MORGAN STANLEY CHARTER MSFCM LP - 10-Q Quarterly Report

Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2004 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
330 Madison Avenue, 8th Floor
New York, NY 10017
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 905-2700

825 Third Avenue, 9th Floor, New York, NY 10022

(Former name, former address, and former fiscal year, if changed
since last report)

Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No___________

Indicate by check-mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

MORGAN STANLEY CHARTER MSFCM L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

September 30, 2004

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 CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)

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

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

September 30, 2004

(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, 2003 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, but not limited to, 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.

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

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 &
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.

On February 27, 2002, the Partnership received notification of a
preliminary entitlement to payment from the Sumitomo Copper
Litigation Settlement Administrator, and the Partnership has
received settlement award payments in the amount of $292,406 as of
August 30, 2002 and $2,880 as of July 30, 2004. Any amounts
received are accounted for in the period received, for the benefit
of the limited partners at the date of receipt.

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 the
Partnership interest income at a rate equal to that earned by
Morgan Stanley DW on its U.S. Treasury bill investments. In
addition, Morgan Stanley DW pays interest received from MS & Co.
and MSIL with respect to such Partnership's assets deposited as
margin. 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, but not limited to, 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 inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.

The market value of exchange-traded contracts is based on the
settlement price quoted by the exchange on the day with respect
to which market value is being determined. If an exchange-traded
contract could not have been liquidated on such day due to the
operation of daily limits or other rules of the exchange, the
settlement price shall be the settlement price on the first
subsequent day on which the contract could be liquidated. The
MORGAN STANLEY CHARTER MSFCM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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;
3) Terms require or permit net settlement.

Generally, derivatives include futures, forward, swaps or options
contracts and other financial instruments with similar
characteristics such as caps, floors, and collars.

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

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
$ $ $

Sep. 30, 2004 7,913,904 (3,708,081) 4,205,823 Jun. 2006 Jan. 2005
Dec. 31, 2003 5,810,267 1,100,595 6,910,862 Mar. 2004 Mar. 2004

The Partnership has credit risk associated with counterparty non-
performance. 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 Morgan Stanley DW,
MS & Co., and MSIL act as the futures commission merchants or the
counterparties, with respect to most of the Partnership's assets.
Exchange-traded futures, forward, 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, forward, and futures-
styled options contracts, are required, pursuant to regulations
MORGAN STANLEY CHARTER MSFCM L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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, forward, and futures-styled options

contracts, including an amount equal to the net unrealized gains
(losses) on all open futures, forward, and futures-styled options
contracts, which funds, in the aggregate, totaled $190,700,414
and $167,619,490 at September 30, 2004 and December 31, 2003,
respectively. With respect to the Partnership's off-exchange-
traded forward currency contracts, there are no daily exchange-
required settlements of variation in value nor is there any
requirement that an amount equal to the net unrealized gains
(losses) on open forward contracts be segregated. However, the
Partnership is required to meet margin requirements equal to the
net unrealized loss on open contracts in the Partnership accounts
with the counterparty, which is accomplished by daily maintenance
of the cash balance in a custody account held at Morgan Stanley
DW for the benefit of MS & Co. With respect to those off-
exchange-traded forward currency contracts, the 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
MORGAN STANLEY CHARTER MSFCM L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

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 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
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 expects to
have, any capital assets. Redemptions, exchanges and sales of
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.

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 program to take
advantage of price movements in the futures, forwards, and options
markets. The following presents a summary of the Partnership's
operations for the three and nine month periods ended September
30, 2004 and 2003 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 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 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 trading profit (loss)"
for open (unrealized) contracts, and recorded as "Realized
trading profit (loss)" when open positions are closed out. The
sum of these amounts, along with the "Proceeds from Litigation
Settlement", 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 foreign currency forward contracts is based on
the spot rate as of the close of business, New York City time, on
a given day. 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 Three and Nine Months Ended September 30, 2004
The Partnership recorded revenues including interest income
totaling $3,379,192 and expenses totaling $3,738,552, resulting in
a net loss of $359,360 for the three months ended September 30,
2004. The Partnership's net asset value per Unit decreased from
$16.76 at June 30, 2004 to $16.72 at September 30, 2004.

The most significant trading losses of approximately 4.1% were
recorded in the currency markets during July and September from
positions in the Australian dollar relative to the U.S. dollar as
the value of the Australian dollar moved without consistent
direction due to volatility in gold prices, geopolitical concerns
regarding terror warnings in the Pacific Rim, and the decision by
the Reserve Bank of Australia to raise interest rates. Elsewhere
in the currency markets, losses resulted from positions in the
euro versus the U.S. dollar and the Japanese yen as the value of
the euro experienced short-term price volatility throughout the
quarter due to higher energy prices and uncertainty about the
direction of the "euro-zone" economy. Smaller losses were
incurred, primarily during September, from short positions in the
Swiss franc against the U.S. dollar as the Swiss currency's "safe-
haven" status pushed its value higher in reaction to major
geopolitical concerns. Within the metals markets, losses of
approximately 1.8% were experienced during September from short
positions in nickel futures as base metals prices increased on
continued demand from China and reports of lower-than-expected
inventories. Elsewhere in the metals markets, losses were
recorded primarily during July from short positions in copper
futures as prices moved higher due to speculation of increased
demand and reduced supply from Mexico. Smaller losses of
approximately 0.4% were recorded in the global stock index futures
markets during July and August from short positions in S&P 500
Index futures as prices temporarily bounced higher due to better-
than-expected U.S. economic data. A portion of the Partnership's
overall losses for the quarter was offset by gains of
approximately 5.5% generated in the energy markets, primarily
during July and September, from long positions in crude oil as
prices strengthened due to continuing fears about potential
terrorist attacks against the production and refining facilities
in Saudi Arabia and Iraq, concerns that top Russian oil producer,
Yukos, may break up or stop selling oil, major disruptions in oil
production in the Gulf of Mexico due to Hurricane Ivan, and
growing civil unrest in Nigeria. Elsewhere in the energy markets,
gains were recorded during August from short positions in natural
gas futures as prices drifted lower due to record reserves and
heavily reduced market demand. Additional gains of approximately
2.4% were recorded in the global interest rate futures markets,
primarily during August and September, from long positions
in European interest rate futures as prices trended higher,
boosted by a surge in oil prices, uncertainty in the global equity
markets, and testimony by U.S. Federal Reserve Chairman Alan
Greenspan depicting a somewhat less optimistic view about the
immediate future of the U.S. economy.

The Partnership recorded losses net of interest income totaling
$30,255,789 and expenses totaling $11,770,360, resulting in a net
loss of $42,026,149 for the nine months ended September 30, 2004.
The Partnership's net asset value per Unit decreased from $20.72
at December 31, 2003 to $16.72 at September 30, 2004.

The most significant trading losses of approximately 18.8% were
recorded in the currency markets from positions in the Japanese
yen versus the U.S. dollar. These losses were experienced
primarily during the first and second quarters from both long and
short positions in the yen relative to the U.S. dollar as the
value of the yen experienced significant short-term price
volatility. Conflicting economic data regarding a Japanese
economic recovery, uncertainty regarding currency market
intervention by the Bank of Japan, geopolitical concerns stemming
from instability in Iraq, and uncertainty regarding the direction
of U.S. and Japanese interest rates contributed to the yen's
trendless movement. Losses were also recorded from positions in
the Singapore dollar against the U.S. dollar as the value of the
Singapore dollar experienced significant "whipsawing"
during the first and second quarters in tandem with the Japanese
yen. The price volatility in the Japanese yen also resulted in
losses from crossrate positions in the euro versus the Japanese
yen for the aforementioned reasons. In the third quarter,
volatility in the euro was responsible for losses in euro/Japanese
yen crossrate positions as the value of the euro moved in a
trendless pattern throughout the quarter due to higher energy
prices and uncertainty about the direction of the "euro-zone"
economy. Additional losses of approximately 2.4% were incurred in
the metals markets, primarily during April, from long futures
positions in gold as precious metals prices weakened due to the
strength in the U.S. dollar. Elsewhere in the metals markets,
losses were recorded primarily during September from short
positions in nickel futures as base metals prices increased on
continued demand from China and reports of lower-than-expected
inventories. Smaller losses of approximately 0.7% were recorded
in the global stock index futures markets during March and May
from long positions in S&P 500 Index futures as equity prices
decreased on geopolitical concerns. During July and August, short
positions in S&P 500 Index futures resulted in further losses as
prices temporarily bounced higher due to better-than-expected U.S.
economic data. A portion of the Partnership's overall losses for
the first nine months of the year was offset by gains of
approximately 4.8% in the energy markets. During February, May,
July, and September, long positions in crude oil profited as
prices trended higher due to consistent news of tight
supply, continuing geopolitical concerns in the Middle East,
concerns that top Russian oil producer, Yukos, may break up or
stop selling oil, major disruptions in oil production in the Gulf
of Mexico due to Hurricane Ivan, and growing civil unrest in
Nigeria. Additional gains of approximately 3.4% were recorded in
the global interest rate futures markets from long positions in
European interest rate futures during February, March, August, and
September as prices rallied on uncertainty in the global equity
markets, disappointing economic data, "safe-haven" buying amid
major geopolitical concerns, and a surge in oil prices.

For the Three and Nine Months Ended September 30, 2003
The Partnership recorded losses net of interest income totaling
$9,647,940 and expenses totaling $3,222,414, resulting in a net
loss of $12,870,354 for the three months ended September 30, 2003.
The Partnership's net asset value per Unit decreased from $23.06
at June 30, 2003 to $21.23 at September 30, 2003.

The most significant trading losses of approximately 6.0% were
recorded in the global interest rate markets primarily during
September from short positions in Japanese, European, and U.S.
interest rate futures as bond prices reversed higher due to
renewed skepticism regarding a global economic recovery and lower
global equity prices. In the metals markets, losses of
approximately 0.8% during August resulted from long futures
positions in aluminum and copper as base metal prices were weighed
down by heavy technically-based selling and expectations for
increased output during the year 2004. Losses of approximately
0.7% were recorded in the global stock index markets during early
August and late September from long positions in U.S. stock index
futures as global equity prices retreated amid a broad-based sell-
off prompted by a steady stream of economic data that raised
concerns about the strength of the global economy. Smaller losses
of approximately 0.4% were incurred in the currency markets from
long positions in the Australian dollar versus the U.S. dollar
during July as the value of the U.S. currency strengthened amid
better-than-expected U.S. earnings data. A portion of the
Partnership's overall losses was offset by gains of approximately
1.1% recorded in the energy markets from short positions in
natural gas futures during July as prices declined amid increased
reserves and mild summer weather conditions.

The Partnership recorded losses net of interest income totaling
$2,561,599 and expenses totaling $10,461,360, resulting in a net
loss of $13,022,959 for the nine months ended September 30, 2003.
The Partnership's net asset value per Unit decreased from $21.84
at December 31, 2002 to $21.23 at September 30, 2003.

The most significant trading losses of approximately 5.6% were
incurred in the metals markets during May and June from short
positions in aluminum and copper futures as prices reversed
higher, buoyed by a rebound in U.S. equity prices and hopes for
increased industrial demand. During August, long futures
positions in aluminum and copper experienced losses as prices were
weighed down by heavy technically-based selling and expectations
for increased output during the year 2004. Losses of
approximately 1.7% were recorded in the global interest rate
markets from short positions in Japanese, Australian, and European
interest rate futures during September as bond prices reversed
higher due to renewed skepticism regarding a global economic
recovery and lower equity prices. Further losses in this sector
stemmed from long positions in Australian interest rate futures
during March as prices reversed sharply lower amid reports of
advancing Coalition forces in the Persian Gulf region. A portion
of the Partnership's losses during the first nine months of the
year was offset by gains of approximately 9.4% in the energy
markets 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. During July, short positions in natural gas futures
yielded gains as prices declined amid increased reserves and mild
summer weather conditions. Additional gains of approximately 5.3%
in the currency markets were produced from long positions in the
euro versus the British pound during January 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 during January, February, April, and May 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.

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.

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, forwards, and options 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 contracts
in the Partnership accounts with the counterparty, which is
accomplished by daily maintenance of the cash balance in a
custody account held at Morgan Stanley DW for the benefit of MS &
Co.

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
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 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
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 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
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
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 September 30, 2004 and 2003.
At September 30, 2004 and 2003, the Partnership's total
capitalization was approximately $188 million and $158 million,
respectively.

Primary Market September 30, 2004 September 30, 2003
Risk Category Value at Risk Value at Risk

Interest Rate (1.94)% (0.09)%
Currency (1.11) (1.98)
Equity - -
Commodity (2.73) (1.98)
Aggregate Value at Risk (4.38)% (2.80)%

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, which could
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 October 1, 2003 through September 30, 2004.
Primary Market Risk Category High Low Average
Interest Rate (2.27)% (0.84)% (1.80)%

Currency (2.71) (1.11) (1.86)

Equity (0.64) - (0.20)

Commodity (4.46) (0.42) (2.40)

Aggregate Value at Risk (5.78)% (2.61)% (4.04)%

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;
? 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 September 30, 2004 and 2003, and for the four
quarter-end reporting periods from October 1, 2003 through
September 30, 2004. 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 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
(approximately 93% as of September 30, 2004) of its available
assets in cash at Morgan Stanley DW. 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
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 expro-
priations, 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 September 30, 2004, 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
September 30, 2004 was to the global interest rate futures
sector. Exposure was primarily spread across the European,
Japanese, and U.S. interest rate sectors. Interest rate
movements directly affect the price of the sovereign bond futures
positions held by the Partnership and 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 countries - 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 September 30, 2004 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 number of currencies, including cross-rates - i.e., positions
between two currencies other than the U.S. dollar. At September
30, 2004, the Partnership's major exposures were to the euro,
Japanese yen, 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.

Commodity.
Energy. The Partnership's energy exposure at September 30,
2004 was shared primarily by futures contracts in crude oil
and 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 price resulting from weather patterns and
supply and demand factors and will likely continue in this
choppy pattern.

Metals. The Partnership's metals exposure at September 30,
2004 was to fluctuations in the price of precious metals,
such as gold, and base metals, such as copper, aluminum,
zinc, and nickel. 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 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 September 30, 2004:

Foreign Currency Balances. The Partnership's primary
foreign currency balances at September 30, 2004 were in the
Japanese yen and Australian dollar. 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 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
(a) 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.

(b) There have been no significant changes during the period
covered by this quarterly report 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
1164: Registration Statement on Form S-1 Units Registered
File Number

Initial Registration 100,000.000 February 3, 1994 33-71654
Pre-conversion 100,000.000

Units sold through 10/17/97 66,708.624
Units unsold through 10/17/97 33,291.376
(Ultimately de-registered)

Commencing with December 1, 2000 monthly closing and with
becoming a member of the Charter series of funds, each previously
outstanding Unit of the Partnership was converted into 100 Units,
totaling 6,670,862.400 Units (pre-conversion).

Additional Registration 1,750,000.000 October 11, 2000 333-41684
Additional Registration 3,000,000.000 July 29, 2002 333-85074
Additional Registration 7,500,000.000 February 26, 2003 333-103168
Additional Registration 18,000,000.000 April 28, 2004 333-113877
Total Units Registered 30,250,000.000

Units sold post-conversion 11,321,022.721
Units unsold through 9/30/04 18,928,977.279
Total Units sold through
9/30/04 17,991,885.121
(pre-and post-conversion)

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.
The aggregate price of the Units sold through September
30, 2004 was $305,205,789.

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
Management. The following changes have been made to the Board
of Directors and Officers of Demeter:

Mr. Kevin Perry, Chief Financial Officer of Demeter, was confirmed
as a principal of Demeter by the National Futures Association on
September 3, 2004.

Mr. William D. Seugling, Director of Demeter, was confirmed as a
principal of Demeter by the National Futures Association on
October 11, 2004.

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 April 28, 2004, filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, as amended, on May 4, 2004.
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 April 28, 2004, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on May 4, 2004.
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 April 28, 2004, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on May 4, 2004.
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)

November 15, 2004 By: /s/ Kevin Perry
Kevin Perry
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-

1412:

1420: