MORGAN STANLEY SPECTRUM GLOBAL BALANCED LP - 10-Q Quarterly Report

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

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2004 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 0-26340

MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-3782232
(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___________

Indicate by check-mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2004

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF FINANCIAL CONDITION

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

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

of these financial statements.
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Six Months Ended June 30, 2004 and 2003
(Unaudited)

of these financial statements.
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)

MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS

June 30, 2004

(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 Global Balanced L.P. (the
"Partnership"). The financial statements and condensed notes
herein should be read in conjunction with the Partnership's
December 31, 2003 Annual Report on Form 10-K.

1. Organization
Morgan Stanley Spectrum Global Balanced 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 Select L.P., Morgan Stanley
Spectrum Strategic L.P., and Morgan Stanley Spectrum Technical
L.P.

MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

2. Related Party Transactions
The Partnership's cash is on deposit with Morgan Stanley DW, MS &
Co., and MSIL in futures, forwards, and options trading accounts
to meet margin requirements as needed. Morgan Stanley DW pays
interest on these funds based on a 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
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
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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 Standards No.
133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 defines a derivative
as a financial instrument or other contract that has all three of
the following characteristics:

1) One or more underlying notional amounts or payment
provisions;
2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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
$ $ $

Jun. 30, 2004 580,573 (13,811) 566,762 Dec. 2004 Sep. 2004
Dec. 31, 2003 2,472,718 74,322 2,547,040 Apr. 2004 Mar. 2004

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
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

counterparties, with respect to most of the Partnership's assets.

Exchange-traded futures, forward, and futures-styled options
contracts are marked to market on a daily basis, with variations
in value settled on a daily basis. Morgan Stanley DW, MS & Co.,
and MSIL, each as a futures commission merchant for the
Partnership's exchange-traded futures, forward, 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, forward, and futures-styled options contracts, including
an amount equal to the net unrealized gains (losses) on all open
futures, forward, and futures-styled options contracts, which
funds, in the aggregate, totaled $51,401,492 and $52,809,135 at
June 30, 2004 and December 31, 2003, respectively. With respect to
the Partnership's off-exchange-traded forward currency contracts,
there are no daily exchange-required settlements of variations in
value nor is there any requirement that an amount equal to the net
unrealized gains (losses) on open forward contracts be segregated,
however, MS & Co. and Morgan Stanley DW will make daily
settlements of losses as needed. 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

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

contracts, to perform. The Partnership has a netting agreement
with MS & Co. This agreement, which seeks to reduce both the
Partnership's and MS & Co.'s exposure on off-exchange-traded
forward currency contracts, should materially decrease the
Partnership's credit risk in the event of MS & Co.'s bankruptcy or
insolvency.

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

Liquidity. The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker, and MS & Co., and MSIL as
clearing brokers in separate futures, forwards, and options
trading accounts established for the Trading Advisor, which assets
are used as margin to engage in trading 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 moves in trading forward
contracts on foreign currencies. The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses. Either of these market conditions could
result in restrictions on redemptions. For the periods covered by
this report, illiquidity has not materially affected the
Partnership's assets.

There are no known material trends, demands, commitments, events
or uncertainties 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.

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, forwards, and options
markets. The following presents a summary of the Partnership's
operations for the three and six month periods ended June 30, 2004
and 2003 and a general discussion of its trading activities
during each period. It is important to note, however, that the
Trading Advisor trades in various markets at different times and
that prior activity in a particular market does not mean that such
market will be actively traded by the Trading Advisor or will be
profitable in the future. Consequently, the results of operations
of the Partnership are difficult to discuss other than in the
context of the Trading Advisor's trading activities on
behalf of the Partnership 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 12 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 trading profit/loss" for open
(unrealized) contracts, and recorded as "Realized trading
profit/loss" when open positions are closed out, and 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 foreign currency forward contracts is based on
the spot rate as of the close of business, New York City time, on
a given day. Interest income revenue, as well as management fees,
incentive fees and brokerage fees expenses of the Partnership are
recorded on an accrual basis.

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

For the Quarter and Six Months Ended June 30, 2004
The Partnership recorded losses net of interest income totaling
$1,720,563 and expenses totaling $761,166, resulting in a net
loss of $2,481,729 for the quarter ended June 30, 2004. The
Partnership's net asset value per Unit decreased from $15.36 at
March 31, 2004 to $14.64 at June 30, 2004.

The most significant trading losses of approximately 2.2% were
incurred in the global interest rate markets, primarily during
April, from long European and Australian interest rate futures
positions as fixed income prices tumbled following the release of
stronger-than-expected U.S. economic data. Losses were also
recorded during June from long positions in Japanese government
bond futures as prices decreased due to rising yields and an
improving Japanese economy. Additional losses of approximately
1.0% resulted in the currency markets during April from long
positions in the Japanese yen versus the U.S. dollar as the U.S.
dollar surged in response to announcements regarding better-than-
expected U.S. economic data. Losses were also incurred on short
U.S. dollar positions against the South African rand during April
as the dollar benefited from rising U.S. interest rates and the
perception that the U.S. economy was experiencing a
sustainable recovery. During May, long positions in the U.S.
dollar versus the South African rand resulted in losses as the
commodity-linked rand reversed higher in response to rising gold
prices. Partnership losses of approximately 0.5% stemmed from
long futures positions in corn during April. In the agricultural
markets, corn prices declined, spurred by news of lower U.S.
exports and increased plantings in the U.S. Corn Belt. During
May, short futures positions in corn also resulted in losses as
prices moved higher during the final week of the month due to
delayed planting caused by inclement weather. Losses of
approximately 0.2% were experienced in the energy sector from
long futures positions in crude oil and its related products as
prices reversed in early April following the release of data
indicating larger-than-expected U.S. supplies. Long futures
positions in crude oil and its related products produced
additional losses during June as prices reversed lower following
news that OPEC moved to increase its daily production quota. A
portion of the Partnership's overall losses for the quarter was
offset by gains of approximately 0.5% in the global stock index
markets. Long positions in European stock index futures profited
as stock prices moved higher amid the release of favorable
corporate earnings and positive economic data.

The Partnership recorded losses net of interest income totaling
$1,333,341 and expenses totaling $1,536,868, resulting in a net
loss of $2,870,209 for the six months ended June 30, 2004.
The Partnership's net asset value per Unit decreased from $15.47
at December 31, 2003 to $14.64 at June 30, 2004.

The most significant trading losses of approximately 2.6% were
experienced in the currency markets, primarily during March.
Long cross rate positions in the Swiss franc versus the Japanese
yen resulted in losses as the yen's value reversed higher due to
speculation that the Bank of Japan was relaxing its efforts to
weaken the yen. Long positions in the U.S. dollar index were
also hurt as the dollar's value declined due to reduced Bank of
Japan intervention activity. During April, losses were incurred
from long positions in the Japanese yen and Singapore dollar
versus the U.S. dollar as the U.S. dollar surged following the
release of stronger-than-expected U.S. jobs data. The yen also
came under pressure following efforts by the Japanese government
to weaken the yen by intervening in the currency markets. Losses
were also incurred on short U.S. dollar positions against the
South African rand, as the dollar benefited from rising U.S.
interest rates and the perception that the U.S. economy was
experiencing a sustainable recovery. In the global interest rate
markets, losses of approximately 1.4% were incurred during
January from long positions in Australian interest rate futures
as prices moved lower in sympathy with U.S. fixed income prices
after the U.S. Federal Reserve hinted at possible rate increases
in the near future. Additional losses stemmed from positions in
Japanese government bond futures during June as prices
first decreased due to rising yields and an improving Japanese
economy and then increased sharply after the Bank of Japan voted
to maintain interest rates close to zero. During April, losses
were incurred on long European interest rate futures positions as
global fixed income prices tumbled following the release of
stronger-than-expected U.S. jobs data. Smaller Partnership
losses of approximately 0.2% were recorded in the agricultural
markets from trading in cocoa futures during the first six months
of the year. In the metals markets, losses of approximately 0.2%
resulted from long futures positions in nickel as prices fell due
to a strengthening of the U.S. dollar during January. Short
nickel futures positions during May also experienced losses as
prices increased during the last week of the month due to a
weaker U.S. dollar and strong Asian demand. A portion of the
Partnership's losses during the first six months of the year was
offset by gains of approximately 1.3% achieved in the global
stock index markets. Long positions in Japanese stock index
futures contributed to gains as Japanese equity prices
strengthened during June amid renewed investor sentiment
regarding the Japanese economic recovery. Long U.S. stock index
futures positions recorded gains as U.S. equity prices moved
higher in response to positive company earnings reports, in
addition to signs of growing U.S. consumer confidence during
January. Long positions in Asian and U.S. stock index futures
both recorded gains during February as global equity prices
advanced amid upbeat corporate profit reports, merger and
acquisition activity and a low-interest rate environment.

For the Quarter and Six Months Ended June 30, 2003
The Partnership recorded revenues including interest income
totaling $4,100,730 and expenses totaling $728,282, resulting in
net income of $3,372,448 for the quarter ended June 30, 2003.
The Partnership's net asset value per Unit increased from $14.62
at March 31, 2003 to $15.64 at June 30, 2003.

The most significant trading gains of approximately 4.9% were
recorded in the global stock index markets from long positions in
European stock index futures during April, May, and June as
equity prices rallied in response to positive earnings
announcements, the conclusion of the war in Iraq, and the
prospect of lower interest rates in the U.S. Long positions in
U.S. stock index futures recorded gains during May as equity
prices rallied in response to the prospect of lower interest
rates. During June, long positions in Japanese stock index
futures also provided gains as Japanese equity prices increased
amid strength in U.S. stocks and foreign demand for Japanese
high-technology, automaker, export, and defensive stocks.
Additional gains of approximately 3.0% were provided in the
global interest rate markets from long positions in U.S. and
European interest rate futures as prices continued to trend
higher during May amid speculation of an interest rate cut by the
U.S. Federal Reserve and lingering doubts concerning a
global economic recovery. A portion of the Partnership's overall
gains for the quarter was offset by losses of approximately 0.3%
in the metals markets from long positions in nickel futures as
prices declined during June amid easing supply concerns.

The Partnership recorded revenues including interest income
totaling $5,047,689 and expenses totaling $1,464,505, resulting
in net income of $3,583,184 for the six months ended June 30,
2003. The Partnership's net asset value per Unit increased from
$14.57 at December 31, 2002 to $15.64 at June 30, 2003.

The most significant trading gains of approximately 5.8% were
recorded in the global interest rate markets, during February and
May, from long positions in European and U.S. interest rate
futures as prices continued to trend higher amid speculation of
an interest rate cut by the U.S. Federal Reserve, lingering
doubts concerning a global economic recovery, and investors
preference for fixed income investments. Additional gains of
approximately 1.7% were recorded during the second quarter in the
global stock index markets from long positions in European and
U.S. stock index futures as global equity prices rallied in
response to positive earnings announcements, the conclusion of
the war in Iraq, and the prospect of lower interest rates. Gains
of approximately 1.4% in the energy markets were recorded,
primarily during February, from long positions in crude oil
futures, as prices continued to trend higher amid the
increasing likelihood of military action against Iraq, and long
positions in natural gas futures, as prices jumped sharply higher
amid fears that extremely cold weather in the U.S. northeast and
midwest could further deplete already diminished supplies. In
the currency markets, gains of approximately 1.4% were provided,
primarily during April, from long positions in the Australian
dollar versus the Japanese yen as the yen's value declined amid
SARS-related fears. Long positions in the euro versus the U.S.
dollar during May also provided gains amid uncertainty regarding
the Bush Administration's economic policy, renewed fears of
potential terrorist attacks against American interests, and
investor preference for non-U.S. dollar denominated assets. A
portion of the Partnership's overall gains for the first half of
the year was offset by small losses of approximately 0.5% in the
agricultural markets from short corn futures positions during
January as the price of corn moved higher, elevated by strong
prices in wheat futures. In April, long positions in corn futures
experienced additional losses as prices reversed lower amid news
of increased supply. Smaller losses of approximately 0.2% in the
metals markets were experienced primarily during June from long
positions in copper futures as prices moved lower.
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 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, forwards, and options are settled daily through
variation margin. Gains/losses on off-exchange-traded forward
currency contracts are settled at the termination of the contract
or more frequently, as agreed upon with each counterparty.

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 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 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.

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 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 Value at Risk
("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 revalues its portfolio
(using delta-gamma approximations) for each of the
historical market moves that occurred over this time period.
This generates a probability distribution of daily "simulated
profit and loss" outcomes. The VaR is the appropriate percentile
of this distribution. For example, the 99% one-day VaR would
represent the 10th worst outcome from Demeter's simulated profit
and loss series.

The Partnership's VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
contract and do not distinguish between exchange and non-exchange
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 June 30, 2004 and 2003.
At June 30, 2004 and 2003, the Partnership's total capitalization
was approximately $50 million and $51 million, respectively.
Primary Market June 30, 2004 June 30, 2003
Risk Category Value at Risk Value at Risk

Equity (1.07)% (0.76)%

Interest Rate (0.60) (0.68)

Currency (0.21) (0.36)

Commodity (0.06) (0.15)

Aggregate Value at Risk (0.92)% (0.89)%

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 which 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 July 1, 2003 through June 30, 2004.
Primary Market Risk Category High Low Average
Equity (1.43)% (0.72)% (1.12)%
Interest Rate (1.33) (0.60) (0.87)
Currency (0.70) (0.21) (0.43)
Commodity (0.39) (0.06) (0.24)
Aggregate Value at Risk (1.56)% (0.92)% (1.24)%

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 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.

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 June 30, 2004 and 2003, and for the four
quarter-end reporting periods from July 1, 2003 through June 30,
2004. VaR not necessarily representative of the 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 not needed for margin. These balances and any market
risk they may represent are immaterial.

The Partnership also maintains a substantial portion
(approximately 96% as of June 30, 2004) of its available assets in
cash at Morgan Stanley DW. 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 primary market risk exposures - constitute
forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities
Exchange Act. The Partnership's primary market risk exposures, as
well as the strategies used and to be used by Demeter and the
Trading Advisor for managing such exposures, are subject to
numerous uncertainties, contingencies and risks, any one of which
could cause the actual results of the Partnership's risk controls
to differ materially from the objectives of such strategies.
Government interventions, defaults and expropriations, illiquid
markets, the emergence of dominant fundamental factors, political
upheavals, changes in historical price relationships, an influx of
new market participants, increased regulation, and many other
factors could result in material losses, as well as in material
changes to the risk exposures and the risk management strategies
of the Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at June 30, 2004 by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Equity. The primary market exposure of the Partnership at June
30, 2004 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., Britain, Germany, Japan, Italy, and
Canada. The stock index futures traded by the Partnership
are by law limited to futures on broadly-based indices. At June
30, 2004, the Partnership's primary exposures were to the Nikkei
(Japan), S&P 500 (U.S.), DAX (Germany), and FTSE (Britain) stock
indices. The Partnership is primarily exposed to the risk of
adverse price trends or static markets in the U.S., European, and
Japanese stock indices. Static markets would not cause major
market changes, but would make it difficult for the Partnership
to avoid trendless price movements, resulting in numerous small
losses.

Interest Rate. The second largest market exposure at June 30,
2004 was to the global interest rate sector. Exposure was
primarily spread across the U.S., European, Australian, 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 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 countries - e.g., Australia.
Demeter anticipates that the G-7 countries and Australian
interest rates will remain the primary interest rate exposures 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.

Currency. The third largest market exposure of the Partnership
at June 30, 2004 was to the currency sector. The Partnership's
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. Interest rate
changes, as well as political and general economic conditions
influence these fluctuations. The Partnership trades a large
number of currencies, including cross-rates - i.e., positions
between two currencies other than the U.S. dollar. At June 30,
2004, the Partnership's major exposures were to the euro,
Canadian dollar, Australian dollar, and Japanese yen currency
crosses, as well as 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.

Commodity.
Energy. The Partnership's energy exposure at June 30, 2004,
was shared primarily by futures contracts in crude oil and
it's 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.

Metals. The Partnership's metals exposure at June 30, 2004
was to fluctuations in the price of base metals, such as
copper and nickel. Economic forces, supply and demand
inequalities, geopolitical factors, and market expectations
influence price movements in these markets. The Trading
Advisor, from time to time, takes positions when market
opportunities develop, and Demeter anticipates that the
Partnership will continue to do so.

Soft Commodities and Agriculturals. At June 30, 2004, the
Partnership had exposure to the markets that comprise these
sectors. All of the exposure was to the cocoa and corn
markets. Supply and demand inequalities, severe weather
disruptions and market expectations affect price movements
in these markets.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at June 30, 2004:

Foreign Currency Balances. The Partnership's primary
foreign currency balances at June 30, 2004 were in euros,
Japanese yen, and Australian dollars. The Partnership
controls the non-trading risk of foreign currency balances
by regularly converting them back into U.S. dollars upon
liquidation of their respective positions.

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

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

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

(b) There have been no significant changes during the period
covered by this quarterly report 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership initially registered 2,000,000 Units pursuant to
a Registration Statement on Form S-1, which became effective on
September 15, 1994 (SEC File Number 33-80146).

The Partnership registered an additional 5,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on January 31, 1996 (SEC File Number 333-00494).

The Partnership registered an additional 1,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on April 30, 1996 (SEC File Number 333-3222).

The Partnership registered an additional 3,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on February 28, 2000 (SEC File Number 333-90475).

The Partnership registered an additional 5,500,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on April 28, 2003 (SEC File Number 333-104002).

The managing underwriter for the Partnership is Morgan Stanley
DW.

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

Through June 30, 2004, 7,580,172.992 Units were sold, leaving
8,919,827.008 Units unsold. The aggregate price of the Units
sold through June 30, 2004 was $107,268,185.

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 the prospectus included as part of the above
referenced Registration Statements.

Item 5. OTHER INFORMATION
Management. Effective June 21, 2004, the following changes have
been made to the Board of Directors and Officers of Demeter:

Mr. Jeffrey D. Hahn resigned the position of Chief Financial
Officer and Director of Demeter.

Mr. Todd Taylor, age 41, is a Director of Demeter. Mr. Taylor
began his career with Morgan Stanley in June 1987 as a Financial
Advisor in the Dallas office. In 1995, he joined the Management
Training Program in New York and was appointed Branch Manager in
St. Louis in 1997. Three years later, in 2000, Mr. Taylor was
appointed to a newly created position, Director of
Individual Investor Group ("IIG") Learning and Development,
before becoming the Director of IIG Strategy in 2002. Most
recently, Mr. Taylor has taken on a new role as the High Net
Worth Segment Director. Currently a member of the firm's E-
Learning Council, Mr. Taylor is also a current member of the
Securities Industry/Regulatory Council on Continuing Education.
Mr. Taylor graduated from Texas Tech University with a B.B.A. in
Finance.

Mr. William D. Seugling, age 34, will become a Director of
Demeter once he has registered with the National Futures
Association ("NFA") as a principal, which registration is
currently pending. Mr. Seugling is an Executive Director at
Morgan Stanley and currently serves as Director of Client
Solutions for US Private Wealth Management. Mr. Seugling joined
Morgan Stanley in June 1993 as an Associate in Equity Structured
Products having previously worked in research and consulting for
Greenwich Associates from October 1991 to June 1993. Since 1994,
he has focused broadly on analysis and solutions for wealthy
individuals and families culminating in his current role within
the division. He was named Vice President in 1996 and an
Executive Director in 1999. Mr. Seugling graduated cum laude
from Bucknell University with a B.S. in Management and a
concentration in Chemistry.

Mr. Kevin Perry, age 35, is the Chief Financial Officer of
Demeter. His registration with the NFA as a principal is
currently pending. He currently serves as an Executive Director
and Controller of Client Solutions at Morgan Stanley. Mr. Perry
joined Morgan Stanley in October 2000 and is also Chief Financial
Officer of Morgan Stanley Trust National Association, Van Kampen
Funds Inc. and Morgan Stanley Distribution, Inc. Prior to
joining Morgan Stanley, Mr. Perry worked as an auditor and
consultant in the financial services practice of Ernst & Young
from October 1991 to October 2000. Mr. Perry received a B.S.
degree in Accounting from the University of Notre Dame in 1991
and is a Certified Public Accountant.

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, 2004, filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, on May 4, 2004.
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.
3.03 Certificate of Amendment of Certificate of Limited
Partnership, dated April 17, 1998, is incorporated by
reference to Exhibit 3.03 of the Partnership's Form 10-K
(File No. 0-26340) for the fiscal year ended December 31,
1998 filed June 30, 1999.
3.04 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001, (changing its name
from Morgan Stanley Dean Witter Spectrum Global Balanced
L.P.) is incorporated by reference to Exhibit 3.01 of the
Partnership's Form 8-K (File No. 0-26340) filed with the
Securities and Exchange Commission on November 1, 2001.
10.01 Management Agreement, dated as of November 1, 1994, among
the Partnership, Demeter, and RXR, Inc., is incorporated
by reference to Exhibit 10.01 of the Partnership's Form
10-K (File No. 0-26340) for fiscal year ended December
31, 1998 filed on June 30, 1999.
10.11 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by purchasers of Units is
incorporated by reference to Exhibit B of the
Partnership's Prospectus, dated April 28, as filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 on May 4,
2004.
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 Strategic L.P., Morgan Stanley
Spectrum Currency L.P., Morgan Stanley Spectrum
Commodity L.P., Morgan Stanley DW and The Chase Manhattan
Bank, as escrow agent, is incorporated by reference to
Exhibit 10.13 of the Partnership's Registration Statement
on Form S-1 (File No. 333-90475) 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, 2004, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 on May 4, 2004.
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. 0-26340) 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. 0-26340) 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-
26340) 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. 0-26340) 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. 0-26340)
filed with the Securities and Exchange Commission on
November 1, 2001.
31.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to rules 13a-15(e) and 15d-15(e), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.

31.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to rules 13a-15(e) and 15d-15(e),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

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

SIGNATURE

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

Morgan Stanley Spectrum
Global Balanced L.P. (Registrant)

By: Demeter Management Corporation
(General Partner)

August 16, 2004 By: /s/Kevin Perry
Kevin Perry
Chief Financial Officer

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

MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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