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 September 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
September 30, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition September 30, 2000
(Unaudited) and December 31, 1999......................... 2
Statements of Operations for the Quarters Ended
September 30, 2000 and 1999 (Unaudited)....................3
Statements of Operations for the Nine Months Ended
September 30, 2000 and the Period from March 1, 1999
(commencement of operations) to September 30, 1999
(Unaudited)................................................4
Statements of Changes in Partners' Capital for the
Nine Months Ended September 30, 2000 and the Period from
March 1, 1999 (commencement of operations) to
September 30, 1999
(Unaudited).............................5
Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and the Period from March 1,
1999 (commencement of operations) to September 30, 1999
(Unaudited)................................................6
Notes to Financial Statements (Unaudited)...............7-
13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......14-24
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ........................................24-37
Part II. OTHER INFORMATION
Item 1. Legal Proceedings......................................38
Item 2. Changes in Securities and Use of Proceeds...........38-39
Item 6. Exhibits and Reports on Form 8-K....................39-40
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31
,
2000 1999 $
$
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 21,318,778 19,067,800
Net unrealized gain (loss) on open contracts (199,496) 1
,070,531
Total Trading Equity 21,119,282 20,138,331
Subscriptions receivable 397,301 811,200
Interest receivable (DWR) 109,027 78,774
Total Assets 21,625,610 21,028,305
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 258,909 228,143
Accrued brokerage fees (DWR) 124,928 108,150
Accrued management fees 35,693 30,900
Total Liabilities 419,530 367,193
Partners' Capital
Limited Partners (2,274,670.637 and
1,984,358.367 Units, respectively)20,967,481 20,424,608
General Partner (25,884.600 and
22,977.618 Units, respectively) 238,599 236,504
Total Partners' Capital 21,206,080 20,661,112
Total Liabilities and Partners' Capital 21,625,610 21,0
28,305
NET ASSET VALUE PER UNIT 9.22 10.29
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
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<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended September 30,
2000 1999
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 1,202,005499,551
Net change in unrealized (358,485) 265,345
Total Trading Results 843,520 764,896
Interest Income (DWR) 315,541 146,592
Total Revenues 1,159,061 911,488
EXPENSES
Brokerage fees (DWR) 360,265 247,317
Management fees 102,933 70,662
Total Expenses 463,198 317,979
NET INCOME 695,863 593,509
NET INCOME ALLOCATION
Limited Partners 688,016 586,822
General Partner 7,847 6,687
NET INCOME PER UNIT
Limited Partners .31 .31
General Partner .31 .31
<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 Nine Months of operations) to
Ended September 30, September 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading profit (loss):
Realized (459,075) 227,946
Net change in unrealized (1,270,027) 705,148
Total Trading Results (1,729,102) 933,094
Interest Income (DWR)
872,695 231,755
Total Revenues (856,407) 1,164,849
EXPENSES
Brokerage fees (DWR) 1,117,185 411,520
Management fees 319,196
117,577
Incentive fees 89,338 _____-___
Total Expenses 1,525,719 529,097
NET INCOME (LOSS) (2,382,126) 635,752
NET INCOME (LOSS) ALLOCATION
Limited Partners (2,354,221) 628,398
General Partner (27,905) 7,354
NET LOSS PER UNIT
Limited Partners (1.07) (.07)
General Partner (1.07) (.07)
<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 Nine Months Ended September 30, 2000 and the
Period from March 1, 1999
(commencement of operations) to
September 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
1,345,887.011 12,564,328 140,000 12,704,328
Net Income
- 628,398 7,354
635,752
Redemptions (9,234.782) (89,916)_____-__ (8
9,916)
Partners' Capital,
September 30, 1999 1,772,965.893 $17,405,946 $207,354$17,613,300
Partners' Capital,
December 31, 1999 2,007,335.985$20,424,608 $236,504$20,661,112
Offering of Units 691,400.028 6,807,307 30,000 6,837,307
Net Loss
- (2,354,221) (27,905)(2,382,126)
Redemptions
(398,180.776) (3,910,213) _____-__ (3,910,213)
Partners' Capital,
September 30, 2000 2,300,555.237 $20,967,481 $238,599$21,206,080
<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 Nine Months of operations) to
Ended September 30, September 30,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S>
<C> <C>
Net income (loss) (2,382,126) 635,752
Noncash item included in net income (loss):
Net change in unrealized 1,270,027 (705,148)
Increase in operating assets:
Interest receivable (DWR) (30,253) (60,067)
Increase in operating liabilities:
Accrued brokerage fees (DWR) 16,778 96,689
Accrued management fees 4,793 27,626
Net cash used for operating activities (1,120,781) (5,148)
CASH FLOWS FROM FINANCING ACTIVITIES
Initial offering
- 4,363,136
Offering of Units 6,837,30712,704,328
(Increase) decrease in subscriptions receivable413,899
(866,159)
Increase in redemptions payable
30,766 42,872
Redemptions of Units (3,910,213) (89,916)
Net cash provided by financing activities 3,371,759 16,154,261
Net increase in cash 2,250,978 16,149,113
Balance at beginning of period 19,067,800______-___
Balance at end of period 21,318,778 16,149,113
<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 unaudited financial statements contained herein 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"), provided 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,
2000, as amended by SFAS No. 137. The Partnership adopted the
provisions of SFAS No. 133 beginning with the fiscal year ended
December 31, 1998. SFAS No. 133 superceded SFAS Nos. 119 and
105, which required the disclosure of average aggregate fair
values and contract/notional values, respectively, of derivative
financial instruments for an entity that carries its assets at
fair value. SFAS No. 133 was further amended by SFAS No. 138,
which clarifies issues surrounding interest rate risk, foreign
currency denominations, normal purchases and sales and net
hedging. The application of SFAS No. 133, as amended by SFAS No.
137, did not have a significant effect on the Partnership's
financial statements, nor will the application of the provisions
of SFAS No. 138 have a significant effect on the Partnership's
financial statements.
SFAS No. 133 defines a derivative as a financial instrument or
other contract that has all three of the following
characteristics:
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
1) One or more underlying notional amounts or payment
provisions;
2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in market
factors;
3) Terms require or permit net settlement.
Generally derivatives include futures, forwards, swaps or option
contracts, or other financial instruments with similar
characteristics such as caps, floors and collars.
The net unrealized gain (loss) on open contracts is reported as a
component of "Equity in futures interests trading accounts" on
the statements of financial condition and totaled $(199,496) and
$1,070,531 at September 30, 2000 and December 31, 1999,
respectively.
Of the $199,496 net unrealized loss on open contracts at
September 30, 2000, $(111,823) related to exchange-traded futures
contracts and $(87,673) related to off-exchange-traded forward
currency contracts.
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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
September 30, 2000 and December 31, 1999 mature through March
2002 and June 2001, respectively. Off-exchange-traded forward
currency contracts held by the Partnership at September 30, 2000
and December 31, 1999 mature through January 2001 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
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
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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 (loss) on all open futures and
futures-styled options contracts, which funds, in the aggregate,
totaled $21,206,955 and $20,201,261 at September 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 (loss) 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 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
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
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 nine
months ended September 30, 2000 and for the quarter ended
September 30, 1999 and the period from March 1, 1999
(commencement of operations) to September 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 Nine Months Ended September 30, 2000
For the quarter ended September 30, 2000, the Partnership
recorded total trading revenues including interest income of
$1,159,061 and posted an increase in Net Asset Value per Unit.
<PAGE>
The most significant gains of approximately 3.5% were recorded in
the currency markets primarily during August from short positions
in the euro as its value weakened versus the U.S. dollar amid
dampened optimism for continued economic growth in Europe.
Additional gains were recorded from short positions in the New
Zealand and Australian dollars as the value of these currencies
weakened relative to the U.S. dollar after worse-than-expected
trade figures were released. In the energy markets, gains of
approximately 2.6% were recorded primarily during August and
September from long positions in natural gas futures as prices
moved higher amid supply and storage concerns. Additional gains
were recorded during August from long futures positions in crude
oil and its related products as prices increased as ongoing
supply concerns outweighed signals from Saudi Arabia that it
would seek a suitable production increase to ease the crunch. In
the metals markets, profits of approximately 0.6% were recorded
primarily during mid-September from long positions in copper
futures as prices rose due to a rise in COMEX copper stocks. In
the global interest rate futures markets, gains of approximately
0.2% were recorded primarily during August from long positions in
long-term U.S. interest rate futures as domestic bond prices
increased after the Federal Reserve left its key bank-lending
rate steady amid signs of moderation for the U.S. economic
expansion. During September, gains were recorded from long
positions in U.S. euro dollar cross-rate futures as investors
shifted from longer-term debt into shorter dated instruments. A
<PAGE>
portion of the Partnership's overall gains was partially offset
by losses of approximately 1.3% recorded in the global stock
index futures markets primarily during late-July from long
positions in U.S. stock index futures as U.S. equity prices
declined as renewed fears that the Federal Reserve will raise
interest rates exacerbated concerns that corporate earnings may
be slowing. During September, losses were also recorded from
long positions as domestic stock prices fell on technology stock
jitters and fears of a continuous increase in oil prices. In the
agricultural markets, losses of approximately 0.6% were incurred
primarily during late-August from short positions in soybeans
futures as prices surged on expectations that the searing heat in
the U.S. delta will trim this year's production. Losses were
also recorded during August and September from short positions in
wheat futures as prices moved higher. In soft commodities,
losses of approximately 0.3% were recorded primarily during July
and early August from short cotton futures positions as prices
increased on forecasts for hot and dry weather, which would
shrink crop sizes. Total expenses for the three months ended
September 30, 2000 were $463,198, resulting in net income of
$695,863. The value of a Unit increased from $8.91 at June 30,
2000 to $9.22 at September 30, 2000.
<PAGE>
For the nine months ended September 30, 2000, the Partnership
recorded total trading losses net of interest income of 856,407
and posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 13.1% 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.
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 has slowed and the prospects of additional
interest rate hikes by the Federal Reserve were fading. In the
agricultural markets, losses of approximately 4.7% 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. growing regions. In the
global stock index futures markets, losses of approximately 4.4%
were recorded primarily during April from long positions in U.S.
stock index futures as domestic equity prices declined amid fears
of inflation and concerns that the Federal Reserve may need to
raise interest rates more aggressively. Additional losses were
experienced during late-July from long positions in U.S. stock
<PAGE>
index futures as U.S. equity prices declined as renewed fears
that the Federal Reserve will raise interest rates exacerbated
concerns that corporate earnings may be slowing. During
September, losses were recorded from long positions as domestic
stock prices fell on technology stock jitters and fears of a
continuous increase in oil prices. In the metals markets, losses
of approximately 2.1% 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. A portion of the Partnership's overall
losses was partially offset by gains of approximately 10.7%
recorded in the energy markets primarily during January and March
from long futures positions in crude oil and its related products
as 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, June
and August 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, August and September 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 and amid supply
and storage concerns. In the currency markets, gains of
<PAGE>
approximately 6.2% were produced primarily during January, April
and August from short positions in the euro and Swiss franc as
the value of these currencies weakened versus the U.S. dollar
amid skepticism about Europe's economic outlook, and lack of
public support for the economy from European officials. Total
expenses for the nine months ended September 30, 2000 were
$1,525,719, resulting in a net loss of $2,382,126. The value of
a Unit decreased from $10.29 at December 31, 1999 to $9.22 at
September 30, 2000.
For the Quarter and Seven Months Ended September 30, 1999
For the quarter ended September 30, 1999, the Partnership
recorded total trading revenues including interest income of
$911,488 and posted an increase in Net Asset Value per Unit. The
most significant gains of approximately 4.6% were recorded in the
currency markets primarily during August and September from long
positions in the Japanese yen as the value of the yen
strengthened versus the U.S. dollar and other major currencies,
despite an intervention by the Bank of Japan on September 10.
The yen's strength during the quarter was attributed primarily to
confidence in Japan's economic recovery. Smaller currency gains
were recorded from long positions in the Mexican peso as the
value of the peso increased versus the U.S. dollar during July
and August as a result of renewed confidence in the Mexican
economy and a sovereign bond rating upgrade. Additional gains of
<PAGE>
approximately 3.0% were recorded in the metals markets primarily
during August and September from long positions in base metal
futures as prices in these markets increased due to increased
demand from Asia and a decline in global supplies. Smaller
profits of approximately 1.4% were recorded in the energy markets
primarily from long positions in crude oil futures as oil prices
climbed higher during August and September due to a perceived
tightness in the gasoline market and an announcement by OPEC
ministers stating that they would continue to adhere to agreed-
upon output cuts through the first quarter of 2000. A portion of
the Partnership's overall gains for the quarter was offset by
losses of approximately 2.0% incurred in the global stock index
futures markets primarily from long positions in U.S. stock index
futures as domestic equity prices declined during late July due
to increased inflationary concerns after Federal Reserve Chairman
Greenspan said that the U.S. economy may be growing fast enough
to warrant another interest rate hike. Smaller losses were
experienced from short positions in German stock index futures
during August as prices increased due to a temporary upward move
in U.S. stock prices during that month. Additional losses of
approximately 0.6% were experienced in the global interest rate
futures markets primarily from short positions in Japanese
interest rate futures during July as prices increased amid
investors' fears that the strong yen might slowdown that nation's
budding recovery. Total expenses for the three months ended
September 30, 1999 were $317,979, resulting in net income of
<PAGE>
$593,509. The value of a Unit increased from $9.62 at June 30,
1999 to $9.93 at September 30, 1999.
For the period from March 1, 1999 (commencement of operations) to
September 30, 1999, the Partnership recorded total trading
revenues including interest income of $1,164,849 and posted a net
decrease in Net Asset Value per Unit. The most significant
losses of approximately 2.9% were recorded in the global stock
index futures markets primarily from long positions in U.S. stock
index futures as domestic stock prices declined during late July
due to increased inflationary concerns after Federal Reserve
Chairman Alan Greenspan said that the U.S. economy may be growing
fast enough to warrant another interest rate hike. Smaller
losses were experienced from short positions in German stock
index futures during August as prices increased due to a
temporary upward move in U.S. stock prices during that month. In
the agricultural markets, losses of approximately 2.7% were
incurred primarily during March from short corn futures positions
as prices moved higher in a technical and seasonally driven
rally, as well as a lack of heavy producer selling. These losses
were mitigated by profits of approximately 7.4% recorded in the
currency markets primarily from long positions in the Japanese
yen as the value of the yen strengthened versus the U.S. dollar
and other major currencies due to renewed confidence in Japan's
economic recovery. Additional profits of approximately 4.4% were
<PAGE>
recorded in the metals markets primarily during May and June from
short positions in gold futures as gold prices fell sharply in
anticipation of the British Treasury's July auction. Gains were
also recorded from long positions in base metal futures as prices
in these markets increased during August and September amid an
increase in demand and a decrease in supplies. Smaller gains of
approximately 3.6% were recorded in the energy markets primarily
from long positions in crude oil futures as oil prices climbed
higher during April, June, August and September amid tightening
of supply and growing global demand. Total expenses for the
period from March 1, 1999 (commencement of operations) to
September 30, 1999 were $529,097, resulting in net income of
$635,752. The value of a Unit decreased from $10.00 at March 1,
1999 (commencement of operations) to $9.93 at September 30, 1999.
The Net Asset Value per Unit decreased despite the Partnership's
net profit for the period because of an influx of subscriptions
after net losses were recorded for earlier interim periods.
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
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the Partnership's
VaR is approximately four years. The one-day 99% confidence level
of the Partnership's VaR corresponds to the negative change in
portfolio value that, based on observed market risk factors,
would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in their daily risk management
activities.
<PAGE>
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market category as of September 30, 2000 and 1999. As
of September 30, 2000 and 1999, the Partnership's total
capitalization was approximately $21 million and $18 million,
respectively.
Primary Market September 30, 2000 September 30, 1999
Risk Category Value at Risk Value at Risk
Currency (2.18)% (1.55)%
Interest Rate (1.89) (2.51)
Equity (1.21) (0.39)
Commodity (1.59) (0.87)
Aggregate Value at Risk (3.30)% (3.05)%
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 September 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,
<PAGE>
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 October
1, 1999 through September 30, 2000.
Primary Market Risk Category High Low Average
Currency (2.33)% (1.24)% (1.80)%
Interest Rate (1.89) (0.90) (1.22)
Equity (1.21) (0.40) (0.79)
Commodity (1.59) (0.55) (1.21)
Aggregate Value at Risk (3.30)% (1.93)% (2.61)%
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
<PAGE>
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, give
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
The VaR tables above present the results of the Partnership's VaR
for the Partnership's market risk exposures and on an aggregate
<PAGE>
basis at September 30, 2000 and for the end of the four quarterly
reporting periods from October 1, 1999 through September 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
September 30, 2000 the Partnership's cash balance at DWR was
approximately 74% 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.
<PAGE>
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
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 September 30, 2000, by market sector. It may
<PAGE>
be anticipated however, that these market exposures will vary
materially over time.
Currency. The primary market exposure at September 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. At September 30, 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 currencies
include major and minor currencies. Demeter does not anticipate
that the risk profile of the Partnership's currency sector will
change significantly in the future. The currency trading VaR
figure includes foreign margin amounts converted into U.S.
dollars with an incremental adjustment to reflect the exchange
rate risk inherent to the dollar-based Partnership in expressing
VaR in a functional currency other than dollars.
Interest Rate. The second largest market exposure at September
30, 2000 was in the interest rate complex. Exposure was
<PAGE>
primarily 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 Australia
interest rates will remain the primary interest rate exposure of
the Partnership for the foreseeable future. The changes in
interest rates that have the most significant 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
<PAGE>
indices. As of September 30, 2000, the Partnership's primary
exposures were in the TOPIX (Japan) and Nikkei (Japan) 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
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
copper, aluminum, nickel and zinc, the principal market exposures
of the Partnership have consistently been in precious metals,
gold and palladium. Gold prices continued to be volatile during
the quarter. Demeter anticipates that precious metals will
remain the primary metals market exposure for the Partnership.
Energy. On September 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,
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
<PAGE>
in prices resulting from weather patterns and supply and demand
factors and may continue in this choppy pattern.
Soft Commodities and Agriculturals. On September 30, 2000, the
Partnership had exposure in the markets that comprise these
sectors. Most of the exposure, however, was in the cocoa, wheat
and coffee markets. Supply and demand inequalities, severe
weather disruption and market expectations affect price movements
in these markets.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of September 30, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances at September 30, 2000 were in Hong Kong dollars
and Japanese yen. 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
<PAGE>
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 instrument, 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 September 30, 2000, 2,713,904.858 Units were sold,
leaving 6,286,095.142 Units unsold. The aggregate price of the
<PAGE>
Units sold through September 30, 2000 was $26,232,795.
Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the "Use of
Proceeds" section of the prospectus included as part of the above
referenced Registration Statement.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership, dated as of October 31,
2000, is incorporated by reference to Exhibit A of the
Partnership's Prospectus, dated October 11, 2000, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on October 13, 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 Graham
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.
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.
<PAGE>
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
October 11, 2000, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the Securities Act of
1933, as amended, on October 13, 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.
10.07 Subscription Agreement Update Form is incorporated by
reference to Exhibit C of the Partnership's Prospectus
dated October 11, 2000, filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3) under
the Securities Act of 1933, as amended, on October 13,
2000.
(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)
November 14, 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.
