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

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

FORM 10-Q

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

MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.

(Exact name of registrant as specified in its charter)

Delaware 13-3782232
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

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

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

Yes X No___________

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

Yes No X

MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

March 31, 2004

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

March 31, December 31,
2004 2003
$ $
(Unaudited)
ASSETS

Equity in futures interests trading accounts:
Cash 52,626,188 50,336,417

Net unrealized gain on open contracts (MS&Co.) 276,027 1,845,313
Net unrealized gain on open contracts (MSIL) 108,224 701,727

Total net unrealized gain on open contracts 384,251 2,547,040

Net option premiums - (39,600)

Total Trading Equity 53,010,439 52,843,857

Subscriptions receivable 1,784,530 1,036,417
Interest receivable (Morgan Stanley DW) 43,079 40,110

Total Assets 54,838,048 53,920,384

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

Redemptions payable 1,455,465 1,033,040
Accrued brokerage fees (Morgan Stanley DW) 206,145 194,891
Accrued management fees 56,019 52,960

Total Liabilities 1,717,629 1,280,891

Partners' Capital

Limited Partners (3,421,410.965 and
3,364,748.115 Units, respectively) 52,549,610 52,064,431
General Partner (37,164.331 Units) 570,809 575,062

Total Partners' Capital 53,120,419 52,639,493

Total Liabilities and Partners' Capital 54,838,048 53,920,384

NET ASSET VALUE PER UNIT 15.36 15.47

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

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

For the Quarters Ended March 31,

2004 2003
$ $
REVENUES

Trading profit (loss):
Realized 2,430,345 1,955,768
Net change in unrealized (2,162,789) (1,155,260)

Total Trading Results 267,556 800,508

Interest income (Morgan Stanley DW) 119,666 146,451

Total 387,222 946,959

EXPENSES
Brokerage fees (Morgan Stanley DW) 609,953 578,909
Management fees 165,749 157,314

Total 775,702 736,223

NET INCOME (LOSS) (388,480) 210,736

NET INCOME (LOSS) ALLOCATION

Limited Partners (384,227) 208,644
General Partner (4,253) 2,092

NET INCOME (LOSS) PER UNIT

Limited Partners (0.11) 0.05
General Partner (0.11) 0.05

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

MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 2004 and 2003
(Unaudited)

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

Partners' Capital,
December 31, 2002 3,460,180.682 49,814,229 591,203 50,405,432

Offering of Units 139,574.031 2,050,790 - 2,050,790

Net Income - 208,644 2,092 210,736

Redemptions (287,848.313) (4,201,113) (50,000) (4,251,113)

Partners' Capital,
March 31, 2003 3,311,906.400 47,872,550 543,295 48,415,845

Partners' Capital,
December 31, 2003 3,401,912.446 52,064,431 575,062 52,639,493

Offering of Units 304,286.577 4,693,770 - 4,693,770

Net Loss - (384,227) (4,253) (388,480)

Redemptions (247,623.727) (3,824,364) - (3,824,364)

Partners' Capital,
March 31, 2004 3,458,575.296 52,549,610 570,809 53,120,419

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

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

For the Quarters Ended March 31,

2004 2003
$ $

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) (388,480) 210,736
Noncash item included in net income (loss):
Net change in unrealized 2,162,789 1,155,260

(Increase) decrease in operating assets:
Net option premiums (39,600) 712,573
Interest receivable (Morgan Stanley DW) (2,969) 2,155

Increase (decrease) in operating liabilities:
Accrued brokerage fees (Morgan Stanley DW) 11,254 (9,122)
Accrued management fees 3,059 (2,480)

Net cash provided by operating activities 1,746,053 2,069,122

CASH FLOWS FROM FINANCING ACTIVITIES

Offering of Units 4,693,770 2,050,790
Increase in subscriptions receivable (748,113) (217,986)
Increase in redemptions payable 422,425 652,336
Redemptions of Units (3,824,364) (4,251,113)

Net cash provided by (used for) financing activities 543,718 (1,765,973)

Net increase in cash 2,289,771 303,149

Balance at beginning of period 50,336,417 49,330,482

Balance at end of period 52,626,188 49,633,631

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

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

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

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

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

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

3. Financial Instruments
The Partnership trades futures contracts, options on futures
contracts, and forward contracts on physical commodities and
other commodity interests, including, but not limited to, foreign
currencies, financial instruments, metals, energy, and
agricultural products. Futures and forwards represent contracts
for delayed delivery of an instrument at a specified date and
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

price. Risk arises from changes in the value of these contracts
and the potential inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.

The market value of contracts is based on closing prices quoted
by the exchange, bank or clearing firm through which the
contracts are traded.

The Partnership's contracts are accounted for on a trade-date
basis and marked to market on a daily basis. The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 defines a derivative
as a financial instrument or other contract that has all three of
the following characteristics:

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

3) Terms require or permit net settlement.

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

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

Net Unrealized Gains (Losses)
on Open Contracts Longest Maturities

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

Mar. 31, 2004 491,422 (107,171) 384,251 Jun. 2004 Jun. 2004
Dec. 31, 2003 2,472,718 74,322 2,547,040 Apr. 2004 Mar. 2004

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

The Partnership also has credit risk because Morgan Stanley DW, MS
& Co., and MSIL act as the futures commission merchants or the
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Morgan Stanley DW, MS & Co., and MSIL,
each as a futures commission merchant for the Partnership's
exchange-traded futures 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 $53,117,610
and $52,809,135 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.
MORGAN STANLEY SPECTRUM GLOBAL BALANCED L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

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

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

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

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

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

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

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

There are no known material trends, favorable or unfavorable, that
would affect, nor any expected material changes to, the
Partnership's capital resource arrangements at the present time.
The Partnership does not have any off-balance sheet arrangements,
nor does it have contractual obligations or commercial commitments
to make future payments that would affect its liquidity or capital
resources.

Results of Operations
General. The Partnership's results depend on the Trading Advisor
and the ability of the Trading Advisor's trading 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 Advisor trades in various markets
at different times and that prior activity in a particular market
does not mean that such market will be actively traded by the
Trading Advisor or will be profitable in the future. Consequently,
the results of operations of the Partnership are difficult to
discuss other than in the context of the Trading Advisor's trading
activities on behalf of the Partnership and how the Partnership
has performed in the past. Past performance is not
necessarily indicative of future results.

The Partnership's results of operations set forth in the financial
statements on pages 2 through 11 of this report were prepared in
accordance with accounting principles generally accepted in the
United States of America, which require the use of certain
accounting policies that affect the amounts reported in these
financial statements, including the following: The contracts the
Partnership trades are accounted for on a trade-date basis and
marked to market on a daily basis. The difference between their
cost and market value is recorded on the Statements of Operations
as "Net change in unrealized 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 $387,222 and expenses totaling $775,702, resulting in a
net loss of $388,480 for the quarter ended March 31, 2004. The
Partnership's net asset value per Unit decreased from $15.47 at
December 31, 2003 to $15.36 at March 31, 2004.

The most significant trading losses of approximately 1.6% were
experienced in the currency markets, primarily during March.
Long cross-rate positions in the Swiss franc and the Australian
dollar - both versus the Japanese yen - resulted in losses as the
yen's value reversed higher due to speculation that the Bank of
Japan was relaxing its efforts to weaken the yen. Long positions
in the U.S. dollar index were also hurt as the dollar's value
declined due to reduced Bank of Japan intervention activity.
During January, long positions in the Mexican peso versus the
U.S. dollar incurred losses as the peso's value fell under
pressure from declining Mexican interest rates and U.S. dollar
weakness against the euro. A portion of the Partnership's
overall losses for the quarter was offset by gains of
approximately 0.8% recorded in the global interest rate markets,
primarily during February, from long positions in European and
U.S. interest rate futures. Global bond prices rallied after
governmental central banks, such as the European Central
Bank and U.S. Federal Reserve, reported no need to raise interest
rates due to a lack of inflation. Additional gains of
approximately 0.8% were recorded in the global stock index
markets during January and February. Long U.S. stock index
futures positions profited as U.S. equity prices moved higher in
response to positive company earnings reports and signs of
growing U.S. consumer confidence. Long positions in Asian and
U.S. stock index futures recorded gains during February as global
equity prices advanced amid upbeat corporate profit reports,
merger and acquisition activity and a low-interest rate global
environment.
For the Quarter Ended March 31, 2003
The Partnership recorded revenues including interest income
totaling $946,959 and expenses totaling $736,223, resulting in
net income of $210,736 for the quarter ended March 31, 2003. The
Partnership's net asset value per Unit increased from $14.57 at
December 31, 2002 to $14.62 at March 31, 2003.

The most significant trading gains of approximately 2.8% were
recorded in the global interest rate markets primarily from long
positions in European and U.S. interest rate futures as prices
trended higher as investors continued to seek the safe haven of
fixed income investments in response to prolonged uncertainty in
global equity markets. Additional gains of approximately 1.5%
were recorded in the energy markets from long positions in
natural gas futures as prices jumped sharply higher during
January and February in response to prolonged frigid temperatures
in the northeastern and midwestern U.S. Further gains were
recorded from long positions in crude oil futures as prices
continued to trend higher during January and February amid the
looming threat of military action against Iraq. A portion of the
Partnership's overall gains for the quarter was offset by losses
of approximately 3.1% in the global stock index markets from long
positions in European, U.S., and Japanese stock index futures as
global equity prices declined throughout a majority of the
quarter amid ongoing fears concerning increased global tensions
and economic uncertainty. Smaller losses of approximately 0.4%
were recorded in the agricultural markets from short positions in
corn futures as prices climbed higher in January on speculative
buying.
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 Advisor is estimated below in terms of
Value at Risk ("VaR"). The Partnership estimates VaR using a
model based upon historical simulation (with a confidence level
of 99%) which involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to risk
including equity and commodity prices, interest rates, foreign
exchange rates, and correlation among these variables. The
hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. The one-day 99% confidence level of the Partnership's
VaR corresponds to the negative change in portfolio value that,
based on observed market risk factors, would have been exceeded
once in 100 trading days, or one day in 100. VaR typically does
not represent the worst case outcome. Demeter uses approximately
four years of daily market data (1,000 observations) and revalues
its portfolio (using delta-gamma approximations) for each of the
historical market moves that occurred over this time period.
This generates a probability distribution of daily "simulated
profit and loss" outcomes. The VaR is the appropriate percentile
of this distribution. For example, the 99% one-day VaR would
represent the 10th worst outcome from Demeter's simulated profit
and loss series.

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

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

The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at March 31, 2004 and 2003. At
March 31, 2004 and 2003, the Partnership's total capitalization
was approximately $53 million and $48 million, respectively.

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

Interest Rate (1.33)% (0.37)%

Equity (1.27) (0.59)

Currency (0.51) (0.19)

Commodity (0.39) (0.10)

Aggregate Value at Risk (1.56)% (0.76)%

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 (1.33)% (0.68)% (0.89)%
Equity (1.43) (0.72) (1.05)
Currency (0.70) (0.30) (0.47)
Commodity (0.39) (0.15) (0.26)
Aggregate Value at Risk (1.56)% (0.89)% (1.23)%

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 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 93% 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 Advisor for managing such exposures, are subject to
numerous uncertainties, contingencies and risks, any one of which
could cause the actual results of the Partnership's risk controls
to differ materially from the objectives of such strategies.
Government interventions, defaults and expropriations, illiquid
markets, the emergence of dominant fundamental factors, political
upheavals, changes in historical price relationships, an influx of
new market participants, increased regulation and many other
factors could result in material losses, as well as in material
changes to the risk exposures and the risk management strategies
of the Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at March 31, 2004 by market sector. It may be
anticipated, however, that these market exposures will vary
materially over time.

Interest Rate. The largest market exposure at March 31, 2004 was
to the global interest rate complex. Exposure was primarily
spread across the European, U.S., Australian, and Japanese
interest rate sectors. Interest rate movements directly affect
the price of the sovereign bond futures positions held by the
Partnership and indirectly affect the value of its stock
index and currency positions. Interest rate movements in one
country, as well as relative interest rate movements between
countries, materially impact the Partnership's profitability.
The Partnership's interest rate exposure is generally to interest
rate fluctuations in the U.S. and the other G-7 countries. 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 the G-7 countries
and Australian interest rates will remain the primary interest
rate exposures of the Partnership for the foreseeable future.
The speculative futures positions held by the Partnership range
from short to long-term instruments. Consequently, changes in
short, medium or long-term interest rates may have an effect on
the Partnership.

Equity. The second largest market exposure of the Partnership at
March 31, 2004 was to the global stock index sector, primarily
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 Nikkei (Japan), DAX (Germany), S&P
500 (U.S.), and FTSE (Britain) stock indices. The Partnership is
primarily exposed to the risk of adverse price trends or static
markets in the U.S., European, and Japanese stock indices.
Static markets would not cause major market changes, but
would make it difficult for the Partnership to avoid trendless
price movements resulting in numerous small losses.

Currency. The third largest market exposure of the Partnership
at March 31, 2004 was to the currency complex. 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 the euro,
Canadian dollar, Australian dollar, Swiss franc, and Japanese yen
currency crosses, as well as outright U.S. dollar positions.
Outright positions consist of the U.S. dollar vs. other
currencies. These other currencies include major and minor
currencies. Demeter does not anticipate that the risk profile of
the Partnership's currency sector will change significantly in
the future. 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 it's related products. Price movements in these
markets result from geopolitical developments, particularly
in the Middle East, as well as weather patterns and other
economic fundamentals. Significant profits and losses,
which have been experienced in the past, are expected to
continue to be experienced in the future.

Metals. The Partnership's metals exposure at March 31, 2004
was to fluctuations in the price of base metals, such as
copper and nickel. Economic forces, supply and demand
inequalities, geopolitical factors and market expectations
influence price movements in these markets. The Trading
Advisor, from time to time, takes positions when market
opportunities develop, and Demeter anticipates that the
Partnership will continue to do so.

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

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

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

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

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

Item 4. CONTROLS AND PROCEDURES

(a) As of the end of the period covered by this quarterly
report, the President and Chief Financial Officer of 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 2,000,000 Units pursuant to
a Registration Statement on Form S-1, which became effective on
September 15, 1994 (SEC File Number 33-80146).

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

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

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

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

The managing underwriter for the Partnership is Morgan
Stanley DW.

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

Through March 31, 2004, 7,355,214.825 Units were sold, leaving
9,144,785.175 Units unsold. The aggregate price of the Units
sold through March 31, 2004 was $103,953,369.

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 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

3.01 Form of Amended and Restated Limited Partnership
Agreement of the Partnership, is incorporated by
reference to Exhibit A of the Partnership's Prospectus,
dated April 28, 2004, filed with the Securities and
Exchange Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933, on May 4, 2004.
3.02 Certificate of Limited Partnership, dated April 18, 1994,
is incorporated by reference to Exhibit 3.02 of the
Partnership's Registration Statement on Form S-1 (File
No. 33-80146) filed with the Securities and Exchange
Commission on June 10, 1994.

3.03 Certificate of Amendment of Certificate of Limited
Partnership, dated April 17, 1998, is incorporated by
reference to Exhibit 3.03 of the Partnership's Form 10-K
(File No. 0-26340) for the fiscal year ended December 31,
1998 filed June 30, 1999.
3.04 Certificate of Amendment of Certificate of Limited
Partnership, dated November 1, 2001, (changing its name
from Morgan Stanley Dean Witter Spectrum Global Balanced
L.P.) is incorporated by reference to Exhibit 3.01 of the
Partnership's Form 8-K (File No. 0-26340) filed with the
Securities and Exchange Commission on November 1, 2001.
10.01 Management Agreement, dated as of November 1, 1994, among
the Partnership, Demeter, and RXR, Inc., is incorporated
by reference to Exhibit 10.01 of the Partnership's Form
10-K (File No. 0-26340) for fiscal year ended December
31, 1998 filed on June 30, 1999.
10.11 Form of Subscription and Exchange Agreement and Power of
Attorney to be executed by purchasers of Units is
incorporated by reference to Exhibit B of the
Partnership's Prospectus, dated April 28, as filed with
the Securities and Exchange Commission pursuant to Rule
424(b)(3) under the Securities Act of 1933 on May 4,
2004.
10.13 Amended and Restated Escrow Agreement, dated as of March
10, 2000, among the Partnership, Morgan Stanley Spectrum
Select L.P., Morgan Stanley Spectrum Technical L.P.,
Morgan Stanley Spectrum Strategic L.P., Morgan Stanley
Spectrum Currency L.P., Morgan Stanley Spectrum Commodity
L.P., Morgan Stanley DW and The Chase Manhattan Bank, as
escrow agent, is incorporated by reference to Exhibit
10.13 of the Partnership's Registration Statement on Form
S-1 (File No. 333-90475) filed with the Securities and
Exchange Commission on November 2, 2001.
10.14 Form of Subscription Agreement Update Form to be executed
by purchasers of Units is incorporated by reference to
Exhibit C of the Partnership's Prospectus, dated April
28, 2004, filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(3) under the
Securities Act of 1933 on May 4, 2004.
10.15 Amended and Restated Customer Agreement between the
Partnership and Morgan Stanley DW, dated as of October
16, 2000, is incorporated by reference to Exhibit 10.01
of the Partnership's Form 8-K (File No. 0-26340) filed
with the Securities and Exchange Commission on
November 1, 2001.
10.16 Commodity Futures Customer Agreement between MS & Co. and
the Partnership, and acknowledged and agreed to by Morgan
Stanley DW, dated as of June 6, 2000, is incorporated by
reference to Exhibit 10.02 of the Partnership's Form 8-K
(File No. 0-26340) filed with the Securities and Exchange
Commission on November 1, 2001.
10.17 Customer Agreement between the Partnership and MSIL,
dated as of May 1, 2000, is incorporated by reference to
Exhibit 10.04 of the Partnership's Form 8-K (File No. 0-
26340) filed with the Securities and Exchange Commission
on November 1, 2001.
10.18 Foreign Exchange and Options Master Agreement between MS
& Co. and the Partnership, dated as of April 30, 2000, is
incorporated by reference to Exhibit 10.05 of the
Partnership's Form 8-K (File No. 0-26340) filed with the
Securities and Exchange Commission on November 1, 2001.
10.19 Securities Account Control Agreement among the
Partnership, MS & Co., and Morgan Stanley DW, dated as of
May 1, 2000, is incorporated by reference to Exhibit
10.03 of the Partnership's Form 8-K (File No. 0-26340)
filed with the Securities and Exchange Commission on
November 1, 2001.
31.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to rules 13a-15(e) and 15d-15(e), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to rules 13a-15(e) and 15d-15(e),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.01 Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.02 Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

(B) Reports on Form 8-K
On April 14, 2004 the Partnership filed the Current Report on form
8-K for the purpose of reporting, under Item 5, the Partnership's
changes made to the Board of Directors of Demeter.

SIGNATURE

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

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

By: Demeter Management Corporation
(General Partner)

May 17, 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.

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

1276: