UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-26340
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
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MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition March 31, 2000
(Unaudited) and December 31, 1999.....................2
Statements of Operations for the Quarters Ended
March 31, 2000 and 1999 (Unaudited)...................3
Statements of Changes in Partners' Capital for the
Quarters Ended March 31, 2000 and 1999
(Unaudited)...........................................4
Statements of Cash Flows for the Quarters Ended
March 31, 2000 and 1999 (Unaudited)...................5
Notes to Financial Statements (Unaudited)..........6-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..12-19
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ...................................19-31
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.................................32
Item 2. Changes in Securities and Use of Proceeds......32-33
Item 5. Other Information.................................34
Item 6. Exhibits and Reports on Form 8-K..................34
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
2000 1999
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 56,964,275 56,904,921
Net unrealized gain on open contracts 2,816,295 810,114
Total Trading Equity 59,780,570 57,715,035
Subscriptions receivable 869,770 847,954
Interest receivable (DWR) 274,230 244,599
Total Assets 60,924,570 58,807,588
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 1,937,233 667,741
Accrued brokerage fees (DWR) 222,237 216,895
Accrued management fee 60,391 58,940
Total Liabilities 2,219,861 943,576
Partners' Capital
Limited Partners (3,491,763.111 and
3,549,239.387 Units, respectively) 58,030,231 57,209,838
General Partner (40,584.304 Units) 674,478 654,174
Total Partners' Capital 58,704,709 57,864,012
Total Liabilities and Partners' Capital 60,924,570 58,
807,588
NET ASSET VALUE PER UNIT 16.62 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 March 31,
2000 1999
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized
(133,121) 1,001,877
Net change in unrealized 2,006,181 (870,068)
Total Trading Results 1,873,060 131,809
Interest Income (DWR) 775,426 498,269
Total Revenues 2,648,486 630,078
EXPENSES
Brokerage fees (DWR) 665,107 537,128
Management fee 180,737 145,959
Total Expenses 845,844 683,087
NET INCOME (LOSS) 1,802,642 (53,009)
NET INCOME (LOSS) ALLOCATION
Limited Partners 1,782,338
(52,414)
General Partner 20,304
(595)
NET INCOME (LOSS) PER UNIT
Limited Partners 0.50
(.02)
General Partner
0.50 (.02)
<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 Quarters Ended March 31, 2000 and 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
Partners' Capital,
December 31, 1998 2,869,073.505 $45,399,750 $514,122
$45,913,872
Offering of Units 219,471.601 3,507,842
- - 3,507,842
Net loss
- - (52,414) (595) (53,009)
Redemptions (63,242.033) (1,010,731)
- - (1,010,731)
Partners' Capital,
March 31, 1999 3,025,303.073 $47,844,447 $513,527
$48,357,974
Partners' Capital,
December 31, 1999 3,589,823.691 $57,209,838 $654,174
$57,864,012
Offering of Units 191,780.967 3,106,698
- - 3,106,698
Net income
- - 1,782,338 20,304 1,802,642
Redemptions (249,257.243) (4,068,643)
- - (4,068,643)
Partners' Capital,
March 31, 2000 3,532,347.415 $58,030,231 $674,478
$58,704,709
<<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 Quarters Ended March 31,
2000 1999
$ $
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 1,802,642
(53,009) Noncash
item included in net income (loss):
Net change in unrealized
(2,006,181) 870,068
Increase in operating assets:
Interest receivable (DWR)
(29,631) (5,691)
Increase (decrease) in operating liabilities:
Accrued brokerage fees (DWR) 5,342 11,971
Accrued management fee 1,451
3,253
Incentive fee payable
- (69,730)
Net cash provided by (used for) operating activities (226,377)
756,862
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 3,106,698 3
,507,842 Increase in
subscriptions receivable
(21,816)
(63,899)
Increase in redemptions payable 1,269,492 201,105
Redemptions of Units
(4,068,643) (1,010,731)
Net cash provided by financing activities 285,731
2,634,317
Net increase in cash 59,354 3
,391,179
Balance at beginning of period 56,904,921
43,020,361
Balance at end of period 56,964,275
46,411,540
<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 financial statements include, in the opinion of management,
all adjustments necessary for a fair presentation of the results
of operations and financial condition of Morgan Stanley Dean
Witter Spectrum 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 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. (formerly,
Morgan Stanley Tangible Asset Fund 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. Brokerage expenses incurred by the
Partnership are paid to DWR.
3. Financial Instruments
The Partnership trades futures 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,
1999. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133," which defers the required
implementation of SFAS No. 133 until fiscal years beginning after
June 15, 2000. However, the Partnership had previously elected
to adopt the provisions of SFAS No. 133 beginning with the fiscal
year ended December 31, 1998. SFAS No. 133 supersedes SFAS No.
119 and No. 105, which required the disclosure of average
aggregate fair values and contract/notional values, respectively,
of derivative financial instruments for an entity which carries
its assets at fair value. The application of SFAS No. 133 does
not 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)
The net 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 $2,816,295 and
$810,114 at March 31, 2000 and December 31, 1999, respectively.
Of the $2,816,295 net unrealized gain on open contracts at March
31, 2000, $2,908,912 related to exchange-traded futures contracts
and $(92,617)related to off-exchange-traded forward currency
contracts.
Of the $810,114 net unrealized gain on open contracts at December
31, 1999, $669,640 related to exchange-traded futures contracts
and $140,474 related to off-exchange-traded forward currency
contracts.
Exchange-traded futures contracts held by the Partnership at
March 31, 2000 and December 31, 1999 mature through June 2000.
Off-exchange-traded forward currency contracts held by the
Partnership at March 31, 2000 and December 31, 1999 mature
through June 2000 and March 2000, respectively.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.
The Partnership also has credit risk because DWR and Carr act as
the futures commission merchants or the counterparties, with
respect to most of the Partnership's assets. Exchange-traded
futures 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 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 contracts, including
an amount equal to the net unrealized gain on all open futures
contracts, which funds, in the aggregate, totaled $59,873,187 and
$57,574,561 at March 31, 2000 and December 31, 1999,
respectively. With respect to the Partnership's off-exchange-
traded forward currency contracts, there are no daily settlements
of variations in value nor is there any requirement that an
amount equal to the
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
net unrealized gain on open forward contracts be segregated.
With respect to those off-exchange-traded forward currency
contracts, the Partnership is at risk to the ability of Carr, the
sole counterparty on all of such contracts, to perform. The
Partnership has a netting agreement with Carr. This agreement,
which seeks to reduce both the Partnership's and Carr's exposure
on off-exchange-traded forward currency contracts, should
materially decrease the Partnership's credit risk in the event of
Carr's bankruptcy or insolvency. Carr's parent, Credit Agricole
Indosuez, has guaranteed to the Partnership payment of the net
liquidating value of the transactions in the Partnership's
account with Carr (including foreign currency contracts).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker in separate futures
trading accounts established for 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 and forwards, it is expected that
the Partnership will continue to own such liquid assets for
margin purposes.
The Partnership's investment in futures 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
investments 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 three months ended March
31, 2000 and 1999, respectively, and a general discussion of its
trading activities during each period. It is important to note,
however, that the Trading 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 is
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.
For the Quarter Ended March 31, 2000
For the quarter ended March 31, 2000, the Partnership recorded
trading revenues, including interest income, of $2,648,486 and
posted an increase in Net Asset Value per Unit. The most
significant gains of approximately 1.8% were recorded in the
global stock index futures markets from long positions in Nikkei
Index futures as Japanese equity prices increased during February
due to weakness in the Japanese yen versus other major
currencies, particularly the U.S. dollar. Later in March, a
surge in Japanese technology issues, linked to rising industrial
production in that nation, and the belief that institutions would
add these issues to their portfolios prior to fiscal year-end,
<PAGE>
boosted the Nikkei to a 40-month high. In the global interest
rate futures markets, gains of approximately 1.3% were recorded
primarily during March from long positions in U.S. interest rate
futures as domestic bond prices increased. This upward price
move was attributed to a "flight-to-quality" following sharp
gyrations in the U.S. stock market, the U.S. Treasury's decision
to buy back outstanding debt, and concerns that longer-term debt
is becoming scarce. In the currency markets, profits of
approximately 0.4% were recorded primarily during March from long
Japanese yen positions versus the Australian dollar and from
cross-rate positions, specifically in the euro relative to the
British pound, as the value of the European common currency
weakened during January versus the pound hurt by skepticism about
Europe's economic outlook and lack of public support for the
economy from European officials. In the metals markets, gains of
approximately 0.4% were recorded primarily in early February from
long nickel futures positions as nickel prices climbed to their
highest level in five years. In the energy markets, gains of
approximately 0.2% were recorded primarily during February from
long positions in crude oil futures and its refined products as
oil prices powered to nine-year highs on concerns about future
output levels from the world's leading producer countries amid
dwindling stockpiles and increasing demand. These gains were
partially offset by losses of approximately 0.4% recorded
primarily during February in the livestock markets from short
lean hog futures positions as prices climbed higher amid
<PAGE>
expectations of higher wholesale pork prices due to light
slaughter rates. During January, additional losses were incurred
from long positions in live cattle futures as prices declined
after the USDA raised its forecast for U.S. red meat production
in 2000. In the agricultural markets, losses of approximately
0.4% were experienced from long corn futures positions as prices
declined later in March amid rainfall in the U.S. Midwest, as
well as outlooks for more rain. Early in February, losses were
incurred from long positions in soybean oil as soybean prices
moved lower following rains in the growing region of South
America, particularly Brazil. Total expenses for the three months
ended March 31, 2000 were $845,844, resulting in net income of
$1,802,642. The value of a Unit increased from $16.12 at
December 31, 1999 to $16.62 at March 31, 2000.
For the Quarter Ended March 31, 1999
For the quarter ended March 31, 1999, the Partnership recorded
total trading revenues, including interest income, of $630,078
and, after expenses, posted a decrease in Net Asset Value per
Unit. The most significant net losses of approximately 1.5% were
recorded in the global interest rate futures markets mainly
during January and March from short Australian interest rate
futures positions as prices moved higher due to depressed gold
prices during late March which weakened the Australian dollar,
and to a lesser extent, Australian stock prices. In the
livestock markets, losses of approximately 0.4% were experienced
<PAGE>
primarily in January from short positions in hog and cattle
futures as prices in both markets moved sharply higher on
concerns that winter storms would hurt supplies, on reports of an
increase in demand and plans for government aid programs to help
struggling farmers. In soft commodities, losses of approximately
0.1% were recorded mostly during March from short cotton futures
positions as prices increased to their highest level since mid-
December on technically motivated speculative buying and rumors
that an influential merchant turned bullish early in March. In
the metals markets, losses of approximately 0.1% were experienced
largely from short copper futures positions as prices moved
significantly higher towards the end of March in response to a
decline in London Metal Exchange ("LME") warehouse stocks and
evidence that Japanese consumption has stabilized. These losses
were partially offset by gains of approximately 0.8% recorded
primarily during January and March in the global stock index
futures component from long Nikkei Index futures positions as
Japanese equity prices were pushed higher by positive economic
factors in Japan such as low interest rates, an easing credit
stance, relatively stable exchange rates and an agreement to
inject public funds into the indebted banking sector. In the
currency markets, gains of approximately 0.7% were recorded
throughout a majority of the quarter mainly from short euro
positions as the value of the U.S. dollar hit new highs during
March versus the European common currency on the strength of the
<PAGE>
U.S. economy, concerns pertaining to the economic health of
Europe and Japan and growing uncertainty about the military
action in Yugoslavia. In the energy markets, gains of
approximately 0.7% were recorded during March largely from long
positions in crude and gas oil futures as prices moved
significantly higher which was largely attributed to the news
that both OPEC and non-OPEC countries had reached an agreement to
cut total output by approximately two million barrels a day
beginning April 1, 1999. In the agricultural markets, gains of
approximately 0.4% were recorded primarily in January and
February from short soybean oil futures positions as prices
declined to 23-year lows in reaction to a healthy South American
crop outlook, weak world demand and fears that Brazil will flood
the market in an effort to support their ailing economy. Total
expenses for the three months ended March 31, 1999 were $683,087,
resulting in a net loss of $53,009. The value of a Unit
decreased from $16.00 at December 31, 1998 to $15.98 at March 31,
1999.
Risks Associated With the Euro. On January 1, 1999, eleven
countries in the European Union established fixed conversion
rates on their existing sovereign currencies and converted to a
common single currency (the euro). During a three-year
transition period, the sovereign currencies will continue to
exist but only as a fixed denomination of the euro. Conversion
to the euro prevents the Trading Advisor from trading those
<PAGE>
sovereign 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.
This could adversely affect the performance results of the
Partnership.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
<PAGE>
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.
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.
<PAGE>
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.
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
<PAGE>
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 tables indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of March 31, 2000 and 1999.
At March 31, 2000 and 1999, the Partnership's total
capitalization was approximately $59 million and $48 million,
respectively.
Primary Market March 31, 2000 March 31, 1999
Risk Category Value at Risk Value at Risk
Equity (1.28)% (1.02)%
Interest Rate (0.73) (0.76)
Currency (0.53) (0.47)
Commodity (0.29) (0.32)
Aggregate Value at Risk (1.67)% (1.38)%
Aggregate Value at Risk represents the aggregate VaR of all the
<PAGE>
Partnership's open positions and not the sum of the VaR of the
individual Market Categories listed above. Aggregate VaR will be
lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open
positions at March 31, 2000 and 1999 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures interests, the
composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
Net Assets for the four quarterly reporting periods from April 1,
1999 through March 31, 2000.
Primary Market Risk Category High Low Average
Equity (1.28)% (0.51)% (0.96)%
Interest Rate (0.76) (0.45) (0.63)
Currency (0.53) (0.42) (0.49)
Commodity (0.40) (0.26) (0.32)
Aggregate Value at Risk (1.67)% (0.90)% (1.33)%
<PAGE>
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, gives no indication of such "risk
of ruin". In addition, VaR risk measures should be viewed in light
of the methodology's limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect past trading positions while future risk
depends on future positions;
<PAGE>
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 March 31, 2000 and for the end of the four
quarterly reporting periods from April 1, 1999 through March 31,
2000. Since VaR is based on historical data, VaR should not be
viewed as predictive of the Partnership's future financial
performance or its ability to manage or monitor risk. There can be
no assurance that the Partnership's actual losses on a particular
day will not exceed the VaR amounts indicated above or that such
losses will not occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market risk
they may represent are immaterial. The Partnership also maintains
a substantial portion (approximately 94%) of its available assets
in cash at DWR. A decline in short-term interest rates will result
in
<PAGE>
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
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
<PAGE>
result in material losses as well as in material changes to the
risk exposures and the risk management strategies of the
Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of March 31, 2000, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
Equity. The primary market exposure in the Partnership is in
the global stock index sector. 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 March 31, 2000, the Partnership's
primary exposures were in the Nikkei (Japan), FT-SE (Britain),
S&P 500 (U.S.) 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 would
make it difficult for the Partnership to avoid being "whipsawed"
into numerous small losses).
Interest Rate. The second largest market exposure this quarter
was in the global interest rate complex. Exposure was spread
<PAGE>
across the U.S., European, Japanese and Australian interest rate
sectors. Interest rate movements directly affect the price of
the sovereign bond futures positions held by the Partnership and
indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's
primary interest rate exposure is generally to interest rate
fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions in the
government debt of smaller nations - e.g. Australia and Spain.
Demeter anticipates that G-7 and Australian interest rates will
remain the primary interest rate exposure of the Partnership for
the foreseeable future. The changes in interest rates, which
have the most effect on the Partnership, are changes in long-
term, as opposed to short-term rates. Most of the speculative
futures positions held by the Partnership are in medium to long-
term instruments. Consequently, even a material change in short-
term rates would have little effect on the Partnership, were the
medium- to long-term rates to remain steady.
Currency. The Partnership's currency exposure is to exchange
rate fluctuations, primarily fluctuations which disrupt the
historical pricing relationships between different currencies and
currency pairs. Interest rate changes as well as political and
general economic conditions influence these fluctuations. The
<PAGE>
Partnership trades in a large number of currencies, including
cross-rates - i.e., positions between two currencies other than
the U.S. dollar. For the first quarter of 2000, the
Partnership's major exposures were in the euro currency crosses
and outright U.S. dollar positions. (Outright positions consist
of the U.S. dollar vs. other currencies. These other currencies
include the major and minor currencies). Demeter does not
anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future. The currency
trading VaR figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Partnership in
expressing VaR in a functional currency other than dollars.
Commodity.
Soft Commodities and Agriculturals . On March 31, 2000, the
Partnership had exposure in the markets that comprise these
sectors. Most of the exposure, however, was in the soybean oil,
lean hogs and corn markets. Supply and demand inequalities,
severe weather disruption and market expectations affect price
movements in these markets.
Energy. On March 31, 2000, the Partnership's energy exposure was
shared by futures contracts in the oil and natural gas markets.
Price movements in these markets result from political
developments in the Middle East, weather patterns, and other
<PAGE>
economic fundamentals. It is possible that volatility will
remain high and that significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in this market. Natural gas has exhibited volatility
in prices resulting from weather patterns and supply and demand
factors and is expected to continue in this choppy pattern.
Metals. The Partnership's metals market exposure is to
fluctuations in the price of base metals. During periods of
volatility, base metals will affect performance dramatically.
Demeter anticipates that the base metals will remain the primary
metals market exposure of the Partnership.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of March 31, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances are in British pounds, euros and Swedish
kronas. The Partnership controls the non-trading risk of these
balances by regularly converting these balances back into dollars
upon liquidation of the respective position.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in essentially
<PAGE>
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
On March 3, 2000, the plaintiffs in the New York action filed an
appeal of the order dismissing the consolidated complaint.
(Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-K for the year ended December 31, 1999 for
a more detailed discussion.)
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership, 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
<PAGE>
registered an additional 8,500,000 Units pursuant to another
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 March 31, 2000, 4,771,945.468 Units were sold, leaving
6,228,054.532 Units unsold as of March 31, 2000. The aggregate
price of the Units sold through March 31, 2000 was $63,807,120.
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
Effective January 31, 2000, Mark J. Hawley resigned as Chairman
of the Board and a Director of Demeter and Dean Witter Futures &
Currency Management Inc. ("DWFCM") and Robert E. Murray replaced
him as Chairman of the Board of Demeter and DWFCM.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Dean Witter Spectrum
Global Balanced L.P.
(Registrant)
By: Demeter Management Corporation
(General Partner)
May 12, 2000 By:/s/ Lewis A. Raibley, III
Lewis A. Raibley, III
Director and Chief Financial
Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Morgan
Stanley Dean Witter Spectrum Global Balanced L.P. and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 56,964,275
<SECURITIES> 0
<RECEIVABLES> 1,144,000<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,924,570<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 60,924,570<F3>
<SALES> 0
<TOTAL-REVENUES> 2,648,486<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 845,844
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,802,642
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,802,642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,802,642
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include subscriptions receivable of $869,770 and
interest receivable of $274,230.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $2,816,295.
<F3>Liabilities include redemptions payable of $1,937,233, accrued
brokerage fees of $222,237, and accrued management fee of $60,391.
<F4>Total revenues include realized trading revenue of $(133,121),
net change in unrealized of $2,006,181 and interest income of
$775,426.
</FN>
</TABLE>
