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 March 31, 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. 0-25607
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-4018063
(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 WELTON L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition March 31, 2000
(Unaudited) and December 31, 1999......................... 2
Statements of Operations for the Quarter Ended
March 31, 2000 and the Period from March 1, 1999
(commencement of operations) to March 31,
1999 (Unaudited)...........................................3
Statements of Changes in Partners' Capital for the
Quarter Ended March 31, 2000 and the Period from
March 1, 1999 (commencement of operations) to
March 31, 1999 (Unaudited).................................4
Statements of Cash Flows for the Quarter Ended
March 31, 2000 and the Period from March 1, 1999
(commencement of operations) to March 31, 1999
(Unaudited)................................................5
Notes to Financial Statements (Unaudited)...............6-
10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......11-16
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ....................................... 16-29
Part II. OTHER INFORMATION
Item 1. Legal Proceedings..................................... 30
Item 2. Change in Securities and Use of Proceeds............30-31
Item 5. Other Information..................................... 31
Item 6. Exhibits and Reports on Form 8-K...................... 31
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
2000 1999
$ $
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 23,166,873 20,297,239
Net unrealized gain on open contracts 1,165,058 1,722,849
Net option premiums (77,517) 403,312
Total Trading Equity 24,254,414 22,423,400
Subscriptions Receivable 1,840,093 948,424
Interest receivable (DWR and Carr) 105,945 8
3,547
Total Assets 26,200,452 23,455,371
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 1,571,204 222,634
Accrued brokerage fee (DWR) 135,906 120,848
Accrued management fee 38,830 34,528
Total Liabilities 1,745,940 378,010
Partners' Capital
Limited Partners (2,727,252.054 and
2,554,572.061 Units, respectively)24,167,471 22,813,660
General Partner (32,392.072 and
29,528.110 Units, respectively) 287,041 263,701
Total Partners' Capital 24,454,512 23,077,361
Total Liabilities and Partners' Capital 26,200,452 23,455,371
NET ASSET VALUE PER UNIT 8.86 8.93
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Period from
March 1, 1999
(commencement
For the Quarter of operations) to
Ended March 31, March 31,
2000 1999
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 656,241 (457,852)
Net change in unrealized (557,791) 32,030
Total Trading Results 98,450 (425,822)
Interest Income (DWR and Carr) 289,902 20,478
Total Revenues 388,352 (405,344)
EXPENSES
Brokerage fees (DWR) 399,203 33,842
Management fees 114,058 9,669
Total Expenses 513,261 43,511
NET LOSS (124,909) (448,855)
NET LOSS ALLOCATION
Limited Partners (123,249) (443,443)
General Partner (1,660) (5,412)
NET LOSS PER UNIT
Limited Partners (.07) (.77)
General Partner (.07) (.77)
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarter Ended March 31, 2000
and the Period from March 1, 1999
(commencement of operations)
to March 31, 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital,
March 1, 1999 580,145.052 $5,731,450 $70,000
$5,801,450
Initial Offering
Offering of Units 298,268.888 2,733,022 20,000
2,753,022
Net Loss - (443,443) (5,412)
(448,855)
Partners' Capital,
March 31, 1999 878,413.940 $8,021,029 $84,588
$8,105,617
Partners' Capital,
December 31, 1999 2,584,100.171 $22,813,660
$263,701 $23,077,361
Offering of Units
435,092.578 3,745,334 25,000
3,770,334
Net Loss
(123,249) (1,660) (124,909)
Redemptions
(259,548.623) (2,268,274) -
(2,268,274)
Partners' Capital,
March 31, 2000
2,759,644.126 $24,167,471 $287,041
$24,454,512
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Period from
March 1, 1999
(commencement
For the Quarter of operations) to
Ended March 31, March 31,
2000
1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss (124,909)
(448,855)
Noncash item included in net loss:
Net change in unrealized 557,791
(32,030) Net
option premiums 480,829 33,020
(Increase) decrease in operating assets:
Interest receivable (DWR and Carr)(22,398) (20,478)
Increase in operating liabilities:
Accrued brokerage fee (DWR) 15,058 33,842
Accrued management fee 4,302 9,669
Net cash provided by (used for) operating activities 910,673
(424,832)
CASH FLOWS FROM FINANCING ACTIVITIES
Initial offering - 5
,801,450
Offering of Units 3,770,334
2,753,022
Increase in subscriptions receivable(891,669)
(2,753,022)
Increase in redemptions payable 1,348,570 -
Redemptions of Units (2,268,274)
- -
Net cash provided by financing activities 1,958,961
5,801,450
Net increase in cash 2,869,634 5
,376,618
Balance at beginning of period 20,297,239
- -
Balance at end of period 23,166,873
5,376,618
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON 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 Welton 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 Welton 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 Graham L.P.,
and Morgan Stanley Dean Witter Charter Millburn L.P.
The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds Inc.
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
("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. Welton Investment Corporation ("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 future
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 a brokerage fee 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
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
factors which may significantly influence the market value of
these contracts, including interest rate volatility.
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 for 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 $1,165,058 and
$1,722,849 at March 31, 2000 and December 31, 1999, respectively.
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The entire $1,165,058 and $1,722,849 of net unrealized gains on
open contracts at March 31, 2000 and December 31, 1999,
respectively, all related to exchange-traded futures and futures-
styled options contracts.
Exchange-traded futures and futures-styled options contracts held
by the Partnership at March 31, 2000 and December 31, 1999 mature
through September 2000 and May 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
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
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
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
$24,331,931 and $22,020,088 at March 31, 2000 and December 31,
1999, respectively. With respect to the Partnership's off-
exchange-traded forward currency contracts, there are no daly
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
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
<PAGE>
no 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 and 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 ("Units") will
affect the amount of funds available for investment 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 and forwards markets. The following presents a summary
of the Partnership's operations for the quarter ended March 31,
2000 and the period from March 1, 1999 (commencement of
operations) to March 31, 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 Ended March 31, 2000
For the quarter ended March 31, 2000 the Partnership recorded
total trading revenues including interest income of $388,352 and,
after expenses, posted a decrease in Net Asset Value per Unit.
The most significant losses of approximately 1.9% were recorded
primarily during January in the global stock index futures
markets from long positions in U.S. stock index futures as U.S.
and European equity prices reversed lower, after rallying higher
<PAGE>
in December, amid fears of interest rate hikes in the U.S. and
Europe. Stock prices declined further later in January as a new
batch of economic data raised fears that the Federal Reserve
could be forced to take aggressive action to slow the economy.
In the soft commodities markets, losses of approximately 1.1%
were incurred primarily from short positions in coffee futures as
prices rebounded during late-January. Additional losses were
incurred from long positions in cotton futures as prices
decreased later in March after the latest figures from the USDA
indicated a fall in exports and on reports of rain. In the
global interest rate futures markets, losses of approximately
0.9% were recorded primarily during February from long futures
positions in Japanese government bonds as the market experienced
significant price volatility. During March, additional losses
were recorded later in March from short positions in Japanese
interest rate futures as Japanese bond prices rebounded. These
losses were partially offset by gains of approximately 3.1%
recorded in the currency markets during March from short
positions in the euro as the value of the European common
currency finished March lower versus the U.S. dollar, undermined
by expectations that interest rates would be held steady by the
European Central Bank. In the energy markets, gains of
approximately 1.7% were recorded during January and February from
long positions in crude oil futures and its refined products as
oil prices increased on concerns about future output levels from
the world's leading producer countries amid dwindling stockpiles
<PAGE>
and increasing demand. Total expenses for the three months ended
March 31, 2000 were $513,261, resulting in a net loss of
$124,909. The value of a Unit decreased from $8.93 at December
31, 1999 to $8.86 at March 31, 2000. Results of operations for
First Quarter 2000 are not comparable to First Quarter 1999
because 1999 reflects only a single month's trading of
approximately 67% lower Net Assets.
For the Period Ended March 31, 1999
For the period from March 1 (commencement of operations) to March
31, 1999, the Partnership recorded total trading losses net of
interest income of $405,344 and posted a decrease in Net Asset
Value per Unit. The most significant net losses of approximately
4.3% were recorded in the global stock index futures markets
largely from long positions in U.S. stock index futures as
domestic equity prices moved lower during late March on investor
fears regarding corporate earnings, most notably technology
companies. In the agricultural markets, losses of approximately
0.9% were experienced from short futures positions in wheat,
corn, and soybean products. Wheat prices moved higher on reports
that a cold snap in the U.S. Midwest could damage the hard red
winter wheat crop early in March. Corn prices increased due to
technical strength amid a lack of farmer selling. Soybean oil
prices increased due to speculative buying incited by signs of an
increase in world oilseed and vegetable oil demand. In soft
commodities, losses of approximately 0.7% were recorded primarily
<PAGE>
from short cotton futures positions as prices surged on
technically motivated speculative buying and rumors that an
influential merchant had turned bullish. In the metals markets,
smaller losses of approximately 0.4% were experienced mainly from
short aluminum futures positions as prices increased during mid-
March as good demand in the United States prompted shipments from
Europe amid a drawdown in supply. Total expenses for the period
ended March 31, 1999 were 43,511, resulting in a net loss of
$448,855. The value of a Unit decreased from $10.00 at March 1,
1999 (commencement of operations) to $9.23 at March 31, 1999.
Risks Associated With the Euro. On January 1, 1999, eleven
countries in the European Union established fixed conversion
rates on their existing sovereign currencies and converted to a
common single currency (the euro). During a three-year transition
period, the sovereign currencies will continue to exist but only
as a fixed denomination of the euro. Conversion to the euro
prevents the Trading Advisor from trading those sovereign
currencies and thereby limits its ability to take advantage of
potential market opportunities that might otherwise have existed
had separate currencies been available to trade. This could
adversely affect the performance results of the Partnership.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
<PAGE>
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.
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
<PAGE>
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
expectations 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.
<PAGE>
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 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
<PAGE>
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 risk category at March 31, 2000 and 1999. As
of March 31, 2000 and 1999, the Partnership's total
capitalization was approximately $24 million and $8 million,
respectively.
Primary Market March 31, 2000 March 31, 1999
Risk Category Value at Risk Value at Risk
Interest Rate (1.08)% (0.44)%
Equity (1.47) (0.16)
Currency (1.35) (0.99)
Commodity (0.58) (0.19)
Aggregate Value at Risk (2.79)% (1.08)%
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.
<PAGE>
The table above represents the VaR of the Partnership's open
positions at March 31, 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 calendar quarter-end reporting periods
from April 1, 1999 through March 31, 2000.
Primary Market Risk Category High Low Average
Interest Rate (1.58)% (0.44)%
(0.99)%
Equity (4.75) (0.16) (1.67)
Currency (1.35) (0.99) (1.17)
Commodity (0.95) (0.19) (0.58)
Aggregate Value at Risk (5.02)% (1.08)% (2.85)%
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
<PAGE>
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;
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.
<PAGE>
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 March 31, 2000 and for the end of the four calendar
quarter reporting periods from April 1, 1999 through March 31,
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. These balances and any market
risk they may represent are immaterial. The Partnership also
maintains a substantial portion (approximately 82%) of its
available assets in cash at DWR. 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.
<PAGE>
The following were the primary trading risk exposures of the
Partnership as of March 31, 2000, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
Interest Rate - The primary market exposure in the Partnership
is in the interest rate sector. Exposure was spread across the
U.S., Japanese, European 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.
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 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
<PAGE>
rates would have little effect on the Partnership, were the
medium- to long-term rates to remain steady.
Equity - The second largest market exposure at March 31, 2000
was in the stock index complex. 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 March 31, 2000, the
Partnership's primary exposures were in the S&P 500 (U.S.), Hang
Seng (China), DAX (Germany) 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).
Currency - 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 first quarter of 2000, the
Partnership's major exposures were in the euro currency crosses
and outright U.S. dollar positions. (Outright positions consist
<PAGE>
of the U.S. dollar vs. other currencies. These other 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.
Commodity
Energy - On March 31, 2000, the Partnership's energy exposure
was shared by futures contracts in the 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 and that 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 is expected to continue in this choppy pattern.
Soft Commodities and Agriculturals - On March 31, 2000, the
Partnership had exposure in the markets that comprise these
sectors. Most of the exposure was in the wheat, coffee and
cotton markets. Supply and demand inequalities, severe weather
<PAGE>
disruption and market expectations affect price movements in
these markets.
Metals - The Partnership's metals market exposure is to
fluctuations in the price of base metals. During periods of
volatility, base metals will affect performance dramatically.
- 27 -
Demeter anticipates that the base metals will remain the primary
metals market exposure of the Partnership. Silver prices have
remained volatile over this period, and the Trading Advisor has
from time to time taken positions as they have perceived market
opportunities to develop.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of March 31, 2000:
Foreign Currency Balances - The Partnership's primary foreign
currency balances are in Hong Kong dollars and euros. 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
<PAGE>
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
diversification 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
On March 3, 2000, the plaintiffs in the New York action filed an
appeal of the order dismissing the consolidated complaint.
(Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-K for the year ended December 31, 1999 for
a more detailed discussion.)
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 333-60097).
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 333-91567).
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.
<PAGE>
Through March 31, 2000, 3,050,301.806 Units were sold, leaving
5,949,698.194 Units unsold as of March 31, 2000. The aggregate
price of the Units sold through March 31, 2000 was $27,585,862.
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" sections of the
prospectus included as part of the above referenced Registration
Statement.
Item 5. OTHER INFORMATION
Effective January 31, 2000, Mark J. Hawley resigned as Chairman
of the Board and a Director of Demeter and Dean Witter Futures
and Currency Management, Inc. ("DWFCM") and Robert E. Murray
replaced him as Chairman of the Board of Demeter and DWFCM.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - None
(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
Welton L.P.(Registrant)
By: Demeter Management Corporation
(General Partner)
May 12, 2000 By: /s/ Lewis A. Raibley, III
Lewis A. Raibley, III
Director and 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Morgan Stanley Charter Welton L.P. and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 23,166,873
<SECURITIES> 0
<RECEIVABLES> 1,946,038<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,200,452<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 26,200,452<F3>
<SALES> 0
<TOTAL-REVENUES> 388,352<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 513,261
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (124,909)
<INCOME-TAX> 0
<INCOME-CONTINUING> (124,909)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (124,909)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include subscriptions receivable of $1,840,093 and interest
receivable of $105,945.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $1,165,058 and net option premiums
of $(77,517).
<F3>Liabilities include redemptions payable of $1,571,204, accrued
brokerage fee of $135,906 and accrued management fee of $38,830.
<F4>Total revenue includes realized trading revenue of $656,241, net
change in unrealized of $(557,791) and interest income of $289,902.
</FN>
</TABLE>
