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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the year ended December 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from
________________to___________________
Commission File Number 0-26282
DWFCM INTERNATIONAL ACCESS FUND L.P.
(Exact name of registrant as specified in its Limited Partnership
Agreement)
DELAWARE 13-3775071
____ (State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
c/o Demeter Management Corporation
Two World Trade Center, - 62nd Flr. New York, N.Y.
10048 (Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code
(212) 392-5454
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange
Title of each class
on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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
Indicate by check-mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment of this Form 10-K.[X ]
State the aggregate market value of the Units of Limited
Partnership Interest held by non-affiliates of the registrant.
The aggregate market value shall be computed by reference to the
price at which units were sold as of a specified date within 60
days prior to the date of filing: $35,469,182 at January 31,
2000.
DOCUMENTS INCORPORATED BY REFERENCE
(See Page 1)
DWFCM INTERNATIONAL ACCESS FUND L.P.
INDEX TO ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1999
Page No.
DOCUMENTS INCORPORATED BY REFERENCE. . . . . . . . . . . . . . . . . .
. . .1
Part I .
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . .
. 2-4
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . .
. . 4
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . .
. 4-6
Item 4. Submission of Matters to a Vote of Security Holders . . .
. . 6
Part II.
Item 5. Market for the Registrant's Partnership Units and
Related Security Holder Matters . . . . . . . . . . . . .
. .7
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . .
. . 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . .
9-21
Item 7A. Quantitative and
Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . . .
.21-33
Item 8. Financial Statements and Supplementary Data. . . . . . .
. .33
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . .
. .33
Part III.
Item10. Directors and Executive Officers of the Registrant . .
34-38
Item11. Executive Compensation . . . . . . . . . . . . . . . . .
. .38
Item12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . .
.38
Item13. Certain Relationships and Related Transactions . . . . .
. .39
Part IV.
Item14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . .
. 40
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference as
follows:
Documents Incorporated Part of Form
10-K
Partnership's Prospectus dated
February 3, 1994 I
Annual Report to the DWFCM
International Access Fund L.P.
Limited Partners for the year
ended December 31, 1999 II, III and IV
PART I
Item 1. BUSINESS
(a) General Development of Business. DWFCM International Access
Fund L.P. (the "Partnership") is a Delaware limited partnership
organized to engage primarily in the speculative trading of
futures and forward contracts, physical commodities, and other
commodity interests including foreign currencies, financial
instruments, metals, energy and agricultural products
(collectively, "futures interests").
The general partner for the Partnership is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker is
Dean Witter Reynolds Inc. ("DWR") and an unaffiliated clearing
commodity broker, Carr Futures Inc. ("Carr"), provides clearing
and execution services. The Trading Manager is Dean Witter
Futures & Currency Management Inc. ("DWFCM" or the "Trading
Manager"). Demeter, DWR, and DWFCM are wholly-owned subsidiaries
of Morgan Stanley Dean Witter & Co. ("MSDW").
The Partnership's Net Asset Value per unit of limited partnership
interest ("Unit(s)") as of December 31, 1999 was $1,413.97,
representing a decrease of 9.2 percent from the Net Asset Value
per Unit of $1,557.38 at December 31, 1998. For a more detailed
description of the Partnership's business see subparagraph (c).
(b) Financial Information about Industry Segments. For financial
information reporting purposes the Partnership is deemed to
engage in one industry segment, the speculative trading of
futures interests. The relevant financial information is
presented in Items 6 and 8.
(c) Narrative Description of Business. The Partnership is in
the business of speculative trading of futures interests,
pursuant to trading instructions provided by its Trading
Manager. For a detailed description of the different facets of
the Partnership's business, see those portions of the
Partnership's prospectus, dated February 3, 1994, (the
"Prospectus") incorporated by reference in this Form 10-K, set
forth below:
Facets of Business
1. Summary 1. "Summary of the
Prospectus"
(Pages 2-10).
2. Commodities Markets 2. "The Commodities
Markets"
(Pages 62-69).
3. Partnership's Trading 3. "Trading Policies"
(Page Arrangements and
58). "The Trading Manager"
Policies (Pages 40-57).
4. Management of the 4. "The Management Agree-
Partnership ments" (Pages 60-62).
"The General Partner"
(Pages 35-38) and
"The Commodity Broker"
(Pages 59-60). "The
Limited Partnership
Agreement" (Pages
71-76).
5. Taxation of the Partner- 5. "Material Federal Income Tax
ship's Limited Partners Considerations" and "State
and Local Income Tax Aspects"
(Pages 80-87).
(d) Financial Information About Foreign and Domestic Operations
and Export Sales.
The Partnership has not engaged in any operations in foreign
countries; however, the Partnership (through the commodity
brokers) enters into forward contract transactions where foreign
banks are the contracting party and trades in futures interests
on foreign exchanges.
Item 2. PROPERTIES
The executive and administrative offices are located within the
offices of DWR. The DWR offices utilized by the Partnership are
located at Two World Trade Center, 62nd Floor, New York, NY
10048.
Item 3. LEGAL PROCEEDINGS
The class actions first filed in 1996 in California and in New
York State courts were each dismissed in 1999. However, in the
New York State class action, plaintiffs appealed the trial
court's dismissal of their case on March 3, 2000.
On September 6, 10, and 20, 1996, and on March 13, 1997,
purported class actions were filed in the Superior Court of the
State of California, County of Los Angeles, on behalf of all
purchasers of interests in limited partnership
commodity pools sold by DWR. Named defendants include DWR,
Demeter, DWFCM, MSDW, certain limited partnership commodity pools
of which Demeter is the general partner (all such parties
referred to hereafter as the "Morgan Stanley Dean Witter
Parties") and certain trading advisors to those pools. On June
16, 1997, the plaintiffs in the above actions filed a
consolidated amended complaint, alleging, among other things,
that the defendants committed fraud, deceit, negligent
misrepresentation, various violations of the California
Corporations Code, intentional and negligent breach of fiduciary
duty, fraudulent and unfair business practices, unjust
enrichment, and conversion in the sale and operation of the
various limited partnership commodity pools. The complaints seek
unspecified amounts of compensatory and punitive damages and
other relief. The court entered an order denying class
certification on August 24, 1999. On September 24, 1999, the
court entered an order dismissing the case without prejudice on
consent. Similar purported class actions were also filed on
September 18 and 20, 1996, in the Supreme Court of the State of
New York, New York County, and on November 14, 1996 in the
Superior Court of the State of Delaware, New Castle County,
against the Morgan Stanley Dean Witter Parties and certain
trading advisors on behalf of all purchasers of interests in
various limited partnership commodity pools sold by DWR. A
consolidated and amended complaint in the action pending in the
Supreme Court of the State of New York was filed on August 13,
1997, alleging that the defendants committed fraud, breach of
fiduciary duty, and negligent misrepresentation in the sale and
operation of the various limited partnership
commodity pools. The complaints seek unspecified amounts of
compensatory and punitive damages and other relief. The New York
Supreme Court dismissed the New York action in November 1998, but
granted plaintiffs leave to file an amended complaint, which they
did in early December 1998. The defendants filed a motion to
dismiss the amended complaint with prejudice on February 1, 1999.
By decision dated December 21, 1999, the New York Supreme Court
dismissed the case with prejudice.
In addition, on December 16, 1997, upon motion of the plaintiffs,
the action pending in the Superior Court of the State of Delaware
was voluntarily dismissed without prejudice.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
RELATED SECURITY HOLDER MATTERS
(a) Market Information
There is no established public trading market for Units in the
Partnership.
(b) Holders
The number of holders of Units at December 31, 1999 was
approximately 3,176.
(c) Distributions
No distributions have been made by the Partnership since it
commenced trading operations on March 3, 1994. Demeter has sole
discretion to decide what distributions, if any, shall be made to
investors in the Partnership. Demeter currently does not intend
to make any distribution of the Partnership profits.
Item 6. SELECTED FINANCIAL DATA (in dollars)
For the Years Ended December 31,
1999 1998 1997 1996
1995
Total Revenues
(including interest) (570,989) 6,332,052 16,257,872
6,553,585 22,294,669
Net Income (Loss) (4,061,483) 2,159,416 10,627,032
1,278,934 13,807,092
Net Income (Loss)
Per Unit (Limited
& General Partners) (143.41) 75.16 307.87
44.84 202.74
Total Assets 36,874,230 45,904,521 48,991,106 45,730,849
55,136,973
Total Limited
Partners' Capital 35,710,955 44,949,810 46,949,644 43,960,184
52,842,505
Net Asset Value per
Unit 1,413.97 1,557.38 1,482.22 1,174.35
1,129.51
Item 7. 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 Manager, 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 Commodity Futures
Trading Commission ("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 interests, it is expected that the Partnership will
continue to own such liquid assets for margin purposes.
The Partnership's investment in futures interests 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 contract has
increased or decreased by an amount equal to the daily limit,
positions in that futures contract can neither be taken nor
liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. These market conditions
could prevent the Partnership from promptly liquidating its
futures contracts and result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currency. 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 of Units in the future
will affect the amount of funds available for investments in
futures interests in subsequent periods. It is not possible to
estimate the amount and therefore, the impact of future
redemptions of Units.
Results of Operations.
General. The Partnership's results depend on its Trading Manager
and the ability of the Trading Manager'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 three years ended December 31,
1999 and a general discussion of its trading activities during
each period. It is important to note, however, that the Trading
Manager 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 Manager 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 Manager's trading activities on
behalf of the Partnership as a whole and how the Partnership has
performed in the past.
At December 31, 1999, the Partnership's total capital was
$36,185,214, a decrease of $9,286,954 from the Partnership's
total capital of $45,472,168 at December 31, 1998. For the year
ended December 31, 1999, the Partnership generated a net loss of
$4,061,483 and total redemptions aggregated $5,225,471.
For the year ended December 31, 1999, the Partnership recorded
total trading losses, net of interest income, of $570,989 and
posted a decrease in Net Asset Value per Unit. The Partnership
experienced losses in the global interest rate futures markets,
approximately 9.25%, primarily from short Japanese bond futures
positions as prices increased during the first quarter amid
growing
speculation that the Bank of Japan may underwrite Japanese
government bonds and during the third quarter on the strength of
the Japanese yen and expectations that additional monetary easing
in that country will come. In the currency markets, losses of
approximately 6.63% were recorded primarily from Australian
dollar positions. Throughout a majority of the first quarter,
losses were experienced from long Australian dollar positions as
its value dropped significantly relative to the U.S. dollar on
speculation regarding potential currency devaluations in the
Asian region. Early in the third quarter, additional losses were
recorded from long positions in this currency due to depressed
commodities prices, emerging market concerns and on-going talks
that China may eventually devalue its currency. Newly
established short positions in the Australian dollar resulted in
losses during September as its value strengthened relative to the
U.S. dollar following the rally in gold prices. Offsetting
currency gains of 4.14% were recorded from Japanese yen
positions, primarily long positions. During the third quarter,
gains were recorded from long positions in the Japanese yen as
the value of the yen climbed to a 44-month high versus the U.S.
dollar due to continued optimism over Japan's economic recovery.
The energy markets produced gains of approximately 7.98%. During
March, gains were recorded from long positions in oil futures as
prices moved significantly higher on news that both OPEC and non-
OPEC countries had reached an agreement to cut total output
beginning April 1st. Gains were also recorded in this market
complex during the third quarter after OPEC ministers confirmed
that they would uphold their global
cutbacks until April of 2000. Total expenses for the year were
$3,490,494, resulting in a net loss of $4,061,483. The value of
a Unit decreased from $1,557.38 at December 31, 1998 to $1,413.97
at December 31, 1999.
At December 31, 1998, the Partnership's total capital was
$45,472,168, a decrease of $2,530,461 from the Partnership's
total capital of $48,002,629 at December 31, 1997. For the year
ended December 31, 1998, the Partnership generated net income of
$2,159,416 and total redemptions aggregated $4,689,877.
For the year ended December 31, 1998, the Partnership recorded
total trading revenues, including interest income, of $6,332,052
and posted an increase in Net Value Asset per Unit. Gains of
approximately 14.45% were recorded in the global interest rate
futures markets from bond futures in most major world countries
throughout the year. The most significant gains were recorded in
U.S. bond futures, by approximately 4.66%, in Japanese bond
futures, by approximately 3.57% and German bond futures, by
approximately 3.45%, from primarily long positions during August
and September as investors sought the safety of fixed income
investments from notable volatility in the global financial
markets. Additional profits were recorded from short Japanese
government bond futures positions during December as prices
declined amid a surge in Japanese bond yields, which was
attributed to news that Japan's Ministry of Finance will end
outright purchases of government debt. Total
expenses for the year were $4,172,636, resulting in net income of
$2,159,416. The value of a Unit increased from $1,482.22 at
December 31, 1997 to $1,557.38 at December 31, 1998.
At December 31, 1997, the Partnership's total capital was
$48,002,629, an increase of $3,208,175 from the Partnership's
total capital of $44,794,454, at December 31, 1996. For the year
ended December 31, 1997, the Partnership generated net income of
$10,627,032 and total redemptions aggregated $7,418,857.
For the year ended December 31, 1997, the Partnership recorded
total trading revenues, including interest income, of $16,257,872
and posted an increase in Net Asset Value per Unit. 1997 was a
profitable year for the Partnership. Gains of approximately
28.06% were recorded in the currency markets primarily from
sustained price movements during January and February and then
again in November and December from short Japanese yen positions
as the value of the U.S. dollar increased versus the yen. A
portion of the Parnterhip's overall gains was offset by losses of
approximately 2.59% recorded in the global interest rate futures
markets primarily due to a sharp trend reversal in international
interest rate futures prices during the fourth quarter and as a
result of short-term volatility in domestic bond and stock index
futures. Offsetting gains were recorded from long global
interest rate futures positions during June and July. Although
many of the profitable periods with
long price trends were followed by trend reversals and short-term
volatile price movement, DWFCM's intermediate to long-term trend
following trading methodology was able to retain profits. Total
expenses for the year were $5,630,840, resulting in net income of
$10,627,032. The value of a Unit increased from $1,174.35 at
December 31, 1996 to $1,482.22 at December 31, 1997.
The Partnership's overall performance record represents varied
results of trading in different futures interests markets. For a
further description of 1999 trading results, refer to the letter
to the Limited Partners in the accompanying Annual Report to
Limited Partners for the year ended December 31, 1999,
incorporated by reference in this Form 10-K. The Partnership's
gains and losses are allocated among its partners for income tax
purposes.
Credit Risk.
Financial Instruments. The Partnership is a party to financial
instruments with elements of off-balance sheet market and credit
risk. The Partnership may trade futures, forwards, and options
in a portfolio of agricultural commodities, energy products,
foreign currencies, interest rates, precious and base metals,
soft commodities, and stock indices. In entering into these
contracts, the Partnership is subject to the market risk that
such contracts may be significantly influenced by market
conditions, such as interest rate volatility, resulting in such
contracts being less valuable. If the markets
should move against all of the positions held by the Partnership
at the same time, and if the Trading Manager was unable to offset
positions of the Partnership, the Partnership could lose all of
its assets and investors would realize a 100% loss.
In addition to the Trading Manager's internal controls, the
Trading Manager must comply with the trading policies of the
Partnership. These trading policies include standards for
liquidity and leverage with which the Partnership must comply.
The Trading Manager and Demeter monitor the Partnership's trading
activities to ensure compliance with the trading policies.
Demeter may require the Trading Manager to modify positions of
the Partnership if Demeter believes they violate the
Partnership's trading policies.
In addition to market risk, in entering into futures, forwards,
and options contracts there is a credit risk to the Partnership
that the counterparty on a contract will not be able to meet its
obligations to the Partnership. The ultimate counterparty or
guarantor of the Partnership for futures contracts traded in the
United States and the foreign exchanges on which the Partnership
trades is the clearinghouse associated with such exchange. In
general, a clearinghouse is backed by the membership of the
exchange and will act in the event of non-performance by one of
its members or one of its member's customers, which should
significantly reduce this credit risk. For example, a
clearinghouse may cover a default by drawing upon a defaulting
member's mandatory contributions and/or non-defaulting members'
contributions to a clearinghouse guarantee fund, established
lines or letters of credit with banks, and/or the clearinghouse's
surplus capital and other available assets of the exchange and
clearinghouse, or assessing its members. In cases where the
Partnership trades off-exchange forward contracts with a
counterparty, the sole recourse of the Partnership will be the
forward contracts counterparty.
There is no assurance that a clearinghouse or exchange will meet
its obligations to the Partnership, and Demeter and the commodity
brokers will not indemnify the Partnership against a default by
such parties. Further, the law is unclear as to whether a
commodity broker has any obligation to protect its customers from
loss in the event of an exchange or clearinghouse defaulting on
trades effected for the broker's customers. Any such obligation
on the part of a broker appears even less clear where the default
occurs in a non-U.S. jurisdiction.
Demeter deals with these credit risks of the Partnership in
several ways. First, it monitors the Partnership's credit
exposure to each exchange on a daily basis, calculating not only
the amount of margin required for it but also the amount of its
unrealized gains at each exchange, if any. The commodity brokers
inform the Partnership, as with all their customers, of its
net margin requirements for all its existing open positions, but
do not break that net figure down, exchange by exchange.
Demeter, however, has installed a system which permits it to
monitor the Partnership's potential margin liability, exchange by
exchange. As a result, Demeter is able to monitor the
Partnership's potential net credit exposure to each exchange by
adding the unrealized trading gains on that exchange, if any, to
the Partnership's margin liability thereon.
Second, the Partnership's trading policies limit the amount of
its Net Assets that can be committed at any given time to futures
contracts and require, in addition, a minimum amount of
diversification in the Partnership's trading, usually over
several different products. One of the aims of such trading
policies has been to reduce the credit exposure of the
Partnership to a single exchange and, historically, the
Partnership's exposure to any one exchange has typically amounted
to only a small percentage of its total Net Assets. On those
relatively few occasions where the Partnership's credit exposure
may climb above such level, Demeter deals with the situation on a
case by case basis, carefully weighing whether the increased
level of credit exposure remains appropriate. Material changes
to the trading policies may be made only with the prior written
approval of the limited partners owning more than 50% of Units
then outstanding.
Third, Demeter has secured, with respect to Carr acting as the
clearing broker for the Partnership, a guarantee by Credit
Agricole Indosuez, Carr's parent, of the payment of the "net
liquidating value" of the transactions (futures and forward
contracts) in the Partnership's account.
With respect to forward contract trading, the Partnership trades
with only those counterparties which Demeter, together with DWR,
have determined to be creditworthy. At the date of this filing,
the Partnership deals only with Carr as its counterparty on
forward contracts. The guarantee by Carr's parent, discussed
above, covers these forward contracts.
See "Financial Instruments" under Notes to Financial Statements
in the Partnership's Annual Report to Limited Partners for the
year ended December 31, 1999, which is incorporated by reference
to Exhibit 13.01 of this Form
10-K.
Year 2000. Commodity pools, like financial and business
organizations and individuals around the world, depend on the
smooth functioning of computer systems. The Year 2000 issue
arose since many of the world's computer systems (including those
in non-information technology systems) traditionally recorded
years in a two-digit format. If not addressed, such computer
systems may have been unable to properly interpret dates beyond
the year 1999, which may have led to business disruptions in the
U.S. and internationally. Such disruptions
could have adversely affected the handling or determination of
futures trades and prices and other services for the Partnership.
Accordingly, Demeter has fully participated in a firmwide
initiative established by MSDW to address issues associated with
the Year 2000. As part of this initiative, MSDW reviewed its
global software and hardware infrastructure for mainframe, server
and desktop computing environments and engaged in extensive
remediation and testing. The Year 2000 initiative also
encompassed the review of agencies, vendors and facilities for
Year 2000 compliance.
Since 1995, MSDW prepared actively for the Year 2000 issue to
ensure that it would have the ability to respond to any critical
business process failure, to prevent the loss of workspace and
technology, and to mitigate any potential financial loss or
damage to its global franchise. Where necessary, contingency
plans were expanded or developed to address specific Year 2000
risk scenarios, supplementing existing business policies and
practices. In conjunction with MSDW's Year 2000 preparations,
Demeter monitored the progress of Carr and the Trading Manager
throughout 1999 in their Year 2000 compliance and, where
applicable, tested its external interfaces, with Carr and the
Trading Manager. In addition, Demeter, the commodity brokers,
the Trading Manager and all U.S. futures exchanges were subjected
to monitoring by the CFTC of their Year 2000 preparedness, and
the major foreign futures exchanges engaged in market-wide
testing of their Year 2000 compliance during 1999.
MSDW and Demeter consider the transition into the Year 2000
successful from the perspective of their internal systems and
global external interactions. Over the millennial changeover
period, no material issues were encountered, and MSDW, Demeter
and the Partnership conducted business as usual.
Risks Associated With the Euro. On January 1, 1999, eleven
countries in the European Union established fixed conversion
rates on their existing sovereign currencies and converted to a
common single currency (the euro). During a three-year
transition period, the sovereign currencies will continue to
exist but only as a fixed denomination of the euro. Conversion
to the euro prevents the Trading Manager from trading those
sovereign currencies and thereby limits its ability to take
advantage of potential market opportunities that might otherwise
have existed had separate currencies been available to trade.
This could adversely affect the performance results of the
Partnership.
Item 7A. 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.
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, 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 Manager is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that
are incorporated in the VaR model include equity and commodity
prices, interest rates, foreign exchange rates, and correlation
among these variables. The hypothetical changes in portfolio
value are based on daily percentage changes observed in key
market indices or other market factors ("market risk factors") to
which the portfolio is sensitive. The historical observation
period of the Partnership's VaR is approximately four years. The
one-day 99% confidence level of the Partnership's VaR corresponds
to the negative change in portfolio value that, based on observed
market risk factors, would have been exceeded once in 100 trading
days.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Manager in their daily risk management
activities.
The Partnership's Value at Risk in Different Market Sectors
The following tables indicates the VaR associated with the
Partnership's open
positions as a percentage of total Net Assets by primary market
risk category as of December 31, 1999 and 1998. As of December
31, 1999 and 1998, the
Partnership's total capitalization was approximately $36 million
and $45 million, respectively.
Primary Market December 31, 1999
December 31, 1998
Risk Category Value at Risk Value at
Risk
Interest Rate (.24)% (.53)%
Currency (.91) (1.10)
Commodity (.81) (1.02)
Equity (.14) (.23)
Aggregate Value at Risk (1.35)%
(1.47)%
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 December 31, 1999 and 1998 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 year 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 January
1, 1999 through December 31, 1999.
Primary Market Risk Category High Low
Average
Interest Rate (1.99)% (.24)% (1.20)%
Currency (3.52) (.91)
(2.18)
Commodity (2.44) (.81) (1.33)
Equity (.75) (.14) (.42)
Aggregate Value at Risk (4.48)% (1.35)% (2.88)%
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership. The value of the
Partnership's open positions thus creates a "risk of ruin" not
typically found in other investments. The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility. The VaR tables
above, as well as the past performance of the Partnership, gives
no indication of such "risk of ruin". In
addition, VaR risk measures should be viewed in light of the
methodology's limitations, which include the following:
past changes in market risk factors will not always result
in accurate predictions of the distributions and correlations of
future market movements;
changes in portfolio value in response to market movements
may differ from those of the VaR model;
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 December 31, 1999 and for the end of the four
quarterly reporting periods during calendar year 1999. Since VaR
is based on historical data, VaR should not be viewed as
predictive of the Partnership's future financial performance or
its
ability to manage or monitor risk. There can be no assurance
that the Partnership's actual losses on a particular day will not
exceed the VaR amounts indicated above or that such losses will
not occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial. The Partnership also
maintains a substantial portion (approximately 90%) of its
available assets in cash at DWR. A decline in short-term
interest rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered
material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-
sensitive instruments.
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 Manager 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 December 31, 1999, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
Interest Rates. The largest exposure this quarter was in the
interest rate sector. Exposure was spread across the U.S.,
Australian, and Japanese interest rate sectors. Interest rate
movements directly affect the price of the sovereign bond
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 G-7 countries and Australia.
Demeter anticipates that G-7 and Australian interest rates will
remain the primary interest rate exposure of the Partnership for
the foreseeable future. The changes in interest rates, which
have the most effect on the Partnership, are changes in long-term
and medium-term instruments. Consequently, even a material
change in short-term rates would have little effect on the
Partnership, were the medium-to long-term rates to remain steady.
Currency. The next most significant exposure in the Partnership
is in the currency complex. The Partnership's currency exposure
is to exchange rate fluctuations, primarily fluctuations that
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 fourth quarter of
1999, the Partnership's foreign currency exposure was in the euro
currency crosses and outright U.S. dollar positions (outright
positions consist of the U.S. dollar vs. other currencies). The
currency trading VaR figure includes foreign margin amounts
converted into U.S. dollars with an incremental adjustment to
reflect the exchange rate risk inherent to the dollar-based
Partnership in expressing VaR in a functional currency other than
dollars.
Commodity.
Metals. The next noteworthy exposure was in the base and
precious metals markets. The Partnership's metals market exposure
in the fourth quarter of 1999 was due to fluctuations in the
prices of base metals, as well as exposure in the gold and silver
markets. A significant amount of exposure was evident in the
base metals as the fund held sizeable positions due to a period
of low volatility prior to the upward price breakout. The
majority of the exposure was in the LME aluminum and copper
markets.
The Partnership aims to equally weight market exposure in the
metals as much as possible, however base metals, during periods
of volatility, will affect performance more dramatically than the
precious metals markets. Demeter anticipates that base metals
will remain the primary metals market exposure of the
Partnership.
Energy. On December 31, 1999, the Partnership's energy exposure
was in futures contracts in the Brent crude oil market. Price
movements in this market results from political developments in
the Middle East, weather patterns, and other economic
fundamentals. As oil prices have increased over
100% this year, and, given that the agreement by OPEC to cut
production is closing in on expiring in March of 2000, it is
possible that volatility will remain on the high end. Significant
profits and losses have been and are expected to continue to be
experienced in this market.
Equity. The Partnership's equity exposure on December 31, 1999 to
price risk in the S&P 500 futures index was noteworthy. The
stock index futures traded by the Partnership are by law limited
to futures on broadly based indices. The General Partner
anticipates little, if any, trading in non G-7 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.)
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at December 31, 1999:
Foreign Currency Balances. The Partnership's foreign currency
balances are in Japanese yen, British pounds, euros, Swiss francs
and Australian 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 Manager, 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 Manager
daily. In addition, the Trading Manager establishes
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Manager.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are incorporated by reference to the
Partnership's Annual Report, which is filed as Exhibit 13.01
hereto.
Supplementary data specified by Item 302 of Regulation S-K
(selected quarterly financial data) is not applicable.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There are no directors or executive officers of the
Partnership. The Partnership is managed by Demeter.
Directors and Officers of the General Partner
The directors and officers of Demeter are as follows:
Robert E. Murray, age 39, is Chairman of the Board, President and
a Director of Demeter. Mr. Murray is also Chairman of the Board,
President and a Director of DWFCM. Effective as of the close of
business on January 31, 2000, Mr. Murray replaced Mr. Hawley as
Chairman of the Board of Demeter and DWFCM. Mr. Murray is
currently a Senior Vice President of DWR's Managed Futures
Department. Mr. Murray began his career at DWR in 1984 and is
currently the Director of the Managed Futures Department. In this
capacity, Mr. Murray is responsible for overseeing all aspects of
the firm's Managed Futures Department. Mr. Murray currently
serves as Vice Chairman and a Director of the Managed Funds
Association, an industry association for investment professionals
in futures, hedge funds and other alternative investments. Mr.
Murray graduated from Geneseo State University in May 1983 with a
B.A. degree in Finance.
Mitchell M. Merin, age 46, is a Director of Demeter. Mr. Merin
is also a Director of DWFCM. Mr. Merin was appointed the Chief
Operating Officer of Individual Asset Management for MSDW in
December 1998 and the President and Chief Executive Officer of
Morgan Stanley Dean Witter Advisors in February 1998. He has
been an Executive Vice President of DWR since 1990, during which
time he has been director of DWR's Taxable Fixed Income and
Futures divisions, Managing Director in Corporate Finance and
Corporate Treasurer. Mr. Merin received his Bachelor's degree
from Trinity College in Connecticut and his M.B.A. degree in
finance and accounting from the Kellogg Graduate School of
Management of Northwestern University in 1977.
Joseph G. Siniscalchi, age 54, is a Director of Demeter. Mr.
Siniscalchi joined DWR in July 1984 as a First Vice President,
Director of General Accounting and served as a Senior Vice
President and Controller for DWR's Securities Division through
1997. He is currently Executive Vice President and Director of
the Operations Division of DWR. From February 1980 to July 1984,
Mr. Siniscalchi was Director of Internal Audit at Lehman Brothers
Kuhn Loeb, Inc.
Edward C. Oelsner, III, age 57, is a Director of Demeter. Mr.
Oelsner is currently an Executive Vice President and head of the
Product Development Group at Morgan Stanley Dean Witter Advisors,
an affiliate of DWR. Mr. Oelsner
joined DWR in 1981 as a Managing Director in DWR's Investment
Banking Department specializing in coverage of regulated
industries and, subsequently, served as head of the DWR Retail
Products Group. Prior to joining DWR, Mr. Oelsner held positions
at The First Boston Corporation as a member of the Research and
Investment Banking Departments from 1967 to 1981. Mr. Oelsner
received his M.B.A. in Finance from the Columbia University
Graduate School of Business in 1966 and an A.B. in Politics from
Princeton University in 1964.
Lewis A. Raibley, III, age 37, is Vice President, Chief Financial
Officer and a Director of Demeter. Mr. Raibley is also a
Director of DWFCM. Mr. Raibley is currently Senior Vice
President and Controller in the Individual Asset Management Group
of MSDW. From July 1997 to May 1998, Mr. Raibley served as
Senior Vice President and Director in the Internal Reporting
Department of MSDW and prior to that, from 1992 to 1997, he
served as Senior Vice President and Director in the Financial
Reporting and Policy Division of Dean Witter Discover & Co. He
has been with MSDW and its affiliates since June 1986.
Richard A. Beech, age 48, is a Director of Demeter. Mr. Beech
has been associated with the futures industry for over 23 years.
He has been at DWR since August 1984, where he is presently
Senior Vice President and head of Branch Futures. Mr. Beech
began his career at the Chicago Mercantile Exchange, where he
became the Chief Agricultural Economist doing market
analysis, marketing and compliance. Prior to joining DWR, Mr.
Beech also had worked at two investment banking firms in
operations, research, managed futures and sales management.
Ray Harris, age 43, is a Director of Demeter. Mr. Harris is
currently Executive Vice President, Planning and Administration
for Morgan Stanley Dean Witter Asset Management and has worked at
DWR or its affiliates since July 1982, serving in both financial
and administrative capacities. From August 1994 to January 1999,
he worked in two separate DWR affiliates, Discover Financial
Services and Novus Financial Corp., culminating as Senior Vice
President. Mr. Harris received his B.A. degree from Boston
College and his M.B.A. in finance from the University of Chicago.
Mark J. Hawley, age 56, served as Chairman of the Board and a
Director of Demeter and DWFCM throughout 1999. Mr. Hawley joined
DWR in February 1989 as Senior Vice President and served as
Executive Vice President and Director of DWR's Product Management
for Individual Asset Management throughout 1999. In this
capacity, Mr. Hawley was responsible for directing the activities
of the firm's Managed Futures, Insurance, and Unit Investment
Trust Business. From 1978 to 1989, Mr. Hawley was a member of
the senior management team at Heinold Asset Management, Inc., a
Commodity Pool Operator, and was responsible for a variety of
projects in public futures funds. From 1972 to 1978, Mr. Hawley
was a Vice President in charge of institutional block trading for
the Mid-West at Kuhn Loeb & Company. Mr. Hawley resigned
effective January 31, 2000.
All of the foregoing directors have indefinite terms.
Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors and executive officers. As a
limited partnership, the business of the Partnership is managed
by Demeter, which is responsible for the administration of the
business affairs of the Partnership but receives no compensation
for such services.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - As of
December 31, 1999, there were no persons known to be beneficial
owners of more than 5 percent of the Units.
(b) Security Ownership of Management - At December 31, 1999,
Demeter owned 335.409 Units of General Partnership Interest
representing a 1.31 percent interest in the Partnership.
(c) Changes in Control - None
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 2 - "Related Party Transactions" of "Notes to
Financial Statements", in the accompanying Annual Report to
Limited Partners for the year ended December 31, 1999, in which
incorporated by reference to Exhibit 13.01 of this Form 10-K. In
its capacity as the Partnership's retail commodity broker, DWR
received commodity brokerage commissions (paid and accrued by the
Partnership) of $2,089,386 for the year ended December 31, 1999.
In its capacity as the Partnership's trading manager, DWFCM
received management fees of $1,194,754 for the year ended
December 31, 1999.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) 1. Listing of Financial Statements
The following financial statements and report of independent
auditors, all appearing in the accompanying Annual Report to
Limited Partners for the year ended December 31, 1999, are
incorporated by reference to Exhibit 13.01 of this Form 10-
K:
- - Report of Deloitte & Touche LLP, independent auditors,
for the years ended December 31, 1999, 1998 and
1997.
- - Statements of Financial Condition as of December 31,
1999 and December 31, 1998.
- - Statements of Operations, Changes in Partners' Capital, and
Cash Flows for the years ended December 31, 1999, 1998 and 1997.
- - Notes to Financial Statements.
With exception of the aforementioned information and the
information incorporated in Items 7, 8 and 13, the Annual
Report to Limited Partners for the year ended December 31,
1999 is not deemed to be filed with this report.
2. Listing of Financial Statement Schedules
No financial statement schedules are required to be filed
with this report.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Partnership
during the last quarter of the period covered by this
report.
(c) Exhibits
Refer to Exhibit Index on Page E-1.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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.
DWFCM INTERNATIONAL
ACCESS FUND L.P.
(Registrant)
BY: Demeter Management
Corporation,
General Partner
March 29, 2000 BY: /s/ Robert E. Murray
Robert E. Murray, Director,
Chairman of the Board and
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Demeter Management Corporation.
BY: /s/ Robert E. Murray _____ March 29,
2000
Robert E. Murray, Director,
Chairman of the Board and
President
/s/ Joseph G. Siniscalchi _______ March 29,
2000
Joseph G. Siniscalchi, Director
/s/ Edward C. Oelsner III ________ March 29,
2000
Edward C. Oelsner III, Director
/s/ Mitchell M. Merin ______ March 29, 2000
Mitchell M. Merin, Director
/s/ Richard A. Beech ______ March 29, 2000
Richard A. Beech, Director
/s/ Ray Harris _____ March 29,
2000
Ray Harris, Director
/s/ Lewis A. Raibley, III __________ March 29, 2000
Lewis A. Raibley, III, Director, Chief
Financial Officer and Principal Accounting
Officer
EXHIBIT INDEX
ITEM
3.01 Limited Partnership Agreement of the Partnership, dated as
of March 1, 1994 is incorporated by reference to Exhibit
3.01 and Exhibit 3.02 of the Partnership's Registration
Statement on Form S-1 (File No. 33-71654).
10.01Form of the Management Agreements among the Partnership,
Demeter Management Corporation and DWFCM (the Trading
Advisor) dated as of March 1, 1994 is incorporated by
reference to Exhibit 10.02 of the Partnership's
Registration Statement on Form S-1 (File No. 33-71654).
10.02Amended and Restated Customer Agreement, dated as of
December 1, 1997, between the Partnership and Dean Witter
Reynolds Inc. is incorporated by reference to Exhibit 10.02
to Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 (File No. 0-26282).
10.03 Customer Agreement, dated as of December 1, 1997, among
the Partnership, Carr Futures, Inc., and Dean Witter Reynolds
Inc. is incorporated by reference to Exhibit 10.03 to
Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (File No. 0-26282).
10.04
International Foreign Exchange Master Agreement, dated as of
August 1, 1997, between the Partnership and Carr Futures,
Inc. is incorporated by reference to Exhibit 10.04 to
Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (File No. 0-26282).
13.01Annual Report to Limited Partners for the year ended
December 31, 1999 is filed herewith.
International
Access
Fund
December 31, 1999
Annual Report
MORGAN STANLEY DEAN WITTER
Demeter Management Corporation
Two World Trade Center
62nd Floor
New York, NY 10048
Telephone (212) 392-8899
DWFCM International Access Fund L.P.
Annual Report
1999
Dear Limited Partner:
This marks the sixth annual report for the DWFCM International Access Fund L.P.
(the "Fund"). The Fund began the year at a Net Asset Value per Unit of
$1,557.38 and decreased in value by 9.2% to close the year at a Net Asset Value
of $1,413.97. Since its inception in March of 1994, the Fund has increased by
41.4% (a compound annual return of 6.1%).
Overall, the Fund experienced difficulty in the global interest rate futures
markets primarily from short Japanese bond futures positions as prices in-
creased during the first quarter amid growing speculation that the Bank of Ja-
pan may underwrite Japanese government bonds and during the third quarter on
the strength of the Japanese yen and expectations that additional monetary eas-
ing in that country will come. Additional losses were recorded from short Aus-
tralian interest rate futures positions as prices increased during July and Au-
gust on the temporary strength in U.S. bonds and weaker-than-expected business
spending data out of Australia. In the currency markets, losses were recorded
throughout the first quarter from long Australian dollar positions as its value
dropped significantly relative to the U.S. dollar on speculation regarding po-
tential currency devaluations in the Asian region. Early in the third quarter,
losses were recorded in this currency due to depressed commodities prices,
emerging market concerns and on-going talks that China may eventually devalue
its currency. Newly established short positions resulted in additional losses
during September as its value strengthened relative to the U.S. dollar follow-
ing the rally in gold prices. Offsetting currency gains were recorded during
the third quarter from long positions in the Japanese yen as the value of the
yen climbed to a 44-month high versus the U.S.
dollar due to continued optimism over Japan's economic recovery. The energy
markets were profitable during March from long positions in crude and heating
oil futures as prices moved significantly higher on news that both OPEC and
non-OPEC countries had reached an agreement to cut total output beginning April
1st. Gains were also recorded in this market complex during the third quarter
after OPEC ministers confirmed that they would uphold their global cutbacks un-
til April of 2000.
While we are disappointed that the Fund had a difficult year in 1999, we remind
investors that managed futures funds such as International Access Fund are de-
signed to provide diversification and non-correlation, that is the ability to
perform independently, of global equities and bonds. Managed futures have his-
torically performed independently of traditional investments, such as stocks
and bonds. This is referred to as non-correlation, or the potential for managed
futures to perform when traditional markets such as stocks and bonds may expe-
rience difficulty performing. Of course, managed futures funds will not auto-
matically be profitable during unfavorable periods for these traditional in-
vestments and vice versa. The degree of non-correlation of any given managed
futures fund will vary, particularly as a result of market conditions, and some
funds will have significantly lesser degrees of non-correlation (i.e., greater
correlation) with stocks and bonds than others. Managed futures have histori-
cally performed independently of traditional investments, such as stocks and
bonds. 1999 proved to be another strong year for equities, due in large part to
continued growth and stability in most major world economies accompanied by low
inflation. This environment, while strong for equities, provided few major sus-
tained price trends in the world's futures and currency markets, and as such, a
difficult trading environment for the money manager in this Fund whose trading
strategy rely on the existence of longer-term price trends for trading opportu-
nities. Nevertheless, we remain confident in the role that managed futures in-
vestments play in the overall investment portfolio, and we believe this confi-
dence is well-founded based on the longer-term diversified non-correlated re-
turns of this alternative investment. Demeter Manage-
ment Corporation, as General Partner to the Fund, has been and continues to be
an active investor with more than $18 million invested among the 24 managed
futures funds to which we act as General Partner.
Should you have any questions concerning this report, please feel free to con-
tact Demeter Management Corporation at Two World Trade Center, 62nd Floor, New
York, NY 10048, or your Morgan Stanley Dean Witter Financial Advisor.
I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is not a
guarantee of future results.
Sincerely,
/s/ Robert E. Murray
Robert E. Murray
Chairman
Demeter Management Corporation
General Partner
DWFCM International Access Fund L.P.
Independent Auditors' Report
The Limited Partners and the General Partner:
We have audited the accompanying statements of financial condition of DWFCM In-
ternational Access Fund L.P. (the "Partnership") as of December 31, 1999 and
1998 and the related statements of operations, changes in partners' capital,
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of materi-
al misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, such financial statements present fairly, in all material re-
spects, the financial position of DWFCM International Access Fund L.P. at De-
cember 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 14, 2000
(March 3, 2000 as to Note 5)
New York, New York
DWFCM International Access Fund L.P.
Statements of Financial Condition
December 31,
---------------------
1999 1998
---------- ----------
$ $
ASSETS
Equity in futures interests trading
accounts:
Cash 36,135,527 46,211,886
Net unrealized gain (loss) on open contracts 608,697 (446,189)
---------- ----------
Total Trading Equity 36,744,224 45,765,697
Interest receivable (DWR) 130,006 138,824
---------- ----------
Total Assets 36,874,230 45,904,521
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 526,756 239,917
Accrued management fees (DWFCM) 92,010 114,567
Accrued administrative expenses 70,250 77,869
---------- ----------
Total Liabilities 689,016 432,353
---------- ----------
PARTNERS' CAPITAL
Limited Partners (25,255.755 and 28,862.490 Units,
respectively) 35,710,955 44,949,810
General Partner (335.409 Units) 474,259 522,358
---------- ----------
Total Partners' Capital 36,185,214 45,472,168
---------- ----------
Total Liabilities and Partners' Capital 36,874,230 45,904,521
========== ==========
NET ASSET VALUE PER UNIT 1,413.97 1,557.38
========== ==========
The accompanying notes are an integral part of these financial statements.
DWFCM International Access Fund L.P.
Statements of Operations
For the Years Ended
December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
$ $ $
REVENUES
Trading profit (loss):
Realized (3,118,414) 10,745,170 9,351,615
Net change in unrealized 1,054,886 (6,135,777) 5,066,794
---------- ---------- ----------
Total Trading Results (2,063,528) 4,609,393 14,418,409
Interest income (DWR) 1,492,539 1,722,659 1,839,463
---------- ---------- ----------
Total Revenues (570,989) 6,332,052 16,257,872
---------- ---------- ----------
EXPENSES
Brokerage commissions (DWR) 2,089,386 2,293,998 2,944,705
Management fees (DWFCM) 1,194,754 1,365,216 1,393,730
Transaction fees and costs 134,354 154,590 186,730
Administrative expenses 72,000 74,000 96,000
Incentive fees (DWFCM) -- 284,832 1,009,675
---------- ---------- ----------
Total Expenses 3,490,494 4,172,636 5,630,840
---------- ---------- ----------
NET INCOME (LOSS) (4,061,483) 2,159,416 10,627,032
========== ========== ==========
Net Income (Loss) Allocation:
Limited Partners (4,013,384) 2,098,465 10,408,317
General Partner (48,099) 60,951 218,715
Net Income (Loss) per Unit:
Limited Partners (143.41) 75.16 307.87
General Partner (143.41) 75.16 307.87
Statements of Changes in Partners' Capital
For the Years Ended December 31, 1999, 1998 and 1997
Units of
Partnership Limited General
Interest Partners Partner Total
----------- ---------- --------- ----------
$ $ $
Partners' Capital, December
31, 1996 38,144.001 43,960,184 834,270 44,794,454
Net income -- 10,408,317 218,715 10,627,032
Redemptions (5,758.462) (7,418,857) -- (7,418,857)
---------- ---------- --------- ----------
Partners' Capital,
December 31, 1997 32,385.539 46,949,644 1,052,985 48,002,629
Net income -- 2,098,465 60,951 2,159,416
Redemptions (3,187.640) (4,098,299) (591,578) (4,689,877)
---------- ---------- --------- ----------
Partners' Capital, December
31, 1998 29,197.899 44,949,810 522,358 45,472,168
Net loss -- (4,013,384) (48,099) (4,061,483)
Redemptions (3,606.735) (5,225,471) -- (5,225,471)
---------- ---------- --------- ----------
Partners' Capital,
December 31, 1999 25,591.164 35,710,955 474,259 36,185,214
========== ========== ========= ==========
The accompanying notes are an integral part of these financial statements.
DWFCM International Access Fund L.P.
Statements of Cash Flows
For the Years Ended
December 31,
-----------------------------------
1999 1998 1997
----------- ---------- ----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) (4,061,483) 2,159,416 10,627,032
Noncash item included in net income
(loss):
Net change in unrealized (1,054,886) 6,135,777 (5,066,794)
(Increase) decrease in
operating assets:
Interest receivable (DWR) 8,818 16,471 (3,102)
Due from DWR -- -- 38,526
Increase (decrease) in operating
liabilities:
Accrued management fee (DWFCM) (22,557) (7,697) 8,466
Accrued administrative
expenses (7,619) (7,476) (14,775)
Incentive fee payable (DWFCM) -- (437,418) 437,418
Accrued brokerage commissions (DWR) -- -- (59,631)
Accrued transaction fees and costs -- -- (13,426)
----------- ---------- ----------
Net cash provided by (used for)
operating activities (5,137,727) 7,859,073 5,953,714
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in redemptions
payable 286,839 (103,533) (305,970)
Redemptions of Units (5,225,471) (4,689,877) (7,418,857)
----------- ---------- ----------
Net cash used for financing activities (4,938,632) (4,793,410) (7,724,827)
----------- ---------- ----------
Net increase (decrease) in cash (10,076,359) 3,065,663 (1,771,113)
Balance at beginning of period 46,211,886 43,146,223 44,917,336
----------- ---------- ----------
Balance at end of period 36,135,527 46,211,886 43,146,223
=========== ========== ==========
The accompanying notes are an integral part of these financial statements.
DWFCM International Access Fund L.P.
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Organization--DWFCM International Access Fund L.P. (the "Partnership") is a
limited partnership organized to engage primarily in speculative trading of
futures and forward contracts, physical commodities, and other commodity inter-
ests including foreign currencies, financial instruments, metals, energy and
agricultural products (collectively, "futures interests").
The general partner for the Partnership is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter Reynolds Inc.
("DWR") and an unaffiliated clearing commodity broker, Carr Futures Inc.
("Carr"), provides clearing and execution services. The Trading Manager is Dean
Witter Futures & Currency Management Inc. ("DWFCM" or the "Trading Manager").
Demeter, DWR and DWFCM are wholly-owned subsidiaries of Morgan Stanley Dean
Witter & Co. ("MSDW").
On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean Wit-
ter, Discover & Co. ("DWD"). At that time DWD changed its corporate name to
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"). Effective February 19,
1998, MSDWD changed its corporate name to Morgan Stanley Dean Witter & Co.
Demeter is required to maintain a 1% minimum interest in the equity of the
Partnership and income (losses) are shared by Demeter and the Limited Partners
based upon their proportional ownership interests.
Use of Estimates--The financial statements are prepared in accordance with gen-
erally accepted accounting principles, which require management to make esti-
mates and assumptions that affect the reported amounts in the financial state-
ments and related disclosures. Management believes that the estimates utilized
in the preparation of the financial statements are prudent and reasonable. Ac-
tual results could differ from those estimates.
Revenue Recognition--Futures interests are open commitments until settlement
date. They are valued at market on a daily basis and the resulting net change
in unrealized gains and losses are reflected in the change in unrealized profit
(loss) on open contracts from one period to the next in the statements of oper-
ations. Monthly, DWR pays the Partnership interest income based upon 80% of the
average daily Net Assets for the month at a rate equal to the average yield on
13-week U.S. Treasury bills. For purposes of such interest payments, Net Assets
do not include monies due the Partnership on futures interests, but not actual-
ly received.
DWFCM International Access Fund L.P.
Notes to Financial Statements--(Continued)
Net Income (Loss) per Unit--Net income (loss) per unit of limited partnership
interest ("Unit(s)") is computed using the weighted average number of Units
outstanding during the period.
Equity in Futures Interests Trading Accounts--The Partnership's asset "Equity
in futures interests trading accounts," reflected in the statements of finan-
cial condition, consists of (A) cash on deposit with DWR and Carr to be used as
margin for trading and (B) net unrealized gains or losses on open contracts,
which are valued at market, and calculated as the difference between original
contract value and market value.
The Partnership, in the normal course of business, enters into various con-
tracts with Carr acting as its commodity broker. Pursuant to brokerage agree-
ments with Carr, to the extent that such trading results in unrealized gains or
losses, the amounts are offset and reported on a net basis in the Partnership's
statements of financial condition.
The Partnership has offset the fair value amounts recognized for forward con-
tracts executed with the same counterparty as allowable under terms of the mas-
ter netting agreement with Carr, the sole counterparty on such contracts. The
Partnership has consistently applied its right to offset.
Brokerage Commissions and Related Transaction Fees and Costs--The Partnership
accrues brokerage commissions on a half-turn basis at 80% of DWR's published
non-member rates. Transactions fees and costs are accrued on a half-turn basis.
Brokerage commissions and transaction fees chargeable to the Partnership are
capped at 13/20 of 1% per month (a maximum 7.8% annual rate) of the Partner-
ship's adjusted month-end Net Assets.
Operating Expenses--The Partnership bears all operating expenses related to its
trading activities, to a maximum of 1/4 of 1% annually of the Partnership's av-
erage month-end Net Assets. These include filing fees, legal, auditing, ac-
counting, mailing, printing and other incidental expenses as permitted by the
Limited Partnership Agreement. In addition, the Partnership incurs a monthly
management fee and may incur an incentive fee. Demeter bears all other operat-
ing expenses.
Redemptions--Limited Partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit on the last day of any month, upon five business
days advance notice by redemption form to Demeter.
Distributions--Distributions, other than redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date.
DWFCM International Access Fund L.P.
Notes to Financial Statements--(Continued)
Income Taxes--No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of the Partnership's revenues
and expenses for income tax purposes.
Dissolution of the Partnership--The Partnership will terminate on December 31,
2025, or at an earlier date if certain conditions set forth in the Limited
Partnership Agreement occur.
2. Related Party Transactions
The Partnership pays brokerage commissions to DWR as described in Note 1. 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 as described in Note 1.
Demeter, on behalf of the Partnership and itself, entered into a Management
Agreement with DWFCM to make all trading decisions for the Partnership.
Compensation to DWFCM by the Partnership consists of a management fee and an
incentive fee as follows:
Management Fee--The Partnership pays a monthly management fee equal to 1/4 of
1% (a 3% annual rate) of the Partnership's adjusted Net Assets, as defined in
the management agreement, as of the last day of each month.
Incentive Fee--The Partnership will pay a quarterly incentive fee equal to 15%
of the trading profits earned by the Partnership as of the end of each calendar
quarter. Trading profits represent the amount by which profits from futures and
forward trading exceed losses, after brokerage commissions, management fees,
transaction fees and costs and administrative expenses have been deducted. Such
incentive fee is accrued in each month in which trading profits occur. In those
months in which trading profits are negative, previous accruals, if any, during
the incentive period will be reduced. In those instances, in which a Limited
Partner redeems an investment, the incentive fee (if earned through a redemp-
tion date) is to be paid to DWFCM on those redemptions in the month of such
redemptions.
3. Financial Instruments
The Partnership trades futures and forward contracts, physical commodities and
other commodities interests including foreign currencies, financial instru-
ments, metals, energy, and agricultural products. Futures and forwards repre-
sent 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 poten-
tial 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.
DWFCM International Access Fund L.P.
Notes to Financial Statements--(Continued)
In June 1998, the Financial Accounting Standards Board ("FASB") issued State-
ment of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Deriva-
tive 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 beginning with the
fiscal year ended December 31, 1998. 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 state-
ments.
The net unrealized gain (loss) on open contracts are reported as a component of
"Equity in futures interests trading accounts" on the statements of financial
condition and totaled $608,697 and $(446,189) at December 31, 1999 and 1998,
respectively.
Of the $608,697 net unrealized gain on open contracts at December 31, 1999,
$465,072 related to exchange-traded futures contracts and $143,625 related to
off-exchange-traded forward currency contracts.
Of the $(446,189) net unrealized loss on open contracts at December 31, 1998,
$1,485,813 related to exchange-traded futures contracts and $(1,932,002) relat-
ed to off-exchange-traded forward currency contracts.
Exchange-traded futures contracts held by the Partnership at December 31, 1999
and 1998 mature through September 2000 and June 1999, respectively. Off- ex-
change-traded forward currency contracts held by the Partnership at December
31, 1999 and 1998 mature through March 2000 and March 1999, respectively.
The Partnership has credit risk associated with counterparty nonperformance.
The credit risk associated with the instruments in which the Partnership is in-
volved is limited to the amounts reflected in the Partnership's statements of
financial condition.
The Partnership also has credit risk because DWR or Carr act as the futures
commission merchants or the counterparties, with respect to most of the Part-
nership'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 regu-
DWFCM International Access Fund L.P.
Notes to Financial Statements--(Continued)
lations of the Commodity Futures Trading Commission 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 $36,600,599 and $47,697,699 at December 31,
1999 and 1998, 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 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-ex-
change-traded forward currency contracts, should materially decrease the Part-
nership'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).
4. Legal Matters
The class actions first filed in 1996 in California and in New York State
courts were each dismissed in 1999. On September 6, 10, and 20, 1996, and on
March 13, 1997, purported class actions were filed in the Superior Court of the
State of California, County of Los Angeles, on behalf of all purchasers of in-
terests in limited partnership commodity pools sold by DWR. Named defendants
include DWR, Demeter, DWFCM, MSDW, certain limited partnership commodity pools
of which Demeter is the general partner (all such parties referred to hereafter
as the "Morgan Stanley Dean Witter Parties") and certain trading advisors to
those pools. On June 16, 1997, the plaintiffs in the above actions filed a con-
solidated amended complaint, alleging, among other things, that the defendants
committed fraud, deceit, negligent misrepresentation, various violations of the
California Corporations Code, intentional and negligent breach of fiduciary du-
ty, fraudulent and unfair business practices, unjust enrichment, and conversion
in the sale and operation of the various limited partnership commodity
pools. The complaints seek unspecified amounts of compensatory and punitive
damages and other relief. The court entered an order denying class certifica-
tion on August 24, 1999. On September 24, 1999, the court entered an order dis-
missing the case without prejudice on consent. Similar purported class actions
were also filed on September 18
DWFCM International Access Fund L.P. Notes to
Financial Statements--(Concluded)
and 20, 1996, in the Supreme Court of the State of New York, New York County,
and on November 14, 1996 in the Superior Court of the State of Delaware, New
Castle County, against the Morgan Stanley Dean Witter Parties and certain trad-
ing advisors on behalf of all purchasers of interests in various limited part-
nership commodity pools sold by DWR. A consolidated and amended complaint in
the action pending in the Su- preme Court of the State of New York was filed on
August 13, 1997, alleging that the defendants committed fraud, breach of fidu-
ciary duty, and negligent misrepresentation in the sale and operation of the
various limited partnership commodity pools. The complaints seek unspecified
amounts of compensatory and punitive damages and other relief. The New York Su-
preme Court dismissed the New York action in November 1998,but granted plain-
tiffs leave to file an amended complaint, which they did in early December
1998. The defendants filed a motion to dismiss the amended complaint with prej-
udice on February 1, 1999.
In addition, on December 16, 1997, upon motion of the plaintiffs, the action
pending in the Superior Court of the State of Delaware was voluntarily dis-
missed without prejudice.
5. Subsequent Event
On March 3, 2000, the plaintiffs in the New York action referred to in Note 4
filed an appeal of the order dismissing the consolidated complaint.
MORGAN STANLEY DEAN WITTER & CO.
Two World Trade Center
62nd Floor
New York, NY 10048
Presorted
First Class Mail
U.S. Postage Paid
Brooklyn, NY
Permit No. 148