MORGAN STANLEY CHARTER MSFCM LP - 10-Q Quarterly Report

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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 June 30, 2003 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 0-26282

MORGAN STANLEY CHARTER MSFCM L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-3775071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Demeter Management Corporation
825 Third Avenue, 9th Floor
New York, NY 10022
(Address of principal executive offices) (Zip Code)

Registrant?s telephone number, including area code (212) 310-6444

(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___________

MORGAN STANLEY CHARTER MSFCM L.P.
INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2003

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MORGAN STANLEY CHARTER MSFCM L.P.
STATEMENTS OF FINANCIAL CONDITION

MORGAN STANLEY CHARTER MSFCM L.P.
STATEMENTS OF OPERATIONS
(Unaudited)

MORGAN STANLEY CHARTER MSFCM L.P.
STATEMENTS OF OPERATIONS
(Unaudited)

MORGAN STANLEY CHARTER MSFCM L.P.
STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
For the Six Months Ended June 30, 2003 and 2002
(Unaudited)

MORGAN STANLEY CHARTER MSFCM L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)

MORGAN STANLEY CHARTER MSFCM L.P.
NOTES TO FINANCIAL STATEMENTS

June 30, 2003

(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 MSFCM L.P. (the ?Partnership?). The
financial statements and condensed notes herein should be read in
conjunction with the Partnership?s December 31, 2002 Annual Report
on Form 10-K.

1. Organization
Morgan Stanley Charter MSFCM L.P. is a Delaware limited
partnership organized to engage primarily in the speculative
trading of futures contracts, options on futures contracts, and
forward contracts on physical commodities and other commodity
interests, including foreign currencies, financial instruments,
metals, energy and agricultural products. The Partnership is one
of the Morgan Stanley Charter series of funds, comprised of the
Partnership, Morgan Stanley Charter Campbell L.P., Morgan Stanley
Charter Graham L.P., and Morgan Stanley Charter Millburn L.P.

The Partnership?s general partner 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 &
MORGAN STANLEY CHARTER MSFCM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Co.?) and Morgan Stanley & Co. International Limited (?MSIL?).
Morgan Stanley Futures & Currency Management Inc. (?MSFCM? or the
?Trading Advisor?) is the trading advisor to the Partnership.
Demeter, Morgan Stanley DW, MS & Co., MSIL, and MSFCM are wholly-
owned subsidiaries of Morgan Stanley.

2. Related Party Transactions
The Partnership?s cash is on deposit with Morgan Stanley DW, MS &
Co. and MSIL in futures, forwards and options trading accounts to
meet margin requirements as needed. Morgan Stanley DW pays
interest on these funds based on a rate equal to that earned by
Morgan Stanley DW on its U.S. Treasury bill investments. The
Partnership pays brokerage fees to Morgan Stanley DW. Management
and incentive fees (if any) incurred by the Partnership are paid
to MSFCM.

3. Financial Instruments
The Partnership trades futures contracts, options on futures
contracts, and forward contracts on physical commodities and other
commodity interests, including foreign currencies, financial
instruments, metals, energy and agricultural products. Futures
and forwards represent contracts for delayed delivery of an
instrument at a specified date and price. Risk arises from
changes in the value of these contracts and the potential
MORGAN STANLEY CHARTER MSFCM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

inability of counterparties to perform under the terms of the
contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest
rate volatility.

The market value of contracts is based on closing prices quoted by
the exchange, bank or clearing firm through which the contracts
are traded.

The Partnership?s contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting 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;
3) Terms require or permit net settlement.

MORGAN STANLEY CHARTER MSFCM L.P.
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, reported as a
component of ?Equity in futures interests trading accounts? on the
statements of financial condition, and their longest contract
maturities were as follows:

Net Unrealized Gains (Losses)
On Open Contracts Longest Maturities

Exchange- Off-Exchange- Exchange- Off-Exchange-
Date Traded Traded Total Traded Traded
$ $ $

Jun. 30, 2003 (7,054,995) 3,082,382 (3,972,613) Mar. 2005 Sep. 2003
Dec. 31, 2002 22,623 7,543,280 7,565,903 Sep. 2004 Apr. 2003

The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership?s statements of financial condition.

The Partnership also has credit risk because Morgan Stanley DW,
MS & Co. and MSIL act as the futures commission merchants or the
counterparties, with respect to most of the Partnership?s assets.

MORGAN STANLEY CHARTER MSFCM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Morgan Stanley DW, MS & Co., and MSIL,
each as a futures commission merchant for the Partnership?s
exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures
Trading Commission (?CFTC?), to segregate from their own assets,
and for the sole benefit of their commodity customers, all funds
held by them with respect to exchange-traded futures and futures-
styled options contracts, including an amount equal to the net
unrealized gains (losses) on all open futures and futures-styled
options contracts, which funds, in the aggregate, totaled
$127,931,181 and $73,921,843 at June 30, 2003 and December 31,
2002, respectively. With respect to the Partnership?s off-
exchange-traded forward currency contracts, there are no daily
settlements of variations in value nor is there any requirement
that an amount equal to the net unrealized gains (losses) on open
forward contracts be segregated. With respect to those off-
exchange-traded forward currency contracts, the Partnership is at
risk to the ability of MS & Co., the sole counterparty on all of
such contracts, to perform. The Partnership has a netting
agreement with MS & Co. This agreement, which seeks to reduce
both the Partnership?s and MS & Co.?s exposure on off-exchange-
traded forward currency contracts, should materially decrease the
MORGAN STANLEY CHARTER MSFCM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTCLUDED)

Partnership?s credit risk in the event of MS & Co.?s bankruptcy
or insolvency.

Item 2. MANAGEMENT?S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Liquidity. The Partnership deposits its assets with Morgan Stanley
DW as non-clearing broker and MS & Co. and MSIL as clearing
brokers in separate futures, forwards, and options trading
accounts established for the Trading Advisor, which assets are
used as margin to engage in trading. The assets are held in either
non-interest bearing bank accounts or in securities and
instruments permitted by the CFTC for investment of customer
segregated or secured funds. The Partnership?s assets held by the
commodity brokers may be used as margin solely for the
Partnership?s trading. Since the Partnership?s sole purpose is to
trade in futures, forwards and options, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.

The Partnership?s investment in futures, forwards, and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as ?daily price fluctuations limits? or ?daily
limits?. Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be taken
nor liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading. These market conditions could prevent the Partnership
from promptly liquidating its futures or options contracts and
result in restrictions on redemptions.

There is no limitation on daily price moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions.

The Partnership has never had illiquidity affect a material
portion of its assets. Furthermore, there are no material trends,
demands, commitments, events or uncertainties known at the present
time that will result in, or that are reasonably likely to result
in, the Partnership?s liquidity increasing or decreasing in any
material way.

Capital Resources. The Partnership does not have, nor expect to
have, any capital assets. Redemptions, exchanges and sales of
additional units of limited partnership interest (?Unit(s)?) in
the future will affect the amount of funds available for
investment in futures, forwards, and options in subsequent
periods. It is not possible to estimate the amount, and
therefore the impact, of future redemptions of Units.

There are no known material trends, favorable or unfavorable, that
would affect, nor any expected material changes to, the
Partnership?s capital resource arrangements at the present time.
The Partnership has no off-balance sheet arrangements, nor
contractual obligations or commercial commitments to make future
payments that would affect the Partnership?s liquidity or capital
resources. The contracts traded by the Partnership are accounted
for on a trade-date basis and marked to market on a daily basis.
The value of futures contracts is the settlement price on the
exchange on which that futures contract is traded on a particular
day and the value of foreign currency forward contracts is based
on the spot rate as of the close of business, New York City time,
on a given day.

Results of Operations
General. The Partnership?s results depend on the Trading Advisor
and the ability of the Trading Advisor?s trading programs to take
advantage of price movements or other profit opportunities in the
futures, forwards and options markets. The following presents a
summary of the Partnership?s operations for the three and six
month periods ended June 30, 2003 and 2002 and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Advisor trades in
various markets at different times and that prior activity
in a particular market does not mean that such market will be
actively traded by the Trading Advisor or will be profitable in
the future. Consequently, the results of operations of the
Partnership are difficult to discuss other than in the context of
the Trading Advisor?s trading activities on behalf of the
Partnership and how the Partnership has performed in the past.

The Partnership?s results of operations set forth in the
financial statements on pages 2 through 11 of this report were
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 profit/loss? for open
(unrealized) contracts, and recorded as ?Realized profit/loss?
when open positions are closed out, and the sum of these amounts
constitutes the Partnership?s trading revenues. Interest income
revenue, as well as management fees, incentive fees and brokerage
fees expenses of the Partnership are recorded on an accrual
basis.

Demeter believes that, based on the nature of the
operations of the Partnership, no assumptions relating to the
application of critical accounting policies other than those
presently used could reasonably affect reported amounts.

For the Quarter and Six Months Ended June 30, 2003
For the quarter ended June 30, 2003, the Partnership recorded
total trading losses, net of interest income, of $7,719,837 and
posted a decrease in net asset value per Unit. The most
significant losses of approximately 5.5% were recorded in the
metals markets during April and May from short positions in
aluminum, nickel, and copper futures as prices reversed higher
amid renewed optimism concerning future growth in industrial
demand and a rebound in U.S. equity prices. During June, losses
in this sector resulted from long positions in aluminum futures as
prices declined in anticipation of an interest rate cut by the
U.S. Federal Reserve. Losses of approximately 2.0% were recorded
in the energy markets from long positions in natural gas futures
as prices reversed sharply lower during June following news of
larger than expected U.S. reserves. A portion of the Partner-
ship?s overall losses was offset by gains of approximately 1.4%
recorded in the global interest rate markets, primarily during
May, from long positions in U.S. and European interest rate
futures as prices trended higher amid speculation of an interest
rate cut by the U.S. Federal Reserve and lingering doubts
concerning a global economic recovery. Additional gains of
approximately 1.0% in the currency markets were experienced
during April and May from long positions in the Australian dollar
versus the U.S. dollar as the value of the Australian currency
strengthened and the U.S. dollar weakened amid significant
interest rate differentials between the two countries. Long
positions in the euro versus the Japanese yen provided additional
gains as the value of the euro continued to trend higher following
the European Central Bank?s decision to leave interest rates
unchanged. Gains of approximately 1.0% in the global stock index
markets were recorded during May and June from long positions in
S&P 500 Index futures as equity prices rallied in response to
renewed expectations for a U.S. interest rate cut. Total expenses
for the three months ended June 30, 2003 were $2,973,423,
resulting in a net loss of $10,693,260. The net asset value of a
Unit decreased from $24.81 at March 31, 2003 to $23.06 at June 30,
2003.

For the six months ended June 30, 2003, the Partnership recorded
total trading revenues, including interest income, of $7,086,341
and posted an increase in net asset value per Unit. The most
significant gains of approximately 8.3% in the energy markets
stemmed from long positions in natural gas futures as prices
trended higher during January and February in response to
prolonged frigid temperatures in the northeastern and midwestern
United States. Additional gains in the energy markets were
recorded during the same time period from long positions in crude
oil futures as prices increased amid the looming threat of
military action against Iraq and an overall decline in
inventories. Additional gains of approximately 5.7% in the
currency markets were produced from positions in the euro versus
the British pound as the value of the pound decreased due to weak
economic data out of the U.K. and an interest rate cut by the Bank
of England. Additional currency gains were recorded from long
positions in the Australian dollar versus the U.S. dollar as the
value of the Australian currency increased on the heels of higher
commodity prices and a significant interest rate differential
between the two countries. During May, gains resulted from long
positions in the euro versus the Japanese yen as the value of the
euro continued to trend higher following the European Central
Bank?s decision to leave interest rates unchanged. Gains of
approximately 4.6% were established in the global interest rate
markets from long positions in European and U.S. interest rate
futures as prices trended higher amid continued uncertainty in the
global equity markets, investor demand for fixed income
investments, and speculation of an interest rate cut by the U.S.
Federal Reserve. In the global stock index markets, gains of
approximately 1.1% resulted from long positions in S&P 500 Index
futures as equity prices rallied during May and June in response
to renewed expectations for a U.S. interest rate cut and the
release of positive economic data. A portion of the Partnership?s
overall gains was offset by losses of approximately 4.9% recorded
in the metals markets, primarily during May and June, from short
positions in aluminum, copper, and nickel futures as prices
reversed higher, buoyed by a rebound in U.S. equity prices and
hopes for increased industrial demand. Total expenses for the six
months ended June 30, 2003 were $7,238,946, resulting in a net
loss of $152,605. The net asset value of a Unit increased from
$21.84 at December 31, 2002 to $23.06 at June 30, 2003. The net
asset value per Unit increased in spite of the Partnership?s net
loss for the period due to an influx of subscriptions that caused
per Unit net losses in March and June to be less than per Unit
gains in the other four months.

For the Quarter and Six Months Ended June 30, 2002
For the quarter ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $11,502,547
and posted an increase in net asset value per Unit. The most
significant gains of approximately 29.7% were recorded in the
currency markets primarily during May and June from previously
established long positions in the Japanese yen, Swiss franc, euro
and Swedish krona relative to the U.S. dollar as the value of
these currencies strengthened against the dollar amid falling
equity prices, concerns regarding corporate accounting integrity
and weak U.S. economic data. Significant currency gains were also
recorded from long positions in the euro relative to the British
pound. Additional gains of approximately 5.8% were recorded in
the global interest rate futures markets primarily during June
from long positions in Japanese and German interest rate futures
as prices trended higher following weakness in U.S. equity
markets, geopolitical concerns and uncertainty surrounding a
global economic recovery. A portion of the Partnership?s overall
gains was offset by losses of approximately 7.5% recorded in the
energy markets primarily during May from previously established
long futures positions in crude oil and its related products as
prices moved lower on supply and demand concerns. Additional
losses of approximately 2.5% were recorded in the metals markets
primarily during April from short positions in aluminum futures as
prices climbed higher on sentiment that an improving U.S. economy
would boost demand. Total expenses for the three months ended
June 30, 2002 were $2,162,364, resulting in net income of
$9,340,183. The net asset value of a Unit increased from $16.80
at March 31, 2002 to $20.18 at June 30, 2002.

For the six months ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $12,160,833
and posted an increase in net asset value per Unit. The most
significant gains of approximately 19.1% were recorded in the
currency markets primarily during May and June from previously
established long positions in the Japanese yen, Swiss franc, euro
and Swedish krona relative to the U.S. dollar as the value of
these currencies strengthened against the dollar amid falling
equity prices, concerns regarding corporate accounting integrity
and weak U.S. economic data. Significant currency gains were also
recorded from long positions in the euro relative to the British
pound. Additional gains of approximately 5.4% were
recorded in the global interest rate futures markets primarily
during June from long positions in Japanese and German interest
rate futures as prices trended higher following weakness in U.S.
equity markets, geopolitical concerns and uncertainty surrounding
a global economic recovery. Gains of approximately 2.1% were
recorded in the energy markets primarily during March from
previously established long positions in crude oil futures as
prices trended higher amid escalating Middle East tensions and
supply and demand factors. A portion of the Partnership?s overall
gains was offset by losses of approximately 2.9% recorded in the
metals markets primarily during April from short positions in
aluminum futures as prices climbed higher on sentiment that an
improving U.S. economy would boost demand. Total expenses for the
six months ended June 30, 2002 were $3,136,804, resulting in net
income of $9,024,029. The net asset value of a Unit increased
from $16.92 at December 31, 2001 to $20.18 at June 30, 2002.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards, and options. The
market-sensitive instruments held by the Partnership are acquired
for speculative trading purposes only and, as a result, all or
substantially all of the Partnership?s assets are at risk of
trading loss. Unlike an operating company, the risk of market-
sensitive instruments is central, not incidental, to the
Partnership?s main business activities.

The futures, forwards and options traded by the Partnership
involve varying degrees of related market risk. Market risk is
often dependent upon changes in the level or volatility of
interest rates, exchange rates, and prices of financial
instruments and commodities. Fluctuations in market risk based
upon these factors result in frequent changes in the fair value
of the Partnership?s open positions, and consequently, in its
earnings and cash flow.

The Partnership?s total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership?s open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.
The Partnership?s past performance is not necessarily
indicative of its future results. Any attempt to numerically
quantify the Partnership?s market risk is limited by the
uncertainty of its speculative trading. The Partnership?s
speculative trading may cause future losses and volatility (i.e.,
?risk of ruin?) that far exceed the Partnership?s experience to
date or any reasonable expectations based upon historical changes
in market value.

Quantifying the Partnership?s Trading Value at Risk
The following quantitative disclosures regarding the Partnership?s
market risk exposures contain ?forward-looking statements? within
the meaning of the safe harbor from civil liability provided for
such statements by the Private Securities Litigation Reform Act of
1995 (set forth in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934). All
quantitative disclosures in this section are deemed to be forward-
looking statements for purposes of the safe harbor, except for
statements of historical fact.

The Partnership accounts for open positions on the basis of mark-
to-market accounting principles. Any loss in the market value of
the Partnership?s open positions is directly reflected in the
Partnership?s earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures, forwards and options are settled daily
through variation margin.
The Partnership?s risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
(?VaR?). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership?s
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors (?market risk factors?) to which the portfolio is
sensitive. The historical observation period of the Partner-
ship?s VaR is approximately four years. The one-day 99%
confidence level of the Partnership?s VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.
In other words, one-day VaR for a portfolio is a number such that
losses in this portfolio are estimated to exceed the VaR only one
day in 100. VaR typically does not represent the worst-case
outcome.

VaR is calculated using historical simulation. Demeter uses
approximately four years of daily market data (1,000
observations) and revalues its portfolio (using delta-gamma
approximations) for each of the historical market moves that
occurred over this time period. This generates a probability
distribution of daily ?simulated profit and loss? outcomes. The
VaR is the appropriate percentile of this distribution. For
example, the 99% one-day VaR would represent the 10th worst
outcome from Demeter?s simulated profit and loss series.

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-traded instruments and are also not based on exchange
and/or dealer based margin requirements.

VaR models, including the Partnership?s, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve. Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Advisor in their daily risk management
activities. Please further note that VaR as described above may
not be comparable to similarly titled measures used by other
entities.

The Partnership?s Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total net assets
by primary market risk category at June 30, 2003 and 2002. At
June 30, 2003 and 2002, the Partnership?s total capitalization
was approximately $145 million and $58 million, respectively.

Primary Market June 30, 2003 June 30, 2002
Risk Category Value at Risk Value at Risk

Interest Rate (1.98)% (3.24)%
Currency (0.79) (2.91)
Equity (0.36) (0.16)
Commodity (1.62) (0.75)
Aggregate Value at Risk (2.67)% (4.30)%

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 above represents the VaR
of the Partnership?s open positions across all the market
categories, and is less than the sum of the VaR(s) for all such
market categories due to the diversification benefit across asset
classes.

The table above represents the VaR of the Partnership?s open
positions at June 30, 2003 and 2002 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership?s
only business is the speculative trading of futures, forwards and
options, the composition of its trading portfolio can change
significantly over any given time period, or even within a single
trading day. Any changes in open positions could positively or
negatively materially impact market risk as measured by VaR.

The table below supplements the quarter-end VaR by presenting the
Partnership?s high, low and average VaR, as a percentage of total
net assets for the four quarterly reporting periods from July 1,
2002 through June 30, 2003.

Primary Market Risk Category High Low Average
Interest Rate (2.57)% (1.23)% (1.75)%

Currency (3.42) (0.79) (2.02)

Equity (0.36) (0.00) (0.10)

Commodity (2.61) (1.62) (2.05)

Aggregate Value at Risk (4.98)% (2.66)% (3.48)%

Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements. Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by the
Partnership to typically be many times the total capitalization of
the Partnership. The value of the Partnership?s open
positions thus creates a ?risk of ruin? not usually found in other
investments. The relative size of the positions held may cause
the Partnership to incur losses greatly in excess of VaR within a
short period of time, given the effects of the leverage employed
and market volatility. The VaR tables above, as well as the past
performance of the Partnership, give no indication of such ?risk
of ruin?. In addition, VaR risk measures should be viewed in light
of the methodology?s limitations, which include the following:
* past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
* changes in portfolio value caused by market movements may
differ from those of the VaR model;
* VaR results reflect past trading positions while future risk
depends on future positions;
* VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
* the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

The VaR tables above present the results of the Partnership?s VaR
for each of the Partnership?s market risk exposures and on an
aggregate basis at June 30, 2003 and 2002, and for the end of the
four quarterly reporting periods from July 1, 2002 through
June 30, 2003. Since VaR is based on historical data, VaR should
not be viewed as predictive of the Partnership?s future financial
performance or its ability to manage or monitor risk. There can
be no assurance that the Partnership?s actual losses on a
particular day will not exceed the VaR amounts indicated above or
that such losses will not occur more than once in 100 trading
days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial.

At June 30, 2003, the Partnership?s cash balance at Morgan Stanley
DW was approximately 86% of its total net asset value. A decline
in short-term interest rates will result in a decline in the
Partnership?s cash management income. This cash flow risk is not
considered to be material.

Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership?s market-
sensitive instruments, in relation to the Partnership?s net
assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures - constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.
The Partnership?s primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Advisor
for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
results of the Partnership?s risk controls to differ materially
from the objectives of such strategies. Government interventions,
defaults and expropriations, illiquid markets, the emergence of
dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market
participants, increased regulation and many other factors could
result in material losses as well as in material changes to the
risk exposures and the risk management strategies of the
Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at June 30, 2003, by market sector. It may be
anticipated, however, that these market exposures will
vary materially over time.

Interest Rate. The primary market exposure of the Partnership at
June 30, 2003 was to the global interest rate complex. Exposure
was primarily spread across the Japanese, European and U.S.
interest rate sectors. Interest rate movements directly affect
the price of the sovereign bond futures positions held by the
Partnership and indirectly affect the value of its stock index
and currency positions. Interest rate movements in one country,
as well as relative interest rate movements between countries,
materially impact the Partnership?s profitability. The
Partnership?s primary interest rate exposure is generally to
interest rate fluctuations in the U.S. and the other G-7
countries. The G-7 countries consist of France, the U.S.,
Britain, Germany, Japan, Italy, and Canada. 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 exposures of the Partnership for the
foreseeable future. The speculative futures positions held by the
Partnership may range from short to long-term instruments.
Consequently, changes in short, medium or long-term interest
rates may have an effect on the Partnership.

Currency. The second largest market exposure of the
Partnership at June 30, 2003 was to the currency sector. The
Partnership?s currency exposure is to exchange rate fluctuations,
primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency pairs.
Interest rate changes as well as political and general economic
conditions influence these fluctuations. The Partnership trades
a large number of currencies, including cross-rates ? i.e.,
positions between two currencies other than the U.S. dollar. At
June 30, 2003, the Partnership?s major exposures were to the
euro, Japanese yen and British pound currency crosses, as well as
outright U.S. dollar positions. Outright positions consist of
the U.S. dollar vs. other currencies. These other currencies
include major and minor currencies. Demeter does not anticipate
that the risk profile of the Partnership?s currency sector will
change significantly in the future. The currency trading VaR
figure includes foreign margin amounts converted into U.S.
dollars with an incremental adjustment to reflect the exchange
rate risk inherent to the U.S.-based Partnership in expressing
VaR in a functional currency other than U.S. dollars.

Equity. The Partnership?s primary equity exposure at June 30,
2003 was to equity price risk in the G-7 countries. The stock
index futures traded by the Partnership are by law limited to
futures on broadly-based indices. At June 30, 2003, the
Partnership?s primary exposure was to the S&P 500 (U.S.) stock
index. The Partnership is exposed to the risk of adverse
price trends or static markets in the U.S. and Japanese stock
indices. Static markets would not cause major market changes but
would make it difficult for the Partnership to avoid being
?whipsawed? into numerous small losses.

Commodity.
Energy. At June 30, 2003, the Partnership?s energy exposure
was primarily to futures contracts in crude oil. Price
movements in this market result from political developments
in the Middle East, weather patterns and other economic
fundamentals. Significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in the future.

Metals. The Partnership?s metals exposure at June 30, 2003
was to fluctuations in the price of base metals, such as
zinc. Economic forces, supply and demand inequalities,
geopolitical factors and market expectations influence price
movements in these markets. The Trading Advisor, from time
to time, takes positions when market opportunities develop
and Demeter anticipates that the Partnership 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 June 30, 2003:

Foreign Currency Balances. The Partnership?s primary foreign
currency balance at June 30, 2003 was in Japanese yen. 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
among different market sectors and trading approaches, and
monitoring the performance of the Trading Advisor daily. In
addition, the Trading Advisor establishes diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.

Demeter monitors and controls the risk of the Partnership?s non-
trading instrument, cash. Cash is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.

Item 4. CONTROLS AND PROCEDURES
(a) As of the end of the period covered by this quarterly
report, the President and Chief Financial Officer of the
general partner, Demeter, 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.

(b) There have been no significant changes in the
Partnership?s internal controls or in other factors that
could significantly affect these controls subsequent to
the date of their evaluation.
PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
None.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership initially registered 100,000 Units in its initial
offering of March 3, 1994 and subsequent supplemental offerings.
Through December 31, 1994, 66,708.624 Units were sold, leaving
33,291.376 Units unsold, which were ultimately de-registered. The
aggregate price of the Units sold through December 31, 1994 was
$67,394,951.

On December 1, 2000, the Partnership converted each outstanding
Unit into 100 Units as it became one of the Charter series of
funds. The Partnership registered an additional 1,750,000 Units
pursuant to a new Registration Statement on Form S-1 (SEC File
Number 333-41684) which became effective on October 11, 2000.

The Partnership registered an additional 3,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on July 29, 2002 (SEC File Number 333-85074).

The Partnership registered an additional 7,500,000 Units pursuant
to a Registration Statement on Form S-1, which became effective on
February 26, 2003 (SEC File Number 333-103168).
The managing underwriter for the Partnership is Morgan
Stanley DW.

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.

Through June 30, 2003, 11,487,850.344 Units were sold, leaving
7,433,012.056 Units unsold. The aggregate price of the Units sold
through June 30, 2003 was $175,228,581.

Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the ?Use of
Proceeds? section of the prospectus included as part of the above
referenced Registration Statements.

Item 5. OTHER INFORMATION
Changes in Management. The following changes have been made to
the Board of Directors and Officers of Demeter:

Mr. Robert E. Murray resigned the position of Chairman of the
Board of Directors of Demeter.

Mr. Jeffrey A. Rothman, President and Director of Demeter, was
named Chairman of the Board of Directors of Demeter.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership, is incorporated by
reference to Exhibit A of the Partnership?s Prospectus,
dated February 26, 2003, filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, as amended, on March 18, 2003.
3.02 Certificate of Limited Partnership, dated March 1, 1994,
is incorporated by reference to Exhibit 3.02 of the
Partnership?s Registration Statement on Form S-1 (File
No. 33-71654) filed with the Securities and Exchange
Commission on November 12, 1993.
3.03 Certificate of Amendment of Certificate of Limited
Partnership, dated October 11, 2000, is incorporated by
reference to Exhibit 3.03 of the Partnership?s Post-
Effective Amendment No. 1 to the Registration Statement
on Form S-1 (File No. 333-41684) filed with the
Securities and Exchange Commission on March 30, 2001.
3.04 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001, (changing its name
from Morgan Stanley Dean Witter Charter DWFCM L.P.) is
incorporated by reference to Exhibit 3.01 of the
Partnership?s Form 8-K (File No. 0-26282) filed with the
Securities and Exchange Commission on November 6, 2001.

10.01 Amended and Restated Management Agreement among the
Partnership, Demeter and MSFCM, dated as of December 1,
2000, is incorporated by reference to Exhibit 10.01 of
the Partnership?s Form 10-K (File No. 0-26282) for fiscal
year ended December 31, 2001, filed on March 28, 2002.
10.02 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units is
incorporated by reference to Exhibit B of the
Partnership?s Prospectus, dated February 26, 2003, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 18, 2003.
10.03 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW, dated as of May 19,
2000, is incorporated by reference to Exhibit 10.01 of
the Partnership?s Form 8-K (File No. 0-26282) filed with
the Securities and Exchange Commission on November 6,
2001.
10.04 Commodity Futures Customer Agreement between MS & Co. and
the Partnership, and acknowledged and agreed to by Morgan
Stanley DW, dated as of May 1, 2000, is incorporated by
reference to Exhibit 10.02 of the Partnership?s Form 8-K
(File No. 0-26282) filed with the Securities and Exchange
Commission on November 6, 2001.
10.05 Customer Agreement between the Partnership and MSIL,
dated as of May 1, 2000, is incorporated by reference to
Exhibit 10.04 of the Partnership?s Form 8-K (File No. 0-
26282) filed with the Securities and Exchange Commission
on November 6, 2001.
10.06 Foreign Exchange and Options Master Agreement between MS
& Co. and the Partnership, dated as of August 30, 1999,
is incorporated by reference to Exhibit 10.05 of the
Partnership?s Form 8-K (File No. 0-26282) filed with the
Securities and Exchange Commission on November 6, 2001.
10.07 Amended and Restated Escrow Agreement, dated as of August
31, 2002, among the Partnership, Morgan Stanley Charter
Graham L.P., Morgan Stanley Charter Millburn L.P., Morgan
Stanley Charter Welton L.P., Morgan Stanley DW, and JP
Morgan Chase Bank, is incorporated by reference to
Exhibit 10.10 of the Partnership?s Registration Statement
on Form S-1 (File No. 333-103168) filed with the
Securities and Exchange Commission on February 13, 2003.

10.08 Form of Subscription Agreement Update Form is
incorporated by reference to Exhibit C of the
Partnership?s Prospectus, dated February 26, 2003, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 18, 2003.
10.09 Securities Account Control Agreement among the
Partnership, MS & Co., and Morgan Stanley DW, dated as of
May 1, 2000, is incorporated by reference to Exhibit
10.03 of the Partnership?s Form 8-K (File No. 0-26282)
filed with the Securities and Exchange Commission on
November 6, 2001.
31.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to rules 13a-15(e) and 15d-15(e), as adopted
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 rules 13a-15(e) and 15d-15(e),
as adopted 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.
(B) Reports on Form 8-K. ? None.

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 MSFCM L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

August 14, 2003 By: /s/ Jeffrey D. Hahn
Jeffrey D. Hahn
Director and 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.

? 3?

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