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MORGAN STANLEY SMITH BARNEY
CHARTER SERIES
December 31, 2009
Annual Report
[LOGO]
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
HISTORICAL FUND PERFORMANCE
Presented below is the percentage change in Net Asset Value per Unit from the
start of every calendar year each Fund has traded. Also provided is the
inception-to-date return and the compound annualized return since inception for
each Fund. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
FUND % % % % % % % % % % % % % % % %
----------------------------------------------------------------------------------------------------------------------------
Charter Campbell. -- -- -- -- -- -- -- -- (4.2) 16.3 3.9 9.7 3.1 (15.0) (2.2) (10.0)
(3 mos.)
----------------------------------------------------------------------------------------------------------------------------
Charter Aspect... (7.3) 21.9 4.0 26.2 5.1 (9.2) 23.8 (3.3) 29.1 (5.1) (5.6) (19.6) 10.5 4.4 23.9 (16.7)
(10 mos.)
----------------------------------------------------------------------------------------------------------------------------
Charter Graham... -- -- -- -- -- 2.9 22.0 9.7 36.8 16.1 1.3 (16.1) 4.6 13.2 32.3 (0.8)
(10 mos.)
----------------------------------------------------------------------------------------------------------------------------
Charter WNT...... -- -- -- -- -- (7.2) 12.1 (11.3) 21.1 (0.6) (5.3) (0.6) (2.4) 10.4 15.5 (12.1)
(10 mos.)
----------------------------------------------------------------------------------------------------------------------------
INCEPTION- COMPOUND
TO-DATE ANNUALIZED
RETURN RETURN
FUND % %
---------------------------------------
Charter Campbell. (2.1) (0.3)
---------------------------------------
Charter Aspect... 87.2 4.0
---------------------------------------
Charter Graham... 188.9 10.3
---------------------------------------
Charter WNT...... 14.4 1.2
---------------------------------------
DEMETER MANAGEMENT LLC
522 Fifth Avenue, 13th Floor
New York, NY 10036
Telephone (212) 296-1999
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
ANNUAL REPORT
2009
Dear Limited Partner:
This marks the eighth annual report for Morgan Stanley Smith Barney Charter
Campbell L.P., the sixteenth annual report for Morgan Stanley Smith Barney
Charter Aspect L.P., and the eleventh annual report for Morgan Stanley Smith
Barney Charter Graham L.P. and Morgan Stanley Smith Barney Charter WNT L.P. The
Net Asset Value per Unit for each of the four Morgan Stanley Smith Barney
Charter Series Funds (formerly, Morgan Stanley Charter Series Funds)
("Fund(s)") as of December 31, 2009 was as follows:
% CHANGE
FUNDS N.A.V. FOR YEAR
---------------------------------
Charter Campbell $ 9.79 -10.0%
---------------------------------
Charter Aspect $18.72 -16.7%
---------------------------------
Charter Graham $28.89 -0.8%
---------------------------------
Charter WNT $11.44 -12.1%
---------------------------------
Since its inception in October 2002, Charter Campbell has returned -2.1% (a
compound annualized return of -0.3%). Since its inception in March 1994,
Charter Aspect has returned 87.2% (a compound annualized return of 4.0%). Since
their inception in March 1999, Charter Graham has returned 188.9% (a compound
annualized return of 10.3%) and Charter WNT has returned 14.4% (a compound
annualized return of 1.2%).
Detailed performance information for each Fund is located in the body of the
financial report. (Note: all returns are net of all fees). For each Fund, we
provide a chart that portrays trading gains and trading losses for the year in
each sector in which the Fund participates.
The trading results by sector charts indicate the year-to-date composite
percentage returns generated by the specific assets dedicated to trading within
each market sector in which each Fund participates. Please note that there is
not an equal amount of assets in each market sector, and the specific
allocations of assets by a Fund to each sector will vary over time within a
predetermined range. Below each chart is a description of the factors that
influenced trading gains and trading losses within each Fund during the year.
Should you have any questions concerning this report, please feel free to
contact Demeter Management LLC, 522 Fifth Avenue, 13th Floor, New York, NY
10036, or your Morgan Stanley Smith Barney Financial Advisor.
I hereby affirm, that to the best of my knowledge and belief, the information
contained in this report is accurate and complete. Past performance is no
guarantee of future results.
Sincerely,
/s/ Walter J. Davis
Walter J. Davis
Chairman of the Board of Directors and President
Demeter Management LLC,
General Partner of
Morgan Stanley Smith Barney Charter Campbell L.P.
Morgan Stanley Smith Barney Charter Aspect L.P.
Morgan Stanley Smith Barney Charter Graham L.P.
Morgan Stanley Smith Barney Charter WNT L.P.
Managed futures investments are speculative, involve a high degree of risk,
use significant leverage, are generally illiquid, have substantial charges, are
subject to conflicts of interest, and are suitable only for the risk capital
portion of an investor's portfolio. Before investing in any managed futures
investment, qualified investors should read the prospectus or offering
documents carefully for additional information with respect to charges,
expenses, and risks. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
This report is based on information from multiple sources and Morgan Stanley
Smith Barney makes no representation as to the accuracy or completeness of
information from sources outside of Morgan Stanley Smith Barney.
This page intentionally left blank.
MORGAN STANLEY SMITH BARNEY CHARTER CAMPBELL L.P.
(FORMERLY, MORGAN STANLEY CHARTER CAMPBELL L.P.)
[CHART]
Year ended December 31, 2009
------------------------------
Currencies 4.13%
Global Interest Rates -4.70%
Global Stock Indices -0.40%
Energies -1.33%
Metals 1.48%
Agriculturals -0.36%
Note:Reflects trading results only and does not include fees or interest income.
FACTORS INFLUENCING ANNUAL TRADING LOSSES:
. The most significant trading losses were recorded within the global interest
rate sector, primarily during April, June, July, August, October, and
December. During April and June, losses were experienced from long positions
in European and Australian fixed-income futures as prices reversed lower
after a pledge from the Group of 20 ("G-20") leaders to support the global
economy and as better-than-expected economic data reduced demand for the
relative "safety" of government bonds. Additional losses were incurred
during July and August from short positions in European and Japanese
fixed-income futures as prices increased on investor sentiment that the slow
pace of the global economic recovery and signs of moderate inflation might
lead central banks in these regions to maintain low interest rates in the
near term. Lastly, losses were incurred during October and December from
long positions in U.S., European, and Japanese fixed-income futures as
prices decreased on concerns that an unprecedented supply of government debt
might outweigh demand, as well as on forecasts that the U.S. economy would
expand in 2010.
. Within the energy markets, losses were incurred primarily during March and
May from short futures positions in crude oil and its related products as
prices rose on hopes that government measures to support the U.S. economy
would boost energy demand. During July and August, losses were recorded from
long futures positions in crude oil and its related products as prices
decreased due to above-average U.S. stockpiles. Additional losses were
incurred during September from newly established short futures positions in
crude oil and its related products as prices reversed higher after positive
economic data boosted speculation of a rebound in energy demand. Further
losses were experienced during October and December from newly established
long futures positions in crude oil and its related products as prices
dropped on speculation of waning energy demand.
MORGAN STANLEY SMITH BARNEY CHARTER CAMPBELL L.P.
(FORMERLY, MORGAN STANLEY CHARTER CAMPBELL L.P.)
FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)
. In the global stock index sector, losses were recorded primarily during
March and April from short positions in U.S., British, and Pacific Rim
equity index futures as prices increased after G-20 leaders indicated that
participating governments and central banks would "take whatever further
actions are necessary to stabilize the financial system." During October,
long positions in U.S., British, and Pacific Rim equity index futures
resulted in additional losses as prices reversed lower towards the end of
the month amid speculation that European and U.S. financial institutions
might need to raise more capital.
. Additional losses were incurred within the agricultural markets, primarily
during September, from short futures positions in coffee as prices rose
during the first half of the month on concerns that adverse weather might
disrupt harvests in Colombia and Brazil, the world's largest
coffee-producing countries. Smaller losses were experienced during December
from newly established long positions in coffee futures as prices decreased
due to speculative selling.
FACTORS INFLUENCING ANNUAL TRADING GAINS:
. Within the currency sector, gains were achieved primarily during February,
March, June, July, September, and November. During February and March, long
positions in the Australian dollar and New Zealand dollar versus the U.S.
dollar resulted in gains as the value of the U.S. dollar decreased relative
to most of its rivals following the U.S. Federal Reserve's surprise plans to
begin a more aggressive phase of quantitative easing. During June, long
positions in the Australian dollar versus the U.S. dollar recorded gains as
the value of the Australian dollar increased relative to the U.S. dollar
amid a rise in risk appetite, which boosted demand for higher-yielding
currency assets. Additional gains were recorded during July, September, and
November from long positions in the Australian dollar, New Zealand dollar,
and Swiss franc versus the U.S. dollar as the value of the U.S. dollar
declined relative to these currencies after improving global economic data
reduced demand for the U.S. dollar as a "safe haven" currency. The value of
the U.S. dollar was also pressured lower after the U.S. central bank
indicated that it remained committed to its quantitative easing program.
Meanwhile, the value of the Australian dollar and New Zealand dollar also
moved higher in the wake of stronger gold prices.
. In the metals markets, gains were experienced primarily during May, July,
August, September, October, and November from long futures positions in
silver as prices rose amid a decline in the value of the U.S. dollar.
Additional gains were experienced from long positions in zinc and copper
futures as prices increased throughout a majority of the last six months of
the year after positive economic data boosted speculation that demand for
base metals might rise.
MORGAN STANLEY SMITH BARNEY CHARTER ASPECT L.P.
(FORMERLY, MORGAN STANLEY CHARTER ASPECT L.P.)
[CHART]
Year ended December 31, 2009
----------------------------
Currencies -3.25%
Global Interest Rates -3.38%
Global Stock Indices 1.31%
Energies -4.96%
Metals 0.48%
Agriculturals 0.32%
Note:Reflects trading results only and does not include fees or interest income.
FACTORS INFLUENCING ANNUAL TRADING LOSSES:
. The most significant trading losses were incurred within the energy markets,
primarily during March, May, June, July, and September, from short futures
positions in crude oil and its related products as prices increased on
optimism that a possible rebound in global economic growth might boost
energy demand. Newly established long futures positions in crude oil and its
related products resulted in losses during October and December as prices
declined after government reports showed a drop in U.S. consumer spending
and a rise in U.S. inventories.
. Within the global interest rate sector, losses were experienced primarily
during January, June, October, and December. During January, losses were
recorded from long positions in U.S. fixed-income futures as prices declined
following news that debt sales might increase as governments around the
world boosted spending in an effort to ease the deepening economic slump.
Additional losses were incurred during June from long positions in U.S. and
Australian fixed-income futures as prices moved lower amid rising investor
confidence, which reduced demand for the relative "safety" of government
bonds. Meanwhile, short positions in Japanese fixed-income futures resulted
in losses as prices increased during the second half of June after the Bank
of Japan indicated that it remained cautious about the Japanese economy.
Further losses were experienced during October and December from long
positions in U.S. fixed-income futures as prices decreased on concerns that
an unprecedented supply of government debt might outweigh demand, as well as
on forecasts that the U.S. economy would expand in 2010, thereby reducing
demand for the relative "safety" of government bonds.
MORGAN STANLEY SMITH BARNEY CHARTER ASPECT L.P.
(FORMERLY, MORGAN STANLEY CHARTER ASPECT L.P.)
FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)
. In the currency sector, losses were recorded primarily during March, April,
May, and July from short positions in the euro and British pound versus the
U.S. dollar as the value of the U.S. dollar moved lower against most of its
rivals after improving global economic data reduced demand for the U.S.
dollar as a "safe haven" currency. Additional losses were incurred from long
positions in the Japanese yen versus the U.S. dollar, primarily during June,
as the value of the Japanese yen reversed lower relative to the U.S. dollar
amid pessimism regarding the future growth of the Japanese economy. During
October, short positions in the British pound versus the U.S. dollar
resulted in further losses as the value of the British pound increased
relative to the U.S. dollar amid better-than-expected economic data out of
the United Kingdom. Further losses were experienced during December from
long positions in the Japanese yen versus the U.S. dollar as the value of
the U.S. dollar reversed higher against most of its major rivals on
speculation that the U.S. Federal Reserve might raise interest rates earlier
than expected.
FACTORS INFLUENCING ANNUAL TRADING GAINS:
. Within the global stock index sector, gains were achieved primarily during
January, February, May, June, August, September, November, and December.
During January and February, short positions in European and Pacific Rim
equity index futures resulted in gains as prices dropped on concerns that
financial firms might need to raise additional capital and on a continued
slowdown in global economic growth. Additional gains were recorded during
June from short positions in European equity index futures as prices
declined on speculation that a recent rally in the European equity markets
might have outpaced the prospects for corporate earnings growth. During
August and September, gains were experienced from newly established long
positions in U.S., European, and Pacific Rim equity index futures as prices
rose due to positive economic data and increased merger and acquisition
activity in the technology sector. Further gains were achieved during
November and December following a pledge from the G-20 nations to maintain
stimulus measures, as well as fundamental signs that the global economy
might be recovering.
. In the metals markets, gains were recorded throughout a majority of the last
six months of the year from long futures positions in gold as prices moved
higher amid a decline in the value of the U.S. dollar. Additional gains were
experienced from long positions in copper and zinc futures as prices rose
during the third quarter following news that China's economy expanded during
the second quarter of 2009 and Chinese manufacturing jumped in July, thereby
spurring speculation that demand for base metals might rise. Further gains
were recorded during November from existing long positions as copper and
zinc futures prices were pressured higher due to reports that showed U.S.
retail sales rose more than expected and Japan's third-quarter economic
expansion was the fastest in two years.
. Smaller gains were achieved in the agricultural sector, primarily during
June, August, and December, from long positions in sugar futures as prices
rose amid expectations of a drop in global production. During August, sugar
prices moved sharply higher at the beginning of the month following reports
of damaged crops in India and reduced yields in Brazil. Prices continued to
climb in August and again in December, reaching a 28-year high, on deepening
concerns that unfavorable weather in producing countries and rising import
demand might worsen the global supply shortfall.
MORGAN STANLEY SMITH BARNEY CHARTER GRAHAM L.P.
(FORMERLY, MORGAN STANLEY CHARTER GRAHAM L.P.)
[CHART]
Year ended December 31, 2009
----------------------------
Currencies 2.91%
Global Interest Rates -6.00%
Global Stock Indices 11.12%
Energies -2.51%
Metals 2.55%
Agriculturals 0.35%
Note:Reflects trading results only and does not include fees or interest income.
FACTORS INFLUENCING ANNUAL TRADING LOSSES:
. The most significant trading losses were incurred within the global interest
rate sector, primarily during January, April, June, July, August, October,
and December. During January, losses were recorded from long positions in
European fixed-income futures as prices decreased following news that debt
sales might increase as governments around the world boosted spending in an
effort to ease the deepening economic slump. European fixed-income futures
prices then moved lower during April and June amid rising investor
confidence, which reduced demand for the relative "safety" of government
debt, thus resulting in further losses from long positions. Meanwhile,
losses were experienced from short positions in Japanese fixed-income
futures as prices increased during the second half of June after the Bank of
Japan indicated that it remained cautious about the Japanese economy. During
July, newly established short positions in U.S. and European fixed-income
futures resulted in losses as prices moved higher on investor sentiment that
the slow pace of the global economic recovery and signs of moderate
inflation might lead central banks in these regions to maintain low interest
rates in the near term. Additional losses were recorded during August from
newly established long positions in European fixed-income futures as prices
reversed lower at the beginning of the month amid a rise in the European
equity markets. Lastly, losses were incurred during October and December
from long positions in U.S. and European fixed-income futures as prices
decreased on concerns that an unprecedented supply of government debt might
outweigh demand.
MORGAN STANLEY SMITH BARNEY CHARTER GRAHAM L.P.
(FORMERLY, MORGAN STANLEY CHARTER GRAHAM L.P.)
FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)
. Within the energy markets, losses were experienced primarily during May from
short positions in heating oil and gas oil as prices increased amid
better-than-expected economic data in the U.S. and China, the world's
largest consumers of energy. Additional losses were recorded during July and
September from both long and short futures positions in crude oil and its
related products as prices moved without consistent direction amid
conflicting data regarding supply and demand. Smaller losses were incurred
during December from long futures positions in crude oil and its related
products as prices dropped on speculation of waning energy demand after the
U.S. government reported a rise in inventories.
FACTORS INFLUENCING ANNUAL TRADING GAINS:
. Within the global stock index sector, gains were achieved during January,
February, May, July, August, September, November, and December. During
January and February, short positions in U.S., European, and Pacific Rim
equity index futures resulted in gains as prices dropped on concerns that
financial firms might need to raise additional capital and a continued
slowdown in global economic growth may further erode corporate earnings.
Additional gains were experienced during May, July, August, and September
from long positions in U.S., European, and Pacific Rim equity index futures
as prices rose due to positive economic data and increased merger and
acquisition activity in the technology sector. Further gains were achieved
during November and December as global equity prices were pressured higher
by a pledge from the G-20 nations to maintain stimulus measures, as well as
signs that the global economy might be recovering.
. In the currency sector, gains were recorded primarily during January, May,
July, August, September, and November. During January, gains were
experienced from short positions in the Australian dollar and New Zealand
dollar versus the U.S. dollar as the value of the U.S. dollar moved higher
against these currencies after a government report showed the U.S. trade
deficit narrowed by the largest amount in 12 years. Newly established long
positions in the Australian dollar, New Zealand dollar, and Canadian dollar
versus the U.S. dollar resulted in additional gains during May, July,
August, September, and November as the value of the U.S. dollar declined
relative to these currencies after improving global economic data reduced
demand for the U.S. dollar as a "safe haven" currency. The value of the U.S.
dollar was also pressured lower by speculation that the U.S. Federal Reserve
might keep borrowing rates low.
. In the metals markets, gains were recorded primarily during May, July,
August, September, and November from long futures positions in copper,
aluminum, lead, and zinc as prices increased after positive economic data
boosted speculation that demand for base metals might rise. Additional gains
were achieved during November from long positions in gold and silver futures
as prices increased due to a drop in the value of the U.S. dollar.
. Smaller gains were experienced within the agricultural sector, primarily
during February, May, July, August, September, and December from long
positions in sugar futures as prices rose amid expectations of a drop in
global production. As such, prices climbed to a 28-year high on deepening
concerns that unfavorable weather in producing countries and rising import
demand might worsen the global supply shortfall.
MORGAN STANLEY SMITH BARNEY CHARTER WNT L.P.
(FORMERLY, MORGAN STANLEY CHARTER WCM L.P.)
[CHART]
Year ended December 31, 2009
----------------------------
Currencies -1.37%
Global Interest Rates -1.06%
Global Stock Indices -1.44%
Energies -1.63%
Metals 0.51%
Agriculturals 0.24%
Note:Reflects trading results only and does not include fees or interest income.
FACTORS INFLUENCING ANNUAL TRADING LOSSES:
. The most significant trading losses were experienced within the energy
markets, primarily during May, June, and July from short futures positions
in crude oil and its related products as prices increased amid
better-than-expected quarterly earnings reports and positive economic data.
During August, newly established long futures positions in crude oil and its
related products resulted in losses as prices reversed lower towards the end
of the month due to above-average U.S. stockpiles. Additional losses were
recorded during September from both long and short futures positions in
crude oil and its related products as prices moved without consistent
direction amid conflicting data regarding supply and demand. Further losses
were incurred during October and December from long futures positions in
crude oil and its related products as prices dropped on speculation of
waning energy demand.
. Within the global stock index sector, losses were incurred primarily during
March, April, May, July, and August, from short positions in U.S., European,
and Pacific Rim equity index futures as prices rose during the first half of
the year on speculation that government programs might revive economic
growth. Additional losses were experienced during July and August from short
positions in U.S., European, and Pacific Rim equity index futures as prices
were pressured higher by positive economic data and increased merger and
acquisition activity in the technology sector. Smaller losses were recorded
during October from newly established long positions in U.S., European, and
Pacific Rim equity index futures as prices reversed lower towards the end of
the month amid concerns that European and U.S. financial institutions might
need to raise more capital.
MORGAN STANLEY SMITH BARNEY CHARTER WNT L.P.
(FORMERLY, MORGAN STANLEY CHARTER WCM L.P.)
FACTORS INFLUENCING ANNUAL TRADING LOSSES: (continued)
. In the currency sector, losses were incurred primarily during February,
March, April, May, August, and December. During February, losses were
experienced from long positions in the Japanese yen versus the U.S. dollar
as the value of the Japanese yen reversed lower against most of its rivals
amid speculation that the Bank of Japan might intervene to weaken the
currency, as well as on news that Japan's trade deficit substantially
increased in January. Additional losses were experienced during March,
April, and May from short positions in the Canadian dollar and British pound
versus the U.S. dollar as the value of the U.S. dollar moved lower against
most of its rivals after improving global economic data reduced demand for
the U.S. dollar as a "safe haven" currency. During August, newly established
long positions in the British pound versus the U.S. dollar resulted in
losses as the value of the British pound declined relative to the U.S.
dollar after government reports showed the British economy contracted for a
fifth consecutive quarter. Lastly, currency losses were incurred during
December from long positions in the Japanese yen versus the U.S. dollar as
the value of the U.S. dollar reversed higher against the Japanese yen on
speculation that the U.S. Federal Reserve might raise interest rates earlier
than expected.
. Within the global interest rate sector, losses were recorded primarily
during January, April, June, and December. During January, losses were
experienced from long positions in U.S. and German fixed-income futures as
prices declined following news that debt sales might increase as governments
around the world boosted spending in an effort to ease the deepening
economic slump. Additional losses were experienced during April and June
from long positions in U.S. and European fixed-income futures as prices
moved lower after a pledge from G-20 leaders to support the global economy
and better-than-expected economic data reduced demand for the relative
"safety" of government bonds. Further losses were incurred from short
positions in Japanese fixed-income futures as prices increased during June
after the Bank of Japan indicated that it remained cautious about the
Japanese economy. Lastly, losses were recorded during December from long
positions in U.S. and European fixed-income futures as prices decreased on
concerns that an unprecedented supply of government debt might outweigh
demand, as well as on forecasts that the U.S. economy would expand in 2010.
FACTORS INFLUENCING ANNUAL TRADING GAINS:
. In the metals markets, gains were experienced, primarily during September,
October, and November, from long futures positions in gold as prices rose
amid a decline in the value of the U.S. dollar.
. Within the agricultural sector, gains were achieved primarily during January
and February from short futures positions in wheat and corn as prices
declined amid speculation that a global economic recession might further
erode demand for food and biofuels. Further gains were experienced during
June, August, and December from short positions in wheat futures as prices
continued to trend lower amid ample supplies and favorable weather forecasts
in the U.S. Midwest.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Demeter Management LLC ("Demeter"), the general partner of Morgan Stanley
Smith Barney Charter Campbell L.P. (formerly, Morgan Stanley Charter Campbell
L.P.), Morgan Stanley Smith Barney Charter Aspect L.P. (formerly, Morgan
Stanley Charter Aspect L.P.), Morgan Stanley Smith Barney Charter Graham L.P.
(formerly, Morgan Stanley Charter Graham L.P.), and Morgan Stanley Smith Barney
Charter WNT L.P. (formerly, Morgan Stanley Charter WCM L.P.) (collectively, the
"Partnerships"), is responsible for the management of the Partnerships.
Management of Demeter ("Management") is responsible for establishing and
maintaining adequate internal control over financial reporting. The internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles.
The Partnerships' internal control over financial reporting includes those
policies and procedures that:
. Pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
Partnerships;
. Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that the Partnerships' transactions are
being made only in accordance with authorizations of Management and
directors of Demeter; and
. Provide reasonable assurance regarding prevention or timely detection and
correction of unauthorized acquisition, use or disposition of the
Partnerships' assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of each Partnership's internal control
over financial reporting as of December 31, 2009. In making this assessment,
Management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control--Integrated
Framework. Based on our assessment and those criteria, Management believes that
each Partnership maintained effective internal control over financial reporting
as of December 31, 2009.
Deloitte & Touche LLP, the Partnerships' independent registered public
accounting firm, has issued an audit report on the Partnerships' internal
control over financial reporting. This report, which expresses an unqualified
opinion on the Partnerships' internal control over financial reporting, appears
under "Report of Independent Registered Public Accounting Firm" on the
following page.
/s/ Walter J. Davis
Walter J. Davis
President
Demeter Management LLC
/s/ Christian M. Angstadt
Christian M. Angstadt
Chief Financial Officer
Demeter Management LLC
New York, New York
March 24, 2010
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Limited Partners and the General Partner of Morgan Stanley Smith Barney
Charter Aspect L.P. (formerly, Morgan Stanley Charter Aspect L.P.), Morgan
Stanley Smith Barney Charter Campbell L.P. (formerly, Morgan Stanley Charter
Campbell L.P.), Morgan Stanley Smith Barney Charter Graham L.P. (formerly,
Morgan Stanley Charter Graham L.P.), and Morgan Stanley Smith Barney Charter
WNT L.P. (formerly, Morgan Stanley Charter WCM L.P.):
We have audited the accompanying statements of financial condition of Morgan
Stanley Smith Barney Charter Aspect L.P., Morgan Stanley Smith Barney Charter
Campbell L.P., Morgan Stanley Smith Barney Charter Graham L.P., and Morgan
Stanley Smith Barney Charter WNT L.P. (collectively, the "Partnerships"),
including the condensed schedules of investments, as of December 31, 2009 and
2008, and the related statements of operations, changes in partners' capital,
and cash flows for each of the three years in the period ended December 31,
2009. We also have audited the Partnerships' internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Partnerships' management is
responsible for these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness
of internal control over financial reporting, included in the accompanying
Management's Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on these financial statements and an
opinion on the Partnerships' internal control over financial reporting based on
our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement and whether
effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A partnership's internal control over financial reporting is a process
designed by, or under the supervision of, the partnership's principal executive
and principal financial officers, or persons performing similar functions, and
effected by the partnership's general partner, management, and other personnel
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A partnership's
internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the partnership; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the partnership are being made only in accordance with
authorizations of management and the general partner of the partnership; and
(3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the partnership's assets that
could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial
reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Morgan Stanley Smith Barney
Charter Aspect L.P., Morgan Stanley Smith Barney Charter Campbell L.P., Morgan
Stanley Smith Barney Charter Graham L.P., and Morgan Stanley Smith Barney
Charter WNT L.P. as of December 31, 2009 and 2008, and the results of their
operations, their changes in partners' capital, and their cash flows for each
of the three years in the period ended December 31, 2009, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the Partnerships maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2009,
based on the criteria established in Internal Control--Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ Deloitte & Touche LLP
New York, New York
March 24, 2010
MORGAN STANLEY SMITH BARNEY CHARTER CAMPBELL L.P.
(FORMERLY, MORGAN STANLEY CHARTER CAMPBELL L.P.)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
------------------------
2009 2008
----------- -----------
$ $
ASSETS
Trading Equity:
Unrestricted cash 95,664,676 155,972,722
Restricted cash 7,153,792 4,511,014
----------- -----------
Total Cash 102,818,468 160,483,736
----------- -----------
Net unrealized gain (loss) on open contracts (MSIP) 237,468 (105,063)
Net unrealized loss on open contracts (MS&Co.) (3,687,328) (1,388,389)
----------- -----------
Total net unrealized loss on open contracts (3,449,860) (1,493,452)
----------- -----------
Options purchased (premiums paid $230,419 and $60,871, respectively) 224,032 33,971
----------- -----------
Total Trading Equity 99,592,640 159,024,255
Interest receivable (MS&Co.) 805 --
----------- -----------
Total Assets 99,593,445 159,024,255
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 4,061,758 11,187,909
Accrued brokerage fees (MS&Co.) 513,615 784,414
Accrued management fees 226,847 346,450
Options written (premiums received $71,821 and $219,773, respectively) 61,722 194,835
Interest payable (MS&Co.) -- 12,183
----------- -----------
Total Liabilities 4,863,942 12,525,791
----------- -----------
PARTNERS' CAPITAL
Limited Partners (9,577,179.414 and 13,330,566.139 Units, respectively) 93,776,897 145,023,184
General Partner (97,287.055 and 135,608.055 Units, respectively) 952,606 1,475,280
----------- -----------
Total Partners' Capital 94,729,503 146,498,464
----------- -----------
Total Liabilities and Partners' Capital 99,593,445 159,024,255
=========== ===========
NET ASSET VALUE PER UNIT 9.79 10.88
=========== ===========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
2009 2008 2007
-------------- -------------- --------------
$ $ $
INVESTMENT INCOME
Interest income (MS&Co.) 99,203 3,338,645 15,890,523
-------------- -------------- --------------
EXPENSES
Brokerage fees (MS&Co.) 6,967,194 12,855,240 21,204,593
Management fees 3,077,177 5,677,730 9,365,362
-------------- -------------- --------------
Total Expenses 10,044,371 18,532,970 30,569,955
-------------- -------------- --------------
NET INVESTMENT LOSS (9,945,168) (15,194,325) (14,679,432)
-------------- -------------- --------------
TRADING RESULTS
Trading profit (loss):
Realized (596,625) 8,407,556 (10,877,451)
Net change in unrealized (1,950,734) 3,162,293 (28,370,699)
-------------- -------------- --------------
Total Trading Results (2,547,359) 11,569,849 (39,248,150)
-------------- -------------- --------------
NET LOSS (12,492,527) (3,624,476) (53,927,582)
============== ============== ==============
NET LOSS ALLOCATION
Limited Partners (12,365,225) (3,581,347) (53,333,596)
General Partner (127,302) (43,129) (593,986)
NET LOSS PER UNIT
Limited Partners (1.09) (0.25) (1.96)
General Partner (1.09) (0.25) (1.96)
UNITS UNITS UNITS
-------------- -------------- --------------
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 11,287,724.872 18,734,987.587 28,036,317.381
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER ASPECT L.P.
(FORMERLY, MORGAN STANLEY CHARTER ASPECT L.P.)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
------------------------
2009 2008
----------- -----------
$ $
ASSETS
Trading Equity:
Unrestricted cash 101,013,648 177,032,429
Restricted cash 13,630,081 4,101,527
----------- -----------
Total Cash 114,643,729 181,133,956
----------- -----------
Net unrealized gain (loss) on open contracts (MSIP) 445,943 (406,906)
Net unrealized gain (loss) on open contracts (MS&Co.) (206,150) 7,917,392
----------- -----------
Total net unrealized gain on open contracts 239,793 7,510,486
----------- -----------
Total Trading Equity 114,883,522 188,644,442
Interest receivable (MS&Co.) -- 24,703
----------- -----------
Total Assets 114,883,522 188,669,145
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 965,075 13,633,679
Accrued brokerage fees (MS&Co.) 603,471 895,284
Accrued management fees 201,157 298,428
Interest payable (MS&Co.) 89 --
Accrued incentive fee -- 1,678,806
----------- -----------
Total Liabilities 1,769,792 16,506,197
----------- -----------
PARTNERS' CAPITAL
Limited Partners (5,981,069.975 and 7,582,467.939 Units, respectively) 111,976,636 170,429,845
General Partner (60,736.223 and 77,106.223 Units, respectively) 1,137,094 1,733,103
----------- -----------
Total Partners' Capital 113,113,730 172,162,948
----------- -----------
Total Liabilities and Partners' Capital 114,883,522 188,669,145
=========== ===========
NET ASSET VALUE PER UNIT 18.72 22.48
=========== ===========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
2009 2008 2007
------------- ------------- -------------
$ $ $
INVESTMENT INCOME
Interest income (MS&Co.) 135,912 2,196,569 5,744,437
------------- ------------- -------------
EXPENSES
Brokerage fees (MS&Co.) 8,101,403 9,627,330 7,691,517
Management fees 2,700,468 3,209,111 2,563,840
Incentive fees 114,911 6,386,421 1,522,184
------------- ------------- -------------
Total Expenses 10,916,782 19,222,862 11,777,541
------------- ------------- -------------
NET INVESTMENT LOSS (10,780,870) (17,026,293) (6,033,104)
------------- ------------- -------------
TRADING RESULTS
Trading profit (loss):
Realized (6,921,660) 50,386,195 11,541,699
Net change in unrealized (7,270,693) 2,446,380 265,340
------------- ------------- -------------
Total Trading Results (14,192,353) 52,832,575 11,807,039
------------- ------------- -------------
NET INCOME (LOSS) (24,973,223) 35,806,282 5,773,935
============= ============= =============
NET INCOME (LOSS) ALLOCATION
Limited Partners (24,719,262) 35,427,485 5,706,008
General Partner (253,961) 378,797 67,927
NET INCOME (LOSS) PER UNIT
Limited Partners (3.76) 4.34 0.76
General Partner (3.76) 4.34 0.76
UNITS UNITS UNITS
------------- ------------- -------------
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 6,614,438.867 8,141,229.423 7,366,524.555
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER GRAHAM L.P.
(FORMERLY, MORGAN STANLEY CHARTER GRAHAM L.P.)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
-----------------------
2009 2008
----------- -----------
$ $
ASSETS
Trading Equity:
Unrestricted cash 371,818,291 550,525,640
Restricted cash 32,234,772 13,066,966
----------- -----------
Total Cash 404,053,063 563,592,606
----------- -----------
Net unrealized gain on open contracts (MSIP) 3,799,477 433,388
Net unrealized gain on open contracts (MS&Co.) 2,122,029 550,003
----------- -----------
Total net unrealized gain on open contracts 5,921,506 983,391
----------- -----------
Total Trading Equity 409,974,569 564,575,997
Interest receivable (MS&Co.) 4,329 37,440
----------- -----------
Total Assets 409,978,898 564,613,437
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 7,234,689 34,123,015
Accrued brokerage fees (MS&Co.) 2,126,799 2,747,331
Accrued management fees 708,933 915,777
Accrued incentive fee -- 2,289,365
----------- -----------
Total Liabilities 10,070,421 40,075,488
----------- -----------
PARTNERS' CAPITAL
Limited Partners (13,699,445.230 and 17,828,720.751 Units, respectively) 395,815,421 519,261,648
General Partner (141,663.501 and 181,160.501 Units, respectively) 4,093,056 5,276,301
----------- -----------
Total Partners' Capital 399,908,477 524,537,949
----------- -----------
Total Liabilities and Partners' Capital 409,978,898 564,613,437
=========== ===========
NET ASSET VALUE PER UNIT 28.89 29.13
=========== ===========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
2009 2008 2007
-------------- -------------- --------------
$ $ $
INVESTMENT INCOME
Interest income (MS&Co.) 382,568 6,692,461 18,458,473
-------------- -------------- --------------
EXPENSES
Brokerage fees (MS&Co.) 26,465,763 29,411,873 25,051,583
Management fees 8,821,923 9,803,959 8,350,531
Incentive fees 4,016,965 11,182,834 --
-------------- -------------- --------------
Total Expenses 39,304,651 50,398,666 33,402,114
-------------- -------------- --------------
NET INVESTMENT LOSS (38,922,083) (43,706,205) (14,943,641)
-------------- -------------- --------------
TRADING RESULTS
Trading profit (loss):
Realized 28,733,723 182,983,623 78,593,971
Net change in unrealized 4,938,115 1,188,856 (12,743,529)
-------------- -------------- --------------
Total Trading Results 33,671,838 184,172,479 65,850,442
-------------- -------------- --------------
NET INCOME (LOSS) (5,250,245) 140,466,274 50,906,801
============== ============== ==============
NET INCOME (LOSS) ALLOCATION
Limited Partners (5,197,538) 138,967,665 50,355,831
General Partner (52,707) 1,498,609 550,970
NET INCOME (LOSS) PER UNIT
Limited Partners (0.24) 7.11 2.56
General Partner (0.24) 7.11 2.56
UNITS UNITS UNITS
-------------- -------------- --------------
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 15,433,467.839 19,521,771.478 20,459,587.918
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER WNT L.P.
(FORMERLY, MORGAN STANLEY CHARTER WCM L.P.)
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31,
----------------------
2009 2008
---------- -----------
$ $
ASSETS
Trading Equity:
Unrestricted cash 86,689,859 134,831,012
Restricted cash 6,125,936 3,635,855
---------- -----------
Total Cash 92,815,795 138,466,867
---------- -----------
Net unrealized gain on open contracts (MSIP) 290,005 532,724
Net unrealized gain on open contracts (MS&Co.) 180,236 1,871,358
---------- -----------
Total net unrealized gain on open contracts 470,241 2,404,082
---------- -----------
Options purchased (premiums paid $4,263 and $0 respectively) 2,053 --
---------- -----------
Total Trading Equity 93,288,089 140,870,949
Interest receivable (MS&Co.) 1,324 17,334
---------- -----------
Total Assets 93,289,413 140,888,283
========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Redemptions payable 558,871 5,235,101
Accrued brokerage fees (MS&Co.) 479,005 687,015
Accrued management fees 159,668 229,005
Options written (premiums received $9,400 and $0, respectively) 4,693 --
Accrued incentive fee -- 242,980
---------- -----------
Total Liabilities 1,202,237 6,394,101
---------- -----------
PARTNERS' CAPITAL
Limited Partners (7,969,131.800 and 10,227,801.856 Units, respectively) 91,155,811 133,141,833
General Partner (81,422.857 and 103,885.857 Units, respectively) 931,365 1,352,349
---------- -----------
Total Partners' Capital 92,087,176 134,494,182
---------- -----------
Total Liabilities and Partners' Capital 93,289,413 140,888,283
========== ===========
NET ASSET VALUE PER UNIT 11.44 13.02
========== ===========
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
2009 2008 2007
------------- ------------- -------------
$ $ $
INVESTMENT INCOME
Interest income (MS&Co.) 110,792 1,517,958 2,721,187
------------- ------------- -------------
EXPENSES
Brokerage fees (MS&Co.) 6,399,137 6,945,739 3,859,018
Management fees 2,133,046 2,315,246 1,286,341
Incentive fees 117,188 3,078,061 995,125
------------- ------------- -------------
Total Expenses 8,649,371 12,339,046 6,140,484
------------- ------------- -------------
NET INVESTMENT LOSS (8,538,579) (10,821,088) (3,419,297)
------------- ------------- -------------
TRADING RESULTS
Trading profit (loss):
Realized (3,514,634) 25,147,601 11,055,850
Net change in unrealized (1,931,344) 1,306,242 3,051
------------- ------------- -------------
Total Trading Results (5,445,978) 26,453,843 11,058,901
------------- ------------- -------------
NET INCOME (LOSS) (13,984,557) 15,632,755 7,639,604
============= ============= =============
NET INCOME (LOSS) ALLOCATION
Limited Partners (13,844,272) 15,467,529 7,561,278
General Partner (140,285) 165,226 78,326
NET INCOME (LOSS) PER UNIT
Limited Partners (1.58) 1.75 1.06
General Partner (1.58) 1.75 1.06
UNITS UNITS UNITS
------------- ------------- -------------
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 8,808,175.647 9,583,683.847 6,281,449.679
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER CAMPBELL L.P.
(FORMERLY, MORGAN STANLEY CHARTER CAMPBELL L.P.)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
--------------- ------------ ---------- ------------
$ $ $
Partners' Capital, December 31, 2006 31,104,088.751 402,578,194 4,453,851 407,032,045
Net loss -- (53,333,596) (593,986) (53,927,582)
Redemptions (6,929,908.015) (83,133,369) (865,213) (83,998,582)
--------------- ------------ ---------- ------------
Partners' Capital, December 31, 2007 24,174,180.736 266,111,229 2,994,652 269,105,881
Net loss -- (3,581,347) (43,129) (3,624,476)
Redemptions (10,708,006.542) (117,506,698) (1,476,243) (118,982,941)
--------------- ------------ ---------- ------------
Partners' Capital, December 31, 2008 13,466,174.194 145,023,184 1,475,280 146,498,464
Net loss -- (12,365,225) (127,302) (12,492,527)
Redemptions (3,791,707.725) (38,881,062) (395,372) (39,276,434)
--------------- ------------ ---------- ------------
Partners' Capital, December 31, 2009 9,674,466.469 93,776,897 952,606 94,729,503
=============== ============ ========== ============
MORGAN STANLEY SMITH BARNEY CHARTER ASPECT L.P.
(FORMERLY, MORGAN STANLEY CHARTER ASPECT L.P.)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ----------- --------- -----------
$ $ $
Partners' Capital, December 31, 2006 7,141,838.457 122,749,550 1,350,866 124,100,416
Offering of Units 1,749,693.684 30,467,524 80,000 30,547,524
Net income -- 5,706,008 67,927 5,773,935
Redemptions (1,409,731.641) (24,610,055) (79,759) (24,689,814)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2007 7,481,800.500 134,313,027 1,419,034 135,732,061
Offering of Units 2,655,463.507 51,901,053 370,000 52,271,053
Net income -- 35,427,485 378,797 35,806,282
Redemptions (2,477,689.845) (51,211,720) (434,728) (51,646,448)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2008 7,659,574.162 170,429,845 1,733,103 172,162,948
Net loss -- (24,719,262) (253,961) (24,973,223)
Redemptions (1,617,767.964) (33,733,947) (342,048) (34,075,995)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2009 6,041,806.198 111,976,636 1,137,094 113,113,730
============== =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER GRAHAM L.P.
(FORMERLY, MORGAN STANLEY CHARTER GRAHAM L.P.)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ------------ ---------- ------------
$ $ $
Partners' Capital, December 31, 2006 21,577,744.878 415,478,418 4,497,373 419,975,791
Offering of Units 2,648,660.176 54,876,900 -- 54,876,900
Net income -- 50,355,831 550,970 50,906,801
Redemptions (4,235,422.629) (85,276,476) (209,036) (85,485,512)
-------------- ------------ ---------- ------------
Partners' Capital, December 31, 2007 19,990,982.425 435,434,673 4,839,307 440,273,980
Offering of Units 4,209,433.764 108,216,510 -- 108,216,510
Net income -- 138,967,665 1,498,609 140,466,274
Redemptions (6,190,534.937) (163,357,200) (1,061,615) (164,418,815)
-------------- ------------ ---------- ------------
Partners' Capital, December 31, 2008 18,009,881.252 519,261,648 5,276,301 524,537,949
Net loss -- (5,197,538) (52,707) (5,250,245)
Redemptions (4,168,772.521) (118,248,689) (1,130,538) (119,379,227)
-------------- ------------ ---------- ------------
Partners' Capital, December 31, 2009 13,841,108.731 395,815,421 4,093,056 399,908,477
============== ============ ========== ============
MORGAN STANLEY SMITH BARNEY CHARTER WNT L.P.
(FORMERLY, MORGAN STANLEY CHARTER WCM L.P.)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
UNITS OF
PARTNERSHIP LIMITED GENERAL
INTEREST PARTNERS PARTNER TOTAL
-------------- ----------- --------- -----------
$ $ $
Partners' Capital, December 31, 2006 4,341,446.934 43,835,717 475,343 44,311,060
Offering of Units 4,185,306.181 42,984,801 330,000 43,314,801
Net income -- 7,561,278 78,326 7,639,604
Redemptions (1,093,121.353) (11,463,529) -- (11,463,529)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2007 7,433,631.762 82,918,267 883,669 83,801,936
Offering of Units 4,562,563.655 55,382,694 460,000 55,842,694
Net income -- 15,467,529 165,226 15,632,755
Redemptions (1,664,507.704) (20,626,657) (156,546) (20,783,203)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2008 10,331,687.713 133,141,833 1,352,349 134,494,182
Net loss -- (13,844,272) (140,285) (13,984,557)
Redemptions (2,281,133.056) (28,141,750) (280,699) (28,422,449)
-------------- ----------- --------- -----------
Partners' Capital, December 31, 2009 8,050,554.657 91,155,811 931,365 92,087,176
============== =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER CAMPBELL L.P.
(FORMERLY, MORGAN STANLEY CHARTER CAMPBELL L.P.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
2009 2008 2007
----------- ------------ -----------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (12,492,527) (3,624,476) (53,927,582)
Noncash item included in net loss:
Net change in unrealized 1,950,734 (3,162,293) 28,370,699
(Increase) decrease in operating assets:
Restricted cash (2,642,778) 19,628,697 14,479,982
Net premiums paid for options purchased (169,548) 505,410 (275,369)
Interest receivable (MS&Co.) (805) 842,283 838,385
Increase (decrease) in operating liabilities:
Accrued brokerage fees (MS&Co.) (270,799) (646,009) (499,711)
Accrued management fees (119,603) (285,320) (220,705)
Net premiums received for options written (147,952) (98,006) 148,685
Interest payable (MS&Co.) (12,183) 12,183 --
----------- ------------ -----------
Net cash provided by (used for) operating activities (13,905,461) 13,172,469 (11,085,616)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid for redemptions of Units (46,402,585) (118,350,833) (82,393,180)
----------- ------------ -----------
Net cash used for financing activities (46,402,585) (118,350,833) (82,393,180)
----------- ------------ -----------
Net decrease in unrestricted cash (60,308,046) (105,178,364) (93,478,796)
Unrestricted cash at beginning of period 155,972,722 261,151,086 354,629,882
----------- ------------ -----------
Unrestricted cash at end of period 95,664,676 155,972,722 261,151,086
=========== ============ ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER ASPECT L.P.
(FORMERLY, MORGAN STANLEY CHARTER ASPECT L.P.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2009 2008 2007
----------- ----------- -----------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (24,973,223) 35,806,282 5,773,935
Noncash item included in net income (loss):
Net change in unrealized 7,270,693 (2,446,380) (265,340)
(Increase) decrease in operating assets:
Restricted cash (9,528,554) 9,930,548 (613,553)
Interest receivable (MS&Co.) 24,703 338,530 121,095
Increase (decrease) in operating liabilities:
Accrued brokerage fees (MS&Co.) (291,813) 251,607 36,004
Accrued management fees (97,271) 83,869 12,001
Interest payable (MS&Co.) 89 -- --
Accrued incentive fees (1,678,806) 1,678,806 (1,017,989)
----------- ----------- -----------
Net cash provided by (used for) operating activities (29,274,182) 45,643,262 4,046,153
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from offering of Units -- 57,180,658 27,741,173
Cash paid for redemptions of Units (46,744,599) (39,571,800) (27,224,419)
----------- ----------- -----------
Net cash provided by (used for) financing activities (46,744,599) 17,608,858 516,754
----------- ----------- -----------
Net increase (decrease) in unrestricted cash (76,018,781) 63,252,120 4,562,907
Unrestricted cash at beginning of period 177,032,429 113,780,309 109,217,402
----------- ----------- -----------
Unrestricted cash at end of period 101,013,648 177,032,429 113,780,309
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER GRAHAM L.P.
(FORMERLY, MORGAN STANLEY CHARTER GRAHAM L.P.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
2009 2008 2007
------------ ------------ -----------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (5,250,245) 140,466,274 50,906,801
Noncash item included in net income (loss):
Net change in unrealized (4,938,115) (1,188,856) 12,743,529
(Increase) decrease in operating assets:
Restricted cash (19,167,806) (1,271,841) 44,350,072
Interest receivable (MS&Co.) 33,111 1,098,945 688,008
Increase (decrease) in operating liabilities:
Accrued brokerage fees (MS&Co.) (620,532) 485,892 137,612
Accrued management fees (206,844) 161,964 45,871
Accrued incentive fees (2,289,365) 2,289,365 --
------------ ------------ -----------
Net cash provided by (used for) operating activities (32,439,796) 142,041,743 108,871,893
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from offering of Units -- 114,248,694 52,162,191
Cash paid for redemptions of Units (146,267,553) (134,248,543) (93,406,701)
------------ ------------ -----------
Net cash used for financing activities (146,267,553) (19,999,849) (41,244,510)
------------ ------------ -----------
Net increase (decrease) in unrestricted cash (178,707,349) 122,041,894 67,627,383
Unrestricted cash at beginning of period 550,525,640 428,483,746 360,856,363
------------ ------------ -----------
Unrestricted cash at end of period 371,818,291 550,525,640 428,483,746
============ ============ ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER WNT L.P.
(FORMERLY, MORGAN STANLEY CHARTER WCM L.P.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2009 2008 2007
----------- ----------- -----------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (13,984,557) 15,632,755 7,639,604
Noncash item included in net income (loss):
Net change in unrealized 1,931,344 (1,306,242) (3,051)
(Increase) decrease in operating assets:
Restricted cash (2,490,081) 3,212,995 (51,082)
Net premiums paid for options purchased (4,263) -- --
Interest receivable (MS&Co.) 16,010 187,858 (33,634)
Increase (decrease) in operating liabilities:
Accrued brokerage fees (MS&Co.) (208,010) 285,175 189,676
Accrued management fees (69,337) 95,059 63,225
Net premiums received for options written 9,400 -- --
Accrued incentive fees (242,980) 242,980 (41,912)
----------- ----------- -----------
Net cash provided by (used for) operating activities (15,042,474) 18,350,580 7,762,826
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from offering of Units -- 60,396,996 42,504,231
Cash paid for redemptions of Units (33,098,679) (16,293,166) (12,923,139)
----------- ----------- -----------
Net cash provided by (used for) financing activities (33,098,679) 44,103,830 29,581,092
----------- ----------- -----------
Net increase (decrease) in unrestricted cash (48,141,153) 62,454,410 37,343,918
Unrestricted cash at beginning of period 134,831,012 72,376,602 35,032,684
----------- ----------- -----------
Unrestricted cash at end of period 86,689,859 134,831,012 72,376,602
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER CAMPBELL L.P.
(FORMERLY, MORGAN STANLEY CHARTER CAMPBELL L.P.)
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2009 AND 2008
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2009 PARTNERSHIP NET ASSETS: $94,729,503 $ % $ % $
Commodity 142,612 0.15 3,200 -- 145,812
Equity 708,608 0.75 -- -- 708,608
Foreign currency (804,417) (0.85) (50,706) (0.05) (855,123)
Interest rate (1,195,602) (1.26) 40,617 0.04 (1,154,985)
---------- ----- ------- ----- ----------
Grand Total: (1,148,799) (1.21) (6,889) (0.01) (1,155,688)
========== ===== ======= =====
Unrealized Currency Loss (2.42) (2,294,172)
===== ----------
Total Net Unrealized Loss on Open Contracts (3,449,860)
==========
OPTION CONTRACTS FAIR VALUE % OF NAV
---------------- ---------- --------
$ %
Options purchased on Futures Contracts -- --
Options purchased on Forward Contracts 224,032 0.24
Options written on Futures Contracts -- --
Options written on Forward Contracts (61,722) (0.07)
MORGAN STANLEY SMITH BARNEY CHARTER CAMPBELL L.P.
(FORMERLY, MORGAN STANLEY CHARTER CAMPBELL L.P.)
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2009 AND 2008 (continued)
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN OF NET ASSETS LOSS OF NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2008 PARTNERSHIP NET ASSETS: $146,498,464 $ % $ % $
Commodity 8,130 0.01 (157,027) (0.11) (148,897)
Equity 56,182 0.04 (188,676) (0.13) (132,494)
Foreign currency 1,629,758 1.11 (868,681) (0.59) 761,077
Interest rate 511,819 0.35 (131,372) (0.09) 380,447
--------- ---- ---------- ----- ----------
Grand Total: 2,205,889 1.51 (1,345,756) (0.92) 860,133
========= ==== ========== =====
Unrealized Currency Loss (1.61) (2,353,585)
===== ----------
Total Net Unrealized Loss on Open Contracts (1,493,452)
==========
OPTION CONTRACTS FAIR VALUE % OF NAV
---------------- ---------- --------
$ %
Options purchased on Futures Contracts -- --
Options purchased on Forward Contracts 33,971 0.02
Options written on Futures Contracts -- --
Options written on Forward Contracts (194,835) (0.13)
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER ASPECT L.P.
(FORMERLY, MORGAN STANLEY CHARTER ASPECT L.P.)
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2009 AND 2008
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2009 PARTNERSHIP NET ASSETS: $113,113,730 $ % $ % $
Commodity 829,767 0.73 29,079 0.02 858,846
Equity 871,369 0.77 (2,147) -- 869,222
Foreign currency (843,556) (0.75) 459,318 0.41 (384,238)
Interest rate (1,780,583) (1.57) 34,276 0.03 (1,746,307)
---------- ----- ---------- ----- ----------
Grand Total: (923,003) (0.82) 520,526 0.46 (402,477)
========== ===== ========== =====
Unrealized Currency Gain 0.57 642,270
===== ----------
Total Net Unrealized Gain on Open Contracts 239,793
==========
2008 PARTNERSHIP NET ASSETS: $172,162,948
Commodity 253,941 0.15 (332,170) (0.19) (78,229)
Equity 2,335 -- (115,208) (0.07) (112,873)
Foreign currency 674,424 0.39 (1,113,530) (0.65) (439,106)
Interest rate 7,328,297 4.26 -- -- 7,328,297
---------- ----- ---------- ----- ----------
Grand Total: 8,258,997 4.80 (1,560,908) (0.91) 6,698,089
========== ===== ========== =====
Unrealized Currency Gain 0.47 812,397
===== ----------
Total Net Unrealized Gain on Open Contracts 7,510,486
==========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER GRAHAM L.P.
(FORMERLY, MORGAN STANLEY CHARTER GRAHAM L.P.)
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2009 AND 2008
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2009 PARTNERSHIP NET ASSETS: $399,908,477 $ % $ % $
Commodity 5,893,727 1.47 245,680 0.06 6,139,407
Equity 786,962 0.20 18,522 0.01 805,484
Foreign currency 616,300 0.15 438,549 0.11 1,054,849
Interest rate (2,169,237) (0.54) 130,659 0.03 (2,038,578)
---------- ----- ---------- ----- ----------
Grand Total: 5,127,752 1.28 833,410 0.21 5,961,162
========== ===== ========== =====
Unrealized Currency Loss (0.01) (39,656)
===== ----------
Total Net Unrealized Gain on Open Contracts 5,921,506
==========
2008 PARTNERSHIP NET ASSETS: $524,537,949
Commodity 1,188,652 0.23 (1,611,368) (0.31) (422,716)
Equity 3,701 -- (198,181) (0.03) (194,480)
Foreign currency 329,587 0.06 (1,682,150) (0.32) (1,352,563)
Interest rate 1,808,595 0.34 (30,243) (0.01) 1,778,352
---------- ----- ---------- ----- ----------
Grand Total: 3,330,535 0.63 (3,521,942) (0.67) (191,407)
========== ===== ========== =====
Unrealized Currency Gain 0.22 1,174,798
===== ----------
Total Net Unrealized Gain on Open Contracts 983,391
==========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER WNT L.P.
(FORMERLY, MORGAN STANLEY CHARTER WCM L.P.)
CONDENSED SCHEDULES OF INVESTMENTS
DECEMBER 31, 2009 AND 2008
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS) OF NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2009 PARTNERSHIP NET ASSETS: $92,087,176 $ % $ % $
Commodity 445,303 0.48 (110,774) (0.12) 334,529
Equity 472,905 0.51 (6,447) (0.01) 466,458
Foreign currency (307,207) (0.33) (21,956) (0.02) (329,163)
Interest rate 12,612 0.02 318 -- 12,930
-------- ----- -------- ----- --------
Grand Total: 623,613 0.68 (138,859) (0.15) 484,754
======== ===== ======== =====
Unrealized Currency Loss (0.02) (14,513)
===== --------
Total Net Unrealized Gain on Open Contracts 470,241
========
OPTIONS CONTRACTS FAIR VALUE % OF NAV
----------------- ---------- --------
$ $
Options purchased on Futures Contracts 2,053 --
Options purchased on Forward Contracts -- --
Options written on Futures Contracts (4,693) (0.01)
Options written on Forward Contracts -- --
LONG UNREALIZED PERCENTAGE SHORT UNREALIZED PERCENTAGE NET UNREALIZED
FUTURES AND FORWARD CONTRACTS: GAIN OF NET ASSETS LOSS OF NET ASSETS GAIN/(LOSS)
------------------------------ --------------- ------------- ---------------- ------------- --------------
2008 PARTNERSHIP NET ASSETS: $134,494,182 $ % $ % $
Commodity 384,008 0.28 (477,406) (0.35) (93,398)
Equity 960 -- (52,288) (0.04) (51,328)
Foreign currency 230,423 0.17 (713,189) (0.53) (482,766)
Interest rate 2,943,278 2.19 (3,840) -- 2,939,438
--------- ---- ---------- ----- ---------
Grand Total: 3,558,669 2.64 (1,246,723) (0.92) 2,311,946
========= ==== ========== =====
Unrealized Currency Gain 0.07 92,136
===== ---------
Total Net Unrealized Gain on Open Contracts 2,404,082
=========
The accompanying notes are an integral part of these financial statements.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. ORGANIZATION
Morgan Stanley Smith Barney Charter Campbell L.P. ("Charter Campbell"), Morgan
Stanley Smith Barney Charter Aspect L.P. ("Charter Aspect"), Morgan Stanley
Smith Barney Charter Graham L.P. ("Charter Graham"), and Morgan Stanley Smith
Barney Charter WNT L.P. ("Charter WNT") (individually, a "Partnership", or
collectively, the "Partnerships") are limited partnerships organized to engage
primarily in the speculative trading of futures contracts, options on futures
and forward contracts, and forward contracts on physical commodities and other
commodity interests, including, but not limited to, foreign currencies,
financial instruments, metals, energy, and agricultural products (collectively,
"Futures Interests") (refer to Note 6. Financial Instruments).
The general partner for each Partnership is Demeter Management LLC
("Demeter"). The commodity brokers are Morgan Stanley & Co. Incorporated
("MS&Co.") and Morgan Stanley & Co. International plc ("MSIP"). MS&Co. acts as
the counterparty on all trading of foreign currency forward contracts. For
Charter Campbell, Morgan Stanley Capital Group Inc. ("MSCG") acts as the
counterparty on all trading of options on foreign currency forward contracts.
MS&Co., MSIP, and MSCG are wholly-owned subsidiaries of Morgan Stanley.
On April 30, 2009, Demeter Management Corporation was converted from a
Delaware corporation to a Delaware limited liability company and changed its
name to Demeter Management LLC. Demeter is a wholly-owned subsidiary of Morgan
Stanley Smith Barney Holdings LLC, which is majority-owned indirectly by Morgan
Stanley and minority-owned indirectly by Citigroup Inc. ("Citigroup").
Demeter does not believe that the change in its ownership had a material
impact on each Partnership's limited partners. At all times Demeter served as
the general partner of the Partnerships and it continues to do so. The change
in ownership occurred pursuant to the transaction in which Morgan Stanley and
Citigroup agreed to combine the Global Wealth Management Group of Morgan
Stanley and the Smith Barney division of Citigroup Global Markets Inc. into a
new joint venture. The transaction closed on June 1, 2009.
Prior to June 1, 2009, Demeter was a wholly-owned subsidiary of Morgan
Stanley.
Effective September 29, 2009, Demeter changed the name of Morgan Stanley
Charter Campbell L.P., Morgan Stanley Charter Aspect L.P., Morgan Stanley
Charter Graham L.P., and Morgan Stanley Charter WCM L.P., respectively, to
Morgan Stanley Smith Barney Charter Campbell L.P., Morgan Stanley Smith Barney
Charter Aspect L.P., Morgan Stanley Smith Barney Charter Graham L.P., and
Morgan Stanley Smith Barney Charter WNT L.P., respectively. The name change
does not have any impact on the operation of each Partnership or its limited
partners.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
Effective December 1, 2008, Charter Aspect, Charter Graham, and Charter WCM
no longer offer units of limited partnership interest ("Unit(s)") for purchase
or exchange.
On April 1, 2007, Morgan Stanley merged Morgan Stanley DW Inc. ("Morgan
Stanley DW") into MS&Co. Upon completion of the merger, the surviving entity,
MS&Co., became the Partnerships' principal U.S. commodity broker-dealer.
On April 13, 2007, Morgan Stanley & Co. International Limited changed its
name to Morgan Stanley & Co. International plc.
Demeter is required to maintain a 1% minimum interest in the equity of each
Partnership and income (losses) are shared by Demeter and the limited partners
based on their proportional ownership interests.
--------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES. The financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America (U.S.
"GAAP"), which require management to make estimates and assumptions that affect
the reported amounts in the financial statements and related disclosures.
Management believes that the estimates utilized in the preparation of the
financial statements are prudent and reasonable. Actual results could differ
from those estimates.
VALUATION. Futures Interests are open commitments until settlement date, at
which time they are realized. They are valued at fair value, generally on a
daily basis, and the unrealized gains and losses on open contracts (the
difference between contract trade price and market price) are reported in the
Statements of Financial Condition as a net unrealized gain or loss on open
contracts. The resulting net change in unrealized gains and losses is reflected
in the change in unrealized trading profit (loss) on open contracts from one
period to the next on the Statements of Operations. The fair value of
exchange-traded futures, options and forwards contracts is determined by the
various futures exchanges, and reflects the settlement price for each contract
as of the close of business on the last business day of the reporting
period. The fair value of foreign currency forward contracts is extrapolated on
a forward basis from the spot prices quoted as of approximately 3:00 P.M.
(E.T.) of the last business day of the reporting period from various exchanges.
The fair value of non-exchange-traded foreign currency option contracts is
calculated by applying an industry standard model application for options
valuation of foreign currency options, using as input, the spot prices,
interest rates, and option implied volatilities quoted as of approximately 3:00
P.M. (E.T.) on the last business day of the reporting period.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
The Partnerships may buy or write put and call options through listed
exchanges and the over-the-counter market. The buyer of an option has the right
to purchase (in the case of a call option) or sell (in the case of a put
option) a specified quantity of a specific Futures Interest on the underlying
asset at a specified price prior to or on a specified expiration date. The
writer of an option is exposed to the risk of loss if the fair value of a
Futures Interest on the underlying asset declines (in the case of a put option)
or increases (in the case of a call option). The writer of an option can never
profit by more than the premium paid by the buyer but can potentially lose an
unlimited amount.
Premiums received/premiums paid from writing/purchasing options are recorded
as liabilities/assets on the Statements of Financial Condition and are
subsequently adjusted to fair values. The difference between the fair value of
an option and the premiums received/premiums paid is treated as an unrealized
gain or loss.
REVENUE RECOGNITION. Monthly, MS&Co. credits each Partnership with interest
income on 100% of its average daily funds held at MS&Co. and MSIP to meet
margin requirements at a rate approximately equivalent to what the commodity
brokers pay or charge other similar customers on margin deposits. In addition,
MS&Co. credits at each month end each Partnership with interest income on 100%
of such Partnership's assets not deposited as margin at a rate equal to the
monthly average of the 4-week U.S. Treasury bill discount rate during the
month. For purposes of such interest payments, net assets do not include monies
owed to the Partnerships on forward contracts and other Futures Interests.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The fair value of the Partnerships'
assets and liabilities that qualify as financial instruments under Accounting
Standards Codification ("ASC") 825-10-50-10, Financial Instruments (formerly,
Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosures About
Fair Values of Financial Instruments), approximates the carrying amount
presented in the Statements of Financial Condition.
FOREIGN CURRENCY TRANSLATION. The Partnerships' functional currency is the
U.S. dollar; however, the Partnerships may transact business in currencies
other than the U.S. dollar. Assets and liabilities denominated in currencies
other than the U.S. dollar are translated into U.S. dollars at the rates in
effect at the date of the Statements of Financial Condition. Income and expense
items denominated in currencies other than the U.S. dollar are translated into
U.S. dollars at the rates in effect during the period. Gains and losses
resulting from the translation to U.S. dollars are reported in income currently.
NET INCOME (LOSS) PER UNIT. Net income (loss) per Unit is computed in
accordance with the specialized accounting for Investment Companies as
illustrated in the Financial Highlights Footnote (See Note 9. Financial
Highlights).
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
TRADING EQUITY. The Partnerships' asset "Trading Equity," reflected on the
Statements of Financial Condition, consists of (A) cash on deposit with MS&Co.
and MSIP to be used as margin for trading; (B) net unrealized gains or losses
on futures and forward contracts, which are valued at fair value and calculated
as the difference between original contract value and fair value; and for
Partnerships which trade in options; and, if any, (C) options purchased at fair
value. Options written at fair value are recorded in "Liabilities".
The Partnerships, in their normal course of business, enter into various
contracts with MS&Co. and MSIP acting as their commodity brokers. Pursuant to
brokerage agreements with MS&Co. and MSIP, to the extent that such trading
results in unrealized gains or losses, these amounts are offset and reported on
a net basis on the Partnerships' Statements of Financial Condition.
The Partnerships have offset the fair value amounts recognized for forward
contracts executed with the same counterparty as allowable under the terms of
their master netting agreement with MS&Co., as the counterparty on such
contracts. The Partnerships have consistently applied their right to offset.
RESTRICTED AND UNRESTRICTED CASH. As reflected on the Partnerships' Statements
of Financial Condition, restricted cash equals the cash portion of assets on
deposit to meet margin requirements plus the cash required to offset unrealized
losses on foreign currency forwards and options and offset losses on offset
London Metal Exchange positions. All of these amounts are maintained
separately. Cash that is not classified as restricted cash is therefore
classified as unrestricted cash.
BROKERAGE AND RELATED TRANSACTION FEES AND COSTS. Each Partnership currently
pays a flat-rate monthly brokerage fee of 1/12 of 6% of the Partnership's net
assets as of the first day of each month (a 6% annual rate). Such fees
currently cover all brokerage fees, transaction fees and costs, and ordinary
administrative and offering expenses.
OPERATING EXPENSES. The Partnerships incur monthly management fees and may
incur an incentive fee. All common administrative and continuing offering
expenses including legal, auditing, accounting, filing fees, and other related
expenses are borne by MS&Co. through the brokerage fees paid by the
Partnerships.
CONTINUING OFFERING. Units of each Partnership were offered 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. No selling commissions or charges related to the continuing
offering of Units were paid by the limited partners or the Partnerships. MS&Co.
paid all such costs.
Effective December 1, 2008, Charter Aspect, Charter Graham, and Charter WNT
no longer offered Units for purchase or exchange.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
REDEMPTIONS. Limited partners may redeem some or all of their Units at 100% of
the Net Asset Value per Unit as of the end of the last day of any month that is
at least six months after the closing at which a person first becomes a limited
partner. The Request for Redemption must be delivered to a limited partner's
local Morgan Stanley Smith Barney Branch Office in time for it to be forwarded
and received by Demeter no later than 3:00 p.m., New York City time, on the
last day of the month in which the redemption is to be effective. Redemptions
must be made in whole Units, with a minimum of 100 Units required for each
redemption, unless a limited partner is redeeming his entire interest in a
particular Partnership.
Units redeemed on or prior to the last day of the twelfth month from the date
of purchase will be subject to a redemption charge equal to 2% of the Net Asset
Value of a Unit on the Redemption Date. Units redeemed after the last day of
the twelfth month and on or prior to the last day of the twenty-fourth month
from the date of purchase will be subject to a redemption charge equal to 1% of
the Net Asset Value of a Unit on the Redemption Date. Units redeemed after the
last day of the twenty-fourth month from the date of purchase will not be
subject to a redemption charge. The foregoing redemption charges are paid to
MS&Co.
The aggregate amounts of redemption charges paid to MS&Co. for the years
ended December 31, 2009, 2008, and 2007 were as follows:
2009 2008 2007
------ ------ ------
$ $ $
Charter Campbell -- 19,939 147,568
Charter Aspect 142,839 203,595 20,263
Charter Graham 340,662 362,110 185,283
Charter WNT 149,519 104,294 16,590
EXCHANGES. On the last day of the first month which occurred more than six
months after a person first became a limited partner in each Partnership except
Charter Campbell, and at the end of each month thereafter, limited partners
could exchange their Units among Charter Aspect, Charter Graham, and Charter
WNT (subject to certain restrictions outlined in the Limited Partnership
Agreements) without paying additional charges.
Effective December 1, 2008, Charter Aspect, Charter Graham, and Charter WNT
no longer offer Units for purchase or exchange.
DISTRIBUTIONS. Distributions, other than redemptions of Units, are made on a
pro-rata basis at the sole discretion of Demeter. No distributions have been
made to date. Demeter does not intend to make any distributions of the
Partnerships' profits.
INCOME TAXES. No provision for income taxes has been made in the accompanying
financial statements, as partners are individually responsible for reporting
income or loss based upon their respective share of each Partnership's revenues
and expenses for income tax purposes. The Partnerships file U.S. federal and
state tax returns.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
ASC 740-10-50-15, Income Taxes (which incorporates former Financial
Accounting Standards Board ("FASB") Statement No. 109 and FASB Interpretation
No. 48, Income Taxes), clarifies the accounting for uncertainty in income taxes
recognized in a Partnership's financial statements, and prescribes a
recognition threshold and measurement attribute for financial statement
recognition and measurement of a tax position taken or expected to be taken.
The Partnerships have concluded there are no significant uncertain tax
positions that would require recognition in the financial statements as of
December 31, 2009. If applicable, the Partnerships recognize interest accrued
related to unrecognized tax benefits in interest expense and penalties in other
expenses in the Statements of Operations. Generally, 2006 through 2009 tax
years remain subject to examination by U.S. federal and most state tax
authorities.
DISSOLUTION OF THE PARTNERSHIPS. Charter Aspect will terminate on December 31,
2025 and Charter Campbell, Charter Graham, and Charter WCM will terminate on
December 31, 2035, or at an earlier date if certain conditions occur as defined
in each Partnership's Limited Partnership Agreement.
OTHER PRONOUNCEMENTS. On July 1, 2009, the FASB issued SFAS No. 168, The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, also known as FASB ASC 105-10, Generally Accepted
Accounting Principles ("ASC 105-10" or the "Codification"). ASC 105-10
established the exclusive authoritative reference for U.S. GAAP for use in
financial statements except for Securities and Exchange Commission ("SEC")
rules and interpretive releases, which are also authoritative GAAP for SEC
registrants. The Codification supersedes all existing non-SEC accounting and
reporting standards. The Codification became the single source of authoritative
accounting principles generally accepted in the United States and is effective
for financial statements issued for interim and annual periods ending after
September 15, 2009.
The Partnerships adopted ASC 855-10, Subsequent Events (formerly, SFAS
No. 165, Subsequent Events), which was issued in May 2009, and Accounting
Standards Update ("ASU") No. 2010-09, Subsequent Events (Topic 855) Amendments
to Certain Recognition and Disclosure Requirements, which was issued in
February 2010. ASC 855-10 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued. ASC 855-10 is effective for the interim and
annual periods ending after June 15, 2009 and ASU No. 2010-09 is effective
immediately. Management has performed its evaluation of subsequent events and
has determined that there were no subsequent events requiring adjustment in the
December 31, 2009 financial statements. The nature of the subsequent event
effective March 12, 2010 is disclosed in Note 10. Subsequent Event.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
ASC 820-10-65, Fair Value Measurements (formerly, FASB Staff Position ("FSP")
SFAS No. 157-4, Determining Fair Value When the Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly), was issued in April 2009. ASC 820-10-65
provides additional guidance for determining fair value and requires new
disclosures regarding the categories of fair value instruments, as well as the
inputs and valuation techniques utilized to determine fair value and any
changes to the inputs and valuation techniques during the period. ASC 820-10-65
is effective for the interim and annual periods ending after June 15, 2009. The
adoption of ASC 820-10-65 did not have a material impact on the Partnerships'
financial statements.
--------------------------------------------------------------------------------
3. RECENT ACCOUNTING PRONOUNCEMENTS
In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about
Fair Value Measurements, which, among other things, amends ASC 820 to require
entities to separately present purchases, sales, issuances, and settlements in
their reconciliation of Level 3 fair value measurements (i.e., to present such
items on a gross basis rather than on a net basis), and which clarifies
existing disclosure requirements provided by ASC 820 regarding the level of
disaggregation and the inputs and valuation techniques used to measure fair
value for measurements that fall within either Level 2 or Level 3 of the fair
value hierarchy. ASU No. 2010-06 is effective for interim and annual periods
beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements which are effective for fiscal years beginning after
December 15, 2010 and for interim periods within those fiscal years. The
Partnerships are currently assessing the impact of adopting ASU No. 2010-06.
In June 2009, the FASB issued ASC 810-10, Consolidation of Variable Interest
Entities (formerly, SFAS 167, Amendments to FASB Interpretation No. 46(R),
Consolidation of Variable Interest Entities). ASC 810-10 contains new criteria
for determining the primary beneficiary, and increases the frequency of
required reassessments to determine whether a company is the primary
beneficiary of a variable interest entity. ASC 810-10 also contains a new
requirement that any term, transaction, or arrangement that does not have a
substantive effect on an entity's status as a variable interest entity, a
company's power over a variable interest entity, or a company's obligation to
absorb losses or its right to receive benefits of an entity must be disregarded
in applying Interpretation 46(R)'s provisions. ASC 810-10 is applicable for
annual periods beginning after November 15, 2009, and interim periods
thereafter. Effective February 25, 2010, the FASB has decided to indefinitely
defer the application of ASC 810-10 for certain entities. Management believes
that the Partnerships meet the criteria for the indefinite deferral of the
application of ASC 810-10.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
--------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
Each Partnership's cash is on deposit with Morgan Stanley DW (through March 31,
2007), MS&Co., and MSIP in futures interests trading accounts to meet margin
requirements as needed. MS&Co. (Morgan Stanley DW, through March 31, 2007) pays
interest on these funds as described in Note 2. Each Partnership pays brokerage
fees to MS&Co. (Morgan Stanley DW, through March 31, 2007) as described in Note
2. For Charter Campbell, MSCG acts as the counterparty on all trading of
options on foreign currency forward contracts.
--------------------------------------------------------------------------------
5. TRADING ADVISORS
Demeter, on behalf of each Partnership, retains certain commodity trading
advisors to make all trading decisions for the Partnerships. The trading
advisors for each Partnership at December 31, 2009, were as follows:
Morgan Stanley Smith Barney Charter Campbell L.P.
Campbell & Company, Inc.
Morgan Stanley Smith Barney Charter Aspect L.P.
Aspect Capital Limited
Morgan Stanley Smith Barney Charter Graham L.P.
Graham Capital Management, L.P.
Morgan Stanley Smith Barney Charter WNT L.P.
Winton Capital Management Limited
Compensation to the trading advisors by the Partnerships consists of a
management fee and an incentive fee as follows:
MANAGEMENT FEE. Charter Aspect, Charter Graham, and Charter WNT each pays its
trading advisor a flat-rate monthly fee equal to 1/6 of 1% (a 2% annual rate)
of the Partnership's net assets under management by each trading advisor as of
the first day of each month.
Charter Campbell pays its trading advisor a flat-rate monthly fee equal to
1/12 of 2.65% (a 2.65% annual rate) of the Partnership's net assets under
management as of the first day of each month.
INCENTIVE FEE. Each Partnership's incentive fee is equal to 20% of trading
profits paid on a monthly basis.
Trading profits represent the amount by which profits from futures, forwards,
and options trading exceed losses after brokerage and management fees are
deducted. When a trading advisor experiences losses with respect to net assets
as of the end of a calendar month, the trading advisor must recover such losses
before that trading advisor is eligible for an incentive fee in the future.
Cumulative trading losses are adjusted on a pro-rated basis for the amount of
each month's net contributions for each trading advisor.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
--------------------------------------------------------------------------------
6. FINANCIAL INSTRUMENTS
The Partnerships trade Futures Interests. 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 fair value of these
contracts, including interest rate volatility.
The fair value of exchange-traded contracts is based on the settlement price
quoted by the exchange on the day with respect to which fair value is being
determined. If an exchange-traded contract could not have been liquidated on
such day due to the operation of daily limits or other rules of the exchange,
the settlement price shall be the settlement price on the first subsequent day
on which the contract could be liquidated. The fair value of
off-exchange-traded contracts is based on the fair value quoted by the
counterparty.
The Partnerships' contracts are accounted for on a trade-date basis and
marked to market on a daily basis. Each Partnership accounts for its derivative
investments as required by ASC 815-10-15, Derivatives and Hedging (formerly,
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities). A
derivative is defined 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 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, swap or options contracts,
and other financial instruments with similar characteristics such as caps,
floors, and collars.
The net unrealized gains (losses) on open contracts at December 31, reported
as a component of "Trading Equity" on the Statements of Financial Condition,
and their longest contract maturities were as follows:
CHARTER CAMPBELL
NET UNREALIZED GAINS/(LOSSES)
ON OPEN CONTRACTS LONGEST MATURITIES
-------------------------------- -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- ---------- --------- ---------- --------- ---------
$ $ $
2009 (2,594,770) (855,090) (3,449,860) Mar. 2011 Mar. 2010
2008 (2,252,566) 759,114 (1,493,452) Sep. 2009 Mar. 2009
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
CHARTER ASPECT
NET UNREALIZED GAINS/(LOSSES)
ON OPEN CONTRACTS LONGEST MATURITIES
----------------------------- -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- --------- ---------
$ $ $
2009 601,960 (362,167) 239,793 Jun. 2012 Jan. 2010
2008 7,949,609 (439,123) 7,510,486 Mar. 2010 Jan. 2009
CHARTER GRAHAM
NET UNREALIZED GAINS/(LOSSES)
ON OPEN CONTRACTS LONGEST MATURITIES
------------------------------- -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- ---------- --------- --------- ---------
$ $ $
2009 4,878,451 1,043,055 5,921,506 Jun. 2011 Feb. 2010
2008 2,306,468 (1,323,077) 983,391 Jun. 2010 Mar. 2009
CHARTER WNT
NET UNREALIZED GAINS
ON OPEN CONTRACTS LONGEST MATURITIES
----------------------------- -------------------
OFF- OFF-
EXCHANGE- EXCHANGE- EXCHANGE- EXCHANGE-
YEAR TRADED TRADED TOTAL TRADED TRADED
---- --------- --------- --------- --------- ---------
$ $ $
2009 470,241 -- 470,241 Dec. 2011 --
2008 2,404,082 -- 2,404,082 Jun. 2010 --
The Partnerships have credit risk associated with counterparty
nonperformance. As of the date of the financial statements, the credit risk
associated with the instruments in which the Partnerships trade is limited to
the unrealized gain amounts reflected in the Partnerships' Statements of
Financial Condition.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
The Partnerships also have credit risk because MS&Co., MSIP, and/or MSCG act
as the futures commission merchants or the counterparties, with respect to most
of the Partnerships' assets. Exchange-traded futures, exchange-traded forward,
and exchange-traded futures-styled options contracts are marked to market on a
daily basis, with variations in value settled on a daily basis. MS&Co. and
MSIP, each acting as a commodity broker for each Partnership's exchange-traded
futures, exchange-traded forward, and exchange-traded futures-styled options
contracts, are required, pursuant to regulations of the Commodity Futures
Trading Commission, 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, exchange-traded forward, and exchange-traded
futures-styled options contracts, including an amount equal to the net
unrealized gains (losses) on all open exchange-traded futures, exchange-traded
forward, and exchange-traded futures-styled options contracts, which funds, in
the aggregate, totaled $100,223,698 and $158,231,170 for Charter Campbell,
$115,245,689 and $189,083,565 for Charter Aspect, $408,931,514 and $565,899,074
for Charter Graham, and $93,286,036 and $140,870,949 for Charter WNT at
December 31, 2009 and 2008, respectively. With respect to each Partnership's
off-exchange-traded forward currency contracts and forward currency options
contracts, there are no daily settlements of variation in value, nor is there
any requirement that an amount equal to the net unrealized gains (losses) on
such contracts be segregated. However, each Partnership is required to meet
margin requirements equal to the net unrealized loss on open forward currency
contracts in the Partnership accounts with the counterparty, which is
accomplished by daily maintenance of the cash balance in a custody account held
at MS&Co. With respect to those off-exchange-traded forward currency contracts,
the Partnerships are at risk to the ability of MS&Co., the sole counterparty on
all such contracts, to perform. With respect to those off-exchange-traded
forward currency options contracts, Charter Campbell is at risk to the ability
of MSCG, the sole counterparty on all such contracts, to perform. Each
Partnership has a netting agreement with the counterparties. These agreements,
which seek to reduce both the Partnerships' and the counterparties' exposure on
off-exchange-traded forward currency contracts, including options on such
contracts, should materially decrease the Partnerships' credit risk in the
event of MS&Co.'s or MSCG's bankruptcy or insolvency.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
The futures, forwards and options on such contracts traded by the
Partnerships involve varying degrees of related market risk. Market risk is
often dependent upon changes in the level or volatility of interest rates,
exchange rates, and prices of financial instruments and commodities, factors
that result in frequent changes in the fair value of the Partnerships' open
positions, and consequently in its earnings, whether realized or unrealized,
and cash flow. Gains and losses on open positions of exchange-traded futures,
exchange-traded forward, and exchange-traded futures-styled options contracts
are settled daily through variation margin. Gains and losses on
off-exchange-traded forward currency contracts are settled upon termination of
the contract. Gains and losses on off-exchange-traded forward currency options
contracts are settled upon an agreed upon settlement date. However, the
Partnerships are required to meet margin requirements equal to the net
unrealized loss on open forward currency contracts in the Partnerships'
accounts with the counterparty, which is accomplished by daily maintenance of
the cash balance in a custody account held at MS&Co.
--------------------------------------------------------------------------------
7. DERIVATIVES AND HEDGING
ASC 815-10-65, Derivatives and Hedging (formerly, SFAS No. 161, Disclosures
about Derivative Instruments and Hedging Activities--an amendment of
SFAS No. 133, which was issued in March 2008), is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand how those
instruments and activities are accounted for; how and why they are used; and
their effects on a Partnership's financial position, financial performance, and
cash flows. The Partnerships adopted ASC 815-10-65 as of January 1, 2009. The
adoption of ASC 815-10-65 did not have a material impact on the Partnerships'
financial statements, other than enhanced financial statements disclosures.
The Partnerships' objective is to profit from speculative trading in Futures
Interests. Therefore, the trading advisor for each Partnership will take
speculative positions in Futures Interests where it feels the best profit
opportunities exist for its trading strategy. As such, the absolute quantity
(the total of the open long and open short positions) has been presented as a
part of the volume disclosure, as position direction is not an indicative
factor in such volume disclosures. In regards to foreign currency forward
trades, each notional quantity amount has been converted to an equivalent
contract based upon an industry convention.
The following tables summarize the valuation of each Partnership's
investments as required by ASC 815-10-65 as of December 31, 2009 and reflects
the contracts outstanding at such time.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
CHARTER CAMPBELL
The Effect of Trading Activities on the Statements of Financial Condition as
of December 31, 2009:
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FUTURES AND FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------------------- ---------- ---------- ---------- ---------- ----------- --------------
$ $ $ $ $
Commodity 441,146 (298,534) 3,200 -- 145,812 229
Equity 708,608 -- -- -- 708,608 656
Foreign currency 94,380 (898,797) 392,651 (443,357) (855,123) 2,847
Interest rate 10,415 (1,206,017) 81,287 (40,670) (1,154,985) 1,941
--------- ---------- ------- -------- ----------
Total 1,254,549 (2,403,348) 477,138 (484,027) (1,155,688)
========= ========== ======= ========
Unrealized currency loss (2,294,172)
----------
Total net unrealized loss on
open contracts (3,449,860)
==========
OPTION CONTRACTS AT FAIR VALUE
------------------------------
$
Options purchased 224,032
Options written (61,722)
CHARTER ASPECT
The Effect of Trading Activities on the Statements of Financial Condition as
of December 31, 2009:
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FUTURES AND FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------------------- ---------- ---------- ---------- ---------- ----------- --------------
$ $ $ $ $
Commodity 2,048,490 (1,218,723) 128,586 (99,507) 858,846 1,683
Equity 871,844 (475) -- (2,147) 869,222 623
Foreign currency 128,587 (972,143) 504,260 (44,942) (384,238) 1,178
Interest rate 331,046 (2,111,629) 49,343 (15,067) (1,746,307) 4,795
--------- ---------- ------- -------- ----------
Total 3,379,967 (4,302,970) 682,189 (161,663) (402,477)
========= ========== ======= ========
Unrealized currency gain 642,270
----------
Total net unrealized gain on
open contracts 239,793
==========
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
CHARTER GRAHAM
The Effect of Trading Activities on the Statements of Financial Condition as
of December 31, 2009:
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FUTURES AND FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------------------- ---------- ---------- ---------- ---------- ----------- --------------
$ $ $ $ $
Commodity 7,291,580 (1,397,853) 499,089 (253,409) 6,139,407 4,941
Equity 1,413,940 (626,978) 18,522 -- 805,484 3,384
Foreign currency 1,718,378 (1,102,078) 1,070,003 (631,454) 1,054,849 41,153
Interest rate 154,564 (2,323,801) 227,907 (97,248) (2,038,578) 10,824
---------- ---------- --------- -------- ----------
Total 10,578,462 (5,450,710) 1,815,521 (982,111) 5,961,162
========== ========== ========= ========
Unrealized currency loss (39,656)
----------
Total net unrealized gain
on open contracts 5,921,506
==========
CHARTER WNT
The Effect of Trading Activities on the Statements of Financial Condition as
of December 31, 2009:
AVERAGE NUMBER
OF CONTRACTS
OUTSTANDING
LONG LONG SHORT SHORT NET FOR THE YEAR
UNREALIZED UNREALIZED UNREALIZED UNREALIZED UNREALIZED (ABSOLUTE
FUTURES AND FORWARD CONTRACTS GAIN LOSS GAIN LOSS GAIN/(LOSS) QUANTITY)
----------------------------- ---------- ---------- ---------- ---------- ----------- --------------
$ $ $ $ $
Commodity 574,468 (129,165) 44,484 (155,258) 334,529 436
Equity 479,575 (6,670) -- (6,447) 466,458 336
Foreign currency 50,370 (357,577) 3,450 (25,406) (329,163) 476
Interest rate 303,800 (291,188) 13,114 (12,796) 12,930 1,613
--------- -------- ------ -------- --------
Total 1,408,213 (784,600) 61,048 (199,907) 484,754
========= ======== ====== ========
Unrealized currency loss (14,513)
--------
Total net unrealized gain on
open contracts 470,241
========
OPTION CONTRACTS AT FAIR VALUE
------------------------------
$
Options purchased 2,053
Options written (4,693)
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
The following tables summarize the net trading results of each Partnership
for the year ended December 31, 2009 as required by the disclosures about
Derivatives and Hedging Topic of ASC 815-10-65.
CHARTER CAMPBELL
The Effect of Trading Activities on the Statements of Operations for the year
ended December 31, 2009 included in Total Trading Results:
TYPE OF INSTRUMENT
------------------
$
Commodity (406,995)
Equity (885,043)
Foreign currency 3,502,707
Interest rate (4,817,441)
Unrealized currency gain 59,413
----------
Total (2,547,359)
==========
Line Items on the Statements of Operations for the year ended December 31,
2009:
TRADING RESULTS
---------------
$
Realized (596,625)
Net change in unrealized (1,950,734)
----------
Total Trading Results (2,547,359)
==========
CHARTER ASPECT
The Effect of Trading Activities on the Statements of Operations for the year
ended December 31, 2009 included in Total Trading Results:
TYPE OF INSTRUMENT
------------------
$
Commodity (5,919,676)
Equity 1,387,998
Foreign currency (4,832,915)
Interest rate (4,657,633)
Unrealized currency loss (170,127)
-----------
Total (14,192,353)
===========
Line Items on the Statements of Operations for the year ended December 31,
2009:
TRADING RESULTS
---------------
$
Realized (6,921,660)
Net change in unrealized (7,270,693)
-----------
Total Trading Results (14,192,353)
===========
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
CHARTER GRAHAM
The Effect of Trading Activities on the Statements of Operations for the year
ended December 31, 2009 included in Total Trading Results:
TYPE OF INSTRUMENT
------------------
$
Commodity 1,660,953
Equity 45,253,372
Foreign currency 13,138,360
Interest rate (25,166,393)
Unrealized currency loss (1,214,454)
-----------
Total 33,671,838
===========
Line Items on the Statements of Operations for the year ended December 31,
2009:
TRADING RESULTS
---------------
$
Realized 28,733,723
Net change in unrealized 4,938,115
----------
Total Trading Results 33,671,838
==========
CHARTER WNT
The Effect of Trading Activities on the Statements of Operations for the year
ended December 31, 2009 included in Total Trading Results:
TYPE OF INSTRUMENT
------------------
$
Commodity (836,702)
Equity (1,421,780)
Foreign currency (1,704,499)
Interest rate (1,376,349)
Unrealized currency loss (106,648)
----------
Total (5,445,978)
==========
Line Items on the Statements of Operations for the year ended December 31,
2009:
TRADING RESULTS
---------------
$
Realized (3,514,634)
Net change in unrealized (1,931,344)
----------
Total Trading Results (5,445,978)
==========
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
--------------------------------------------------------------------------------
8. FAIR VALUE MEASUREMENTS AND DISCLOSURES
As defined by ASC 820-10-55, Fair Value Measurements and Disclosures (formerly,
SFAS No. 157, Fair Value Measurements), fair value is the amount that would be
recovered when an asset is sold or an amount paid to transfer a liability, in
an ordinary transaction, between market participants at the measurement date
(exit price). Market price observability is impacted by a number of factors,
including the types of investments, the characteristics specific to the
investment, and the state of the market (including the existence and the
transparency of transactions between market participants). Investments with
readily available actively quoted prices in an ordinary market will generally
have a higher degree of market price observability and a lesser degree of
judgment used in measuring fair value.
ASC 820-10-55 requires use of a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value into three levels:
Level 1--unadjusted quoted market prices in active markets for identical assets
and liabilities; Level 2--inputs other than unadjusted quoted market prices
that are observable for the asset or liability, either directly or indirectly
(including quoted prices for similar investments, interest rates, credit risk);
and Level 3--unobservable inputs for the asset or liability (including the
Partnerships' own assumptions used in determining the fair value of
investments).
In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, an investment's
level within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement. The Partnerships' assessment
of the significance of a particular input to the fair value measurement in its
entirety requires judgment, and considers factors specific to the investment.
The Partnerships adopted ASC 820-10-55 as of January 1, 2008. The adoption of
ASC 820-10-55 did not have a material impact on the Partnerships' financial
statements, other than enhanced financial statements disclosures.
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
The following tables summarize the valuation of each Partnership's
investments according to the level of the above ASC 820-10-55 fair value
hierarchy as of December 31, 2009 and 2008, respectively:
CHARTER CAMPBELL
UNADJUSTED
QUOTED
PRICES IN
ACTIVE
MARKETS SIGNIFICANT
FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
(LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
---------- ----------- ------------ ----------
DECEMBER 31, 2009
----------------- $ $ $ $
ASSETS
Net unrealized
loss on open
contracts (2,594,770) (855,090) n/a (3,449,860)
Options purchased -- 224,032 n/a 224,032
LIABILITIES
Options written -- 61,722 n/a 61,722
DECEMBER 31, 2008
-----------------
ASSETS
Net unrealized
gain (loss) on
open contracts (2,252,566) 759,114 n/a (1,493,452)
Options purchased -- 33,971 n/a 33,971
LIABILITIES
Options written -- 194,835 n/a 194,835
CHARTER ASPECT
UNADJUSTED
QUOTED
PRICES IN
ACTIVE
MARKETS SIGNIFICANT
FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
(LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
---------- ----------- ------------ ---------
DECEMBER 31, 2009
----------------- $ $ $ $
ASSETS
Net unrealized
gain (loss) on
open contracts 601,960 (362,167) n/a 239,793
DECEMBER 31, 2008
-----------------
ASSETS
Net unrealized
gain (loss) on
open contracts 7,949,609 (439,123) n/a 7,510,486
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
CHARTER GRAHAM
UNADJUSTED
QUOTED
PRICES IN
ACTIVE
MARKETS SIGNIFICANT
FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
(LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
---------- ----------- ------------ ---------
DECEMBER 31, 2009
----------------- $ $ $ $
ASSETS
Net unrealized
gain on open
contracts 4,878,451 1,043,055 n/a 5,921,506
DECEMBER 31, 2008
-----------------
ASSETS
Net unrealized
gain (loss) on
open contracts 2,306,468 (1,323,077) n/a 983,391
CHARTER WNT
UNADJUSTED
QUOTED
PRICES IN
ACTIVE
MARKETS SIGNIFICANT
FOR OTHER SIGNIFICANT
IDENTICAL OBSERVABLE UNOBSERVABLE
ASSETS INPUTS INPUTS
(LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL
---------- ----------- ------------ ---------
DECEMBER 31, 2009
----------------- $ $ $ $
ASSETS
Net unrealized
gain on open
contracts 470,241 -- n/a 470,241
Options purchased 2,053 -- n/a 2,053
LIABILITIES
Options written 4,693 -- n/a 4,693
DECEMBER 31, 2008
-----------------
ASSETS
Net unrealized
gain on open
contracts 2,404,082 - n/a 2,404,082
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(continued)
--------------------------------------------------------------------------------
9. FINANCIAL HIGHLIGHTS
CHARTER CAMPBELL
2009 2008 2007
-------- ------- --------
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 10.88 $ 11.13 $ 13.09
-------- ------- --------
NET OPERATING RESULTS:
Interest Income 0.01 0.18 0.57
Expenses (0.90) (0.99) (1.09)
Realized Profit (Loss)/(1)/ (0.03) 0.39 (0.43)
Unrealized Profit (Loss) (0.17) 0.17 (1.01)
-------- ------- --------
Net Loss (1.09) (0.25) (1.96)
-------- ------- --------
NET ASSET VALUE, DECEMBER 31: $ 9.79 $ 10.88 $ 11.13
======== ======= ========
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
Net Investment Loss (8.9)% (7.4)% (4.3)%
Expenses before Incentive Fees 9.0 % 9.1 % 8.9 %
Expenses after Incentive Fees 9.0 % 9.1 % 8.9 %
Net Loss (11.2)% (1.8)% (15.8)%
TOTAL RETURN BEFORE INCENTIVE FEES (10.0)% (2.2)% (15.0)%
TOTAL RETURN AFTER INCENTIVE FEES (10.0)% (2.2)% (15.0)%
INCEPTION-TO-DATE RETURN (2.1)%
COMPOUND ANNUALIZED RETURN (0.3)%
CHARTER ASPECT
2009 2008 2007
-------- -------- -------
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 22.48 $ 18.14 $ 17.38
-------- -------- -------
NET OPERATING RESULTS:
Interest Income 0.02 0.27 0.78
Expenses (1.66) (2.36) (1.60)
Realized Profit (Loss)/(1)/ (1.01) 6.13 1.54
Unrealized Profit (Loss) (1.11) 0.30 0.04
-------- -------- -------
Net Income (Loss) (3.76) 4.34 0.76
-------- -------- -------
NET ASSET VALUE, DECEMBER 31: $ 18.72 $ 22.48 $ 18.14
======== ======== =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
Net Investment Loss (8.3)% (10.4)% (4.7)%
Expenses before Incentive Fees 8.3 % 7.9 % 7.9 %
Expenses after Incentive Fees 8.4 % 11.8 % 9.1 %
Net Income (Loss) (19.2)% 21.9 % 4.5 %
TOTAL RETURN BEFORE INCENTIVE FEES (16.6)% 28.2 % 5.6 %
TOTAL RETURN AFTER INCENTIVE FEES (16.7)% 23.9 % 4.4 %
INCEPTION-TO-DATE RETURN 87.2 %
COMPOUND ANNUALIZED RETURN 4.0 %
MORGAN STANLEY SMITH BARNEY CHARTER SERIES
(FORMERLY, MORGAN STANLEY CHARTER SERIES)
NOTES TO FINANCIAL STATEMENTS
(concluded)
CHARTER GRAHAM
2009 2008 2007
-------- ------- -------
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 29.13 $ 22.02 $ 19.46
-------- ------- -------
NET OPERATING RESULTS:
Interest Income 0.02 0.34 0.90
Expenses (2.57) (2.58) (1.63)
Realized Profit/(1)/ 1.99 9.29 3.91
Unrealized Profit (Loss) 0.32 0.06 (0.62)
-------- ------- -------
Net Income (Loss) (0.24) 7.11 2.56
-------- ------- -------
NET ASSET VALUE, DECEMBER 31: $ 28.89 $ 29.13 $ 22.02
======== ======= =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
Net Investment Loss (9.0)% (8.8)% (3.6)%
Expenses before Incentive Fees 8.2 % 7.9 % 8.0 %
Expenses after Incentive Fees 9.1 % 10.1 % 8.0 %
Net Income (Loss) (1.2)% 28.3 % 12.1 %
TOTAL RETURN BEFORE INCENTIVE FEES 0.1 % 34.9 % 13.2 %
TOTAL RETURN AFTER INCENTIVE FEES (0.8)% 32.3 % 13.2 %
INCEPTION-TO-DATE RETURN 188.9 %
COMPOUND ANNUALIZED RETURN 10.3 %
CHARTER WNT
2009 2008 2007
-------- ------- -------
PER UNIT OPERATING PERFORMANCE:
NET ASSET VALUE, JANUARY 1: $ 13.02 $ 11.27 $ 10.21
-------- ------- -------
NET OPERATING RESULTS:
Interest Income 0.01 0.16 0.43
Expenses (0.99) (1.29) (0.98)
Realized Profit (Loss)/(1)/ (0.38) 2.74 1.61
Unrealized Profit (Loss) (0.22) 0.14 --
-------- ------- -------
Net Income (Loss) (1.58) 1.75 1.06
-------- ------- -------
NET ASSET VALUE, DECEMBER 31:....... $ 11.44 $ 13.02 $ 11.27
======== ======= =======
FOR THE CALENDAR YEAR:
RATIOS TO AVERAGE NET ASSETS:
Net Investment Loss (8.3)% (9.0)% (5.1)%
Expenses before Incentive Fees 8.3 % 7.7 % 7.6 %
Expenses after Incentive Fees 8.4 % 10.3 % 9.1 %
Net Income (Loss) (13.6)% 13.0 % 11.3 %
TOTAL RETURN BEFORE INCENTIVE FEES (12.0)% 18.4 % 11.9 %
TOTAL RETURN AFTER INCENTIVE FEES (12.1)% 15.5 % 10.4 %
INCEPTION-TO-DATE RETURN 14.4 %
COMPOUND ANNUALIZED RETURN 1.2 %
(1)Realized Profit (Loss) is a balancing amount necessary to reconcile the
change in Net Asset Value per Unit with the other per Unit information.
--------------------------------------------------------------------------------
10. SUBSEQUENT EVENT
Effective March 12, 2010, Campbell & Company, Inc. ("Campbell"), the trading
advisor of Charter Campbell, announced that, by mutual agreement, Chief
Investment Officer Kevin Heerdt left the firm to pursue other interests.
Going forward, management of the research and investment process at Campbell
will be conducted by an Investment Committee chaired by Campbell's Vice
Chairman Bruce Cleland. Other members of the Investment Committee will be
Research Director, Xiaohua Hu, PhD, and Chief Operating Officer Will Andrews.
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