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, 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
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___________

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

June 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 OPERATIONS
(Unaudited)

MORGAN STANLEY CHARTER MSFCM L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 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

June 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.

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

delivery of an instrument at a specified date and price. Risk
arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms
of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.

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

The Partnership's contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting 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;

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

2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3) Terms require or permit net settlement.

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

The net unrealized gains (losses) on open contracts, reported as a
component of "Equity in futures interests trading accounts" on the
statements of financial condition, and their longest contract
maturities were as follows:
Net Unrealized Gains (Losses)
On Open Contracts Longest Maturities

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

Jun. 30, 2004 (6,412,221) (15,537,205) (21,949,426) Mar. 2006 Sep. 2004
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 is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.

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

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
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 $196,673,508
and $167,619,490 at June 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 variations in value nor is there any
requirement that an amount equal to the net unrealized gains
(losses) on open forward contracts be segregated, however, MS &
Co. and Morgan Stanley DW will make daily settlements of losses
as needed. With respect to those off-exchange-traded forward
MORGAN STANLEY CHARTER MSFCM L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

currency contracts, the Partnership is at risk to the ability of
MS & Co., the sole counterparty on all such contracts, to
perform. The Partnership has a netting agreement with MS & Co.
This agreement, which seeks to reduce both the Partnership's and
MS & Co.'s exposure on off-exchange-traded forward currency
contracts, should materially decrease the Partnership's credit
risk in the event of MS & Co.'s bankruptcy or insolvency.

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 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.

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 six month periods ended June 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, and the
sum of these amounts constitutes the Partnership's trading
results. The market value of a futures contract is the settlement
price on the exchange on which that futures contract is traded on
a particular day. The value of 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 Quarter and Six Months Ended June 30, 2004
The Partnership recorded losses net of interest income totaling
$40,020,650 and expenses totaling $4,142,747, resulting in a net
loss of $44,163,397 for the quarter ended June 30, 2004. The
Partnership's net asset value per Unit decreased from $21.05 at
March 31, 2004 to $16.76 at June 30, 2004.

The most significant trading losses of approximately 10.1% were
generated in the currency markets from positions in the Japanese
yen and Singapore dollar versus the U.S. dollar. These losses
were experienced throughout the quarter from both long and short
positions in the Japanese yen relative to the dollar as the value
of the yen experienced significant short-term price volatility due
to conflicting economic data regarding a Japanese economic
recovery, uncertainty regarding a currency market intervention by
the Bank of Japan, geopolitical concerns stemming from terror
warnings and instability in Iraq, and uncertainty regarding the
direction of U.S. and Japanese interest rates. 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" throughout the quarter in tandem with the
Japanese yen. Elsewhere in the currency markets, losses
were recorded primarily during May and June from positions in the
euro relative to the British pound. During May, losses were
recorded from long positions in the euro versus the pound as the
value of the euro moved lower against the pound following the Bank
of England's decision to raise interest rates. Further losses
were recorded during June as the value of the euro experienced
short-term volatile price movements against most major currencies.
In the global interest rate futures markets, losses of
approximately 5.2% were recorded during April from long European,
Japanese and Australian interest rate futures positions as prices
tumbled following the release of stronger than expected U.S. jobs
data. Losses continued in May from short positions in Japanese
interest rate futures as prices were pushed higher by the Bank of
Japan's decision to maintain current interest rate levels and
strong results from an auction of Japanese Government bonds.
Smaller losses were experienced during June from short positions
in European interest rate futures as prices increased due to
weaker than expected economic reports and diminished expectations
for the U.S. Federal Reserve to maintain an aggressive policy
towards tightening interest rates. In the metals markets, losses
of approximately 2.4% were recorded during April from long futures
positions in gold and copper as both precious and base metals
prices weakened due to the strength in the U.S. dollar. Smaller
losses were incurred during May from short positions in aluminum
futures as prices increased due to a weaker U.S. dollar and news
of strong demand from Asia. Within the energy markets,
losses of approximately 1.6% were recorded during April and June
from long positions in natural gas futures as prices reversed
sharply lower due to news of increased supply.

The Partnership recorded losses net of interest income totaling
$33,634,981 and expenses totaling $8,031,808, resulting in a net
loss of $41,666,789 for the six months ended June 30, 2004. The
Partnership's net asset value per Unit decreased from $20.72 at
December 31, 2003 to $16.76 at June 30, 2004.

The most significant trading losses of approximately 15.3% were
recorded in the currency markets from positions in the Japanese
yen and Singapore dollar versus the U.S. dollar. These losses
were experienced throughout the year from both long and short
positions in the Japanese yen relative to the U.S. dollar as the
value of the yen experienced significant short-term price
volatility due to conflicting economic data regarding a Japanese
economic recovery, uncertainty regarding an intervention by the
Bank of Japan in the currency markets, geopolitical concerns
stemming from terror warnings and instability in Iraq, and
uncertainty regarding the direction of U.S. and Japanese interest
rates. 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" throughout the year in
tandem with the Japanese yen. This price volatility in the
Japanese yen also resulted in losses from cross-rate positions in
the euro versus the Japanese yen as the yen experienced volatile
price movements against most major currencies for the
aforementioned reasons. Elsewhere in the currency markets, losses
were experienced during May and June from positions in the euro
versus the British pound. During May, losses were recorded from
long positions in the euro versus the British pound as the value
of the euro moved lower against the pound following the Bank of
England's decision to raise interest rates. Further losses were
recorded during June as the value of the euro experienced short-
term volatile price movements against most major currencies.
Within the energy markets, losses of approximately 0.6% were
recorded during April and June from long positions in natural gas
futures as prices reversed sharply lower due to news of increased
supply. Additional losses of approximately 0.5% 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. A portion of the Partnership's
overall losses was offset by gains of approximately 0.9% in the
global interest rate markets, primarily during February and March
from long positions in European and U.S. interest rate futures, as
prices trended higher on speculation about European and U.S.
interest rate policy, uncertainty in global equity markets, and
safe-haven buying following a major terrorist attack in Madrid.

For the Quarter and Six Months Ended June 30, 2003
The Partnership recorded losses net of interest income totaling
$7,719,837 and expenses totaling $2,973,423, resulting in a net
loss of $10,693,260 for the quarter ended June 30, 2003. The
Partnership's net asset value per Unit decreased from $24.81 at
March 31, 2003 to $23.06 at June 30, 2003.

The most significant trading 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 Partnership'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.

The Partnership recorded revenues including interest income
totaling $7,086,341 and expenses totaling $7,238,946, resulting in
a net loss of $152,605 for the six months ended June 30, 2003.
The Partnership's net asset value per 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.

The most significant trading 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.

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/losses on off-exchange-traded forward
currency contracts are settled at the termination of the contract
or more frequently, as agreed upon with each counterparty.

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 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 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.

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 Value at Risk
("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 June 30, 2004 and 2003. At
June 30, 2004 and 2003, the Partnership's total capitalization
was approximately $183 million and $145 million, respectively.

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

Interest Rate (2.27)% (1.98)%
Currency (1.41) (0.79)
Equity - (0.36)
Commodity (0.42) (1.62)
Aggregate Value at Risk (2.61)% (2.67)%

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 July 1, 2003 through June 30, 2004.

Primary Market Risk Category High Low Average
Interest Rate (2.27)% (0.09)% (1.34)%

Currency (2.71) (1.41) (2.08)

Equity (0.64) - (0.20)

Commodity (4.46) (0.42) (2.22)

Aggregate Value at Risk (5.78)% (2.61)% (3.64)%

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 typically found in other
investments. The relative size of the positions held may cause
the Partnership to incur losses greatly in excess of VaR
within a short period of time, given the effects of the leverage
employed and market volatility. The VaR tables above, as well as
the past performance of the Partnership, give no indication of
such "risk of ruin". In addition, VaR risk measures should be
viewed in light of the methodology's limitations, which include
the following:
? past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
? changes in portfolio value caused by market movements may
differ from those of the VaR model;
? VaR results reflect past 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.

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 June 30, 2004 and 2003, and for the four
quarter-end reporting periods from July 1, 2003 through June 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 not needed for margin. These balances and any market
risk they may represent are immaterial.

The Partnership also maintains a substantial portion
(approximately 99% as of June 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
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, 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
June 30, 2004 was to the global interest rate futures sector.
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 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 June 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 large number of currencies, including cross-rates - i.e.,
positions between two currencies other than the U.S. dollar. At
June 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 profile of the Partnership's currency sector will
change significantly in the future.

Commodity.
Metals. The Partnership's metals exposure at June 30, 2004
was to fluctuations in the price of 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, 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, 2004:

Foreign Currency Balances. The Partnership's primary
foreign currency balance at June 30, 2004 was in the
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 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
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 another Registration Statement on Form S-1, which became
effective on February 26, 2003 (SEC File Number 333-103168).

The Partnership registered an additional 18,000,000 Units
pursuant to another Registration Statement on Form S-1, which
became effective on April 28, 2004 (SEC File Number 333-113877).

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, 2004, 17,183,245.704 Units were sold, leaving
19,737,616.696 Units unsold. The aggregate price of the Units
sold through June 30, 2004 was $291,948,509.

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. Effective June 21, 2004, the following changes have
been made to the Board of Directors and Officers of Demeter:

Mr. Jeffrey D. Hahn resigned the position of Chief Financial
Officer and Director of Demeter.
Mr. Todd Taylor, age 41, is a Director of Demeter. Mr.
Taylor began his career with Morgan Stanley in June 1987 as a
Financial Advisor in the Dallas office. In 1995, he joined the
Management Training Program in New York and was appointed Branch
Manager in St. Louis in 1997. Three years later, in 2000, Mr.
Taylor was appointed to a newly created position, Director of
Individual Investor Group ("IIG") Learning and Development,
before becoming the Director of IIG Strategy in 2002. Most
recently, Mr. Taylor has taken on a new role as the High Net
Worth Segment Director. Currently a member of the firm's E-
Learning Council, Mr. Taylor is also a current member of the
Securities Industry/Regulatory Council on Continuing Education.
Mr. Taylor graduated from Texas Tech University with a B.B.A. in
Finance.

Mr. William D. Seugling, age 34, will become a Director of
Demeter once he has registered with the National Futures
Association ("NFA") as a principal, which registration is
currently pending. Mr. Seugling is an Executive Director at
Morgan Stanley and currently serves as Director of Client
Solutions for US Private Wealth Management. Mr. Seugling joined
Morgan Stanley in June 1993 as an Associate in Equity Structured
Products having previously worked in research and consulting for
Greenwich Associates from October 1991 to June 1993. Since 1994,
he has focused broadly on analysis and solutions for wealthy
individuals and families culminating in his current role within
the division. He was named Vice President in 1996 and an
Executive Director in 1999. Mr. Seugling graduated cum laude
from Bucknell University with a B.S. in Management and a
concentration in Chemistry.

Mr. Kevin Perry, age 35, is the Chief Financial Officer of
Demeter. His registration with the NFA as a principal is
currently pending. He currently serves as an Executive Director
and Controller of Client Solutions at Morgan Stanley. Mr. Perry
joined Morgan Stanley in October 2000 and is also Chief Financial
Officer of Morgan Stanley Trust National Association, Van Kampen
Funds Inc. and Morgan Stanley Distribution, Inc. Prior to
joining Morgan Stanley, Mr. Perry worked as an auditor and
consultant in the financial services practice of Ernst & Young
from October 1991 to October 2000. Mr. Perry received a B.S.
degree in Accounting from the University of Notre Dame in 1991
and is a Certified Public Accountant.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership, is incorporated by
reference to Exhibit A of the Partnership's Prospectus,
dated 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)

August 16, 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.

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