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 0-25605
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
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 ........................................23-35
Part II. OTHER INFORMATION
Item 1. Legal Proceedings......................................36
Item 2. Change 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 MILLBURN 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 24,070,727 21,677,769
Net unrealized gain (loss) on open contracts (411,852)
920,823
Total Trading Equity 23,658,875 22,598,592
Subscriptions receivable 358,786 1,013,235
Interest receivable (DWR) 128,515 96,202
Total Assets 24,146,176 23,708,029
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 340,578 237,975
Accrued brokerage fees (DWR) 140,919 129,371
Accrued management fees 40,263 36,963
Total Liabilities 521,760 404,309
Partners' Capital
Limited Partners (2,845,912.577 and
2,481,763.344 Units, respectively)23,368,050 23,039,629
General Partner (31,221.881 and
28,447.087 Units, respectively) 256,366 264,091
Total Partners' Capital 23,624,416 23,303,720
Total Liabilities and Partners' Capital24,146,176 23,708,029
NET ASSET VALUE PER UNIT 8.21 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 September 30,
2000 1999
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized (31,198)472,179
Net change in unrealized 21,379 (593,350)
Total Trading Results (9,819) (121,171)
Interest Income (DWR) 372,081 191,035
Total Revenues 362,262 69,864
EXPENSES
Brokerage fees (DWR) 416,796 320,520
Management fees 119,084 91,578
Total Expenses 535,880 412,098
NET LOSS (173,618) (342,234)
NET LOSS ALLOCATION
Limited Partners (171,691) (338,188)
General Partner (1,927) (4,046)
NET LOSS PER UNIT
Limited Partners (.06) (.28)
General Partner (.06) (.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 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 (1,014,081) 661,065
Net change in unrealized (1,332,675) 123,450
Total Trading Results (2,346,756) 784,515
Interest Income (DWR) 1,017,562 294,657
Total Revenues (1,329,194) 1,079,172
EXPENSES
Brokerage fees (DWR) 1,267,988 528,810
Management fees 362,282 151,089
Incentive fees ____-___ 103,350
Total Expenses 1,630,270 783,249
NET INCOME (LOSS) (2,959,464) 295,923
NET INCOME (LOSS) ALLOCATION
Limited Partners (2,926,739) 292,598
General Partner (32,725) 3,325
NET INCOME (LOSS) PER UNIT
Limited Partners (1.07) .32
General Partner (1.07) .32
<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 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 483,488.295 $4,774,883 $60,000
$4,834,883
Offering of Units 1,732,224.466 17,541,969 18
5,000 17,726,969
Net Income
- 292,598 3,325 295,923
Redemptions (14,862.814) (152,767) ____-___
(152,767)
Partners' Capital,
September 30, 19992,200,849.947 $22,456,683 $248,325
$22,705,008
Partners' Capital,
December 31, 1999 2,510,210.431 $23,039,629 $264,091
$23,303,720
Offering of Units 872,767.609 7,675,004 25,000 7,700,004
Net Loss
- (2,926,739) (32,725)
(2,959,464)
Redemptions (505,843.582) (4,419,844) ____-___
(4,419,844)
Partners' Capital,
September 30, 20002,877,134.458 $23,368,050 $256,366
$23,624,416
<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 Nine Months of operations) to
Ended September 30, September 30,
2000 1999
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S>
<C> <C>
Net income (loss): (2,959,464) 295,923
Noncash item included in net income (loss):
Net change in unrealized 1,332,675 (123,450)
Increase in operating assets:
Interest receivable (DWR) (32,313) (78,046)
Increase in operating liabilities:
Accrued brokerage fees (DWR) 11,548 123,283
Accrued management fees 3,300 35,224
Net cash provided by (used for) operating activities (1
,644,254) 252,934
CASH FLOWS FROM FINANCING ACTIVITIES
Initial offering
- 4,834,883
Offering of Units 7,700,00417,726,969
(Increase) decrease in subscriptions receivable654,449
(1,625,967)
Increase in redemptions payable 102,603 94,301
Redemptions of Units (4,419,844) (152,767)
Net cash provided by financing activities 4,037,212
20,877,419
Net increase in cash 2,392,958 21,130,353
Balance at beginning of period 21,677,769 ____-___
Balance at end of period 24,070,727 21,130,353
<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 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 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"), provided 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,
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 MILLBURN 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 gains (losses) on open contracts are reported
as a component of "Equity in futures interests trading accounts"
on the statements of financial condition and totaled $(411,852)
and $920,823 at September 30, 2000 and December 31, 1999,
respectively.
Of the $411,852 net unrealized loss on open contracts at
September 30, 2000, $(429,266) related to exchange-traded futures
contracts and $17,414 related to off-exchange-traded forward
currency contracts.
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN L.P.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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
September 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 September 30, 2000
and December 31, 1999 mature through December 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
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
<PAGE>
MORGAN STANLEY DEAN WITTER CHARTER MILLBURN L.P.
NOTES TO FINANCIAL STATEMENTS - (CONCLUDED)
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 (loss) on all open futures contracts,
which funds, in the aggregate, totaled $23,641,461 and
$22,661,540 at September 30, 2000 and December 31, 1999,
respectively. With respect to the Partnership's off-exchange-
traded forward currency contracts, there are no daily settlements
of variations in value nor is there any requirement that an
amount equal to the net unrealized gain (loss) on open forward
contracts be segregated. With respect to those off-exchange-
traded forward currency contracts, the Partnership is at risk to
the ability of Carr, the sole counterparty on all of such
contracts, to perform. The Partnership has a netting agreement
with Carr. This agreement, which seeks to reduce both the
Partnership's and Carr's exposure on off-exchange-traded forward
currency contracts, should materially decrease the Partnership's
credit risk in the event of Carr's bankruptcy or insolvency.
Carr's parent, Credit Agricole Indosuez, has guaranteed to the
Partnership payment of the net liquidating value of the
transactions in the Partnership's account with Carr (including
foreign currency contracts).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with DWR as non-
clearing broker and Carr as clearing broker in separate futures
trading accounts established for the Trading Advisor, which
assets are used as margin to engage in trading. The assets are
held in either non-interest bearing bank accounts or in
securities and instruments permitted by the CFTC for investment
of customer segregated or secured funds. The Partnership's
assets held by the commodity brokers may be used as margin solely
for the Partnership's trading. Since the Partnership's sole
purpose is to trade in futures, forwards, and options, it is
expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership's investment in futures, forwards, and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits". Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be
taken nor liquidated unless traders are willing to effect trades
at or within the limit. Futures prices have occasionally
moved the
<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 nine
months ended September 30, 2000 and the quarter ended September
30, 1999 and the period from March 1, 1999 (commencement of
operations) to Sepember 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 Nine Months Ended September 30, 2000
For the quarter ended September 30, 2000, the Partnership
recorded total trading revenues including interest income of
$362,262 and, after expenses, posted a decrease in Net Asset
Value per Unit. The most significant losses of approximately
1.2% were recorded in the metals markets throughout a majority of
the quarter from long positions in zinc and aluminum futures as
<PAGE>
prices decreased on technical factors. In the global interest
rate futures markets, losses of approximately 0.3% were
experienced primarily during July and September from short
positions in German interest rate futures as prices increased on
benign economic data, volatility in the equity markets and
concerted intervention in the foreign exchange markets. In the
agricultural markets, losses of approximately 0.2% were incurred
primarily during early July from long wheat futures positions as
prices moved lower amid benefical U.S. crop weather. A portion
of the Partnership's overall losses was partially offset by gains
of approximately 0.6% recorded in the global stock index futures
markets primarily during July from short positions in Topix Index
futures as Japanese stock prices declined. In the soft
commodities markets, profits of approximately 0.5% were recorded
primarily during July from long sugar futures positions as prices
increased on forecasts that the world surplus will shrink with
smaller crops in 2000-2001. In the energy markets, gains of
approximately 0.4% were recorded primarily during August and
September from long positions in natural gas futures as prices
moved higher amid supply and storage concerns. Additional gains
were recorded during August 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. In
the currency markets, gains of approximately 0.1% were produced
<PAGE>
primarily during August and early September from short positions
in the euro as its value weakened versus the U.S. dollar and
other major currencies amid dampened optimism for continued
economic growth in Europe. Offsetting currency losses recorded
primarily during August from short positions in the Japanese yen
as its value strengthened versus the U.S. dollar following
comments by a senior Japanese official stating that the Bank of
Japan could raise interest rates again by year-end. Total
expenses for the three months ended September 30, 2000 were
$535,880, resulting in a net loss of $173,618. The value of a
Unit decreased from $8.27 at June 30, 2000 to $8.21 at September
30, 2000.
For the nine months ended September 30, 2000, the Partnership
recorded total trading losses net of interest income of
$1,329,194 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 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
<PAGE>
June due primarily to the perception that interest rates in the
U.S. may have topped out. During August, additional losses were
incurred from short positions in the Japanese yen following
comments by a senior Japanese official stating that the BOJ could
raise interest rates again by year-end. In the global interest
rate futures markets, losses of approximately 5.6% were
experienced primarily during July and September from short
positions in German interest rate futures as prices increased on
benign economic data, volatility in the equity markets and
concerted intervention in the foreign exchange markets. In the
global stock index futures markets, losses of approximately 4.4%
were recorded primarily from long futures positions in the Hang
Seng Index as most global equity prices reversed lower in early
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 movement within most
of the world's stock markets. In the metals markets, losses of
approximately 2.7% were experienced throughout a majority of the
third quarter from long positions in zinc and aluminum futures as
prices decreased on technical factors. In the agricultural
markets, losses of approximately 2.0% were incurred primarily
during February, May, June and early July from long wheat futures
positions as prices declined as a result of insufficient demand
and heavy rain in the U.S. production areas. A portion of the
Partnership's overall losses was offset by gains of approximately
9.9% recorded in the energy markets primarily during February,
<PAGE>
May, June and August 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, increasing demand and rising concerns
regarding supplies and production levels. Additional gains were
recorded during May, August and September from long positions in
natural gas futures as prices trended higher on supply and
storage concerns. In the soft commodities markets, profits of
approximately 1.3% were recorded primarily during May, June and
July from long sugar futures positions as prices moved higher due
to strong demand, declining production from Brazil and decreasing
global supplies. Total expenses for the nine months ended
September 30, 2000 were $1,630,270, resulting in a net loss of
$2,959,464. The value of a Unit decreased from $9.28 at December
31, 1999 to $8.21 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 revenues including interest income of
$69,864 and, after expenses, posted a decrease in Net Asset Value
per Unit. The most significant losses of approximately 3.8% were
recorded in the global stock index futures markets primarily from
long positions in Hang Seng Index futures as equity prices in
Hong Kong dropped during early August amid tensions between China
and Taiwan. Smaller losses were incurred from trading Nikkei
<PAGE>
Index futures during August and September as Japanese equity
prices experienced short-term volatility amid speculation of
whether the BOJ would intervene to prevent the yen from rising
further relative to the U.S. dollar. In global interest rate
futures, losses of approximately 3.1% were recorded primarily
from trading in U.S. interest rate futures as domestic bond
prices moved in an erratic sideways pattern for a majority of the
month due to inflationary concerns and questions regarding the
future direction of U.S. interest rates. In currencies, losses
of approximately 0.3% were recorded primarily during July and
September from short positions in the euro and the Swiss franc as
the value of these currencies reversed their previous downward
trend versus the U.S. dollar amid bullish economic data out of
Europe and inflationary pressures in the U.S. These losses were
mitigated by currency gains recorded from long Japanese yen
positions as the value of the yen strengthened versus most major
currencies during August and September due to optimism regarding
the Japanese economy. A portion of the Partnership's overall
losses for the month was offset by gains of approximately 4.7%
recorded in the energy markets primarily from long positions in
crude oil and its refined products, unleaded gas, heating oil and
gas oil, as prices moved higher throughout the quarter as a
result of declining inventories and increasing demand. Smaller
profits of approximately 1.6% were recorded in the metals markets
primarily from long gold futures positions during September as
prices skyrocketed following the Bank of England's second gold
<PAGE>
auction and an announcement by several European central banks
stating that they were to restrict the sales of gold reserves for
five years. Total expenses for the three months ended September
30, 1999 were $412,098, resulting in a net loss of $342,234. The
value of a Unit decreased from $10.60 at June 30, 1999 to $10.32
at September 30, 1999.
For the period from March 1, 1999 (commencement of operations) to
September 30, 1999, the Partnership recorded total trading
revenues including interest income of $1,079,172 and posted an
increase in Net Asset Value per Unit. The most significant gains
of approximately 9.1% were recorded in the energy markets
primarily from long positions in crude oil and its refined
products, unleaded gas, gas oil and heating oil, as prices
climbed higher during March following an agreement reached by
both OPEC and non-OPEC countries to cut total output beginning
April 1st. Oil prices continued to move higher throughout the
third quarter due to declining supplies and increasing demand.
Additional gains of approximately 3.0% were recorded in the
metals markets primarily from long positions in gold futures as
gold prices soared during September following the Bank of
England's second gold auction and an announcement by several
European central banks stating that they were going to restrict
the sales of gold reserves for five years. Smaller gains of
approximately 1.3% were recorded in the global interest rate
futures markets primarily from short positions in German interest
<PAGE>
rate futures during June and July as prices moved lower amid
skepticism regarding the European Monetary Union and fears of an
interest rate hike in the U.S. These gains were partially offset
by losses of approximately 3.0% incurred in the global stock
index futures markets primarily from long positions in Hang Seng
Index futures as equity prices in Hong Kong dropped during early
August amid tensions between China and Taiwan. Smaller losses
were incurred from trading Nikkei Index futures during August and
September as Japanese equity prices experienced short-term
volatility amid speculation of whether the Bank of Japan would
intervene to prevent the yen from rising further relative to the
U.S. dollar. Losses of approximately 2.2% were also 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. Smaller losses of approximately 0.9% were incurred in
the currency markets primarily during July and September from
short positions in the euro, and the Swiss franc as the value of
these currencies reversed their previous downward trend versus
the U.S. dollar amid bullish economic data out of Europe and
inflationary pressures in the U.S. Total expenses for the period
from March 1, 1999 (commencement of operations) to September 30,
1999 were $783,249, resulting in net income of $295,923. The
value of a Unit increased from $10.00 at March 1, 1999
(commencement of operations) to $10.32 at September 30, 1999.
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures interests. The market-sensitive instruments
held by the Partnership are acquired for speculative trading
purposes only and, as a result, all or substantially all of the
Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.
The futures interests traded by the Partnership involve varying
degrees of market risk. Market risk is often dependent upon
changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities.
Fluctuations in market risk based upon these factors result in
frequent changes in the fair value of the Partnership's open
positions, and, consequently, in its earnings and cash flow.
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
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.
<PAGE>
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the
Partnership's market risk exposures contain "forward-looking
statements" within the meaning of the safe harbor from civil
liability provided for such statements by the Private Securities
Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). All quantitative disclosures in this section are
deemed to be forward-looking statements for purposes of the safe
harbor, except for statements of historical fact.
The Partnership accounts for open positions using mark-to-market
accounting principles. Any loss in the market value of the
Partnership's open positions is directly reflected in the
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.
<PAGE>
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the 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
<PAGE>
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total Net Assets
by primary market risk category as of September 30, 2000 and
1999. As of September 30, 2000 and 1999, the Partnership's total
capitalization was approximately $24 million and $23 million,
respectively.
Primary Market September 30, 2000 September 30, 1999
Risk Category Value at Risk Value at Risk
Currency (1.77)% (1.62)%
Interest Rate (1.37) (0.79)
Equity (0.88) (0.86)
Commodity (1.17) (1.26)
Aggregate Value at Risk (2.71)% (2.19)%
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
<PAGE>
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.
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
Currency (1.77)% (0.92)% (1.31)%
Interest Rate (1.37) (0.61) (1.02)
Equity (0.88) (0.34) (0.67)
Commodity (1.42) (0.59) (0.98)
Aggregate Value at Risk (2.71)% (1.71)% (2.10)%
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
<PAGE>
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
typically found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, 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.
<PAGE>
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.
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 76% 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.
<PAGE>
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and
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 September 30, 2000, by market sector. It may
be
<PAGE>
anticipated however, that these market exposures will vary
materially over time.
Currency. The primary market exposure at September 30, 2000 was
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 third 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 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 September
30, 2000 was in the interest rate complex. The Partnership's
exposure in the interest rate market complex was primarily spread
<PAGE>
across the U.S., German 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 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 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.
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
exposures were in the TOPIX (Japan), S&P 500 (U.S.) and Hang Seng
<PAGE>
(China) 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
market changes but would make it difficult for the 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 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 zinc, aluminum
and copper, the principal market exposures of the Partnership
have consistently been in gold. Exposure was evident in the gold
market as gold prices continued to be volatile during the
<PAGE>
quarter. Demeter anticipates that precious metals will remain
the primary metals market exposure for 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 coffee, corn
and sugar 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 September 30, 2000:
Foreign Currency Balances. The Partnership's primary foreign
currency balances at September 30, 2000 were in Hong Kong
dollars. 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.
<PAGE>
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 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 September 30, 2000, 3,404,782.094 Units were sold,
leaving 5,595,217.906 Units unsold. The aggregate price of the
Units sold through September 30, 2000 was $33,128,740.
<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 3.02 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.
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.
<PAGE>
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.
- 37 -
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 October 13, 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 in Exhibit 10.06 of the Partnership's Form
10-Q (File No. 0-25605) 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
Millburn L.P. (Registrant)
By: Demeter Management Corporation
(General Partner)
November 14, 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.
