Morgan Stanley Dean Witter Charter Series
Monthly Report
October 1999
Dear Limited Partner:
The Net Asset Value per Unit for each of the three Morgan Stanley Dean
Witter Charter Funds as of October 31, 1999 was as follows:
Funds N.A.V. % change for month
Charter Graham $ 9.33 -6.08%
Charter Millburn $ 9.01 -12.70%
Charter Welton $ 7.78 -6.88%
Toward mid-October, most managed futures funds, including the funds in the
Charter Series, entered a period of difficulty. In large measure, this
reflects how the Funds' managers trade in the futures markets.
Specifically, the managers are long-term trend followers, which is a way of
participating in the futures markets that has tended to produce successful
results over long periods of time. However, this philosophy of money
management is subject to, and will be hurt by, sudden trend reversals and
short-term volatility, or "whipsawing." While unpleasant, these types of
market behavior occur periodically and usually have a negative impact on
managed futures funds, not only at Morgan Stanley Dean Witter, but also
throughout the industry.
An analogous weakness exists when it comes to investing in the equity
markets. Most equity managers and investors participate in the markets by
purchasing an investment and holding it because that has historically
generated the most success. However, such an approach is also subject to,
and will be hurt by, broad-based declines in the stock market. And, as in
managed futures, while these periods of decline are unpleasant, they are
also unavoidable and part of holding an asset class for a long period of
time.
From late summer through mid-October, a vast number of futures and currency
markets were trending in a way that generally reflected weakness in
equities and fixed income investments with an anticipation of continued
price erosion. (For example, from September 1 through October 15 the S&P
500 declined by 5.5%.) Consequently, the Fund's managers were positioned
accordingly: short interest rate futures and stock indices, long energies
and base metals and short the U.S. dollar. Had these trends continued it
is likely the Funds would have produced positive results. However, given
the reversal and whipsaw conditions that developed in mid-October, the
Funds encountered difficulty.
Sudden reversals in previously existing uptrends occurred in the energy
markets, base metals and some foreign currencies. In these markets, due to
their established upward moves in late summer and early fall, the Funds had
long positions in these markets and benefited from them. However, as
markets such as crude oil, zinc, the Swiss franc, the euro and many others
reversed sharply downward, it had a negative impact on these long
positions.
The global stock markets also proved difficult for Charter Graham and
Millburn during the month. Given the widespread contraction of a number of
major stock markets, some downward trends became established in the late
summer/early fall that caused the managers of both of these Funds to
establish short positions. As these markets continued in a downward
direction, these positions were largely profitable. Given the upward
snapback exhibited in many of these markets, especially the U.S. and Japan,
during the last two weeks of October, these previously existing short
positions were negatively affected. On the other hand, Charter Welton was
able to record profits from this sharp upward move in domestic equity
prices due to long positions the Fund's manager had established in NASDAQ
100 and S&P 500 Index futures.
Additionally, reversals in global interest rate futures also contributed to
this difficult period. As interest rates were generally rising, downward
price trends became rather firmly established in these markets.
Accordingly, the Funds' managers executed short positions to participate in
these trends and generated profits by doing so, such as the gains
<PAGE>
recorded by Charter Graham in the European interest rate futures markets.
However, as interest rates fell dramatically in
the last few days of October (the yield on the U.S. long bond fell
approximately 0.28%), this caused a sharp and sudden upward reversal in
prices and resulted in losses for these short positions, particularly for
Charter Millburn.
Finally, a number of futures markets, such as coffee, exhibited spike like
moves. Coffee prices, for example, rose so dramatically it caused the
manager of Charter Welton to establish long positions. After entering this
market, coffee prices went through a very quick snapback to levels at or
under where the long positions were established. This whipsaw nature
created short-term losses in this market and other markets traded by the
Charter Series Fund managers.
In summary, because the Funds are designed to make money from long-term
price trends, they are subject to periods of difficulty when market action
creates sudden reversals or short-term volatility in the markets. It is
these conditions that predominated during the latter half of October.
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation at Two World Trade Center, 62nd
Floor New York, NY 10048, or your Morgan Stanley Dean Witter Financial
Advisor.
I hereby affirm, that to the best of my knowledge and belief, the
information contained in this report is accurate and complete. Past
performance is not a guarantee of future results.
Sincerely,
Robert E. Murray
President
Demeter Management Corporation
General Partner
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<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER SERIES
Historical Fund Performance
Presented below is the percentage change in Net Asset Value per
Unit from inception-to-date for each Fund in the Morgan Stanley
Dean Witter Charter Series. PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS.
<CAPTION>
Charter Graham
Year Return
<S> <C>
1999 (8 months) -6.7%
Inception-to-Date Return: -6.7%
_________________________________________________________________
___________________________
Charter Millburn
Year Return
1999 (8 months) -9.9%
Inception-to-Date Return: -9.9%
_________________________________________________________________
___________________________
Charter Welton
Year Return
1999 (8 months) -22.2%
Inception-to-Date Return: -22.2%
_________________________________________________________________
___________________________
</TABLE>
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<TABLE>
Morgan Stanley Dean Witter Charter Series
Statements of Operations
For the Month Ended October 31, 1999
(Unaudited)
<CAPTION>
Morgan Stanley Dean Witter
Charter Graham L.P. Morgan Stanley Dean Witter Charter Millburn L.P.
Percent of
Percent of
October 1, 1999
October 1, 1999
Beginning
Beginning
Amount Net Asset Value Amount
Net Asset Value
$ % $
%
REVENUES
<S> <C> <C>
<C> <C>
Trading Profit (Loss):
Realized 65,972 0.37
(915,406) (4.03)
Net change in unrealized (1,073,910) (6.10)
(1,881,454) (8.29)
Total Trading Results (1,007,938) (5.73)
(2,796,860) (12.32)
Interest Income (DWR) 69,319 0.39
83,875 0.37
Total Revenues (938,619) (5.34)
(2,712,985) (11.95)
EXPENSES
Brokerage fees (DWR) 102,744 0.58
132,446 0.58
Management fees 29,355 0.16
37,841 0.17
Total Expenses 132,099 0.74
170,287 0.75
NET LOSS (1,070,718) (6.08)
(2,883,272) (12.70)
Morgan Stanley Dean Witter Charter Series
Statements of Changes in Net Asset Value
For the Month Ended October 31, 1999
(Unaudited)
Morgan Stanley Dean Witter Charter Graham L.P. Morgan
Stanley Dean Witter Charter Millburn L.P.
Units Amount Per Unit Units
Amount Per Unit
$ $
$ $
<S> <C> <C> <C> <C>
<C> <C>
Net Asset Value,
October 1, 1999 1,772,965.893 17,613,300 9.93
2,200,849.947 22,705,008 10.32
Net Loss - (1,070,718) (0.60) -
(2,883,272) (1.31)
Redemptions (900.000) (8,397) 9.33
(800.000) (7,208) 9.01
Subscriptions 76,748.887 716,067 9.33
113,594.246 1,023,484 9.01
Net Asset Value,
October 31, 1999 1,848,814.780 17,250,252 9.93
2,313,644.193 20,838,012 9.01
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Morgan Stanley Dean Witter Charter Series
Statements of Operations
For the Month Ended October 31, 1999
(Unaudited)
<CAPTION>
Morgan Stanley Dean
Witter Charter Welton L.P.
Percent of
October 1, 1999
Beginning
Amount Net Asset Value
$ %
REVENUES
<S> <C> <C>
Trading Profit (Loss):
Realized (1,315,602) (6.90)
Net change in unrealized 72,384 0.38
Total Trading Results (1,243,218) (6.52)
Interest Income (DWR) 74,345 0.39
Total Revenues (1,168,873) (6.13)
EXPENSES
Brokerage fees (DWR) 111,285 0.58
Management fees 31,796 0.17
Total Expenses 143,081 0.75
NET LOSS (1,311,954) (6.88)
Morgan Stanley Dean Witter Charter Series
Statements of Changes in Net Asset Value
For the Month Ended October 31, 1999
(Unaudited)
Morgan Stanley Dean Witter Charter Welton L.P.
Units Amount Per Unit
$ $
<S> <C> <C> <C>
Net Asset Value,
October 1, 1999 2,283,167.870 19,077,471 8.36
Net Loss - (1,311,954) (0.58)
Redemptions (1,800.000) (14,004) 7.78
Subscriptions 105,598.986 821,560 7.78
Net Asset Value,
October 31, 1999 2,386,966.856 18,573,073 7.78
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Morgan Stanley Dean Witter Charter Series
Notes to Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
Organization - Morgan Stanley Dean Witter Charter Graham L.P. ("Charter
Graham"), Morgan Stanley Dean Witter Charter Millburn L.P. ("Charter
Millburn"), and Morgan Stanley Dean Witter Charter Welton L.P. ("Charter
Welton") (individually, a "Partnership", or collectively, the
"Partnerships") are limited partnerships organized to engage in the
speculative trading of futures and forward contracts, options on futures
contracts on physical commodities and other commodity interests, including
foreign currencies, financial instruments, metals, energy and agricultural
products (collectively, "futures interests"). The general partner for each
Partnership is Demeter Management Corporation ("Demeter"). The non-
clearing commodity broker is Dean Witter Reynolds, Inc. ("DWR") and an
unaffiliated clearing commodity broker, Carr Futures Inc. ("Carr"),
provides clearing and execution services. Demeter and DWR are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co.
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by the General and Limited
Partners based upon their proportional ownership interests.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Revenue Recognition - Futures interests are open commitments until
settlement date. They are valued at market and the resulting unrealized
gains and losses are reflected in income. Monthly, DWR credits each
Partnership with interest income on 100% of its average daily funds held in
its individual account at DWR at a rate equal to that earned by DWR on its
U.S. Treasury bill investments during such month. Carr also credits DWR
with the interest income earned with respect to the Partnership's Net
Assets maintained in trading accounts at Carr. DWR in turn credits the
Partnership with 100% of the interest income received from Carr. For
purposes of such interest payments, Net Assets do not include monies due
to the Partnership on forward contracts and other futures interests, but
not actually received.
Net Income (Loss) per Unit - Net income (loss) per Limited Partnership
interest ("Unit(s)") is computed using the weighted average number of Units
outstanding during the period.
Brokerage and Related Transaction Fees and Costs - Each Partnership pays a
flat-rate monthly brokerage fee of 1/12 of 7% of the Partnership's Net
Assets as of the first day of each month (a 7% annual rate). Such fee
covers all brokerage commissions, transaction fees and costs and ordinary
administrative and offering expenses.
Operating Expenses - The Partnerships incur monthly management fees and may
incur incentive fees. Demeter bears all other operating expenses.
Income Taxes - No provision for income taxes has been made in the
accompanying financial statements, as partners are individually responsible
for reporting income or loss based upon their respective share of each
Partnership's revenues and expenses for income tax purposes.
Distributions - Distributions, other than on redemptions of Units, are made
on a pro-rata basis at the sole discretion of Demeter. No distributions
have been made to date.
Continuing Offering - Units of each Partnership are offered at a price
equal to 100% of the Net Asset Value per Unit at monthly closings held as
of the last day of each month.
<PAGE>
Morgan Stanley Dean Witter Charter Series
Notes to Financial Statements
(Continued)
Redemptions - Limited Partners may redeem some or all of their Units as of
the last day of the sixth month following the closing at which a person
first becomes a Limited Partner. Redemptions may only be made in whole
Units, with a minimum of 100 Units required for each redemption, unless a
Limited Partner is redeeming his entire interest in the Partnership.
Units redeemed on or prior to the last day of the twelfth month from the
date of purchase will be subject to a redemption charge equal to 2% of the
Net Asset Value of a Unit on the
Redemption Date. Units redeemed after the last day of the twelfth month
and on or prior to the last day of the twenty-fourth month from the date of
purchase will be subject to a redemption charge equal to 1% of the Net
Asset Value of a Unit on the Redemption Date. Units redeemed after the
last day of the twenty-fourth month from the date of purchase will not be
subject to a redemption charge.
Exchanges - On the last day of the first month which occurs more than 180
days after a person first becomes a Limited Partner in any of the
Partnerships, and at the end of each month thereafter, Limited Partners may
transfer their investment among the Partnerships (subject to certain
restrictions outlined in the Limited Partnership Agreements) without paying
additional charges.
Dissolution of the Partnership - Each Partnership will terminate on
December 31, 2035 or at an earlier date if certain conditions occur as
defined in the Partnership's Limited Partnership Agreement.
2. Related Party Transactions
Each Partnership pays brokerage fees to DWR for trades executed on its
behalf as described in Note 1. Each Partnership's cash is on deposit with
DWR and Carr in future interests trading accounts to meet margin
requirements as needed. DWR pays interest on these funds as described in
Note 1.
3. Trading Advisors
Demeter, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership are as follows:
Morgan Stanley Dean Witter Charter Graham L.P.
Graham Capital Management L.P.
Morgan Stanley Dean Witter Charter Millburn L.P.
Millburn Ridgefield Corporation
Morgan Stanley Dean Witter Charter Welton L.P.
Welton Investment Corporation
Compensation to the trading advisors by the Partnerships consists of
management fees and incentive fees as follows:
Management Fee - Each Partnership pays a flat-rate monthly fee of 1/12 of
2% of the Net Assets under management by each trading advisor as of the
first day of each month (a 2% annual rate).
Incentive Fee - Each Partnership pays a monthly incentive fee equal to 20 %
of "Trading Profits", (as defined in the Limited Partnership Agreements),
as of the end of each calendar month. When a trading advisor experiences
losses with respect to Net Assets as of the end of a calendar month, the
trading advisor must earn back such losses before that trading advisor is
eligible for an incentive fee in the future.
<PAGE>
Morgan Stanley Dean Witter Charter Series
Notes to Financial Statements
(Concluded)
4. Legal Matters
The following supplements Legal Proceedings previously disclosed in the
Partnership's March 31, 1999 Form 10-Q:
In the New York action, the motion to dismiss the amended complaint with
prejudice has been fully briefed and argued and the Dean Witter Parties are
awaiting the New York Supreme Court's decision.
In the California action, on September 24, 1999, the Superior Court in the
State of California entered an order dismissing the consolidated amended
complaint without prejudice on consent.
