Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the year ended December 31, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from
________________to___________________
Commission File Number 0-31563
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
(Exact name of registrant as specified in its Limited Partnership
Agreement)
DELAWARE 13-4084211
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization)
Identification No.)
c/o Demeter Management Corporation
Two World Trade Center, - 62nd Flr., New York, N.Y.
10048 (Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (212)
392-5454
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange
Title of each class on which
registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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 _____
Indicate by check-mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment of this Form 10-K. [X]
State the aggregate market value of the Units of Limited
Partnership Interest held by non-affiliates of the registrant.
The aggregate market value shall be computed by reference to the
price at which units were sold as of a specified date within 60
days prior to the date of filing: $13,840,627 at January 31,
2001.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
MORGAN STANLEY DEAN WITTER SPECTRUM CURRENCY L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2000
Page No.
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . .
. . . . 1
Part I .
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . .
. 2-6
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . .
. . 6
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . .
. 6-7
Item 4. Submission of Matters to a Vote of Security Holders.
. ...7
Part II.
Item 5. Market for the
Registrant's Partnership Units
and Related Security Holder Matters . . . . . . . . .
. 8-9
Item 6. Selected Financial Data . . . . . . . . . . . . . . .
. . 10
Item 7. Management's
Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . .
11-20
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . .
20-30
Item 8. Financial Statements and Supplementary Data. . . . . .
. .30
Item 9. Changes in and
Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . .
. .30
Part III.
Item 10. Directors and
Executive Officers of the Registrant . . 31-35
Item 11. Executive Compensation . . . . . . . . . . . . . . . .
. .35
Item 12. Security
Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . .
. .36
Item 13. Certain Relationships and Related Transactions . . .
.36-37
Part IV.
Item 14. Exhibits,
Financial Statement Schedules, and
Reports on Form 8-K. . . . . . . . . . . . . . . . . .
. .38
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference
as follows:
Documents Incorporated Part of Form l0-
K
Partnership's Prospectus dated
March 6, 2000 I
Partnership's Supplement to
the Prospectus dated June 22, 2000 I
Annual Report to Morgan Stanley
Dean Witter Spectrum Series Limited
Partners for the year ended December 31, 2000 II, III and
IV
PART I
Item 1. BUSINESS
(a) General Development of Business. Morgan Stanley Dean Witter
Spectrum Currency L.P. (the "Partnership") is a Delaware limited
partnership organized to engage primarily in the speculative
trading of futures options and forward contracts in global
currency markets. The Partnership commenced operations on July
3, 2000. The Partnership is one of the Morgan Stanley Dean
Witter Spectrum Series of funds, comprised of the Partnership,
Morgan Stanley Dean Witter Spectrum Commodity L.P., Morgan
Stanley Dean Witter Spectrum Global Balanced L.P., Morgan Stanley
Dean Witter Spectrum Strategic L.P., Morgan Stanley Dean Witter
Spectrum Select L.P. and Morgan Stanley Dean Witter Spectrum
Technical L.P. (collectively, the "Spectrum Series").
The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds, Inc. ("DWR"). The clearing commodity brokers are
Morgan Stanley & Co. Incorporated ("MS & Co.") and Morgan Stanley
& Co. International Limited ("MSIL") which provide clearing and
execution services. Demeter, DWR, MS & Co. and MSIL are wholly-
owned subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW").
The trading advisors
to the Partnership are John W. Henry & Company, Inc. ("JWH") and
Sunrise Capital Partners, LLC ("Sunrise") (collectively, the
"Trading Advisors").
The Partnership registered 12,000,000 Units of limited
partnership interest ("Units") pursuant to a Registration
Statement on Form S-1 (SEC File Number 333-90483), which became
effective on March 6, 2000 (the "Registration Statement").
The managing underwriter for the Spectrum Series is DWR.
Units of the Partnership were offered initially at $10 per Unit
from March 6, 2000 through June 30, 2000 for issuance at the
initial closing which was held on June 30, 2000 (the "Initial
Closing").
Units which remain unsold following the Initial Closing are
available for sale at monthly closings held as of the last day of
each month (a "Monthly Closing") during the Partnership's
continuing offering of Units ("Continuing Offering"). Since the
Partnership may register additional Units for sale, there is no
maximum aggregate amount of contributions that may be received by
the Partnership. During the Continuing Offering, Units of the
Partnership are offered for sale at Monthly Closings at a
purchase price equal to 100% of the net asset value per Unit as
of the last day of each month.
The Partnership's net asset value per Unit at December 31, 2000
was $11.17, representing an increase of 11.70 percent from the
net asset value per Unit of $10.00 on July 3, 2000 (commencement
of operations). For a more detailed description of the
Partnership's business see subparagraph (c).
(b) Financial Information about Segments. For financial
information reporting purposes, the Partnership is deemed to
engage in one industry segment, the speculative trading of
futures, forwards, and options. The relevant financial
information is presented in Items 6 and 8.
(c) Narrative Description of Business. The Partnership is in the
business of speculative trading of futures, forwards, and
options, pursuant to trading instructions provided by the Trading
Advisors. For a detailed description of the different facets of
the Partnership's business, see those portions of the
Partnership's prospectus, dated March 6, 2000, (the "Prospectus")
and the Partnership's supplement to the Prospectus dated June 22,
2000 (the "Supplement") incorporated by reference in this Form 10-
K,
set forth below.
Facets of Business
1. Summary 1. "Summary" (Pages 1-8 of
the Prospectus and Page
S-2 of the Supplement).
2. Futures, Options, and 2. "The Futures, Options, and
Forwards Markets Forwards Markets" (Pages
86-90 of the Prospectus).
3. Partnership's Trading 3. "Use of Proceeds (Pages
Arrangements and 20-22 of the Prospectus).
Policies "The Trading Advisors"
(Pages 40-65 of the
Prospectus and Pages S-12
to S-19 of the Supplement).
4. Management of the Part- 4. "The Trading Advisors -
nership The Management Agree-
ments" (Page 40 of the
Prospectus), "The
General Partner" (Pages 35-39 of the
Prospectus,
and Pages S-10 to S-11 of
the Supplement), "The Com-
modity Brokers" (Pages
68-69 of the Prospectus
and Pages S-19 to S-20
of the Supplement), "The
Limited Partnership
Agreements"(Pages 70-
73 of the Prospectus).
5. Taxation of the Partner- 5. "Material Federal
Income ship's Limited Partners
Tax Considerations" and "State and
Local Income Tax
Aspects" (Pages 79-85 of
the Prospectus).
(d) Financial Information about Geographic Areas.
The Partnership has not engaged in any operations in foreign
countries; however, the Partnership (through the commodity
brokers) enters into forward contract transactions where foreign
banks are the contracting party and trades in futures, forwards,
and options on foreign exchanges.
Item 2. PROPERTIES
The executive and administrative offices are located within the
offices of DWR. The DWR offices utilized by the Partnership are
located at Two World Trade Center, 62nd Floor, New York, NY
10048.
Item 3. LEGAL PROCEEDINGS
Similar class actions were filed in 1996 in California and New
York State courts. Each of these actions were dismissed in 1999.
However, the New York State class action discussed below is still
pending because plaintiffs appealed the trial court's dismissal
of their case on March 3, 2000.
On September 18 and 20, 1996, purported class actions were filed
in the Supreme Court of the State of New York, New York County,
on behalf of all purchasers of interests in limited partnership
commodity pools sold by DWR. Named defendants include DWR,
Demeter, MSDW, certain limited partnership commodity pools of
which Demeter is the general partner and certain trading advisors
to those pools. A consolidated and amended complaint in the
action pending in the Supreme Court of the State of New York was
filed on August 13, 1997, alleging that the defendants committed
fraud, breach of fiduciary duty, and negligent misrepresentation
in the sale and operation of the various limited partnership
commodity pools. The complaints sought unspecified amounts of
compensatory and punitive damages and other relief. The New York
Supreme Court dismissed the New York action in November 1998, but
granted plaintiffs leave to file an amended complaint, which they
did in early December 1998. The defendants filed a motion to
dismiss the amended complaint with prejudice on February 1, 1999.
By decision dated December 21, 1999, the New York Supreme Court
dismissed the case with prejudice. However, on March 3, 2000,
plaintiffs appealed the trial court's dismissal of their case.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED
SECURITY HOLDER MATTERS
(a) Market Information
There is no established public trading market for Units of the
Partnership.
(b) Holders
The number of holders of Units at December 31, 2000 was
approximately 1,260.
(c) Distributions
No distributions have been made by the Partnership since it
commenced trading operations on July 3, 2000. Demeter has sole
discretion to decide what distributions, if any, shall be made to
investors in the Partnership. Demeter currently does not intend
to make any distribution of Partnership profits.
(d) Use of Proceeds
The Partnership registered 12,000,000 Units pursuant to a
Registration Statement on From S-1 (SEC file Number 333-90483),
which became effective on March 6, 2000. The managing
underwriter for the Partnership is DWR. The offering originally
commenced on March 6, 2000 with 633,154.332 Units sold through
June 30, 2000.
The aggregate price of the offering amount registered was
$6,331,543 (based upon the initial offering price of $10.00 per
Unit) for the Initial Closing on June 30, 2000 (the "Initial
Offering"). After the Initial Offering, Units are sold at
Monthly Closings at a price equal to 100% of the net asset value
per Unit as of the close of business on the last day of each
month.
Through December 31, 2000, 1,460,031.957 Units were sold, leaving
10,539,968.043 Units unsold at December 31, 2000. The aggregate
price of the Units sold through December 31, 2000 was
$15,168,701.
Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the "Use of
Proceeds" section of the Prospectus and the Supplement.
Item 6. SELECTED FINANCIAL DATA (in dollars)
For the Period from
July 3, 2000
(commencement of
operations) to
December 31, 2000
Total Revenues
(including interest) 1,918,231
Net Income 1,308,544
Net Income
Per Unit (Limited
& General Partners) 1.17
Total Assets 18,056,724
Total Limited
Partners' Capital 13,988,414
Net Asset Value Per
Unit 11.17
Item 7. 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 MS & Co. and MISL as clearing brokers in
separate futures, forwards, and options 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
Commodity Futures Trading Commission ("CFTC") for investment of
customer segregated or secured funds. The Partnership's assets
held by the commodity brokers may be used as margin solely for
the Partnership's trading. Since the Partnership's sole purpose
is to trade in futures, forwards, and options, it is expected
that the Partnership will continue to own such liquid assets for
margin purposes.
The Partnership's investment in futures, forwards, and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be
taken
nor liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
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 currencies. 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, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources. The Partnership does not have, or expect to
have, any capital assets. Redemptions, exchanges and sales of
additional Units in the future will affect the amount of funds
available for investments in futures, forwards, and options in
subsequent periods. It is not possible to estimate the amount
and therefore the impact of future redemptions.
Results of Operations.
General. The Partnership's results depend on its Trading
Advisors and the ability of each Trading 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 period ended December 31, 2000 and a general discussion of
its trading activities during that period. It is important to
note, however, that the Trading Advisors trade in various markets
at different times and that prior activity in a particular market
does not mean that such market will be actively traded by the
Trading Advisors or will be profitable in the future.
Consequently, the results of operations of the Partnership are
difficult to discuss other than in the context of its Trading
Advisors' trading activities on behalf of the Partnership as a
whole and how the Partnership has performed in the past.
At December 31, 2000, the Partnership's total capital was
$15,707,232, an increase of $9,375,689 from the Partnership's
total capital of $6,331,543 at July 3, 2000 (commencement of
operations). For the period from July 3, 2000 (commencement of
operations) to December 31, 2000, the Partnership generated net
income of $1,308,544, total subscriptions aggregated $16,713,346
and total redemptions aggregated $2,314,658.
For the period from July 3, 2000 (commencement of operations) to
December 31, 2000, the Partnership recorded total trading
revenues, including interest income, of $1,918,231 and posted an
increase in net asset value per Unit. The most significant gains
of approximately 7.6% were recorded primarily during August and
October from short positions in the euro and Swiss franc as the
value of these European currencies weakened relative to the U.S.
dollar amid continued skepticism regarding the European economy.
Additional gains were recorded during December from long
positions in the euro and Swiss franc as their respective values
reversed upward versus the U.S. dollar as a result of new
confidence in the European economy and an overall skepticism
regarding the U.S. economy. During December, profits of
approximately 3.7% were recorded from short positions in the
Japanese yen as the value of the yen declined versus most major
currencies on further signs of weakness in the Japanese economy.
Gains of approximately 2.8% were also recorded primarily during
October and November from short South African rand positions as
its value weakened versus the U.S. dollar, while moving in
sympathy with other emerging market currencies. A portion of
the Partnership's overall gains was partially offset by losses of
approximately 1.2% recorded primarily during October and November
from long British pound positions as its value weakened versus
the U.S. dollar on disappointing economic data out of the U.K.
Additional losses were recorded during December from short
positions in the British pound as its value strengthened versus
the U.S. dollar on fresh evidence that the U.S. economy is
cooling down. Total expenses for the period from July 3, 2000
(commencement of operations) to December 31, 2000 were $609,687,
resulting in net income of $1,308,544. The net asset value of a
Unit increased from $10.00 at July 3, 2000 (commencement of
operations) to $11.17 at December 31, 2000.
The Partnership's overall performance record represents varied
results of trading in different futures, forwards, and options
markets. For a further description of 2000 trading results,
refer to the letter to the Limited Partners in the accompanying
Annual Report to Limited Partners for the year ended December 31,
2000, which is incorporated by reference to Exhibit 13.01 of this
Form 10-K. The Partnership's gains and losses are allocated
among its partners for income tax purposes.
Credit Risk.
Financial Instruments. The Partnership is a party to financial
instruments with elements of off-balance sheet market and credit
risk. The Partnership may trade futures, forwards, and options
in global currency markets. In entering into these contracts,
the Partnership is subject to the market risk that such contracts
may be significantly influenced by market conditions, such as
interest rate volatility, resulting in such contracts being less
valuable. If the markets should move against all of the
positions held by the Partnership at the same time, and if the
Trading Advisors were unable to offset positions of the
Partnership, the Partnership could lose all of its assets and
investors would realize a 100% loss.
In addition to the Trading Advisors' internal controls, the
Trading Advisors must comply with the trading policies of the
Partnership. These trading policies include standards for
liquidity and leverage with which the Partnership must comply.
The Trading Advisors and Demeter monitor the Partnership's
trading activities to ensure compliance with the trading
policies. Demeter may require the Trading Advisors to modify
positions of the Partnership if Demeter believes they violate the
Partnership's trading policies.
In addition to market risk, in entering into futures, forwards,
and options contracts there is a credit risk to the Partnership
that the counterparty on a contract will not be able to meet its
obligations to the Partnership. The ultimate counterparty or
guarantor of the Partnership for futures contracts traded in the
United States and the foreign exchanges on which the Partnership
trades is the clearinghouse associated with such exchange. In
general, a clearinghouse is backed by the membership of the
exchange and will act in the event of non-performance by one of
its members or one of its member's customers, which should
significantly reduce this credit risk. For example, a
clearinghouse may cover a default by drawing upon a defaulting
member's mandatory contributions and/or non-defaulting members'
contributions to a clearinghouse guarantee fund, established
lines or letters of credit with banks, and/or the clearinghouse's
surplus capital and other available assets of the exchange and
clearinghouse, or assessing its members. In cases where the
Partnership trades off-exchange forward contracts with a
counterparty, the sole recourse of the Partnership will be the
forward contracts counterparty.
There is no assurance that a clearinghouse or exchange will meet
its obligations to the Partnership, and Demeter and the commodity
brokers will not indemnify the Partnership against a
default by such parties. Further, the law is unclear as to
whether a commodity broker has any obligation to protect its
customers from loss in the event of an exchange or clearinghouse
defaulting on trades effected for the broker's customers. Any
such obligation on the part of a broker appears even less clear
where the default occurs in a non-U.S. jurisdiction.
Demeter deals with these credit risks of the Partnership in
several ways. First, it monitors the Partnership's credit
exposure to each exchange on a daily basis, calculating not only
the amount of margin required for it but also the amount of its
unrealized gains at each exchange, if any. The commodity brokers
inform the Partnership, as with all their customers, of its net
margin requirements for all its existing open positions, but do
not break that net figure down, exchange by exchange. Demeter,
however, has installed a system which permits it to monitor the
Partnership's potential margin liability, exchange by exchange.
As a result, Demeter is able to monitor the Partnership's
potential net credit exposure to each exchange by adding the
unrealized trading gains on that exchange, if any, to the
Partnership's margin liability thereon.
Second, the Partnership's trading policies limit the amount of
its net assets that can be committed at any given time to futures
contracts and require, in addition, a minimum amount of
diversification in the Partnership's trading, usually over
several different products. One of the aims of such trading
policies has been to reduce the credit exposure of the
Partnership to a single exchange and, historically, the
Partnership's exposure to any one exchange has typically amounted
to only a small percentage of its total net assets. On those
relatively few occasions where the Partnership's credit exposure
may climb above such level, Demeter deals with the situation on a
case by case basis, carefully weighing whether the increased
level of credit exposure remains appropriate. Material changes
to the trading policies may be made only with the prior written
approval of the limited partners owning more than 50% of Units
then outstanding.
Third, with respect to forward contract trading, the Partnership
trades with only those counterparties which Demeter, together
with DWR, have determined to be creditworthy. The Partnership
presently deals with MS & Co. as the sole counterparty on forward
contracts.
See "Financial Instruments" under Notes to Financial Statements
in the Partnership's Annual Report to Limited Partners for the
year ended December 31, 2000, which is incorporated by reference
to Exhibit 13.01 of this Form 10-K.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures, forwards, and options. 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, forwards, and options traded by the Partnership
involve varying degrees of related market risk. Market risk is
often dependent upon changes in the level or volatility of
interest rates, exchange rates, and prices of financial
instruments and commodities. Fluctuations in market risk based
upon these factors result in frequent changes in the fair value
of the Partnership's open positions, and, consequently, in its
earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). All
quantitative disclosures in this section are deemed to be forward-
looking statements for purposes of the safe harbor, except for
statements of historical fact.
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures, forwards, and options are settled daily through
variation margin.
The Partnership's risk exposure in the market sector traded by
the Trading Advisors is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation
among these variables. The hypothetical changes in portfolio
value are based on daily percentage changes observed in key
market indices or other market factors ("market risk factors") to
which the portfolio is sensitive. The historical observation
period of the Partnership's VaR is approximately four years. The
one-day 99% confidence level of the Partnership's VaR corresponds
to the negative change in portfolio value that, based on observed
market risk factors, would have been exceeded once in 100 trading
days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
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 table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at December 31, 2000. At
December 31, 2000, the Partnership's total capitalization was
approximately $16 million.
Primary Market December 31, 2000
Risk Category Value at Risk
Currency (2.12)%
The table above represents the VaR of the Partnership's open
positions at December 31, 2000 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, forwards, and
options, 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 December 31, 2000 VaR by
presenting the Partnership's high, low and average VaR, as a
percentage of total net assets for the two quarterly reporting
periods from July 3, 2000 through December 31, 2000.
Primary Market Risk Category High Low Average
Currency (2.85)% (2.12)% (2.49)%
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
usually found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, give
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
The VaR tables above present the results of the Partnership's VaR
for the Partnership's market risk exposure and on an aggregate
basis at December 31, 2000 and for the end of the two quarterly
reporting periods during the year 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. At December 31, 2000, the
Partnership's cash balance at DWR was approximately 92% of its
total net asset value. A decline in short-term interest
rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered to be
material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses taking into account the leverage,
optionality and multiplier features of 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 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 was the primary trading risk exposure of the
Partnership as of December 31, 2000. It may be anticipated
however, that market exposure will vary materially over time.
Currency. The Partnership's currency exposure at December 31,
2000 was to exchange rate fluctuations, primarily fluctuations
which disrupt the historical pricing relationships between
different currencies and currency pairs. Interest rate changes
as well as political and general economic conditions influence
these fluctuations. The Partnership trades in a large number of
currencies. For the fourth quarter of 2000, the Partnership's
major exposures were to outright U.S. dollar positions. Outright
positions consist of the U.S. dollar vs. other currencies. These
other currencies include major and minor currencies. Demeter
does not anticipate that the risk profile
of the Partnership's currency sector will change significantly in
the future. The currency trading VaR figure includes foreign
margin amounts converted into U.S. dollars with an incremental
adjustment to reflect the exchange rate risk inherent to the
dollar-based Partnership in expressing VaR in a functional
currency other than dollars.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
At December 31, 2000 there was no non-trading risk exposure
because the Partnership did not have any foreign currency
balances.
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.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are incorporated by reference to the
Partnership's Annual Report, which is filed as Exhibit 13.01
hereto.
Supplementary data specified by Item 302 of Regulation S-K:
Summary of Quarterly Results (Unaudited)
Net
Income
Per Unit
Quarter Net of Limited
Ended Revenue Income Partnership
Interest
2000
September 30 $ 422,969 $ 215,504 $0.24
December 31 $1,495,262 $1,093,040 $0.93
Total $1,918,231 $1,308,544 $1.17
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There are no directors or executive officers of the Partnership.
The Partnership is managed by Demeter.
Directors and Officers of the General Partner
The directors and executive officers of Demeter are as follows:
Robert E. Murray, age 40, is Chairman of the Board, President and
a Director of Demeter. Mr. Murray is also Chairman of the Board,
President and a Director of Dean Witter Futures & Currency
Management Inc. ("DWFCM"). Mr. Murray is currently a Senior Vice
President of DWR's Managed Futures Department. Mr. Murray began
his career at DWR in 1984 and is currently the Director of the
Managed Futures Department. In this capacity, Mr. Murray is
responsible for overseeing all aspects of the firm's Managed
Futures Department. Mr. Murray previously served as Vice
Chairman and a Director of the Managed Funds Association, an
industry association for investment professionals in futures,
hedge funds and other alternative investments. Mr. Murray
graduated from Geneseo State University in May 1983 with a B.A.
degree in Finance.
Mitchell M. Merin, age 47, is a Director of Demeter. Mr. Merin
is also a Director of DWFCM. Mr. Merin was appointed the Chief
Operating Officer of Individual Asset Management for MSDW in
December 1998 and the President and Chief Executive Officer of
Morgan Stanley Dean Witter Advisors in February 1998. He has
been an Executive Vice President of DWR since 1990, during which
time he has been Director of DWR's Taxable Fixed Income and
Futures divisions, Managing Director in Corporate Finance and
Corporate Treasurer. Mr. Merin received his Bachelor's degree
from Trinity College in Connecticut and his M.B.A. degree in
Finance and Accounting from the Kellogg Graduate School of
Management of Northwestern University in 1977.
Joseph G. Siniscalchi, age 55, is a Director of Demeter. Mr.
Siniscalchi joined DWR in July 1984 as a First Vice President,
Director of General Accounting and served as a Senior Vice
President and Controller for DWR's Securities Division through
1997. He is currently Executive Vice President and Director of
the Operations Division of DWR. From February 1980 to July 1984,
Mr. Siniscalchi was Director of Internal Audit at Lehman Brothers
Kuhn Loeb, Inc.
Edward C. Oelsner, III, age 59, is a Director of Demeter. Mr.
Oelsner is currently an Executive Vice President and head of the
Product Development Group at Morgan Stanley Dean Witter Advisors.
Mr. Oelsner joined DWR in 1981 as a Managing Director
in DWR's Investment Banking Department specializing in coverage
of regulated industries and, subsequently, served as head of the
DWR Retail Products Group. Prior to joining DWR, Mr. Oelsner
held positions at The First Boston Corporation as a member of the
Research and Investment Banking Departments from 1967 to 1981.
Mr. Oelsner received his M.B.A. in Finance from the Columbia
University Graduate School of Business in 1966 and an A.B. in
Politics from Princeton University in 1964.
Richard A. Beech, age 49, is a Director of Demeter. Mr. Beech
has been associated with the futures industry for over 23 years.
He has been at DWR since August 1984 where he is presently Senior
Vice President and head of Branch Futures. Mr. Beech began his
career at the Chicago Mercantile Exchange, where he became the
Chief Agricultural Economist doing market analysis, marketing and
compliance. Prior to joining DWR, Mr. Beech also had worked at
two investment banking firms in operations, research, managed
futures and sales management.
Raymond A. Harris, age 44, is a Director of Demeter. Mr. Harris
is currently Executive Vice President, Planning and
Administration for Morgan Stanley Dean Witter Asset Management
and has worked at DWR or its affiliates since July 1982, serving
in both financial and administrative capacities. From August
1994 to January 1999, he worked in two separate DWR affiliates,
Discover Financial Services and Novus Financial Corp.,
culminating as Senior Vice President. Mr. Harris received his
B.A. degree from Boston College and his M.B.A. in finance from
the University of Chicago.
Anthony J. DeLuca, age 38, became a Director of Demeter on
September 14, 2000. Mr. DeLuca is also a Director of DWFCM. Mr.
DeLuca was appointed the Controller of Asset Management for MSDW
in June 1999. Prior to that, Mr. DeLuca was a partner at the
accounting firm of Ernst & Young LLP, where he had MSDW as a
major client. Mr. DeLuca had worked continuously at Ernst &
Young LLP ever since 1984, after he graduated from Pace
University with a B.B.A. degree in Accounting.
Raymond E. Koch, age 45, is Chief Financial Officer of Demeter.
Effective July 10, 2000, Mr. Koch replaced Mr. Raibley as Chief
Financial Officer of Demeter. Mr. Koch began his career at MSDW
in 1988, has overseen the Managed Futures Accounting function
since 1992, and is currently First Vice President, Director of
Managed Futures and Realty Accounting. From November 1979 to
June 1988, Mr. Koch held various positions at Thomson McKinnon
Securities, Inc. culminating as Manager, Special Projects in the
Capital Markets Division. From August 1977 to November 1979 he
was an auditor, specializing in financial services at Deloitte
Haskins and Sells. Mr. Koch received his B.B.A. in accounting
from Iona College in 1977, an M.B.A. in finance from Pace
University in 1984 and is a Certified Public Accountant.
Lewis A. Raibley, III, age 38, served as Vice President, Chief
Financial Officer, and a Director of Demeter and DWFCM until his
resignation from MSDW on July 1, 2000.
All of the foregoing directors have indefinite terms.
Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers. As a
limited partnership, the business of the Partnership is managed
by Demeter, which is responsible for the administration of the
business affairs of the Partnership but receives no compensation
for such services.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - At
December 31, 2000, the beneficial owners of more than 5 percent
of outstanding Units are listed below:
Name and address Units of
Title of Class of beneficial owner beneficial ownership
Percent of Class
Units Keystone District *107,779.767 Units
7.66%
Council of Carpenters
Pension Fund
524 S. 22nd St.
Harrisburg, PA
17104-2403
Units Demeter Management 153,905.792 Units
10.94%
Corporation
2 World Trade Center
62nd Floor
New York, NY 10048
*We have not been advised that the beneficial ownership of these
Units were acquired with intent of changing or influencing
control.
(b) Security Ownership of Management - At December 31, 2000,
Demeter owned 153,905.792 Units of General Partnership Interest
representing a 10.94 percent interest in the Partnership.
(c) Changes in Control - None
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to
Financial Statements", in the accompanying Annual Report to
Limited Partners for the year ended December 31, 2000, which is
incorporated by reference to Exhibit 13.01 of this Form 10-K. In
its capacity as the Partnership's retail commodity broker, MS &
Co. received commodity brokerage fees of $249,571 for the year
ended December 31, 2000.
PART IV
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and report of independent
auditors, all appearing in the accompanying Annual Report to
Limited Partners for the year ended December 31, 2000, are
incorporated by reference to Exhibit 13.01 of this Form 10-K:
- Report of Deloitte & Touche LLP, independent auditors, for
the period from July 3, 2000 (commencement of operations) to
December 31, 2000.
- Statement of Financial Condition as of December 31, 2000.
- Statement of Operations, Changes in Partners' Capital, and
Cash Flows for the period from July 3, 2000 (commencement of
operations) to December 31, 2000.
- - Notes to Financial Statements.
With the exception of the aforementioned information and the
information incorporated in Items 7, 8 and 13, the Annual Report
to Limited Partners for the year ended December 31, 2000, is not
deemed to be filed with this report.
2. Listing of Financial Statement Schedules
No financial statement schedules are required to be filed with
this report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Partnership during
the last quarter of the period covered by this report.
(c) Exhibits
Refer to Exhibit Index on Page E-1 to E-2.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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 CURRENCY L.P.
(Registrant)
BY: Demeter Management
Corporation,
General Partner
March 27, 2001 BY: /s/ Robert E. Murray .
Robert E. Murray, Director,
Chairman of the Board and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Demeter Management Corporation.
BY: /s/ Robert E. Murray March 27, 2001
Robert E. Murray, Director,
Chairman of the Board and
President
/s/ Mitchell M. Merin March 27, 2001
Mitchell M. Merin, Director
/s/ Joseph G. Siniscalchi March 27, 2001
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III March 27, 2001
Edward C. Oelsner III, Director
/s/ Richard A. Beech March 27,
2001
Richard A. Beech, Director
/s/ Raymond A. Harris March 27, 2001
Raymond A. Harris, Director
/s/ Anthony J. DeLuca March 27, 2001
Anthony J. DeLuca, Director
/s/ Raymond E. Koch March 27, 2001
Raymond E. Koch, Chief
Financial Officer and Principal
Accounting Officer
EXHIBIT INDEX
ITEM
3.01 Form of Amended and Restated Limited Partnership Agreement
of the Partnership, dated as of March 6, 2000, is
incorporated by reference to Exhibit A of the
Partnership's Prospectus, dated March 6, 2000, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended, on
March 9, 2000.
3.02 Certificate of Limited Partnership, dated October 20,
1999, is incorporated by reference to Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File No.
333-90485) filed with the Securities and Exchange
Commission on November 5, 1999.
10.01 Management Agreement among the Partnership, Demeter
Management Corporation, and John W. Henry & Company, Inc.
dated as of March 6, 2000.
10.02 Management Agreement among the Partnership, Demeter
Management Corporation, and Sunrise Capital Management,
Inc., dated as of March 6, 2000.
10.03 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units is
incorporated by reference to exhibit B of the
Partnership's Prospectus, dated March 6, 2000, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended, on
March 9, 2000.
10.04 Form of Subscription Agreement Update Form to b executed
by each purchaser of Units is incorporated by reference to
Exhibit C of the Partnership's Prospectus, dated March 6,
2000, filed with the Securities and Exchange Commission
pursuant to Rule 424(b)(3) under the Securities Act of
12933, as amended, on March 9, 2000.
10.05 Amended and Restated Escrow Agreement among the
Partnership, Morgan Stanley Dean Witter Spectrum Select
L.P., Morgan Stanley Dean Witter Spectrum Technical L.P.,
Morgan Stanley Dean Witter Spectrum Strategic L.P., Morgan
Stanley Dean Witter Spectrum Global Balanced L.P., Morgan
Stanley Dean Witter Spectrum Commodity L.P., Demeter
Management Corporation, Dean Witter Reynolds Inc., and The
Chase Manhattan Bank, the escrow agent, dated as of March
10, 2000.
10.09 Amended and Restated Customer Agreement between the
Registrant and Dean Witter Reynolds Inc. is incorporated
by reference to Exhibit 10.09 of the Partnership's
Registration Statement on Form S-1 (File No. 333-90485)
filed with the SEC on March 14, 2001.
10.10 Customer Agreement among the Registrant, Morgan Stanley &
Co. Incorporated, and Dean Witter Reynolds Inc. is
incorporated by reference to Exhibit 10.10 of the
Partnership's Registration Statement on Form S-1 (File No.
333-90485) filed with the SEC on March 14, 2001.
10.11 Form of Foreign Exchange and Options Master Agreement
between the Registrant and Morgan Stanley & Co.
Incorporated is incorporated by reference to Exhibit 10.11
of the Partnership's Registration Statement on Form S-1
(File No. 333-90485) filed with the SEC on March 14, 2001.
10.12 Amendment to Management Agreement, dated as of November
30, 2000, among the Registrant, John W. Henry & Company,
Inc., and Demeter Management Corporation is incorporated
by reference to the Partnership's Form 8-K (File No. 0-
31563), filed with the SEC on January 3, 2001.
10.13 Amendment to Management Agreement, dated as of November
30, 2000, among the Registrant, Sunrise Capital
Management, Inc., and Demeter Management Corporation is
incorporated by reference to the Partnership's Form 8-K
(File No. 0-31563), filed with the SEC on January 3, 2001.
13.01 Annual Report to Limited Partners for the year ended
December 31, 2000 is filed herewith.
Morgan Stanley Dean Witter
Spectrum Series
[GRAPHIC]
December 31, 2000
Annual Report
MORGAN STANLEY DEAN WITTER
Morgan Stanley Dean Witter Spectrum Series
Historical Fund Performance
Presented below is the percentage change in Net Asset Value per Unit from the
start of every calendar year each Fund has traded. Also provided is the incep-
tion-to-date return and the annualized return since inception for each Fund.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Funds
- -----
Spectrum
Commodity
Year Return
---- ------
1998 -34.3%
1999 15.8%
2000 3.2%
Inception-to-Date Return: -21.5%
Annualized Return: -7.8%
- -------------------------------------------------------------------------------
Spectrum
Currency
Year Return
---- ------
2000 (6 months) 11.7%
Inception-to-Date Return: 11.7%
- -------------------------------------------------------------------------------
Spectrum Global Balanced
Year Return Year Return
---- ------ ---- ------
1994 (2 months) -1.7% 1998 16.4%
1995 22.8% 1999 0.7%
1996 -3.6% 2000 0.9%
1997 18.2%
Inception-to-Date Return: 62.6%
Annualized Return: 8.2%
- -------------------------------------------------------------------------------
Spectrum Select
Year Return Year Return
---- ------ ---- ------
1991 (5 months) 31.2% 1996 5.3%
1992 -14.4% 1997 6.2%
1993 41.6% 1998 14.2%
1994 -5.1% 1999 -7.6%
1995 23.6% 2000 7.1%
Inception-to-Date Return: 135.7%
Annualized Return: 9.5%
- -------------------------------------------------------------------------------
Spectrum Strategic
Year Return Year Return
---- ------ ---- ------
1994 (2 months) 0.1% 1998 7.8%
1995 10.5% 1999 37.2%
1996 -3.5% 2000 -33.1%
1997 0.4%
Inception-to-Date Return: 6.1%
Annualized Return: 1.0%
- -------------------------------------------------------------------------------
Spectrum Technical
Year Return Year Return
---- ------ ---- ------
1994 (2 months) -2.2% 1998 10.2%
1995 17.6% 1999 -7.5%
1996 18.3% 2000 7.8%
1997 7.5%
Inception-to-Date Return: 60.8%
Annualized Return: 8.0%
Demeter Management Corporation
Two World Trade Center
62nd Floor
New York, NY 10048
Telephone (212) 392-8899
Morgan Stanley Dean Witter Spectrum Series
Annual Report
2000
Dear Limited Partner:
This marks the seventh annual report for Morgan Stanley Dean Witter Spectrum
Global Balanced, Spectrum Strategic and Spectrum Technical, the tenth annual
report for Morgan Stanley Dean Witter Spectrum Select and the third annual
report for Morgan Stanley Dean Witter Spectrum Commodity. It also marks the
first annual report for Spectrum Currency, which began trading on July 3, 2000
with a Net Asset Value per Unit of $10.00. The Net Asset Value per Unit for
each of the six Morgan Stanley Dean Witter Spectrum Funds as of December 31,
2000 was as follows:
Funds N.A.V. % change for year
----- ------ -----------------
Spectrum Commodity $ 7.85 3.2%
Spectrum Currency $11.17 11.7%
Spectrum Global Balanced $16.26 0.9%
Spectrum Select $23.57 7.1%
Spectrum Strategic $10.61 -33.1%
Spectrum Technical $16.08 7.8%
Spectrum Commodity
The Fund recorded profits primarily in the energy markets from long positions
in natural gas futures as prices increased amid ongoing supply concerns and
increased demand. Additional gains were recorded 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. Losses were recorded in the Fund
primarily in the metals markets from long silver futures positions as silver
prices declined throughout a majority of the year on technically-based fac-
tors.
Spectrum Currency
The Fund produced gains primarily from short positions in the euro and Japa-
nese yen as their respective values
weakened relative to the U.S. dollar amid continued skepticism regarding the
European economy and on further signs of weakness in the Japanese economy. Ad-
ditional gains were recorded from short South African rand positions as its
value weakened later in the year versus the U.S. dollar while moving in sympa-
thy with other emerging market currencies. These gains were partially offset
by losses experienced late in the year from long British pound positions as
its value weakened versus the U.S. dollar on disappointing economic data out
of the U.K. Losses were also recorded from short positions in the British
pound during December as its value strengthened versus the U.S. dollar on
fresh evidence that the U.S. economy is cooling down.
Spectrum Global Balanced
The Fund recorded gains primarily in the global interest rate futures markets
from long positions in U.S. interest rate futures as prices climbed higher
amid a drop in stock prices and on fears of an economic slowdown. Profits were
also recorded in the energy markets from long positions in natural gas and
crude oil futures as prices increased amid ongoing supply concerns and in-
creased demand. A portion of the Fund's overall gains for the year was offset
by losses experienced in the global stock index futures component from long
positions in Nikkei Index futures as Japanese equity prices declined due pri-
marily to the weakness in most global technology issues and economic uncer-
tainty in Japan.
Spectrum Select
The Fund recorded gains primarily in the global interest rate futures markets
from long positions in U.S. interest rate futures as prices climbed higher
amid a drop in stock prices and on fears of an economic slowdown. Profits were
also recorded in the energy markets from long positions in natural gas and
crude oil futures as prices increased amid ongoing supply concerns and in-
creased demand. Additional gains were generated in the currency markets from
short positions in the euro and Swiss franc as the value of these European
currencies weakened relative to the U.S. dollar during a majority of the year
amid skepticism about Europe's economic outlook. These gains were partially
offset by losses recorded primarily in the global stock index futures markets
from trading in U.S. stock indices as domestic equity prices moved erratically
due to jitters in the tech-
nology sector, a worrisome spike in oil prices and ongoing concerns regarding
the U.S. economy.
Spectrum Strategic
Spectrum Strategic experienced losses in every sector except energies, with
the majority of them occurring in stock indices, metals, soft commodities and
currencies. The primary reason behind the losses, as well as the gains, lies
in the unique trading philosophy of Spectrum Strategic. Specifically, the man-
agers in the Fund analyze markets from a fundamental or discretionary perspec-
tive. As such, the Fund will do well when the views the managers have taken
and the subsequent positions they have established are consistent with future
market movements. While this has occurred in the past (e.g., the Fund was up
37.2% in 1999), this year, however, the markets moved in a pattern that was
generally not consistent with the views held by the Fund's money managers and,
as a result, produced disappointing performance.
A significant percentage of Spectrum Strategic's losses this year occurred
during the first four months largely due to views that anticipated falling eq-
uity prices and rising coffee and base metals prices. In light of these views,
short positions were established in U.S. stock index futures and long posi-
tions in base metals and coffee futures. However, prices in these markets
moved in an opposite direction to the positions held (U.S. stock prices moved
higher, while base metal and coffee prices moved lower), and losses were in-
curred. Additionally, losses were experienced during the latter half of 2000
in lumber futures as a bullish forecast resulted in long positions being es-
tablished. However, as the economic outlook became more pessimistic and
weather became a factor, that market fell in value, thereby producing losses.
In currency trading, losses were experienced early in the second quarter from
long positions in the Japanese yen, as the value of the yen weakened versus
the U.S. dollar during April following the Bank of Japan's surprise yen-sell-
ing intervention on April 3, and from short positions in the yen during June
as the yen strengthened versus the dollar due to the perception that U.S. in-
terest rates had topped out. Transactions involving the euro were also unprof-
itable for the Fund during the year from long positions during January, July
and August as the value of the European common currency weakened versus the
U.S. dollar amid concerns regarding a
cooling European economy. Further losses were incurred in September from newly
established short positions in the European common currency as its value re-
versed sharply and suddenly higher versus the dollar due to a coordinated in-
tervention to support the euro on September 22.
In contrast to the views held about the markets that experienced difficulty
during 2000, the views held about energies resulted in gains being generated
in that sector. Specifically, prior to June 2000 the Fund was positioned for a
bullish price move in the energy markets, particularly in crude oil, and as a
result profited from long positions in these products as oil prices reached
10-year highs. In addition, long positions in natural gas futures also proved
profitable for the Fund during the year, specifically in the first, second and
fourth quarters, as natural gas prices climbed sharply higher, peaking in De-
cember at an all-time high due to supply and demand concerns.
Spectrum Technical
The Fund recorded profits primarily in the energy markets from long positions
in natural gas futures as prices increased amid ongoing supply concerns and
increased demand. Additional gains were recorded 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. Losses incurred in the metals mar-
kets from gold futures positions, as gold prices increased early in the year
and then reversed lower during the second half of the year, offset a portion
of the overall Fund gains.
Should you have any questions concerning this report, please feel free to con-
tact Demeter Management Corporation at Two World Trade Center, 62nd Floor, New
York, N.Y. 10048 or your Morgan Stanley Dean Witter Financial Advisor.
I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is not a
guarantee of future results.
Sincerely,
/s/ Robert E. Murray
Robert E. Murray
Chairman
Demeter Management Corporation
General Partner
Morgan Stanley Dean Witter Spectrum Series
Independent Auditors' Report
To the Limited Partners and the General Partner of
Morgan Stanley Dean Witter Spectrum Commodity L.P.
(formerly, Morgan Stanley Tangible Asset Fund L.P.)
Morgan Stanley Dean Witter Spectrum Currency L.P.
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
Morgan Stanley Dean Witter Spectrum Select L.P.
Morgan Stanley Dean Witter Spectrum Strategic L.P.
Morgan Stanley Dean Witter Spectrum Technical L.P.:
We have audited the accompanying statements of financial condition of Morgan
Stanley Dean Witter Spectrum Currency L.P. ("Spectrum Currency") as of Decem-
ber 31, 2000 and of Morgan Stanley Dean Witter Spectrum Commodity L.P. (for-
merly Morgan Stanley Tangible Asset Fund L.P.) ("Spectrum Commodity"), Morgan
Stanley Dean Witter Spectrum Global Balanced L.P., Morgan Stanley Dean Witter
Spectrum Select L.P., Morgan Stanley Dean Witter Spectrum Strategic L.P., and
Morgan Stanley Dean Witter Spectrum Technical L.P. (collectively, the "Part-
nerships") as of December 31, 2000 and 1999, and the related statements of op-
erations, changes in partners' capital, and cash flows for the period from
July 3, 2000 (commencement of operations) to December 31, 2000 for Spectrum
Currency, for the period from January 2, 1998 (commencement of operations) to
December 31, 1998 and the two years ended December 31, 2000 for Spectrum Com-
modity, and for each of the three years in the period ended December 31, 2000
for the other above mentioned Partnerships. These financial statements are the
responsibility of the Partnerships' management. Our responsibility is to ex-
press an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the finan-
cial statements are free of material misstatement. An audit includes examin-
ing, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits pro-
vide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material re-
spects, the financial position of Morgan Stanley Dean Witter Spectrum Currency
L.P. as of December 31, 2000 and of Morgan Stanley Dean Witter Spectrum Com-
modity L.P., Morgan Stanley Dean Witter Spectrum Global Balanced L.P., Morgan
Stanley Dean Witter Spectrum Select L.P., Morgan Stanley Dean Witter Spectrum
Strategic L.P., and Morgan Stanley Dean Witter Spectrum Technical L.P. as of
December 31, 2000 and 1999, and the results of their operations and their cash
flows for the period from July 3, 2000 (commencement of operations) to Decem-
ber 31, 2000 for Spectrum Currency, for the period from January 2, 1998 (com-
mencement of operations) to December 31, 1998 and the two years ended December
31, 2000 for Spectrum Commodity, and for each of the three years in the period
ended December 31, 2000 for the other above mentioned Partnerships, in confor-
mity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
New York, New York
February 16, 2001
Morgan Stanley Dean Witter Spectrum Commodity L.P. (formerly, Morgan Stanley
Tangible Asset Fund L.P.)
Statements of Financial Condition
December 31,
----------------------
2000 1999
---------- ----------
$ $
ASSETS
Equity in futures interests trading accounts:
Cash 20,529,979 23,430,137
Net unrealized gain (loss) on open contracts (MS&Co.) 160,096 (100,830)
Net unrealized gain (loss) on open contracts (MSIL) (185,379) 643,258
---------- ----------
Total net unrealized gain (loss) on open contracts (25,283) 542,428
---------- ----------
Total Trading Equity 20,504,696 23,972,565
Subscriptions receivable 215,897 --
Interest receivable (DWR and MS&Co.) 89,128 76,192
---------- ----------
Total Assets 20,809,721 24,048,757
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 489,923 269,545
Accrued brokerage fees (DWR and MS&Co.) 77,628 70,827
Accrued management fees (MSCM) 42,189 48,511
Service fee payable (Demeter) -- 19,404
---------- ----------
Total Liabilities 609,740 408,287
---------- ----------
PARTNERS' CAPITAL
Limited Partners (2,530,392.671 and 3,062,471.522
Units, respectively) 19,859,397 23,310,162
General Partner (43,395.648 Units) 340,584 330,308
---------- ----------
Total Partners' Capital 20,199,981 23,640,470
---------- ----------
Total Liabilities and Partners' Capital 20,809,721 24,048,757
========== ==========
NET ASSET VALUE PER UNIT 7.85 7.61
========== ==========
Statements of Operations
For the Period from
For the Years January 2, 1998
Ended (commencement of
December 31, operations) to
-------------------- December 31,
2000 1999 1998
--------- --------- -------------------
$ $ $
REVENUES
Trading profit (loss):
Realized 1,696,824 3,003,270 (11,870,063)
Net change in unrealized (567,711) 1,178,071 (635,643)
--------- --------- -----------
Total Trading Results 1,129,113 4,181,341 (12,505,706)
Interest income (DWR and MS&Co.) 1,047,350 864,383 1,265,793
--------- --------- -----------
Total Revenues 2,176,463 5,045,724 (11,239,913)
--------- --------- -----------
EXPENSES
Brokerage fees (DWR and MS&Co.) 949,310 852,484 1,176,024
Management fees (MSCM) 546,187 583,893 805,496
Service fees (Demeter) 58,604 233,558 322,198
--------- --------- -----------
Total Expenses 1,554,101 1,669,935 2,303,718
--------- --------- -----------
NET INCOME (LOSS) 622,362 3,375,789 (13,543,631)
========= ========= ===========
Net Income (Loss)
Allocation:
Limited Partners 612,086 3,330,798 (13,398,948)
General Partner 10,276 44,991 (144,683)
Net Income (Loss) per Unit:
Limited Partners .24 1.04 (3.43)
General Partner .24 1.04 (3.43)
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Currency L.P.
Statement of Financial Condition
December 31,
2000
------------
$
ASSETS
Equity in futures interests trading accounts:
Cash 14,391,541
Net unrealized gain on open contracts (MS&Co.) 555,569
----------
Total Trading Equity 14,947,110
Subscriptions receivable 3,054,150
Interest receivable (DWR) 55,464
----------
Total Assets 18,056,724
==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 2,237,351
Accrued brokerage fee (DWR) 55,245
Accrued incentive fee 32,876
Accrued management fee 24,020
----------
Total Liabilities 2,349,492
----------
PARTNERS' CAPITAL
Limited Partners (1,252,545.441 Units) 13,988,414
General Partner (153,905.792 Units) 1,718,818
----------
Total Partners' Capital 15,707,232
----------
Total Liabilities and Partners' Capital 18,056,724
==========
NET ASSET VALUE PER UNIT 11.17
==========
Statement of Operations
For the Period from
July 3, 2000
(commencement of
operations) to
December 31,
2000
-------------------
$
REVENUES
Trading profit:
Realized 1,126,201
Net change in unrealized 555,569
---------
Total Trading Results 1,681,770
Interest income (DWR) 236,461
---------
Total Revenues 1,918,231
---------
EXPENSES
Brokerage fees (DWR) 249,571
Incentive fees 188,423
Management fees 171,693
---------
Total Expenses 609,687
---------
NET INCOME 1,308,544
=========
Net Income Allocation:
Limited Partners 1,134,371
General Partner 174,173
Net Income per Unit:
Limited Partners 1.17
General Partner 1.17
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Global
Balanced L.P.
Statements of Financial Condition
December 31,
----------------------
2000 1999
---------- ----------
$ $
ASSETS
Equity in futures interests trading accounts:
Cash 52,414,304 56,904,921
Net unrealized gain on open contracts (MS&Co.) 3,384,377 --
Net unrealized loss on open contracts (MSIL) (66,733) --
Net unrealized gain on open contracts (Carr) -- 810,114
---------- ----------
Total net unrealized gain on open contracts 3,317,644 810,114
Net option premiums 192,500 --
---------- ----------
Total Trading Equity 55,924,448 57,715,035
Subscriptions receivable 530,634 847,954
Interest receivable (DWR) 285,054 244,599
---------- ----------
Total Assets 56,740,136 58,807,588
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 602,490 667,741
Accrued brokerage fees (DWR) 202,789 216,895
Accrued management fees 55,107 58,940
---------- ----------
Total Liabilities 860,386 943,576
---------- ----------
PARTNERS' CAPITAL
Limited Partners (3,396,880.702 and
3,549,239.387 Units, respectively) 55,220,008 57,209,838
General Partner (40,584.304 Units) 659,742 654,174
---------- ----------
Total Partners' Capital 55,879,750 57,864,012
---------- ----------
Total Liabilities and
Partners' Capital 56,740,136 58,807,588
========== ==========
NET ASSET VALUE PER UNIT 16.26 16.12
========== ==========
Statements of Operations
For the Years Ended
December 31,
---------------------------------
2000 1999 1998
---------- ---------- ---------
$ $ $
REVENUES
Trading profit (loss):
Realized (2,091,009) 2,425,585 5,113,920
Net change in unrealized 2,507,530 (1,157,073) 1,285,628
---------- ---------- ---------
Total Trading Results 416,521 1,268,512 6,399,548
Interest income (DWR) 3,275,958 2,385,751 1,642,542
---------- ---------- ---------
Total Revenues 3,692,479 3,654,263 8,042,090
---------- ---------- ---------
EXPENSES
Brokerage fees (DWR) 2,558,008 2,387,515 1,591,467
Management fees 695,117 648,787 422,960
Incentive fees -- 215,651 449,775
---------- ---------- ---------
Total Expenses 3,253,125 3,251,953 2,464,202
---------- ---------- ---------
NET INCOME 439,354 402,310 5,577,888
========== ========== =========
Net Income Allocation:
Limited Partners 433,786 397,258 5,518,127
General Partner 5,568 5,052 59,761
Net Income per Unit:
Limited Partners .14 .12 2.25
General Partner .14 .12 2.25
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Select L.P.
Statements of Financial Condition
December 31,
------------------------
2000 1999
----------- -----------
$ $
ASSETS
Equity in futures interests trading accounts:
Cash 196,555,362 207,251,012
Net unrealized gain on open contracts (MS&Co.) 26,063,382 --
Net unrealized loss on open contracts (MSIL) (511,085) --
Net unrealized gain on open contracts (Carr) -- 6,887,064
----------- -----------
Total net unrealized gain on open contracts 25,552,297 6,887,064
Net option premiums -- 776,380
----------- -----------
Total Trading Equity 222,107,659 214,914,456
Subscriptions receivable 1,583,941 3,730,051
Interest receivable (DWR) 889,954 722,305
----------- -----------
Total Assets 224,581,554 219,366,812
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 2,110,529 3,764,242
Accrued brokerage fees (DWR) 1,231,479 1,270,975
Accrued management fees 509,577 525,921
----------- -----------
Total Liabilities 3,851,585 5,561,138
----------- -----------
PARTNERS' CAPITAL
Limited Partners (9,255,010.627 and 9,583,810.732
Units, respectively) 218,182,118 210,877,519
General Partner (108,076.600 and 133,076.700 Units,
respectively) 2,547,851 2,928,155
----------- -----------
Total Partners' Capital 220,729,969 213,805,674
----------- -----------
Total Liabilities and Partners' Capital 224,581,554 219,366,812
=========== ===========
NET ASSET VALUE PER UNIT 23.57 22.00
=========== ===========
Statements of Operations
For the Years Ended December 31,
----------------------------------
2000 1999 1998
---------- ----------- ----------
$ $ $
REVENUES
Trading profit (loss):
Realized 6,845,291 (1,351,849) 36,087,729
Net change in unrealized 18,665,233 (1,547,990) (1,192,107)
---------- ----------- ----------
Total Trading Results 25,510,524 (2,899,839) 34,895,622
Interest income (DWR) 9,573,095 7,678,789 6,883,110
---------- ----------- ----------
Total Revenues 35,083,619 4,778,950 41,778,732
---------- ----------- ----------
EXPENSES
Brokerage fees (DWR) 14,706,945 15,188,479 11,360,166
Management fees 6,085,629 6,284,885 5,202,158
Incentive fees -- -- 1,832,021
Transaction fees and costs -- -- 625,327
Administrative expenses -- -- 64,000
---------- ----------- ----------
Total Expenses 20,792,574 21,473,364 19,083,672
---------- ----------- ----------
NET INCOME (LOSS) 14,291,045 (16,694,414) 22,695,060
========== =========== ==========
Net Income (Loss) Allocation:
Limited Partners 14,165,099 (16,455,697) 22,302,202
General Partner 125,946 (238,717) 392,858
Net Income (Loss) per Unit (Note 1):
Limited Partners 1.57 (1.80) 2.95
General Partner 1.57 (1.80) 2.95
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Strategic L.P.
Statements of Financial Condition
December 31,
-----------------------
2000 1999
---------- -----------
$ $
ASSETS
Equity in futures interests trading accounts:
Cash 73,445,827 97,808,328
Net unrealized gain on open contracts (MS&Co.) 1,936,658 --
Net unrealized gain on open contracts (MSIL) 58,457 --
Net unrealized gain (loss) on open contracts (Carr) (8,983) 9,563,813
---------- -----------
Total net unrealized gain on open contracts 1,986,132 9,563,813
Net option premiums 226,200 (11,653)
---------- -----------
Total Trading Equity 75,658,159 107,360,488
Subscriptions receivable 462,060 1,743,958
Interest receivable (DWR) 306,879 339,582
---------- -----------
Total Assets 76,427,098 109,444,028
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 1,307,093 847,860
Accrued brokerage fees (DWR) 409,292 590,001
Accrued incentive fee 289,687 --
Accrued management fees 186,577 313,646
---------- -----------
Total Liabilities 2,192,649 1,751,507
---------- -----------
PARTNERS' CAPITAL
Limited Partners (6,919,445.814 and 6,723,390.378
Units, respectively) 73,433,119 106,542,362
General Partner (75,507.615 and 72,581.141 Units,
respectively) 801,330 1,150,159
---------- -----------
Total Partners' Capital 74,234,449 107,692,521
---------- -----------
Total Liabilities and
Partners' Capital 76,427,098 109,444,028
========== ===========
NET ASSET VALUE PER UNIT 10.61 15.85
========== ===========
Statements of Operations
For the Years Ended
December 31,
----------------------------------
2000 1999 1998
----------- ---------- ----------
$ $ $
REVENUES
Trading profit (loss):
Realized (23,193,914) 32,274,037 7,945,575
Net change in unrealized (7,577,681) 4,264,478 2,771,722
----------- ---------- ----------
Total Trading Results (30,771,595) 36,538,515 10,717,297
Interest income (DWR) 3,832,634 3,017,103 2,379,478
----------- ---------- ----------
Total Revenues (26,938,961) 39,555,618 13,096,775
----------- ---------- ----------
EXPENSES
Brokerage fees (DWR) 5,798,093 5,837,887 4,402,540
Management fees 2,880,999 3,137,509 2,342,447
Incentive fees 1,269,237 2,451,152 1,336,693
----------- ---------- ----------
Total Expenses 9,948,329 11,426,548 8,081,680
----------- ---------- ----------
NET INCOME (LOSS) (36,887,290) 28,129,070 5,015,095
=========== ========== ==========
Net Income (Loss) Allocation:
Limited Partners (36,503,461) 27,829,050 4,958,188
General Partner (383,829) 300,020 56,907
Net Income (Loss) per Unit:
Limited Partners (5.24) 4.30 .84
General Partner (5.24) 4.30 .84
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Technical L.P.
Statements of Financial Condition
December 31,
------------------------
2000 1999
----------- -----------
$ $
ASSETS
Equity in futures interests trading accounts:
Cash 231,502,090 251,443,755
Net unrealized gain on open contracts (MS&Co.) 41,877,552 --
Net unrealized loss on open contracts (MSIL) (1,835,243) --
Net unrealized gain on open contracts (Carr) -- 18,036,296
----------- -----------
Total net unrealized gain on open contracts 40,042,309 18,036,296
Net option premiums -- (74,725)
----------- -----------
Total Trading Equity 271,544,399 269,405,326
Subscriptions receivable 1,087,585 3,926,914
Interest receivable (DWR) 1,063,044 900,955
----------- -----------
Total Assets 273,695,028 274,233,195
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 3,432,384 3,057,593
Accrued brokerage fees (DWR) 1,458,126 1,559,481
Accrued management fees 559,827 860,403
Accrued incentive fee 111,599 --
----------- -----------
Total Liabilities 5,561,936 5,477,477
----------- -----------
PARTNERS' CAPITAL
Limited Partners (16,479,195.979 and 17,836,873.576
Units, respectively) 265,060,579 265,907,998
General Partner (191,022.517 Units) 3,072,513 2,847,720
----------- -----------
Total Partners' Capital 268,133,092 268,755,718
----------- -----------
Total Liabilities and Partners' Capital 273,695,028 274,233,195
=========== ===========
NET ASSET VALUE PER UNIT 16.08 14.91
=========== ===========
Statements of Operations
For the Years Ended
December 31,
----------------------------------
2000 1999 1998
---------- ----------- ----------
$ $ $
REVENUES
Trading profit (loss):
Realized 12,255,064 726,179 35,224,194
Net change in unrealized 22,006,013 (872,972) 6,612,556
---------- ----------- ----------
Total Trading Results 34,261,077 (146,793) 41,836,750
Interest income (DWR) 11,613,896 9,593,178 8,103,423
---------- ----------- ----------
Total Revenues 45,874,973 9,446,385 49,940,173
---------- ----------- ----------
EXPENSES
Brokerage fees (DWR) 17,835,223 19,176,380 15,543,787
Management fees 9,595,464 10,580,071 8,403,764
Incentive fees 166,085 430,097 3,191,252
---------- ----------- ----------
Total Expenses 27,596,772 30,186,548 27,138,803
---------- ----------- ----------
NET INCOME (LOSS) 18,278,201 (20,740,163) 22,801,370
========== =========== ==========
Net Income (Loss) Allocation:
Limited Partners 18,053,408 (20,531,494) 22,571,217
General Partner 224,793 (208,669) 230,153
Net Income (Loss) per Unit:
Limited Partners 1.17 (1.21) 1.49
General Partner 1.17 (1.21) 1.49
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Series
Morgan Stanley Dean Witter Spectrum Commodity L.P. (formerly, Morgan Stanley
Tangible Asset Fund L.P.)
Statements of Changes in Partners' Capital
For the Years Ended December 31, 2000 and 1999 and for the Period from
January 2, 1998 (commencement of operations) to December 31, 1998
Units of
Partnership Limited General
Interest Partners Partner Total
------------- ----------- --------- -----------
$ $ $
Partners' Capital,
January 2, 1998 200.000 1,000 1,000 2,000
Initial Offering 2,573,486.803 25,475,868 259,000 25,734,868
Offering of Units 1,665,202.477 15,758,355 170,000 15,928,355
Net loss -- (13,398,948) (144,683) (13,543,631)
Redemptions (450,424.580) (3,213,276) -- (3,213,276)
------------- ----------- --------- -----------
Partners' Capital,
December 31, 1998 3,788,464.700 24,622,999 285,317 24,908,316
Net income -- 3,330,798 44,991 3,375,789
Redemptions (682,597.530) (4,643,635) -- (4,643,635)
------------- ----------- --------- -----------
Partners' Capital,
December 31, 1999 3,105,867.170 23,310,162 330,308 23,640,470
Offering of Units 277,607.062 2,115,964 -- 2,115,964
Net income -- 612,086 10,276 622,362
Redemptions (809,685.913) (6,178,815) -- (6,178,815)
------------- ----------- --------- -----------
Partners' Capital,
December 31, 2000 2,573,788.319 19,859,397 340,584 20,199,981
============= =========== ========= ===========
Morgan Stanley Dean Witter Spectrum Currency L.P.
Statement of Changes in Partners' Capital
For the Period from July 3, 2000 (commencement of operations) to
December 31, 2000
Units of
Partnership Limited General
Interest Partners Partner Total
------------- ----------- --------- -----------
$ $ $
Partners' Capital,
July 3, 2000 (commencement
of operations) 2.000 10 10 20
Initial Offering 633,152.332 4,886,888 1,444,635 6,331,523
Offering of Units 980,783.417 10,281,803 100,000 10,381,803
Net income -- 1,134,371 174,173 1,308,544
Redemptions (207,486.516) (2,314,658) -- (2,314,658)
------------- ----------- --------- -----------
Partners' Capital,
December 31, 2000 1,406,451.233 13,988,414 1,718,818 15,707,232
============= =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Series
Statements of Changes in Partners' Capital
For the Years Ended December 31, 2000, 1999 and 1998
Units of
Partnership Limited General
Interest Partners Partner Total
-------------- ----------- --------- -----------
$ $ $
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
Partners' Capital,
December 31, 1997 1,868,284.841 25,418,875 264,361 25,683,236
Offering of Units 1,205,176.553 17,447,965 190,000 17,637,965
Net income -- 5,518,127 59,761 5,577,888
Redemptions (204,387.889) (2,985,217) -- (2,985,217)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 1998 2,869,073.505 45,399,750 514,122 45,913,872
Offering of Units 1,019,759.235 16,184,278 135,000 16,319,278
Net income -- 397,258 5,052 402,310
Redemptions (299,009.049) (4,771,448) -- (4,771,448)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 1999 3,589,823.691 57,209,838 654,174 57,864,012
Offering of Units 568,088.752 8,983,545 -- 8,983,545
Net income -- 433,786 5,568 439,354
Redemptions (720,447.437) (11,407,161) -- (11,407,161)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2000 3,437,465.006 55,220,008 659,742 55,879,750
============== =========== ========= ===========
Units of
Partnership Limited General
Interest Partners Partner Total
-------------- ----------- --------- -----------
(Note 1) $ $ $
Morgan Stanley Dean Witter Spectrum Select L.P.
Partners' Capital,
December 31, 1997 8,000,551.600 163,999,307 2,774,014 166,773,321
Offering of Units 1,310,353.729 30,297,590 -- 30,297,590
Net income -- 22,302,202 392,858 22,695,060
Redemptions (903,138.578) (19,683,455) -- (19,683,455)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 1998 8,407,766.751 196,915,644 3,166,872 200,082,516
Offering of Units 2,238,093.744 51,589,367 -- 51,589,367
Net loss -- (16,455,697) (238,717) (16,694,414)
Redemptions (928,973.063) (21,171,795) -- (21,171,795)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 1999 9,716,887.432 210,877,519 2,928,155 213,805,674
Offering of Units 1,339,972.159 28,581,403 -- 28,581,403
Net income -- 14,165,099 125,946 14,291,045
Redemptions (1,693,772.364) (35,441,903) (506,250) (35,948,153)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2000 9,363,087.227 218,182,118 2,547,851 220,729,969
============== =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Series
Statements of Changes in Partners' Capital
For the Years Ended December 31, 2000, 1999 and 1998
Units of
Partnership Limited General
Interest Partners Partner Total
-------------- ----------- --------- -----------
$ $ $
Morgan Stanley Dean Witter Spectrum Strategic L.P.
Partners' Capital,
December 31, 1997 5,517,887.455 58,482,349 613,232 59,095,581
Offering of Units 1,610,245.841 16,662,471 80,000 16,742,471
Net income -- 4,958,188 56,907 5,015,095
Redemptions (1,031,933.595) (10,431,372) -- (10,431,372)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 1998 6,096,199.701 69,671,636 750,139 70,421,775
Offering of Units 1,300,877.987 16,846,544 100,000 16,946,544
Net income -- 27,829,050 300,020 28,129,070
Redemptions (601,106.169) (7,804,868) -- (7,804,868)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 1999 6,795,971.519 106,542,362 1,150,159 107,692,521
Offering of Units 1,467,043.314 17,566,488 35,000 17,601,488
Net loss -- (36,503,461) (383,829) (36,887,290)
Redemptions (1,268,061.404) (14,172,270) -- (14,172,270)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2000 6,994,953.429 73,433,119 801,330 74,234,449
============== =========== ========= ===========
Units of
Partnership Limited General
Interest Partners Partner Total
-------------- ----------- --------- -----------
$ $ $
Morgan Stanley Dean Witter Spectrum Technical L.P.
Partners' Capital,
December 31, 1997 12,434,700.738 180,099,271 1,851,236 181,950,507
Offering of Units 4,731,996.876 69,886,681 565,000 70,451,681
Net income -- 22,571,217 230,153 22,801,370
Redemptions (1,342,497.646) (20,102,124) -- (20,102,124)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 1998 15,824,199.968 252,455,045 2,646,389 255,101,434
Offering of Units 3,976,153.731 61,073,132 410,000 61,483,132
Net loss -- (20,531,494) (208,669) (20,740,163)
Redemptions (1,772,457.606) (27,088,685) -- (27,088,685)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 1999 18,027,896.093 265,907,998 2,847,720 268,755,718
Offering of Units 2,110,290.038 29,668,693 -- 29,668,693
Net income -- 18,053,408 224,793 18,278,201
Redemptions (3,467,967.635) (48,569,520) -- (48,569,520)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2000 16,670,218.496 265,060,579 3,072,513 268,133,092
============== =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Commodity L.P.
(formerly, Morgan Stanley Tangible Asset Fund L.P.)
Statements of Cash Flows
For the Period from
For the January 2, 1998
Years Ended (commencement of
December 31, operations) to
---------------------- December 31,
2000 1999 1998
---------- ---------- -------------------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) 622,362 3,375,789 (13,543,631)
Noncash item included in net
income (loss):
Net change in unrealized 567,711 (1,178,071) 635,643
(Increase) decrease in operating
assets:
Interest receivable (MS&Co.) (12,936) 2,530 (78,722)
Increase (decrease) in operating
liabilities:
Accrued brokerage
fees (DWR and MS&Co.) 6,801 (10,395) 81,222
Accrued management fees (MSCM) (6,322) (7,121) 55,632
Service fees payable (Demeter) (19,404) (2,849) 22,253
---------- ---------- -----------
Net cash provided by (used for)
operating activities 1,158,212 2,179,883 (12,827,603)
---------- ---------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Initial offering -- -- 25,736,868
Offering of Units 2,115,964 -- 15,928,355
Increase in
subscriptions receivable (215,897) -- --
Increase (decrease) in
redemptions payable 220,378 (626,002) 895,547
Redemptions of Units (6,178,815) (4,643,635) (3,213,276)
---------- ---------- -----------
Net cash provided by
(used for) financing activities (4,058,370) (5,269,637) 39,347,494
---------- ---------- -----------
Net increase (decrease) in cash (2,900,158) (3,089,754) 26,519,891
Balance at beginning of period 23,430,137 26,519,891 --
---------- ---------- -----------
Balance at end of
period 20,529,979 23,430,137 26,519,891
========== ========== ===========
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Currency L.P.
Statement of Cash Flows
For the Period from
July 3, 2000
(commencement of
operations) to
December 31,
2000
-------------------
$
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income 1,308,544
Noncash item included in net income:
Net change in unrealized (555,569)
Increase in operating assets:
Interest receivable (DWR) (55,464)
Increase in operating liabilities:
Accrued brokerage
fees (DWR) 55,245
Accrued incentive fees 32,876
Accrued management fees 24,020
----------
Net cash provided by operating activities 809,652
----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Initial offering 6,331,543
Offering of Units 10,381,803
Increase in subscriptions receivable (3,054,150)
Increase in redemptions payable 2,237,351
Redemptions of Units (2,314,658)
----------
Net cash provided by
financing activities 13,581,889
----------
Net increase in cash 14,391,541
Balance at beginning of period --
----------
Balance at end of period 14,391,541
==========
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Global
Balanced L.P.
Statements of Cash Flows
For the Years Ended
December 31,
-----------------------------------
2000 1999 1998
----------- ---------- ----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income 439,354 402,310 5,577,888
Noncash item included in net
income:
Net change in unrealized (2,507,530) 1,157,073 (1,285,628)
Increase in operating assets:
Net option premiums (192,500) -- (458,150)
Interest receivable (DWR) (40,455) (77,458) (48,192)
Increase (decrease) in operating liabilities:
Accrued brokerage
fees (DWR) (14,106) 47,054 70,079
Accrued management fees (3,833) 12,787 20,703
Incentive fees payable -- (69,730) 69,730
----------- ---------- ----------
Net cash provided by
(used for) operating activities (2,319,070) 1,472,036 3,946,430
----------- ---------- ----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Offering of Units 8,983,545 16,319,278 17,637,965
(Increase) decrease in subscriptions
receivable 317,320 315,143 (537,387)
Increase (decrease) in redemptions
payable (65,251) 549,551 3,614
Redemptions of Units (11,407,161) (4,771,448) (2,985,217)
----------- ---------- ----------
Net cash provided by
(used for) financing activities (2,171,547) 12,412,524 14,118,975
----------- ---------- ----------
Net increase (decrease) in cash (4,490,617) 13,884,560 18,065,405
Balance at beginning of period 56,904,921 43,020,361 24,954,956
----------- ---------- ----------
Balance at end of period 52,414,304 56,904,921 43,020,361
=========== ========== ==========
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Select L.P.
Statements of Cash Flows
For the Years Ended
December 31,
-------------------------------------
2000 1999 1998
----------- ----------- -----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) 14,291,045 (16,694,414) 22,695,060
Noncash item included in net
income (loss):
Net change in unrealized (18,665,233) 1,547,990 1,192,107
(Increase) decrease in
operating assets:
Net option premiums 776,380 (776,380) --
Interest receivable (DWR) (167,649) (130,447) 46,346
Due from DWR -- -- 1,097,517
Increase (decrease) in
operating liabilities:
Accrued brokerage
fees (DWR) (39,496) 106,631 1,164,344
Accrued management fees (16,344) 44,124 58,124
Accrued administrative expenses -- -- (72,499)
----------- ----------- -----------
Net cash provided by (used for)
operating activities (3,821,297) (15,902,496) 26,180,999
----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Offering of Units 28,581,403 51,589,367 30,297,590
(Increase) decrease in subscriptions
receivable 2,146,110 2,291,656 (6,021,707)
Increase (decrease) in
redemptions payable (1,653,713) 2,824,861 (1,332,933)
Redemptions of Units (35,948,153) (21,171,795) (19,683,455)
----------- ----------- -----------
Net cash provided by (used for)
financing activities (6,874,353) 35,534,089 3,259,495
----------- ----------- -----------
Net increase (decrease) in cash (10,695,650) 19,631,593 29,440,494
Balance at beginning of period 207,251,012 187,619,419 158,178,925
----------- ----------- -----------
Balance at end of period 196,555,362 207,251,012 187,619,419
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Strategic L.P.
Statements of Cash Flows
For the Years Ended
December 31,
------------------------------------
2000 1999 1998
----------- ---------- -----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) (36,887,290) 28,129,070 5,015,095
Noncash item included in net income
(loss):
Net change in unrealized 7,577,681 (4,264,478) (2,771,722)
(Increase) decrease in operating
assets:
Net option premiums (237,853) 237,299 96,477
Interest receivable (DWR) 32,703 (134,335) 17,798
Increase (decrease) in operating
liabilities:
Accrued brokerage fees (DWR) (180,709) 184,395 45,565
Accrued incentive fee 289,687 -- --
Accrued management fees (127,069) 94,670 30,719
----------- ---------- -----------
Net cash provided by (used for)
operating activities (29,532,850) 24,246,621 2,433,932
----------- ---------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Offering of Units 17,601,488 16,946,544 16,742,471
(Increase) decrease in subscriptions
receivable 1,281,898 52,093 (962,792)
Increase (decrease) in redemptions
payable 459,233 448,884 (967,188)
Redemptions of Units (14,172,270) (7,804,868) (10,431,372)
----------- ---------- -----------
Net cash provided by
financing activities 5,170,349 9,642,653 4,381,119
----------- ---------- -----------
Net increase (decrease) in cash (24,362,501) 33,889,274 6,815,051
Balance at beginning of period 97,808,328 63,919,054 57,104,003
----------- ---------- -----------
Balance at end of period 73,445,827 97,808,328 63,919,054
=========== ========== ===========
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Technical L.P.
Statements of Cash Flows
For the Years Ended
December 31,
-------------------------------------
2000 1999 1998
----------- ----------- -----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) 18,278,201 (20,740,163) 22,801,370
Noncash item included in net income
(loss):
Net change in unrealized (22,006,013) 872,972 (6,612,556)
(Increase) decrease in operating
assets:
Net option premiums (74,725) 74,725 --
Interest receivable (DWR) (162,089) (183,270) (60,123)
Increase (decrease) in operating
liabilities:
Accrued brokerage fees (DWR) (101,355) 120,330 341,957
Accrued management fees (300,576) 66,388 220,319
Accrued incentive fee 111,599 -- (139,190)
----------- ----------- -----------
Net cash provided by (used for)
operating activities (4,254,958) (19,789,018) 16,551,777
----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Offering of Units 29,668,693 61,483,132 70,451,681
(Increase) decrease in subscriptions receivable 2,839,329 75,719 (1,037,012)
Increase in redemptions payable 374,791 1,718,282 330,081
Redemptions of Units (48,569,520) (27,088,685) (20,102,124)
----------- ----------- -----------
Net cash provided by (used for)
financing activities (15,686,707) 36,188,448 49,642,626
----------- ----------- -----------
Net increase (decrease)
in cash (19,941,665) 16,399,430 66,194,403
Balance at beginning of period 251,443,755 235,044,325 168,849,922
----------- ----------- -----------
Balance at end of period 231,502,090 251,443,755 235,044,325
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Organization--Morgan Stanley Dean Witter Spectrum Commodity L.P. (formerly
known as Morgan Stanley Tangible Asset Fund L.P.) ("Spectrum Commodity"), Mor-
gan Stanley Dean Witter Spectrum Currency L.P. ("Spectrum Currency"), Morgan
Stanley Dean Witter Spectrum Global Balanced L.P. (formerly known as Dean Wit-
ter Spectrum Global Balanced L.P.) ("Spectrum Global Balanced"), Morgan Stan-
ley Dean Witter Spectrum Select L.P. (formerly known as Dean Witter Spectrum
Select L.P.) ("Spectrum Select"), Morgan Stanley Dean Witter Spectrum Strate-
gic L.P. (formerly known as Dean Witter Spectrum Strategic L.P.) ("Spectrum
Strategic") and Morgan Stanley Dean Witter Spectrum Technical L.P. (formerly
known as Dean Witter Spectrum Technical L.P.) ("Spectrum Technical"), (indi-
vidually, a "Partnership," or collectively, the "Partnerships"), are limited
partnerships organized to engage in the speculative trading of futures and
forward contracts, options on futures contracts, physical commodities and
other commodity interests, including, but not limited to foreign currencies,
financial instruments, metals, energy and agricultural products (collectively,
"futures interests").
The general partner for each Partnership is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter Reynolds Inc.
("DWR"). Morgan Stanley & Co., Inc. ("MS&Co.") and Morgan Stanley & Co. Inter-
national Limited ("MSIL") provide clearing and execution services. Prior to
October 2000, Carr Futures Inc. ("Carr") provided clearing and execution serv-
ices to Spectrum Global Balanced, Spectrum Select, Spectrum Strategic and
Spectrum Technical. Morgan Stanley Dean Witter Commodities Management, Inc.
("MSCM") is the trading advisor to Spectrum Commodity. Demeter, DWR, MS&Co.,
MSIL and MSCM are wholly-owned subsidiaries of Morgan Stanley Dean Witter &
Co. ("MSDW").
Spectrum Commodity became one of the Spectrum Series of funds effective March
6, 2000.
Spectrum Currency commenced trading as of July 3, 2000.
Spectrum Select became one of the Spectrum Series of funds effective June 1,
1998. Each outstanding unit of limited partnership interest ("Unit(s)") in
Dean Witter Select Futures Fund L.P. was converted to 100 Units of Spectrum
Select. The number of Units outstanding, net income or loss per Unit and Net
Asset Value per Unit have been adjusted for all reporting periods prior to
this conversion.
Effective February 19, 1998, Morgan Stanley, Dean Witter, Discover & Co.
changed its corporate name to Morgan Stanley Dean Witter & Co.
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Continued)
Demeter and the Limited Partners based upon their proportional ownership in-
terests.
Use of Estimates--The financial statements are prepared in accordance with ac-
counting principles generally accepted in the United States of America, which
require management to make estimates and assumptions that affect the reported
amounts in the financial statements and related disclosures. Management be-
lieves that the estimates utilized in the preparation of the financial state-
ments are prudent and reasonable. Actual results could differ from those esti-
mates.
Revenue Recognition--Futures interests are open commitments until settlement
date. They are valued at market on a daily basis and the resulting net change
in unrealized gains and losses is reflected in the change in unrealized
profits (losses) on open contracts from one period to the next in the
statements of operations. Monthly, DWR pays each Partnership interest income
based upon 80% of its average daily "Net Assets" (as defined in the limited
partnership agreements) for the month in the case of Spectrum Commodity,
Spectrum Currency, Spectrum Select, Spectrum Strategic and Spectrum Technical,
and 100% in the case of Spectrum Global Balanced. The interest rate is equal
to a prevailing rate on U.S. Treasury bills. For purposes of such interest
payments, Net Assets do not include monies due the Partnership on futures
interests, but not actually received.
Net Income (Loss) per Unit--Net income (loss) per Unit is computed using the
weighted average number of Units outstanding during the period.
Equity in Futures Interests Trading Accounts--The Partnerships' asset "Equity
in futures interests trading accounts," reflected in the statements of
financial condition consists of (A) cash on deposit with DWR, MS&Co. and MSIL
to be used as margin for trading; (B) net unrealized gains or losses on open
contracts, which are valued at market and calculated as the difference between
original contract value and market value, and (C) net option premiums, which
represent the net of all monies paid and/or received for such option premiums.
The Partnerships, in their normal course of business, enter into various
contracts with MS&Co. and MSIL acting as their commodity brokers. Pursuant to
brokerage agreements with MS&Co. and MSIL, to the extent that such trading
results in unrealized gains or losses, these amounts are offset and reported
on a net basis on the Partnerships' statements of financial condition.
The Partnerships have offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under terms of the
master netting agreements with MS&Co., the sole counterparty on such
contracts. The Partnerships have consistently applied their right to offset.
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Continued)
Brokerage and Related Transaction Fees and Costs-- The brokerage fee for
Spectrum Commodity, Spectrum Currency and Spectrum Global Balanced are accrued
at a flat monthly rate of 1/12 of 4.6% (a 4.6% annual rate) of Net Assets as
of the first day of each month. Prior to April 1, 2000, brokerage fees for
Spectrum Commodity were accrued at a monthly rate of 1/12 of 3.65% of Net
Assets (a 3.65% annual rate) as of the first day of each month. Prior to June
1, 1998, brokerage fees for Spectrum Global Balanced were accrued at 49/120 of
1% of Net Assets (a 4.9% annual rate) as of the first day of each month.
Brokerage fees for Spectrum Select, Spectrum Strategic and Spectrum Technical
are accrued at a flat monthly rate of 1/12 of 7.25% (a 7.25% annual rate) of
Net Assets as of the first day of each month. Prior to June 1, 1998, brokerage
commissions for Spectrum Select were accrued on a half-turn basis at 80% of
DWR's published non-member rates and transaction fees and costs were accrued
on a half-turn basis. Brokerage commissions and transaction fees and costs
combined were capped at 13/20 of 1% per month (a 7.8% maximum annual rate) of
Spectrum Select's month-end Net Assets. Prior to June 1, 1998, brokerage fees
for Spectrum Strategic and Spectrum Technical were accrued at 51/80 of 1% of
the Net Assets (a 7.65% annual rate) as of the first day of each month.
Such brokerage fees currently cover all brokerage commissions, transaction
fees and costs and ordinary administrative and continuing offering expenses.
Service Fee--Prior to April 1, 2000, Spectrum Commodity paid Demeter a monthly
service fee equal to 1/12 of 1% per month (a 1% annual rate) of the
Partnership's Net Assets as of the first day of each month.
Operating Expenses--The Partnerships incur monthly management fees and may
incur incentive fees. All common administrative and continuing offering
expenses including legal, auditing, accounting, filing fees and other related
expenses are borne by DWR through the brokerage fees paid by the Partnerships
(effective June 1, 1998 for Spectrum Select with its change to a flat rate
brokerage fee).
Prior to June 1, 1998, Spectrum Select was charged all operating expenses re-
lated to its trading activities to a maximum of 1/4 of 1% annually of Spectrum
Select's average month end Net Assets. Demeter was responsible for operating
expenses in excess of the cap.
Income Taxes--No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of each Partnership's reve-
nues and expenses for income tax purposes.
Distributions--Distributions, other than redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Continued)
Continuing Offering--Units of each Partnership are offered at a price equal to
100% of the Net Asset Value per Unit as of the close of business on the last
day of the month. No selling commissions or charges related to the continuing
offering of Units will be paid by the Limited Partners or the Partnership. DWR
will pay all such costs.
Redemptions--Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the end of the last day of any month that
is at least six months after the closing at which a person becomes a Limited
Partner, upon five business days advance notice by redemption form to Demeter.
Thereafter, Units redeemed on or prior to the last day of the twelfth month
after such Units were purchased will be subject to a redemption charge equal
to 2% of the Net Asset Value of a Unit on the date of such redemption. Units
redeemed after the last day of the twelfth month and on or prior to the last
day of the twenty-fourth month after which such Units were purchased will be
subject to a redemption charge equal to 1% of the Net Asset Value of a Unit on
the date of such redemption. Units redeemed after the last day of the twenty-
fourth month after which such Units were purchased will not be subject to a
redemption charge. The foregoing redemption charges will be paid to DWR.
Redemptions must be made in whole Units, in a minimum amount of 50 Units,
unless a Limited Partner is redeeming his entire interest in a Partnership.
Exchanges--On the last day of the first month which occurs more than six
months after a person first becomes a Limited Partner in any of the Partner-
ships, and at the end of each month thereafter, Limited Partners may exchange
their investment among the Partnerships (subject to certain restrictions out-
lined in the Limited Partnership Agreement) without paying additional charges.
Dissolution of the Partnerships--Spectrum Commodity will terminate on December
31, 2027, Spectrum Currency,Spectrum Global Balanced, Spectrum Strategic and
Spectrum Technical will terminate on December 31, 2035 and Spectrum Select
will terminate on December 31, 2025 regardless of financial condition at such
time, or at an earlier date if certain conditions occur as defined in each
Partnership's Limited Partnership Agreement.
2. Related Party Transactions
The Partnerships pay brokerage fees to DWR as described in Note 1. Each Part-
nership's cash is on deposit with DWR, MS&Co. and MSIL in futures interests
trading accounts to meet margin requirements as needed. DWR pays interest on
these funds as described in Note 1. Spectrum Commodity paid Demeter a service
fee prior to April 1, 2000 and pays management fees, and when applicable, in-
centive fees to MSCM.
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Continued)
3. Trading Advisors
Demeter, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership are as follows:
Morgan Stanley Dean Witter Spectrum Commodity L.P.
Morgan Stanley Dean Witter Commodities
Management Inc.
Morgan Stanley Dean Witter Spectrum Currency L.P.
John W. Henry & Company, Inc. ("JWH")
Sunrise Capital Partners, LLC ("Sunrise")
Morgan Stanley Dean Witter Spectrum Global Balanced L.P.
RXR, Inc.
Morgan Stanley Dean Witter Spectrum Select L.P.
EMC Capital Management, Inc.
Rabar Market Research, Inc.
Sunrise Capital Management, Inc.
Morgan Stanley Dean Witter Spectrum Strategic L.P.
Allied Irish Capital Management, Ltd. ("AICM")
Blenheim Investments, Inc. ("Blenheim")
Eclipse Capital Management Inc. ("Eclipse")
Effective April 30, 1998, A. Gary Shilling & Co., Inc.("Shilling") was termi-
nated as an advisor to Spectrum Strategic. The assets of the Partnership pre-
viously allocated to Shilling were allocated to Stonebrook Capital Management
Inc., ("Stonebrook"), effective June 1, 1998.
Effective March 4, 1999, Stonebrook was terminated as an advisor to Spectrum
Strategic. The assets of the Partnership previously allocated to Stonebrook
were allocated to AICM, effective June 1, 1999.
Effective April 14, 2000, Willowbridge Associates Inc. ("Willowbridge") was
terminated as an advisor to Spectrum Strategic. The assets of the Partnership
previously allocated to Willowbridge were allocated to Eclipse, effective June
26, 2000.
Morgan Stanley Dean Witter Spectrum Technical L.P.
Campbell & Company, Inc. ("Campbell")
Chesapeake Capital Corporation ("Chesapeake")
John W. Henry & Company, Inc.
Compensation to the trading advisors by the Partnerships consists of a
management fee and an incentive fee as follows:
Management Fee--The management fee for Spectrum Commodity is accrued at the
rate of 5/24 of 1% of Net Assets on the first day of each month (a 2.5% annual
rate).
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Continued)
The management fee for Spectrum Currency is accrued at the rate of 1/12 of 2%
of Net Assets on the first day of each month (a 2% annual rate). Prior to De-
cember 1, 2000, the management fee was accrued at the rate of 1/3 of 1% of Net
Assets allocated to JWH on the first day of each month and 1/4 of 1% of Net
Assets allocated to Sunrise on the first day of each month (annual rates of 4%
and 3%, respectively).
The management fee for Spectrum Global Balanced is accrued at the rate of 5/48
of 1% per month of Net Assets on the first day of each month (a 1.25% annual
rate).
The management fee for Spectrum Select is accrued at the rate of 1/4 of 1% per
month of Net Assets allocated to each trading advisor on the first day of each
month (a 3% annual rate). Prior to June 1, 1998, the management fee was ac-
crued at the rate of 1/4 of 1% of the Partnership's adjusted Net Assets, as
defined in its limited partnership agreement, as of the last day of each month
(a 3% annual rate).
The management fee for Spectrum Strategic is accrued at the rate of 1/12 of 4%
per month of Net Assets allocated to Blenheim on the first day of each month,
and 1/12 of 3% per month of Net Assets allocated to AICM and Eclipse on the
first day of each month (annual rates of 4% and 3%, respectively). Prior to
June 1, 1998, the management fee was accrued at the rate of 1/3 of 1% of Net
Assets allocated to Blenheim and Willowbridge on the first day of each month
(a 4% annual rate).
The management fee for Spectrum Technical is accrued at the rate of 1/12 of 2%
of Net Assets allocated to JWH on the first day of each month, 1/12 of 3% of
Net Assets allocated to Campbell on the first day of each month and 1/3 of 1%
of Net Assets allocated to Chesapeake on the first day of each month (annual
rates of 2%, 3% and 4% respectively). Prior to December 1, 2000 the management
fee was accrued to each trading advisor at the rate of 1/3 of 1% of Net Assets
on the first day of each month (a 4% annual rate).
Incentive Fee--Spectrum Commodity pays an annual incentive fee equal to 17.5%
of Partnership trading profits, as determined from the end of the last period
in which an incentive fee was earned. Prior to December 1, 2000, Spectrum Com-
modity paid an annual incentive fee to MSCM equal to 20% of the trading prof-
its.
Spectrum Currency pays a monthly incentive fee equal to 20% of the trading
profits experienced with respect to each trading advisor's allocated Net As-
sets as of the end of each month. Prior to December 1, 2000, Spectrum Currency
paid a monthly incentive fee equal to 15% of the trading profits.
Spectrum Global Balanced, Spectrum Select and Spectrum Strategic each pay a
monthly incentive fee equal to 15% of the trading profits experienced with re-
spect to each trading advisor's allocated Net Assets as of the end of each
calendar
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Continued)
month. Prior to June 1, 1998, Spectrum Select paid a quarterly incentive fee
to each trading advisor equal to 17.5% of the trading profits.
Spectrum Technical pays a monthly incentive fee equal to 20% of the trading
profits experienced with respect to the Net Assets allocated to Campbell and
JWH and 19% of the Trading profits experienced with respect to the Net Assets
allocated to Chesapeake as of the end of each calendar month. Prior to June 1,
1998, Spectrum Technical paid an incentive fee equal to 15% of trading profits
to Chesapeake. Prior to December 1, 2000, Spectrum Technical paid an incentive
fee equal to 15% of trading profits to Campbell and JWH.
Trading profits represent the amount by which profits from futures, forwards
and options trading exceed losses after brokerage and management fees are de-
ducted. Prior to June 1, 1998, trading profits for Spectrum Select represented
the amount by which profits from futures, forwards and options trading ex-
ceeded losses after brokerage commissions, management fees, administrative ex-
penses and transaction fees and costs were deducted.
For all Partnerships when trading losses are incurred, no incentive fee will
be paid in subsequent months until all such losses are recovered. Cumulative
trading losses are adjusted on a pro-rata basis for the net amount of each
months' subscriptions and redemptions.
4. Financial Instruments
The Partnerships trade futures and forward contracts, options on futures con-
tracts, physical commodities and other commodity interests, including, but not
limited to foreign currencies, financial instruments, metals, energy and agri-
cultural products. Futures and forwards represent contracts for delayed deliv-
ery of an instrument at a specified date and price. Risk arises from changes
in the value of these contracts and the potential inability of counterparties
to perform under the terms of the contracts. There are numerous factors which
may significantly influence the market value of these contracts, including in-
terest rate volatility.
In June 1998, the Financial Accounting Standards Board ("FASB") issued State-
ment of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Deriv-
ative Instruments and Hedging Activities" effective for fiscal years beginning
after June 15, 2000, as amended by SFAS No. 137. The Partnership adopted the
provisions of SFAS No. 133 beginning with the fiscal year ended December 31,
1998. SFAS No. 133 superceded SFAS Nos. 119 and 105, which required the dis-
closure of average aggregate fair values and contract/notional values, respec-
tively, of derivative financial instruments for an entity that carries its as-
sets at fair value. SFAS No. 133 was further amended by SFAS No. 138, which
clarifies issues sur-
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Continued)
rounding interest rate risk, foreign currency denominations, normal purchases
and sales and net hedging. The application of SFAS No. 133, as amended by SFAS
No. 137 and SFAS No. 138, did not have a significant effect on the Partner-
ships' financial statements.
SFAS No. 133 defines a derivative as a financial instrument or other contract
that has all three of the following characteristics:
(1) One or more underlying notional amounts or payment provisions;
(2) Requires no initial net investment or a smaller initial net investment
than would be required relative to changes in market factors;
(3) Terms require or permit net settlement.
Generally derivatives include futures, forwards, swaps or option contracts and
other financial instruments with similar characteristics such as caps, floors
and collars.
The net unrealized gains (losses) on open contracts are reported as a compo-
nent of "Equity in futures interests tradingaccounts'' on the statements of
financial condition and totaled at December 31, 2000 and 1999, respectively,
$(25,283) and $542,428 for Spectrum Commodity, $3,317,644 and $810,114 for
Spectrum Global Balanced, $25,552,297 and $6,887,064 for Spectrum Select,
$1,986,132 and $9,563,813 for SpectrumStrategic, and $40,042,309 and
$18,036,296 for Spectrum Technical. For Spectrum Currency, the net realized
gain totaled $555,569 at December 31, 2000.
For Spectrum Commodity, the $25,283 net unrealized loss on open contracts at
December 31, 2000 and the $542,428 net unrealized gain on open contracts at
December 31, 1999 all related to exchange-traded futures contracts.
For Spectrum Currency, the $555,569 net unrealized gain on open contracts at
December 31, 2000 was related to off-exchange-traded forward currency con-
tracts.
For Spectrum Global Balanced, of the $3,317,644 net unrealized gain on open
contracts at December 31, 2000, $3,374,178 related to exchange-traded futures
contracts and $(56,534) related to off-exchange-traded forward currency con-
tracts. Of the $810,114 net unrealized gain on open contracts atDecember 31,
1999, $669,640 related to exchange-traded futures contracts and $140,474 re-
lated to off-exchange-traded forward currency contracts.
For Spectrum Select, of the $25,552,297 net unrealized gain on open contracts
at December 31, 2000, $23,901,575 related to exchange-traded futures and
futures-styled options contracts
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Continued)
and $1,650,722 related to off-exchange-traded forward currency contracts. Of
the $6,887,064 net unrealized gain on open contracts at December 31, 1999,
$6,935,040 related to exchange-traded futures and futures-styled options con-
tracts and $(47,976) related to off-exchange-traded forward currency con-
tracts.
For Spectrum Strategic, the $1,986,132 net unrealized gain on open contracts
at December 31, 2000 and the $9,563,813 net unrealized gain on open contracts
at December 31, 1999 all related to exchange-traded futures and futures-styled
options contracts.
For Spectrum Technical, of the $40,042,309 net unrealized gain on open
contracts at December 31, 2000, $37,170,209 related to exchange-traded futures
and futures-styled options contracts and $2,872,100 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 futures-styled options contracts and $1,030,252 related to off-
exchange-traded forward currency contracts.
Exchange-traded contracts and off-exchange-traded forward currency contracts
held by the Partnerships at December 2000 and 1999 mature as follows:
2000 1999
------------- -------------
Spectrum Commodity
Exchange-Traded Contracts April 2001 April 2000
Spectrum Currency
Off-Exchange-Traded Forward Currency Contracts March 2001 --
Spectrum Global Balanced
Exchange-Traded Contracts June 2001 June 2000
Off-Exchange-Traded Forward Currency Contracts March 2001 March 2000
Spectrum Select
Exchange-Traded Contracts December 2001 December 2000
Off-Exchange-Traded Forward Currency Contracts March 2001 March 2000
Spectrum Strategic
Exchange-Traded Contracts December 2001 December 2001
Spectrum Technical
Exchange-Traded Contracts December 2001 December 2000
Off-Exchange-Traded Forward Currency Contracts March 2001 March 2000
The Partnerships have credit risk associated with counterparty nonperformance.
The credit risk associated with the instruments in which the Partnerships are
involved is limited to the amounts reflected in the Partnerships' statements
of financial condition.
The Partnerships also have credit risk because DWR, MS&Co. and MSIL act as the
futures commission merchants or the counterparties, with respect to most of
the Partnerships' assets. Exchange-traded futures and futures-styled options
contracts are marked to market on a daily basis, with variations
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Continued)
in value settled on a daily basis. Each of DWR, MS&Co. and MSIL, as a futures
commission merchant for each Partnership's exchange-traded futures and
futures-styled options contracts, are required, pursuant to regulations of the
Commodity Futures Trading Commission to segregate from their own assets, and
for the sole benefit of their commodity customers, all funds held by them with
respect to exchange-traded futures and futures-styled options contracts, in-
cluding an amount equal to the net unrealized gain on all open futures and
futures-styled options contracts, which funds, in the aggregate, totaled at
December 31, 2000 and 1999 respectively, $20,504,696 and $23,972,565 for Spec-
trum Commodity, $55,788,482 and $57,574,561 for Spectrum Global Balanced,
$220,456,937 and $214,186,052 for Spectrum Select, $75,431,959 and
$107,372,141 for Spectrum Strategic and $268,672,299 and $268,449,799 for
Spectrum Technical. For Spectrum Currency, the amount totaled $14,391,541 at
December 31, 2000. With respect to the Partnerships' off-exchange-traded for-
ward currency contracts, there are no daily settlements of variations in value
nor is there any requirement that an amount equal to the net unrealized gain
on open forward contracts be segregated. With respect to those off-exchange-
traded forward currency contracts, the Partnerships are at risk to the ability
of MS&Co., the sole counterparty on all of such contracts, to perform. Each
Partnership has a netting agreement with MS&Co.. These agreements, which seek
to reduce both the Partnerships' and MS&Co.'s exposure on off-exchange-traded
forward currency contracts, should materially decrease the Partnerships'
credit risk in the event of MS&Co.'s bankruptcy or insolvency.
5. Legal Matters
Similar class actions were filed in 1996 in California and New York State
courts. Each of the actions were dismissed in 1999. However, the New York
State class action discussed below is still pending because plaintiffs ap-
pealed the trial court's dismissal of their case on March 3, 2000.
On September 18 and 20, 1996, purported class actions were filed in the Su-
preme Court of the State of New York, New York County, on behalf of all pur-
chasers of interests in limited partnership commodity pools sold by DWR. Named
defendants include DWR, Demeter, Dean Witter Futures & Currency Management
Inc., MSDW, Spectrum Select (under its original name, "Dean Witter Select
Futures Fund L.P.") and certain other limited partnership commodity pools of
which Demeter is the general partner, and certain trading advisors to those
pools. A consolidated and amended complaint in the action pending in the Su-
preme Court of the State of New York was filed on August 13, 1997, alleging
that the defendants committed fraud, breach of fiduciary duty, and negligent
misrepresentation in the sale and operation of the various limited partnership
commodity pools. The complaints sought unspecified amounts of compensatory and
punitive damages and other relief. The New York Supreme Court dismissed the
New York
Morgan Stanley Dean Witter Spectrum Series
Notes to Financial Statements--(Concluded)
action in November 1998, but granted plaintiffs leave to file an amended com-
plaint, which they did in early December 1998. The defendants filed a motion
to dismiss the amended complaint with prejudice on February 1, 1999. By deci-
sion dated December 21, 1999, the New York Supreme Court dismissed the case
with prejudice. However, on March 3, 2000 plaintiffs appealed the trial
court's dismissal of their case.
MORGAN STANLEY DEAN WITTER & CO. Presorted
Two World Trade Center First Class Mail
62nd Floor U.S. Postage Paid
New York, NY 10048 Brooklyn, NY
Permit No. 529