MORGAN STANLEY SPECTRUM STRATEGIC LP - 10-Q Quarterly Report

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

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2003 or

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

Commission File Number 0-26280

MORGAN STANLEY SPECTRUM STRATEGIC L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-3782225
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

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

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

Yes X No___________

MORGAN STANLEY SPECTRUM STRATEGIC L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31, 2003

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF FINANCIAL CONDITION

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF OPERATIONS
(Unaudited)

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

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS

March 31, 2003

(Unaudited)

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

1. Organization
Morgan Stanley Spectrum Strategic L.P. is a Delaware limited
partnership organized to engage primarily in the speculative
trading of futures contracts, options on futures contracts, and
forward contracts on physical commodities and other commodity
interests, including, but not limited to, foreign currencies,
financial instruments, metals, energy and agricultural products.
The Partnership is one of the Morgan Stanley Spectrum series of
funds, comprised of the Partnership, Morgan Stanley Spectrum
Currency L.P., Morgan Stanley Spectrum Global Balanced L.P.,
Morgan Stanley Spectrum Select L.P., and Morgan Stanley Spectrum
Technical L.P.

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINED)

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?). The non-clearing commodity broker is
Morgan Stanley DW Inc. (?Morgan Stanley DW?). The clearing
commodity brokers are Morgan Stanley & Co. Incorporated (?MS &
Co.?) and Morgan Stanley & Co. International Limited (?MSIL?).
Demeter, Morgan Stanley DW, MS & Co. and MSIL are wholly-owned
subsidiaries of Morgan Stanley. The trading advisors to the
Partnership are Allied Irish Capital Management, Ltd., Blenheim
Capital Management, L.L.C., and Eclipse Capital Management, Inc.
(collectively, the ?Trading Advisors?).

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

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

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINED)

other commodity interests, including, but not limited, to foreign
currencies, financial instruments, metals, energy and
agricultural products. Futures and forwards represent contracts
for delayed delivery of an instrument at a specified date and
price. Risk arises from changes in the value of these contracts
and the potential inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.

The market value of contracts is based on closing prices quoted
by the exchange, bank or clearing firm through which the
contracts are traded.

The Partnership?s contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting Standard No. 133,
?Accounting for Derivative Instruments and Hedging Activities?
(?SFAS No. 133?). SFAS No. 133 defines a derivative as a
financial instrument or other contract that has all three of the
following characteristics:

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINED)

1) One or more underlying notional amounts or payment
provisions;

2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3) Terms require or permit net settlement.

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

The net unrealized gains (losses) on open contracts, reported as a
component of ?Equity in futures interests trading accounts? on the
statements of financial condition, and their longest contract
maturities were as follows:

Net Unrealized Gains (Losses)
on Open Contracts Longest Maturities
Exchange- Off-Exchange- Exchange- Off-Exchange-
Date Traded Traded Total Traded Traded
$ $ $

Mar. 31, 2003 (823,325) (597,497) (1,420,822) Jul. 2004 Jun. 2003
Dec. 31, 2002 6,387,996 543,148 6,931,144 Jul. 2004 Mar. 2003

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINED)

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

The Partnership also has credit risk because Morgan Stanley DW, MS
& Co. and MSIL act as the futures commission merchants or the
counterparties, with respect to most of the Partnership?s assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Each of Morgan Stanley DW, MS & Co.,
and MSIL, as a futures commission merchant for the Partnership?s
exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures Trading
Commission (?CFTC?), to segregate from their own assets, and for
the sole benefit of their commodity customers, all funds held by
them with respect to exchange-traded futures and futures-styled
options contracts, including an amount equal to the net unrealized
gains (losses) on all open futures and futures-styled options
contracts, which funds, in the aggregate, totaled $83,740,585 and
$74,612,644 at March 31, 2003 and December 31, 2002, respectively.
With respect to the Partnership?s off-exchange-traded forward
currency contracts, there are no daily settlements of variations

MORGAN STANLEY SPECTRUM STRATEGIC L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

in value nor is there any requirement that an amount equal to the
net unrealized gains (losses) on open forward contracts be
segregated. With respect to those off-exchange-traded forward
currency contracts, the Partnership is at risk to the ability of
MS & Co., the sole counterparty on all of such contracts, to
perform. The Partnership has a netting agreement with MS & Co.
This agreement, which seeks to reduce both the Partnership?s and
MS & Co.?s exposure on off-exchange-traded forward currency
contracts, should materially decrease the Partnership?s credit
risk in the event of MS & Co.?s bankruptcy or insolvency.

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

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

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

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

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

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

There are no known material trends, favorable or unfavorable, that
would affect, nor any expected material changes to, the
Partnership?s capital resource arrangements at the present time.
The Partnership has no off-balance sheet arrangements, nor
contractual obligations or commercial commitments to make future
payments that would affect the Partnership?s liquidity or capital
resources. The contracts traded by the Partnership are accounted
for on a trade-date basis and marked to market on a daily basis.
The value of futures contracts is the settlement price on the
exchange on which that futures contract is traded on particular
day and the value of foreign currency forward contracts is based
on the spot rate as of the close of business, New York City time,
on a given day.

Results of Operations
General. The Partnership?s results depend on the Trading
Advisors and the ability of the Trading Advisors? trading
programs to take advantage of price movements or other profit
opportunities in the futures, forwards, and options markets. The
following presents a summary of the Partnership?s operations for
the three month periods ended March 31, 2003 and 2002 and a
general discussion of its trading activities during each period.
It is important to note, however, that the Trading Advisors trade
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 Advisors or will be
profitable in the future. Consequently, the results of operations
of the Partnership are difficult to discuss other than in the
context of the Trading Advisors? trading activities on behalf of
the Partnership and how the Partnership has performed in the
past.

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

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

For the Quarter Ended March 31, 2003
For the quarter ended March 31, 2003, the Partnership recorded
total trading revenues, including interest income, of $7,634,556
and posted an increase in net asset value per Unit. The most
significant gains of approximately 3.6% were recorded in the
agricultural markets, primarily during January, from long
positions in cocoa futures as continued political instability and
fighting in the Ivory Coast resulted in supply concerns and
higher prices. Additional gains resulted from long positions in
sugar futures as prices rose on speculative buying ahead of the
Brazilian harvest. Gains of approximately 2.9% were recorded in
the currency markets from long positions in the euro versus the
U.S. dollar as the dollar?s value weakened amid the release of
weak U.S. economic data and the looming threat of military action
against Iraq. Additional currency gains were recorded during
January and February from long positions in the Australian dollar
as its value climbed to a two and a half year high relative to
the U.S. dollar on the heels of higher gold prices. Gains of
approximately 1.7% were recorded in March in the energy markets,
primarily from short positions in heating oil futures, as prices
fell sharply in anticipation of a swift military victory
by Coalition forces against Iraq. Additional gains were recorded
from long positions in natural gas futures as prices rallied in
response to prolonged frigid temperatures in the northeastern and
midwestern United States. Long positions in crude oil futures
also resulted in gains as prices trended higher during January
and February amid fears that a potential military conflict with
Iraq could curb market supply. Other gains of approximately 1.6%
were recorded in the global interest rate markets from long
positions in Japanese interest rate as prices increased during
January and February amid continued uncertainty concerning the
Japanese economy. A portion of the Partnership?s overall gains
for the quarter was offset by losses of approximately 0.1% in the
metals markets, primarily from long positions in gold futures, as
prices declined during March amid renewed strength in the value
of the U.S. dollar and a moderate rebound in global equity
prices. Total expenses for the three months ended March 31, 2003
were $2,853,378, resulting in net income of $4,781,178. The net
asset value of a Unit increased from $11.54 at December 31, 2002
to $12.29 at March 31, 2003.

For the Quarter Ended March 31, 2002
For the quarter ended March 31, 2002, the Partnership recorded
total trading revenues, including interest income, of $8,275,813
and posted an increase in net asset value per Unit. The most
significant gains of approximately 7.2% were recorded in
the agricultural commodities markets primarily during January and
February from long positions in cocoa futures as prices moved
higher on supply concerns. Gains were also recorded during March
from long coffee futures positions as prices trended to seven
month highs on speculative buying and technical factors. During
February, additional profits were recorded from long positions in
lumber futures as prices increased amid an increase in demand. In
the metals markets, gains of approximately 4.2% were recorded
throughout a majority of the quarter from long positions in
copper and zinc futures as prices moved higher on expectations
for a U.S. economic recovery and, subsequently, improved demand
for the metal. A portion of the Partnership's overall gains was
partially offset by losses of approximately 1.6% recorded in the
global interest rate futures markets primarily during early
February and March from long positions in German and U.S.
interest rate futures as prices trended lower on forecasts for a
strong and fast economic turnaround and the prospect of higher
interest rates. Total expenses for the three months ended March
31, 2002 were $1,783,610, resulting in net income of $6,492,203.
The net asset value of a Unit increased from $10.55 at December
31, 2001 to $11.55 at March 31, 2002.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

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

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

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

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

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

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

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

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

The Partnership?s Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total net assets
by primary market risk category at March 31, 2003 and 2002.
At March 31, 2003 and 2002, the Partnership?s total capitalization
was approximately $84 million and $73 million, respectively.

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

Currency (0.49)% (0.38)%
Interest Rate (0.14) (0.25)
Equity (0.12) (0.20)
Commodity (1.04) (2.33)
Aggregate Value at Risk (1.19)% (2.47)%

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

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

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

Primary Market Risk Category High Low Average
Currency (1.99)% (0.49)% (1.15)%

Interest Rate (1.39) (0.14) (0.77)

Equity (0.64) (0.12) (0.35)

Commodity (2.79) (1.04) (1.93)

Aggregate Value at Risk (3.93)% (1.19)% (2.53)%

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

The VaR tables above present the results of the Partnership?s VaR
for each of the Partnership?s market risk exposure and on an
aggregate basis at March 31, 2003 and 2002, and for the end of the
four quarterly reporting periods from April 1, 2002 through March
31, 2003. Since VaR is based on historical data, VaR
should not be viewed as predictive of the Partnership?s future
financial performance or its ability to manage or monitor risk.
There can be no assurance that the Partnership?s actual losses on
a particular day will not exceed the VaR amounts indicated above
or that such losses will not occur more than once in 100 trading
days.

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

At March 31, 2003, the Partnership?s cash balance at Morgan
Stanley DW was approximately 91% of its total net asset value. A
decline in short-term interest rates will result in a decline in
the Partnership?s cash management income. This cash flow risk is
not considered to be material.

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

Qualitative Disclosures Regarding Primary Trading Risk
Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures?except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures ? constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.
The Partnership?s primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Advisors
for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
results of the Partnership?s risk controls to differ materially
from the objectives of such strategies. Government interventions,
defaults and expropriations, illiquid markets, the emergence of
dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market
participants, increased regulation and many other factors could
result in material losses as well as in material changes to the
risk exposures and the risk management strategies of the
Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at March 31, 2003 by market sector. It may be
anticipated, however, that these market exposures will
vary materially over time.

Currency. The Partnership?s currency exposure at March 31, 2003
was to exchange rate fluctuations, primarily fluctuations which
disrupt the historical pricing relationships between different
currencies and currency pairs. Interest rate changes as well as
political and general economic conditions influence these
fluctuations. The Partnership trades a large number of
currencies, including cross-rates ? i.e., position between two
currencies other than the U.S. dollar. At March 31, 2003, the
Partnership?s major exposures were to the euro and Japanese yen
currency crosses and outright U.S. dollar positions. Outright
positions consist of the U.S. dollar vs. other currencies. These
other currencies include major and minor currencies. Demeter
does not anticipate that the risk profile of the Partnership?s
currency sector will change significantly in the future. The
currency trading VaR figure includes foreign margin amounts
converted into U.S. dollars with an incremental adjustment to
reflect the exchange rate risk inherent to the U.S.-based
Partnership in expressing VaR in a functional currency other than
U.S. dollars.

Interest Rate. At March 31, 2003, the Partnership?s exposure to
the global interest rate market complex was primarily spread
across the U.S., Australian, European and Japanese interest rate
sectors. Interest rate movements directly affect the price
of the sovereign bond futures positions held by the Partnership
and indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country, as well as
relative interest rate movements between countries, materially
impact the Partnership?s profitability. The Partnership?s
primary interest rate exposure is generally to interest rate
fluctuations in the U.S. and the other G-7 countries. The G-7
countries consist of France, the U.S., Britain, Germany, Japan,
Italy, and Canada. The Partnership also takes futures position
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 range from short to
long-term instruments. Consequently, changes in short, medium or
long-term interest rates may have an effect on the Partnership.

Equity. The Partnership?s equity exposure at March 31, 2003 was
to equity price risk in the G-7 countries. The stock index
futures traded by the Partnership are by law limited to futures
on broadly-based indices. At March 31, 2003, the Partnership?s
primary exposures were to the Nikkei (Japan) and NASDAQ (U.S.)
stock indices. The Partnership is primarily exposed to the risk
of adverse price trends or static markets in the U.S., Japanese
and European stock indices. Static markets would not cause major
market changes but would make it difficult for the
Partnership to avoid being "whipsawed" into numerous small
losses.

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

Metals. The Partnership's metals exposure at March 31, 2003
was to fluctuations in the price of precious metals, such as
gold, and base metals, such as copper, zinc, tin and nickel.
Economic forces, supply and demand inequalities, geo-
political factors and market expectations influence price
movements in these markets. The Trading Advisors, from time
to time, take positions when market opportunities develop
and Demeter anticipates that the Partnership will continue
to do so.

Energy. At March 31, 2003, the Partnership?s energy
exposure was shared primarily by futures contracts in crude
oil and its related products. Price movements in these
markets result from political developments in the Middle
East, weather patterns and other economic
fundamentals. Significant profits and losses, which have
been experienced in the past, are expected to continue to be
experienced in the future.

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

Foreign Currency Balances. The Partnership?s primary
foreign currency balances at March 31, 2003 were in British
pounds and Japanese yen. The Partnership controls the non-
trading risk of these balances by regularly converting them
back into U.S. dollars upon liquidation of their respective
positions.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisors, 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 Trading Advisors, each of whose strategies focus
on different market sectors and trading approaches, and by
monitoring the performance of the Trading Advisors daily. In
addition, the Trading Advisors establish 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 Advisors.

Item 4. CONTROLS AND PROCEDURES

(a) As of a date within 90 days of the filing date of this
quarterly report, the President and Chief Financial
Officer of the general partner, Demeter, have evaluated
the effectiveness of the Partnership?s disclosure
controls and procedures (as defined in Rules 13a-14 and
15d-14 of the Exchange Act), and have judged such
controls and procedures to be effective.

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

Item 1. LEGAL PROCEEDINGS
None.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership, Morgan Stanley Spectrum Technical L.P.
(?Spectrum Technical?) and Morgan Stanley Spectrum Global
Balanced L.P. (?Spectrum Global Balanced?), collectively
registered 10,000,000 Units, pursuant to a Registration Statement
on a Form S-1, which became effective on September 15, 1994 (SEC
File Number 33-80146). While such Units were not allocated to
the Partnership, Spectrum Technical, and Spectrum Global Balanced
at that time, they were subsequently allocated for convenience
purposes as follows: the Partnership 4,000,000, Spectrum
Technical 4,000,000, and Spectrum Global Balanced 2,000,000.

The Partnership, Spectrum Technical, and Spectrum Global Balanced
collectively registered an additional 20,000,000 Units pursuant
to the new Registration Statement on Form S-1, which became
effective on January 31, 1996 (SEC File Number 333-00494); such
Units were allocated to the Partnership, Spectrum Technical, and
Spectrum Global Balanced as follows: the Partnership 6,000,000,
Spectrum Technical 9,000,000, and Spectrum Global Balanced
5,000,000.

The Partnership, Spectrum Technical, and Spectrum Global
Balanced collectively registered an additional 8,500,000 Units
pursuant to another Registration Statement on Form S-1, which
became effective on April 30, 1996 (SEC File Number 333-3222);
such Units were allocated to the Partnership, Spectrum Technical,
and Spectrum Global Balanced as follows: the Partnership
2,500,000, Spectrum Technical 5,000,000, and Spectrum Global
Balanced 1,000,000.

The Partnership registered an additional 6,500,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on February 28, 2000 (SEC File Number 333-90487).

The managing underwriter for the Partnership is Morgan Stanley
DW.

Units are being sold at monthly closings as of the close of
business on the last day of each month at a purchase price equal
to 100% of the net asset value per Unit as of the date of such
monthly closing.

Through March 31, 2003, 13,743,887.227 Units were sold, leaving
5,256,112.773 Units unsold. The aggregate price of the Units
sold through March 31, 2003 was $152,812,126.

The Partnership registered an additional 6,500,000 Units
pursuant to another Registration Statement on Form S-1, which
became effective on April 28, 2003 (SEC File Number 333-104003).
The aggregate price of the amount registered was $82,420,000
based upon an initial offering price of $12.68 per Unit.

Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the ?Use of
Proceeds? section of its Prospectus.

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

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

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

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

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

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

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

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership is incorporated by reference
to Exhibit A of the Partnership?s Prospectus, dated April
28, 2003, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, on May 7, 2003.
3.02 Certificate of Limited Partnership, dated April 18, 1994,
is incorporated by reference to Exhibit 3.02 of the
Partnership?s Registration Statement on Form S-1 (File
No. 33-80146) filed with the Securities and Exchange
Commission on June 10, 1994.
3.04 Certificate of Amendment of Certificate of Limited
Partnership of the Partnership, dated April 6, 1999
(changing its name from Dean Witter Spectrum Strategic
L.P.), is incorporated by reference to Exhibit 3.04 of
the Partnership?s Registration Statement (File No. 333-
3222) filed with the Securities and Exchange Commission
on April 12, 1999.
3.05 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001 (changing its name
from Morgan Stanley Dean Witter Spectrum Strategic L.P.),
is incorporated by reference to Exhibit 3.01 of the
Partnership?s Form 8-K (File No. 0-26280) filed with the
Securities and Exchange Commission on November 1, 2001.
10.02 Management Agreement, dated as of November 1, 1994, among
the Partnership, Demeter, and Blenheim Investments, Inc.
is incorporated by reference to Exhibit 10.01 of the
Partnership?s Form 10-K (File No. 0-26280) for fiscal
year ended December 31, 1998 filed on June 30, 1999.
10.02(a) Amendment to the Management Agreement, among the
Partnership, Demeter, and Blenheim Investments, Inc. is
incorporated by reference to Exhibit 10.01 of the
Partnership?s Form 8-K (File No. 0-26280), filed with the
Securities and Exchange Commission on April 25, 2001.
10.03 Management Agreement, dated as of June 1, 2000, among the
Partnership, Demeter, and Eclipse Capital Management,
Inc. is incorporated by reference to Exhibit 10.09 of the
Partnership?s Form 10-Q (File No. 0-26280) for the
quarterly period ended September 30, 2000 and filed with
the Securities and Exchange Commission on November 14,
2000.

10.04 Management Agreement, dated as of May 1, 1999, among the
Partnership, Demeter, and Allied Irish Capital Management
Ltd. is incorporated by reference to Exhibit 10.04 of the
Partnership?s Registration Statement on Form S-1 (File
No. 333-90487) filed with the Securities and Exchange
Commission on December 29, 1999.
10.11 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units is
incorporated by reference to Exhibit B of the
Partnership?s Prospectus dated April 28, 2003, as filed
with the Securities and Exchange Commission pursuant to
Rule 424(b)(3) under the Securities Act of 1933 on May 7,
2003.
10.13 Amended and Restated Escrow Agreement, dated as of March
10, 2000 among the Partnership, Morgan Stanley Spectrum
Select L.P., Morgan Stanley Spectrum Technical L.P.,
Morgan Stanley Spectrum Global Balanced L.P., Morgan
Stanley Spectrum Currency L.P., Morgan Stanley Spectrum
Commodity L.P., Morgan Stanley DW, and The Chase
Manhattan Bank, the escrow agent, is incorporated by
reference to Exhibit 10.13 of the Partnership?s
Registration Statement on Form S-1 (File No. 333-90487)
filed with the Securities and Exchange Commission on
November 2, 2001.
10.14 Form of Subscription Agreement Update Form to be executed
by purchasers of Units is incorporated by reference to
Exhibit C of the Partnership?s Prospectus, dated April
28, 2003, as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 on May 7, 2003.
10.15 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW, dated as of October
16, 2000, is incorporated by reference to Exhibit 10.01
of the Partnership?s Form 8-K (File No. 0-26280) filed
with the Securities and Exchange Commission on November
1, 2001.
10.16 Commodity Futures Customer Agreement between MS & Co. and
the Partnership, and acknowledged and agreed to by Morgan
Stanley DW, dated as of June 6, 2000, is incorporated by
reference to Exhibit 10.02 of the Partnership?s Form 8-K
(File No. 0-26280) filed with the Securities and Exchange
Commission on November 1, 2001.

10.17 Customer Agreement between the Partnership and MSIL,
dated as of May 1, 2000, is incorporated by reference to
Exhibit 10.04 of the Partnership?s Form 8-K (File No.
0-26280) filed with the Securities and Exchange
Commission on November 1, 2001.
10.18 Foreign Exchange and Options Master Agreement between MS
& Co. and the Partnership, dated as of April 30, 2000, is
incorporated by reference to Exhibit 10.05 of the
Partnership?s Form 8-K (File No. 0-26280) filed with the
Securities and Exchange Commission on November 1, 2001.
10.19 Securities Account Control Agreement among the
Partnership, MS & Co., and Morgan Stanley DW, dated as of
May 1, 2000, is incorporated by reference to Exhibit
10.03 of the Partnership?s Form 8-K (File No. 0-26280)
filed with the Securities and Exchange Commission on
November 1, 2001.
99.01 Certification of President of Demeter Management
Corporation, general partner of the Partnership, pursuant
to 18 U.S.C. Section 1350, as adopted, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.02 Certification of Chief Financial Officer of Demeter
Management Corporation, general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as
adopted, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

(B) Reports on Form 8-K. ? None.

SIGNATURE

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

Morgan Stanley Spectrum
Strategic L.P. (Registrant)

By: Demeter Management Corporation
(General Partner)

May 15, 2003 By:/s/Jeffrey D. Hahn
Jeffrey D. Hahn
Director and Chief Financial Officer

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

CERTIFICATIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

CERTIFICATIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

EXHIBIT 99.01

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

In connection with the Quarterly Report of Morgan Stanley Spectrum
Strategic L.P. (the ?Partnership?) on Form 10-Q for the period
ended March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the ?Report?), I, Jeffrey A.
Rothman, President, Demeter Management Corporation, general
partner of the Partnership, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.

By: /s/ Jeffrey A. Rothman

Name: Jeffrey A. Rothman
Title: President

Date: May 15, 2003

EXHIBIT 99.02

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

In connection with the Quarterly Report of Morgan Stanley Spectrum
Strategic L.P. (the ?Partnership?) on Form 10-Q for the period
ended March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the ?Report?), I, Jeffrey D. Hahn,
Chief Financial Officer, Demeter Management Corporation, general
partner of the Partnership, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.

By: /s/ Jeffrey D. Hahn

Name: Jeffrey D. Hahn
Title: Chief Financial Officer

Date: May 15, 2003