Morgan Stanley Tangible Asset Fund L.P.
March 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 (3 months) -4.6%
Inception-to-Date Return: -4.6%
<PAGE>
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
March 1998
Dear Limited Partner:
This report summarizes the performance and trading activity
for the Morgan Stanley Tangible Asset Fund L.P. during
March. The Net Asset Value per Unit as of March 31, 1998
was 9.54, up 0.11% 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
<PAGE>
Morgan Stanley Tangible Asset Fund L.P.
Monthly Report of the Trading Manager
March 1998
Natural gas, copper and sugar contributed to the positive
results for the month. Despite its light usage this winter,
natural gas moved higher in anticipation of a warm summer
and the related increase in electric utility demand. Copper
rose as robust demand in North America and Europe coupled
with strong buying by China in response to increased
spending on infrastructure improvements, caused stockpiles
to move lower at a time when many producers have been forced
to shutdown high-cost mines and delay expansion plans.
Sugar moved higher on weather related concerns on crops in
Brazil, China and Cuba.
With its news commanding the center stage for much of the
month, it may be surprising to some that the energy sector
did not contribute to the positive results in March. Until
recently, supply and demand fundamentals, which began to
deteriorate at the end of October 1997, have offered little
sign of relieving the dramatic price declines experienced by
the petroleum sector. Importantly, as we mentioned in our
shareholder letter last month, the economic implications of
low prices create conditions which result in upward price
pressure as producers and consumers begin to adjust their
behavior in response to this growing disequilibrium (in this
case, one of supply overshadowing demand).
The confluence of events, which included concerns over the
fallout of the currency crisis developing Asia, abnormally
warm temperatures in much of the U.S. and Europe during the
winter heating season, the decision of OPEC in late 1997 to
increase production by 10% and the decision by the United
Nations to allow Iraq to more than double its sale of oil
for humanitarian purposes, began to take its toll on
producers this month. In response to the dramatically lower
prices, both OPEC and certain non-OPECC countries announced
intentions to cut global supply/demand balance and end the
six-month price slump. The market rallied quickly,
providing confirmation that such cuts were the type of
action necessary to unwind the "supply overhang". However,
the market adopted a more cautious tone as time went on and
is now looking for actual production cuts to support the
words of the world's key producer before offering price
stability at higher levels. The significance of the
production reduction announcement was sufficient to reverse
most of the weakness experienced earlier in the month, with
crude oil and refine products, however, still finishing
March 1% to 2% lower in price than they were at the start of
the month.
Morgan Stanley Commodities Management, Inc.
Note: Investors are cautioned that past results are not
necessarily indicative of future results.
<PAGE>
<TABLE>
Morgan Stanley Tangible Fund L.P.
Statement of Operations
For the Month Ended March 31, 1998
(Unaudited)
<CAPTION>
Percent of February 28,
1998
Amount Net Asset Value
$ %
REVENUES
<S> <C> <C>
Trading Profit (Loss):
Realized (1,091,479) (3.25)
Net change in unrealized 1,208,852 3.60
Total Trading Results 117,373 .35
Interest Income (DWR.) 121,113 .36
Total Revenues 238,486 .71
EXPENSES
Brokerage fee (DWR/MS) 102,169 .31
Management fee (MSCM) 69,979 .21
Service fee (Demeter) 27,991 .08
Total Expenses 200,139 .60
NET INCOME 38,347 .11
</TABLE>
<PAGE>
<TABLE>
Statement of Changes in Net Asset Value
For the Month Ended March 31, 1998
(Unaudited)
<CAPTION>
Percent of
February 28, 1998
Amount Per Unit
Net Asset Value
$ $
$
<S> <C> <C> <C>
Subscriptions
February 28, 1998
(3,523,831.065 Units) 33,589,771 9.53
100.00
Net Income 38,347 .01
.11
Subscriptions
(564,568.066 Units) 5,385,979 9.54
16.04
Net Asset Value
March 31, 1998
(4,088,399.131 Units) 39,014,097 9.54
116.15
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
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 & Co.("MSDW").
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 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., MSDW (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 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
<PAGE>
Morgan Stanley Tangible Asset Fund L.P.
Notes to Financial Statements-(Concluded)
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.
