MORGAN STANLEY SPECTRUM TECHNICAL 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, 2003 or

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

Commission File Number 0-26338

MORGAN STANLEY SPECTRUM TECHNICAL L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-3782231
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

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

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

Yes X No___________
MORGAN STANLEY SPECTRUM TECHNICAL L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2003

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

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

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

MORGAN STANLEY SPECTRUM TECHNICAL L.P.
STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
For the Six Months Ended June 30, 2003 and 2002
(Unaudited)

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

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

June 30, 2003

(Unaudited)

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

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

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?). The non-clearing commodity broker is
MORGAN STANLEY SPECTRUM TECHNICAL L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Morgan Stanley DW Inc. (?Morgan Stanley DW?). The clearing
commodity brokers are Morgan Stanley & Co. Incorporated (?MS &
Co.?) and Morgan Stanley & Co. International Limited (?MSIL?).
Demeter, Morgan Stanley DW, MS & Co. and MSIL are wholly-owned
subsidiaries of Morgan Stanley. The trading advisors to the
Partnership are Campbell & Company, Inc., Chesapeake Capital
Corporation, and John W. Henry & Company, Inc. (collectively, the
?Trading Advisors?).

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

3. Financial Instruments
The Partnership trades futures contracts, options on futures
contracts, and forward contracts on physical commodities and 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 TECHNICAL 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;
3) Terms require or permit net settlement.
MORGAN STANLEY SPECTRUM TECHNICAL L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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, 2003 (21,341,981) (2,346,651) (23,688,632) Jun. 2004 Sep. 2003
Dec. 31, 2002 16,269,250 7,833,963 24,103,213 Dec. 2003 Mar. 2003

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

The Partnership also has credit risk because Morgan Stanley DW,
MS & Co. and MSIL act as the futures commission merchants or the
counterparties with respect to most of the Partnership?s assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
MORGAN STANLEY SPECTRUM TECHNICAL L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

settled on a daily basis. Each of Morgan Stanley DW, MS & Co. and
MSIL, as a futures commission merchant for the Partnership?s
exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures
Trading Commission (?CFTC?), to segregate from their own assets,
and for the sole benefit of their commodity customers, all funds
held by them with respect to exchange-traded futures and futures-
styled options contracts, including an amount equal to the net
unrealized gains (losses) on all open futures and futures-styled
options contracts, which funds, in the aggregate, totaled
$409,981,343 and $326,385,223 at June 30, 2003 and December 31,
2002, respectively. With respect to the Partnership?s off-
exchange-traded forward currency contracts, there are no daily
settlements of variations in value nor is there any requirement
that an amount equal to the net unrealized gains (losses) on open
forward contracts be segregated. With respect to those off-
exchange-traded forward currency contracts, the Partnership is at
risk to the ability of MS & Co., the sole counterparty on all of
such contracts, to perform. The Partnership has a netting
agreement with MS & Co. This agreement, which seeks to reduce
both the Partnership?s and MS & Co.?s exposure on off-exchange-
traded forward currency contracts, should materially decrease the
Partnership?s credit risk in the event of MS & Co.?s bankruptcy
or insolvency.

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

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

The Partnership?s investment in futures, forwards, and options
may, from time to time, be illiquid. Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as ?daily price fluctuations limits? or ?daily
limits?. Trades may not be executed at prices beyond the daily
limit. If the price for a particular futures or option 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.

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

Capital Resources. The Partnership does not have, nor expect to
have, any capital assets. Redemptions, exchanges and sales of
additional units of limited partnership interest (?Unit(s)?) in
the future will affect the amount of funds available for
investment in futures, forwards, and options in subsequent
periods. It is not possible to estimate the amount, and therefore
the impact, of future redemptions of Units.
There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership?s capital resource arrangements at the
present time. The Partnership has no off-balance sheet
arrangements, nor contractual obligations or commercial
commitments to make future payments that would affect the
Partnership?s liquidity or capital resources. The contracts
traded by the Partnership are accounted for on a trade-date basis
and marked to market on a daily basis. The value of futures
contracts is the settlement price on the exchange on which that
futures contract is traded on a particular day and the value of
foreign currency forward contracts is based on the spot rate as
of the close of business, New York City time, on a given day.

Results of Operations
General. The Partnership?s results depend on the Trading
Advisors and the ability of each Trading Advisor?s trading
programs to take advantage of price movements or other profit
opportunities in the futures, forwards, and options markets. The
following presents a summary of the Partnership's operations for
the three and six month periods ended June 30, 2003 and 2002 and
a general discussion of its trading activities during each
period. It is important to note, however, that the Trading
Advisors trade in various markets at different times and that
prior activity in a particular market does not mean that such
market will be actively traded by the Trading Advisors or will be
profitable in the future. Consequently, the results of operations
of the Partnership are difficult to discuss other than in
the context of the Trading Advisors? trading activities on behalf
of the Partnership and how the Partnership has performed in the
past.

The Partnership?s results of operations set forth in the financial
statements on pages 2 through 11 of this report were prepared in
accordance with accounting principles generally accepted in the
United States of America, which require the use of certain
accounting policies that affect the amounts reported in these
financial statements, including the following: The contracts the
Partnership trades are accounted for on a trade-date basis and
marked to market on a daily basis. The difference between their
cost and market value is recorded on the Statements of Operations
as ?Net change in unrealized profit/loss? for open (unrealized)
contracts, and recorded as ?Realized profit/loss? when open
positions are closed out, and the sum of these amounts constitutes
the Partnership?s trading revenues. Interest income revenue, as
well as management fees, incentive fees and brokerage fees
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, 2003
For the quarter ended June 30, 2003, the Partnership recorded
total trading revenues, including interest income, of $9,441,031
and, after expenses, posted a decrease in net asset value per
Unit. The most significant losses of approximately 2.1% were
incurred in the metals markets, primarily during June, from long
gold futures positions as prices dropped counter to the rise of
the U.S. dollar. Further losses in this sector were provided by
long positions in aluminum and copper futures as prices declined
in anticipation of the U.S. Federal Reserve?s interest rate cut
and on technically based selling. Additional losses of
approximately 2.0% in the agricultural markets were recorded
primarily during June from short futures positions in cotton as
supply concerns triggered by adverse weather conditions in the
U.S. and increased exports forced cotton prices higher. Further
losses in this sector were experienced from long lean hog futures
positions as fears related to a potential outbreak of Mad Cow
Disease depressed prices. Smaller losses of approximately 0.5%
in the global stock index markets resulted during May from
positions in Japanese stock index futures as prices reversed
higher amid heavy buying by Japanese pension funds and renewed
hope for a government stimulus package. A portion of the
Partnership?s overall losses for the second quarter was offset by
gains of approximately 5.5% in the currency markets during April
from long positions in the euro versus the U.S. dollar as
concerns regarding the U.S. economic recovery resurfaced and
resulted in the value of the dollar declining to a four-year low
versus the euro. Long positions in the euro versus the
U.S. dollar provided additional gains during May as the value of
the euro strengthened to an all-time high 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.
Currency gains were also recorded from long positions in the
Australian dollar versus the U.S. dollar as its value
strengthened in response to continued weakness in the U.S. dollar
and significant interest rate differentials between the two
countries. Additional gains of approximately 2.1% in the global
interest rate markets were recorded primarily during May from
long positions in U.S. and European interest rate futures as
prices trended higher amid speculation of an interest rate cut by
the Federal Reserve and lingering doubts concerning a global
economic recovery. Total expenses for the three months ended
June 30, 2003 were $10,487,357, resulting in a net loss of
$1,046,326. The net asset value of a Unit decreased from $20.10
at March 31, 2003 to $20.08 at June 30, 2003.

For the six months ended June 30, 2003, the Partnership recorded
total trading revenues, including interest income, of $54,826,398
and posted an increase in net asset value per Unit. The most
significant gains of approximately 10.9% in the currency markets
were supplied during January from long positions in the euro as
its value strengthened versus the U.S. dollar amid renewed fears
of a military conflict with Iraq, increased tensions with North
Korea, and weak U.S. economic data. During May,
additional gains were recorded as the value of the euro
strengthened to an all-time high 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. Gains were
also recorded from long positions in the Australian dollar versus
the U.S. dollar as the Australian currency strengthened in
response to continued weakness in the U.S. dollar and a
significant interest rate differential between the two countries.
Additional gains of approximately 6.2% in the global interest
rate markets were recorded during January and February from
positions in U.S. interest rate futures as prices declined amid a
temporary increase in U.S. manufacturing activity and then
increased as investors continued to seek the ?safe haven? of
fixed income investments in response to prolonged uncertainty in
global equity markets. Additional gains were recorded from long
positions in European and U.S. interest rate futures as strong
demand from investors seeking the security of fixed income
investments sent prices higher. During May, gains were provided
from long positions in U.S. and European interest rate futures as
prices trended higher amid speculation of an interest rate cut by
the U.S. Federal Reserve and lingering doubts concerning a global
economic recovery. Gains of approximately 3.8% were recorded in
the energy markets during January and February from long
positions in natural gas futures as prices increased in response
to prolonged frigid temperatures in the northeastern and
midwestern United States and fears that extremely cold
weather could further deplete already diminished supplies.
Additional gains were provided from long positions in crude oil
futures as prices trended higher amid fears that a military
conflict with Iraq could curb market supply. A portion of the
Partnership?s gains was offset by losses of approximately 2.5% in
the metals markets from long positions in aluminum futures as
prices fell amid muted industrial demand during March. During
June, long positions in aluminum futures incurred additional
losses as prices declined in anticipation of the U.S. Federal
Reserve?s interest rate cut and on technically based selling.
Further losses in this sector were provided by long gold futures
positions as prices dropped counter to the rise of the U.S.
dollar. Additional losses of approximately 2.4% stemmed from the
agricultural markets, primarily during June, as short futures
positions in cotton suffered losses due to an increase in prices
spurred by supply concerns. Total expenses for the six months
ended June 30, 2003 were $26,130,612, resulting in net income of
$28,695,786. The net asset value of a Unit increased from $18.41
at December 31, 2002 to $20.08 at June 30, 2003.

For the Quarter and Six Months Ended June 30, 2002
For the quarter ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $48,100,199
and posted an increase in net asset value per Unit. The most
significant gains of approximately 20.6% were recorded in the
currency markets primarily during May and June from previously
established long positions in the euro, Swiss franc and
Japanese yen relative to the U.S. dollar as the value of these
currencies strengthened against the dollar amid falling equity
prices, concerns regarding corporate accounting integrity, and
weak economic data. Additional gains of approximately 1.3% were
recorded in the global stock index futures markets from short
positions in European stock index futures as prices trended lower
on geopolitical concerns and uncertainty surrounding a global
economic recovery. A portion of the Partnership?s overall gains
for the quarter was offset by losses of approximately 2.2% in the
energy markets primarily from previously established long futures
positions in crude oil and its related products as prices moved
lower during May on supply and demand concerns. Smaller losses
of approximately 1.0% were recorded in the metals markets
primarily during April, as copper prices reversed lower early in
the month amid increasing tensions in the Middle East, growing
inventory levels and weakening demand, resulting in losses from
previously established long futures positions. Total expenses
for the three months ended June 30, 2002 were $5,927,970,
resulting in net income of $42,172,229. The net asset value of a
Unit increased from $13.74 at March 31, 2002 to $16.16 at June
30, 2002.

For the six months ended June 30, 2002, the Partnership recorded
total trading revenues, including interest income, of $33,801,538
and posted an increase in net asset value per Unit. The most
significant gains of approximately 15.0% were recorded in the
currency markets primarily during May and June from
previously established long positions in the euro, Swiss franc
and Japanese yen relative to the U.S. dollar as the value of
these currencies strengthened against the U.S. dollar amid
falling equity prices, concerns regarding corporate accounting
integrity and weak economic data. Additional gains of
approximately 0.5% were recorded in the energy markets primarily
during March, as crude oil prices continued their upward trend
amid escalating tensions in the Middle East, supply concerns and
signs of a rebound in the economic demand for oil, thus resulting
in profits from previously established long futures positions. A
portion of the Partnership?s overall gains was offset by losses
of approximately 0.9% in the metals markets primarily from short
positions in aluminum futures as prices increased during April on
signs of recovery in U.S. industrial production. Elsewhere in
the metals markets, copper prices reversed lower early in April
amid increasing tensions in the Middle East, growing inventory
levels and weakening demand, resulting in losses from previously
established long futures positions. Additional losses of
approximately 0.8% were recorded in the global stock index
futures markets primarily from long positions in Nikkei Index
futures as Japanese equity prices reversed lower early in June.
Total expenses for the six months ended June 30, 2002 were
$12,279,339, resulting in net income of $21,522,199. The net
asset value of a Unit increased from $14.93 at December 31, 2001
to $16.16 at June 30, 2002.
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

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

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

The Partnership?s total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership?s open positions, the volatility present within the
markets, and the liquidity of the markets. At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.

The Partnership?s past performance is not necessarily indicative
of its future results. Any attempt to numerically quantify the
Partnership?s market risk is limited by the uncertainty of its
speculative trading. The Partnership?s speculative trading may
cause future losses and volatility (i.e., ?risk of ruin?) that
far exceed the Partnership?s experience to date or any reasonable
expectations based upon historical changes in market value.

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

The Partnership accounts for open positions on the basis of mark-
to-market accounting principles. Any loss in the market value of
the Partnership?s open positions is directly reflected in the
Partnership?s earnings, whether realized or unrealized, and its
cash flow. Profits and losses on open positions of exchange-
traded futures, forwards, and options are settled daily through
variation margin.

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

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

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

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

The Partnership?s Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total net assets
by primary market risk category at June 30, 2003 and 2002. At
June 30, 2003 and 2002, the Partnership?s total capitalization
was approximately $414 million and $282 million, respectively.

Primary Market June 30, 2003 June 30, 2002
Risk Category Value at Risk Value at Risk

Currency (1.59)% (2.59)%
Interest Rate (1.35) (2.59)
Equity (1.23) (1.08)
Commodity (1.22) (0.70)
Aggregate Value at Risk (2.72)% (4.11)%

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

The table above represents the VaR of the Partnership?s open
positions at June 30, 2003 and 2002 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership?s only
business is the speculative trading of futures, forwards, and
options, the composition of its trading portfolio can change
significantly over any given time period, or even within a
single trading day. Any changes in open positions could
positively or negatively materially impact market risk as
measured by VaR.
The table below supplements the quarter-end VaR by presenting the
Partnership?s high, low and average VaR, as a percentage of total
net assets for the four quarterly reporting periods from July 1,
2002 through June 30, 2003.

Primary Market Risk Category High Low Average
Currency (2.14)% (0.61)% (1.30)%

Interest Rate (1.78) (0.53) (1.23)

Equity (1.23) (0.24) (0.63)

Commodity (1.46) (0.39) (1.06)

Aggregate Value at Risk (2.76)% (0.87)% (2.21)%

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

The VaR tables above present the results of the Partnership?s VaR
for each of the Partnership?s market risk exposures and on an
aggregate basis at June 30, 2003 and 2002, and for the end of the
four quarterly reporting periods from July 1, 2002 through June
30, 2003. Since VaR is based on historical data, VaR should not be
viewed as predictive of the Partnership?s future financial
performance or its ability to manage or monitor risk. There
can be no assurance that the Partnership?s actual losses on a
particular day will not exceed the VaR amounts indicated above or
that such losses will not occur more than once in 100 trading
days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. These balances and any market
risk they may represent are immaterial.

At June 30, 2003, the Partnership?s cash balance at Morgan
Stanley DW was approximately 88% of its total net asset value. A
decline in short-term interest rates will result in a decline in
the Partnership?s cash management income. This cash flow risk is
not considered to be material.

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

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures ? except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures ?
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership?s primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisors for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership?s
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and expro-
priations, 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, 2003, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Currency. The primary market exposure of the Partnership at June
30, 2003 was to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. Interest
rate changes as well as political and general economic conditions
influence these fluctuations. The Partnership trades a large
number of currencies, including cross-rates - i.e., positions
between two currencies other than the U.S. dollar. At June 30,
2003, the Partnership?s major exposures were to the euro,
Japanese yen, Australian dollar, British pound, Swiss franc,
Canadian dollar, Norwegian krone and Swedish krona 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. The
currency trading VaR figure includes foreign margin amounts
converted into U.S. dollars with an incremental adjustment to
reflect the exchange rate risk inherent to the U.S.-based
Partnership in expressing VaR in a functional currency other than
U.S. dollars.

Interest Rate. At June 30, 2003 the Partnership had market
exposure to the global interest rate complex. Exposure was
primarily spread across the U.S., European and Japanese interest
rate sectors. Interest rate movements directly affect the price
of the sovereign bond futures positions held by the Partnership
and indirectly affect the value of its stock index and currency
positions. Interest rate movements in one country, as well as
relative interest rate movements between countries, materially
impact the Partnership?s profitability. The Partnership?s
primary interest rate exposure is generally to interest rate
fluctuations in the U.S. and the other G-7 countries. The G-7
countries consist of France, the U.S., Britain, Germany, Japan,
Italy, and Canada. However, the Partnership also takes futures
positions in the government debt of smaller nations ? e.g.,
Australia. Demeter anticipates that G-7 countries interest rates
will remain the primary interest rate exposure of the Partnership
for the foreseeable future. The speculative futures positions
held by the Partnership may range from short to long-term
instruments. Consequently, changes in short, medium or long-term
interest rates may have an effect on the Partnership.

Equity. At June 30, 2003, the Partnership had market exposure to
equity price risk in the G-7 countries. The stock index futures
traded by the Partnership are by law limited to futures on
broadly?based indices. At June 30, 2003, the Partnership?s
primary exposures were to the NASDAQ (U.S.), S&P 500 (U.S.), DAX
(Germany), Dow Jones Industrial Average (U.S.) and Euro Stoxx 50
(Europe) stock indices. The Partnership is 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 being ?whipsawed? into numerous small losses.

Commodity.
Energy. At June 30, 2003, the Partnership?s energy
exposure was shared primarily by futures contracts in crude
oil and its related products, and natural gas. Price
movements in these markets result from political
developments in the Middle East, weather patterns and other
economic fundamentals. Significant profits and losses,
which have been experienced in the past, are expected to
continue to be experienced in the future. Natural gas has
exhibited volatility in prices resulting from weather
patterns and supply and demand factors and may continue in
this choppy pattern.

Metals. The Partnership's metals exposure at June 30, 2003
was to fluctuations in the price of precious metals, such as
gold and silver, and base metals, such as copper, aluminum,
nickel and zinc. Economic forces, supply and demand
inequalities, geopolitical factors and market expectations
influence price movements in these markets. The Trading
Advisors, from time to time, take positions when market
opportunities develop and Demeter anticipates that the
Partnership will continue to do so.

Soft Commodities and Agriculturals. At June 30, 2003, the
Partnership had exposure to the markets that comprise these
sectors. Most of the exposure was to the live cattle, lean
hogs and coffee 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, 2003:
Foreign Currency Balances. The Partnership?s primary foreign
currency balances at June 30, 2003 were in euros, Japanese
yen, Australian dollars and British pounds. 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 Advisors, separately, attempt to
manage the risk of the Partnership?s open positions in essentially
the same manner in all market categories traded. Demeter attempts
to manage market exposure by diversifying the Partnership?s assets
among different Trading Advisors, each of whose strategies focus
on different market sectors and trading approaches, and monitoring
the performance of the Trading Advisors daily. In addition, the
Trading Advisors establish diversification guidelines, often set
in terms of the maximum margin to be committed to positions in any
one market sector or market-sensitive instrument.

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

Item 4. CONTROLS AND PROCEDURES
(a) As of the end of the period covered by this quarterly
report, the President and Chief Financial Officer of
the general partner, Demeter, have evaluated the
effectiveness of the Partnership?s disclosure controls
and procedures (as defined in Rules 13a?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 in the
Partnership?s internal controls or in other factors
that could significantly affect these controls
subsequent to the date of their evaluation.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
None.

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

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

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

The Partnership registered an additional 5,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on May 11, 1998 (SEC File Number 333-47831).

The Partnership registered an additional 10,000,000 Units
pursuant to another Registration Statement on Form S-1, which
became effective January 21, 1999 (SEC File Number 333-68779).

The Partnership registered an additional 1,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on April 30, 2002 (SEC File Number 333-84652).

The Partnership registered an additional 10,000,000 Units
pursuant to another Registration Statement on Form S-1, which
became effective on April 28, 2003 (SEC File Number 333-104001).

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, 2003, 34,409,364.231 Units were sold,
leaving 9,590,635.769 Units unsold. The aggregate price of the
Units sold through June 30, 2003 was $504,970,329.

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 a part of the
above referenced Registration Statements.

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

Mr. Robert E. Murray resigned the position of Chairman of the
Board of Directors of Demeter.

Mr. Jeffrey A. Rothman, President and Director of Demeter, was
named Chairman of the Board of Directors of Demeter.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership is incorporated by reference
to Exhibit A of the Partnership?s prospectus, dated April
28, 2003, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 on May 7, 2003.
3.02 Certificate of Limited Partnership, dated April 18, 1994,
is incorporated by reference to Exhibit 3.02 of the
Partnership?s Registration Statement on Form S-1 (File
No. 33-80146) filed with the Securities and Exchange
Commission on June 10, 1994.
3.03 Certificate of Amendment of Certificate of Limited
Partnership, dated April 6, 1999 (changing its name from
Dean Witter Spectrum Technical L.P.), is incorporated by
reference to Exhibit 3.03 of the Partnership?s
Registration Statement on Form S-1 (File No. 333-68779)
filed with the Securities and Exchange Commission on
April 12, 1999.
3.04 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001 (changing its name
from Morgan Stanley Dean Witter Spectrum Technical L.P.),
is incorporated by reference to Exhibit 3.01 of the
Partnership?s Form 8-K (File No. 0-26338) 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 Campbell & Company, Inc. is
incorporated by reference to Exhibit 10.01 of the
Partnership?s Form 10-K (File No. 0-26338) for fiscal
year ended December 31, 1998 filed on March 31, 1999.
10.01(a) Amendment to Management Agreement, dated as of November
30, 2000, among the Partnership, Demeter, and Campbell &
Company, Inc. is incorporated by reference to Exhibit
10.02 of the Partnership?s Form 8-K (File No. 0-26338)
filed with the Securities and Exchange Commission on
January 3, 2001.
10.02 Management Agreement, dated as of November 1, 1994, among
the Partnership, Demeter, and Chesapeake Capital
Corporation is incorporated by reference to Exhibit 10.02
of the Partnership?s Form 10-K (File No. 0-26338) for
fiscal year ended December 31, 1998 filed on March 31,
1999.

10.03 Management Agreement, dated as of November 1, 1994, among
the Partnership, Demeter, and John W. Henry & Co. is
incorporated by reference to Exhibit 10.03 of the
Partnership?s Form 10-K (File No. 0-26338) for fiscal
year ended December 31, 1998 filed on March 31, 1999.
10.03(a) Amendment to Management Agreement, dated as of November
30, 2000, among the Partnership, Demeter, and John W.
Henry & Company, Inc. is incorporated by reference to
Exhibit 10.01 of the Partnership?s Form 8-K (File No. 0-
26338) filed with the Securities and Exchange Commission
on January 3, 2001.
10.07 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by each purchaser of Units is
incorporated by reference to Exhibit B of the
Partnership?s prospectus dated April 28, 2003, filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1993 on May 7,
2003.
10.08 Amended and Restated Escrow Agreement, dated as of March
10, 2000, among the Partnership, Morgan Stanley Spectrum
Select L.P., Morgan Stanley Spectrum Strategic L.P.,
Morgan Stanley Spectrum Global Balanced L.P., Morgan
Stanley Spectrum Currency L.P., Morgan Stanley Spectrum
Commodity L.P., Morgan Stanley DW, and The Chase
Manhattan Bank, the escrow agent, is incorporated by
reference to Exhibit 10.08 of the Partnership?s
Registration Statement on Form S-1 (File No. 333-68779)
filed with the Securities and Exchange Commission on
November 2, 2001.
10.09 Form of Subscription Agreement Update Form to be executed
by purchasers of Units is incorporated by reference to
Exhibit C of the Partnership?s prospectus, dated April
28, 2003, as filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 on May 7, 2003.
10.10 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 0-26338) filed with
the Securities and Exchange Commission on November 1,
2001.
10.11 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. 0-26338) filed with the Securities and
Exchange Commission on November 1, 2001.
10.12 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.
0-26338) filed with the Securities and Exchange
Commission on November 1, 2001.
10.13 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. 0-26338) filed with the
Securities and Exchange Commission on November 1, 2001.
10.14 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. 0-26338)
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 13(a)-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 13(a)-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 Technical L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

August 14, 2003 By: /s/Jeffrey D. Hahn
Jeffrey D. Hahn
Director and Chief Financial Officer

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