MORGAN STANLEY SPECTRUM TECHNICAL LP - 10-Q Quarterly Report

Back to GetFilings.com

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

FORM 10-Q

[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 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 0-26338

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___________

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 TECHNICAL L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31, 2004

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 CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 2004 and 2003
(Unaudited)

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

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

March 31, 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 Technical 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 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. (individually, a
"Trading Advisor", or 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
$ $ $

Mar. 31, 2004 33,021,256 (12,069,214) 20,952,042 Sep. 2005 Jun. 2004
Dec. 31, 2003 34,239,960 12,194,250 46,434,210 Dec. 2004 Mar. 2004

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

The Partnership also has credit risk because Morgan Stanley DW,
MS & Co., and MSIL act as the futures commission merchants or the
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. Morgan Stanley DW, MS & Co., and MSIL,
each 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
$648,529,766 and $517,752,016 at March 31, 2004 and December 31,
2003, respectively. With respect to the Partnership's off-
exchange-traded forward currency contracts, there are no daily
exchange-required settlements of variations in value nor is there
any requirement that an amount equal to the net unrealized gains
(losses) on open forward contracts be segregated, however, MS &
Co. and Morgan Stanley DW will make daily settlements of losses
as needed. With respect to those off-exchange-traded forward
currency contracts, the Partnership is at risk to the ability of
MS & Co., the sole counterparty on all such 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 and may be used as
margin solely for the Partnership's trading. The assets are held
in either non-interest bearing bank accounts or in securities and
instruments permitted by the CFTC for investment of customer
segregated or secured funds. Since the Partnership's sole purpose
is to trade in futures, forwards, and options, it is expected that
the Partnership will continue to own such liquid assets for margin
purposes.

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

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

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

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

There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership's capital resource arrangements at the
present time. 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
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 month periods ended March 31, 2004 and 2003 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.
Past performance is not necessarily indicative of futures
results.

The Partnership's results of operations set forth in the
financial statements on pages 2 through 10 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. The market value
of a futures contract is the settlement price on the exchange on
which that futures contract is traded on a particular day. The
value of foreign currency forward contracts is based on the spot
rate as of the close of business, New York City time, on a given
day. Interest income revenue, as well as management fees,
incentive fees and brokerage fees expenses of the Partnership are
recorded on an accrual basis.

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

For the Quarter Ended March 31, 2004
The Partnership recorded revenues including interest income
totaling $72,341,653 and expenses totaling $26,439,235, resulting
in net income of $45,902,418 for the quarter ended March 31,
2004. The Partnership's net asset value per Unit increased from
$22.64 at December 31, 2003 to $24.55 at March 31, 2004.

The most significant trading gains of approximately 6.3% were
achieved in the global interest rate markets. Long positions in
European and U.S. interest rate futures profited as global bond
prices rallied during the quarter in response to weak economic
data, reports from central banks, such as the European Central
Bank and U.S. Federal Reserve, that highlighted a lack of
inflation and safe haven buying following the terrorist attack in
Madrid. Profits of approximately 2.8% were recorded in the
metals markets throughout the quarter from long futures positions
in base metals, such as copper, aluminum and zinc, and precious
metals such as silver. Industrial metals prices trended higher
during the quarter in response to greater demand from Asia driven
by a declining U.S. dollar. Long futures positions in silver
also benefited from a lower U.S. dollar value and contributed to
sector gains. Additional gains of approximately 2.3% were
established in the energy markets, primarily during February.
Long futures positions in crude oil and its related products
recorded gains as prices rallied in response to low market
supply, falling inventory levels and a production-cut
announcement from OPEC. Gains of approximately 1.0% were
generated in the currency markets during January and
February from long positions in the British pound versus the U.S.
dollar. During January, the British pound advanced as the dollar
sold off due to imbalanced U.S. current-account deficits,
interest rate differentials between the U.S. and most other major
economies and concerns for potential terrorist attacks against
U.S. interests. During February, the British pound continued to
benefit amid an increase in U.K. interest rates. Long euro
cross-rate positions also supplied gains during the quarter.
Smaller gains of approximately 0.3% in the agricultural markets
resulted from long futures positions in corn, soybeans, and
soybean-related products as prices for these commodities drew
strength from increased exports abroad and greater demand from
Asia. Finally, the global stock index markets generated gains of
approximately 0.2% obtained largely during February. Long
positions in Asian stock index futures profited as Asian equity
prices finished higher due to continued optimism regarding an
economic recovery in Japan.

For the Quarter Ended March 31, 2003
The Partnership recorded revenues including interest income
totaling $45,385,367 and expenses totaling $15,643,255, resulting
in net income of $29,742,112 for the quarter ended March 31,
2003. The Partnership's net asset value per Unit increased from
$18.41 at December 31, 2002 to $20.10 at March 31, 2003.

The most significant trading gains of approximately 5.1%
were recorded in the currency markets from long positions in the
euro versus the U.S. dollar as its value strengthened amid fears
of a military conflict with Iraq, increased tensions with North
Korea, and weak U.S. economic data. Additional gains of
approximately 4.2% were recorded in the energy markets during
January and February from long positions in natural gas futures
as prices increased during January and February in response to
prolonged frigid temperatures in the northeastern and midwestern
United States. Additional gains were provided from long
positions in crude oil futures as prices trended higher during
January and February amid fears that a potential military
conflict with Iraq could curb market supply. Gains of
approximately 4.0% were recorded in the global interest rate
markets from long positions in U.S., European, and Japanese
interest rate futures during January and February as prices
trended higher as investors continued to seek the safe haven of
fixed income investments in response to prolonged uncertainty in
the global equity markets. Gains of approximately 1.5% were
recorded in the global stock index markets, primarily during
January, from short positions in European stock indices as prices
were pressured lower amid higher energy prices, fears of a
military conflict with Iraq, and strong investor demand for fixed
income investments. A portion of the Partnership's overall gains
for the quarter was offset by losses of approximately 0.5% in the
metals markets, incurred primarily during March, from long
positions in aluminum futures as prices fell amid muted
industrial demand. Additional losses stemmed from long
positions in gold and silver futures as precious metals prices
declined during February and March in response to international
efforts to avert military action against Iraq. Smaller losses of
approximately 0.4% were recorded in the agricultural markets from
long positions in live cattle futures as prices fell sharply
during February amid demand concerns.
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. Profits and losses on open positions of exchange-
traded futures, forwards, and options are settled daily through
variation margin.

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

The Partnership's past performance is 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 and cash flow.

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 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 Advisors in their daily risk management activities.
Please further note that VaR as described above may not be
comparable to similarly-titled measures used by other entities.

The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at March 31, 2004 and 2003. At
March 31, 2004 and 2003, the Partnership's total capitalization
was approximately $661 million and $391 million, respectively.

Primary Market March 31, 2004 March 31, 2003
Risk Category Value at Risk Value at Risk

Interest Rate (1.94)% (0.53)%
Equity (0.91) (0.44)
Currency (0.58) (0.61)
Commodity (2.04) (0.39)
Aggregate Value at Risk (3.09)% (0.87)%

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 April 1, 2003 through March 31, 2004.

Primary Market Risk Category High Low Average
Interest Rate (1.94)% (0.96)% (1.36)%
Equity (1.97) (0.91) (1.44)
Currency (2.48) (0.58) (1.63)
Commodity (2.04) (1.13) (1.46)
Aggregate Value at Risk (3.47)% (2.72)% (3.18)%

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 provided present the results of the Partnership's
VaR for each of the Partnership's market risk exposures and on an
aggregate basis at March 31, 2004 and 2003, and for the four
quarter-end reporting periods from April 1, 2003 through March 31,
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 not needed for margin. These balances and any market
risk they may represent are immaterial.

The Partnership also maintains a substantial portion
(approximately 78% as of March 31, 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 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 March 31, 2004, by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Interest Rate. The primary market exposure of the Partnership at
March 31, 2004 was to the global interest rate complex. Exposure
was primarily spread across the U.S., European, Japanese, and
Australian 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. 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 and
Australian interest rates will remain the primary interest rate
exposure of the Partnership for the foreseeable future. The
speculative futures positions held by the Partnership may range
from short to long-term instruments. Consequently, changes in
short, medium or long-term interest rates may have an
effect on the Partnership.

Equity. The second largest market exposure of the Partnership at
March 31, 2004 was to equity price risk in the G-7 countries.
The stock index futures traded by the Partnership are by law
limited to futures on broadly-based indices. At March 31, 2004,
the Partnership's primary exposures were to the Euro Stoxx 50
(Europe), Dax (Germany), NASDAQ (U.S.), Nikkei (Japan), and S&P
500 (U.S.) 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 trendless price movements resulting in numerous small
losses.

Currency. The third largest market exposure of the Partnership
at March 31, 2004 was to the currency sector. The Partnership's
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs. Interest rate
changes, as well as political and general economic conditions
influence these fluctuations. The Partnership trades a large
number of currencies, including cross-rates - i.e., positions
between two currencies other than the U.S. dollar. At March 31,
2004, the Partnership's major exposures were to euro, Japanese
yen, Australian dollar, British pound, Swiss franc, Canadian
dollar, New Zealand dollar, Hungarian fornint, Czech
koruna, Swedish krona, and Norwegian kroner currency crosses, as
well as to outright U.S. dollar positions. Outright positions
consist of the U.S. dollar vs. other currencies. These other
currencies include major and minor currencies. Demeter does not
anticipate that the risk 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.

Commodity.
Energy. At March 31, 2004, 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 geopolitical
developments, particularly in the Middle East, as well as
weather patterns and other economic fundamentals.
Significant profits and losses, which have been experienced
in the past, are expected to continue to be experienced in
the future. Natural gas has exhibited volatility in prices
resulting from weather patterns and supply and demand
factors and will likely continue in this choppy pattern.

Soft Commodities and Agriculturals. At March 31, 2004, the
Partnership had exposure to the markets that comprise these
sectors. Most of the exposure was to coffee, lean
hogs and wheat. Supply and demand inequalities, severe
weather disruptions and market expectations affect price
movements in these markets.

Metals. The Partnership's metals exposure at March 31,
2004 was to fluctuations in the price of precious metals,
such as gold, silver, and to a lesser extent, platinum, and
palladium. The Partnership also had exposure to base
metals, such as copper, aluminum, nickel, zinc, tin, and
lead. 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.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at March 31, 2004:

Foreign Currency Balances. The Partnership's primary foreign
currency balances at March 31, 2004 were in euros, Japanese
yen, Canadian dollars, Swiss francs, and New Zealand
dollars. The Partnership controls the non-trading risk of
foreign currency balances by regularly converting them back
into U.S. dollars upon liquidation of their
respective positions.

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

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

Item 4. CONTROLS AND PROCEDURES

(a) As of 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 initially registered 4,000,000 Units pursuant to
a Registration Statement on Form S-1, which became effective on
September 15, 1994 (SEC File Number 33-80146).

The Partnership registered an additional 9,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on January 31, 1996 (SEC File Number 333-00494).

The Partnership registered an additional 5,000,000 Units pursuant
to another Registration Statement on Form S-1, which became
effective on April 30, 1996 (SEC File Number 333-3222).

The Partnership registered an additional 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 Partnership registered an additional 40,000,000 Units
pursuant to another Registration Statement on Form S-1, which
became effective on April 28, 2004 (SEC File Number 333-113397).

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 March 31, 2004, 42,072,687.587 Units were sold, leaving
1,927,312.413 Units unsold. The aggregate price of the Units
sold through March 31, 2004 was $676,949,898.

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

Mr. Jeffrey S. Swartz resigned his position as a Director of
Demeter.

Ms. Louise M. Wasso-Jonikas, age 50, will become a Director of
Demeter once she has registered with the National Futures
Association as an associated person, which registration is
currently pending. Ms. Wasso-Jonikas is a Managing Director of
Morgan Stanley and Director of Alternative Investments for the
Individual Investor Group (IIG) of Morgan Stanley. Ms. Wasso-
Jonikas rejoined Morgan Stanley in 1999. Ms. Wasso-Jonikas was
Co-Founder and President/Chief Operating Officer of Graystone
Partners, an objective consulting firm, from 1993 to 1999, when
Graystone was acquired by Morgan Stanley. Prior to founding
Graystone, Ms. Wasso-Jonikas was a Senior Vice President at
Bessemer Trust and opened their Chicago office. She also was a
Vice President at the Northern Trust in their Wealth Management
Services Group where she worked exclusively with their largest
private clients and family offices throughout the U.S. and
abroad serving their broad investment and custody needs.
Ms. Wasso-Jonikas also worked as an Equity Block Trader with
Goldman Sachs and with Morgan Stanley advising and managing
money for private clients. Ms. Wasso-Jonikas' focus is on
developing a robust external manager platform utilizing
alternative managers for IIG clients, as well as overseeing some
of the firm's largest client relationships. Ms. Wasso-Jonikas
holds a BA in Economics from Mount Holyoke College and an MBA in
Finance from the University of Chicago Graduate School of
Business.

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 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 purchasers of Units is
incorporated by reference to Exhibit B 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 1993 on May 4,
2004.
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, as 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, 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.
10.10 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 No. 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 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 Technical L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

May 10, 2004 By: /s/Jeffrey D. Hahn
Jeffrey D. Hahn
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.

1318: