are true and
correct with the same effect as though expressly made at such Closing.
(viii) Each Trading Advisor shall deliver, at such Closing as
requested by DWR, such certificate as specified in each such Trading
Advisor's respective Management Agreement.
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(ix) Counsel to each Trading Advisor shall deliver, at such Closing
as requested by DWR, such legal opinion as specified in the respective
Management Agreement of each Trading Advisor.
(x) All agreements contemplated herein or in the 1999 Registration
Statements or the Prospectus shall have been duly executed and delivered.
11. Indemnification.
(a) Each Partnership agrees to indemnify, defend, and hold harmless
DWR, the General Partner, each Additional Seller (if any) and their respective
"affiliates" (as defined in Section 11(c)) from and against any loss, liability,
damage, cost, and expense (including attorneys' and accountants' fees and
expenses incurred in investigating or defending any demands, claims, or
lawsuits), actually and reasonably incurred arising from any act, omission,
activity, or conduct undertaken pursuant to this Agreement by or on behalf of
the Partnership, including, without limitation, any demands, claims, or lawsuits
initiated by a Limited Partner (or assignee thereof), provided that (1) DWR, the
General Partner, or the Additional Seller, as applicable, has determined, in
good faith, that the act, omission, activity, or conduct giving rise to the
claim for indemnification was in the best interests of the Partnership, and (2)
the act, omission, activity, or conduct that was the basis for such loss,
liability, damage, cost, or expense was not the result of misconduct or
negligence. The indemnity in this Section 11(a) is in addition to any liability
that the Partnership may otherwise have and will extend, upon the same terms and
conditions, to each person, if any, who controls an indemnified person within
the meaning of the 1933 Act. Notwithstanding anything to the contrary contained
in the foregoing, neither DWR, the General Partner, an Additional Seller, nor
their respective affiliates shall be indemnified by a Partnership for any
losses, liabilities, or expenses arising from or out of an alleged violation of
federal or state securities laws unless (1) there has been a successful
adjudication on the merits of each count involving alleged securities laws
violations as to the particular indemnitee, or (2) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to the particular indemnitee, or (3) a court of competent jurisdiction approves
a settlement of the claims against the particular indemnitee and finds that
indemnification of the settlement and related costs should be made, provided,
with regard to such court approval, the indemnitee must apprise the court of the
position of the SEC, and the positions of the respective securities
administrators of Massachusetts, Missouri, Tennessee, and/or those other states
and jurisdictions in which the plaintiffs claim that they were offered or sold
Units, with respect to indemnification for securities laws violations before
seeking court approval for indemnification. Furthermore, in any action or
proceeding brought by a Limited Partner in the right of a Partnership to which
the General Partner, DWR, an Additional Seller, or any affiliate of any of the
foregoing is a party defendant, any such person shall be indemnified only to the
extent and subject to the conditions specified in DRULPA and this Section 11. A
Partnership shall make advances to the General Partner, DWR, an Additional
Seller, or their respective affiliates hereunder only if: (1) the demand, claim,
or lawsuit relates to the performance of duties or services by such persons to
the Partnership; (2) such demand, claim, or lawsuit is not initiated by a
Limited Partner; and (3) such advances are repaid, with interest at the legal
rate under Delaware law, if the person receiving such advance is ultimately
found not to be entitled to indemnification hereunder.
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(b) DWR agrees to indemnify, hold harmless, and defend each
Partnership, the General Partner, their respective "affiliates" (as defined in
Section 11(e)), and their respective successors and assigns, from and against
any loss, claim, damage, liability, cost, and expense, joint or several
(including attorneys' and accountants' fees and expenses incurred in
investigating or defending any demands, claims, or lawsuits), to which any
indemnified party may become subject under the 1933 Act, the 1934 Act, the
CEAct, the Blue Sky law of any jurisdiction, or otherwise (including in
connection with the settlement of claims approved in advance by DWR and in
connection with any administrative proceedings), in respect of the offer or sale
of Units, insofar as such loss, claim, damage, liability, cost, or expense
arises out of, or is based upon: (i) a breach by DWR of any representation,
warranty, or agreement in this Agreement or any certificate delivered pursuant
to this Agreement, or the failure by DWR to perform any covenant made by DWR
herein; or (ii) a misleading or untrue statement of a material fact made in any
of the 1999 Registration Statements, the Prospectus or any Sales Literature, or
an omission to state a material fact therein which is required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus and any Sales Literature, in light of the circumstances under which
they were made) not misleading, provided such statement or omission relates
specifically to DWR, or was made in reliance upon, and in conformity with,
written information or instructions furnished by or on behalf of DWR or DWR's
agents. The indemnity in this Section 11(b) is in addition to any liability that
DWR may otherwise have and will extend, upon the same terms and conditions, to
each person, if any, who controls an indemnified person within the meaning of
the 1933 Act.
(c) As used in this Section 11 the term "affiliate" of a person
shall mean: (i) any natural person, partnership, corporation, association, or
other legal entity directly or indirectly owning, controlling, or holding with
power to vote 10% or more of the outstanding voting securities of such person;
(ii) any partnership, corporation, association, or other legal entity 10% or
more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote by such person; (iii) any natural person,
partnership, corporation, association, or other legal entity directly or
indirectly controlling, controlled by, or under common control with, such
person; or (iv) any officer, director, or partner of such person.
Notwithstanding the foregoing, solely for purposes of determining eligibility
for indemnification under Section 11(a), the term "affiliate" shall include only
those persons performing services for the applicable Partnership.
(d) Promptly after receipt by an indemnified party under Section
11(a) or (b) hereof of notice of the commencement of any action, claim, or
proceeding to which any of such subsections may apply, the indemnified party
will notify the indemnifying party in writing of the commencement thereof if a
claim in respect thereof is to be made against the indemnifying party under any
of such subsections; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability which the indemnifying
party may have to the indemnified party otherwise than under any of such
subsections, except where such omission has materially prejudiced the
indemnifying party. In case any action, claim, or proceeding is brought against
an indemnified party and the indemnified party notifies the indemnifying party
of the commencement thereof as provided above, the indemnifying party will be
entitled to participate therein and, to the extent that the indemnifying party
desires, to assume the defense thereof with counsel selected by the indemnifying
party and not unreasonably disapproved by the indemnified party. After notice
from the indemnifying party to the indemnified party of the indemnifying
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<PAGE>
party's election so to assume the defense thereof as provided above, the
indemnifying party will not be liable to the indemnified party under any of such
subsections for any legal and other expenses subsequently incurred by the
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation.
(e) Notwithstanding Section 11(d), if, in any action, claim, or
proceeding as to which indemnification is or may be available under Section
11(a) or (b) hereof, an indemnified party reasonably determines that its
interests are or may be adverse, in whole or in part, to the indemnifying
party's interests or that there may be legal defenses available to the
indemnified party which are different from, in addition to, or inconsistent
with, the defenses available to the indemnifying party, the indemnified party
may retain its own counsel in connection with such action, claim, or proceeding,
and will be indemnified by the indemnifying party for any legal and other
expenses reasonably incurred in connection with investigating or defending such
action, claim, or proceeding.
(f) In no event will the indemnifying party be liable for the fees
and expenses of more than one counsel for all indemnified parties in connection
with any one action, claim, or proceeding, or in connection with separate but
similar or related actions, claims, or proceedings, in the same jurisdiction
arising out of the same general allegations. The indemnifying party will not be
liable for any settlement of any action, claim, or proceeding effected without
the indemnifying party's express written consent, but if any action, claim, or
proceeding is settled with the indemnifying party's express written consent or
if there is a final judgment for the plaintiff in any such action, claim, or
proceeding, the indemnifying party will indemnify, defend, and hold harmless an
indemnified party as provided in Section 11(a) or (b) hereof, as applicable.
(g) The exculpation provisions in each DWR Customer Agreement, and
each Limited Partnership Agreement shall not relieve any party thereto from any
liability it may have or incur to any party under this Agreement; nor shall any
party thereto be entitled to be indemnified by any party thereto pursuant to the
indemnification provisions contained in such agreements, against any loss,
liability, damage, cost, or expense it may incur under this Agreement.
12. Termination. Each of the parties shall have the right to
terminate this Agreement as to itself at any time prior to a Closing by giving
written notice of such termination to the other parties.
13. Survival. The respective indemnities, agreements, obligations,
representations, warranties, and other statements of the parties hereto set
forth in this Agreement or in any certificates delivered pursuant hereto will
retain in full force and effect (regardless of any investigation or any
statement as to the results thereof made by, or on behalf of, DWR, any
Partnership, the General Partner or any officer, director, controlling person,
or agent of any of the foregoing) and will survive the delivery of and payment
for Units and the termination or expiration of this Agreement, and each Closing.
14. Notices. All notices required or desired to be given under this
Agreement must be in writing and will be effective when given personally on the
date delivered or, when
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given by mail, on the date of receipt, addressed as follows (or to such other
address as the party entitled to notice hereafter designates in accordance with
the terms hereof):
if to a Partnership, the Partnerships or the General Partner:
Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Robert E. Murray
President
if to DWR:
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Robert E. Murray
Senior Vice-President
in either case with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: Edwin L. Lyon, Esq.
15. Successors. This Agreement will be binding upon and inure solely
to the benefit of DWR, each Partnership and the General Partner (and to the
extent provided in Section 11 hereof, the "affiliates" of each Partnership, the
General Partner, DWR, any Additional Sellers, and the respective heirs,
executors, administrators, successors, and assigns of such persons), and no
other person will acquire or have any rights under or by virtue of this
Agreement. No purchaser of Units will be deemed to be a successor or assign to
any party hereto merely by reason of such purchase.
16. Assignment; Amendment. This Agreement may not be assigned by any
party hereto without the prior express written consent of all other parties.
This Agreement may not be amended except by the express written consent of all
parties hereto.
17. Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of laws. If any action or proceeding shall be brought
by a party to this Agreement to enforce any right or remedy under this
Agreement, each party hereto hereby consents and will submit to the jurisdiction
of the courts of the State of New York or any federal court sitting in the
County, City and State of New York. Any action or proceeding brought by any
party to this Agreement to enforce any right, assert any claim or obtain any
relief whatsoever in connection with this Agreement shall be brought by such
party exclusively in the courts of the State of New York or any federal court
sitting in the County, City and State of New York.
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18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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If the foregoing Agreement is satisfactory to you, please so indicate by
signing at the place provided below.
Accepted and Agreed: MORGAN STANLEY DEAN WITTER SPECTRUM
SELECT L.P.
DEAN WITTER REYNOLDS INC. By: Demeter Management Corporation,
General Partner
By: _____________________________ By:____________________________________
Robert E. Murray Robert E. Murray
Senior Vice President President
MORGAN STANLEY DEAN WITTER SPECTRUM
TECHNICAL L.P.
By: Demeter Management Corporation,
General Partner
By:____________________________________
Robert E. Murray
President
MORGAN STANLEY DEAN WITTER SPECTRUM
STRATEGIC L.P.
By: Demeter Management Corporation,
General Partner
By:____________________________________
Robert E. Murray
President
MORGAN STANLEY DEAN WITTER SPECTRUM
GLOBAL BALANCED L.P.
By: Demeter Management Corporation,
General Partner
By:____________________________________
Robert E. Murray
President
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM
CURRENCY L.P.
By: Demeter Management Corporation,
General Partner
By:____________________________________
Robert E. Murray
President
MORGAN STANLEY DEAN WITTER SPECTRUM
COMMODITY L.P.
By: Demeter Management Corporation,
General Partner
By:____________________________________
Robert E. Murray
President
DEMETER MANAGEMENT CORPORATION
By:____________________________________
Robert E. Murray
President
<PAGE>
Exhibit 1.02
ADDITIONAL SELLER AGREEMENT
________________
(Date)
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Ladies and Gentlemen:
Morgan Stanley Dean Witter Spectrum Select L.P., Morgan Stanley Dean
Witter Spectrum Technical L.P., Morgan Stanley Dean Witter Spectrum Strategic
L.P., Morgan Stanley Dean Witter Spectrum Global Balanced L.P., Morgan Stanley
Dean Witter Spectrum Currency L.P., and Morgan Stanley Dean Witter Spectrum
Commodity L.P. (collectively, the "Partnerships," and individually, a
"Partnership"), each a limited partnership organized under the Delaware Revised
Uniform Limited Partnership Act, are proposing concurrently to offer and sell,
and issue, up to 11,000,000, 33,000,000, 19,000,000, 11,000,000, 15,000,000, and
7,000,000 units of limited partnership interest (the "Units"), respectively, in
accordance with the terms and conditions set forth in the Amended and Restated
Selling Agreement, dated as of o (the "Selling Agreement"), among you, each of
the Partnerships, and Demeter Management Corporation, a Delaware corporation
which is the general partner of each of the Partnerships (the "General
Partner"), and in accordance with the effective registration statements on Form
S-1 listed in Schedule A attached hereto, including the exhibits and any
amendments thereto, as filed by the Partnerships with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act"). Such registration statements, in the form in which they have
become effective under the 1933 Act, are herein referred to each individually as
a "Registration Statement," and collectively as the "Registration Statements,"
and the prospectus constituting a part of the last Registration Statement under
the 1933 Act in the form last filed
<PAGE>
with the SEC pursuant to Rule 424 under the 1933 Act, together with any
supplements thereto, is herein referred to as the "Prospectus."
Pursuant to the Selling Agreement, you were appointed the selling
agent for the Units to use your best efforts to offer and sell Units and, in
that connection, you were authorized under the Selling Agreement to appoint,
with the written approval of the General Partner, as your agent to make offers
and sales of Units, certain securities brokers or dealers (each such broker or
dealer, an "Additional Seller"). All capitalized terms used herein shall have
the meanings ascribed to them in the Selling Agreement unless otherwise defined
herein or unless the context indicates otherwise.
On the basis of the terms, conditions, and agreements contained in
this Agreement, we agree with you as follows:
1. We agree to become an Additional Seller, to use our best efforts
to offer and sell the Units on the terms stated in this Agreement, the Selling
Agreement, the Registration Statements, and the Prospectus, and to comply with
the terms and conditions of this Agreement and the Selling Agreement in making
offers and sales of Units.
2. We, as an Additional Seller, represent and warrant to you, as
follows:
(a) We are a corporation, partnership, or other entity duly
organized, validly existing, and in good standing under the laws of the
jurisdiction indicated on the signature page hereof, and are qualified to do
business and are in good standing in each jurisdiction in which the nature or
conduct of our business requires such qualification and where the failure to be
so qualified could materially adversely affect our ability to perform our
obligations hereunder. We have full power and authority under applicable law to
conduct our business and perform our obligations under this Agreement.
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<PAGE>
(b) We have all U.S. federal and state, and non-U.S. regulatory and
self-regulatory approvals, licenses, registrations, and memberships, and have
effected all filings with U.S. federal and state, and non-U.S. governmental
regulators and self-regulatory organizations required to conduct our business
and required to perform our obligations under this Agreement. Specifically, we
are either: (i) a broker or dealer who is (A) registered and in good standing as
such with the SEC under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and (B) registered or licensed and in good standing as such under
the respective securities laws of the 50 states, the District of Columbia, and
Puerto Rico, where such registration or licensing is required for us to
consummate offers and sales of Units as contemplated by this Agreement, and (C)
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD"); or (ii) a non-U.S. broker or dealer not eligible for
membership in the NASD, in which case we agree: (A) to make no offers or sales
of Units within the United States, its territories or possessions, or areas
subject to its jurisdiction, or to persons who are citizens thereof or residents
therein, (B) that in making offers and sales of Units, we will comply with the
"Free-Riding and Withholding Interpretation" in IM-2110-1 to NASD Conduct Rule
2110, and NASD Conduct Rules 2730 and 2750, as if we were a member of the NASD,
and NASD Conduct Rule 2420 as it applies to a non-member non-U.S. broker or
dealer, (C) that we will not offer or sell any Units in any non-U.S.
jurisdiction until we effect, at our cost and expense, any and all registration
or qualification filings with regard to the Units, the Partnerships or the
General Partner as may be required under the securities or other laws of such
jurisdiction (we will provide you, at our cost and expense, an opinion of
qualified counsel, satisfactory in form and substance to you, confirming that
any such filings have been properly effected, or that no such filings were
required, prior to the time a Subscription and Exchange Agreement and Power of
Attorney, in the form annexed to the Prospectus as Exhibit B (the "Subscription
Agreement"), is delivered by
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a resident of any non-U.S. jurisdiction), and (D) that because limited partners
in the Partnerships have a right of exchange (redemption of Units and purchase
of Units with the proceeds of the redemption) among the Partnerships, we will
maintain and update as necessary, at our cost and expense, any required
registration or qualification filings effected pursuant to the immediately
preceding clause (C) so long as any person resident in such non-U.S.
jurisdiction remains a Limited Partner.
(c) This Agreement has been duly and validly authorized, executed,
and delivered by us and constitutes our valid and binding agreement, enforceable
against us in accordance with its terms.
(d) The execution and delivery of this Agreement, the incurrence of
the obligations set forth herein, and the consummation of the transactions
contemplated herein will not violate, or constitute a breach of, or default
under, our certificate of incorporation or bylaws, partnership certificate or
agreement, or other organizational document, or any other agreement or
instrument by which we are bound or any order, law, rule, or regulation
applicable to us of any court, governmental body, administrative agency, panel,
or self-regulatory organization having jurisdiction over us.
3. It is understood and agreed that we shall not, without your prior
written approval, publish, circulate, distribute, or otherwise use any
advertisement or solicitation material relating to the Units, other than the
Prospectus and any other selling literature supplied by you to us expressly for
such purpose ("Selling Literature"). We understand and acknowledge that we are
not authorized by you, the General Partner, or any Partnership to make any
representations in connection with the offering of Units other than those
contained in the Prospectus. It is agreed that, upon our written request, you
shall provide us with copies of the Registration Statements.
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<PAGE>
4. We will offer and sell Units only to persons who satisfy the
suitability and/or minimum investment requirements set forth in the Prospectus
and the Subscription Agreement (and as may be required by the law of any
non-U.S. jurisdiction in which we may offer Units) and who, to the General
Partner's satisfaction, complete a Subscription Agreement. We will conduct a
thorough review of the suitability of each subscriber for Units. We will forward
subscriptions to the General Partner's office at Two World Trade Center, 62nd
Floor, New York, New York 10048-0026 (or such other office as you may notify
us), no later than noon of the first business day following our receipt of an
acceptable Subscription Agreement from a subscriber for Units, by mail or
courier, so that the General Partner should receive such Subscription Agreement
at least five business days prior to the applicable Monthly Closing. We will
arrange for the opening of a customer account with you for each such subscriber
for the purpose of paying for subscriptions, crediting of interest thereon,
redemptions of Units, and receipt of any distributions thereon. We understand
that subsequent to its review of each Subscription Agreement, the General
Partner will notify us, and we shall notify each subscriber by the business day
following our receipt of notice from the General Partner, of the General
Partner's acceptance of all, a portion, or none of the subscriber's
subscription. We understand that the General Partner may reject subscriptions,
in whole or in part, for any reason, and we agree that we shall not be entitled
to commissions with respect to any rejected subscriptions. All payments for
subscriptions by subscribers shall be made as provided under the heading
"Subscription Procedure" in the Prospectus. You shall be responsible for the
deposit of subscription funds into the Escrow Account as described under the
heading "Plan of Distribution" in the Prospectus. You shall be responsible for
issuance and delivery of interim receipts to subscribers.
-5-
<PAGE>
5. We will offer and sell Units in compliance with the requirements
set forth in the Registration Statements, the Prospectus (particularly under the
captions "Summary -- Investment Requirements," "Plan of Distribution,"
"Subscription Procedure," and "Purchases by Employee Benefit Plans -- ERISA
Considerations"), the Subscription Agreement, the Selling Agreement, and this
Agreement. We will deliver a Prospectus to each subscriber to whom we sell Units
at least five (5) business days prior to the "Initial Closing", or "Monthly
Closing" (as defined in the Prospectus) at which the Units subscribed for will
be issued. We will comply fully at all times with all applicable U.S. federal
and state, and non-U.S. securities and commodities laws (including, without
limitation, the 1933 Act, the 1934 Act, the Commodity Exchange Act, as amended
(the "CEAct"), and the securities laws of the jurisdictions in which we solicit
subscriptions), and all applicable requirements of the NASD (including NASD
Conduct Rule 2810, particularly paragraphs (b)(2) and (3) thereof), the Board of
Governors of the Federal Reserve System, and all other securities and
commodities exchanges, governmental regulators and self-regulatory organizations
that have jurisdiction over us or over the offer and sale of Units by us.
6. Specifically, if we are a member of the NASD, (a) we will not
permit the purchase of any Units by a customer account over which we have
discretionary authority without the prior written approval by the customer
owning such account; (b) we confirm that we have reasonable grounds to believe
that all material facts are adequately and accurately disclosed in the
Prospectus, which provides a basis for evaluating the Partnerships; (c) we
confirm that in determining the adequacy of disclosed facts pursuant to clause
(b), we have obtained information on material facts relating to: (i) items of
compensation, (ii) tax aspects, (iii) financial stability and experience of the
General Partner, and (iv) the Partnerships' conflicts and risk factors; (d) we
will take such measures as are reasonably necessary to assure ourselves that (i)
our registered
-6-
<PAGE>
principals and representatives have informed each subscriber of all pertinent
facts relating to the liquidity and marketability of the Units, and (ii) in
recommending the purchase or redemption of Units, or the exchange of Units in
one Partnership for Units in another Partnership, as described under "Exchange
Privilege" in the Prospectus (an "Exchange"), our registered principals and
representatives have reasonable grounds to believe, on the basis of information
obtained from each subscriber concerning his investment objectives, other
investments, financial situation and needs, and any other information known by
such registered principal or representative, that: (A) such subscriber is or
will be in a financial position appropriate to enable him to realize to a
significant extent the benefits described in the Prospectus, (B) such subscriber
has a fair market net worth sufficient to sustain the risks inherent in the
purchase of Units, including loss of investment and lack of liquidity, and (C)
the purchase of Units is otherwise suitable for such subscriber; and (e) it is
understood that the General Partner will maintain in its files, located c/o Dean
Witter Reynolds Inc., Two World Trade Center, New York, New York 10048, each
subscriber's Subscription Agreement for not less than six years, and we will
maintain, at our respective branch offices, any other documents disclosing the
basis upon which the determination of suitability was reached for each such
subscriber.
7. Promptly after each closing, you shall pay to us for each Unit
subscribed, accepted, and paid for through our efforts, a commission of ___% of
the Net Asset Value of each such Unit as of the closing as of which the Unit is
issued. Your determination of the amount payable to us, if any, shall be
conclusive. In addition, if we are legally qualified or permitted to receive
additional compensation, as provided in Section 5(h) of the Selling Agreement,
you agree to pay to us, as additional compensation, an amount equal to _____% of
the monthly brokerage fees received by you from each Partnership and
attributable to the outstanding Units sold by us. Such additional compensation
shall be in consideration of and is contingent upon our
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<PAGE>
agreement (which we hereby undertake to perform) to provide additional services
in connection with Units sold by us, including: (a) inquiring of the General
Partner from time to time, at the request of a Limited Partner, as to the Net
Asset Value of a Unit; (b) inquiring of the General Partner, at the request of a
Limited Partner, as to the futures markets and the activities of the
Partnerships; (c) responding to questions of Limited Partners from time to time
with respect to monthly account statements, annual reports, financial
statements, and annual tax information furnished periodically to Limited
Partners; (d) providing advice to Limited Partners from time to time as to when
and whether to make additional investments or to redeem or Exchange Units; (e)
assisting Limited Partners in the redemption or Exchange of Units; and (f)
providing such other services as Limited Partners from time to time may
reasonably request. We understand and agree that no portion of such additional
compensation may be paid to our employees unless such employees meet the
qualifications set forth in Section 5(g) of the Selling Agreement and have
actually performed the above services for the Limited Partners holding Units
sold by us. Acceptance of compensation hereunder shall constitute a
representation by us that we have complied with all of the provisions of this
Paragraph 7 and this Agreement, and that we shall comply with the provisions of
this Paragraph 7 so long as we shall continue to receive any additional
compensation hereunder as specified in this Paragraph 7. We shall not be
entitled to a commission in any case in which it is determined by you or the
General Partner that the solicitation by us was made in violation of the
securities or commodities laws of any applicable jurisdiction. It is understood
that any compensation payable to us hereunder is payable solely from your funds,
and neither any Partnership, the General Partner, any subscriber, nor any
Limited Partner shall be liable or responsible therefor.
8. This Agreement shall terminate upon the termination of the
offering pursuant to the Selling Agreement and may be terminated by either party
upon ten (10) days'
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<PAGE>
prior written notice to the other. Upon termination of this Agreement, all
authorizations, rights and obligations hereunder shall cease, except (a) the
indemnities set forth in Paragraph 10 hereof, (b) the obligations to settle
accounts hereunder, (c) our obligations under Paragraph 2(b)(ii)(D) and
Paragraph 9 hereof, and (d) your agreement to provide additional compensation
and our obligations in connection therewith set forth in Paragraph 7 hereof.
9. We authorize you to deduct from any compensation that we may
receive under Paragraph 7 all transfer taxes, if any, paid by you for our
account with respect to sales of Units made through our efforts. We agree to pay
our proportionate share of any amount asserted against and discharged by you and
the other Additional Sellers, or any of them, based on the claim that you and
the Additional Sellers constitute an association, unincorporated business, or
other separate entity, including any expense incurred in defending against such
claim.
10. (a) We agree to indemnify, hold harmless, and defend you, the
General Partner, each Partnership, each Trading Advisor, and any other Commodity
Broker for a Partnership against any loss, claim, damage, liability, cost, and
expense, joint or several (including attorneys' and accountants' fees and
expenses reasonably incurred in investigating or defending any demands, claims,
or lawsuits), to which you or any indemnified party may become subject under the
1933 Act, the 1934 Act, the CEAct, the securities law of any jurisdiction, or
otherwise (including in connection with the settlement of claims approved in
advance by us and in connection with any administrative proceedings), in respect
of the offer or sale of Units, insofar as such loss, claim, damage, liability,
cost, or expense arises out of, or is based upon a breach by us of any
representation, warranty, or agreement in this Agreement, or the failure by us
to perform any covenant made by us herein. The indemnity agreement in this
subparagraph (a) shall be in addition to any liability that we may otherwise
have and will extend, upon the same terms and conditions, to each person, if
any, who would be deemed a controlling
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<PAGE>
person (within the meaning of Section 15 of the 1933 Act) of you, the General
Partner, any Partnership, any Trading Advisor, or any other Commodity Broker.
(b) Promptly after receipt by an indemnified party under
subparagraph (a) above of notice of the commencement of any action, claim, or
proceeding to which such subparagraph may apply, the indemnified party shall
notify the indemnifying party in writing of the commencement thereof if a claim
in respect thereof is to be made against the indemnifying party thereunder; but
the omission so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which the indemnifying party may have to
the indemnified party otherwise than under such subparagraph, except to the
extent that such omission has materially prejudiced the indemnifying party. If
any action, claim, or proceeding is brought against an indemnified party and the
indemnified party notifies the indemnifying party of the commencement thereof as
provided above, the indemnifying party shall be entitled to participate therein
and, to the extent that the indemnifying party desires, to assume the defense
thereof with counsel selected by the indemnifying party and approved by the
indemnified party, such approval not to be unreasonably withheld. After notice
from the indemnifying party to the indemnified party of the indemnifying party's
election so to assume the defense thereof as provided above, the indemnifying
party shall not be liable to the indemnified party under subparagraph (a) for
any legal and other expenses subsequently incurred by the indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation.
(c) Notwithstanding subparagraph (b), if, in any action, claim, or
proceeding as to which indemnification is or may be available under subparagraph
(a) above, an indemnified party reasonably determines that its interests are or
may be adverse, in whole or in part, to the indemnifying party's interests or
that there may be legal defenses available to the indemnified party which are
inconsistent with the defenses available to the indemnifying party, the
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<PAGE>
indemnified party may retain its own counsel in connection with such action,
claim, or proceeding, and shall be indemnified by the indemnifying party for any
legal and other expenses reasonably incurred in connection with investigating or
defending such action, claim, or proceeding.
(d) In no event will an indemnifying party under this Agreement be
liable for the fees and expenses of more than one counsel for any one
indemnified party in connection with any one action, claim, or proceeding or in
connection with separate but similar or related actions, claims, or proceedings
in the same jurisdiction arising out of the same general allegations. The
indemnifying party will not be liable for any settlement of any action, claim,
or proceeding effected without the indemnifying party's express written consent,
but if any action, claim, or proceeding is settled with the indemnifying party's
express written consent or if there is a final judgment for the plaintiff in any
such action, claim, or proceeding, the indemnifying party shall indemnify,
defend, and hold harmless an indemnified party as provided in subparagraph (a)
above.
11. We agree that under no circumstances shall we engage in any
activities hereunder in any jurisdiction unless (a) the Units have been
registered or qualified for sale under the securities laws thereof, and (b) we
may lawfully so engage in such activities therein.
12. We acknowledge receipt of copies of the Selling Agreement, the
Prospectus, and any Selling Literature provided to us pursuant to Paragraph 3
hereof, and confirm that in executing this Agreement we have relied thereon and
upon no other representations whatsoever, either written or oral. We hereby
confirm: (a) that we have examined the Selling Agreement, the Prospectus and any
such Selling Literature, and we are familiar with the terms of the Units and
other terms of the offering; (b) that the information, if any, relating to us
which has been furnished by us or on our behalf expressly for use in
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<PAGE>
connection with the Registration Statements, the Prospectus, and any Selling
Literature does not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus and any Selling Literature, in
light of the circumstances under which such statements were made) not
misleading; (c) that we are willing to accept the responsibilities of an
Additional Seller under the 1933 Act and the CEAct; and (d) that we are willing
to proceed with the offering of Units in the manner contemplated. Further, we
understand that you may approve of or object to any further amendments to the
Registration Statements, the filing of one or more additional registration
statements and amendments thereto, or amendments or supplements to the
Prospectus and any Selling Literature, without our consent or approval. With
respect to the Selling Agreement, we understand that you may in your discretion
exercise any right of cancellation or termination and consent to such other
changes in the Selling Agreement as you may approve without our consent or
approval. You agree that you will: (i) notify us of any such amendment to the
Registration Statements, any additional registration statement and any amendment
thereto, and shall provide a copy of same to us upon our written request; (ii)
notify us of any amendment or supplement to the Prospectus or any Selling
Literature, and cause a copy of same to be furnished to us; and (iii) notify us
of any material change in the Selling Agreement.
13. We agree that you shall be under no liability (except for your
own lack of good faith and for obligations expressly assumed by you hereunder)
to us in respect of any matters connected herewith or action taken by you
pursuant hereto for, or in respect of, the form of or the statements contained
in the Registration Statements, any additional registration statement, the
Prospectus, any Selling Literature, or any amendment or supplement to any of the
foregoing documents; the qualification of the Units for sale under the laws of
any jurisdiction; or any matter in connection with any of the foregoing;
provided, however, that nothing in this
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<PAGE>
Paragraph 13 shall be deemed to relieve you from any liability imposed by the
1933 Act.
14. Nothing contained herein shall constitute us as partners with
you or with other Additional Sellers, and the obligations of ourselves and of
all other Additional Sellers are several and not joint.
15. Any notice from you to us at the address set forth below shall
be deemed to have been duly given if mailed, telexed, telegraphed, telecopied,
or telephoned and subsequently confirmed in writing to us.
16. This Agreement shall be construed in accordance with the
internal laws of the State of New York, without regard to principles of
conflicts of laws.
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<PAGE>
Your acceptance of this Agreement and approval hereof shall be
indicated below, whereupon this Agreement shall constitute a binding agreement
between us.
Very truly yours,
_______________________________________
Print or Type Name of Additional Seller
By:____________________________________
(Signature of Authorized Signatory)
Name:_______________________________
Title:______________________________
Address:
_______________________________________
_______________________________________
Attention:_____________________________
Telephone No.:_________________________
Telex No.:_____________________________
Telecopier No.:________________________
Type of Organization (Corporation,
Partnership or Other Entity):__________
_______________________________________
State or Other Jurisdiction Where
Organized:_____________________________
Accepted as of ______________:
Dean Witter Reynolds Inc.
By:_______________________________
(Signature of Authorized Officer)
Name:_____________________________
Title:____________________________
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<PAGE>
Schedule A to Additional Seller Agreement
No. of Units
SEC File No. Effective Date Partnership Registered
- ------------ -------------- ----------- ----------
33-80146 9/15/94 Global Balanced 2,000,000*
33-80146 9/15/94 Strategic 4,000,000*
33-80146 9/15/94 Technical 4,000,000*
333-00494 1/31/96 Global Balanced 5,000,000
333-00494 1/31/96 Strategic 6,000,000
333-00494 1/31/96 Technical 9,000,000
333-3222 4/30/96 Global Balanced 1,000,000
333-3222 4/30/96 Strategic 2,500,000
333-3222 4/30/96 Technical 5,000,000
333-47831 5/11/98 Technical 5,000,000
333-47829 5/11/98 Select 1,500,000
333-68779 7/21/99 Technical 10,000,000
333-68773 1/21/99 Select 5,000,000
333-o o Select 4,500,000
333-o o Strategic 6,500,000
333-o o Global Balanced 3,000,000
333-o o Currency 15,000,000
333-o o Commodity 7,000,000
- ----------
* Units allocated after SEC effectiveness.
<PAGE>
Exhibit 5.04
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
November 5, 1999
Dean Witter Reynolds, Inc.
Demeter Management Corporation
Two World Trade Center
62nd Floor
New York, NY 10048
Re: Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
Ladies and Gentlemen:
We have acted as your counsel in connection with the organization
of Morgan Stanley Dean Witter Strategic Global Balanced L.P., a Delaware
limited partnership (the "Partnership"), and the preparation and filing with
the Securities and Exchange Commission of a Registration Statement on Form
S-1 (the "Registration Statement") relating to the registration under the
Securities Act of 1933, as amended, of 3,000,000 units of limited partnership
interest of the Partnership ("Units"). In such connection, we have assisted
in the preparation of the Limited Partnership Agreement of the Partnership
and in the preparation and filing with the Secretary of State of the State of
Delaware of the Certificate of Limited Partnership of the Partnership. We
have also examined such other documents, records, and applicable law as we
have deemed necessary or appropriate for purposes of rendering this opinion.
Based upon the foregoing, we are of the opinion that (1) the Units
have been duly authorized, and (2) upon (a) the sale of the Units described in
the Registration Statement in the manner and on the terms and conditions set
forth therein, and (b) the identification of the purchasers of Units as limited
partners on the books and records of the Partnership, the Units will be validly
issued, fully-paid, and non-assessable. We are also of the opinion that a
limited partner's liability for the losses and obligations of the Partnership
solely by reason of such person being a limited partner of the Partnership will
not exceed such limited partner's unredeemed capital contribution, undistributed
profits, if any, and any distributions and amounts received upon redemption of
Units with interest thereon.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
CADWALADER, WICKERSHAM & TAFT
<PAGE>
Exhibit 8.04
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
November 5, 1999
Dean Witter Reynolds, Inc.
Demeter Management Corporation
Two World Trade Center
62nd Floor
New York, NY 10048
Re: Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
Ladies and Gentlemen:
We have acted as your counsel in connection with the preparation and
filing with the Securities and Exchange Commission of a Registration Statement
on Form S-1 (the "Registration Statement") relating to the registration under
the Securities Act of 1933, as amended, of 3,000,000 units of limited
partnership interest ("Units") of Morgan Stanley Dean Witter Spectrum Global
Balanced L.P., a Delaware limited partnership (the "Partnership"). We have also
examined such documents, records, and applicable law as we have deemed necessary
for purposes of rendering this opinion.
Based upon the foregoing, we hereby confirm our opinion under the
heading "Material Federal Income Tax Considerations" in the Prospectus
constituting a part of the Registration Statement (the "Prospectus") that the
Partnership will be taxed as a partnership for federal income tax purposes. We
also confirm our opinion that the descriptions set forth under the heading
"Material Federal Income Tax Considerations" in the Prospectus correctly
describe the material federal income tax consequences to United States taxpayers
who are individuals of acquiring, owning, and disposing of Units.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the references made to us in the Prospectus under
the captions "Summary -- Tax Considerations," "Risk Factors -- Taxation risks,"
"Purchases by Employee Benefit Plans -- ERISA Considerations," "Material Federal
Income Tax Considerations," "State and Local Income Tax Aspects," and "Legal
Matters."
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
CADWALADER, WICKERSHAM & TAFT
<PAGE>
AMENDED AND RESTATED
ESCROW AGREEMENT
Chemical Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Re: Morgan Stanley Dean Witter Spectrum Series
Escrow Account
Gentlemen:
In accordance with arrangements made by Demeter Management
Corporation, a Delaware corporation (the "General Partner"), on behalf of Morgan
Stanley Dean Witter Spectrum Select L.P., Morgan Stanley Dean Witter Spectrum
Technical L.P., Morgan Stanley Dean Witter Spectrum Strategic L.P., Morgan
Stanley Dean Witter Spectrum Global Balanced L.P., Morgan Stanley Dean Witter
Spectrum Currency L.P. ("Spectrum Currency"), and Morgan Stanley Dean Witter
Spectrum Commodity L.P., each a Delaware corporation (collectively, the
"Partnerships," and each individually, a "Partnership"), and Dean Witter
Reynolds Inc., the selling agent for the Partnerships (the "Depositor"; the
Partnerships and the Depositor being herein sometimes collectively referred to
as the "Parties" or, individually, as a "Party"), the Depositor shall: (i)
deliver to you, as Escrow Agent, all subscription funds (by the direct transfer
of immediately available funds into a non-interest bearing escrow account
established by you for the Partnerships, for investment in your interest bearing
money market account) received by the Depositor from each subscriber
("Subscriber" or, collectively, the "Subscribers") during the "Initial Offering
Period" of Spectrum Currency and the "Continuing Offering" of each Partnership
(as each such term is defined in the Partnerships' Prospectus, updated,
supplemented, and amended from time to time, the "Prospectus") in connection
with the offering to the public of Units of Limited Partnership Interest of the
Partnerships (the "Units") and (ii) also promptly transmit to the General
Partner a complete report of all funds deposited with you during the Initial
Offering Period of Spectrum Currency and Continuing Offering of each
Partnership. You, as Escrow Agent, shall hold such subscription funds together
with any additions, substitutions, or other financial instruments in which such
funds may be invested or for which such funds may be exchanged (collectively
referred to herein as the "Fund"), IN ESCROW upon the following terms:
1. (a) Following receipt by you of written notice from the General
Partner that the General Partner has rejected a Subscriber's subscription, in
whole or in part, during either the Initial Offering Period of Spectrum Currency
or Continuing Offering of each Partnership, you shall transmit to the Depositor,
as soon as practicable but in no event later than three business days following
receipt by you of such notice, the amount of such Subscriber's subscription
funds that shall as having been deposited with you hereunder and that the
General Partner shall have notified you have been rejected and any interest
earned on the Fund and allocated to the rejected amount of such subscription in
accordance with Section 2 hereof. You
<PAGE>
shall at the same time give notice to the Depositor of the amount of aggregate
subscription funds and/or interest so returned.
(b) On the second business day before the scheduled day of
each closing, the General Partner shall notify you of the portion of the Fund
that represents subscriptions to be accepted by the General Partner for each
Partnership. Upon receipt by you of joint written notice from the General
Partner and the Depositor on the date of each such closing to the effect that
all of the terms and conditions with respect to the release of subscription
funds from escrow set forth in the Prospectus have been fulfilled, you shall
promptly pay and deliver to each of the Partnerships that portion of the Fund
specified for such Partnership in the General Partner's prior instructions
(excluding any interest earned on the Fund and funds relating to rejected
subscriptions); provided, however, that in the case of the Initial Closing of
Spectrum Currency you will only pay and deliver funds to the Partnerships after
a minimum of 500,000 Units of Spectrum Currency have been subscribed for in the
aggregate and not rejected by the General Partner and a minimum amount of
$5,000,000 has cleared the U.S. banking system (the subscription for each Unit
of Spectrum Currency to be $10.00 at the Initial Closing of Spectrum Currency
and at each subsequent closing, if any, at 100% of the net asset value per Unit
of Spectrum Currency as of the close of business on the day of the closing).
(c) On the date of each closing, or as soon thereafter as
practicable, you shall transmit to the Depositor an amount representing: (i) for
each Subscriber whose subscription shall be accepted by the General Partner in
whole or in part, any interest earned on the Fund and allocated to the accepted
portion of such Subscriber's subscription in accordance with Section 2 hereof,
and (ii) for each Subscriber whose subscription shall have been rejected by the
General Partner in whole or in part but whose subscription funds shall not have
been previously returned to the Depositor by you in accordance with Section 1(a)
hereof, such Subscriber's subscription funds that shall have been deposited with
you hereunder and that shall have been rejected by the General Partner, and any
interest earned on the Fund and allocated to the rejected amount of such
subscription in accordance with Section 2 hereof. You shall at the same time
give notice to the Depositor of the aggregate amount of subscription funds
and/or interest so returned.
(d) Notwithstanding Section 1(a) hereof, upon receipt by you
of written notice from the General Partner that a Subscriber has been rejected
or because such Subscriber has provided bad funds in the form of a bad check,
draft, or otherwise to the Depositor), you shall transmit to the Depositor,
within three business days following receipt by you of such notice, the amount
of subscription funds deposited with you hereunder relating to that amount (the
portion of such Subscriber's subscription for which good funds have not been
provided) together with any interest earned on the Fund and allocated to such
portion of such a subscription in accordance with Section 2 hereof to the date
of such return, and shall immediately notify the General Partner of the return
of such funds.
2. You shall hold the Fund (including any interest earned thereon)
for the account of the Partnerships pending delivery to either the Partnerships
or the Depositor, pursuant to Paragraphs 1 or 3 hereof, as the case may be. On
each day that subscription funds are transferred to you hereunder in immediately
available funds and receipt is confirmed before 2:00 P.M., New York City time,
you shall immediately invest such subscription funds solely in your
-2-
<PAGE>
interest bearing money market account. If subscription funds are transferred to
you in immediately available funds and receipt is confirmed after 2:00 P.M., New
York City time, you shall so invest such funds on the next day. Interest earned
on the Fund shall be allocated by the Depositor among the Subscribers
proportionately based on (A) the amount of their respective subscriptions on
deposit in the Fund and (B) the period of time from the date that their
respective subscriptions shall have been deposited in the Fund to the earlier of
the delivery of the Fund to the Partnerships at a closing or the Depositor in
accordance with Sections 1 or 3 hereof, as the case may be.
3. If, during the Initial Offering Period of Spectrum Currency, you
are notified in writing jointly by the Parties that subscriptions for fewer than
500,000 Units have been subscribed for and not rejected by the General Partner,
that the offering of Units has been terminated, and that no Initial Closing of
Spectrum Currency will be held, you shall transmit to the Depositor, as soon as
practicable but in no event later than three business days after receipt by you
of such notice, an amount representing the full amount of all subscription funds
that shall have been deposited with you hereunder, together with any interest
earned on the Fund in accordance with Section 2 hereof. You shall at the same
time give notice to the Depositor of the aggregate amounts of subscription funds
and/or interest so returned.
4. The Parties further agree with you as follows:
(a) Your duties and responsibilities shall be limited solely
to those expressly set forth in this Agreement and are ministerial in nature.
You shall neither be subject to nor obliged to recognize any other agreement
between, or other direction or instruction of, any or all of the Parties or any
Subscriber even though reference thereto may be made herein; provided, however,
that with your written consent, this Agreement may be amended at any time or
times by an instrument in writing signed by the Parties.
(b) You are authorized, in your sole discretion, to disregard
any and all notices or instructions given by any of the Parties or by any other
person, firm, or corporation, except only such notices or instructions as are
hereunder provided for and orders or process of any court entered or issued with
or without jurisdiction. If the Fund or any part thereof is at any time
attached, garnished, or levied upon under any court order or in case the
payment, assignment, transfer, conveyance, or delivery of the Fund shall be
stayed or enjoined by any court order, or in case any order, judgment, or decree
shall be made or entered by any court affecting the Fund or any part thereof,
then and in any such event you are authorized, in your sole discretion, to rely
upon and comply with any such order, writ, judgment, or decree that you are
advised by legal counsel of your own choosing is binding upon you, and if you
comply with any such order, writ, judgment, or decree you shall not be liable to
any of the Parties or to any other person, firm, or corporation by reason of
such compliance even though such order, writ, judgment, or decree may be
subsequently reversed, modified, annulled, set aside, or vacated.
(c) You shall be fully protected in relying upon any written
notice, demand, certificate, document, or instrument believed by you in good
faith to be genuine and to have been signed or presented by the proper person or
persons or Party or Parties. The Parties shall provide you with a list of
officers and employees who shall be authorized to deliver
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instructions hereunder. You shall not be liable for any action taken or omitted
by you in connection herewith in good faith and in the exercise of your own best
judgment.
(d) Should any dispute arise with respect to the delivery,
ownership, right of possession, and/or disposition of the subscription funds
deposited with you hereunder, or should any claim be made upon any such
subscription funds by a third party, you, upon receipt of written notice of such
dispute by any of the Parties or by a third party, are authorized and directed
to retain in your possession all or any of such subscription funds until such
dispute shall have been settled either by mutual agreement of the parties
involved or by final order, decree, or judgment of any court in the United
States.
(e) If for any reason funds are deposited in the escrow
account other than by transfer of immediately available funds, you shall proceed
as soon as practicable to collect checks, drafts, and other collection items at
any time deposited with you hereunder. All such collections shall be subject to
the usual collection agreement regarding items received by your commercial
banking department for deposit or collection; provided, however, that if any
check, draft, or other collection item at any time deposited with you hereunder
is returned to you as being uncollectable (except by reason of an account
closing), you shall attempt a second time to collect such item before returning
such item to the Depositor as uncollectable. Subject to the foregoing, you shall
promptly notify the Parties of any uncollectable check, draft, or other
collection item deposited with you hereunder and shall promptly return such
uncollectable item to the Depositor, in which case you shall not be liable to
pay any interest on the subscription funds represented by such uncollectable
item. In no event, however, shall you be required or have a duty to take any
legal action to enforce payment of any check or note deposited hereunder.
(f) You shall not be responsible for the sufficiency or
accuracy of the form, execution, validity, or genuineness of documents now or
hereafter deposited with you hereunder, or for any lack of endorsement thereon
or for any description therein, nor shall you be responsible or liable in any
respect on account of the identity, authority, or rights of the persons
executing or delivering or purporting to execute or deliver any such document,
or endorsement or this Agreement. You shall not be liable for any loss sustained
as a result of any investment made pursuant to the instructions of the Parties
or as a result of any liquidation of an investment prior to its maturity or the
failure of the Parties to give you any instructions to invest or reinvest the
Fund or any earnings thereon.
(g) All notices required or desired to be delivered hereunder
shall be in writing and shall be effective when delivered personally on the day
delivered, or when given by registered or certified mail, postage prepaid,
return receipt requested, on the day of receipt, addressed as follows (or to
such other address as the party entitled to notice shall hereafter designate in
accordance with the terms hereof):
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if to a Partnership, the Partnerships or the General
Partner:
Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Robert E. Murray
President
if to the Depositor:
Dean Witter Reynolds Inc.
Two World Trade Center, 62nd Floor
New York, New York 10048
Attn: Mr. Robert E. Murray
Senior Vice-President
in either case with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: Edwin L. Lyon, Esq.
if to you:
Chemical Bank
450 W. 33rd Street, 15th Floor
New York, New York 10001
Attn: Mr. Paul Gilkeson
Whenever, under the terms hereof, the time for giving a notice or performing an
act falls on a Saturday, Sunday, or legal holiday, such time shall be extended
to the next business day.
(h) The Depositor agrees to indemnify, defend, and hold you
harmless from and against, any and all loss, damage, tax, liability, and expense
that may be incurred by you arising out of or in connection with your duties
hereunder, except as caused by your gross negligence, bad faith, or willful
misconduct, including the legal costs and expenses of defending yourself against
any claim or liability in connection with your performance hereunder.
(i) You shall be paid by the Depositor for your services a fee
of $3,000 in advance for each twelve month period; the first twelve month period
beginning from the date of this Agreement (each twelve month period shall be
called a "Fee Period").
(j) It is understood that you may at any time resign hereunder
as Escrow Agent by giving written notice of your resignation to the Parties at
their address set forth above at least 20 days prior to the date specified for
such resignation to take effect, and upon the effective date of such
resignation, all property then held by you hereunder shall be delivered by you
to such person as may be designated jointly by the Parties in writing, whereupon
all your
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obligations hereunder shall cease and terminate. If you shall resign prior to
the conclusion of any Fee Period you shall pay to the Depositor an amount equal
to the product of $3,000 and a fraction, the numerator of which shall be the
number of days remaining in the Fee Period and the denominator of which shall be
365. If no successor Escrow Agent has been appointed or has accepted such
appointment by such date, all your obligations hereunder shall nevertheless
cease and terminate. Your sole responsibility thereafter shall be to keep safely
all property then held by you and to deliver the same to a person designated by
the Parties hereto or in accordance with the directions of a final order or
judgment of a court of competent jurisdiction.
5. This Agreement shall be governed by and construed in accordance
with the law of the State of New York and any action brought hereunder shall be
brought in the courts of the State of New York, sitting in the County of New
York.
6. The undersigned Escrow Agent hereby acknowledges and agrees to
hold, deal with, and dispose of, the Fund (including any interest earned
thereon) and any other property at any time held by the Escrow Agent hereunder
in accordance with this Agreement.
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If the foregoing Agreement is satisfactory to you, please so
indicate by signing at the place provided below.
Sincerely,
MORGAN STANLEY DEAN WITTER SELECT SPECTRUM L.P.
By: Demeter Management Corporation
By:___________________________________________________
Robert E. Murray
President
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
By: Demeter Management Corporation
By:___________________________________________________
Robert E. Murray
President
MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.
By: Demeter Management Corporation
By:___________________________________________________
Robert E. Murray
President
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MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED
L.P.
By: Demeter Management Corporation
By:___________________________________________________
Robert E. Murray
President
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
By: Demeter Management Corporation
By:___________________________________________________
Robert E. Murray
President
MORGAN STANLEY DEAN WITTER SPECTRUM COMMODITY L.P.
By: Demeter Management Corporation
By:___________________________________________________
Robert E. Murray
President
DEAN WITTER REYNOLDS INC.
By:___________________________________________________
Robert E. Murray
Senior Vice-President
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Accepted and agreed to:
CHEMICAL BANK
By:___________________________________________________
P.J. Gilkeson
Vice-President
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INDEPENDENT AUDITORS' CONSENT
We consent to the use in Post-Effective Amendment No. 2 to Registration
Statement No. 333-68779 for Morgan Stanley Dean Witter Spectrum Technical
L.P. (formerly Dean Witter Spectrum Technical L.P.) ("Spectrum Technical") on
Form S-1 of our report dated February 15, 1999 (March 4, 1999 and September
24, 1999 as to Note 6) relating to statements of financial condition of
Spectrum Technical at December 31, 1998 and 1997 and the related statements
of operations, changes in partners' capital and cash flows for each of the
three years in the period ended December 31, 1998 appearing in the Prospectus
which is a part of such Registration Statement.
We consent to the use in the Registration Statements (collectively the
"Registration Statements") for Morgan Stanley Dean Witter Spectrum Strategic
L.P. (formerly Dean Witter Spectrum Strategic L.P.) Morgan Stanley Dean
Witter Spectrum Global Balanced L.P. (formerly Dean Witter Spectrum Global
Balanced L.P.) and Morgan Stanley Dean Witter Spectrum Select L.P. (formerly
Dean Witter Spectrum Select L.P.)(the "Partnerships") of our report dated
February 15, 1999 (March 4, 1999 and September 24, 1999 as to Note 6)
relating to the statements of financial condition of such Partnerships at
December 31, 1998 and 1997 and the related statements of operations, changes
in partners' capital and cash flows for each of the three years in the period
ended December 31, 1998 appearing in the Prospectus which is a part of such
Registration Statements.
We consent to the use in the Registration Statement for Morgan Stanley Tangible
Asset Fund L.P. ("MSTAF") of our report dated February 15, 1999 (September 24,
1999 as to Note 5) relating to the statement of financial condition of MSTAF
at December 31, 1998 and the related statements of operations, changes in
partners' capital and cash flows for the period January 2, 1998 through
December 31, 1998 appearing in the Prospectus which is a part of such
Registration Statement.
We consent to the use of our report dated October 27, 1999 relating to the
statement of financial condition of Morgan Stanley Dean Witter Spectrum Currency
L.P. appearing in the Prospectus which is a part of such Registration Statement.
We also consent to the use of our report dated January 11, 1999 (September 24,
1999 as to Note 6) relating to the statements of financial condition of Demeter
Management Corporation at November 30, 1998 and 1997 appearing in the
Prospectus, which is a part of such Registration Statements, and to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
New York, New York
November 5, 1999
