MORGAN STANLEY CHARTER WELTON 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, 2002 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 0-25607

MORGAN STANLEY CHARTER WELTON L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-4018063
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Demeter Management Corporation
c/o Managed Futures Department
825 Third Ave., 8th Floor, New York, NY 10022
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (201) 209-8400

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

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

Yes X No___________

MORGAN STANLEY CHARTER WELTON L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2002

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

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

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

MORGAN STANLEY CHARTER WELTON L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 2002 and 2001
(Unaudited)

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

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

June 30, 2002

(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 Welton L.P. (the "Partnership"). The
financial statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 2001 Annual Report
on Form 10-K.

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

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

The 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., Inc. ("MS & Co.") and Morgan Stanley & Co.
International Limited ("MSIL"). Demeter, Morgan Stanley DW, MS &
Co. and MSIL are wholly-owned subsidiaries of Morgan Stanley.
Welton Investment Corporation (the "Trading Advisor") is the
trading advisor to the Partnership.

Effective June 20, 2002 Morgan Stanley Dean Witter & Co. changed
its name to Morgan Stanley.

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

3. Financial Instruments
The Partnership trades futures contracts, options on futures
contracts and forward contracts on physical commodities and other

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

commodity interests, including foreign currencies, financial
instruments, metals, energy and agricultural products. Futures
and forwards represent contracts for delayed delivery of an
instrument at a specified date and price. Risk arises from
changes in the value of these contracts and the potential
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 Standard 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:

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

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.

The net unrealized gains 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
on Open Contracts Longest Maturities
Exchange- Off-Exchange- Exchange- Off-Exchange-
Date Traded Traded Total Traded Traded
$ $ $

Jun. 30, 2002 1,192,949 - 1,192,949 Mar. 2003 -
Dec. 31, 2001 126,045 - 126,045 Sep. 2002 -

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

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

The Partnership also has credit risk because Morgan Stanley DW, MS
& Co. and MSIL act as the futures commission merchants or the
counterparties with respect to most of the Partnership's assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Each of Morgan Stanley DW, MS & Co. and
MSIL, as a futures commission merchant for the Partnership's
exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures Trading
Commission ("CFTC"), to segregate from their own assets, and for
the sole benefit of their commodity customers, all funds held by
them with respect to exchange-traded futures and futures-styled
options contracts, including an amount equal to the net unrealized
gains on all open futures and futures-styled options contracts,
which funds, in the aggregate, totaled $16,170,582 and $17,452,742
at June 30, 2002 and December 31, 2001, respectively. With respect
to the Partnership's off-exchange-traded forward currency

MORGAN STANLEY CHARTER WELTON L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

contracts, there are no daily settlements of variations in value
nor is there any requirement that an amount equal to the net
unrealized gains on open forward contracts be segregated. With
respect to those off-exchange-traded forward currency contracts,
the Partnership is at risk to the ability of MS & Co., the sole
counterparty on all of such contracts, to perform. The
Partnership has a netting agreement with MS & Co. This agreement,
which seeks to reduce both the Partnership's and MS & Co.'s
exposure on off-exchange-traded forward currency contracts, should
materially decrease the Partnership's credit risk in the event of
MS & Co.'s bankruptcy or insolvency.

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

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

The Partnership's investment in futures, forwards and options may,
from time to time, be illiquid. Most U.S. futures exchanges limit
fluctuations in prices during a single day by regulations referred
to as "daily price fluctuations limits" or "daily limits". Trades
may not be executed at prices beyond the daily limit. If the
price for a particular futures or options contract has increased
or decreased by an amount equal to the daily limit, positions in
that futures or options contract can neither be taken nor

liquidated unless traders are willing to effect trades at or
within the limit. Futures prices have occasionally moved the daily
limit for several consecutive days with little or no trading.
These market conditions could prevent the Partnership from
promptly liquidating its futures or options contracts and result
in restrictions on redemptions.

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

There are no material trends, events, or uncertainties known at
the present time that will result in or that are reasonably likely
to result in the Partnership's liquidity increasing or decreasing
in any material way.

The Partnership has never had illiquidity affect a material
portion of its assets.

The Partnership has no off-balance sheet arrangements, nor
contractual obligations or commercial commitments to make future
payments that would affect the Partnership's liquidity or capital
resources. The contracts traded by the Partnership are accounted
for a trade-date basis and marked to market on a daily basis. 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.

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, nor
any expected material changes to the Partnership's capital
resource arrangements at the present time.

Results of Operations
General. The Partnership's results depend on the Trading Advisor
and the ability of the Trading Advisor's trading programs to take
advantage of price movements or other profit opportunities in the

futures, forwards and options markets. The following presents a
summary of the Partnership's operations for the three and six
month periods ended June 30, 2002 and 2001, and a general
discussion of its trading activities during each period. It is
important to note, however, that the Trading Advisor trades in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Advisor or will be profitable in the future.
Consequently, the results of operations of the Partnership are
difficult to discuss other than in the context of the Trading
Advisor's trading activities on behalf of the Partnership and how
the Partnership has performed in the past.

The Partnership's results of operations are set forth in
financial statements prepared in accordance with United States
generally accepted accounting principles, which require the use
of certain accounting policies that affect the amounts reported
in these financial statements, including the following. The
contracts the Partnership trades are accounted for on a trade-
date basis and marked to market on a daily basis. The difference
between their cost and market value is recorded on the Statements
of Operations as "Net change in unrealized profit/loss" for open
(unrealized) contracts, and recorded as "Realized profit/loss"
when open positions are closed out, and the sum of these amounts
constitutes the Partnership's trading revenues. Earned 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 other than those
presently used relating to the application of critical accounting
policies are reasonably plausible that could affect reported
amounts.

For the Quarter and Six Months Ended June 30, 2002
For the quarter ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $1,879,243
and posted an increase in net asset value per Unit. The most
significant gains of approximately 16.7% were recorded in the
currency markets throughout the quarter from previously
established long positions in the euro and Swiss franc relative
to the U.S. dollar as the value of these currencies strengthened
against the dollar amid falling equity prices, concerns regarding
corporate accounting integrity, and weak U.S. economic data.
Additional gains of approximately 7.9% were recorded in the
global interest rate futures markets primarily during June from
long positions in European and Japanese interest rate futures as
prices trended higher following weakness in U.S. equity markets,
geopolitical concerns and uncertainty surrounding a global
economic recovery. A portion of the Partnership's gains was
offset by losses of approximately 7.2% recorded in the energy

markets primarily during May from previously established long
futures positions in crude oil and its related products as prices
reversed lower on supply and demand concerns. Additional losses
were recorded in natural gas futures primarily during June from
short positions as prices moved higher amid supply and demand
concerns and warmer than normal temperatures across most of the
U.S. Losses of approximately 4.2% were recorded in the global
stock index futures markets from positions in Japanese and U.S.
index futures as prices fluctuated without consistent direction
over geopolitical concerns and uncertainty regarding a global
economic recovery. Total expenses for the three months ended
June 30, 2002 were $320,505, resulting in net income of
$1,558,738. The net asset value of a Unit increased from $6.57
at March 31, 2002 to $7.29 at June 30, 2002.

For the six months ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $945,250
and posted an increase in net asset value per Unit. The most
significant gains of approximately 9.1% were recorded in the
global interest rate futures markets primarily during June from
long positions in European and Japanese interest rate futures as
prices trended higher following weakness in U.S. equity markets,
geopolitical concerns and uncertainty surrounding a global
economic recovery. Additional gains of approximately 8.3% were
recorded in the currency markets from previously established long

positions in the euro and Swiss franc relative to the U.S. dollar
as the value of these currencies strengthened against the U.S.
dollar throughout the second quarter amid falling equity prices,
concerns regarding corporate accounting integrity and weak U.S.
economic data. A portion of the Partnership's gains was offset
by losses of approximately 8.2% recorded in the global stock
index futures markets from positions in Japanese and U.S. index
futures as prices fluctuated without consistent direction from
January to June over geopolitical concerns and uncertainty
regarding a global economic recovery. Losses of approximately
3.9% were recorded in the energy markets primarily during May
from previously established long futures positions in crude oil
and its related products as prices moved lower on supply and
demand concerns. Total expenses for the six months ended June
30, 2002 were $671,088, resulting in net income of $274,162. The
net asset value of a Unit increased from $7.13 at December 31,
2001 to $7.29 at June 30, 2002.

For the Quarter and Six Months Ended June 30, 2001
For the quarter ended June 30, 2001, the Partnership recorded
total trading losses, net of interest income, of $3,654,962 and
posted a decrease in net asset value per Unit. The most
significant losses of approximately 6.4% were recorded in the
global interest rate futures markets primarily during late June
from long positions in German interest rate futures as bond prices

moved lower due to weakness in the euro, gains in the equity
markets and a smaller cut in U.S. interest rates than expected.
Additional losses were incurred during late June from long
positions in U.S. interest rate futures as prices dropped on the
reduced chance of further aggressive interest rate cuts by the
U.S. Federal Reserve, following its 0.25% cut after the Federal
Open Market Committee meeting. In the currency markets, losses of
approximately 6.0% were recorded primarily during April and May
from short positions in the Japanese yen as the value of the yen
reversed higher relative to the U.S. dollar following a surprise
interest rate cut by the U.S. Federal Reserve and on optimism that
the Japanese government would unveil an emergency package to
revive that country's ailing economy. In the metals markets,
losses of approximately 2.6% were recorded during late May from
long positions in gold futures as gold prices reversed sharply
lower, after spiking higher earlier in the month, following the
return of more bearish sentiment regarding the outlook for the
U.S. economy. Additional losses of approximately 2.6% were
incurred in the energy markets during early April from short
futures positions in crude oil and heating oil as prices moved
higher on supply concerns amid refinery production problems.
Total expenses for the three months ended June 30, 2001 were
$459,361, resulting in a net loss of $4,114,323. The net asset
value of a Unit decreased from $8.05 at March 31, 2001 to $6.56 at
June 30, 2001.

For the six months ended June 30, 2001, the Partnership recorded
total trading losses, net of interest income, of $3,550,699 and
posted a decrease in net asset value per Unit. The most
significant losses of approximately 9.4% were recorded in the
energy markets primarily during February from short futures
positions in crude oil and its related products as prices
reversed higher amid cold weather forecasts, anticipated OPEC
production cuts and a tightening in supplies. Additional losses
were recorded during January from long positions in natural gas
futures as prices declined, reversing their previous sharp upward
trend amid bearish inventory data and forecasts for warmer
weather. In the currency markets, losses of approximately 6.6%
were recorded primarily during January and February from trading
the euro relative to the Japanese yen due to short-term
volatility as a result of conflicting economic signals and a
surprise cut in the discount rate by the Bank of Japan. In the
metals markets, losses of approximately 4.0% were incurred
primarily during April and early May from short gold futures
positions as prices climbed higher on weakness in the U.S.
dollar. Smaller losses of 1.6% were recorded in the agricultural
markets during February from short lean hog futures positions as
prices rallied sharply higher, and during January from long
soybean meal futures positions as prices moved lower due to

favorable South American weather. These losses were partially
offset by gains of approximately 2.5% recorded throughout the
first quarter in the global interest rate futures markets
primarily from long positions in Japanese government bond futures
as prices moved higher amid weak Japanese stock prices and
disappointing economic data in that country. Additional profits
were recorded during January from long positions in eurodollar
futures as prices moved higher due to a surprise interest rate
cut by the U.S. Federal Reserve in early January. In the soft
commodities markets, gains of approximately 1.2% were recorded
primarily during February from short cotton futures positions as
cotton prices declined on weak export sales and low demand.
Total expenses for the six months ended June 30, 2001 were
$944,123, resulting in a net loss of $4,494,822. The net asset
value of a Unit decreased from $8.20 at December 31, 2000 to
$6.56 at June 30, 2001.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards and options. The market-
sensitive instruments held by the Partnership are acquired for
speculative trading purposes only and, as a result, all or
substantially all of the Partnership's assets are at risk of
trading loss. Unlike an operating company, the risk of market-
sensitive instruments is central, not incidental, to the
Partnership's main business activities.

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

The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,

each of these factors may act to increase or decrease the market
risk associated with the Partnership.

The Partnership's past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading. The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experience to date or any reasonable
expectations based upon historical changes in market value.

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

The Partnership accounts for open positions on the basis of mark-
to-market accounting principles. Any loss in the market value of
the Partnership's open positions is directly reflected in the

Partnership's earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures, forwards and options are settled daily through
variation margin.

The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio. The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk. Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The historical observation period of the Partner-
ship's VaR is approximately four years. The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.

In other words, one-day VaR for a portfolio is a number such that
losses in this portfolio are estimated to exceed the VaR only one
day in 100.

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

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

The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at June 30, 2002 and 2001. At
June 30, 2002 and 2001, the Partnership's total capitalization
was approximately $16 million and $18 million, respectively.

Primary Market June 30, 2002 June 30, 2001
Risk Category Value at Risk Value at Risk

Interest Rate (3.32)% (2.71)%
Currency (2.63) (3.09)
Equity (0.47) (0.63)
Commodity (0.89) (1.17)
Aggregate Value at Risk (4.59)% (4.40)%

The VaR for a market category represents the one-day downside
risk for the aggregate exposures associated with this market
category. The aggregate VaR, listed above for the Partnership,
represents the aggregate 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.

The table above represents the VaR of the Partnership's open
positions at June 30, 2002 and 2001 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures, forwards and
options, the composition of its trading portfolio can change
significantly over any given time period, or even within a single
trading day. Any changes in open positions could positively or
negatively materially impact market risk as measured by VaR.

The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
net assets for the four quarterly reporting periods from July 1,
2001 through June 30, 2002.

Primary Market Risk Category High Low Average
Interest Rate (3.32)% (1.57)% (2.57)%

Currency (3.10) (1.74) (2.43)

Equity (1.47) (0.47) (0.89)

Commodity (2.19) (0.89) (1.45)

Aggregate Value at Risk (4.59)% (3.52)% (4.06)%

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 trading positions while future risk
depends on future positions;

? VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
? the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

The VaR tables above present the results of the Partnership's VaR
for each of the Partnership's market risk exposures and on an
aggregate basis at June 30, 2002 and 2001 and for the end of the
four quarterly reporting periods from July 1, 2001 through June
30, 2002. Since VaR is based on historical data, VaR should not
be viewed as predictive of the Partnership's future financial
performance or its ability to manage or monitor risk. There can
be no assurance that the Partnership's actual losses on a
particular day will not exceed the VaR amounts indicated above or
that such losses will not occur more than once in 100 trading
days.

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

At June 30, 2002, the Partnership's cash balance at Morgan Stanley
DW was approximately 72% of its total net asset value. A decline
in short-term interest rates will result in a decline in the
Partnership's cash management income. This cash flow risk is not
considered to be material.

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

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's

risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation and many other factors could result in
material losses as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at June 30, 2002, 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, 2002 was to the global interest rate complex. Exposure
was primarily spread across the Japanese, European, and U.S.
interest rate sectors. Interest rate movements directly affect
the price of the sovereign bond futures positions held by the
Partnership and indirectly affect the value of its stock index
and currency positions. Interest rate movements in one country
as well as relative interest rate movements between countries
materially impact the Partnership's profitability. The

Partnership's primary interest rate exposure is generally to
interest rate fluctuations in the U.S. and the other G-7
countries. The G-7 countries consist of France, the U.S.,
Britain, Germany, Japan, Italy, and Canada. Demeter anticipates
that G-7 interest rates will remain the primary interest rate
exposure of the Partnership for the foreseeable future. The
speculative futures positions held by the Partnership may range
from short to long-term instruments. Consequently, changes in
short, medium or long-term interest rates may have an effect on
the Partnership.

Currency. The second largest market exposure of the Partnership
at June 30, 2002 was to the currency sector. The Partnership's
currency exposure at June 30, 2002 was 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, 2002, the Partnership's major exposures
were to euro currency crosses and outright U.S. dollar positions.
Outright positions consist of the U.S. dollar vs. other
currencies. These other currencies include major and minor
currencies. Demeter does not anticipate that the risk profile of

the Partnership's currency sector will change significantly in
the future. The currency trading VaR figure includes foreign
margin amounts converted into U.S. dollars with an incremental
adjustment to reflect the exchange rate risk inherent to the
U.S.-based Partnership in expressing VaR in a functional currency
other than U.S. dollars.

Equity. The primary equity exposure at June 30, 2002 was to
equity price risk in the G-7 countries. The stock index futures
traded by the Partnership are by law limited to futures on
broadly-based indices. At June 30, 2002, the Partnership's
primary exposures were to the S&P 500 (U.S.) and Nikkei (Japan)
stock indices. The Partnership is primarily exposed to the risk
of adverse price trends or static markets in the U.S. and
Japanese indices. Static markets would not cause major market
changes but would make it difficult for the Partnership to avoid
being "whipsawed" into numerous small losses.

Commodity
Energy. At June 30, 2002, the Partnership's energy exposure
was primarily to futures contracts in the natural gas
markets. Price movements in the energy markets result from
political developments in the Middle East, weather patterns,
and other economic fundamentals. Significant profits and
losses, which have been experienced in the past, are

expected to continue to be experienced in these markets.
Natural gas has exhibited volatility in prices resulting
from weather patterns and supply and demand factors and may
continue in this choppy pattern.

Metals. The Partnership's metals exposure at June 30, 2002
was to fluctuations in the price of precious metals, such as
gold, and base metals, such as 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. Demeter
anticipates that the Partnership will continue to be exposed
to the precious and base metals markets.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at June 30, 2002:

Foreign Currency Balances. The Partnership's primary
foreign currency balance at June 30, 2002 was in Japanese
yen. The Partnership controls the non-trading risk of these
balances by regularly converting them back into U.S. dollars
upon liquidation of their respective positions.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership's open positions in essentially
the same manner in all market categories traded. Demeter attempts
to manage market exposure by diversifying the Partnership's assets
among different market sectors and trading approaches, and
monitoring the performance of the Trading Advisor daily. In
addition, the Trading Advisor establishes diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.

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

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
None.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership initially registered 3,000,000 Units pursuant to
a Registration Statement on Form S-1, which became effective on
November 6, 1998 (SEC File Number 333-60097).

The Partnership registered an additional 6,000,000 Units pursuant
to a new Registration Statement on Form S-1, which became
effective on March 27, 2000 (SEC File Number 333-91567).

The managing underwriter for the Partnership is Morgan Stanley
DW.

Units are sold continuously at monthly closings at a 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, 2002, 4,068,642.997 Units were sold, leaving
4,931,357.003 Units unsold. The aggregate price of the Units
sold through June 30, 2002 was $35,120,293.

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 Statement.

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 July
29, 2002, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, as amended, on August 12, 2002.
3.02 Certificate of Limited Partnership, dated July 15, 1998,
is incorporated by reference to Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File
No. 333-60097) filed with the Securities and Exchange
Commission on July 29, 1998.
3.03 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001 (changing its name
from Morgan Stanley Dean Witter Welton L.P.), is
incorporated by reference to Exhibit 3.01 of the
Partnership's Form 8-K (File No. 0-25607) filed with the
Securities and Exchange Commission on November 6, 2001.
10.01 Management Agreement, dated as of November 6, 1998, among
the Partnership, Demeter and Welton Investment
Corporation, is incorporated by reference to Exhibit
10.01 of the Partnership's Quarterly Report on Form 10-Q
(File No. 0-25607) filed with the Securities and Exchange
Commission on May 17, 1999.
10.02 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units is
incorporated by referenced to Exhibit B of the
Partnership's Prospectus dated July 29, 2002, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended,
on August 12, 2002.

10.03 Amended and Restated Escrow Agreement, dated as of
October 11, 2000, among the Partnership, Morgan Stanley
Charter Graham L.P., Morgan Stanley Charter Millburn
L.P., Morgan Stanley Charter MSFCM L.P., Morgan Stanley
DW and The Chase Manhattan Bank is incorporated by
reference to Exhibit 10.04 of the Partnership's Post-
Effective Amendment No. 3 to the Registration Statement
on Form S-1 (File No. 333-91567) filed with the
Securities and Exchange Commission on March 30, 2001.
10.04 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW, dated as of November
13, 2000, is incorporated by reference to Exhibit 10.01
of the Partnership's Form 8-K (File No. 0-25607) filed
with the Securities and Exchange Commission on November
6, 2001.
10.05 Commodity Futures Customer Agreement between MS & Co. and
the Partnership, and acknowledged and agreed to by Morgan
Stanley DW, dated as of November 6, 2000, is incorporated
by reference to Exhibit 10.02 of the Partnership's Form
8-K (File No. 0-25607) filed with the Securities and
Exchange Commission on November 6, 2001.
10.06 Customer Agreement between the Partnership and MSIL,
dated as of November 6, 2000, is incorporated by
reference to Exhibit 10.04 of the Partnership's Form 8-K
(File No. 0-25607) filed with the Securities and Exchange
Commission on November 6, 2001.
10.07 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. 0-25607) filed with the
Securities and Exchange Commission on November 6, 2001.
10.08 Form of Subscription Agreement Update Form is
incorporated by reference to Exhibit C of the
Partnership's Prospectus dated July 29, 2002, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933, as amended,
on August 12, 2002.

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. 0-25603)
filed with the Securities and Exchange Commission on
November 6, 2001
99.01 Certification of Periodic Financial Reports.
(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 Welton L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

August 14, 2002 By:/s/Raymond E. Koch
Raymond E. Koch
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.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Morgan Stanley Charter
Welton L.P. (the "Partnership") on Form 10-Q for the period ended
June 30, 2002 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Robert E. Murray, President,
Demeter Management Corporation, general partner of the
Partnership, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results
of operations of the Partnership.

By: /s/Robert E. Murray

Name: Robert E. Murray
Title: Chairman of the Board and President

Date: August 14, 2002

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Morgan Stanley Charter
Welton L.P. (the "Partnership") on Form 10-Q for the period ended
June 30, 2002 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Raymond E. Koch, Chief
Financial Officer, Demeter Management Corporation, general partner
of the Partnership, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results
of operations of the Partnership.

By: /s/Raymond E. Koch

Name: Raymond E. Koch
Title: Chief Financial Officer

Date: August 14, 2002