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. 0-26338
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3782231
(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 TECHNICAL 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.......... 32-34
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 TECHNICAL 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 254,883,907 251,443,755
Net unrealized gain on open contracts11,259,522 18,036,296
Net option premiums
- - (74,725)
Total Trading Equity 266,143,429 269,405,326
Subscriptions receivable 2,777,934 3,926,914
Interest receivable (DWR) 994,128 900,955
Total Assets 269,915,491 274,233,195
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 4,601,160 3,057,593
Accrued brokerage fees (DWR) 1,624,086 1,559,481
Accrued management fees 896,047 860,403
Total Liabilities 7,121,293 5,477,477
Partners' Capital
Limited Partners (17,715,433.242 and
17,836,873.576 Units, respectively) 259,990,761265,907,998
General Partner (191,022.517 Units) 2,803,437 2,847,720
Total Partners' Capital 262,794,198 268,755,718
Total Liabilities and Partners' Capital 269,915,491 274,233,195
NET ASSET VALUE PER UNIT 14.68 14.91
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
2000 1999
$ $
<S> <C> <C>
REVENUES
Trading profit (loss):
Realized 7,388,455 (176,028)
Net change in unrealized
(6,776,774) (7,731,117)
Total Trading Results 611,681 (7,907,145)
Interest Income (DWR) 2,854,265 2,094,771
Total Revenues 3,465,946 (5,812,374)
EXPENSES
Brokerage fees (DWR) 4,891,913 4,585,319
Management fees 2,698,986 2,529,832
Incentive fees
54,486 -
Total Expenses 7,645,385 7,115,151
NET LOSS (4,179,439) (12,927,525)
NET LOSS ALLOCATION
Limited Partners (4,135,156)
(12,792,933) General Partner
(44,283) (134,592)
NET LOSS PER UNIT
Limited Partners
(.23) (.81)
General Partner
(.23) (.81)
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
- 3 -
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL 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, 199815,824,199.968 $252,455,045 $2,646,389
$255,101,434
Offering of Units 1,064,065.488 16,256,999 160,000
16,416,999
Net Loss
- - (12,792,933) (134,592)
(12,927,525)
Redemptions (378,586.272) (5,846,956)
- - (5,846,956)
Partners' Capital,
March 31, 1999 16,509,679.184 $250,072,155 $2,671,797
$252,743,952
Partners' Capital,
December 31, 1999 18,027,896.093 $265,907,998 $2,847,720
$268,755,718
Offering of Units 691,109.928 10,310,260
- - 10,310,260
Net Loss
- - (4,135,156) (44,283)
(4,179,439)
Redemptions (812,550.262) (12,092,341)
- - (12,092,341)
Partners' Capital,
March 31, 2000 17,906,455.759 $259,990,761 $2,803,437
$262,794,198
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss
(4,179,439) (12,927,525)
Noncash item included in net loss:
Net change in unrealized 6,776,774
7,731,117
Increase in operating assets:
Net option premiums (74,725) -
Interest receivable (DWR)
(93,173) (3,389)
Increase in operating liabilities:
Accrued brokerage fees (DWR) 64,605 110,494
Accrued management fees 35,644
60,961
Net cash provided by (used for) operating activities 2,529,686
(5,028,342)
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 10,310,260 1
6,416,999 (
Increase) decrease in subscriptions receivable 1,148,980
(1,188,949)
Increase in redemptions payable 1,543,567 1
,153,566 R
edemptions of Units
(12,092,341) (5,846,956)
Net cash provided by financing activities 910,466
10,534,660
Net increase in cash 3,440,152 5
,506,318
Balance at beginning of period 251,443,755
235,044,325
Balance at end of period 254,883,907
240,550,643
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL 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 Technical 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 Technical L.P. is a Delaware
limited partnership organized to engage primarily in the
speculative trading of futures and forward contracts, options on
futures contracts, physical commodities and other commodity
interests, including but not limited to foreign currencies,
financial instruments, metals, energy and agricultural products
(collectively, "futures interests"). The Partnership is one of
the Morgan Stanley Dean Witter Spectrum Series of funds,
comprised of the Partnership, Morgan Stanley Dean Witter Spectrum
Commodity L.P. (formerly, Morgan Stanley Tangible Asset Fund
L.P.) Morgan Stanley Dean Witter Spectrum Global Balanced L.P.,
Morgan Stanley Dean Witter Spectrum Select L.P. and Morgan
Stanley Dean Witter Spectrum Strategic L.P.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds Inc. ("DWR"), and an unaffiliated clearing commodity
broker, Carr Futures Inc. ("Carr"), provides clearing and
execution services. Both Demeter and DWR are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co. The trading
advisors to the Partner-ship are Campbell & Company, Inc.,
Chesapeake Capital Corporation and John W. Henry & Company, Inc.,
(collectively, the "Trading Advisors").
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interests trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on a prevailing rate on
U.S. Treasury bills. Brokerage expenses incurred by the
Partnership are paid to DWR.
3. Financial Instruments
The Partnership trades futures and forward contracts, options on
futures contracts, physical commodities and other commodity
interests, including but not limited to foreign currencies,
financial instruments, metals, energy and agricultural products.
Futures and forwards represent contracts for delayed delivery of
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
an instrument at a specified date and price. Risk arises from
changes in the value of these contracts and the potential
inability of counterparties to perform under the terms of the
contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest
rate volatility.
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities" effective for fiscal years beginning after June 15,
1999. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133," which defers the required
implementation of SFAS No. 133 until fiscal years beginning after
June 15, 2000. However, the Partnership had previously elected
to adopt the provisions of SFAS No. 133 beginning with the fiscal
year ended December 31, 1998. SFAS No. 133 supersedes SFAS No.
119 and No. 105, which required the disclosure of average
aggregate fair values and contract/notional values, respectively,
of derivative financial instruments for an entity which carries
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 TECHNICAL 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 $11,259,522 and
$18,036,296 at March 31, 2000 and December 31, 1999,
respectively.
Of the $11,259,522 net unrealized gain on open contracts at March
31, 2000, $10,335,301 related to exchange-traded futures and
futures-styled options contracts and $924,221 related to off-
exchange-traded forward currency contracts.
Of the $18,036,296 net unrealized gain on open contracts at
December 31, 1999, $17,006,044 related to exchange-traded futures
and future-styled options contracts and $1,030,252 related to off-
exchange-traded forward currency contracts.
Exchange-traded futures and futures-styled option contracts held
by the Partnership at March 31, 2000 and December 31, 1999 mature
through March 2001 and December 2000, respectively. Off-exchange-
traded forward currency contracts held by the Partnership at
March 31, 2000 and December 31, 1999 mature through June 2000 and
March 2000, respectively.
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL 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 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 on all open
futures and futures-styled options contracts, which funds, in the
aggregate, totaled $265,219,208 and $268,449,799 at March 31,
2000 and December 31, 1999, respectively. With respect to the
Partnership's off-exchange-traded forward currency contracts,
there are no daily settlements of variations in value nor is
there any requirement that an amount equal to the net unrealized
gain on open forward
<PAGE>
MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
contracts be segregated. With respect to those off-exchange-
traded forward currency contracts, the Partnership is at risk to
the ability of Carr, the sole counterparty on all of such
contracts, to perform. The Partnership has a netting agreement
with Carr. This agreement, which seeks to reduce both the
Partnership's and Carr's exposure on off-exchange-traded forward
currency contracts, should materially decrease the Partnership's
credit risk in the event of Carr's bankruptcy or insolvency.
Carr's parent, Credit Agricole Indosuez, has guaranteed to the
Partnership payment of the net liquidating value of the
transactions in the Partnership's account with Carr (including
foreign currency contracts).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker in separate futures
trading accounts established for each Trading Advisor, which
assets are used as margin to engage in trading. The assets are
held in either non-interest-bearing bank accounts or in
securities and instruments permitted by the CFTC for investment
of customer segregated or secured funds. The Partnership's
assets held by the commodity brokers may be used as margin solely
for the Partnership's trading. Since the Partnership's sole
purpose is to trade in futures, forwards and options, it is
expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership's investment in futures, forwards and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be
taken nor liquidated unless traders are willing to effect trades
at or
<PAGE>
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. These market conditions could prevent the Partnership
from promptly liquidating its futures or options contracts and
result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources - The Partnership does not have, or expect to
have, any capital assets. Redemptions, exchanges and sales of
additional units of limited partnership interest ("Unit(s)") in
the future will affect the amount of funds available for
investments in futures interests in subsequent periods. It is
not possible to estimate the amount and therefore, the impact of
future redemptions of Units.
<PAGE>
Results of Operations
General. The Partnership's results depend on its Trading
Advisors and the ability of the Trading Advisors' trading
programs to take advantage of price movements or other profit
opportunities in the futures, forwards, and options markets. The
following presents a summary of the Partnership's operations for
the three months ended March 31, 2000 and 1999, respectively and
a general discussion of its trading activities during each
period. It is important to note, however, that the Trading
Advisors trade in various markets at different times and that
prior activity in a particular market does not mean that such
market will be actively traded by the Trading Advisors or will be
profitable in the future. Consequently, the results of
operations of the Partnership is difficult to discuss other than
in the context of its Trading Advisors' trading activities on
behalf of the Partnership as a whole and how the Partnership has
performed in the past.
For the Quarter Ended March 31, 2000
For the quarter ended March 31, 2000, the Partnership recorded
trading revenues including interest income of $3,465,946 and,
after expenses, posted a decrease in Net Asset Value per Unit.
The most significant net losses of approximately 3.8% were
recorded primarily in early February in the global interest rate
futures markets from long positions in Japanese interest rate
futures as Japanese bond prices declined in reaction to the yen's
weakness and a higher Nikkei 225 Index. Additional losses were
<PAGE>
incurred during March from long positions in Japanese government
bond futures as prices moved lower on firmer-than-expected
capital investment figures out of Japan and fears that the Bank
of Japan would scrap its zero-rate policy earlier than expected.
In the metals markets, losses of approximately 2.7% were
experienced from short gold futures positions as gold prices
spiked sharply higher on February 4, as short covering, rumored
producer hedge unwinding, and fresh buying fueled panicky
rallies. Newly established long positions in gold futures
produced additional losses later in February as gold prices fell
under the weight of palladium and the weakness of the Australian
dollar. In the soft commodities markets, losses of approximately
0.5% were incurred primarily during January and March from long
coffee futures positions as coffee prices declined in the wake of
forecasts for a bumper crop in Brazil this year. These losses
were partially offset by gains of approximately 4.8% recorded
primarily during January and February in the energy markets from
long futures positions in crude oil and its refined products as
oil prices increased on concerns about future output levels from
the world's leading producer countries amid dwindling stockpiles
and increasing demand. In the global stock index futures
markets, gains of approximately 1.9% were recorded primarily
during February from long positions in DAX and CAC 40 Index
futures as the price of European stock index futures surged on
strength in technology stocks and record highs on the NASDAQ.
Additional gains were recorded during February from long
<PAGE>
positions in NASDAQ 100 Index futures as the NASDAQ Index climbed
higher on strength in computer-chip makers and biotechnology
companies. In the currency markets, gains of approximately 0.6%
were recorded during January and March from short positions in
the European common currency, the euro, and the Swiss franc as
the values of these currencies weakened versus the U.S. dollar.
The euro dropped below parity with the U.S. dollar late in
January, hurt by skepticism about Europe's economic outlook and
lack of public support from European officials. Total expenses
for the three months ended March 31, 2000 were $7,645,385
resulting in a net loss of $4,179,439. The value of a Unit
decreased from $14.91 at December 31, 1999 to $14.68 at March 31,
2000.
For the Quarter Ended March 31, 1999
For the quarter ended March 31, 1999, the Partnership recorded
total trading losses net of interest income of $5,812,374 and
posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 4.1% were recorded in the
global interest rate futures markets early in the quarter largely
from short Japanese government bond futures positions as prices
surged higher in response to the Bank of Japan's aggressive
easing of monetary policy which brought short-term interest rates
down to virtually zero. Additional losses were experienced later
in the quarter from newly established long positions as prices
retreated following comments by Bank of Japan Governor Masaru
<PAGE>
Hayami that he expected interest rates in Japan to rise over
time. In the metals markets, losses of approximately 1.3% were
experienced primarily from long silver futures positions as
prices declined during mid-March after Berkshire Hathaway's
annual report failed to provide any new information on the
company's silver positions. In the livestock markets, losses of
approximately 0.8% were recorded mainly during January from short
cattle and hog futures positions as prices in both markets moved
sharply higher on concerns that winter storms would hurt
supplies, on reports of an increase in demand and plans for
government aid programs to help aid struggling farmers. In soft
commodities, losses of approximately 0.6% were experienced
primarily during January from long coffee futures positions as
prices dropped on fears spurred by the collapse of the Brazilian
real. In the global stock index futures markets, losses of
approximately 0.1% were recorded mostly from long positions in
German stock index futures as European equity prices moved lower
amid rising global bond yields and skepticism regarding the
stability of emerging market economies. These losses were
partially offset by gains of approximately 1.8% recorded in the
energy markets mainly during March from long futures positions in
crude oil and its refined products, unleaded gas and heating oil,
as oil prices moved significantly higher. The substantial
recovery in oil prices during March was largely attributed to the
news that both OPEC and non-OPEC countries had reached an
agreement to cut total output by approximately two million
<PAGE>
barrels a day beginning April 1, 1999. In the currency markets,
gains of approximately 1.4% were recorded primarily during
February and March from short Swiss franc positions as its value
weakened versus the U.S. dollar as investors reasoned that the
United States is the safest place to invest during the crisis in
Kosovo due to the fact that it is geographically removed from the
actual conflict and possesses a powerful military force and on
lack of economic growth in Europe. Gains were also recorded
during January and February from short positions in the euro as
the value of the euro fell versus the U.S. dollar. The euro's
weakness against the dollar was attributed to fears that the
European Central Bank may cut interest rates amid a recent
economic slowdown in that region. In the agricultural markets,
gains of approximately 0.5% were recorded mostly during January
and February from short futures positions in soybeans and soybean
oil as prices trended steadily lower amid a healthy South
American crop, weak world demand and fears that Brazil will flood
the market in an effort to aid their ailing economy. Total
expenses for the three months ended March 31, 1999 were
$7,115,151, resulting in a net loss of $12,927,525. The value of
a Unit decreased from $16.12 at December 31, 1998 to $15.31 at
March 31, 1999.
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
<PAGE>
common single currency (the euro). During a three-year transition
period, the sovereign currencies will continue to exist but only
as a fixed denomination of the euro. Conversion to the euro
prevents the Trading Advisors from trading those sovereign
currencies and thereby limits their ability to take advantage of
potential market opportunities that might otherwise have existed
had separate currencies been available to trade. This could
adversely affect the performance results of the Partnership.
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
<PAGE>
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 at numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). All
<PAGE>
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 Advisors is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
<PAGE>
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the
Partnership's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisors in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following tables indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category at March 31, 2000 and 1999. At
March 31, 2000 and 1999, the Partnership's total capitalization
was approximately $263 million and $253 million, respectively.
<PAGE>
Primary Market March 31, 2000 March 31, 1999
Risk Category Value at Risk Value at Risk
Interest Rate (1.42)% (1.25)%
Currency (1.58) (2.58)
Equity (1.55) (1.15)
Commodity (1.23) (0.83)
Aggregate Value at Risk (3.09)% (3.17)%
Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual Market Categories listed above. Aggregate VaR will be
lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open
positions at March 31, 2000 and 1999 only and is not necessarily
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
<PAGE>
Net Assets for the four quarterly reporting periods from April 1,
1999 through March 31, 2000.
Primary Market Risk Category High Low Average
Interest Rate (2.11)% (1.25)% (1.52)%
Currency (2.58) (1.58) (2.09)
Equity (1.55) (0.39) (1.03)
Commodity (1.23) (0.83) (1.00)
Aggregate Value at Risk (3.80)% (2.57)% (3.16)%
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:
<PAGE>
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 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.
<PAGE>
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. The balances and any market risk
they may represent are immaterial. The Partnership also maintains
a substantial portion (approximately 79%) of its available assets
in cash at DWR. A decline in short-term interest rates will result
in a decline in the Partnership's cash management income. This cash
flow risk is not considered material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market
sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures - constitute
forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act. The
Partnership's primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Advisors
for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
<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 at March 31, 2000, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
Interest Rate. The primary market exposure in the Partnership
was in the global interest rate sector. Exposure was primarily
spread across the U.S., German, Japanese and European interest
rate sectors. Interest rate movements directly affect the price
of the sovereign bond futures positions held by 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
<PAGE>
fluctuations in the United States and the other G-7 countries.
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 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 second largest market exposure at March 31, 2000
was in the currency complex. The Partnership's currency exposure
is to exchange rate fluctuations, primarily fluctuations which
disrupt the historical pricing relationships between different
currencies and currency pairs. Interest rate changes as well as
political and general economic conditions influence these
fluctuations. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar. For the first quarter of
2000, the Partnership's major exposures were in the euro currency
crosses and outright U.S. dollar positions. (Outright positions
consist of the U.S. dollar vs. other currencies. These other
currencies include the major and minor currencies). Demeter does
<PAGE>
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.
Equity. 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), S&P 500 (U.S.) and All
Ordinaries (Australia) stock indices. The Partnership is
primarily exposed to the risk of adverse price trends or static
markets in the U.S., European and Japanese indices. (Static
markets would not cause major market changes but would make it
difficult for the Partnership to avoid being "whipsawed" into
numerous small losses).
Commodity.
Energy. On March 31, 2000, the Partnership's energy exposure was
shared by futures contracts in the oil and natural gas markets.
Price movements in these markets result from political
developments in the Middle East, weather patterns, and other
economic fundamentals. It is possible that volatility will
<PAGE>
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 primary metals market exposure is to
fluctuations in the price of gold and silver. Although certain
Trading Advisors will, from time to time, trade base metals such
as aluminum, copper, zinc, nickel, tin and lead, the principal
market exposures of the Partnership have consistently been in
precious metals, such as gold and silver (and, to a much lesser
extent, platinum). Exposure was evident in the gold market as
gold prices were volatile during the quarter ended March 31,
2000. Silver prices have also remained volatile over this
period, and the Trading Advisors have, from time to time, taken
positions as they have perceived market opportunities to develop.
Demeter anticipates that gold and silver will remain the primary
metals market exposure for the Partnership.
Soft Commodities and Agriculturals . On March 31, 2000, the
Partnership had exposure in the markets that comprise these
sectors. Most of the exposure, however, was in the soybeans and
soybean related products, coffee, corn, and livestock markets.
Supply and demand inequalities, severe weather disruption and
market expectations affect price movements in these markets.
<PAGE>
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of March 31, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances are in euros, Australian dollars, Swiss francs,
British pounds and Canadian dollars. The Partnership controls
the non-trading risk of these balances by regularly converting
these balances back into dollars upon liquidation of the
respective position.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisors, separately, attempt to
manage the risk of the Partnership's open positions in essentially
the same manner in all market categories traded. Demeter attempts
to manage the market exposure by diversifying the Partnership's
assets among different Trading Advisors, each of whose strategies
focus on different market sectors and trading approaches, and
monitoring the performance of the Trading Advisors daily. In
addition, the Trading Advisors establish diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-sensitive
instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership investment
directed by Demeter, rather than the Trading Advisors.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On March 3, 2000, the plaintiffs in the New York action filed an
appeal of the order dismissing the consolidated complaint.
(Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-K for the year ended December 31, 1999 for
a more detailed discussion).
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership, Morgan Stanley Dean Witter Spectrum Strategic L.P.
("Spectrum Strategic") and Morgan Stanley Dean Witter Spectrum
Global Balanced L.P. ("Spectrum Global Balanced") , 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 to the
Partnership, Spectrum Strategic and Spectrum Global Balanced at
that time, they were subsequently allocated for convenience
purposes as follows: the Partnership 4,000,000, Spectrum Strategic
4,000,000 and Spectrum Global Balanced 2,000,000. The Partnership,
Spectrum Strategic and Spectrum Global Balanced 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: the Partnership 9,000,000, Spectrum Strategic
6,000,000 and Spectrum Global Balanced 5,000,000. The Partnership,
Spectrum Strategic and
<PAGE>
Spectrum Global Balanced collectively 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 to the Partnership, Spectrum
Strategic and Spectrum Global Balanced as follows: the Partnership
5,000,000, Spectrum Strategic 2,500,000 and Spectrum Global
Balanced 1,000,000.
The Partnership registered an additional 5,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on May 11, 1998 (SEC File Number 333-47831).
The Partnership registered an additional 10,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective January 21, 1999 (SEC File Number 333-68779).
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, 23,252,422.730 Units were sold, leaving
9,747,577.270 Units unsold as of March 31, 2000. The aggregate
price of the Units sold through March 31, 2000 is $311,035,153.
<PAGE>
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.
Item 5. OTHER INFORMATION
Effective January 31, 2000, Mark J. Hawley resigned as Chairman
of the Board and a Director of Demeter and Dean Witter Futures
and Currency Management Inc. ("DWFCM") and Robert E. Murray
replaced him as Chairman of the Board of Demeter and DWFCM.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - None.
(B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Dean Witter Spectrum
Technical 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 Technical 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> 254,883,907
<SECURITIES> 0
<RECEIVABLES> 3,772,062<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 269,915,491<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 269,915,491<F3>
<SALES> 0
<TOTAL-REVENUES> 3,465,946<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,645,385
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,179,439)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,179,439)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,179,439)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include subscriptions receivable of $2,777,934 and
interest receivable of $994,128.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $11,259,522.
<F3>Liabilities include redemptions payable of $4,601,160,
accrued brokerage fees of $1,624,086 and accrued management fees of
$896,047.
<F4>Total revenues include realized trading revenue of $7,388,455,
net change in unrealized of $(6,776,774) and interest income of
$2,854,265.
</FN>
</TABLE>
