MORGAN STANLEY CHARTER CAMPBELL LP - 10-Q Quarterly Report

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

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2003 or

[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to__________________

Commission File Number 0-50064

MORGAN STANLEY CHARTER CAMPBELL L.P.

(Exact name of registrant as specified in its charter)

Delaware 01-0710311
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

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

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

Yes X No___________

MORGAN STANLEY CHARTER CAMPBELL L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2003

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

MORGAN STANLEY CHARTER CAMPBELL L.P.
STATEMENT OF OPERATIONS
(Unaudited)

MORGAN STANLEY CHARTER CAMPBELL L.P.
STATEMENT OF OPERATIONS
(Unaudited)

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

MORGAN STANLEY CHARTER CAMPBELL L.P.
STATEMENT OF CASH FLOWS
(Unaudited)

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

June 30, 2003
(Unaudited)

The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Morgan Stanley Charter Campbell L.P. (?Charter Campbell? or the
?Partnership?). The financial statements and condensed notes
herein should be read in conjunction with the Partnership?s
December 31, 2002 Annual Report on Form 10-K.

1. Organization
Morgan Stanley Charter Campbell 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.

Charter Campbell began trading on October 1, 2002.

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

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?). The non-clearing commodity broker is
Morgan Stanley DW Inc. (?Morgan Stanley DW?). The clearing
commodity brokers are Morgan Stanley & Co. Incorporated (?MS &
Co.?) and Morgan Stanley & Co. International Limited (?MSIL?).
Demeter, Morgan Stanley DW, MS & Co. and MSIL are wholly-owned
subsidiaries of Morgan Stanley. Campbell & Company, Inc. (the
?Trading Advisor?) is the trading advisor to the Partnership.

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

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;
2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3) Terms require or permit net settlement.
MORGAN STANLEY CHARTER CAMPBELL L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

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

Jun. 30, 2003 (928,197) 626,989
(301,208) Mar. 2004 Sep. 2003
Dec. 31, 2002 253,129 243,558 496,687 Sep. 2003 Mar. 2003

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

The Partnership also has credit risk because Morgan Stanley DW,
MS & Co. and MSIL act as the futures commission merchants or the
counterparties, with respect to most of the Partnership?s assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
MORGAN STANLEY CHARTER CAMPBELL L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

settled on a daily basis. Morgan Stanley DW, MS & Co., and MSIL,
each as a futures commission merchant for the Partnership?s
exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures
Trading Commission (?CFTC?), to segregate from their own assets,
and for the sole benefit of their commodity customers, all funds
held by them with respect to exchange-traded futures and futures-
styled options contracts, including an amount equal to the net
unrealized gains (losses) on all open futures and futures-styled
options contracts, which funds, in the aggregate, totaled
$54,464,787 and $15,659,223 at June 30, 2003 and December 31,
2002, respectively. With respect to the Partnership?s off-
exchange-traded forward currency contracts, there are no daily
settlements of variations in value nor is there any requirement
that an amount equal to the net unrealized gains (losses) on open
forward contracts be segregated. With respect to those off-
exchange-traded forward currency contracts, the Partnership is at
risk to the ability of MS & Co., the sole counterparty on all of
such contracts, to perform. The Partnership has a netting
agreement with MS & Co. This agreement, which seeks to reduce
both the Partnership?s and MS & Co.?s exposure on off-exchange-
traded forward currency contracts, should materially decrease the
MORGAN STANLEY CHARTER CAMPBELL L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

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

Item 2. MANAGEMENT?S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

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

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

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

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

Capital Resources. The Partnership does not have, nor expect to
have, any capital assets. Redemptions, exchanges and sales of
additional units of limited partnership interest (?Unit(s)?) in
the future will affect the amount of funds available for
investment in futures, forwards, and options in subsequent
periods. It is not possible to estimate the amount, and
therefore the impact, of future redemptions of Units.
There are no known material trends, favorable or unfavorable, that
would affect, nor any expected material changes to, the
Partnership?s capital resource arrangements at the present time.
The Partnership has no off-balance sheet arrangements, nor
contractual obligations or commercial commitments to make future
payments that would affect the Partnership?s liquidity or capital
resources. The contracts traded by the Partnership are accounted
for on a trade-date basis and marked to market on a daily basis.
The value of futures contracts is the settlement price on the
exchange on which that futures contract is traded on a particular
day and the value of foreign currency forward contracts is based
on the spot rate as of the close of business, New York City time,
on a given day.

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

The Partnership?s results of operations set forth in the financial
statements on pages 2 through 11 of this report were prepared in
accordance with accounting principles generally accepted in the
United States of America, which require the use of certain
accounting policies that affect the amounts reported in these
financial statements, including the following: The contracts the
Partnership trades are accounted for on a trade-date basis and
marked to market on a daily basis. The difference between their
cost and market value is recorded on the Statements of Operations
as ?Net change in unrealized profit/loss? for open (unrealized)
contracts, and recorded as ?Realized profit/loss? when open
positions are closed out, and the sum of these amounts constitutes
the Partnership?s trading revenues. Interest income revenue, as
well as management fees, incentive fees and brokerage fees
expenses of the Partnership are recorded on an accrual basis.

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

For the Quarter and Six Months Ended June 30, 2003
For the quarter ended June 30, 2003, the Partnership recorded
total trading revenues, including interest income, of $2,760,196
and posted an increase in net asset value per Unit. The most
significant gains of approximately 5.9% in the currency markets
stemmed from long positions in the euro versus the U.S. dollar as
concerns regarding the U.S. economic recovery resurfaced and
resulted in the value of the dollar declining to an all time low
versus the euro during April. Additional gains resulted from long
positions in the Canadian dollar and the Australian dollar versus
the U.S. dollar as the value of these currencies strengthened amid
significant interest rate differentials between the respective
countries and the U.S. Gains of approximately 2.0% were recorded
primarily during May in the global interest rate markets from long
positions in U.S. interest rate futures as prices trended higher
during May amid speculation of an interest rate cut by the U.S.
Federal Reserve and lingering doubts concerning a global economic
recovery. A portion of the Partnership?s overall gains for the
quarter was offset by losses of approximately 0.8% in the global
stock index markets from short positions in European stock index
futures as global equity prices rallied in response to positive
earnings announcements and the conclusion of the war in Iraq.
Losses of approximately 0.7% in the energy markets resulted from
short futures positions in crude oil and its related products
during May as prices moved higher amid supply concerns and renewed
fears concerning security at Middle Eastern refining facilities.
During June, losses were recorded from long positions in
natural gas futures as prices reversed sharply lower following
news of larger than expected U.S. reserves. Total expenses for
the three months ended June 30, 2003 were $1,164,137, resulting in
net income of $1,596,059. The net asset value of a Unit increased
from $10.39 at March 31, 2003 to $10.79 at June 30, 2003.

For the six months ended June 30, 2003, the Partnership recorded
total trading revenues, including interest income, of $5,306,051
and posted an increase in net asset value per Unit. The most
significant gains of approximately 13.1% were recorded in the
currency markets from long positions in the euro as its value
strengthened to an all time high versus the U.S. dollar during
January amid renewed fears of a military conflict with Iraq,
increased tensions with North Korea, and weak U.S. economic data.
Additional gains were provided by short positions in the British
pound versus the U.S. dollar as the value of the pound decreased
during February due to weak economic data out of the U.K. and an
interest rate cut by the Bank of England. Additional gains during
February and April were recorded from long positions in the
Canadian and Australian dollar versus the U.S. dollar as the value
of these currencies increased on the heels of higher commodity
prices and significant interest rate differentials between the
respective countries and the U.S. Additional gains of
approximately 4.1% in the energy markets were provided by long
positions in natural gas futures as prices rallied during January
and February in response to prolonged frigid temperatures in the
northeastern and midwestern United States. Additional
gains resulted from long positions in crude oil futures as prices
trended higher amid the looming threat of military action against
Iraq and an overall decline in inventories. In the global
interest rate markets, gains of approximately 3.8% were generated
from long positions in U.S. and European interest rate futures
during January and February as prices moved higher amid investor
demand for fixed income investments due to uncertainty in global
equity markets. During June, long positions in U.S. and European
interest rate futures experienced further gains as prices
continued to trend higher amid speculation of an interest rate cut
by the U.S. Federal Reserve and lingering doubts concerning a
global economic recovery. A portion of the Partnership?s overall
gains during the first half of the year was offset by losses of
approximately 0.6% in the global stock index markets recorded from
short positions in European stock index futures as global equity
prices rallied during April in response to positive earnings
announcements and the conclusion of the war in Iraq. Short
positions in Asian stock index futures incurred losses during May
as prices reversed higher amid heavy buying by Japanese pension
funds and renewed hopes for a government stimulus package. Losses
of approximately 0.6% were incurred by long positions in gold
futures as prices declined in response to the rise of the U.S.
dollar. Total expenses for the six months ended June 30, 2003
were $2,440,684, resulting in net income of $2,865,367. The net
asset value of a Unit increased from $9.58 at December 31, 2002 to
$10.79 at June 30, 2003.
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 Partnership?s VaR is approximately four years. The
one-day 99% confidence level of the Partnership?s VaR corresponds
to the negative change in portfolio value that, based on observed
market risk factors, would have been exceeded once in 100 trading
days. In other words, one-day VaR for a portfolio is a number
such that losses in this portfolio are estimated to exceed the
VaR only one day in 100. VaR typically does not represent the
worst case outcome.

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

The Partnership?s VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
contract and do not distinguish between exchange and non-
exchange-traded instruments and are also not based on exchange
and/or dealer-based margin requirements.

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

The Partnership?s Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total net assets
by primary market risk category at June 30, 2003. At June
30, 2003, the Partnership?s total capitalization was
approximately
$64 million.

Primary Market June 30, 2003
Risk Category Value at Risk

Interest Rate (1.26)%
Currency (1.20)
Equity (0.78)
Commodity (0.21)
Aggregate Value at Risk (1.90)%

The VaR for a market category represents the one-day downside risk
for the aggregate exposures associated with this market category.
The Aggregate Value at Risk above represents the VaR of the
Partnership?s open positions across all the market categories, and
is less than the sum of the VaR(s) for all such market categories
due to the diversification benefit across asset classes.

The table above represents the VaR of the Partnership?s open
positions at June 30, 2003 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 three quarterly reporting periods from October
1, 2002 through June 30, 2003.

Primary Market Risk Category High Low Average
Interest Rate (1.26)% (0.32)% (0.75)%
Currency (1.33) (0.66) (1.06)
Equity (0.78) (0.22) (0.41)
Commodity (1.07) (0.05) (0.44)
Aggregate Value at Risk (1.90)% (0.75)% (1.48)%

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

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

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

At June 30, 2003, the Partnership?s cash balance at Morgan Stanley
DW was approximately 75% of its total net asset value. A decline
in short-term interest rates will result in a decline in the
Partnership?s cash management income. This cash flow risk is not
considered to be material.

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

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of
how the Partnership manages its primary market risk exposures -
constitute

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

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

Interest Rate. The primary market exposure of the
Partnership at June 30, 2003 was to the global interest rate
sector. Exposure was primarily spread across the U.S., European
and Japanese 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 the G-7 countries 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, 2003 was to the currency sector. The Partnership?s
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. Interest rate
changes as well as political and general economic conditions
influence these fluctuations. At June 30, 2003, the
Partnership?s major exposures were 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. The currency trading VaR figure includes foreign
margin amounts converted into U.S. dollars with an incremental
adjustment to reflect the exchange rate risk inherent to the
U.S.-based Partnership in expressing VaR in a functional currency
other than U.S. dollars.

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

Commodity.
Energy. At June 30, 2003, the Partnership?s energy exposure
was primarily to futures contracts in crude oil and its
related products, and natural gas. Price movements in these
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 the future. Natural gas has exhibited
volatility in prices resulting from weather patterns and
supply and demand factors and will likely continue in this
choppy pattern.

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

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at June 30, 2003:

Foreign Currency Balances. The Partnership?s primary foreign
currency balances at June 30, 2003 were in euros and
Japanese yen. The Partnership controls the non-trading risk
of foreign currency balances by regularly converting them
back into U.S. dollars upon liquidation of their
respective positions.

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

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

Item 4. CONTROLS AND PROCEDURES
(a) As of the end of the period covered by this quarterly
report, the President and Chief Financial Officer of
the general partner, Demeter, have evaluated the
effectiveness of the Partnership?s disclosure controls
and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) of the Exchange Act), and have judged
such controls and procedures to be effective.

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

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
None.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership initially registered 3,000,000 Units pursuant to a
Registration Statement on Form S-1, which became effective on July
29, 2002 (SEC File Number 333-85078). The offering originally
commenced on July 29, 2002 with 822,786.300 Units sold through
September 30, 2002.

After September 30, 2002, the initial closing, Units have been
continuously offered at monthly closings at a purchase price equal
to 100% of the net asset value per Unit as of the close of
business on the last day of each month.

The Partnership registered an additional 18,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on February 26, 2003 (SEC File Number 333-103171).

The managing underwriter for the Partnership is Morgan Stanley DW.

Through June 30, 2003, 6,134,820.541 Units were sold, leaving
14,865,179.459 Units unsold. The aggregate price of the Units
sold through June 30, 2003 was $63,533,099.

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

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

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

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

Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits

3.01 Form of Amended and Restated Limited Partnership
Agreement, by and among Demeter Management Corporation
and the Limited Partners, dated March 26, 2002, is
incorporated by reference to Exhibit A of the
Partnership?s Prospectus, dated February 26, 2003, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 18, 2003.
3.02 Certificate of Limited Partnership of the Partnership is
incorporated by reference to Exhibit 3.02 of the
Partnership?s Registration Statement on Form S-1 (File
No. 333-85078) filed with the Securities and Exchange
Commission on March 28, 2002.

10.01 Management Agreement, among the Partnership, Demeter
Management Corporation and Campbell & Company, Inc.,
dated September 30, 2002, is incorporated by reference to
Exhibit 10.01 of the Partnership Registration Statement
on Form S-1 (File No. 333-103171) filed with the
Securities and Exchange Commission on February 13, 2003.
10.02 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by purchasers of Units is
incorporated by reference to Exhibit B of the
Partnership?s Prospectus, dated February 26, 2003, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 18, 2003.
10.03 Form of Subscription Agreement Update Form to be executed
by purchasers of Units is incorporated by reference to
Exhibit C of the Partnership?s Prospectus, dated February
26, 2003, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, as amended, on March 18, 2003.
10.04 Amended and Restated Escrow Agreement among the
Partnership, Morgan Stanley Charter Graham L.P., Morgan
Stanley Charter Millburn L.P., Morgan Stanley Charter
Welton L.P., Morgan Stanley Charter MSFCM L.P., Morgan
Stanley DW Inc., and JP Morgan Chase Bank, as escrow
agent, dated August 31, 2002, is incorporated by
reference to Exhibit 10.04 of the Partnership?s
Registration Statement on Form S-1 (File No. 333-103171)
filed with the Securities and Exchange Commission on
February 13, 2003.
10.05 Customer Agreement between the Partnership and Morgan
Stanley DW Inc., dated September 30, 2002, is
incorporated by reference to Exhibit 10.05 of the
Partnership?s Registration Statement on Form S-1 (File
No. 333-103171) filed with the Securities and Exchange
Commission on February 13, 2003.
10.06 Customer Agreement, among the Partnership, Morgan Stanley
& Co. Incorporated, and Morgan Stanley DW Inc., dated
September 30, 2002, is incorporated by reference to
Exhibit 10.06 of the Partnership?s Registration Statement
on Form S-1 (File No. 333-103171) filed with the
Securities and Exchange Commission on February 13, 2003.
10.07 Customer Agreement, between the Partnership and Morgan
Stanley & Co. International Limited, dated September 30,
2002, is incorporated by reference to Exhibit 10.07 of
the Partnership?s Registration Statement on Form S-1
(File No. 333-103171) filed with the Securities
and Exchange Commission on February 13, 2003.
10.08 Foreign Exchange and Options Master Agreement, between
the Partnership and Morgan Stanley & Co. Incorporated,
dated August 31, 2002, is incorporated by reference to
Exhibit 10.08 of the Partnership?s Quarterly Report on
Form 10-Q (File No. 0-50064) filed with the Securities
and Exchange Commission on May 14, 2003.
10.09 Securities Account Control Agreement, among the
Partnership, Morgan Stanley & Co. Incorporated and Morgan
Stanley DW Inc., dated September 30, 2002, is
incorporated by reference to Exhibit 10.09 of the
Partnership?s Registration Statement on Form S-1 (File
No. 333-103171) filed with the Securities and Exchange
Commission on February 13, 2003.
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 Campbell L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

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

The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.

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