UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________________to_____________
Commission File 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
September 30, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition September 30, 2000
(Unaudited) and December 31, 1999..........................2
Statements of Operations for the Quarters Ended
September 30, 2000 and 1999 (Unaudited)....................3
Statements of Operations for the Nine Months Ended
September 30, 2000 and the Period from March 1, 1999
(commencement of operations) to September 30, 1999
(Unaudited)................................................4
Statements of Changes in Partners' Capital for the
Nine Months Ended September 30, 2000 and the Period from
March 1, 1999 (commencement of operations) to
September 30, 1999
(Unaudited).............................5
Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and the Period from March 1,
1999 (commencement of operations) to September 30, 1999
(Unaudited)................................................6
Notes to Financial Statements (Unaudited)...............7-
12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......13-22
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ........................................22-35
Part II. OTHER INFORMATION
Item 1. Legal Proceedings......................................36
Item 2. Changes in Securities and Use of Proceeds...........36-37
Item 6. Exhibits and Reports on Form 8-K....................37-38
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
September 30, December 31
,
2000 1999 $
$
(Unaudited)
ASSETS
<S>
<C> <C>
Equity in futures interests trading accounts:
Cash 21,289,602 20,297,239
Net unrealized gain (loss) on open contracts(1,035,664)1,722,849
Net option premiums (162,206) 403,312
Total Trading Equity 20,091,732 22,423,400
Subscriptions receivable 357,914 948,424
Interest receivable (DWR) 109,103 83,547
Total Assets 20,558,749 23,455,371
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 274,510 222,634
Accrued brokerage fees (DWR) 126,016 120,848
Accrued management fees 36,005 34,528
Total Liabilities 436,531 378,010
Partners' Capital
Limited Partners (2,803,923.259 and
2,554,572.061 Units, respectively)19,892,413 22,813,660
General Partner (32,392.072 and
29,528.110 Units, respectively) 229,805 263,701
Total Partners' Capital 20,122,218 23,077,361
Total Liabilities and Partners' Capital 20,558,749 23,45
5,371
NET ASSET VALUE PER UNIT 7.09 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 Quarters Ended September 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading loss:
Realized (947,355)(1,102,288)
Net change in unrealized (978,571) (282,044)
Total Trading Results (1,925,926)(1,384,332)
Interest Income (DWR) 331,342 176,916
Total Revenues (1,594,584) (1,207,416)
EXPENSES
Brokerage fees (DWR) 380,085 296,675
Management fees 108,596 84,765
Total Expenses 488,681 381,440
NET LOSS (2,083,265) (1,588,856)
NET LOSS ALLOCATION
Limited Partners (2,059,397)(1,571,130)
General Partner (23,868) (17,726)
NET LOSS PER UNIT
Limited Partners (0.74) (.85)
General Partner (0.74) (.85)
<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 Nine Months of operations) to
Ended September 30, September 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading profit (loss):
Realized (1,740,713) (2,096,441)
Net change in unrealized (2,758,513) 470,344
Total Trading Results (4,499,226) (1,626,097)
Interest Income (DWR) 950,936 289,356
Total Revenues (3,548,290) (1,336,741)
EXPENSES
Brokerage fees (DWR) 1,190,990 512,045
Management fees 340,283 146,299
Total Expenses 1,531,273 658,344
NET LOSS (5,079,563) (1,995,085)
NET LOSS ALLOCATION
Limited Partners (5,020,667) (1,972,182)
General Partner (58,896) (22,903)
NET LOSS PER UNIT
Limited Partners (1.84) (1.64)
General Partner (1.84) (1.64)
<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 Nine Months Ended September 30, 2000 and the
Period from March 1, 1999
(commencement of operations) to
September 30, 1999
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C>
<C> <C> <C>
Partners' Capital,
March 1, 1999
Initial Offering 580,145.052 $5,731,450 $70,000 $5,801,450
Offering of Units 1,726,658.495 15,311,038 160,000 15,471,038
Net Loss
- (1,972,182) (22,903) (1,995,085)
Redemptions (23,635.677) (199,932)
____-___ (199,932)
Partners' Capital,
September 30, 1999 2,283,167.870 $18,870,374 $207,097
$19,077,471
Partners' Capital,
December 31, 1999 2,584,100.171 $22,813,660 $263,701
$23,077,361
Offering of Units 773,314.065 6,386,584 25,000 6,411,584
Net Loss
- (5,020,667) (58,896)
(5,079,563)
Redemptions (521,098.905)
(4,287,164) ____-___ (4,287,164)
Partners' Capital,
September 30, 20002,836,315.331 $19,892,413 $229,805
$20,122,218
<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 Nine Months of operations) to
Ended September 30, September 30,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S>
<C> <C>
Net loss (5,079,563)(1,995,085)
Noncash item included in net loss:
Net change in unrealized 2,758,513 (470,344)
(Increase) decrease in operating assets:
Net option premiums 565,518 215,869
Interest receivable (DWR) (25,556) (68,320)
Increase in operating liabilities:
Accrued brokerage fees (DWR) 5,168109,254
Accrued management fees 1,477 31,215
Net cash used for operating activities (1,774,443) (2,177,411)
CASH FLOWS FROM FINANCING ACTIVITIES
Initial offering
- 5,801,450
Offering of Units 6,411,584 15,471,038
(Increase) decrease in subscriptions receivable590,510
(906,618)
Increase in redemptions payable
51,876 128,135
Redemptions of Units (4,287,164) (199,932)
Net cash provided by financing activities 2,766,806 2
0,294,073
Net increase in cash 992,363 18,116,662
Balance at beginning of period 20,297,239_ ___-___
Balance at end of period 21,289,602 18,116,662
<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 unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Morgan Stanley Dean Witter Charter 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"), provided clearing and execution services.
Demeter and DWR are wholly-owned subsidiaries of Morgan Stanley
Dean Witter & Co. Welton Investment Corporation (the "Trading
Advisor") is the Trading Advisor to the Partnership.
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interests trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on a rate equal to that
earned by DWR on its U.S. Treasury bill investments. The
Partnership pays brokerage fees to DWR.
3. Financial Instruments
The Partnership trades futures and forward contracts, options on
futures contracts and on physical commodities and other commodity
interests, including foreign currencies, financial instruments,
metals, energy and agricultural products. Futures and forwards
represent contracts for delayed delivery of an instrument at a
specified date and price. Risk arises from changes in the value
of these contracts and the potential inability of counterparties
to perform under the terms of the contracts. There are numerous
factors which may significantly influence the market value of
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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,
2000, as amended by SFAS No. 137. The Partnership adopted the
provisions of SFAS No. 133 beginning with the fiscal year ended
December 31, 1998. SFAS No. 133 superceded SFAS Nos. 119 and
105, which required the disclosure of average aggregate fair
values and contract/notional values, respectively, of derivative
financial instruments for an entity that carries its assets at
fair value. SFAS No. 133 was further amended by SFAS No. 138,
which clarifies issues surrounding interest rate risk, foreign
currency denominations, normal purchases and sales and net
hedging. The application of SFAS No. 133, as amended by SFAS No.
137, did not have a significant effect on the Partnership's
financial statements, nor will the application of the provisions
of SFAS No. 138 have a significant effect on the Partnership's
financial statements.
SFAS No. 133 defines a derivative as a financial instrument or
other contract that has all three of the following
characteristics:
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
1) One or more underlying notional amounts or payment
provisions;
2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in market
factors;
3) Terms require or permit net settlement.
Generally derivatives include futures, forwards, swaps or option
contracts, or other financial instruments with similar
characteristics such as caps, floors and collars.
The net unrealized gain (loss) on open contracts is reported as a
component of "Equity in futures interests trading accounts" on
the statements of financial condition and totaled $(1,035,664)
and $1,722,849 at September 30, 2000 and December 31, 1999,
respectively.
The net unrealized loss of $1,035,664 and the net unrealized gain
of $1,722,849 at September 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 September 30, 2000 and December 31, 1999
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
mature through March 2001 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
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 $20,253,938 and $22,020,088 at September 30, 2000 and
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
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 nine months
ended September 30, 2000 and for the quarter ended September 30,
1999 and the period from March 1, 1999 (commencement of
operations) to September 30, 1999, respectively, and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Advisor trades in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Advisor or will be profitable in the
future. Consequently, the results of operations of the
Partnership are difficult to discuss other than in the context of
its Trading Advisor's trading activities on behalf of the
Partnership as a whole and how the Partnership has performed in
the past.
For the Quarter and Nine Months Ended September 30, 2000
For the quarter ended September 30, 2000, the Partnership
recorded total trading losses net of interest income of
$1,594,584 and posted a decrease in Net Asset Value per Unit.
The most significant losses of approximately 3.0% were recorded
in the global interest rate futures markets primarily during
<PAGE>
mid September from long positions in Australian interest rate
futures as prices declined following a pattern set by U.S.
Treasuries. In the soft commodities markets, losses of
approximately 2.4% were recorded primarily during mid July from
coffee futures positions as prices moved in an extremely erratic
manner on conflicting weather signals from Brazil. In the energy
markets, losses of approximately 1.7% were incurred primarily
during July from long positions in natural gas futures as prices
declined as a result of lower than normal cooling demand in key
consumption areas and an increase in supplies as reported by the
American Gas Association. Additional losses were experienced
during July from long futures positions in crude oil and its
related products as prices reversed lower amid growing conviction
that Saudi Arabia will follow through with a pledge to boost
production. During late September, losses were also recorded from
long positions as energy prices reversed sharply lower after
President Clinton ordered the release of 30 million barrels of
oil from the Strategic Petroleum Reserve. In the global stock
index futures markets, losses of approximately 1.3% were
experienced primarily during September from long positions in
U.S. stock index futures as prices fell on technology stock
jitters and fears of a continuous increase in oil prices. In the
metals markets, losses of approximately 1.0% were recorded during
August from short nickel futures positions and during September
from short zinc futures positions as prices increased. A portion
of the Partnership's overall losses were offset by gains of
<PAGE>
approximately 0.4% recorded in the currency markets primarily
during August from short positions in the euro as the value of
the European common currency weakened versus the U.S. dollar amid
dampened optimism for economic growth in Europe. Total expenses
for the three months ended September 30, 2000 were $488,681,
resulting in a net loss of $2,083,265. The value of a Unit
decreased from $7.83 at June 30, 2000 to $7.09 at September 30,
2000.
For the nine months ended September 30, 2000, the Partnership
recorded total trading losses net of interest income of
$3,548,290 and posted a decrease in Net Asset Value per Unit.
The most significant losses of approximately 9.7% were recorded
in the global stock index futures markets primarily during
January 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 the release of an unexpected jump in the
Consumer Price Index. In the global interest rate futures
markets, losses of approximately 4.6% were recorded throughout
the majority of the second and third quarters from short
positions in German bund futures as prices were pushed higher by
a rise in U.S. prices. Additional losses were recorded primarily
during mid September from long positions in Australian interest
<PAGE>
rate futures as prices declined following a pattern set by U.S.
Treasuries. In the currency markets, losses of approximately
4.5% 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 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. In
the soft commodities markets, losses of approximately 2.7% were
recorded primarily during mid July from coffee futures positions
as coffee prices moved in an extremely erratic manner on
conflicting weather signals from Brazil. In the metals markets,
losses of approximately 2.6% 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. Additional
losses were recorded primarily during September from short zinc
futures positions as prices increased. A portion of the
Partnership's overall losses were offset by gains of
approximately 4.4% recorded in the energy markets primarily
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 and increasing
demand. Gains were also recorded during May and June from long
<PAGE>
futures positions in crude oil as the previous upward movement in
oil prices re-emerged amid rising concerns regarding supplies and
production levels. During August, additional gains were recorded
from long positions in crude oil futures and its related products
as prices increased as ongoing supply concerns outweighed signals
from Saudi Arabia that it would seek a suitable production
increase to ease the crunch. Additional gains were recorded
during May, August and September from long positions in natural
gas futures as prices continued their upward trend on supply and
storage concerns. Total expenses for the nine months ended
September 30, 2000 were $1,531,273, resulting in a net loss of
$5,079,563. The value of a Unit decreased from $8.93 at December
31, 1999 to $7.09 at September 30, 2000.
For the Quarter and Seven Months Ended September 30, 1999
For the quarter ended September 30, 1999, the Partnership
recorded total trading losses net of interest income of
$1,207,416 and posted a decrease in Net Asset Value per Unit.
The most significant losses of approximately 8.1% were recorded
from trading global stock index futures, primarily S&P 500, Hang
Seng and DAX index futures, as short-term price volatility in
these markets throughout a majority of the quarter resulted in
difficulty for Welton's trend following trading approach and
concentrated participation in this market sector. Additional
losses of approximately 2.0% were experienced in the currency
markets primarily from short positions in the European common
<PAGE>
currency and the Swiss franc as the previous downward trend in
the value of these currencies versus the U.S. dollar reversed
higher during July due to bullish economic data out of Europe and
inflationary concerns in the U.S. These losses were mitigated by
currency gains from long Japanese yen positions as the value of
the yen strengthened versus the U.S. dollar during the quarter
amid optimism regarding the Japanese economy. Smaller losses of
approximately 0.5% incurred in the global interest rate futures
markets primarily from trading Australian interest rate futures
throughout the quarter, as well as British interest rate futures
during August, more than offset profits recorded from short
positions in German interest rate futures during July and
September. A portion of the Partnership's overall losses for the
quarter were offset by gains of approximately 2.4% recorded in
the energy markets primarily from long positions in crude oil and
its refined products, unleaded gas and heating oil, as oil prices
climbed higher during August and September amid a tightness in
supplies and a commitment by OPEC officials to continue output
cuts through the first quarter of 2000. Additional profits of
approximately 0.7% were recorded in the metals markets primarily
from long positions in nickel futures as base metal prices
increased as a result of rising demand and shrinking supply.
Total expenses for the three months ended September 30, 1999 were
$381,440, resulting in a net loss of $1,588,856. The value of a
Unit decreased from $9.21 at June 30, 1999 to $8.36 at September
30, 1999.
<PAGE>
For the period from March 1, 1999 (commencement of operations) to
September 30, 1999, the Partnership recorded total trading losses
net of interest income of $1,336,741 and posted a decrease in Net
Asset Value per Unit. The most significant losses of
approximately 13.3% were recorded from trading global stock index
futures, primarily S&P 500, Hang Seng and DAX index futures, as
short-term price volatility in these markets throughout a
majority of the third quarter resulted in difficulty for the
Trading Advisor's trend following trading approach and
concentrated participation in this market sector. Additional
losses of approximately 3.8% were experienced in the currency
markets primarily from short positions in the euro and the Swiss
franc as the previous downward trend in the value of these
currencies versus the U.S. dollar reversed higher during July due
to bullish economic data out of Europe and inflationary concerns
in the U.S. These losses were mitigated by currency gains
recorded from long Japanese yen positions as the value of the yen
increased versus the U.S. dollar during the third quarter on
optimism regarding Japan's economic recovery. A portion of the
Partnership's overall losses for the year was offset by gains of
approximately 1.0% recorded in the energy markets primarily from
long positions in crude oil and its refined products, unleaded
gas and heating oil, as prices trended higher during August and
September due to declining supply and a commitment by OPEC
officials to adhere to agreed-upon output cuts. In the global
interest rate futures markets, profits of approximately 1.2% were
<PAGE>
recorded primarily from short positions in German interest rate
futures during July and September as prices continued lower on
fears that the European Central Bank would also raise interest
rates. Additional profits were recorded during June from short
positions in Spanish and German bund 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. Total expenses
for the period from March 1, 1999 (commencement of operations) to
September 30, 1999 were $658,344, resulting in a net loss of
$1,995,085. The value of a Unit decreased from $10.00 at March
1, 1999 (commencement of operations) to $8.36 at September 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
<PAGE>
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
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
<PAGE>
1995 (set forth in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934). All
quantitative disclosures in this section are deemed to be forward-
looking statements for purposes of the safe harbor, except for
statements of historical fact.
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures interests are settled daily through variation
margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
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.
<PAGE>
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the Partnership's
VaR is approximately four years. The one-day 99% confidence
level of the Partnership's VaR corresponds to the negative change
in portfolio value that, based on observed market risk factors,
would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category at September 30, 2000 and 1999.
As of September 30, 2000 and 1999, the Partnership's total
capitalization was approximately $20 million and $19 million,
respectively.
<PAGE>
Primary Market September 30, 2000 September 30, 1999
Risk Category Value at Risk Value at Risk
Interest Rate (1.09)% (1.58)%
Currency (1.47) (1.22)
Equity (0.02) (0.30)
Commodity (1.73) (0.95)
Aggregate Value at Risk (2.35)% (2.49)%
Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual Market Categories listed above. Aggregate VaR will be
lower as it takes into account correlation among different
positions and categories.
The table above represents the VaR of the Partnership's open
positions at September 30, 2000 and 1999 only and is not
necessarily representative of either the historic or future risk
of an investment in the Partnership. Because the Partnership's
only business is the speculative trading of futures interests,
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.
<PAGE>
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
Net Assets for the four quarterly reporting periods from October
1, 1999 through September 30, 2000.
Primary Market Risk Category High Low Average
Interest Rate (1.30)% (0.08)% (0.89)%
Currency (1.47) (0.55) (1.12)
Equity (1.95) (0.02) (1.05)
Commodity (1.73) (0.54) (1.02)
Aggregate Value at Risk (2.79)% (1.98)% (2.33)%
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
<PAGE>
above, as well as the past performance of the Partnership, give
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
The VaR tables above present the results of the Partnership's VaR
for each of the Partnership's market risk exposures and on an
aggregate basis at September 30, 2000 and for the end of the four
quarterly reporting periods from October 1, 1999 through
September 30, 2000. Since VaR is based on historical data, VaR
should not be viewed as predictive of the Partnership's future
financial performance or its ability to manage or monitor risk.
<PAGE>
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 September 30, 2000
the Partnership's cash balance at DWR was approximately 84% 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
<PAGE>
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expro-
priations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation and many other factors could result in
material losses as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of September 30, 2000, by market sector. It may
be anticipated however, that these market exposures will vary
materially over time.
Interest Rate. The primary market exposure at September 30, 2000
was in the interest rate sector. Exposure was primarily spread
<PAGE>
across the German, Japanese, U.S. and Australian interest rate
sectors. Interest rate movements directly affect the price of
the sovereign bond futures positions held by the Partnership and
indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country as well as
relative interest rate movements between countries materially
impact the Partnership's profitability. The Partnership's
primary interest rate exposure is generally to interest rate
fluctuations in the United States and the other G-7 countries.
The G-7 countries consist of France, U.S., Britain, Germany,
Japan, Italy and Canada. However, the Partnership also takes
futures positions in the government debt of smaller nations -
e.g. Australia. Demeter anticipates that G-7 and Australian
interest rates will remain the primary interest rate exposure of
the Partnership for the foreseeable future. The changes in
interest rates that have the most significant effect on the
Partnership are changes in long-term, as opposed to short-term,
rates. Most of the speculative futures positions held by the
Partnership are in medium- to long-term instruments.
Consequently, even a material change in short-term rates would
have little effect on the Partnership, were the medium- to long-
term rates to remain steady.
Currency. The second largest market exposure at September 30,
2000 was in the currency complex. The Partnership's currency
exposure is to exchange rate fluctuations, primarily fluctuations
<PAGE>
which disrupt the historical pricing relationships between
different currencies and currency pairs. Interest rate changes
as well as political and general economic conditions influence
these fluctuations. The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar. At September 30, 2000,
the Partnership's major exposures were in the euro currency
crosses and outright U.S. dollar positions. Outright positions
consist of the U.S. dollar vs. other currencies. These other
currencies include major and minor currencies. Demeter does not
anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future. The currency
trading VaR figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Partnership in
expressing VaR in a functional currency other than dollars.
Equity. The primary equity exposure is to equity price risk in
the G-7 countries. The stock index futures traded by the
Partnership are by law limited to futures on broadly based
indices. As of September 30, 2000, the Partnership's primary
exposure was in the S&P 500 (U.S.) stock index. The Partnership
is primarily exposed to the risk of adverse price trends or
static markets in the U.S. stock index. Static markets would not
cause major market changes but would make it difficult for the
<PAGE>
Partnership to avoid being "whipsawed" into numerous small
losses.
Commodity.
Energy. On September 30, 2000, the Partnership's energy exposure
was shared primarily by futures contracts in the crude oil and
natural gas markets. Price movements in these markets result
from political developments in the Middle East, weather patterns,
and other economic fundamentals. It is possible that volatility
will remain high. Significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in this market. Natural gas has exhibited volatility
in prices resulting from weather patterns and supply and demand
factors and may continue in this choppy pattern.
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.
Demeter anticipates that the base metals will remain the primary
metals market exposure of the Partnership.
Soft Commodities and Agriculturals. On September 30, 2000, the
Partnership had exposure in the markets that comprise these
sectors. Most of the exposure, however, was in the wheat and
cotton markets. Supply and demand inequalities, severe weather
<PAGE>
disruption and market expectations affect price movements in
these markets.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of September 30, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances at September 30, 2000 were in Japanese yen.
The Partnership controls the non-trading risk of these balances
by regularly converting these balances back into dollars upon
liquidation of the respective position.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different market sectors and trading
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.
<PAGE>
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 September 30, 2000, 3,388,523.293 Units were sold,
leaving 5,611,476.707 Units unsold. The aggregate price of the
Units sold through September 30, 2000 was $30,227,112.
<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 "Use of
Proceeds" section of the prospectus included as part of the above
referenced Registration Statement.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership, dated as of October 31,
2000, is incorporated by reference to Exhibit A of the
Partnership's Prospectus, dated October 11, 2000, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on October 13, 2000.
3.02 Certificate of Limited Partnership, dated July 15, 1998,
is incorporated by reference to Exhibit 3.01 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.
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.
<PAGE>
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 October 11, 2000, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on October 13, 2000.
10.06 Escrow Agreement, dated November 6, 1998, among the
Partnership, Demeter Management Corporation, Dean
Witter Reynolds Inc., and Chemical Bank is incorporated
by reference to Exhibit 10.06 of the Partnership's Form
10-Q (File No. 0-25607) for the quarter ended March 31,
1999.
10.07 Subscription Agreement Update Form is incorporated by
reference to Exhibit C of the Partnership's Prospectus dated
October 11, 2000, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the Securities Act of
1933, as amended, on October 13, 2000.
(B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Dean Witter Charter
Welton L.P.(Registrant)
By: Demeter Management Corporation
(General Partner)
November 13, 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.
