MORGAN STANLEY CHARTER GRAHAM 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 March 31, 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 0-25603

MORGAN STANLEY CHARTER GRAHAM L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-4018068
(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 GRAHAM L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31, 2003

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

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

MORGAN STANLEY CHARTER GRAHAM L.P.
STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
For the Quarters Ended March 31, 2003 and 2002
(Unaudited)

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

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

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

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

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

Charter Welton terminated trading effective December 31, 2002 and
commenced its dissolution in April 2003 pursuant to its Limited
Partnership Agreement.

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. Graham Capital Management, L.P.
(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
MORGAN STANLEY CHARTER GRAHAM 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 GRAHAM 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 (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
$ $ $

Mar. 31, 2003 (1,597,014) (457,141) (2,054,155) Sep. 2004 Jun. 2003
Dec. 31, 2002 7,053,639 159,286 7,212,925 Jun. 2004 Mar. 2003

The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in

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

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 (losses) on all open futures and futures-styled options
contracts, which funds, in the aggregate, totaled $144,983,398 and
$111,564,112 at March 31, 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
MORGAN STANLEY CHARTER GRAHAM L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

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.

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 month
periods ended March 31, 2003 and 2002 and a general discussion of
its trading activities during each period. It is important to
note, however, that the Trading Advisor trades in various markets
at different times and that prior activity in a particular
market does not mean that such market will be actively traded by
the Trading Advisor or will be profitable in the future.
Consequently, the results of operations of the Partnership are
difficult to discuss other than in the context of the Trading
Advisor?s trading activities on behalf of the Partnership and how
the Partnership has performed in the past.

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

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

For the Quarter Ended March 31, 2003
For the quarter ended March 31, 2003, the Partnership recorded
total trading revenues, including interest income, of $13,703,187
and posted an increase in net asset value per Unit. The most
significant gains of approximately 6.2% were recorded in the
energy markets, primarily during January and February, from long
positions in natural gas futures as prices trended higher in
response to prolonged frigid temperatures in the northeastern and
midwestern U.S. Additional gains were recorded from long futures
positions in crude oil and its related products as prices
continued to trend higher amid the looming threat of military
action against Iraq. Gains of approximately 4.7% were recorded in
the currency markets, during January and February, from long
positions in the Canadian dollar, the Australian dollar and the
South African rand versus the U.S. dollar as the value of these
currencies increased on the heels of higher commodity prices.
Additional gains resulted from long positions in the euro as its
value climbed higher versus the British pound and the U.S. dollar
amid declining investor sentiment. In the global interest rate
markets, gains of approximately 2.0% resulted from long positions
in European interest rate futures as prices moved higher as
investors continued to seek the ?safe haven? of fixed income
investments in response to prolonged uncertainty in global equity
markets. Gains of approximately 0.7% were recorded in the
agricultural markets from long positions in sugar futures as
prices increased amid speculative buying and supply concerns.
Other gains of approximately 0.4% were recorded in the global
stock index markets from short positions in Asian and European
stock index futures as prices declined amid renewed fears of an
extended military conflict in Iraq. A portion of the
Partnership?s overall gains was offset by losses of approximately
1.2% in the metals markets during March from long positions in
copper, nickel, and aluminum futures as prices fell amid muted
industrial demand. Total expenses for the three months ended
March 31, 2003 were $7,648,183, resulting in net income of
$6,055,004. The net asset value of a Unit increased from $18.84 at
December 31, 2002 to $20.04 at March 31, 2003.

For the Quarter Ended March 31, 2002
For the quarter ended March 31, 2002, the Partnership recorded
total trading losses, net of interest income, of $1,380,687 and
posted a decrease in net asset value per Unit. The most
significant losses of approximately 2.6% were recorded in the
global stock index markets primarily during February and March
from positions as equity prices traded in a non-trending pattern
from continued global economic uncertainty and unrest in the
Middle East. Smaller losses of approximately 0.9% were recorded
in the global interest rate markets primarily during February from
previously established short positions in Japanese government bond
futures when prices moved higher following the possibility
of an anti-deflation plan from the Japanese government.
Additional losses were recorded mainly during March in eurodollar
positions on short-term volatile price movements. Losses of
approximately 0.4% were also recorded in the metals markets during
January from short positions in copper as prices increased on the
shoulders of rising demand expectations, fueled by the possibility
of an accelerated U.S. economic recovery. Partially offsetting
gains of approximately 0.7% were recorded in the agricultural
markets primarily during January and February from previously
established long positions in cocoa when prices trended higher
over supply concerns and technical factors. Total expenses for
the three months ended March 31, 2002 were $1,124,962, resulting
in a net loss of $2,505,649. The net asset value of a Unit
decreased from $13.77 at December 31, 2001 to $13.11 at March 31,
2002.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

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

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

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

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

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

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

The Partnership?s VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
contract and does not distinguish between exchange and non-
exchange-traded instruments and is 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 March 31, 2003 and 2002. At
March 31, 2003 and 2002, the Partnership?s total capitalization
was approximately $156 million and $52 million, respectively.

Primary Market March 31, 2003 March 31, 2002
Risk Category Value at Risk Value at Risk

Currency (0.97)% (0.94)%
Equity (0.96) (0.41)
Interest Rate (0.71) (2.05)
Commodity (0.65) (1.30)
Aggregate Value at Risk (1.72)% (2.98)%

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 March 31, 2003 and 2002 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership?s only
business is the speculative trading of futures, forwards
and options, the composition of its trading portfolio can change
significantly over any given time period, or even within a single
trading day. Any changes in open positions could positively or
negatively materially impact market risk as measured by VaR.

The table below supplements the quarter-end VaR by presenting the
Partnership?s high, low and average VaR, as a percentage of total
net assets for the four quarterly reporting periods from April 1,
2002 through March 31, 2003.

Primary Market Risk Category High Low Average
Currency (2.25)% (0.52)% (1.42)%

Equity (1.30) (0.61) (0.95)

Interest Rate (3.24) (0.71) (1.64)

Commodity (1.62) (0.65) (1.12)

Aggregate Value at Risk (4.59)% (1.72)% (2.91)%

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 March 31, 2003 and 2002, and for the end of the
four quarterly reporting periods from April 1, 2002 through March
31, 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 March 31, 2003, the Partnership?s cash balance at Morgan
Stanley DW was approximately 81% 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 March 31, 2003, by market sector. It may be
anticipated, however, that these market exposures will
vary materially over time.
Currency. The primary market exposure of the Partnership at
March 31, 2003 was to the currency complex. 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 March 31,
2003, the Partnership?s major exposures were to euro, Japanese
yen and British pound 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 second largest market exposure of the Partnership at
March 31, 2003 was to the global stock index sector. The primary
equity exposure was to equity price risk in the G-7 countries.
The G-7 countries consist of France, the U.S., Britain,
Germany, Japan, Italy and Canada. The stock index futures traded
by the Partnership are by law limited to futures on broadly-based
indices. At March 31, 2003, the Partnership?s primary exposures
were to the DAX (Germany), TOPIX (Japan), Hang Seng (Hong Kong)
and Nikkei (Japan) stock indices. The Partnership is primarily
exposed to the risk of adverse price trends or static markets in
the U.S., European, Japanese and Hong Kong 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.

Interest Rate. At March 31, 2003, 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. However, the
Partnership also takes futures positions in the government debt
of smaller nations - e.g., Australia. 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.

Commodity.
Soft Commodities and Agriculturals. At March 31, 2003, the
Partnership had exposure to the markets that comprise these
sectors. Most of the exposure was to the corn, wheat and
cotton markets. Supply and demand inequalities, severe
weather disruptions and market expectations affect price
movements in these markets.

Metals. The Partnership?s metals exposure at March 31, 2003
was to fluctuations in the price of 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
and Demeter anticipates that the Partnership will continue
to do so.

Energy. At March 31, 2003, the Partnership?s energy
exposure was primarily to futures contracts in natural gas.
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.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at March 31, 2003:

Foreign Currency Balances. The Partnership?s primary foreign
currency balances at March 31, 2003 were in euros and
British pounds. 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.

Item 4. CONTROLS AND PROCEDURES
(a) As of a date within 90 days of the filing date of 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?14 and
15d?14 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
November 6, 1998 (SEC File Number 333-60115).

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 333-91563).

The Partnership registered an additional 2,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on July 29, 2002 (SEC File Number 333-85076).

The Partnership registered an additional 9,000,000 Units pursuant
to a Registration Statement on Form S-1, which became effective on
February 26, 2003 (SEC File Number 333-103166).

The managing underwriter for the Partnership is Morgan Stanley DW.

Units are continuously sold 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 March 31, 2003, 9,336,615.285 Units were sold, leaving
10,663,384.715 Units unsold. The aggregate price of the Units
sold through March 31, 2003 was $136,869,141.

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 Statement.

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

Mr. Anthony J. DeLuca resigned the position of Director of
Demeter.

Mr. Edward C. Oelsner resigned the position of Director of
Demeter.

Mr. Joseph G. Siniscalchi resigned the position of
Director of Demeter.

Mr. Douglas J. Ketterer, age 37, was named a Director of Demeter,
subject to Mr. Ketterer being confirmed as a principal of Demeter
by the National Futures Association. Mr. Ketterer is a Managing
Director and head of the Strategic Solutions Group, which is
comprised of the Global Product Development Group, Financial
Planning, Mutual Fund Advisory Group, Retirement Strategies,
Education Strategies, Gifting Strategies, External Mutual Funds
and the Global Portfolio Analysis and Research Departments. Mr.
Ketterer joined the firm in 1990 in the Corporate Finance
Division as a part of the Retail Products Group. He later moved
to the origination side of Investment Banking, and then, after
the merger between Morgan Stanley and Dean Witter, served in the
Product Development Group at Morgan Stanley Dean Witter Advisors
(now known as Morgan Stanley Funds). From the summer of 2000 to
the summer of 2002, Mr. Ketterer served as the Chief
Administrative Officer for Morgan Stanley Investment Management,
where he headed the Strategic Planning & Administrative Group.
Mr. Ketterer received his M.B.A. from New York University?s
Leonard N. Stern School of Business and his B.S. in Finance from
the University at Albany?s School of Business.

Mr. Jeffrey S. Swartz, age 36, was named a Director of
Demeter, subject to Mr. Swartz being confirmed as a principal of
Demeter by the National Futures Association. Mr. Swartz is a
Managing Director and Chief Operating Officer of Investor
Advisory Services (?IAS?). Mr. Swartz began his career with
Morgan Stanley in 1990, working as a Financial Advisor in Boston.
He was appointed Sales Manager of the Boston office in 1994, and
served in that role for two years. In 1996, he was named Branch
Manager of the Cincinnati office. In 1999, Mr. Swartz was named
Associate Director of the Midwest region, which consisted of 10
states and approximately 90 offices. Mr. Swartz served in this
capacity until October of 2001, when he was named Director of IAS
Strategy and relocated to IAS headquarters in New York. In
December of 2002, Mr. Swartz was promoted to Managing Director
and Chief Operating Officer of IAS. Mr. Swartz received his
degree in Business Administration from the University of New
Hampshire.

Mr. Jeffrey D. Hahn, Chief Financial Officer of Demeter, was
named a Director of Demeter.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership, is incorporated by
reference to Exhibit A of the Partnership?s Prospectus,
dated February 26, 2003, filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, as amended, on March 18, 2003.
3.02 Certificate of Limited Partnership, dated July 15, 1998,
is incorporated by reference to Exhibit 3.02 of the
Partnership?s Registration Statement on Form S-1 (File
No. 333-60115) 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 Charter Graham L.P.), is
incorporated by reference to Exhibit 3.01 of the
Partnership?s Form 8-K (File No. 0-25603) 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 Graham Capital Management
L.P. is incorporated by reference to Exhibit 10.01 of the
Partnership?s Quarterly Report on Form 10-Q (File No. 0-
25603) 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 reference to Exhibit B of the
Partnership?s Prospectus, dated February 26, 2003, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 18, 2003.
10.03 Amended and Restated Escrow Agreement, dated as of August
31, 2002, among the Partnership, Morgan Stanley Charter
Millburn L.P., Morgan Stanley Charter Welton L.P., Morgan
Stanley Charter MSFCM L.P., Morgan Stanley DW, and JP
Morgan Chase Bank is incorporated by reference to Exhibit
10.04 of the Partnership?s Registration Statement on Form
S?1 (File No. 333-103166) filed with the Securities and
Exchange Commission on February 13, 2003.

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. 0-25603) 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. 0-25603) 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. 0-25603) 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. 0-25603) 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 February 26, 2003, filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933, as
amended, on March 18, 2003.
10.09 Securities Account Control Agreement among the
Partnership, MS & Co., and Morgan Stanley DW, dated as of
May 1, 2000, is incorporated by reference to Exhibit
10.03 of the Partnership?s Form 8-K (File No. 0-25603)
filed with the Securities and Exchange Commission on
November 6, 2001.
99.01 Certification of President of Demeter Management
Corporation, 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.
99.02 Certification of Chief Financial Officer of Demeter
Management Corporation, 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 Graham L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

May 15, 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.

CERTIFICATIONS

I, Jeffrey A. Rothman, President of Demeter Management
Corporation, the general partner of the registrant, certify that:

1. I have reviewed this quarterly report on Form 10-Q of the
registrant;

2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant?s other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant?s disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the
?Evaluation Date?); and

c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;

5. The registrant?s other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant?s auditors and the audit committee of Demeter?s
board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant?s ability to record, process, summarize and
report financial data and have identified for the
registrant?s auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant?s internal controls; and

6. The registrant?s other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.

Date: May 15, 2003 /s/Jeffrey A. Rothman
Jeffrey A. Rothman
President,
Demeter Management Corporation,
general partner of the registrant

CERTIFICATIONS
I, Jeffrey D. Hahn, Chief Financial Officer of Demeter Management
Corporation, the general partner of the registrant, certify that:

1. I have reviewed this quarterly report on Form 10-Q of the
registrant;

2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant?s other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant?s disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the
?Evaluation Date?); and

c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;

5. The registrant?s other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant?s auditors and the audit committee of Demeter?s
board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant?s ability to record, process, summarize and
report financial data and have identified for the
registrant?s auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant?s internal controls; and

6. The registrant?s other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.

Date: May 15, 2003 /s/Jeffrey D. Hahn
Jeffrey D. Hahn
Chief Financial Officer,
Demeter Management Corporation,
general partner of the registrant

EXHIBIT 99.01

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
Graham L.P. (the ?Partnership?) on Form 10-Q for the period ended
March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the ?Report?), I, Jeffrey A.
Rothman, 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/Jeffrey A. Rothman

Name: Jeffrey A. Rothman
Title: President

Date: May 15, 2003

EXHIBIT 99.02

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
Graham L.P. (the ?Partnership?) on Form 10-Q for the period ended
March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the ?Report?), I, Jeffrey D. Hahn,
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/Jeffrey D. Hahn

Name: Jeffrey D. Hahn
Title: Chief Financial Officer

Date: May 15, 2003

? 6 ?

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