UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to__________________
Commission File No. 0-26340
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3782232
State or other jurisdiction of (I.R.S.
Employer
incorporation or organization) Identification
No.)
c/o Demeter Management Corporation
Two World Trade Center, 62 Fl., New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___________
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition September 30, 2000
(Unaudited) and December 31, 1999.....................2
Statements of Operations for the Quarters Ended
September 30, 2000 and 1999 (Unaudited)...............3
Statements of Operations for the Nine Months Ended
September 30, 2000 and 1999 (Unaudited)...............4
Statements of Changes in Partners' Capital for the
Nine Months Ended September 30, 2000 and 1999
(Unaudited)...........................................5
Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999 (Unaudited)...............6
Notes to Financial Statements (Unaudited)..........7-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..14-23
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ...................................23-35
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.................................36
Item 2. Changes in Securities and Use of Proceeds......36-37
Item 5. Other Information.................................38
Item 6. Exhibits and Reports on Form 8-K...............38-39
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31,
2000 1999 $
$
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 53,837,727 56,904,921
Net unrealized gain (loss) on open contracts(527,878) 8
10,114
Net option premiums (71,950) ____-___
Total Trading Equity 53,237,899 57,715,035
Subscriptions receivable 474,643 847,954
Interest receivable (DWR) 278,729 244,599
Total Assets 53,991,271 58,807,588
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 843,497 667,741
Accrued brokerage fees (DWR) 212,435 216,895
Accrued management fees 57,727 58,940
Total Liabilities 1,113,659 943,576
Partners' Capital
Limited Partners (3,458,097.645 and
3,549,239.387 Units, respectively)52,264,238 57,209,838
General Partner (40,584.304 Units) 613,374 654,174
Total Partners' Capital 52,877,612 57,864,012
Total Liabilities and Partners' Capital 53,991,271 58,807,588
NET ASSET VALUE PER UNIT 15.11 16.12
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
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<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended September 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading loss:
Realized (627,097) (795,642)
Net change in unrealized (1,158,893) (339,120)
Total Trading Results (1,785,990) (1,134,762)
Interest Income (DWR) 840,735 637,615
Total Revenues (945,255) (497,147)
EXPENSES
Brokerage fees (DWR) 630,717 626,181
Management fees 171,391 170,160
Total Expenses 802,108 796,341
NET LOSS (1,747,363) (1,293,488)
NET LOSS ALLOCATION
Limited Partners (1,727,249) (1,279,707)
General Partner (20,114) (13,781)
NET LOSS PER UNIT
Limited Partners
(0.50) (0.38)
General Partner
(0.50) (0.38)
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Nine Months Ended September 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading profit (loss):
Realized (2,131,343) 1,814,125
Net change in unrealized (1,337,992) (1,850,072)
Total Trading Results (3,469,335) (35,947)
Interest Income (DWR) 2,435,497 1,682,953
Total Revenues (1,033,838) 1,647,006
EXPENSES
Brokerage fees (DWR) 1,947,603 1,746,137
Management fees 529,244 474,498
Incentive fees ____-___ 215,651
Total Expenses 2,476,847 2,436,286
NET LOSS (3,510,685) (789,280)
NET LOSS ALLOCATION
Limited Partners (3,469,885) (780,570)
General Partner (40,800) (8,710)
NET LOSS PER UNIT
Limited Partners
(1.01) (0.21)
General Partner
(1.01) (0.21)
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C>
<C> <C>
Partners' Capital,
December 31, 1998 2,869,073.505 $45,399,750 $514,122
$45,913,872
Offering of Units 841,624.874 13,410,326 90,000 13,500,326
Net Loss
- (780,570) (8,710)
(789,280)
Redemptions (184,941.727) (2,961,093)
- (2,961,093)
Partners' Capital,
September 30, 1999 3,525,756.652 $55,068,413 $595,412
$55,663,825
Partners' Capital,
December 31, 1999 3,589,823.691 $57,209,838 $654,174
$57,864,012
Offering of Units 486,995.728 7,706,104
- 7,706,104
Net Loss
- (3,469,885) (40,800)
(3,510,685)
Redemptions (578,137.470) (9,181,819)
- (9,181,819)
Partners' Capital,
September 30, 2000 3,498,681.949 $52,264,238 $613,374
$52,877,612
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Nine Months Ended September 30,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S>
<C> <C>
Net loss (3,510,685)
(789,280)
Noncash item included in net loss:
Net change in unrealized 1,337,992 1
,850,072
(Increase) decrease in operating assets:
Net option premiums 71,950
-
Interest receivable (DWR) (34,130) (51,833)
Increase (decrease) in operating liabilities:
Accrued brokerage fees (DWR) (4,460) 41,345
Accrued management fees (1,213) 11,235
Incentive fees payable ____-___ (69,730)
Net cash provided by (used for) operating activities (2,140,546)
991,809
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 7,706,104 1
3,500,326 (
Increase) decrease in subscriptions receivable 373,311
(61,503)
Increase in redemptions payable 175,756 261,260
Redemptions of Units (9,181,819)
(2,961,093)
Net cash provided by (used for) financing activities
(926,648) 10,738,990
Net increase (decrease) in cash (3,067,194) 1
1,730,799
Balance at beginning of period 56,904,921
43,020,361
Balance at end of period 53,837,727
54,751,160
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Morgan Stanley Dean Witter Spectrum Global Balanced L.P. (the
"Partnership"). The financial statements and condensed notes
herein should be read in conjunction with the Partnership's
December 31, 1999 Annual Report on Form 10-K.
1. Organization
Morgan Stanley Dean Witter Spectrum Global Balanced L.P. is a
Delaware limited partnership organized to engage primarily in the
speculative trading of futures, options and forward contracts,
physical commodities and other commodity interests, including,
but not limited to foreign currencies, financial instruments,
metals, energy and agricultural products (collectively, "futures
interests"). The Partnership is one of the Morgan Stanley Dean
Witter Spectrum Series of funds, comprised of the Partnership,
Morgan Stanley Dean Witter Spectrum Commodity L.P., Morgan
Stanley Dean Witter Spectrum Currency 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.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds Inc. ("DWR") and an unaffiliated clearing commodity
broker, Carr Futures Inc. ("Carr"), provides clearing and
execution services. Both Demeter and DWR are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co. RXR, Inc. (the
"Trading Advisor") is the Trading Advisor to the Partnership.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interests trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on a prevailing rate on
U.S. Treasury bills. The Partnership pays brokerage fees to DWR.
3. Financial Instruments
The Partnership trades futures, options and forward contracts,
physical commodities and other commodity interests, including but
not limited to foreign currencies, financial instruments, metals,
energy and agricultural products. Futures and forwards represent
contracts for delayed delivery of an instrument at a specified
date and price. Risk arises from changes in the value of these
contracts and the potential inability of counterparties to
perform under the terms of the contracts. There are numerous
factors
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
which may significantly influence the market value of these
contracts, including interest rate volatility.
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities" effective for fiscal years beginning after June 15,
2000, as amended by SFAS No. 137. The Partnership adopted the
provisions of SFAS No. 133 beginning with the fiscal year ended
December 31, 1998. SFAS No. 133 superceded SFAS Nos. 119 and
105, which required the disclosure of average aggregate fair
values and contract/notional values, respectively, of derivative
financial instruments for an entity that carries its assets at
fair value. SFAS No. 133 was further amended by SFAS No. 138,
which clarifies issues surrounding interest rate risk, foreign
currency denominations, normal purchases and sales and net
hedging. The application of SFAS No. 133, as amended by SFAS No.
137, did not have a significant effect on the Partnership's
financial statements, nor will the application of the provisions
of SFAS No. 138 have a significant effect on the Partnership's
financial statements.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SFAS No. 133 defines a derivative as a financial instrument or
other contract that has all three of the following
characteristics:
1) One or more underlying notional amounts or payment
provisions;
2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in market
factors;
3) Terms require or permit net settlement.
Generally derivatives include futures, forwards, swaps or option
contracts, or other financial instruments with similar
characteristics such as caps, floors and collars.
The net unrealized gains (losses) on open contracts are reported
as a component of "Equity in futures interests trading accounts"
on the statements of financial condition and totaled $(527,878)
and $810,114 at September 30, 2000 and December 31, 1999,
respectively.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Of the $527,878 net unrealized loss on open contracts at
September 30, 2000, $503,616 related to exchange-traded futures
and futures-styled options contracts and $24,262 related to off-
exchange-traded forward currency contracts.
Of the $810,114 net unrealized gain on open contracts at
September 31, 1999, $669,640 related to exchange-traded futures
and futures-styled options contracts and $140,474 related to off-
exchange-traded forward currency contracts.
Exchange-traded futures and futures-styled options contracts held
by the Partnership at September 30, 2000 and December 31, 1999
mature through December 2000 and June 2000, respectively. Off-
exchange-traded forward currency contracts held by the
Partnership at September 30, 2000 and December 31, 1999 mature
through December 2000 and March 2000, respectively.
The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.
The Partnership also has credit risk because DWR and Carr act as
the futures commission merchants or the counterparties, with
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
respect to most of the Partnership's assets. Exchange-traded
futures and futures-styled options contracts are marked to market
on a daily basis, with variations in value settled on a daily
basis. Each of DWR and Carr, as a futures commission merchant for
all of the Partnership's exchange-traded futures and futures-
styled options contracts, are required, pursuant to regulations
of the Commodity Futures Trading Commission ("CFTC"), to
segregate from their own assets, and for the sole benefit of
their commodity customers, all funds held by them with respect to
exchange-traded futures and futures-styled options contracts,
including an amount equal to the net unrealized gain (loss) on
all open futures and futures-styled options contracts, which
funds, in the aggregate, totaled $53,334,111 and $57,574,561 at
September 30, 2000 and December 31, 1999, respectively. With
respect to the Partnership's off-exchange-traded forward currency
contracts, there are no daily settlements of variations in value
nor is there any requirement that an amount equal to the net
unrealized gain (loss) on open forward contracts be segregated.
With respect to those off-exchange-traded forward currency
contracts, the Partnership is at risk to the ability of Carr, the
sole counterparty on all of such contracts, to perform. The
Partnership has a netting agreement with Carr. This agreement,
which seeks to reduce both the Partnership's and Carr's exposure
on off-exchange-traded forward
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
currency contracts, should materially decrease the Partnership's
credit risk in the event of Carr's bankruptcy or insolvency.
Carr's parent, Credit Agricole Indosuez, has guaranteed to the
Partnership payment of the net liquidating value of the
transactions in the Partnership's account with Carr (including
foreign currency contracts).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker in separate futures
trading accounts established for the Trading Advisor, which
assets are used as margin to engage in trading. The assets are
held in either non-interest-bearing bank accounts or in
securities and instruments permitted by the CFTC for investment
of customer segregated or secured funds. The Partnership's
assets held by the commodity brokers may be used as margin solely
for the Partnership's trading. Since the Partnership's sole
purpose is to trade in futures, options and forwards, it is
expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership's investment in futures, options and forwards
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures contract has
increased or decreased by an amount equal to the daily limit,
positions in that futures contract can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. These market conditions could
<PAGE>
prevent the Partnership from promptly liquidating its futures
contracts and result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources - The Partnership does not have, or expect to
have, any capital assets. Redemptions, exchanges and sales of
additional units of limited partnership interest ("Unit(s)") in
the future will affect the amount of funds available for
investment in futures interests in subsequent periods. It is not
possible to estimate the amount and therefore, the impact of
future redemptions of Units.
Results of Operations
General. The Partnership's results depend on its Trading Advisor
and the ability of the Trading Advisor's trading programs to take
<PAGE>
advantage of price movements or other profit opportunities in the
futures and forwards markets. The following presents a summary
of the Partnership's operations for the quarters and nine months
ended September 30, 2000 and 1999, respectively, and a general
discussion of its trading activities 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 of Operations
For the Quarter and Nine Months Ended September 30, 2000
For the quarter ended September 30, 2000, the Partnership
recorded total trading losses net of interest income of $945,255
and posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 2.2% were recorded in the
global stock index futures markets primarily during late July and
September from long positions in Nikkei Index futures as Japanese
stock prices declined as major technology issues were hit hard by
losses in the U.S. NASDAQ Index. In the global interest rate
futures markets, losses of approximately 1.0% were experienced
<PAGE>
primarily during September from long positions in Australian
interest rate futures as prices declined during mid-month
following a pattern set by U.S. Treasuries and as the Australian
currency again dipped to new historic lows. In soft commodities,
losses of approximately 0.3% were experienced primarily during
July from short cotton futures positions as prices moved higher
amid fears that the dryness and heat in Texas would slash the
size of the U.S. crop. These losses were partially offset by
gains of approximately 0.1% recorded in the metals markets
primarily during July and mid September from long positions in
copper futures as prices rose higher due to a rise in COMEX
copper stocks. In the energy markets, gains of approximately
0.1% were produced during August from long futures positions in
gas and heating oil as prices climbed higher due to a sharp
decline in U.S. inventories and concerns that OPEC would not
increase production in the near future. In the currency markets,
profits of approximately 0.1% were recorded from short positions
in the New Zealand dollar as its value fell to historic lows
relative to the U.S. dollar after worse-than-expected trade
figures were released. Total expenses for the three months ended
September 30, 2000 were $802,108, resulting in a net loss of
$1,747,363. The value of a Unit decreased from $15.61 at June
30, 2000 to $15.11 at September 30, 2000.
<PAGE>
For the nine months ended September 30, 2000, the Partnership
recorded total trading losses net of interest income of
$1,033,838 and posted a decrease in Net Asset Value per Unit.
The most significant losses of approximately 4.9% were recorded
in the global stock index futures component during April, May,
late July and September from long positions in Nikkei Index
futures as Japanese equity prices declined due primarily to the
weakness in most global technology issues and economic
uncertainty in Japan. Additional losses were recorded primarily
during the second quarter and September from long positions in
FTSE Index futures as most stock indices sagged after the
European Central Bank's aggressive interest rate hike in early
June and during September on concerns about costly crude oil and
a weak euro. In the currency markets, losses of approximately
1.0% were recorded primarily during May and June from short euro
positions relative to the Australian and U.S. dollars as the
value of the euro reversed higher amid suggestions that
intervention to support the euro was a possibility and due to
interest rate hikes in Europe. In the livestock markets, losses
of approximately 1.0% were recorded primarily during January from
long positions in live cattle futures as prices declined after
the USDA raised its forecast for U.S. red meat production in
2000. In the global interest rate futures markets, losses of
approximately 0.9% were experienced primarily during September
from long positions in Australian interest rate futures as
<PAGE>
prices declined during mid-month following a pattern set by U.S.
Treasuries and as the Australian currency again dipped to new
historic lows. In soft commodities, losses of approximately 0.5%
were experienced primarily during July from short cotton futures
positions as prices moved higher amid fears that the dryness and
heat in Texas would slash the size of the U.S. crop. These
losses were partially offset by gains of approximately 2.0%
recorded in the energy markets primarily during May from long
positions in natural gas futures as prices continued their upward
trend, as data released by the American Gas Association further
confirmed fears that inventory levels remain low. Additional
gains were recorded during February from long positions in crude
oil futures as prices increased due to a combination of cold
weather, declining inventories and increasing demand. Gains were
also recorded during June and August as oil prices surged in
reaction to the dismissal by OPEC of a price setting mechanism, a
promise of only a modest production increase and a decline in
U.S. inventories. Total expenses for the nine months ended
September 30, 2000 were $2,476,847, resulting in a net loss of
$3,510,685. The value of a Unit decreased from $16.12 at
December 31, 1999 to $15.11 at September 30, 2000.
For the Quarter and Nine Months Ended September 30, 1999
For the quarter ended September 30, 1999, the Partnership
recorded total trading losses net of interest income of $497,147
<PAGE>
and posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 2.1% were recorded in the
global interest rate futures component of the balanced portfolio
primarily during July and August from long U.S. interest rate
futures positions as domestic bond prices moved lower after
Federal Reserve Chairman Alan Greenspan commented that central
bankers must consider stock prices when setting monetary policy
and as economic reports added to concern that the U.S. Federal
Reserve will raise interest rates soon. In the global stock
index component, losses of approximately 1.8% were experienced
primarily during July from long German stock index futures
positions as German equity prices declined as investors reacted
to the strengthening euro by selling automaker and export-
dependent stocks. Prices in this market were also pushed lower
later in the month by the weakness on Wall Street and lower-than-
expected second quarter earnings reported by Daimler Chrysler.
During September, additional losses were incurred in this market
as German equity prices dropped following a decline in U.S. stock
prices. In agriculturals, small losses of approximately 0.8%
were recorded primarily from short wheat futures positions as
grain prices increased significantly amid drier-than-expected
weather in the U.S. midwest, forecasts for very little rain and
concerns about shriveling production. These losses were
partially offset by gains of approximately 1.7% recorded in the
energy markets primarily from long crude and gas oil futures
positions as oil prices climbed to a 33-month high after OPEC
<PAGE>
ministers confirmed that they will uphold their global cutbacks
until April of next year. Profits of approximately 0.6% were
also recorded in the metals markets primarily from long nickel
futures positions as prices moved higher aided by perceptions of
improving Asian demand and a drop in London Metal Exchange
warehouse stocks. In the currency markets, gains of
approximately 0.5% were recorded primarily from short cross-rate
positions in the euro versus the Japanese yen as the value of the
yen strengthened due to optimism regarding the Japanese economy
and Japanese investors selling euros looking to hedge their
investments. Additional gains were recorded from long Japanese
yen positions versus the U.S. dollar as the value of the yen
strengthened against the dollar due to inflationary pressures in
the United States and optimistic prospects for economic growth in
Japan. Total expenses for the three months ended September 30,
1999 were $796,341, resulting in a net loss of $1,293,488. The
value of a Unit decreased from $16.17 at June 30, 1999 to $15.79
at September 30, 1999.
For the nine months ended September 30, 1999, the Partnership
recorded total trading revenues including interest income of
$1,647,006 and, after expenses, posted a decrease in Net Asset
Value per Unit. The most significant losses of approximately
2.6% were experienced in the fixed income component primarily
during February, April and May from long U.S. interest rate
futures positions as prices dropped in reaction to Federal
<PAGE>
Reserve Chairman Alan Greenspan's warnings that a strong economy
could reignite inflation. Fears that the Federal Reserve
eventually could boost target interest rates pushed down domestic
bond prices during the first and second quarters and forced
yields higher. During July and August, long U.S. interest rate
futures positions resulted in losses as domestic bond prices
moved temporarily lower after Federal Reserve Chairman Alan
Greenspan commented that central bankers must consider stock
prices when setting monetary policy and as economic reports added
to concern that the U.S. Federal Reserve will raise interest
rates. In the agricultural markets, losses of approximately 0.7%
were recorded primarily from long corn futures positions as
prices regressed in early April in reaction to reports by the
USDA that the expected corn surplus will be one of the biggest in
years and from declining demand from Asian markets. Later in
April, corn prices fell due to technical factors and on reports
of favorable planting conditions. During early August, losses
were experienced from short corn futures positions as prices
increased significantly amid drier-than-expected weather in the
U.S. midwest, forecasts for very little rain and concerns about
shriveling production. These losses were partially offset by
gains of approximately 2.3% recorded in the energy markets
primarily from long positions in crude and gas oil futures, as
prices climbed higher during March following an agreement reached
by both OPEC and non-OPEC countries to cut total output beginning
April 1st.. Oil prices continued to move higher throughout the
<PAGE>
third quarter due to declining supplies, increasing demand and
adherence to output cuts. In the currency markets, gains of
approximately 1.0% were recorded primarily during August from
short euro, Swiss franc, and Australian dollar positions versus
the Japanese yen as the value of the yen strengthened due to
optimism regarding the Japanese economy and Japanese investors
selling euros looking to hedge their investments. In the global
stock index futures component, gains of approximately 0.8% were
recorded primarily during January and March from long Nikkei
Index futures positions as Japanese equity prices were pushed
higher by positive economic factors in Japan such as low interest
rates, an easing credit stance, relatively stable exchange rates
and an agreement to inject public funds into the indebted banking
sector. Total expenses for the nine months ended September 30,
1999 were $2,436,286, resulting in a net loss of $789,280. The
value of a Unit decreased from $16.00 at December 31, 1998 to
$15.79 at September 30, 1999.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
<PAGE>
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
<PAGE>
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partner-
ship's market risk exposures contain "forward-looking statements"
within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities Litigation
Reform Act of 1995 (set forth in Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934). All quantitative disclosures in this section are deemed to
be forward-looking statements for purposes of the safe harbor,
except for statements of historical fact.
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and cash
flow. Profits and losses on open positions of exchange-traded
futures interests are settled daily through variation margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
<PAGE>
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the Partner-
ship's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in its daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of September 30, 2000 and
<PAGE>
1999. At September 30, 2000 and 1999, the Partnership's total
capitalization was approximately $53 million and $56 million,
respectively.
Primary Market September 30, 2000 September 30, 1999
Risk Category Value at Risk Value at Risk
Interest Rate (0.63)% (0.45)%
Equity (0.55) (0.51)
Currency (0.38) (0.42)
Commodity (0.32) (0.40)
Aggregate Value at Risk (1.02)% (0.90)%
Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual Market Categories listed above. Aggregate VaR will be
lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open
positions at September 30, 2000 and 1999 only and is not
necessarily representative of either the historic or future risk
of an investment in the Partnership. Because the Partnership's
only business is the speculative trading of futures interests,
the composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.
<PAGE>
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
Net Assets for the four quarterly reporting periods from October
1, 1999 through September 30, 2000.
Primary Market Risk Category High Low Average
Interest Rate (0.84)% (0.20)% (0.60)%
Equity (1.28) (0.38) (0.82)
Currency (0.53) (0.22) (0.40)
Commodity (0.39) (0.22) (0.30)
Aggregate Value at Risk (1.67)% (0.58)% (1.17)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by the
Partnership to typically be many times the total capitalization of
the Partnership. The value of the Partnership's open positions
thus creates a "risk of ruin" not typically found in other
investments. The relative size of the positions held may cause the
Partnership to incur losses greatly in excess of VaR within a short
period of time, given the effects of the leverage employed and
market volatility. The VaR tables above, as well as the past
performance of the Partnership, give no indication of such "risk of
ruin". In addition, VaR risk measures should be viewed in light of
the
<PAGE>
methodology's limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
The VaR tables above present the results of the Partnership's VaR
for each of the Partnership's market risk exposures and on an
aggregate basis at September 30, 2000 and for the end of the four
quarterly reporting periods from October 1, 1999 through September
30, 2000. Since VaR is based on historical data, VaR should not be
viewed as predictive of the Partnership's future financial
performance or its ability to manage or monitor risk. There can be
no assurance that the Partnership's actual losses on a particular
day will not exceed the VaR amounts indicated above or that such
losses will not occur more than 1 in 100 trading days.
<PAGE>
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market risk
they may represent are immaterial. At September 30, 2000 the
Partnership's cash balance at DWR was approximately 94% of its
total Net Asset Value. A decline in short-term interest rates will
result in a decline in the Partnership's cash management income.
This cash flow risk is not considered material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-
sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures - constitute
forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act. The
Partnership's primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Advisor
for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
<PAGE>
results of the 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 the
Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of September 30, 2000, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
Interest Rate. The primary market exposure in the Partnership at
September 30, 2000 was in the global interest rate sector.
Exposure was primarily spread across the U.S., European, German and
British interest rate sectors. Interest rate movements directly
affect the price of the sovereign bond futures positions held by
the Partnership and indirectly affect the value of its stock index
and currency positions. Interest rate movements in one country as
well as relative interest rate movements between countries may
materially impact the Partnership's profitability. The
Partnership's primary interest rate exposure is generally to
interest rate fluctuations
<PAGE>
interest rate fluctuations in the United States and the other G-7
countries. The G-7 countries consist of France, U.S., Britain,
Germany, Japan, Italy and Canada. However, the Partnership also
takes futures positions in the government debt of smaller nations -
e.g. Australia. Demeter anticipates that G-7 and Australian
interest rates will remain the primary interest rate exposure of
the Partnership for the foreseeable future. The changes in
interest rates that have the most significant effect on the
Partnership are changes in long-term, as opposed to short-term,
rates. Most of the speculative futures positions held by the
Partnership are in medium- to long-term instruments. Consequently,
even a material change in short-term rates would have little effect
on the Partnership, were the medium- to long-term rates to remain
steady.
Equity. The second largest market exposure at September 30, 2000
was in the global stock index complex. The 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 September 30, 2000, the
Partnership's primary exposures were in the S&P 500 (U.S.), FTSE
(Britain), Nikkei (Japan), and DAX (German) stock indices. The
Partnership is primarily exposed to the risk of adverse price
trends or static markets in the U.S., European and Japanese
indices. Static markets would not cause major market changes but
<PAGE>
would make it difficult for the Partnership to avoid being
"whipsawed" into numerous small losses.
Currency. The Partnership's currency exposure at September 30,
2000 was to exchange rate fluctuations, primarily fluctuations
which disrupt the historical pricing relationships between
different currencies and currency pairs. Interest rate changes
as well as political and general economic conditions influence
these fluctuations. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar. For the third quarter of
2000, the Partnership's major exposures were in the euro currency
crosses and outright U.S. dollar positions. Outright positions
consist of the U.S. dollar vs. other currencies. These other
currencies include major and minor currencies. Demeter does not
anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future. The currency
trading VaR figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Partnership in
expressing VaR in a functional currency other than dollars.
Commodity
Energy. On September 30, 2000, the Partnership's energy exposure
was shared primarily by futures contracts in the crude oil and
natural gas markets. Price movements in these markets result
<PAGE>
from political developments in the Middle East, weather patterns,
and other economic fundamentals. It is possible that volatility
will remain high. Significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in this market. Natural gas has exhibited volatility
in prices resulting from weather patterns and supply and demand
factors and may continue in this choppy pattern.
Metals. The Partnership's metals market exposure at September
30, 2000 was to fluctuations in the price of base metals. During
periods of volatility, base metals may affect performance
dramatically. Demeter anticipates that the base metals will
remain the primary metals market exposure of the Partnership.
Soft Commodities and Agriculturals. On September 30, 2000, the
Partnership had exposure in the soybean oil, cotton and the
livestock markets. Supply and demand inequalities, severe
weather disruption and market expectations affect price movements
in these markets.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of September 30, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances are in Japanese yen. The Partnership controls
<PAGE>
the non-trading risk of these balances by regularly converting
these balances back into dollars upon liquidation of the
respective position.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different market sectors and trading
approaches, and monitoring the performance of the Trading Advisor
daily. In addition, the Trading Advisor establishes
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership investment
directed by Demeter, rather than the Trading Advisor.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-Q for the quarter ended March 31, 2000 and
Form 10-K for the year ended December 31, 1999.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership, Morgan Stanley Dean Witter Spectrum Strategic L.P.
("Spectrum Strategic") and Morgan Stanley Dean Witter Spectrum
Technical L.P. ("Spectrum Technical"), collectively registered
10,000,000 Units pursuant to a Registration Statement on Form S-1,
which became effective on September 15, 1994 (SEC File Number 33-
80146). While such Units were not allocated among the Partnership,
Spectrum Strategic and Spectrum Technical at that time, they were
subsequently allocated for convenience purposes as follows:
Spectrum Strategic 4,000,000, Spectrum Technical 4,000,000 and the
Partnership 2,000,000. The Partnership, Spectrum Strategic and
Spectrum Technical collectively registered an additional 20,000,000
Units pursuant to a new Registration Statement on Form S-1, which
became effective on January 31, 1996 (SEC File Number 333-00494);
such Units were allocated as follows: Spectrum Strategic 6,000,000,
Spectrum Technical 9,000,000 and the Partnership 5,000,000. The
Partnership, Spectrum Strategic and Spectrum Technical collectively
registered an additional 8,500,000 Units pursuant to another
<PAGE>
Registration Statement on Form S-1, which became effective on April
30, 1996 (SEC File Number 333-3222); such Units were allocated as
follows: Spectrum Strategic 2,500,000, Spectrum Technical
5,000,000 and the Partnership 1,000,000.
The Partnership registered an additional 3,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on February 28, 2000 (SEC File Number 333-90475).
The managing underwriter for the Partnership is DWR.
Units are being sold at monthly closings as of the last day of each
month at a price equal to 100% of the Net Asset Value of a Unit as
of the date of such monthly closing.
Through September 30, 2000, 5,067,160.229 Units were sold, leaving
5,932,839.771 Units. The aggregate price of the Units sold through
September 30, 2000 was $68,406,526.
Since DWR has paid all offering expenses and no other expenses are
chargeable against proceeds, 100% of the proceeds of the offering
have been applied to the working capital of the Partnership for use
in accordance with the "Investment Programs, Use of Proceeds and
Trading Policies" section of the Prospectus included as part of
each Registration Statement.
<PAGE>
Item 5. OTHER INFORMATION
In the month of October 2000, the clearing commodity brokers for
the Partnership were changed from Carr Futures Inc. to Morgan
Stanley & Co., Inc. and Morgan Stanley & Co. International
Limited.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
3.01 Form of Amended and Restated Limited Partnership Agreement
of the Partnership, dated as of May 31, 1998, is
incorporated by reference to Exhibit A of the
Partnership's Prospectus, dated March 6, 2000, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended, on
March 9, 2000.
3.02 Certificate of Limited Partnership, dated April 18, 1994,
is incorporated by reference to Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File No.
33-80146) filed with the Securities and Exchange
Commission on June 10, 1994.
3.03 Certificate of Amendment of Certificate of Limited
Partnership, dated April 17, 1998, is incorporated by
reference to Exhibit 3.03 of the Partnership's
Registration Statement on Form S-1 (File No. 333-3222)
filed with the Securities and Exchange Commission on April
12, 1999.
10.01 Management Agreement, dated as of November 1, 1994, among
the Partnership, Demeter Management Corporation, and RXR,
Inc. is incorporated by reference to Exhibit 10.01 of the
Partnership's Form 10-K (File No. 0-26340) for fiscal year
ended December 31, 1998.
10.02 Amended and Restated Customer Agreement, dated as of
December 1, 1997, between the Partnership and Dean Witter
Reynolds Inc. is incorporated by reference to Exhibit 10.05 of
the Partnership's Form 10-K (File No. 0-26340) for fiscal
year ended December 31, 1998.
<PAGE>
10.03 Customer Agreement, dated as of December 1, 1997,
among the Partnership, Carr Futures, Inc., and Dean Witter
Reynolds Inc. is incorporated by reference to Exhibit 10.06 of
the Partnership's Form 10-K (File No. 0-26340) for fiscal year
ended December 31, 1998.
10.04 International Foreign Exchange Master Agreement, dated
as of August 1, 1997, between the Partnership and Carr
Futures, Inc. is incorporated by reference to Exhibit 10.07 of
the Partnership's Form 10-K (File No. 0-26340) for fiscal
year ended December 31, 1998.
10.05 Subscription and Exchange Agreement and Power of Attorney
to be executed by each purchaser of Units is incorporated
by reference to Exhibit B of the Partnership's Prospectus
dated March 6, 2000, filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, as amended, on March 9, 2000.
10.06 Escrow Agreement, dated September 30, 1994, among the
Partnership, Demeter Management Corporation, Dean Witter
Reynolds Inc., and Chemical Bank is incorporated by
reference to Exhibit 10.06 of the Partnership's Form 10-K
(File No. 0-26340) for fiscal year ended December 31,
1998.
(B) Reports on Form 8-K - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Dean Witter Spectrum
Global Balanced L.P.
(Registrant)
By: Demeter Management Corporation
(General Partner)
November 14, 2000 By:/s/Raymond E. Koch
Raymond E. Koch
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
