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 September 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
330 Madison Avenue, 8th Floor
New York, NY 10017
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 905-2700

825 Third Avenue, 9th Floor, New York, NY 10022

(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

September 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 CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)

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

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

September 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. Monthly, Morgan Stanley DW
pays the Partnership interest income equal to 100% of its average
daily Net Assets for the month at 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
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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 exchange-traded contracts is based on the
settlement price quoted by the exchange on the day with respect
to which market value is being determined. If an exchange-traded
contract could not have been liquidated on such day due to the
operation of daily limits or other rules of the exchange, the
settlement price shall be the settlement price on the first
subsequent day on which the contract could be liquidated. The
market value of off-exchange-traded contracts is based on the
fair market value quoted by the counterparty.

The Partnership's contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments 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

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

as a financial instrument or other contract that has all three of
the following characteristics:

1) One or more underlying notional amounts or payment
provisions;
2) Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3) Terms require or permit net settlement.

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

The net unrealized gains 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
on Open Contracts Longest Maturities

Exchange- Off-Exchange- Exchange- Off-Exchange-
Date Traded Traded Total Traded Traded
$ $ $

Sep. 30, 2004 783,401 62,102 845,503 Mar. 2005 Dec. 2004
Dec. 31, 2003 2,472,718 74,322 2,547,040 Apr. 2004 Mar. 2004

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

The Partnership has credit risk associated with counterparty non-
performance. The credit risk associated with the instruments in
which the Partnership trades 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, 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 $48,524,788 and $52,809,135 at
September 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
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

variation in value nor is there any requirement that an amount
equal to the net unrealized gains (losses) on open forward
contracts be segregated. However, the Partnership is required to

meet margin requirements equal to the net unrealized loss on open
contracts in the Partnership accounts with the counterparty, which
is accomplished by daily maintenance of the cash balance in a
custody account held at Morgan Stanley DW for the benefit of MS &
Co. With respect to those off-exchange-traded forward currency
contracts, the Partnership is at risk to the ability of MS & Co.,
the sole counterparty on all such contracts, to perform. The
Partnership has a netting agreement with MS & Co. This agreement,
which seeks to reduce both the Partnership's and MS & Co.'s
exposure on off-exchange-traded forward currency contracts, should
materially decrease the Partnership's credit risk in the event of
MS & Co.'s bankruptcy or insolvency.

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 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 expects to
have, any capital assets. Redemptions, exchanges, and sales of
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 nine month periods ended September
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 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 trading profit (loss)" for open
(unrealized) contracts, and recorded as "Realized trading profit
(loss)" when open positions are closed out. The sum of these
amounts constitutes the Partnership's trading results. The market
value of a futures contract is the settlement price on the
exchange on which that futures contract is traded on a particular
day. The value of 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 Three and Nine Months Ended September 30, 2004
The Partnership recorded losses net of interest income totaling
$531,920 and expenses totaling $718,311, resulting in a net loss
of $1,250,231 for the three months ended September 30, 2004. The
Partnership's net asset value per Unit decreased from $14.64 at
June 30, 2004 to $14.28 at September 30, 2004.

The most significant trading losses of approximately 2.1%
incurred in the global stock index markets resulted primarily
during July and August from long positions in Japanese, European,
and U.S. stock index futures. During July, long positions
experienced losses as prices reversed lower early in the month
due to the release of disappointing U.S. employment data, surging
energy prices, and new warnings concerning potential terrorist
attacks. Long positions in these markets incurred additional
losses during August as equity prices declined amid climbing
energy prices and a conflicted economic picture generated by U.S.
economic reports. Additional losses of approximately 1.5%
resulted in the currency markets throughout the quarter. During
July, short cross-rate positions in the Australian dollar versus
the Japanese yen incurred losses as the Australian currency
reversed higher amid speculation for increases in
Australian interest rates. During August, losses were
experienced from short positions in the Japanese yen versus the
U.S. dollar, Swiss franc, Australian dollar, and the euro as the
value of the yen moved higher due to stronger Japanese equity
prices and the release of positive Japanese economic data.
During September, short positions in the Mexican peso versus the
U.S. dollar resulted in losses as the dollar reversed lower amid
perceptions that the U.S. Federal Reserve had reformed their
outlook regarding aggressive increases in interest rates. Long
positions in the Japanese yen versus the U.S. dollar also
resulted in losses during September as the yen declined from
Japan's swelling national debt and a reversal of the dollar's
value in response to a hike in U.S. interest rates. The metals
markets generated losses of approximately 0.4%, primarily during
July and August, from long futures positions in precious and base
metals after industrial metals prices declined amid a slowdown in
demand from China, while precious metals prices fell amid a
rebound in the value of the U.S. dollar. Smaller losses of
approximately 0.2% resulted in the agricultural markets from
futures positions in cotton, soybean oil, and sugar. A portion
of the Partnership's overall losses for the quarter was offset by
gains of approximately 2.0% achieved in the global interest rates
markets, primarily during August, from long positions in U.S.,
European, Japanese, and Australian interest rate futures as
prices trended higher in response to a surge in oil prices, a
drop in equity prices and a conflicted economic picture
generated by U.S. economic reports. Additional gains of
approximately 0.8% were recorded in the energy markets throughout
the quarter from long futures positions in crude oil and its
related products as crude oil prices trended higher reaching
historical highs amid heavy market demand and concerns for
supply.

The Partnership recorded losses net of interest income totaling
$1,865,261 and expenses totaling $2,255,179, resulting in a net
loss of $4,120,440 for the nine months ended September 30, 2004.
The Partnership's net asset value per Unit decreased from $15.47
at December 31, 2003 to $14.28 at September 30, 2004.

The most significant trading losses of approximately 4.1% were
experienced in the currency markets. During the first quarter,
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 unprofitable as the dollar's value declined due to a
reduction in Bank of Japan intervention activity. During the
second quarter, 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 from
weakening efforts by the Japanese government through
currency market interventions. 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. During the third quarter, short cross-rate positions
in the Australian dollar versus the Japanese yen incurred losses
as the Australian currency reversed higher amid speculation for
increases in Australian interest rates. During August, losses
were experienced from short positions in the Japanese yen versus
the U.S. dollar, Swiss franc, Australian dollar, and the euro as
the value of the yen moved higher due to higher Japanese equity
prices and the release of positive Japanese economic data.
During September, short positions in the Mexican peso versus the
U.S. dollar resulted in losses as the dollar reversed lower amid
perceptions that the U.S. Federal Reserve reformed their outlook
regarding aggressive increases in interest rates. Long positions
in the Japanese yen versus the U.S. dollar also supplied losses
during September as the yen declined from Japan's swelling
national debt and a reversal of the dollar's value in response to
a hike in U.S. interest rates. Losses of approximately 0.9%
occurred in the global stock index markets, primarily during the
third quarter, from long positions in European, Japanese, and
U.S. stock index futures. Long positions experienced losses as
prices reversed lower during July due to the release of
disappointing U.S. employment data, surging energy prices and new
warnings concerning potential terrorist attacks. Long
positions in these markets incurred additional losses during
August as equity prices declined amid climbing energy prices and
a conflicted economic picture generated by U.S. economic reports.
In the metals markets, losses of approximately 0.6% resulted from
long futures positions in base metals. Long futures positions in
nickel experienced losses as prices fell due to a strengthening
of the U.S. dollar during January. Short nickel futures
positions during May experienced losses as prices increased
during the last week of the month due to a weaker U.S. dollar and
strong Asian demand. During the third quarter, further sector
losses resulted from long futures positions in precious and base
metals after industrial metals prices declined amid a slowdown in
demand from China, while precious metals prices fell amid a
rebound in the value of the U.S. dollar. Smaller losses of
approximately 0.4% were experienced in the agricultural markets
from positions in cocoa, cotton, and sugar. A portion of the
Partnership's overall losses during the first nine months of the
year was offset by gains of approximately 0.8% achieved in the
energy markets, primarily during the third quarter, from long
futures positions in crude oil and its related products as prices
trended higher reaching historical highs amid heavy market demand
and supply concerns. Further gains of approximately 0.7% in the
global interest rates markets resulted during the first and third
quarters of the year from long positions in U.S. and European
interest rate futures. During the first quarter, long positions
benefited from a rally in bond prices sparked by low
inflation and reduced concerns for increases in interest rates.
During the third quarter, long positions profited as prices
trended higher in response to a surge in oil prices, a drop in
equity prices and a conflicted economic picture generated by U.S.
economic reports.

For the Three and Nine Months Ended September 30, 2003
The Partnership recorded losses net of interest income totaling
$386,145 and expenses totaling $749,549, resulting in a net loss
of $1,135,694 for the three months ended September 30, 2003. The
Partnership's net asset value per Unit decreased from $15.64 at
June 30, 2003 to $15.29 at September 30, 2003.

The most significant trading losses of approximately 1.7% were
recorded in the currency markets from positions in the New
Zealand dollar versus the U.S. dollar during July and August as
the value of the U.S. currency strengthened amid rising
expectations for a U.S. economic recovery, only to subsequently
reverse lower amid comments from U.S. monetary officials alluding
to the benefits of a weaker U.S. dollar. Long positions in the
Australian dollar versus the Japanese yen provided additional
losses as the value of the Australian dollar declined during July
in response to negative Australian economic data. Additional
losses stemmed from long positions in the euro versus the
Canadian dollar during August as the value of the Canadian
currency strengthened amid rising commodity prices. During
September, smaller losses stemmed from short positions in the
euro versus the Canadian dollar as the value of the Canadian
currency declined with the U.S. dollar and in response to poor
Canadian economic data and the possibility of further interest
rate cuts by the Bank of Canada. In the energy markets, losses
of approximately 0.4% were incurred from positions in crude oil
futures during September as prices trailed lower throughout a
majority of the month and then unexpectedly reversed higher after
OPEC announced that it would move to reduce output by limiting
production in an effort to stem declining oil prices. Additional
losses of approximately 0.4% in the agricultural markets stemmed
from long positions in corn futures during September after
better-than-expected harvests and favorable weather forecasts
forced prices lower. A portion of the Partnership's overall
losses for the quarter was offset by gains of approximately 1.3%
in the global stock index markets from long positions in Japanese
stock index futures as prices jumped higher during July and
August in response to increased investor demand triggered by
record low Japanese government bond yields and robust Japanese
economic data.

The Partnership recorded revenues including interest income
totaling $4,661,544 and expenses totaling $2,214,054, resulting
in net income of $2,447,490 for the nine months ended September
30, 2003. The Partnership's net asset value per Unit
increased from $14.57 at December 31, 2002 to $15.29 at September
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 trended higher amid speculation of an interest
rate cut by the U.S. Federal Reserve, lingering doubts concerning
a global economic recovery, and investor preference for fixed
income investments. Additional gains of approximately 3.0% were
recorded primarily 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. Additional gains
were recorded from long positions in Japanese stock index futures
during July and August as prices jumped higher in response to
increased investor demand triggered by record-low Japanese
government bond yields, robust Japanese economic data and gains
in the U.S. equity markets. Gains of approximately 1.0% in the
energy markets were experienced, primarily during February, from
long positions in crude oil futures as prices trended 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. A portion of the Partnership's overall gains
for the first nine months of the year was offset by losses of
approximately 0.9% in the agricultural markets from corn futures
positions as the price of corn was lifted higher with wheat
prices during January and then traded inconsistently during April
and August amid supply and weather-related issues. In the
currency markets, small losses of approximately 0.3% were
established from short positions in the euro versus the Canadian
dollar during September as the value of the Canadian currency
declined with the U.S. dollar. Smaller losses of approximately
0.3% in the metals markets were experienced primarily during June
from long positions in copper futures as prices moved lower.
Positions in copper futures incurred additional losses during
July as prices moved in a choppy pattern due to a cloudy supply
and demand outlook.
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 and losses on off-exchange-traded
forward currency contracts are settled upon termination of the
contract, however, the Partnership is required to meet margin
requirements equal to the net unrealized loss on open contracts
in the Partnership accounts with the counterparty, which is
accomplished by daily maintenance of the cash balance in a
custody account held at Morgan Stanley DW for the benefit of MS &
Co.

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

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

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

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

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

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

The Partnership's risk exposure in the market sectors traded by
the Trading Advisor is estimated below in terms of VaR. The
Partnership estimates VaR using a model based upon historical
simulation (with a confidence level of 99%) which involves
constructing a distribution of hypothetical daily changes in the
value of a trading portfolio. The VaR model takes into account
linear exposures to risk including equity and commodity prices,
interest rates, foreign exchange rates, and correlation among
these variables. The hypothetical changes in portfolio value are
based on daily percentage changes observed in key market indices
or other market factors ("market risk factors") to which the
portfolio is sensitive. The one-day 99% confidence level of the
Partnership's VaR corresponds to the negative change in portfolio
value that, based on observed market risk factors, would have
been exceeded once in 100 trading days, or one day in 100. VaR
typically does not represent the worst case outcome. Demeter
uses approximately four years of daily market data (1,000
observations) and 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 September 30, 2004 and 2003.
At September 30, 2004 and 2003, the Partnership's total
capitalization was approximately $48 million and $51 million,
respectively.

Primary Market September 30, 2004 September 30, 2003
Risk Category Value at Risk Value at Risk

Equity (1.48)% (0.72)%

Interest Rate (0.84) (0.84)

Currency (0.35) (0.30)

Commodity (0.92) (0.31)

Aggregate Value at Risk (2.03)% (1.02)%

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 October 1, 2003 through September 30, 2004.

Primary Market Risk Category High Low Average
Equity (1.48)% (1.07)% (1.31)%
Interest Rate (1.33) (0.60) (0.87)
Currency (0.70) (0.21) (0.45)
Commodity (0.92) (0.06) (0.39)
Aggregate Value at Risk (2.03)% (0.92)% (1.50)%

Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio's aggregate market
risk exposure, incorporating a range of varied market risks;
reflect risk reduction due to portfolio diversification or hedging
activities; and can cover a wide range of portfolio assets.
However, VaR risk measures should be viewed in light of the
methodology's limitations, which include, but may not be limited
to the following:
? past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
? changes in portfolio value caused by market movements may
differ from those of the VaR model;
? VaR results reflect past market fluctuations applied to current
trading positions while future risk depends on future
positions;
? VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
? the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

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

The VaR tables provided present the results of the Partnership's
VaR for each of the Partnership's market risk exposures and on an
aggregate basis at September 30, 2004 and 2003, and for the four
quarter-end reporting periods from October 1, 2003 through
September 30, 2004. VaR is 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. These balances and any market risk they may represent
are immaterial.

The Partnership also maintains a substantial portion
(approximately 95% as of September 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 September 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
September 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 September 30, 2004, the Partnership's primary
exposures were to the DAX (Germany), FTSE (Britain), and S&P 500
(U.S.) 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 September
30, 2004 was to the global interest rate sector. Exposure was
primarily spread across the European, Australian, U.S., 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 September 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 number of currencies, including cross-rates
- - i.e., positions between two currencies other than the U.S.
dollar. At September 30, 2004, the Partnership's major exposures
were to the euro, Swiss franc, 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 associated with of the Partnership's currency trades will
change significantly in the future.

Commodity.
Energy. The Partnership's energy exposure at September 30,
2004, was shared primarily by futures contracts in crude oil
and its related products, and natural gas. Price movements
in these markets result from geopolitical developments,
particularly in the Middle East, as well as weather patterns
and other economic fundamentals. Significant profits and
losses, which have been experienced in the past, are
expected to continue to be experienced in the future.
Natural gas has exhibited volatility in price resulting from
weather patterns and supply and demand factors and will
likely continue in this choppy pattern.

Metals. The Partnership's metals exposure at September 30,
2004 was to fluctuations in the price of precious metals,
such as gold, and base metals, such as copper, zinc, and
nickel. Economic forces, supply and demand inequalities,
geopolitical factors and market expectations influence price
movements in these markets. The Trading Advisor utilizes
the trading system(s) to take positions when market
opportunities develop, and Demeter anticipates that the
Partnership will continue to do so.

Soft Commodities and Agriculturals. At September 30, 2004,
the Partnership had exposure to the markets that comprise
these sectors. Most of the exposure was to the corn and
sugar 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 September 30, 2004:

Foreign Currency Balances. The Partnership's primary
foreign currency balances at September 30, 2004 were in
euros, Australian dollars, Swiss francs, and South African
rand. 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
Registration Statement on Form S-1 Units Registered
Effective Date File Number

Initial Registration 2,000,000.000 September 15, 1994 33-80146
Additional Registration 5,000,000.000 January 31, 1996 333-00494
Additional Registration 1,000,000.000 April 30, 1996 333-3222
Additional Registration 3,000,000.000 February 28, 2000 333-90475
Additional Registration 5,500,000.000 April 28, 2003 333-104002
Total Units Registered 16,500,000.000

Units sold through 9/30/04 7,699,553.188
Units unsold through 9/30/04 8,800,446.812

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.

The aggregate price of the Units sold through September 30, 2004
was $108,973,360.

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 and the supplement included
as part of the above referenced Registration Statements.

Item 5. OTHER INFORMATION
Management. The following changes have been made to the Board
of Directors and Officers of Demeter:

Mr. Kevin Perry, Chief Financial Officer of Demeter, was confirmed
as a principal of Demeter by the National Futures Association on
September 3, 2004.

Mr. William D. Seugling, Director of Demeter, was confirmed as a
principal of Demeter by the National Futures Association on
October 11, 2004.

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 with the Securities and Exchange Commission on
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 with the Securities and Exchange
Commission 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, 2004 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)

November 15, 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 (CONCLUDED)

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

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