Morgan Stanley Tangible Asset Fund L.P.
January 1998
Monthly Report
Morgan Stanley Tangible Asset fund L.P.
Historical Fund Performance
Presented below is the percentage change in Net Asset Value
per Unit from the start of each calendar year the Fund has
traded. Also provided is the inception-to-date return for
the Fund. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF
FUTURE RESULTS.
Year Return
1998 (1 month) 1.3%
Inception-to-Date Return: 1.3%
Demeter Management Corporation
Two World Trade Center, 62nd Floor
New York, NY 10048
Telephone (212) 392-8899
Morgan Stanley Tangible Asset Fund L.P.
Monthly Report
January 1998
Dear Limited Partner:
This marks the first monthly report to Limited Partners for
the Morgan Stanley Tangible Asset Fund L.P. Each month a
report providing a brief synopsis of market activity and
unaudited financial statements will be distributed to all
Limited Partners. An annual report providing audited
financial statements and a summary of trading activity for
the calendar year will also be provided at the conclusion of
each calendar year.
The Morgan Stanley Tangible Asset Fund L.P. began trading
January 2, 1998 at a Net Asset Value per Unit of $10.00 and
as of January 31, 1998 was $10.13, up 1.27% for the month.
Should you have any questions concerning this report, please
feel free to contact Demeter Management Corporation at Two
World Trade Center, 62nd Floor, New York, NY 10048, or your
Dean Witter Account Executive.
I hereby affirm, that to the best of my knowledge and
belief, the information contained in this report is accurate
and complete. Past performance is not a guarantee of future
results.
Sincerely,
Mark J. Hawley
President
Demeter Management Corporation
General Partner
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Morgan Stanley Tangible Asset Fund L.P.
Monthly Report of the Trading Manager
January 1998
The Morgan Stanley Tangible Asset Fund L.P. was up 1.27% for
the month of January, its first month of trading.
The fallout from the Asian currency crisis put downward
pressure on prices of many of the worldOs commodities as
1997 drew to a close. This selling pressure continued into
the first half of January before finally abating.
While we would expect some of the longer term impact of the
Asian situation to be felt by the base metals markets due to
the large number of development projects which may be
significantly delayed or canceled, pricing in these markets
has rapidly adjusted to this lower level of expected demand.
During January the prices of most base metals moved lower.
Nickel declined during the month by 11.15%, lead lost 8.30%
of its value, tin fell by 3.92% and aluminum slipped by
1.73%.
Base metals were not alone in facing downward price pressure
as the Asian situation unfolded, but we believe revisions
with respect to estimates for Asian demand are likely to be
less severe than initially thought for most other
commodities, particularly grains and livestock.
The uncertainty surrounding developments in Asia were not
the only events impacting commodity prices during January.
Energy markets, in particular, were impacted by events from
other areas of the globe. Concerns over Iraq's refusal to
grant United Nations weapons inspectors access to certain
suspected weapons sites, and the potential military response
that such refusal might prompt, provided some support to
crude oil and refined petroleum product prices. However,
unseasonably warm weather during the month, in which almost
the entire United States experienced above average
temperatures, significantly reduced demand for energy for
heating purposes. In sum, the downward price pressure from
the atypical weather conditions dominated the market and
petroleum prices declined across the board (crude oil: -
4.54%, heating oil:
- -4.30%, unleaded gasoline: -1.64%). Both tensions with Iraq
and the warm temperatures in the United States have
continued into February, but it is not yet clear what path
energy prices will follow.
Grain markets were mixed during January.
The soybean complex fell in price in the face
of good growing conditions in South America, while wheat and
corn rose modestly with improving expectations for demand.
We are pleased to have been able to position our portfolio
to generate a gain in conditions that were unfavorable to
several of the markets we trade. We appreciate your
investment in MSTAF and look forward to the opportunities
that we believe are likely to develop in the months ahead.
Morgan Stanley Commodities Management, Inc.
Note: Investors are cautioned that past results are not
necessarily indicative of future results.
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<TABLE>
Morgan Stanley Tangible Fund L.P.
Statement of Operations
For the Month Ended January 31, 1998
(Unaudited)
<CAPTION>
Percent of Initial
Amount Net Asset Value
$ %
REVENUES
<S> <C> <C>
Trading Profit (Loss):
Realized (11,299) (.04)
Net change in unrealized 461,203 1.79
Total Trading Results 449,904 1.75
Interest Income (MS & Co.) 90,250 .35
Total Revenues 540,154 2.10
EXPENSES
Brokerage fee (DWR/MS & Co.) 78,283 .30
Incentive fee (MSCM) 59,311 .23
Management fee (MSCM) 53,619 .22
Service fee (Demeter) 21,447 .08
Total Expenses 212,660 .83
NET INCOME 327,494 1.27
</TABLE>
<TABLE>
Statement of Changes in Net Asset Value
For the Month Ended January 31, 1998
(Unaudited)
<CAPTION>
Percent of
Initial
Amount Per Unit Net Asset
Value
$ $
Subscriptions
January 2, 1998
<S> <C> <C> <C>
(2,573,686.803 Units) 25,736,868 10.00 100.00
Net Income 327,494 .13 1.27
Redemptions
(500.000 Units) (5,065) 10.13 (.02)
Net Asset Value
January 31, 1998
(2,573,186.803 Units) 26,059,297 10.13 101.25
Subscriptions
February 2, 1998
(579,549.496 Units) 5,870,837 10.13 22.81
Net Asset Value,
February 2, 1998
(3,152,736.299 Units) 31,930,134 10.13 124.06
The accompanying notes are an integral part
of these financial statements.
Morgan Stanley Tangible Asset Fund L.P. Notes to Financial
Statements
(Unaudited)
1. Summary of Significant Accounting Policies
Organization - Morgan Stanley Tangible Asset Fund L.P. (the
"Partnership") is a limited partnership organized to engage
primarily in speculative trading of futures contracts in
metals, energy and agricultural markets. The general
partner for the Partnership is Demeter Management
Corporation ("Demeter"). The commodity brokers are Morgan
Stanley & Co. Incorporated ("MS & Co.") and Morgan Stanley &
Co. International Limited ("MSIL") the "Commodity Brokers".
The trading advisor is Morgan Stanley Commodities
Management, Inc. ("MSCM"). MSCM, the commodity brokers and
Demeter are wholly-owned subsidiaries of Morgan Stanley,
Dean Witter, Discover & Co.("MSDWD").
Demeter is required to maintain a 1% minimum interest in the
equity of the Partnership and income (losses) are shared by
the General and Limited Partners based upon their
proportional ownership interests.
Basis of Accounting - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts in the
financial statements.
Revenue Recognition - MS & Co. will credit the Partnership
at each month-end with interest income as if 80% of the
Partnership's average daily Net Assets for the month were
invested at a rate based on U.S. Treasury Bills. For purpose
of such interest payments, Net Assets do not include monies
due to the Partnership on or with respect to 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.
Brokerage and Related Transaction Fees and Costs - Brokerage
fees are accrued at a monthly rate of 1/12 of 3.65% of the
Net Assets, as defined, as of the first day of each month(a
3.65% annual rate). Such fees are for all costs of
executing trades by the Partnership, including exchange
fees, clearing house fees, NFA fees, "give-ups" or transfer
fees and any costs associated with taking delivery of
commodities.
Service Fee - The Partnership will pay Demeter a monthly
service fee equal to 1/12 of 1% per month (a 1% annual rate)
of the Partnership's Net Assets, as defined, as of the first
day of each month.
Operating Expenses - The Partnership incurs monthly
management fees and may incur incentive fees as described in
Note 2. All administrative expenses are borne by Demeter.
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 on redemption of
Units, are made on a pro-rata basis at the sole discretion
of Demeter. No distributions have been made to date.
Offering of Units - Additional units of limited partnership
interest are being offered to the public at a price equal to
100% of the net asset value as of the close of business on
the last day of the month immediately preceding the closings
currently scheduled for February 2, 1998, March 2, 1998 and
April 1, 1998.
<PAGE>
Morgan Stanley Tangible Asset Fund L.P.
Notes to Financial Statements-(Continued)
Redemptions - Limited Partners may redeem some or all of
their Units at 100% of the Net Asset Value Per Unit
effective as of the last day of the sixth month following
the closing at which a person first becomes a Limited
Partner, upon five business days advance notice by
redemption form to Demeter. Thereafter, Units may be
redeemed as of the end of any month upon five business days
advance notice by redemption form to Demeter. However, any
Units redeemed at or prior to the last day of the eleventh
month after such Units were purchased will be subject to a
redemption charge to 2% of the Net Asset Value of a Unit on
the date of such redemption. Units redeemed after the last
day of the eleventh 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 per 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. Limited Partners who
obtained their units via an exchange from another DWR
sponsored commodity pool are not subject to the six month
holding period or the redemption charges.
Dissolution of the Partnership - The Partnership will
terminate on December 31, 2027 or at an earlier date if
certain conditions occur as defined in the Partnership's
Limited Partnership Agreement.
2. Related Party Transactions
The Partnership pays brokerage commissions to the Commodity
Brokers and a service fee to Demeter as described in Note 1.
The Partnership's cash is on deposit with MS & Co. and MSIL
in commodity trading accounts to meet margin requirements as
needed. MS & Co. pays interest on these funds as described
in Note 1.
Compensation to the Trading Advisor by the Partnership
consists of a management fee and an incentive fee as
follows:
Management Fee - The management fee is accrued at the rate
of 5/24 of 1% of the Net Assets on the first day of each
month (a 2.5% annual rate).
Incentive Fee - The Partnership will pay an annual incentive
fee equal to 20% of the "Trading Profits" as defined as of
the end of each calendar year. Such incentive fee is
accrued in each month in which "Trading Profits" occur. In
those months in which trading profits are negative, previous
accruals, if any, during the incentive period will be
reduced. Any accrued incentive fees with respect to Units
redeemed at the end of a month that is not the end of a
calendar year will be deducted and paid to the Trading
Advisor at the time of such redemption.
3. Legal Matters
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 Reynolds ("DWR"). Named
defendants include DWR, Demeter, Dean Witter Futures &
Currency Management Inc., MSDWD (all such parties referred
to hereafter as the "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. Similar purported class
actions were also filed on September 18 and 20, 1996, in the
Supreme
<PAGE>
Morgan Stanley Tangible Asset Fund L.P.
Notes to Financial Statements-(Continued)
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 DWR. Generally, these complaints allege, among
other things, that the defendants committed fraud, deceit,
misrepresentation, breach of fiduciary duty, fraudulent and
unfair business practices, unjust enrichment, and conversion
in connection with the sale and operation of the various
limited partnership commodity pools. The complaints seek
unspecified amounts of compensatory and punitive damages and
other relief. It is possible that additional similar
actions may be filed and that, in the course of these
actions, other parties could be added as defendants. The
Dean Witter Parties believe that they have strong defenses
to, and they will vigorously contest, the actions. Although
the ultimate outcome of legal proceedings cannot be
predicted with certainty, it is the opinion of management of
the Dean Witter Parties that the resolution of the actions
will not have a material adverse effect on the financial
condition or the results of operations of any of the Dean
Witter Parties.
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