UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to__________________
Commission File Number 0-25603
MORGAN STANLEY CHARTER GRAHAM L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-4018068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Demeter Management Corporation
522 Fifth Avenue, 13th Floor
New York, NY 10036
(Address of principal executive offices) (Zip Code)
Registrant?s telephone number, including area code (212) 296-1999
(Former name, former address, and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No___________
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of ?large accelerated filer?,
?accelerated filer? and ?smaller reporting company? in Rule 12b-2 of the
Exchange Act.
Large accelerated filer_______ Accelerated filer_______
Non-accelerated filer X Smaller reporting company_______
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes___ No X
<page> <table> MORGAN STANLEY CHARTER GRAHAM L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2008
<caption>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<s> <c>
Statements of Financial Condition as of March 31, 2008
(Unaudited) and December 31, 2007...........................2
Statements of Operations for the Quarters
Ended March 31, 2008 and 2007 (Unaudited)...................3
Statements of Changes in Partners? Capital for the
Quarters Ended March 31, 2008 and 2007 (Unaudited)..........4
Statements of Cash Flows for the Quarters Ended
March 31, 2008 and 2007 (Unaudited).........................5
Condensed Schedules of Investments as of March 31, 2008
(Unaudited) and December 31, 2007 6
Notes to Financial Statements (Unaudited)................7-15
Item 2. Management?s Discussion and Analysis of
Financial Condition and Results of Operations....... 16-25
Item 3. Quantitative and Qualitative Disclosures About
Market Risk..........................................25-39
Item 4. Controls and Procedures.................................39
Item 4T. Controls and Procedures.................................39
PART II. OTHER INFORMATION
Item 1A. Risk Factors............................................40
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds......................................40-41
Item 5. Other Information....................................41-42
Item 6. Exhibits................................................43
</table>
<page> <table> PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF FINANCIAL CONDITION
<caption>
March 31, December 31,
2008 2007
$ $
(Unaudited)
ASSETS
<s> <c> <c>
Trading Equity:
Unrestricted cash 461,930,126 428,483,746
Restricted cash 18,065,465 11,795,125
Total cash 479,995,591 440,278,871
Net unrealized gain (loss) on open contracts (MS&Co.) 3,568,462 (269,587)
Net unrealized gain on open contracts (MSIP) 518,183 64,122
Total net unrealized gain (loss) on open contracts 4,086,645 (205,465)
Total Trading Equity 484,082,236 440,073,406
Subscriptions receivable 7,974,760 6,032,184
Interest receivable (MS&Co.) 634,343 1,136,385
Total Assets 492,691,339 447,241,975
LIABILITIES AND PARTNERS? CAPITAL
Liabilities
Redemptions payable 6,345,034 3,952,743
Accrued brokerage fees (MS&Co.) 2,386,143 2,261,439
Accrued management fees 795,381 753,813
Total Liabilities 9,526,558 6,967,995
Partners? Capital
Limited Partners (19,645,628.746 and
19,771,249.924 Units, respectively) 477,820,453 435,434,673
General Partner (219,732.501 Units) 5,344,328 4,839,307
Total Partners? Capital 483,164,781 440,273,980
Total Liabilities and Partners? Capital 492,691,339 447,241,975
NET ASSET VALUE PER UNIT 24.32 22.02
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page> <table> MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
<caption>
For the Quarters Ended March 31,
2008 2007
$ $
<s> <c> <c>
INVESTMENT INCOME
Interest income (MS&Co.) 2,520,335 4,966,259
EXPENSES
Brokerage fees (MS&Co.) 6,814,958 6,054,126
Management fees 2,271,653 2,018,043
Total Expenses 9,086,611 8,072,169
NET INVESTMENT LOSS (6,566,276) (3,105,910)
TRADING RESULTS
Trading profit (loss):
Realized 48,029,305 (32,216,940)
Net change in unrealized 4,292,110 (8,548,341)
Total Trading Results 52,321,415 (40,765,281)
NET INCOME (LOSS) 45,755,139 (43,871,191)
NET INCOME (LOSS) ALLOCATION
Limited Partners 45,250,118 (43,395,636)
General Partner 505,021 (475,555)
NET INCOME (LOSS) PER UNIT
Limited Partners 2.30 (2.05)
General Partner 2.30 (2.05)
Units Units
WEIGHTED AVERAGE NUMBER
OF UNITS OUTSTANDING 19,889,850.515 21,247,802.287
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page> <table> MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
For the Quarters Ended March 31, 2008 and 2007
(Unaudited)
<caption>
Units of
Partnership Limited General
Interest Partners Partner Total
$ $ $
<s> <c> <c> <c> <c>
Partners? Capital,
December 31, 2006 21,577,744.878 415,478,418 4,497,373 419,975,791
Offering of Units 760,036.983 13,862,819 ? 13,862,819
Net Loss ? (43,395,636) (475,555) (43,871,191)
Redemptions (1,439,305.704) (26,223,036) ? (26,223,036)
Partners? Capital,
March 31, 2007 20,898,476.157 359,722,565 4,021,818 363,744,383
Partners? Capital,
December 31, 2007 19,990,982.425 435,434,673 4,839,307 440,273,980
Offering of Units 823,462.460 19,450,283 ? 19,450,283
Net Income ? 45,250,118 505,021 45,755,139
Redemptions (949,083.638) (22,314,621) ? (22,314,621)
Partners? Capital,
March 31, 2008 19,865,361.247 477,820,453 5,344,328 483,164,781
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page> <table> MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<caption>
For the Quarters Ended March 31,
2008 2007
$ $
<s> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 45,755,139 (43,871,191)
Noncash item included in net income (loss):
Net change in unrealized (4,292,110) 8,548,341
(Increase) decrease in operating assets:
Restricted cash (6,270,340) 39,466,588
Interest receivable (MS&Co.) 502,042 47,392
Increase (decrease) in operating liabilities:
Accrued brokerage fees (MS&Co.) 124,704 (213,792)
Accrued management fees 41,568 (71,263)
Net cash provided by operating activities 35,861,003 3,906,075
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from offering of Units 17,507,707 13,411,482
Cash paid for redemptions of Units (19,922,330) (29,112,599)
Net cash used for financing activities (2,414,623) (15,701,117)
Net increase (decrease) in unrestricted cash 33,446,380 (11,795,042)
Unrestricted cash at beginning of period 428,483,746 360,856,363
Unrestricted cash at end of period 461,930,126 349,061,321
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page <table> MORGAN STANLEY CHARTER GRAHAM L.P.
CONDENSED SCHEDULES OF INVESTMENTS
March 31, 2008 (Unaudited) and December 31, 2007
<caption>
Futures and Forward Contracts
Long
Unrealized
Gain/(Loss)
Percentage of
Net Assets
Short
Unrealized
Gain/(Loss)
Percentage of
Net Assets
Net
Unrealized
Gain/(Loss)
$
%
$
%
$
March 31, 2008, Partnership Net Assets: $483,164,781
<s>
<c>
<c>
<c>
<c>
<c>
Commodity
(1,199,656)
(0.25)
(129,930)
(0.03)
(1,329,586)
Equity
(190,000)
(0.04)
(50,546)
(0.01)
(240,546)
Foreign currency
725,907
0.15
5,232,890
1.08
5,958,797
Interest rate
(1,891,287)
(0.39)
(313,730)
(0.06)
(2,205,017)
Grand Total:
(2,555,036)
(0.53)
4,738,684
0.98
2,183,648
Unrealized Currency Gain
1,902,997
Total Net Unrealized Gain
4,086,645
December 31, 2007, Partnership Net Assets: $440,273,980
Commodity
1,186,484
0.27
(118,001)
(0.03)
1,068,483
Equity
(102,031)
(0.02)
(23,945)
(0.01)
(125,976)
Foreign currency
(1,534,962)
(0.34)
(914,641)
(0.21)
(2,449,603)
Interest rate
381,109
0.08
(597,710)
(0.13)
(216,601)
Grand Total:
(69,400)
(0.01)
(1,654,297)
(0.38)
(1,723,697)
Unrealized Currency Gain
1,518,232
Total Net Unrealized Loss
(205,465)
<fn>
The accompanying notes are an integral part
of these financial statements.
</table>
<page> MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
(Unaudited)
The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Morgan Stanley Charter Graham L.P. (the ?Partnership?). The
financial statements and condensed notes herein should be read in
conjunction with the Partnership?s December 31, 2007, Annual
Report on Form 10-K.
1. Organization
Morgan Stanley Charter Graham L.P. is a Delaware limited
partnership organized in 1998 to engage primarily in the
speculative trading of futures contracts, options on futures
contracts, and forward contracts on physical commodities and other
commodity interests, including, but not limited to, foreign
currencies, financial instruments, metals, energy, and
agricultural products (collectively, ?Futures Interests?). The
Partnership is one of the Morgan Stanley Charter series of funds,
comprised of the Partnership, Morgan Stanley Charter WCM L.P.,
Morgan Stanley Charter Aspect L.P., and Morgan Stanley Charter
Campbell L.P. (collectively, the ?Charter Series?), which
effective as of May 1, 2006, no longer accepts subscriptions and
<page> MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
exchanges of units of limited partnership interest ("Unit(s)")
from any other Charter Series for Units of Morgan Stanley Charter
Campbell L.P.
The Partnership?s general partner is Demeter Management
Corporation ("Demeter"). The commodity brokers are Morgan Stanley
& Co. Incorporated ("MS&Co.") and Morgan Stanley & Co.
International plc ("MSIP"). MS&Co. also acts as the counterparty
on all trading of foreign currency forward contracts. MSIP serves
as the commodity broker for trades on the London Metal Exchange.
Demeter, MS&Co., and MSIP are wholly-owned subsidiaries of Morgan
Stanley. Graham Capital Management, L.P. (the "Trading Advisor")
is the trading advisor to the Partnership.
2. Related Party Transactions
The Partnership?s cash is on deposit with MS&Co. and MSIP in
futures, forward, and options trading accounts to meet margin
requirements as needed. MS&Co. pays the Partnership at each
month end interest income on an amount equal to the commodity
brokers? margin requirements on the Partnership?s current futures,
forward, and options contracts at a rate approximately equivalent
to the rate the commodity brokers pay other similar customers on
margin deposits. In addition, MS&Co. pays the Partnership at each
<page> MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
month end interest income on the Partnership?s funds in excess of
such current margin requirements but available to satisfy margin
requirements at a rate equal to the monthly average of the
4-week U.S. Treasury bill discount rate during the month. The
Partnership pays brokerage fees to MS&Co.
3. Income Taxes
No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible
for reporting income or loss based upon their respective share of
the Partnership?s revenues or expenses for income tax purposes.
The Partnership files U.S. federal and state tax returns. The
2004 through 2007 tax years generally remain subject to
examination by U.S. federal and most state tax authorities.
4. Financial Instruments
The Partnership trades 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.
<page> MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Partnership?s contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting 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 a smaller initial net
investment than would be required relative to changes in
market factors;
<page> MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3) Terms require or permit net settlement.
Generally, derivatives include futures, forward, swap or options
contracts, and other financial instruments with similar
characteristics such as caps, floors, and collars.
The net unrealized gains (losses) on open contracts, reported as a
component of ?Trading Equity? on the Statements of Financial
Condition, and their longest contract maturities were as follows:
Net Unrealized Gains/(Losses)
on Open Contracts Longest Maturities
Exchange- Off-Exchange- Exchange- Off-Exchange-
Date Traded Traded Total Traded Traded
$ $ $
Mar. 31, 2008 (1,516,645) 5,603,290 4,086,645 Sep. 2009 Jun. 2008
Dec. 31, 2007 2,077,012 (2,282,477) (205,465) Jun. 2009 Mar. 2008
The Partnership has credit risk associated with counterparty non-
performance. As of the date of the financial statements, the
credit risk associated with the instruments in which the
Partnership trades is limited to the amounts reflected in the
Partnership?s Statements of Financial Condition.
The Partnership also has credit risk because MS&Co. and MSIP act
as the futures commission merchants or the counterparties, with
<page> MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
respect to most of the Partnership?s 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. MS&Co. and
MSIP, each acting as a commodity broker for the 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 ("CFTC"),
to segregate from their own assets, and for the sole benefit of
their commodity customers, all funds held by them with respect to
exchange-traded futures, 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
$478,478,946 and $442,355,883 at March 31, 2008, and December 31,
2007, respectively. With respect to the Partnership?s off-
exchange-traded forward currency 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, the Partnership is required to
meet margin requirements equal to the net unrealized loss on open
forward currency contracts in the Partnership accounts with the
<page> MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
counterparty, which is accomplished by daily maintenance of the
cash balance in a custody account held at MS&Co. With respect to
those off-exchange-traded forward currency contracts, the
Partnership is at risk to the ability of MS&Co., the sole
counterparty on all such contracts, to perform. The Partnership
has a netting agreement with MS&Co. This agreement, which seeks
to reduce both the Partnership?s and MS&Co.?s exposure on off-
exchange-traded forward currency contracts, should materially
decrease the Partnership?s credit risk in the event of MS&Co.?s
bankruptcy or insolvency.
5. New Accounting Developments
In September 2006, the Financial Accounting Standards Board
(?FASB?) issued Statement of Financial Accounting Standards No.
157 (?SFAS? 157?), ?Fair Value Measurements?. SFAS 157 requires
use of a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three
levels: Level 1 ? quoted market prices in active markets for
identical assets and liabilities; Level 2 ? inputs other than
quoted market prices that are observable for the asset or
liability, either directly or indirectly (including quoted prices
for similar investments, interest rates, credit risk); and Level
3 ? unobservable inputs for the asset or liability (including the
<page> MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Partnership?s own assumptions used in determining the fair value
of investments).
Demeter evaluated the impact of adopting SFAS 157 on the
Partnership?s financial statements. The Partnership adopted SFAS
157 as of January 1, 2008. Based on its analysis, the effect of
applying SFAS 157 to the investments included in the financial
statements does not have a material impact on the Partnership?s
financial statements.
The following table summarizes the valuation of the Partnership?s
investments by the above SFAS 157 fair value hierarchy as of
March 31, 2008: <table> <caption>
Assets
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
<s>
<c>
<c>
<c>
<c>
Unrealized gain(loss) on open contracts
$ (1,516,645)
$5,603,290
n/a
$ 4,086,645
</table>
In March 2008, the FASB issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities (?SFAS 161?). SFAS
161 is intended to improve financial reporting about derivative
instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand how those
instruments and activities are accounted for; how and why they are
<page> MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
used; and their effects on a Partnership?s financial position,
financial performance, and cash flows. SFAS 161 is effective for
financial statements issued for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years.
The Partnership is currently evaluating the impact that the
adoption of SFAS No. 161 will have on its financial statement
disclosures.
6. Restricted and Unrestricted Cash
As reflected on the Partnership?s Statements of Financial
Condition, restricted cash equals the cash portion of assets on
deposit to meet margin requirements plus the cash required to
offset unrealized losses on foreign currency forwards and options
and offset losses on offset London Metal Exchange positions. All
of these amounts are maintained separately. Cash that is not
classified as restricted cash is therefore classified as
unrestricted cash.
7. Reclassification
Certain prior year amounts relating to cash balances were
reclassified on the Statements of Cash Flows to conform to 2008
presentation. Such reclassification has no impact on the
Partnership?s reported net income (loss).
<page>
Item 2. MANAGEMENT?S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity. The Partnership deposits its assets with MS&Co. and
MSIP as commodity brokers in separate futures, forward, and
options trading accounts established for the Trading Advisor.
Such assets are used as margin to engage in trading and may be
used as margin solely for the Partnership?s trading. The assets
are held in either non-interest bearing bank accounts or in
securities and instruments permitted by the CFTC for investment of
customer segregated or secured funds. Since the Partnership?s
sole purpose is to trade in futures, forwards, and options, it is
expected that the Partnership will continue to own such liquid
assets for margin purposes.
The Partnership?s investment in futures, forwards, and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as ?daily price fluctuations limits? or ?daily
limits?. Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be taken
nor liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. These market conditions could prevent the Partnership
<page> from promptly liquidating its futures or options contracts
and result in restrictions on redemptions.
There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions. For the periods covered by
this report, illiquidity has not materially affected the
Partnership?s assets.
There are no known material trends, demands, commitments, events,
or uncertainties at the present time that are reasonably likely to
result in the Partnership?s liquidity increasing or decreasing in
any material way.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets. Redemptions, exchanges, and
sales of Units in the future will affect the amount of funds
available for investments in futures, forwards, and options in
subsequent periods. It is not possible to estimate the amount,
and therefore the impact, of future inflows and outflows of Units.
<page> There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership?s capital resource arrangements at the present
time.
Off-Balance Sheet Arrangements and Contractual Obligations. The
Partnership does not have any off-balance sheet arrangements, nor
does it have contractual obligations or commercial commitments to
make future payments that would affect its liquidity or capital
resources.
Results of Operations
General. The Partnership?s results depend on the Trading Advisor
and the ability of the Trading Advisor?s trading programs to take
advantage of price movements in the futures, forward, and options
markets. The following presents a summary of the Partnership?s
operations for the three month periods ended March 31, 2008 and
2007, and a general discussion of its trading activities during
each period. It is important to note, however, that the Trading
Advisor trades in various markets at different times and that
prior activity in a particular market does not mean that such
market will be actively traded by the Trading Advisor or will be
profitable in the future. Consequently, the results of operations
of the Partnership are difficult to discuss other than in the
context of the Trading Advisor?s trading activities on behalf of
<page> the Partnership during the period in question. Past
performance is no guarantee of future results.
The Partnership?s results of operations set forth in the
Financial Statements on pages 2 through 15 of this report are
prepared in accordance with accounting principles generally
accepted in the United States of America, which require the use
of certain accounting policies that affect the amounts reported
in these Financial Statements, including the following: The
contracts the Partnership trades are accounted for on a trade-
date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded on the Statements
of Operations as ?Net change in unrealized trading gain (loss)?
for open (unrealized) contracts, and recorded as ?Realized
trading gain (loss)? when open positions are closed out. The sum
of these amounts constitutes the Partnership?s trading results.
The market value of a futures contract is the settlement price on
the exchange on which that futures contract is traded on a
particular day. The value of a foreign currency forward contract
is based on the spot rate as of the close of business. Interest
income, as well as management fees, incentive fees, and brokerage
fees expenses of the Partnership are recorded on an accrual
basis.
<page> Demeter believes that, based on the nature of the
operations of the Partnership, no assumptions relating to the
application of critical accounting policies other than those
presently used could reasonably affect reported amounts.
For the Quarter Ended March 31, 2008
The Partnership recorded total trading results including interest
income totaling $54,841,750 and expenses totaling $9,086,611,
resulting in net income of $45,755,139 for the quarter ended
March 31, 2008. The Partnership?s net asset value per Unit
increased from $22.02 at December 31, 2007, to $24.32 at March
31, 2008.
The most significant trading gains of approximately 4.0% were
experienced in the global stock index sector throughout the
quarter from short positions in European, U.S., and Japanese
equity index futures as prices moved lower on concerns that a
persistent U.S. housing slump, mounting losses linked to U.S.
sub-prime mortgage investments, and a weakening job market might
restrain consumer spending, erode corporate earnings, and curb
global economic growth. Within the energy markets, gains of
approximately 3.6% were recorded, primarily during February and
March, from long futures positions in crude oil and its related
products as prices increased due to speculation that OPEC would
cut production, ongoing geopolitical concerns in the Middle East,
and strong demand for physical commodities as an inflation hedge.
<page> Meanwhile, long positions in natural gas futures resulted
in gains as prices rose on expectations of a rise in demand due
to colder weather in the U.S. Northeast and news of a drop in
U.S. inventories. Additional gains of approximately 1.6% were
experienced within the agricultural markets, primarily during
January and February, from long positions in corn futures as
prices moved higher following news that global production might
drop, while rising energy prices might boost demand for
alternative biofuels made from crops. Meanwhile, long futures
positions in wheat recorded further gains, primarily during
January and February, as prices increased amid speculation that
U.S. stockpiles would fall to a 30-year low. Within the currency
sector, gains of approximately 1.4% were experienced, primarily
during February and March, from long positions in the Colombian
peso, Brazilian real, and Mexican peso versus the U.S. dollar as
the value of the U.S. dollar moved lower against these currencies
due to the aforementioned disappointing economic data in the U.S.
and fears of a possible U.S. recession, which fueled speculation
of continued interest rate cuts by the U.S. Federal Reserve.
Elsewhere, short positions in the Korean won versus the U.S.
dollar resulted in gains as the value of the Korean won decreased
relative to the U.S. dollar in March amid news of a widening
Current-Account deficit out of Korea. Further gains of
approximately 0.9% were recorded in the global interest rate
sector, primarily during January and February, from long
positions in U.S. and Japanese fixed-income futures as prices
<page> increased in a "flight-to-quality" following a sharp
decline in the global equity markets and concerns that an
economic slowdown in the United States would weaken the global
economy. Furthermore, U.S. fixed-income futures prices moved
higher as the U.S. Federal Reserve cut interest rates by 200
basis points throughout the quarter and U.S. government reports
showed a rise in unemployment and slower-than-expected fourth
quarter Gross Domestic Product growth. Smaller gains of
approximately 0.4% were experienced in the metals markets,
primarily during February, from long positions in gold and silver
futures as prices rose due to a drop in the value of the U.S.
dollar, which spurred demand for "safe haven" investments.
For the Quarter Ended March 31, 2007
The Partnership recorded total trading results including interest
income totaling $(35,799,022) and expenses totaling $8,072,169,
resulting in a net loss of $43,871,191 for the quarter ended
March 31, 2007. The Partnership?s net asset value per Unit
decreased from $19.46 at December 31, 2006, to $17.41 at March
31, 2007.
The most significant trading losses of approximately 3.1% were
incurred in the currency sector primarily during January from
long positions in the New Zealand dollar, Australian dollar, and
euro versus the U.S. dollar as the value of the U.S. dollar
strengthened after a government report showed that U.S. job
<page> growth had been unexpectedly higher during December 2006,
cooling speculation that the U.S. Federal Reserve would cut
interest rates in the near-term. Additionally, the value of the
U.S. dollar continued to move higher against most of its major
rivals after news that the U.S. trade gap had contracted for a
third consecutive month in November, reaching its narrowest point
since July 2005. Additional losses were experienced during March
from long positions in the New Zealand dollar and the euro versus
the U.S. dollar as the value of the New Zealand dollar declined
early in the month after the Reserve Bank of New Zealand
indicated that interest rates might remain steady in the near-
term, while the euro weakened at the beginning of the month due
to investor uncertainty regarding the strength of the global
economy after the substantial sell-off in the global equity
markets in late February. Additional losses in the currency
markets were incurred from short positions in the Swiss franc
versus the U.S. dollar as the value of the Swiss franc
strengthened in February and March on news that Switzerland?s
economy had accelerated faster than expected, thereby increasing
the likelihood of an interest rate hike by the Swiss National
Bank. Smaller losses were incurred from both long and short
positions in the South African rand versus the U.S. dollar.
Additional losses of approximately 2.9% were incurred in the
global interest rate sector, primarily during February from short
positions in U.S and European fixed-income futures as prices
reversed sharply higher at the end of February due to a worldwide
<page> ?flight-to-quality? after a sell-off in the global equity
markets that began on February 27, 2007, following comments from
former U.S. Federal Reserve Chairman Alan Greenspan that the U.S.
economy could be due for a recession. In addition, concerns that
tighter credit conditions in China and Japan might dampen global
growth first sent Chinese stock markets plunging before the sell-
off spread to other equity markets. Further losses of
approximately 1.8% were experienced in the global stock index
futures markets from long positions in U.S., European, and
Pacific Rim equity index futures as price fell suddenly and
sharply at the end of February and early March due to the
aforementioned factors that affected the currency and global
interest rate markets. Additional losses of approximately 1.6%
were recorded in the energy sector primarily during January and
February from short positions in natural gas futures as prices
reversed higher amid colder weather in U.S Northeast and news
from the U.S. Department of Energy that supplies were weaker-
than-expected. Smaller losses in the energy markets were
experienced during February and March from short futures
positions in crude oil as prices moved higher amid geopolitical
uncertainty in Iraq, worries that Iran would continue with its
nuclear program, and news that Iran had captured 15 members of
the British Royal Navy in the Persian Gulf. Losses of
approximately 0.8% were experienced in the metals sector during
January from long positions in aluminum and zinc as prices
declined amid news of a slowdown in the U.S. housing market.
<page> During February and March, short positions in copper
futures resulted in losses as prices moved higher on continued
speculation that low stockpiles and supply disruptions might
create a supply shortage in the future and news of stronger-than-
expected Chinese industrial data. Lastly, smaller losses of
approximately 0.1% were recorded in the agricultural sector,
primarily during January from long positions in coffee futures as
prices fell on speculation that retail price increases might curb
demand in the United States. Elsewhere in the agricultural
sector, long positions in corn futures recorded losses as prices
declined sharply during March after the U.S. Department of
Agriculture?s Prospective Plantings report showed corn acreage
might be up in 2007 to its highest since 1944.
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards, and options. The
market-sensitive instruments held by the Partnership are acquired
for speculative trading purposes only and, as a result, all or
substantially all of the Partnership?s assets are at risk of
trading loss. Unlike an operating company, the risk of market-
sensitive instruments is inherent to the primary business
activity of the Partnership.
<page> The futures, forwards, and options traded by the
Partnership involve varying degrees of related market risk.
Market risk is often dependent upon changes in the level or
volatility of interest rates, exchange rates, and prices of
financial instruments and commodities, factors that result in
frequent changes in the fair value of the Partnership?s open
positions, and consequently in its earnings, whether realized or
unrealized, and cash flow. Gains and losses on open positions of
exchange-traded futures, exchange-traded forward, and exchange-
traded futures-styled options contracts are settled daily through
variation margin. Gains and losses on off-exchange-traded forward
currency contracts are settled upon termination of the contract.
However, the Partnership is required to meet margin requirements
equal to the net unrealized loss on open forward currency
contracts in the Partnership accounts with the counterparty,
which is accomplished by daily maintenance of the cash balance in
a custody account held at MS&Co.
The Partnership?s total market risk may increase or decrease as
it is influenced by a wide variety of factors, including, but not
limited to, the diversification among the Partnership?s open
positions, the volatility present within the markets, and the
liquidity of the markets.
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin <page>
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership typically to be many times the total
capitalization of the Partnership.
The Partnership?s past performance is no guarantee of its future
results. Any attempt to numerically quantify the Partnership?s
market risk is limited by the uncertainty of its speculative
trading. The Partnership?s speculative trading and use of
leverage may cause future losses and volatility (i.e., ?risk of
ruin?) that far exceed the Partnership?s experience to date under
the ?Partnership?s Value at Risk in Different Market Sectors?
section and significantly exceed the Value at Risk (?VaR?) tables
disclosed.
Limited partners will not be liable for losses exceeding the
current net asset value of their investment.
Quantifying the Partnership?s Trading Value at Risk
The following quantitative disclosures regarding the Partnership?s
market risk exposures contain "forward-looking statements" within
the meaning of the safe harbor from civil liability provided for
such statements by the Private Securities Litigation Reform Act of
1995 (set forth in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934). All <page>
quantitative disclosures in this section are deemed to be forward-
looking statements for purposes of the safe harbor, except for
statements of historical fact.
The Partnership accounts for open positions on the basis of mark
to market accounting principles. Any loss in the market value of
the Partnership?s open positions is directly reflected in the
Partnership?s earnings and cash flow.
The Partnership?s risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of VaR. The
Partnership estimates VaR using a model based upon historical
simulation (with a confidence level of 99%) which involves
constructing a distribution of hypothetical daily changes in the
value of a trading portfolio. The VaR model takes into account
linear exposures to risks including equity and commodity prices,
interest rates, foreign exchange rates, and correlation among
these variables. The hypothetical changes in portfolio value are
based on daily percentage changes observed in key market indices
or other market factors (?market risk factors?) to which the
portfolio is sensitive. The one-day 99% confidence level of the
Partnership?s VaR corresponds to the negative change in portfolio
value that, based on observed market risk factors, would have
been exceeded once in 100 trading days, or one day in 100. VaR
typically does not represent the worst case outcome. Demeter
<page> uses approximately four years of daily market data (1,000
observations) and re-values its portfolio (using delta-gamma
approximations) for each of the historical market moves that
occurred over this time period. This generates a probability
distribution of daily ?simulated profit and loss? outcomes. The
VaR is the appropriate percentile of this distribution. For
example, the 99% one-day VaR would represent the 10th worst
outcome from Demeter?s simulated profit and loss series.
The Partnership?s VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
contract and do not distinguish between exchange and non-exchange
dealer-based instruments. They are also not based on exchange
and/or dealer-based maintenance margin requirements.
VaR models, including the Partnership?s, are continually evolving
as trading portfolios become more diverse and modeling techniques
and systems capabilities improve. Please note that the VaR model
is used to numerically quantify market risk for historic
reporting purposes only and is not utilized by either Demeter or
the Trading Advisor in their daily risk management activities.
Please further note that VaR as described above may not be
comparable to similarly-titled measures used by other entities.
The Partnership?s Value at Risk in Different Market Sectors
<page> The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total Net Assets
by primary market risk category at March 31, 2008, and 2007. At
March 31, 2008, and 2007, the Partnership?s total capitalization
was approximately $483 million and $364 million, respectively.
Primary Market March 31, 2008 March 31, 2007
Risk Category Value at Risk Value at Risk
Currency (0.94)% (1.37)%
Equity (0.33) (0.15)
Interest Rate (0.30) (0.82)
Commodity (0.41) (0.33)
Aggregate Value at Risk (1.05)% (1.38)%
The VaR for a market category represents the one-day downside risk
for the aggregate exposures associated with this market category.
The Aggregate Value at Risk listed above represents the VaR of the
Partnership?s open positions across all the market categories, and
is less than the sum of the VaRs for all such market categories
due to the diversification benefit across asset classes.
Because the business of the Partnership is the speculative
trading of futures, forwards, and options, the composition of its
trading portfolio can change significantly over any given time
period, or even within a single trading day. Such changes could
<page> positively or negatively materially impact market risk as
measured by VaR.
The table below supplements the quarter-end VaR set forth above
by presenting the Partnership?s high, low, and average VaR, as a
percentage of total Net Assets for the four quarter-end reporting
periods from April 1, 2007, through March 31, 2008.
Primary Market Risk Category High Low Average
Currency (1.32)% (0.94)% (1.11)%
Equity (1.06) (0.07) (0.40)
Interest Rate (1.20) (0.09) (0.42)
Commodity (0.85) (0.20) (0.44)
Aggregate Value at Risk (2.21)% (1.05)% (1.49)%
Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio?s aggregate market
risk exposure, incorporating a range of varied market risks,
reflect risk reduction due to portfolio diversification or hedging
activities, and can cover a wide range of portfolio assets.
However, VaR risk measures should be viewed in light of the
methodology?s limitations, which include, but may not be limited
to the following:
* past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
<page>
* changes in portfolio value caused by market movements may
differ from those of the VaR model;
* VaR results reflect past market fluctuations applied to
current trading positions while future risk depends on future
positions;
* VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
* the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.
In addition, the VaR tables above, as well as the past performance
of the Partnership, give no indication of the Partnership?s
potential "risk of ruin".
The VaR tables provided present the results of the Partnership?s
VaR for each of the Partnership?s market risk exposures and on an
aggregate basis at March 31, 2007, and for the four quarter-end
reporting periods from April 1, 2007, through March 31, 2008. VaR
is not necessarily representative of the Partnership?s historic
risk, nor should it be used to predict the Partnership?s future
financial performance or its ability to manage or monitor risk.
There can be no assurance that the Partnership?s actual losses on
a particular day will not exceed the VaR amounts indicated above
<page> or that such losses will not occur more than once in 100
trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances. These balances and any market risk they may represent
are immaterial.
The Partnership also maintains a substantial portion of its
available assets in cash at MS&Co.; as of March 31, 2008, such
amount was equal to approximately 94% of the Partnership?s net
asset value. A decline in short-term interest rates would result
in a decline in the Partnership?s cash management income. This
cash flow risk is not considered to be material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality, and multiplier features of the Partnership?s market-
sensitive instruments, in relation to the Partnership?s Net
Assets.
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
<page> Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership?s primary market risk
exposures, as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures, are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership?s
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expropriations,
illiquid markets, the emergence of dominant fundamental factors,
political upheavals, changes in historical price relationships, an
influx of new market participants, increased regulation, and many
other factors could result in material losses, as well as in
material changes to the risk exposures and the risk management
strategies of the Partnership. Investors must be prepared to lose
all or substantially all of their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership at March 31, 2008, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.
Currency. The largest market exposure of the Partnership at
March 31, 2008, was to the currency sector. The Partnership?s
currency exposure is to exchange rate fluctuations, primarily
<page> fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs.
Interest rate changes, as well as political and general economic
conditions influence these fluctuations. The Partnership trades
a large number of currencies, including cross-rates - i.e.,
positions between two currencies other than the U.S. dollar. At
March 31, 2008, the Partnership?s major exposures were to the
Canadian dollar, euro, Australian dollar, Polish zloty, Japanese
yen, Swiss franc, and British pound currency crosses, as well as
to outright U.S. dollar positions. Outright positions consist of
the U.S. dollar vs. other currencies. These other currencies
include major and minor currencies. Demeter does not anticipate
that the risk associated with the Partnership?s currency trades
will change significantly in the future.
Equity. The third largest market exposure of the Partnership at
March 31, 2008, was to the global stock index sector, primarily
to equity price risk in the G-7 countries. The G-7 countries
consist of France, the U.S., Britain, Germany, Japan, Italy, and
Canada. The stock index futures traded by the Partnership are by
law limited to futures on broadly-based indices. At March 31,
2008, the Partnership?s primary market exposures were to the DAX
(Germany), NASDAQ 100 (U.S.), Hang Seng (Hong Kong), S&P 500
(U.S.), IBEX 35 (Spain), Nikkei 225 (Japan), Euro Stox 50
(Europe), Russell 2000 (U.S.), CAC 40 (France), Dow Jones (U.S.),
TOPIX (Japan), and FTSE 100 (United Kingdom) stock indices. The
<page> Partnership is typically exposed to the risk of adverse
price trends or static markets in the European, U.S., Hong Kong,
and Japanese stock indices. Static markets would not cause major
market changes, but would make it difficult for the Partnership
to avoid trendless price movements, resulting in numerous small
losses.
Interest Rate. At March 31, 2008, the Partnership had market
exposure to the global interest rate sector. Exposure was
primarily spread across the European, U.S., Japanese, and
Australian interest rate sectors. Interest rate movements
directly affect the price of the sovereign bond futures positions
held by the Partnership and indirectly affect the value of its
stock index and currency positions. Interest rate movements in
one country, as well as relative interest rate movements between
countries, materially impact the Partnership?s profitability. The
Partnership?s interest rate exposure is generally to interest
rate fluctuations in the U.S. and the other G-7 countries.
However, the Partnership also takes futures positions in the
government debt of smaller nations - e.g., Australia. Demeter
anticipates that the G-7 countries? and Australian interest rates
will remain the primary interest rate exposure of the Partnership
for the foreseeable future. The speculative futures positions
held by the Partnership may range from short to long-term
instruments. Consequently, changes in short, medium, or long-
term interest rates may have an effect on the Partnership.
<page>
Commodity.
Energy. The second largest market exposure of the
Partnership at March 31, 2008, was to the energy sector.
The Partnership?s energy exposure was shared primarily by
futures contracts in crude oil and its related products, as
well as natural gas. Price movements in these markets
result from geopolitical developments, particularly in the
Middle East, as well as weather patterns and other economic
fundamentals. Significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in the future. Natural gas has exhibited
volatility in prices resulting from weather patterns and
supply and demand factors and will likely continue in this
choppy pattern.
Soft Commodities and Agriculturals. At March 31, 2008, the
Partnership had market exposure to the markets that comprise
these sectors. Most of the exposure was to the corn,
soybeans, soybean oil, cocoa, wheat, and live cattle
markets. Supply and demand inequalities, severe weather
disruptions, and market expectations affect price movements
in these markets.
Metals. At March 31, 2008, the Partnership had market
exposure in the metals sector. The Partnership?s metals
<page> exposure was to fluctuations in the price of base
metals, such as copper and aluminum, as well as precious
metals, such as gold. Economic forces, supply and demand
inequalities, geopolitical factors, and market expectations
influence price movements in these markets. The Trading
Advisor utilizes the trading system(s) to take positions
when market opportunities develop, and Demeter anticipates
that the Trading Advisor will continue to do so.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at March 31, 2008:
Foreign Currency Balances. The Partnership?s primary foreign
currency balances at March 31, 2008, were in euros, British
pounds, Swiss francs, Japanese yen, Australian dollars, and
Hong Kong dollars. The Partnership controls the non-trading
risk of foreign currency balances by regularly converting
them back into U.S. dollars upon liquidation of their
respective positions.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership?s open positions in essentially
the same manner in all market categories traded. Demeter attempts
to manage market exposure by diversifying the Partnership?s assets
<page> among different market sectors and trading approaches, and
by monitoring the performance of the Trading Advisor daily. In
addition, the Trading Advisor establishes diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.
Demeter monitors and controls the risk of the Partnership?s non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.
Item 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this quarterly report, the
President and Chief Financial Officer of Demeter, the general
partner of the Partnership, have evaluated the effectiveness of
the Partnership?s disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), and have
judged such controls and procedures to be effective.
Changes in Internal Control over Financial Reporting
There have been no material changes during the period covered by
this quarterly report in the Partnership?s internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
of the Exchange Act) or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
<page>
Item 4T. CONTROLS AND PROCEDURES
Not applicable.
<page> PART II. OTHER INFORMATION
Item 1A. RISK FACTORS
There have been no material changes from the risk factors
previously referenced in the Partnership?s Report on Form 10-K for
the fiscal year ended December 31, 2007.
<table> <caption>
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
SEC
Registration Statement on Form S-1 Units Registered Effective Date File Number
<s> <c> <c> <c>
Initial Registration 3,000,000.000 November 6, 1998 333-60115
Additional Registration 6,000,000.000 March 27, 2000 333-91563
Additional Registration 2,000,000.000 July 29, 2002 333-85076
Additional Registration 9,000,000.000 February 26, 2003 333-103166
Additional Registration 30,000,000.000 April 28, 2004 333-113876
Total Units Registered 50,000,000.000
Units sold through 3/31/08 39,538,182.032
Units unsold through 3/31/08 10,461,817.968
</table>
The managing underwriter for the Partnership is MS&Co.
Units are continuously sold at monthly closings at a purchase
price equal to 100% of the net asset value per Unit as of the
close of business on the last day of each month.
The aggregate price of the Units sold through March 31, 2008, was
$748,253,005.
<page> Since no expenses are chargeable against the proceeds, 100%
of the proceeds of the offering have been applied to the working
capital of the Partnership for use in accordance with the ?Use of
Proceeds? section of the prospectus included as part of the above
referenced Registration Statements.
Item 5. OTHER INFORMATION
Management. Effective March 20, 2008, Mr. Michael Durbin, age
40, was named a Director of Demeter, subject to approval by the
National Futures Association. Mr. Durbin is a Managing Director
of Morgan Stanley and has been Chief Operating Officer of
National Sales since February 2008. Mr. Durbin joined Morgan
Stanley in 1990 and has served in a succession of leadership
positions in both its institutional and wealth management
businesses, most recently as head of Global Wealth Management
Group Capital Markets from October 2007 to February 2008. Mr.
Durbin also served as Head of Equity Products and Services from
March 2006 to October 2007, Head of International Private Wealth
Management from May 2005 to March 2006, Chief Strategic and Risk
Officer of Global Wealth Management Group from September 2004 to
May 2005, and Chief Administrative Officer of each of Private
Wealth Management and Global Wealth Management Group from January
2002 to September 2004. Mr. Durbin received his B.B.A. from the
University of Notre Dame in 1990 and an M.B.A. from the New York
University in 1998.
<page> Effective March 20, 2008, Mr. Jose Morales, age 31, was
named a Director of Demeter, subject to approval by the National
Futures Association. Mr. Morales is a Vice President at Morgan
Stanley and has headed the Product Development Group for the
firm?s Global Wealth Management business since August 2007. Mr.
Morales joined the firm in September 1998 as an analyst in the
investment management division, and subsequently held positions
in the Morgan Stanley Investment Management Global Product
Development Group from May 2000 to December 2003, in the Global
Wealth Management Product Development Group from December 2003 to
June 2006, and in Global Wealth Management Alternative
Investments Product Development & Management from June 2006 to
August 2007. Mr. Morales is a member of the Global Wealth
Management New Products Committee and the Consulting Services Due
Diligence Committee. Prior to his appointment as a Director of
Demeter, Mr. Morales served as a member of the Managed Futures
Investment Management Committee from March 2005 to March 2008.
Mr. Morales received an M.B.A. with a concentration in Finance
from the NYU Stern School of Business in June 2007 and a B.S. in
International Business Administration with a concentration in
Economics from Fordham University in 1998.
Effective April 1, 2008, Mr. Andrew Saperstein no longer serves
as a Director of Demeter.
<page>
Item 6. EXHIBITS
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.
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.
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.
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.
<page>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Morgan Stanley Charter Graham L.P.
(Registrant)
By: Demeter Management Corporation
(General Partner)
May 15, 2008 By: /s/ Christian Angstadt
Christian Angstadt
Chief Financial Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
? 14 ?
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