UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________________to_____________
Commission File number 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
June 30, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition June 30, 2000
(Unaudited) and December 31, 1999..........................2
Statements of Operations for the Quarters Ended
June 30, 2000 and 1999 (Unaudited).........................3
Statements of Operations for the Six Months Ended
June 30, 2000 and the Period from March 1, 1999
(commencement of operations) to June 30, 1999
(Unaudited)................................................4
Statements of Changes in Partners' Capital for the
Six Months Ended June 30, 2000 and the Period from
March 1, 1999 (commencement of operations) to
June 30, 1999
(Unaudited)..................................5
Statements of Cash Flows for the Six Months Ended
June 30, 2000 and the Period from March 1,
1999 (commencement of operations) to June 30, 1999
(Unaudited)................................................6
Notes to Financial Statements (Unaudited)...............7-
11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......12-21
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ........................................21-33
Part II. OTHER INFORMATION
Item 1. Legal Proceedings......................................34
Item 2. Changes in Securities and Use of Proceeds...........34-35
Item 5. Other Information..................................... 35
Item 6. Exhibits and Reports on Form 8-K....................35-36
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
June 30, December 31,
2000 1999 $
$
(Unaudited)
ASSETS
<S> <C> <C>
Equity in futures interests trading accounts:
Cash 22,658,173 20,297,239
Net unrealized gain (loss) on open contracts(57,093)1,722,849
Net option premiums (215,831) 403,312
Total Trading Equity 22,385,249 22,423,400
Subscriptions receivable 382,301 948,424
Interest receivable (DWR) 106,154 83,547
Total Assets 22,873,704 23,455,371
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 413,077 222,634
Accrued brokerage fees (DWR) 133,718 120,848
Accrued management fees 38,205 34,528
Total Liabilities 585,000 378,010
Partners' Capital
Limited Partners (2,813,703.558 and
2,554,572.061 Units, respectively) 22,035,031 22,813,660
General Partner (32,392.072 and
29,528.110 Units, respectively) 253,673 263,701
Total Partners' Capital 22,288,704 23,077,361
Total Liabilities and Partners' Capital 22,873,704 23,455,371
NET ASSET VALUE PER UNIT 7.83 8.93
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
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<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended June 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading profit (loss):
Realized (1,449,599)(536,301)
Net change in unrealized (1,222,151) 720,358
Total Trading Results (2,671,750) 184,057
Interest Income (DWR) 329,692 91,962
Total Revenues (2,342,058) 276,019
EXPENSES
Brokerage fees (DWR) 411,702 181,528
Management fees 117,629 51,865
Total Expenses 529,331 233,393
NET INCOME (LOSS) (2,871,389) 42,626
NET INCOME (LOSS) ALLOCATION
Limited Partners (2,838,021) 42,391
General Partner (33,368) 235
NET INCOME (LOSS) PER UNIT
Limited Partners (1.03) (.02)
General Partner (1.03) (.02)
<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 Six Months of operations) to
Ended June 30, June 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading profit (loss):
Realized (793,358) (994,153)
Net change in unrealized (1,779,942) 752,388
Total Trading Results (2,573,300) (241,765)
Interest Income (DWR) 619,594 112,440
Total Revenues (1,953,706) (129,325)
EXPENSES
Brokerage fees (DWR) 810,905 215,370
Management fees 231,687 61,534
Total Expenses 1,042,592 276,904
NET LOSS (2,996,298) (406,229)
NET LOSS ALLOCATION
Limited Partners (2,961,270) (401,052)
General Partner (35,028) (5,177)
NET LOSS PER UNIT
Limited Partners (1.10) (.79)
General Partner (1.10) (.79)
<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 Six Months Ended June 30, 2000 and the
Period from March 1, 1999
(commencement of operations) to
June 30, 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C> <C>
Partners' Capital,
March 1, 1999
Initial Offering 580,145.052 $5,731,450 $70,000 $5,801,450
Offering of Units 997,332.947 9,038,806 100,000 9,138,806
Net Loss
- (401,052) (5,177) (406,229)
Partners' Capital,
June 30, 1999 1,577,477.999 $14,369,204 $164,823
$14,534,027
Partners' Capital,
December 31, 1999 2,584,100.171 $22,813,660 $263,701
$23,077,361
Offering of Units 643,848.858 5,433,034 25,000 5,458,034
Net Loss
- (2,961,270) (35,028)
(2,996,298)
Redemptions (381,853.399) (3,250,393)
______-__ (3,250,393)
Partners' Capital,
June 30, 2000 2,846,095.630 $22,035,031 $253,673
$22,288,704
<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 Six Months of operations) to
Ended June 30, June 30,
2000 1999
$ $
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (2,996,298)(406,229)
Noncash item included in net loss:
Net change in unrealized 1,779,942 (752,388)
(Increase) decrease in operating assets:
Net option premiums 619,143 178,547
Interest receivable (DWR) (22,607) (38,708)
Increase in operating liabilities:
Accrued brokerage fees (DWR) 12,870 72,440
Accrued management fees 3,677 20,697
Net cash used for operating activities (603,273) (925,641)
CASH FLOWS FROM FINANCING ACTIVITIES
Initial offering
- 5,801,450
Offering of Units 5,458,034 9,138,806
(Increase) decrease in subscriptions receivable
566,123 (1,740,035)
Increase in redemptions payable
190,443 -
Redemptions of Units (3,250,393) ______-___
Net cash provided by financing activities 2,964,207
13,200,221
Net increase in cash 2,360,934 12,274,580
Balance at beginning of period 20,297,239_____-____
Balance at end of period 22,658,173 12,274,580
<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 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
<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 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 $(57,093) and
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
$1,722,849 at June 30, 2000 and December 31, 1999, respectively.
The net unrealized loss of $57,093 and the net unrealized gain of
$1,722,849 at June 30, 2000 and December 31, 1999, respectively,
related to exchange-traded futures and futures-styled options
contracts.
Exchange-traded futures and futures-styled options contracts held
by the Partnership at June 30, 2000 and December 31, 1999 mature
through December 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
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
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 $22,601,080 and $22,020,088 at June 30, 2000 and December
31, 1999, respectively. With respect to the Partnership's off-
exchange-traded forward currency contracts, there are no daily
settlements of variations in value nor is there any requirement
that an amount equal to the net unrealized gain (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
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, 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 and six months
ended June 30, 2000 and for the quarter ended June 30, 1999 and
the period from March 1, 1999 (commencement of operations) to
June 30, 1999, respectively, and a general discussion of its
trading activities during each period. It is important to note,
however, that the Trading Advisor trades in various markets at
different times and that prior activity in a particular market
does not mean that such market will be actively traded by the
Trading Advisor or will be profitable in the future.
Consequently, the results of operations of the Partnership are
difficult to discuss other than in the context of its Trading
Advisor's trading activities on behalf of the Partnership as a
whole and how the Partnership has performed in the past.
For the Quarter and Six Months Ended June 30, 2000
For the quarter ended June 30, 2000, the Partnership recorded
total trading losses net of interest income of $2,342,058 and
posted a decrease in Net Assets Value per Unit. The most
significant losses of approximately 7.7% were recorded in the
currency markets primarily during April from long positions in
the Japanese yen as the value of the yen weakened versus the U.S.
<PAGE>
dollar amid fears of additional Bank of Japan ("BOJ")
intervention. During May and June, losses were recorded from
short positions in the Japanese yen as its value reversed higher
versus the U.S. dollar following hints by BOJ governor Hayami of
the possible end of the zero interest rate policy in Japan. The
U.S. dollar weakened further versus the yen during June due
primarily to the perception that interest rates in the U.S. may
have topped out. In the global stock index futures markets,
losses of approximately 6.3% were recorded primarily during April
from long U.S. stock index futures positions as domestic equity
prices declined following an unexpected jump in the Consumer
Price Index on fears of inflation and concerns that the Federal
Reserve may need to raise interest rates more aggressively. In
the metals markets, losses of approximately 1.5% resulted
primarily during June from short aluminum futures positions as
prices reversed sharply higher mid-month on institutional buying
and fears that U.S. capacity could be hit further by power
shortages. In the global interest rate futures markets, losses
of approximately 0.8% were recorded throughout the majority of
the quarter from short positions in German bund futures as prices
were pushed higher by a rise in U.S. prices. These losses were
partially offset by gains of approximately 4.2% recorded
primarily in the energy markets during May and June from long
futures positions in crude oil and its related products as the
previous upward movement in oil prices re-emerged amid rising
concerns regarding supplies and production levels. Additional
<PAGE>
gains were recorded during May from long positions in natural gas
futures as prices continued their upward trend, as data released
by the American Gas Association further confirmed fears that
inventory levels remain low. In the soft commodities markets,
gains of approximately 0.6% were recorded throughout a majority
of the quarter from short positions in coffee futures as prices
declined on technical factors. Total expenses for the three
months ended June 30, 2000 were $529,331, resulting in a net loss
of $2,871,389. The value of a Unit decreased from $8.86 at March
31, 2000 to $7.83 at June 30, 2000.
For the six months ended June 30, 2000, the Partnership recorded
total trading losses net of interest income of $1,953,706 and
posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 8.2% 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 in December,
amid fears of interest rate hikes in the U.S. and Europe. During
April, additional losses were recorded from long U.S. stock index
futures positions as domestic equity prices declined following an
unexpected jump in the Consumer Price Index. In the currency
markets, losses of approximately 4.7% were experienced primarily
during April from long positions in the Japanese yen as the value
of the yen weakened versus the U.S. dollar amid fears of
additional BOJ intervention. During May and June, losses were
<PAGE>
recorded from short positions in the Japanese yen as its value
reversed higher versus the U.S. dollar following hints by BOJ
governor Hayami of the possible end of the zero interest rate
policy in Japan. In the global interest rate futures markets,
losses of approximately 1.7% were recorded throughout the
majority of the second quarter from short positions in German
bund futures as prices were pushed higher by the rise in U.S.
prices. In the metals markets, losses of approximately 1.6%
resulted primarily during June from short aluminum futures
positions as prices reversed sharply higher at mid-month on
institutional buying and fears that U.S. capacity could be hit
further by power shortages. These losses were partially offset
by gains of approximately 5.8% recorded primarily during January
and February in the energy markets 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 and increasing
demand. Gains were also recorded during May and June from long
futures positions in crude oil as the previous upward movement in
oil prices reemerged amid rising concerns regarding supplies and
production levels. Additional gains were recorded during May
from long positions in natural gas futures as prices continued
their upward trend, as data released by the American Gas
Association further confirmed fears that inventory levels remain
low. Total expenses for the six months ended June 30, 2000
<PAGE>
were $1,042,592, resulting in a net loss of $2,996,298. The value
of a Unit decreased from $8.93 at December 31, 1999 to $7.83 at
June 30, 2000.
For the Quarter and Four Months Ended June 30, 1999
For the quarter ended June 30, 1999, the Partnership recorded
total trading revenues including interest income of $276,019 and
posted a small increase in Total Net Assets. Due to monthly
fluctuations in Net Asset Value per Unit and the timing of
monthly subscriptions, Net Asset Value per Unit decreased
slightly for the quarter. The most significant losses of
approximately 2.6% were recorded in the energy markets primarily
from long positions in natural gas futures as prices dropped
during mid June on reports of higher-than-expected storage levels
and a break in a heat wave in key consumption areas of the U.S.
In metals, losses of approximately 2.2% were incurred primarily
during May from long futures positions in most base metals as
prices reversed sharply lower amid increased supply, low demand
and as the likelihood of a production cut faded. Smaller losses
of approximately 0.4% were recorded in the currency markets
primarily from crossrate transactions, specifically short
positions in the European common currency relative to the
Japanese yen, as the value of the euro climbed versus the yen
during mid May following comments by Japanese finance officials
that the subsequent decline in the yen versus the U.S. dollar was
rapid but not concerning. These losses were partially offset by
<PAGE>
gains of approximately 2.3% recorded in the global interest rate
futures markets primarily during June from short positions in
European interest rate futures, particularly Spanish and German
bond futures, as prices declined amid dampened sentiment
regarding economic unity in that region and on fears of an
interest rate hike in the U.S. Additional gains of approximately
2.2% were recorded in the global stock index futures markets
primarily from long positions in U.S. stock index futures as
domestic equity prices rose during June following the release of
U.S. economic data that calmed investor fears of any extreme
action by the Federal Open Market Committee. Smaller gains of
approximately 0.4% were recorded in the livestock markets
primarily from short positions in lean hog futures as prices
declined sharply due to reports of an inventory surplus. Total
expenses for the three months ended June 30, 1999 were $233,393,
resulting in net income of $42,626. The value of a Unit
decreased from $9.23 at March 31, 1999 to $9.21 at June 30, 1999.
For the period from March 1, 1999 (commencement of operations) to
June 30, 1999, the Partnership recorded total trading losses net
of interest income of $129,325 and posted a decrease in Net Asset
Value per Unit. The most significant losses of approximately 3.1%
were recorded in the energy markets primarily from long positions
in natural gas futures as prices dropped during mid June on
reports of higher-than-expected storage levels and a break in a
heat wave in key consumption areas of the U.S. In metals, losses
<PAGE>
of approximately 2.6% were incurred primarily during May from
long futures positions in most base metals as prices reversed
sharply lower amid increased supply, low demand and as the
likelihood of a production cut faded. Smaller losses were
recorded in this market complex during March from short aluminum
futures positions as prices increased as strong demand from the
U.S. prompted shipments from Europe amid a drawdown in supply.
In currencies, losses of approximately 0.5% were recorded
primarily during March from short Japanese yen positions as the
value of the yen increased relative to the U.S. dollar amid
positive investor reaction to the Bank of Japan's decision to
leave the official discount rate unchanged. Losses were also
recorded from short yen positions during June as the yen's value
temporarily strengthened versus the U.S. dollar on optimism
regarding the Japanese economy. These losses were mitigated by
gains of approximately 2.1% recorded in the global interest rate
futures markets primarily from short positions in European
interest rate futures, particularly Spanish and German bond
futures, as prices declined during June amid dampened sentiment
regarding economic unity in that region and on fears of an
interest rate hike in the U.S. Smaller profits of approximately
0.4% were recorded in the livestock markets primarily from short
positions in lean hog futures as prices declined sharply due to
reports of an inventory surplus. Total expenses for the period
from March 1, 1999 (commencement of operations) to June 30, 1999
were $276,904, resulting in a net
<PAGE>
loss of $406,229. The value of a Unit decreased from $10.00 at
March 1, 1999 (commencement of operations) to $9.21 at June 30,
1999.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
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
<PAGE>
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
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
<PAGE>
Partnership's earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures interests are settled daily through variation
margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the Partnership's
VaR is approximately four years. The one-day 99% confidence
level of the Partnership's VaR corresponds to the negative change
in portfolio value that, based on observed market risk factors,
would have been exceeded once in 100 trading days.
<PAGE>
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following tables indicate the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category at June 30, 2000 and 1999. As of
June 30, 2000 and 1999, the Partnership's total capitalization
was approximately $22 million and $15 million, respectively.
Primary Market June 30, 2000 June 30, 1999
Risk Category Value at Risk Value at Risk
Interest Rate (1.30)% (0.86)%
Currency (1.11) (1.12)
Equity (0.74) (4.75)
Commodity (1.23) (0.60)
Aggregate Value at Risk (1.98)% (5.02)%
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
<PAGE>
lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open
positions at June 30, 2000 and 1999 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures interests, the
composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day.
Any changes in open positions could positively or negatively
materially impact market risk as measured by VaR.
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
Net Assets for the four quarterly reporting periods from July 1,
1999 through June 30, 2000.
Primary Market Risk Category High Low Average
Interest Rate (1.30)% (0.44)% (0.92)%
Currency (1.35) (0.99) (1.14)
Equity (4.75) (0.16) (1.78)
Commodity (1.23) (0.19) (0.65)
Aggregate Value at Risk (5.02)% (1.08)% (2.72)%
<PAGE>
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
typically found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, gives
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
<PAGE>
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
The VaR tables above present the results of the Partnership's VaR
for the Partnership's market risk exposures and on an aggregate
basis at June 30, 2000 and for the end of the four quarterly
reporting periods from July 1, 1999 through June 30, 2000. Since
VaR is based on historical data, VaR should not be viewed as
predictive of the Partnership's future financial performance or
its ability to manage or monitor risk. There can be no assurance
that the Partnership's actual losses on a particular day will not
exceed the VaR amounts indicated above or that such losses will
not occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial. At June 30, 2000 the
<PAGE>
Partnership's cash balance at DWR was approximately 86% of its
total Net Asset Value. A decline in short-term interest rates
will result in a decline in the Partnership's cash management
income. This cash flow risk is not considered material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-
sensitive instruments.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expro-
priations, illiquid markets, the emergence of dominant
<PAGE>
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation and many other factors could result in
material losses as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of June 30, 2000 by market sectors. It may be
anticipated however, that these market exposures will vary
materially over time.
Interest Rate. The primary market exposure in the Partnership at
June 30, 2000 was 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. The G-7 countries consist of France, U.S., Britain,
<PAGE>
Germany, Japan, Italy and Canada. However, the Partnership also
takes futures positions in the government debt of smaller nations
- e.g. Australia. Demeter anticipates that G-7 and Australian
interest rates will remain the primary interest rate exposure of
the Partnership for the foreseeable future. The changes in
interest rates which have the most effect on the Partnership are
changes in long-term, as opposed to short-term, rates. Most of
the speculative futures positions held by the Partnership are in
medium- to long-term instruments. Consequently, even a material
change in short-term rates would have little effect on the
Partnership, were the medium- to long-term rates to remain
steady.
Currency. The second largest market exposure at June 30, 2000
was in the currency complex. The Partnership's currency exposure
is to exchange rate fluctuations, primarily fluctuations which
disrupt the historical pricing relationships between different
currencies and currency pairs. Interest rate changes as well as
political and general economic conditions influence these
fluctuations. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar. For the second quarter of
2000, the Partnership's major exposures were in the euro currency
crosses and outright U.S. dollar positions. Outright positions
consist of the U.S. dollar vs. other currencies. These other
currencies include the major and minor currencies. Demeter does
<PAGE>
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.
Equity. The primary equity exposure at June 30, 2000 was to
equity price risk in the G-7 countries. The stock index futures
traded by the Partnership are by law limited to futures on
broadly based indices. As of June 30, 2000, the Partnership's
primary exposures were in the S&P 500 (U.S.), Hang Seng (China)
and NASDAQ (U.S.) stock indices. The Partnership is primarily
exposed to the risk of adverse price trends or static markets in
the U.S., European and Japanese indices. Static markets would
not cause major market changes but would make it difficult for
the Partnership to avoid being "whipsawed" into numerous small
losses.
Commodity.
Energy. On June 30, 2000, the Partnership's energy exposure was
shared primarily by futures contracts in the crude oil and
natural gas markets. Price movements in these markets result
from political developments in the Middle East, weather patterns,
and other economic fundamentals. It is possible that volatility
<PAGE>
will remain high. Significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in this market. Natural gas has exhibited volatility
in prices resulting from weather patterns and supply and demand
factors and may continue in this choppy pattern.
Soft Commodities and Agriculturals . On June 30, 2000, the
Partnership had exposure in the corn, wheat and coffee markets.
Supply and demand inequalities, severe weather disruption and
market expectations affect price movements in these markets.
Metals. The Partnership's metals market exposure at June 30,
2000 was to fluctuations in the price of base metals. During
periods of volatility, base metals will affect performance
dramatically. Demeter anticipates that the base metals will
remain the primary metals market exposure of the Partnership.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of June 30, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances at June 30, 2000 were in Japanese yen and
British pounds. The Partnership controls the non-trading risk of
these balances by regularly converting these balances back into
dollars upon liquidation of the respective position.
<PAGE>
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different market sectors and trading
approaches, and monitoring the performance of the Trading Advisor
daily. In addition, the Trading Advisor establishes
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
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 333-60097).
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.
Through June 30, 2000, 3,259,058.086 Units were sold, leaving
5,740,941.914 Units unsold as of June 30, 2000. The aggregate
price of the Units sold through June 30, 2000 was $29,273,562.
<PAGE>
Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the "Investment
Programs, Use of Proceeds and Trading Policies" sections of the
prospectus included as part of the above referenced Registration
Statement.
Item 5. OTHER INFORMATION
Effective July 1, 2000, Lewis A. Raibley, III resigned as Chief
Financial Officer and a Director of Demeter and Dean Witter
Futures Currency Management Inc. Effective July 10, 2000,
Raymond E. Koch replaced Lewis A. Raibley, III as Chief Financial
Officer in Demeter.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
3.01 Form of Limited Partnership Agreement of the
Partnership, dated as of March 27, 2000, is
incorporated by reference to Exhibit A of the
Partnership's Prospectus, dated November 6, 1998, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 31, 2000.
3.02 Certificate of Limited Partnership, dated July 15, 1998,
is incorporated by reference to Exhibit 3.01 of the
Partnership's Form 10-Q (File No. 0-25607) for the quarter
ended March 31, 1999.
10.01 Management Agreement, dated as of November 6, 1998,
among the Partnership, Demeter Management Corporation, and
Welton Investment Corporation, is incorporated by reference
to Exhibit 10.01 of the Partnership's Form 10- Q (File No. 0-
25607) for the quarter ended March 31, 1999.
<PAGE>
10.02 Customer Agreement, dated as of November 6, 1998,
between the Partnership and Dean Witter Reynolds Inc. is
incorporated by reference to Exhibit 10.02 of the
Partnership's Form 10-Q (File No. 0-25607) for the
quarter ended March 31, 1999.
10.03 Customer Agreement, dated as of November 6, 1998,
among the Partnership, Carr Futures, Inc., and Dean Witter
Reynolds Inc. is incorporated by reference to Exhibit 10.03
of the Partnership's Form 10-Q (File No. 0-25607) 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.
0-25607) for the quarter ended March 31, 1999.
10.05 Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units is
incorporated by reference to Exhibit B of the
Partnership's Prospectus dated March 27, 2000, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 31, 2000.
10.06 Escrow Agreement, dated November 6, 1998, among the
Partnership, Demeter Management Corporation, Dean
Witter Reynolds Inc., and Chemical Bank is incorporated
by reference to Exhibit 10.06 of the Partnership's Form
10-Q (File No. 0-25607) for the quarter ended March 31,
1999.
(B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Dean Witter Charter
Welton L.P.(Registrant)
By: Demeter Management Corporation
(General Partner)
August 11, 2000 By:/s/ Raymond E. Koch_____________
Raymond E. Koch
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
