MORGAN STANLEY SPECTRUM CURRENCY 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 September 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 0-31563

MORGAN STANLEY SPECTRUM CURRENCY L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-4084211
(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 CURRENCY L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

September 30, 2003

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

September 30, December 31,
2003 2002
$ $
(Unaudited)
ASSETS

Equity in futures interests trading accounts:

Cash 138,707,387 88,478,803
Net unrealized gain on open contracts (MS&Co.) 5,834,986 5,651,549

Total Trading Equity 144,542,373 94,130,352

Subscriptions receivable 6,930,791 4,178,758
Interest receivable (Morgan Stanley DW) 83,994 70,210

Total Assets 151,557,158 98,379,320

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

Redemptions payable 732,562 1,526,335
Accrued brokerage fees (Morgan Stanley DW) 548,831 316,460
Accrued management fees 238,623 137,591
Accrued incentive fees - 239,482

Total Liabilities 1,520,016 2,219,868

Partners' Capital

Limited Partners (10,492,388.278 and
6,739,826.121 Units, respectively) 148,380,956 93,891,619
General Partner (117,113.068 and
162,791.986 Units, respectively) 1,656,186 2,267,833

Total Partners' Capital 150,037,142 96,159,452

Total Liabilities and Partners' Capital 151,557,158 98,379,320

NET ASSET VALUE PER UNIT 14.14 13.93

The accompanying notes are an integral part
of these financial statements.

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

For the Quarters Ended September 30,

2003 2002
$ $
REVENUES

Trading profit (loss):
Realized (13,345,296) (1,326,778)
Net change in unrealized 8,044,106 (6,173,971)

Total Trading Results (5,301,190) (7,500,749)

Interest income (Morgan Stanley DW) 245,838 246,494

Total (5,055,352) (7,254,255)

EXPENSES

Brokerage fees (Morgan Stanley DW) 1,611,378 890,107
Management fees 700,600 387,002

Total 2,311,978 1,277,109

NET LOSS (7,367,330) (8,531,364)

NET LOSS ALLOCATION

Limited Partners (7,289,038) (8,233,879)
General Partner (78,292) (297,485)

NET LOSS PER UNIT

Limited Partners (0.79) (1.48)
General Partner (0.79) (1.48)

The accompanying notes are an integral part
of these financial statements.

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

For the Nine Months Ended September 30,

2003 2002
$ $
REVENUES

Trading profit (loss):
Realized 6,995,826 6,989,446
Net change in unrealized 183,437 (3,495,712)

Total Trading Results 7,179,263 3,493,734

Interest income (Morgan Stanley DW) 728,646 600,392

Total 7,907,909 4,094,126

EXPENSES

Brokerage fees (Morgan Stanley DW) 4,266,653 2,155,277
Incentive fees 2,224,255 1,246,393
Management fees 1,855,068 937,077

Total 8,345,976 4,338,747

NET LOSS (438,067) (244,621)

NET INCOME (LOSS) ALLOCATION

Limited Partners (533,277) (233,624)
General Partner 95,210 (10,997)

NET INCOME (LOSS) PER UNIT

Limited Partners 0.21 (0.05)
General Partner 0.21 (0.05)

The accompanying notes are an integral part
of these financial statements.

MORGAN STANLEY SPECTRUM CURRENCY L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)

Units of
Partnership Limited General
Interest Partners Partner Total
$ $ $

Partners' Capital,
December 31, 2001 3,852,648.433 45,598,611 2,213,130 47,811,741

Offering of Units 2,996,712.824 36,766,686 350,000 37,116,686

Net Loss - (233,624) (10,997) (244,621)

Redemptions (624,768.510) (7,519,858) (220,008) (7,739,866)

Partners' Capital,
September 30, 2002 6,224,592.747 74,611,815 2,332,125 76,943,940

Partners' Capital,
December 31, 2002 6,902,618.107 93,891,619 2,267,833 96,159,452

Offering of Units 4,468,996.636 64,897,975 620,000 65,517,975

Net Loss - (533,277) 95,210 (438,067)

Redemptions (762,113.397) (9,875,361) (1,326,857) (11,202,218)

Partners' Capital,
September 30, 2003 10,609,501.346 148,380,956 1,656,186 150,037,142

The accompanying notes are an integral part
of these financial statements.

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

For the Nine Months Ended September 30,

2003 2002
$ $

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss (438,067) (244,621)
Noncash item included in net loss:
Net change in unrealized (183,437) 3,495,712

Increase in operating assets:
Interest receivable (Morgan Stanley DW) (13,784) (32,070)

Increase (decrease) in operating liabilities:
Accrued brokerage fees (Morgan Stanley DW) 232,371 146,372
Accrued management fees 101,032 63,640
Accrued incentive fees (239,482) (913,255)

Net cash provided by (used for) operating activities (541,367) 2,515,778

CASH FLOWS FROM FINANCING ACTIVITIES

Offering of Units 65,517,975 37,116,686
Increase in subscriptions receivable (2,752,033) (925,573)
Increase (decrease) in redemptions payable (793,773) 3,448,429
Redemptions of Units (11,202,218) (7,739,866)

Net cash provided by financing activities 50,769,951 31,899,676

Net increase in cash 50,228,584 34,415,454

Balance at beginning of period 88,478,803 43,241,135

Balance at end of period 138,707,387 77,656,589

The accompanying notes are an integral part
of these financial statements.

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

September 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 Currency 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 Currency 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 in global currency markets. The Partnership is
one of the Morgan Stanley Spectrum series of funds, comprised of
the Partnership, Morgan Stanley Spectrum Global Balanced L.P.,
Morgan Stanley Spectrum Select L.P., Morgan Stanley Spectrum
Strategic L.P., and Morgan Stanley Spectrum Technical L.P.

The Partnership's general partner is Demeter Management
Corporation ("Demeter"). The non-clearing commodity broker is
Morgan Stanley DW Inc. ("Morgan Stanley DW"). The clearing
commodity broker is Morgan Stanley & Co. Incorporated ("MS &
MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Co."). Demeter, Morgan Stanley DW and MS & Co. are wholly-owned
subsidiaries of Morgan Stanley. The trading advisors to the
Partnership are John W. Henry & Company, Inc. and Sunrise Capital
Partners, LLC (individually, a "Trading Advisor", or
collectively, the "Trading Advisors").

2. Related Party Transactions
The Partnership's cash is on deposit with Morgan Stanley DW and
MS & Co. 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 in global currency markets.
Futures and forwards represent contracts for delayed delivery of
an instrument at a specified date and price. Risk arises from
changes in the value of these contracts and the potential
inability of counterparties to perform under the terms of the
contracts. There are numerous factors which may significantly
influence the market value of these contracts, including interest
rate volatility.
MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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.

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

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

Net Unrealized Gains
on Open Contracts Longest Maturities

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

Sep. 30, 2003 - 5,834,986 5,834,986 - Dec. 2003
Dec. 31, 2002 - 5,651,549 5,651,549 - 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
and MS & Co. act as the futures commission merchants or the
counterparties with respect to most of the Partnership's assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Morgan Stanley DW and MS & Co., 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
MORGAN STANLEY SPECTRUM CURRENCY L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

held by them with respect to exchange-traded futures and futures-
styled options contracts, including an amount equal to the net
unrealized gains on all open futures and futures-styled options
contracts. 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 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. as clearing broker
in separate futures, forwards, and options trading accounts
established for each Trading Advisor, which assets are used as
margin to engage in trading. The assets are held in either non-
interest bearing bank accounts or in securities and instruments
permitted by the CFTC for investment of customer segregated or
secured funds. The Partnership's assets held by the commodity
brokers may be used as margin solely for the Partnership's
trading. Since the Partnership's sole purpose is to trade in
futures, forwards, and options, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.

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

There is no limitation on daily price moves in trading forward
contracts on foreign 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, and no 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. The contracts the Partnership
trades 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. 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 nine month periods ended September 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 Nine Months Ended September 30, 2003
For the quarter ended September 30, 2003, the Partnership
recorded total trading losses, net of interest income, of
$5,055,352 and posted a decrease in net asset value per Unit. The
most significant losses of approximately 3.4% resulted from short
positions in the euro and Swiss franc versus the U.S. dollar
during September as the dollar's value sunk after the release of
several weak U.S. economic reports prompted fears of an
unsustainable U.S. economic recovery. Additional losses of
approximately 2.1% were recorded from long positions in the
Australian dollar versus the U.S. dollar primarily during July
amid rising expectations for a U.S. economic recovery, negative
economic data out of Australia and narrowing interest rate
differentials between the two countries. A portion of the
Partnership's losses for the quarter was offset by gains of
approximately 1.9% recorded from long positions in the Japanese
yen versus the U.S. dollar during September as the yen's value
was buoyed by Bank of Japan comments regarding its passive
currency intervention policy and perceptions that the Japanese
economic crisis was finally at a turning point. Gains of
approximately 1.6% were supplied by long positions in the Thai
baht versus the U.S. dollar during August and September as the
baht's value increased in response to the improving Thailand
economy and the rise in value of the Japanese yen. Additional
gains of approximately 1.3% resulted from long positions in the
South African rand versus the U.S. dollar during August and
September as the value of the rand was lifted by strong South
African export data, a high South African interest rate
environment and weaker U.S. equity prices. Total expenses for the
three months ended September 30, 2003 were $2,311,978, resulting
in a net loss of $7,367,330. The net asset value of a Unit
decreased from $14.93 at June 30, 2003 to $14.14 at September 30,
2003.

For the nine months ended September 30, 2003, the Partnership
recorded total trading revenues, including interest income, of
$7,907,909 and posted an increase in net asset value per Unit.
The most significant gains of approximately 10.7% were recorded
from long positions in the euro versus the U.S. dollar as the
value of the euro strengthened to an all-time high during May
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. assets.
During January and April, gains were recorded from long positions
in the euro versus the U.S. dollar as the U.S. dollar's value
weakened amid renewed fears of a military conflict with Iraq,
increased tensions with North Korea, and weak U.S.
economic data. Additional gains of approximately 5.0% resulted
from long positions in the Australian dollar versus the U.S.
dollar as the Australian currency strengthened during April, May
and June in response to continued weakness in the U.S. dollar,
higher interest rates relative to those in the U.S., Europe and
Asia, and higher gold prices earlier in the year. Gains of
approximately 2.0% were provided by long positions in the South
African rand versus the U.S. dollar during April as the rand's
value strengthened in response to significant interest rate
differentials between the two countries. Smaller profits of
approximately 1.6% were experienced from long positions in the
Thai baht versus the U.S. dollar primarily during September as
the baht's value appreciated in tandem with the value of the
Japanese yen. A portion of the Partnership's overall gains was
offset by losses of approximately 4.1% from positions in the
British pound versus the U.S. dollar as the value of the pound
strengthened during April and May on expectations that the Bank
of England would likely leave interest rates unchanged and the
release of lower than expected unemployment data from Great
Britain. During June, losses stemmed from positions in the pound
versus the U.S. dollar as the pound's value increased early in
the month amid expectations that the Bank of England would likely
leave interest rates unchanged, and then reversed lower after the
British Finance Minister released positive comments regarding the
U.K.'s entry prospects into the European Union. Additional losses
of approximately 2.0% resulted from long positions in the
Japanese yen versus the U.S. dollar during May as the yen's value
first strengthened and then reversed lower on speculation that
the Bank of Japan favored a weaker yen in order to spur economic
activity. During August, losses resulted from short positions in
the Japanese yen as the Asian currency strengthened on stronger
equity prices and the Bank of Japan's commitment to its monetary
policy. Total expenses for the nine months ended September 30,
2003 were $8,345,976, resulting in a net loss of $438,067. The
net asset value of a Unit increased from $13.93 at December 31,
2002 to $14.14 at September 30, 2003. The net asset value per
Unit increased despite the Partnership's net loss for the period
since the net loss per Unit amount, incurred in the later months
of the nine month period, was not in excess of the net income per
Unit amount incurred in the earlier months of the nine month
period because the later losses were spread over a larger number
of Units due to subscriptions increasing the Partnership's total
number of Units each month.

For the Quarter and Nine Months Ended September 30, 2002
For the quarter ended September 30, 2002, the Partnership
recorded total trading losses, net of interest income, of
$7,254,255 and posted a decrease in net asset value per Unit.
The most significant losses of approximately 5.4% were recorded
in minor currencies, predominantly from long positions in the
Polish zloty, South African rand, and New Zealand dollar, as well
as from short positions in the Mexican peso. Additional
losses of approximately 1.6% and 1.3% were recorded from long
positions in the British pound and the euro, respectively, as
their values reversed lower versus the U.S. dollar due to the
emphasis on a "strong dollar" policy by the Bush Administration
during July and the persistence of trendless price activity
during August and September. Losses of approximately 0.9% were
recorded from long positions in the Japanese yen during August
and September as the value of the yen reversed lower relative to
the U.S. dollar amid renewed concerns regarding Japan's economic
woes. Total expenses for the three months ended September 30,
2002 were $1,277,109, resulting in a net loss of $8,531,364. The
net asset value of a Unit decreased from $13.84 at June 30, 2002
to $12.36 at September 30, 2002.

For the nine months ended September 30, 2002, the Partnership
recorded total trading revenues, including interest income, of
$4,094,126 and, after expenses, posted a decrease in net asset
value per Unit. The most significant gains of approximately 6.8%
were recorded primarily during May and June from previously
established long positions in the euro as its value strengthened
relative to the U.S. dollar amid falling equity prices, concerns
regarding corporate accounting integrity, and weak U.S. economic
data. Previously established long positions in the Australian
dollar provided gains of approximately 3.2% as the currency
strengthened relative to the U.S. dollar, primarily during March
and May, due to rising gold prices. Long positions in the
Swiss franc resulted in further gains of approximately 3.2%,
primarily during April, May, and June, as its value strengthened
relative to the U.S. dollar due to weak economic forecasts.
Smaller gains of approximately 2.5% were recorded predominantly
during the second quarter from long positions in the minor
currencies, such as the Norwegian krone. These gains were
partially offset by losses of approximately 4.8% recorded from
transactions involving the British pound during June, July, and
August as its value fluctuated without consistent direction
versus the U.S. dollar. Smaller losses of approximately 3.8%
were recorded throughout a majority of the year from transactions
involving the Japanese yen as its value also experienced erratic
movements versus the U.S. dollar amid concerns regarding the
state of Japan's economy. Total expenses for the nine months
ended September 30, 2002 were $4,338,747, resulting in a net loss
of $244,621. The net asset value of a Unit decreased from $12.41
at December 31, 2001 to $12.36 at September 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, but not limited to, 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 Partner-
ship'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
for a 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
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 September 30, 2003 and 2002.
At September 30, 2003 and 2002, the Partnership's total
capitalization was approximately $150 million and $77 million,
respectively.

Primary Market September 30, 2003 September 30, 2002
Risk Category Value at Risk Value at Risk
Currency (2.57)% (3.97)%

The VaR for a market category represents the one-day downside
risk for the aggregate exposures associated with this market
category. The table above represents the VaR of the Partner-
ship's open positions at September 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 only
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. 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 set forth
above by presenting the Partnership's high, low, and average VaR,
as a percentage of total net assets for the four quarter-end
reporting periods from October 1, 2002 through September 30,
2003.

Primary Market Risk Category High Low Average
Currency (3.91)% (1.20)% (2.28)%

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 its market risk exposures at September 30, 2003 and 2002, and
for the four quarter-end reporting periods from October 1, 2002
through September 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. The Partnership did not have any
foreign currency balances at September 30, 2003.

The Partnership also maintains a substantial portion
(approximately 95% as of September 30, 2003) of its available
assets in cash at Morgan Stanley DW. 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 expropria-
tions, 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 was the only trading risk exposure of the
Partnership at September 30, 2003. It may be anticipated,
however, that market exposure will vary materially over time.

Currency. The Partnership's currency exposure at September 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. At September 30, 2003, the
Partnership's exposure was 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.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
At September 30, 2003, there was no non-trading risk exposure
because the Partnership did not have any foreign currency
balances.

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 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 initially registered 12,000,000 Units pursuant to
a Registration Statement on Form S-1, which became effective on
March 6, 2000 (SEC File Number 333-90483).

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 333-84654).

The Partnership registered an additional 14,000,000 Units
pursuant to another Registration Statement on Form S-1, which
became effective on April 28, 2003 (SEC File Number 333-104004).

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 September 30, 2003, 12,318,789.852 Units were
sold, leaving 14,681,210.148 Units unsold. The aggregate price
of the Units sold through September 30, 2003 was $157,552,456.

Since no expenses are chargeable against proceeds, 100% of the
proceeds of the offering have been applied to the working capital
of the Partnership for use in accordance with the "Use of
Proceeds" section of the prospectus included as part of the above
referenced Registration Statements.

Item 5. OTHER INFORMATION
Management. The following individuals were named to the Board of
Directors of Demeter in the quarter ended March 31, 2003 and were
subsequently confirmed as principals of Demeter by the National
Futures Association:

Mr. Douglas J. Ketterer was confirmed as a principal of Demeter
by the National Futures Association on October 27, 2003.

Mr. Jeffrey S. Swartz was confirmed as a principal of Demeter by
the National Futures Association on October 23, 2003.

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 October 20,
1999, is incorporated by reference to Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File
No. 333-90485) filed with the Securities and Exchange
Commission on November 5, 1999.
3.03 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001, (changing its name
from Morgan Stanley Dean Witter Spectrum Currency L.P.)
is incorporated by reference to Exhibit 3.01 of the
Partnership's Form 8-K (File No. 0-31563) filed with the
Securities and Exchange Commission on November 1, 2001.
10.01 Management Agreement among the Partnership, Demeter and
John W. Henry & Company, Inc., dated as of March 6, 2000,
is incorporated by reference to Exhibit 10.01 of the
Partnership's Quarterly Report on Form 10-Q (File No.
0-31563) filed with the Securities and Exchange
Commission on November 14, 2000.
10.01(a) Amendment to Management Agreement, dated as of November
30, 2000, among the Partnership, John W. Henry & Company,
Inc., and Demeter is incorporated by reference to Exhibit
10.01 of the Partnership's Form 8-K (File No. 0-31563),
filed with the Securities and Exchange Commission on
January 3, 2001.
10.02 Management Agreement among the Partnership, Demeter and
Sunrise Capital Partners, LLC, dated as of March 6, 2000,
is incorporated by reference to Exhibit 10.02 of the
Partnership's Quarterly Report on Form 10-Q (File No.
0-31563) filed with the Securities and Exchange
Commission on November 14, 2000.
10.02(a) Amendment to Management Agreement, dated as of November
30, 2000, among the Partnership, Sunrise Capital
Partners, LLC, and Demeter is incorporated by reference
to Exhibit 10.02 of the Partnership's Form 8-K (File No.
0-31563), filed with the Securities and Exchange
Commission on January 3, 2001.

10.05 Amended and Restated Escrow Agreement among the
Partnership, Morgan Stanley Spectrum Select L.P., Morgan
Stanley Spectrum Technical L.P., Morgan Stanley Spectrum
Strategic L.P., Morgan Stanley Spectrum Global Balanced
L.P., Morgan Stanley Spectrum Commodity L.P., Morgan
Stanley DW and The Chase Manhattan Bank, the escrow
agent, dated as of March 10, 2000, is incorporated by
reference to Exhibit 10.05 of the Partnership's
Registration Statement on Form S-1 (File No. 333-90485)
filed with the Securities and Exchange Commission on
November 2, 2001.
10.06 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 1933 on May 7, 2003.
10.08 Form of Subscription Agreement Update Form to be executed
by each purchaser of Units is incorporated by reference
to Exhibit C 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.
10.09 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW, dated as of June 30,
2000, is incorporated by reference to Exhibit 10.01 of
the Partnership's Form 8-K (File No. 0-31563) filed with
the Securities and Exchange Commission on November 1,
2001.
10.10 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. 0-31563) filed with the Securities and Exchange
Commission on November 1, 2001.
10.11 Foreign Exchange and Options Master Agreement between MS
& Co. and the Partnership, dated as of June 30, 2000, is
incorporated by reference to Exhibit 10.04 of the
Partnership's Form 8-K (File No. 0-31563) filed with the
Securities and Exchange Commission on November 1, 2001.

10.12 Securities Account Control Agreement among the
Partnership, MS & Co., and Morgan Stanley DW, dated as of
June 6, 2000, is incorporated by reference to Exhibit
10.03 of the Partnership's Form 8-K (File No. 0-31563)
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 Currency L.P.
(Registrant)

By: Demeter Management Corporation
(General Partner)

November 14, 2003 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.

- - 10 -

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

- - 11 -

- - 38 -