UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from
to___________________
Commission File No. 0-25603
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-4018068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
c/o Demeter Management Corporation
Two World Trade Center, 62 Fl., New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 392-5454
_________________________________________________________________
_
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No____________
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S>
<C>
Statements of Financial Condition June 30, 2000
(Unaudited) and December 31, 1999......................... 2
Statements of Operations for the Quarters Ended
June 30, 2000 and 1999 (Unaudited).........................3
Statements of Operations for the Six Months Ended
June 30, 2000 and the Period from March 1, 1999
(commencement of operations) to June 30, 1999
(unaudited)................................................4
Statements of Changes in Partners' Capital for the
Six Months Ended June 30, 2000 and the Period from
March 1, 1999 (commencement of operations) to
June 30, 1999
(Unaudited)..................................5
Statements of Cash Flows for the Six Months Ended
June 30, 2000 and the Period from March 1,
1999 (commencement of operations) to June 30, 1999
(Unaudited)................................................6
Notes to Financial Statements (Unaudited)...............7-
12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......13-23
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ........................................23-35
Part II. OTHER INFORMATION
Item 1. Legal Proceedings......................................36
Item 2. Changes in Securities and Use of Proceeds...........36-37
Item 5. Other Information......................................37
Item 6. Exhibits and Reports on Form 8-K....................37-38
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
June 30, December 31,
2000 1999 $
$
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 20,182,482 19,067,800
Net unrealized gain on open contracts 158,989 1,070,531
Total Trading Equity 20,341,471 20,138,331
Subscriptions receivable 413,831 811,200
Interest receivable (DWR) 94,069 78,774
Total Assets 20,849,371 21,028,305
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 377,560 228,143
Accrued brokerage fees (DWR) 125,042 108,150
Accrued management fees 35,727 30,900
Total Liabilities 538,329 367,193
Partners' Capital
Limited Partners (2,252,508.264 and
1,984,358.367 Units, respectively)20,080,290 20,424,608
General Partner (25,884.600 and
22,977.618 Units, respectively) 230,752 236,504
Total Partners' Capital 20,311,042 20,661,112
Total Liabilities and Partners' Capital 20,849,371 21,028,305
NET ASSET VALUE PER UNIT 8.91 10.29
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<caption >
For the Quarters Ended June 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading profit (loss):
Realized (1,949,142)1,028
Net change in unrealized (1,004,583) 499,211
Total Trading Results (2,953,725) 500,239
Interest Income (DWR) 292,554 70,256
Total Revenues (2,661,171) 570,495
EXPENSES
Brokerage fees (DWR) 383,498 138,751
Management fees 109,571 39,643
Total Expenses 493,069 178,394
NET INCOME (LOSS) (3,154,240) 392,101
NET INCOME (LOSS) ALLOCATION
Limited Partners (3,117,539) 386,624
General Partner (36,701) 5,477
NET INCOME (LOSS) PER UNIT
Limited Partners (1.42) .42
General Partner (1.42) .42
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Period from
March 1, 1999
(commencement
For the Six Months of operations) to
Ended June 30, June 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading profit (loss):
Realized (1,661,080) (271,605)
Net change in unrealized (911,542) 439,803
Total Trading Results (2,572,622) 168,198
Interest Income (DWR)
557,154
85,163
Total Revenues (2,015,468) 253,361
EXPENSES
Brokerage fees (DWR) 756,920 164,203
Management fees 216,263
46,915
Incentive fees 89,338 _____-___
Total Expenses 1,062,521 211,118
NET INCOME (LOSS) (3,077,989) 42,243
NET INCOME (LOSS) ALLOCATION
Limited Partners (3,042,237) 41,576
General Partner (35,752) 667
NET LOSS PER UNIT
Limited Partners (1.38) (.38)
General Partner (1.38) (.38)
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 2000 and the
Period from March 1, 1999
(commencement of operations) to
June 30, 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S>
<C> <C> <C>
<C>
Partners' Capital,
March 1, 1999
Initial Offering 436,313.664 $4,303,136 $60,000 $4,363,136
Offering of Units 749
,134.133 6,916,675 80,000 6,996,675
Net Income
- 41,576 667
42,243
Partners' Capital,
June 30, 1999 1,185,447.797 $11,261,387 $140,667$11,402,054
Partners' Capital,
December 31, 19992,007,335.985 $20,424,608 $236,504 $20,661,
112
Offering of Units 563,505.568 5,638,495 30,000 5,668,495
Net Loss
- (3,042,237) (35,752)(3,077,989)
Redemptions
(292,448.689) (2,940,576) -
(2,940,576)
Partners' Capital,
June 30, 2000 2,278,392.864 $20,080,290 $230,752$20,311,042
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Period from
March 1, 1999
(commencement
For the Six Months of operations) to
Ended June 30, June 30,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S>
<C> <C>
Net income (loss) (3,077,989) 42,243
Noncash item included in net income (loss):
Net change in unrealized 911,542 (439,803)
Increase in operating assets:
Interest receivable (DWR) (15,295) (30,462)
Increase in operating liabilities:
Accrued brokerage fees (DWR) 16,892 54,972
Accrued management fees 4,827 15,706
Net cash used for operating activities (2,160,023) (357,344)
CASH FLOWS FROM FINANCING ACTIVITIES
Initial offering
- 4,363,136
Offering of Units 5,668,495 6,996,675
(Increase) decrease in subscriptions receivable 397,369
(1,354,199)
Increase in redemptions payable
149,417 -
Redemptions of Units
(2,940,576) ________- __
Net cash provided by financing activities 3,274,705 1
0,005,612
Net increase in cash 1,114,682 9,648,268
Balance at beginning of period 19,067,800_______-___
Balance at end of period 20,182,482 9,648,268
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management,
all adjustments necessary for a fair presentation of the results
of operations and financial condition of Morgan Stanley Dean
Witter Charter Graham L.P. (the "Partnership"). The financial
statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 1999 Annual
Report on Form 10-K.
1. Organization - Morgan Stanley Dean Witter Charter Graham L.P.
is a Delaware limited partnership organized to engage primarily
in the speculative trading of futures and forward contracts,
options on futures contracts and on physical commodities, and
other commodity interests, including foreign currencies,
financial instruments, metals, energy and agricultural products
(collectively, "futures interests"). The Partnership commenced
operations on March 1, 1999. The Partnership is one of the
Morgan Stanley Dean Witter Charter Series of funds, comprised of
the Partnership, Morgan Stanley Dean Witter Charter Millburn
L.P., and Morgan Stanley Dean Witter Charter Welton L.P.
The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds Inc. ("DWR") and an unaffiliated clearing commodity
broker, Carr
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Futures Inc. ("Carr"), provides clearing and execution services.
Demeter and DWR are wholly-owned subsidiaries of Morgan Stanley
Dean Witter & Co. Graham Capital Management L.P. (the "Trading
Advisor"), is the trading advisor to the Partnership.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interests trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on a rate equal to that
earned by DWR on its U.S. Treasury bill investments. The
Partnership pays brokerage fees to DWR.
3. Financial Instruments
The Partnership trades futures and forward contracts, options on
futures contracts and on physical commodities and other commodity
interests, including foreign currencies, financial instruments,
metals, energy and agricultural 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.
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities" effective for fiscal years beginning after June 15,
1999. In June, 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS no. 133", which defers the required
implementation of SFAS No. 133 until fiscal years beginning after
June 15, 2000. However, the Partnership had previously elected
to adopt the provisions of SFAS No. 133 beginning with the fiscal
year ended December 31, 1999. SFAS No. 133 supersedes SFAS No.
119 and No. 105, which required the disclosure of average
aggregate fair values and contract/notional values, respectively,
of derivative financial instruments for an entity which carries
its assets at fair value. The application of SFAS No. 133 does
not have a significant effect on the Partnership's financial
statements.
The net unrealized gains on open contracts are reported as a
component of "Equity in futures interests trading accounts" on
the statements of financial condition and totaled $158,989 and
$1,070,531 at June 30, 2000 and December 31, 1999, respectively.
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Of the $158,989 net unrealized gain on open contracts at June 30,
2000, $304,180 related to exchange-traded futures contracts and
$(145,191) related to off-exchange-traded forward currency
contracts.
Of the $1,070,531 net unrealized gain on open contracts at
December 31, 1999, $1,133,461 related to exchange-traded futures
contracts and $(62,930) related to off-exchange-traded forward
currency contracts.
Exchange-traded futures contracts held by the Partnership at June
30, 2000 and December 31, 1999 mature through December 2001 and
June 2001, respectively. Off-exchange-traded forward currency
contracts held by the Partnership at June 30, 2000 and December
31, 1999 mature through August 2000 and April 2000, respectively.
The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.
The Partnership also has credit risk because DWR and Carr act as
the futures commission merchants or the counterparties with
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
respect to most of the Partnership's assets. Exchange-traded
futures and futures-styled options contracts are marked to market
on a daily basis, with variations in value settled on a daily
basis. Each of DWR and Carr, as a futures commission merchant for
the Partnership's exchange-traded futures and futures-styled
options contracts, are required, pursuant to regulations of the
Commodity Futures Trading Commission ("CFTC"), to segregate from
their own assets, and for the sole benefit of their commodity
customers, all funds held by them with respect to exchange-traded
futures and futures-styled options contracts, including an amount
equal to the net unrealized gain on all open futures and futures-
styled options contracts, which funds, in the aggregate, totaled
$20,486,662 and $20,201,261 at June 30, 2000 and December 31,
1999, respectively. With respect to the Partnership's off-
exchange-traded forward currency contracts, there are no daily
settlements of variations in value nor is there any requirement
that an amount equal to the net unrealized gain on open forward
contracts be segregated. With respect to those off-exchange-
traded forward currency contracts, the Partnership is at risk to
the ability of Carr, the sole counterparty on all of such
contracts, to perform. The Partnership has a netting agreement
with Carr. This agreement which seeks to reduce both the
Partnership's and Carr's exposure on off-exchange-traded forward
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
currency contracts, should materially decrease the Partnership's
credit risk in the event of Carr's bankruptcy or insolvency.
Carr's parent, Credit Agricole Indosuez, has guaranteed to the
Partnership payment of the net liquidating value of the
transactions in the Partnership's account with Carr (including
foreign currency contracts).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker in separate futures
trading accounts established for the Trading Advisor, which
assets are used as margin to engage in trading. The assets are
held in either non-interest-bearing bank accounts or in
securities and instruments permitted by the CFTC for investment
of customer segregated or secured funds. The Partnership's
assets held by the commodity brokers may be used as margin solely
for the Partnership's trading. Since the Partnership's sole
purpose is to trade in futures, forwards, and options, it is
expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership's investment in futures, forwards, and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be
taken nor liquidated unless traders are willing to effect trades
at or within the limit. Futures prices have occasionally moved
the daily limit for several consecutive days with little or no
<PAGE>
trading. These market conditions could prevent the Partnership
from promptly liquidating its futures or options contracts and
result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources. The Partnership does not have, or expect to
have, any capital assets. Redemptions, exchanges and sales of
additional units of limited partnership interest ("Unit(s)") in
the future will affect the amount of funds available for
investments in futures interests in subsequent periods. It is
not possible to estimate the amount and therefore, the impact of
future redemptions of Units.
<PAGE>
Results of Operations
General. The Partnership's results depend on its Trading Advisor
and the ability of the Trading Advisor's trading programs to take
advantage of price movements or other profit opportunities in the
futures, forwards and options markets. The following presents a
summary of the Partnership's operations for the quarter and six
months ended June 30, 2000 and for the quarter ended June 30,
1999 and the period from March 1, 1999 (commencement of
operations) to June 30, 1999, respectively, and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Advisor trades in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Advisor or will be profitable in the
future. Consequently, the results of operations of the
Partnership are difficult to discuss other than in the context of
its Trading Advisor's trading activities on behalf of the
Partnership as a whole and how the Partnership has performed in
the past.
For the Quarter and Six Months Ended June 30, 2000
For the quarter ended June 30, 2000, the Partnership recorded
total trading losses net of interest income of $2,661,171 and
posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 11.0% were recorded in the
global interest rate futures markets primarily during April and
<PAGE>
early May from long positions in U.S. interest rate futures as
prices declined amid fears of additional interest rate hikes by
the U.S. Federal Reserve to snuff out inflationary pressures.
Newly established short positions incurred additional losses
later in May and during June as prices moved higher amid signs
that U.S. economic growth has slowed and the prospects of
additional interest rate hikes by the Federal Reserve were
fading. In the agricultural markets, losses of approximately
5.3% were experienced throughout a majority of the quarter from
long positions in corn and soybean futures as prices declined due
to forecasts for heavy rain in the U.S. corn and soy growing
regions. In the global stock index futures markets, losses of
approximately 3.1% were recorded primarily during April from long
NASDAQ 100, Russell 1000 and S&P 500 Index futures positions as
domestic equity prices declined following the release of an
unexpected jump in the Consumer Price Index on fears of inflation
and concerns that the Federal Reserve may need to raise interest
rates more aggressively. In the metals markets, losses of
approximately 1.2% were experienced primarily during April and
May from long positions in copper, zinc and nickel as most base
metals prices moved lower amid a technically based sell-off. In
the currency markets, losses of approximately 0.8% were incurred
during April from long positions in the Japanese yen as the value
of the yen weakened versus the U.S. dollar amid fears of
additional Bank of Japan intervention. These losses were
partially offset by gains of approximately 6.4% recorded in the
<PAGE>
energy markets primarily during May and June from long futures
positions in crude oil and its related products as the previous
upward movement in oil prices reemerged amid rising concerns
regarding supplies and production levels. Additional gains were
recorded during May from long positions in natural gas futures as
prices continued their upward trend, as data released by the
American Gas Association further confirmed fears that inventory
levels remain low. In the soft commodities markets, profits of
approximately 1.3% were recorded primarily during May and June
from long sugar futures positions as prices moved higher due to
strong demand and declining production from Brazil. Total
expenses for the three months ended June 30, 2000 were $493,069,
resulting in a net loss of $3,154,240. The value of a Unit
decreased from $10.33 at March 31, 2000 to $8.91 at June 30,
2000.
For the six months ended June 30, 2000, the Partnership recorded
total trading losses net of interest income of $2,015,468 and
posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 13.2% were recorded in the
global interest rate futures markets primarily during February
from short positions in short and medium-term U.S. Treasury note
futures as prices rose in late February as the U.S. stock markets
fluctuated and investors shifted assets to short-term Treasury
notes from stocks and 30-year bonds. During April and early May,
additional losses were recorded from long positions in U.S.
<PAGE>
interest rate futures as prices declined amid fears of additional
interest rate hikes by the U.S. Federal Reserve. Newly
established short positions incurred additional losses later in
May and during June as prices moved higher amid signs that U.S.
economic growth had slowed and the prospects of additional
interest rate hikes by the Federal Reserve were fading. In the
agricultural markets, losses of approximately 4.1% were
experienced throughout a majority of the second quarter from long
positions in corn and soybean futures as prices declined due to
forecasts for heavy rain in the U.S. corn and soy growing
regions. In the global stock index futures markets, losses of
approximately 3.1% were recorded primarily during April from long
NASDAQ 100, Russell 1000 and S&P 500 Index futures positions as
domestic equity prices declined following the release of an
unexpected jump in the Consumer Price Index, fears of inflation
and concerns that the Federal Reserve may need to raise interest
rates more aggressively. In the metals markets, losses of
approximately 2.6% were experienced primarily from long aluminum
and copper futures positions as prices reversed lower in early
February due primarily to technically based selling. During
April and May, additional losses were experienced from long
positions in copper, zinc and nickel as most base metals prices
moved lower amid a technical sell-off. These losses were
partially offset by gains of approximately 8.1% recorded
primarily during January and March in the energy markets from
long futures positions in crude oil and its related products as
<PAGE>
prices increased on concerns about future output levels from the
world's leading producer countries amid dwindling stockpiles and
increasing demand. Gains were also recorded during May and June
from long futures positions in crude oil as the previous upward
movement in oil prices reemerged amid rising concerns regarding
supplies and production levels. Additional gains were recorded
during May from long positions in natural gas futures as prices
continued their upward trend, as data released by the American
Gas Association further confirmed fears that inventory levels
remain low. In the currency markets, gains of approximately 2.8%
were produced primarily during January from short positions in
the euro and Swiss franc as the value of these currencies
weakened versus the U.S. dollar skepticism about Europe's
economic outlook and lack of public support for the economy from
European officials. Gains were also recorded during April from
short positions in the euro as its value weakened versus the U.S.
dollar due to the European Central Bank's ("ECB") passive stance
towards its currency and increasing concern that the ECB should
be more aggressive in combating inflation. Total expenses for
the six months ended June 30, 2000 were $1,062,521, resulting in
a net loss of $3,077,989. The value of a Unit decreased from
$10.29 at December 31, 1999 to $8.91 at June 30, 2000.
For the Quarter and Four Months Ended June 30, 1999
For the quarter ended June 30, 1999, the Partnership recorded
total trading revenues including interest income of $570,495 and
<PAGE>
posted an increase in Net Asset Value per Unit. The most
significant gains of approximately 3.5% were recorded in the
global interest rate futures markets primarily during June from
short positions in European interest rate futures as prices
declined due to dampened sentiment regarding the European
Monetary Union and fears of an interest rate hike in the U.S.
Additional gains were recorded from short positions in U.S.
interest rate futures as domestic bond prices declined during May
and June due primarily to fears of a tighter Federal Reserve
monetary policy and an interest rate hike in the U.S. In
energies, profits of approximately 1.6% were recorded primarily
from long positions in crude oil futures as oil prices climbed
higher during April and June amid declining inventories and
growing global demand. Additional gains were recorded in this
market complex from long positions in natural gas futures as
prices moved higher during April as storage reports showed supply
stocks within market expectations. In global stock index
futures, profits of approximately 0.4% were recorded primarily
during June from long positions from Nikkei Index futures as
Japanese equity prices rose in response to encouraging economic
data out of Japan. Smaller gains of approximately 0.4% were
recorded in soft commodities primarily from short cocoa futures
positions as cocoa prices declined to a 5 1/2 year low during April
in reaction to reports of a supply surplus, declining demand and
a promising West African crop. In currencies, small gains were
recorded from short positions in the euro and Swiss franc, as the
<PAGE>
value of these currencies declined throughout the quarter, more
than offset losses recorded during June from short positions in
the South African rand and Japanese yen. These gains were
partially offset by losses of approximately 0.4% incurred
primarily during late May and early June in livestock from short
cattle futures positions as prices increased on firm boxed beef
prices and stronger-than-expected demand. Smaller losses of
approximately 0.2% were experienced in the metals markets
primarily during May from long positions in base metal futures,
as prices reversed lower amid large supplies and low demand, more
than offset profits recorded from short positions in gold
futures, as gold prices plummeted during May and June in
participation of the British Treasury's July auction. Total
expenses for the three months ended June 30, 1999 were $178,394,
resulting in net income of $392,101. The value of a Unit
increased from $9.20 at March 31, 1999 to $9.62 at June 30, 1999.
For the period from March 1, 1999 (commencement of operations) to
June 30, 1999, the Partnership recorded total trading revenues
including interest income of $253,361. The most significant net
trading losses of approximately 2.3% were recorded primarily
during March in the agricultural markets from short corn futures
positions as prices moved higher in a technical and seasonally
driven rally, as well as from a lack of heavy producer selling.
Losses of approximately 0.4% were incurred in the livestock
markets primarily from short cattle futures positions as prices
<PAGE>
increased during late May and early June on firm boxed beef
prices and stronger-than-expected demand. In metals, losses of
approximately 0.8% were experienced primarily from long positions
in base metal futures as prices reversed lower during May amid
abundant supplies and weak demand. In currencies, losses of
approximately 0.4% were recorded primarily from short positions
in the Japanese yen as the value of the yen strengthened versus
the U.S. dollar during mid June on optimism regarding the
Japanese economy. Smaller currency losses were incurred from
short South African rand positions as the value of the rand also
strengthened versus the dollar during June as nervousness about
the South African election assuaged. These losses were mitigated
by gains of approximately 3.2% recorded in the global interest
rate futures markets primarily from short positions in European
interest rate futures as prices declined during June due to
dampened sentiment regarding the European Monetary Union and
fears of an interest rate hike in the U.S. Additional gains were
recorded from short positions in U.S. interest rate futures as
domestic bond prices declined during May and June due primarily
to fears of a tighter Federal Reserve monetary policy and an
interest rate hike in the U.S. In energies, profits of
approximately 1.4% were recorded primarily from long positions in
crude oil futures as oil prices climbed higher during April and
June amid declining inventories and growing global demand.
Smaller gains of approximately 0.6% were recorded primarily
during June from long positions in Nikkei Index futures as
<PAGE>
Japanese equity prices rose in response to encouraging economic
data out of Japan. Total expenses for the period from March 1,
1999 (commencement of operations) to June 30, 1999 were $211,118,
resulting in net income of $42,243. The value of a Unit
decreased from $10.00 at March 1, 1999 (commencement of
operations) to $9.62 at June 30, 1999.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
<PAGE>
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectation based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). All quantitative disclosures in this section are
deemed to be forward-
looking statements for purposes of the safe harbor, except for
statements of historical fact.
<PAGE>
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures interests are settled daily through variation
margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the Partnership's
VaR is approximately four years. The one-day 99% confidence level
of the Partnership's VaR corresponds to the negative change in
<PAGE>
portfolio value that, based on observed market risk factor, would
have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following tables indicate the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market category as of June 30, 2000 and 1999. As of
June 30, 2000 and 1999, the Partnership's total capitalization
was approximately $20 million and $11 million, respectively.
Primary Market June 30, 2000 June 30, 1999
Risk Category Value at Risk Value at Risk
Currency (1.24)% (2.76)%
Interest Rate (0.96) (3.74)
Equity (0.40) (0.25)
Commodity (1.36) (0.84)
Aggregate Value at Risk (1.93)% (4.71)%
<PAGE>
Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual Market Categories listed above. Aggregate VaR will be
lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open
positions at June 30, 2000 and 1999 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures interests, the
composition of its trading portfolio can change significantly
over any given time period or even within a single trading day.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
Net Assets for the four quarterly reporting periods from July 1,
1999 through June 30, 2000.
Primary Market Risk Category High Low Average
Currency (2.76)% (1.24)% (1.90)%
Interest Rate (3.74) (0.96) (1.72)
Equity (0.73) (0.25) (0.41)
Commodity (1.36) (0.67) (1.05)
Aggregate Value at Risk (4.71)% (1.83)% (2.90)%
<PAGE>
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
typically found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, gives
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
<PAGE>
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
The VaR tables above present the results of the Partnership's VaR
for the Partnership's market risk exposures and on an aggregate
basis at June 30, 2000 and for the end of the four quarterly
reporting periods from July 1, 1999 through June 30, 2000. Since
VaR is based on historical data, VaR should not be viewed as
predictive of the Partnership's future financial performance or
its ability to manage or monitor risk. There can be no assurance
that the Partnership's actual losses on a particular day will not
exceed the VaR amounts indicated above or that such losses will
not occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. However, such balances, as well
as any market risk they may represent are immaterial. At June
30, 2000 the Partnership's cash balance at DWR was approximately
<PAGE>
82% of its total Net Asset Value. A decline in short-term
interest rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered
material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-
sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expro-
priations, illiquid markets, the emergence of dominant
<PAGE>
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation and many other factors could result in
material losses as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of June 30, 2000, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
Currency. The primary market exposure in the Partnership at June
30, 2000 was in the currency sector. The Partnership's currency
exposure is to exchange rate fluctuations, primarily fluctuations
which disrupt the historical pricing relationships between
different currencies and currency pairs. Interest rate changes
as well as political and general economic conditions influence
these fluctuations. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar. For the second quarter of
2000, the Partnership's major exposures were in the euro currency
crosses and outright U.S. dollar positions. Outright positions
consist of the U.S. dollar vs. other currencies. These other
<PAGE>
currencies include the major and minor currencies. Demeter does
not anticipate that the risk profile of the Partnership's
currency sector will change significantly in the future. The
currency trading VaR figure includes foreign margin amounts
converted into U.S. dollars with an incremental adjustment to
reflect the exchange rate risk inherent to the dollar-based
Partnership in expressing VaR in a functional currency other than
dollars.
Interest Rate. The second largest market exposure at June 30,
2000 was in the interest rate complex. 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 the Partnership and
indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's
primary interest rate exposure is generally to interest rate
fluctuations in the United States and the other G-7 countries.
The G-7 countries consist of France, U.S., Britain, Germany,
Japan, Italy and Canada. However, the Partnership also takes
futures positions in the government debt of smaller nations -
e.g. Australia. Demeter anticipates that G-7 and Australian
interest rates will remain the primary interest rate exposure of
<PAGE>
the Partnership for the foreseeable future. The changes in
interest rates which have the most effect on the Partnership are
changes in long-term, as opposed to short-term, rates. Most of
the speculative futures positions held by the Partnership are in
medium- to long-term instruments. Consequently, even a material
change in short-term rates would have little effect on the
Partnership, were the medium- to long-term rates to remain
steady.
Equity. The primary equity exposure is to equity price risk in
the G-7 countries. The stock index futures traded by the
Partnership are by law limited to futures on broadly based
indices. As of June 30, 2000, the Partnership's primary
exposures were in the Nikkei (Japan) and Hang Seng (China) stock
indices. The Partnership is primarily exposed to the risk of
adverse price trends or static markets in the U.S., European and
Japanese indices. Static markets would not cause major market
changes but would make it difficult for the Partnership to avoid
being "whipsawed" into numerous small losses.
Commodity.
Energy. On June 30, 2000, the Partnership's energy exposure was
shared primarily by futures contracts in the crude oil and
natural gas markets. Price movements in these markets result
from political developments in the Middle East, weather patterns,
<PAGE>
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 and may continue in this choppy pattern.
Metals. The Partnership's primary metals market exposure is to
fluctuations in the price of gold and palladium. Although the
Trading Advisor will from time to time trade base metals such as
aluminum, copper and nickel, the principal market exposures of
the Partnership have consistently been in precious metals, gold
and palladium. Exposure was evident in the gold market as gold
prices were volatile during the quarter. Demeter anticipates that
gold will remain the primary metals market exposure for the
Partnership.
Soft Commodities and Agriculturals. On June 30, 2000, the
Partnership had exposure in the markets that comprise these
sectors. Most of the exposure, however, was in the sugar, cotton
and soybean meal markets. Supply and demand inequalities, severe
weather disruption and market expectations affect price movements
in these markets.
<PAGE>
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of June 30, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances are in Japanese yen and Australian dollars.
The Partnership controls the non-trading risk of these balances
by regularly converting these balances back into dollars upon
liquidation of the respective position.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different market sectors and trading
approaches, and monitoring the performance of the Trading Advisor
daily. In addition, the Trading Advisor establishes diversi-
fication guidelines, often set in terms of the maximum margin to
be committed to positions in any one market sector or market-
sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instruments, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-Q for the quarter ended March 31, 2000 and
Form 10-K for the year ended December 31, 1999.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership registered 3,000,000 Units pursuant to a
Registration Statement on Form S-1, which became effective on
November 6, 1998 (SEC File Number 333-60115).
The Partnership registered an additional 6,000,000 Units pursuant
to a new Registration Statement on Form S-1, which became
effective on March 27, 2000 (SEC File Number 333-91563).
The managing underwriter for the Partnership is DWR.
Units are being sold at monthly closings at a price equal to 100%
of the Net Asset Value per Unit as of the close of business on
the last day of each month.
Through June 30, 2000, 2,586,010.398 Units were sold, leaving
6,413,989.602 Units unsold as of June 30, 2000. The aggregate
price of the Units sold through June 30, 2000 was $25,063,983.
<PAGE>
Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the "Investment
Programs, Use of Proceeds and Trading Policies" section of the
prospectus included as part of the above referenced Registration
Statement.
Item 5. OTHER INFORMATION
Effective July 1, 2000, Lewis A. Raibley, III resigned as Chief
Financial Officer and a Director of Demeter and Dean Witter
Futures Currency Management Inc. Effective July 10, 2000, Raymond
E. Koch replaced Lewis A. Raibley, III as Chief Financial Officer
of Demeter.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
3.01 Form of Limited Partnership Agreement of the
Partnership, dated as of March 27, 2000, is
incorporated by reference to Exhibit A of the
Partnership's Prospectus, dated November 6, 1998, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 31, 2000.
3.02 Certificate of Limited Partnership, dated July 15,
1998, is incorporated by reference to Exhibit 3.02 of
the Partnership's Form 10-Q (File No. 0-25603) for the
quarter ended March 31, 1999.
10.01 Management Agreement, dated as of November 6, 1998,
among the Partnership, Demeter Management Corporation, and
Capital Management L.P. is incorporated by reference to Exhibit
10.01 of the Partnership's Form 10-Q (File No. 0-25603) for the
quarter ended March 31, 1999.
<PAGE>
10.02 Customer Agreement, dated as of November 6, 1998,
between the Partnership and Dean Witter Reynolds Inc. is
incorporated by reference to Exhibit 10.02 of the Partnership's
Form 10-Q (File No. 0-25603) for the quarter ended March 31,
1999.
10.03 Customer Agreement, dated as of November 6, 1998, among
the Partnership, Carr Futures, Inc., and Dean Witter Reynolds
Inc. is incorporated by reference to Exhibit 10.03 of the
Partnership's Form 10-Q (File No. 0-25603) for the quarter ended
March 31, 1999.
10.04 International Foreign Exchange Master Agreement, dated
as of November 6, 1998, between the Partnership and Carr futures,
Inc. is incorporated by reference to Exhibit 10.04 of the
Partnership's Form 10-Q (File No. 0-25603) for the quarter ended
March 31, 1999.
10.05 Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchase of Units is incorporated
by reference to Exhibit B of the Partnership's Prospectus dated
March 27, 2000, filed with the Securities and Exchange Commission
pursuant to Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 31, 2000.
10.06 Escrow Agreement, dated November 6, 1998, among the
Partnership, Demeter Management Corporation, Dean Witter Reynolds
Inc., and Chemical Bank is incorporated by reference in Exhibit
10.06 of the Partnership's Form 10-Q (File No. 0-25603) for the
quarter ended March 31, 1999.
(B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Dean Witter Charter
Graham L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
August 11, 2000 By:/s/Raymond E. Koch __________
Raymond E. Koch
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
