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 0-25605
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-4018065
(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 MILLBURN L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2000
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S>
<C>
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-
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. Change in Securities and Use of Proceeds............36-37
Item 5. Other Information......................................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 MILLBURN 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 24,026,878 21,677,769
Net unrealized gain (loss) on open contracts (433,231)
920,823
Total Trading Equity 23,593,647 22,598,592
Subscriptions receivable 591,573 1,013,235
Interest receivable (DWR) 112,682 96,202
Total Assets 24,297,902 23,708,029
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 362,537 237,975
Accrued brokerage fees (DWR) 143,988 129,371
Accrued management fees 41,139 36,963
Total Liabilities 547,664 404,309
Partners' Capital
Limited Partners (2,839,654.476 and
2,481,763.344 Units, respectively)23,491,945 23,039,629
General Partner (31,221.881 and
28,447.087 Units, respectively) 258,293 264,091
Total Partners' Capital 23,750,238 23,303,720
Total Liabilities and Partners' Capital 24,297,902 23,708,029
NET ASSET VALUE PER UNIT 8.27 9.28
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended June 30,
2000 1999
$ $
REVENUES
<S>
<C> <C>
Trading profit (loss):
Realized (731,761)226,548
Net change in unrealized (595,866) 684,885
Total Trading Results (1,327,627) 911,433
Interest Income (DWR) 339,053 86,746
Total Revenues (988,574) 998,179
EXPENSES
Brokerage fees (DWR) 430,989 180,086
Management fees 123,140 51,543
Incentive fees ________-__ 103,350
Total Expenses 554,129 334,889
NET INCOME (LOSS) (1,542,703) 663,290
NET INCOME (LOSS) ALLOCATION
Limited Partners (1,525,718) 655,608
General Partner (16,985) 7,682
NET INCOME (LOSS) PER UNIT
Limited Partners (0.55) .65
General Partner (0.55) .65
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN 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 (982,883) 188,886
Net change in unrealized (1,354,054) 716,800
Total Trading Results (2,336,937) 905,686
Interest Income (DWR) 645,481 103,622
Total Revenues (1,691,456) 1,009,308
EXPENSES
Brokerage fees (DWR) 851,192 208,290
Management fees 243,198 59,511
Incentive fees ________-__ 103,350
Total Expenses 1,094,390 371,151
NET INCOME (LOSS) (2,785,846) 638,157
NET INCOME (LOSS) ALLOCATION
Limited Partners (2,755,048) 630,786
General Partner (30,798) 7,371
NET INCOME (LOSS) PER UNIT
Limited Partners (1.01) .60
General Partner (1.01) .60
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN 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 483,488.295 $4,774,883 $60,000 $4,834,883
Offering of Units 916,824.243 9,266,662 105,000 9,371,662
Net Income - 630,786 7,371 638,157
Partners' Capital,
June 30, 1999 1,400,312.538 $14,672,331 $172,371 $14,844,702
Partners' Capital,
December 31, 1999 2,510,210.431 $23,039,629 $264,091 $23,303,720
Offering of Units 732,745.200 6,519,656 25,000 6,544,656
Net Loss - (2,755,048) (30,798) (2,785,846)
Redemptions (372,079.274) (3,312,292) _____-___ <3,312,292)
Partners' Capital,
June 30, 2000 2,870,876.357 $23,491,945 $258,293 $23,750,238
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN 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
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S>
<C> <C>
Net income (loss): (2,785,846) 638,157
Noncash item included in net income (loss):
Net change in unrealized 1,354,054 (716,800)
Increase in operating assets:
Interest receivable (DWR) (16,480) (38,478)
Increase in operating liabilities:
Accrued brokerage fees (DWR) 14,617 73,627
Accrued management fees 4,176 21,036
Accrued incentive fees ________-__
28,060
Net cash provided by (used for) operating activities (1
,429,479) 5,602
CASH FLOWS FROM FINANCING ACTIVITIES
Initial offering
- 4,834,883
Offering of Units 6,544,656 9,371,662
(Increase) decrease in subscriptions receivable 421,662
(1,567,184)
Increase in redemptions payable
124,562 -
Redemptions of Units
(3,312,292) ______-___
Net cash provided by financing activities 3,778,588 12,639,361
Net increase in cash 2,349,109 12,644,963
Balance at beginning of period 21,677,769______-____
Balance at end of period 24,026,878 12,644,963
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN 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 Millburn 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 Millburn 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 Welton 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 MILLBURN 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. Millburn Ridgefield 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 these contracts, including interest
rate volatility.
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities" effective for fiscal years beginning after June 15,
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 $(433,231) and
$920,823 at June 30, 2000 and December 31, 1999, respectively.
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Of the $433,231 net unrealized loss on open contracts at June 30,
2000, $270,993 related to exchange-traded futures contracts and
$(704,224) related to off-exchange-traded forward currency
contracts.
Of the $920,823 net unrealized gain on open contracts at December
31, 1999, $983,771 related to exchange-traded futures contracts
and $(62,948) related to off-exchange-traded forward currency
contracts.
Exchange-traded futures contracts held by the Partnership at June
30, 2000 and December 31, 1999 mature through March 2001 and June
2000, respectively. Off-exchange-traded forward currency
contracts held by the Partnership at June 30, 2000 and December
31, 1999 mature through September 2000 and March 2000,
respectively.
The Partnership has credit risk associated with counterparty
nonperformance. 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
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
respect to most of the Partnership's assets. Exchange-traded
futures 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 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 contracts, including an amount equal to
the net unrealized gain on all open futures contracts, which
funds, in the aggregate, totaled $24,297,871 and $22,661,540 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 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
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
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
<PAGE>
daily limit for several consecutive days with little or no
trading. These market conditions could prevent the Partnership
from promptly liquidating its futures or options contracts and
result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets and subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
The Partnership has never had illiquidity affect a material
portion of its assets.
Capital Resources. The Partnership does not have, or expect to
have, any capital assets. Redemptions, exchanges and sales of
additional units of limited partnership interest ("Unit(s)") in
the future 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, forwards, and options markets. The following presents a
summary of the Partnership's operations for the quarter and six
months ended June 30, 2000 and 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 quarter. 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 $988,574 and
posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 6.3% were recorded in the
currency markets primarily during April from long positions in
<PAGE>
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. 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 interest rate futures markets,
losses of approximately 4.6% were experienced primarily during
April and early May from long positions in U.S. interest rate
futures as prices declined amid fears of additional interest rate
hikes by the U.S. Federal Reserve. Newly established short
positions incurred additional losses later in May and during June
as prices moved higher amid signs that U.S. economic growth has
slowed and the prospects of additional interest rate hikes by the
Federal Reserve were fading. In the metals markets, losses of
approximately 1.3% were recorded 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. In the global stock
index futures markets, losses of approximately 0.8% were incurred
primarily during April and June from trading Hang Seng Index
futures. These losses were partially offset by gains of
approximately 6.7% recorded in the energy markets primarily
during May and June from long futures positions in crude oil and
<PAGE>
its related products as the previous upward movement in oil
prices re-emerged 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. In the soft commodities markets, profits of approximately
1.3% were recorded throughout a majority of the quarter from long
sugar futures positions as prices moved higher due to strong
demand and declining production from Brazil. Total expenses for
the three months ended June 30, 2000 were $554,129, resulting in
a net loss of $1,542,703. The value of a Unit decreased from
$8.82 at March 31, 2000 to $8.27 at June 30, 2000.
For the six months ended June 30, 2000, the Partnership recorded
total trading losses net of interest income of $1,691,456 and
posted a decrease in Net Asset Value per Unit. The most
significant losses of approximately 6.6% 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.
dollar amid fears of additional 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
<PAGE>
interest rates in the U.S. may have topped out as data suggested
that economic growth may finally be slowing. In the global
interest rate futures markets, losses of approximately 5.3% were
experienced primarily during April and early May from long
positions in U.S. interest rate futures as prices declined amid
fears of additional interest rate hikes by the U.S. Federal
Reserve. Newly established short positions incurred additional
losses later in May and during June as prices moved higher amid
signs that U.S. economic growth has slowed and the prospects of
additional interest rate hikes by the Federal Reserve were
fading. In the global stock index futures markets, losses of
approximately 4.9% were recorded primarily from long futures
positions in the Hang Seng Index as most global equity prices
reversed lower earlier in January amid fears of interest rate
hikes. During March and June, additional losses were recorded
from trading Hang Seng and TOPIX Index futures due to trendless
price movements within most of the world's stock markets. In the
agricultural markets, losses of approximately 1.7% were incurred
primarily during February, May and June from long corn and wheat
futures positions as prices declined as a result of insufficient
demand and heavy rain in the U.S. production areas. These losses
were partially offset by gains of approximately 9.4% recorded
primarily during 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
<PAGE>
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. In the soft commodities markets, profits of
approximately 0.8% were recorded primarily during May and June
from long sugar futures positions as prices moved higher due to
strong demand and declining production from Brazil. Total
expenses for the six months ended June 30, 2000 were $1,094,390,
resulting in a net loss of $2,785,846. The value of a Unit
decreased from $9.28 at December 31, 1999 to $8.27 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 $998,179 and
posted an increase in Net Asset Value per Unit. The most
significant gains of approximately 7.3% were recorded in the
global interest rate futures markets primarily from long
positions in Japanese government bond futures as prices rallied
higher during April as investors flooded into higher yielding
long-term debt instruments after the Japanese government failed
to propose a new economic spending plan. Gains were also
<PAGE>
recorded from short positions in this market during June as
Japanese bond prices moved lower due to rising interest rates
spurred by an optimistic outlook for that country's economy.
Additional gains were recorded during June from short positions
in European and U.S. interest rate futures as prices moved lower
amid skepticism regarding the European Monetary Union and fears
of an interest rate hike in the U.S. In global stock index
futures trading, gains of approximately 2.8% were recorded
primarily from long positions in Hang Seng and Nikkei Index
futures during June, as most Asian equity prices moved higher
during June amid an overall bullish sentiment for the economies
of the Far East, more than offset losses recorded in these same
markets during May. In metals, gains of approximately 0.9% were
recorded primarily from long aluminum futures positions as prices
increased during April and June amid tightening supply levels and
increased demand. These gains were partially offset by losses of
approximately 2.1% experienced in soft commodities primarily from
long coffee futures positions as coffee prices declined sharply
during early June due to forecasts for warmer weather in Brazil
and ample warehouse supplies. In currencies, losses of
approximately 0.6% were incurred from short positions in the
Japanese yen, as the value of the yen strengthened versus the
U.S. dollar during mid June on optimism regarding that country's
economy, more than offset profits recorded from short positions
in the euro and Swiss franc as the value of these currencies
<PAGE>
weakened throughout a majority of the quarter. Total expenses
for the three months ended June 30, 1999 were $334,889, resulting
in net income of $663,290. The value of a Unit increased from
$9.95 at March 31, 1999 to $10.60 at June 30, 1999.
For the period from March 1, 1999 (commencement of operations) to
June 30, 1999, the Partnership recorded total trading revenues
including interest income of $1,009,308 and posted an increase in
Net Asset Value per Unit. The most significant gains of
approximately 7.5% were recorded in the global interest rate
futures markets primarily from long positions in Japanese
government bond futures as prices rallied higher during April as
investors flooded into higher yielding long-term debt instruments
after the Japanese government failed to propose a new economic
spending plan. Gains were also recorded from short positions in
this market during June as Japanese bond prices moved lower due
to rising interest rates spurred by an optimistic outlook for
that country's economy. Smaller gains were recorded during June
from short positions in European and U.S. interest rate futures
as prices moved lower amid skepticism regarding the European
Monetary Union and fears of an interest rate hike in the U.S. In
global stock index futures trading, gains of approximately 3.9%
were recorded primarily from long positions in Hang Seng and
Nikkei Index futures during June as most Asian equity prices
moved higher during June amid an overall bullish sentiment for
the economies of the Far East. In the energy markets, gains of
approximately 1.2%
<PAGE>
were recorded primarily during March from long futures positions
in crude oil and unleaded gas as prices climbed following an
agreement reached by both OPEC and non-OPEC countries to cut
total output beginning April 1st. These gains were partially
offset by losses of approximately 2.9% experienced in soft
commodities primarily from long coffee futures positions as
coffee prices declined sharply during early June due to forecasts
for warmer weather in Brazil and ample warehouse supplies. In
currencies, losses of approximately 0.4% incurred primarily from
short positions in the Japanese yen, as the value of the yen
strengthened versus the U.S. dollar during mid-June on optimism
regarding that country's economy, more than offset profits
recorded since March from short positions in the euro and Swiss
franc as the value of these currencies weakened versus the
dollar. In the agricultural markets, small losses of
approximately 0.8% were recorded primarily from short corn
futures positions as prices moved higher in a technical and
seasonally driven rally early in March and on a lack of farmer
selling. Total expenses for the period from March 1, 1999
(commencement of operations) to June 30, 1999 were $371,151,
resulting in net income of $638,157. The value of a Unit
increased from $10.00 at March 1, 1999 (commencement of
operations) to $10.60 at June 30, 1999.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
<PAGE>
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
<PAGE>
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). All quantitative disclosures in this section are
deemed to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and cash
flow. Profits and losses on open positions of exchange-traded
futures interests are settled daily through variation margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
<PAGE>
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the Partner-
ship's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in their daily risk management
activities.
<PAGE>
The Partnership's Value at Risk in Different Market Sectors
The following tables indicate the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of June 30, 2000 and 1999. As
of June 30, 2000 and 1999, the Partnership's total capitalization
was approximately $24 million and $15 million, respectively.
Primary Market June 30, 2000 June 30, 1999
Risk Category Value at Risk Value at Risk
Currency (0.92)% (2.66)%
Interest Rate (0.61) (1.41)
Equity (0.34) (1.61)
Commodity (1.42) (1.75)
Aggregate Value at Risk (1.77)% (4.36)%
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 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
<PAGE>
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
Currency (2.66)% (0.92)% (1.76)%
Interest Rate (1.41) (0.61) (1.05)
Equity (1.61) (0.34) (0.99)
Commodity (1.75) (0.59) (1.21)
Aggregate Value at Risk (4.36)% (1.77)% (2.75)%
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
<PAGE>
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, gives
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
VaR results reflect past trading positions while future risk
depends on future positions;
VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
the historical market risk factor data used for VaR
estimation may provide only limited insight into losses that
could be incurred under certain unusual market movements.
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 June 30, 2000 and for the end of the four
quarterly reporting periods from July 1, 1999 through June 30,
<PAGE>
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
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
<PAGE>
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
expropriations, 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 June 30, 2000, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
<PAGE>
Currency. The primary market exposure in the Partnership is in
the currency sector. The Partnership's currency exposure is to
exchange rate fluctuations, primarily fluctuations which disrupt
the historical pricing relationships between different currencies
and currency pairs. Interest rate changes as well as political
and general economic conditions influence these fluctuations.
The Partnership trades in a large number of currencies, including
cross-rates - i.e., positions between two currencies other than
the U.S. dollar. 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 not
anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future. The currency
trading VaR figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Partnership in
expressing VaR in a functional currency other than dollars.
Interest Rate. The second largest market exposure at June 30,
2000 was in the interest rate complex. The Partnership's
exposure in the interest rate market complex was spread across
the U.S., European and Japanese interest rate sectors. Interest
rate movements directly affect the price of the sovereign bond
futures positions held by the Partnership and indirectly affect
<PAGE>
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. Demeter
anticipates that G-7 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.
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 June 30, 2000, the Partnership's primary
exposures were in the TOPIX (Japan), Hang Seng (China) and S&P
500 (U.S.) stock indices. The Partnership is primarily exposed
to the risk of adverse price trends or static markets in the U.S.
and Japanese indices. Static markets would not cause major
<PAGE>
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
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 primary metals market exposure is to
fluctuations in the price of gold. Although the Trading Advisor
will from time to time trade base metals such as aluminum and
zinc, the principal market exposures of the Partnership have
consistently been in precious metals. Exposure was evident in
the gold market as gold prices were volatile during the quarter.
Demeter anticipates that gold will remain the primary metals
market exposure for the Partnership.
<PAGE>
Soft Commodities and Agriculturals . On June 30, 2000, the
Partnership had exposure in the sugar, coffee and wheat markets.
Supply and demand inequalities, severe weather disruption and
market expectations affect price movements in these markets.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of June 30, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances are in the 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
<PAGE>
daily. In addition, the Trading Advisor establishes diversi-
fication guidelines, often set in terms of the maximum margin to
be committed to positions in any one market sector or market-
sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-Q for the quarter ended March 31, 2000 and
Form 10-K for the year ended December 31, 1999.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership registered 3,000,000 Units pursuant to a
Registration Statement on Form S-1, which became effective on
November 6, 1998 (SEC File Number 333-60103).
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 333-91569).
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, 3,264,759.685 Units were sold, leaving
5,735,240.315 Units unsold as of June 30, 2000. The aggregate
price of the Units sold through June 30, 2000 was $31,973,393.
<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" section 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 of Demeter.
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 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 3.02 of the
Partnership's Form 10-Q (File No. 0-25605) for the quarter
ended March 31, 1999.
10.01 Management Agreement, dated as of November 6, 1998,
among the Partnership, Demeter Management Corporation, and
Millburn Ridgefield Corporation is incorporated by reference
to Exhibit 10.01 of the Partnership's Form 10- Q (File No. 0-
25605) 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. 0-25605) 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. 0-25605) 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.
0-25605) for the quarter ended March 31, 1999.
10.05 Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchase of Units is
incorporated by reference to Exhibit B of the
Partnership's Prospectus dated 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 in Exhibit 10.06 of the Partnership's Form
10-Q (File No. 0-25605) 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
Millburn 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.
