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, 2002 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 0-25603
MORGAN STANLEY CHARTER GRAHAM L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-4018068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Demeter Management Corporation
c/o Managed Futures Department
Harborside Financial Center
Plaza Two, 1st Floor, Jersey City, NJ 07311
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 209-8400
825 Third Ave., 8th Floor, New York, NY 10022
(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>
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MORGAN STANLEY CHARTER GRAHAM L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2002
<caption>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<s> <c>
Statements of Financial Condition as of September 30, 2002
(Unaudited) and December 31, 2001..........................2
Statements of Operations for the Quarters Ended
September 30, 2002 and 2001 (Unaudited)....................3
Statements of Operations for the Nine Months Ended
September 30, 2002 and 2001 (Unaudited)....................4
Statements of Changes in Partners' Capital for the
Nine Months Ended September 30, 2002 and 2001 (Unaudited)..5
Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and 2001 (Unaudited)....................6
Notes to Financial Statements (Unaudited)...............7-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......13-23
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.........................................24-37
Item 4. Controls and Procedures.............................37-38
Part II. OTHER INFORMATION
Item 1. Legal Proceedings......................................39
Item 2. Changes in Securities and Use of Proceeds...........39-40
Item 5. Other Information......... ..40-42
Item 6. Exhibits and Reports on Form 8-K....................42-44
</table>
<page>
<table>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF FINANCIAL CONDITION
<caption> September 30, December 31,
2002 2001
$ $
(Unaudited)
ASSETS
<s> <c> <c>
Equity in futures interests trading accounts:
Cash 91,034,310 45,247,504
Net unrealized gain on open contracts (MS & Co.) 5,016,994 1,617,509
Net unrealized gain (loss) on open contracts (MSIL) 154,174 (751,401)
Total net unrealized gain on open contracts 5,171,168 866,108
Total Trading Equity 96,205,478 46,113,612
Subscriptions receivable 6,430,653 2,428,001
Interest receivable (Morgan Stanley DW) 125,346 69,554
Total Assets 102,761,477 48,611,167
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued incentive fees 1,537,530 -
Redemptions payable 1,196,624 329,746
Accrued brokerage fees (Morgan Stanley DW) 494,308 264,953
Accrued management fees 146,462 75,700
Total Liabilities 3,374,924 670,399
Partners' Capital
Limited Partners (5,126,173.407 and
3,443,452.290 Units, respectively) 98,287,141 47,429,838
General Partner (57,339.906 and
37,094.046 Units, respectively) 1,099,412 510,930
Total Partners' Capital 99,386,553 47,940,768
Total Liabilities and Partners' Capital 102,761,477 48,611,167
NET ASSET VALUE PER UNIT 19.17 13.77
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page>
<table>
MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<caption>
For the Quarters Ended September 30,
2002 2001
$ $
REVENUES
<s> <c> <c>
Trading profit (loss):
Realized 27,651,346 2,073,541
Net change in unrealized (875,797) 5,004,330
Total Trading Results 26,775,549 7,077,871
Interest income (Morgan Stanley DW) 345,275 287,108
Total 27,120,824 7,364,979
EXPENSES
Incentive fees 3,660,660 341,515
Brokerage fees (Morgan Stanley DW) 1,291,084 598,524
Management fees 382,545 171,007
Total 5,334,289 1,111,046
NET INCOME 21,786,535 6,253,933
NET INCOME ALLOCATION
Limited Partners 21,547,553 6,185,323
General Partner 238,982 68,610
NET INCOME PER UNIT
Limited Partners 4.72 2.15
General Partner 4.72 2.15
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page>
<table>
MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<caption>
For the Nine Months Ended September 30,
2002 2001
$ $
REVENUES
<s> <c> <c>
Trading profit:
Realized 27,939,911 5,477,264
Net change in unrealized 4,305,060 2,299,333
Total Trading Results 32,244,971 7,776,597
Interest income (Morgan Stanley DW) 775,671 1,017,007
Total 33,020,642 8,793,604
EXPENSES
Incentive fees 3,660,660 973,558
Brokerage fees (Morgan Stanley DW) 3,065,898 1,675,089
Management fees 895,927 478,597
Total 7,622,485 3,127,244
NET INCOME 25,398,157 5,666,360
NET INCOME ALLOCATION
Limited Partners 25,119,675 5,604,745
General Partner 278,482 61,615
NET INCOME PER UNIT
Limited Partners 5.40 1.94
General Partner 5.40 1.94
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page>
<table>
MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
<caption>
Units of
Partnership Limited General
Interest Partners Partner Total
$ $ $
<s> <c> <c> <c> <c>
Partners' Capital,
December 31, 2000 2,291,643.790 28,446,182 324,976 28,771,158
Offering of Units 922,369.874 11,552,740 81,000 11,633,740
Net Income - 5,604,745 61,615 5,666,360
Redemptions (261,171.771) (3,281,123) - (3,281,123)
Partners' Capital,
September 30, 2001 2,952,841.893 42,322,544 467,591 42,790,135
Partners' Capital,
December 31, 2001 3,480,546.336 47,429,838 510,930 47,940,768
Offering of Units 2,089,728.419 31,556,370 310,000 31,866,370
Net Income - 25,119,675 278,482 25,398,157
Redemptions (386,761.442) (5,818,742) - (5,818,742)
Partners' Capital,
September 30, 2002 5,183,513.313 98,287,141 1,099,412 99,386,553
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page>
<table>
MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<caption>
For the Nine Months Ended September 30,
2002 2001
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<s> <c> <c>
Net income 25,398,157 5,666,360
Noncash item included in net income:
Net change in unrealized (4,305,060) (2,299,333)
(Increase) decrease in operating assets:
Interest receivable (Morgan Stanley DW) (55,792) 45,002
Increase (decrease) in operating liabilities:
Accrued incentive fees 1,537,530 (519,312)
Accrued brokerage fees (Morgan Stanley DW) 229,355 64,722
Accrued management fees 70,762 18,492
Net cash provided by operating activities 22,874,952 2,975,931
CASH FLOWS FROM FINANCING ACTIVITIES
Offering of Units 31,866,370 11,633,740
Increase in subscriptions receivable (4,002,652) (641,277)
Increase (decrease) in redemptions payable 866,878 (286,007)
Redemptions of Units (5,818,742) (3,281,123)
Net cash provided by financing activities 22,911,854 7,425,333
Net increase in cash 45,786,806 10,401,264
Balance at beginning of period 45,247,504 26,570,361
Balance at end of period 91,034,310 36,971,625
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page>
MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
(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 Charter Graham L.P. (the "Partnership"). The
financial statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 2001 Annual Report
on Form 10-K.
1. Organization
Morgan Stanley Charter Graham L.P. is a Delaware limited
partnership organized to engage primarily in the speculative
trading of futures contracts, options on futures contracts, and
forward contracts on physical commodities and other commodity
interests, including foreign currencies, financial instruments,
metals, energy and agricultural products. The Partnership is one
of the Morgan Stanley Charter Series of funds, comprised of the
Partnership, Morgan Stanley Charter Millburn L.P., Morgan Stanley
Charter Welton L.P., and Morgan Stanley Charter MSFCM L.P.
The Partnership's general partner is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker is
<page>
MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Morgan Stanley DW Inc. ("Morgan Stanley DW"). The clearing
commodity brokers are Morgan Stanley & Co., Inc. ("MS & Co.") and
Morgan Stanley & Co. International Limited ("MSIL"). Demeter,
Morgan Stanley DW, MS & Co. and MSIL are wholly-owned subsidiaries
of Morgan Stanley. Graham Capital Management L.P. (the "Trading
Advisor") is the trading advisor to the Partnership.
2. Related Party Transactions
The Partnership's cash is on deposit with Morgan Stanley DW, MS &
Co. and MSIL in futures, forwards and options trading accounts to
meet margin requirements as needed. Morgan Stanley DW pays
interest on these funds based on a rate equal to that earned by
Morgan Stanley DW on its U.S. Treasury bill investments. The
Partnership pays brokerage fees to Morgan Stanley DW.
3. Financial Instruments
The Partnership trades futures contracts, options on futures
contracts, and forward contracts on physical commodities and other
commodity interests, including foreign currencies, financial
<page>
MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
The market value of contracts is based on closing prices quoted by
the exchange, bank or clearing firm through which the contracts
are traded.
The Partnership's contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"). SFAS No. 133 defines a derivative as a
financial instrument or other contract that has all three of the
following characteristics:
1) One or more underlying notional amounts or payment
provisions;
<page>
MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, forward, swaps or options
contracts and other financial instruments with similar
characteristics such as caps, floors and collars.
The net unrealized gains (losses) on open contracts, reported as a
component of "Equity in futures interests trading accounts" on the
statements of financial condition, and their longest contract
maturities were as follows:
Net Unrealized Gains (Losses)
on Open Contracts Longest Maturities
Exchange- Off-Exchange- Exchange- Off-Exchange-
Date Traded Traded Total Traded Traded
$ $ $
Sept. 30, 2002 5,459,686 (288,518) 5,171,168 Mar. 2004 Dec. 2002
Dec. 31, 2001 1,017,777 (151,669) 866,108 Jun. 2003 Mar. 2002
The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
<page>
MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Morgan Stanley DW, MS
& Co. and MSIL act as the futures commission merchants or the
counterparties with respect to most of the Partnership's assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Each of Morgan Stanley DW, MS & Co., and
MSIL, as a futures commission merchant for the Partnership's
exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures Trading
Commission ("CFTC"), to segregate from their own assets, and for
the sole benefit of their commodity customers, all funds held by
them with respect to exchange-traded futures and futures-styled
options contracts, including an amount equal to the net unrealized
gains (losses) on all open futures and futures-styled options
contracts, which funds, in the aggregate, totaled $96,493,996 and
$46,265,281 at September 30, 2002 and December 31, 2001,
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 gains (losses) on open forward
<page>
MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
contracts be segregated. With respect to those off-exchange-
traded forward currency contracts, the Partnership is at risk to
the ability of MS & Co., the sole counterparty on all of such
contracts, to perform. The Partnership has a netting agreement
with MS & Co. This agreement, which seeks to reduce both the
Partnership's and MS & Co.'s exposure on off-exchange-traded
forward currency contracts, should materially decrease the
Partnership's credit risk in the event of MS & Co.'s bankruptcy or
insolvency.
<page>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker and MS & Co. and MSIL as
clearing brokers in separate futures, forwards, and options
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
<page>
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 or options contracts and
result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.
There are no material trends, demands, commitments, events or
uncertainties known at the present time that will result in or
that are reasonably likely to result in the Partnership's
liquidity increasing or decreasing in any material way.
The Partnership has never had illiquidity affect a material
portion of its assets.
<page>
Capital Resources. The Partnership does not have, nor 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, forwards, and options in subsequent
periods. It is not possible to estimate the amount and therefore
the impact of future redemptions of Units.
There are no known material trends, favorable or unfavorable, nor
any expected material changes to the Partnership's capital
resource arrangements at the present time.
The Partnership has no off-balance sheet arrangements, nor
contractual obligations or commercial commitments to make future
payments that would affect the Partnership's liquidity or capital
resources. The contracts traded by the Partnership are accounted
for on a trade-date basis and marked to market on a daily basis.
The value of foreign currency forward contracts is based on the
spot rate as of the close of business, New York City time, on a
given day.
Results of Operations
General. The Partnership's results depend on the Trading Advisor
and the ability of the Trading Advisor's trading programs to take
advantage of price movements or other profit opportunities in the
<page>
futures, forwards and options markets. The following presents a
summary of the Partnership's operations for the three and nine
month periods ended September 30, 2002 and 2001 and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Advisor trades in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Advisor or will be profitable in the future.
Consequently, the results of operations of the Partnership are
difficult to discuss other than in the context of the Trading
Advisor's trading activities on behalf of the Partnership and how
the Partnership has performed in the past.
The Partnership's results of operations are set forth in financial
statements prepared in accordance with United States generally
accepted accounting principles, which require the use of certain
accounting policies that affect the amounts reported in these
financial statements, including the following: The contracts the
Partnership trades are accounted for on a trade-date basis and
marked to market on a daily basis. The difference between their
cost and market value is recorded on the Statements of Operations
as "Net change in unrealized profit/loss" for open (unrealized)
contracts, and recorded as "Realized profit/loss" when open
positions are closed out, and the sum of these amounts constitutes
the Partnership's trading revenues. Earned interest income
<page>
revenue, as well as management fees, incentive fees and brokerage
fees expenses of the Partnership are recorded on an accrual basis.
Demeter believes that, based on the nature of the operations of
the Partnership, no assumptions other than those presently used
relating to the application of critical accounting policies are
reasonably plausible that could affect reported amounts.
For the Quarter and Nine Months Ended September 30, 2002
For the quarter ended September 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $27,120,824
and posted an increase in net asset value per Unit. The most
significant gains of approximately 27.1% were recorded in the
global interest rate futures markets from previously established
long positions in European and U.S. interest rate futures, as
prices trended higher throughout the quarter due to investors
seeking a safe haven from falling equity prices and increased
pessimism regarding a global economic recovery. Gains of
approximately 9.1% were recorded in the global stock index futures
markets, primarily during July and September, from short positions
in U.S. and European stock index futures as prices weakened amid
suspicions regarding corporate accounting practices and global
political and economic uncertainty. In the agricultural markets,
gains of approximately 4.5% were recorded from long positions in
wheat and corn futures as prices trended higher amid weather
<page>
related concerns. Additional gains of approximately 1.8% were
recorded in the energy futures markets, primarily during August
and September, from long positions in crude oil futures and its
related products as prices trended higher on the increasing
possibility of military action against Iraq. A portion of the
Partnership's overall gains was offset by losses of approximately
2.6% in the currency markets from previously established long
positions in the Canadian dollar and Japanese yen relative to the
U.S. dollar as these currencies weakened against the dollar due to
the emphasis on a "strong dollar" policy by the Bush
Administration during July and the persistence of trendless price
activity during August and September. Additional losses of
approximately 1.5% were recorded in the metals markets from
positions in copper and aluminum futures as these markets
exhibited erratic price behavior. Total expenses for the three
months ended September 30, 2002 were $5,334,289, resulting in net
income of $21,786,535. The net asset value of a Unit increased
from $14.45 at June 30, 2002 to $19.17 at September 30, 2002.
For the nine months ended September 30, 2002, the Partnership
recorded total trading revenues, including interest income, of
$33,020,642 and posted an increase in net asset value per Unit.
The most significant gains of approximately 21.8% were recorded
from long positions in the global interest rate futures markets as
<page>
prices trended higher during a majority of the second and third
quarters due to uncertainty regarding a global economic recovery.
In the currency markets, gains of approximately 14.3% were
recorded, primarily during May and June, from previously
established long positions in the euro, Swiss franc, and British
pound relative to the U.S. dollar as the value of these currencies
strengthened against the dollar amid falling U.S. equity prices
and increased tensions in the Israeli-Palestinian conflict. Gains
of approximately 8.0% were recorded in the global stock index
futures markets, primarily during the third quarter, from short
positions in European and U.S. stock index futures as prices
weakened amid suspicions regarding corporate accounting practices
and global political and economic uncertainty. Additional gains
of approximately 6.0% were recorded in the agricultural markets
from long positions in wheat and corn as prices trended higher
amid weather related concerns. A portion of the Partnership's
overall gain was offset by losses of approximately 2.3% in the
metals markets from positions in aluminum, copper, and zinc
futures as trendless price activity persisted throughout the
period. Total expenses for the nine months ended September 30,
2002 were $7,622,485, resulting in net income of $25,398,157. The
net asset value of a Unit increased from $13.77 at December 31,
2001 to $19.17 at September 30, 2002.
<page>
For the Quarter and Nine Months Ended September 30, 2001
For the quarter ended September 30, 2001, the Partnership
recorded total trading revenues, including interest income, of
$7,364,979 and posted an increase in net asset value per Unit.
The most significant gains of approximately 14.8% were recorded
primarily during August and September from long positions in U.S.
interest rate futures as domestic bond prices trended higher amid
concerns for the U.S. economy, declining stock prices, as well as
in reaction to the Federal Reserve's interest rate cuts. Smaller
gains were recorded from long positions in short-term European
interest rate futures as prices trended higher. In the global
stock index futures markets, gains of approximately 10.0% were
recorded throughout a majority of the quarter from short
positions in DAX, Nikkei and TOPIX Index futures as equity prices
moved sharply lower on corporate profit warnings and worries
regarding global economic uncertainty. In the metals markets,
gains of approximately 5.2% were recorded throughout the quarter
from short futures positions in aluminum, copper and nickel as
base metals prices trended lower as a result of increased
supplies and weak demand. These gains were partially offset by
losses of approximately 4.2% recorded in the currency markets
primarily during August from short positions in the Japanese yen
as the value of the yen strengthened versus the U.S. dollar due
to a Japanese repatriation of assets and the weakness in the U.S.
resulting from economic pessimism. Additional losses were
<page>
recorded during September from transactions involving the Mexican
peso. In the agricultural markets, losses of approximately 3.5%
were recorded primarily during July from short positions in corn
and wheat futures as prices increased on forecasts for hotter and
drier weather in the U.S. midwest. In the energy markets, losses
of approximately 2.1% were recorded during August and September
from long futures positions in crude oil and its refined products
as oil prices reversed lower due to near-term concerns over the
effects of a global economic slowdown on oil demand. Total
expenses for the three months ended September 30, 2001 were
$1,111,046, resulting in net income of $6,253,933. The net asset
value of a Unit increased from $12.34 at June 30, 2001 to $14.49
at September 30, 2001.
For the nine months ended September 30, 2001, the Partnership
recorded total trading revenues, including interest income, of
$8,793,604 and posted an increase in net asset value per Unit.
The most significant gains of approximately 15.4% were recorded
in the global interest rate futures markets primarily during
August and September from long positions in U.S. interest rate
futures as domestic bond prices trended higher amid concerns for
the U.S. economy, declining stock prices, as well as in reaction
to the Federal Reserve's interest rate cuts. Smaller gains were
recorded from long positions in short-term European interest rate
futures as prices trended higher. In the global stock index
<page>
futures markets, gains of approximately 9.6% were recorded during
July through September from short positions in DAX, Nikkei and
TOPIX Index futures as equity prices moved sharply lower on
corporate profit warnings and amid worries regarding global
economic uncertainty. In the metals markets, gains of
approximately 5.7% were recorded primarily throughout the third
quarter from short futures positions in aluminum, copper and
nickel as base metals prices trended lower as a result of
increased supplies and weak demand. In the soft commodities
markets, gains of approximately 2.0% were recorded throughout the
first quarter from short cotton futures positions as prices moved
lower on weak export sales and low demand. These gains were
partially offset by losses of approximately 4.3% recorded in the
currency markets from cross-rate transactions involving the
British pound relative to the Swiss franc and Japanese yen, as
well as from trading the euro relative to the British pound and
Canadian dollar. In the energy markets, losses of approximately
3.5% were experienced primarily during April from short positions
in crude oil futures as prices moved higher on supply concerns
amid refinery production problems. Additional losses were
experienced during the third quarter from long futures positions
in crude oil and its refined products as oil prices reversed
lower due to near-term concerns over the effects of a global
economic slowdown on oil demand. Total expenses for the nine
months ended September 30, 2001 were $3,127,244, resulting in net
<page>
income of $5,666,360. The net asset value of a Unit increased
from $12.55 at December 31, 2000 to $14.49 at September 30, 2001.
<page>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards, and options. 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, forwards and options traded by the Partnership
involve varying degrees of related 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
<page>
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 on the basis of mark-
to-market accounting principles. Any loss in the market value of
the Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and its
<page>
cash flow. Profits and losses on open positions of exchange-
traded futures, forwards and options are settled daily through
variation margin.
The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the 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.
In other words, one-day VaR for a portfolio is a number such that
<page>
losses in this portfolio are estimated to exceed the VaR only one
day in 100.
VaR is calculated using historical simulation. Demeter uses
approximately four years of daily market data (1,000 observations)
and revalues its portfolio (using delta-gamma approximations) for
each of the historical market moves that occurred over this time
period. This generates a probability distribution of daily
'simulated profit and loss' outcomes. The VaR is the appropriate
percentile of this distribution. For example, the 99% one-day VaR
would represent the 10th worst outcome from Demeter's simulated
profit and loss series.
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in their daily risk management
activities. Please further note that VaR as described above may
not be comparable to similarly titled measures used by other
entities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
<page>
Partnership's open positions as a percentage of total net assets
by primary market risk category at September 30, 2002 and 2001.
At September 30, 2002 and 2001, the Partnership's total
capitalization was approximately $99 million and $43 million,
respectively.
Primary Market September 30, 2002 September 30, 2001
Risk Category Value at Risk Value at Risk
Equity (0.95)% (0.41)%
Interest Rate (0.72) (3.42)
Currency (0.52) (1.19)
Commodity (1.50) (0.97)
Aggregate Value at Risk (2.08)% (3.89)%
The VaR for a market category represents the one-day downside risk
for the aggregate exposures associated with this market category.
The aggregate VaR, listed above for the Partnership, represents
the aggregate VaR of the Partnership's open positions across all
the market categories, and is less than the sum of the VaRs for
all such market categories due to the diversification benefit
across asset classes.
The table above represents the VaR of the Partnership's open
positions at September 30, 2002 and 2001 only and is not
necessarily representative of either the historic or future risk
of an investment in the Partnership. Because the Partnership's
<page>
only business is the speculative trading of futures, forwards and
options, 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, 2001 through September 30, 2002.
Primary Market Risk Category High Low Average
Equity (1.30)% (0.18)% (0.71)%
Interest Rate (3.24) (0.72) (1.74)
Currency (2.25) (0.52) (1.42)
Commodity (1.50) (0.69) (1.11)
Aggregate Value at Risk (4.59)% (2.08)% (3.06)%
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
<page>
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 caused by 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 the Partnership's market risk exposures and on an aggregate
<page>
basis at September 30, 2002 and 2001 and for the end of the four
quarterly reporting periods from October 1, 2001 through September
30, 2002. 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 once 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, 2002, the Partnership's cash balance at Morgan
Stanley DW was approximately 79% 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 to be 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-
<page>
sensitive instruments, in relation to the Partnership's net
assets.
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.
<page>
The following were the primary trading risk exposures of the
Partnership at September 30, 2002, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
Equity. The primary market exposure of the Partnership at
September 30, 2002 was to the global stock index sector. The
primary equity exposure was to equity price risk in the G-7
countries. The G-7 countries consist of France, the U.S.,
Britain, Germany, Japan, Italy and Canada. The stock index
futures traded by the Partnership are by law limited to futures
on broadly-based indices. At September 30, 2002, the
Partnership's primary exposures were to the NASDAQ (U.S.), TOPIX
(Taiwan) and Nikkei (Japan) 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.
Interest Rate. At September 30, 2002, exposure was primarily
spread across the European, Japanese and U.S. interest rate
sectors. Interest rate movements directly affect the price of
the sovereign bond futures positions held by the Partnership and
<page>
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 U.S. and the other G-7 countries. However, the
Partnership also takes futures positions in the government debt
of smaller nations - e.g. Australia. Demeter anticipates that
the G-7 countries' interest rates will remain the primary
interest rate exposure of the Partnership for the foreseeable
future. The speculative futures positions held by the
Partnership may range from short to long-term instruments.
Consequently, changes in short, medium, or long-term interest
rates may have an effect on the Partnership.
Currency. 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. At September 30, 2002, the Partnership's major
exposures were to the Japanese yen and euro currency crosses and
outright U.S. dollar positions. Outright positions consist of
<page>
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 U.S.-based Partnership in expressing
VaR in a functional currency other than U.S. dollars.
Commodity.
Energy. At September 30, 2002, the Partnership's energy
exposure was shared primarily by futures contracts in crude
oil and its related products, and natural gas. Price
movements in these markets result from political
developments in the Middle East, weather patterns and other
economic fundamentals. Significant profits and losses,
which have been experienced in the past, are expected to
continue to be experienced in these markets. Natural gas
has exhibited volatility in prices resulting from weather
patterns and supply and demand factors and may continue in
this choppy pattern.
<page>
Metals. The Partnership's metals exposure at September 30,
2002 was to fluctuations in the price of precious metals,
such as gold, and base metals, such as copper, aluminum and
lead. Economic forces, supply and demand inequalities,
geopolitical factors, and market expectations influence
price movements in these markets. The Trading Advisor, from
time to time, takes positions when market opportunities
develop. Demeter anticipates that the Partnership will
continue to be exposed to the precious and base metals
markets.
Soft Commodities and Agriculturals. At September 30, 2002,
the Partnership had exposure to the markets that comprise
these sectors. Most of the exposure was to the sugar and
coffee 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 at September 30, 2002:
Foreign Currency Balances. The Partnership's primary
foreign currency balances at September 30, 2002 were in
euros, Japanese yen and British pounds. The Partnership
<page>
controls the non-trading risk of these balances by regularly
converting them back into U.S. dollars upon liquidation of
their respective positions.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in essentially
the same manner in all market categories traded. Demeter attempts
to manage market exposure by diversifying the Partnership's assets
among different market sectors and trading approaches, and
monitoring the performance of the Trading Advisor daily. In
addition, the Trading Advisor establishes diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.
Item 4. CONTROLS AND PROCEDURES
(a) As of a date within 90 days of the filing date of this
quarterly report, the President and Chief Financial
Officer of the general partner, Demeter, have evaluated
the Partnership's disclosure controls and procedures,
<page>
and have judged such controls and procedures to be
effective.
(b) There have been no significant changes in the
Partnership's internal controls or in other factors
that could significantly affect these controls
subsequent to the date of their evaluation.
<page>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership initially registered 3,000,000 Units pursuant to a
Registration Statement on Form S-1, which became effective on
November 6, 1998 (SEC File Number 333-60115).
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 333-91563).
The Partnership registered an additional 2,000,000 Units pursuant to
another Registration Statement on Form S-1, which became effective
on July 29, 2002 (SEC File Number 333-85076).
The managing underwriter for the Partnership is Morgan Stanley DW.
Units are continuously 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.
<page>
Through September 30, 2002, 6,410,124.037 Units were sold, leaving
4,589,875.963 Units unsold. The aggregate price of the Units sold
through September 30, 2002 was $79,301,139.
Since no expenses are chargeable against the 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 5. OTHER INFORMATION
Changes in Management
The following changes have been made to the Board of Directors
and Officers of Demeter Management Corporation, general partner:
Mr. Robert E. Murray resigned the position of President of
Demeter. Mr. Murray, however, retains his position as Chairman
and as a Director of Demeter.
Mr. Jeffrey A. Rothman, age 41, was named President and a
Director of Demeter. Mr. Rothman is the Executive Director of
Morgan Stanley Managed Futures, responsible for overseeing all
aspects of the firm's managed futures department. He is also
President and a Director of Morgan Stanley Futures & Currency
<page>
Management Inc., Morgan Stanley's internal commodity trading
advisor. Mr. Rothman has been with the Managed Futures
Department for sixteen years and most recently held the position
of National Sales Manager, assisting Branch Managers and
Financial Advisors with their managed futures education,
marketing, and asset retention efforts. Throughout his career,
Mr. Rothman has helped with the development, marketing, and
administration of approximately 33 commodity pool investments.
Mr. Rothman is an active member of the Managed Funds Association
and serves on its Board of Directors.
Mr. Frank Zafran, age 47, will become a Director of Demeter and
of Morgan Stanley Futures & Currency Management Inc. once he has
registered with the National Futures Association as an associated
person of both firms, which registration is currently pending.
Mr. Zafran is an Executive Director of Morgan Stanley and, in
September 2002, was named Chief Administrative Officer of Morgan
Stanley's Global Products and Services Division. Mr. Zafran
joined the firm in 1979 and has held various positions in
Corporate Accounting and the Insurance Department, including
Senior Operations Officer - Insurance Division, until his
appointment in 2000 as Director of 401(k) Plan Services,
responsible for all aspects of 401(k) Plan Services including
marketing, sales and operations. Mr. Zafran received a B.S.
degree in Accounting from Brooklyn College, New York.
<page>
Mr. Raymond E. Koch resigned the position of Chief Financial
Officer of Demeter.
Mr. Jeffrey D. Hahn, age 45, was named Chief Financial Officer of
Demeter. Mr. Hahn began his career at Morgan Stanley in 1992 and
is currently an Executive Director responsible for
the management and supervision of the accounting, reporting, tax
and finance functions for the firm's private equity, managed
futures, and certain legacy real estate investing activities. He
is also Chief Financial Officer of Morgan Stanley Futures &
Currency Management Inc. From August 1984 through May 1992, Mr.
Hahn held various positions as an auditor at Coopers & Lybrand,
specializing in manufacturing businesses and venture capital
organizations. Mr. Hahn received his B.A. in economics from St.
Lawrence University in 1979, an M.B.A. from Pace University in
1984, and is a Certified Public Accountant.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership is incorporated by reference
to Exhibit A of the Partnership's Prospectus, dated
July 29, 2002, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, as amended, on August 12, 2002.
3.02 Certificate of Limited Partnership, dated July 15, 1998,
is incorporated by reference to Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File
No. 333-60115) filed with the Securities and Exchange
Commission on July 29, 1998.
<page>
3.03 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001, (changing its name
from Morgan Stanley Dean Witter Charter Graham L.P.) is
incorporated by reference to Exhibit 3.01 of the
Partnership's Form 8-K (File No. 0-25603) filed with the
Securities and Exchange Commission on November 6, 2001.
10.01 Management Agreement, dated as of November 6, 1998, among
the Partnership, Demeter and Graham Capital Management
L.P. is incorporated by reference to Exhibit 10.01 of the
Partnership's Quarterly Report on Form 10-Q (File No. 0-
25603) filed with the Securities and Exchange Commission
on May 17, 1999.
10.02 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units is
incorporated by reference to Exhibit B of the
Partnership's Prospectus dated July 29, 2002, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended,
on August 12, 2002.
10.03 Amended and Restated Escrow Agreement, dated as of
October 11, 2000, among the Partnership, Morgan Stanley
Charter Millburn L.P., Morgan Stanley Charter Welton
L.P., Morgan Stanley Charter MSFCM L.P., Morgan Stanley
DW, and The Chase Manhattan Bank is incorporated by
reference to Exhibit 10.04 of the Partnership's Post-
Effective Amendment No. 3 to the Registration Statement
on Form S-1 (File No. 333-91563) filed with the
Securities and Exchange Commission on March 30, 2001.
10.04 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW, dated as of November
13, 2000, is incorporated by reference to Exhibit 10.01
of the Partnership's Form 8-K (File No. 0-25603) filed
with the Securities and Exchange Commission on November
6, 2001.
10.05 Commodity Futures Customer Agreement between MS & Co. and
the Partnership, and acknowledged and agreed to by Morgan
Stanley DW, dated as of November 6, 2000, is incorporated
by reference to Exhibit 10.02 of the Partnership's Form
8-K (File No. 0-25603) filed with the Securities and
Exchange Commission on November 6, 2001.
<page>
10.06 Customer Agreement between the Partnership and MSIL,
dated as of November 6, 2000, is incorporated by
reference to Exhibit 10.04 of the Partnership's Form 8-K
(File No. 0-25603) filed with the Securities and Exchange
Commission on November 6, 2001.
10.07 Foreign Exchange and Options Master Agreement between MS
& Co. and the Partnership, dated as of August 30, 1999,
is incorporated by reference to Exhibit 10.05 of the
Partnership's Form 8-K (File No. 0-25603) filed with the
Securities and Exchange Commission on November 6, 2001.
10.08 Form of Subscription Agreement Update Form is
incorporated by reference to Exhibit C of the
Partnership's Prospectus dated July 29, 2002, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended,
on August 12, 2002.
10.09 Securities Account Control Agreement among the
Partnership, MS & Co., and Morgan Stanley DW, dated as of
May 1, 2000, is incorporated by reference to Exhibit
10.03 of the Partnership's Form 8-K (File No. 0-25603)
filed with the Securities and Exchange Commission on
November 6, 2001.
99.01 Certification of Periodic Report by Jeffrey A. Rothman,
President of Demeter Management Corporation, the general
partner of the Partnership.
99.02 Certification of Periodic Report by Jeffrey D. Hahn,
Chief Financial Officer of Demeter Management
Corporation, the general partner of the Partnership.
(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 Charter Graham L.P.
(Registrant)
By: Demeter Management Corporation
(General Partner)
November 14, 2002 By: /s/ Jeffrey D. Hahn
Jeffrey D. Hahn
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.
<page>
CERTIFICATIONS
I, Jeffrey A. Rothman, President of Demeter Management
Corporation, the general partner of the Partnership, certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
Partnership;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
Partnership as of, and for, the periods presented in this
quarterly report;
4. Demeter's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the Partnership and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the Partnership,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the Partnership's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report
(the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. Demeter's other certifying officers and I have disclosed,
based on our most recent evaluation, to the Partnership's
auditors and the audit committee of Demeter's board of
directors (or persons performing the equivalent function):
<page>
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Partnership's ability to record, process, summarize and
report financial data and have identified for the
Partnership's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the Partnership's internal controls; and
6. Demeter's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/Jeffrey A. Rothman
Jeffrey A. Rothman
President, Demeter Management
Corporation, general partner
of the Partnership
<page> CERTIFICATIONS
I, Jeffrey D. Hahn, Chief Financial Officer of Demeter Management
Corporation, the general partner of the Partnership, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of the
Partnership;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
Partnership as of, and for, the periods presented in this
quarterly report;
4. Demeter's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the Partnership and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
Partnership, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Partnership's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. Demeter's other certifying officers and I have disclosed,
based on our most recent evaluation, to the Partnership's
auditors and the audit committee of Demeter's board of
directors (or persons performing the equivalent function):
<page>
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
Partnership's ability to record, process, summarize and
report financial data and have identified for the
Partnership's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the Partnership's internal controls; and
6. Demeter's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002 /s/Jeffrey D. Hahn
Jeffrey D. Hahn
Chief Financial Officer,
Demeter Management Corporation,
general partner of the
Partnership
<page>
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Morgan Stanley Charter
Graham L.P. (the "Partnership") on Form 10-Q for the period ended
September 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Jeffrey A.
Rothman, President, Demeter Management Corporation, general
partner of the Partnership, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.
By: /s/Jeffrey A. Rothman
Name: Jeffrey A. Rothman
Title: President
Date: November 14, 2002
<page>
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Morgan Stanley Charter
Graham L.P. (the "Partnership") on Form 10-Q for the period ended
September 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Jeffrey D. Hahn,
Chief Financial Officer, Demeter Management Corporation, general
partner of the Partnership, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.
By: /s/Jeffrey D. Hahn
Name: Jeffrey D. Hahn
Title: Chief Financial Officer
Date: November 14, 2002