UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x           QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
quarterly period ended September 30, 2009 or





o           TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
transition period from __________________to__________________





Commission
File Number: 0-25603





MORGAN
      STANLEY SMITH BARNEY CHARTER GRAHAM L.P.(Exact
      name of registrant as specified in its charter)





Delaware
            
            13-4018068(State or other jurisdiction of
              incorporation or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)Demeter
      Management LLC522
      Fifth Avenue, 13th FloorNew
      York, NY
            
            10036(Address
      of principal executive offices)
            
            (Zip
      Code)





Registrant’s
      telephone number, including area code
            
            (212)
      296-1999





Morgan
Stanley Charter Graham L.P.


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





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





Yes x No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes o  No o


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer x
            Smaller
      reporting company o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes 0  No
T

















MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


INDEX TO QUARTERLY REPORT ON
FORM 10-Q





September 30,
2009











PART I. FINANCIAL
    INFORMATIONItem
      1.
            Financial
      Statements (Unaudited)Statements
      of Financial Condition as of September 30, 2009 and December 31, 2008
            2Statements
      of Operations for the Three and Nine Months Ended September 30, 2009 and
      2008
            3Statements
      of Changes in Partners’ Capital for the Nine Months Ended September 30,
      2009 and 2008
            4Statements
      of Cash Flows for the Nine Months Ended September 30, 2009 and 2008
            5Condensed
      Schedules of Investments as of September 30, 2009 and December 31,
      2008
            6Notes
      to Financial Statements
            7-19Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            20-30Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            31-42Item
      4.
            Controls
      and Procedures
            42-43Item
      4T.
            Controls
      and Procedures
            43PART II. OTHER INFORMATIONItem
      1A.
            Risk
      Factors
            44Item
      6.
            Exhibits
            44











PART I.  FINANCIAL
INFORMATION


Item
1.  Financial
Statements





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


STATEMENTS
OF FINANCIAL CONDITION


(Unaudited)


September
      30,
            
            December
      31,2009
            
            2008ASSETS
            $
            
            $Trading
      Equity:Unrestricted
      cash
            360,826,354
            
            550,525,640Restricted
      cash
            61,280,159
            
            13,066,966Total
      cash
            422,106,513
            
            563,592,606Net
      unrealized gain on open contracts (MS&Co.)
            9,979,159
            
            550,003Net
      unrealized gain (loss) on open contracts (MSIP)
            (351,311)
            
            433,388Total
      net unrealized gain on open contracts
            9,627,848
            
            983,391Total
      Trading Equity
            431,734,361
            
            564,575,997Interest
      receivable (MS&Co.)
            14,752
            
            37,440Total
      Assets
            431,749,113
            
            564,613,437LIABILITIES
      AND PARTNERS’ CAPITALLiabilitiesRedemptions
      payable
            5,145,183
            
            34,123,015Accrued
      brokerage fees (MS&Co.)
            2,049,494
            
            2,747,331Accrued
      management fees
            683,165
            
            915,777Accrued
      incentive fee
            –
            
            2,289,365Total
      Liabilities
            7,877,842
            
            40,075,488Partners’
      CapitalLimited
      Partners (14,237,892.103 and 17,828,720.751 Units,
      respectively)
            419,610,372
            
            519,261,648General
      Partner (144,577.501 and 181,160.501 Units, respectively)
            4,260,899
            
            5,276,301Total
      Partners’ Capital
            423,871,271
            
            524,537,949Total
      Liabilities and Partners’ Capital
            431,749,113
            
            564,613,437NET
      ASSET VALUE PER UNIT
            29.47
            
            29.13

















The
accompanying notes are an integral part of these financial
statements.





- 2
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


STATEMENTS
OF OPERATIONS


(Unaudited)


For
      the Three Months
              Ended September 30,
            
            For
      the Nine Months
              Ended September 30,2009
            
            2008
            
            2009
            
            2008$
            
            $
            
            $
            
            $INVESTMENT
      INCOMEInterest
      income (MS&Co.)
            102,987
            
            1,847,377
            
            361,792
            
            6,304,379EXPENSESBrokerage
      fees (MS&Co.)
            6,119,954
            
            7,434,091
            
            20,187,346
            
            21,530,244Management
      fees
            2,039,985
            
            2,478,030
            
            6,729,116
            
            7,176,749Incentive
      fee
            –
            
            –
            
            1,873,519
            
            –Total
      Expenses
            8,159,939
            
            9,912,121
            
            28,789,981
            
            28,706,993NET
      INVESTMENT LOSS
            (8,056,952)
            
            (8,064,744)
            
            (28,428,189)
            
            (22,402,614)TRADING
      RESULTSTrading
      profit (loss):Realized
            32,979,440
            
            10,834,599
            
            22,658,302
            
            100,767,311Net
      change in unrealized
            12,661,527
            
            (34,348,807)
            
            8,644,457
            
            (21,642,921)Total
      Trading Results
            45,640,967
            
            (23,514,208)
            
            31,302,759
            
            79,124,390NET
      INCOME (LOSS)
            37,584,015
            
            (31,578,952)
            
            2,874,570
            
            56,721,776NET
      INCOME (LOSS) ALLOCATIONLimited
      Partners
            37,204,193
            
            (31,239,180)
            
            2,847,407
            
            56,093,655General
      Partner
            379,822
            
            (339,772)
            
            27,163
            
            628,121NET
      INCOME (LOSS) PER UNITLimited
      Partners
            2.56
            
            (1.64)
            
            0.18
            
            2.84General
      Partner
            2.56
            
            (1.64)
            
            0.18
            
            2.84Units
            
            Units
            
            Units
            
            UnitsWEIGHTED
      AVERAGE NUMBEROF
      UNITS OUTSTANDING
            14,683,874.839
            
            19,639,185.958
            
            15,693,691.289
            
            19,730,811.356
































The
accompanying notes are an integral part of these financial
statements.





– 3
–





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


STATEMENTS
OF CHANGES IN PARTNERS’ CAPITAL


For the
Nine Months Ended September 30, 2009 and 2008


(Unaudited)











Units
      ofPartnership
            
            Limited
            
            GeneralInterest
            
            Partners
            
            Partner
            
            Total$
            
            $
            
            $Partners’
      Capital,December
      31, 2007
            19,990,982.425
            
            435,434,673
            
            4,839,307
            
            440,273,980Offering
      of Units
            3,020,069.706
            
            74,500,154
            
            –
            
            74,500,154Net
      Income
            –
            
            56,093,655
            
            628,121
            
            56,721,776Redemptions
            (3,154,425.851)
            
            (77,511,453)
            
            (292,365)
            
            (77,803,818)Partners’
      Capital,September
      30, 2008
            19,856,626.280
            
            488,517,029
            
            5,175,063
            
            493,692,092Partners’
      Capital,December
      31, 2008
            18,009,881.252
            
            519,261,648
            
            5,276,301
            
            524,537,949Net
      Income
            –
            
            2,847,407
            
            27,163
            
            2,874,570Redemptions
            (3,627,411.648)
            
            (102,498,683)
            
            (1,042,565)
            
            (103,541,248)Partners’
      Capital,September
      30, 2009
            14,382,469.604
            
            419,610,372
            
            4,260,899
            
            423,871,271
























































The
accompanying notes are an integral part of these financial
statements.





- 4
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


STATEMENTS
OF CASH FLOWS


(Unaudited)





For the Nine Months Ended September
      30,2009
            
            2008$
            
            $CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
            2,874,570
            
            56,721,776Noncash
      item included in net income:Net
      change in unrealized
            (8,644,457)
            
            21,642,921(Increase)
      decrease in operating assets:Restricted
      cash
            (48,213,193)
            
            (25,049,089)Interest
      receivable (MS&Co.)
            22,688
            
            742,022Increase
      (decrease) in operating liabilities:Accrued
      brokerage fees (MS&Co.)
            (697,837)
            
            152,650Accrued
      management fees
            (232,612)
            
            50,884Accrued
      incentive fee
            (2,289,365)
            
            –Net
      cash provided by (used for) operating activities
            (57,180,206)
            
            54,261,164CASH
      FLOWS FROM FINANCING ACTIVITIESCash
      received from offering of Units
            –
            
            70,462,571Cash
      paid for redemptions of Units
            (132,519,080)
            
            (74,359,620)Net
      cash used for financing activities
            (132,519,080)
            
            (3,897,049)Net
      increase (decrease) in unrestricted cash
            (189,699,286)
            
            50,364,115Unrestricted
      cash at beginning of period
            550,525,640
            
            428,483,746Unrestricted
      cash at end of period
            360,826,354
            
            478,847,861


















































The
accompanying notes are an integral part of these financial
statements.





- 5
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


CONDENSED
SCHEDULES OF INVESTMENTS


September
30, 2009 and December 31, 2008 (Unaudited)





Futures and Forward
    Contracts
            Long
      Unrealized
              Gain/(Loss)
            Percentage
      of
              Net Assets
            Short  Unrealized
              Loss
            
            Percentage
      of
              Net Assets
            
            Net
      Unrealized
              Gain/(Loss)$
            %
            $
            
            %
            
            $September
      30, 2009, Partnership Net Assets: $423,871,271Commodity
            3,285,928
            0.78
            (991,590)
            
            (0.24)
            
            2,294,338Equity
            (1,223,363)
            (0.29)
            (5,627)
            
            –
            
            (1,228,990)Foreign
      currency
            5,507,537
            1.30
            (396,963)
            
            (0.09)
            
            5,110,574Interest
      rate
            3,367,612
            0.79
            (3,975)
            
            –
            
            3,363,637Grand
      Total:
            10,937,714
            2.58
            (1,398,155)
            
            (0.33)
            
            9,539,559Unrealized
      Currency Gain
            
            
            
            
            0.02
            
            88,289Total
      Net Unrealized Gain on Open Contracts
            
            
            
            
            
            
            9,627,848December
      31, 2008, Partnership Net Assets: $524,537,949Commodity
            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)
            
            1,778,352Grand
      Total:
            3,330,535
            0.63
            (3,521,942)
            
            (0.67)
            
            (191,407)Unrealized
      Currency gain
            
            
            
            
            0.22
            
            1,174,798Total
      Net Unrealized Gain on Open Contracts
            
            
            
            
            
            
            983,391



























































The
accompanying notes are an integral part of these financial
statements.





- 6
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS





September
30, 2009





(Unaudited)





The
unaudited financial statements contained herein include, in the opinion of
management, all adjustments necessary for a fair presentation of the financial
condition and results of operations of Morgan Stanley Smith Barney Charter
Graham L.P. (formerly, Morgan Stanley Charter Graham L.P.) (the
"Partnership").  The financial statements and condensed notes herein
should be read in conjunction with the Partnership’s Annual Report on Form 10-K
for the fiscal year ending December 31, 2008.





1.  Organization


Morgan
Stanley Smith Barney Charter Graham L.P. (formerly, Morgan Stanley Charter
Graham L.P.) is a Delaware limited partnership organized in 1998 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 4. Financial
Instruments).  The Partnership is one of the Morgan Stanley
Smith Barney Charter series of funds, comprised of the Partnership, Morgan
Stanley Smith Barney Charter WNT L.P., Morgan Stanley Smith Barney Charter
Aspect L.P., and Morgan Stanley Smith Barney Charter Campbell  L.P.
(collectively, the "Charter Series").





Effective
September 29, 2009, Demeter Management LLC (“Demeter”), the general partner of
the Partnership, changed the name of Morgan Stanley Charter Graham L.P. to
Morgan Stanley Smith Barney Charter Graham L.P.





- 7
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





The
Partnership’s general partner is Demeter.  The commodity brokers are
Morgan Stanley & Co. Incorporated ("MS&Co.") and Morgan Stanley &
Co. International plc ("MSIP").   MS&Co. also acts as the
counterparty on all trading of foreign currency forward contracts. MSIP serves
as the commodity broker for trades on the London Metal Exchange (“LME”). Demeter
is a wholly-owned subsidiary of Morgan Stanley Smith Barney Holdings LLC
(“MSSB”).  MSSB is majority-owned indirectly by Morgan Stanley and
minority-owned indirectly by Citigroup Inc.  MS&Co. and MSIP are
wholly-owned subsidiaries of Morgan Stanley.  Graham Capital
Management, L.P. (the “Trading Advisor”) is the trading advisor to the
Partnership.





On July
1, 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles(“GAAP”), also known as FASB Accounting Standards Codification (“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.











- 8
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





2.  Related Party
Transactions


The
Partnership’s cash is on deposit with MS&Co. and MSIP in futures, forward
and options trading accounts to meet margin requirements as
needed.  Monthly, MS&Co. credits the 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 other similar customers on margin deposits.  In addition,
MS&Co. credits the Partnership at each month end with interest income on
100% of the 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 such
month.  The Partnership pays brokerage fees to MS&Co.





3.  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 the Partnership’s revenues or expenses
for income tax purposes. The Partnership files U.S. federal and state tax
returns.





ASC
740-10, Income Taxes
(which incorporates former FASB 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 2005 through 2008 tax years
generally remain subject to examination by U.S. federal and most state tax
authorities.








- 9
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





4.  Financial
Instruments


The
Partnership trades Futures Interests.  Futures and forwards represent
contracts for delayed delivery of an instrument at a specified date and
price.  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 net unrealized gains or
losses 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.  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.  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.














- 10
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)








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
Partnership’s contracts are accounted for on a trade-date basis and marked to
market on a daily basis.  The Partnership accounts for its derivative
investments as required by ASC 815-10-15, Derivative 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 a smaller initial net investment than would
      be required relative to changes in market
  factors;


3)
            Terms
      require or permit net settlement.





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
































- 11
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





The net
unrealized gains (losses) on open contracts, reported as a component of "Trading
Equity" on the Statements of Financial Condition, and their longest contract
maturities were as follows:


Net Unrealized Gains/(Losses) on Open
      Contracts
            Longest MaturitiesDate
            Exchange-Traded
            Off-Exchange-Traded
            Total
            Exchange-Traded
            Off-Exchange-Traded$
            $
            $Sep.
      30, 2009
            4,668,925
            4,958,923
            9,627,848
            Mar.
      2011
            Dec.
      2009Dec.
      31, 2008
            2,306,468
            (1,323,077)
            983,391
            Jun.
      2010
            Mar.
      2009





The
Partnership has credit risk associated with counterparty
non-performance.  As of the date of the financial statements, the
credit risk associated with the instruments in which the Partnership trades is
limited to the unrealized gain amounts reflected in the Partnership’s Statements
of Financial Condition.





The
Partnership also has credit risk because MS&Co. and MSIP act as the futures
commission merchants or the counterparties, with respect to most of the
Partnership’s 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 the 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 ("CFTC"), to segregate from their own assets, and for the sole
benefit of their commodity customers, all funds held by them with respect to
exchange-traded futures, 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








- 12
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





exchange-traded
futures-styled options contracts, which funds, in the aggregate, totaled
$426,775,438 and $565,899,074 at September 30, 2009, and December 31, 2008,
respectively.  With respect to the Partnership’s off-exchange-traded
forward currency 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, the
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 Partnership is at risk to the ability of
MS&Co., the sole counterparty on all such contracts, to perform. The
Partnership has a netting agreement with MS&Co.  This agreement,
which seeks to reduce both the Partnership’s and MS&Co.’s exposure on
off-exchange-traded forward currency contracts, should materially decrease the
Partnership’s credit risk in the event of MS&Co.’s bankruptcy or
insolvency.





The
futures, forwards and options traded by the Partnership involve varying degrees
of related market risk.  Market risk is often dependent upon changes
in the level or volatility of interest rates, exchange rates, and prices of
financial instruments and commodities, factors that result in frequent changes
in the fair value of the Partnership’s open positions, and consequently in its
earnings, whether realized or unrealized, and cash flow.  Gains and
losses on open positions of exchange-traded futures, 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.  However, the Partnership is








- 13
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





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.





5.  Derivative and
Hedging


ASC
815-10-65, Derivative 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.  ASC 815-10-65 was effective as of January 1, 2009, for
the Partnership.





The
Partnership’s objective is to profit from speculative trading in Futures
Interests.  Therefore, the Trading Advisor for the 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 table summarizes the valuation of the Partnership’s investments as
required by ASC 815-10-65 of September 30, 2009 and reflects the contracts
outstanding at such time.


- 14
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)








The
Effect of Trading Activities on the Statements of Financial Condition as of
September 30, 2009:


Futures and Forward
    Contracts
            Long
      Unrealized
              Gain
            Long
      Unrealized
              Loss
            Short
      Unrealized
              Gain
            Short
      Unrealized
              Loss
            Net   Unrealized
              Gain/(Loss)
            Total
      number of outstanding
              contracts
      (absolute quantity)$
            $
            $
            $
            $Commodity
            4,858,664
            (1,572,736)
            2,201,903
            (3,193,493)
            2,294,338
            7,219Equity
            459,178
            (1,682,541)
            –
            (5,627)
            (1,228,990)
            5,172Foreign
      currency
            6,671,596
            (1,164,059)
            710,015
            (1,106,978)
            5,110,574
            34,368Interest
      rate
            3,557,660
            (190,048)
            26,833
            (30,808)
            3,363,637
            17,791Total
            15,547,098
            (4,609,384)
            2,938,751
            (4,336,906)
            9,539,559Unrealized
      currency gain
            
            
            
            
            88,289Total
      net unrealized gain on open contracts
            
            
            
            
            9,627,848








The
following tables summarize the net trading results of the Partnership during the
three and nine month periods as required by the disclosures about Derivative and
Hedging Topics of ASC 815-10-65.





The
Effect of Trading Activities on the Statements of Operations for the Three and
Nine Months Ended September 30, 2009 included in Total Trading
Results:


For
      the Three Months
            
            For
      the Nine MonthsEnded September 30,
      2009
            
            Ended September 30,
      2009Type of Instrument
            $
            
            $Commodity
            7,921,966
            
            (2,052,970)Equity
            37,288,223
            
            36,030,331Foreign
      currency
            7,435,737
            
            10,644,217Interest
      rate
            (6,805,380)
            
            (12,232,310)Unrealized
      currency loss
            (199,579)
            
            (1,086,509)Total
            45,640,967
            
            31,302,759





Line
Items on the Statements of Operations for the Three and Nine Months Ended
September 30, 2009:


For
      the Three Months
            For
      the Nine MonthsEnded September 30, 2009
            Ended September 30, 2009Trading Results
            $
            $Realized
            32,979,440
            22,658,302Net
      change in unrealized
            12,661,527
            8,644,457Total
      Trading Results
            45,640,967
            31,302,759


- 15
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





6.  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
Partnership’s 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 Partnership’s
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.


- 16
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)





The
following tables summarize the valuation of the Partnership’s investments by the
above ASC 820-10-55 fair value hierarchy as of September 30, 2009 and December
31, 2008:





September 30,
2009


Quoted
      Prices in Active Markets for Identical Assets
              (Level 1)
            Significant
      Other Observable Inputs
              (Level 2)
            Significant
      Unobservable Inputs
              (Level 3)
            
            Total$
            $
            
            
            $AssetsNet
      unrealized gain on open contracts
            4,668,925
            4,958,923
            n/a
            
            9,627,848





December 31,
2008


Quoted
      Prices in Active Markets for Identical Assets
              (Level 1)
            Significant
      Other Observable Inputs
              (Level 2)
            Significant
      Unobservable Inputs
              (Level 3)
            
            Total$
            $
            
            
            $AssetsNet
      unrealized gain (loss) on open contracts
            2,306,468
            (1,323,077)
            n/a
            
            983,391


























- 17
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONTINUED)











7.  Recent Accounting
Pronouncements


(a)  Fair Value
Measurements


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 Partnership’s financial
statements.





(b)  Financial
Instruments


ASC
825-10-65, Financial
Instruments(formerly, FSP SFAS No. 107-1 and Accounting Principals Board
No. 28-1, Interim Disclosures
About Fair Value of Financial Instruments),was issued in April
2009.ASC
825-10-65requires
fair value disclosures of financial instruments on a quarterly basis, as well as
new disclosures regarding the methodology and significant assumptions underlying
the fair value measures and any changes to the methodology and assumptions
during the reporting period.  ASC 825-10-65 is effective for the
interim and annual periods ending after June 15, 2009.  The adoption
of ASC 825-10-65 did not have a material impact on the Partnership’s financial
statements.





- 18
-





MORGAN
STANLEY SMITH BARNEY CHARTER GRAHAM L.P.


(formerly,
Morgan Stanley Charter Graham L.P.)


NOTES TO FINANCIAL
STATEMENTS (CONCLUDED)





(c)  Subsequent
Events


The
Partnership adopted ASC 855-10, Subsequent Events (formerly,
SFAS No. 165, Subsequent
Events),which was issued in May
2009.ASC
855-10establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued.  It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date; that is, whether that date represents the date the financial statements
were issued or were available to be issued.  ASC 855-10 is effective
for the interim and annual periods ending after June 15,
2009.  Management has performed its evaluation of subsequent events
through November 13, 2009, the date these financial statements were issued, and
has determined that there were no subsequent events requiring adjustment or
disclosure in the financial statements.





8.  Restricted and Unrestricted
Cash


As
reflected on the Partnership’s 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 LME positions. All of these amounts are
maintained separately.  Cash that is not classified as restricted cash
is therefore classified as unrestricted cash.

















- 19
-





Item
2.        MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL COMMODITY AND


RESULTS OF
OPERATIONS





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





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





There is
no limitation on daily price movements in trading forward contracts on foreign
currencies.  The markets for some world currencies have low trading
volume and are illiquid, which may prevent the Partnership from trading in
potentially profitable markets or prevent the Partnership from promptly
liquidating unfavorable positions in such markets, subjecting it to substantial
losses.  Either of these market conditions could result in
restrictions on redemptions.  For the periods covered by this report,
illiquidity has not materially affected the Partnership’s assets.





- 20
-





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





Capital
Resources.  The Partnership does not have, nor does it expect
to have, any capital assets.  Redemptions of units of limited
partnership interest ("Unit(s)") in the future will affect the amount of funds
available for investments in futures, forwards and options in subsequent
periods.  It is not possible to estimate the amount, and therefore the
impact, of future outflows of Units.





There are
no known material trends, favorable or unfavorable, that would affect, nor any
expected material changes to, the Partnership’s capital resource arrangements at
the present time.





Off-Balance Sheet
Arrangements and Contractual Obligations.  The Partnership does
not have any off-balance sheet arrangements, nor does it have contractual
obligations or commercial commitments to make future payments that would affect
its liquidity or capital resources.





Results of
Operations


General.  The
Partnership’s results depend on the Trading Advisor and the ability of the
Trading Advisor’s trading program to take advantage of price movements in the
futures, forward and options markets.  The following presents a
summary of the Partnership’s operations for the three and nine month periods
ended September 30, 2009 and 2008, and a general discussion of its trading
activities during each period.  It is important to note, however, that
the Trading Advisor trades in various markets at different times and that prior
activity in a particular market does not mean that such market will be actively
traded by the Trading Advisor or will be profitable in the future.





- 21
-





Consequently,
the results of operations of the Partnership are difficult to discuss other than
in the context of the Trading Advisor’s trading activities on behalf of the
Partnership during the period in question.  Past performance is no
guarantee of future results.





The
Partnership’s results of operations set forth in the Financial Statements on
pages 2 through 19 of this report are prepared in accordance with U.S. GAAP,
which require the use of certain accounting policies that affect the amounts
reported in these Financial Statements, including the following: the contracts
the Partnership trades are accounted for on a trade-date basis and marked to
market on a daily basis.  The difference between their original
contract value and market value is recorded on the Statements of Operations as
"Net change in unrealized trading profit (loss)" for open (unrealized)
contracts, and recorded as "Realized trading profit (loss)" when open positions
are closed out.  The sum of these amounts constitutes the
Partnership’s trading results.  The market value of a futures contract
is the settlement price on the exchange on which that futures contract is traded
on a particular day.  The value of a foreign currency forward contract
is based on the spot rate as of the close of business.  Interest
income, as well as management fees, incentive fees, and brokerage fees of the
Partnership are recorded on an accrual basis.





For the Three and Nine
Months Ended September 30, 2009


The
Partnership recorded total trading results including interest income totaling
$45,743,954 and expenses totaling $8,159,939, resulting in net income of
$37,584,015 for the three months ended September 30, 2009.  The
Partnership’s net asset value per Unit increased from $26.92 at June 30, 2009,
to $29.47 at September 30, 2009.








- 22
-





The most
significant trading gains of approximately 9.3% were recorded in the global
stock index sector throughout a majority of the quarter from long positions in
U.S., European, and Hong Kong equity index futures as prices increased due to
positive economic data and increased merger and acquisition activity in the
technology sector.  Within the agricultural markets, gains of
approximately 2.0% were experienced throughout a majority of the quarter from
long futures positions in sugar as prices moved sharply higher amid speculation
that a global production deficit may continue for two consecutive years,
triggered by increasing demand from India, the world’s largest
consumer.  Sugar prices continued to climb throughout August, reaching
a 28-year high, on deepening concerns that unfavorable weather in producing
countries and rising import demand may worsen the global supply
shortfall.  Elsewhere in the agricultural complex, short positions in
wheat futures resulted in gains as prices declined during August and September
amid favorable weather forecasts in the U.S. Midwest and reports that global
wheat inventories may increase next year.  Smaller gains were recorded
from long futures positions in cocoa, primarily during July and September, as
prices rose following news of a smaller-than-average crop this year and a
decline in global inventories.  Within the currency sector, gains of
approximately 1.6% were experienced primarily during July and September from
long positions in the Canadian dollar, New Zealand dollar, and Australian dollar
versus the U.S. dollar as the value of the U.S. dollar moved lower against these
currencies on speculation that the U.S. Federal Reserve might keep borrowing
rates low after the U.S. central bank indicated that it remained committed to
its quantitative easing program.  Meanwhile, the value of the Canadian
dollar, New Zealand dollar, and Australian dollar also moved higher in the wake
of stronger gold prices.  Additional gains of approximately 1.4% were
recorded in the metals markets throughout a











- 23
-





majority
of the quarter from long futures positions in copper, lead, zinc, and aluminum
as prices increased 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 may rise.  Smaller
gains were experienced from long positions in silver and gold futures as prices
rose amid a decline in the value of the U.S. dollar.  A portion of the
Partnership’s gains for the quarter was offset by losses of approximately 1.8%
incurred within the global interest rate sector, primarily during July, from
short positions in U.S. and European fixed-income futures 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, thus reducing demand for the relative
“safety” of government bonds.  Smaller losses of approximately 1.5%
were experienced within the energy markets, primarily 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.





The
Partnership recorded total trading results including interest income totaling
$31,664,551 and expenses totaling $28,789,981, resulting in net income of
$2,874,570 for the nine months ended September 30, 2009.  The
Partnership’s net asset value per Unit increased from $29.13 at December 31,
2008 to $29.47 at September 30, 2009.











- 24
-





The most
significant trading gains of approximately 8.7% were recorded within the global
stock index sector, primarily during January, February, May, July, August, and
September.  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 may 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.  Within the
currency sector, gains of approximately 2.2% were recorded primarily during
January, May, July, August, and September.  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, primarily during May, July,
August, and September 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 on speculation that the U.S. Federal Reserve might keep
borrowing rates low after the U.S. central bank indicated that it remained
committed to its quantitative easing program.  Meanwhile, the value of
the Australian dollar, New Zealand dollar, and Canadian dollar also moved higher
in the wake of stronger gold prices.  Within the agricultural markets,
gains of approximately 1.0% were recorded primarily during February, May, July,
August, and September from long futures positions in sugar as prices moved
higher on expectations of a drop in global production.  Sugar prices
continued to climb throughout August, reaching a 28-year high, on
deepening





- 25
-





concerns
that unfavorable weather in producing countries and rising import demand may
worsen the global supply shortfall.  Elsewhere, long positions in
cocoa futures resulted in gains as prices rose during July and September
following news of a smaller-than-average crop this year and a decline in global
inventories.  Additional gains of approximately 0.3% were experienced
within the metals sector, primarily during May, July, August, and September from
long futures positions in lead, aluminum, and zinc as prices increased after
positive economic data boosted speculation that demand for base metals may
rise.  A portion of the Partnership’s gains for the first nine months
of the year was offset by losses of approximately 3.0% incurred within the
global interest rate sector, primarily during January, April, June, July, and
August.  Losses were recorded during January 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 moved lower during April and June amid rising investor confidence, which
reduced demand for the relative “safety” of government
debt.  Additional losses were experienced from short positions in
Japanese fixed-income futures as prices increased after the Bank of Japan
indicated that they remain 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.  Lastly, further 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, thus reducing demand for the relative “safety” of
government bonds.  Within the energy markets, losses of approximately
1.9% were incurred primarily during May from short positions in heating oil and
gas oil as prices increased amid better-than-





- 26
-





expected
economic data in the U.S. and China, the world’s largest consumers of
energy.  Smaller losses were experienced 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.





For the Three and Nine
Months Ended September 30, 2008


The
Partnership recorded total trading results including interest income totaling
$(21,666,831) and expenses totaling $9,912,121, resulting in a net loss of
$31,578,952 for the three months ended September 30, 2008. The Partnership’s net
asset value per Unit decreased from $26.50 at June 30, 2008, to $24.86 at
September 30, 2008.





The most
significant trading losses of approximately 2.6% were incurred within the
currency sector, primarily during September, from long positions in the
Brazilian real, South African rand, and Colombian peso versus the U.S. dollar as
the value of the U.S. dollar moved sharply higher against these currencies in
tandem with surging U.S. Treasury prices amid a worldwide "flight-to-quality"
due to fears of an intense credit crunch and subsequent global
recession.  Within the energy markets, losses of approximately 2.2%
were experienced primarily during July and August from long futures positions in
crude oil and its related products as prices reversed lower amid signs that the
U.S. economic slump would extend into 2009 and curb future energy
demand.  Meanwhile, long positions in natural gas futures resulted in
losses as prices sharply decreased in July amid rising inventories and news that
the Atlantic hurricane season's first storm had avoided the gas-producing fields
in the Gulf of Mexico.  Within the agricultural sector, losses of
approximately 1.7% were recorded primarily during July and August from long
futures positions in the soybean complex and corn as prices declined on news
that favorable weather might improve crop conditions in the U.S. Midwest and on
speculation





- 27
-





that a
slowing U.S. economy would reduce demand for alternative
biofuels.  Elsewhere in the agricultural complex, long positions in
cocoa futures resulted in losses during July as prices decreased following news
of a rise in exports from the Ivory Coast, the world’s largest cocoa
producer.  Additional losses of approximately 1.0% were incurred
within the metals markets throughout the majority of the quarter from long
positions in gold futures as prices dropped due to a rise in the value of the
U.S. dollar.  Further losses were recorded in July from long futures
positions in aluminum as prices dropped on concerns that slowing economic growth
may erode demand for base metals.  Smaller losses of approximately
0.7% were experienced within the global interest rate sector, primarily during
July and August, from short positions in European fixed-income futures as prices
increased amid a decline in the global equity markets and growing speculation
that the European Central Bank would not raise interest rates due to weak
economic growth.  A portion of the Partnership’s losses for the
quarter was offset by gains of approximately 3.6% recorded within the global
stock index sector. Such gains were primarily recorded during September, from
short positions in U.S., European, and Pacific Rim equity index futures as
prices moved sharply lower amid unprecedented U.S. financial market turmoil
following news of the collapse of a major U.S. investment bank and the
government rescue of a U.S. insurance giant.  Furthermore, global
equity markets plunged after the U.S. House of Representatives rejected the
Economic Stabilization   Act of 2008, which would have allowed
the U.S. Treasury to purchase troubled mortgage-backed securities from U.S.
financial institutions.





The
Partnership recorded total trading results including interest income totaling
$85,428,769 and expenses totaling $28,706,993, resulting in net income of
$56,721,776 for the nine months ended September 30, 2008.  The
Partnership’s net asset value per Unit increased from $22.02 at December 31,
2007, to $24.86 at September 30, 2008.


- 28
-





The most
significant trading gains of approximately 8.5% were experienced within the
global stock index sector from short positions in U.S., European, and Pacific
Rim equity index futures as prices decreased during January, February, May, and
June on concerns that a persistent U.S. housing slump, mounting losses linked to
U.S. sub-prime mortgage investments, rising commodity prices, and a weakening
job market would restrain consumer spending, erode corporate earnings, and curb
global economic growth.  Additional gains were experienced in
September from short positions in global stock index futures as prices dropped
sharply amid unprecedented U.S. financial market turmoil following news of the
collapse of a major U.S. investment bank and the government rescue of a U.S.
insurance giant.  Furthermore, global equity markets plunged after the
U.S. House of Representatives rejected the Economic Stabilization Act of 2008,
which would have allowed the U.S. Treasury to purchase troubled mortgage-backed
securities from U.S. financial institutions.  Within the energy
markets, gains of approximately 7.5% were recorded primarily during February,
March, April, May, and June from long futures positions in crude oil and its
related products as prices moved consistently higher due to speculation that
OPEC would cut production, ongoing geopolitical concerns in the Middle East,
growing Asian fuel consumption, and strong demand for physical commodities as an
inflation hedge.  Elsewhere, long positions in natural gas futures
also experienced gains during the first and second quarters as prices rose in
February and March on expectations of a rise in demand due to colder weather in
the U.S. Northeast and news of a drop in U.S. inventories.  During the
second quarter, prices were pressured higher amid news of declining production
in Western Canada, a continued decline in U.S. inventories, and forecasts for an
active hurricane season in the Atlantic.  Within the currency sector,
gains of approximately 0.9% experienced primarily during March, April, May, and
July from long positions in the Australian dollar, Chilean peso, and Colombian
peso versus the U.S. dollar as the value of the U.S. dollar moved lower against
these currencies during the first six





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months of
the year amid concerns of a slowing U.S. economy.  Short positions in
the Korean won versus the U.S. dollar resulted in additional gains primarily
during March as the value of the Korean won decreased relative to the U.S.
dollar in March amid news of a widening Current-Account deficit out of
Korea.  Within the agricultural markets, gains of approximately 0.8%
were recorded primarily during January, February, and June from long positions
in corn futures as prices increased during the first half of the year following
news that global production might drop, rising energy prices might boost demand
for alternative biofuels made from ethanol, and severe floods in the U.S.
Midwest had damaged crops.  Meanwhile, short futures positions in
cotton resulted in gains dropped to a one-year low in September after the U.S.
Department of Agriculture reported exports remained below average due to a
decline in demand.  Smaller gains of approximately 0.3% were
experienced within the global interest rate sector, primarily during January,
February, and September, from long positions in U.S. fixed-income futures as
prices moved higher in a worldwide “flight-to-quality” following the
aforementioned drop in the global equity markets throughout most of the year and
worries regarding the fundamental health of the global economy and financial
system.  Additionally, U.S. fixed-income futures prices moved higher
as the U.S. Federal Reserve cut interest rates by 200 basis points throughout
the first quarter and U.S. government reports showed a rise in unemployment and
slower-than-expected Gross Domestic Product growth during the fourth quarter of
2007.  A portion of the Partnership’s gains for the first nine months
of the year was offset by losses of approximately 0.5% incurred within the
metals markets from long positions in gold futures as prices decreased during
the third quarter due to a rise in the value of the U.S.
dollar.  Smaller losses were recorded from long futures positions in
aluminum as prices declined during July and August on concerns that slowing
economic growth would erode demand for base metals.




















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Item
      3.  QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Introduction


The
Partnership is a commodity pool engaged primarily in the speculative trading of
futures, forwards and options.  The market-sensitive instruments held
by the Partnership are acquired for speculative trading purposes only and, as a
result, all or substantially all of the Partnership’s assets are at risk of
trading loss.  Unlike an operating company, the risk of
market-sensitive instruments is inherent to the primary business activity of the
Partnership.





The
futures, forwards and options on such contracts traded by the Partnership
involve varying degrees of related market risk.  Market risk is often
dependent upon changes in the level or volatility of interest rates, exchange
rates, and prices of financial instruments and commodities, factors that result
in frequent changes in the fair value of the Partnership’s open positions, and
consequently in its earnings, whether realized or unrealized, and cash
flow.  Gains and losses on open positions of exchange-traded futures,
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 and forward currency options
contracts are settled upon termination of the contract.  However, the
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.














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The
Partnership’s total market risk may increase or decrease as it is influenced by
a wide variety of factors, including, but not limited to, the diversification
among the Partnership’s open positions, the volatility present within the
markets, and the liquidity of the markets.





The face
value of the market sector instruments held by the Partnership is typically many
times the applicable margin requirements.  Margin requirements
generally range between 2% and 15% of contract face
value.  Additionally, the use of leverage causes the face value of the
market sector instruments held by the Partnership typically to be many times the
total capitalization of the Partnership.





The
Partnership’s past performance is no guarantee of its future
results.  Any attempt to numerically quantify the Partnership’s market
risk is limited by the uncertainty of its speculative trading.  The
Partnership’s speculative trading and use of leverage may cause future losses
and volatility (i.e.,
"risk of ruin") that far exceed the Partnership’s experience to date under the
“Partnership’s Value at Risk in Different Market Sectors" section and
significantly exceed the Value at Risk ("VaR") tables disclosed.





Limited
partners will not be liable for losses exceeding the current net asset value of
their investment.





Quantifying the
Partnership’s Trading Value at Risk


The
following quantitative disclosures regarding the Partnership’s market risk
exposures contain "forward-looking statements" within the meaning of the safe
harbor from civil liability provided for such statements by the Private
Securities Litigation Reform Act of 1995 (set forth in Section 27A of the
Securities Act of 1933 and Section 21E of





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the
Securities Exchange Act of 1934).  All quantitative disclosures in
this section are deemed to be forward-looking statements for purposes of the
safe harbor, except for statements of historical fact.





The
Partnership accounts for open positions on the basis of mark to market
accounting principles.  Any loss in the market value of the
Partnership’s open positions is directly reflected in the Partnership’s earnings
and cash flow.





The
Partnership’s risk exposure in the market sectors traded by the Trading Advisor
is estimated below in terms of VaR.  The Partnership estimates VaR
using a model based upon historical simulation (with a confidence level of 99%)
which involves constructing a distribution of hypothetical daily changes in the
value of a trading portfolio.  The VaR model takes into account linear
exposures to risk including equity and commodity prices, interest rates, foreign
exchange rates, and correlation among these variables. The hypothetical changes
in portfolio value are based on daily percentage changes observed in key market
indices or other market factors ("market risk factors") to which the portfolio
is sensitive.  The one-day 99% confidence level of the Partnership’s
VaR corresponds to the negative change in portfolio value that, based on
observed market risk factors, would have been exceeded once in 100 trading days,
or one day in 100. VaR typically does not represent the worst case
outcome.  Demeter uses approximately four years of daily market data
(1,000 observations) and re-values its portfolio (using delta-gamma
approximations) for each of the historical market moves that occurred over this
time period.  This generates a probability distribution of daily
"simulated profit and loss" outcomes.  The VaR is the appropriate
percentile of this distribution.  For example, the 99% one-day VaR
would represent the 10th worst outcome from Demeter’s simulated profit and loss
series.











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





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





The Partnership’s Value at
Risk in Different Market Sectors


The
following table indicates the VaR associated with the Partnership’s open
positions as a percentage of total net assets by primary market risk category at
September 30, 2009 and 2008.  At September 30, 2009 and 2008, the
Partnership’s total capitalization was approximately $424 million and $494
million, respectively.





Primary
      Market
            September
      30, 2009
            September
      30, 2008Risk Category
            Value at Risk
            Value at RiskEquity
            (3.45)%
            (0.21)%Interest
      Rate
            (1.78)
            (0.22)Currency
            (1.37)
            (0.35)Commodity
            (0.95)
            (0.59)Aggregate
      Value at Risk
            (3.91)%
            (0.89)%








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





Because
the business of the Partnership is the speculative trading of futures, forwards
and options, the composition of its trading portfolio can change significantly
over any given time period, or even within a single trading day.  Such
change could positively or negatively materially impact market risk as measured
by VaR.





The table
below supplements the quarter-end VaR set forth above by presenting the
Partnership’s high, low, and average VaR, as a percentage of total net assets
for the four quarter-end reporting periods from October 1, 2008 through
September 30, 2009.





Primary Market Risk
Category
            High
            Low
            AverageEquity
            (3.45)%
            (0.05)%
            (1.56)%Interest
      Rate
            (1.78)
            (0.32)
            (0.77)Currency
            (1.37)
            (0.07)
            (0.75)Commodity
            (1.00)
            (0.19)
            (0.60)Aggregate
      Value at Risk
            (3.91)%
            (0.42)%
            (2.19)%

















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Limitations on Value at Risk
as an Assessment of Market Risk


VaR
models permit estimation of a portfolio’s aggregate market risk exposure,
incorporating a range of varied market risks, reflect risk reduction due to
portfolio diversification or hedging activities, and can cover a wide range of
portfolio assets. However, VaR risk measures should be viewed in light of the
methodology’s limitations, which include, but may not be limited to the
following:


·
            past
      changes in market risk factors will not always result in accurate
      predictions of the distributions and correlations of future market
      movements;


·
            changes
      in portfolio value caused by market movements may differ from those of the
      VaR model;


·
            VaR
      results reflect past market fluctuations applied to current trading
      positions while future risk depends on future
  positions;


·
            VaR
      using a one-day time horizon does not fully capture the market risk of
      positions that cannot be liquidated or hedged within one day;
      and


·
            the
      historical market risk factor data used for VaR estimation may provide
      only limited insight into losses that could be incurred under certain
      unusual market movements.





In
addition, the VaR tables above, as well as the past performance of the
Partnership, give no indication of the Partnership’s potential "risk of
ruin".





The VaR
tables provided present the results of the Partnership’s VaR for each of the
Partnership’s market risk exposures and on an aggregate basis at September 30,
2009 and 2008, and for the four quarter-end reporting periods from October 1,
2008 through September 30, 2009.  VaR is not necessarily
representative of the





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Partnership’s
historic risk, nor should it be used to predict the Partnership’s future
financial performance or its ability to manage or monitor risk.  There
can be no assurance that the Partnership’s actual losses on a particular day
will not exceed the VaR amounts indicated above or that such losses will not
occur more than once in 100 trading days.





Non-Trading
Risk


The
Partnership has non-trading market risk on its foreign cash
balances.  These balances and any market risk they may represent are
immaterial.





The
Partnership also maintains a substantial portion of its available assets in cash
at MS&Co.; as of September 30, 2009, such amount was equal to approximately
85% of the Partnership’s net asset value.  A decline in short-term
interest rates would result in a decline in the Partnership’s cash management
income. This cash flow risk is not considered to be material.





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





Qualitative Disclosures
Regarding Primary Trading Risk Exposures


The
following qualitative disclosures regarding the Partnership’s market risk
exposures - except for (A) those disclosures that are statements of historical
fact and (B) the descriptions of how the Partnership manages its





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





The
Trading Advisor,in
general, tends to utilize its trading system(s) to take positions when
market opportunities develop, and Demeter anticipates that the Trading Advisor
will continue to do so.





Investors
must be prepared to lose all or substantially all of their investment in the
Partnership.





The
following were the primary trading risk exposures of the Partnership at
September 30, 2009, by market sector.  It may be anticipated, however,
that these market exposures will vary materially over time.





Equity.  The
largest market exposure of the Partnership at September 30, 2009, was to the
global stock index sector, primarily to equity price risk in the G-7
countries.  The G-7 countries consist of France, the U.S., the United
Kingdom, Germany, Japan, Italy, and Canada. The stock index futures traded by
the Partnership are by





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Law
limited to futures on broadly-based indices.  At September 30, 2009,
The Partnership’s primary market exposures were to the CAC 40 (France), Euro
Stox 50 (Europe), S&P 500 (U.S.), FTSE 100 (United Kingdom), DAX (Germany),
NASDAQ 100 (U.S.), IBEX 35 (Spain), TOPIX (Japan), Nikkei 225 (Japan), Dow Jones
(U.S.), Canadian S&P 60 (Canada), Russell 2000 (U.S.), Hang Seng (Hong
Kong), AEX (The Netherlands), S&P Midcap (U.S.), and SPI 200 (Australia)
stock indices.  The Partnership is typically exposed to the risk of
adverse price trends or static markets in the U.S., European, and Pacific Rim
stock indices. Static markets would not cause major market changes, but would
make it difficult for the Partnership to avoid trendless price movements,
resulting in numerous small losses.





Interest
Rate.  The second largest market exposure of the Partnership at
September 30, 2009, was to the global interest rate sector.  Exposure
was primarily spread across the European, U.S., Japanese, Australian, and
Canadian interest rate sectors.  Interest rate movements directly
affect the price of the sovereign bond futures positions held by the Partnership
and indirectly affect the value of its stock index and currency
positions.  Interest rate movements in one country, as well as
relative interest rate movements between countries, materially impact the
Partnership’s profitability. The Partnership’s interest rate exposure is
generally to interest rate fluctuations in the U.S. and the other G-7
countries.  However, the Partnership also takes futures positions in
the government debt of smaller nations - e.g.,
Australia.  Demeter anticipates that the G-7 countries’ and Australian
interest rates will remain the primary interest rate exposure of the Partnership
for the foreseeable future.  The speculative futures positions held by
the Partnership may range from short to long-term
instruments.  Consequently, changes in short, medium, or long-term
interest rates may have an effect on the Partnership.





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-





Currency.  At
September 30, 2009, the Partnership had market exposure to the currency
sector.  The Partnership’s currency exposure is to exchange rate
fluctuations, primarily fluctuations which disrupt the historical pricing
relationships between different currencies and currency
pairs.  Interest rate changes, as well as political and general
economic conditions influence these fluctuations.  The Partnership
trades a number of currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar.  At September 30, 2009, the
Partnership’s major exposures were to the Australian dollar, Japanese yen, euro,
Swiss franc, Swedish krona, Polish zloty, British pound, New Zealand dollar,
Norwegian krone, and Canadian dollar currency crosses, as well as to outright
U.S. dollar positions.  Outright positions consist of the U.S. dollar
vs. other currencies.  These other currencies include major and minor
currencies.  Demeter does not anticipate that the risk associated with
the Partnership’s currency trades will change significantly in the
future.





Commodity.


Soft Commodities and
Agriculturals.  The third largest market exposure of the
Partnership at September 30, 2009, was to the markets that comprise these
sectors.  Most of the exposure was to the wheat, sugar, cocoa, corn,
cotton, soybeans, soybean meal, coffee, soybean oil, and live cattle
markets.  Supply and demand inequalities, severe weather disruptions,
and market expectations affect price movements in these markets.





Metals. At September
30, 2009, the Partnership had market exposure to the metals
sector.  The Partnership’s metals exposure was to fluctuations in the
price of precious metals, such as silver and gold, as well as base metals, such
as copper, zinc, aluminum, and lead.  Economic forces, supply and
demand





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inequalities,
geopolitical factors, and market expectations influence price movements in these
markets.





Energy.  At
September 30, 2009, the Partnership had market exposure to the energy
sector.  The Partnership’s energy exposure was shared primarily by
futures contracts in natural gas, as well as in crude oil and its related
products.  Price movements in these markets result from geopolitical
developments, particularly in the Middle East, as well as weather patterns, and
other economic fundamentals.  Significant profits and losses, which
have been experienced in the past, are expected to continue to be experienced in
the future.  Natural gas has exhibited volatility in prices resulting
from weather patterns and supply and demand factors and will likely continue in
this choppy pattern.





Qualitative Disclosures
Regarding Non-Trading Risk Exposure


The
following was the only non-trading risk exposure of the Partnership at September
30, 2009:





Foreign Currency
Balances. The Partnership’s primary foreign currency balances at
September 30, 2009, were in euros, Japanese yen, Hong Kong dollars, Australian
dollars, British pounds, Canadian dollars, and Swiss francs.  The
Partnership controls the non-trading risk of foreign currency balances by
regularly converting them back into U.S. dollars upon liquidation of their
respective positions.

















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-





Qualitative Disclosures
Regarding Means of Managing Risk Exposure


The
Partnership and the Trading Advisor, separately, attempt to manage the risk of
the Partnership’s open positions in essentially the same manner in all market
categories traded. Demeter attempts to manage market exposure by diversifying
the Partnership’s assets among different market sectors through the selection of
a Commodity Trading Advisor and by daily monitoring its
performance.  In addition, the Trading Advisor establishes
diversification guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-sensitive
instrument.





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








Item
      4.
            CONTROLS AND
      PROCEDURES





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





Changes in Internal Control
over Financial Reporting


There
have been no material changes during the period covered by this quarterly report
in the Partnership’s internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected
or are reasonably likely to affect the Partnership’s internal control over
financial reporting.











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Limitations on the
Effectiveness of Controls





Any
control system, no matter how well designed and operated, can provide reasonable
(not absolute) assurance that its objectives will be
met.  Furthermore, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected.








Item
4T.  CONTROLS AND
PROCEDURES


Not
applicable.























































































































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PART II.  OTHER
INFORMATION





Item
      1A.
            RISK
      FACTORS





There
have been no material changes from the risk factors previously referenced in the
Partnership’s Report on Form 10-K for the fiscal year ended December 31,
2008.








Item
      6.
            EXHIBITS





31.01
            Certification
      of President of Demeter Management LLC, the general partner of the
      Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.




31.02
            Certification
      of Chief Financial Officer of Demeter Management LLC, the general partner
      of the Partnership, pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.




32.01
            Certification
      of President of Demeter Management LLC, the general partner of the
      Partnership, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002.




32.02
            Certification
      of Chief Financial Officer of Demeter Management LLC, the general partner
      of the Partnership, pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.



























































– 44
–



























SIGNATURE











Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.














Morgan
      Stanley Smith Barney Charter Graham L.P.(Registrant)By:
            Demeter
      Management LLC(General
      Partner)November
      13, 2009
            By:
            /s/Christian
      AngstadtChristian
      AngstadtChief
      Financial Officer














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






























































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