-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EE+eX65wcaRGg7P17/VijNKBA8t76ZTDX2COsZPLmVoCKRZA8OgnZd2YzquK2Qv+ zWc0ib/O1YCG5arR8T7aDA== /in/edgar/work/20000622/0000890163-00-000288/0000890163-00-000288.txt : 20000920 0000890163-00-000288.hdr.sgml : 20000920 ACCESSION NUMBER: 0000890163-00-000288 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20000622 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER SPECTRUM SELECT LP CENTRAL INDEX KEY: 0000873799 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 133619290 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-90467 FILM NUMBER: 659175 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CNTR - 62ND FLR STREET 2: C/O DEMETER MANAGEMENT CORP CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123928899 MAIL ADDRESS: STREET 1: C/O DEMETER MANAGEMENT CORP STREET 2: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 FORMER COMPANY: FORMER CONFORMED NAME: DEAN WITTER SPECTRUM SELECT LP DATE OF NAME CHANGE: 19980507 FORMER COMPANY: FORMER CONFORMED NAME: WITTER DEAN SELECT FUTURES FUND LP DATE OF NAME CHANGE: 19930328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WITTER DEAN SPECTRUM STRATEGIC LP CENTRAL INDEX KEY: 0000925263 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 133782225 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-90487 FILM NUMBER: 659176 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER 62ND FL STREET 2: C/O DETEMER MANAGEMENT CORP CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123925453 MAIL ADDRESS: STREET 1: C/O DETEMER MANAGEMENT CORP STREET 2: TWO WORLD TRADE CENTER 62ND FL CITY: NEW YORK STATE: NY ZIP: 10048 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEAN WITTER SPECTRUM GLOBAL BALANCED LP CENTRAL INDEX KEY: 0000925266 STANDARD INDUSTRIAL CLASSIFICATION: [6798 ] IRS NUMBER: 133782232 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-90475 FILM NUMBER: 659177 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER 62ND FL STREET 2: C/O DEMETER MANAGEMENT CORP CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123925453 MAIL ADDRESS: STREET 1: C/O DETEMER MANAGEMENT CORP STREET 2: TWO WORLD TRADE CENTER 62ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10048 FORMER COMPANY: FORMER CONFORMED NAME: WITTER DEAN SPECTRUM BALANCED LP DATE OF NAME CHANGE: 19940613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL LP CENTRAL INDEX KEY: 0000925306 STANDARD INDUSTRIAL CLASSIFICATION: [6189 ] IRS NUMBER: 133782231 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-68779 FILM NUMBER: 659178 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER 62ND FLOOR STREET 2: C/O DEMETER MANAGEMENT CORP CITY: NEW YORK STATE: NY ZIP: 10048 MAIL ADDRESS: STREET 1: C/O DEMETER MANAGEMENT CORP STREET 2: TWO WORLD TRADE CENTER 62ND FL CITY: NEW YORK STATE: NY ZIP: 10048 FORMER COMPANY: FORMER CONFORMED NAME: WITTER DEAN SPECTRUM TECHNICAL LP DATE OF NAME CHANGE: 19940614 424B3 1 0001.txt FORM 424B3 MORGAN STANLEY DEAN WITTER SPECTRUM SERIES (THIS IS ONE OF TWO PROSPECTUS SUPPLEMENTS FOR THE PARTNERSHIPS IN THE SPECTRUM SERIES) 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. ------------------------ SUPPLEMENT TO PROSPECTUS DATED MARCH 6, 2000 YOU SHOULD READ THIS SUPPLEMENT TOGETHER WITH THE PROSPECTUS DATED MARCH 6, 2000. ALL PAGE AND SECTION REFERENCES IN THIS SUPPLEMENT RELATE TO THE PROSPECTUS, EXCEPT REFERENCES TO PAGES PRECEDED BY "S-," WHICH RELATE TO THIS SUPPLEMENT. ------------------------ MORGAN STANLEY DEAN WITTER DEAN WITTER REYNOLDS INC. THE DATE OF THIS SUPPLEMENT IS JUNE 22, 2000. TABLE OF CONTENTS PAGE Advisor Change for Spectrum Strategic...................................... S-1 Commodity Broker Change.................................................... S-1 Summary.................................................................... S-1 Risk Factors............................................................... S-3 Conflicts of Interest...................................................... S-3 Description of Charges..................................................... S-3 The Spectrum Series........................................................ S-4 Selected Financial Data.................................................... S-7 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... S-9 Quantitative and Qualitative Disclosures About Market Risk................. S-14 The Trading Advisors....................................................... S-21 The Commodity Brokers...................................................... S-28 Litigation................................................................. S-30 Financial Statements....................................................... S-31
ADVISOR CHANGE FOR SPECTRUM STRATEGIC Effective April 14, 2000, Spectrum Strategic terminated Willowbridge Associates Inc. as a trading advisor. On June 26, 2000, Spectrum Strategic will add Eclipse Capital Management Inc. as a trading advisor, and will allocate to Eclipse the assets previously managed by Willowbridge, approximately $19 million (approximately 23%) of Spectrum Strategic's net assets. Eclipse will be paid a monthly management fee at a 3% annual rate (Willowbridge was paid 4%) and a monthly incentive fee equal to 15% (Willowbridge was also paid 15%) of any trading profits. In addition, 50% of any subscriptions into Spectrum Strategic will be allocated to Allied Irish Capital Management, Ltd. and the remaining 50% will be allocated to Eclipse, while 100% of any redemptions out of Spectrum Strategic will be allocated to Blenheim Investments, Inc. Accordingly, the disclosures regarding Willowbridge in the prospectus are no longer relevant. The description of Eclipse begins on page S-23. COMMODITY BROKER CHANGE Commencing in June 2000, the general partner will begin to transfer the futures and options clearing for each Spectrum Series partnership from Carr Futures Inc. to Morgan Stanley & Co. Incorporated, an affiliate of the general partner, with the exception of trades on the London Metal Exchange, which will be cleared by Morgan Stanley & Co. International Limited, also an affiliate of the general partner. In addition, Morgan Stanley & Co. Incorporated, rather than Carr Futures, will act as the counterparty on all of the foreign currency forward trades for the Spectrum Series partnerships. Dean Witter will continue to act as the non-clearing commodity broker for the Spectrum Series partnerships. THE FOLLOWING REVISIONS TO THE "SUMMARY," "RISK FACTORS," "CONFLICTS OF INTEREST," "DESCRIPTION OF CHARGES," "THE COMMODITY BROKERS," AND "LITIGATION" SECTIONS OF THE PROSPECTUS RELATE TO THE COMMODITY BROKER CHANGE DESCRIBED ABOVE. UNTIL THE CHANGE IS EFFECTED, THE PROSPECTUS DESCRIBES THE CURRENT ARRANGEMENTS WITH CARR FUTURES. SUMMARY THE FOLLOWING UPDATES AND REPLACES THE FIRST BULLET POINT UNDER "MAJOR CONFLICTS OF INTEREST" ON PAGE 4. * Because the general partner, Dean Witter, Morgan Stanley, and Morgan Stanley International are affiliates of each other, the fees payable to those parties and the other terms relating to the operation of the partnerships and the sale of units were not negotiated by an independent party. S-1 THE FOLLOWING UPDATES AND REPLACES THE INFORMATION UNDER "ORGANIZATIONAL CHART" ON PAGE 5. ORGANIZATIONAL CHART Following is an organizational chart, which shows the relationships among the various parties involved with this offering. With the exception of the trading advisors, all parties are affiliates of Morgan Stanley Dean Witter & Co. wholly-owned Morgan Stanley Dean Witter & Co. wholly-owned wholly-owned general 23 other commodity Dean Witter Demeter partnership pools* GENERAL PARTNER interest Selling Agreement SELLING AGENT AND NON-CLEARING COMMODITY BROKER general partnership Customer Agreement interest Management Agreements Spectrum Select Spectrum Technical Spectrum Strategic Customer Agreement Spectrum Global Balanced Customer Agreement Management Agreements F/X Agreement Trading Advisor Morgan Stanley and Morgan Stanley International CLEARING COMMODITY BROKERS
- ------------------ *Demeter presently serves as general partner for 23 other commodity pools. Dean Witter acts as the non-clearing commodity broker for all of the pools. Morgan Stanley acts as clearing commodity broker for all but one of the pools, and Morgan Stanley International serves as the clearing commodity broker for trades of such pools that take place on the London Metal Exchange. Dean Witter also serves as selling agent for all of the pools managed by Demeter. All of the pools, including the partnerships, are managed and traded independently of one another. S-2 RISK FACTORS THE RISK FACTOR "TRADING AND PERFORMANCE RISKS -- THE UNREGULATED NATURE OF THE FORWARDS MARKETS CREATES COUNTERPARTY RISKS THAT DO NOT EXIST IN FUTURES TRADING ON EXCHANGES," ON PAGES 10-11 OF THE PROSPECTUS, SHOULD NOW BE READ AS APPLYING TO MORGAN STANLEY, RATHER THAN CARR FUTURES. CONFLICTS OF INTEREST THE FOLLOWING CONFLICT IS ADDED TO "CONFLICTS OF INTEREST" ON PAGES 13-15. THE GENERAL PARTNER HAS A DISINCENTIVE TO REPLACE THE COMMODITY BROKERS. The general partner has a disincentive to replace Dean Witter, Morgan Stanley, and Morgan Stanley International because they are affiliates of the general partner and receive compensation for serving as the partnerships' commodity brokers. In connection with this conflict of interest, you should understand that Dean Witter receives a monthly flat-rate brokerage fee from each partnership for serving as the partnership's non-clearing commodity broker. From its brokerage fee, Dean Witter pays or reimburses each partnership for the transaction fees and costs charged by Morgan Stanley and Morgan Stanley International for acting as the partnership's clearing commodity brokers. Also, Morgan Stanley, as the counterparty on each partnership's foreign currency forward trades, will attempt to earn a mark-up, spread, or other profit on each foreign currency forward contract trade which is separate from the flat-rate brokerage fees paid by the partnership to Dean Witter. Prior to the transfer from Carr Futures to Morgan Stanley of each partnership's foreign currency forward trading, this mark-up, spread, or other profit was earned by a non-affiliated counterparty on each trade. The general partner reviews the brokerage arrangements, including foreign currency forward contracts, annually to ensure that they are fair, reasonable and competitive, and that they represent the best price and services available, taking into consideration the size and trading activity of each partnership and the services provided, and the costs, expenses, and risk borne, by Dean Witter and the general partner. DESCRIPTION OF CHARGES THE FOLLOWING REPLACES THE SECOND PARAGRAPH ON PAGE 20. COMMODITY BROKERS From the flat-rate brokerage fees received from the partnerships, Dean Witter will pay or reimburse the partnerships for all fees and costs of Morgan Stanley and Morgan Stanley International in executing trades on behalf of the partnerships, including floor brokerage fees, exchange fees, clearinghouse fees, National Futures Association fees, "give up" fees, any taxes (other than income taxes), any third party clearing costs incurred by Morgan Stanley and Morgan Stanley International, and costs associated with taking delivery on futures contracts. Morgan Stanley will act as principal for its own account on the partnerships' foreign currency forward contract trades and it will attempt to earn a profit on each foreign currency forward contract trade that is not paid or reimbursed by Dean Witter. S-3 THE SPECTRUM SERIES THE FOLLOWING UPDATES AND REPLACES THE TABLE FOLLOWING THE FOURTH PARAGRAPH UNDER "THE SPECTRUM SERIES -- GENERAL" ON PAGE 24. Following is a summary of information relating to the sale of units of the partnerships through March 31, 2000:
LIMITED GENERAL NUMBER OF UNITS UNITS AVAILABLE PARTNER PARTNER LIMITED SOLD FOR SALE CONTRIBUTIONS CONTRIBUTIONS PARTNERS -------------- --------------- ----------- ------------- --------- $ $ Spectrum Select*............. 18,679,641.738 6,934,325.362 292,496,684 1,680,000 16,338 Spectrum Technical........... 23,252,422.730 9,747,577.270 311,035,153 2,511,984 25,667 Spectrum Strategic........... 10,202,100.866 8,797,899.134 112,769,129 812,000 11,284 Spectrum Global Balanced..... 4,771,945.468 6,228,054.532 63,807,120 533,234 7,131
- --------------- * The number of units sold has been adjusted to reflect a 100-for-1 unit conversion that took place on April 30, 1998 when Spectrum Select became part of the Spectrum Series of partnerships. THE FOLLOWING UPDATES AND REPLACES THE PERFORMANCE INFORMATION UNDER "THE SPECTRUM SERIES -- PERFORMANCE RECORDS" ON PAGES 27-29. PERFORMANCE RECORDS A summary of performance information for each partnership from its commencement of trading through March 31, 2000 is set forth in Capsules I through IV below. All performance information has been calculated on an accrual basis in accordance with generally accepted accounting principles. You should read the footnotes on page 30, which are an integral part of the following capsules. You are cautioned that the information set forth in each capsule is not indicative of, and has no bearing on, any trading results that may be attained by any partnership in the future. Past results are not a guarantee of future results. We cannot assure you that a partnership will be profitable or will avoid incurring substantial losses. You should also note that interest income may constitute a significant portion of a partnership's total income and may generate profits where there have been realized or unrealized losses from futures, forwards, and options trading. S-4 CAPSULE I PERFORMANCE OF SPECTRUM SELECT Type of pool: publicly-offered fund Inception of trading: August 1991 Aggregate subscriptions: $294,176,684 Current capitalization: $211,718,422 Current net asset value per unit: $21.68 Worst monthly % drawdown in past five years: (12.11)% (February 1996) Worst monthly % drawdown since inception: (13.72)% (January 1992) Worst month-end peak-to-valley past five years: (26.78)% (15 months, June 1995-August 1996) Worst month-end peak-to-valley since inception: (26.78)% (15 months, June 1995-August 1996) Cumulative return since inception: 116.80%
MONTHLY PERFORMANCE ------------------------------------------------------------------------------------------------- MONTH 2000 1999 1998 1997 1996 1995 1994 1993 1992 - --------------------- --------- ------ ------ ------ ------ ------ ------ ------ ------ % % % % % % % % % January.............. 2.86 (2.90) 0.87 3.93 (0.38) (8.13) (11.67) 0.31 (13.72) February............. (2.17) 5.45 2.16 4.75 (12.11) 9.61 (6.79) 14.84 (6.09) March................ (2.08) (2.50) 0.23 0.31 (0.22) 20.58 12.57 (0.59) (3.91) April................ 3.70 (6.72) (5.46) 4.07 9.06 (0.95) 10.35 (1.86) May.................. (4.38) 1.79 (1.18) (3.65) 11.08 6.84 1.95 (1.42) June................. 0.34 0.93 0.16 1.37 (1.70) 10.30 0.21 7.19 July................. (4.40) (0.97) 9.74 (1.44) (10.61) (4.91) 13.90 10.72 August............... (0.44) 19.19 (6.22) (0.46) (4.81) (6.95) (0.95) 6.69 September............ 1.69 6.24 0.93 3.34 (7.76) 1.25 (4.13) (5.24) October.............. (8.39) (5.14) (3.77) 13.30 (3.35) (4.78) (4.97) (3.17) November............. 3.29 (4.16) 0.62 6.76 1.37 5.68 (1.30) 1.39 December............. 1.62 1.19 3.35 (3.36) 11.19 (2.72) 8.14 (3.58) Compound Annual/ Period Rate of Return (1.45) (7.56) 14.15 6.22 5.27 23.63 (5.13) 41.63 (14.45) (3 months) MONTH 1991 - --------------------- ------ % January.............. February............. March................ April................ May.................. June................. July................. August............... (6.20) September............ 6.32 October.............. (2.28) November............. (2.93) December............. 38.67 Compound Annual/ Period Rate of Return 31.18 (5 months)
CAPSULE II PERFORMANCE OF SPECTRUM TECHNICAL Type of pool: publicly-offered fund Inception of trading: November 1994 Aggregate subscriptions: $313,547,137 Current capitalization: $262,794,198 Current net asset value per unit: $14.68 Worst monthly % drawdown in past five years: (9.96)% (October 1999) Worst monthly % drawdown since inception: (9.96)% (October 1999) Worst month-end peak-to-valley drawdown past five years: (14.08)% (6 months, May 1999-October 1999) Worst month-end peak-to-valley drawdown since inception: (14.08)% (6 months, May 1999-October 1999) Cumulative return since inception: 46.80%
MONTHLY PERFORMANCE --------------------------------------------------------------------------- MONTH 2000 1999 1998 1997 1996 1995 1994 - -------------------------- --------- ------ ------ ------ ------ ------ ------ % % % % % % % January................... 1.21 (4.96) (1.16) 3.67 4.78 (1.84) February.................. (1.19) 2.48 0.41 1.13 (6.39) 5.10 March..................... (1.54) (2.48) 1.31 (1.82) 1.24 10.21 April..................... 7.18 (4.62) (2.93) 4.82 3.60 May....................... (5.00) 3.28 (3.75) (3.84) 0.69 June...................... 5.13 (1.10) 0.69 3.21 (1.12) July...................... (3.90) (0.98) 9.33 (4.80) (2.44) August.................... 0.95 10.29 (5.97) (0.35) (0.63) September................. (1.51) 4.35 1.85 5.50 (3.33) October................... (9.96) (0.73) 0.36 9.92 (0.09) November.................. 1.84 (6.17) 1.01 8.34 0.93 (0.90) December.................. 3.83 5.98 4.57 (3.88) 6.09 (1.31) Compound Annual/ Period Rate of Return.......... (1.54) (7.51) 10.18 7.49 18.35 17.59 (2.20) (3 months) (2 months)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. S-5 CAPSULE III PERFORMANCE OF SPECTRUM STRATEGIC Type of pool: publicly-offered fund Inception of trading: November 1994 Aggregate subscriptions: $113,581,129 Current capitalization: $87,835,285 Current net asset value per unit: $12.41 Worst monthly % drawdown in past five years: (18.47)% (February 2000) Worst monthly % drawdown since inception: (18.47)% (February 2000) Worst month-end peak-to-valley drawdown past five years: (32.11)% (16 months, April 1997-July 1998) Worst month-end peak-to-valley drawdown since inception: (32.11)% (16 months, April 1997-July 1998) Cumulative return since inception: 24.10%
MONTHLY PERFORMANCE --------------------------------------------------------------------------- MONTH 2000 1999 1998 1997 1996 1995 1994 - -------------------------- --------- ------ ------ ------ ------ ------ ------ % % % % % % % January................... (1.96) (3.55) 5.32 (0.66) 3.71 (3.50) February.................. (18.47) 11.76 (3.37) 10.09 (10.29) 1.45 March..................... (2.05) (3.45) 0.37 6.77 (0.97) 7.86 April..................... 2.00 (11.06) (6.90) 6.08 0.00 May....................... (13.38) (7.40) 0.78 (3.05) (0.66) June...................... 21.85 (0.89) (1.63) (2.86) (6.38) July...................... (1.00) (5.26) 7.65 (4.91) (0.81) August.................... 5.31 11.82 (4.93) 1.14 4.00 September................. 13.27 19.03 (6.03) 5.11 (0.39) October................... (9.55) 8.44 (6.24) 2.92 0.30 November.................. 4.85 (7.94) (2.22) 3.49 2.76 0.10 December.................. 9.39 2.76 5.62 (2.65) 6.24 0.00 Compound Annual/ Period Rate of Return... (21.70) 37.23 7.84 0.37 (3.53) 10.49 0.10 (3 months) (2 months)
CAPSULE IV PERFORMANCE OF SPECTRUM GLOBAL BALANCED Type of pool: publicly-offered fund Inception of trading: November 1994 Aggregate subscriptions: $64,340,354 Current capitalization: $58,704,709 Current net asset value per unit: $16.62 Worst monthly % drawdown in past five years: (7.92)% (February 1996) Worst monthly % drawdown since inception: (7.92)% (February 1996) Worst month-end peak-to-valley drawdown in past five years: (10.64)% (4 months, February 1996-May 1996) Worst month-end peak-to-valley drawdown since inception: (10.64)% (4 months, February 1996-May 1996) Cumulative return since inception: 66.20%
MONTHLY PERFORMANCE --------------------------------------------------------------------------- MONTH 2000 1999 1998 1997 1996 1995 1994 - -------------------------- --------- ------ ------ ------ ------ ------ ------ % % % % % % % January................... (0.93) (0.06) 2.25 3.35 0.41 1.32 February.................. 0.94 (0.06) 1.49 3.16 (7.92) 4.62 March..................... 3.10 0.00 2.24 (2.50) (1.08) 2.88 April..................... 4.13 (1.78) (1.65) 1.27 2.15 May....................... (4.99) (0.35) 1.68 (3.13) 4.38 June...................... 2.28 0.00 3.64 0.46 0.79 July...................... (1.67) (1.19) 11.89 0.83 (1.39) August.................... (0.19) 2.55 (5.92) (0.82) (1.41) September................. (0.50) 5.11 3.26 2.30 1.61 October................... (1.77) 1.18 (1.69) 3.77 0.26 November.................. 1.93 2.66 (0.37) 4.76 2.72 (0.50) December.................. 1.96 1.27 3.07 (3.88) 2.99 (1.21) Compound Annual/ Period Rate of Return... 3.10 0.75 16.36 18.23 (3.65) 22.79 (1.70) (3 months) (2 months)
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. S-6 SELECTED FINANCIAL DATA THE FOLLOWING UPDATES AND REPLACES "SELECTED FINANCIAL DATA" ON PAGES 31-32. The following are the results of operations for each partnership for the periods indicated. Per unit results for Spectrum Select have been adjusted to reflect a 100-for-1 unit conversion that became effective on April 30, 1998. SPECTRUM SELECT
FOR THE QUARTERS ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31, --------------------------- ------------------------------------------------------------------------ 2000 1999 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ $ $ REVENUES (UNAUDITED) (UNAUDITED) Trading Profit (Loss): Realized.............. 4,910,985 5,798,268 (1,351,849) 36,087,729 15,940,851 26,876,393 65,987,157 Net change in unrealized............ (4,790,955) (2,656,394) (1,547,990) (1,192,107) 3,149,167 (10,950,217) (4,657,344) ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Trading Results............. 120,030 3,141,874 (2,899,839) 34,895,622 19,090,018 15,926,176 61,329,813 Interest income (Dean Witter)................. 2,284,949 1,726,568 7,678,789 6,883,110 7,405,511 6,120,347 7,969,749 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Revenues...... 2,404,979 4,868,442 4,778,950 41,778,732 26,495,529 22,046,523 69,299,562 ------------ ------------ ------------ ------------ ------------ ------------ ------------ EXPENSES Brokerage fees (Dean Witter)................. 3,919,970 3,663,607 15,188,479 11,360,166 9,777,851 10,641,478 14,173,695 Management fees......... 1,622,055 1,515,975 6,284,885 5,202,158 5,239,533 4,583,197 5,626,908 Incentive fees.......... -- -- -- 1,832,021 49,989 175,796 8,707,049 Transaction fees and costs................... -- -- -- 625,327 1,370,439 1,104,011 1,589,795 Administrative expenses................ -- -- -- 64,000 114,000 128,000 148,000 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Expenses...... 5,542,025 5,179,582 21,473,364 19,083,672 16,551,812 16,632,482 30,245,447 ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS)........ (3,137,046) (311,140) (16,694,414) 22,695,060 9,943,717 5,414,041 39,054,115 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) ALLOCATION: Limited partners......... (3,094,054) (305,969) (16,455,697) 22,302,202 9,781,168 5,283,411 38,580,172 General partners......... (42,992) (5,171) (238,717) 392,858 162,549 130,630 473,943 NET INCOME (LOSS) PER UNIT Limited partners......... (0.32) (0.04) (1.80) 2,95 1.22 .98 3.56 General partners......... (0.32) (0.04) (1.80) 2.95 1.22 .98 3.56 TOTAL ASSETS AT END OF PERIOD.................. 217,519,658 210,298,857 219,366,812 202,668,038 169,541,807 167,588,012 179,342,999 TOTAL NET ASSETS AT END OF PERIOD............... 211,718,422 206,764,629 213,805,674 200,082,516 166,773,321 163,786,285 176,446,260 NET ASSET VALUE PER UNIT AT END OF PERIOD........ Limited partners......... 21.68 23.76 22.00 23.80 20.85 19.62 18.64 General partner.......... 21.68 23.76 22.00 23.80 20.85 19.62 18.64
SPECTRUM TECHNICAL
FOR THE QUARTERS ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31, --------------------------- ------------------------------------------------------------------------ 2000 1999 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ $ $ REVENUES (UNAUDITED) (UNAUDITED) Trading Profit (Loss): Realized.............. 7,388,455 (176,028) 726,179 35,224,194 13,777,460 26,334,748 4,446,595 Net change in unrealized............ (6,776,774) (7,731,117) (872,972) 6,612,556 9,762,823 (1,552,659) 3,362,093 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Trading Results............. 611,681 (7,907,145) (146,793) 41,836,750 23,540,283 24,782,089 7,808,688 Interest income (Dean Witter)................. 2,854,265 2,094,771 9,593,178 8,103,423 5,987,304 3,242,977 1,430,845 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Revenues...... 3,465,946 (5,812,374) 9,446,385 49,940,173 29,527,587 28,025,066 9,239,533 ------------ ------------ ------------ ------------ ------------ ------------ ------------ EXPENSES Brokerage fees (Dean Witter)................. 4,891,913 4,585,319 19,176,380 15,543,787 11,617,770 6,997,531 3,003,934 Management fees......... 2,698,986 2,529,832 10,580,071 8,403,764 5,832,758 3,273,649 1,373,227 Incentive fees.......... 54,486 -- 430,097 3,191,252 369,975 1,852,569 600,504 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Expenses...... 7,645,385 7,115,151 30,186,548 27,138,803 17,820,503 12,123,749 4,977,665 ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS)........ (4,179,439) (12,927,525) (20,740,163) 22,801,370 11,707,084 15,901,317 4,261,868 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) ALLOCATION: Limited partners......... (4,135,156) (12,792,933) (20,531,494) 22,571,217 11,589,197 15,737,852 4,226,249 General partners......... (44,283) (134,592) (208,669) 230,153 117,887 163,465 35,619 NET INCOME (LOSS) PER UNIT Limited partners......... (.23) (.81) (1.21) 1.49 1.02 2.11 1.72 General partners......... (.23) (.81) (1.21) 1.49 1.02 2.11 1.72 TOTAL ASSETS AT END OF PERIOD.................. 269,915,491 257,641,450 274,233,195 258,673,911 184,769,817 114,822,056 60,075,842 TOTAL NET ASSETS AT END OF PERIOD............... 262,794,198 252,743,952 268,755,718 255,101,434 181,950,507 112,985,629 59,326,379 NET ASSET VALUE PER UNIT AT END OF PERIOD........ Limited partners......... 14.68 15,31 14.91 16.12 14.63 13.61 11.50 General partner.......... 14.68 15.31 14.91 16.12 14.63 13.61 11.50
S-7 SPECTRUM STRATEGIC
FOR THE QUARTERS ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31, --------------------------- ------------------------------------------------------------------------ 2000 1999 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ $ $ REVENUES (UNAUDITED) (UNAUDITED) Trading Profit (Loss): Realized.............. (15,636,889) 5,490,705 32,274,037 7,945,575 1,297,824 4,980,402 3,408,036 Net change in unrealized............ (5,709,698) (263,612) 4,264,478 2,771,722 2,387,258 (1,679,048) 1,451,792 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Trading Results............. (21,346,587) 5,227,093 36,538,515 10,717,297 3,685,082 3,301,354 4,859,828 Interest income (Dean Witter)................. 1,009,168 621,201 3,017,103 2,379,478 2,304,248 1,604,026 887,226 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Revenues...... (20,337,419) 5,848,294 39,555,618 13,096,775 5,989,330 4,905,380 5,747,054 ------------ ------------ ------------ ------------ ------------ ------------ ------------ EXPENSES Brokerage fees (Dean Witter)................. 1,842,276 1,265,457 5,837,887 4,402,540 4,414,327 3,398,205 1,802,579 Management fees......... 973,088 686,283 3,137,509 2,342,447 2,212,788 1,587,213 824,036 Incentive fees.......... 662,823 1,012,167 2,451,152 1,336,693 427,094 726,825 437,310 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Expenses...... 3,478,187 2,963,907 11,426,548 8,081,680 7,054,209 5,712,243 3,063,925 ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS)........ (23,815,606) 2,884,387 28,129,070 5,015,095 (1,064,879) (806,863) 2,683,129 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) ALLOCATION: Limited partners......... (23,566,210) 2,854,127 27,829,050 4,958,188 (1,054,657) (799,980) 2,659,882 General partners......... (249,396) 30,260 300,020 56,907 (10,222) (6,883) 23,247 NET INCOME (LOSS) PER UNIT: Limited partners......... (3.44) .47 4.30 .84 0.04 (.39) 1.05 General partners......... (3.44) .47 4.30 .84 0.04 (.39) 1.05 TOTAL ASSETS AT END OF PERIOD.................. 90,007,051 75,974,236 109,444,028 71,445,333 61,010,043 47,089,676 33,049,282 TOTAL NET ASSETS AT END OF PERIOD............... 87,835,285 74,577,938 107,692,521 70,421,775 59,095,581 45,118,877 32,462,932 NET ASSET VALUE PER UNIT AT END OF PERIOD Limited partners......... 12.41 12.02 15.85 11.55 10.71 10.67 11.06 General partner.......... 12.41 12.02 15.85 11.55 10.71 10.67 11.06
SPECTRUM GLOBAL BALANCED
FOR THE QUARTERS ENDED MARCH 31, FOR THE YEARS ENDED DECEMBER 31, --------------------------- ------------------------------------------------------------------------ 2000 1999 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ $ $ REVENUES (UNAUDITED) (UNAUDITED) Trading Profit (Loss): Realized.............. (133,121) 1,001,877 2,425,585 5,113,920 3,683,460 177,564 1,508,581 Net change in unrealized............ 2,006,181 (870,068) (1,157,073) 1,285,628 464,966 (175,835) 373,624 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Trading Results............. 1,873,060 131,809 1,268,512 6,399,548 4,148,426 1,729 1,882,205 Interest income (Dean Witter)................. 775,426 498,269 2,385,751 1,642,542 1,145,033 891,897 447,608 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Revenues...... 2,648,486 630,078 3,654,263 8,042,090 5,293,459 893,626 2,329,813 ------------ ------------ ------------ ------------ ------------ ------------ ------------ EXPENSES Brokerage fees (Dean Witter)................. 665,107 537,128 2,387,515 1,591,467 1,124,531 1,030,310 503,995 Management fees......... 180,737 145,959 648,787 422,960 269,162 221,282 104,999 Incentive fees.......... -- -- 215,651 449,775 300,250 -- 161,155 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Expenses...... 845,844 683,087 3,251,953 2,464,202 1,693,943 1,251,592 770,149 ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS)........ 1,802,642 (53,009) 402,310 5,577,888 3,599,516 (357,966) 1,559,664 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) ALLOCATION: Limited partners......... 1,782,338 (52,414) 397,258 5,518,127 3,561,537 (354,537) 1,536,421 General partners......... 20,304 (595) 5,052 59,761 37,979 (3,429) 23,243 NET INCOME (LOSS) PER UNIT Limited partners......... 0.50 (.02) .12 2.25 2.12 (.44) 2.24 General partners......... 0.50 (.02) .12 2.25 2.12 (.44) 2.24 TOTAL ASSETS AT END OF PERIOD.................. 60,924,570 48,908,487 58,807,588 46,317,786 25,923,024 19,620,770 14,923,682 TOTAL NET ASSETS AT END OF PERIOD............... 58,704,709 48,357,974 57,864,012 45,913,872 25,683,236 18,706,255 14,754,500 NET ASSET VALUE PER UNIT AT END OF PERIOD........ Limited partners......... 16.62 15.98 16.12 16.00 13.75 11.63 12.07 General partner.......... 16.62 15.98 16.12 16.00 13.75 11.63 12.07
S-8 PERFORMANCE RECORDS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING UPDATES, FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999, AND SUPPLEMENTS THE INFORMATION FOR EACH PARTNERSHIP UNDER THE CAPTIONS "RESULTS OF OPERATIONS" ON PAGES 33-34, 36-37, 37-38, AND 39-40. MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P. For the Quarter Ended March 31, 2000. For the quarter ended March 31, 2000, Spectrum Select posted a decrease in net asset value per unit, after expenses. The most significant losses of approximately 1.8% were recorded in the global interest rate futures markets from short positions in U.S. Treasury bond futures, as interest rates at the longer-end of the yield curve declined during the second half of January, resulting in domestic bond prices being pushed higher. Losses were also recorded from short positions in short- to mid-term U.S. Treasury note futures, as prices rose later in February as the U.S. stock markets fluctuated and investors shifted assets into two-year and five-year Treasury notes from stocks and 30- year Treasury bonds. In the metals markets, losses of approximately 1.0% were experienced from long positions in aluminum and copper futures, as prices reversed lower earlier in February due primarily to technically based selling and dipped lower again later in February led downward by falling prices of other base metals. In the global stock index futures markets, losses of approximately 0.4% were incurred from long positions in Hang Seng Index futures, as most global equity prices reversed lower earlier in January amid fears of interest rate hikes. Additional losses were experienced from short-term volatile price movements in U.S. and European stock index futures throughout a majority of January. Losses were also experienced during March from long positions in European stock index futures, as prices declined. These losses were partially offset by gains of approximately 1.7% recorded primarily during January and February in the energy markets from long futures positions in crude oil and its refined products, as oil prices increased on concerns about future output levels from the world's leading producer countries amid dwindling stockpiles and increasing demand. In the currency markets, gains of approximately 1.5% were recorded primarily during January and March from short positions in the euro, Europe's common currency, and the Swiss franc, as the values of these currencies weakened versus the U.S. dollar. The euro dropped below parity with the U.S. dollar late in January, hurt by skepticism about Europe's economic outlook and lack of public support from European officials. Offsetting currency losses were recorded during February from long British pound positions, as the value of the pound weakened versus the U.S. dollar on interest rate increases by the U.S. Federal Reserve and talks of a merger between two major telecommunications companies. For the quarter ended March 31, 2000, Spectrum Select's total trading revenues, including interest income, were $2,404,979. Total expenses for the quarter were $5,542,025, resulting in a net loss of $3,137,046. The value of a unit decreased from $22.00 at December 31, 1999 to $21.68 at March 31, 2000. For the Quarter Ended March 31, 1999. For the quarter ended March 31, 1999, Spectrum Select posted a decrease in net asset value per unit, after expenses. The most significant losses of approximately 1.5% were recorded in the global interest rate futures markets primarily from short Japanese government bond futures positions early in the quarter, as prices surged higher in response to the Bank of Japan's aggressive easing of monetary policy which brought short-term interest rates down to virtually zero. Additional losses were experienced late in the quarter from newly established long positions, as prices retreated following comments by Bank of Japan Governor Masaru Hayami that he expected interest rates in Japan to rise over time. In the metals markets, losses of approximately 0.4% were experienced throughout a majority of the quarter largely from short gold futures positions, as gold prices reached a 2-month high on short-covering by speculative investment funds before selling off in late March. In the global stock index futures market, losses of approximately 0.3% were recorded during January and early February mainly S-9 from long European stock index futures positions, as European equity prices moved lower amid rising global bond yields and skepticism regarding the stability of emerging market economies. These losses were partially offset by gains of approximately 1.5% recorded primarily during March in the energy markets from long futures positions in crude oil and its refined products, unleaded gas and heating oil, as oil prices moved significantly higher. The substantial recovery in oil prices during March was largely attributed to the news that both OPEC and non-OPEC countries had reached an agreement to cut total output by approximately two million barrels a day beginning April 1, 1999. In the currency markets, gains of approximately 1.1% were recorded mainly during February and March from short Swiss franc positions, as its value weakened versus the U.S. dollar as investors reasoned that the U.S. is the safest place to invest during the crisis in Kosovo (due to the fact that it is geographically removed from the actual conflict and possesses a powerful military force, and on lack of economic growth in Europe). In the agricultural markets, gains of approximately 0.8% were recorded largely during January and February from short futures positions in soybeans and soybean oil, as prices trended steadily lower amid a healthy South American crop, weak world demand and fears that Brazil will flood the market in an effort to aid their ailing economy. In soft commodities, gains of approximately 0.3% were recorded throughout a majority of the quarter mostly from short cocoa futures positions, as prices declined amid fears that Brazil's financial troubles will have an adverse effect on supply and demand. For the quarter ended March 31, 1999, Spectrum Select's total trading revenues, including interest income, were $4,868,442. Total expenses for the quarter were $5,179,582, resulting in a net loss of $311,140. The value of a unit decreased from $23.80 at December 31, 1998 to $23.76 at March 31, 1999. MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P. For the Quarter Ended March 31, 2000. For the quarter ended March 31, 2000, Spectrum Technical posted a decrease in net asset value per unit. The most significant net losses of approximately 3.8% were recorded primarily in early February in the global interest rate futures markets from long positions in Japanese interest rate futures, as Japanese bond prices declined in reaction to the yen's weakness and a higher Nikkei 225 Index. Additional losses were incurred during March from long positions in Japanese government bond futures, as prices moved lower on firmer-than-expected capital investment figures out of Japan and fears that the Bank of Japan would scrap its zero-rate policy earlier than expected. In the metals markets, losses of approximately 2.7% were experienced from short gold futures positions, as gold prices spiked sharply higher on February 4, as short covering, rumored producer hedge unwinding, and fresh buying fueled panicky rallies. Newly established long positions in gold futures produced additional losses later in February, as gold prices fell under the weight of palladium and the weakness of the Australian dollar. In the soft commodities markets, losses of approximately 0.5% were incurred primarily during January and March from long coffee futures positions, as coffee prices declined in the wake of forecasts for a bumper crop in Brazil this year. These losses were partially offset by gains of approximately 4.8% recorded primarily during January and February in the energy markets from long futures positions in crude oil and its refined products, as oil prices increased on concerns about future output levels from the world's leading producer countries amid dwindling stockpiles and increasing demand. In the global stock index futures markets, gains of approximately 1.9% were recorded primarily during February from long positions in DAX and CAC 40 Index futures, as the price of European stock index futures surged on strength in technology stocks and record highs on the NASDAQ. Additional gains were recorded during February from long positions in NASDAQ 100 Index futures, as the NASDAQ Index climbed higher on strength in computer-chip makers and biotechnology companies. In the currency markets, gains of approximately 0.6% were recorded during January and March from short positions in the the euro and the Swiss franc, as the values of these currencies weakened versus the U.S. dollar. The euro dropped below parity with the U.S. dollar late in January, hurt by skepticism about Europe's economic outlook and lack of public support from European officials. S-10 For the quarter ended March 31, 2000, Spectrum Technical's total trading revenues, including interest income, were $3,465,946. Total expenses for the quarter were $7,645,385, resulting in a net loss of $4,179,439. The value of a unit decreased from $14.91 at December 31, 1999 to $14.68 at March 31, 2000. For the Quarter Ended March 31, 1999. For the quarter ended March 31, 1999, Spectrum Technical posted a decrease in net asset value per unit. The most significant losses of approximately 4.1% were recorded in the global interest rate futures markets early in the quarter largely from short Japanese government bond futures positions, as prices surged higher in response to the Bank of Japan's aggressive easing of monetary policy which brought short-term interest rates down to virtually zero. Additional losses were experienced later in the quarter from newly established long positions, as prices retreated following comments by Bank of Japan Governor Masaru Hayami that he expected interest rates in Japan to rise over time. In the metals markets, losses of approximately 1.3% were experienced primarily from long silver futures positions, as prices declined during mid-March after Berkshire Hathaway's annual report failed to provide any new information on the company's silver positions. In the livestock markets, losses of approximately 0.8% were recorded mainly during January from short cattle and hog futures positions, as prices in both markets moved sharply higher on concerns that winter storms would hurt supplies and reports of an increase in demand and plans for government aid programs to help aid struggling farmers. In soft commodities, losses of approximately 0.6% were experienced primarily during January from long coffee futures positions, as prices dropped on fears spurred by the collapse of the Brazilian real. In the global stock index futures markets, losses of approximately 0.1% were recorded mostly from long positions in German stock index futures, as European equity prices moved lower amid rising global bond yields and skepticism regarding the stability of emerging market economies. These losses were partially offset by gains of approximately 1.8% recorded in the energy markets mainly during March from long futures positions in crude oil and its refined products, unleaded gas and heating oil, as oil prices moved significantly higher. The substantial recovery in oil prices during March was largely attributed to the news that both OPEC and non-OPEC countries had reached an agreement to cut total output by approximately two million barrels a day beginning April 1, 1999. In the currency markets, gains of approximately 1.4% were recorded primarily during February and March from short Swiss franc positions, as its value weakened versus the U.S. dollar as investors reasoned that the U.S. is the safest place to invest during the crisis in Kosovo (due to the fact that it is geographically removed from the actual conflict and possesses a powerful military force, and on lack of economic growth in Europe). Gains were also recorded during January and February from short positions in the euro, as the value of the euro fell versus the U.S. dollar. The euro's weakness against the dollar was attributed to fears that the European Central Bank may cut interest rates amid a recent economic slowdown in that region. In the agricultural markets, gains of approximately 0.5% were recorded mostly during January and February from short futures positions in soybeans and soybean oil, as prices trended steadily lower amid a healthy South American crop, weak world demand and fears that Brazil will flood the market in an effort to aid their ailing economy. For the quarter ended March 31, 1999, Spectrum Technical's total trading losses, net of interest income, were $5,812,374. Total expenses for the quarter were $7,115,151, resulting in a net loss of $12,927,525. The value of a unit decreased from $16.12 at December 31, 1998 to $15.31 at March 31, 1999. MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P. For the Quarter Ended March 31, 2000. For the quarter ended March 31, 2000, Spectrum Strategic posted a decrease in net asset value per unit. The most significant losses of approximately 9.3% were recorded in the global stock index futures markets from short positions in U.S. stock index futures, as domestic equity prices moved higher in early January on fears of an interest rate hike and reports of a major corporate merger. Additional losses were recorded during February from short positions in NASDAQ 100 Index futures, as the NASDAQ Index climbed S-11 higher on strength in computer-chip makers and biotechnology companies. In the currency markets, losses of approximately 8.3% were recorded primarily during January from long positions in the euro, as the value of the European common currency weakened versus the U.S. dollar. The euro dropped below parity with the U.S. dollar late in January, hurt by skepticism about Europe's economic outlook and lack of public support for the economy from European officials. During February, losses were also recorded from long positions in the euro, due to reduced expectations for an interest rate increase. In the metals markets, losses of approximately 6.5% were experienced from long positions in aluminum and copper futures, as prices reversed lower earlier in February due primarily to technically based selling and again in late February and late March, led downward by falling prices of other base metals and the softening of oil prices. In the global interest rate futures markets, losses of approximately 5.0% were experienced from short positions in U.S. Treasury bond futures, as interest rates at the longer-end of the yield curve declined during the second half of January, resulting in domestic bond prices being pushed higher. During February, losses were incurred from short positions in German interest rate futures, as prices increased following a surge in U.S. bond prices. In soft commodities, losses of approximately 2.2% were recorded during January and February from long coffee futures positions, as coffee prices declined in the wake of forecasts for a bumper crop in Brazil. These losses were partially offset by gains of approximately 10.4% recorded primarily during January in the energy markets from long futures positions in crude oil and its refined products, as oil prices increased on growing speculation that OPEC would extend production cuts beyond the current deadline of March 2000. Additional gains were recorded during March from short positions in crude oil futures, as prices declined after OPEC effectively restored production levels to their year-earlier level. In the agricultural markets, gains of approximately 0.7% were recorded primarily during March from long positions in soybean futures, as prices moved higher amid warm, dry long-term forecasts for U.S. growing areas that fanned fears of a drought this summer. For the quarter ended March 31, 2000, Spectrum Strategic's total trading losses, net of interest income, were $20,337,419. Total expenses for the quarter were $3,478,187, resulting in a net loss of $23,815,606. The value of a unit decreased from $15.85 at December 31, 1999 to $12.41 at March 31, 2000. For the Quarter Ended March 31, 1999. For the quarter ended March 31, 1999, Spectrum Strategic posted an increase in net asset value per unit. The most significant gains of approximately 7.3% were recorded primarily during March in the energy markets from long crude oil positions, as prices climbed to their highest level since October 1, 1998. This strong upward move in energy prices was largely attributed to confirmation of OPEC production cuts and supply concerns caused by an explosion at a U.S. refinery. In the global interest rate futures markets, gains of approximately 4.1% were recorded mainly during February from short U.S. interest rate futures positions, as prices dropped in reaction to Federal Reserve Chairman Alan Greenspan's warnings in Congressional testimony that a strong economy could reignite inflation, increasing the prospects of an interest rate hike. In the currency markets, gains of approximately 1.5% were recorded during January and February largely from short positions in the euro, as the value of the euro fell versus the U.S. dollar. The euro's weakness against the dollar was attributed to fears that the European Central Bank may cut interest rates amid a recent economic slowdown in that region. A portion of these gains was offset by losses recorded during January from long Japanese yen positions, after an intervention by the Bank of Japan boosted the U.S. dollar against the yen and helped ease concerns about the impact of a strong yen on Japanese exports. Losses were also recorded in March from newly established short Japanese yen positions, as the value of the yen increased versus the U.S. dollar amid new signs that Japan's economy may be on the mend and speculation that Japanese interest rates may soon rise. In the global stock index futures markets, losses of approximately 3.6% were experienced primarily during March from short S&P 500 Index futures positions, as equity prices increased in reaction to Wall Street reaching a major milestone during mid-March as the Dow Jones Industrial Average hit 10,000 for the first time. In soft commodities, losses of approximately 1.2% were experienced throughout a majority of the quarter S-12 largely from long cocoa futures positions, as prices hit new contract lows during mid-February on an overabundance of speculative sales. For the quarter ended March 31, 1999, Spectrum Strategic's total trading revenues, including interest income, were $5,848,294. Total expenses for the quarter were $2,963,907, resulting in net income of $2,884,387. The value of a unit increased from $11.55 at December 31, 1998 to $12.02 at March 31, 1999. MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P. For the Quarter Ended March 31, 2000. For the quarter ended March 31, 2000, Spectrum Global Balanced posted an increase in net asset value per unit. The most significant gains of approximately 1.8% were recorded in the global stock index futures markets from long positions in Nikkei Index futures, as Japanese equity prices increased during February due to weakness in the Japanese yen versus other major currencies, particularly the U.S. dollar. Later in March, a surge in Japanese technology issues, linked to rising industrial production in that nation, and the belief that institutions would add these issues to their portfolios prior to fiscal year-end, boosted the Nikkei to a 40-month high. In the global interest rate futures markets, gains of approximately 1.3% were recorded primarily during March from long positions in U.S. interest rate futures, as domestic bond prices increased. This upward price move was attributed to a "flight-to- quality" following sharp gyrations in the U.S. stock market, the U.S. Treasury's decision to buy back outstanding debt, and concerns that longer-term debt is becoming scarce. In the currency markets, profits of approximately 0.4% were recorded primarily during March from long Japanese yen positions versus the Australian dollar and from cross-rate positions, specifically in the euro relative to the British pound, as the value of the European common currency weakened during January versus the pound, hurt by skepticism about Europe's economic outlook and lack of public support for the economy from European officials. In the metals markets, gains of approximately 0.4% were recorded primarily in early February from long nickel futures positions, as nickel prices climbed to their highest level in five years. In the energy markets, gains of approximately 0.2% were recorded primarily during February from long positions in crude oil futures and its refined products, as oil prices powered to nine-year highs on concerns about future output levels from the world's leading producer countries amid dwindling stockpiles and increasing demand. These gains were partially offset by losses of approximately 0.4% recorded primarily during February in the livestock markets from short lean hog futures positions, as prices climbed higher amid expectations of higher wholesale pork prices due to light slaughter rates. During January, additional losses were incurred from long positions in live cattle futures, as prices declined after the USDA raised its forecast for U.S. red meat production in 2000. In the agricultural markets, losses of approximately 0.4% were experienced from long corn futures positions, as prices declined later in March amid rainfall in the U.S. Midwest, as well as outlooks for more rain. Early in February, losses were incurred from long positions in soybean oil, as soybean prices moved lower following rains in the growing region of South America, particularly Brazil. For the quarter ended March 31, 2000, Spectrum Global Balanced's total trading revenues, including interest income, were $2,648,486. Total expenses for the quarter were $845,844, resulting in net income of $1,802,642. The value of a unit increased from $16.12 at December 31, 1999 to $16.62 at March 31, 2000. For the Quarter Ended March 31, 1999. For the quarter ended March 31, 1999, Spectrum Global Balanced posted a decrease in net asset value per unit. The most significant net losses of approximately 1.5% were recorded in the global interest rate futures markets mainly during January and March from short Australian interest rate futures positions, as prices moved higher due to depressed gold prices during late March which weakened the Australian dollar, and to a lesser extent, Australian stock prices. In the livestock markets, losses of approximately 0.4% were experienced primarily in January from short positions in hog and cattle futures, as prices in both markets moved sharply higher on concerns that winter storms would hurt supplies, on reports of an increase in demand and plans for government aid programs to help struggling farmers. In soft S-13 commodities, losses of approximately 0.1% were recorded mostly during March from short cotton futures positions, as prices increased to their highest level since mid-December on technically motivated speculative buying and rumors that an influential merchant turned bullish early in March. In the metals markets, losses of approximately 0.1% were experienced largely from short copper futures positions, as prices moved significantly higher towards the end of March in response to a decline in London Metal Exchange warehouse stocks and evidence that Japanese consumption has stabilized. These losses were partially offset by gains of approximately 0.8% recorded primarily during January and March in the global stock index futures component from long Nikkei Index futures positions, as Japanese equity prices were pushed higher by positive economic factors in Japan such as low interest rates, an easing credit stance, relatively stable exchange rates, and an agreement to inject public funds into the indebted banking sector. In the currency markets, gains of approximately 0.7% were recorded throughout a majority of the quarter mainly from short euro positions, as the value of the U.S. dollar hit new highs during March versus the European common currency on the strength of the U.S. economy, concerns pertaining to the economic health of Europe and Japan, and growing uncertainty about the military action in Yugoslavia. In the energy markets, gains of approximately 0.7% were recorded during March largely from long positions in crude and gas oil futures, as prices moved significantly higher on news that both OPEC and non-OPEC countries had reached an agreement to cut total output by approximately two million barrels a day beginning April 1, 1999. In the agricultural markets, gains of approximately 0.4% were recorded primarily in January and February from short soybean oil futures positions, as prices declined to 23-year lows in reaction to a healthy South American crop outlook, weak world demand and fears that Brazil will flood the market in an effort to support their ailing economy. For the quarter ended March 31, 1999, Spectrum Global Balanced's total trading revenues, including interest income, were $630,078. Total expenses for the quarter were $683,087, resulting in a net loss of $53,009. The value of a unit decreased from $16.00 at December 31, 1998 to $15.98 at March 31, 1999. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION FOR EACH PARTNERSHIP UNDER THE CAPTION "EACH PARTNERSHIP'S VALUE AT RISK IN DIFFERENT MARKET SECTORS" ON PAGES 42-43. EACH PARTNERSHIP'S VALUE AT RISK IN DIFFERENT MARKET SECTORS The following tables indicate the VaR associated with each partnership's open positions, as a percentage of total net assets, by primary market risk category as of March 31, 2000 and 1999. SPECTRUM SELECT: As of March 31, 2000 and 1999, Spectrum Select's total capitalization was approximately $212 million and $207 million, respectively.
VAR MARCH 31, -------------------- MARKET CATEGORY 2000 1999 ---------------------------------------------- -------- -------- % % Currency...................................... (1.16) (1.09) Equity........................................ (0.78) (0.55) Commodity..................................... (0.78) (0.77) Interest Rate................................. (0.58) (0.46) Aggregate Value at Risk....................... (1.88) (1.59)
S-14 SPECTRUM TECHNICAL: As of March 31, 2000 and 1999, Spectrum Technical's total capitalization was approximately $263 million and $253 million, respectively.
VAR MARCH 31, -------------------- MARKET CATEGORY 2000 1999 ---------------------------------------------- -------- -------- % % Currency...................................... (1.58) (2.58) Equity........................................ (1.55) (1.15) Interest Rate................................. (1.42) (1.25) Commodity..................................... (1.23) (0.83) Aggregate Value at Risk....................... (3.09) (3.17)
SPECTRUM STRATEGIC: As of March 31, 2000 and 1999, Spectrum Strategic's total capitalization was approximately $88 million and $75 million, respectively.
VAR MARCH 31, -------------------- MARKET CATEGORY 2000 1999 ---------------------------------------------- -------- -------- % % Commodity..................................... (2.11) (0.69) Interest Rate................................. (1.00) (1.97) Currency...................................... (0.95) (2.40) Equity........................................ (0.58) (1.53) Aggregate Value at Risk....................... (2.49) (2.97)
SPECTRUM GLOBAL BALANCED: As of March 31, 2000 and 1999, Spectrum Global Balanced's total capitalization was approximately $59 million and $48 million, respectively.
VAR MARCH 31, -------------------- MARKET CATEGORY 2000 1999 ---------------------------------------------- -------- -------- % % Equity........................................ (1.28) (1.02) Interest Rate................................. (0.73) (0.76) Currency...................................... (0.53) (0.47) Commodity..................................... (0.29) (0.32) Aggregate Value at Risk....................... (1.67) (1.38)
Aggregate Value at Risk, listed above for each partnership, represents the aggregate VaR of all of a partnership's open positions and not the sum of the VaR of the individual market categories. Aggregate VaR will be lower as it takes into account correlation among the different positions and categories. The tables above represent the VaR of each partnership's open positions at March 31, 2000 and 1999 only and are not necessarily representative of either the historic or future risk of an investment in that partnership. Because the only business of each partnership is the speculative trading of futures, forwards, and options, the composition of a partnership's trading portfolio can change significantly over any given time period, or even within a single trading day. Any changes in open positions could positively or negatively materially impact market risk as measured by VaR. S-15 The tables below supplement the March 31, 2000 VaR (set forth above) by presenting each partnership's high, low and average VaR, as a percentage of total net assets, for the four quarterly reporting periods from April 1, 1999 through March 31, 2000. SPECTRUM SELECT
MARKET CATEGORY HIGH LOW AVERAGE - ----------------------- ------ ------ ------- % % % Interest Rate.......... (1.61) (0.46) (0.79) Commodity.............. (1.48) (0.77) (0.97) Currency............... (1.52) (1.09) (1.24) Equity................. (0.82) (0.31) (0.62) Aggregate Value at Risk................. (2.83) (1.59) (2.06)
SPECTRUM STRATEGIC
MARKET CATEGORY HIGH LOW AVERAGE - ----------------------- ------ ------ ------- % % % Commodity.............. (3.13) (0.69) (2.18) Currency............... (2.98) (0.95) (1.98) Equity................. (2.41) (0.58) (1.58) Interest Rate.......... (1.97) (0.52) (1.33) Aggregate Value at Risk................. (4.88) (2.49) (3.58)
SPECTRUM TECHNICAL
MARKET CATEGORY HIGH LOW AVERAGE - ----------------------- ------ ------ ------- % % % Currency............... (2.58) (1.58) (2.09) Interest Rate.......... (2.11) (1.25) (1.52) Equity................. (1.55) (0.39) (1.03) Commodity.............. (1.23) (0.83) (1.00) Aggregate Value at Risk................. (3.80) (2.57) (3.16)
SPECTRUM GLOBAL BALANCED
MARKET CATEGORY HIGH LOW AVERAGE - ----------------------- ------ ------ ------- % % % Equity................. (1.28) (0.51) (0.96) Interest Rate.......... (0.76) (0.45) (0.63) Currency............... (0.53) (0.42) (0.49) Commodity.............. (0.40) (0.26) (0.32) Aggregate Value at Risk................. (1.67) (0.90) (1.33)
THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION FOR EACH PARTNERSHIP UNDER THE CAPTION "QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES" ON PAGES 44-48. QUALITATIVE DISCLOSURES REGARDING PRIMARY TRADING RISK EXPOSURES SPECTRUM SELECT The following were the primary trading risk exposures of Spectrum Select as of March 31, 2000, by market sector. It may be anticipated however, that these market exposures will vary materially over time. Currency. The primary market exposure in Spectrum Select at March 31, 2000 was in the currency sector. Spectrum Select's currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. Interest rate changes as well as political and general economic conditions influence these fluctuations. Spectrum Select trades in a large number of currencies, including cross-rates - i.e., positions between two currencies other than the U.S. dollar. For the first quarter of 2000, Spectrum Select's major exposures were in the euro currency crosses and outright U.S. dollar positions. Outright positions consist of the U.S. dollar vs. other currencies. These other currencies include the major and minor currencies. The general partner does not anticipate that the risk profile of Spectrum Select'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. Interest Rate. The second largest market exposure at March 31, 2000 was in the interest rate complex. Spectrum Select's exposure in the interest rate market complex was spread across the U.S., European, Australian and Japanese interest rate sectors. Interest rate movements directly affect the price of the sovereign bond futures positions held by Spectrum Select and indirectly affect the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact Spectrum Select's profitability. Spectrum Select's primary interest rate exposure is generally to interest rate fluctuations in the U.S. and the other G-7 countries. The G-7 countries consist of the U.S., Britain, Canada, France, Germany, Italy, and Japan. However, Spectrum Select also takes futures positions in the government debt of smaller nations - e.g., Australia and Spain. The general partner anticipates that G-7 and Australian interest rates will remain the primary interest rate exposure of S-16 Spectrum Select for the foreseeable future. The changes in interest rates which have the most effect on Spectrum Select are changes in long-term, as opposed to short-term, rates. Most of the speculative futures positions held by Spectrum Select are in medium- to long- term instruments. Consequently, even a material change in short-term rates would have little effect on Spectrum Select, were the medium- to long-term rates to remain steady. Equity. The primary equity exposure is to equity price risk in the G-7 countries. The stock index futures traded by Spectrum Select are by law limited to futures on broadly based indices. As of March 31, 2000, Spectrum Select's primary exposures were in the S&P 500 (U.S.), NASDAQ 100 (U.S.), Hang Seng (China) and Nikkei (Japan) stock indices. Spectrum Select is primarily exposed to the risk of adverse price trends or static markets in the U.S., European and Japanese indices. Static markets would not cause major market changes but would make it difficult for Spectrum Select to avoid being "whipsawed" into numerous small losses. Commodity. Metals. Spectrum Select's primary metals market exposure is to fluctuations in the price of gold and silver. Although certain trading advisors will, from time to time, trade base metals such as aluminum, copper, zinc, nickel, tin and lead, the principal market exposures of Spectrum Select have consistently been in precious metals, gold and silver. Exposure was evident in the gold market as gold prices were volatile during the quarter. Silver prices have also remained volatile over this period, and the trading advisors have, from time to time, taken positions as they have perceived market opportunities to develop. The general partner anticipates that gold and silver will remain the primary metals market exposure for Spectrum Select. Soft Commodities and Agriculturals. On March 31, 2000, Spectrum Select had exposure in the markets that comprise these sectors. Most of the exposure, however, was in the soybeans and soybean related products, corn, and cotton markets. Supply and demand inequalities, severe weather disruption and market expectations affect price movements in these markets. Energy. On March 31, 2000, Spectrum Select's energy exposure was shared by futures contracts in the oil and natural gas markets. Price movements in these markets result from political developments in the Middle East, weather patterns, and other economic fundamentals. It is possible that volatility will remain high. Significant profits and losses, which have been experienced in the past, are expected to continue to be experienced in this market. Natural gas has exhibited volatility in prices resulting from weather patterns and supply and demand factors. Fluctuation in natural gas prices is expected to continue in this choppy pattern. SPECTRUM TECHNICAL The following were the primary trading risk exposures of Spectrum Technical at March 31, 2000, by market sector. It may be anticipated however, that these market exposures will vary materially over time. Interest Rate. The primary market exposure in Spectrum Technical was in the global interest rate sector. Exposure was primarily spread across the U.S., German, Japanese and European interest rate sectors. Interest rate movements directly affect the price of the sovereign bond futures positions held by Spectrum Technical and indirectly affect the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact Spectrum Technical's profitability. Spectrum Technical's primary interest rate exposure is generally to interest rate fluctuations in the U.S. and the other G-7 countries. Spectrum Technical also takes futures positions in the government debt of smaller nations - -e.g., Australia. The general partner anticipates that G-7 and Australian interest rates will remain the primary interest rate exposure of Spectrum Technical for the foreseeable future. The changes in interest rates which have the most effect on Spectrum Technical are changes in long-term, as opposed to short-term rates. Most of the speculative futures positions held by Spectrum Technical are in medium- to long-term instruments. Consequently, even a S-17 material change in short-term rates would have little effect on Spectrum Technical, were the medium-to long- term rates to remain steady. Currency. The second largest market exposure at March 31, 2000 was in the currency sector. Spectrum Technical's currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. Interest rate changes as well as political and general economic conditions influence these fluctuations. Spectrum Technical trades in a large number of currencies, including cross-rates. For the first quarter of 2000, Spectrum Technical's major exposures were in the euro currency crosses and outright U.S. dollar positions. The general partner does not anticipate that the risk profile of Spectrum Technical's currency sector will change significantly in the future. The currency trading VaR figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the dollar-based partnership in expressing VaR in a functional currency other than dollars. Equity. The primary equity exposure is to equity price risk in the G-7 countries. The stock index futures traded by Spectrum Technical are by law limited to futures on broadly based indices. As of March 31, 2000, Spectrum Technical's primary exposures were in the Nikkei (Japan), S&P 500 (U.S.) and All Ordinaries (Australia) stock indices. Spectrum Technical is primarily exposed to the risk of adverse price trends or static markets in the U.S., European and Japanese indices. Static markets would not cause major market changes but would make it difficult for Spectrum Technical to avoid being "whipsawed" into numerous small losses. Commodity. Energy. On March 31, 2000, Spectrum Technical's energy exposure was shared by futures contracts in the oil and natural gas markets. Price movements in these markets result from political developments in the Middle East, weather patterns, and other economic fundamentals. It is possible that volatility will remain high. Significant profits and losses, which have been experienced in the past, are expected to continue to be experienced in this market. Natural gas has exhibited volatility in prices resulting from weather patterns and supply and demand factors. Fluctuation in natural gas prices is expected to continue in this choppy pattern. Metals. Spectrum Technical's primary metals market exposure is to fluctuations in the price of gold and silver. Although certain trading advisors will, from time to time, trade base metals such as aluminum, copper, zinc, nickel, tin and lead, the principal market exposures of Spectrum Technical have consistently been in precious metals, such as gold and silver and, to a much lesser extent, platinum. Exposure was evident in the gold market as gold prices were volatile during the quarter ended March 31, 2000. Silver prices have also remained volatile over this period, and the trading advisors have, from time to time, taken positions as they have perceived market opportunities to develop. The general partner anticipates that gold and silver will remain the primary metals market exposure for Spectrum Technical. Soft Commodities and Agriculturals. On March 31, 2000, Spectrum Technical had exposure in the markets that comprise these sectors. Most of the exposure, however, was in the soybeans and soybean related products, coffee, corn, and livestock markets. Supply and demand inequalities, severe weather disruption and market expectations affect price movements in these markets. SPECTRUM STRATEGIC The following were the primary trading risk exposures of Spectrum Strategic as of March 31, 2000, by market sector. It may be anticipated however, that these market exposures will vary materially over time. Interest Rate. Spectrum Strategic's exposure in the interest rate market complex was spread across the Japanese, U.S. and European interest rate sectors. Interest rate movements directly affect the price of the sovereign bond futures positions held by Spectrum Strategic and indirectly affect the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact Spectrum S-18 Strategic's profitability. Spectrum Strategic's primary interest rate exposure is generally to interest rate fluctuations in the U.S. and the other G-7 countries. The general partner anticipates that G-7 interest rates will remain the primary interest rate exposure of Spectrum Strategic for the foreseeable future. The changes in interest rates which have the most effect on Spectrum Strategic are changes in long-term, as opposed to short-term, rates. Most of the speculative futures positions held by Spectrum Strategic are in medium- to long- term instruments. Consequently, even a material change in short-term rates would have little effect on Spectrum Strategic, were the medium- to long-term rates to remain steady. Currency. Spectrum Strategic's currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. Interest rate changes as well as political and general economic conditions influence these fluctuations. Spectrum Strategic trades in a large number of currencies, including cross-rates. For the first quarter of 2000, Spectrum Strategic's major exposures were in outright U.S. dollar positions. The general partner does not anticipate that the risk profile of Spectrum Strategic's currency sector will change significantly in the future. The currency trading VaR figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the dollar-based partnership in expressing VaR in a functional currency other than dollars. Equity. The primary equity exposure is to equity price risk in the G-7 countries. The stock index futures traded by Spectrum Strategic are by law limited to futures on broadly based indices. As of March 31, 2000, Spectrum Strategic's primary exposure was in the Nikkei (Japan) stock index. Spectrum Strategic is primarily exposed to the risk of adverse price trends or static markets in the U.S., European and Japanese indices. Static markets would not cause major market changes but would make it difficult for Spectrum Strategic to avoid being "whipsawed" into numerous small losses. Commodity. Energy. The primary market exposure in Spectrum Strategic is in the energy sector. On March 31, 2000, Spectrum Strategic's energy exposure was shared by futures contracts in the oil and natural gas markets. Price movements in these markets result from political developments in the Middle East, weather patterns, and other economic fundamentals. It is possible that volatility will remain high. Significant profits and losses, which have been experienced in the past, are expected to continue to be experienced in this market. Natural gas has exhibited volatility in prices resulting from weather patterns and supply and demand factors. Fluctuation in natural gas prices is expected to continue in this choppy pattern. Metals. The second largest market exposure at March 31, 2000 was in the metals sector. Spectrum Strategic's metals market exposure is to fluctuations in the price of base metals. During periods of volatility, base metals will affect performance dramatically. The general partner anticipates that the base metals will remain the primary metals market exposure of Spectrum Strategic. Soft Commodities and Agriculturals. On March 31, 2000, Spectrum Strategic had a reasonable amount of exposure in the markets that comprise these sectors. Most of the exposure, however, was in the coffee, soybeans and soybean related products, and wheat markets. Supply and demand inequalities, severe weather disruption and market expectations affect price movements in these markets. SPECTRUM GLOBAL BALANCED The following were the primary trading risk exposures of Spectrum Global Balanced as of March 31, 2000, by market sector. It may be anticipated however, that these market exposures will vary materially over time. Equity. The primary market exposure in Spectrum Global Balanced is in the global stock index sector. The primary equity exposure is to equity price risk in the G-7 countries. The stock S-19 index futures traded by Spectrum Global Balanced are by law limited to futures on broadly based indices. As of March 31, 2000, Spectrum Global Balanced's primary exposures were in the Nikkei (Japan), FTSE (Britain), S&P 500 (U.S.) and DAX (German) stock indices. Spectrum Global Balanced is primarily exposed to the risk of adverse price trends or static markets in the U.S., European and Japanese indices. Static markets would not cause major market changes but would make it difficult for Spectrum Global Balanced to avoid being "whipsawed" into numerous small losses. Interest Rate. The second largest market exposure this quarter was in the global interest rate sector. Exposure was spread across the U.S., European, Japanese and Australian interest rate sectors. Interest rate movements directly affect the price of the sovereign bond futures positions held by Spectrum Global Balanced and indirectly affect the value of its stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact Spectrum Global Balanced's profitability. Spectrum Global Balanced's primary interest rate exposure is generally to interest rate fluctuations in the United States and the other G-7 countries. However, Spectrum Global Balanced also takes futures positions in the government debt of smaller nations - e.g., Australia and Spain. The general partner anticipates that G-7 and Australian interest rates will remain the primary interest rate exposure of Spectrum Global Balanced for the foreseeable future. The changes in interest rates, which have the most effect on Spectrum Global Balanced, are changes in long-term, as opposed to short-term, rates. Most of the speculative futures positions held by Spectrum Global Balanced are in medium- to long-term instruments. Consequently, even a material change in short-term rates would have little effect on Spectrum Global Balanced, were the medium- to long-term rates to remain steady. Currency. Spectrum Global Balanced's currency exposure is to exchange rate fluctuations, primarily fluctuations which disrupt the historical pricing relationships between different currencies and currency pairs. Interest rate changes as well as political and general economic conditions influence these fluctuations. Spectrum Global Balanced trades in a large number of currencies, including cross-rates. For the first quarter of 2000, Spectrum Global Balanced's major exposures were in the euro currency crosses and outright U.S. dollar positions. The general partner does not anticipate that the risk profile of Spectrum Global Balanced's currency sector will change significantly in the future. The currency trading VaR figure includes foreign margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the dollar-based partnership in expressing VaR in a functional currency other than dollars. Commodity. Soft Commodities and Agriculturals. On March 31, 2000, Spectrum Global Balanced had exposure in the markets that comprise these sectors. Most of the exposure, however, was in the soybean oil, lean hogs and corn markets. Supply and demand inequalities, severe weather disruption and market expectations affect price movements in these markets. Energy. On March 31, 2000, Spectrum Global Balanced's energy exposure was shared by futures contracts in the oil and natural gas markets. Price movements in these markets result from political developments in the Middle East, weather patterns, and other economic fundamentals. It is possible that volatility will remain high. Significant profits and losses, which have been experienced in the past, are expected to continue to be experienced in this market. Natural gas has exhibited volatility in prices resulting from weather patterns and supply and demand factors. Fluctuation in natural gas prices is expected to continue in this choppy pattern. Metals. Spectrum Global Balanced's metals market exposure is to fluctuations in the price of base metals. During periods of volatility, base metals will affect performance dramatically. The general partner anticipates that the base metals will remain the primary metals market exposure of Spectrum Global Balanced. S-20 QUALITATIVE DISCLOSURES REGARDING NON-TRADING RISK EXPOSURE The following was the only non-trading risk exposure of each partnership at March 31, 2000: FOREIGN CURRENCY BALANCES. The partnerships have primary foreign currency balances in British pounds, euros, Swedish kronas, Hong Kong dollars, Australian dollars, Swiss francs and Canadian dollars. Each partnership controls the non-trading risk of these balances by regularly converting these balances back into U.S. dollars at varying intervals, depending upon size and volatility factors. THE TRADING ADVISORS MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P. THE FOLLOWING UPDATES THE INFORMATION RELATING TO ASSETS UNDER MANAGEMENT BY EMC CAPITAL MANAGEMENT, INC., RABAR MARKET RESEARCH, INC., AND SUNRISE CAPITAL MANAGEMENT, INC., THE TRADING ADVISORS TO SPECTRUM SELECT, UNDER "THE TRADING ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P." ON PAGES 52, 54, AND 57 RESPECTIVELY. As of March 31, 2000, EMC managed approximately $43.8 million of client assets pursuant to its Classic Program and approximately $47.7 million in all of its programs (notional funds included). As of March 31, 2000, Rabar was managing approximately $238 million of client assets pursuant to its trading program (notional funds included). As of March 31, 2000, Sunrise was managing approximately $87.9 million of client assets pursuant to the CIMCO Program and approximately $523.9 million of client assets in all of its programs. MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P. THE FOLLOWING UPDATES THE INFORMATION RELATING TO ASSETS UNDER MANAGEMENT BY CAMPBELL & COMPANY, INC., CHESAPEAKE CAPITAL CORPORATION, AND JOHN W. HENRY & COMPANY, INC., THE TRADING ADVISORS TO SPECTRUM TECHNICAL, UNDER "THE TRADING ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P." ON PAGES 60, 62, AND 68 RESPECTIVELY. As of March 31, 2000, Campbell was managing approximately $1.5 billion of client assets pursuant to the Financial Metals & Energy Large Portfolio and approximately $1.9 billion in all of its programs. As of March 31, 2000, Chesapeake was managing approximately $129 million of customer funds in the Diversified 2XL Program and approximately $1 billion of client assets in all of the Chesapeake trading programs. As of March 31, 2000, JWH was managing approximately $178 million of client assets pursuant to its Original Investment Program, approximately $567 million of client assets pursuant to its Financial and Metals Portfolio and approximately $1.6 billion in all of its programs. THE FOLLOWING SUPPLEMENTS THE INFORMATION RELATING TO JOHN W. HENRY & COMPANY, INC. UNDER "THE TRADING ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P.--3. JOHN W. HENRY & COMPANY, INC. (JWH REGISTERED)--OTHER INVESTMENT PROGRAMS OPERATED BY JWH" ON PAGES 71-72. Multiple Style Programs. Multiple Style Programs involve the selection and allocation of assets among the other types of JWH investment programs on a discretionary basis. The Strategic Allocation Program is the only program offered in this category. The Strategic Allocation Program's objective is capital appreciation with the reduction of the volatility and risk of loss that typically would be associated with an investment in any one JWH investment program. JWH currently operates 11 investment programs; any and all of them may be included in the Strategic Allocation Program. JWH, through its Investment Policy Committee, allocates assets among different combinations of its investment programs which each have distinctive style, timing and market characteristics. The allocation of the Strategic Allocation S-21 Program's assets among the investment programs, as well as the selection of the programs used for the Strategic Allocation Program, is dynamic, changing at the discretion of the Investment Policy Committee. While JWH's individual investment programs are technical, trend-following programs, the selection of programs as well as the allocation of assets among the programs in the Strategic Allocation Program are entirely discretionary. JWH is under no obligation to include any particular investment program in the Strategic Allocation Program. Generally, the maximum allocation to an individual program will not exceed 25% of an account's assets. The Investment Policy Committee also monitors and adjusts on an ongoing basis the position size in relation to account equity at which the Strategic Allocation Program trades. Factors which may affect the decision to adjust position size include: ongoing program and portfolio research, portfolio volatility, recent market volatility, perceived risk exposure and subjective evaluation of general market conditions. Position size can range from 50% to 150% of standard trading levels. The Strategic Allocation Program has been trading client capital since July 1996. MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P. THE FOLLOWING UPDATES AND SUPPLEMENTS THE INFORMATION UNDER "THE TRADING ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.--1. ALLIED IRISH CAPITAL MANAGEMENT, LTD." ON PAGES 73-74. Tony Gannon is a non-executive director of Allied Irish. Chris Johns is no longer a principal of Allied Irish. THE FOLLOWING UPDATES THE CAPSULE PERFORMANCE SUMMARIES ON PAGES 77-78. THE TEXT PRECEEDING THE CAPSULES ON PAGE 77 AND THE FOOTNOTES ON PAGES 77-79 ARE AN INTEGRAL PART OF THE FOLLOWING CAPSULE PERFORMANCE SUMMARIES. CAPSULE A ALLIED IRISH CAPITAL MANAGEMENT, LTD. WORLDWIDE FINANCIAL FUTURES PROGRAM Name of commodity trading advisor: Allied Irish Capital Management, Ltd. Name of program: Worldwide Financial Futures Program Inception of trading by commodity trading advisor: November 1993 Inception of trading in program: November 1993 Number of open accounts: 51 Aggregate assets overall: $1,109,380,000 Aggregate assets in program: $851,680,000 Largest monthly drawdown: (1.05)% - (November 1998) Worst peak-to-valley drawdown: (1.25)% - (2 months, October 1998-November 1998) 2000 year-to-date return: (0.60)% (3 months) 1999 annual return: 4.39% 1998 annual return: 5.06% 1997 annual return: 8.86% 1996 annual return: 12.39% 1995 annual return: 12.57% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. S-22 CAPSULE A-1 ALLIED IRISH CAPITAL MANAGEMENT, LTD. PRO FORMA OF AN ACCOUNT FROM CAPSULE A WORLDWIDE FINANCIAL FUTURES PROGRAM Largest monthly drawdown: (6.11)% - (February 2000) Worst peak-to-valley drawdown: (18.66)% - (October 1998 - March 2000) 2000 year-to-date return: (8.05)% (3 months) 1999 annual return: (3.57)% 1998 annual return: (0.93)% 1997 annual return: 15.05% 1996 annual return: 32.42% 1995 annual return: 23.35% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE FOLLOWING IS ADDED TO THE END OF THE THIRD PARAGRAPH UNDER "THE TRADING ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P.--2. BLENHEIM INVESTMENTS INC.--PRINCIPALS" ON PAGE 79. Derivatives Portfolio Management, L.L.C. is registered with the CFTC as a commodity pool operator, effective January 26, 1994, and is a member of the National Futures Association in that capacity. Derivatives Portfolio Management, L.L.C. is not currently managing any commodity pools. Derivatives Portfolio Management, L.L.C. has a wholly-owned subsidiary named DPM Brokerage, LLC, a Delaware limited liability company formed in 1999 to provide introduction and execution services to individual clients and private investors. DPM Brokerage, LLC is registered with the CFTC as an introducing broker, effective August 16, 1999 and is a member of the National Futures Association in that capacity. THE FOLLOWING UPDATES THE INFORMATION RELATING TO ASSETS UNDER MANAGEMENT BY BLENHEIM, A TRADING ADVISOR TO SPECTRUM STRATEGIC, UNDER "THE TRADING ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P." ON PAGE 80. As of March 31, 2000, Blenheim was managing approximately $55 million of client assets pursuant to its trading program. THE DISCLOSURE PERTAINING TO WILLOWBRIDGE ASSOCIATES INC. ON PAGES 81-84 IS HEREBY DELETED AND REPLACED BY THE FOLLOWING INFORMATION RELATING TO ECLIPSE CAPITAL MANAGEMENT, INC. 3. ECLIPSE CAPITAL MANAGEMENT, INC. Eclipse is a Delaware corporation organized in July 1983. Eclipse's main business address is 7700 Bonhomme, Suite 500, St. Louis, Missouri 63105. Eclipse also has offices at 101 Park Avenue, 26th Floor, New York, New York 10178. Eclipse has been registered with the CFTC as a commodity trading advisor since August 1986 and is a member of the National Futures Association in such capacity. Principals Thomas W. Moller, the sole shareholder of Eclipse, has served as its President, CEO and sole director since founding the firm. Mr. Moller received an undergraduate degree in Business and Economics from Vanderbilt University and a graduate degree in Accounting from the University of Kentucky. He was a Certified Public Accountant and has a background in financial planning and investment management. In 1980, as chief financial officer of a privately held company, he designed and implemented one of the first variable rate loan hedge programs using interest rate futures contracts. In 1982, he formed Interest Rate Management, Inc., another commodity trading advisor which provided interest-rate-hedging advisory and management services. Since 1986, Mr. S-23 Moller has devoted his time exclusively to Eclipse and is primarily involved in the areas of trading, research, and product development. Gregg H. Byers is Executive Vice President with primary responsibility for corporate, administrative, and business development operations within the firm. He holds a BS degree in Finance from Northern Illinois University and an MBA in Finance from Roosevelt University in Chicago. Following eight years with Continental Illinois National Bank, Mr. Byers joined Bank of America, where he served from 1977 to 1988 in a progression of senior-level posts: Vice President and Regional Office Manager in Chicago; Executive Director - Securities Sales and Eurobond New Issue Syndicate Manager, based in London; and Vice President and National Sales Manager, based in San Francisco. From 1988 to 1990, he was Vice President and Regional Office Manager for Chemical Securities, Inc. in Chicago. From May 1990 to December 1998, he served as President of BA Futures, Inc., the global futures brokerage subsidiary of BankAmerica. Mr. Byers joined Eclipse in April 2000. James R. Klingler, JD is Senior Vice President, Corporate Secretary and General Counsel. Mr. Klingler has a BA in Economics from Vanderbilt University and a JD from Vanderbilt University School of Law. He previously worked as an associate with the St. Louis law firm of Thompson Coburn (formerly Coburn & Croft) and as a staff attorney with Mercantile Bancorporation, also in St. Louis. From January 1991 to December 1997, he was Compliance Counsel and, subsequently, Associate Vice President with A.G. Edwards & Sons, Inc. Mr. Klingler joined Eclipse in January 1998. Ronald R. Breitigam is Vice President -- Trading with primary responsibility for the implementation of the firm's trading strategies. After graduating from Pacific Union College in 1982, Mr. Breitigam became an independent floor trader at the Mid-America Commodity Exchange. He served as an institutional broker with Thomson McKinnon (1984-1985) and PaineWebber (1986) and, in 1986, formed his own trading company to work full time implementing various proprietary futures and options trading strategies. Mr. Breitigam joined Eclipse in May 1989. James W. Dille, PhD is Vice President -- Research and Technology with responsibility for computer-based research, development and operations. Dr. Dille has undergraduate and graduate engineering degrees from the University of Virginia. He also received a master's and doctorate from Harvard University in Applied Sciences, specializing in the areas of Decision and Control Theory and Computer Science. From 1987 through 1993, he worked for the Boeing Company (formerly McDonnell Douglas) in the Training Systems and Flight Simulation divisions, where he was responsible for research in the areas of computer architectures and networking. He is an affiliate professor at Washington University in St. Louis, teaching courses in numerical analysis and the simulation and analysis of complex systems. Dr. Dille joined Eclipse in January 1994. Eric S. Goodbar is Director -- Risk Management with responsibility for risk and performance monitoring and evaluation. Goodbar has a BS degree with a dual major in Financial Administration and Management of Information Systems from the University of Nevada at Las Vegas and an Executive MBA degree from the University of Chicago Graduate School of Business. From 1984 to 1995, he was employed by NationsBanc-CRT in several different capacities, the last of which was as Vice President -- Financial Engineering. From 1995 to 1997 he served as Executive Vice President of New Century Investment Research and Management, Inc., a trading manager and fund management consultant. Mr. Goodbar joined Eclipse in January 1998. Trading Programs Eclipse currently offers two trading programs, the Global Monetary Program and the Diversified Strategies Program. These programs are designed primarily for institutions, commodity pools and certain other qualified investors. The Global Monetary Program employs a systematic trading approach, using multiple trend-following and fundamentally driven models. The Diversified Strategies Program also employs a systematic trading approach, but uses S-24 predominantly non-trend-following models. The following two paragraphs describe these programs: Global Monetary Program: This "financial, metals and energy" program requires a minimum investment of $5 million and trades a global portfolio of futures and options on futures on interest rate instruments, currencies, stock indices, precious and base metals, and energy products, as well as interbank spot and forward currency markets. A key characteristic of this program is the extensive diversification achieved by applying multiple trading models to a wide variety of financial markets located throughout the world. Diversified Strategies Program: Also with a minimum investment requirement of $5 million, this program employs fundamental and other trading models designed to produce returns that are not correlated with those generated by traditional, technical trend-following strategies. Although the program is systematic, the strategies used in it are under continual review and subject to change, enhancement or replacement. As a result, the program's trading models and their respective investment allocations within the portfolio change over time. Futures and options on futures are traded, typically, on interest rates, currencies, stock indices, energy, metals and agricultural commodities, as well as interbank spot and forward currency markets. Trading Approach The two trading programs of Eclipse are systematic and their strategies are either fundamental or trend-following in nature, with the objective of capitalizing on intermediate- and long-term price trends. Eclipse makes all trading decisions pursuant to its proprietary trading, capital allocation and risk management models. The Eclipse programs make use of multiple models to accentuate overall diversification. Fundamental models generate trading signals through the quantitative analysis of environmental, macroeconomic and intermarket data. Trend identification models use various technical and statistical analysis techniques to identify and evaluate price trends. Capital allocation models determine the percentage of trading capital allocated to various markets and trading models. Eclipse's risk management models were developed with the objective of limiting losses, capturing profits and conserving capital in choppy, sideways markets. The risk management principles which Eclipse employs include: * using stop orders to exit trades when markets are moving against an established position (although, depending on market circumstances, such "stop-loss" orders may be difficult or impossible to execute); * diversifying positions among several different markets, futures, and/or futures groups to limit exposure in any one area; * using multiple entry and exit points; * limiting the assets committed as margin, generally within a range of 5% to 20% of assets managed, at minimum exchange margin requirements, but possibly above or below that range at certain times; and * prohibiting the use of unrealized profits in a particular futures contract as margin for additional contracts in the same or a related futures contract. Decisions whether to trade a particular futures contract are based upon various factors, including liquidity, significance in terms of desired degrees of concentration, diversification and profit potential, both historical and at a given time. These decisions are based upon output generated by a proprietary risk management program, but require the exercise of judgment by principals of Eclipse. The decision not to trade specific contracts for certain periods or to reduce the number of contracts traded may result at times in missing significant profit opportunities which otherwise would be captured by technical strategies. The specific contracts traded in each portfolio have been selected based on liquidity, historical volatility, and the degree of past directional movement. The actual number of contracts held at any particular point in time depends on a number of factors, including evaluation of market volatility and potential risk versus S-25 return. There are occasions when a trading model may indicate that no position is appropriate in a particular contract or contract group. In addition to technical trading in futures contracts, Eclipse may also employ trading techniques such as spreads and straddles and may buy or sell futures options. Eclipse may alter its trading programs, including, without limitation, its trading strategies, commodity interests, and markets traded and trading principles if Eclipse determines that such change is in the best interest of the accounts which it manages. Past Performance of Eclipse The past performance information for Eclipse's Global Monetary Program, the program to be traded by Eclipse for Spectrum Strategic, is set forth in Capsule A below. Eclipse will trade the net assets of Spectrum Strategic allocated to it pursuant to the Global Monetary Program at 1.5 times the leverage normally employed by that program. Capsule A-1 is a pro forma of the composite performance presented in Capsule A, adjusted for the increased leverage to be employed by Eclipse for Spectrum Strategic, and also adjusted for the brokerage, management, and incentive fees applied to Spectrum Strategic. The footnotes following Capsules A and A-1 are an integral part of those Capsules. You are cautioned that the performance information set forth in the following capsule performance summaries is not indicative of, and may have no bearing on, any trading results which may be attained by Eclipse or Spectrum Strategic in the future, since past performance is not a guarantee of future results. In addition, Eclipse trades the net assets allocated to it at 1.5 the leverage it normally applies to the Global Monetary Program, which will significantly increase volatility as well as profits and losses. Spectrum Strategic cannot assure you that Eclipse or Spectrum Strategic will make any profit or will be able to avoid incurring substantial losses. You should also note that interest income may constitute a significant portion of a commodity pool's total income and may generate profits where there have been realized or unrealized losses from futures, forwards, and options trading. CAPSULE A ECLIPSE CAPITAL MANAGEMENT, INC. GLOBAL MONETARY PROGRAM Name of commodity trading advisor: Eclipse Capital Management, Inc. Name of program: Global Monetary Program Inception of trading by commodity trading advisor: April 1986 Inception of trading in program: August 1990 Number of open accounts: 26 Aggregate assets overall (excluding notional): $470,189,305 Aggregate assets overall (including notional): $495,850,805 Aggregate assets in program (excluding notional): $468,424,353 Aggregate assets in program (including notional): $494,085,853 Largest monthly drawdown: (11.95)%--(April 1998) Worst peak-to-valley drawdown: (20.26)%--(February 1998 - July 1998) 2000 year-to-date return: (2.16)% (3 months) 1999 annual return: 12.30% 1998 annual return: 5.03% 1997 annual return: 15.93% 1996 annual return: 30.68% 1995 annual return: 20.21% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. S-26 FOOTNOTES TO ECLIPSE CAPSULE A PERFORMANCE SUMMARY "Inception of trading by commodity trading advisor" is the date on which Eclipse began trading client accounts. "Inception of trading in program" is the date on which Eclipse began trading client accounts pursuant to the program shown. "Number of open accounts" is the number of accounts directed by Eclipse pursuant to the program shown as of March 31, 2000. "Aggregate assets overall" is the total actual equity, including cash and cash equivalents, deposited in the accounts at the carrying futures commission merchant plus committed funds shown with and without notional equity as of March 31, 2000. Notional equity represents the additional amount of equity that exceeds the amount of equity actually committed to Eclipse for management. "Aggregate assets in program" is the aggregate amount of assets in the program specified as of March 31, 2000 and includes notional equity. "Largest monthly drawdown" is the largest monthly loss experienced by any single account in the program in any calendar month during the most recent five calendar years and year-to-date expressed as a percentage of the total equity in the account and includes the month and year of such drawdown. "Worst peak-to-valley drawdown" is the largest calendar-month-end to calendar-month-end loss experienced by any single account in the program during the most recent five calendar years and year-to-date expressed as a percentage of total equity in the account and includes the months and years in which it occurred. For example, a worst peak-to-valley drawdown in an account of "(10)%-(1/95-8/95)" means that the peak-to-valley drawdown was 10% and lasted from January 1995 to August 1995. "Annual and year-to-date return" is computed on a compounded monthly basis assuming reinvestment of accrued profits. The rate of return is computed by reference to total equity in the program. These numbers represent the composite performance of all accounts in the program, not the performance of any specific account. CAPSULE A-1 ECLIPSE CAPITAL MANAGEMENT, INC. PRO FORMA OF CAPSULE A GLOBAL MONETARY PROGRAM AT 150% LEVERAGE Largest monthly drawdown: (16.38)% - (April 1998) Worst peak-to-valley drawdown: (32.80)% - (10 months, April 1994 - January 1995) 2000 year-to-date return: (5.01)% (3 months) 1999 annual return: 14.98% 1998 annual return: 2.88% 1997 annual return: 21.50% 1996 annual return: 44.63% 1995 annual return: 29.17% PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. FOOTNOTES TO ECLIPSE CAPSULE A-1 PRO FORMA PERFORMANCE SUMMARY Capsule A-1 above reflects pro forma rates of return, which are the result of the general partner and Eclipse making pro forma adjustments to the actual past performance record of client accounts managed pursuant to the Global Monetary Program, the trading program employed for Spectrum Strategic by Eclipse. The pro forma adjustments are an attempt to reflect the current brokerage, management and incentive fees, and historical interest income, and the degree of S-27 leverage applied for the portion of Spectrum Strategic's net assets traded by Eclipse, as opposed to the actual fees, expenses and interest income and leverage applicable to the account. Capsule A-1 must be read in conjunction with the description of Eclipse and its trading programs above. Furthermore, you must be aware that pro forma rates of return have inherent limitations: (A) pro forma adjustments are only an approximate means of modifying historical records to reflect aspects of the economic terms of a commodity pool, constitute no more than mathematical adjustments to actual performance numbers, and give no effect whatsoever to such factors as possible changes in trading approach that might have resulted from the different fee structure, interest income, leverage, and other factors applicable to Spectrum Strategic as compared to Eclipse's actual trading; and (B) there are different means by which the pro forma adjustments could have been made. While the general partner believes that the information set forth in Capsule A-1 is relevant to evaluating an investment in Spectrum Strategic, no representation is or could be made that the capsule presents what the performance results of the portion of Spectrum Strategic's net assets traded by Eclipse would have been in the past or are likely to be in the future. Past results are not a guarantee of future results. MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P. THE FOLLOWING UPDATES THE INFORMATION RELATING TO ASSETS UNDER MANAGEMENT BY RXR, THE TRADING ADVISOR TO SPECTRUM GLOBAL BALANCED, UNDER "THE TRADING ADVISORS--MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P." ON PAGE 85. As of March 31, 2000, RXR was managing approximately $319.8 million of client assets pursuant to its Balanced Portfolio Program and approximately $325.2 million in all of its programs. THE COMMODITY BROKERS THE FOLLOWING REPLACES THE INFORMATION CONTAINED UNDER "THE COMMODITY BROKERS" ON PAGES 88-89. DEAN WITTER REYNOLDS INC., MORGAN STANLEY & CO. INCORPORATED, AND MORGAN STANLEY & CO. INTERNATIONAL LIMITED Dean Witter Reynolds Inc., a Delaware corporation, acts as the partnerships' non-clearing commodity broker. Dean Witter, as the non-clearing commodity broker, holds each partnership's funds in customer segregated or secured accounts, and provides all required margin funds to the clearing commodity brokers. Morgan Stanley & Co. Incorporated, a Delaware corporation, acts as the partnerships' clearing commodity broker and foreign currency forward counterparty, and Morgan Stanley & Co. International Limited serves as the clearing commodity broker for trades that take place on the London Metal Exchange. Dean Witter monitors each partnership's futures positions that Morgan Stanley reports it is carrying for any errors in trade prices or trade fill. Dean Witter also serves as the non-clearing commodity broker for all, and Morgan Stanley serves as the clearing commodity broker and foreign exchange counterparty and Morgan Stanley International serves as the clearing commodity broker with regard to any trading on the London Metal Exchange for all but one, of the other commodity pools for which Demeter serves as general partner and commodity pool operator. Dean Witter is a financial services company which provides to its individual, corporate and institutional clients services as a broker in securities, futures, and options, a dealer in corporate, municipal and government securities, an investment adviser, and an agent in the sale of life insurance and various other products and services. Dean Witter has its main business office at Two World Trade Center, New York, New York 10048. Dean Witter is a member firm of the New York Stock Exchange, the American Stock Exchange, the Chicago Board Options Exchange, and other major securities exchanges. Dean Witter is registered with the CFTC as a futures commission merchant and is a member of the National Futures Association in such capacity. Dean Witter is S-28 also registered with the SEC as a broker-dealer and is a member of the NASD. Dean Witter is currently servicing its clients through a network of approximately 450 offices nationwide with 12,000 financial advisors servicing individual and institutional client accounts. Morgan Stanley & Co. Incorporated is the clearing commodity broker for all trades for the partnerships, other than those on the London Metal Exchange. Morgan Stanley has its main business office at 1585 Broadway, New York, New York 10036. Morgan Stanley is registered as a futures commission merchant, is a member of the National Futures Association and is a member of most major U.S. and foreign commodity exchanges. Morgan Stanley is registered with the SEC as a broker-dealer and is a member of the NASD. Morgan Stanley International, a United Kingdom corporation, acts as the partnerships' clearing commodity broker solely with regard to any trading on the London Metal Exchange. Morgan Stanley International has its main business office at 25 Cabot Square, Canary Wharf, London E14 4QA, England, is regulated by the United Kingdom Securities and Futures Authority as a member firm, and is a member of the London Metal Exchange and other securities and commodities exchanges worldwide. Morgan Stanley Dean Witter & Co., the parent company of Dean Witter, Morgan Stanley, and Morgan Stanley International, is a worldwide financial services firm, employing, directly and through its subsidiaries, more than 45,000 people worldwide in offices throughout the United States and 20 foreign countries. Morgan Stanley Dean Witter & Co. is a publicly-traded company listed on the New York Stock Exchange; its common stock had a market value of approximately $79.9 billion at February 29, 2000. At that date, Morgan Stanley Dean Witter & Co. had leading market positions in its three primary businesses (securities, asset management and credit services), and it ranked among the top five asset managers globally, with over $455 billion in assets under management. BROKERAGE ARRANGEMENTS The partnerships' brokerage arrangements are discussed under "Conflicts of Interest" on pages 13-15 and S-3 and "Description of Charges -- Commodity Brokers" on pages 19-20 and S-3. The general partner will review at least annually the brokerage arrangements of each partnership to ensure that those arrangements are fair, reasonable, and competitive, and represent the best price and services available, taking into consideration: * the size of the partnership; * the futures, forwards, and options trading activity; * the services provided by the commodity brokers or any affiliate thereof to the partnership; * the cost incurred by the commodity brokers or any affiliate thereof in organizing and operating the partnership and offering units; * the overall costs to the partnership; * any excess interest and compensating balance benefits to the commodity brokers from assets held thereby; and * if the general partner does not receive any direct compensation from the partnership for its services as general partner, the risks incurred by the general partner as general partner of the partnership; Each customer agreement sets forth a standard of liability for the commodity broker and provides for indemnities of the commodity broker. See "Fiduciary Responsibility and Liability" on page 15. S-29 LITIGATION THE FOLLOWING SUPPLEMENTS THE INFORMATION UNDER "LITIGATION" ON PAGES 89-90. On October 25, 1996, the Market Surveillance Committee of the NASD filed a formal complaint against Morgan Stanley and seven current and former traders, alleging violations of certain NASD rules relating to manipulative and deceptive practices, locked and crossed markets, and failure to supervise. Hearings were held in June and July 1997. On April 13, 1998 the Committee ruled that Morgan Stanley and the seven traders had engaged in manipulative and deceptive practices and improperly locked or crossed markets, but not that Morgan Stanley had failed to supervise its traders. The Committee levied a fine of $1,000,000 on Morgan Stanley, a fine of $100,000 and a 90-day suspension on one of its former traders, and fines of $25,000 and 30-day suspensions on each of the remaining current and former traders. On January 18, 2000 the National Adjudicatory Council, which heard the appeal, issued a ruling which upheld the Market Surveillance Committee's April 1998 decision, however, the National Adjudicatory Council reduced the firm's fine to $495,000, reversed all previously imposed suspensions against the traders, reduced the fine for each of six traders to $2,500 and dismissed all charges against the seventh trader. On January 11, 1999, the SEC brought an action against 28 NASDAQ market makers, including Morgan Stanley, and 51 individuals, including one current and one former trader employed by Morgan Stanley, for certain conduct during 1994. The core of the charges against Morgan Stanley concerns improper or undisclosed coordination of price quotes with other broker-dealers and related reporting, recordkeeping and supervisory deficiencies in violation of Sections 15(b)(4)(E), 15(c)(1) and (2) and 17(a) of the Securities Exchange Act and Rules 15c1-2, 15c2-7 and 17a-3 promulgated thereunder. Without admitting or denying the charges, Morgan Stanley consented to the entry of a cease and desist order and to the payment of a civil penalty of $350,000, disgorgement of $4,170 and to submit certain of its procedures to an independent consultant for review. In addition, one current and one former trader employed by Morgan Stanley accepted suspensions of less than two months each and were fined $25,000 and $30,000 respectively. During the five years preceding the date of this prospectus, other than as described above, there have been no material criminal, civil, or administrative actions pending, on appeal, or concluded against the commodity brokers, the general partner, or any of their principals, which the general partner believes would be material to an investor's decision to invest in the partnerships. S-30 INDEPENDENT AUDITORS' REPORT To the Limited Partners and the General Partner of Morgan Stanley Dean Witter Spectrum Global Balanced L.P. Morgan Stanley Dean Witter Spectrum Select L.P. Morgan Stanley Dean Witter Specrtum Strategic L.P.: Morgan Stanley Dean Witter Spectrum Technical L.P.: We have audited the accompanying statements of financial condition of Morgan Stanley Dean Witter Spectrum Global Balanced L.P., 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 "Partnerships") as of December 31, 1999 and 1998 and the related statements of operations, changes in partners' capital, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Morgan Stanley Dean Witter Spectrum Global Balanced L.P., Morgan Stanley Dean Witter Spectrum Select L.P., Morgan Stanley Dean Witter Spectrum Strategic L.P. and Morgan Stanley Dean Witter Spectrum Technical L.P. at December 31, 1999 and 1998 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. February 7, 2000 New York, New York S-31 MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P. STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, MARCH 31, ----------------------------- 2000 1999 1998 ------------ ------------ ------------ $ $ $ (UNAUDITED) ASSETS Equity in futures interests trading accounts: Cash........................................... 56,964,275 56,904,921 43,020,361 Net unrealized gain on open contracts.......... 2,816,295 810,114 1,967,187 ---------- ---------- ---------- Total Trading Equity........................ 59,780,570 57,715,035 44,987,548 Subscriptions receivable......................... 869,770 847,954 1,163,097 Interest receivable (Dean Witter)................ 274,230 244,599 167,141 ---------- ---------- ---------- Total Assets................................ 60,924,570 58,807,588 46,317,786 ---------- ---------- ---------- ---------- ---------- ---------- LIABILITIES AND PARTNERS' CAPITAL LIABILITIES Redemptions payable............................ 1,937,233 667,741 118,190 Accrued brokerage fees (Dean Witter)........... 222,237 216,895 169,841 Accrued management fees........................ 60,391 58,940 46,153 Incentive fees payable......................... -- -- 69,730 ---------- ---------- ---------- Total Liabilities........................... 2,219,861 943,576 403,914 ---------- ---------- ---------- PARTNERS' CAPITAL Limited Partners (3,491,763.111, 3,549,239.387 and 2,836,946.985 Units, respectively)......... 58,030,231 57,209,838 45,399,750 General Partner (40,584.304, 40,584.304 and 32,126.520 Units, respectively)................ 674,478 654,174 514,122 ---------- ---------- ---------- Total Partners' Capital........................ 58,704,709 57,864,012 45,913,872 ---------- ---------- ---------- Total Liabilities and Partners' Capital........ 60,924,570 58,807,588 46,317,786 ---------- ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE PER UNIT......................... 16.62 16.12 16.00 ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these financial statements. S-32 MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P. STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, MARCH 31, ----------------------------- 2000 1999 1998 ------------ ------------ ------------ $ $ $ (UNAUDITED) ASSETS Equity in futures interests trading accounts: Cash.......................................... 209,219,096 207,251,012 187,619,419 Net unrealized gain on open contracts......... 2,096,109 6,887,064 8,435,054 Net option premiums........................... 273,274 776,380 -- ------------ ------------ ------------ Total Trading Equity....................... 211,588,479 214,914,456 196,054,473 Subscriptions receivable........................ 5,138,043 3,730,051 6,021,707 Interest receivable (Dean Witter)............... 793,136 722,305 591,858 ------------ ------------ ------------ Total Assets............................... 217,519,658 219,366,812 202,668,038 ------------ ------------ ------------ ------------ ------------ ------------ LIABILITIES AND PARTNERS' CAPITAL LIABILITIES Redemptions payable........................... 3,964,374 3,764,242 939,381 Accrued brokerage fees (Dean Witter).......... 1,299,244 1,270,975 1,164,344 Accrued management fees....................... 537,618 525,921 481,797 ------------ ------------ ------------ Total Liabilities.......................... 5,801,236 5,561,138 2,585,522 ------------ ------------ ------------ PARTNERS' CAPITAL Limited Partners (9,632,323.307, 9,583,810.732 and 8,274,690.051 Units, respectively)........ 208,833,259 210,877,519 196,915,644 General Partner (133,076.700 Units)........... 2,885,163 2,928,155 3,166,872 ------------ ------------ ------------ Total Partners' Capital....................... 211,718,422 213,805,674 200,082,516 ------------ ------------ ------------ Total Liabilities and Partners' Capital....... 217,519,658 219,366,812 202,668,038 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE PER UNIT........................ 21.68 22.00 23.80 ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements. S-33 MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P. STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, MARCH 31, ----------------------------- 2000 1999 1998 ----------- ------------ ------------ $ $ $ (UNAUDITED) ASSETS Equity in futures interests trading accounts: Cash.......................................... 84,075,566 97,808,328 63,919,054 Net unrealized gain on open contracts......... 3,854,115 9,563,813 5,299,335 Net option premiums........................... 108,928 (11,653) 225,646 ----------- ------------ ------------ Total Trading Equity....................... 88,038,609 107,360,488 69,444,035 Subscriptions receivable........................ 1,648,663 1,743,958 1,796,051 Interest receivable (Dean Witter)............... 319,779 339,582 205,247 ----------- ------------ ------------ Total Assets............................... 90,007,051 109,444,028 71,445,333 ----------- ------------ ------------ ----------- ------------ ------------ LIABILITIES AND PARTNERS' CAPITAL LIABILITIES Redemptions payable........................... 1,349,921 847,860 398,976 Accrued brokerage fees (Dean Witter).......... 539,748 590,001 405,606 Accrued management fees....................... 282,097 313,646 218,976 ----------- ------------ ------------ Total Liabilities.......................... 2,171,766 1,751,507 1,023,558 ----------- ------------ ------------ PARTNERS' CAPITAL Limited Partners (7,001,397.561, 6,723,390.378 and 6,031,262.407 Units, respectively)........ 86,909,522 106,542,362 69,671,636 General Partner (74,579.110, 72,581.141 and 64,937.294 Units, respectively)............... 925,763 1,150,159 750,139 ----------- ------------ ------------ Total Partners' Capital....................... 87,835,285 107,692,521 70,421,775 ----------- ------------ ------------ Total Liabilities and Partners' Capital....... 90,007,051 109,444,028 71,445,333 ----------- ------------ ------------ ----------- ------------ ------------ NET ASSET VALUE PER UNIT........................ 12.41 15.85 11.55 ----------- ------------ ------------ ----------- ------------ ------------
The accompanying notes are an integral part of these financial statements. S-34 MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P. STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, MARCH 31, ----------------------------- 2000 1999 1998 ------------ ------------ ------------ $ $ $ (UNAUDITED) ASSETS Equity in futures interests trading accounts: Cash........................................ 254,883,907 251,443,755 235,044,325 Net unrealized gain on open contracts....... 11,259,522 18,036,296 18,909,268 Net option premiums......................... -- (74,725) -- ------------ ------------ ------------ Total Trading Equity..................... 266,143,429 269,405,326 253,953,593 Subscriptions receivable...................... 2,777,934 3,926,914 4,002,633 Interest receivable (Dean Witter)............. 994,128 900,955 717,685 ------------ ------------ ------------ Total Assets............................. 269,915,491 274,233,195 258,673,911 ------------ ------------ ------------ ------------ ------------ ------------ LIABILITIES AND PARTNERS' CAPITAL LIABILITIES Redemptions payable......................... 4,601,160 3,057,593 1,339,311 Accrued brokerage fees (Dean Witter)........ 1,624,086 1,559,481 1,439,151 Accrued management fees..................... 896,047 860,403 794,015 ------------ ------------ ------------ Total Liabilities........................ 7,121,293 5,477,477 3,572,477 ------------ ------------ ------------ PARTNERS' CAPITAL Limited Partners (17,715,433.242, 17,836,873.576 and 15,660,041.764 Units, respectively)............................... 259,990,761 265,907,998 252,455,045 General Partner (191,022.517, 191,022.517 and 164,158.204 Units, respectively)........ 2,803,437 2,847,720 2,646,389 ------------ ------------ ------------ Total Partners' Capital..................... 262,794,198 268,755,718 255,101,434 ------------ ------------ ------------ Total Liabilities and Partners' Capital..... 269,915,491 274,233,195 258,673,911 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE PER UNIT...................... 14.68 14.91 16.12 ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements. S-35 MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P. STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED FOR THE YEARS ENDED MARCH 31, DECEMBER 31, --------------------------- ------------------------------------------ 2000 1999 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ (UNAUDITED) (UNAUDITED) REVENUES Trading Profit (Loss): Realized................... (133,121) 1,001,877 2,425,585 5,113,920 3,683,460 Net change in unrealized... 2,006,181 (870,068) (1,157,073) 1,285,628 464,966 ---------- ---------- ---------- ---------- ---------- Total Trading Results.... 1,873,060 131,809 1,268,512 6,399,548 4,148,426 Interest income (Dean Witter)....................... 775,426 498,269 2,385,751 1,642,542 1,145,033 ---------- ---------- ---------- ---------- ---------- Total Revenues........... 2,648,486 630,078 3,654,263 8,042,090 5,293,459 ---------- ---------- ---------- ---------- ---------- EXPENSES Brokerage fees (Dean Witter)....................... 665,107 537,128 2,387,515 1,591,467 1,124,531 Management fees............... 180,737 145,959 648,787 422,960 269,162 Incentive fees................ -- -- 215,651 449,775 300,250 ---------- ---------- ---------- ---------- ---------- Total Expenses........... 845,844 683,087 3,251,953 2,464,202 1,693,943 ---------- ---------- ---------- ---------- ---------- NET INCOME (LOSS)............... 1,802,642 (53,009) 402,310 5,577,888 3,599,516 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME (LOSS) ALLOCATION: Limited Partners.............. 1,782,338 (52,414) 397,258 5,518,127 3,561,537 General Partner............... 20,304 (595) 5,052 59,761 37,979 NET INCOME (LOSS) PER UNIT: Limited Partners.............. 0.50 (.02) 0.12 2.25 2.12 General Partner............... 0.50 (.02) 0.12 2.25 2.12
The accompanying notes are an integral part of these financial statements. S-36 MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P. STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED FOR THE YEARS ENDED MARCH 31, DECEMBER 31, --------------------------- ------------------------------------------ 2000 1999 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ (UNAUDITED) (UNAUDITED) REVENUES Trading Profit (Loss): Realized................... 4,910,985 5,798,268 (1,351,849) 36,087,729 15,940,851 Net change in unrealized... (4,790,955) (2,656,394) (1,547,990) (1,192,107) 3,149,167 ------------ ------------ ------------ ------------ ------------ Total Trading Results.... 120,030 3,141,874 (2,899,839) 34,895,622 19,090,018 Interest income (Dean Witter)....................... 2,284,949 1,726,568 7,678,789 6,883,110 7,405,511 ------------ ------------ ------------ ------------ ------------ Total Revenues........... 2,404,979 4,868,442 4,778,950 41,778,732 26,495,529 ------------ ------------ ------------ ------------ ------------ EXPENSES Brokerage fees (Dean Witter)....................... 3,919,970 3,663,607 15,188,479 11,360,166 9,777,851 Management fees............... 1,622,055 1,515,975 6,284,885 5,202,158 5,239,533 Incentive fees................ -- -- -- 1,832,021 49,989 Transaction fees and costs.... -- -- -- 625,327 1,370,439 Administrative expenses -- -- -- 64,000 114,000 ------------ ------------ ------------ ------------ ------------ Total Expenses........... 5,542,025 5,179,582 21,473,364 19,083,672 16,551,812 ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS)............... (3,137,046) (311,140) (16,694,414) 22,695,060 9,943,717 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) ALLOCATION: Limited Partners.............. (3,094,054) (305,969) (16,455,697) 22,302,202 9,781,168 General Partner............... (42,992) (5,171) (238,717) 392,858 162,549 NET INCOME (LOSS) PER UNIT: Limited Partners.............. (0.32) (0.04) (1.80) 2.95 1.22 General Partner............... (0.32) (0.04) (1.80) 2.95 1.22
The accompanying notes are an integral part of these financial statements. S-37 MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P. STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED FOR THE YEARS ENDED MARCH 31, DECEMBER 31, --------------------------- ------------------------------------------ 2000 1999 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ (UNAUDITED) (UNAUDITED) REVENUES Trading Profit (Loss): Realized................... (15,636,889) 5,490,705 32,274,037 7,945,575 1,297,824 Net change in unrealized... (5,709,698) (263,612) 4,264,478 2,771,722 2,387,258 ------------ ------------ ------------ ------------ ------------ Total Trading Results.... (21,346,587) 5,227,093 36,538,515 10,717,297 3,685,082 Interest income (Dean Witter)....................... 1,009,168 621,201 3,017,103 2,379,478 2,304,248 ------------ ------------ ------------ ------------ ------------ Total Revenues........... (20,337,419) 5,848,294 39,555,618 13,096,775 5,989,330 ------------ ------------ ------------ ------------ ------------ EXPENSES Brokerage fees (Dean Witter)....................... 1,842,276 1,265,457 5,837,887 4,402,540 4,414,327 Management fees............... 973,088 686,283 3,137,509 2,342,447 2,212,788 Incentive fees................ 662,823 1,012,167 2,451,152 1,336,693 427,094 ------------ ------------ ------------ ------------ ------------ Total Expenses........... 3,478,187 2,963,907 11,426,548 8,081,680 7,054,209 ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS)............... (23,815,606) 2,884,387 28,129,070 5,015,095 (1,064,879) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) ALLOCATION: Limited Partners.............. (23,566,210) 2,854,127 27,829,050 4,958,188 (1,054,657) General Partner............... (249,396) 30,260 300,020 56,907 (10,222) NET INCOME (LOSS) PER UNIT: Limited Partners.............. (3.44) .47 4.30 .84 .04 General Partner............... (3.44) .47 4.30 .84 .04
The accompanying notes are an integral part of these financial statements. S-38 MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P. STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH FOR THE YEARS ENDED 31, DECEMBER 31, --------------------------- ------------------------------------------ 2000 1999 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ (UNAUDITED) (UNAUDITED) REVENUES Trading Profit (Loss): Realized................... 7,388,455 (176,028) 726,179 35,224,194 13,777,460 Net change in unrealized... (6,776,774) (7,731,117) (872,972) 6,612,556 9,762,823 ------------ ------------ ------------ ------------ ------------ Total Trading Results.... 611,681 (7,907,145) (146,793) 41,836,750 23,540,283 Interest income (Dean Witter)....................... 2,854,265 2,094,771 9,593,178 8,103,423 5,987,304 ------------ ------------ ------------ ------------ ------------ Total Revenues........... 3,465,946 (5,812,374) 9,446,385 49,940,173 29,527,587 ------------ ------------ ------------ ------------ ------------ EXPENSES Brokerage fees (Dean Witter)....................... 4,891,913 4,585,319 19,176,380 15,543,787 11,617,770 Management fees............... 2,698,986 2,529,832 10,580,071 8,403,764 5,832,758 Incentive fees................ 54,486 -- 430,097 3,191,252 369,975 ------------ ------------ ------------ ------------ ------------ Total Expenses........... 7,645,385 7,115,151 30,186,548 27,138,803 17,820,503 ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS)............... (4,179,439) (12,927,525) (20,740,163) 22,801,370 11,707,084 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) ALLOCATION: Limited Partners.............. (4,135,156) (12,792,933) (20,531,494) 22,571,217 11,589,197 General Partner............... (44,283) (134,592) (208,669) 230,153 117,887 NET INCOME (LOSS) PER UNIT: Limited Partners.............. (.23) (.81) (1.21) 1.49 1.02 General Partner............... (.23) (.81) (1.21) 1.49 1.02
The accompanying notes are an integral part of these financial statements. S-39 MORGAN STANLEY DEAN WITTER SPECTRUM SERIES STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE QUARTER ENDED MARCH 31, 2000 (UNAUDITED) AND FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
UNITS OF PARTNERSHIP LIMITED GENERAL INTEREST PARTNERS PARTNER TOTAL ------------- -------------- ------------ ------------ $ $ $ MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P. Partners' Capital, December 31, 1996........... 1,609,108.931 18,499,873 206,382 18,706,255 Offering of Units.............................. 505,325.179 6,507,261 20,000 6,527,261 Net Income..................................... -- 3,561,537 37,979 3,599,516 Redemptions.................................... (246,149.269) (3,149,796) -- (3,149,796) ------------- -------------- ------------ ------------ Partners' Capital, December 31, 1997........... 1,868,284.841 25,418,875 264,361 25,683,236 Offering of Units.............................. 1,205,176.553 17,447,965 190,000 17,637,965 Net Income..................................... -- 5,518,127 59,761 5,577,888 Redemptions.................................... (204,387.889) (2,985,217) -- (2,985,217) ------------- -------------- ------------ ------------ Partners' Capital, December 31, 1998........... 2,869,073.505 45,399,750 514,122 45,913,872 Offering of Units.............................. 1,019,759.235 16,184,278 135,000 16,319,278 Net Loss....................................... -- 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.............................. 191,780.967 3,106,698 -- 3,106,698 Net Income..................................... -- 1,782,338 20,304 1,802,642 Redemptions.................................... (249,257.243) (4,068,643) -- (4,068,643) ------------- -------------- ------------ ------------ Partners' Capital, March 31, 2000.............. 3,532,347.415 $ 58,030,231 $ 674,478 $ 58,704,709 ------------- -------------- ------------ ------------ ------------- -------------- ------------ ------------
UNITS OF PARTNERSHIP LIMITED GENERAL INTEREST PARTNERS PARTNER TOTAL ------------- -------------- ------------ ------------ NOTE 1 $ $ $ MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P. Partners' Capital, December 31, 1996........... 8,346,327.700 161,174,820 2,611,465 163,786,285 Offering of Units.............................. 573,746.700 12,056,614 -- 12,056,614 Net Income..................................... -- 9,781,168 162,549 9,943,717 Redemptions.................................... (919,522.800) (19,013,295) -- (19,013,295) ------------- -------------- ------------ ------------ Partners' Capital, December 31, 1997........... 8,000,551.600 163,999,307 2,774,014 166,773,321 Offering of Units.............................. 1,310,353.729 30,297,590 -- 30,297,590 Net Income..................................... -- 22,302,202 392,858 22,695,060 Redemptions.................................... (903,138.578) (19,683,455) -- (19,683,455) ------------- -------------- ------------ ------------ Partners' Capital, December 31, 1998........... 8,407,766.751 196,915,644 3,166,872 200,082,516 Offering of Units.............................. 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.............................. 517,227.165 11,415,053 -- 11,415,053 Net Loss....................................... -- (3,094,054) (42,992) (3,137,046) Redemptions.................................... (468,714.690) (10,365,259) -- (10,365,259) ------------- -------------- ------------ ------------ Partners' Capital, March 31, 2000.............. 9,765,399.907 $ 208,833,259 $ 2,885,163 $211,718,422 ------------- -------------- ------------ ------------ ------------- -------------- ------------ ------------
The accompanying notes are an integral part of these financial statements. S-40 MORGAN STANLEY DEAN WITTER SPECTRUM SERIES STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE QUARTER ENDED MARCH 31, 2000 (UNAUDITED) AND FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
UNITS OF PARTNERSHIP LIMITED GENERAL INTEREST PARTNERS PARTNER TOTAL --------------- -------------- ------------ ------------ $ $ $ MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P. Partners' Capital, December 31, 1996......... 4,229,101.851 44,645,423 473,454 45,118,877 Offering of Units............................ 1,956,789.313 22,377,135 150,000 22,527,135 Net Loss..................................... -- (1,054,657) (10,222) (1,064,879) Redemptions.................................. (668,003.709) (7,485,552) -- (7,485,552) --------------- -------------- ------------ ------------ Partners' Capital, December 31, 1997......... 5,517,887.455 58,482,349 613,232 59,095,581 Offering of Units............................ 1,610,245.841 16,662,471 80,000 16,742,471 Net Income................................... -- 4,958,188 56,907 5,015,095 Redemptions.................................. (1,031,933.595) (10,431,372) -- (10,431,372) --------------- -------------- ------------ ------------ Partners' Capital, December 31, 1998......... 6,096,199.701 69,671,636 750,139 70,421,775 Offering of Units............................ 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............................ 552,786.769 7,543,441 25,000 7,568,441 Net Loss..................................... -- (23,566,210) (249,396) (23,815,606) Redemptions.................................. (272,781.617) (3,610,071) -- (3,610,071) --------------- -------------- ------------ ------------ Partners' Capital, March 31, 2000............ 7,075,976.671 $ 86,909,522 $ 925,763 $ 87,835,285 --------------- -------------- ------------ ------------ --------------- -------------- ------------ ------------
UNITS OF PARTNERSHIP LIMITED GENERAL INTEREST PARTNERS PARTNER TOTAL --------------- -------------- ------------ ------------ $ $ $ MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P. Partners' Capital, December 31, 1996......... 8,300,169.234 111,852,280 1,133,349 112,985,629 Offering of Units............................ 5,034,287.188 69,082,458 600,000 69,682,458 Net Income................................... -- 11,589,197 117,887 11,707,084 Redemptions.................................. (899,755.684) (12,424,664) -- (12,424,664) --------------- -------------- ------------ ------------ Partners' Capital, December 31, 1997......... 12,434,700.738 180,099,271 1,851,236 181,950,507 Offering of Units............................ 4,731,996.876 69,886,681 565,000 70,451,681 Net Income................................... -- 22,571,217 230,153 22,801,370 Redemptions.................................. (1,342,497.646) (20,102,124) -- (20,102,124) --------------- -------------- ------------ ------------ Partners' Capital, December 31, 1998......... 15,824,199.968 252,455,045 2,646,389 255,101,434 Offering of Units............................ 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............................ 691,109.928 10,310,260 -- 10,310,260 Net Loss..................................... -- (4,135,156) (44,283) (4,179,439) Redemptions.................................. (812,550.262) (12,092,341) -- (12,092,341) --------------- -------------- ------------ ------------ Partners' Capital, March 31, 2000............ 17,906,455.759 $ 259,990,761 $ 2,803,437 $262,794,198 --------------- -------------- ------------ ------------ --------------- -------------- ------------ ------------
The accompanying notes are an integral part of these financial statements. S-41 MORGAN STANLEY DEAN WITTER SPECTRUM GLOBAL BALANCED L.P. STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED FOR THE YEARS ENDED MARCH 31, DECEMBER 31, ---------------------------- -------------------------------------------- 2000 1999 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)......... 1,802,642 (53,009) 402,310 5,577,888 3,599,516 Noncash item included in net income (loss): Net change in unrealized trading profit (loss)... (2,006,181) 870,068 1,157,073 (1,285,628) (464,966) (Increase) decrease in operating assets: Interest receivable (Dean Witter)........... (29,631) (5,691) (77,458) (48,192) (33,466) Net option premiums..... -- -- -- (458,150) 458,150 Increase (decrease) in operating liabilities: Accrued brokerage fees (Dean Witter)........... 5,342 11,971 47,054 70,079 7,615 Accrued management fees.................... 1,451 3,253 12,787 20,703 4,507 Incentive fees payable................. -- (69,730) (69,730) 69,730 -- ------------ ------------ ------------ ------------ ------------ Net cash provided by (used for) operating activities................ (226,377) 756,862 1,472,036 3,946,430 3,571,356 ------------ ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Offering of Units......... 3,106,698 3,507,842 16,319,278 17,637,965 6,527,261 (Increase) decrease in subscriptions receivable................ (21,816) (63,899) 315,143 (537,387) (434,141) Increase (decrease) in redemptions payable....... 1,269,492 201,105 549,551 3,614 (686,849) Redemptions of Units...... (4,068,643) (1,010,731) (4,771,448) (2,985,217) (3,149,796) ------------ ------------ ------------ ------------ ------------ Net cash provided by financing activities...... 285,731 2,634,317 12,412,524 14,118,975 2,256,475 ------------ ------------ ------------ ------------ ------------ Net increase in cash...... 59,354 3,391,179 13,884,560 18,065,405 5,827,831 Balance at beginning of period.................... 56,904,921 43,020,361 43,020,361 24,954,956 19,127,125 ------------ ------------ ------------ ------------ ------------ Balance at end of period.................... 56,964,275 46,411,540 56,904,921 43,020,361 24,954,956 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements. S-42 MORGAN STANLEY DEAN WITTER SPECTRUM SELECT L.P. STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED FOR THE YEARS ENDED MARCH 31, DECEMBER 31, ---------------------------- -------------------------------------------- 2000 1999 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)......... (3,137,046) (311,140) (16,694,414) 22,695,060 9,943,717 Noncash item included in net income (loss): Net change in unrealized trading profit (loss)... 4,790,955 2,656,394 1,547,990 1,192,107 (3,149,167) (Increase) decrease in operating assets: Net option premiums..... 503,106 -- (776,380) -- 18,205 Interest receivable (Dean Witter)........... (70,831) (9,022) (130,447) 46,346 (105,144) Due from Dean Witter.... -- -- -- 1,097,517 (688,191) Increase (decrease) in operating liabilities: Accrued brokerage fees (Dean Witter)........... 28,269 101,643 106,631 1,164,344 (491,315) Accrued management fees.................... 11,697 42,060 44,124 58,124 19,815 Accrued administrative expenses................ -- -- -- (72,499) (50,844) Incentive fees payable................. -- -- -- -- (348,459) Accrued transaction fees and costs............... -- -- -- -- (64,595) ------------ ------------ ------------ ------------ ------------ Net cash provided by (used for) operating activities................ 2,126,150 2,479,935 (15,902,496) 26,180,999 5,084,022 ------------ ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Offering of Units....... 11,415,053 11,547,488 51,589,367 30,297,590 12,056,614 (Increase) decrease in subscriptions receivable.............. (1,407,992) 1,837,918 2,291,656 (6,021,707) 5,365,420 Increase (decrease) in redemptions payable..... 200,132 805,003 2,824,861 (1,332,933) (97,843) Redemptions of Units.... (10,365,259) (4,554,235) (21,171,795) (19,683,455) (19,013,295) ------------ ------------ ------------ ------------ ------------ Net cash provided by (used for) financing activities................ (158,066) 9,636,174 35,534,089 3,259,495 (1,689,104) ------------ ------------ ------------ ------------ ------------ Net increase in cash...... 1,968,084 12,116,109 19,631,593 29,440,494 3,394,918 Balance at beginning of period.................... 207,251,012 187,619,419 187,619,419 158,178,925 154,784,007 ------------ ------------ ------------ ------------ ------------ Balance at end of period.................... 209,219,096 199,735,528 207,251,012 187,619,419 158,178,925 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements. S-43 MORGAN STANLEY DEAN WITTER SPECTRUM STRATEGIC L.P. STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED FOR THE YEARS ENDED MARCH 31, DECEMBER 31, ---------------------------- -------------------------------------------- 2000 1999 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)......... (23,815,606) 2,884,387 28,129,070 5,015,095 (1,064,879) Noncash item included in net income (loss): Net change in unrealized trading profit (loss)... 5,709,698 263,612 (4,264,478) (2,771,722) (2,387,258) (Increase) decrease in operating assets: Net option premiums..... (120,581) 705,904 237,299 96,477 (367,448) Interest receivable (Dean Witter)........... 19,803 (21,262) (134,335) 17,798 (59,402) Increase (decrease) in operating liabilities: Accrued brokerage fees (Dean Witter)........... (50,253) 20,529 184,395 45,565 36,599 Accrued management fees.................... (31,549) 15,375 94,670 30,719 31,436 ------------ ------------ ------------ ------------ ------------ Net cash provided by (used for) operating activities................ (18,288,488) 3,868,545 24,246,621 2,433,932 (3,810,952) ------------ ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Offering of Units....... 7,568,441 3,205,264 16,946,544 16,742,471 22,527,135 (Increase) decrease in subscriptions receivable.............. 95,295 442,658 52,093 (962,792) (168) Increase (decrease) in redemptions payable..... 502,061 336,836 448,884 (967,188) (124,372) Redemptions of Units.... (3,610,071) (1,933,488) (7,804,868) (10,431,372) (7,485,552) ------------ ------------ ------------ ------------ ------------ Net cash provided by financing activities...... 4,555,726 2,051,270 9,642,653 4,381,119 14,917,043 ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in cash...................... (13,732,762) 5,919,815 33,889,274 6,815,051 11,106,091 Balance at beginning of period.................... 97,808,328 63,919,054 63,919,054 57,104,003 45,997,912 ------------ ------------ ------------ ------------ ------------ Balance at end of period.................... 84,075,566 69,838,869 97,808,328 63,919,054 57,104,003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements. S-44 MORGAN STANLEY DEAN WITTER SPECTRUM TECHNICAL L.P. STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED FOR THE YEARS ENDED MARCH 31, DECEMBER 31, ---------------------------- -------------------------------------------- 2000 1999 1999 1998 1997 ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)......... (4,179,439) (12,927,525) (20,740,163) 22,801,370 11,707,084 Noncash item included in net income (loss): Net change in unrealized trading profit (loss)... 6,776,774 7,731,117 872,972 (6,612,556) (9,762,823) (Increase) decrease in operating assets: Net option premiums..... (74,725) -- 74,725 -- 328,955 Interest receivable (Dean Witter)........... (93,173) (3,389) (183,270) (60,123) (275,721) Increase (decrease) in operating liabilities: Accrued brokerage fees (Dean Witter)........... 64,605 110,494 120,330 341,957 320,941 Accrued management fees.................... 35,644 60,961 66,388 220,319 197,331 Incentive fees payable................. -- -- -- (139,190) 139,190 ------------ ------------ ------------ ------------ ------------ Net cash provided by (used for) operating activities................ 2,529,686 (5,028,342) (19,789,018) 16,551,777 2,654,957 ------------ ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Offering of Units......... 10,310,260 16,416,999 61,483,132 70,451,681 69,682,458 (Increase) decrease in subscriptions receivable................ 1,148,980 (1,188,949) 75,719 (1,037,012) 2,151,502 Increase in redemptions payable................... 1,543,567 1,153,566 1,718,282 330,081 325,421 Redemptions of Units...... (12,092,341) (5,846,956) (27,088,685) (20,102,124) (12,424,664) ------------ ------------ ------------ ------------ ------------ Net cash provided by financing activities...... 910,466 10,534,660 36,188,448 49,642,626 59,734,717 ------------ ------------ ------------ ------------ ------------ Net increase in cash...... 3,440,152 5,506,318 16,399,430 66,194,403 62,389,674 Balance at beginning of period.................... 251,443,755 235,044,325 235,044,325 168,849,922 106,460,248 ------------ ------------ ------------ ------------ ------------ Balance at end of period.................... 254,883,907 240,550,643 251,443,755 235,044,325 168,849,922 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements. S-45 MORGAN STANLEY DEAN WITTER SPECTRUM SERIES NOTES TO FINANCIAL STATEMENTS (INFORMATION WITH RESPECT TO 2000 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- 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. (individually, a "Partnership," or collectively, the "Partnerships") are limited partnerships organized to engage in the speculative trading of futures and forward contracts, options on futures contracts and on physical commodities, and other commodities interests, including foreign currencies, financial instruments, metals, energy and agricultural products (collectively, "futures interests"). The general partner for each Partnership is Demeter Management Corporation ("Demeter" or the "General Partner"). The non-clearing commodity broker is Dean Witter Reynolds, Inc. ("Dean Witter"), and an unaffiliated clearing commodity broker, Carr Futures Inc., provides clearing and execution services. Both Demeter and Dean Witter are wholly-owned subsidiaries of Morgan Stanley Dean Witter & Co. Spectrum Select became one of the Spectrum Series of funds effective June 1, 1998. Each outstanding unit of limited partnership interest in Dean Witter Select Futures Fund L.P. was converted into 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 to reflect this conversion. On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean Witter, Discover & Co. At that time, Dean Witter, Discover & Co. changed its corporate name to Morgan Stanley, Dean Witter, Discover & Co. 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 the General Partner and the Limited Partners based upon their proportional ownership interests. USE OF ESTIMATES -- The financial statements are prepared in accordance with generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts in the financial statements and related disclosures. Management believes that the estimates utilized in the preparation of the financial statements are prudent and reasonable. Actual results could differ from those estimates. The unaudited interim financial statements contained herein include, in the opinion of management, all of the adjustments necessary for a fair presentation of the results of operations and financial condition of the Partnerships. These financial statements should be read in conjunction with the Partnerships' December 31, 1999 annual report on Form 10-K. REVENUE RECOGNITION -- Futures interests are open commitments until settlement date. They are valued at market on a daily basis and the resulting net changes in unrealized gains and losses are reflected in the change in unrealized profit (loss) on open contracts from one period to the next in the statements of operations. Monthly, Dean Witter pays each Partnership interest income based upon 80% of its average daily "Net Assets" (as defined in the limited partnership agreements) for the month in the case of Spectrum Select, Spectrum Strategic and Spectrum Technical and 100% in the case of Spectrum Global Balanced. The interest rate is equal to a prevailing rate on U.S. Treasury bills. For purposes of such interest payments, Net Assets do not include monies due the Partnership on futures interests, but not actually received. NET INCOME (LOSS) PER UNIT -- Net income (loss) per Unit is computed using the weighted average number of units outstanding during the period. S-46 EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS -- The Partnerships' asset "Equity in futures interests trading accounts," reflected in the statement of financial condition, consists of (A) cash on deposit with Dean Witter and Carr Futures 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) the net option premiums, which represent the net of all monies paid and/or received for such option premiums. The asset or liability related to the unrealized gains or losses on forward contracts is presented as a net amount in each period due to master netting agreements. 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 Carr Futures, the sole counterparty on such contracts. The Partnerships have consistently applied their right to offset. BROKERAGE AND RELATED TRANSACTION FEES AND COSTS -- Prior to July 31, 1997, brokerage fees for Spectrum Global Balanced were accrued at a monthly rate of 11/24 of 1% of the Net Assets (a 5.5% annual rate) as of the first day of each month. From August 1, 1997 to May 31, 1998 brokerage fees were further reduced to 49/120 of 1% of the Net Assets (a 4.9% annual rate) as of the first day of the month. Effective June 1, 1998, brokerage fees were reduced to a flat-rate monthly fee of 1/12 of 4.60% of the Net Assets (a 4.60% annual rate) as of the first day of each month. Prior to June 1, 1998, brokerage commissions for Spectrum Select were accrued on a half-turn basis at 80% of Dean Witter's published non-member rates and transaction fees and costs were accrued on a half-turn basis. Brokerage commissions and transaction fees and costs were capped at 13/20 of 1% per month (a 7.8% maximum annual rate) of Spectrum Select's month-end Net Assets. Effective June 1, 1998 brokerage fees for Spectrum Select were reduced to a 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 July 31, 1997, brokerage fees for Spectrum Strategic and Spectrum Technical were accrued at a monthly rate of 33/48 of 1% of Net Assets (an 8.25% annual rate) as of the first day of each month. From August 1, 1997 to May 31, 1998, brokerage fees were accrued at 51/80 of 1% of the Net Assets (a 7.65% annual rate) as of the first day of each month. Effective June 1, 1998, brokerage fees for Spectrum Strategic and Spectrum Technical were reduced to a flat-rate monthly fee of 1/12 of 7.25% (a 7.25% annual rate) of the Net Assets as of the first day of each month. Such fees cover all brokerage fees, transaction fees and costs and ordinary administrative and continuing offering expenses. OPERATING EXPENSES -- The Partnerships incur monthly management fees, and may incur incentive fees. All common administrative and continuing offering expenses including legal, auditing, accounting, filing fees and other related expenses, are borne by Dean Witter through the brokerage fees paid by the Partnerships (effective June 1, 1998 for Spectrum Select with its change to a flat rate brokerage fee). Prior to June 1, 1998, Spectrum Select was charged all operating expenses related to its trading activities to a maximum of 1/4 of 1% annually of Spectrum Select's average month end Net Assets. Demeter was responsible for operating expenses in excess of the cap. INCOME TAXES -- No provision for income taxes has been made in the accompanying financial statements, as partners are individually responsible for reporting income or loss based upon their respective share of each Partnership's revenues and expenses for income tax purposes. DISTRIBUTIONS -- Distributions, other than redemptions of Units, are made on a pro-rata basis at the sole discretion of Demeter. No distributions have been made to date. CONTINUING OFFERING -- Units of each Partnership are offered at a price equal to 100% of the Net Asset Value per Unit as of the close of business on the last day of the month. No selling commissions or charges related to the continuing offering of Units were paid by the Limited Partners or the Partnership. Dean Witter will pay all such costs. S-47 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 Dean Witter. Redemptions must be made in whole Units, in a minimum amount of 50 Units, unless a Limited Partner is redeeming his entire interest in a Partnership. EXCHANGES -- On the last day of the first month which occurs more than six months after a person first becomes a Limited Partner in any of the Partnerships, and the end of each month thereafter, Limited Partners may exchange their investment among the Partnerships (subject to certain restrictions outlined in the Limited Partnership Agreement) without paying additional charges. DISSOLUTION OF THE PARTNERSHIP -- Spectrum Global Balanced, Spectrum Strategic and Spectrum Technical will terminate on December 31, 2035 and Spectrum Select will terminate on December 31, 2025 regardless of their financial condition at such time, or at an earlier date if certain conditions occur as defined in each Partnership's Limited Partnership Agreement. 2. RELATED PARTY TRANSACTIONS Each Partnership pays brokerage fees to Dean Witter as described in Note 1. Each Partnership's cash is on deposit with Dean Witter and Carr Futures in futures interests trading accounts to meet margin requirements as needed. Dean Witter pays interest on these funds as described in Note 1. 3. TRADING ADVISORS Demeter, on behalf of each Partnership, retains certain commodity trading advisors to make all trading decisions for the Partnerships. The trading advisors for each Partnership are as follows: Morgan Stanley Dean Witter Spectrum Global Balanced L.P. RXR, Inc. Morgan Stanley Dean Witter Spectrum Select L.P. EMC Capital Management, Inc. Rabar Market Research, Inc. Sunrise Capital Management, Inc. Morgan Stanley Dean Witter Spectrum Strategic L.P. Blenheim Investments, Inc. Allied Irish Capital Management, Ltd. Willowbridge Associates Inc. Effective April 30, 1998, A. Gary Shilling & Co., Inc. ("Shilling") was terminated as an advisor to Spectrum Strategic. The assets of the Partnership previously 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 Allied Irish Capital Management, Ltd. ("AICM"), effective June 1, 1999. Morgan Stanley Dean Witter Spectrum Technical L.P. Campbell & Company, Inc. ("Campbell") S-48 Chesapeake Capital Corporation ("Chesapeake") John W. Henry & Company, Inc. ("JWH") Compensation to the trading advisors by the Partnerships consists of a management fee and an incentive fee as follows: MANAGEMENT FEE -- The management fee is accrued at the rate of 5/48 of 1% of the Net Assets on the first day of each month (a 1.25% annual rate) for Spectrum Global Balanced. The management fee is accrued at the rate of 1/4 of 1% per month of the Net Assets allocated to each trading advisor on the first day of each month (a 3% annual rate) for Spectrum Select. Prior to June 1, 1998, the management fee was accrued at the rate of 1/4 of 1% of the Partnership's adjusted Net Assets, as defined in the Limited Partnership Agreement, as of the last day of each month (a 3% annual rate.) The management fee is accrued at the rate of 1/12 of 4% of the Net Assets allocated to each of Blenheim and Willowbridge on the first day of each month, and 1/12 of 3% of the Net Assets allocated to AICM on the first day of each month for Spectrum Strategic (annual rates of 4% and 3%, respectively). Prior to June 1, 1998, the management fee was accrued at the rate of 1/3 of 1% per month of the Net Assets allocated to each trading advisor on the first day of each month (a 4% annual rate). The management fee is accrued at the rate of 1/3 of 1% per month of the Net Assets allocated to each trading advisor on the first day of each month (a 4% annual rate) for Spectrum Technical. INCENTIVE FEE -- Spectrum Global Balanced, Spectrum Select and Spectrum Strategic each will pay a monthly incentive fee equal to 15% of trading profits experienced with respect to each trading advisor's allocated Net Assets as of the end of each calendar month. Trading profits represent the amount by which profits from futures, forwards and options trading exceed losses, after brokerage, management and incentive fees have been deducted. Prior to June 1, 1998, trading profits for Spectrum Select represented the amount by which profits from futures, forwards and options trading exceed losses, after brokerage, management, incentive, administrative and transaction fees and costs were deducted and prior to June 1, 1998, Spectrum Select paid a quarterly incentive fee to each trading advisor equal to 17.5% of trading profits. Spectrum Technical pays a monthly incentive fee equal to 15% of trading profits experienced with respect to the Net Assets allocated to Campbell and JWH and 19% of trading profits with respect to the Net Assets allocated to Chesapeake as of the end of each calendar month. Trading profits represent the amount by which profits from futures, forwards and options trading exceed losses, after brokerage, management and incentive fees have been paid. Prior to June 1, 1998, trading profits represented the amount by which profits from futures, forwards and options trading exceed losses, after brokerage, management, incentive, administrative and transaction fees and costs were paid. Prior to June 1, 1998, Spectrum Technical paid an incentive fee equal to 15% of trading profits to all trading advisors. For all Partnerships when trading losses are incurred, no incentive fee will be paid in subsequent months until all such losses are recovered. Cumulative trading losses are adjusted on a pro-rata basis for the net amount of each month's subscriptions and redemptions. 4. FINANCIAL INSTRUMENTS The Partnerships trade futures and forward contracts and options on futures contracts and on physical commodities, in interest rates, stock indices, commodities, currencies, precious and industrial metals and energy products. Futures and forwards represent contracts for delayed delivery of an instrument at a specified date and price. Risk arises from changes in the value of these contracts and the potential inability of counterparties to perform under the terms of the contracts. There are numerous factors which may significantly influence the market value of these contracts, including interest rate volatility. S-49 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" effective for fiscal years beginning after June 15, 1999. The issuance of SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No. 133," defers the required implementation of SFAS No. 133 until fiscal years beginning after June 15, 2000. However, the Partnerships elected to adopt the provisions of SFAS No. 133 for the fiscal year ended December 31, 1998. SFAS No. 133 supersedes SFAS No. 119 and No. 105, which required the disclosure of average aggregate fair values and contract/notional values, respectively, of derivative financial instruments for an entity which carries its assets at fair value. The application of SFAS No. 133 did not have a significant effect on the Partnerships' financial statements. The unrealized gains on open contracts are reported as a component of "Equity in futures interests trading accounts" on the statements of financial condition and totaled at March 31, 2000, December 31, 1999, and December 31, 1998, respectively, $2,816,295, $810,114, and $1,967,187 for Spectrum Global Balanced, $2,096,109, $6,887,064, and $8,435,054 for Spectrum Select, $3,854,115, $9,563,813, and $5,299,335 for Spectrum Strategic, and $11,259,522, $18,036,296 and $18,909,268 for Spectrum Technical. For Spectrum Global Balanced, of the $2,816,295 net unrealized gain on open contracts at March 31, 2000, $2,908,912 related to exchange-traded futures contracts and $(92,617) related to off-exchange-traded forward currency contracts. Of the $810,114 net unrealized gain on open contracts at December 31, 1999, $669,640 related to exchange-traded futures contracts and $140,474 related to off-exchange-traded forward currency contracts. Of the $1,967,187 net unrealized gain on open contracts at December 31, 1998 $2,044,752 related to exchange-traded futures contracts and $(77,565) related to off-exchange-traded forward currency contracts. For Spectrum Select, of the $2,096,109 net unrealized gain on open contracts at March 31, 2000, $2,133,905 related to exchange-traded futures and futures-styled options contracts and $(37,796) 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 contracts and $(47,976) related to off-exchange-traded forward currency contracts. Of the $8,435,054 net unrealized gain on open contracts at December 31, 1998, $8,982,276 related to exchange-traded futures contracts and $(547,222) related to off-exchange-traded forward currency contracts. For Spectrum Strategic, of the $3,854,115 net unrealized gain on open contracts at March 31, 2000, $3,854,344 related to exchange-traded futures and futures-styled options contracts and $(229) related to off-exchange-traded forward currency contracts. The $9,563,813 net unrealized gain on open contracts at December 31, 1999 and the $5,299,335 net unrealized gain on open contracts at December 31, 1998 all related to exchange-traded futures and futures-styled options contracts. For Spectrum Technical, of the $11,259,522 net unrealized gain on open contracts at March 31, 2000, $10,335,301 related to exchange-traded futures and futures-styled options contracts and $924,221 related to off-exchange-traded forward currency contracts. Of the $18,036,296 net unrealized gain on open contracts at December 31, 1999, $17,006,044 related to exchange-traded futures and future-styled options contracts and $1,030,252 related to off-exchange-traded forward currency contracts. Of the $18,909,268 net unrealized gain on open contracts at December 31, 1998, $19,606,697 related to exchange-traded futures contracts and $(697,429) related to off-exchange-traded forward currency contracts. S-50 Exchange-traded contracts and off-exchange-traded forward currency contracts held by the Partnerships at March 31, 2000, and December 31, 1999 and 1998 mature as follows:
2000 1999 1998 -------------- -------------- -------------- SPECTRUM GLOBAL BALANCED Exchange-Traded Contracts June 2000 June 2000 March 1999 Off-Exchange-Traded Forward Currency Contracts June 2000 March 2000 March 1999 SPECTRUM SELECT Exchange-Traded Contracts March 2001 December 2000 December 1999 Off-Exchange-Traded Forward Currency Contracts June 2000 March 2000 March 1999 SPECTRUM STRATEGIC Exchange-Traded Contracts December 2001 December 2001 March 2000 Off-Exchange-Traded Forward Currency Contracts April 2000 -- -- SPECTRUM TECHNICAL Exchange-Traded Contracts March 2001 December 2000 December 1999 Off-Exchange-Traded Forward Currency Contracts June 2000 March 2000 March 1999
The Partnerships also have credit risk because either Dean Witter or Carr Futures act as the futures commission merchants or the counterparties, with respect to most of the Partnerships' assets. Exchange-traded futures and futures-styled options contracts are marked to market on a daily basis, with variations in value settled on a daily basis. Each of Dean Witter and Carr Futures, as a futures commission merchant for each Partnership's exchange-traded futures and futures-styled options contracts, are required, pursuant to regulations of the Commodity Futures Trading Commission, to segregate from their own assets and for the sole benefit of their commodity customers, all funds held by them with respect to exchange-traded futures and futures-styled options contracts, including an amount equal to the net unrealized gain on all open futures and futures-styled options contracts, which funds, in the aggregate, totaled at March 31, 2000, December 31, 1999, and December 31, 1998 respectively, $59,873,187, $57,574,561, and $45,065,113 for Spectrum Global Balanced, $211,353,001, $214,186,052, and $196,601,695 for Spectrum Select, $87,929,910, $107,372,141, and $69,218,389 for Spectrum Strategic and $265,219,208, $268,449,799, and $254,651,022 for Spectrum Technical. With respect to the Partnerships' off-exchange-traded forward currency contracts, there are no daily settlements of variations in value nor is there any requirement that an amount equal to the net unrealized gain on open forward contracts be segregated. With respect to those off-exchange-traded forward currency contracts, the Partnerships are at risk to the ability of Carr Futures, the sole counterparty on all of such contracts, to perform. Each partnership has a netting agreement with Carr Futures. These agreements, which seek to reduce both the partnerships' and Carr Futures' exposure on off-exchange-traded forward currency contracts, should materially decrease the partnerships' credit risk in the event of Carr Futures' bankruptcy or insolvency. Carr Futures' parent, Credit Agricole Indosuez, has guaranteed to the Partnerships payment of the net liquidating value of the transactions in the Partnerships' account with Carr Futures (including foreign currency contracts). 5. LEGAL MATTERS The class actions first filed in 1996 in California and in New York State courts were each dismissed in 1999. On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported class actions were filed in the Superior Court of the State of California, County of Los Angeles, on behalf of all purchasers of interests in limited partnership commodity pools sold by Dean Witter. Named defendants include Dean Witter, Demeter, Dean Witter Futures and Currency Management Inc., Morgan Stanley Dean Witter & Co. (all such parties referred to hereafter as the "Dean Witter S-51 Parties"), Spectrum Select (under its original name) and certain other limited partnership commodity pools of which Demeter is the general partner, and certain trading advisors to these pools. On June 16, 1997, the plaintiffs in the above actions filed a consolidated amended complaint, alleging, among other things, that the defendants committed fraud, deceit, negligent misrepresentation, various violations of the California Corporations Code, intentional and negligent breach of fiduciary duty, fraudulent and unfair business practices, unjust enrichment, and conversion in the sale and operation of the various limited partnerships commodity pools. The court entered an order denying class certification on August 24, 1999. On September 24, 1999, the court entered an order dismissing the case without prejudice on consent. Similar purported class actions were also filed on September 18 and 20, 1996 in the Supreme Court of the State of New York, New York County, and on November 14, 1996 in the Superior Court of the State of Delaware, New Castle County, against the Dean Witter Parties and certain trading advisors on behalf of all purchasers of interests in various limited partnership commodity pools sold by Dean Witter. 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 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. In addition, on December 16, 1997, upon motion of the plaintiffs, the action pending in the Superior Court of the State of Delaware was voluntarily dismissed without prejudice. 6. SUBSEQUENT EVENTS (UNAUDITED) On March 3, 2000, the plaintiffs in the New York action referred to in Note 5 above filed an appeal of the order dismissing the consolidated complaint. Effective April 14, 2000, Spectrum Strategic terminated Willowbridge Associates Inc. as a trading advisor. In June 2000, Eclipse Capital Management, Inc. will be added as a trading advisor for Spectrum Strategic. Commencing in June 2000, the General Partner will transfer the futures and options clearing for each Spectrum Series partnership from Carr Futures Inc. to Morgan Stanley & Co. Incorporated, an affiliate of the general partner, with the exception of trades on the London Metal Exchange, which will be cleared by Morgan Stanley & Co. International Limited, also an affiliate of the general partner. S-52 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Demeter Management Corporation We have audited the accompanying statements of financial condition of Demeter Management Corporation (the "Company"), a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co., as of November 30, 1999 and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of financial condition is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of financial condition. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of financial condition presentation. We believe that our audits of the statements of financial condition provide a reasonable basis for our opinion. In our opinion, such statements of financial condition present fairly, in all material respects, the financial position of Demeter Management Corporation at November 30, 1999 and 1998 in conformity with generally accepted accounting principles. January 21, 2000 New York, New York S-53 DEMETER MANAGEMENT CORPORATION (WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.) STATEMENTS OF FINANCIAL CONDITION
NOVEMBER 30, FEBRUARY 29, ----------------------------- 2000 1999 1998 ------------ ------------ ------------ $ $ $ (UNAUDITED) ASSETS Investments in affiliated partnerships (Note 2) 17,997,295 17,825,316 16,959,248 Income taxes receivable 337,254 803,778 708,505 Receivable from affiliated partnerships 20,798 20,428 25,716 ------------ ------------ ------------ Total Assets 18,355,347 18,649,522 17,693,469 ------------ ------------ ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES: Payable to Morgan Stanley Dean Witter & Co. 12,676,196 13,033,208 11,648,971 Accrued expenses 9,117 29,293 62,198 ------------ ------------ ------------ Total Liabilities 12,685,313 13,062,501 11,711,169 ------------ ------------ ------------ STOCKHOLDER'S EQUITY: Common stock, no par value: Authorized 1,000 shares; Issued and outstanding 100 shares at stated value of $500 per share 50,000 50,000 50,000 Additional paid-in capital 123,170,000 123,170,000 111,170,000 Retained earnings 5,520,034 5,437,021 5,832,300 ------------ ------------ ------------ 128,740,034 128,657,021 117,052,300 Less: Notes receivable from Morgan Stanley Dean Witter & Co. (123,070,000) (123,070,000) (111,070,000) ------------ ------------ ------------ Total Stockholder's Equity 5,670,034 5,587,021 5,982,300 ------------ ------------ ------------ Total Liabilities and Stockholder's Equity 18,355,347 18,649,522 17,693,469 ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements. S-54 DEMETER MANAGEMENT CORPORATION (WHOLLY-OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER & CO.) NOTES TO STATEMENTS OF FINANCIAL CONDITION (INFORMATION WITH RESPECT TO 2000 IS UNAUDITED) 1. INTRODUCTION AND BASIS OF PRESENTATION Demeter Management Corporation ("Demeter") is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. Effective February 19, 1998 Morgan Stanley, Dean Witter, Discover & Co. changed its corporate name to Morgan Stanley Dean Witter & Co. Demeter manages the following commodity pools as sole general partner: Dean Witter Cornerstone Fund II, Dean Witter Cornerstone Fund III, Dean Witter Cornerstone Fund IV, Columbia Futures Fund, Dean Witter Diversified Futures Fund Limited Partnership, Dean Witter Diversified Futures Fund II L.P., Dean Witter Diversified Futures Fund III L.P., Dean Witter Multi-Market Portfolio L.P., Dean Witter Principal Plus Fund L.P., Dean Witter Principal Plus Fund Management L.P., Dean Witter Portfolio Strategy Fund L.P., Dean Witter Global Perspective Portfolio L.P., Dean Witter World Currency Fund L.P., Dean Witter Institutional Account II L.P., DWFCM International Access Fund L.P., Morgan Stanley Dean Witter Spectrum Global Balanced L.P., Morgan Stanley Dean Witter Spectrum Strategic L.P., Morgan Stanley Dean Witter Spectrum Technical L.P., Morgan Stanley Dean Witter Spectrum Select L.P., Morgan Stanley Tangible Asset Fund L.P. (to be renamed Morgan Stanley Dean Witter Spectrum Commodity L.P.), Morgan Stanley Dean Witter/Chesapeake L.P., DWR Institutional Balanced Portfolio Account III L.P., Morgan Stanley Dean Witter/JWH Futures Fund L.P., Morgan Stanley Dean Witter/Market Street Futures Fund L.P., Morgan Stanley Dean Witter Charter Graham L.P., Morgan Stanley Dean Witter Charter Millburn L.P., and Morgan Stanley Dean Witter Charter Welton L.P. Each of the commodity pools is a limited partnership organized to engage in the speculative trading of commodity futures contracts, forward contracts on foreign currencies and other commodity interests. The financial statements are prepared in accordance with generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts in the financial statements and related disclosures. Management believes that the estimates utilized in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The unaudited interim statement of financial condition contained herein includes, in the opinion of management, all adjustments necessary for a fair presentation of the statement of financial condition of Demeter. On July 31, 1997, Demeter entered into a limited partnership agreement as general partner in Morgan Stanley Tangible Asset Fund. On November 4, 1997, Morgan Stanley Tangible Asset Fund registered with the Securities and Exchange Commission 5,000,000 units and began trading on January 2, 1998. Units were made available to investors in a public offering that ended March 12, 1998 ("Offering Period"). Subsequently, Morgan Stanley Tangible Asset Fund, Demeter, the trading advisor and Dean Witter Reynolds agreed to extend the Offering Period until no later than October 16, 1998 ("Extended Offering Period"), and offered to the public unsold units remaining at the end of the Offering Period. In January of 1998, Demeter entered into a limited partnership agreement as general partner in Morgan Stanley Dean Witter/Market Street Futures Fund, which offers units to investors in a continuing private offering. The fund began trading on October 1, 1998. On April 20, 1998, Dean Witter Spectrum Balanced L.P. changed its name to Dean Witter Spectrum Global Balanced L.P. and subsequently on April 30, 1999, changed it to Morgan Stanley Dean Witter Spectrum Global Balanced L.P. S-55 On April 20, 1998, Dean Witter Select Futures Fund L.P. ("DWSF") changed its name to Dean Witter Spectrum Select L.P. Effective May 1, 1998 Spectrum Select became part of the Spectrum family of funds and consequently revised its fee structure, instituted an exchange provision with other funds in the Spectrum family and is offered to investors in a continuing public offering. On April 30, 1999, DWSF changed its name to Morgan Stanley Dean Witter Spectrum Select L.P. On April 30, 1998, Demeter ceased trading activities in Dean Witter Institutional Account II and subsequently distributed its net assets. On May 11, 1998, Demeter registered with the SEC 5,000,000 additional units of Dean Witter Spectrum Technical L.P. ("DWST") and 1,500,000 units of Spectrum Select, both of which are being offered to investors in a continuing public offering with previously registered units of the other Spectrum funds. On April 30, 1999, DWST changed its name to Morgan Stanley Dean Witter Spectrum Technical, L.P. On July 15, 1998, Demeter entered into a limited partnership agreement as general partner in the Morgan Stanley Dean Witter Charter Series. The three partnerships that comprise the Charter Series are Morgan Stanley Dean Witter Charter Graham L.P., Morgan Stanley Dean Witter Charter Millburn L.P. and Morgan Stanley Dean Witter Charter Welton L.P. On July 29, 1998, the Charter Series individually registered with the SEC 3,000,000 units of Charter Graham, 3,000,000 units of Charter Millburn and 3,000,000 units of Charter Welton to be offered to investors for a limited time in a public offering. Charter Graham, Charter Millburn and Charter Welton each commenced trading on March 1, 1999. On September 30, 1998, Demeter ceased trading activities in Dean Witter Institutional Balanced Portfolio Account III, and subsequently distributed its net assets. On February 3, 1999, DWR Chesapeake L.P. changed its name to Morgan Stanley Dean Witter/ Chesapeake L.P. On February 3, 1999, DWR/JWH Futures Fund L.P. changed its name to Morgan Stanley Dean Witter/JWH Futures Fund L.P. On April 30, 1999, Dean Witter Spectrum Strategic L.P. changed its name to Morgan Stanley Dean Witter Spectrum Strategic L.P. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INCOME TAXES -- The results of operations of Demeter are included in the consolidated federal income tax return of Morgan Stanley Dean Witter & Co., computed on a separate company basis and due to Morgan Stanley Dean Witter & Co. 3. INVESTMENTS IN AFFILIATED PARTNERSHIPS The limited partnership agreement of each commodity pool requires Demeter to maintain a general partnership interest in each partnership, generally in an amount equal to, but not less than 1 percent of the aggregate capital contributed to the partnership by all partners. The total assets, liabilities and partners' capital of all the funds managed by Demeter at February 29, 2000, and November 30, 1999 and 1998 were as follows:
NOVEMBER 30, FEBRUARY 29, ---------------------------------- 2000 1999 1998 -------------- -------------- -------------- $ $ $ Total assets.......................... 1,348,402,633 1,355,594,817 1,316,093,947 Total liabilities..................... 33,756,305 28,406,267 21,644,069 Total partners' capital............... 1,314,646,328 1,327,188,550 1,294,449,878
Demeter's investments in such limited partnerships are carried at market value. S-56 4. PAYABLE TO MORGAN STANLEY DEAN WITTER & CO. The payable to Morgan Stanley Dean Witter & Co. is primarily for amounts due for the purchase of partnership investments, income tax payments made by Morgan Stanley Dean Witter & Co. on behalf of Demeter and the cumulative results of operations. 5. NET WORTH REQUIREMENT At February 29, 2000, November 30, 1999, and November 30, 1998, Demeter held non-interest bearing notes from Morgan Stanley Dean Witter & Co. that were payable on demand. These notes were received in connection with additional capital contributions aggregating $123,070,000 at February 29, 2000, $123,070,000 at November 30, 1999, and $111,070,000 at November 30, 1998. The limited partnership agreement of each commodity pool requires Demeter to maintain its net worth at an amount not less than 10% of the capital contributions by all partners in each pool in which Demeter is the general partner (15% if the capital contributions to any partnership are less than $2,500,000, or $250,000, whichever is less). In calculating this requirement, Demeter's interests in each limited partnership and any amounts receivable from or payable to such partnerships are excluded from net worth. Notes receivable from Morgan Stanley Dean Witter & Co. are included in net worth for purposes of this calculation. 6. LITIGATION The class actions first filed in 1996 in California and in New York State courts were each dismissed in 1999. On September 6, 10, and 20, 1996, and on March 13, 1997, similar purported class actions were filed in the Superior Court of the State of California, County of Los Angeles, on behalf of all purchasers of interests in limited partnership commodity pools sold by Dean Witter. Named defendants include Dean Witter, Demeter, Dean Witter Futures & Currency Management Inc., Morgan Stanley Dean Witter & Co. (all such parties referred to hereafter as the "Morgan Stanley Dean Witter Parties"), certain limited partnership commodity pools of which Demeter is the general partner, and certain trading advisors to those pools. On June 16, 1997, the plaintiffs in the above actions filed a consolidated amended complaint alleging, among other things, that the defendants committed fraud, deceit, negligent misrepresentation, various violations of the California Corporations Code, intentional and negligent breach of fiduciary duty, fraudulent and unfair business practices, unjust enrichment, and conversion in the sale and operation of the various limited partnership commodity pools. The court entered an order denying class certification on August 24, 1999. On September 24, 1999, the court entered an order dismissing the case without prejudice on consent. Similar purported class actions were also filed on September 18 and 20, 1996 in the Supreme Court of the State of New York, New York County, and on November 14, 1996 in the Superior Court of the State of Delaware, New Castle County, against the Morgan Stanley Dean Witter Parties and certain trading advisors on behalf of all purchasers of interests in various limited partnership commodity pools sold by Dean Witter. 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 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. In addition on December 16, 1997, upon motion of the plaintiffs, the action pending in the Superior Court of the State of Delaware was voluntarily dismissed without prejudice. 7. SUBSEQUENT EVENT (UNAUDITED) On March 3, 2000, the plaintiffs in the New York action referred to in Note 6 above filed an appeal of the order dismissing the consolidated complaint. S-57 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. SUPPLEMENT TO PROSPECTUS DATED MARCH 6, 2000 The Prospectus dated March 6, 2000 is supplemented by a supplement dated June 22, 2000. You should read the supplement together with the prospectus. June 22, 2000 -----END PRIVACY-ENHANCED MESSAGE-----