UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
[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, 2006 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 0-25603
MORGAN STANLEY CHARTER GRAHAM L.P.
(Exact name of registrant as specified in its Limited Partnership Agreement)
DELAWARE 13-4018068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Demeter Management Corporation
330 Madison Avenue, 8th Floor
New York, NY 10017
(Address of principal executive offices) (Zip Code)
Registrant?s telephone number, including area code (212) 905-2700
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 if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes No X
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes No X
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 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]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definitions of ?accelerated
filer and large accelerated filer? in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer___ Accelerated filer____ Non-accelerated filer X
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes No 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 the last
business day of the registrant?s most recently completed second fiscal quarter:
$429,720,991 at June 30, 2006.
EXPLANATORY NOTE
This Annual Report on Form 10-K/A (?Form 10-K/A?) is being
filed as Amendment No. 1 to our Annual Report on Form 10-K
for the year ended December 31, 2006, which was filed with
the Securities and Exchange Commission on March 9, 2007 (the
?Original Filing?). This Form 10-K/A is a technical
amendment to add as Exhibit 13.01 the Annual Report to
Limited Partners for the year ended December 31, 2006. The
referenced exhibit was inadvertently omitted from the
electronically filed document.
This form 10-K/A only adds the referenced exhibit, and we
have not modified or updated other disclosures presented in
our Original Filing. Accordingly, this Amendment No. 1 does
not reflect events occurring after the filing of our Original
Filing and does not modify or update those disclosures
affected by subsequent events. Information not affected by
this amendment is unchanged and reflects the disclosures made
at the time of the Original Filing.
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.
MORGAN STANLEY CHARTER GRAHAM L.P.
(Registrant)
BY: Demeter Management Corporation,
General Partner
March 23, 2007 BY: /s/ Lee Horwitz ___
Lee Horwitz, Chief Financial Officer
EXHIBIT INDEX
ITEM
13.01 December 31, 2006, Annual Report to Limited Partners is
filed herewith.
31.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
is filed herewith.
31.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 is filed herewith.
32.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 is filed
herewith.
32.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 is filed herewith.
Morgan Stanley
Charter Series
December 31, 2006
Annual Report
[LOGO]
MORGAN STANLEY CHARTER SERIES
HISTORICAL FUND PERFORMANCE
Presented below is the percentage change in Net Asset Value per Unit from the
start of every calendar year each Fund has traded. Also provided is the
inception-to-date return and the compound annualized return since inception for
each Fund. Past performance is no guarantee of future results.
INCEPTION- COMPOUND
TO-DATE ANNUALIZED
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 RETURN RETURN
FUND % % % % % % % % % % % % % % %
- ----------------------------------------------------------------------------------------------------------------------------
Charter Campbell -- -- -- -- -- -- -- -- (4.2) 16.3 3.9 9.7 3.1 30.9 6.5
(3 mos.)
- ----------------------------------------------------------------------------------------------------------------------------
Charter Aspect.. (7.3) 21.9 4.0 26.2 5.1 (9.2) 23.8 (3.3) 29.1 (5.1) (5.6) (19.6) 10.5 73.8 4.4
(10 mos.)
- ----------------------------------------------------------------------------------------------------------------------------
Charter Graham.. -- -- -- -- -- 2.9 22.0 9.7 36.8 16.1 1.3 (16.1) 4.6 94.6 8.9
(10 mos.)
- ----------------------------------------------------------------------------------------------------------------------------
Charter WCM..... -- -- -- -- -- (7.2) 12.1 (11.3) 21.1 (0.6) (5.3) (0.6) (2.4) 2.1 0.3
(10 mos.)
- ----------------------------------------------------------------------------------------------------------------------------
DEMETER MANAGEMENT CORPORATION
330 Madison Avenue, 8th Floor
New York, NY 10017
Telephone (212) 905-2700
MORGAN STANLEY CHARTER SERIES
ANNUAL REPORT
2006
Dear Limited Partner:
This marks the fifth annual report for Morgan Stanley Charter Campbell L.P.,
the thirteenth annual report for Morgan Stanley Charter Aspect L.P., and the
eighth annual report for Morgan Stanley Charter Graham L.P. and Morgan Stanley
Charter WCM L.P. The Net Asset Value per Unit for each of the four Charter
Series Funds ("Funds") as of December 31, 2006 was as follows:
% CHANGE
FUNDS N.A.V. FOR YEAR
--------------------------------
Charter Campbell $13.09 3.1%
--------------------------------
Charter Aspect $17.38 10.5%
--------------------------------
Charter Graham $19.46 4.6%
--------------------------------
Charter WCM $10.21 (2.4)%
--------------------------------
Since its inception in October 2002, Charter Campbell has returned 30.9% (a
compound annualized return of 6.5%). Since its inception in March 1994, Charter
Aspect has returned 73.8% (a compound annualized return of 4.4%). Since their
inception in March 1999, Charter Graham has returned 94.6% (a compound
annualized return of 8.9%) and Charter WCM has returned 2.1% (a compound
annualized return of 0.3%).
Detailed performance information for each Fund is located in the body of the
financial report. For each Fund, we provide a chart that portrays trading gains
and trading losses for the year in each sector in which the Fund participates.
The trading results by sector charts indicate the year-to-date composite
percentage returns generated by the specific assets dedicated to trading within
each market sector in which each Fund participates. Please note that there is
not an equal amount of assets in each market sector, and the specific
allocations of assets by a Fund to each sector will vary over time within
a predetermined range. Below each chart is a description of the factors that
influenced trading gains and trading losses within each Fund during the year.
Effective September 15, 2006, Demeter Management Corporation ("Demeter"), the
general partner of Morgan Stanley Charter MSFCM L.P. ("Charter MSFCM"), decided
to remove VK Capital, Inc. ("VK Capital") as the sole trading advisor to
Charter MSFCM. Consequently, VK Capital ceased all futures interests trading on
behalf of Charter MSFCM as of that date.
On October 16, 2006, Demeter and Aspect Capital Limited ("Aspect") entered into
a management agreement in which Charter MSFCM was renamed to Morgan Stanley
Charter Aspect L.P. ("Charter Aspect"), also pursuant to the management
agreement, Aspect trades the Net Assets of Charter Aspect pursuant to its
Diversified Program. Charter Aspect pays Aspect a monthly management fee equal
to 1/12 of 2% ( a 2% annual rate) of the Partnership's Net Assets under
management by Charter Aspect as of the first day of each month, as well as, an
incentive fee equal to 20% of the trading profits earned by Charter Aspect as
of the end of each month.
Effective September 30, 2006, Demeter the general partner of Morgan Stanley
Charter Millburn L.P. ("Charter Millburn"), decided to remove Millburn
Ridgefield Corporation ("Millburn") as the sole trading advisor to Charter
Millburn. Consequently, Millburn ceased all futures interests trading on behalf
of Charter Millburn as of that date. On October 13, 2006, Demeter and Winton
Capital Management Limited ("Winton") entered into a management agreement in
which Charter Millburn was renamed to Morgan Stanley Charter WCM L.P. ("Charter
WCM"), also pursuant to the management agreement, Winton trades the Net Assets
of Charter WCM pursuant to its Diversified Trading Program. Charter WCM pays
Winton a monthly management fee equal to 1/12 of 2% ( a 2% annual rate) of the
Partnership's Net Assets under management by Charter WCM as of the first day of
each month, as well as, an incentive fee equal to 20% of the trading profits
earned by Charter WCM as of the end of each month.
Should you have any questions concerning this report, please feel free to
contact Demeter Management Corporation, 330 Madison Ave., 8th Floor, New York,
NY 10017, or your Morgan Stanley 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 no
guarantee of future results.
Sincerely,
/s/ Walter J. Davis
Walter J. Davis
Chairman of the Board of Directors and President
Demeter Management Corporation,
General Partner of
Morgan Stanley Charter Campbell L.P.
Morgan Stanley Charter Aspect L.P.
Morgan Stanley Charter Graham L.P.
Morgan Stanley Charter WCM L.P.
This page intentionally left blank.
MORGAN STANLEY CHARTER CAMPBELL L.P.
[CHART]
Year ended December 31, 2006
------------------------------
Currencies 2.57%
Interest Rates 2.89%
Stock Indices 6.95%
Energies -6.65%
Metals 2.02%
Note:Reflects trading results only and does not include fees or interest income.
FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. The most significant trading gains were recorded in the global stock index
markets during the first quarter from long positions in European and U.S.
stock index futures as global equity prices trended higher on strong
corporate earnings and consistently strong economic data out of the U.S. and
European Union. Also supporting the move higher in European equity index
futures prices was news that German business sentiment had risen to its
highest level since October 1991. During September, additional gains were
recorded from long positions in European and U.S. equity index futures as
prices increased amid falling oil prices, merger and acquisition activity,
and the decision by the European Central Bank to leave interest rates
unchanged. Finally, in December, long positions in European, Pacific Rim,
and U.S. equity index futures resulted in gains as prices advanced due to a
decline in oil prices and speculation that the U.S. Federal Reserve could
possibly cut interest rates in the near future. Furthermore, Pacific Rim
stock markets strengthened after consumer spending continued to pick up in
China and Japan, Asia's two biggest economies.
.. Within the global interest rate sector, gains were recorded from short
positions in U.S. interest rate futures during the first and second quarter
as prices trended lower amid strength in the global equity markets and
general sentiment that the U.S. Federal Reserve would keep lifting interest
rates in order to stave off inflation. In December, further gains were
experienced in the global interest rate sector from short positions in U.S.
fixed-income futures as prices trended lower after data indicating strong
jobs creation and another survey showed increased confidence in the labor
market.
MORGAN STANLEY CHARTER CAMPBELL L.P.
FACTORS INFLUENCING ANNUAL TRADING GAINS: (continued)
.. Within the currency sector, gains were experienced due to long U.S. dollar
positions relative to the New Zealand dollar in March as the value of the
U.S. dollar moved higher amid expectations that the U.S. Federal Reserve
would continue lifting U.S. interest rates to fend off inflation. In
addition, the value of the New Zealand dollar was pulled lower on negative
economic data out of that country. During November, short positions in the
U.S. dollar versus the euro and the Australian dollar experienced gains as
the value of the U.S. dollar declined against these currencies on news that
foreign central banks would begin to more aggressively diversify reserves
away from the U.S. dollar. Finally, the value of the U.S. dollar dropped
sharply against the euro at the end of the month on expectations that the
European Central Bank would continue to raise interest rates, rising home
prices, merger and acquisition activity in the United Kingdom, and a
marginal decline in unemployment within Germany and France.
.. Within the metals sector, additional gains were recorded, primarily during
March, April, and May, from long futures positions in copper and zinc as
prices advanced on a strong U.S. manufacturing survey from the Institute of
Supply Management, news that China's pace of industrial production remained
strong, and increasing demand from the U.S., China, and India.
FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. Trading losses were incurred in the energy markets during February from long
futures positions in crude oil and its related products as prices declined
early in the month on reduced fears about a possible supply disruption to
Iranian oil. Prices continued to decline after Chinese government
authorities announced that China would place an emphasis on prospecting
alternative energy sources in the future. Losses were also recorded during
August and September from long futures positions in crude oil and its
related products as prices reversed lower after remarks by the U.S.
Department of Energy Secretary Samuel Bodman suggested there were adequate
supplies to make up for the loss of output due to British Petroleum's recent
pipeline shutdown in Alaska. Additionally, prices were pressured lower after
reports of a terrorist plot to attack U.S.-bound flights from the United
Kingdom increased concerns that demand for oil would weaken. Prices
continued to move lower towards the latter half of August and into September
after news of an official cease-fire between Israel and Hezbollah militants
in Lebanon and as OPEC reduced its 2006 oil demand growth forecast. Lastly,
additional losses were incurred in December from long positions in crude oil
futures as prices declined due to mild weather across the U.S. Northeast.
MORGAN STANLEY CHARTER ASPECT L.P.
[CHART]
Year ended December 31, 2006
----------------------------
Currencies -0.41%
Interest Rates 3.74%
Stock Indices 0.39%
Energies -0.36%
Metals 9.15%
Agriculturals 0.73%
Note:Reflects trading results only and does not include fees or interest income.
FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. The most significant trading gains were recorded in the metals sector,
primarily during the first and second quarters, from long positions in
copper, nickel, aluminum, gold, and silver futures. During the first
quarter, copper, aluminum, and nickel futures prices strengthened amid weak
supplies, forecasts for continued buying by China, and acceleration in
demand from Japan, Europe, and the U.S. Elsewhere in the metals markets,
gains were recorded from long positions in silver and gold futures as prices
moved higher on persistent demand from foreign central banks and worries
regarding global inflation. In addition, silver prices were also boosted
after news that a silver-backed Exchange Traded Fund would launch. During
the second quarter, copper, nickel, and aluminum futures prices continued to
move higher on strong global industrial demand from the U.S., China, and
India, while gold and silver futures prices both rallied to 25-year highs in
April, benefiting from strong demand and lagging supply.
.. Additional trading gains were recorded in the global interest rate futures
markets, primarily during the first half of the year, from short positions
in U.S. and European interest rate futures as prices moved lower during
March and April amid strength in regional equity markets and investor
sentiment that interest rates in the United States and the European Union
would rise in order to combat inflation. Smaller gains were experienced in
August from long positions in Japanese and U.S. fixed-income futures as
prices increased on higher demand amid concerns of a possible slowing of the
global economy and news that Iran would continue its nuclear research
program. In addition, Japanese fixed-income futures prices were pressured
higher after lower than expected inflation data dampened expectations for
another interest rate hike by the Bank of Japan.
MORGAN STANLEY CHARTER ASPECT L.P.
FACTORS INFLUENCING ANNUAL TRADING GAINS: (continued)
.. Within the agricultural complex, gains were recorded primarily during
January from long positions in sugar futures as prices trended higher,
moving to their highest level since 1981, in response to a decline in
inventories, as well as from increased ethanol demand. Additional gains were
experienced in July and August from short positions in sugar futures as
prices were pressured lower following the U.S. Department of Agriculture
data showing that ethanol-production using sugarcane was more costly than
previously expected, as well as from low physical demand and high
inventories.
.. Smaller gains were recorded in the global stock index sector from long
positions in European and Asian stock index futures in January as global
equity prices trended higher after a weaker than expected December U.S. jobs
report raised hopes that the U.S. Federal Reserve would end its cycle of
interest rate hikes sooner rather than later. In December, long positions in
European and Asian equity index futures resulted in gains as prices moved
higher, lifted by a decline in oil prices and speculation that the U.S.
Federal Reserve could possibly cut interest rates in the near future.
Additionally, European stocks gained on speculation of increased merger and
acquisition activity in the region, while Pacific Rim stock markets ended
higher as consumer spending continued to pick up in China and Japan.
FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. Trading losses were recorded in the currency sector from long U.S. dollar
positions versus the euro and Australian dollar as the U.S. dollar's value
reversed lower in January on expectations that a string of increases in
interest rates by the U.S. Federal Reserve would end. Also pushing the value
of the U.S. dollar lower against its rivals was speculation that China, with
a massive U.S. dollar reserve, might diversify some of its assets into other
currencies. In February, further losses were recorded from short U.S. dollar
positions relative to the Australian dollar as the value of the U.S. dollar
reversed higher due to predictions that U.S. interest rates would continue
to increase. The value of the Australian dollar also moved lower in the wake
of a temporary decline in gold prices. Further losses in the currency
markets were recorded during May and June from long positions in the
Australian dollar versus the U.S. dollar as the value of the U.S. dollar
reversed higher after hawkish comments from several U.S. Federal Reserve
officials implied another interest rate hike was necessary to help contain
rising inflation. Losses were incurred during early July from short
positions in the U.S. dollar against the euro and Swiss franc as the U.S.
dollar strengthened against most of its major rivals following narrower than
expected May U.S. trade deficit data. Meanwhile, the value of the euro was
pressured lower after the European Central Bank decided to keep interest
rates unchanged. Further losses were also recorded from short positions in
the British pound versus the euro and the U.S. dollar as the British pound
strengthened amid strong economic growth in the United Kingdom. Finally,
during August, losses were incurred from short positions in the U.S. dollar
versus the Swiss franc, euro, and Australian dollar as the U.S. dollar
reversed higher in late August and early September after revisions to U.S.
quarterly productivity data showed that unit labor costs had risen in 2006
at the fastest pace since 1990.
.. Within the energy sector, further losses were recorded primarily during May
from long futures positions in crude oil as prices fell on renewed optimism
that the standoff between Iran and the West would be resolved
diplomatically. During June, smaller losses were incurred from short futures
positions in crude oil and its related products as prices reversed higher
amid reports from the U.S. Department of Energy showing lower than expected
levels of domestic gasoline inventories and fears of supply disruptions in
the Gulf of Mexico.
MORGAN STANLEY CHARTER GRAHAM L.P.
[CHART]
Year ended December 31, 2006
----------------------------
Currencies -5.40%
Interest Rates -1.27%
Stock Indices 12.76%
Energies -0.25%
Metals 2.88%
Agriculturals -2.14%
Note:Reflects trading results only and does not include fees or interest income.
FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. The most significant trading gains were recorded in the global stock index
futures markets from long positions in European and Hong Kong stock index
futures as prices trended higher during the first quarter on strong
corporate earnings and solid economic data out of the European Union,
Australia, Japan, and the United States. Further gains in the global stock
index futures market were recorded during September from long positions in
European and Pacific Rim equity index futures as prices climbed higher amid
falling oil prices. Furthermore, prices increased on merger and acquisition
activity and consistently strong economic data out of the Euro-Zone. In
addition, Hong Kong equity index futures prices increased on an optimistic
economic outlook for the region. Further gains were experienced in the
global stock index futures markets during October from long positions in
European and Hong Kong equity index futures after news of the world's
largest initial public offering in China. Finally, in December, long
positions in European and Pacific Rim equity index futures resulted in
further gains as prices moved higher on weak energy prices and investor
optimism about the future of the global economy.
.. Additional gains were experienced in the metals sector throughout the first
half of the year from long zinc, copper, nickel, aluminum, and gold futures
positions. Base metals prices rallied sharply to record highs amid an
increase in industrial demand from strong global economic growth and limited
production ability, while gold prices rose to 26-year highs due to continued
geopolitical concerns regarding Iran's nuclear program and inflation
concerns due to high oil prices. Additional gains were recorded from long
positions in zinc and aluminum futures during October as prices rose amid
labor protests in producer countries and news that inventories had declined
more than expected.
MORGAN STANLEY CHARTER GRAHAM L.P.
FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. Trading losses were recorded in the currency sector from long U.S. dollar
positions versus the euro, Swiss franc, and Australian dollar as the U.S.
dollar's value reversed lower against these currencies on news that foreign
central banks would diversify their currency reserves away from the U.S.
dollar. The U.S. dollar also weakened on worries regarding the U.S. trade
deficit and speculation that the U.S. Federal Reserve was near the end of
its cycle in interest rate increases. During June, long positions in the
euro versus the U.S. dollar recorded losses as the U.S. dollar reversed
higher against most of its rivals due to diplomatic developments made
between the U.S. and Iran regarding Iran's nuclear research program, as well
as news confirming the death of insurgent leader Abu Musab al-Zarqawi in
Iraq. Furthermore, the value of the U.S. dollar continued to move higher in
the days leading up to the U.S. Federal Reserve's 17th consecutive interest
rate hike on June 29. Additional losses were incurred during the first and
second quarters from both short and long positions in the Mexican peso
relative to the U.S. dollar as the value of the peso moved without
consistent direction amid political uncertainty in Mexico. Finally, in
October, losses were experienced from long positions in the U.S. dollar
versus the Swiss franc and the euro as the value of the U.S. dollar declined
towards the latter half of the month after the U.S. Department of Commerce
reported slower than expected growth in the third quarter U.S. Gross
Domestic Product, as well as a faster than expected decline in consumer core
inflation.
.. Additional losses were incurred in the agricultural complex from long
positions in wheat futures as prices fell during March on forecasts for
above average rainfall in U.S. growing regions. Additional losses were
recorded during June from long positions in wheat as prices moved lower on
favorable weather forecasts across the U.S. growing regions and reports from
the U.S. Department of Agriculture showing improved crop conditions.
Elsewhere in the agricultural complex, losses were incurred from short
positions in coffee futures as prices reversed higher amid large U.S. export
sales and news of a smaller than expected crop from Brazil.
.. Within the global interest rate sector, losses were incurred largely from
short positions in U.S. and Japanese fixed-income futures in August as
prices increased on higher demand amid concerns of a slowing global economy
and news that Iran would continue its nuclear research program. U.S.
interest rate futures prices were also pressured higher by government
reports showing a slow-down in the U.S. economy and soft inflation data,
which boosted expectations that the U.S. Federal Reserve would hold interest
rates steady. Further losses were incurred from long positions in Japanese
fixed income futures during December as prices fell after the Tankan survey
showed business confidence unexpectedly improved to a two year high.
.. Smaller losses were incurred in the energy sector primarily during March
from short positions in crude oil and unleaded gas futures as prices
increased early in the month on supply fears fueled by news of geopolitical
tensions in Nigeria and Iran. Prices then continued to move higher towards
the end of March on concerns regarding the possibility of economic sanctions
by the United Nations against Iran, one of the world's largest oil
producers. Further losses were recorded during November from short positions
in crude oil futures and its related products as prices rose on supply
concerns after a major Nigerian facility ceased production following a
hostage situation.
MORGAN STANLEY CHARTER WCM L.P.
[CHART]
Year ended December 31, 2006
----------------------------
Currencies -7.08%
Interest Rates -4.18%
Stock Indices 4.69%
Energies 1.40%
Metals 6.21%
Agriculturals -1.32%
Note:Reflects trading results only and does not include fees or interest income.
FACTORS INFLUENCING ANNUAL TRADING LOSSES:
.. The most significant trading losses were recorded in the currency markets
during the first quarter from long U.S. dollar positions versus the Czech
koruna, Norwegian krone, Swiss franc, Swedish krona, and Singapore dollar as
the U.S. dollar's value reversed lower against these currencies during
January on speculation that China, with a massive U.S. dollar reserve, would
diversify some of its assets into other currencies. Additional losses in the
currency markets were experienced during March from long positions in the
Mexican peso versus the U.S. dollar as the value of the peso weakened on
political uncertainty in Mexico, as well as during May from long positions
in the Turkish lira and Mexican peso relative to the U.S. dollar as the
value of these currencies declined sharply amid political uncertainty.
During July, long positions in the euro versus the Mexican peso and the
Turkish lira incurred losses as the value of the euro moved lower after the
European Central Bank decided to keep its interest rate unchanged despite
concerns about the rising core rate of inflation.
MORGAN STANLEY CHARTER WCM L.P.
FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)
.. Within the global interest rate sector, losses were experienced from short
positions in U.S., European, and Canadian fixed-income futures in July as
prices reversed higher on significant geopolitical concerns after North
Korean long-range missile tests, terrorist bombings aboard commuter trains
in Bombay, India and fears of an escalating conflict in the Middle East. In
addition, prices were boosted by U.S. Federal Reserve Chairman Ben
Bernanke's testimony before Congress, which eased fears of accelerating
inflation and suggested that interest rate increases might come to a pause.
Additional losses in the global interest rate sector were recorded in
December from long positions in U.S., German, and Australian fixed income
futures as prices declined due to strength from the equity markets. In
addition, U.S. interest rate futures prices declined after data indicated
strong jobs creation and another survey showed increased confidence in the
labor market. Furthermore, German fixed-income futures prices moved lower
after the European Central Bank lifted the benchmark interest rate to 3.5%,
while Australian interest rate futures decreased amid consistently strong
economic data leading investors to conclude that the Reserve Bank of
Australia would potentially raise rates.
.. Additional losses were experienced from long positions in wheat and corn
futures during the second quarter as prices moved lower on favorable weather
forecasts across the U.S. corn and wheat belts and reports from the U.S.
Department of Agriculture showing improved crop conditions. Elsewhere in the
agricultural complex, short positions in soybean meal futures recorded
losses, also during the second quarter, as prices benefited from large
volumes of speculative buying. Further losses were incurred from short
positions in live cattle futures as prices reversed higher, during the
second quarter, after news that South Korea would resume the U.S. beef
imports. In December, losses were recorded from short positions in cocoa
futures as prices rose on speculation that production from the Ivory Coast
was lower than expected.
FACTORS INFLUENCING ANNUAL TRADING GAINS:
.. Trading gains were experienced during the first half of the year, in the
metals sector from long copper, zinc, and nickel futures positions as base
metals prices rallied sharply to record highs amid strong global industrial
demand from the U.S., China, and India. Elsewhere in the metals markets,
gains were achieved from long futures positions in silver and gold as
precious metals prices reached 26-year highs in May on persistent demand
from foreign central banks. Additional gains were experienced from long
positions in nickel futures during July and August as prices trended higher
on reports of weak global stockpiles, consistently strong global demand and
lower than forecasted production.
.. Within the global stock index sector gains were recorded during January and
March from long positions in European, Hong Kong, South African, and
Australian stock index futures as global equity prices trended higher during
the first quarter on strong corporate earnings, and solid economic data.
During September, additional gains were recorded from long positions in
European equity index futures as prices increased amid falling oil prices,
increased merger and acquisition activity, and the decision by the European
Central Bank to leave interest rates unchanged. Elsewhere in the global
stock index sector, gains were experienced throughout the third quarter from
long positions in Hong Kong equity index futures as prices increased on an
optimistic economic outlook for the region after Gross Domestic Product in
China surged to 10.9% in the first six months of the year. Finally, in
December, long positions in European and Pacific Rim equity index futures
resulted in further gains as prices continued to move higher on lower energy
prices, consistently strong economic data out of the Euro-Zone, and news
that consumer spending continued to pick up in China and Japan. Smaller
gains were incurred in the energy sector from short futures positions in
natural gas and crude oil and its related products in December as prices
decreased due to mild winter weather across the Northeastern United States.
Furthermore, natural gas prices were pressured lower by news from the U.S.
Department of Energy that domestic supplies were up 12% from a year earlier.
MORGAN STANLEY CHARTER SERIES
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Demeter Management Corporation ("Demeter"), the general partner of Morgan
Stanley Charter Campbell L.P., Morgan Stanley Charter Aspect L.P. (formerly
Morgan Stanley Charter MSFCM L.P.), Morgan Stanley Charter Graham L.P., and
Morgan Stanley Charter WCM L.P. (formerly Morgan Stanley Charter Millburn L.P.)
(collectively, the "Partnerships"), is responsible for the management of the
Partnerships.
Management of Demeter ("Management") is responsible for establishing and
maintaining adequate internal control over financial reporting. The internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles.
The Partnerships' internal control over financial reporting includes those
policies and procedures that:
.. Pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
Partnerships;
.. Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that the Partnerships' transactions are
being made only in accordance with authorizations of Management and
directors; and
.. Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Partnerships' assets
that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of each Partnership's internal control
over financial reporting as of December 31, 2006. In making this assessment,
Management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control--Integrated
Framework. Based on our assessment and those criteria, Management believes that
each Partnership maintained effective internal control over financial reporting
as of December 31, 2006.
Deloitte & Touche LLP, the Partnerships' independent registered public
accounting firm, has issued an audit report on Management's assessment of the
Partnerships' internal control over financial reporting and on the
effectiveness of the Partnerships' internal control over financial reporting.
This report, which expresses unqualified opinions on Management's assessment
and on the effectiveness of the Partnerships' internal control over financial
reporting, appears under "Report of Independent Registered Public Accounting
Firm" on the following page.
/s/ Walter J. Davis
Walter J. Davis
President
Demeter Management Corporation
/s/ Lee Horwitz
Lee Horwitz
Chief Financial Officer
Demeter Management Corporation
New York, New York
February 28, 2007
MORGAN STANLEY CHARTER SERIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Limited Partners and the General Partner of Morgan Stanley Charter
Campbell L.P., Morgan Stanley Charter Aspect L.P. (formerly Morgan Stanley
Charter MSFCM L.P.), Morgan Stanley Charter Graham L.P., and Morgan Stanley
Charter WCM L.P. (formerly Morgan Stanley Charter Millburn L.P.):
We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that Morgan
Stanley Charter Campbell L.P., Morgan Stanley Charter Aspect L.P., (formerly
Morgan Stanley Charter MSFCM L.P.), Morgan Stanley Charter Graham L.P., and
Morgan Stanley Charter WCM L.P. (formerly Morgan Stanley Charter Millburn L.P.)
(collectively, the "Partnerships") maintained effective internal control over
financial reporting as of December 31, 2006, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Partnerships' management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Partnerships' internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinions.
A company's internal control over financial reporting is a process designed
by, or under the supervision of, the company's principal executive and
principal financial officers, or persons performing similar functions, and
effected by the company's board of directors, management, and other personnel
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's
internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, management's assessment that the Partnerships maintained
effective internal control over financial reporting as of December 31, 2006, is
fairly stated, in all material respects, based on the criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also in our opinion, the Partnerships
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on the criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the financial statements as of and
for the year ended December 31, 2006 of the Partnerships and our report dated
February 28, 2007 expressed an unqualified opinion on those financial
statements.
/s/ Deloitte & Touche LLP
New York, New York
February 28, 2007
MORGAN STANLEY CHARTER SERIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Limited Partners and the General Partner of Morgan Stanley Charter
Campbell L.P., Morgan Stanley Charter Aspect L.P. (formerly Morgan Stanley
Charter MSFCM L.P.), Morgan Stanley Charter Graham L.P., and Morgan Stanley
Charter WCM L.P. (formerly Morgan Stanley Charter Millburn L.P.):
We have audited the accompanying statements of financial condition of Morgan
Stanley Charter Campbell L.P., Morgan Stanley Charter Aspect L.P. (formerly
Morgan Stanley Charter MSFCM L.P.), Morgan Stanley Charter Graham L.P., and
Morgan Stanley Charter WCM L.P. (formerly Morgan Stanley Charter Millburn L.P.)
(collectively, the "Partnerships"), including the schedules of investments, as
of December 31, 2006 and 2005, 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, 2006. These financial statements are the
responsibility of the Partnerships' management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting 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 presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Morgan Stanley Charter Campbell L.P.,
Morgan Stanley Charter Aspect L.P. (formerly Morgan Stanley Charter MSFCM
L.P.), Morgan Stanley Charter Graham L.P., and Morgan Stanley Charter WCM L.P.
(formerly Morgan Stanley Charter Millburn L.P.) at December 31, 2006 and 2005,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2006 in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 1, in 2006 and 2005, the Partnerships modified their
classification of cash within the statements of cash flows.
We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the
Partnerships' internal control over financial reporting as of December 31,
2006, based on the criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 28, 2007 expressed an unqualified
opinion on management's assessment of the effectiveness of the Partnerships'
internal control over financial reporting and an unqualified opinion on the
effectiveness of the Partnerships' internal control over financial reporting.
/s/ Deloitte & Touche LLP
New York, New York
February 28, 2007
MORGAN STANLEY CHARTER CAMPBELL L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
------------------------
2006 2005
----------- -----------
$ $
ASSETS
Equity in futures interests trading accounts:
Unrestricted cash 355,636,882 360,451,084
Restricted cash 37,612,693 38,241,731
----------- -----------
Total Cash 393,249,575 398,692,815
----------- -----------
Net unrealized gain (loss) on open contracts (MS&Co.) 23,915,253 (13,123,062)
Net unrealized gain (loss) on open contracts (MSIL) (205,700) 172,596
----------- -----------
Total net unrealized gain (loss) on open contracts 23,709,553 (12,950,466)
----------- -----------
Net option premiums 125,257 --
----------- -----------
Total Trading Equity 417,084,385 385,742,349
Subscriptions receivable -- 13,754,739
Interest receivable (Morgan Stanley DW) 1,680,668 1,136,822
----------- -----------
Total Assets 418,765,053 400,633,910
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 8,950,399 4,715,179
Accrued brokerage fees (Morgan Stanley DW) 1,930,134 1,979,943
Accrued management fees 852,475 874,475
----------- -----------
Total Liabilities 11,733,008 7,569,597
----------- -----------
PARTNERS' CAPITAL
Limited Partners (30,763,739.696 and
30,609,700.729 Units, respectively) 402,578,194 388,854,021
General Partner (340,349.055 and
331,424.599 Units, respectively) 4,453,851 4,210,292
----------- -----------
Total Partners' Capital 407,032,045 393,064,313
----------- -----------
Total Liabilities and Partners' Capital 418,765,053 400,633,910
=========== ===========
NET ASSET VALUE PER UNIT 13.09 12.70
=========== ===========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2006 2005 2004
----------- ----------- -----------
$ $ $
INVESTMENT INCOME
Interest income (Morgan Stanley DW) 19,614,906 9,391,904 2,467,486
----------- ----------- -----------
EXPENSES
Brokerage fees (Morgan Stanley DW) 24,753,539 20,072,049 12,094,851
Management fees 10,932,810 8,702,588 5,128,216
Incentive fee -- -- 4,265,659
----------- ----------- -----------
Total Expenses 35,686,349 28,774,637 21,488,726
----------- ----------- -----------
NET INVESTMENT LOSS (16,071,443) (19,382,733) (19,021,240)
----------- ----------- -----------
TRADING RESULTS
Trading profit (loss):
Realized (11,170,042) 63,703,297 28,264,123
Net change in unrealized 36,660,019 (11,953,244) (6,209,755)
----------- ----------- -----------
Total Trading Results 25,489,977 51,750,053 22,054,368
----------- ----------- -----------
NET INCOME 9,418,534 32,367,320 3,033,128
=========== =========== ===========
NET INCOME ALLOCATION:
Limited Partners 9,310,154 32,018,766 3,001,427
General Partner 108,380 348,554 31,701
NET INCOME PER UNIT:
Limited Partners 0.39 1.12 0.44
General Partner 0.39 1.12 0.44
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER ASPECT L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
------------------------
2006 2005
----------- -----------
$ $
ASSETS
Equity in futures interests trading accounts:
Unrestricted cash 109,366,402 132,225,920
Restricted cash 13,269,522 9,763,163
----------- -----------
Total Cash 122,635,924 141,989,083
----------- -----------
Net unrealized gain on open contracts (MS&Co.) 5,039,041 2,962,664
Net unrealized gain (loss) on open contracts (MSIL) (240,275) 4,458,024
----------- -----------
Total net unrealized gain on open contracts 4,798,766 7,420,688
----------- -----------
Total Trading Equity 127,434,690 149,409,771
Subscriptions receivable 2,103,254 1,025,580
Interest receivable (Morgan Stanley DW) 484,328 486,775
----------- -----------
Total Assets 130,022,272 150,922,126
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 4,093,636 5,017,050
Incentive fee payable 1,017,989 --
Accrued brokerage fees (Morgan Stanley DW) 607,673 764,078
Accrued management fees 202,558 254,693
----------- -----------
Total Liabilities 5,921,856 6,035,821
----------- -----------
PARTNERS' CAPITAL
Limited Partners (7,064,097.616 and
9,108,599.482 Units, respectively) 122,749,550 143,289,197
General Partner (77,740.841 and
101,524.841 Units, respectively) 1,350,866 1,597,108
----------- -----------
Total Partners' Capital 124,100,416 144,886,305
----------- -----------
Total Liabilities and Partners' Capital 130,022,272 150,922,126
=========== ===========
NET ASSET VALUE PER UNIT 17.38 15.73
=========== ===========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
2006 2005 2004
---------- ----------- -----------
$ $ $
INVESTMENT INCOME
Interest income (Morgan Stanley DW) 6,351,353 5,375,673 2,427,231
---------- ----------- -----------
EXPENSES
Brokerage fees (Morgan Stanley DW) 6,530,451 11,086,249 12,088,626
Management fees 2,176,817 3,612,872 3,868,362
Incentive fee 1,017,989 -- --
---------- ----------- -----------
Total Expenses 9,725,257 14,699,121 15,956,988
---------- ----------- -----------
NET INVESTMENT LOSS (3,373,904) (9,323,448) (13,529,757)
---------- ----------- -----------
TRADING RESULTS
Trading profit (loss):
Realized 20,452,188 (29,379,015) (2,374,993)
Net change in unrealized (2,621,922) (5,603,030) 6,112,856
---------- ----------- -----------
17,830,266 (34,982,045) 3,737,863
Proceeds from Litigation Settlement -- 3,661 2,880
---------- ----------- -----------
Total Trading Results 17,830,266 (34,978,384) 3,740,743
---------- ----------- -----------
NET INCOME (LOSS) 14,456,362 (44,301,832) (9,789,014)
========== =========== ===========
NET INCOME (LOSS) ALLOCATION:
Limited Partners 14,299,103 (43,833,268) (9,674,111)
General Partner 157,259 (468,564) (114,903)
NET INCOME (LOSS) PER UNIT:
Limited Partners 1.65 (3.83) (1.16)
General Partner 1.65 (3.83) (1.16)
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
------------------------
2006 2005
----------- -----------
$ $
ASSETS
Equity in futures interests trading accounts:
Unrestricted cash 362,441,363 396,726,923
Restricted cash 54,560,197 29,685,072
----------- -----------
Total Cash 417,001,560 426,411,995
----------- -----------
Net unrealized gain (loss) on open contracts (MS&Co.) 12,852,858 (1,496,739)
Net unrealized gain (loss) on open contracts (MSIL) (314,794) 4,355,496
----------- -----------
Total net unrealized gain on open contracts 12,538,064 2,858,757
----------- -----------
Total Trading Equity 429,539,624 429,270,752
Subscriptions receivable 3,317,475 8,958,985
Interest receivable (Morgan Stanley DW) 1,824,393 1,331,130
----------- -----------
Total Assets 434,681,492 439,560,867
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 11,873,932 15,313,368
Accrued brokerage fees (Morgan Stanley DW) 2,123,827 2,194,515
Accrued management fees 707,942 731,505
----------- -----------
Total Liabilities 14,705,701 18,239,388
----------- -----------
PARTNERS' CAPITAL
Limited Partners (21,346,676.377 and
22,414,234.236 Units, respectively) 415,478,418 416,811,790
General Partner (231,068.501 and
242,510.501 Units, respectively) 4,497,373 4,509,689
----------- -----------
Total Partners' Capital 419,975,791 421,321,479
----------- -----------
Total Liabilities and Partners' Capital 434,681,492 439,560,867
=========== ===========
NET ASSET VALUE PER UNIT 19.46 18.60
=========== ===========
STATEMENTS OF OPERATION
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2006 2005 2004
----------- ----------- -----------
$ $ $
INVESTMENT INCOME
Interest income (Morgan Stanley DW) 19,833,324 12,691,490 4,414,059
----------- ----------- -----------
EXPENSES
Brokerage fees (Morgan Stanley DW) 25,529,062 26,821,717 22,233,723
Management fees 8,509,689 8,756,858 7,114,792
Incentive fee -- -- 5,135,381
----------- ----------- -----------
Total Expenses 34,038,751 35,578,575 34,483,896
----------- ----------- -----------
NET INVESTMENT LOSS (14,205,427) (22,887,085) (30,069,837)
----------- ----------- -----------
TRADING RESULTS
Trading profit (loss):
Realized 23,818,303 (57,942,853) 58,748,074
Net change in unrealized 9,679,307 2,618,843 (16,226,752)
----------- ----------- -----------
Total Trading Results 33,497,610 (55,324,010) 42,521,322
----------- ----------- -----------
NET INCOME (LOSS) 19,292,183 (78,211,095) 12,451,485
=========== =========== ===========
NET INCOME (LOSS) ALLOCATION:
Limited Partners 19,081,838 (77,357,066) 12,333,083
General Partner 210,345 (854,029) 118,402
NET INCOME (LOSS) PER UNIT:
Limited Partners 0.86 (3.56) 0.28
General Partner 0.86 (3.56) 0.28
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER WCM L.P.
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
----------------------
2006 2005
---------- ----------
$ $
ASSETS
Equity in futures interests trading accounts:
Unrestricted cash 35,032,684 40,758,493
Restricted cash 6,797,768 6,129,461
---------- ----------
Total Cash 41,830,452 46,887,954
---------- ----------
Net unrealized gain on open contracts (MS&Co.) 1,298,984 326,059
Net unrealized gain (loss) on open contracts (MSIL) (204,195) 59,761
---------- ----------
Total net unrealized gain on open contracts 1,094,789 385,820
---------- ----------
Total Trading Equity 42,925,241 47,273,774
Subscriptions receivable 3,743,732 268,850
Interest receivable (Morgan Stanley DW) 171,558 137,932
---------- ----------
Total Assets 46,840,531 47,680,556
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 2,204,674 1,234,240
Accrued brokerage fees (Morgan Stanley DW) 212,164 236,081
Accrued management fees 70,721 78,694
Accrued incentive fee payable 41,912 --
---------- ----------
Total Liabilities 2,529,471 1,549,015
---------- ----------
PARTNERS' CAPITAL
Limited Partners (4,294,874.399 and
4,363,058.843 Units, respectively) 43,835,717 45,625,125
General Partner (46,572.535 and
48,427.701 Units, respectively) 475,343 506,416
---------- ----------
Total Partners' Capital 44,311,060 46,131,541
---------- ----------
Total Liabilities and Partners' Capital 46,840,531 47,680,556
========== ==========
NET ASSET VALUE PER UNIT 10.21 10.46
========== ==========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
2006 2005 2004
--------- ---------- ----------
$ $ $
INVESTMENT INCOME
Interest income (Morgan Stanley DW) 2,148,805 1,376,905 727,529
--------- ---------- ----------
EXPENSES
Brokerage fees (Morgan Stanley DW) 2,296,027 3,215,858 3,804,604
Management fees 765,342 1,048,673 1,217,473
Incentive fee 41,912 -- --
--------- ---------- ----------
Total Expenses 3,103,281 4,264,531 5,022,077
--------- ---------- ----------
NET INVESTMENT LOSS (954,476) (2,887,626) (4,294,548)
--------- ---------- ----------
TRADING RESULTS
Trading profit (loss):
Realized (731,319) 4,735,942 913,379
Net change in unrealized 708,969 (2,911,685) (1,078,871)
--------- ---------- ----------
Total Trading Results (22,350) 1,824,257 (165,492)
--------- ---------- ----------
NET LOSS (976,826) (1,063,369) (4,460,040)
========= ========== ==========
NET LOSS ALLOCATION:
Limited Partners (966,683) (1,059,720) (4,419,596)
General Partner (10,143) (3,649) (40,444)
NET LOSS PER UNIT:
Limited Partners (0.25) (0.06) (0.59)
General Partner (0.25) (0.06) (0.59)
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER CAMPBELL L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ----------- --------- -----------
$ $ $
Partners' Capital,
December 31, 2003 9,989,868.793 110,098,161 1,230,037 111,328,198
Offering of Units 15,066,314.126 173,974,554 1,650,000 175,624,554
Net income -- 3,001,427 31,701 3,033,128
Redemptions (1,268,894.870) (14,485,166) -- (14,485,166)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2004 23,787,288.049 272,588,976 2,911,738 275,500,714
Offering of Units 12,577,705.709 150,307,643 950,000 151,257,643
Net income -- 32,018,766 348,554 32,367,320
Redemptions (5,423,868.430) (66,061,364) -- (66,061,364)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2005 30,941,125.328 388,854,021 4,210,292 393,064,313
Offering of Units 6,727,952.165 86,512,830 360,000 86,872,830
Net income -- 9,310,154 108,380 9,418,534
Redemptions (6,564,988.742) (82,098,811) (224,821) (82,323,632)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2006 31,104,088.751 402,578,194 4,453,851 407,032,045
============== =========== ========= ===========
MORGAN STANLEY CHARTER ASPECT L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ----------- --------- -----------
$ $ $
Partners' Capital,
December 31, 2003 8,374,102.250 171,628,106 1,846,434 173,474,540
Offering of Units 4,820,781.793 91,495,743 710,000 92,205,743
Net loss -- (9,674,111) (114,903) (9,789,014)
Redemptions (1,659,259.354) (30,209,585) -- (30,209,585)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2004 11,535,624.689 223,240,153 2,441,531 225,681,684
Offering of Units 1,372,452.207 22,743,972 -- 22,743,972
Net loss -- (43,833,268) (468,564) (44,301,832)
Redemptions (3,697,952.573) (58,861,660) (375,859) (59,237,519)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2005 9,210,124.323 143,289,197 1,597,108 144,886,305
Offering of Units 863,480.025 14,587,304 -- 14,587,304
Net income -- 14,299,103 157,259 14,456,362
Redemptions (2,931,765.891) (49,426,054) (403,501) (49,829,555)
-------------- ----------- --------- -----------
Partners' Capital,
December 31, 2006 7,141,838.457 122,749,550 1,350,866 124,100,416
============== =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ------------ --------- ------------
$ $ $
Partners' Capital,
December 31, 2003 12,370,561.267 267,851,230 2,858,562 270,709,792
Offering of Units 10,495,671.792 219,363,280 2,170,000 221,533,280
Net income -- 12,333,083 118,402 12,451,485
Redemptions (1,368,456.859) (28,256,679) -- (28,256,679)
-------------- ------------ --------- ------------
Partners' Capital,
December 31, 2004 21,497,776.200 471,290,914 5,146,964 476,437,878
Offering of Units 6,774,055.862 126,736,962 480,000 127,216,962
Net loss -- (77,357,066) (854,029) (78,211,095)
Redemptions (5,615,087.325) (103,859,020) (263,246) (104,122,266)
-------------- ------------ --------- ------------
Partners' Capital,
December 31, 2005 22,656,744.737 416,811,790 4,509,689 421,321,479
Offering of Units 4,357,310.697 84,188,382 -- 84,188,382
Net income -- 19,081,838 210,345 19,292,183
Redemptions (5,436,310.556) (104,603,592) (222,661) (104,826,253)
-------------- ------------ --------- ------------
Partners' Capital,
December 31, 2006 21,577,744.878 415,478,418 4,497,373 419,975,791
============== ============ ========= ============
MORGAN STANLEY CHARTER WCM L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005, AND 2004
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ----------- -------- -----------
$ $ $
Partners' Capital,
December 31, 2003 5,840,215.439 64,188,800 687,198 64,875,998
Offering of Units 2,031,792.936 21,322,002 60,000 21,382,002
Net loss -- (4,419,596) (40,444) (4,460,040)
Redemptions (2,111,461.350) (21,209,420) -- (21,209,420)
-------------- ----------- -------- -----------
Partners' Capital,
December 31, 2004 5,760,547.025 59,881,786 706,754 60,588,540
Offering of Units 589,614.840 5,806,303 -- 5,806,303
Net loss -- (1,059,720) (3,649) (1,063,369)
Redemptions (1,938,675.321) (19,003,244) (196,689) (19,199,933)
-------------- ----------- -------- -----------
Partners' Capital,
December 31, 2005 4,411,486.544 45,625,125 506,416 46,131,541
Offering of Units 1,273,546.608 13,270,384 50,000 13,320,384
Net loss -- (966,683) (10,143) (976,826)
Redemptions (1,343,586.218) (14,093,109) (70,930) (14,164,039)
-------------- ----------- -------- -----------
Partners' Capital,
December 31, 2006 4,341,446.934 43,835,717 475,343 44,311,060
============== =========== ======== ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER CAMPBELL L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2006 2005 2004
----------- ----------- -----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income 9,418,534 32,367,320 3,033,128
Noncash item included in net
income:
Net change in unrealized (36,660,019) 11,953,244 6,209,755
(Increase) decrease in operating
assets:
Restricted cash 629,038 (10,755,484) (18,927,514)
Net option premiums (125,257) -- --
Interest receivable
(Morgan Stanley DW) (543,846) (699,562) (366,414)
Increase (decrease) in operating
liabilities:
Accrued brokerage fees
(Morgan Stanley DW) (49,809) 607,474 864,031
Accrued management fees (22,000) 292,549 366,349
Accrued incentive fee -- -- (9,503)
----------- ----------- -----------
Net cash provided by (used for)
operating activities (27,353,359) 33,765,541 (8,830,168)
----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Cash received from offering of Units 100,627,569 151,835,689 171,067,686
Cash paid for redemptions of Units (78,088,412) (64,666,231) (11,991,071)
----------- ----------- -----------
Net cash provided by
financing activities 22,539,157 87,169,458 159,076,615
----------- ----------- -----------
Net increase (decrease) in
unrestricted cash (4,814,202) 120,934,999 150,246,447
Unrestricted cash at beginning of
period 360,451,084 239,516,085 89,269,638
----------- ----------- -----------
Unrestricted cash at end of period 355,636,882 360,451,084 239,516,085
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER ASPECT L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2006 2005 2004
----------- ----------- -----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) 14,456,362 (44,301,832) (9,789,014)
Noncash item included in net
income (loss):
Net change in unrealized 2,621,922 5,603,030 (6,112,856)
(Increase) decrease in operating
assets:
Restricted cash (3,506,359) 12,412,773 (5,457,466)
Interest receivable
(Morgan Stanley DW) 2,447 (142,089) (222,227)
Increase (decrease) in operating
liabilities:
Accrued incentive fee 1,017,989 -- --
Accrued brokerage fees
(Morgan Stanley DW) (156,405) (365,305) 288,773
Accrued management fees (52,135) (106,710) 92,407
----------- ----------- -----------
Net cash provided by (used for)
operating activities 14,383,821 (26,900,133) (21,200,383)
----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Cash received from offering of Units 13,509,630 26,817,698 95,673,242
Cash paid for redemptions of Units (50,752,969) (58,958,439) (28,296,818)
----------- ----------- -----------
Net cash provided by (used for)
financing activities (37,243,339) (32,140,741) 67,376,424
----------- ----------- -----------
Net increase (decrease) in
unrestricted cash (22,859,518) (59,040,874) 46,176,041
Unrestricted cash at beginning of
period 132,225,920 191,266,794 145,090,753
----------- ----------- -----------
Unrestricted cash at end of period 109,366,402 132,225,920 191,266,794
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
2006 2005 2004
------------ ----------- -----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) 19,292,183 (78,211,095) 12,451,485
Noncash item included in net
income (loss):
Net change in unrealized (9,679,307) (2,618,843) 16,226,752
(Increase) decrease in operating
assets:
Restricted cash (24,875,125) 58,163,783 (44,045,645)
Interest receivable
(Morgan Stanley DW) (493,263) (552,167) (582,869)
Increase (decrease) in operating
liabilities:
Accrued brokerage fees
(Morgan Stanley DW) (70,688) (141,612) 1,065,884
Accrued management fees (23,563) (16,055) 341,082
------------ ----------- -----------
Net cash used for operating activities (15,849,763) (23,375,989) (14,543,311)
------------ ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Cash received from offering of Units 89,829,892 133,523,099 220,274,157
Cash paid for redemptions of Units (108,265,689) (94,800,218) (25,636,027)
------------ ----------- -----------
Net cash provided by (used for)
financing activities (18,435,797) 38,722,881 194,638,130
------------ ----------- -----------
Net increase (decrease) in
unrestricted cash (34,285,560) 15,346,892 180,094,819
Unrestricted cash at beginning of
period 396,726,923 381,380,031 201,285,212
------------ ----------- -----------
Unrestricted cash at end of period 362,441,363 396,726,923 381,380,031
============ =========== ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER WCM L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2006 2005 2004
----------- ----------- -----------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss (976,826) (1,063,369) (4,460,040)
Noncash item included in net loss:
Net change in unrealized (708,969) 2,911,685 1,078,871
(Increase) decrease in operating
assets:
Restricted cash (668,307) (1,016,681) 1,879,904
Interest receivable
(Morgan Stanley DW) (33,626) (45,889) (46,444)
Increase (decrease) in operating
liabilities:
Accrued brokerage fees
(Morgan Stanley DW) (23,917) (79,350) (3,746)
Accrued management fees (7,973) (22,244) (1,199)
Accrued incentive fee 41,912 -- --
----------- ----------- -----------
Net cash provided by (used for)
operating activities (2,377,706) 684,152 (1,552,654)
----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Cash received from offering of Units 9,845,502 6,637,841 23,001,426
Cash paid for redemptions of Units (13,193,605) (19,655,621) (21,120,813)
----------- ----------- -----------
Net cash provided by (used for)
financing activities (3,348,103) (13,017,780) 1,880,613
----------- ----------- -----------
Net increase (decrease) in
unrestricted cash (5,725,809) (12,333,628) 327,959
Unrestricted cash at beginning of
period 40,758,493 53,092,121 52,764,162
----------- ----------- -----------
Unrestricted cash at end of period 35,032,684 40,758,493 53,092,121
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER CAMPBELL L.P.
SCHEDULES OF INVESTMENTS
DECEMBER 31, 2006 AND 2005
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS
- ------------------------------ --------------- ------------- ---------------- -------------
2006 PARTNERSHIP NET ASSETS: $407,032,045 $ % $ %
Commodity (3,998,724) (0.98) (154,300) (0.04)
Equity 4,657,094 1.14 -- --
Foreign currency (2,899,408) (0.71) 16,812,492 4.13
Interest rate (429,351) (0.11) 10,622,441 2.61
---------- ----- ---------- -----
Grand Total: (2,670,389) (0.66) 27,280,633 6.70
========== ===== ========== =====
Unrealized Currency Loss
Total Net Unrealized Gain per Statement of Financial Condition
2005 PARTNERSHIP NET ASSETS: $393,064,313
Commodity (3,105,740) (0.79) -- --
Equity (222,463) (0.06) (84,893) (0.02)
Foreign currency (6,119,861) (1.56) (4,804,870) (1.22)
Interest rate 106,175 0.03 2,415,862 0.61
---------- ----- ---------- -----
Grand Total: (9,341,889) (2.38) (2,473,901) (0.63)
========== ===== ========== =====
Unrealized Currency Loss
Total Net Unrealized Loss per Statement of Financial Condition
NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS)
- ------------------------------ --------------
2006 PARTNERSHIP NET ASSETS: $407,032,045 $
Commodity (4,153,024)
Equity 4,657,094
Foreign currency 13,913,084
Interest rate 10,193,090
-----------
Grand Total: 24,610,244
Unrealized Currency Loss (900,691)
-----------
Total Net Unrealized Gain per Statement of Financial Condition 23,709,553
===========
2005 PARTNERSHIP NET ASSETS: $393,064,313
Commodity (3,105,740)
Equity (307,356)
Foreign currency (10,924,731)
Interest rate 2,522,037
-----------
Grand Total: (11,815,790)
Unrealized Currency Loss (1,134,676)
-----------
Total Net Unrealized Loss per Statement of Financial Condition (12,950,466)
===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER ASPECT L.P.
SCHEDULES OF INVESTMENTS
DECEMBER 31, 2006 AND 2005
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS
- ------------------------------ --------------- ------------- ---------------- -------------
2006 PARTNERSHIP NET ASSETS: $124,100,416 $ % $ %
Commodity (387,481) (0.31) 1,895,345 1.53
Equity 695,962 0.56 -- --
Foreign currency 1,204,942 0.97 597,818 0.48
Interest rate (137,111) (0.11) 922,709 0.74
--------- ----- --------- -----
Grand Total: 1,376,312 1.11 3,415,872 2.75
========= ===== ========= =====
Unrealized Currency Gain
Total Net Unrealized Gain per Statement of Financial Condition
2005 PARTNERSHIP NET ASSETS: $144,886,305
Commodity 4,260,768 2.94 (292,043) (0.20)
Equity 1,100,792 0.76 -- --
Foreign currency 2,914,320 2.01 332,578 0.23
Interest rate (147,334) (0.10) (7,256) (0.01)
--------- ----- --------- -----
Grand Total: 8,128,546 5.61 33,279 0.02
========= ===== ========= =====
Unrealized Currency Loss
Total Net Unrealized Gain per Statement of Financial Condition
NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS)
- ------------------------------ --------------
2006 PARTNERSHIP NET ASSETS: $124,100,416 $
Commodity 1,507,864
Equity 695,962
Foreign currency 1,802,760
Interest rate 785,598
---------
Grand Total: 4,792,184
Unrealized Currency Gain 6,582
---------
Total Net Unrealized Gain per Statement of Financial Condition 4,798,766
=========
2005 PARTNERSHIP NET ASSETS: $144,886,305
Commodity 3,968,725
Equity 1,100,792
Foreign currency 3,246,898
Interest rate (154,590)
---------
Grand Total: 8,161,825
Unrealized Currency Loss (741,137)
---------
Total Net Unrealized Gain per Statement of Financial Condition 7,420,688
=========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER GRAHAM L.P.
SCHEDULES OF INVESTMENTS
DECEMBER 31, 2006 AND 2005
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS
- ------------------------------ --------------- ------------- ---------------- -------------
2006 PARTNERSHIP NET ASSETS: $419,975,791 $ % $ %
Commodity 79,650 0.02 680,903 0.16
Equity 3,642,736 0.87 -- --
Foreign currency 5,610,658 1.34 642,240 0.15
Interest rate (3,101,026) (0.75) 4,738,934 1.13
---------- ----- ---------- -----
Grand Total: 6,232,018 1.48 6,062,077 1.44
========== ===== ========== =====
Unrealized Currency Gain
Total Net Unrealized Gain per Statement of Financial Condition
2005 PARTNERSHIP NET ASSETS: $421,321,479
Commodity 5,608,515 1.33 (1,541,659) (0.37)
Equity 1,298,208 0.31 63,750 0.02
Foreign currency (1,529,914) (0.36) 3,258,728 0.77
Interest rate 292,861 0.07 (715,950) (0.17)
---------- ----- ---------- -----
Grand Total: 5,669,670 1.35 1,064,869 0.25
========== ===== ========== =====
Unrealized Currency Loss
Total Net Unrealized Gain per Statement of Financial Condition
NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS)
- ------------------------------ --------------
2006 PARTNERSHIP NET ASSETS: $419,975,791 $
Commodity 760,553
Equity 3,642,736
Foreign currency 6,252,898
Interest rate 1,637,908
----------
Grand Total: 12,294,095
Unrealized Currency Gain 243,969
----------
Total Net Unrealized Gain per Statement of Financial Condition 12,538,064
==========
2005 PARTNERSHIP NET ASSETS: $421,321,479
Commodity 4,066,856
Equity 1,361,958
Foreign currency 1,728,814
Interest rate (423,089)
----------
Grand Total: 6,734,539
Unrealized Currency Loss (3,875,782)
----------
Total Net Unrealized Gain per Statement of Financial Condition 2,858,757
==========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER WCM L.P.
SCHEDULES OF INVESTMENTS
DECEMBER 31, 2006 AND 2005
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS
- ------------------------------ --------------- ------------- ---------------- -------------
2006 PARTNERSHIP NET ASSETS: $44,311,060 $ % $ %
Commodity (296,275) (0.67) 410,666 0.93
Equity 737,505 1.66 -- --
Foreign currency 65,403 0.15 531,873 1.20
Interest rate (583,619) (1.31) 227,255 0.51
---------- ----- --------- -----
Grand Total: (76,986) (0.17) 1,169,794 2.64
========== ===== ========= =====
Unrealized Currency Gain
Total Net Unrealized Gain per Statement of Financial Condition
2005 PARTNERSHIP NET ASSETS: $46,131,541
Commodity 971,789 2.11 (217,221) (0.47)
Equity 272,504 0.59 -- --
Foreign currency (1,330,719) (2.88) (267,908) (0.58)
Interest rate 102,950 0.22 202,282 0.44
---------- ----- --------- -----
Grand Total: 16,524 0.04 (282,847) (0.61)
========== ===== ========= =====
Unrealized Currency Gain
Total Net Unrealized Gain per Statement of Financial Condition
NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS)
- ------------------------------ --------------
2006 PARTNERSHIP NET ASSETS: $44,311,060 $
Commodity 114,391
Equity 737,505
Foreign currency 597,276
Interest rate (356,364)
----------
Grand Total: 1,092,808
Unrealized Currency Gain 1,981
----------
Total Net Unrealized Gain per Statement of Financial Condition 1,094,789
==========
2005 PARTNERSHIP NET ASSETS: $46,131,541
Commodity 754,568
Equity 272,504
Foreign currency (1,598,627)
Interest rate 305,232
----------
Grand Total: (266,323)
Unrealized Currency Gain 652,143
----------
Total Net Unrealized Gain per Statement of Financial Condition 385,820
==========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. Morgan Stanley Charter Campbell L.P. ("Charter Campbell"),
Morgan Stanley Charter Aspect L.P. ("Charter Aspect") (formerly Morgan Stanley
Charter MSFCM L.P.), Morgan Stanley Charter Graham L.P. ("Charter Graham"), and
Morgan Stanley Charter WCM L.P. ("Charter WCM") (formerly Morgan Stanley
Charter Millburn L.P.) (individually, a "Partnership", or collectively, the
"Partnerships") are limited partnerships organized to engage primarily in the
speculative trading of futures contracts, options on futures and forward
contracts, and forward contracts on physical commodities and other commodity
interests, including, but not limited to, foreign currencies, financial
instruments, metals, energy, and agricultural products (collectively, "Futures
Interests").
The general partner of each Partnership is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Morgan Stanley DW Inc.
("Morgan Stanley DW"). The clearing commodity brokers are Morgan Stanley & Co.
Incorporated ("MS&Co.") and Morgan Stanley & Co. International Limited
("MSIL"). MS&Co. acts as the counterparty on all of the foreign currency
forward contracts for each Partnership. In 2007, Morgan Stanley intends to
merge Morgan Stanley DW into MS&Co. Upon completion of the merger, the
surviving entity, MS&Co., will be the Partnerships' principal U.S. commodity
broker-dealer. Effective January 2006, for Charter Campbell, Morgan Stanley
Capital Group Inc. ("MSCG") acts as the counterparty on all of the options on
foreign currency forward contracts.
Prior to September 15, 2006, the trading advisor for Charter MSFCM L.P. was
VK Capital Inc. ("VK Capital"). Demeter, Morgan Stanley DW, MS&Co., MSIL, MSCG,
and VK Capital are wholly-owned subsidiaries of Morgan Stanley.
Effective September 15, 2006, Demeter terminated the management agreement
between Charter MSFCM and VK Capital. Consequently, VK Capital has ceased all
futures interests trading on behalf of Charter MSFCM as of September 15, 2006.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
Also, effective September 30, 2006, Demeter terminated the management
agreement between Charter Millburn and Millburn Ridgefield Corporation
("Millburn"). Consequently, Millburn ceased all futures interests trading on
behalf of Charter Millburn as of September 30, 2006.
Effective October 16, 2006, Demeter entered into a management agreement with
Aspect Capital Limited ("Aspect") to serve as the sole trading advisor to
Charter Aspect effective December 1, 2006.
Effective October 13, 2006, Demeter entered into a management agreement with
Winton Capital Management Limited ("Winton") to serve as the sole trading
advisor to Charter WCM effective December 1, 2006.
For the period from September 15, 2006 to December 1, 2006 for Charter Aspect
and the period from September 30, 2006 to December 1, 2006 for Charter WCM, all
of Charter Aspect's assets and Charter WCM's assets were paid interest at the
rate specified in the then-current Charter Series prospectus, with a limited
partner's share of interest credited to its Units. No management, brokerage, or
incentive fees were charged during this interim period, given the absence of
futures interests trading by Charter Aspect and Charter WCM.
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by Demeter and the limited partners
based on their proportional ownership interests.
USE OF ESTIMATES. The financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make estimates and assumptions that affect the reported
amounts in the financial statements and related disclosures. Management
believes that the estimates utilized in the preparation of the financial
statements are prudent and reasonable. Actual results could differ from those
estimates.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
REVENUE RECOGNITION. Futures Interests are open commitments until settlement
date, at which time they are realized. They are valued at market on a daily
basis and the resulting net change in unrealized gains and losses is reflected
in the change in unrealized trading profit (loss) on open contracts from one
period to the next on the Statements of Operations. Monthly, Morgan Stanley DW
credits each Partnership with interest income on 100% of its average daily
funds held at Morgan Stanley DW. In addition, Morgan Stanley DW credits each
Partnership with 100% of the interest income Morgan Stanley DW receives from
MS&Co. and MSIL with respect to such Partnership's assets deposited as margin.
The interest rates used are equal to that earned by Morgan Stanley DW on its
U.S. Treasury bill investments. For purposes of such interest payments, Net
Assets do not include monies owed to the Partnerships on forward contracts and
other Futures Interests.
The Partnerships' functional currency is the U.S. dollar; however, they
transact business in currencies other than the U.S. dollar. Assets and
liabilities denominated in currencies other than the U.S. dollar are translated
into U.S. dollars at the rates in effect at the date of the Statements of
Financial Condition. Income and expense items denominated in currencies other
than the U.S. dollar are translated into U.S. dollars at the rates in effect
during the period. Gains and losses resulting from the translation to U.S.
dollars are reported in income currently.
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.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
NEW ACCOUNTING DEVELOPMENTS. In July 2006, the Financial Accounting Standards
Board ("FASB") issued Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes--an interpretation of FASB Statement 109" ("FIN 48"). FIN 48
clarifies the accounting for income taxes by prescribing the minimum
recognition threshold a tax position must meet before being recognized in the
financial statements. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The impact to the Partnerships' Financial Statements, if
any, is currently being assessed.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.
SFAS No. 157 is effective for the Partnerships as of January 1, 2008. The
impact to the Partnerships' Financial Statements, if any, is currently being
assessed.
In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" ("SAB No. 108") to provide guidance on how the effects of the
carryover or reversal of prior year unrecorded misstatements should be
considered in quantifying a current year misstatement. SAB No. 108 requires a
company to apply an approach that considers the amount by which the current
year income statement is misstated ("rollover approach") and an approach that
considers the cumulative amount by which the current year balance sheet is
misstated ("iron-curtain approach"). Prior to the issuance of SAB No. 108, many
companies applied either the rollover or iron-curtain approach for purposes of
assessing materiality of misstatements. SAB No. 108 is effective for the
Partnerships as of January 1, 2007. Upon adoption, SAB No. 108 allows a
one-time cumulative effect adjustment against Partners' Capital for those prior
year misstatements that were not material under the Partnership's prior
approach, but that are deemed material under the SAB No. 108 approach. Demeter
does not expect the adoption of SAB No. 108 to have a material impact on the
Partnerships' Financial Statements.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
EQUITY IN FUTURES INTERESTS TRADING ACCOUNTS. The Partnerships' asset "Equity
in futures interests trading accounts", reflected on the Statements of
Financial Condition, consists of (A) cash on deposit with Morgan Stanley DW,
MS&Co., and MSIL to be used as margin for trading (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; and (C) net option
premiums, which represent the net of all monies paid and/or received for such
option premiums.
The Partnerships, in their normal course of business, enter into various
contracts with MS&Co. and MSIL acting as their commodity brokers. Pursuant to
brokerage agreements with MS&Co. and MSIL, to the extent that such trading
results in unrealized gains or losses, these amounts are offset and reported on
a net basis on the Partnerships' Statements of Financial Condition.
The Partnerships have offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under the terms of
their master netting agreements with MS&Co., the sole counterparty on such
contracts. The Partnerships have consistently applied their right to offset.
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS. Each Partnership currently
pays a flat-rate monthly brokerage fee of 1/12 of 6.00% of the Partnership's
Net Assets as of the first day of each month (a 6.00% annual rate). Such fees
currently cover all brokerage fees, transaction fees and costs, and ordinary
administrative and offering expenses.
Subsequent to September 15, 2006 for Charter Aspect and subsequent to
September 30, 2006 for Charter WCM, no brokerage fees were paid until December
1, 2006, given the absence of futures interests trading.
From August 1, 2002 to June 30, 2005, each Partnership paid a flat-rate
monthly brokerage fee of 1/12 of 6.25% of the Partnership's Net Assets as of
the first day of each month (a 6.25% annual rate).
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
OPERATING EXPENSES. The Partnerships incur monthly management fees and may
incur an incentive fee. All common administrative and continuing offering
expenses including legal, auditing, accounting, filing fees, and other related
expenses are borne by Morgan Stanley DW through the brokerage fees paid by the
Partnerships.
CONTINUING OFFERING. Units of each Partnership except Charter Campbell are
offered at a price equal to 100% of the Net Asset Value per Unit at monthly
closings held as of the last day of each month. Effective September 30, 2006,
Subscriptions for Units of Charter Aspect and Charter WCM were not accepted
until November 30, 2006 month-end closing when Aspect and Winton commenced
trading. No selling commissions or charges related to the continuing offering
of Units are paid by the limited partners or the Partnerships. Morgan Stanley
DW pays all such costs.
Effective May 1, 2006, Charter Campbell no longer accepts any subscriptions
for Units in the Partnership.
REDEMPTIONS. Limited partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the end of the last day of any month that is
at least six months after the closing at which a person first becomes a limited
partner. The Request for Redemption must be delivered to a limited partner's
local Morgan Stanley Branch Office in time for it to be forwarded and received
by Demeter no later than 3:00 p.m., New York City time, on the last day of the
month in which the redemption is to be effective. Redemptions must be made in
whole Units, with a minimum of 100 Units required for each redemption, unless a
limited partner is redeeming his entire interest in a particular Partnership.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
Units redeemed on or prior to the last day of the twelfth month from the date
of purchase will be subject to a redemption charge equal to 2% of the Net Asset
Value of a Unit on the Redemption Date. Units redeemed after the last day of
the twelfth month and on or prior to the last day of the twenty-fourth month
from the date of purchase will be subject to a redemption charge equal to 1% of
the Net Asset Value of a Unit on the Redemption Date. Units redeemed after the
last day of the twenty-fourth month from the date of purchase will not be
subject to a redemption charge. The foregoing redemption charges are paid to
Morgan Stanley DW.
EXCHANGES. On the last day of the first month which occurs more than six
months after a person first becomes a limited partner in each Partnership, and
at the end of each month thereafter, limited partners may exchange their Units
among Charter Aspect, Charter Graham, and Charter WCM (subject to certain
restrictions outlined in the Limited Partnership Agreements) without paying
additional charges.
Effective September 30, 2006, Charter Aspect and Charter WCM did not accept
any exchanges of Units from any other Charter Series of Funds until the
November 30, 2006 month-end closing when Aspect and Winton commenced trading.
Effective May 1, 2006, Charter Campbell no longer accepts any exchanges of
Units from any other Charter Series Fund for Units of Charter Campbell.
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. Demeter does not intend to make any distributions of the
Partnerships' profits.
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 each Partnership's revenues
and expenses for income tax purposes.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
DISSOLUTION OF THE PARTNERSHIPS. Charter Aspect will terminate on December 31,
2025 and Charter Campbell, Charter Graham, and Charter WCM will terminate on
December 31, 2035 or at an earlier date if certain conditions occur as defined
in each Partnership's Limited Partnership Agreement.
LITIGATION SETTLEMENT. Charter Aspect received notification of a preliminary
entitlement to payment from the Sumitomo Copper Litigation Settlement
Administrator, and Charter Aspect received settlement award payments in the
amount of $2,880 during July 2004 and $3,661 during November 2005. Any amounts
received are accounted for in the period received, for the benefit of the
limited partners at the date of receipt.
RECLASSIFICATIONS. Certain prior year amounts relating to cash balances were
reclassified on the Statements of Cash Flows to conform to 2006 and 2005
presentation. Such reclassifications have no impact on the Partnerships'
reported net income (loss).
- --------------------------------------------------------------------------------
2. RELATED PARTY TRANSACTIONS
Each Partnership pays brokerage fees to Morgan Stanley DW as described in Note
1. Each Partnership's cash is on deposit with Morgan Stanley DW, MS&Co., and
MSIL in futures interests trading accounts to meet margin requirements as
needed. Morgan Stanley DW pays interest on these funds as described in Note 1.
- --------------------------------------------------------------------------------
3. TRADING ADVISORS
Demeter, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership at December 31, 2006 were as follows:
Morgan Stanley Charter Campbell L.P.
Campbell & Company, Inc.
Morgan Stanley Charter Aspect L.P.
Aspect Capital Limited,
effective December 1, 2006
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
Morgan Stanley Charter Graham L.P.
Graham Capital Management, L.P.
Morgan Stanley Charter WCM L.P.
Winton Capital Management Limited,
effective December 1, 2006
Compensation to the trading advisors by the Partnerships consists of a
management fee and an incentive fee as follows:
MANAGEMENT FEE. Charter Aspect, Charter Graham, and Charter WCM each pay its
trading advisor a flat-rate monthly fee equal to 1/12 of 2% (a 2% annual rate)
of the Partnership's Net Assets under management by each trading advisor as of
the first day of each month.
Effective as of September 15, 2006 for Charter Aspect and September 30, 2006
for Charter WCM, no management fees were paid until December 1, 2006 when
Aspect and Winton commenced trading.
Charter Campbell pays its trading advisor a flat-rate monthly fee equal to
1/12 of 2.65% (a 2.65% annual rate) of the Partnership's Net Assets under
management as of the first day of each month.
INCENTIVE FEE. Each Partnership's incentive fee is equal to 20% of trading
profits paid on a monthly basis.
Effective as of September 15, 2006 for Charter Aspect and September 30, 2006
for Charter WCM, no incentive fees were paid until December 1, 2006 when Aspect
and Winton commenced trading.
Trading profits represent the amount by which profits from futures, forwards,
and options trading exceed losses after brokerage and management fees are
deducted. When a trading advisor experiences losses with respect to Net Assets
as of the end of a calendar month, the trading advisor must recover such losses
before that trading advisor is eligible for an incentive fee in the future.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
Charter Aspect and Charter WCM will pay incentive fees to Aspect and Winton,
respectively, based upon the performance of each trading advisor beginning
December 1, 2006 without regard to any losses incurred by the prior trading
advisor(s).
- --------------------------------------------------------------------------------
4. FINANCIAL INSTRUMENTS
The Partnerships trade Futures Interests. 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 exchange-traded contracts is based on the settlement
price quoted by the exchange on the day with respect to which market value is
being determined. If an exchange-traded contract could not have been liquidated
on such day due to the operation of daily limits or other rules of the
exchange, the settlement price shall be the settlement price on the first
subsequent day on which the contract could be liquidated. The market value of
off-exchange-traded contracts is based on the fair market value quoted by the
counterparty.
The Partnerships' contracts are accounted for on a trade-date basis and
marked to market on a daily basis. Each Partnership accounts for its derivative
investments in accordance with the provisions of Statement of Financial
Accounting Standards 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;
(2)Requires no initial net investment or smaller initial net investment than
would be required relative to changes in market factors;
(3)Terms require or permit net settlement.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
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 at December 31, 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:
CHARTER CAMPBELL
NET UNREALIZED GAINS/
(LOSSES) ON OPEN CONTRACTS LONGEST MATURITIES
------------------------------------ -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- ---------- ----------- ----------- --------- ---------
$ $ $
2006 9,796,471 13,913,082 23,709,553 Sep. 2007 Mar. 2007
2005 (2,025,735) (10,924,731) (12,950,466) Sep. 2006 Mar. 2006
CHARTER ASPECT
NET UNREALIZED GAINS
ON OPEN CONTRACTS LONGEST MATURITIES
----------------------------- -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- --------- ---------
$ $ $
2006 2,996,006 1,802,760 4,798,766 Mar. 2008 Jan. 2007
2005 4,575,616 2,845,072 7,420,688 Sep. 2006 Mar. 2006
CHARTER GRAHAM
NET UNREALIZED GAINS
ON OPEN CONTRACTS LONGEST MATURITIES
------------------------------ -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- ---------- --------- ---------
$ $ $
2006 5,466,119 7,071,945 12,538,064 Jun. 2008 Mar. 2007
2005 786,903 2,071,854 2,858,757 Jun. 2007 Mar. 2006
CHARTER WCM
NET UNREALIZED GAINS/
(LOSSES) ON OPEN CONTRACTS LONGEST MATURITIES
------------------------------- -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- ---------- --------- --------- ---------
$ $ $
2006 1,094,789 -- 1,094,789 Jun. 2008 --
2005 1,984,446 (1,598,626) 385,820 Oct. 2006 Mar. 2006
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
The Partnerships have credit risk associated with counterparty
nonperformance. As of the date of the financial statements, the credit risk
associated with the instruments in which the Partnerships trade is limited to
the amounts reflected in the Partnerships' Statements of Financial Condition.
The Partnerships also have credit risk because Morgan Stanley DW, MS&Co.,
MSIL, and/or MSCG act as the futures commission merchants or the
counterparties, with respect to most of the Partnerships' assets.
Exchange-traded futures, exchange-traded forward, and exchange-traded
futures-styled options contracts are marked to market on a daily basis, with
variations in value settled on a daily basis. Morgan Stanley DW, MS&Co., and
MSIL, each as a futures commission merchant for each Partnership's
exchange-traded futures, exchange-traded forward, and exchange-traded
futures-styled options contracts, are required, pursuant to regulations 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, exchange-traded forward, and
exchange-traded futures-styled options contracts, including an amount equal to
the net unrealized gains (losses) on all open exchange-traded futures,
exchange-traded forward, and exchange-traded futures-styled options contracts,
which funds, in the aggregate, totaled $403,046,046 and $396,667,080 for
Charter Campbell, $125,631,930 and $146,564,699 for Charter Aspect,
$422,467,679 and $427,198,898 for Charter Graham, and $42,925,241 and
$48,872,400 for Charter WCM at December 31, 2006 and 2005, respectively. With
respect to each Partnership's off-exchange-traded forward currency contracts
and forward currency options contracts, there are no daily settlements of
variation in value, nor is there any requirement that an amount equal to the
net unrealized gains (losses) on such contracts be segregated. However, each
Partnership is required to meet margin requirements equal to the net unrealized
loss on open forward currency contracts in the Partnership accounts with the
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
counterparty, which is accomplished by daily maintenance of the cash balance in
a custody account held at Morgan Stanley DW for the benefit of MS&Co. With
respect to those off-exchange-traded forward currency contracts, the
Partnerships are at risk to the ability of MS&Co., the sole counterparty on all
such contracts, to perform. With respect to those off-exchange-traded forward
currency options contracts, the Partnerships are at risk to the ability of
MSCG, the sole counterparty on all such contracts, to perform. Each Partnership
has a netting agreement with the counterparties. These agreements, which seek
to reduce both the Partnerships' and the counterparties' exposure on off-
exchange-traded forward currency contracts, should materially decrease the
Partnerships' credit risk in the event of MS&Co.'s or MSCG's bankruptcy or
insolvency.
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(continued)
- --------------------------------------------------------------------------------
5. FINANCIAL HIGHLIGHTS
CHARTER CAMPBELL
2006 2005 2004
------- ------- -------
PER UNIT OPERATING
PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 12.70 $ 11.58 $ 11.14
------- ------- -------
NET OPERATING RESULTS:
Interest Income 0.60 0.34 0.14
Expenses (1.09) (1.04) (1.24)
Realized Profit (Loss) (0.24) 2.25 1.90
Unrealized Profit (Loss) 1.12 (0.43) (0.36)
------- ------- -------
Net Income 0.39 1.12 0.44
------- ------- -------
NET ASSET VALUE,
DECEMBER 31: $ 13.09 $ 12.70 $ 11.58
======= ======= =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET
ASSETS:
Net Investment Loss (3.9)% (5.7)% (9.2)%
Expenses before Incentive Fees 8.6 % 8.5 % 8.3 %
Expenses after Incentive Fees 8.6 % 8.5 % 10.4 %
Net Income 2.3 % 9.6 % 1.5 %
TOTAL RETURN BEFORE
INCENTIVE FEES 3.1 % 9.7 % 6.2 %
TOTAL RETURN AFTER
INCENTIVE FEES 3.1 % 9.7 % 3.9 %
INCEPTION-TO-DATE RETURN 30.9 %
COMPOUND ANNUALIZED
RETURN 6.5 %
CHARTER ASPECT
2006 2005 2004
------- -------- -------
PER UNIT OPERATING
PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 15.73 $ 19.56 $ 20.72
------- -------- -------
NET OPERATING RESULTS:
Interest Income 0.79 0.50 0.23
Expenses (1.21) (1.36) (1.52)
........Realized Profit (Loss).. 2.40 (2.45) (0.45)
Unrealized Profit (Loss) (0.33) (0.52) 0.58
Proceeds from Litigation
Settlement -- 0.00 0.00
------- -------- -------
Net Income (Loss) 1.65 (3.83) (1.16)
------- -------- -------
NET ASSET VALUE,
DECEMBER 31: $ 17.38 $ 15.73 $ 19.56
======= ======== =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET
ASSETS:
Net Investment Loss (2.5)% (5.4)% (6.8)%
Expenses before Incentive Fees 6.5 % 8.5 % 8.1 %
Expenses after Incentive Fees 7.3 % 8.5 % 8.1 %
Net Income (Loss) 10.9 % (25.5)% (4.9)%
TOTAL RETURN BEFORE
INCENTIVE FEES 11.3 % (19.6)% (5.6)%
TOTAL RETURN AFTER
INCENTIVE FEES 10.5 % (19.6)% (5.6)%
INCEPTION-TO-DATE RETURN 73.8 %
COMPOUND ANNUALIZED
RETURN 4.4 %
MORGAN STANLEY CHARTER SERIES
NOTES TO FINANCIAL STATEMENTS
(concluded)
CHARTER GRAHAM
2006 2005 2004
------- -------- -------
PER UNIT OPERATING
PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 18.60 $ 22.16 $ 21.88
------- -------- -------
NET OPERATING RESULTS:
Interest Income 0.90 0.55 0.25
Expenses (1.54) (1.54) (1.96)
Realized Profit (Loss) 1.06 (2.68) 2.91
Unrealized Profit (Loss) 0.44 0.11 (0.92)
------- -------- -------
Net Income (Loss) 0.86 (3.56) 0.28
------- -------- -------
NET ASSET VALUE,
DECEMBER 31: $ 19.46 $ 18.60 $ 22.16
======= ======== =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET
ASSETS:
Net Investment Loss (3.3)% (5.3)% (8.1)%
Expenses before Incentive Fees 8.0 % 8.2 % 7.9 %
Expenses after Incentive Fees 8.0 % 8.2 % 9.2 %
Net Income (Loss) 4.5 % (18.1)% 3.3 %
TOTAL RETURN BEFORE
INCENTIVE FEES 4.6 % (16.1)% 2.6 %
TOTAL RETURN AFTER
INCENTIVE FEES 4.6 % (16.1)% 1.3 %
INCEPTION-TO-DATE RETURN 94.6 %
COMPOUND ANNUALIZED
RETURN 8.9 %
CHARTER WCM
2006 2005 2004
------- ------- -------
PER UNIT OPERATING
PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 10.46 $ 10.52 $ 11.11
------- ------- -------
NET OPERATING RESULTS:
Interest Income 0.51 0.26 0.12
Expenses (0.73) (0.81) (0.84)
Realized Profit (Loss) (0.20) 1.04 0.31
Unrealized Profit (Loss) 0.17 (0.55) (0.18)
------- ------- -------
Net Loss (0.25) (0.06) (0.59)
------- ------- -------
NET ASSET VALUE,
DECEMBER 31:...................... $ 10.21 $ 10.46 $(10.52)
======= ======= =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET
ASSETS:
Net Investment Loss (2.1)% (5.6)% (7.1)%
Expenses before Incentive Fees 6.8 % 8.3 % 8.3 %
Expenses after Incentive Fees 6.9 % 8.3 % 8.3 %
Net Loss (2.2)% (2.1)% (7.4)%
TOTAL RETURN BEFORE
INCENTIVE FEES (2.3)% (0.6)% (5.3)%
TOTAL RETURN AFTER
INCENTIVE FEES (2.4)% (0.6)% (5.3)%
INCEPTION-TO-DATE RETURN 2.1 %
COMPOUND ANNUALIZED
RETURN 0.3 %
PRESORTED
STANDARD
U.S. POSTAGE
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LANCASTER, PA
Demeter Management Corporation
330 Madison Avenue, 8th Floor
New York, NY 10017
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EXHIBIT 31.01
CERTIFICATIONS
I, Walter Davis, President of Demeter Management Corporation
(?Demeter?), the general partner of the registrant, Morgan Stanley
Charter Graham L.P., certify that:
1. I have reviewed this annual report on Form 10-K/A of the
registrant;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant?s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared;
b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
c)Evaluated the effectiveness of the registrant?s disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) Discovered in this report any change in the registrant?s
internal control over financial reporting that occurred
during the registrant?s most recent fiscal quarter (the
registrant?s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrant?s internal
control over financial reporting; and
5. The registrant?s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant?s auditors and the audit
committee of Demeter?s board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect
the registrant?s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant?s internal control over financial reporting.
Date: March 23, 2007 /s/ Walter Davis
Walter Davis
President,
Demeter Management Corporation,
general partner of the registrant
EXHIBIT 31.02
CERTIFICATIONS
I, Lee Horwitz, Chief Financial Officer of Demeter Management
Corporation (?Demeter?), the general partner of the registrant,
Morgan Stanley Charter Graham L.P., certify that:
1. I have reviewed this annual report on Form 10-K/A of the
registrant;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant?s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-
15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this
report is being prepared;
b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant?s disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
b) Disclosed in this report any change in the registrant?s
internal control over financial reporting that occurred
during the registrant?s most recent fiscal quarter (the
registrant?s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably
likely to materially affect, the registrant?s internal
control over financial reporting; and
5. The registrant?s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant?s auditors and the audit
committee of Demeter?s board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect
the registrant?s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant?s internal control over financial reporting.
Date: March 23, 2007 /s/Lee Horwitz
Lee Horwitz
Chief Financial Officer,
Demeter Management Corporation,
general partner of the registrant
EXHIBIT 32.01
CERTIFICATION OF PRESIDENT 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 Annual Report of Morgan Stanley Charter
Graham L.P. (the ?Partnership?) on Form 10-K/A for the period
ended December 31, 2006, as filed with the Securities and Exchange
Commission on the date hereof (the ?Report?), I, Walter Davis,
President of Demeter Management Corporation, the 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, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section
13(a) 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/ Walter Davis
Name: Walter Davis
Title: President
Date: March 23, 2007
EXHIBIT 32.02
CERTIFICATION OF CHIEF FINANCIAL OFFICER 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 Annual Report of Morgan Stanley Charter
Graham L.P. (the ?Partnership?) on Form 10-K/A for the period
ended December 31, 2006, as filed with the Securities and Exchange
Commission on the date hereof (the ?Report?), I, Lee Horwitz,
Chief Financial Officer of Demeter Management Corporation, the
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, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section
13(a) 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/ Lee Horwitz
Name: Lee Horwitz
Title: Chief Financial Officer
Date: March 23, 2007
- - 1 -